Privatization is particularly identified with the brand of conservatism favoured by the former British prime minister, Margaret Thatcher (see Thatcherism). However, during the 1980s similar policies were adopted in many countries throughout the world, and were even accepted, although sometimes reluctantly, by social democratic parties. In many ways privatization is simply a new word for de-nationalization, the removal from government control of monopolies both in the service sector and in manufacturing industry. However, whereas the de-nationalization that previous Conservative governments had undertaken, such as the reversal, in 1953, of the nationalization of the iron and steel industry, was carried out by selling the assets of the state company to industry at fixed prices, and was virtually a reflex reversal of the previous Labour Party government’s legislation, Thatcher saw privatization as desirable for two reasons. Firstly, by making the new private companies responsible to shareholders, and therefore profit oriented, they ought to become more efficient. Secondly, and at least as important, it was a way of spreading shareholding widely among the population, and bringing Britain back to the traditional Conservative Party aim of ‘a property-owning democracy’, a 1950s slogan which was reintroduced. Shares in several large state monopolies were offered for sale to institutions and members of the public, using merchant banks and obeying both the legal and practical rules of issuing shares to raise capital, with the government taking the profit from the sales. Special regulations were introduced and what amounted to a lottery run to ensure that thousands of minor shareholders could afford to buy at least a few shares. Although it was initially seen as rather a gimmick, by the end of the Thatcher era a very large minority of people who would never have thought of owning shares in publicly quoted companies held anything from a few hundred to several thousand shares in electricity, gas, water and telecommunications companies.
By expanding the shareholding base the Conservative Party made it virtually impossible for its political opponents to reverse privatizations, unless the shares became worthless (see below); indeed, many voters who would otherwise regard themselves as firm Labour supporters are among those who have purchased shares. The trend towards privatizations outlasted Thatcher, with the Conservative governments of her successor, John Major, undertaking a complex privatization of the country’s railway system.
The major criticism of privatization has been that these in dustries were nearly all natural monopolies, and there is noway to arrange genuine consumer choice among, for example, water or electricity suppliers. Consequently it is far from clear that the need to satisfy the profit demands of shareholders, which has been done most successfully, is any more in the consumer’s interests than the previous system. Privatization has come to mean, by analogy, any structural reforms which give financial accountability and management authority to small units of a state system. The move to allow individual schools to control their own finances by ‘opting out’ of local education authority control, or to allow National Health Service (NHS) hospitals to become self-managing trusts, is seen by some as an attempt to ‘privatize’something that should clearly be a state responsibility. While managerial efficiency may be improved by many of these reforms, the emphasis on market forces and profitability introduces serious doubts about whether these services will continue to be run in the public interest, although independent regulatory authorities, for example in the gas, water and telecommunications industries, have been established. By the beginning of the 21st century at least one of these privatizations, that of the erstwhile British Rail, was widely held to be a total failure. Indeed the major privatized element, Railtrack, which owned and operated the infrastructure, but not the trains, was forced into receivership with the assent of the Labour government, and the Conservatives, who had carried out the privatization, were unable convincingly to attack the government on the issue. Other similar privatized utilities, notably the air-traffic control system (itself privatized by Labour), were also clearly in real difficulties.
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