A hint of broadband here …. Next in the holiday line-up was James Meek’s thought-provoking Private Island: Why Britain Now Belongs to Someone Else. I was doubly interested to read this because the boundary between the state and the market, and the space for other non-state, non-market collective institutions is one of the themes running through the course I teach on public policy economics.
The book covers several of the UK’s privatised industries – electricity, rail, water, and post, as well as the housing crisis, the NHS and its marketisation, and a final chapter on immigration and the rise of UKIP. The chapters are largely self-contained, and indeed some started as extended essays in the London Review of Books. Each raises valid questions about the specific failures of privatisation – in particular, the failure of the privatisers to consider that markets need far more than private ownership of assets to operate efficiently and in the interests of consumers. Competition and regulation are required, in the right mix, regulations that do not turn out to inhibit competition, but rather limit monopoly rents and enable new entry.
In the end, though, the book is more a lament about financialisation and short-termism than about private sector operation of these sectors in itself. It is hard to tell whether Meek objects to private ownership at all, but he certainly objects to the ownership of large amounts of the country’s infrastructure by foreign owners and/or through debt-financed instruments. The grounds for this objection shift between chapters. In the case of water, it is that overseas bondholders require high financial returns and so necessary investment has not occurred. In the case of electricity, it is that EDF, a state-controlled French company, has bought the UK’s nuclear fleet and plans to invest in new nuclear plants – even though the essay accepts that low-carbon baseload generation is needed, and even though no UK companies were prepared to make the investment. (I sit on an advisory panel for EDF Energy.)
Should we be concerned about the high proportion of UK infrastructure owned by foreigners? I don’t know. Will Hutton recently used the purchase of the FT by Japan’s Nikkei to make this argument. But I’ve not seen a full analysis of what extent of foreign ownership is ok, in which sectors, and why nationality matters, although of course there are obvious arguments in some cases eg the threat of offshoring R&D in pharma made by big multinationals which had to be bought off with a big tax break (the ‘patent box’). It seems to me an academic questin, however, until and unless British investors are prepared to stump up the funds for long-term projects and long-lived asset holding.
Meek doesn’t address this question, though some chapters do have clear and sound policy conclusions. Build more council housing is one – yes! Scrap the dreadful ‘Help to Buy’ scheme – yes!
Still, overall the essays, with their sympathetic reportage of the conditions of casualised mail workers, about-to-be-homeless disabled people, flooded householders, add up to a powerful critique of the absence of strategic thinking in the British state. “No one has answered the question,” he writes, “of how governments with five year terms can be held to account for their stewardship of projects whose lifespan is measured in generations.” Only the Treasury, with its equally short-termist, penny-wise pound-foolish principles endures. I don’t think the question is mainly specific accountability, though; it is the absence of any institutions or public consensus about the need to take a long term perspective and embody responsibility to the future.