Philosophers often point out when something is going badly wrong. Not least, this may be via the broadcasts by Professor John Gray on BBC Radio 4’s A Point of View. I sat up in bed abruptly when the recording began. The arguments used a critique of Thatcherism to make the case for proportional representation. The professor pointed out that the short-lived premiership of Liz Truss was demonstration that the neoliberal creed is dead in Realpolitik. I was reminded of the comment by Frank Zappa: ‘Jazz isn’t dead, it just smells funny’.
Thatcher may not have always been under the thumb of right-wing think tanks. She had supported the UK’s membership of the EU and she did not fully privatise the NHS. Yet John Gray argues her credo of privatisation lives on in British political thinking, and across the spectrum. Post war assumptions that the market should be overseen by the state vanished in 1979.
Economic intervention has taken many forms. Famously the Labour governments of Clement Atlee and Harold Wilson pursued a policy of state ownership for key industries deemed strategically important, economically central to the national interest, and which employed many people.
I should mention in passing that the de facto nationalised Water Industry was consolidated under state control under the Water Act 1973, an outcome of the Conservative administration of Edward Heath. We may ask whether this was the last hurrah of the post-Second World War consensus?
Importantly, ‘privatisation’ was to affect not only the likes of railways, coal, and steel, but also public service industries such as water and energy. Schools (meanwhile) are being enticed away from local authority control. Once some new regulatory model is in place, the field became open to a private sector approach, whether this is appropriate or not.
The rise of neoliberalism
With the election of the neoliberal government of Margaret Thatcher in 1979, John Maynard Keynes’s ideas of a regulated market economy were to become eclipsed in the global West. State ownership of the means of production was out. Ever since, our press and politicians have reminded us of perceived faults of centrally planned economies. It is governments that provide too much planning that start to ‘smell funny’.
Free marketeers took their theory from Friedrich von Hayek via Milton Friedman and Sir Keith Joseph which was implemented by a certain grocer’s daughter from Lincolnshire. Anything ‘statist’ became a slur. Thatcher’s opponents were aligned with support for working people’s rights and public expenditure for the common good. Yet, John Gray confidently asserts that subsequent Labour governments were also influenced by the Thatcher years, something that gave us party ‘modernisers’ and the Tony Blair / Gordon Brown years.
Back then, what did they believe?
I recall being alternatively angered, then amused, by the patronising clichés delivered, often to me as ‘an hairy’ young man. Proponents could be bar-room philosophers, Alf Garnets, and representatives of a country club mentality of the kind that delivered Brexit. Here are some examples recovered from the 70s and 80s:
‘The country is in a terrible state, and something just has to be done’a teacher, being really unhelpful
‘The unions have brought this country to its knees and must be stopped’Just about every reader of certain brands of newspaper. Working people have seen their purchasing powers undermined before the present day — so they protest!
‘Communism was all right in theory, but it does not work in practice’ and ‘Communism has been a worthy experiment but…’Individuals who maybe felt guilty about voting for Thatcher?
‘There is a tendency to damn all the creators of wealth in this country!’An economist who might have known better.
‘Privatisation is a good thing because it is easier to give something in the private sector a good kicking’Another economist who should also have known better.
Developed from the writings of Adam Smith, and implicit in such attitudes, “the mechanisms of private enterprise will solve all of life’s problems once carefully encased in trading standards, and in a firm and fair rule of law“.
Many of us beg to differ
Production and provision of services ‘set free’ from governmental interference (at all levels) removes the possibility of any meaningful regulation. Public and environmental interests cannot be easily catered for. State or public ownership became an anathema. Instead, privatisation was lauded, in terms of ‘private sector discipline’ or ‘efficiency’. But this same privatisation threw millions out of work and wrecked regional economies within the UK.
To regulate ‘natural monopolies’ such as water and sectors that provide for the public good like education, government ‘regulators’ were created – Water Services Regulation Authority (Ofwat) for water and Office for Standards in Education, Children’s Services and Skills (Ofsted) for education. The theory is that these regulatory bodies substitute for the market competition that is absent from monopolies. They should restrict financial profit and encourage investment in the longer term. They might even consider the impact of economic activities on human welfare and the environment?
Failures of the modern regulatory state
A recent human tragedy should make us all sit up and think. It is the death of respected head teacher Ruth Perry following an Ofsted inspection, as reported in the local press and this newspaper. This has made many both sad and angry. Thatcherism made enemies of many of good intent who saw themselves as public servants.
Although teachers don’t tend to warm to school inspectors (as a hairy young teacher, neither did I!), inspectors have a role to play in regulation and with it a responsibility to behave in a professional manner. I therefore asked two friends, both respected (now retired) head teachers at primary schools, what they had to say about Ofsted and their fellow travellers. Their more printable comments suggest a cri de coeur for supportive action by school inspectors following an unfavourable inspection. For a start, blunt reporting of unsatisfactory aspects of school activities requires serious attention, and it destroys both people and careers.
It will, of course take some time for this dreadful outcome of a simple school inspection to seep into the policy makers’ consciousness, but it should so do. As a former school teacher who subsequently became interested in both water and agriculture as industries, it is the failing of regulation, and hence the ‘regulatory state’, that grabbed my attention. The discharge of sewage to our rivers, lakes and seas remains totally unacceptable.
State intervention can work
In a market economy, and where state intervention is a dirty word, a form of market failure occurs because there is a monopoly supplier of some good. There can be no true market competition when the consumer cannot practically go to another supplier. Once, there was no shame in this because a public good could be achieved by public organisation of an industry. Famous is the activity in Birmingham where the controversial (in his day) Joseph Chamberlain (dubbed the “gas-and-water Socialist”) undertook effective development of utilities in that developing industrial city.
Another example: Intervention in agriculture never reached public ownership of land, but the activities of farmers have long been the subject of intervention through advice, grants, support of product prices (this is no longer the case), and payments for producing environmental goods. Effective reduction of adverse impacts linked with benefits to farmers calls for participation of all concerned.
What to do?
Where privatisation has failed, new models of ownership and regulation for key industries and services must be sought. Failure of water privatisation, manifest in poor investment, continuing widespread pollution, rising costs to the consumer and serious reductions in budgets to the Environment Agency (EA). This has culminated in public disgust around sewage discharges to inland waters and at the coast. One statistic gives a 29-fold increase in discharges to rivers over five years making some urban rivers effectively extensions of sewerage networks. Many such incidents, dreadful and irresponsible though they are, are technically legal. Even last year, the House of Lords debated these discharges and concluded that water companies’ profit (to which CEO bonuses are linked) was more important than clean rivers.
Full-scale re-nationalisation may prove difficult (this is left an open question), but the regulators have failed to ensure investment and improve service levels. The not-for-profit approach taken by Glas Cymru (Welsh Water), is one model. Compare this to Yorkshire Water, owned by a Jersey based consortium.
Whether the ‘Office for this or that’ approach to institutional regulation is still deemed appropriate, is also open to question. As we now know there are problems that fall nothing short of disgraceful. Certainly humanity, good service and protection have left the room under present regimes. If the Environment Agency (EA) cannot do its job due to poor financing of its monitoring and enforcement remit, then Ofwat has failed to make the water industry invest in sewerage management. Given the evidence, this cannot be denied.
Whatever the case, regulation of our goods and service providers is proving highly problematic. Anti-Thatcher foot-soldiers are taking a long, cool, historic view, having been on the side of the angels for about 45 years. In future we need to come up with humane – and practical – solutions. Ofwat has failed to take control of the profit incentive and not ensured the investment needed to protect our environment. Ofsted has failed to regulate on a wholly professional and very human level. Until recently, such failings in Thatcher’s state apparatus have been under the radar. This is no longer the case now!
Ed: Other sectors where regulation has failed include energy, railways and the NHS. Other readers of WEB may like to write something on these vital economic sectors?