Rebecca Lowe is Director of FREER—a new initiative promoting economic and social liberalism, based at the IEA, where she is a Research Fellow. She is also an Assistant Editor of ConservativeHome.
The increasing usefulness of the term “Manichean” counters George Orwell’s excellent advice about choosing short, simple words, wherever possible. Its stretchy, almost mystical implications suit a dualistic age of subjective emotion over objective fact, painted caricature over proven reality, and shouted assertions over reasoned argument. Yes – I’m purposefully being dramatically Manichean about modernity: after all, even our assessments about how very bad or very good things are seem suitably cleaved.
That this is true in discussions about the economy is unsurprising. Economics is about picking between options, which means people often think of it as black and white. But it’s not, of course. For a start, we all know that Britain — like most places in the world — has a mixed economy: we don’t have completely free markets; there’s no complete government control. People on both “sides” might like to claim otherwise, for rhetorical gains, but of course it’s a mix, and, realistically, it’s going to remain that way. Unless, you shout, John McDonnell gets his way!
The growing debate about “nationalisation versus privatisation” typifies these days of fighty dualism. For a start, such terms are rarely clarified. There are important differences between owning something, making overall decisions about it, making everyday decisions within it, working in it, and gaining from it. There’s also much political obfuscation about these differences. Many of the problems that certain politicos claim could be fixed by “nationalising” certain industries, for instance, are truly problems of state interference; proper liberalisation is, all too often, what’s actually missing. And just like those politicians who suffocate their sinecure seats by pretending things have never been worse, those who blame failures on incorrect “causes” worsen the lives of the people they serve, trampling on their welfare and opportunities, in order to stay in power.
A great example of this relates to the railways. Sure, they’re beset by many problems. But it was darkly funny to see Labour MPs claiming on Twitter that nationalisation could fix signals failures en route home from their party conference, when track infrastructure is, of course, owned and controlled by the state, with Network Rail basically acting as both a monopoly and a monopsony. The division between “track and train”, and the crazy state-run franchise system, with its price controls and disincentives for investment, hardly make the model of a freedom-based utility general. Now, those quasi-privatised bits have had their successes: more people use trains than ever, and cheap tickets are available at unusual times. But it’s not even as if the operators make much profit: it’s a relatively small amount of money, which would hardly (if it still existed) be spent on infrastructure improvements under state control, anyway. More likely, it’d be used to meet demands for NHS funding, and so on. Trains are a niche interest in the UK, after all — most non-drivers outside of London use buses instead.
Similarly, all this depressing talk about energy price caps not only defies economic logic, it also implies that the problems we face here relate to the free market “running out of control”. This caricature is somewhat surprising, yet again, when used to depict a highly regulated, varyingly subsidised, and other ways state-infiltrated system, with a few big players, who love and push for its high barriers to entry. This system has little space for innovation driven by risk, and will only become more inflexible with the introduction of caps, which will push up prices — as ever, costing the poorest (and least informed) the most.
Then there are the arguments in favour of nationalising failure. One of the biggest myths we economic liberals urgently need to dispel is the topsy-turvy suggestion that we support “crony”-type capitalism: the kind of system that prevents the innovation that stems from competition and drives down prices. And that we favour the state interventions that protect only those who are “too big to fail”.
Sure, there are often strong political reasons for politicians to try to prevent industries or organisations from failing: that doesn’t mean that doing so is fundamentally the right thing, however, or that it’s beneficial to society. In Saving the X Industry, Henry Hazlitt neatly explains how X can benefit from such a move, “only at the expense of the A, B and C industries”. Taxpayers lose out, other workers suffer, other parts of town decline, and other parts of the country, too. One of the beauties of the genuine market is that, whether or not you yourself like its results, those results are fairer across the board; powerful interest groups can’t lobby the market, directly. Yes, we can argue all day about fair access to the market in a time of global capital, but, for now, let’s focus on the nation state. We’re talking about nationalisation, after all.
These debates always return to the same question: would the state do it better? We can offer case studies from history or international comparison: the struggles and costs of governments trying to allocate resources; the improvements to services, price reductions, and new technologies and ideas that flourish with true competition and all-round access to clear information. But there’s another underlying question: should the state be getting involved, at all, regardless of the consequences of doing so?
All too often, nationalisation equates to centralised, bureaucratic control: the idea that a small set of people, mostly likely in London, know what’s best for over 60 million others. Yes, these policies tend to X-inefficiency, and those other well-known problems touched on above, as well as being extremely expensive to enact, beset by legal problems, and so on. But nationalisation’s Westminster-centricity problem is worthy of the inclusion of “national” in the word. And that’s an issue in itself.
Unless you’re genuinely an anarchist, there’ll be some things you think the state should control, or own, or whatever. Life isn’t neatly Manichean, after all. A monopoly on legitimate force — or defence — is the standard example, and there are endless debates about what else fits into that category: what should truly be considered a public good, and so on. But again, the “national” point comes back. Even if you think something is best provided, or controlled by the state, that doesn’t necessarily mean “the state” should always mean London — potentially hundreds of miles, both literally and figuratively, away from what shapes your personal package of public goods requirements.
Locally-driven solutions, on the other hand — even those involving state actors — might give you some more control over your own life. We urgently need to discuss the way in which the so-called “localisation” agenda of the past decades has mostly been a sham, involving the decoupling of revenue raising from spending, and the general imposition of centralised control on local “decision” makers. That’s what we should be thinking about, rather than obsessing over a return to the 70s, or the 80s. We need to think afresh, not only in terms of desirable economic consequences, but also regarding the political legitimacy that comes from respecting each of us as individual creatures, capable of our own decisions and demands.