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Margaret Thatcher Was a Privatization Pioneer, and This Is the Story of How Her Agenda Did Nothing But Make Life Worse for Millions of People

The one essay you need to read to understand what a pernicious ideology "free market" privatization is.

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As in Chile, privatization in Britain was a victory for Chicago monetarism. This time it was implemented democratically. In fact, voters endorsed Margaret Thatcher’s selloff of public industries so strongly that by 1991, when she was replaced as prime minister by her own party’s John Major, only 35 percent of Britain’s voters supported the Labour Party – half the proportion registered in 1945. The Conservatives sold off public monopolies, used the proceeds to cut taxes, and put the privatized firms on a profit-making basis. Their stock prices rose sharply, making capital gains for investors whose ranks included millions of Britons who had been employees and/or customers of these enterprises.

Yet by 1997 the Conservatives were voted out of office by one of the largest margins in their history. What concerned voters were the results of privatization that Mrs. Thatcher had not warned them about. Prices did not decline proportionally to cost cuts and productivity gains. Many services were cut back, especially on the least utilized transport routes. The largest privatized bus company was charged with cut-throat monopoly practices. The water system broke down, while consumer charges leapt. Electricity prices were shifted against residential consumers in favor of large industrial users. Economic inequality widened as the industrial labor force shrunk by two million from 1979 to 1997, while wages stagnated in the face of soaring profits for the privatized companies. The tax cuts financed by their selloff turned out to benefit mainly the rich.

Opinion polls showed that voters had opposed privatization at the outset (as did the press and many Conservative back benchers), but the Conservatives pointed out that Tony Blair rode to victory in part by abandoning “Clause Four” of the Labour Party’s 1904 constitution, advocating state control over the means of production, distribution and exchange. Most voters wanted tighter regulation in the public interest, but not a return to state ownership. On the other hand, they feared the prospect of selling off the post office, the BBC and the London tube (subway) system.

Nearly everyone agreed that companies were run differently in private hands than was the case under public ownership, even when the same managers remained in charge. Privatization was praised by Mrs. Thatcher and her allies – and blamed by many others – for managing these companies to generate capital gains for stockholders rather than to serve broader social ends.

Many people did not believe that essential public-sector industries should be run as commercial gain-seeking enterprises. Among the norms of public service, making a profit certainly was not one of the yardsticks used by the bureaucracy put in charge of these companies. Public-sector labor unions aimed more at maintaining employment than at producing revenue for the state as owner. The purpose of taxes, after all, was to subsidize basic services to the population.

This attitude had long been shared by many Conservatives, as well as by Labour. When Benjamin Disraeli created the Conservative Party in its modern form in the mid-nineteenth century (replacing the old royalist Tory Party), his major ideological adversary was not socialism but the free-trade liberalism that led Britain to repeal its protectionist agricultural tariffs (the Corn Laws) in 1846. Indeed, as a novelist Disraeli sought to expose the horrors of unbridled laissez faire. In Sybil, or The Two Nations, written in 1845 (three years before the Communist Manifesto), he described the rich and the poor as constituting “two nations between whom there is no intercourse and no sympathy, and . . . who are not governed by the same laws.” His novel assigned the loftiest ideals to Sybil, the daughter of a factory worker, but placed his hopes in a morally regenerate aristocracy. And in due course, Disraeli’s social welfare legislation, especially the public health system introduced from 1874 to 1881 (he said that his motto was Sanitas sanitatum, “Health, all is health”), helped the Conservative Party evolve as a nationalist and sometimes “state socialist” party, especially after World War II under Harold Macmillan in the 1960s and even Edward Heath in the ‘70s.

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