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
Continued from previous page
But it was the Labour Party that pressed for nationalization of the major industries. Fabian socialists such as Sydney and Beatrice Webb, George Bernard Shaw and other wealthy opinion-makers typified the degree to which many of Britain’s leading upper-class intellectuals supported nationalization as a cure for the ills of industrial capitalism. Indeed, the aristocracy underwent a schooling in personal economic values that resembled of those of ancient Greece and Rome in their disdain for the idea that one’s life should be devoted to so lowly a purpose as commercial gain-seeking.
Britain’s government was controlled about half of the postwar period by the British Labour Party, which in turn was controlled by the trade unions. This gave the unions more political power than in any other country. Conversely, the Labour Party’s strength was based on the unions. Most workers employed by the public utilities and other government enterprises belonged Transport and General Workers’ Union (TGWU). Although the number of individual party members was relatively small, all of the TGWU’s approximately one million members were deemed to belong simply by virtue of their union membership. The union’s general secretary cast their votes as a bloc at the Labour Party’s annual convention.
Trade unions were given broad privileges in 1906, subsequently restricted by the Trade Disputes Act of 1929 passed largely in retaliation against the 1926 general strike. This act made it mandatory for union members to opt in to the payment of the union’s political levy to the Labour Party. After World War II the rule was changed to give unions a right to opt out of paying the political levy. This had the ironic effect of placing the Labour party finances more firmly in the hands of the union leaders. At the Labour Party conferences these leaders voted on behalf of all their members who had paid the levy. The TGWU thus was placed in a position to cast one million of the party’s roughly six million votes.
Labour endorsed the nationalization of industry so as to serve the interests of workers. As noted above, Clause Four of its 1918 constitution (added in 1919 in the aftermath of World War I) called for the state to control the means of production, distribution and exchange. In 1945 the incoming Labour government nationalized the gas and electric utilities, as well as most transport lines that remained municipally or privately owned. Nearly all were run at a loss, which duly was covered by public subsidy.
World War II had been the great catalyst for faith in public ownership and national planning. Some four-fifths of Britain’s gross domestic product (GDP) was commandeered by the government. By the end of the 1940s most utilities and natural monopolies were in public ownership at the national or local level, or (as in the case of water) were held by public companies with restricted returns for the owners of their equity shares. The coal mines, gas and electric utilities, road transport and railways all were nationalized. The foundations and basic cost structure of Britain’s economy thus were shaped by these public utilities, public housing and socialized medicine, not to mention British Petroleum (BP) and, in time, the government’s North Sea oil holdings. And in due course the automotive, steel and aircraft sectors were rescued from collapse by being nationalized, henceforth to be run at heavy losses subsidized by taxpayers.
Clement Atlee’s Labour government of 1945-51 cited five reasons for nationalizing British industry. As Mrs. Thatcher’s Treasury Chancellor Nigel Lawson. has summarized, the first reason was to improve industrial relations. In practice, he retorted, this meant caving in to the trade union leaders, especially inasmuch as a second objective of postwar nationalization was to ensure full employment. The effect was to inflate wage rates through make-work programs and featherbedding.