'Demonopolisation': Thatcherism as though entrepreneurs really mattered

A poll found last week that only 26% believed public utilities were best run by private companies answerable to shareholders. Fully 61% thought they were better off located in the public sector.

This is a pretty resounding 'no' to the policy that came to define Thatcherism. It should also give the Government some pause given they are now planning another round of privatisation (£).

I think it is fair to assume that one key element behind the public hostility must be that those public utilities now in private hands are dominated by a small handful of companies that are disliked and distrusted. Firms that are seen as treating their customers as cash cows and offering poor service rarely win widespread public affection.

Despite the rhetoric of popular capitalism, Thatcher was better at delivering the capitalism part than the popular part

The problem originates back in the 1980s themselves when privatisation was delivered in such a way as to effectively replace public sector monopolies with private sector oligopolies. Despite the rhetoric of popular capitalism, the Thatcher era was much better at delivering the capitalism part than the popular part. Privatisation as it turned out was really a gift to a select group of big businesses rather than to a wider group of entrepreneurs and the general public. If the above poll is anything to go by, the result (as one might expect of an oligopolistic situation) is services delivered by organisations that are barely less remote from their customers’ interests than the public sector leviathans they replaced.

Given that harnessing the enormous power of popular innovation, enterprise and competition is a sound route to better products and services, the key question must be: can privatisation be done in a different way to prevent the rise of oligopolies and monopolies?

 The Big Four Monopolies

We could do much worse here than look to the great nineteenth century opponent of monopoly, Benjamin Tucker.  Tucker identified four areas of deeply embedded (and almost unquestioned) state-led practices that he felt kept business big in size but small in number and which effectively prevented a wider flourishing of entrepreneurialism and thus a fairer distribution of wealth and power.

The ‘Big Four’ for Tucker were: 

• The protection offered to big banks through strict controls over who can issue currency and credit;

• The protection offered to big landowners by the enforcement of titles of ownership even if the owner has no link nor interest beyond the rent they can secure from the land;

• The protection offered to domestic companies through tariffs and subsidies;

• The protection offered to holders of intellectual property through patent and copyright law.

Others have noted that Tucker’s list is probably too short but nevertheless it is remarkable to note that (with the possible exception of tariffs), state intervention in these areas is as active now as it was when Tucker was writing in the 1880s. Were he alive today, Tucker would probably argue that it is hardly a surprise that we still face huge problems in relation to the use of and access to credit, real estate and, increasingly, intellectual property given that regulation ensures that the playing field is still skewed towards bigger, established and wealthier organisations rather than the smaller entrepreneur.

Demonopolisation

This actually directs the eye to another flagship policy of Thatcher - deregulation. For while some in Government may obsess about labour market and workplace regulation, they actually ignore the deeply embedded laws and rules that protect oligopolies and which do far more to prevent market entry, diversity and competition and ultimately undermine the potential benefits of privatisation.

Tucker’s approach suggests that the focus of any policy to spread the benefits of the free market into previously restricted areas should be on the dismantling of the legal structures that protect monopolies and oligopolies wherever they appear not primarily on the mere shifting of ownership from the taxpayer to shareholder. Demonopolisation rather than privatisation should be the goal.

Put another way, it is hardly worth privatising if such a process does not go hand-in-hand with a wider effort to challenge the legal and financial eco-system that favours big, established businesses over the small.

As the references to a long-dead political writer reveal, this is hardly a new area. But it seems to me to have added resonance today. If we are potentially on the brink of an entrepreneurial (or maybe I should say 'venturist') revolution driven by radically lowered costs for start-ups then to repeat the mistakes of previous privatisations would be less forgivable now than it ever was.