Three Quarters Of British People Want To Re-Nationalize Utilities
According to a poll taken late last year, 77 percent of respondents in the UK wanted to re-nationalize all of Britain’s energy utilities. In addition, 83 percent of those surveyed wanted to renationalize the water utilities as well.
To a degree this seems like a repudiation of Margaret Thatcher’s great privatization experiment of the 1980s. She and her Conservative government privatized large swathes of the economy including the nation’s electric, gas and water utilities.
Unlike other industries which could become genuinely competitive, utilities remained monopolies. As a result they required something to protect the public against unlimited corporate pricing power. Prime Minister Thatcher, taking the optimistic view of good corporate intentions, sought to introduce genuinely competitive markets with way too few legitimate participants. Even Adam Smith wrote about what would inevitably happen.
We could call it “light handed competition”. This goes along with their pro-business policy of “light handed regulation.” Whether right or wrong, this corporate friendly concept swept the world of public policy on both sides of the Atlantic during this period. These ideas informed California’s reorganization of its electric utility sector. (Ugh!) And has influenced American utility policy ever since. Globally even an august institution like the World Bank genuflects at the shrine of light handed regulation and extols the virtues of public-private partnerships.
Maybe the UK privatization sentiment poll was wrong. But we see other signs.
When does it become clear that a particular public policy has begun to “hit the skids” so to speak? First sign: widespread public dissatisfaction, complaints about the level prices or the uneven delivery of services. Eventually this dissatisfaction reaches the politicians.
The present Conservative government UK, whose incoherent policies have helped mightily to push up energy prices, has at an inopportune time decided to forsake its adherence to competition and market-based solutions and advocate for price controls. It’s the only way they can pay for their planned fleet of high priced nuclear power stations.
The Labor opposition, also hewing to its traditional roots, has offered its solution: renationalize the utilities. This represents a marked departure from previous Labor government’s policies of accommodation with Thatcherite policies and a return to old time Labor orthodoxy.
Now we’re at the stage were the intellectual adherents are all almost about to say they were misinterpreted or whatever tiptoeing towards the exits looks like in these circles. Political support starts to peel away. A noted energy economist recently wrote a report for the government highly critical of the electricity in-dustry and its rather lax regulatory structure. An ex-regulator even went so far as to accuse the regulatory establishment of not being adequately pro consumer.
Then follows the fatal cut, possibly. Well, maybe that is too dramatic for a full page exposé in the Financial Times, Britain’s (and maybe the world’s) most prestigious financial paper, a stalwart of old-style liberal (i.e. conservative) economics.
The article (on January 23) was entitled THE BIG READ: PRIVATISATION REVISITED. The not so subtle conclusion? “Britain was once the pioneer in privatisation but now many people believe that investors have run rings around regulators. That has prompted a rethink about how public utilities should be managed.”
Let’s begin with the admission. The intellectual linch pin of price cap regulation, the incentive regulation formula, was devised in only two days. And, contrary to more than a century of prior regulatory practice, the Thatcher government would not countenance any limit on utility corporate profits because that was “socialism”.
