Privatisation slows down worldwide

Has the money lost heart, or is it the bureaucrats?

Via Richard Murphy comes this Financial Times piece (£), suggesting that privatisation may be declining globally:

The pace of privatisation around the world has slowed sharply, with an unprecedented number of asset sales delayed or cancelled amid volatile markets and political uncertainty.

Despite governments across the globe continuing to hoist for-sale signs over state-owned enterprises ranging from airports to electricity networks, the number of completed deals last year was less than half the 2010 figure, according to the Privatisation Barometer, a joint project between KPMG and Fondazione Eni Enrico Mattei, a Milan-based research institute.

The report (pdf) offers the explanation that last year was one of "global financial retrenchment", prompted by the Eurozone crisis and the fight in the US over the debt ceiling. It offers, as a "dramatic" example of the former:

The Spanish government['s] forced cancellation, literally days before execution, of what would have been 2011’s largest privatization — the October sale of 30% of the national lottery, Loterias y Apuerto del Estado, which would have raised over €7 billion ($9.7 billion) — and the near-coincident delayed (not yet renewed) sale of the Madrid and Barcelona airports that could have raised more than €5 billion ($6.9 billion).

The explanation leaves something to be lacking, however. If, as the report argues, the Eurozone crisis was one of sovereign debt, then it ought to have led to more, not fewer, privatisations, given that they are one of the most effective ways for a nation to raise in a short period of time the amount of cash necessary pay down debt.

Similarly, the big economic story of the last year has been the flight to safety, which has led to the reverse-sovereign-debt-crisis being experienced across much of the world, as well as little quirks like RORO. That too ought to lead to greater, not lesser, privatisation, since taking control of an established monopoly is a pretty safe investment. So long as a company doesn't completely misjudge how much it can make from a utility (looking your way, GNER), it's hard to fail when buying out the state (hard to fail, that is, from a financial point of view. Very easy to fail when it comes to actually providing services).

I think the best explanation is that privatisation is becoming uncool, not for economic reasons, but for political ones. States simply don't want to take the unpopular move of handing over control of their services to the private sector. Whether this is good or bad depends on the specific circumstances (as with Matt Yglesias, I think a well-thought-out mutualisation of the US Postal Service could do wonders, but the sale of Madrid and Barcelona airports risks creating the nation's own version of BAA), but Murphy thinks there is something to celebrate anyway:

Let’s hope that there might also be a realisation implicit in this that people now realise that it’s not just banks that can be too big to fail, but that much else that we depend upon is also too big to fail, and needs to be state run to ensure it survives as a result.

Barcelona airport, following a protest by cleaners. The airport was due to be privatised this year. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Who will win the Copeland by-election?

Labour face a tricky task in holding onto the seat. 

What’s the Copeland by-election about? That’s the question that will decide who wins it.

The Conservatives want it to be about the nuclear industry, which is the seat’s biggest employer, and Jeremy Corbyn’s long history of opposition to nuclear power.

Labour want it to be about the difficulties of the NHS in Cumbria in general and the future of West Cumberland Hospital in particular.

Who’s winning? Neither party is confident of victory but both sides think it will be close. That Theresa May has visited is a sign of the confidence in Conservative headquarters that, win or lose, Labour will not increase its majority from the six-point lead it held over the Conservatives in May 2015. (It’s always more instructive to talk about vote share rather than raw numbers, in by-elections in particular.)

But her visit may have been counterproductive. Yes, she is the most popular politician in Britain according to all the polls, but in visiting she has added fuel to the fire of Labour’s message that the Conservatives are keeping an anxious eye on the outcome.

Labour strategists feared that “the oxygen” would come out of the campaign if May used her visit to offer a guarantee about West Cumberland Hospital. Instead, she refused to answer, merely hyping up the issue further.

The party is nervous that opposition to Corbyn is going to supress turnout among their voters, but on the Conservative side, there is considerable irritation that May’s visit has made their task harder, too.

Voters know the difference between a by-election and a general election and my hunch is that people will get they can have a free hit on the health question without risking the future of the nuclear factory. That Corbyn has U-Turned on nuclear power only helps.

I said last week that if I knew what the local paper would look like between now and then I would be able to call the outcome. Today the West Cumbria News & Star leads with Downing Street’s refusal to answer questions about West Cumberland Hospital. All the signs favour Labour. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.