Leader: The end of national capitalism

No other major Western country has allowed so many of its strategic industries, assets and pre-eminent companies to fall into foreign ownership. 

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In their 1987 track “Shopping”, the Pet Shop Boys sang of Margaret Thatcher’s privatisations: “I heard it in the House of Commons: everything’s for sale.” More than three decades later, it remains true.

On 11 November, British Steel was sold to the Chinese firm Jingye for the paltry sum of £50m. The exchange was a familiar one. No other major Western country has allowed so many of its strategic industries, assets and pre-eminent companies to fall into foreign ownership. One thinks of Cadbury (bought by US firm Kraft in 2010), Jaguar Land Rover (acquired by India’s Tata Group in 2008) and Imperial Chemical Industries (sold to the Dutch company AkzoNobel in 2008). Britain’s leading football teams – Arsenal, Chelsea, Manchester City and Manchester United – are similarly foreign-owned and detached from their roots.

The majority of the UK’s rail franchises are run by foreign owners, including the French, German, Dutch and Italian states. And more than 70 per cent of the shares in England’s nine privatised water companies are held by overseas firms, including hedge funds and private equity companies based in tax havens.

There was nothing inevitable about this transformation. As the historian David Edgerton notes in his cover story this week, during the postwar era the UK pursued a distinctive form of national capitalism. “This national industry supplied the British people with nearly all their common infrastructure – railways, roads and energy – as well as their cars, TVs, aeroplanes and clothes.” The state enjoyed an expansive and entrepreneurial role, providing strategic direction and guidance. Manufacturing employment accounted for a greater share of employment than when the UK was the “workshop of the world” in the 19th century.

But from the 1980s onwards, Britain was progressively opened up to foreign capital and interests. New Labour and the Tory-led coalition that followed accepted all of Mrs Thatcher’s privatisations and even extended the market into realms in which she feared to tread (such as air-traffic control and the Royal Mail).

Overseas firms now account for 34 per cent of the turnover of non-financial businesses, and 50 per cent of the UK stock market is owned by foreign capital. The result is a cowed and enfeebled state, further debilitated by austerity, and the absence of anything resembling a national economic strategy.

This process is sometimes presented as unavoidable. Yet as the more dirigiste French and German economies demonstrate, other choices were available. Even the supposedly laissez-faire US maintains laws restricting foreign ownership of airlines and TV stations, and vetoed the attempted Chinese takeover of oil company Unocal in 2005.

Free-marketeers contend that ultimate ownership is irrelevant provided firms are well run. But the problem is that too often they have not been. The defects of the British economy – its lack of investment, its short-termism, its overdependence on finance – directly reflect its promiscuous approach to ownership and the absence of a national strategic vision or plan.

A 2017 study by the University of Greenwich, for instance, found that consumers in England were paying £2.3bn a year more for their water and sewerage bills than if the utility companies had remained in public ownership. Of the £18.8bn profit made by the nine firms in the decade to 2016, £18.1bn was paid out in dividends. The UK’s polarised and fractured politics is a reflection of its anarchic, free-for-all economy. Though many Conservative Brexiteers crave further liberalisation, the Leave vote was a symptom of voters’ desire for a more interventionist state that protects them from the chill winds of globalisation.

National ownership is not an invariable panacea. The state, as well as the market, can become a vested interest. Few are nostalgic for the era of British Rail. But a dogmatic preference for the private sector has not served the public interest. The United Kingdom remains a state united in name but wholly divided in spirit.

This article appears in the 13 November 2019 issue of the New Statesman, How Britain was sold