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Proposal #8

Extend Public Ownership

Danny Nicol

29 June 2018

Contrary to mainstream “Corbynista” opinion, the problems of capitalism cannot be resolved merely by an anti-austerity level of state spending. Structural change in our economy is necessary to create the egalitarian society craved by the British Left.

A national economic plan

 

The greatest liberation in leaving the European Union, the customs union and the single market will be that Britain regains sovereignty over public ownership. A nation isn’t a democracy if it cannot decide for itself what should be in public ownership and what should be in private ownership. Yet this is the situation in the EU and in the European Economic Area (EEA). By breaking free of the EU’s and EEA’s extreme-capitalist chokehold – and always assuming that we don’t become enmeshed in some bespoke agreement with the EU which restricts public ownership – we secure the freedom to decide for ourselves the extent of public ownership in Britain. We should take advantage of this freedom to create a national economic plan based on public ownership which will bring about growth, full employment and a shift in wealth and power in favour of working people.

 

There has been much debate over whether Corbyn’s programme is possible within EU law. But this is entirely beside the point. We need a far more radical programme. And this would not be permitted within the EU nor within the EEA because of their entrenched corporate freedoms, prohibitions on public monopoly and on nationality discrimination, and restrictions on state aid.

 

Yet freeing ourselves from these legal restrictions is not enough. There needs above all to be a change of mind set. We have to break free of the Margaret Thatcher-Tony Blair mentality that “There Is No Alternative” to an economy based on private ownership. This ethos has dominated British politics for the last four decades. And as a result wealth has shifted from the many to the few as governments have fostered a globalised economy in which decisive economic power is concentrated in fewer and fewer hands.

 

Britain needs a national plan for the economy which has the objective of economic expansion, providing higher levels of employment, rising living standards and improved public services. The plan should aim to introduce a far greater level of substantive economic equality. It would need to cover the entire field of economic development – ranging from rebalancing the roles of the financial and manufacturing sectors in our economic mix, regional policy, forward planning of labour supply and skills, present and future housing needs and health service provision. The plan also needs to incorporate a radically redistributive tax system which maximises the tax-take from large corporations and the rich.

 

The national plan’s significance is not just economic but political. It is needed for the British Left to recover its ideological power. We presently occupy a political environment in which there is no imaginable alternative to neoliberal capitalism. Indeed, capitalism presently seamlessly occupies the horizons of the thinkable, even in the minds of the young, such that the lack of alternatives to capitalism is not even an issue.[1] Many people recognise neoliberalism’s iniquitous nature but are not moved to oppose it since no popular alternative has cohered enough to gain the critical mass to challenge it.[2] Under these conditions only a transformative plan can galvanise the Left. Labour’s present shopping list of disconnected “nice-things-to-achieve” will not do so, and will easily get knocked off course.

 

“Utilities”: the clamour for nationalisation

 

The means to achieve the national plan is public ownership. No doubt this is why the economic and political elite have spent decades denigrating and marginalising public ownership and fashioning supranational prohibitions on its extension. Yet even in the narrow field of “public utilities”, public ownership has never been more desperately needed. The chaos on our railways, the unending swindle of gas, electricity and water provision, the institutionalised rip-off of private sector intrusions into NHS, local authority, prison and social welfare roles have generated numerous national scandals. The bigger picture is that privatisation was a means to an end: to enrich the economic elite, as the super-rich became increasingly dissatisfied with the mild egalitarianism of the 1945-79 “mixed economy”.[3]

 

For some, privatisation on a national basis was not enough. Neoliberal leaders, notably “New Labour” ones, were impatient to place privatisation on a firmer footing by enshrining it in the EU’s series of liberalisation directives, which compel governments to retain the market system in gas, electricity, rail, mail and telecommunications. These directives – which also form part of the EEA – make it impossible for national governments to reverse privatisation since they rule out 1945-style sectoral nationalisation – an outrageous curtailment of our national democracy.[4] Once free of this neoliberal straitjacket, it is essential that Labour takes advantage of Britain’s new freedom to nationalise these sectors in their entirety so that they may be run in the public interest.  

 

This does not mean replicating the “Morrisonian” nationalisation of the 1940s. We can do better than that. A new model of public ownership needs to be more answerable to Parliament, more responsive to staff, and more sensitive to the general public. Above all, the publicly-owned undertaking needs to be made responsible for playing its part in a national plan. As Costello, Michie and Milne have observed, the real failure of Britain’s nationalised industries was that they were never used as a lever to change the way the economy was run. No Labour government ever used the national industries as a springboard for planned investment and growth.[5]

 

We should also give short shrift to the objection that public ownership will be unaffordable. Governments may, as in the 1940s, compensate private owners by issuing non-redeemable bonds. The government has to pay out interest on these bonds, but it also gains the profits of the nationalised industries.[6] If we are told by the European Court of Human Rights that compensation via bonds is incompatible with the fundamental right to private property then let us defy the Court, as we did over prisoner voting. There is more than one interpretation of human rights.

 

Beyond “utilities”: more extensive nationalisation

 

There is no compelling reason, however, why the limits on public ownership should be set by the 1945-79 social democratic consensus. After all, in reality very many industries are really “utilities”. If gas, water and public transport are “essential public services”, then why too aren’t supermarkets, banks, and the production of food and white goods?

 

Moreover we need public ownership to become the dominant form of property ownership in Britain if the national economic plan is to succeed. Large-scale industrial restructuring and expansion will be impossible without an extension of nationalisation into all major sectors of the British economy. In this regard we need to learn the lessons of the failure of British social democracy, which was never magnificent and which ended ignominiously with the winter of discontent – the industrial action of 1978-9 which led to 40 years of neoliberal rule. The then Labour government came unstuck because of the impossibility of serving the working class interest within the framework of a capitalist economy. That basic incompatibility led to unrest and the government’s downfall. This was catastrophic, ushering in a protracted period of reaction which endures to the present day. For their part, the Blair and Brown governments made no attempt to resurrect the failed post-war consensus. Instead they addressed the contradiction between working class interests and capitalism by supercharging Thatcherism rather than discarding it.[7] New Labour largely avoided industrial relations woes through Thatcher-style methodology: keeping the unions weak and introducing an unlimited labour supply from Eastern Europe.

 

With the economic elite determined to resist any shift towards egalitarianism a rehashing of social democracy is therefore no longer really an option for the British Left, no matter how many Corbynistas may kid themselves otherwise. This is why the Left needs to develop policies which shift economic power from the “One Per Cent” to democratically elected governments. Public ownership is the only way of doing it. The Labour Party therefore needs to reconsider its stance on extending public ownership. A sensible starting-point would be to revive the demand for outright ownership of at least one top company in each economic sector. This would give the government the knowledge of how the industries work as well as their cost and demand structure. Such information would enable the government to draw up compulsory planning agreements with those industrial giants remaining in the private sector to ensure that that they play their part in the national plan, as well as giving a measure of direct control over each industry.

 

Two candidates for more extensive nationalisation, however, would be the financial and construction sectors. The banking crisis of 2008 condemned British society to a decade of austerity and widened the gap between Britain’s haves and have-nots. The rather obvious conclusion is that it is simply not safe to have the financial sector in private hands. The profit motive – which manifested itself in the sector’s calamitous embrace of sub-prime mortgages – is inappropriate for a sector on which the entire economy relies and which therefore needs constantly to operate in the public interest. EU and EEA rules prohibit a public banking monopoly since they confer on corporations from other Member States directly-effective rights to establish branches and subsidiaries and to provide services in any Member State. These fundamental rights would be rendered meaningless if governments were allowed to eject companies from national markets through sectoral nationalisation. Leaving the EU and EEA will free Britain from these restrictions. Yet instead of demanding a public monopoly in banking the Left leadership seems content to allow the sector to remain in private hands, regardless of the horrendous damage it is likely to do in the future. The status quo has so far won by default merely because the Left has been too meek to make bank nationalisation its clarion call.

 

By the same token, contemporary British life is dominated by a severe housing crisis which is having terrible social consequences outside the family circles of the well-to-do. It is clear that the private-sector construction giants are interested only in profit that leads to social cleansing, not social housing. If the underprivileged majority of the British people are to be adequately housed within a reasonable time, this will require a massive public sector in construction. Even the Conservative Sir Oliver Letwin has envisaged a huge role for the State in helping construct the homes the country needs.[8] But State intervention, to be effective, would require the full gamut of extensive nationalisation, privileged treatment of the new public-sector concern by the government, and state aid. The public sector undertaking should be tasked with training, fostering and employing a predominantly British workforce which has votes to re-elect a Labour government.  Such a programme would have been difficult or impermissible in the EU and EEA,[9] and we need to take full advantage of Britain’s new autonomy as it becomes available.

 

The many diverse prohibitions on public ownership in the EU, EEA and other supranational agreements were put in place by neoliberal leaders determined to bind themselves and their successors to a privately-owned economy in which power lies durably with corporations and the super-rich. We need to sweep these prohibitions away – and use public ownership to fashion a fundamental reorganisation of our society.

 

References

​[1] See Mark Fisher, Capitalist Realism: Is There No Alternative? (Winchester: Zero Books, 2009).

[2] See Jeremy Gilbert, “What Kind of Thing is Neoliberalism?” in Jeremy Gilbert (ed.) Neoliberal Culture (London: Lawrence & Wishart, 2006).

[3] See David Harvey, A Brief History of Neoliberalism (Oxford: Oxford University Press, 2005).

[4] See Danny Nicol, The Constitutional Protection of Capitalism (Oxford: Hart, 2010).

[5] See Nicholas Costello, Jonathan Michie and Seumas Milne, Beyond The Casino Economy: Planning for the 1990s (London: Verso, 1989).

[6] See Campaign for Labour Party Democracy, The Case for Public Ownership (1986).

[7] See Simon Jenkins, Thatcher and Sons: A Revolution in Three Acts (London: Penguin, 2006).

[8] “War Spirit Needed to Fix the Housing Shortage and Save the Tories, Warns Letwin”, The Telegraph, 23 June 2018.

[9] See e.g. the effect of EU-EEA competition rules on public undertakings granted special rights, the prohibition on nationality discrimination in the field of public procurement, the supervision of state aids and the EU provisions on the free movement of workers. See generally Nicol, Constitutional Protection, ch.3 and Proposal #3 - Quit the Single Market.

 

About the author

Danny Nicol is Professor of Public Law at the University of Westminster.

 

This work represents the views of the authors only. It is licensed under a Creative Commons Attribution-

 

NonCommercial-NoDerivatives 4.0 International License. Published 29 June 2018.