Nationalisation!
So here it is, a 1000 word essay on the topic of nationalised industries the pros's and con's as I see it.
In terms of the national collective memory, nationalisation is a dirty word. To people of my generation it conjures up images of industrial strife and decay. The period is often summed up by the poor cars that were built. The Morris Marina and the Austin Allegro. These were often poorly made never mind poorly designed. also it was estimated that British Steel lost £1000 a minute during the late seventies. So all in all by the 1980's the nation had a very poor attitude towards nationalised industries.
The argument has arisen again in the UK because of the privatised railway system and to a lesser extent the provision of specific NHS services by private companies for profit.
So why would you nationalise an industry in the first place? The history books will tell you that post war democratic socialism saw it as a means of transitioning from capitalism to socialism by removing capitalists from industry. However in this day and age it is usually about saving a bankrupt industry (financial crisis of 2008 and the nationalisation of Northern Rock) and situations where there is a clear national interest.
The advantage to the industry is that they are largely freed from their debt burden, as the tax payer shoulders it. The second advantage is that the industry can access vast amounts of resources.
Many companies become bankrupt by growing too fast and running out of cash flow. Not being able to access loans and or cash could result in business opportunities (retooling or Research and development etc) being lost. A nationalised company has little such worry when it comes to cash flow.
The problem for nationalisation are the politicians.
Where to start?
There is an apocryphal tale about a truck factory in old Soviet Union. The USSR used to have a series of 5 year plans whereby progress was set out in a document and time scaled with clear objectives for that period. Unfortunately some bright spark in the Kremlin decided that lorry production would be measured in terms of gross tonnage. The outcome was that if the truck factory started slip behind in it's production tonnage, it just built heavier trucks. So much so that at times these were the heaviest trucks ever built!
When the Conservative government of the 1980's and early 90's decided that not only would we use less coal for industry and power (helped in part by the need to reduce greenhouse emissions but mostly to snub the miners) they would buy it on the open market. Many parts of the world produced cheaper coal by open cast mining but sometimes just good old poor working conditions. The coal industry was hung out to dry and whole communities had their raison d'etre ripped from them and so little was done to repair the damage. It should never have happened in a nationalised industry. Managed decline could have been possible at the very least
The point is that politicians and industry don't mix!
In the 1970's UK Industry became heavily politicised on two fronts. The first was it became a legitimate route to take on government policy. Note all the miners strikes and blackouts of the 1970's. Secondly, Governments or rather political parties seek election to high office based on their attitudes to nationalised industry. The NHS is the classic example here.
What nationalised industries, in my experience, do is produce gargantuan organisations that can find change difficult to manage. On the upside they can be released from the ups and downs of market forces and therefore provide a stable platform for customer and provider.
However if I had to jump one way or the other I would say that I am generally not in favour of nationalisation. There are exceptions to this rule. The NHS is better as a nationalised service, but I would stretch that to areas where public health is concerned. I was never in favour of privatising the water companies as a for instance. There are instances whereby the the need for safe provision of services outweighs the right to make a profit at it.
Nationalisation has come to the fore again recently as the government has been forced to run a bit of the national rail network. The North East line to be precise. The previous franchisee pulled out because it could not make a profit and pay the government the fee it promised when it was granted the franchise. Since running the line itself the operator has made a profit of £600 million for the government coffers. So the question has been asked, if it can do it here why can't it do it elsewhere and use that money for developing the network and paying for loss making parts instead of subsidies being used for private profit? At the very least it would be able to stave off the higher than inflation fare rises that have been announced.
The railways are also one of my exceptions. Railways have no history of making a profit since Victorian times quite honestly but the country needs the rail network as much as it needs a good road network. Nationalisation could work. So long as railwaymen (a term used to describe people, male and female, steeped in railway experience) get to run the railways with as little political interference as possible.
There is the added irritation at the moment that some rail franchises are receiving a large subsidy to continue a service. It seems faintly ridiculous that a line or group of routes is unable support itself financially so a company is paid to work the line and then effectively charges their profit margins to the tax payer
One of the problems nationalised industries have to overcome is HM Treasury. It is the practice of the Treasury not to ascribe a purpose to any income. There is just income and expenditure and in a perfect world the two match. What this can mean to a successful industry is that it sees it's profits swallowed into the national purse and that industry doesn't get to enjoy the fruits of it's labours
 |
| Nasty! |
In terms of the national collective memory, nationalisation is a dirty word. To people of my generation it conjures up images of industrial strife and decay. The period is often summed up by the poor cars that were built. The Morris Marina and the Austin Allegro. These were often poorly made never mind poorly designed. also it was estimated that British Steel lost £1000 a minute during the late seventies. So all in all by the 1980's the nation had a very poor attitude towards nationalised industries.
 |
| hahahaha! |
The argument has arisen again in the UK because of the privatised railway system and to a lesser extent the provision of specific NHS services by private companies for profit.
So why would you nationalise an industry in the first place? The history books will tell you that post war democratic socialism saw it as a means of transitioning from capitalism to socialism by removing capitalists from industry. However in this day and age it is usually about saving a bankrupt industry (financial crisis of 2008 and the nationalisation of Northern Rock) and situations where there is a clear national interest.
The advantage to the industry is that they are largely freed from their debt burden, as the tax payer shoulders it. The second advantage is that the industry can access vast amounts of resources.
Many companies become bankrupt by growing too fast and running out of cash flow. Not being able to access loans and or cash could result in business opportunities (retooling or Research and development etc) being lost. A nationalised company has little such worry when it comes to cash flow.
The problem for nationalisation are the politicians.
 |
| A right B'stard |
Where to start?
There is an apocryphal tale about a truck factory in old Soviet Union. The USSR used to have a series of 5 year plans whereby progress was set out in a document and time scaled with clear objectives for that period. Unfortunately some bright spark in the Kremlin decided that lorry production would be measured in terms of gross tonnage. The outcome was that if the truck factory started slip behind in it's production tonnage, it just built heavier trucks. So much so that at times these were the heaviest trucks ever built!
 |
| Light truck! |
When the Conservative government of the 1980's and early 90's decided that not only would we use less coal for industry and power (helped in part by the need to reduce greenhouse emissions but mostly to snub the miners) they would buy it on the open market. Many parts of the world produced cheaper coal by open cast mining but sometimes just good old poor working conditions. The coal industry was hung out to dry and whole communities had their raison d'etre ripped from them and so little was done to repair the damage. It should never have happened in a nationalised industry. Managed decline could have been possible at the very least
The point is that politicians and industry don't mix!
In the 1970's UK Industry became heavily politicised on two fronts. The first was it became a legitimate route to take on government policy. Note all the miners strikes and blackouts of the 1970's. Secondly, Governments or rather political parties seek election to high office based on their attitudes to nationalised industry. The NHS is the classic example here.
What nationalised industries, in my experience, do is produce gargantuan organisations that can find change difficult to manage. On the upside they can be released from the ups and downs of market forces and therefore provide a stable platform for customer and provider.
However if I had to jump one way or the other I would say that I am generally not in favour of nationalisation. There are exceptions to this rule. The NHS is better as a nationalised service, but I would stretch that to areas where public health is concerned. I was never in favour of privatising the water companies as a for instance. There are instances whereby the the need for safe provision of services outweighs the right to make a profit at it.
 |
| IC125 |
The railways are also one of my exceptions. Railways have no history of making a profit since Victorian times quite honestly but the country needs the rail network as much as it needs a good road network. Nationalisation could work. So long as railwaymen (a term used to describe people, male and female, steeped in railway experience) get to run the railways with as little political interference as possible.
There is the added irritation at the moment that some rail franchises are receiving a large subsidy to continue a service. It seems faintly ridiculous that a line or group of routes is unable support itself financially so a company is paid to work the line and then effectively charges their profit margins to the tax payer
One of the problems nationalised industries have to overcome is HM Treasury. It is the practice of the Treasury not to ascribe a purpose to any income. There is just income and expenditure and in a perfect world the two match. What this can mean to a successful industry is that it sees it's profits swallowed into the national purse and that industry doesn't get to enjoy the fruits of it's labours
Conclusion
As a general rule governments should not interfere directly with commerce in the form of nationalisation. The Industries we have tried it on have not prospered in the long term. Despite access to greater resources and the ability to take a patient, nurturing view and not pander to short term rewards, British nationalised industries have died a long and painful death. (Well a few exceptions - Rolls Royce aero engines, BP, BT)
On the other hand, where making a profit is not the foremost concern of an industry (i.e. health), nationalisation can be a force for good relieving the powers that be from making moral choices based on the ability to turn a buck. I am proud to work in a national health service where the choices for treatment are based on what is in the best interests of the patient and not what they or their insurance company are prepared to pay for!
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