Privatisation and the Fiscal Crisis of the State: Thatcher Contra Offe and O'Connor?

Date01 April 1987
Published date01 April 1987
DOI10.1111/j.1467-9256.1987.tb00268.x
Ws
(1987)
7.
29-34
PRIVATISATION
AND
THE FISCAL CRISIS
OF
THE STATE: THATCHER CONTRA OFFE
AND
O’CONNOR?
Steven
Young
PRIVATISATION of the nationalised industries, scarcely acknowledged
as
part
of the Conser-
vative agenda in the Party‘s
1979
manifesto, continues
a
pace.
By
March
1986
the market value
of asset disposals had reached
f8
billion, with a
E13.25
billion queue of state enterprises and
utilities lined up for disposal before the next election. Plans to take the British from Leyland,
or
privatise
water
have shown that even the kitchen sink is not immune from the Treasury‘s
covetous eye. With the OPEC cavalry unlikely to come
to
the rescue of falling government
revenues (proceeds
from
oil taxes down by
an
anticipated
f
5
billion in
1986),
the Chancellor‘s
desperate attempts to Salvage long promised
tax
cuts,
squeezed
by
a tight
PSBR,
ensures the
continuing disposal of state assets. Despite past hiccups, the water authorities and
Royal
Ordnance Factories, by
the
next election,
40
per cent
of
public
sector
assets will have been
transferred to the private sector.
Privatisation is redrawing the ideological and political map, eroding the foundations
of
the
post-war settlement Labour,
tom
between the financial costs
of
renationalisation with com-
pensation, or the political costs of straightforward sequestration,
has
made a policy of not hav-
ing a policy. But while the political and ideological consequences of privatisation are begining
to emerge (on a worldwide scale,
as
increasing numbers of countries look to privatisation
as
a
panacea for economic ills) what have been effects on the post-war relationship between the
state
and capital in Britain? SpeCificaUy,
can
the concrete realities of privatisation be explained
by
‘fiscal
crisis’ theories-variants of which came
from
O’Connor and Offe in
the
radical comer,
and Bacon
&
Eltis form the free market side.
The
Problem
of
Fiscal
Crisis
For
O’Connor, the state’s
two
main functions
are
maintaining/aeating the conditions for
profitable capital accumulation, and rnaintainingkreating the conditions for
social
harmony.
The state’s ability
to
discharge these functions depends on the possibilities generated in
two
spheres of operation. The
first
concerns the legitimate
arena
for value (commodity) produc-
tion, while the second involves the state’s
fisd
position. The result can be a self or mutually
contradictory relationship
within
and between the
two
levels (O’connor,
1973,
p
6).
The cen-
tral
tension is between the state’s need for revenues to maintain the conditions for capital
accumulation and the processes of legitimation, and capital‘s ability
to
enjoy unaammelled
production for value.
The state’s repertoire
of
solutions to increase revenues includes raising taxes, issuing debt
and borrowing against future
tax
revenues (inflation financing),
or
establishing profitable state
enterprises. The problem of state expenditures outstripping revenues
was
postponed (and
exacerbated) in the
1960’s
and early
1970’s
by the inflationary bargaining of corporatism. But
with the changed balance of political forces, the emphasis has now switched away from
fisd
solutions, which reduce the private sector‘s potential for value production, to solutions which
lower costs and hence, ameliorate fiscal crisis. According
to
OConnor,
this
gives
three
choices:
1)
development of a ‘social industrial complex’ to expand productivity throughout the
economy
2)
wage and price controls to restrain costs
3)
managed recession to deflate the whole economy.
1)
and
2),
essentially social democratic solutions, are precluded by the
free
market ideology of
the current British government, which has plumped for the third option. But
as
well
as
the
designed effect of slowing the increase in money wages,
and
hence labour cost& managed
recession also reduces
aggregate
wage and profit income, lowers the
tax
base and cuts into
tax
receipts. The Thatcher government has found itself in the position where
‘recession
creates

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