RIVAL EXPLANATIONS OF PUBLIC OWNERSHIP, ITS FAILURE AND PRIVATIZATION
| Date | 01 December 1994 |
| Published date | 01 December 1994 |
| Author | CHRISTOPHER FOSTER |
| DOI | http://doi.org/10.1111/j.1467-9299.1994.tb00805.x |
RIVAL EXPLANATIONS OF PUBLIC OWNERSHIP,
ITS FAILURE AND PRIVATIZATION
CHRISTOPHER FOSTER
This
article contrasts three
types
of
explanation of three events
-
the initial nationalization
of many British industries, mainly in the
19&,
the failure of most nationalized industries
to be economically successful by the
1970s
and
the privatization
of
most of them
in
the
1980s
and
1990s.
Its first section summarizes briefly an ordinary historical account of each
event as developed elsewhere at greater length
(in
Foster
1992).
The second section
considers Chicagoan and Virginian explanations
of
the
same events; and whether they are
consistent with the other historical explanations. It concludes that Chicagoan theories do
not explain any
of
these episodes plausibly, except possible rail nationalization, but in that
case it worked in any
sense
only over an implausibly long period. Virginian
type
expla-
nations have greater power
in
explaining both nationalization and its so-called ‘failure’
thereafter. It is more difficult to explain privatization satisfactorily in Virginian terms.
ORDINARY EXPLANATION
The
causes
of
nationalization
In
brief, my contention
is
that nationalisation, as
it
developed in Britain, was
essentially a response to the earlier market and regulatory failures of particular
natural monopolies (Foster
1992,
chs.
2,3),
using
natural monopoly in its tech-
nical economic sense of an industry where either at the national or the local
level, one enterprise can supply the product or service more efficiently than two
or more (cf., Sharkey
1982;
Berg and Tschirhart
1988).
By
this
definition
of
the
traditional basic industries which were also nationalized in Britain, neither coal
nor iron and steel are natural monopolies. Railways, roads, gas, electricity,
postal services (which were always a public monopoly), airports, telecommuni-
cations and broadcasting are such natural monopolies, or contain them, gener-
ally as a grid or network.
To
consider railway nationalization first, state development and ownership of
railways has always had some advocates
in
Britain (Bonavia
1986).
As
the
railways’ financial performance worsened from the
1880s,
more books were
written advocating its nationalization, contrasting high fares and rates on Brit-
ain’s railways with the supposed greater efficiency of state-owned railways
Sir Christopher Foster
is
Senior Public Sector and Economic Partner at Coopers
&I
Lybrand
Public Administration Vol.
72
Winter 1994
(489-503)
0
Basil Blackwell Ltd. 1994,
108
Cowley Road, Oxford OX4
~JF,
UK
and 238 Main Street, Cambridge,
MA
02142,
USA.
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