Saturday, 30 August 2014

In which I agree a little bit with Owen Jones


It's OK folks, I've not turned overnight - as if in some Kafka-esque horror - into a socialist. But I think that Owen Jones, Boy Socialist has a point when he talks about the elite and what the Americans would call 'corporate welfare':

Who are the real scroungers? Free-marketeers decry 'big government' yet the City and big business benefit hugely from the state – from bailouts to the billions made from privatisation. Socialism does exist in Britain – but only for the rich

Now our youthful leftie then goes on to spoil his argument a little by missing out on some of the corporate welfare but his points have some merit. Indeed, I would go as far as to say that Owen's criticism of what he calls 'privatisation' also has merits.

The point however relates to a different cause than Owen suggests and the solution lies in less socialism not more socialism. The problem with what Owen calls privatisation is that it is nothing of the sort. Privatisation involves taking a state-owned monopoly and placing it - usually through sale - into an open market environment. We did this with telephones, gas, electricity and water with considerable success (although the state kept its fingers in the pie by fixing all these markets in one way or another - mostly to the benefit of businesses rather than consumers).

Issuing contracts to run trains on a state-owned rail network is not privatisation. Nor is outsourcing the collection of municipal waste or the commissioning of hernia operations. This is just the state opting to buy rather than do itself - for it to be true privatisation you have to change the customer - to have to have a system where consumers make choices in a free (or relatively free) market.

However, to return to Owen Jones, he is wrong when he argues that big business rejects 'statism' but right when he points to the benefits that the grandees of big business get from big government. The switch to a smaller state with more of what we call 'public services' delivered through the market simply doesn't suit those powerful businesses that deliver those public services on contract. Or indeed the equally large businesses that fund those businesses allowing them to compete for large public contracts.

However, the problem here isn't just the fact that public services are outsourced but that the market is, mostly because of regulation and legislation, seriously constrained. Owen points to the big public services contractors like Serco, G4S, Atos and Capita and makes reference to the 'Big Four' accountancy firms. What he describes here is a marketplace constrained by the scale of the contracts and by the specification of those contracts. While the Transatlantic Trade and Investment Partnership (TTIP) would partly open this market - and some of the regulations, its main outcome for public services would be opening up EU 'markets' to large US contractors (and vice versa).

The problem is that, so long as people like Owen insist that services are delivered through a planned system rather than a market, the producers - whether state employed management or the managers in private contractors - will fix the system in their own interests rather than in the interests of the consumer. And while there are areas - basic scientific and medical research, for example - where only the state will invest, in areas where a market can operate there will be more investment under capitalism than in a state-directed monopoly.

Owen Jones is right to identify corporate welfare as a problem but completely wrong in offering a 'solution' that merely transfers the self-interest to the managers of state enterprises. If Owen wants real change he needs a system where the self-interest is transferred to the consumer of the service - you and me, the public. And this system - in most circumstances - is called a free market.


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