August 23, 2014
Sell It All, Let the Market Sort It Out

James Meek has a magnificent article at The Guardian. Were it possible to imagine a riveting description of the impact of privatization of formerly public services in Britain compared with the contemporaneous process in the former Soviet Union, this would be it. Part history and travelogue, part rumination on the relative advantages and disadvantages of socialism and capitalism, the argument is superficially unpretentious but sophisticated and in the end deep, and in lovely prose to boot.

The article can’t easily be summarized, but it recounts the author’s philosophical journey through economics coinciding with a physical one as the tide of capitalism swept aside the old communal structures of the former Soviet Union. He gives credence to often-argued claims about the benefits to society of privatizing public services, then proceeds to explore the available information to see if that credence is warranted. While he does not like the result, he is careful in apportioning responsibility. The National Health Service, for example, remains private but has seen many market-like “reforms” modify its behaviors.

What the story of the latter years of the NHS shows is that the most powerful market force eating away at the core of the welfare state is not so much capitalism as consumer capitalism — the convergence of desires between the users of a public service and the private companies providing it when the companies use the skills of marketing to give users a sense of dissatisfaction and peer disadvantage. “If consumption represents the psychological competition for status,” writes Daniel Bell, “then one can say that bourgeois society is the institutionalisation of envy.” Hip replacement, a procedure invented within the NHS by John Charnley, began as a blessed relief from pain for which patients were, as Charnley said, pathetically grateful. It rapidly progressed to a rationed entitlement. It has now become a competitive market.

Spoiler alert, though, Meek does blame Thatcher for the loss of what was formerly the property of the British people and is now more often than not owned by foreigners. The losses, he asserts, were not measured only in pounds and real estate. In a real sense part of the compact between state and individual was dissolved, and corporations, even more faceless and less accountable than government, took over and immediately began raising rates, the British railways, water, and electricity being prime examples. Ironically, it appears that the best-run, most efficient railway corporations are owned by other, mostly European, states, flatly contradicting the basis for privatizing to begin with.

But Thatcher cut taxes and spending! Well, yes and no. Progressive income tax rates were cut, sure enough, but she also raised the VAT, a consumption-based tax that is inherently highly regressive. So much like the situation here in the US, the actual amount paid by individuals in taxes is adjusted to place the heaviest burden on the lower brackets. And that’s ignoring what I think is a powerful argument Meek makes that given the absolute necessity in today’s world for electricity, water, and communications the amount we pay to have those in our homes is a tax in every way except that it’s collected by private corporations rather than accruing to the common benefit.

All in all, a great piece of writing whose focus on the UK illuminates its idiosyncratic issues as well as the larger human, political and economic, questions that society generally has failed to grapple with.


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Posted by Chuck Dupree at August 23, 2014 10:03 PM
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