Free Life 26, December 1996, A Book on the Private Finance Initiative, Reviewed by Sean Gabb

From Free Life, Issue 26, December 1996
ISSN: 0260 5112

Seize the Initiative
Allan Stewart and Eamonn Butler
Adam Smith Institute, London, 1996, 32pp., £18.00 (pbk)

Note: I was hired by the Adam Smith Institute to ghost this pamphlet. I knew, before writing it, that I was being paid to wrote some grossly corporatist propaganda, and that any one inclined to drool over this as carrying forward the “market reforms” of the Thatcher and Major Governments needed his head examined.

This review, also ghosted, is my penance. But I was in need of Madsen’s cash….

Broadly speaking, there are two ways of looking at the Adam Smith Institute. It can be seen as part of the Movement, and it can be seen as part of the Enemy.

According to the first – and orthodox – view, it has spent the past 19 years persuading the British State to dismantle itself. The basic insight of public choice theory is that the establishment of a country – this being the effective organs of power plus the main special interest groups – is led, as if by an invisible hand, to rob and oppress the people. Imagine you are a bureaucrat, or a lazy but well-connected businessman, or a politician looking for votes. You may believe in the beneficial effects of a free market, but it will be in your personal interest to claim an exception where you are concerned. Perhaps you will be made head of the regulatory agency. Perhaps you will be protected from foreign or domestic competition. Perhaps your constituents will be grateful that you got a subsidy to keep the foundry turning out steel at three times the world price. No matter how greatly your interventions may impoverish the country as a whole, you will be enriched.

There are people highminded enough to ignore personal interest, and to see through the fallacies dreamed up to equate intervention with the public interest. Sometimes, as in 19th century England, such people are able to dominate an establishment. But these are rare people, and their dominance is rarer still. In this century, our rulers saw what can be loosely called New Deal economics, realised it was good for them, and had no trouble believing in its truth. And even after its falsehood had become obvious to anyone with half a brain, they continued to hope that it might be true, and to behave as if it were.

Then the Adam Smith Institute was created. Madsen Pirie et al. saw that bodies like the Institute of Economic Affairs had been around for decades, and had got nowhere. For the reasons given above, mere possession of the truth was not enough to get it enacted. And so they attached themselves to elements of the establishment. This has never been a monolithic thing in the Marxist sense. Within it have always been different shades and emphases of statist ideology. Perhaps more importantly, the forces that drive its members to steal from the public also drive them to steal from each other. The great achievement of the Adam Smith Institute in the 1980s was to show particular members of the establishment how this second kind of theft could be made easier and more profitable than the first.

Therefore privatisation. For the politicians, it meant more money to waste on themselves and their own clients without reducing levels of service elsewhere. For the people in charge of the industries concerned, it meant vast salary increases and share options. For the abler middle management, it meant bigger opportunities. All that stood in the way was a workforce whose trade union representatives had been on the losing side in the great establishment split of the 1970s, and were now too broken to resist what was happening.

For the public, the benefits are increasingly plain. We now have the most open telecommunications market in the world, and the lowest utility bills in Western Europe. The idea – plainly ascendant in 1977 – that the State ought to own and run the commanding heights of the economy, is now dead. Every other civilised country is following the British lead. In this country, the coal mines and railways are now being sold. The Post Office and roads are not sacred. Where privatisation is not yet convenient, there is marketisation – where an organisation is kept formally in public ownership, but is broken up into small units, each of which must operate as if it were a private company, and compete and cooperate with real private companies; and where, after a few years of this, the organisation can be discarded from public ownership rather like a colony is given independence.

If this view is correct, the Adam Smith Institute is an integral part of our Movement. The Institute of Economic Affairs shows what is now wrong with the world. The Libertarian Alliance argues how the world ought to be. The Adam Smith Institute makes the engines that move the world between these states.

But let us now consider the second, less optimistic, view. According to this, the Adam Smith Institute has helped not so much to dismantle as vastly to strengthen our establishment. Until recently, the main political debate in this country was between those who wanted to destroy the market and those who just wanted to rig it in their own favour. It was then natural for us libertarians – whatever private doubts we had – to be in alliance with the riggers. They gained most from the deal, by getting some good intellectual ammunition. It was no good for them to make speeches about their right to go on benefitting from their shabby little trade in bribes and privilege. Though ordinary people stood to gain vastly more from these arrangements than from socialism, the truth seemed a poor justification. And so they employed people like us to ghost speeches and pamphlets crying up the virtues of the free market all the way to heaven. In return, we got a few fellowships and institutes and some shelter from the universal hostility of the people in charge of the universities.

It was always an unstable alliance, since it was plain that, apart from a dislike of socialism, we had little in common. We wanted a separation of State and market. They wanted to introduce market forces into government, thereby creating more markets that they could rig in advance and profit from. But we seemed to hold together during the 1980s, before our paths had radically diverged. And the Adam Smith Institute was one of the main clearing houses for the business side of the alliance.

Since the fall of socialism in 1989, however, the alliance has lost its reason for existence. The emergence of Tony Blair was an important event in itself, but it also confirmed the shift of political debate to an argument about the division of spoils in a rigged market. We retain a presence in the Conservative Party, and some politicians there still find it useful occasionally to parrot our rhetoric. But the truth is that we have about as much influence within the Party as the Labour radicals who go about in donkey jackets and CND badges have in theirs. The notion – always dubious, but common in the 1980s – that we were using the riggers to help us through the first stage of our revolution, is clearly shown now to have been a delusion. It is the same with the libertarian credentials of the Adam Smith Institute. The gloomy predictions I was making as far back as 1983 have been confirmed for no one to deny. Certainly, the privatisation and deregulation and marketisation and so on have immeasurably improved things like the telephone network. But, despite the bright, young libertarians with whom Madsen Pirie likes to surround himself, the Adam Smith Institute was always an instrument of the riggers, never of us. In the 19 years of its existence, its greatest and most enduring achievement has been to give us more of the government we pay for.

The old statism was at least mitigated by incompetence. The people in charge of it were paid too little to feel really important; and much of their energy was absorbed in disputes with stupid or malevolent union leaders. The new statism is different. It looks like private enterprise. It makes a profit. Those in charge of it are paid vast salaries, and smugly believe they are worth every penny. But for all its external appearance, the reality is statism. Just look at these privatised companies, with their boards full of retired politicians, their cosy relationships with the regulators, their quick and easy ways to get whatever privileges they want. Just look at the favours they do in return. The case of John Gorman, reported in Private Eye – though hardly anywhere else – is a fine illustration of the network of personal ties that link these companies with the state sector they are supposed to have left. There are other stories – not so well reported – of favours traded. I hear of road protestors who find themselves with £500 Telecom bills, and whose homes are invaded at three in the morning by British Gas inspectors – using their powers of entry without warrant to search for “leaks”.

And this new statism is more pervasive yet. As with National Socialism in Germany, it is leading to the abolition of the distinction between public and private. Security companies, for example, are being awarded contracts to ferry defendants between prison and court, and in some cases to build and operate prisons. This has been sold to us on the – perfectly correct – grounds that it ensures better value for money. But it also involves grants of state powers of coercion to private organisations. All over the country, private companies are being given powers of surveillance and control greater than the Police used to possess.

I have heard it argued that this is nothing to fear, because these companies will be more interested in making profits than in bothering the rest of us. I disagree. In legal theory, joint stock limited liability companies may exist solely to bring dividends to their shareholders. In reality, they are most often run to serve the personal interests of the directors, for whom higher profits are less important than being accepted into the establishment – and this can easily involve taking on and discharging coercive powers as enthusiastically as the politicians could ever want.

On this view, the greater efficiency introduced by the Adam Smith Institute reforms is actually part of the indictment against it. Its achievement has not been to stop our establishment from doing certain things, but to ensure that it does them well. Notice how it devised the Poll Tax – a scheme that might have cut down on local government waste, but only at the expense of tagging the whole adult population. Notice its endorsement of video cameras in public places – another scheme that might save money only at the expense of our liberties. It has enabled the transformation of social democracy from a system that was always on the verge of collapse into one that is both stable and moderately prosperous – one that yields enough to enrich the farmers and to keep the cattle well-fed.

But I come to the publication that my Editor has asked me to review. Seize the Initiative is all about something called the Private Finance Initiative, and reeks of the soft fascism just mentioned. The aim of this initiative is to enable the Government to remain in charge of great areas of economic activity, while sharing the costs and profits with a few privileged private contractors. As with many other reports put out under famous names, I doubt if this one really was written by Messrs Stewart and Butler. It seems rather to be the work of some bored hack who knew that he was lying for money. I only hope he was well-paid for his efforts.

Beyond this, I will say no more about the report. I will wait until the Adam Smith Institute produces something utterly amoral – for example, a report on the need to contract out the setting up and running of the criminal convictions register to EDS or IBM; or a report on how much public money could be saved if the Crown Courts were sold to Group Four, and the Judges’ salaries were to be paid from the produce of convict labour.

I seem to have gone somewhat beyond the balance that I at first intended. Never mind. I wonder if I shall be invited this year to the Adam Smith Institute Christmas party?

Howard Perkins (Sean Gabb)

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