In Britain there is still a considerable amount of ideological hostility to the whole idea, but much less now that, say, 10 years ago. With some exceptions like the proposed sale of the Royal Mail last year, or to a lesser extent the sale of the nuclear power industry at the moment, the principle behind privatisation is generally accepted. Instead, the debate is about the detail: the terms and method of the actual sales, the implications for the structure of the industry (for example, the level of monopoly), and the regulation and taxation of the industries once they have been sold off. No future British government would contemplate a programme of renationalisation: for all practical purposes the idea that it is a proper role for the state to own commercial enterprises is dead.
It is dead elsewhere too. Hardly any government anywhere in the world is extending state ownership. Instead privatisation has extended beyond the developed countries which pioneered it to the developing world. As the graph on the left shows, nearly one-third of the privatisations taking place this year are in countries outside the developed countries' "club", the OECD: $25bn (pounds 16bn) out of a total of $85bn. Though the UK will this year be behind Germany in money raised from privatisation (middle graph), it still has the highest overall tally (right-hand graph). Since 1977, it has raised $97bn from that source.
If one looks at the process of privatisation from a global perspective rather than a British one, a number of big forward-looking questions spring out. Here are some. To what extent can privatisation transform the debt position of continental European governments? Will it make a material impact on global competitiveness and global living standards? And will the success of privatisation prompt a further rethinking of the appropriate boundaries of the state?
The European question is an obvious and immediate one. Think what would have happened to British public finances had we not had privatisation. You would not only have to add the $100bn-odd of receipts to the national debt; you would also have to add the additional interest on the debt and (if the French experience with banking and airlines is any guide) quite probably have to add on billions of nationalised industry losses too. Instead of having a public debt of around 56 per cent of GDP, it would be 80 per cent or more.
Both Germany and France have a similar-sized national debt to the UK, so they have the potential to make a corresponding reduction if (as they are now doing) they follow a policy of vigorous privatisation. It would be perfectly possible to recalculate French and German national debt to show that it is actually below 50 per cent of GDP. Across Europe, Morgan Stanley estimates that between now and the year 2000, total receipts from privatisation could total $250-300bn. Privatisation on its own will not solve the continental European budgetary problem. Countries like Belgium and Italy would still have very high debt-to-GDP ratios, the social-security budgets of virtually the whole of Europe would still have large unfunded liabilities, and the gap between voters' expectations of the state and the state's ability to deliver would remain. But privatisation would - indeed will, because it is going to happen - make a problem which appears almost unmanageable rather easier to manage.
It is harder to be certain of the potential impact on global efficiency. But since privatisation is concentrated on particular industries it is possible to make some sort of an assessment. The pie-chart on the right shows which industries have been most affected: telecommunications, oil and gas, electricity and banking being the leaders. The most important of these, not just in size, but in terms of impact on the world economy is surely telecommunications. Both the quality of service and the costs have been radically improved by privatisation - to such an extent that countries which have been slow to privatise have put themselves at a competitive disadvantage. The principal reason that Germany is at the top of this year's league table is the sale of shares in its telephone service Deutsche Telekom, a move driven largely by pressure from commercial and industrial users.
But the main impact of telecoms sell-offs will be felt outside the developed world, as developing countries, often located far away from their main markets, arguably have an even greater need for a liberal telecommunications environment than developed ones. Privatisation is not the only way of putting pressure on telephone charges - deregulation is just as important - but the plain fact remains that countries which privatised early have cheaper phone calls than those which have not.
The impact on other industries will turn on their relative importance to the countries concerned and the degree to which the state-owned industries have had to operate in a competitive market. I suspect the impact of further privatisations of oil and gas will be less than for electricity, for most oil and gas producers are forced into open competition with their commercial rivals, whereas electricity supply remains a state monopoly in most nations in both the developed and the developing world. Expect radical changes in the efficiency of electricity supply, but less in oil and gas.
Of the others, banking and airlines are areas where the record of state- owned companies is particularly bad, so expect a considerable impact here. Again, this is likely to be greater in less-developed countries, where both banks and airlines have lived in a more protected environment, than in the developed world. Insofar as developing countries have given themselves an unfair handicap by imposing state ownership in these areas, expect the comparative advantage of the developed world to narrow.
There is a bigger point here. One of the effects of the spread of privatisation to the non-OECD countries will be to narrow the gap between the developed and the developing world. Privatisations are not universally successful, of course. In some ways the managerial revolution which takes place in preparation for the sale may be as important as the change in ownership itself. But statistically they do deliver a significantly better performance. That, plus the side effect of stimulating savings and a local capital market, will tend to improve the performance of large parts of the world which have disappointed in the last 20 to 30 years.
If it is hard to make a more specific judgement than that on the impact on the world economy, it is even harder to guess where privatisation goes next. It is difficult to see Britain being the pioneer in this next stage, because most first-line assets have already been sold and the scale of change heaped on the nation seems to require some time for digestion and reassessment. It is possible that once the present bout of privatisation has run its course that a new plateau will be reached, a new understanding of the proper frontiers of the state.
But I think it more likely that somewhere else in the world the experiment will continue. The more successful privatisation is perceived to be worldwide, the more pressure there will be to press on. One form this will take will be more sub-contracting of state functions: expect more commercial companies to pitch to provide services on behalf of the state. Just as all large companies out-source more and more of their requirements, so too will governments.
That is easy. Much harder to see will be the extent to which privatisation will spread to, say, television stations. Will, a generation from now, state-ownership of the BBC be a distant memory? That would make many feel uncomfortable. But the gale which started here and swept across the world is still blowing harder than ever. On a world perspective privatisation is still in its early stages.Reuse content