1. Alan Smith proposes a sensible solution


The recent controversy about a privately owned prison in Birmingham raises once again the question of whether public ownership of large institutions is better than private. I should have thought that nowadays virtually everyone would reject the idea of the free market between competing private companies as a solution to every problem, just as they would reject state ownership as a solution to every problem. For the former, I do not think that anyone would seriously consider putting the defence of the United Kingdom out to competitive tender, although possibly the US Marine Corps would be interested. A state that outsourced its defence to a private corporation or a foreign state-owned corporation would find that it had lost its sovereignty. Similarly, I do not think that the nationalization of corner shops is on anyone’s agenda; Arkwright, you’re safe!

Nevertheless, there is the danger that we can become so obsessed with privatization (or else nationalization) as a solution to almost all problems that we do not bother to look at the particular activity under consideration, but force that activity into our preferred model, however bad the fit. It would be wiser to consider private ownership and public ownership as potential solutions to each particular problem, possibly combining elements of each. The archetype of public ownership is provided by the military, where the efficiency of the organization is aided by the esprit de corps of the ship’s company, the regiment, or the squadron. The essential model of private ownership is the free market offered by the high street in which there are two or more butchers, bakers and, for that matter candlestick makers. In the absence of a local monopoly the moderate competition in price, quality, and service provides advantages to the customer, though we must be aware of aggressive competition in which a large firm sells goods or services at a loss in order to put competitors out of business.

On the question of privately-run prisons, I have a gut-feeling that, where the confinement of an individual’s freedom has been ordered by a court, that confinement should be enforced by officers of the Crown rather than by employees of a private corporation. Moreover, whereas a privately-run school can increase its profits by increasing the number of pupils, a similar option is not open to a privately-owned prison which can maximize its profits only by providing the barest minimum of services required by its contract.

Similarly, I was opposed to the privatization of Royal Mail. In addition to the gut-feeling that a private corporation ought not to be allowed to call itself the Royal Mail or have the Queen’s head on its stamps, there is the question as to whether the necessary distribution network makes competition possible, let alone the complication of the standard price for the delivery of a letter regardless of the distance involved.

There are a number of areas where one may query whether the free market is an appropriate model, particularly those in which a significant investment in a distribution network is required. I have no choice about which water company supplies its product to my house. For gas and electricity I do have the choice of which company bills me but, whichever company I choose, it is the same gas delivered through the same pipes and the same electricity delivered along the same wires, so the only choice is over the relative qualities of their billing systems.

Living in Epping, as far as rail travel to London is concerned I have effectively a choice of only one: Transport for London’s Central Line which, although publicly owned, is not electorally responsible to me or to any of its users who live in the Epping Forest District. True, there are the alternatives of travelling by overground to Liverpool Street: Chingford, a terminus of one suburban line; Harlow or Waltham Cross on the Cambridge line, or one of the stations between Stratford and Brentwood on the line to Southend and Colchester and beyond. However, the use of these alternatives would require road journeys by bus or car, apart from Stratford—and the most effective way of getting to Stratford is by the Central Line!

This article does not propose that the privately owned services discussed should be nationalized. It may be that, despite the total absence of consumer choice or the presence of a minimal choice, there is something about private ownership in certain areas that makes it more efficient than public ownership, but this needs to be demonstrated empirically rather than taken as an act of faith. I should like to make a plea, particularly for those services in which a high investment in a network is required, that, without presupposing that either private or public provision is better, we should look for the solutions that make use of the best aspects of each.