How to Denationalize

November 12, 1951

Now that British socialism has been repudiated at the polls, the world waits to see how far the Conservatives will dare to go in denationalizing and desocializing. They are pledged to “stop all further nationalization,” and specifically to denationalize steel. But apart from this, the outlook is not clear. They have been silent on some nationalized industries and worse than silent on coal. They have given explicit assurance that “coal will remain nationalized.”

A few weeks before the election, at the Reform Club in London, I raised this problem with a group of outstanding economists and financial journalists. Though everyone in the group was anti-socialist, and expected the Conservatives to win, most of them treated denationalization as if it were difficult and all but impossible. Yet from a purely technical standpoint it is infinitely easier to denationalize than to nationalize. The economic problems involved are minor; it is the ideological and political problems that are appalling.

This becomes clear as soon as we candidly examine the obstacles to denationalization. Let’s begin with the cliche that once you scramble eggs you can’t unscramble them. This might be true if you were trying to get each yolk back into its original shell—in other words, if you were trying to reestablish all the original private companies in their original form. But such an exact restoration is pointless and unnecessary. In coal, for example, the more than 1,400 collieries that the British Government took over are now divided into only nine administrative regions. These nine regions could be simply transformed into nine separate private companies. Or, if so few companies were thought to endanger competition, the National Coal Board could subdivide the present regions into whatever number or whatever size of private companies promised to combine optimum competition with optimum efficiency. Then the individual units could be put up for sale.

Such a sale would present no more inherent difficulties than are presented every day by private sales. The government could consult investment bankers as to the best financial setup and the best realizable price for each company, share or bond. Or, without attempting to set a price in advance, the government could open the various stock and bond issues to competitive bidding by investment firms or individuals. States and municipalities constantly offer their own obligations in this way. Nor would the government necessarily have to sell all securities of a desocialized industry at once; it could do so over an extended period. And it could of course retain existing governmental managers until the new owners had had time to reelect or replace them.

A well-advised government would, in offering shares, give priority to the workers in a denationalized industry, allowing them not only to purchase on installment but at a price somewhat below the market.

Some of the misgivings of the Conservatives regarding denationalization have a real enough basis. One is that if any attempt were made to denationalize coal, for example, the mine unions would immediately go on strike. Another is that nobody would buy the British railways today, which are losing money under government management, unless they had assurance that they could alter present costs and rate-and-fare levels. A third is that private investors would not buy back into these industries as long as they had reason to fear (as they now have) that the Laborites, once back in power, would reexpropriate the steel mills, coal mines, or whatnot without any compensation at all.

But none of these fears shows that denationalization is undesirable or inherently difficult. What they do show is how formidable the obstacles to it can be as long as a powerful minority, which could become a majority again, retains the socialist ideology. It is not some mystically inevitable socialist wave of the future that we have to fear, but men’s ideas and intentions in the present. It is the winds of doctrine that blow today that determine the waves of tomorrow.