Liberty in Great Britain; N. Elliott

The most notable changes since 1979, when Thatcher was first elected, have been in eco-· nomic policy. "Privatization" is the popular term for three classes of policy: the sale of state-owned industries to private shareholders, the contracting out of state services to private firms, and deregulation of private markets. Stock offerings in state industries and public utilities are now a regular event. The public of fering of British Telecom shares in 1982 pio neered the policy, and quelled popular suspi cions by· yielding easy profits for the small in vestor. Public offerings since then have included British Gas, British Airports Author ities, Rolls Royce, British Airways, and Jag uar. Those lined up for dispatch at the moment include water authorities, electricity, and coal mines. So far, the policy has entailed a transfer of asset ownership from state to private. The public utilities, however, remain statutory mo nopolies, with rival producers being excluded.

Debates are raging in economics journals over whether privatization has brought im provements in efficiency. One problem is that the government is concerned with other things besides efficiency. Privatization is often used as a means of filling Treasury coffers, and the Mr. Elliott resides in England and is a graduate of the Uni versity of York. He is a regular contributor to the journal Economic Affairs, published by the Institute of Economic Affairs. asset value of any newly privatized company would tend to be reduced if competition were permitted. It also seems prudent to make changes gradually, to evade the organized hos tility of public sector unions and other interest groups, so that private sector monopoly may appear to be a necessary step on the road to free capitalism. The second method of privatization involves competitive bidding by suppliers for the provi sion .of public sector services such as refuse collection and hospital cleaning. This policy has saved local authorities much money, but as John Blundell of the Institute for Humane Studies has contended, money saved may not be returned to citizens in the form of lower local taxes. 1 The policy is not an unambiguous improvement. Despite these reservations, the policy has at least been discussed and-most importantly-accepted by the public, as an ad vance of market forces.

Most praise should go to the third policy of privatization, the deregulation of private markets. Two examples are worthy of note. The introduction of private sector competition into local passenger transport has worked quite well, and has become an accepted part of life for many people. The other example is the "Big Bang" dereg ulation of financial services, which allowed for the combination of the roles of broker and jobber, and abolished the requirement of fixed commissions for jobbers. This has ensured that London will remain a major center of financial activity, and employment will continue to move into the financial sector. Significantly, many more workers in financial services have a share stake in the continued prosperity of capi talism. In addition, the market remains rela tively unregulated, characterized by continual change. In this environment, workers are far less likely to endorse welfare state attitudes.

Regrettably, the deregulation of the financial sector has been tempered by two policies. The first of these, in 1985, made "insider dealing" a criminal offense; the law was rushed through Parliament in an attempt to conciliate Members of Parliament ruffled by trading scandals. The second, a greatly ominous piece of legislation, established a "self-regulatory" organization, the Securities and Investments Board. Effec tively this has established a system of licensing for investment firms, and the probable danger is that established operators will use these new powers to exclude competitive beginners. But these policies have not been nearly as significant as the shift in popular ideas that has taken place since 1979. Partly as cause, and partly in consequence of Thatcherite economic policy, there has been a favorable movement in popular opinion. The unspoken presuppositions which define the limits of debate have moved distinctly in favor of the market. Competition and efficiency are now regarded by most people as necessary and desirable; people no longer believe that the welfare state is faultless; all politicians now clamor to be defined as ,'libertarian. ' , Why the Ascent?

It is instructive to look at the reasons for this shift in thinking and for the economic policies outlined above. Circumstances and an indepen dent change of ideas are responsible. Margaret Thatcher was elected in 1979 fol lowing a decade in which socialism demon strably failed. Support for Thatcher was a re jection of what had gone before. The 1970s were a period of turmoil when the inability of government to control events was exposed in sharpest detail. These years were characterized by a lack of realism in which consequences seemed to belong to the distant future. Trade unions were at their strongest because govern ment courted them. Union leaders were regu larly welcomed at Downing Street for discus243 Prime Minister Thatcher sions on economic planning. At the same time, with a Labour government, unions could afford to be militant. In 1979, however, people re membered strikes and electrical power cuts, and voted against them.

Until 1976, monetary policy was highly in flationary. Prices rose from the late 1960s on wards, peaking at a 33 per cent annual rate in the first quarter of 1975. The culmination was the balance of payments crisis in 1976. To avoid a plummeting pound, the government ap plied to the International Monetary Fund for a loan; this was popularly perceived as a national disgrace. From that time onwards, printing money was discarded as a policy solution. From 1976 to 1979 the Labour government maintained tight monetary control. Profligate spending was no longer a viable policy. This fact was recognized, most significantly, by Prime Minister James Callaghan speaking at the Labour Party conference of 1976: We used to think that you could just spend your way out of a recession and increase em ployment by cutting taxes and boosting gov ernment spending. I tell you, in all candor, that that option no longer exists; and that in sofar as it ever did exist, it only worked by 244 THE FREEMAN. JUNE 1988 injecting bigger doses of inflation into the economy followed by higher levels of unem ployment as the next step. That is the history of the last twenty years.

Public choice theory, at its simplest,gives gloomy predictions about what voters will vote for: the most attractive party will be the one offering the most handouts. Fortunately for Britain, voters in 1979 did not decide based on their immediate pecuniary self-interest. They recognized that, while their long-term interests would be advanced by the Conservatives, aus terity would have to be endured in the short run. These were the events which brought to prominence a revived system of classical liberal ideas. The intellectual tradition of liberalism was kept afloat in the interwar years by a handful of intellectuals like Edwin Cannan, Ludwig von Mises, and Wilhelm Ropke. The genesis of a new intellectual movement began after the Second World War. Under the aus pices of the Mont Pelerin Society, politicians met with academic proponents of the free economy to compare notes. At the very time when policy, more than ever before, was con ceived amidst the misapprehensions of state planning, libertarian ideas were reviving in academia. Milton Friedman began his notable efforts to bring the market to the masses with the publication of Capitalism and Freedom in 1962. At the same time, F. A. Hayek was working on an analysis of the economy of knowledge in markets and, reciprocally, a de struction of the conceptual foundations of cen tral planning. Both these economists have been a major inspiration to the British Conservative government.

In the same period, the Institute of Eco nomic Affairs was founded in Britain to pro mote the work of liberal economists. lEA papers have covered every imaginable topic of economics, they have been read by politicians, and are an acceptable component of university courses. In some cases, such as passenger transport and exchange controls, a direct influ ence on policy has been evident, but their more important function has been to alter the general limits of academic debate within which policy is conceived. Public choice theory has been fundamentally important in explaining why societies fall prey to creeping collectivism, and why this trend is difficult to reverse. However, if this were the only application of the theory, then free-mar keteers would be only helpless onlookers in the relentless extinction of liberty. Fortunately, there is more to it than this. The Adam Smith Institute was conceived as an antidote, as an organ for the other side of public choice-the theory of micropolitics.

Public choice theory tells us that radical re forms will be resisted by organized interest groups. The micropolitical solution is to make small, gradual changes, "death by a thousand cuts, " so that even if opponents realize what is planned, individual changes do not justify the commitment of resistance. Just as public choice theory explains that concentrated benefits ac crue to organized lobbyists, micropolitics looks for groups with an interest in the maintenance of markets. This approach has proved to be a stroke of genius. The first Thatcherite policy contrived with this in mind was' the sale of public housing to private dwellers. At the start, the policy was denounced by opposition parties. Now the pro gram has proved to be popular, and no party will risk alienating the thousands of voters who have benefited from it by threatening to repos sess houses for the state. The other policy formulated from the in sights of micropolitics is the sale of state indus tries and public utilities. When the sale of British Telecom was first announced, telecom munications unions pledged obstinate resis tance. The response was to give shares in the company to the workforce; consequently there was very little resistance. Whenever a sell-off occurs, preference in share allocations is given to small investors. This ensures that shares are widely distributed (the total number of indi vidual shareholders has increased from 3 mil lion to 8 million since 1979). Again,"the La bour Party at first pledged to reclaim Telecom, but since then, realizing that this would not be welcomed by the 1Y2 million voters who hold shares, they have dropped the pledge.

In summary, the Thatcher government has its intellectual origins in the postwar revival of lib eral economics. Policies have been successfully implemented through a political strategy which circumvents opposition and gives visible ben efits to new interest groups. Signs of Progress In the past I saw it as a limitation of micro politics that the strategy relied upon a receptive government ear; I feared that a change in power could end the gains of eight years. Following developments in discussion among the Left, I now have fewer reservations. The fact is that the shift in ideological boundaries is not con fined,to the Conservative Party, but is in prog ress in all parties. To illustrate, consider two recent articles. Colin Ward, writing in The Guardian, a soft socialist newspaper, called for the Left to abandon reflexive endorsement of state action: How sad that in Britain - birthplace of friendly societies, trade unionism and the co operative movement-socialists should have been so intoxicated with power and bureau cracy and the mystique of the state, that they should dismiss their own inheritance as a path not worth taking. It's their own fault of course, for rejecting their history and origins for the sake of a version of socialism which is governmental, authoritarian, paternalistic and unloved.2 Similarly, David Selbourne, writing in the socialist journal, the New Statesman, argues that the Left should rediscover individualist roots: It was, in essence, a libertarian politics of working-class and community self-reliance, underpinned by a strong moral sense of citi zenship, justice and individual entitlement. It is a legacy which the left and Labourism have squandered; much of its surviving im pulse has been co-opted and rearticulated by the Toryism which is now in power.3 The Future Acceptance of the market is now wide spread. Within a decade the place of free enter prise no longer will be a matter of debate; its acceptance will be an unspoken presupposition upon which all debate proceeds.

LIBERTY IN GREAT BRITAIN 245 Next the arguments must be won on social services-education, health care, and welfare payments. At the moment, a micropolitical plan is in progress to introduce, in stages, com petition among schools. The aim is to avoid the organized hostility which meets education vouchers. The state National Health Service is yet to be tackled. Nor has a reform scheme been advanced for Social Security benefits and pensions. Reform has sufficient intellectual support; what is needed is a politically feasible method of introduction. These are the debates which will dominate the politics of the next ten years. The last eight years have been a gain for eco nomic freedom, but in the sphere of civil lib erty, policy has followed a course of despo tism. Britain has the strictest censorship of por nography in Western Europe. Following a scare campaign in the tabloid press, a law was passed in 1984 making the sale of "video nasties" a criminal offense. This scare ensued from the report of a Parliamentary Group Video En quiry. Survey methods used in the enquiry were highly dubious, and the presentation of the report was partially selective and mis leading.

To give one illustration, the popular press seized on the finding that 45.5 per cent of 7-16 year-olds had viewed at least one pornographic film. This figure includes, as the most widely seen film, "The Evil Dead," a film passed for viewing by the British Board of Film Censors and therefore, under the stated terms of the re port, not illicit. It is hard to avoid the conclu sion that the whole enquiry was conceived and staffed with the aim of making a case for legis lation. In common with the United States, the Con servative government has pursued an anti-drug campaign. In 1986 a Drug Traffic Act was passed which, in an abandonment of the prin ciples of common law, provides that the assets of the accused may be seized, and thus makes a preliminary assumption of guilt. Evidence indi cates that this whole policy has failed. The street value of heroin is largely untouched by customs seizures, suggesting that narcotics im porters have no difficulty in eluding law en forcers. A significant source of illness among addicts is the use of contaminated syringes; the 246 THE FREEMAN. JUNE 1988 purchase of sterile syringes is illegal so that users often share them, or use them more than once. Fears over the spread of AIDS brought home the discomfiting truth that government policy has been responsible for one problem which it was supposed to solve. In Scotland, where spread of the disease has been particu 1arly rapid, addicts are now permitted to trade in used syringes for fresh ones.

The most recent target of criminal policy has been the use of offensive weapons. Talk of new restrictions on firearms was already in progress when a multiple murder occurred at Hunger ford. A chorus of demands for tighter controls followed. Greater limitations have now been introduced on the possession of semi-automatic rifles, and it seems highly likely that new laws will follow relating to other weapons. This will not be an effective policy against crime, since crimes which yearly proliferate do not entail the employment of guns (and least of all ma chine guns). Knives have also now been the subject of stricter legislation. Again with disre gard for the common law principle of demon strated guilt, an intention of malicious use is now assumed. The policies of the Conservative government originate in the ideological inclinations of groups within the Conservative Party. To sim plify greatly, there are three factions: wets, old right, and libertarians. Wets are paternalists, in the tradition of Disraeli, who advocate a prag matic, as opposed to ideological, approach to policy. They seek a return to the mixed economy consensus of postwar governments.

Members of the old right are supportive of dra conian law and order policies, advocate the im position of reactionary moral standards, oppose immigration, and are quite enthusiastic about the free market. The Thatcher government is founded upon the support of the old right and libertarians. This explains the need for the government to maintain support among the old right in matters of criminal policy. In future years this alignment will change. Many of tomorrow's Conservative Party leaders will rise from the Federation of Conser vative Students. This body became dominated by libertarians in the late 1970s, and was dis banded by the party in 1986 because its unconservative behavior had become an embarrass ment to the government. By the time this ascendancy has come about, a large portion of the intellectual community will have been won over to the libertarian position on civil liberties, and public discussion will be under way. Those in the Conservative Party with an earlier liber tarian background then will feel free to take openly the libertarian side in these debates.

This shift in the focus of discussion will change the alignment of factions. In debates on drugs, pornography, and immigration the old right will line up with the wets to oppose liber tarians. However, this does not mean that liber tarians will lose because the sizes of factions will change also. I noted above the growing acceptance of libertarian ideas across the political spectrum. If this continues, then fewer and fewer will hark back to the mythical golden age of the postwar consensus. In other words, there will be fewer Conservative wets. For those centrists who remain, the center will have moved, so that going along with the consensus will in volve being more libertarian than it does at the moment. On the left there has always been a current of libertarian thought. This stream is rarely mani fested today because the focus of political dis cussion is on economic policy and on social services. The Left (other than a few dissidents) is not libertarian on economic policy, and rarely so on social services. The Left remains tethered to a command state outlook, and will continue to miss the political initiative for some time to come.

Optimism is justified. Hopeful predictions for the future of liberty cannot be dismissed as wishful thinking,., because of the momentum behind the modern libertarian movement. While not denying the significance.of our fore bears, I regard our movement, in ideological consistency and in determination, as unique. My optimism is based on the sincere belief that the future is ours. D 1. John Blundell, "Privati,sation-by Political Process or Con sumer Preference?" Economic Affairs, Volume 7, No. 1. 2. The Guardian, October 12, 1987. 3. New Statesman, October 16, 1987.