Nationalisation: a flawed idea, or an economic saving grace?

Nationalisation is often seen as a buzzword. It usually has a weird effect on people that causes them to start rabidly screaming the words “Marxist” at you every time it’s mentioned. With the Labour Manifesto in the public domain, this phenomenon is becoming more and more common. However, if you’re going to make such a comparison, at least give the Communist Manifesto a read first. The Labour party has pledged to re-nationalise industries such as the Royal Mail, British Energy, as well as Broadband services. Whether the policies put forward by Jeremy Corbyn are plausible or not isn’t the point of discussion, I’m more interested in establishing how or if nationalism fits into the modern-day.

Firstly, it must be established that nationalisation is not actually that radical. Corbyn’s manifesto has been called “Radical” by the BBC and even members of the Labour Party, but the actual policy of nationalisation isn’t as extreme at all. America has utilised nationalisation in various industries, and their Government the exact opposite of socialist. Nearly nine out of ten people in the United States receive their water service from a publicly owned utility and in the last 20 years. Since then, nationalisation of the water industry has only expanded. From 2007 to 2014, the portion of people with water from publicly owned water suppliers increased from 83% to 87%. France’s mass nationalisation of its energy industry in the 1980s, Germany’s re-nationalisation of the Print Office in 2008 after it was privatised in 2001, and Iceland’s re-nationalisation of its largest commercial banks in 2008, shows that it isn’t some outlandish or outdated idea. 

This isn’t necessarily a socialist idea, it’s simply economically liberal. What is then done with nationalised industries is what takes it a step further. Even the services stated above are only a partially nationalised industry, as the state does not have a 100% market share and neither does it legally obstruct private companies from entering the industry. The common question asked is, why on earth would the government want to do this? Simple, it’s because we can’t trust the market completely to operate fairly, and when it crashes, the market won’t protect the public.

In some industries – take water for example – it just makes more sense to have fewer entities providing the service because of the infrastructure involved. The economically savvy readers will recognise this as a natural monopoly. It’s even been used to pull banks and other private entities out of trouble. This is done by temporarily buying them to ensure they don’t collapse and cause damage to the economy as a whole. A good example was when the US government took over GM Motors. When the problem is resolved, the government simply sells the company afterwards. In the case of nationalising industry, it allows the consumer to get a cheaper or even free service whilst the government tanks the cost but runs the companies, they are purchased at a profit which can then go back into your pocket.

Some of you will be reading this and think “Why don’t we just do this for everything? Cheap Nationalised Broadband? Sounds great”. Don’t jump the gun. It’s not something to be taken lightly and isn’t always a good idea. When nationalising an industry, the assumption is the government will actually be good at running the businesses in that industry. You can very easily argue that the British Government, in combination with local government, just isn’t good at it.

To paint a picture, I’m going to use the Labour party promise to provide a state-run fibre broadband service across the country. I am a huge PC gamer nerd. I play mostly League of Legends and Counter-Strike, but anyone who plays video games regularly can unite and agree upon a common enemy, bad ping. Lag spikes are actually the worst, and usually, we all have little tricks we use to try and deal with them, but if they don’t work, we are comforted by the fact that we can just switch broadband providers or upgrade our service. If Broadband is nationalised, you might not be able to do that, leaving you with bad ping and poor gaming experience. 

The state wants to purchase broadband relevant parts of BT, but the BT group also owns Plusnet and EE which have their own broadband services. If only the state broadband service is available in the area you live in, and that service just isn’t good enough, you would have to move to get to a different service provider, because currently there are only 5 providers for commercial usage, and 3 of them (BT, Plusnet and EE) could end up under the state service. To make it even worse, Openreach (a BT Subsidiary) maintains the fibre networks that the other broadband services sell, so if a state broadband service was to exist, the government would either need control of that as well or sub-contract it to Openreach. Even with all those complications, it doesn’t even touch on the fact that everyone who currently works for those companies now becomes state employees, and that’s a whole different fiasco.

Although nationalisation isn’t a ‘pipe dream’ like some would call it. The belief that magically buying all these industries will solve itself is certainly naïve. As I have displayed by briefly exploring the result of the nationalisation of just one service, this is not a straightforward process by any means. Paul Johnson, director of the Institute for Fiscal Studies, said the nationalisation plans of the Labour Party as a whole is risky and would require a restructuring of the economy specifically in the area of taxation. This would be a slow and gradual process that would take around 10 years. This doesn’t just apply to the Labour Party’s plan, it applies the nationalisation as an idea. 10 years is two governments, maybe three, governments. Who says our economic situation doesn’t change? Who says halfway through the project it’s no longer economically viable and the whole thing gets put on hold?

Nationalisation isn’t the Marxist evil that many claim it to be, but it isn’t necessarily the undeniable saving grace of the British population that it is being peddled as either.