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Privatization: A Very Public Affair
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11130 |
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CURRENT ISSUES
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3 / 1986 |
2,600 Words |
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Lynn Scarlett
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On a single day in November 1984, two million Britons became stockholders in British Telecom.
The mammoth government-owned communications firm went on the auction block in one of the largest stock offerings in British history. By day's end, Britain's stock-owned racks had nearly doubled. Even more notable, the sale marked a major success of British Prime Minister Margaret Thatcher's privatization crusade.
Privatization--transferring public programs and assets to the private sector--is the centerpiece of Thatcher's economic policy. Decades of commitment to building a modern welfare state had swollen Britain's government expenditures. The government consumed, at one point, a full 48 percent of Britain's Gross National Product (GNP).
Even high taxes could not meet the onerous demands for public funds and Britain's treasury deficit loomed large. Private businesses languished under the burden of high taxes. Nationalized industries, shielded from the pressures of competition, stagnated and ate up scarce public funds.
Into this bleak economic landscape came Thatcher in 1979. since first launching her privatization policy, Thatcher's Conservative Party has overseen the shedding of hundreds of government services and assets, in whole or in part, to the private sector. British Rail sold off rail hotels, government-owned British Leyland sold its tractor and truck division.
Sale of shares in Leyland's Jaguar division created such fervor that fights erupted as interested buyers vied for shares.
In a particularly innovative twist, Britain's National Freight Corporation was sold to its employees. The once debt-ridden and unprofitable trucking firm showed profits after only one year in its employees' hands, marking a victory both for conservative privatization goals and liberal self-management ideals in one coup. Pride-of-ownership generated a 30 percent increase in worker productivity.
Even many beneficiaries of Britain's social welfare programs have hit the jackpot. Nearly one million former public-housing tenants have now bought their homes, filling the treasury's coffers with more than five billion pounds sterling. Former tenants report the transformation of shabby, uniform, public row houses into well-kept homes displaying the personal touches that ownership inspires.
The tangible results of Thatcher's pioneering privatization efforts are striking. Britain's basic tax rate is expected to decline from 30 to 25 percent before the next election. Spending as a part of GNP is down from 48 percent to 42 percent and may fall to as low as 33 percent. Billions have been raised through asset sales for Britain's treasury. And billions more are anticipated from sales over the next year of Britain's airports, British Gas, British Airways and other prospects.
Britain's success at dismantling some of its public sector has heartened deficit doomsayers across the Atlantic. Confronted with a burgeoning federal deficit--now pegged at around $200 billion for 1986--and a marked failure of the Reagan administration to cut the budget through more
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