Privatization of railways in Britain has been a disaster. So disastrous that the Labour Party had promised to nationalize the rail industry in five years during the just concluded election.
That wouldn’t have happened immediately because train operators work under contract with the government, which maintains control of tracks and stations. Once those contracts expired, those operations would have gone back into public hands. Labour’s manifesto also called for nationalizing water, energy and the postal service. But re-nationalizing the railways would have had particularly symbolic meaning along with the concrete benefit of better service and lower fares.
Naturally, the Conservative Party would have none of this. But the Covid-19 virus has upended previous ideological certainty. Boris Johnson’s Tory government has announced a back-door nationalization of the railways, albeit one seemingly intended to be temporary. The Department of Transport said on March 23 it would suspend existing franchise agreements and assume all revenue and risk for six months. The government said it is taking these measures to minimize disruption to the industry and safeguard jobs.
A steep decline in ridership resulting from the Covid-19 pandemic and strict shelter-in-place orders prompted the action. So it is not saving the jobs of working-class Britons — a group the Tories hardly have a history of caring about — but rather saving the companies operating the privatized railways that is the motivation here. Nonetheless, it is an irony that brings a smile to our faces that the Tories have done an abrupt about-face when it comes to nationalization.
Of course, not all blame for privatization can be laid at the feet of the Tories. Tony Blair was an unyielding proponent of “public-private partnerships,” known as “private finance initiatives” in Britain. Under these, governments sell off a public asset and lease it back.
Public-private partnerships are nothing more than a variation on straightforward schemes to sell off public assets below cost, with working people having to pay more for reduced quality of service. A scheme concocted by the Conservative Party and enthusiastically adopted by the “New Labour” of Blair and Gordon Brown, the results are far from the double talk of neoliberal rhetoric. A 2015 report in The Independent revealed that the British government owed more than £222 billion to banks and businesses as a result of private finance initiatives. Britain will pay more than five times the value of the assets, which are valued at £56.5 billion, under the terms of the initiatives used to create them.
Research by the Labour Party conducted in 2017 found that privatized rail, telecommunications, energy and water companies in Britain had paid out £37 billion in dividends to shareholders — money that could have been used to invest in public services and/or to reduce consumer prices. Nor has better service been the outcome of privatization, as exemplified by the case of British Rail. Dozens were killed and hundreds injured in a series of accidents in the first four years of privatization.
A 2013 study reported that “British taxpayers spend far more on the privatized system than they did on the old nationalized model,” in part because government subsidies are funneled into shareholder dividends. Britain’s commuters spend up to six times more on rail travel than do those in continental Europe systems, and rail fares have increased twice as fast as wages. By 2018, riders paid 70 percent of the cost of a ride, up from 30 percent a decade earlier.
And so the private sector once again proves to be worse for customers and taxpayers than the public sector. Such a lesson ought to be intuitive — the private sector expects to obtain a hefty profit, give bloated salaries to top executives and hand out bundles of cash to shareholders. A private-sector owner will not hesitate to cut staff, reduce service and cut maintenance as the fastest routes to generating massive profits.
The private sector, and capitalism in general, simply is unable to cope with the serious crisis that has arisen from the Covid-19 pandemic. We can readily see this failure in the United States, not only due to the incompetence of the Trump administration but the inability of capitalist enterprises to plan for emergencies or even have the capacity (or desire) to quickly switch to necessary production. Massive shortages of medical supplies, even those as basic as face masks, demonstrate the priorities of the “market.”
The modern nature of “just in time” supply chains is another example of capitalist failure. Producing extra supplies for future emergencies — outbreaks of new diseases occur at frequent intervals and medical professionals have long warned that a pandemic would inevitably occur someday — could have at least made the current crisis less severe. But doing so would have cut into profits, and that’s all that matters.
Trump could have invoked the Defense Production Act early, but didn’t. The reason is he and his gang desperately want to demonstrate that the market will solve all problems. It clearly can’t, as the escalating toll the virus has taken in the United States makes plain to anyone who wishes to observe. Trump’s consistent behavior in putting profits ahead of human life isn’t simply incompetency, it is capitalism in action.