Public or Private? Let’s not worry about the colour of a cat that catches mice

Public or Private? Let’s not worry about the colour of a cat that catches mice

by Jim Sillars
article from Saturday 21, October, 2017

AT THE OUTSET, let me say that I am glad that there is now, through ThinkScotland, a forum for people on the Right to explore public policy ideas, critique policy from either the Scottish Government or the one at Westminster, and promote views in favour of markets.  The more thinking that goes on in Scotland the better.

It might assist readers of ThinkScotland to engage in further thinking to hear from a socialist, particularly in relation to the role the public sector can play, and in my view should play, in certain areas of the economy.  I am prompted to write after reading Brian Monteith’s views as expounded in his Scotsman column on 16th October, where he rubbished Nicola Sturgeon’s idea of a not-for-profit public owned energy company in particular, and condemned the idea of state-owned companies in general making a useful contribution to our economy, by visiting the past.

The socialist movement, and non-socialist Leftish groups (who often think they are socialists, but have no theoretical underpinning), have a serious hang up about the word ‘profit,’ to which they attach ideological dirt.  Not this socialist.  I know that no profit, no new investment, no jobs is the format that applies in major sectors of our economy, in private hands.  It cannot be different for any public owned organisation that engages in commercial activity, whether it be the superb Lothian Buses, or Scottish Water – the need for profit sits at the heart of all successful business plans. If there is no profit, there is no new investment, no rise in productivity, and stagnation or failure is the result.

Now, if you think you have a convert here, you make a mistake. I read the Daily Telegraph, business pages as well as the front ones, and subscribe to The Spectator and The Economist, wherein I am addressed in all three journals by proponents of the free market, and on occasion pick up the lecture on what constitutes the imperative foundation of the market ideology – constructive destruction.  I also receive regular challenges to my socialism from my friend Dr. Jim Walker of the Austrian School.

While I am impressed by the Austrian school’s consistency; that is not so with the others who punt that the market must rule.  If it is best that the market must rule, why, when the 2007-08 crunch came, were the banks saved by actions essentially socialist? And why was Greece and its people put to the sword rather than see French and German banks pay the price of their market mistakes?  When faced with creative destruction, supposedly pro-free market governments quailed at the very thought of applying it. 

There is nothing unusual in that. When Rolls Royce went bust Ted Heath saved it, because the loss of the high level engineering design and skills would have been a wounding blow to British manufacturing. When the US car industry was about to buckle, the US Government protected it until recovery. 

There is no free market in any state in this world. There are various mixes of free-ish markets in some economic sectors,  along with light and/or  heavy regulation in others.  This reality does not, of course, invalidate the arguments put for ‘the free market’ that benefits come from competition.   The problem is the Right often talks in absolutes that bear no relation to the facts. The problem for the Left is that while we can scorn the Right’s claims, with examples for justification, few have made  an attempt to examine what went wrong with the Morrisonian model of public ownership; not to mention the deafening silence on Venezuela.

There is a socialist case for the public ownership of essential utilities such electricity, gas, rail, and banks, where all of these have a profound influence on economic performance and the lives of people. There is also a case for a more effective use of land through public policy, without going to the suicidal extent of state nationalisation.  The Prime Minister has accused the electricity giants of ripping off the public; which invites consideration of a different form of ownership.  As for public owned rail, Scotland’s internal rail system is already there, owned by the state of Netherlands.

It would be a negative if, in a democracy, there was no intellectual conflict between competing ideologies.  The clash of ideas gives life to a society, and stops it sinking to mediocrity under the domination of a single mentality.  But ideology should be a guide, not a dogma, in order to prevent any one side adopting policies that are inherently sensible in the national interest.

That brings me to the new policy on energy provision that Nicola Sturgeon sprang on the SNP conference to the immediate delight of the delegates. That none of them was likely to be involved in working the headline into detail did not seem to cross a single mind.  Nor since then, has social media or the newspapers in the nationalist sphere been awash with examination of how it would actually work.  Let me be clear, the idea of delivering cheaper energy to the 900,000 people in fuel poverty is an excellent one; and I know that the ‘not for profit’ part cannot mean that.  I think Nicola means profit made will not be distributed to shareholders, but will be invested to make the company more competitive and successful – at least I hope so.  But that company will be joining a regulated market, dominated by giants, in which there can be no special treatment for the new Scottish company because the Holyrood Government does not have the powers to make it so.  Will the eventual size and structure be able to survive?  We need the detail before judging its potential.  To damn it just because it will be in public ownership is unwise.

I would prefer a much bolder model, in which ‘profit’ would be one of the objectives.  My model is a Scottish Energy Corporation as a holding company, with divisions engaged in fracked gas, oil, and renewables, which would, like Statoil, act on their own when appropriate, and in partnership with private companies when such would better achieve the objectives.  Ideology as a guide, not as dogma, would govern.

Nye Bevan’s NHS is a good example of a public good delivered by public-private partnership. We have NHS public paid staff in hospitals, with self-employed GPs, private suppliers of drugs, and private pharmacists dealing with prescriptions.

Ever since oil was discovered in the North Sea it has been unionist policy to deride its importance. The joy in many quarters with the price  fall since Alex Salmond’s White Paper,  underlines the sad fact that all eyes, unionist and nationalist,  have been diverted from what should be considered in the national interest. Once Mrs. Thatcher dispatched the public owned British National Oil Corporation, on purely ideological grounds, the discussion about oil has been on the tax revenues, whereas in Norway the primary focus has been on making a lot of money from selling oil.  

No matter whether it has been a Right wing or a Left wing Norwegian government in office, none  has contemplated privatising Statoil, preferring to see the state’s sovereign wealth fund growing steadily. Nor has Statoil been averse to engaging in a partnership with a private concerns.

My model would see the Scottish Government buying an oil company, either wholly or in majority part, borrowing against the asset to do so. There are a number of buying and selling transactions in the North Sea on a regular basis, with some bought at a relatively modest cost. That would give us two advantages: for the first time we would have a public practitioner’s window into the business, and secondly we would see profits with extraction costs varying from $15-20 a barrel while the price has been bouncing between $56-58.  As things stand now, the Scottish nation doesn’t own a bucket of the black stuff, which is the real wealth maker.  

The other components of the this new Corporation, fracked gas and renewables, would be in partnership with the private sector which has the necessary technical expertise and knowledge. Thus profits would be made to invest in the Corporation to seek expansion, while providing business and households with cheap energy.  Whether the tax take on these activities would go to Holyrood or Westminster is an interesting question.

While that model promotes a public owned/involved contribution to tackling some of our energy and human requirements, and finds an important place for Scotland in an industry off and on its shores, there is no reason why the Right should condemn it, especially as there are successful examples all over the world from democratic Norway to autocratic Saudi Arabia where the historic development of ARAMCO is instructive.

I have become a bit like Deng Xiaoping with his analogy of the cat whose colour didn’t matter as long as it caught mice. If something can be better delivered by the private sector, under market competition, then let it be so.  But if something is better delivered as a public good by the public sector, then let that be how it is done.  

Free markets have never been permitted to operate; capitalism’s exploitative nature creates its own dark passages in history and in the contemporary world; the pursuit of pure socialism has brought immense suffering wherever it has been tried, along with the destruction of intellectual freedom.

Our Scottish society must let loose the battle of ideas, but both sides of Right and Left should, in the light of experience, remember the importance of humility.

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