Trends

THE REVOLUTION COMES TO BRITAIN

When Edward Heath was elected Prime Minister of Great Britain, few people expected any significant changes in government policy. To be sure, 25 years of crushing taxation, nationalization, and interventionism have severely reduced Britain's productivity and ability to compete, but Heath's rather bland record gave little indication that his policies would be other than middle-of-the-road.

Yet Heath's decision to let once-mighty-Rolls-Royce go bankrupt rather than prop it up with huge subsidies "sent a deep shock wave rippling through Britain's business community" and focused world attention on what appears to be Heath's grand design to restore capitalism in Britain. Besides Rolls, the nation's largest shipyard (Upper Clyde Shipbuilders), grown fat from subsidy and government paternalism, and a charter airline (Skyways Coach Air, Ltd.) have been allowed to go bankrupt despite pleas for government aid. The Heath government refused to provide a subsidy for the proposed BAC-311 airbus (a sort of British version of the Lockheed L-1011), thereby killing the project. And it has also stopped the long-established policy of giving price preference on government computer purchases to giant International Computers, Ltd. (ICL).

In making these moves, Heath and his Secretary of State for Trade and Industry, John Davies (formerly of British Petroleum), risk political suicide at the hands of both age-encrusted corporate boards and militant unions. But Heath and company are sufficiently convinced of the failure of state interventionism to be willing to take the risk. Businessmen worthy of the name support Heath's moves. Deputy Chairman Bernard Scott of Lucas Industries calls Heath's policies a "revolution" to make people and firms "accept the consequence of their acts without pampering." And Arthur Bryan of Wedgewood, Ltd., thinks Heath should go much farther toward restoring economic freedom: "Let it rip…Now we have the worst of all worlds—a lot of restrictions and only a little freedom."

Heath apparently has only just begun. He and Davies are now eyeing the large number of government-owned businesses, devising plans to sell parts of some and all of others. First to hit the market were 200 pubs and a brewery (taken over during World War I). Next in line will be Thomas Cook & Sons, a travel agency (taken over in World War II).

A number of subsidiaries of the nationalized British Steel Corporation, National Coal Board, Central Electricity Board, and the Gas Council may be sold off, as may various properties of British Rail. Several choice airline routes were recently taken from state-owned BOAC and given to newly-merged Caledonian/BUA—Britain's first scheduled long-haul private airline in decades.

Outright attempts to sell the large industries, such as the utilities and transportation companies, would be politically impossible at present. But a promising alternative known as the "BP Solution" may serve as the necessary transition step. British Petroleum, Davies' former company was once fully government-owned but was later incorporated and a majority of the shares were sold to the public. The British government still retains 49% stake and a say in management; but BP is now able to operate much like a private firm, and the government can easily sell off more of its share without shaking things up. The Chairman of British Steel has already suggested this idea to Heath; given Davies' background, it may not be long until the plan is tried.

SOURCES:
• "Britain Creates a Private Airline," BUSINESS WEEK, 9 January, 1971.
• "Reversing the Tide of Nationalization," BUSINESS WEEK, 30 January, 1971.
• "Britain Stages a Technological Retreat," BUSINESS WEEK, 13 March 1971.
• "Heath Tries 'Industrial Darwinism,'" BUSINESS WEEK, 20 March 1971.
• "Aid Cutoff Dooms British Shipbuilder," Associated Press, 14 June, 1971.

AND REVERBERATES ROUND THE WORLD

Britain is not the only place where the nationalization trend is being reversed. The experiences of countries that have tried nationalization should be cause for sober consideration, placing economic facts ahead of nationalism. In Uganda, for example, the government which came to power last January has announced a severe cutback in former president Obote's plans to take over 60% ownership of the country's largest industries, banks, and commercial establishments. According to the NEW YORK TIMES, "Obote's policies had shattered confidence among private investors, brought new investment to a virtual standstill, caused a rapid outflow of capital, and saddled [the government of] Uganda with a huge compensation bill." The seven concerns whose takeover agreements were signed before January will still be taken over, and the government will take a 49% interest in 11 others. But another 62 which had been in line for takeover will be left entirely in private hands.

In Venezuela, the Caracas City Council has voted unanimously to abolish the city owned bus system in favor of a new mass transit corporation to be created jointly with private capital. The existing bus line, run as a "public service," has been losing over $3 million a year, keeping less than 200 buses running on only 25 of 46 former routes. Political pressures have prevented fares from rising and bureaucratic mismanagement has allowed organizational stagnation. (In addition, Caracas allows free-market jitney operations: privately-owned cars which charge twice the bus fare, carry up to five passengers, and operate without routes or schedules. Regular taxis charge four times as much.)

The third recent case of denationalization (or "reprivatization") is found in the United States. Little known to most people, the federal government owns and operates two airports—Dulles International and Washington National. When FAA Administrator John Shaffer couldn't come up with a solution to rising cost problems, he jokingly suggested selling the two airports. The Office of Management and Budget (OMB), under the direction of George Schultz, didn't think it was funny and has included the proposal in the Budget.

SOURCES:
• "Uganda President to Curb Nationalization Plans," NEW YORK TIMES, 2 May 1971.
• "Caracas Reforms Its Bus System," Ibid.
• "Soft Sell," AVIATION, 8 February 1971.