Global Trends


Twists and Turns Along Britain's Private Route

GREAT BRITAIN—One of the most important positive developments in Great Britain is a genuine debate about the welfare state. Even the BBC used its flagship current-affairs program, Panorama, to analyze the future of government spending and taxation given present statutory commitments to entitlements, as they are called in the United States.

In one sense, the Tories are being very brave in attacking the sanctity of the welfare state. They have, for example, actually lopped off administrators from the National Health Service. In another sense, the party's commitments are a load of talk and not much go. Lord Carrington, the former foreign minister, came out and suggested that perhaps it is time for government to reduce its welfare functions. The thought was absorbed, sagely accepted as perhaps an inevitability, and nothing has happened since.

The Tories have pinned their flag to lower taxes but haven't been able to actually do much to cut spending. There is, however, a genuine review of spending options going on inside the civil service. One of the main targets is local governments. Already there's a planned statute to limit the taxes they can impose. Although the act has no provision for reducing the functions of local governments, it would at least put a ceiling on local tax increases.

The trend toward privatization continues. Proceeds from denationalized state-owned industries and real estate are forecast to bring in about $12 billion in the next three to four years, up from $3 billion brought in during the first Thatcher term. Slated for privatization soon are 51 percent of British Telecom, the telecommunications monopoly; the British Airports Authority; the Royal Ordnance factories; and British Airways.

There is much discussion of selling government-owned real estate. Michael Osborne, an analyst with a London stock brokerage, estimates that real estate sales alone could bring in some $405 billion—enough to finance the government's deficit through the year 2010.

Meanwhile, the Economist has been urging that the Tories "have the courage of their radical-right convictions" when it comes to privatization. A British Airports Authority memorandum recently argued for selling its seven airports as a single unit, because this would preserve crosssubsidization of unprofitable airports by the profitable ones. But "crosssubsidization is exactly what recompetitioning in Britain should not tolerate," argued the Economist.

Likewise, the magazine warned against merely selling shares in government-owned enterprises. "A British Gas or British Telecom with half its shares held by the public, will merely be a partly state-owned public monopoly.…Britain would be reinventing the sort of public utility concept that Americans have been trying to bury since 1940." For the benefit of consumers, urged the Economist, state monopolies should be broken up and barriers to entry into a market, such as telecommunications, removed.

Similarly, local governments should not keep barriers to entry in place when they privatize garbage collection and hospital laundry service by awarding exclusive franchises, thus installing a private monopoly in place of a government one. "It should be made as easy for households to pick their own rubbish-collector as it is to pick their milkman," the magazine said.

So the political sea-change is not free of problems, but it's become an established option in the British mind to go the private route on many things.

—Eben Wilson

Capitalist By Any Other Name…

HUNGARY—Issuance of corporate bonds, proposals for stock markets, political elections with competing candidates, and widespread small-business enterpreneurship are not terribly unusual—except that they're cropping up in Hungary.

After coordinating the Soviet invasion that crushed the popular Hungarian uprising in 1956, Yuri Andropov, the wily Soviet ambassador to Budapest at the time, engineered the installation of Janos Kadar as Communist party chief. It was an inspired choice. Kadar was and still is absolutely loyal to Moscow, but he is also a little more temperate than other Eastern European dictators.

Under Kadar, there have been no more large-scale revolts, and Hungary has remained a steadfast member of the Warsaw Pact. But from Moscow's standpoint, there is a price for this stability—a series of Hungarian deviations from Communist orthodoxy.

A recent Los Angeles Times article reviewed some of the capitalist-like reforms firmly in place or under serious discussion in Hungary. For instance, an estimated 300,000 Hungarians are in business for themselves or in partnership with friends. Some 50 enterprises are being run, on an experimental basis, by "boards of directors" made up mainly of employees. Under study are several proposals for what amounts to a stock market. A proposed constitutional tribunal would permit some institutions to challenge government decisions. And in the next parliamentary and local elections, the Communist Party will run (typically, by decree) at least two candidates for every office.

As an example of the special economic atmosphere in Hungary, the Times described what happened when the Vineyards Agricultural Cooperative in rural Nagyrede recently ran short of cash for expansion and modernization. It couldn't get government money because of an austerity program, and bank loans would require 14 percent interest—so the cooperative issued what Westerners call bonds. About 500 townspeople and members of the cooperative bought $230,000 worth of the bonds for a promise of 9 percent interest and full repayment by the end of 1988.

In the face of all the evidence to the contrary, Hungary's leaders go out of their way to declare the nation's continuing allegiance to socialism. "The Hungarian national economy is socialist," Kadar declaimed in a radio address last spring. "The methods applied in economic life promote the building of socialism and serve its interests. The party as well as our allies should have a clear picture of this."

Kadar and his underlings are in fact on a tightrope. There has been grumbling over the reforms from more-orthodox Communists in Eastern Europe. Moreover, Hungary has serious economic problems, including a foreign debt per capita that even exceeds Poland's.

Yet according to the Times, the Hungarian Communist leadership doesn't see any alternative to the path they've turned down. They've progressed to a point where, as party economist Ferenc Havasi said in an interview, a return to the old centralized system "is as inconceivable as going back to the Stone Age."

Radio-Freeing Europe

FRANCE—The French government recently authorized the use of the FM radio band for broadcast by nongovernment stations, which breaks with the longtime policy of a state radio (as well as TV) monopoly. About 800 newly authorized radio stations will broadcast in this spectrum. Though the stations are prohibited from airing commercials and are under some public-interest restrictions, they are free to fashion their own fare.

By authorizing the new stations, France effectively obviated a problem that has been a headache to many European governments set on monopolization of the air waves—so-called pirate stations, or illicit broadcasters. The number of pirate stations varies from country to country—largely depending on how strongly the government monopoly is enforced. In Holland, for example, there are an estimated 10,000 pirate stations, while in Britain, where the government is cracking down hard on pirates, there are perhaps 45 of the illicit broadcasters.

In the Republic of Ireland, where some 70 or so pirate stations operate, the government has taken a course between France's liberal policy and Britain's get-tough stance: it has provided for the licensing of 30 nongovernment stations, but licenses are limited to five-year periods. And though the stations will be required to help fund certain public-interest activities in the communities where they operate, and more-lucrative stations will be required to subsidize poorer ones, the "free" stations will be allowed to sell commercial air time.