Global Trends


Councils of Despair

GREAT BRITAIN—There is a fierce battle raging here over Prime Minister Margaret Thatcher's plan to phase out an entire layer of local government, the metropolitan councils. The councils were created by the Conservative Heath government in the early 1970s when "strategic planning" was in vogue. All they have done, however, is sopped up tax pounds and hired huge staffs for wishy-washy local-government purposes, while all the actual public services are provided by the local borough governments.

William Waldegrave, a junior minister at the Department of the Environment, is in charge of the campaign for abolition of the councils. "Some people have suggested that we should take a few years to conduct another review of local government," he has noted. "But we can't wait. There is a national consensus on this issue. Our duty is to protect the citizen from institutions which in some cases are out of control."

Waldegrave caustically observed that in the battle to abolish the councils he has encountered what he calls the "Royal Marine syndrome." He said, "When the services are under heavy pressure to cut costs, they answer, 'We can only do it by abolishing the Royal Marines.'…In the same way with councils, when they are pressed to make cuts they announce that they can only do it by eliminating Home Helps or reducing services for the elderly. They are very powerful and big animals, with very strong unions. They have a lot of imperial ambitions to defend."

The second line of attack on big government by the Thatcher administration is the "Rates Bill," which was getting its reading in Parliament in early January. Its basic idea is simply to give the central government the power to put a lid on local tax increases. The bill is an interesting little beast, and it is the result of a spat between the central government and socialist city halls that have gone mad dealing out money to all and sundry. There have been lots of rumblings in Parliament about the "autonomy of local government," etc., but in January, it looked like the bill would scrape through Parliament by Easter.

It will be fascinating to see if someone now comes up with a bill to limit the tax-raising powers of the central government. The question in Britain is, Who would do it? The Queen?

—Eben Wilson

Liquidating the State

EUROPE—The world's biggest stock sale ever may come in October 1984, when Prime Minister Margaret Thatcher's government is expected to put 51 percent of state-owned British Telecommunications (Britain's phone company) on the market. The plan is part of the Thatcher administration's grand strategy of privatizing a large chunk of nationalized businesses, which have in recent years been especially draining of the public coffers.

Already, Britain has entirely unloaded one large state-owned firm (British Aerospace) and has hived off substantial portions of 11 other state enterprises. The Thatcher government has a hit list of about a dozen more state businesses, from steel to airways. And some British scholars have suggested that the denationalization drive ought to get even more radical, offering as targets the government's coal-mining, electricity, and postal operations.

While Britain is Europe's most visible and aggressive de-nationalizer, the move to sell off state enterprises is evident in other Western European nations as well, though on a much smaller scale. The Swedish government, for example, recently sold Luxor, the state TV maker, to a Finnish firm. West Germany's government has sold almost 14 percent of the energy and chemical company Veba—the country's largest industrial group—thus reducing its share of the firm to 30 percent.

Many German businessmen hope that the Veba sale, the first such transfer since 1961, is the beginning of a move to cut back the government's involvement in the hundreds of enterprises in which it has a substantial stake. One major objective announced by the government is the privatization of Salzgitter, a wholly state-owned steel and engineering concern with more than 500,000 workers.

In France, things are somewhat less encouraging. Albin Chalandon, a former minister in Giscard d'Estaing's cabinet who transformed the state-run Elf Aquitaine oil company into the country's most profitable enterprise, has been preaching denationalization of certain state industries to French business executives. Chalandon warns that the economy of France, where the government's share of national investment is 55 percent, will stagnate if public-sector growth is not turned around. Though Socialist President Francois Mitterrand is trying to maintain austerity measures as best his ideology allows him, it is unlikely that his government will embrace Chalandon's recommendations.

Reviewing the recent book Nationalized Companies, by R. Joseph Monsen and Kenneth Walters, in the Wall Street Journal, Johns Hopkins economist Steve Hanke states that the "most striking feature of nationalized enterprises is their politicization" and that "successful managers of nationalized enterprises resemble politicians rather than businessmen." The result is that "virtually all nationalized companies generate accounting losses." The high cost of politicizing businesses is a lesson that US advocates of a "national industrial policy" ought to take seriously.

Party of Freedom

NEW ZEALAND—In any democratic state, the odds are usually against success for a new political party. But here, the New Zealand Party—a generally pro-free-market party led by real-estate millionaire Robert Jones—may be defying the traditional odds.

When the New Zealand Party started last year, conservative Prime Minister Robert Muldoon reportedly called it a "hoax" and a "joke." He may have spoken too soon. After only two months in existence, the party could boast last November of 11 percent support in opinion polls, displacing the Social Credit Party to become the third most popular party in the country (the conservative National Party was pegged at 41 percent and the Labour Party at 38 percent). Moreover, the party's rallies were attracting huge, sometimes record-breaking crowds. A December report in the New Zealand Herald said the party "is more akin to a phenomenon than some flash-in-the-pan the political establishment had prophesied."

The commitment of Jones and his followers to free-market principles is not absolute, but it is a vast improvement over New Zealand's mainstream politicians. The Herald reports that the politics of the new party draw on both "right-wing" ideas (free-market economics, more law and order, less welfare) and "traditional liberal ideals" including small government, individual freedoms, and "more education but less defense."

A campaign speech by Jones in Ashburton was typical. The "South Pacific Poland-style command economy" must be ended, he said. "It doesn't work in Poland and it doesn't work here." Reintroduction of a private-enterprise system is what will save New Zealand's people, according to Jones. "We can make this nation a great society, not by Government schemes but by unshackling this nation and letting the people do it."

Much of the New Zealand Party's political support comes from former National Party adherents. According to the Herald, Jones's audiences tend to be made up largely of professional people—lawyers, doctors, accountants, academics, businessmen, and farmers. But despite (or perhaps because of) their old allegiances, they are most responsive to Jones at rallies when he criticizes the Muldoon regime as "dictatorial" and speaks about the erosion of freedoms in New Zealand.

Perhaps the biggest obstacle the New Zealand Party confronts is New Zealand's electoral system, similar to Britain's "first-past-the-post" arrangement. To win a parliamentary seat, the new party would have to capture a majority of the votes in a constituency. So to the extent that party supporters are concentrated in its best constituencies, it will probably do well—but if they are fairly evenly dispersed around the country, the party could face a debacle at the polls in November.

Jones himself is confident. "We are going to win first time up," he told a Herald interviewer. "I haven't got time to muck around—it has got to be quick."