24 September 2015

Why do the British dislike the free market?


Renationalising the railways? That is the new Labour leader’s “new politics”. Jeremy Corbyn advocates a reheated Andy Burnham policy of taking each line into public ownership as the franchises expire. A policy of returning to the glorious past of British Rail. Oh but it is popular, they say. So are One Direction. It doesn’t make it right.

It does however pose the interesting question of why public opinion appears to favour non-market solutions. I say “appears to” because Labour’s previous leader Ed Miliband was hailed as the man who had rewritten the laws of economics when he proposed a price freeze for gas and electricity, and a lot of good it did him. The policy went down so well in focus groups it was “off the scale”, we were told, but people didn’t vote for it.

It is a paradox. Opinion polls show that people support renationalisation, price controls, rent controls and “affordable” housing. Yet we live in a mostly free-market country. Margaret Thatcher changed our economy, but she doesn’t seem to have changed our minds. Which must have been frustrating for her.

She once said: “Economics are the method: the object is to change the soul.” A miserable failure she was on that front.

If she wasn’t frustrated, I certainly am. I was no supporter of hers, but I have been given to muttering, under my breath, “It’s as if Margaret Thatcher never existed,” every time I come across a website that makes it hard to pay for something, or a shop that isn’t open when I want it to be, or an opinion poll that finds that people think that the Government should make things cheaper.

Nigel Lawson recently said that Thatcher initially shied away from “denationalisation” as it was known then because she was worried about the opinion polls. Since then the surest way to oppose any attempt to improve the NHS has been to accuse ministers of “privatisation”. Even now, a quarter-century after she has gone, profit is still a dirty word in this country.

And an opinion poll last month found that more people oppose the provision of public services by private companies than support it in every case except street cleaning, rubbish collection and buses. Opinium asked: “As long as the cost to the taxpayer was no higher and the quality of service was as good or better, how would you feel about these services being run by a private company under contract to the government/local council?”

For the police, fire service, hospitals and GPs, the answer from a majority was No. Just wait until that 52 per cent of the population find out that family doctors have been private contractors to the NHS since it was founded in 1948.

But it is the polls that find public support for renationalising the railways, the energy and water companies and Royal Mail that most excite Corbyn’s supporters. Having failed with Miliband’s milk-and-water price controls, Labour members have decided to go for someone who wants just to nationalise the lot.

It is not as if the Government is much better, pandering to ignorance by peddling schemes for recycling money from one lot of marginal house-buyers to another, for example. Help to Buy is one of the most pointless policies to which proper economists at the Treasury have put their names. By subsidising one group of first-time buyers, the scheme can only benefit them at the expense of a wider group of people who would otherwise have been able to buy. But the winners make happy case studies for election photo-ops, while the losers are dispersed and unaware of their loss.

It is as if we live in a free-market economy and don’t like it. So we pretend that politicians can make it better. When people say they want to renationalise the railways, I suspect that what they mean is that ticket prices are too high. It is easier to resent profits being syphoned off by “fat cat” private company directors and shareholders than it is to demand higher subsidy (especially if there have been well-documented examples of rent-seeking behaviour in parts of the semi-privatised rail system).

Partly, it is like complaining about the weather. Grumble, have you seen the price of grumble these days? A politician who wants to seem to be “in touch” has to know the price of milk and has to be photographed, as Miliband often was, pointing at things, saying how expensive they were and how there ought to be a law against such a dreadful rip-off.

House prices are the staple diet of the grumbler. Especially in London. Ridiculous, insane, wrong are some of the milder words. Which side of the supply and demand equation do people not understand? A significant proportion of the world’s population wants to live in London, an urban area with entrenched planning controls, surrounded by an electorally sacred green belt. In many ways, it is surprising that London house prices are so low. Particularly when you look at mortgage repayments, rather than house prices, in relation to incomes.

Indeed, you would never guess from the hyperventilation of the “housing crisis” conventional wisdom that, even in London, house prices in the four easternmost boroughs (Barking and Dagenham, Redbridge, Havering and Bexley) are still lower in real terms than they were seven years ago.

As I say, I was not a Thatcher supporter. I have been a socialist all my life, which I define as seeking equality of respect. That demands, I think, greater material equality than we have now, at the same time as recognising that the things money can buy are not the only good things in life.

But it also means recognising that you cannot abolish market forces. As a teenager I thought everyone should be paid the same, until my (younger) sister said, “What if not enough people want to become doctors?”

So the purpose of politics, I have thought since then, is to work with the grain of market forces – or human nature plus maths, as might be a better description – towards a more equally prosperous society. But no, we would rather dream about renationalising the railways.

John Rentoul is chief political commentator for The Independent on Sunday