The Privatization Putsch
Institute for Research on Public Policy,
Halifax, 1989
Table of contents
Review excerpts
The story behind the book
In the heady right-wing days of the 1980s, with Margaret Thatcher in power in Britain In and her American admirer, Ronald Reagan, ensconced in the White House, privatization was all the ideological fashion in ruling circles in those countries. This was particularly significant for the United Kingdom, where there were major state enterprises and where, under Thatcher, the privatization wave began. Ironically, the original motivating force was visceral: to punish her political opponents, the Labour Party, and labour unions, who identified with the nationalized industries. Ideology to justify the ongoing privatizations was patched in to suit.

Soon, other governments around the western world jumped on the privatization bandwagon. The only question seemed to be what share price would guarantee a good sale of the assets.

As Herschel Hardin documents, however, the ideological drumbeating covered over just how questionable the rationalizations for it were. Did privatization rescue and rehabilitate enterprise? In instance after instance, Hardin points out, the contrary was the case: public ownership had rescued enterprise from private-sector incompetence or failure. Did privatization eliminate bureaucracy in enterprise? In reality, privatization added to enterprise a whole new bureaucracy of financial and corporate gameplayers.

He also looks at the great entrepreneurial accomplishments of public enterprise here in Canada and abroad, and its appropriateness for the future, especially for Canada. Some of its advantages: democratic ownership, decentralization of economic power, indigenous control of reinvestment capital, a long-term view of development and productivity and, above all, the creative impulse of “community-centred” entrepreneurship. And market competition? Public enterprise enhances it.

Privatization, Hardin argues, is the last thing we need.

Book talk
One reviewer complained that “putsch,” generally meaning a “coup d’état,” was wrongly used in the title. For the private takeover of state enterprises, however, engineered to destroy public ownership regardless of public opinion, “putsch” was the perfect word. The cover design, by Victoria designer Ron Lightburn, was equally apt. It shows a militant fist holding a flag, but instead of a fascist flag it was one with a dollar sign on it, and the hand holding the flag belonged to a corporate “suit,” cuff link flashing. Perfect design matched perfect title.

Without largely compliant and boosterish media, the wholesale privatization of the 1980s and later would not have happened. The bias worked in several ways. Business coverage overplayed difficulties in crown corporations while underplaying difficulties in private ones. Editorial pages and columnists were heavily biased against crown corporations. Of still greater impact was “structural bias.” Specifically, the business model that was assumed and elaborated on, and often glorified, in business reporting was the private corporation, and that was all. Crown corporations, regardless of their history and enterprise, fell outside the frame. This gave the promoters of privatization a powerful ideological advantage. The story is told in Chapter 16, “The Abject Media, Houses of Dogma.”

Conventional wisdom has it that public ownership may be all right for natural monopolies, but if there’s any market competition at all, even around the edges, then the company should be privatized. This illegitimacy of crown ownership in markets is simply assumed without any practical justification. The assumption is so entrenched, moreover, that it is taboo to suggest otherwise. The assumption is also made notwithstanding there are contrary examples at hand of state-owned companies that have operated in markets for decades. If crown (state) enterprise, however, has an entrepreneurial culture of its own and, in its ownership, is different from private corporations, wouldn’t it add variety and competition to markets, that is, enhance markets? The Privatization Putsch, Chapter 11, “Public Enterprise in the Competitive Marketplace,” topples the taboo.

Copyright © Herschel Hardin 2005
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