Posted by: John Elliott | April 10, 2013

How we launched Thatcher’s ‘Privatisation’ word in the FT in 1979

Originated as Reprivatisierung in Nazi Germany

One of Margaret Thatcher’s most significant legacies is privatisation – not only for introducing the policy itself, but also for adding the word into the world’s every-day vocabulary. Her death this week seems a good moment to recount how we launched the word on July 28 1979 in The Financial Times.

The day before, I telephoned Nigel Lawson, who had just become Financial Secretary at the Treasury, for a background briefing on de-nationalisation, as it was then called. During the conversation, he used the word privatisation, which I had never heard before.

I was covering the industrial policy side of nationalised industries for the FT, and an economics correspondent, Anatole Kaletski (Kaletsky) , was writing on the finances. We launched the word in the first paragraph of an FT leader page feature, saying:

“A new word has been circulating in Whitehall in recent weeks. It goes to the heart of the Government’s policy for reforming the ownership and bureaucracy of state owned industries, but few Ministers would admit to using it. The word is ‘privatisation’ which, to those close to the centre of Tory thinking, means the Government’s well known interest in selling public sector assets to private individuals, financial institutions, and anyone else (apart from foreign  interests in some sensitive cases) who might want to buy them”.

No-one seemed to have heard of the word, and the FT features editor did not agree with my request to put our scoop in the headline, saying something like “no-one will know what it means”. Instead, with vintage FT cautious precision, the headline said, “Long and short term aims of denationalisation”.

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People of course rapidly came to “know what it means”, and the word became internationally used, putting a positive and private sector spin on the more negative heavy-sounding de-nationalisation. Thatcher also intended it to mark the end of Britain’s see-saw policies, with Conservative and Labour governments alternately nationalising and de-nationalising industries.

Sadly, the briefing was non-attributable, so the article does not include any quotations from Lawson – though I did write, leaving a small trail, that he was at the “centre of the ‘privatisation’ exercise”. I also mentioned that Sir Keith Joseph, the Industry Secretary (Minister) and a strong right-wing influence on Thatcher, was concerned about how to protect consumers when public utility monopolies such as electricity and gas supply were sold off. He had briefed me on that earlier – the answer was to allow the creation of rival companies, as happened most notably in telecommunications.

Years later, living in India where the wrongs and rights of privatisation are hotly debated, I’ve wondered whether that was the first use of the word and where it actually came from. The origin, I have just discovered, is Nazi Germany in the 1930s. Udaya Narayana Singh, a linguist and professor at Santiniketan in West Bengal, discovered for me that “English Etymological Dictionaries show the coinage ‘privatization’ to have come into operation from 1959”.

So I googled privatization, with a ‘z’ instead of an ‘s’, and added 1959, which led to links suggesting that the word started in Germany between 1959 and 1965 when Volkswagen and other government companies were sold.

A ‘war economy’

Some sources have also claimed, wrongly, that Peter Drucker, a management theorist,  introduced the word in a 1969 book, but my search revealed that it actually first appeared in Nazi Germany in the 1930s as Reprivatisierung, which meant returning nationalised assets to the private sector. “In return for business assistance, the Nazis hastened to give evidence of their good will by restoring to private capitalism a number of monopolies held or controlled by the state”, said an analysis in 1941, which also suggested the policy was aimed at strengthening the wealth and loyalty of capitalists, and strengthening what would become a “war economy”.

Thatcher’s war economy was different, and was aimed at destroying the power of trade unions and revitalising Britain’s leftward-leaning economy.  In her memoirs, she describes privatisation as “fundamental to improving Britain’s economic performance”. During her time as prime minister, more than £50 billion was raised by selling stakes (and usually control) in business such as British Railways, Airways, Aerospace, Gas, Steel, and Telecom, plus buses, water, sewerage and other utilities (some of the candidates are below).

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Like most of Thatcher’s policies, privatisation went too far and continued for too long, becoming a mantra – internationally as well as in Britain – rather than a reasoned policy. A senior Treasury official explained to me in the 1990s how it was essential for him to have a continuing list of potential sales so as to maintain the political momentum. If that momentum was lost, it could be very difficult to restart, he said.

Consequently, despite the obvious successes like airways, aerospace and telecom (with new private companies overtaking what is now BT), there have been some disasters in the UK – notably railways, which were renationalised after serious crashes and mis-management, hospitals (under the Blair Labour government), and security (the G4S company had to be baled out by the British army at last year’s Olympics). The policy is still running – the government intends to privatise the Royal Mail, which has defied reformers since 1979.

It has also developed into a world-wide craze for PPP – public-private partnership – which often blurs and confuses the conflicting priorities of providing adequate public services and making private sector profits. The private sector cannot be trusted to deliver public services in terms of quantity and quality – as has been seen in Britain with railways and hospitals, and in India with airports (where privatisation is often corrupted by land scams) and highways (where companies shirk PPP responsibilities).

India has debated how far to go along the Thatcher path for over 20 years. More progress has been made on divestment (selling minority stakes) than on privatising control. Manmohan Singh, prime minister since 2004, has never been a fan, and does not favour selling off profitable businesses. That reflects both India’s old socialist approach, and (I suspect and hope) a healthy scepticism about how far parts of the Indian private sector can be trusted with the country’s family jewels.

This is all a long way from my phone call to Nigel Lawson in July 1979, and even further from Germany in the 1930s. It is a tribute to Thatcher’s leadership that what she started 34 years ago has become a continuing international trend. What happened in Britain however also reflects her inability – or lack of interest – in seeing the downsides of the reforms that she so passionately believed in. As she herself said, “the lady is not for turning”.

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Responses

  1. Hi John,
    Thank you very much for enlightening us about the history of this much dreaded word! sadly even after 20 years of indian liberalisation, privatisation has not become acceptable.

  2. Very interesting. India has developed an own term disinvestment because privatisation is still seen as a dirty word. Incidentally, India has been selling small stakes in non-financial companies and investing increasing amounts in the banking system given its large holdings in state-run banks.


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