Introduction

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This book is ultimately concerned with the transformation of public enterprises

in the light of privatisation policies and the process of market integration and, in
particular, seeks to assess the future role of public services in the European Union.
Public enterprises have been at the heart of economic and social life since the rise of
nationalism and the formation of new States during the nineteenth century and they
enjoyed their ‘golden age’ between the post war period until the end of the 1970s.
Attacks on public enterprises, which had been voiced since their creation, became
sustained following the crisis of the 1970s. These attacks were prompted by a host
of factors, including the perceived poor performance of the mixed economies during
that period, which was compounded by the debt crisis in the 1980s in many
developing countries, and the subsequent collapse of centrally planned economies in
the 1990s. As a new rhetoric and credo in the Market replaced the post-war faith in
the State, there was an assumption within the dominant modes of thinking that a
change of ownership from public to private status would release enterprises from the
‘shackles of bureaucracy’ and lead them via the ‘cold winds of market forces’ to
economic efficiency. Though this had a powerful influence on key international
institutions such as the World Bank and the IMF, this dominant discourse was
debated, but not necessarily accepted in all quarters. As is shown in this book, the
rhetoric had a patchy influence on EU governments, being important in certain
countries at particular moments in time. Moreover, the discourse contained many
contradictions, over-simplifications and mistaken assumptions. More recently, in
certain World Bank and IMF policy publications, it has been admitted that
enthusiasm for pro-market reforms was sometimes total, unquestioning and thus
blind, and that a trail of corruption has been left behind following privatisation
activity and this must be rectified through the introduction of transparent regulation
and good corporate governance practices (as predicted by authors such as Harriss-
White and White, 1996 and then demonstrated by Stiglitz, 2002). Part of the
weakness of the pro-privatisation rhetoric was a misunderstanding, or at best a gross
simplification, of what public enterprises were and why they had been created, or
why and how it was that they had emerged by default under a State as ‘entrepreneur
2 ,QWURGXFWLRQ

in the last resort’. The way in which dominant discourses helped shape attitudes
towards public and private enterprises is examined in the first chapter. This is then
deconstructed and shown to be riddled with contradictions, prejudices and ideology.
A brief, but timely, reassessment of public enterprise history reinforces this
argument, drawing attention to the problems of defence, the need for public finance,
the lack of private initiative, the existence of market failures and desires to avoid
foreign influence amongst others.
The analysis of privatisation in the EU, as expressed in early publications such
as Vickers and Yarrow (1988) and Vickers and Wright (1989) tended to interpret
events from a determinist perspective, assuming that Britain was the pioneer which
other countries would soon try to emulate. The result would be a world-wide
extension of the US-style regulatory framework. Many recent articles in influential
reviews such as 7KH (FRQRPLVW and 3ULYDWLVDWLRQ ,QWHUQDWLRQDO continue this
perspective:

‘When Margaret Thatcher became PM of the UK 20 years ago, she immediately

began privatising state owned enterprises. Since then, nearly every government of
the world has sought better economic performance by selling SOE. By the mid-
1980s, other European governments began to follow the UK lead and privatise as
part of their effort to break out of economic stagnation’. 3ULYDWLVDWLRQ,QWHUQDWLRQDO
<HDUERRN(2000: 7).

‘A decade or so ago it seemed that privatisation would provide the cure for part
of continental Europe’s economic ills. Government of all hues were following the
trail blazed by Margaret Thatcher in Britain after 1979. By shifting assets from the
public-sector control to the disciplines of private ownership and the capital markets,
huge economic efficiencies could be unleashed, and, not incidentally, large sums of
money be raised for state coffers’. 7KH(FRQRPLVW (29 June 2002: 71-73).

Later, observing that the privatisation experiences were much more varied in
some regions including the EU, publications such as those edited by Parker (1998)
pointed to a diversity of experiences. In this book, it is sought to ascertain to what
extent the ‘British paradigm’ explanation is helpful in furthering our understanding
of privatisation across the EU region, or whether it is more accurate to speak of a
‘diversity of experiences’ in the region. Given that the overwhelming bulk of
privatisation activity in the EU occurred after 1993, shortly after the consolidation of
the Single Common Market and the Maastricht Treaty, it is questioned to what
extent the logic of integration helps shed light on explaining privatisation. In order
to do this, the privatisation experiences of all EU countries are reviewed in Chapter
Two (with the exception of Luxemburg). In general, comparative privatisation
literature such as Feigenbaum HW DO (1998) has focused on the early privatising
experiences of the large economies such as Britain and France, as well as the later
experiences of countries which earned the largest overall proceeds (Britain, Italy,
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Spain). This is logical due to the fact that much privatisation literature has
highlighted the financial aspects of the process, at the expense of other avenues of
enquiry, such as the social and political consequences. Countries which privatised
later in the 1990s, or which made relatively large privatisation efforts in terms of the
size of the economy have received much less attention in the comparative literature.
In Chapter Three, privatisation experiences across the EU are analysed
comparatively, and attention is drawn to overall proceeds, and proceeds in terms of
country and economy size in order to asses the ‘privatisation effort’ of each country.
This helps reveal the timing, peaks and sequence of privatisation activity across the
EU. The results include several findings. Firstly, although the UK and to a lesser
extent, France, underwent privatisation programmes in the 1980s, the bulk of EU
privatisation activity occurred during the 1990s, specifically, from 1993. This
suggests that the need to implement sectoral liberalization in the light of the Single
Common Market and the Maastricht Treaty in 1992 were by far more influential
factors for governments when introducing privatisation reforms than pro-Market
discourse. Secondly, it is shown that, while anti-State rhetoric was relevant at
specific times in specific countries (for instance, under the Swedish administration
of Carl Bidt between 1991 and 1994, and during the Spanish presidency of José
María Aznar from 1997), it was also irrelevant at other times in certain countries.
For example, the discourse did not have much resonance in countries such as
Finland, Sweden and Austria, and, to a lesser extent, Ireland, for a variety of reasons
relating to the performance of public enterprises vis-à-vis private enterprises, as well
as the historical role of public enterprises in national independence movements. In
conclusion, the importance of the ‘grand’ shift from State to Market at the heart of
discourse is significant at the global level, however, once individual EU
governments are analysed for their policy motivations, there is a great deal of
unevenness in the relevance of the pro-Market discourse. In some countries, this
discourse was used to add further legitimacy when applying dramatic reforms in the
light of sectoral liberalization, however, in other countries, it jarred with national
development and history rendering it inappropriate.
Going beyond the suggested importance of the process of European
integration to the privatisation process, the common rationales guiding or even
driving privatisation in the region are sought in Chapter Four. It is shown, first, that
there was a progressive downward convergence in the size of the public sector
which suggests an European pattern. However, among different sectors and
industries there was a variety of trajectories. Of all the factors connected to the
European Single Market, the overriding one in terms of privatisation was gradual
commercial and financial integration, which drove privatisation in the
manufacturing and financial sectors. In these sectors, it proved easier and less
controversial to introduce competition via a regulatory framework. Privatisation in
other sectors, such as transport and communications, gas, electricity and water,
where it was more complex and sensitive to introduce competition, has been less far
reaching across the EU. There are many reasons for this including the technological
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characteristics of the sector, socio-economic benefits they bring, their historic roots
at the local and regional level, and the fact that they are still considered to have
qualities which render them public services. Since the 1990s, the EU has replaced
the term ‘public services’ by ‘services of general interest’. This change can be
explained by the EU’s intention to shift emphasis away from the notion of ‘public’
(which many primarily associate with ownership status), and to direct attention
towards the importance of properly providing a service which is in the ‘general
interest’, regardless of whether this is provided by a private or public enterprise.
Among recent EU policy developments is an emerging (if still unconsolidated)
definition of ‘services of general interest’ which seeks to understand the notion from
the point of view of citizenship. That is, a service of general interest is a right which
all EU citizens can expect to enjoy. Some of the EU’s social partners, such as the
CEEP, have been instrumental in developing definitions and conceptual
contributions along these lines. This has meant that, to some extent, services of
general interest are being defined in a bottom-up, citizen-led manner, and emphasis
is placed on what rights to public services should be expected by EU citizens at a
social, political and economic level. This, of course, reflects the preoccupation, at
the EU policy-making level, with defining and consolidating a sense of integration,
not only in economic terms, but also in social and political terms. To what extent
does this shift in direction in terms of paying more attention to the socio-political
consequences of privatisation indicate a softening of the pro-Market anti-State
climate of the 1980s and a toning down of New Right ideology? Or should it be
interpreted more cynically as a means of legitimising and consolidating pro-Market
reforms? Most importantly, what consequences do these changes have in terms of
the prospects for public enterprises of the future?
The authors of this book believe that these are critical questions facing the EU
in the immediate future. The relevance of this topic is global, and is reflected in
developments within the United Nations, for instance, whereby progress is being
made to designate access to clean water a human right. In the case of the EU, the
answers depend, as usual, upon a host of variables, including policy-makers’
receptiveness to a ‘bottom-up’ approach to services of general interest, as well as
increased awakening and organisation on the part of the public and organised
groups. In an age of so-called ‘globalisation’, as demonstrated by the rise in ‘anti-
globalisation’ protests as documented by Klein (2000), faith must be placed in
citizen action to make a difference.