‘Liberalisation’ – sounds like a good thing, right – like ‘freedom’? It’s rarely named or explained, but underpins the trade agenda and ‘globalisation’. It allows corporations to become mega-transnationals. It’s the reason that ‘ownership’ of the water we drink in the UK has been passed around between, among others, the Chinese state, Canadian teachers’ pension funds and Australian Macquarie Bank. Why does provision of our water have to involve profits in China, Canada or Australia?
George Monbiot recently wrote an article slamming ‘neoliberalism’ (it’s really worth reading by the way) – the ideology that, however well-intentioned it’s initiators were, conveniently enables the rich to get richer. Liberalisation is the vehicle for it. We have had total liberalisation since the 1980s, and we’ve been told that there is no alternative. I’m suggesting that it’s time to question that.
Liberalisation means opening investment opportunities to foreign and transnational investors. While the word is tossed around by journalists and politicians, it is rarely explained. Thus people don’t get the chance to grasp the meaning, to connect it to their own experience, or to recognise that the UK’s total liberalisation is a political choice – and that there are other options. Part of the problem is that prestigious BBC journalists don’t really grasp this meaning themselves.
Since Thatcher, liberalisation has been fundamental to the UK economy, the essential nature of our ‘very open economy’, always touted as a plus. Liberalisation is so much taken for granted that when there are investment opportunities, such as a UK private sector sell-offs, like Cadbury’s, or an investment opportunity arising from privatising or part privatising of a public service, e.g. NHS contracts, water service sell-offs or PFI schemes, the liberalisation of these investment opportunities is not even mentioned.
This political choice is the reason that hardly any UK brands are UK owned any more, and with privatisations of public services, it is much harder to reinstate public provision when foreign or transnational investors are involved.
Would national ownership – as opposed to liberalised ownership – be different?
To be clear, I am not referring here to ‘nationalising’ as in shifting operations from private ownership to government ownership or control, a corner to which many on the Left have gone directly as an antidote to everything that is currently wrong with the nature of our economy.
While there is certainly a case for nationalisation in some areas, and other forms of non-private ownership to aim for, it is unlikely that the UK, in the near or even more distant future, would have an economy that is not ‘mixed’, so including private ownership. What I am discussing here is the nature of that private ownership and whether it would be different if it was not, or was to a lesser extent, liberalised, raising the possibility of encouraging, boosting or advantaging national ownership and investment.
The decision of Tata Steel to either close or offload its investment here was made on the basis of shareholder interests. Admittedly the company is experiencing significant ongoing losses, with causes outside of the UK. However it was always obvious that when the going got rough, Tata would abandon its higher wage UK production and maintain lower wage, home country, Indian production – though the Tata empire is not so keen on paying home-country taxes.
Would national ownership lead to a different situation? Would there be wider considerations than just shareholders’ interests? Would there be broader expectations of a national company but also broader support available for it? Would there be a more multifaceted consideration of the situation, e.g. for workers, for the supply companies, for the social context role of the firm? Would there be more training within the firm if it was part of the national industrial fabric, taking account of current and future workers and their skills, towards a more holistic societal role for the firm?
Even Marxist economics, focused on the issue of who is in control, may not take such considerations into account. But, apart from essential services and possibly essential industries (though there is as yet no political move re the latter), private ownership is likely to continue as the locus for a lot of labour and economic activity.
For this reason, the liberalisation options warrant consideration with the possibility of challenging the model that we have.
The ‘liberalisation’ I am discussing here is the liberalisation of ‘services’, which includes financial services and investment. Just about everything is a ‘service’ now because services providers get privileged treatment, especially when service liberalisations are committed to trade agreements. It was transnational financial corporations such as American Express and Citicorp that lobbied for ‘services’ to be included in the trade agenda, resulting in the General Agreement on Trade in Services (GATS) being included in the World Trade organisation’s agreements, at the point when the WTO was set up.
The trade-in-services commitments that countries make in international trade deals are to open a service to transnational and foreign investments and to keep it open in that way.
At that point, as part of the commitment, two corporate-friendly rules also kick in. These are the Market Access and National Treatment rules. The Market Access rule means that for a service a country has liberalised and committed to a trade deal, it cannot limit the number of suppliers or the number of services that they offer – e.g. newly devised financial services. The National Treatment rule means that a government must treat any foreign investor in that service at least as well as any domestic investor – including access to any subsidies.
With trade agreement commitments, public service privatisations become harder to reverse. In effect, liberalisations prevent reversals of privatisations.
The liberalisation of trade-in-goods, applicable at the point where goods actually cross borders, is about reducing tariffs (import taxes) and government subsidies to home country producers. But all other aspects of ‘goods’ eg distribution, labour supply, credit and insurance , are ‘services’, subject to trade-in-services provisions, which, as pointed out, are about the rights of transnational and foreign corporations.
Liberalisation is the basis of the international trade agenda and of globalisation. It allows corporations to become mega-corporations. The City of London, i.e. transnational financial services, ensure that the UK has a completely liberalised economy, as a global model, in order to have as much of the world as possible open to international financial services business and for access to investment world-wide.
Can we, should we or do we want to pull back on that? Should the interests of the transnational financial services industry continue to be the priority of UK government policy, as is currently the case?
How we shift from the political choice of complete liberalisation to a different option, with different priorities, is for debate. But the starting point is naming and explaining liberalisation, its implications and the fact that it is a political choice and that there are other options. Only when these realities are generally recognised, can broadly-understood, broadly-supported change become a possibility.
The views expressed in our blog are those of the author and not necessarily lowimpact.org's
1Dave Darby May 12th, 2016
Great analysis. I agree, although international investors steering government policy because of their ability to whisk money out of any country that introduces corporate-unfriendly policies is a problem wherever the HQs of companies operating in that country are.
Don’t know if you saw the report by Credit Suisse (http://lowimpactorg.wpengine.com/why-international-investors-i-e-the-1-couldnt-care-less-about-politics/), but international investors couldn’t care less who’s elected in any particular country – they know that ultimately, they’re in charge.
But we’re an environmental organisation at core, and any philosophy that orients business towards the global economy rather than producing for domestic consumption has got to be a bad philosophy – so that we get virtually all our material possessions from dirty factories far from EU environmental directives, which then have to be transported from the other side of the world. That’s not good. Neoliberalism has got to go.
‘Should the interests of the transnational financial services industry continue to be the priority of UK government policy, as is currently the case?’ – no, they absolutely shouldn’t. And the argument that they provide jobs is false. Many times more jobs would be provided by an economy that looks to provide for its own communities – especially via small, local businesses. See http://lowimpactorg.wpengine.com/supermarkets-destroy-jobs-and-local-resilience/.