Unlike some bloggers, the People's Republic was glad that Northern Rock was taken under state ownership earlier this week. The only criticism would be that it should have happened sooner. The Conservative Party have started bleating that we are back to the nationalisations of the 70's which wrecked the economy. Personally, I am just glad we are not back to the botched privatisations of the 90's in which they sold off the family silver to their rich mates below cost price in terrible deals for the taxpayer and the consumer.
As far as I can see it there were three choices: leaving Northern Rock to the mercy of the market; a botched privatisation in which the taxpayer would have underwritten the debts while shareholders of the takeover company pocket the profits; or nationalisation. Now, there is a lot to be said for the first one and this would be the choice for anyone who truly believes in laissez-faire capitalism. However, the Conservatives preferred the second option, in which the rich would make money with any mistakes covered by poor old Joe Public through taxation. For them, this is true to form. The privatisation of water under the Conservatives left us with the worst of both worlds, with shareholder profiting from a monopoly industry (just try phoning Severn Trent with a query and timing how long you wait; in proper capitalism, you would close your account and take your business elsewhere). Then they sold of our railways on the cheap in such a way that there was no competition on any given route, thus offering no incentive for lower prices and better services. Gas and electricity almost worked, until you take into account the latest price hikes. With the telephone networks, BT's size and control of the networks leaves them with an unfair advantage; remember how they held back broadband? How anyone who genuinely believes in free markets can support the Conservative position is absolutely beyond me. Unfortunately, botched private/ public partnerships and private protectionism also became the bedrock of New Labour's economic theory; trying to sell off the Tote to their horse-racing mates was just one of the examples that springs, not to mention the many failed PFI ideas.
The reason why I believe in the third option above is that the credit crunch is unprecedented, in recent years at least. The whole market seems to be affected, and the main central banks are so concerned they have come together to try and limit the damage. The first option is an acceptable way of doing things, but would have left many customers anxious as their life savings (although protected by regulation) faced an uncertain future. The third option at least protects the consumer and gives some stability to the banking sector. It is not without its downsides however. After all, will some banks decide to gamble recklessly with other peoples money, safe in the knowledge that if they mess up the government will come in and save the day? I personally do not think banks think like this, but it does raise the precedent of state intervention in such circumstances.
For those of us with a soft spot for socialism however, the best thing about this privatisation is that it allows us to play the free marketeers at their own game. I can choose to bank in a nationalised industry, which at the moment offers some very competitive savings rates, safe in the knowledge that the savings are guaranteed. For once, it is not the shareholders getting the best deal. It is the ordinary man on the street.
I think I will go and open an account in the bank which I own through the Government right away.