So Northern Rock is to be nationalised, but as the Darling treasurer hurriedly explained, only as a temporary measure and only as a last resort; wouldn’t want to do anything that frightened business, now would we? The Tories immediately started howling about how this was all an embarassement and a prelude to a new winter of discontent, with the mass strikes and the power cuts and the dead piling up in the streets and all that, while Northern Rock shareholders immediately started making noises about sueing because of course no matter what happens they deserve their pound of flesh. For the rest of the financial sector, however much they may not like the dreaded n-word, they seem happy to let it happen and have the tax payer take responsibility for their failings.
For all the angst surrounding it, this nationalisation really is only business as usual, as over eleven years of New Labour it has always been willing to guarantee private profits with public money, although it’s usually done through less visible methods like private finance initiatives. Nationalisation happened only because Darling was unable to get rid of Norther Rock any other way, had spent too much money propping it up already to sweep the losses under the carpet and the crisis was too high profile to resolve through the usual sleight of hand. Not just the opposition and the voters were watching, so was the EU competition commissioner. Any hint of preferential treatment and the EU would’ve pounced. Since nobody was stupid enough to buy an almost bankrupt company with a multiple billion pound debt, nationalisation was the only option remaining.
But while nationalisation should not be seen as some huge blow for socialism, the mere fact that the government actually wants to go through with it is a significant break with the past. until now the profit principle, privetisation and marketisation as the solutions to all ills had been sacrosanct. To abandon them in the case of Northern Rocks means things are changing. It fits in a larger pan-European trend of abandonment of free market principles, as even the Dutch government has now admitted privetisation of public services has largely failed to bring the benefits that they promised it would. Plans to sell off Schiphol have been halted and the threatened liberalisation of public transport in the four biggest cities has fallen through. The finance minister has even gone so far as to say that privetisation of remaining state run companies would be stopped entirely, unless there were compelling reasons otherwise.
This u-turn is not to be explained by a change in ideology on the part of the British or Dutch governments, but simply because both can see the threatening recession looming at the horizon and both know that this recession is likely to be severe. Contrary to free market ideology, business has always relied on the government to shelter them through these storms.