Following the Second World War, Clement Attlee won a majority, and by 1951, 20% of the British economy had been nationalised. When faced with the failures of the nationalised system, Thatcher sold off the state-owned companies, which worked until 2008, but now the British economy is failing again. Perhaps it is time we re-learnt how to nationalise well.
Our French neighbours, for one, do it better than us. The secret magic behind Renault, the French car manufacturer, is that it is run like a private company. Where Renault was reporting profits of $160 million last year, their privately owned rival, Peugeot, reported a $349 million loss.
Whilst Renault was profitable prior to nationalisation, this suggests that nationalisation might not be a uniquely destructive force, and that the state has a role in profitable economic sectors.
The reason for Renault’s success was that 25% of its historic sales were from one model, the R5. This is sometimes presented as a shortcoming, and in the business world this makes sense. Product diversification prevents disruptions in the market from affecting whole corporations. However, in the state-owned model, this dependency is the source of success. The R5 was not the nicest car available; nor the most modern; nor the fastest. But, the R5 cost below 10,000 francs on launch and therefore provided a unique service: it was universally affordable.
The market-competitive company, coupled with an approach which did not seek to monopolise, kept Renault disciplined by market forces even as a state-owned firm, as the private logic prevented the corporation from becoming a black hole for subsidy. For the British equivalent, British Leyland, the government sank £2.9 billion into the company from 1979 to 1988 due to the insufficient space left between political and economic interests in a company weakened partially due to the production of multiple competing models. This is the first lesson to learn. These nationalised companies should operate on staunch market principles to serve the lowest common denominator and, importantly, leave sufficient space between political and economic interests.
Operating in a minimum-provider capacity brings several benefits: a cheaper competitor forces private competition to either match its price or retreat upmarket, putting downward pressure on living costs. This was also the goal of SEAT in Spain: increasing access to affordable cars, thus creating the country’s most popular car.
The minimum provider role also plays into the corporation’s position under national ownership. Those who are likely to purchase from the national corporation are not interested in luxury vehicles or cutting-edge technology, but in reliability and accessibility: they are the average voter.
Then how come there are successful exceptions? Singapore Airlines, for one, is widely considered a luxury, high-quality airline, yet is state-owned.
The value there is both strategic and economic. Upon gaining independence in 1965, Singapore was a small, resource-poor island, dependent on international trade and investment for survival. For a nation known for its role as a wealthy economic hub, a luxury airline is the kind of state-owned company which plays into its strategic strengths. The image of businessmen in an elite first-class seat projects the very image Singapore wanted to show to the world.
This does not always work. Until 2020, the Malaysian government had provided RM28 billion (£5 billion) to keep Malaysia Airlines afloat in their pursuit of a prestige carrier. What makes Singapore Airlines distinctive is not the unique strategic purpose it had, but the discipline to run a profit, embedded at the company’s founding in 1972 when Lee Kuan Yew gave clear instructions that the enterprises had to be profitable or be shut down.
This is nationalisation for investment, a counter-intuitive but effective idea if government employees can manage it.
Britain should look to the Renault model in its energy sector. British electricity generation reports profit of up to 15%, meaning there is room to undercut. By competing with other energy providers in the sector instead of monopolising, the company would push energy prices down and force its competitors to look for efficiencies. Besides, a national monopoly would be too big to be effective: review, oversight, conflict of interest inquiries, bureaucratic imbroglio, parliamentary committees and the rapid change of technology needed to make an energy infrastructure system work would mean it could not do the job as well as a competitive private sector. A one-among-many model allows for direct intervention without regulatory overreach.
Semiconductors are are another opportunity: a rapidly growing industry, estimated by PwC to see around 8.6% annual growth globally. This growth provides a substantial opportunity for return on investment and economic opportunities for Britain, as local semiconductor manufacturing attracts investment. Few suppliers currently dominate global semiconductor production, and these are distant and precarious. This could be Britain’s Singapore Airlines.
The semiconductor industry is a risky space to invest in; the necessary equipment can cost from $10 to $20 billion to begin. This is not necessarily a risk any private investor can take. But if we do it properly, we could carve ourselves a name in the new technological world order with the chisel of semiconductor technology.
Thus, Britain still has a lot to learn about nationalisation.
Original photo is a first generation Renault R5 by Wikisympathisant.
