Opinion
Nationalization: An idea that has come full circle
Summary
- British Steel, privatized by Thatcher, may get nationalized. Decisions in the political economy space must sometimes be made on merits and context. Universal truths said to hold at all times are suspect at best.
Almost 46 years after former British Prime Minister Margaret Thatcher privatized British Petroleum and embarked on a spate of privatizations, including British Airways, British Telecom and British Steel, during the 1980s and 1990s, the UK Parliament set the clock back.
In an emergency session late last week, it passed a law allowing the government to take control of British Steel’s plant in Scunthorpe, Lincolnshire.
In a scene unimaginable in 1980s Britain, when privatizing state-run enterprises was seen as a push for market-driven efficiency, lawmakers were called back from their Easter break to enable a state takeover of the once Tata-owned and now Chinese-owned factory.
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This was a last-ditch effort to save local steel-making and jobs. In the words of Prime Minister Keir Starmer, it was done “in the national interest." Just as privatization once was.
Rewind to the 1980s. Writing on Thatcher’s privatization legacy in the Cato Journal in 2017, Chris Edwards of the Cato Institute was emphatic. Privatization had “a huge effect on the global economy," he observed. “It spurred economic growth and improved living standards as privatized businesses cut costs, increased service quality, and innovated."
After the Soviet model of statism collapsed in 1991, countries around the world started turning public sector enterprises private. India, too, of course. Generally, a difference in incentives between public and private enterprises does show up in customer satisfaction and performance levels.
In strategic industries, though, state presence is a given; arms manufacturing and nuclear energy, for example, entail lethal risks that need tight control. Rare earths qualify as strategic too.
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In a few other markets, especially those with high barriers to entry and very few players, a state player is often desirable if it helps keep private cartels and prices in check.
But by and large, businesses should be privately owned. Private management is not infallible, however, as the UK’s latest bailout using taxpayer money shows. British Steel is its sole maker of virgin steel (as opposed to recycled). Its current avatar dates back to 2016, when Tata Steel sold its loss-making long products division in Scunthorpe to Greybull Capital for a token £1.
In 2020, the plant, renamed British Steel, was acquired by Jingye. However, various factors—including Chinese oversupply—combined to create a global steel glut, even as costs rose and the covid outbreak led to a demand slump, leaving Jingye’s unit unable to compete.
By March 2025, the plant was reportedly losing about £700,000 a day, forcing its owner to contemplate closure. Whether steel-making remains viable in the West has been a question mark.
In September 2024, Tata Steel turned off its blast furnaces at Port Talbot in Wales, once the UK’s largest producer of virgin steel, saying it was losing £1.7 million a day. The company plans to install electric-arc furnaces instead.
The Starmer government has been quick to say British Steel has not been nationalized, though it could be, if required. For now, Jingye still owns it, but control rests wholly with the state. A case of back-door nationalization, perhaps.
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The law was passed unanimously, though, which is a telling commentary on how attitudes have transformed. When it comes to political economy issues, there are no universal truths that hold good forever. Decisions are made on merits and context. And democracy doesn’t always favour market orientation.
