As usual, Mother went too far. When I described my latest travel fiasco to her, she replied: "But Richard, the answer is simple: expropriate the railroads." Mother, I should explain, inhabits a peculiar corner of the left; she once described the fiery miners' leader Arthur Scargill as an "un homme sympatique", nicely blending worker solidarity and class distance. Still, she has a point. For the past 20 years the private sector has claimed it could do a better job running essential public services than governmental functionaries. The privatisers draw a cartoonish contrast between lean, fit, profit-seeking organisations and slow, fat, time-serving public servants. We all know by now this is nonsense. Even in America, land of the free market, there has emerged a strong outcry against the shambolic workings of private health maintenance organisations.
Companies such as Railtrack are both incompetent and profitable. Part of the reason for this seeming paradox is that in the last decade, capital has become impatient. The average stock is held for eight months today; in 1975 it was held for 46 months. Since the shareholders are not interested in long-term results, the companies have little compulsion to deliver them. Impatient shareholders want immediate signs of change in a company, signals that the company is dynamic, in play. Cutting costs is high on this list, improved quality of service much lower.
Customer service stands low in the estimation that markets make of privatisation because travellers or patients are a captive audience. In the US a cancer patient has little chance of choosing among competitive service providers once he or she has embarked on treatment, no more than the rail commuter in Britain can choose among railways. There is no free market; rather, a move from public to private monopoly. The only rationale for making this monopoly transfer is that government is strapped for cash - which neither the American nor the British treasuries are.
The devil lurking in many privatisations is institutional knowledge loss. The markets want to see fresh faces and established procedures replaced by something new. The result, in any corporate re-engineering, entails losing the knowledge that accumulates through experience of how to make things work - the kind of knowledge that resembles customising a computer program.
In the public sector, with its complex thickets of rules and competing interests, the most important members of an organisation are the people who have learned to adapt a formal system to the needs of the public. Yet these old hands are the first to leave or to be pushed, like the senior doctors currently draining out of the national health service.
So what, in the words of Mother's favourite author, is to be done?
The government is currently pondering Lenin's question in thinking about Railtrack. Its chairman, Sir Philip Beck, has taken an indefensible position; he argues the company will not tolerate government "interference" in the choice of his successor, as reported in the Guardian on January 4. This claim is indefensible not only because the company is incompetent, but because it owes its very existence to the government, which handed it a private monopoly five years ago and will give the company a further £15bn over the next five years.
One way for the public to "interfere" is for Railtrack to issue new shares earmarked for government ownership. A more complicated route is a general shares issue, underwritten by the government, which raises more private money while the government buys a stake on the open market.
The best solution, in my view, is political rather than economic. Big German companies allot seats on their boards to unions; the idea could be extended by reserving seats on privatised services not only to unions or employee groups but even - even - to representatives of the public. To make this kind of renationalisation truly effective, government and public seats ought to outnumber private ones.
Beck and his ilk would moan, but who would want to invest in such a concern? German companies do not seem short of investors; moreover, big quasi-public institutional investors, such as the teacher's pension scheme TIAA-CREF in the United States, could easily take the place of short-term investors and day-traders. No public service company should be run to serve their impatient interests. Equally, services such as the tube or the air control system should not be privatised at all, if the pursuit of immediate profit is going to entail lower performance or lessened public accountability.
I once proposed something like this political plan to a task force on American private medical insurance, chaired by Hillary Clinton. Her minion at the meeting stared at me blankly then said: "But that would be socialism." Well, yes. But I had, I think, done Mother proud.
• Richard Sennett, formerly professor of sociology at New York University, is now professor of sociology at the London School of Economics .
R.Sennett@lse.ac.uk
