1. What the evidence says:

“On the basis of the evidence available, then, public ownership is decidedly not inherently less efficient. Sweeping claims to the contrary should be treated as ideologically motivated.”

2. Corbyn’s partner state vision:

“I believe in public ownership, but I have never favoured the remote nationalised model that prevailed in the post-war era. Like a majority of the population and a majority of even Tory voters, I want the railways back in public ownership. But public control should mean just that, not simply state control: so we should have passengers, rail workers and government too, co-operatively running the railways to ensure they are run in our interests and not for private profit. This model should replace both the old Labour model of top-down operation by central diktat and Tories favoured model of unaccountable privatised operators running our public services for their own ends.”

3. Alternative forms of public ownership that favor decentralized outcomes

“History demonstrates that public ownership can indeed serve to decentralise economic power, rebuild and stabilise local communities, allow for the possibility of real democracy and participation, and provide the institutional support for political and social movements dedicated to genuine systemic change.”

The following is excerpted from Joe Guinan:

“Robert Millward, Professor Emeritus of Economic History at the University of Manchester, is perhaps the dean of economic historians working on comparisons between public and private enterprise. A comprehensive 1983 survey of the evidence by Millward and his colleagues, Public Sector Economics, offered as its first conclusion that “there is no systematic evidence that public enterprises are less cost effective than private firms.” (Millward et al, 1983, 258) In the energy sector, for example, none of the cost studies examined supported the argument that public electricity providers had higher unit costs or lower productivity than private firms (ibid, 244). Of course, as was acknowledged, the data and time series then available were limited. But Millward’s later work using additional data has confirmed his earlier conclusions. In fact, remarkably, it appears that the nationalised industries actually outperformed both the rest of the British economy and their privately-held equivalents in the United States:

“On the new evidence, the British total factor productivity growth record in most of the nationalized industries was significantly better than that of their U.S. counterparts and better than that in the whole of the British economy. To be more specific, the average annual rate of total factor productivity growth from 1950 to 1973 was higher in Britain than in the U.S. for airlines, electricity, gas, and coal… The proposition that privatisation in Britain led to an improvement is contradicted by a comparison of these figures with those for 1973-1995, when the growth rates for airlines, gas, and electricity were lower… The state enterprise in Britain compared favorably in productivity growth with comparable sectors in (the more privately owned) U.S. industries and with the privatised regimes which followed in Britain.” (Millward, 2011, 24-27)

Nor is Millward alone. “Although it would not sit comfortably with the beliefs of new Conservatism,” observes Michael Oliver, an economist not known as an advocate of public enterprise, “economic historians have found that the long-term trend of productivity in Britain’s nationalized industries was no lower than that for private firms.” (Oliver, 2014, 271) Similarly, the late British economist and journalist Christopher Johnson – a supporter of privatisation –found that “many of the improvements in manning and productivity claimed for privatisation took place in nationalised industries before privatisation and in those not privatised.” (Robinson and Rubin, 1998, 17)

University of Glasgow professor Andrew Cumbers, drawing upon examples from around the world, found that “contrary to the current received wisdom, the experience and performance of statist public ownership was highly varied.” For instance, “Korea, Taiwan and Singapore all used state-owned enterprises to fuel spectacular economic growth.” (Cumbers, 2012, 33-34) “The conviction that public production is inefficient has been sufficiently strong for empirical evidence to seem irrelevant,” economist Johan Willner wrote in 1996. “Successful counterexamples do not make headlines… The empirical research has been unsystematic, but there exists by now a fairly large number of industry studies which throw light on the relative efficiency of public ownership.” (Willner, 2005, 28) Similarly, Tel Aviv University Professor Yair Aharoni concluded that “[t]he assumption that ownership per se creates an environment that is conducive to high or low performance is not proven, and empirical research on this point has yielded conflicting results.” (Aharoni, 2000, 50)

A plethora of other studies draw similar conclusions. In 1997, University of Chicago economist Stacey Kole and University of Georgia professor J. Harold Mulherin studied U.S. government ownership of seized American subsidiaries of German and Japanese companies during and after the Second World War. They found no difference between these publicly-owned firms and their private counterparts, and stated that the “results stand in contrast to the typical results regarding the inefficiency of government enterprise.” (Kole and Mulherin, 1997) In 2006, writing in the World Bank Economic Review, Colin Kirkpatrick (University of Manchester), David Parker (Cranfield University), and Yin-Fang Zhang (University of Manchester) concluded that, with regards to African water utilities, “the results for cost efficiency and service quality fail to show that privatised water utilities perform better than state-run utilities.” (Kirkpatrick, et al., 2006) Moreover, these results supported similar prior research on the sector. In 2014 the OECD summarized a number of studies of publicly-owned German banks and wrote that “[s]avings banks appear to be at least as efficient as commercial banks.” And writing in the Harvard International Journal, Francisco Flores-Macias and Aldo Musacchio maintain that “[t]he world has changed” and modern public enterprises can be “efficient, even in comparison to their private counterparts.” (Flores-Macias and Musacchio, 2009)

How efficiency is defined and conceptualized is rarely discussed, yet crucial. For instance, a 2000 review of empirical studies by University of Oklahoma privatisation expert William Megginson and University of Georgia Professor Jeffry Netter states that “to a large extent we ignore the arguments concerning the importance of equitable concerns such as income distribution… The effects of privatisation on productive efficiency, or at least observable variables that are proxies for productive efficiency, is the focus of most of the empirical literature we review here.” (Megginson and Netter, 2001) However, because public enterprises often exist to fulfill social – not just market – requirements, traditional measures of efficiency are not adequate. According to Aharoni, “it is not enough to measure performance in strict economic terms. One has to measure the stimulus provided to other socioeconomic activities and other externalities… Financial measures are misleading for those who see [a public enterprise] as a government instrument that should strive to achieve objectives such as a more egalitarian distribution of income, regional development, technological self-sufficiency, poverty reduction, or development.” (Aharoni, 2000, 52-53)

Even the World Bank summarizes the efficiency argument with an important warning about its focus on the profitability measure: “[A]n enterprise’s profitability summarizes all the indicators of economic efficiency as seen from the viewpoint of its private owners,” it states. “But from the point of view of national economic growth and development, social costs and benefits, which are not reflected in profitability, can be no less important. For example, when a privatized enterprise achieves profitability by dismissing its excess workers, the economy as a whole does not necessarily become more efficient. If economic conditions prevent the fired workers from finding other employment or starting their own business, this downsizing might lead to an overall economic loss for the country because people were moved from low-productivity jobs to zero-productivity unemployment.”

Additionally, as previously indicated and contrary to the dominant perspective, comparing the efficiency of public and private enterprises is highly problematic. “In comparing [state owned enterprises] to privately owned firms,” Megginson and Netter write, “it is difficult, if not impossible, to determine the appropriate set of comparison firms or benchmarks…” (2001) In one of the few studies to investigate roughly comparable firms – in this case, public and private railways in Canada – Douglas Caves and Laurits Christensen announced that “[o]ur principal conclusion is that public ownership is not inherently less efficient than private ownership.”

Another instance facilitating direct comparison is the utility sector in the United States, where public enterprises operate alongside private investor-owned companies. Aharoni again: “Overall, the studies of electricity utilities in the United States do not provide support for the assumed superiority of private ownership…” (2000, 57) Harvard University Professor John Donahue is even more emphatic. He found that “[t]he evidence broadly contradicts the common presumption that private utilities will operate more efficiently than their public counterparts.” (Donahue, 1989, 76) A recent American Public Power Association study, for example, found a median net revenue transfer to municipalities of 5.5 per cent of revenues for public utilities. By contrast, the median tax payment of investor-owned utilities was roughly 25 per cent less, or 4.2 per cent of gross revenues.

On the basis of the evidence available, then, public ownership is decidedly not inherently less efficient. Sweeping claims to the contrary should be treated as ideologically motivated. The question for the British left at this point should not be a technical economic one about efficiency but a political one about power, democracy, the social benefits of ownership, and which particular forms of collective enterprise we might wish to promote.

Today, increasing inequality, poverty, environmental degradation and the catastrophic threat of climate change, together with a general sense of an impoverished public sphere and loss of local economic control wrought by decades of privatisation and globalisation, are pushing activists and theorists once again in the direction of the institutional structure of public enterprise. As calls for common ownership grow, many activists and thinkers engaged in its recovery and rehabilitation have already decided against a simple return to the top-down centralised public corporation model of the postwar Labour governments. Here Jeremy Corbyn has been very clear:

“I believe in public ownership, but I have never favoured the remote nationalised model that prevailed in the post-war era. Like a majority of the population and a majority of even Tory voters, I want the railways back in public ownership. But public control should mean just that, not simply state control: so we should have passengers, rail workers and government too, co-operatively running the railways to ensure they are run in our interests and not for private profit. This model should replace both the old Labour model of top-down operation by central diktat and Tories favoured model of unaccountable privatised operators running our public services for their own ends.”

In this, Corbyn is very much in line with recent trends around the world in which the fightback against neoliberal privatisation of public services has been accompanied by the adoption of innovative new approaches to collective ownership. In this view, worker ownership, consumer cooperatives, municipal enterprise and a host of kindred institutional forms all represent ways in which capital can be held in common by small and large publics, including through hybrid models that draw upon two or more institutional forms. From the We Own It campaign to the Municipal Services Project, we are seeing the emergence of a more pluralistic approach to public ownership, one that is already finding practical application in attempts by governments, municipal authorities and social movements to reclaim the commons and bring back social ownership in the form of “public-public partnerships” and the like. By way of example, Paul Salveson’s thoughtful vision for returning the railways to public hands would avoid the old nationalisation model and move instead to a devolution of rail responsibilities to the regions, accompanied by strong direct involvement by local communities. (Salveson, 2013)

Public ownership, then, can take many forms, of which the public corporation model adopted by the postwar Labour governments is but one – and hardly the most appealing. Dig a little deeper into the history of public ownership and some far more interesting precedents are to be found. In particular, as the search commences for ways to re-embed the economy and provide an expanding zone of decommodification to buffer against the market, there is a very substantial but somewhat forgotten history of local public ownership and municipal socialism upon which to draw for inspiration. This history demonstrates that public ownership can indeed serve to decentralise economic power, rebuild and stabilise local communities, allow for the possibility of real democracy and participation, and provide the institutional support for political and social movements dedicated to genuine systemic change.”