Discourse in Comparative Policy Analysis: Privatisation Policies in Britain, Russia and the United States

Discourse in Comparative Policy Analysis: Privatisation Policies in Britain, Russia and the United States

Vache Gabrielyan Abstract Privatisation has been of the most widely used and extensively debated policies in the world for the last quarter century. This phenomenon, though, is mostly unified by rhetoric, and substantially varies across time and space, particularly in implementation. To answer the question of what presupposes a choice of particular mechanism of privatisation, three distinct cases of privatisation (the US, the UK, and Russia) are analysed through Fischer’s (1995) model of practical policy deliberation. The model tests the reasons for policy ranging from its technical efficiency to its relation to the ideological principles that justify the societal system. The elaborated theory suggests that privatisation policies generally pursue multiple goals, with the prevailing goal being determined by the dominant discourse in which the topic of privatisation is debated in society. The prevailing goal, in turn, determines the privatisation mechanism that maximises this particular goal.

Privatisation has been one of the most widespread policies in the world in the last 30 years, marking changing attitudes toward state, and making the boundaries of public and private realms even fuzzier. Even without massive postcommunist privatisation schemes, the worth of privatised enterprises around the world since 1980 is estimated to be well over a trillion dollars. Simple stipulation of this figure, though, disguises the fact that we are dealing with a phenomenon that is mostly unified by rhetoric, but substantially varies across time and space, and significantly differs in implementation and policy debate. Broadly, privatisation is defined as the act of reducing the role of the government, or increasing the role of the private sector, in an activity or in ownership of assets (Savas 1992). Different countries and different contexts put different meaning in the word privatisation. For example, in Europe it is understood primarily as the sale of state-owned enterprises and assets accompanying a shift in ideology, whereas in the US contracting out for services is routinely referred to as privatisation. These considerable differences in privatisation practices are rarely addressed in a systematic manner.1 Comparative research has generally concentrated on factors affecting privatisation decisions in various countries, such as labour market flexibility, accountability, potential windfall profits, political doctrines (Fuller 1994), political economy of privatisation, performance issues, problems and prospects of different strategies (Clarke, 1994), privatisationnationalisation cycles (Hirschman 1982). The question that always begs for an answer, though, is the choice of a particular mechanism of privatisation. Why

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are asset sales more popular in some countries, and vouchers in others? Why do mechanisms change over time? Obviously, policies should differ across time and space, but what and how is determining their choice? What are the tools that would help us to make sense of similar situations that we are bound to encounter? Zahariadis (1995) and Feigenbaum et al. (1999) offer the most sophisticated analysis of this issue. In his study of industrial privatisation in Britain and France, Zahariadis shows that most rational choice approaches have more a normative appeal rather than an empirical record. Drawing from the garbagecan approach, Zahariadis develops a “multiple streams” model of privatisation, where it “is brought about by coupling three factors in critical moments in time: available alternatives generated in policy communities; high government borrowing needs; and the ideology and strategy of governing parties” (1995, 36). What results is a “policy in search of a rationale” (Kay and Thompson 1986). While accurate for the cases discussed, the model has limitations, as it: a) does not seem to be applicable to situations without drastic changes in policy, and b) as most literature in the garbage can model tradition, lacks prescription. Basing their argument on political logic of privatisation that draws from the policies’ underlying presumption about the boundaries of the state, Feigenbaum et al. (1999) distinguish between pragmatic, tactical and systemic varieties of privatisation, with a “principal argument... that the broad privatisation movement is, in most of its manifestations, better understood as a political phenomenon than as a technical adjustment [the administrative perspective] or as a consequence of economic laws [the economic perspective]” (1999, 41). Discussing the popularity of different strategies of privatisation, they conclude that “discussion of privatization and implementation of privatization proceeded on two fairly distinct tracts and, somewhat ironically, practices associated with privatization have proven most viable when least visible” (Ibid, 173). While giving insights into the broader logic of the problem, and introducing useful classifications (labels) of policy, the methodology employed lacks heuristics of understanding how these different tracks would develop in a new situation, what determines their development. To answer the question of what presupposes a choice of particular mechanism of privatisation I will apply Fischer’s (1995) model of practical policy deliberation. Before discussing privatisation in the aforesaid mode, let us state what a theory conceived in such an approach should entail. It should answer not only to “what?”, but also to “why?” and “how?” questions (Sutton and Straw 1995), and aim at such knowledge-generating serviceable models that would “retain recognition of norms but have enough research questions and methods appropriate to them to describe meaningful aspects of … [the field],

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explaining why, for example, a technique works the way it does or why people are satisfied or dissatisfied with it” (Miller 1991, 4). Fischer’s model of practical policy deliberation is well equipped both to provide fuller theory generation and to accommodate the needs of comparative research. As a model for policy evaluation, the model “tests the reasons given concerning a policy’s technical efficiency, its relevance to the circumstances of the situation, its instrumental implications for the social system as a whole, and its relation to the ideological principles that justify the societal system” (Fischer 1995, 231). There are two discursive phases of policy evaluation – “first-order” and “second-order” evaluation, with the second shifting the logic from concrete situation to the society as a whole. Second-order evaluation is rarer than the first-order discourse, and enters into practical policy deliberation mostly during systemic societal changes. Usually, a higher level discourse is invoked when the lower-level discourse cannot fully explain or justify discussed phenomena. The basic outline of the logic follows (Fischer 1995, 18). Levels, Discourses and Questions

Level: First-order Evaluation Technical-Analytic Discourse: Program Verification (Outcomes) Organising Question: Does the program empirically fulfil its stated objective(s)? Contextual Discourse: Situational Validation (Objectives) Organising Question: Is the program objective(s) relevant to the problem situation? Level: Second-order Evaluation Systems Discourse: Societal Vindication (Goals) Organising Question: Does the policy goal have instrumental or contributive value for the society as a whole? Ideological Discourse: Social Choice (Values) Organising Question: Do the fundamental ideals (or ideology) that organise the accepted social order provide a basis for legitimate resolution of conflicting judgments?

Including second-order discourses in the proposed analytical framework is important not only for empirical, but also for epistemological reasons. Theorygeneration and testing requires reflective analysis of frames that shape our vision of facts and preference of values. First-order discourses directly address the issues involved in “classic” policy/program evaluation, whereas second-order discourses help to examine the issue in a broader framework and are especially valuable in comparative research. Another important aspect of the logic of practical policy deliberation is that it allows one to escape the conundrum of “scientific” vs. “pragmatic” criteria. The model does not strive for uncovering eternal regularities, but conceptualises

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problems and their solutions within their socio-economic context, aiming for transformational social science that “is to assist political actors in their own efforts to discursively understand the ways in which they can make and remake their political systems” (Fischer 1995, 22). Since the method is explicitly questioning the function of the object of the study, it is functional for examining how much the concepts under study are really comparable. To this end, what will we look at when analysing privatisation from the viewpoint of the logic of policy deliberation? First, we should try to detect the discourse within which the debates about privatisation are framed in each country. Is it first-order discourse focusing on particular aspects of the program (e.g., does it work?), rarely questioning underlying societal values? Or is it couched in more abstract terms (e.g., is there an overriding moral cause for privatisation?), leaving the “particulars” to implementers? The discussion of the reasons for such a situation leads us to systemic vindication level, sometimes transcending into ideological discourse. If ideology is explicitly questioned during public debate, we are dealing with fourth-level discourse. To generate a theory, case studies using “congruence procedures” with strongly defining characteristics (Van Evera 1997) are employed. Three countries well-known for prevalent use of one form of privatisation – the US, the UK, and Russia, are chosen for study. In the US, the prevalent form of privatisation is outsourcing; in the UK it was sale of assets through “floating” them on market; and in Russia, sale of assets through a gigantic voucher system. In addition, the cases are strongly defined also by the size of the public sector – varying from the minimal presence to centralised economy. Privatisation in the US: Optimising Small Government Due to the historically limited character of the public sector and small volume of other forms of privatisation, privatisation in the US is generally identified with outsourcing (Gabrielyan 1998), which will be the focus of our analysis.2 Contracting out for services has a long history: mail delivery was outsourced before the adoption of US Constitution. It was widespread, and even covered some “pure” governmental operations, such as the secret service. Almost each case of decision about nationalisation followed some problem or scandal involving the contractors (NAPA 1989). The scope and scale of government expanded greatly during the Progressive Movement and especially with the New Deal. This tendency of government growth along with increased cooperation with the private sector was apparent till the 1960s, while the increasing complexity, scale and the scope of the government intensified the criticisms of the public sector in the early 1970s, though the sentiments against increasing government

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were not new. The first major attempt on behalf of the federal government to encourage contracting instead of its own production came after the WW II. The policy calling for substituting contracting for governmental commercial and industrial production was codified in the Bureau of the Budget Bulletin 55-4 in the 1950s, and later in Circular A-76 (revised in 1967, 1979, and 1983). The drive received a new impetus (though not full implementation) in the Reagan era, with President’s Private Sector Survey on Cost Control (1985) and Commission on Privatization (1988). The Clinton administration, “while tapping into the rhetoric of systemic privatization, however…was seeking to return the US privatization energies back to their more pragmatic roots” (Feigenbaum et al. 1999, 144). The George W. Bush administration has ventured where nobody else dared – aiming to privatise Social Security, which has yet to be put into life. The scope of outsourcing in the federal government is substantial. In FY1993, for example, federal spending through contracts (37% of all discretionary spending) was about twice as much as entitlements (19%), while a GAO study found that out of the 108 randomly selected federal contracts, 28 involved some regulatory activities that should have not been carried out by contractors (Kettl 1995). In the 1980s many state governments created privatisation task forces that resulted in more frequent privatisation projects in the 1990s (Chi 1994), including public discussion of services that have been considered “out of reach” before, such as child welfare. The quite diverse provision of local services, on the other hand, has undergone two transformations since colonial times: from private firms to public provision (with urban growth), and later back to private (Nelson 1980). While always existing, the second trend did not become popular until the late 1960s. In 1989 “virtually every jurisdiction in the US contracted for one or more services” (Savas 1992), and in a 1995 survey of the 100 largest American cities found the average number of privatised services for the 66 cities being 6.9 (ranging from 0 to 19), and only three of the 66 cities not privatising any city services (Dilger et al. 1997). Pro and Con Arguments The most common cited reason for privatisation is cost savings. Though, many argue, cost savings are only one aspect in the line of arguments for privatisation, the most dominant drive is ideological. Even the arguments on the grounds of efficiency, they maintain, are often ideological, and offer counterarguments.

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Table 1 Arguments For and Against Privatisation FOR

• • •

•

• • • • •

AGAINST IDEOLOGICAL Smaller government is better • Smaller governments are not compatible with welfare state Government should not deliver services that the private sector does • Privatization overlooks the values of accountability, equity, service equality and Government officials work for reelection, governmental capacity so may choose to please special interests, ignoring efficiency • Competitive bidding has built-in incentives that lead to corruption of public officials Everything equal, private business is better, because they also pay taxes EFFICIENCY Government agencies are less efficient • Private sector does not automatically mean competition Government agencies, being monopolies, lack incentives to manage well • In services (that governments usually provide) often there is no real competition Private sector managers manage better • Too much competition can lead to selfImproving the quality of services destruction Privatization can help stimulate the economy and lower the taxes

•

Efficiency is illusory, since it is due to lower quality or lower safety

•

•

Filling short-term project needs

•

Adjusting for limited resources

•

Lowering the cost of services

Entering into low-bid contracts, the firms then hike the price PRACTICAL • Services often became public after a concrete scandal •

Nobody wants to do it initially, only after government organization it becomes attractive

There has been a significant amount of privatisation research, looking for patterns. Usually, several sets of questions are asked. First, is it effective? Second, who does privatise? The answer is still elusive. Third, what is that makes privatisation effective? How should it be done? The answer to this question is more likely to be a checklist of do-s and don’t-s. And finally, there is an important aspect that studies touch upon – impact on labour. The generalised prescription can be summarised as follows: Privatisation should not be considered as the only available efficient option to the increasingly complex problems government faces, but as an alternative arrangement of

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service delivery that can be more efficient under certain conditions that must include competition. The decision about privatisation should be adopted after careful consideration of a host of factors, ranging from technical characteristics, organisational structure and competitiveness of the environment to management’s capacity for monitoring, monitoring costs and the relation of the privatisation service to the agency’s mission. Gains in cost savings should not be at the expense of other values of the government, such as equity and fairness. Because of the increased possibility of corruption, privatisation requires constant feedback and reinforcement of accountability practices. Privatisation should not be pursued for goals other than cost savings, such as reducing the government or decreasing service levels. US Privatisation in Comparative Perspective Privatisation in the United States comprises a much less radical process than in Europe and the post-communist countries. The most popular form of practice is outsourcing, while the argument is by and large limited to the first-order discourse. Two types of issues preoccupy both policy and academic debate: 1) does it work? and 2) under what conditions does it work? Systemic-level questions can be raised, but only with regard to a very narrow set of problems, and are discussed only briefly. Ideological discourse is marginalised even in the academe. The arguments are couched in terms of microeconomic efficiency and are mostly about effectiveness of outsourcing, and conditions that induce efficiency, such as low transaction costs, etc. There are only two issues where the argument transcends this language, albeit in a very limited manner. First is the issue of labour, since public employee unions have some priority in competition for contracts. But this is more a part of situational than systemic discourse, since these privileges exist not because of high value attached to public employment, but because structurally labour is already present in the system. In an extremely large and structurally fragmented country with almost no government involvement in industry and lack of articulated industrial policy, labour displacement is treated as a local issue without macroeconomic implications. The topic that comes closest to the systemic vindication level is the issue of possible privatisation of social security. While macroeconomic implications belong to situational-level discourse (e.g., will the government debt become more expensive?), the issue of capacity preservation in case of market failure invokes other values. Christopher Hood’s (1991) typology is very useful for discussing values: there are Sigma-type values (purposefulness, frugality, efficiency), Thetatype values (honesty, fairness), and Lambda-type values (resilience, robustness,

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survival and safety). When Clinton’s Council of Economic Advisers stated that “…any proposal for equity investment must consider the consequences when markets fall” (Calmes 1997, A2), it was bringing Lambda-type values into public discourse. With more politicisation, the logic of efficiency that dominated the first-level discourse has to retreat, opening room for other types of values. One can also argue that Theta-type values are always in the picture, since issues like “creaming” are discussed. While correct, there is a substantial difference between the two. In the first case, the argument is about resilience and safety of the social safety net, and there are no clear answers. Will the government take the responsibility case of failure? Given that capacity is lost, will it even be able to do so? In the second case, outsourcing solves the conflict between Sigma and Theta values by prioritising Sigma and assuming Theta values on the following logic: 1) outsourcing is more efficient; 2) in case of unfair practice the contract will not be renewed; and 3) losses or discrimination in service can be ameliorated, since the damage is not too big and was not suffered too long. Because it is believed that violations of Theta values are not inherently natural for privatisation, but are allowable digressions that can be corrected within a short period of time without substantial injection of additional resources. Thus, constant renewability and limited scale of the contract make it a part of the situational validation discourse. Why doesn’t the discussion of privatisation ever rise to discussing the role of the market or the role of the state in society? Why is outsourcing the most common form of privatisation in the US? Let us discuss some structural and cultural reasons for this. First, we have to remember that the US government is one of the smallest ones in the developed world, and always had limited presence in industry in general. It never owned certain services (such as airlines) that often used to be government monopolies in other Western countries. As opposed to most industrialised countries, in the US the rise of big business preceded the rise of the big government (McCraw 1984). As a result, it was much more likely for an expanding government to take a regulatory strategy than to go for a direct provision of services. There are not too many things that the US government was earlier involved in that it now wants to shed. Essentially, there is not much argument about what services the government should provide. Blatantly wasteful programs are not too big in scale or cost. The biggest item in the federal budget criticised for excess is welfare income transfers, which is not an easy issue to tackle. So, despite numerous calls for federal assets sales since the early 1980s, the biggest sale in the 1990s has not been Amtrak, but Elk Hills oil and natural gas reserve (Danielski 1997). Second, the US has the largest internal market in the world. This means “constant” availability of domestic competition. “Competition” infers that there

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is a pressure to cut costs, and “domestic” infers that, since foreign takeovers are not likely, nationalism is not an issue when privatising. As a result, even such a sensitive enterprise as the US [Uranium] Enrichment Corporation was being offered for sale (Marray 1996), though the recent Chinese bid for Unocal has been treated differently. Third, the open and fragmented character of American politics, often labelled as interest-group liberalism, devolves many policies to subsystems with sometimes quite powerful and organised interest groups who are able to maintain their benefits and services. Finally, despite the fact that public-sector unions gained increased clout within the American labour movement, potential opposition to outsourcing is less powerful, since the US has the lowest unionisation rates among industrial countries – 18% (Lodge 1990). When speaking about cultural factors, one has to start from the concept of state. This concept is notoriously absent from American public administration discourse. It can be partly explained by the peculiar American history wherein a strong state came after big business (McCraw 1984), or by the fact that the apparatus of the state has developed earlier in the US than the concept of state came to be recognised (Stillman 1991). Partly it can be explained by the fact that the founding of American republic was influenced by Lockean understanding of government by contract which is ideal for outsourcing purposes. Another implication of foregoing the concept of state is that historical perspective is often lost. Thus, if one is detached from history and institution building, microeconomic rationale seems to be the best for judging aspects of the social contract. Second, Americans believe that they live in a predominantly middle-class, egalitarian society. While behavioural norms and attitudes are really quite egalitarian, income distribution is far from it (Vanhoudt 1997). Ironically, though, the absolute majority of Americans, regardless of their income consider themselves to be middle-class (Roberts 1997). This perception reinforces the underlying notions of “public choice” school – we are all consumers of government services, and government institutions are, in essence, our contractual arrangements that should be monitored, renewed or terminated. Discussing how national culture affects organisational paradigms, Hofstede (1996) notes that most American theories of organisation are anchored on the concept (metaphor) of market, while, say, the French build on concept of power. From this angle organisation is seen as an entity based on controlling the shirking of its members. With low transaction costs there is no need for institutions. The market metaphor also prefers outputs over jobs, since employees are seen as independent contractors in the market, with organised labour not warranting

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more protection. Thus, layoffs are also natural. Historically, this may be also a result of a abundant cheap immigrant labour supply. Finally, there is the legacy of the old politics-administration dichotomy. As a heritage from the Progressive era, municipal administration is seen as the domain of neutral expertise (Feigenbaum et al. 1999). It gave local officials the possibility of experimenting with privatisation, given that pre-Reagan privatisation arguments were more pragmatic. The heritage is not only ideological, but has also resulted from structural reform that isolated city managers from labour unions and other interest groups. Henig (1991) discusses how neo-conservative argument and pragmatic local practice “found” each other after many years of separate existence. The public space for privatisation ideas opened not as an evident consequence of bottom up processes of “simmering” local practice, but as a result of two important argumentative developments: sharpening up of the intellectual tools of conservative economic argument by the representatives of the public choice school, and the 1970s’ widespread “sense that the national government, through the various Great Society Programs, have given its ‘best shot’, and that it had failed” (Feigenbaum et al. 1999, 122). Despite the ideological zeal of Reagan administration, this failure still did not mean rejection of the liberal objectives by the public (instead, pressures for political correctness even increased). As a result, the debate mostly took the shape of first-order discourse argumentation of efficiency and suitability of market conditions. Among the many meanings of umbrella term “privatisation”, outsourcing emerges as the most proper for the administration for the task of optimising limited government in a fragmented and incremental system. Privatisation under Mrs. Thatcher: Curing the “British Disease” with “Popular Capitalism” The “Thatcher revolution” changed the nature of British politics, fundamentally altering the political landscape and the role of the state in the economy. Before 1979, the UK had one of the largest public enterprise sectors in Europe. In 1995, after selling more than £50 billion of state assets (not including housing), the government reduced the share of employment in publicly-owned industries from 7.2% to fewer than 2%. After eighteen years of Conservative rule, nationalisation has been exorcised from the political vocabulary, and union powers have been curtailed. The 1997 Labor Manifesto claimed: New Labor offers business a new deal for the future. We will leave intact the main changes of the 1980s in industrial relations and enterprise. We see healthy profits

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as an essential motor of a dynamic market economy… New Labor believes in a flexible labor market that serves employers and employees alike.

History of Privatisation under Mrs. Thatcher The privatisation program of the Thatcher government is usually divided into three general phases, roughly equivalent with electoral victories (Cook 1996). During the first phase (1979-1983), the government sold public sector assets and small public enterprises largely operating in competitive markets, with the major event being the sale of over one million public housing units. Privatisation was not a main tenet of the 1979 Conservative electoral platform.3 The paramount concern of the 1979 Thatcher government was fighting inflation, which was seen as a social disease that “had become deeply rooted in the British political and economic system and in British psychology” (Thatcher 1995, 569). Since the government was “dealing with crises on a weekly basis” as it “scanned the figures on public borrowing and spending” (Thatcher 1993, 49), the next aim was reducing public borrowing. Both, as Thatcher saw it, were arresting development, by raising interest rates and crowding out private investment. The heavily monetarist program contained only very specific pledges of denationalisation (e.g. aerospace industry). But as Thatcher (1995, 64) put it, “we got bolder and we learned as we went along”. The road for privatisation was paved by the previous Labor government that sold the first 17% of British Petroleum shares under pressure from the International Monetary Fund. In 1979, 5% more shares were sold, followed by direct sales of two technology companies to institutional investors in 1980. More energetic attempts at privatisation started with the partial sale of two larger companies in 1981. Time and enabling legislation were needed to transform a statutory public corporation without equity into a company under Company Act, allowing the government to hold and dispose the shares of the company. Privatisation reached its peak under the second Thatcher government (198387). This phase extended privatisation to public-sector utilities. Starting with the successful sale of British Telecom, it continued to encompass gas, water and electricity. Of course, many “commercial” public enterprises such as RollsRoyce also have been sold. The distinguishing characteristic of this phase was the establishment of separate regulatory offices for newly privatised (and often liberalised) industries, since under public monopoly regime the UK lacked developed competition and regulation mechanisms such as anti-trust or utility regulation mechanisms existing in the US (Swann 1988).4 Along with regulation, there were certain attempts at deregulation. From the beginning and onwards, local government emphasised the outsourcing and introduction of competition in purchasing of local services. Compulsory

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Competitive Tendering (CCT) was established in 1980, requiring local authorities to solicit competitive bids for a specified range of construction-related services. In 1988-1989 this was extended to so-called “blue collar” services (such as refuse collection), and in 1992, to “white collar” services (such as finance). The 1985 Transport Act aimed to introduce competition in bus services via restructuring the industry and encouraging new entrants. The only significant sale of assets was under the “right to buy” initiative that enabled tenants to purchase their rented homes from the local authority at a discounted value. The third phase, from 1988 on, “represented a new direction for the privatization program” that “gained momentum when a significant number of publicly-owned companies had already been sold and those remaining were proving to be difficult to sell or were unlikely to generate large sums of revenue” (Cook 1996). The government then turned to new methods focusing on improving government operations and concentrating on the traditional welfare state, or what has also been called the public non-market sector. From efficiency scrutinies to the Financial Management Initiative (FMI) to the “The Next Steps” (Ibbs 1988) effort, the government management reform became more radical, and “emphasized not only bureaucratic disaggregation… but also competition and using market mechanisms … and improving the quality of services” (Rhodes 1997, 13). Results of Privatisation With certain qualifications, UK privatisation is generally considered to be a success. It has been argued that the goals of privatisation have evolved, and emphases during different phases varied (Kay and Thompson 1986). Marsh (1991) provides a systematic review of literature as to whether privatisation achieved its aims: 1. Reducing government involvement in industry: Obviously, there was tremendous change: more than half of the public sector has been transferred to the private sector, etc. However, new regulations gave the government the capacity to interfere. 2. Increasing efficiency: Of three types of privatisation mechanisms – liberalisation, contracting out, and asset sales – only outsourcing have led to significant cost savings, though mostly at the expense of workers. 3. Reducing the PSBR (Public Sector Borrowing Requirements): Clearly, asset sales have significantly reduced the PSBR, but policy-wise soon it ceased to be treated as the main culprit for inflation, so the reduction mostly aimed to ensure tax cuts.

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4. Curbing public sector union power: Oddly enough, unions have been affected more from contracting out than from asset sales. Working conditions and layoffs in privatised companies varied, since many have been made “lean” before privatisation. 5. Wider share ownership and employee share ownership: These themes became dominant for the second phase of privatisation. While undeniably shareholding has widened, only 40% of initial shareholders retained their shares. 6. Gaining political advantage: While nationalisation was never very popular, Conservatives’ opposition to nationalisation was only a minor vote-winner in 1979. Later, though it “has had a positive effect among those voters who have benefited from it” (Ibid., 477), by some estimates, bringing in 10-15% more votes. Forms of Privatisation: The Dominance of Fixed-Price Flotation Out of seven forms of privatisation in Britain,5 fixed-price sale of assets on the stock market was clearly the most important, both in terms of frequency, generated revenue and government attention. Usually, floating worked through the following structure. First, the shares are underwritten: the official advisers (an investment bank) arrange the deal and take the risk until sub-underwriting is arranged, whereby other financial institutions agree to underwrite a portion of shares.6 Underwriters offer the shares to the public for a given price. The public subscribes. The shares are split into three categories: 1) firm placing shares – that the priority applicants (institutional investors arranging applications before the public offer) are guaranteed to receive; 2) provisional placing shares – the priority applicants will receive these unless the public over-subscribes by a predetermined amount, in which case they will be allocated to the public, and 3) commitment shares – to be taken up by the priority applicants only if not applied by the public (Hyman 1989). If the public oversubscribes for the shares, then the shares are allocated with a design to promote wider ownership – which means that people subscribing for the minimal amount of shares get all what they apply for, the next group gets somewhat less (say, 75%), and so on, with the highest group getting 1012% of the amount they subscribe for. In addition, various mechanisms are employed to encourage small investors/employees. First, they are allowed to pay in instalments. Second, loyalty bonuses entitle individuals a free share for every ten shares they hold for more than 3 years. Third, the government offered employees free shares, as well as matched with a further number of free shares if they purchased shares in the enterprise. Finally, in the case of public utilities

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the shareholders were entitled to discounts on their utility bills. The problem with fixed-price offer is underpricing, as in the case of Amersham in 1982, when “the merchant bank advisers …overdid the underpricing by an embarrassingly wide margin” (Lawson 1993, 210). This led to tremendous oversubscription and the value of the shares jumped significantly a week after trading and resulted in “political storm” charging the government with ripping off taxpayers. During the next big sale (Britoil) the government tried a tender approach to flotation – i.e. naming a starting bidding price. The sale was a “flop”: influenced by falling world oil prices, the public subscribed only 27% of Britoil shares. As a result, “although the tender method used for the sale had not been the cause for undersubscription, it had certainly not helped, and fixed priced offers, or some variant of them, became accepted as the norm for future privatizations” (Lawson 1993, 220). When preparing Britoil for public offer, there was also a concern that the stock market could not absorb it and “the company would fall into foreign hands; and it became politically imperative to find an answer to this” (Lawson 1993, 219). The response was the “golden share”, a “special share which would be retained by the Government after privatization, and which would enable it to prevent control of the company from falling into “unsuitable” (i.e. foreign) hands” (Ibid.) Essentially, fixed-price floating was geared to achieve three particular ends: 1) wider ownership; 2) the success of sales as an end; and 3) generating enough revenue, while safeguarding from foreign ownership. It certainly did not try to maximise government revenue or to get a “fair price” for public assets. Since many companies were sold as monopolies, the method did not enforce competition as well.7 Vickers and Yarrow (1988, 428) complained that “short-term political advantage may have been won, but longer-lasting gains in economic efficiency have been lost”. The problem is a little deeper: rapid privatisation was pursued mostly for remaking the British society. Curing the “British Disease” with “Popular Capitalism”: A Case of Societal Vindication. In the 1970s it was widely perceived that Britain was in decline. The “British disease” was debated widely. Respective “cures” were based on the perceived diagnosis (which were many) of its most important cause(s). “When asked to crystallize the essence of the British disease”, Thatcher always held that “the nationalized industries were the seat of it: where monopoly unions conspired with monopoly suppliers, to produce an inadequate service to the consumer at massive cost to the taxpayer” (Young 1989, 353). Weak financial performance and constant subsidies to public enterprises in Britain brought the issue of public ownership into the centre of public debates

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during the 1970s. Empirically, the findings were not subject to much debate. Instead, many governmental white papers, recognising multiple goals of public enterprises, were trying to clarify the issue by redefining and refining concepts. It “was not clear to what extent managers should reduce costs, promote regional development, maintain employment and fight inflation” (Cook 1996). The debate was framed as one of situational validation: figuring out what the problem was and what these enterprises were supposed to accomplish. The Thatcher government, however, did not engage in discussions on defining the situation, but took the argument to a higher level. The solution offered by Thatcherism transcended particular specifics of public enterprise reform, and moved to the societal vindication level, by solving the problem by discarding many objectives as unworthy: We intended policy in the 1980s to be directed towards fundamentally different goals from those of most of the post-war era. We believed that since jobs (in a free society) did not depend on government but upon satisfying customers, there was no point in setting targets for “full” employment. Instead, government should create the right framework of sound money, low taxes, light regulation, and flexible markets (including labor markets) … (Thatcher 1995, 569).

The first public statement of the government rationale for privatisation was offered in 1983 by Financial Secretary John Moore (1986), which many considered an after the fact rationalisation. It dwelled heavily on inefficiencies of the public sector and the virtues of privatisation, without mentioning wider ownership. But such a view was contested also by many Conservatives, who disliked the idea of “selling the family silver” to make the ends meet. If in the class-conscious British society employment was being discarded as a value, there emerged a need for another alluring goal for the people. The solution came from new conservative thinking, heavily informed by the work of Friedrich von Hayek and crystallisation of ideology within the Conservative Party (Veljanovski 1987). It stipulated the virtues of markets and proprietors. Thus, ownership, instead of jobs, became the means of inclusion. Nigel Lawson’s 1984 speech extolled such a state of affairs: “The successful sale of British Telecom… reveals a vast and untapped yearning among ordinary people for a direct stake in the ownership of British enterprise. ... We are seeing the birth of people’s capitalism” (Lawson 1993, 224).8 Couched in terms of “reversing the corrosive and corrupting effects of socialism” through wider ownership, the room for choice for tools for privatisation was not as large: Just as nationalization was at the heart of the collectivist program…, so privatization is at the center of any program of reclaiming territory for freedom.

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Whatever arguments there may – and should – be about means of sale, the competitive structures or the regulatory frameworks adopted in different cases, this fundamental purpose of privatization must not be overlooked. That consideration was of practical relevance (Thatcher 1993, 677).

The solution was meant to transcend the particulars of the economic problem and deal with societal values. As it is framed in the discourse of societal vindication, the situational validation factors, such as the nature of government regulation, are not defining any more. On the other hand, institutional factors are still worth examining, since they shape the discourse. In the British case, parliamentary sovereignty, compounded with strong electoral support after the Falkland War, resulted in relatively unrestricted policy-making in this area. As Cook (1996) notes, “the main limitations on the will of the government to implement the privatization program are… more procedural than substantive and have not greatly hindered the privatization program”. The ideological landscape, while not revealed in a lower-level discourse, emerges as the main battleground. The result of the Thatcher revolution has been not only Labor’s grudging reversal of support for nationalisation, but also the erosion of its long emphasis on equality (Economist 1995). As Thatcher wrote in 1995 (p. 605), “eventually, a Labor government may come to power in Britain. If it does, however, it is unlikely to nationalise the industries privatised in the 1980s, nor restore the 98% top tax rates of 1979, nor reverse all trade union reforms, let alone implement the proposals contained in the Labor election manifesto of 1983”. True, but the Thatcher revolution only reduced the government; it did not minimise it.9 A new value consensus has emerged. Mass Privatisation in Russia: Destroying the Remnants of Centralised Power One should begin the discussion of Russian privatisation from Gorbachev’s efforts to reform the Soviet economy. By the 1980s, growth was minimal (if any), shortages were escalating, and Soviet leaders were becoming increasingly anxious about the increasing gap with the West. The younger new General Secretary’s efforts of catching up with the West initially were conceived in purely Soviet terms – increased investment into “locomotive” industries and improved centralised control over quality. Failing to deliver quick results, in 1987 Gorbachev initiated Perestroika – an effort to reform the economic system. Economic reform followed two lines of change. First, existing state enterprises were given more autonomy and flexibility. Second, they were allowed to engage in non-planned economic activities. In 1986 the state monopoly of foreign trade was abolished, in 1987 it became feasible to establish joint ventures

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with Western partners and the Law on State Enterprises critically weakened the control of central ministries (Aslund 1989). Sanctioning commercial economic activity was more difficult. Because Marxism stipulated that hired labour inevitably leads to exploitation, the only legitimate non-state economic activity was through non-hired labour: the 1986 Law on Individual Labor Activity was followed by the 1988 Law on Cooperation. In essence, the latter allowed for private enterprises, with the only constraint for collective ownership that ensured lack of exploitation. “Purely” private economic activity was allowed only by 1990. To move ahead with reforms, Gorbachev tried to mobilise popular support through the policy of glasnost. With this limited freedom of speech, pressure mounted from the forces for reform and the independence movements on the periphery. By 1991 the country was fragmented, the economy was a mess and the administrative apparatus was in agony. Riding on the wave of euphoria following the collapse, the new Russian leader Boris Yeltsin embarked on a course of radical economic reform that had mass privatisation as its centrepiece, the idea of which was in the air for some time already. Stages of Privatisation Privatisation in Russia can be divided into three main phases. In the beginning, there was nomenklatura privatisation. Though the legal basis for it was established only in 1992, an unregulated form was well underway from the late 1980s. First, there was the more or less “spontaneous” process of siphoning cheap state resources to private enterprises where the state enterprise managers had significant interest. Second, there were the savvier “centralised” forms of “nomenklatura privatisation”. Losing their confidence in the future, the top nomenklatura (the senior Soviet officials occupying top patronage positions in intermingled Communist Party-Soviet bureaucracy) started to gain back its privileges through their “monetisation”. It was done through tactics like the transformation of ministries into concerns with unclear ownership structure; corporatisation and opaque privatisation of profitable enterprises without any enabling legislation; etc. (Kryshtanovskaya 1996). The resulting exchange of nomenklatura’s authority for property was virtually impossible to turn back – something bitterly complained about by later reformers (Chubais 1999). When Boris Yeltsin assumed power in late 1991, a team of young economists led by Yegor Gaidar embarked on a radical economic reform that prominently featured mass privatisation. It was envisaged along the lines of “Washington Consensus” and rested on the ideas of liberalisation, stabilisation and privatisation. The radical program was influenced by a specific mix of “utopianism” of

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reformers believing in quick fixes (Sogrin 1997) and more “pragmatic” belief of rapidly disappearing window of political opportunity (Balcerovicz 1994). There was also an acute need for reform, since “Boris Yeltsin inherited a weak but hypertrophied state: its reach far exceeded its grasp” (Skidelski 1996, 93). And finally, there was ideology: by 1991 Marxism was totally discredited in the eyes of a younger generation that constituted the core of reformers. In the framework of reform, privatisation was central because of its political importance. First, the nomenklatura was seen as the class enemy in the Marxist mold and reducing its powers was a priority. Second, the awareness of nomenklatura privatisation prompted a desire to gain control over the events. Third, the reformers felt that after Gorbachev’s reforms, the state only financed the enterprises, but did not have real authority over them. Because of overrepresentation of enterprise managers in the legislature (a Soviet legacy), the reformers felt that they should sever the inflationary link between politicians and managers (Boycko et al. 1995). Finally, the task of privatising a largely state-dominated industry was enormous. In June of 1992, after heated debates, the Russian parliament passed the privatisation program. Later privatisation was regulated by presidential decrees. The law was a compromise between the reformers’ initial vision and parliamentary demands: it combined voucher and insider privatisation. Voucher privatisation proposed distribution to every citizen of certificates worth 10,000 rubles that could be invested in one of 15,000 enterprises to be privatised from 1992 to 1994. Privatisation was prohibited for about 30% of all property in Russia, 31% was subject to decision by the government, 21% to decision by the State Property Committee (GKI), and 20% to decision by local authorities (Aslund 1995). The next step was classifying enterprises into large, small, and medium ones. It was envisioned that small enterprises would be privatised through tender sales, the larger ones transferred into joint-stock companies, and then privatised, whereas the medium ones could have been privatised either way. While corporatisation was designed to “bar well-placed members of the Communist Party, enterprise managers, and state bureaucrats from snapping up the companies under their control” (Blasi et al. 1997, 40), it effectively severed the link of the enterprise from the branch ministry by putting it under GKI. After corporatisation, the general meeting of enterprise employees chose one of three options. The first option allowed the employees to receive 25% of the shares (nonvoting) for free, 10% at a 30% discount from the book value, and 5% at a nominal price (quite low after hyperinflation). The rest of the shares were supposed to be sold at an auction or held by the state for later sale. The second option provided for workers and management retaining 51% of the shares, by paying 1.7 times the nominal value. Option three (for medium enterprises)

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proposed a management buyout by a group promising to restructure the enterprise, by the managers acquiring 20% and the employees another 30% (with a clawback clause in case of failure to restructure). When the process was over, the second option – initially resisted by the reformers – emerged as the most popular one (73%), with 25% choosing option 1, and 2% choosing option 3 (Blasi et al. 1997). After decision, privatisation commissions were formed for each enterprise to organise share subscription among employees. Next, the voucher auctions aimed to increase private ownership above the 65% level (the official bar of being private). About 10% of shares were supposed to be held by the Property Fund until a later decision. Technically, auctions were designed to be simple, practically, outsiders were often excluded. Despite presidential decrees stipulating that at least 29% of shares should be sold at voucher auctions, the voucher share stayed at around 20% (Aslund 1995). The designers of the program wanted to create “core” shareholders (owning more than 5% of the shares) for exercising outside control. To facilitate, the government licensed mutual-fundlike investment funds for people without market savvy to invest their vouchers. Voucher auctions were the final and most public step in the mass privatisation scheme. From 1992 to 1994 106,000 small enterprises became private, with lease and subsequent buyout by the employees emerging as the dominant method (Aslund 1995, 251). After the first phase of mass privatisation, in July of 1994 President Yeltsin issued a decree about the second phase of mass privatisation – monetary privatisation. At this phase, the government was scheduled to sell its share in privatised companies with some of the proceeds going to budget, and the rest to enterprises for capital restructuring. For different reasons, these auctions were not successful (Blasi et al. 1997). On the other hand, the government was in dire need of revenues. The result was the infamous loans-for-shares program, when a consortium of Russian commercial banks loaned funds to the government while taking the state’s share in the largest companies as collateral. Since the government was not really able to pay, many of these shares ended up with the banks at very cheap prices, who managed to become the organisers of auctions for these shares, and in that capacity, effectively blocked other oligarchs (Klebnikov 1998a). Soon the tycoon-controlled media was trading accusations about unfair sales, resulting in some high-profile reversals of sales. As a result of public outcry following the bribery scandal involving leading Russian “privatisators”, loans-for-shares deals were prohibited in 1997.

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Results of Privatisation Is Russian privatisation a success, a failure, or is it too complex an undertaking to give an unequivocal answer? Observers claiming it a success, though acknowledging problems, hold that privatising more than 15,000 enterprises in 18 months is a commendable achievement (Aslund 1995). Those arguing for the failure of the Russian privatisation are focusing on the intended effects (Goldman 1997). Others are keen to mention that privatisation was only the first step that would make later changes possible, and while the things are not rosy now, it is too soon to tell (Blasi et al. 1997). Let us discuss Russian privatisation against the aims proclaimed in the official State Privatisation Programs of 1992 and 1994 (Grenbek and Solomennikova 1995): 1. Creation of a class of private property owners: Despite both the widely distributed vouchers and workers shares in the privatised enterprises, the desired new class was not created. There was little change in corporate governance, and the voucher investment funds have miserably failed (Blasi et al. 1997). 2. Increasing efficiency of the enterprises: There are virtually no reports of increased efficiency, but there is solid evidence of slow restructuring (Blasi et al. 1997) and of decrease in industrial output and worsening of social conditions (Birman 1996). 3. Social safety and creating social security infrastructure from privatisation revenues: It is difficult to decompose the impact of privatisation among reforms on social conditions, but in general there were a sharp increase in income inequality (Lyle 1998), poverty (Klugman and Braithwaite 1998), and corruption (Varese 1997), accompanied by the loss of the “welfare functions” of enterprises (Desai 1995). 4. Facilitating financial stabilisation in Russia: This goal was subsequently dropped from 1994 program, “explained by the fact that such an accomplishment during voucher privatization is impossible at all” (Grenbek and Solomennikova 1995, 5). 5. Creating of competition and demonopolisation of the economy: Demonopolisation was not addressed directly. In some industries (trade) there was more competition, while in others (oil and gas) it was the contrary (Sachs and Pistor 1997). 6. Attracting foreign investments: Whereas there has been substantial amount of foreign investment in Russia, it is countered by capital flight from Russia (Birman 1996), domination of Russian oil monopolies in the market (Klebnikov 1998b).

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If we add here the motive of gaining political/ideological advantage, one can hardly call privatisation a winner in a political sense. Being the most visible element of radical reform, for many it exemplified the wrong turn that the country took (Cottrel 1997). After initial approval, it was never again supported in subsequent parliaments. On the other hand, ideological success cannot be denied. Privatisation was designed to give the public a vested interest to resist “any effort to renationalize and return to Communism” (Goldman 1997, 35). Chubais’s (1998) comment is telling: “Is the victory of the left possible in Russia? I would not rule out such a possibility. …But a communist regime is categorically impossible in Russia – neither economically, nor politically”. Mass Privatisation with Insider Control: The Compromise that Buried Communism Initially, most of the Russian reformers were opposed to the ideas of both voucher privatisation (disperses ownership, does not generate revenue, may lead to Yugoslav-type inflation) and employee buy-outs (creates infamous Soviet collective farm mentality, and is unfair to the rest of population not working in factories) as the main form of privatisation (Chubais 1999). But these objections were not central for the purpose of privatisation, and as mere “details” could be accommodated as a part of political compromise. What was, then, the strategic objective of mass privatisation in Russia? As Desai (1995, 9-10) puts it: In Russia, the timing, the speed, design and implementation of the program was in large measure dictated by the objective of launching a frontal attack on the Soviet command economy characterized by state ownership of property as its principal pillar, the apparatchiks as the supreme wielders of economic power, and the citizens as passive employees of the state…. Russian privatization, in short, was a remarkable political-ideological accomplishment. It buried once and for all the idea of state ownership of productive assets in the economy.

The combination of voucher privatisation with employee/management control gave the frontal attack on the power of the Communist Party two things that it needed – legitimacy and political support. As one respected Soviet observer put it (Bogomolov 1993, 202): The idea that country’s riches…belonged to the people was firmly established in the social consciousness over the course of decades… each citizen believed that some part of the general wealth belonged to him or her. And now it is very difficult to convince those citizens of the necessity to buy their own property. This idea challenges a keenly felt sense of social justice…

Employee ownership has long been the favourite model for non-radical

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reformers of socialist economy looking for some kind of “third way” between capitalism and socialism. Although for Russian reformers the idea was reminiscent of Yugoslav-type socialism, they realised that only such a method would ensure workers’ and managers’ support. After the failed August 1991 coup, enterprise managers emerged as the most potent non-radical force in the Russian parliament. The managers could publicly claim the interests of the employees only, which, of course, they would control. As employee ownership was the legitimising ploy for managers to keep their power and get property, the reformers realised that without such a compromise privatisation would never take off. It was assumed that employee ownership would mortally wound central branch ministries, and then the market would force these enterprises to become efficient. The reformers acknowledged that “turning of the director into a shareholder” was “neither a weakness nor a mistake”, but the “only possible in such a situation political compromise, to which we agreed to completely consciously and deliberately” (Boycko 1999, 54). Voucher privatisation had similar advantages. First, it was the only means to give ownership to “everybody’s property” to people who worked in budgetary institutions – teachers, doctors, etc. Second, after high inflation most people could not afford to purchase shares if they were auctioned. The most likely candidates that would end up with people’s property, the popular opinion held, were either the criminals or the foreigners, who would buy everything cheaply. Again, despite their initial dislike, the reformers used voucher options to achieve the main objective – destroying the power of the system. The Russian privatisation was framed almost exclusively as a secondorder discourse. Empirical verification and situational validation were deemed unnecessary. When, during a TV debate in March of 1992, Anatoli Chubais was invited to visit and study a nearby successful firm already privatised via employee ownership, Chubais’s answer was that he had already visited a collective farm and did not need to see another one. As the other debaters note, “in this peculiarly Russian triumph of neoliberal ideology, empirical experience might be appropriate to illustrate the correctness of the government’s policy but not to test alternatives to it” (Logue et al. 1995, 258). Chubais’s assessment of privatisation was also couched in global terms: “The choice in Russia … was between a criminalized transition and civil war” (Klebnikov 1998a). The majority of the younger professionals in the reform government, who came of age with the prevalent cynicism of secondary echelons of the Soviet elites during the Brezhnev era, never actually believed in Marxist orthodoxy to begin with and were convinced that consensual reform was bound to fail. In their thirties, while lacking significant governmental experience, their vision of the state and the economy was quite influenced by ideologies of Thatcher and

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Reagan (Sogrin 1997). For instance, Chubais initially spoke about the necessity to choose popular capitalism over Latin American oligarchic capitalism (Klebnikov 1998a).10 The socialism-capitalism battle waged by reformers was not as much an issue of systemic vindication – i.e. rejection of certain values in favour of others. Reformers did not argue against the values championed by Marxism. The debate was waged as a part of social choice. The reformers believed that both normative reflection and empirical evidence damn Marxism, and that Communist ideology and organisation cannot succeed. Thus, there was a need for justification and adoption of alternative ideology, and the social order that such an ideology prescribed. Concluding Perspectives This paper set out to discuss the discourse(s) that framed the debates about privatisation in each country and examine how they affect the choice of different privatisation mechanisms. It has been shown that policies evolving over time can be fairly reconstructed by the logic of practical policy deliberation (Hoppe 1993). Through the strongly defined case selection discussed above, we can also explain the logic of privatisation policies spanning across countries. As seen in the table below, despite some common objectives, privatisation strategies differ across time and space, and reflect the predominant discourse in which the debate on privatisation in each country is framed.

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Table 2 Main Features of Privatisation in the US, UK and Russia US

Main form of privatisation

Main objective of privatisation

UK The Practice of Privatisation Outsourcing Fixed-price flotation on stock market with clauses for wider distribution of shares Optimising small Creating “popular government, or capitalism” through minimising the costs wider ownership for the taxpayer

Discursive Analysis The level of discourse First-order discourse: Transcending from situational validation Empirical verification (how to make public (Is it efficient?) and enterprises efficient situational validation and effective?) to (When is it efficient?). systems vindication (they should be effective for profits only, not for full employment).

Russia Combination of employee ownership with a massive voucher program Frontal attack on Communist power by demolishing its base-the Soviet command economy Second-order discourse: From systemic vindication (our society in existing shape is unjust and undemocratic) to social choice (Communism is a false ideology).

In the United States the argument is confined to first-order discourse and deals primarily with issues framed in the discourse of empirical verification and situational validation. Outsourcing is the most common form of privatisation, since it is most appropriate for managing the government in an ideologically stable, politically fragmented and incremental system, where the economic stress is upon revenues and the values of individualism and egalitarianism shape the implicit consensus of small government. The debate never rises to the level of systems vindication, since, except for the rare case of social security, the boundaries of state responsibility are not challenged. The state is not expected to take over new responsibilities or to cede one (in terms of financing through collective action), but is perfectly happy to experiment with multiple modes of operation existing in diverse governments (state, local) in the US. In the UK, it was the opposite. Margaret Thatcher did not become involved in first-order discourse. Since the situational validation discourse did not yield a definite position her government could subscribe to, the background consensus about systems had to be opened up for a debate. The economic stress in the UK

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was manifested not only in revenue shortage, but also in increasing subsidies to public enterprises confused under multiple objectives. Frustrated both by subsidies and by long debates about the rationale for public enterprises, the Thatcher government embarked on a large-scale privatisation program. It aimed to reverse “the corrosive and corrupting effects of socialism” without much opposition (largely facilitated by parliamentary sovereignty). In a class-conscious society such a major undertaking in redistribution (such as privatisation) could not forego the issue of systemic vindication, thus it had to transcend the discourse of situational validation. The boundaries of state have been questioned, but the idea of mixed economy was not up for discussion – the issue was redefining the boundaries of state responsibility, not their existence. In Russia first-order discourse has been buried under the wrecks of Perestroika-era reforms, where economic arrangements with varying degree of freedom and resource attachment failed to reinvigorate the moribund Soviet economy. The debate was constrained to second-order discourse only. The question was raised to the level of social choice due to lack of consensus on the role and rationale for the state, as well as deep mistrust in the ability of Communist-dominated state apparatus to constrain itself to new redefinition of state’s responsibilities. There was recession and severe problems in all spheres of economic life, coupled with public disappointment in totalitarian ideology. Privatisation was an essential part of revolutionary transition from socialism, and thus was significantly molded by ideology. The revolutionary task of destroying the basis of Communism (an ideology blamed for crippling the country) through cooptation of regional and industrial elites determined the essence of privatisation mechanisms. The policy made sense only on the fourth level – if framed in any of the lower levels, it would have been outright rejected. Obviously, even similarly labelled policies differ across time and space, particularly when it comes to implementation. In all the discussed cases, the policies were complex and multi-form, but competing values and interests had only modified the strategic rationale optimised by the dominant mechanism rather than supplanted it. We have discussed both structural (particularly, the form of economic stress and political constraints of policy making) and cultural (particularly, underlying cultural values and ideology) factors that account for differences. But, it was not the aim of this paper to uncover these factors, neither the list nor the coverage of which can be theoretically exhaustive. The intent was to elaborate an approach that would allow these factors to be ordered in a way that enables the story of why privatisation takes the form it takes to be understood. The frameworks elaborated on the basis of the garbage-can model (Zahariadis 1995) and theories of state growth and shrinkage (Feigenbaum et al. 1998), despite

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tackling enormous amount of information and arguments, failed to generate a serviceable knowledge-generating model that would also address the issue of dominant privatisation mechanism choice. The garbage-can approach’s lack of heuristics and disregard for institutional basis of politics makes it applicable both everywhere (in terms of ex-post explaining) and nowhere (in terms of ex-ante advice). Theories of state growth and shrinkage (Feigenbaum et al. 1998) while accurately pinpointing the political essence of privatisation, because of very high vantage point of analysis (as the phenomena under consideration relates to the idea of state),11 correctly analyse and distinguish the broad varieties of privatisation and some underlying trends for them (e.g. the making of ideological and methodological background for privatisation), but do not provide a toolkit for analysing lower-level policy choices. On the other hand, Fischer’s (1995) model of practical policy deliberation enables concrete policy construction. It was fruitful in proposing a theory on choice of particular privatisation policy mechanisms, which in a schematic form is summarised below. Privatisation policies generally pursue multiple goals that change their relative importance over time. Usually, the prevailing goal is determined by the dominant discourse in which the topic of privatisation is debated in society. The prevailing goal, in turn, determines the particular privatisation mechanism – i.e. the one that maximises the dominant goal at that time. The goals phrased in higher than the dominant discourse level become irrelevant and are not discussed, while the objectives phrased in lower-level discourses become complementary to the leading one. Notes 1. There are, of course, many attempts of categorisation. Vickers and Wright (1989), for example, classify it by intent, by impact, by sector, while Kuhl (1997) distinguishes three basic forms of privatisation according to their political logic: political privatisation, fiscal privatisation, and economic privatisation. 2. Other common forms in the US are loan guarantees, government-sponsored enterprises, vouchers and deregulation. Enterprise sale is rare. 3. According to Nigel Lawson (1993) privatisation was part of the initial program and was reflected in Geoffrey Howe’s first budget speech in 1979, while for Thatcher (1995, 569) it was more of a strategy: “I came into 10 Downing Street with an overall conception of how to put Britain’s economy right, rather than a detailed plan: progress in different areas would depend on circumstances, both economic and political”. 4. These included both ‘economic’ and ‘quality’ regulators (Cook 1996). 5. They are: 1) public sector companies’ and special asset sales; 2) deregulation of state monopolies; 3) contracting out; 4) private provision of services; 5) inducing the private sector to invest in deprived areas; 6) reducing subsidies and increasing charges; and 7) council house sales (Young 1986). 6. Before the introduction of competitive bids in 1985, there were hefty commissions for underwriting.

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7. First, it was timing. Second, breaking companies would make them less attractive for investors. Finally, there was the nationalist argument that breaking up companies like British Gas will hinder them to compete globally – a view championed by CEOs of these companies. 8. Thatcher called it “popular capitalism”, since “people’s” sounded to her too Communist (Lawson 1993). 9. Public spending as a share of GDP fell from 42.6 % in 1979 to 40.25 % in 1990 (Thatcher 1995, 571), which is higher than 33-34% of the US and Japan. As for scale, Callaghan government cut public spending from 49% in 1975 to 44% in 1978 (Thatcher 1995, 372). 10. He later argued, though, that in a black-and-white time, in a time of revolutions, you do not go after varieties, you go after the essence (Chubais 1999). 11. Even the names of the labels draw from metaphors of state retreating or attacking – pragmatic, tactical and systemic.

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