Think tanks have played a major role in providing the intellectual rational for privatisation around the world and in setting out the policy prescriptions for it. Using a range of free market economic theories, such as public choice theory, and dogmas, such as the market serves the public interest best and private companies are more efficient, they have argued that public services should be privatised, contracted out, and subject to commercial imperatives. In reality these measures were designed to provide expanding profit opportunities for private corporations.
“the fountainhead of industrial privatization showering the alleged benefits over the rest of the world.” On the basis of the free market economic arguments and theories provided by the think tanks, the Thatcher government sought to “move decision-making for the productive sector of the economy from public to private hands”.
Privatisation was not something that the public demanded. When the Conservative Party came to power in the UK in 1979 it had made no mention of ‘privatisation’ being on its policy agenda. Surveys in the following years consistently showed that the majority of people opposed the privatisation of gas, telecommunications, electricity and water.
The Centre for Policy Studies (CPS) claims “a large share of the credit for initiating policies such as privatisation…” The chair of its working group on electricity, Alex Henney, wrote a book, Privatize Power that was published by CPS in 1987. He accused the Central Electricity Generating Board (CEGB) of being inefficient inflexible and secretive. He recommended the separation of transmission to a separate company that would be mutually owned by the distribution companies.
Another think tank that was considered to be a driving force behind privatisation was the Adam Smith Institute (ASI). It sought to make privatisation acceptable to the public by creating interests in favour of it through "encouraging management buy-outs, cheap or free shares to employees and widespread share ownership among the public". It distributed pro-privatisation literature to councillors, civil servants and the media.
Think tanks ensured that by the mid-1990s there was a widely acceptable rationale for deregulation. “Calls by large industries for utility deregulation found a ready chorus in academics, analysts, and politicians who believed that competition would produce lower prices, better service, and more innovation than government regulation”. By the early 1990s “the tide of free-market hysteria reached a fever-pitch” and industry continued to lobby for deregulation. Past lessons about the failings of markets in delivering public goods were conveniently forgotten.
The Australian state of Victoria is now the most privatised region in the world and much of the ground work for this was established by Project Victoria. Project Victoria was established to privatise public services and infrastructure. It originated from the work of a consortium of private firms, employer organisations and think-tanks in Victoria and is a prime illustration of the contribution to the privatisation drive made by the new breed of pro-market think tanks. At the behest of their sponsors, these think tanks have set the agenda, formed interlocking networks, and provided detailed advice on implementing privatisation.
Privatisation in Victoria was presented as a way of reducing the government debt and therefore taxes and charges to business. It was also seen as way of allowing private firms “to get a piece of the action”.
In 1990, more than a year before the free market Kennett Government was elected, 13 business organizations commissioned the Tasman Institute and the Institute of Public Affairs (IPA) to establish Project Victoria. These organisations included the Australian Chamber of Manufacturers, the Business Council of Australia (BCA), the State Chamber of Commerce and Industry, the Victorian Employers Federation and the Victorian Farmers Federation.The Tasman Institute, as Porter pointed out, “provided most of the policy expertise, particularly for infrastructure issues, for Project Victoria.”
Project Victoria was far reaching. It covered water, ports, electricity, public transport and workers compensation and the Kennett Government used this basis to extend variations of privatisation to roads, hospitals, prisons and schools. Tasman and IPA prepared a number of reports and strategies between 1991 and 1993.
The Kennett Government implemented most of Project Victoria recommendations after it was elected and in some cases went further, slashing the public service workforce by more than three times the 1991 report recommendations.
Project Victoria “continued to have an independent policy role, including high level annual meetings with business and community groups, the Premier, Treasurer and key sector Ministers.”