Brian Micklethwait

First published 1985.

Nationalised industries seldom go to hell straight away, which explains why many people think they need never go to hell at all.

When a nationalised enterprise begins, the government is “improving” upon a going concern, about which many people have clear and sensible opinions. It is squirting money at something that is widely understood. A “good” house, or agricultural “improvement”, or a “better” health service, all mean something. The government may still prefer mass slaughter and concentration camps, but if it wants to be nice it knows how.

But as the years pass this knowledge is forgotten. Gradually, if not immediately, the money starts to be spent in insane ways. Insane interest groups (actually very sane indeed, of course) spring up, who insist that the craziness must continue and become crazier. The first council houses between the wars were amazingly sensible compared to the idiocies of later decades. The first nationalised theatres were simply the old theatres with a bit more money to slosh about. It was many years before that giant incinerator of bank notes, the “national theatre”, was erected. Ditto with the health business.

But the new megahospitals are now built and eating money, and all contact with financial sanity has gone. The frugal small hospitals of yesteryear, built by the private sector and usually with the help of private charity, are being smashed to rubble.

In other words, the “welfare state” is slowly but surely collapsing under the weight of its ignorance, unreplenished by the knowledge of changing tastes and changing costs that would have been provided by a free market. To put the blame entirely on savage cuts is to blame the messenger for the message. All that these “cuts” are is the inability of politicians any longer to tolerate the continuously increasing demands now being made both by the producers and consumers of welfare services, in the absence of any satisfactory idea of what these services now ought to be.


The British public became aware of the forthcoming disintegration of the welfare state when Mrs Thatcher announced during the last election campaign, and repeated since that election, that “the welfare state is safe” with her and her government.

When politicians say things like that you know something is up, or why would the question keep being asked? A wave of quiet terror has spread through all the middle aged folk of Britain, who had hitherto regarded their old age as taken care of. Good grief, we’ll all be sleeping under Charing Cross Bridge! These promises of Mrs T, so reminiscent of the ones Mr Wilson used to make about not devaluing the pound, have probably done more to galvanise the British economy than any other public declarations she has emitted.

Next question: is this forthcoming collapse the catastrophe it is said to be by those who will be most inconvenienced by it? I believe not. If we libertarians thought that the collapse of the welfare state will mean the end of welfare then we’d not be libertarians.


The way to grasp just how much havoc is caused by the welfare state is to ponder what a randomly selected industry that is now operating in the free market would be like had it instead been run the way that health care is run now. Consider the shoe business. This trade — such are the quirks of fate — has escaped the clutches of the government, perhaps because shoe-making equipment is too small and transportable to be stolen by the government.

But what would a nationalised shoe industry be like?

There would be a tiny “private sector” supplying custom built and cruelly expensive products to plutocrats and their imitators. That or a black market, depending on the legal position.

Then there would be a gradually more mediocre standard product available to the middle classes and to the luckier or better organised proletarians, partly or wholly paid for by the government.

And finally, about fifteen to twenty five per cent of the population would be walking about in bare feet, or else standing bare footed in shoe queues, despite having paid much of the taxes needed to pay for all the shoes.

Most aspects of shoe technology would be stagnant, at the level reached when nationalisation first struck. Changes in design would require mass demonstrations, and skilful lobbying by wildly unrepresentative pressure groups.

Anyone suggesting that a free market in shoes would be an improvement on this shambles would be accused of being in favour of bare feet.


The defenders of the chaotic nationalised status quo would orate thus:

“Are you seriously suggesting that the proletarians should be expected to buy their shoes from grasping tradesmen, whose concern is profit rather than human need? No. A free-for-all in shoes would mean luxury for a tiny few and shoddy goods or nothing for the rest. After all there’d be no profit in selling shoes to the less wealthy, would there? Shoe costs have spiralled in recent years, you know. Do you really think the masses could afford three hundred pounds a pair without state provision?

“Monster. Fiend. Anti-Christ. And what is to become of all the state cobblers?”

In short, those who argue for a free market in welfare are accused of wanting the disasters unleashed only by a nationalised industry.

Note especially the point about costs. Costs are not things carved by the deity onto stone tablets, but to hear people in the NHS talk you’d think they were. If a shopkeeper in my high street faces me with “spiralling costs” I can decide not to incur them, either by going to a different shop where prices are not spiralling, or by arranging my life differently.

On the other hand, if in a free market some grasping Taiwanese materials technologist or brutal Romanian personnel manager learns how to undercut the prices I now pay I can at once take advantage of the fact. With shoes this is what has happened, and the local shoemen have had to damn well unspiral their costs or go bust. Ditto in textiles.

As with costs so with technology, in fact these two subjects are really the same subject. People talk about “new technology” as if it was delivered annually from Mars, and then climbs out of its parcel and applies itself, at a rate and in a way that cannot in any way be influenced by earthmen. Yet the question of whether new technology is applied, and if so whether in such a way as to divide costs by ten or multiply them by a hundred, is crucially dependent on the wider political and economic setting within which the relevant choices are made. Gutter Marxists are right about that if about nothing else.

That medical costs have reached the ozone layer is not because medicine is an inherently expensive activity, but because no rewards are available to those who might have kept medical costs down, or pushed them down even further as has happened with portable radios.


I’m not a doctor myself, although my sister is, but I do have some thoughts about how a wholly free market in medicine might have developed had it been allowed.

(By the way, THERE IS NOT A FREE MARKET IN MEDICINE IN AMERICA. If you think there is, jet over there and try selling medicine to the first Americans who pass your door, at fifty cents a session let us say, and then count the number of minutes that elapse before the local police, alerted by the government sponsored doctors, move in and close you down.)

What I usually want from a doctor is information, not pills. I want to know that it is this month’s local bug that I’ve got rather than congenital herpes, and I want to know the likely course of my malady, so that I can rearrange my affairs and my mind accordingly.

For many centuries doctors knew nothing about curing people, and their new found glimmerings of knowledge in this area have quite gone to their heads. Even when a real cure is available it can often be self administered, provided the patient is well informed. The genuine brilliance achieved by doctors in such arts as the reconstruction of car crash victims or war wounded are heroic exceptions, but exceptions they remain. Mostly what we want of doctors is knowledge of what is wrong and knowledge of what, if anything, we can do about it.

The cost cutting possibilities in the application of the new electronic information technology to medicine are obvious. Diagnosis, treatment, cure (when possible), medical education, should all mean computers (and in due course computer controlled videos) just as the information processing job done by bankers has meant computers to bankers.

But we’re doing that, say the doctors. We already have computers, and a right pig’s dinner they are making of everything! But of course. They are making just the mess of medicine that I would make of a bank if I computerised that (through me being, say, the Minister for Banking). Yet the banks have computerised successfully, by trying out many different schemes for computerisation on a small scale until they had something that looked good, by copying that, and by putting the winners of the race in charge of the losers. In medicine the old winners have stayed in charge, and the potential new computerised winners were shot dead by the starter’s gun.

When it is said that “medicine” is getting more expensive, what is meant is that bedmakers, housekeepers, skivvies, cooks, bottle washers, brain surgeons and other menials are getting more expensive, as indeed they are. But if medical knowledge were separated from domestic service it would be revealed as something that is getting cheaper by the day. Customers faced with on the one hand knowledge, and on the other hand knowledge-plus-domestic service, and with the prices, will not hesitate.


Despite all the obstruction caused by the NHS the computer will eventually transform traditional medicine out of all recognition, when satisfactory diagnostic computer software, complete with a friendly bedside manner, becomes available at mass market prices. In other words when good quality free market medicine becomes as hard to control as the shoe business. As with every important new medical technique, this one will be fiercely resisted by all but a few of the doctors. “But doctor, my computer says …”

More mundane market disciplines are impinging upon medicine via the growing private sector both in traditional medical care, and in the newly exploding industry of health information, in the form of books and magazines. Read the latest BUPA adverts to see how the desire not to waste money has suddenly crackled into life in the private sector, where patients (via insurance companies) are paying the bills.

If you were to put your mind to the question of how free market roads might be made to work better than the mess we grope about in now, or free market “community policing”, or free market USSR scaring, then you too could think of several pages-worth of futurology as good as mine and maybe better.

Most of our ideas would turn out to be wrong, but the market, like the best teachers, rewards success, while allowing errors to be quietly forgotten. The “collapse of the welfare state” will result in much more welfare

Economic Notes No. 3

ISSN 0267-7164 ISBN 1 85637 213 8 An occasional publication of the Libertarian Alliance, 25 Chapter Chambers, Esterbrooke Street, London SW1P 4NN email: © 1985: Libertarian Alliance; Brian Micklethwait. The views expressed in this publication are those of its author, and not necessaril those of the Libertarian Alliance, its Committee, Advisory Council or subscribers. Director: Dr Chris R. Tame Editorial Director: Brian Micklethwait Webmaster: Dr Sean Gabb