For Britons, it's a bit like going back to the 1980s. A Tory government is privatizing an old public utility. Everyone is scrambling to buy shares while the Labour Party shouts that the nation's assets are being sold for a song. Could it be that popular capitalism is back, or is it just a tired and broke public desperate to cash in on an easy win?
The sale of the Royal Mail could be not be going better for the government. It was a gamble – even Margaret Thatcher hesitated to put the Posties up for sale – but at the latest count, 700,000 people submitted their debit card and bank details online, offering enough money to subscribe for all the shares seven times over. It's the biggest and most-hyped government sell-off since the privatizations of British Telecom and British Gas in the 1980s, and has drawn similar numbers of public applications. So much money is chasing the Royal Mail that institutional investors will be scaled back and, in the grey market, the shares are already trading at a fifth above the maximum offer price, suggesting the business is worth £4-billion ($6.6-billion).
If the shares fly higher when trading starts on Friday, Labour shadow ministers will probably call for an inquiry by the Public Accounts Committee into the pricing of the offer. The government is unlikely to worry – the real give-away was not the pricing of the shares, but the decision to set aside 10 per cent of the stock for Royal Mail employees. Every postal worker will get about £2,000 worth of free shares, a poke in the eye to the union which opposes privatization and is threatening to strike. Interestingly, of the 150,000 staff eligible for free shares, less than 400 failed to apply.
It is a good omen for a government lumbered by a portfolio of bank shares (Lloyds and RBS) which it is keen to sell. Jubilant Tories, soaring house prices and soaring stock prices: it sounds like the eighties, but politicians should not presume that public trust in capitalism and in markets has yet been restored. What attracted the public to Royal Mail was probably the promised 6 per cent dividend, a yield unobtainable from any bank, and the vague feeling that a 500-year old business would not disappear tomorrow.
Meanwhile, popular capitalism remains a dwindling pastime. Individuals own about 10 per cent of the U.K. stock market, down from heights of more than 50 per cent in the 1960s. The Thatcher privatizations helped to stabilise individual holdings at about a fifth in the 1980s and 1990s, but it has since crumbled again. Today, the biggest constituency among owners of the U.K. stock market is not indivduals, nor U.K. institutions, but foreign investors. Back in the 1980s, foreign investors were an exotic presence in London, owning about 10 per cent of the market. Today they have a controlling stake of 53 per cent, rising by 10 percentage points over the past two years.
This should worry the British Tories, as well as supporters of markets everywhere. The globalization of capitalism is not just a problem of increased systemic risk, it creates political distrust. Individuals find personal ownership reassuring. It is the reason why they seek to own property and hoard bits of gold, even in the knowledge that these investments are not safe from depreciation. Owning a little piece of the Royal Mail is a reassuring idea in a world of incomprehensible markets and untrustworthy money managers. Stock markets have become too frightening and too remote to represent a connection for ordinary people to capitalism. We need to find something better if markets are going to retain their political legitimacy.
Carl Mortished