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Private and Public Enterprises in Europe: Energy, Telecommunications and Transport, 1830-1990

Author(s):Millward, Robert
Reviewer(s):Toninelli, Pier Angelo

Published by EH.NET (February 2006)

Robert Millward, Private and Public Enterprises in Europe: Energy, Telecommunications and Transport, 1830-1990. New York: Cambridge University Press, 2005. xix + 351 pp. $90 (hardback), ISBN: 0-521-83524-0

Reviewed by Pier Angelo Toninelli, Department of Economics, University of Milano-Bicocca.

Robert Millward, professor of economic history at the University of Manchester, has written extensively on the history of infrastructures and public ownership in Britain. In this volume his attention is addressed towards a wider and more ambitious objective, the comparative history of the economic organization of energy, transport and communications in a large number of European countries in the nineteenth and twentieth centuries.

The book is divided into five parts. The first is devoted to an introductory discussion of the basic hypothesis of the volume: the actual pattern of regulation and public ownership that has characterized infrastructure and public utilities has to be explained primarily by economic and technological factors or by strategic reasons, rather than by socio-ideological aspects.

The second part analyzes the years from 1830 to 1914, when the new European system of infrastructure was constructed, but no homogenous pattern of government intervention in services and infrastructure emerged: private, municipal and state ownership were mixed up apparently without any uniform criteria or ideological bias. Private enterprise dominated the early growth of networks, when municipal government was fragmented or weak, whereas municipal or state involvement — which required the presence of a well structured and autonomous authority — was motivated by the desires to expedite rights of way, to control monopolies, to secure a reliable supply and by fiscal constraints, as well. For instance, while gas services in Denmark, Germany and Britain were municipalized because of the revenues they could guarantee to the town councils, in several other countries they heavily relied on the private sector — public authorities being content to continue with arm?s length regulation of supply and tariffs. In the case of railways, the state took over the initiative when no subsidiary system could possibly induce the private sector to operate lines not sufficiently profitable, or to quickly build lines that were reputedly strategic. Telegraph services, on the other hand, were soon fully nationalized everywhere, and this depended on the critical and strategic interests of governments in controlling information for civil and military purposes. Therefore government ownership of the nineteenth century can be hardly associated with political or ideological stimuli. Municipal socialism flourished later, after the 1850-1870 spread of municipalization of gas and water services, soon followed by the municipalization of tramways and electricity.

The third part is dedicated to the 1914 to 1945 period, when a tendency towards a more common and homogenous pattern of behavior emerged: ?the road to state enterprise.? Emphasis here is more on the action of central governments than of municipal authorities as a consequence of the stronger interventionist stance by the state in the infrastructure sector. This was motivated mainly by a) the move towards system integration into national networks in electricity supply and telephone services, b) an increasing involvement in railroads by governments which had not yet nationalized trunk lines (as Prussia and Italy had already done), and c) the increasing state presence in the ownership and management of key strategic natural resources like coal and oil. These developments were not so much a product of political-ideological forces nor of wars and Depression, as of specific technological and economic changes. In electricity, for instance, although network integration was a potentially large source of economic benefits, where ?a nationally integrated network was not necessarily an economic proposition? (p. 119) integration could wait, as happened for different reasons in Norway and Italy. In railroads increased state intervention was explained primarily by their ?desperate financial straits? induced by overlapping causes such as wage rises, increases in coal prices and hard competition by petrol-driven coaches, trucks and cars.

Part four discusses the 1945 to 1990 period. It embraces the phase of the maximum expansion of state ownership, when large sectors of economic activities passed into government hands, even in countries previously less affected by the phenomenon, such as France and Britain. The focus here is particularly on coal, oil and airlines. State ownership — together with attempts at economic planning, which yielded a range of successes and failures — characterized the economic policy of recovery and reconstruction of the golden age. Here Millward raises the fundamental question: how to evaluate in a historical perspective the performance of state enterprises in order to take into account additional ?non-economic? aims (that is ?public interest?) increasingly assigned to them by governments? A correct measure should not reckon so much with profitability as with measures of x efficiency, i.e. the difference between maximum and actual effectiveness in the utilization of inputs — such as, for example, output per employee/hour or total factor productivity. These measures are difficult to calculate, given the lack of specific data differentiating private from public firms, but can be approximated by comparing results within the same sectors before and after eventual change of ownership, or across countries in case of different property regimes (i.e. private vs. public). Interestingly enough, no evidence of a poor productivity growth for state enterprises emerges from the examples considered by Millward.

In the fifth part of the volume Millward draws a few conclusions on the findings of his research: here the focus is on the moves towards the privatization and deregulation of the recent decades, in order to evaluate to what extent these were prompted by economic and technological change and/or supported by the prior economic history of the infrastructure sector. According to Millward, such moves did not lie so much in the inefficiencies of public undertakings as in the vanishing of the rationale of state enterprise. On the one side the motives which prompted such institutional format had increasingly weakened — for instance technological change of the last decades had greatly downgraded the issue of natural monopolies; on the other, state enterprises fundamentally failed to break even in the post war period, since the non-economic objectives were financially not supported enough by governments. Therefore the less visible mode of state intervention, arm?s length regulation, has been increasingly replacing the most visible one, ownership.

The major qualities of Millward?s quite stimulating and innovative book lay in its large comparative approach, in its meritorious effort to take into consideration both levels — the central and the municipal — of state intervention, as well as in its deep and not prejudicial discussion about the role and performance of public enterprises. These merits get the better of a few minor shortcomings which I noticed in the treatment of the Italian case: errors in spelling proper nouns and some historical imprecision (e.g. the SIP company was never re-privatized), while the prevailing identification of ideology with socialism is likely to lessen the impact of fascism and autarchy on the still persisting fortunes of statism.

Pier Angelo Toninelli is professor of history at the University of Milano-Bicocca. His latest book is Storia d?impresa (Bologna, Il Mulino, 2006)

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII