The decision to privatise or nationalise certain utilities has long been a central consideration in political and economic discourse. To privatise is to transfer ownership of any given business/service/property from the public sector to the private sector, that is from the people to a private agent. Proponents of such a transfer of ownership, argue that privatisation can lead to a level of market-efficiency that the government is unable to achieve. On the contrary, to nationalise is to do the opposite and those in support of such a transfer argue that nationalisation protects the market from private injustices.
Despite the dichotomy in ownership, privatisation is an endemic phenomenon under capitalism, particularly as it coincides with the fundamental principles of a free market system; granting the individual agent power and freedom to privately manage any given utility without external influence. However, the incessant drive towards privatisation has created many complications within the market, exposing a flaw in the ideology that incentivises it – leaving the people, and society worse off. For instance, the privatisation of public services within the UK under the Thatcher years, such as British Steel, BP, British Airways, water and electricity caused their respective prices to rise, depriving their supply despite the extremely high demand for them. This meant, for instance, that the cost of energy, travelling by air, water and or electricity rose to the detriment of the people that regularly used them.
Perhaps the greatest injustice of privatisation is the creation of monopoly power, concentrated in the hands of a few companies and individuals, who profit from highly inelastic utilities that are integral to society’s survival such as food, water and energy. This is perhaps clear in healthcare and medicine, where, for instance, monopolies are able to charge extortionate prices for remedies to treat problems as harsh as cancer.
Not only has this stripped essential services from society, but it has also reduced accountability towards private agents, who do not answer to the public per se but solely to their investors. Surely the role of a state is to guarantee these public utilities rather than allowing them to be syphoned out to private providers that seek to exploit them! In actual fact, despite the purported benefits of privatisation, it is clear that it also fails to eliminate inefficiency; apparent when one looks to the likes of National Rail, where trains are often delayed and marred by poor service.
On the other extreme, pure nationalisation is also not the cure to ownership. For instance, despite the Labour Party’s rhetoric to prevent the NHS from falling into private hands, it is clear that the government (of all leanings) has consistently failed at efficiently managing public health care for the benefit of its people. The same can certainly be said for a number of public utilities related to energy and telecommunications within the UK alone, which are marred by poor output, weak telephone signals and commonly high prices at no benefit to the British people. This is due to the profit-maximising and cost-minimising incentives that exist even in government, who seek to cut costs for the betterment of their budget.
History is littered with many examples of the poor records of nationalisation in maintaining utilities for the public; the most recent was the nationalisation of Northern Rock and the Royal Bank of Scotland, which, although was done to prevent defaulting, it was a clear indication of the government’s inability to manage efficiently – particularly as it was unable to later recover toxic assets or even sell shares in the very company they had bought!
Capitalism has failed to regulate ownership of natural resources and essential services other than let things run loose on a free for all basis – akin to an unruly group of children left unsupervised in the classroom with only a supply teacher making periodic visits to control them. In neglecting the system by which wealth and its ownership is distributed within society, it has caused great confusion. On the contrary, Islam left the economic science (the means to produce or manufacture) to the people but detailed the economic system (the rules and laws), so that humans are able to create wealth independently but manage it in accordance with the Islamic ideology, particularly in respect to its ownership.
The Khilafah would secure fundamental goods and services, so that they remain in the hands of the public as opposed to the private sector. For instance, Muhammad (saw) said that:
لَيْسَ لِابْنِ آدَمَ حَقٌّ فِي سِوَى هَذِهِ الْخِصَالِ بَيْتٌ يَسْكُنُهُ وَثَوْبٌ يُوَارِي عَوْرَتَهُ وَجِلْفُ الْخُبْزِ وَالْمَاءِ
“the Son of Adam has no better right than that he would have a house wherein he may live, a piece of clothing whereby he may hide his nakedness and a piece of bread and some water.” [Tirmidhi]
This serves as a fundamental basis to secure that which is integral to the people’s survival, preventing the privatisation of these goods (such as water, energy, transport and shelter) so that they can be consistently available and in abundance for those who need them. Although it would manage these services on behalf of the people, they would be owned entirely by the public and provided to the people at cost price, so that they do not pay for that which they have a right to.
The Khilafah system would also sustain a private sector in accordance with the Islamic ideology. It certainly incentivises economic activity and profit for the one who seeks it, but, unlike capitalism, the private sector would be closely regulated and stripped of monopoly power to ensure healthy competition between firms and businesses. In fact, Muhammad (saw) said, in relation to the privatisation of public goods, that
“Whoever withholds food (in order to raise its price), has certainly erred!” [Muslim]
The Islamic way of life also has a unique view to manage resources that are neither private nor public yet are administered on behalf of the people by the state. In contrast to public property, state property can be given to individuals such as land and buildings based on the Khalifah’s discretion.
Thus Islam, as an alternative ideology, provides a system by which ownership is justly divided between the people in different respects; public, private and state. The Khilafah would solve those problems related to utilities that exist within capitalism, whether that be preventing the privatisation of public goods or regulating the private sector so that it is able to flourish, rather than being marred by inefficiency and corruption.