European Union Policy Studies

The Politics of Marketization


By Dr. Helen Callaghan

On June 14, 2017, a 24-storey block of low income housing apartments in London’s Kensington and Chelsea neighborhood went up in flames and burnt for almost sixty hours. 250 firefighters did what they could to control the inferno. Nevertheless, seventy-two people lost their lives, and many more were injured. The scorched ruins of Grenfell Tower epitomize what can happen when market forces reign supreme. In Britain, a law requiring that external walls must be fire resistant for at least one hour was scrapped in 1986. In 2014, the country’s housing minister asserted that the responsibility for encouraging the installation of sprinkler systems lay not with the government, but with the marketing departments of private manufacturers. The lack of rules against wrapping high-rise tenements in plastic without appropriate safeguards to prevent flames and fumes from spreading led to the choice of polyethylene panels on cost grounds when Grenfell Tower was refurbished in 2016.

The “bonfire of red tape” promised and delivered by recent British administrations is just one example of a broader trend that has been gathering pace for more than thirty years. Since the early 1980s, governments worldwide have taken a wide range of policy measures to strengthen and expand the role of markets. Apart from curbing safety standards, they have privatized state-owned enterprises and stopped subsidizing private ones; dismantled tariffs and harmonized product standards to facilitate cross-border trade; outsourced the provision and management of public infrastructure, including roads, bridges, tunnels, railways, waste treatment facilities, hospitals, museums, schools, asylum shelters, and prisons; encouraged a shift toward private health insurance and supplementary pension plans; removed job protections and cut back unemployment benefits; and deregulated financial markets; et cetera. British Prime Minister Margaret Thatcher and US President Ronald Reagan led the way, but center-left governments were not too far behind, important nuances notwithstanding.

My book, Contestants, Profiteers, and the Political Dynamics of Marketization. How Shareholders gained Control Rights in Britain, Germany, and France examines the political dynamics that propelled marketization forward, through the study of parliamentary and extra-parliamentary battles regarding shareholder rights in Britain, Germany, and France over a century and a half. I show that governments of all political colors struggle with the challenge of navigating a path between the Scylla of institutionalizing socially destabilizing cut-throat competition and the Charybdis of permitting economically inefficient, socially exclusive insider cartels. Markets periodically come to be viewed as the lesser of two evils, because greed and exploitation can grow rampant not just in their presence, but also in their absence.

In the case of Grenfell Tower, the worst of both these worlds combined. In the “excessive marketization” dimension, lax safety standards increased profitability. It was not even private shareholders who opted for combustible cladding because it was cheap and perfectly legal. The building was in public hands, namely those of the Kensington and Chelsea London Borough Council. This affluent local authority happens to have been under Conservative Party control ever since the first council election in 1964, but Labour-run local authorities across the UK chose the same cladding for council flats. Its suppliers regularly won competitive tenders. In the “excessive entrenchment” dimension, the proceeds of what the Conservative leader of the council proudly called an “over-achieving efficiency drive” were tapped to offer tax payers in the highest income bracket a refund shortly before local elections.

But the lessons from Grenfell Tower, and from my book, extend beyond Kensington and Chelsea, and go further than partisan finger-wagging. The pursuit of efficiency can be deadly when it goes into overdrive, but cronyism makes things worse. That is why shareholders and stakeholders, like citizens in all income brackets, deserve transparency and the right to vote.

Dr. Helen Callaghan received her B.A. in Politics, Philosophy, and Economics from Oxford University in 1998 and her Ph.D. in Political Science from Northwestern University in 2006. During the inaugural year of the EUPS program (2007-2008), Dr. Callaghan taught a course on the EU Institutions and PolicyMaking. After spending the last few years in Germany, she returned to Italy earlier this year and became a Research Associate for the Robert Schuman Center at the European University Institute (EUI) in Fiesole. In addition to her work at the EUI, Dr. Callaghan has decided to return to JMU for the first time since the EUPS program was launched ten years ago. She is currently teaching Contemporary Issues and Controversies in the EU and will teach European Economic and Social Policy in Spring 2019. Here, Dr. Callaghan provides a quick summary of her recently published book, Contestants, Profiteers, and the Political Dynamics of Marketization. How Shareholders gained Control Rights in Britain, Germany, and France (Oxford UP, 2018).

Published: Tuesday, November 20, 2018

Last Updated: Tuesday, November 20, 2018

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