The privatization of UK oil assets 1977-1987 : rational policy-making, international changes and domestic constraints
Why did British politicians initiate, and why did civil servants facilitate, the complete disposal of the government's oil assets, a vital national resource. Public choice theory has traditionally found it difficult to explain the retreat of the state, not because the theory is flawed, but because insufficient attention has been given to the parameters that actors face at both the domestic and international level. Four sets of parameters are particularly relevant to this case: international, industry, bureaucratic and political, which I review in sequence. First, though international factors are rarely incorporated into domestic policy-making analyses, they do have an impact. Realists' issue-specific models can be adapted to these analyses and help explain why Britain was forced to bow to international financial pressures and to work within the international oil structure. A balance of payments crisis in 1976 forced Britain's first asset sale while the development of a free market for oil (not dominated by a monopoly or cartel) made further sales more feasible, but not inevitable. Second, state-owned companies were often obstacles to privatization. A closer examination of the companies' structures explains the differing reactions of the managers of British National Oil Company (BNOC), British Gas Corporation (BGC) and British Petroleum (BP) and their abilities to achieve their preferences. The management of BP favoured privatization while the managers of BNOC and BGC opposed the sales of their oil assets. Though they could not prevent the fulfilment of the government's plans, they were able to cause delays and affect the form which privatization took. Third, contrary to budget-maximizing models, the British civil servants did not impede privatization. As members of a generalist bureaucracy, they were more concerned with their immediate work tasks and future career prospects across the civil service as a whole, than the long term future of the division or department where they were immediately located. In addition, because the Department of Energy was a relatively weak agency, individual level and career-maximizing strategies predominated rather than collective action strategies. Finally, because political demands for privatization were weak, other supply- side factors dominated politicians' decision to select privatization. These included party political pressures to cut public spending by means of asset sales and personal political advantage, which encouraged policy entrepreneurs to bear the initial costs of a potentially hazardous innovation.