Tenners for fivers (1990)

From the April 1990 issue of the Socialist Standard

The privatisation of the water industry has seen "tens of thousands" of individual buyers cashing in by selling their shares at the first opportunity. This merely repeats what has happened in every previous privitisation. When British Gas was sold off in 1986 there were 4.2 million shareholders. That figure is now 2.6 million. Of the original 650,000 who bought British Steel shares in 1988 only 400,000 remained six months later. British Airways can boast the most spectacular fall—from 1.2 million shareholders down to just 420,000 in only months. And it's the same story with British Telecom, TSB, Jaguar and the others.

Research shows that between one quarter and one third of all investors in previous privitisation issue have pulled out within the first six weeks. (Guardian, 20 December, 1989.)

Why, then, do these sellers buy shares in the first place? Simply to make some easy money. After all, the government is so anxious to make sure that each flotation doesn't flop that it sells the shares well below market value and this has been well described as "selling tenners for fivers". Indeed, buying shares in privatised industries is such a sure money maker that people withdraw savings from building societies and even borrow to buy the shares, and this, more than any belief in the "enterprise culture", is what accounts for the growth in share buying.

Of course the government has other reasons for selling privatised industries cheaply. One is the genuine desire to get government out of business. Another is to raise cash to give away in tax cuts before general elections, but the most important is the wish to create "popular capitalism" in which a shareholding population will identify with capitalism and, especially when they have shares in the company they work for, never go on strike for higher pay in case this harms their dividends. This dotty idea ignores the fact the workers depend primarily for their living in their wages and salaries which far outweigh any puny dividends they may get. Anyway, owning shares in the company which employs them didn't stop workers in British Telecom and Jaguar from striking for higher pay.

The myth of "a nation of shareholders" isn't new. Back in the mid 1800s The Economist claimed: "Everybody is in stocks now. Needy clerks, poor tradesmen's apprentices, discharged serving men and bankrupts—all have entered the ranks of the great moneyed interests." This drivel is quoted by Colin Chapman in his excellent book, How the Stock Exchange Works. And during the boom in the American stock market in the 1920s which led to the Wall Street crash the popular the popular notion was that everyone, from housewives to waiters, was "in the market". J. K. Galbraith exposed this nonsense in his book, The Great Crash 1929:

Then as now, to the great majority of workers, farmers, white-collar workers, indeed to the great majority of all Americans, the stock market . . . was in every respect as remote from life as the casino at Monte Carlo.

Supporters of popular capitalism argue that buying shares could become a national pastime if it were made easier by having American-style "share shops" in every high street much as there are betting shops now, but these share shops haven't stopped the decline of individual share owning in America.

Can Britain ever become a nation of small investors? First of all, dealers in the City don't want it because it produces a vast increase in unprofitable, small transactions and try to discourage the small fry by charging them double commission on deals. meanwhile the dealers have halved charges for the big institutional investors which own two thirds of all company shares. However, the main obstacle is that most people couldn't buy shares even if they wanted to. Peter Morris of MORI, the research and opinion poll agency, confirms that at least half the public are excluded from buying because they have no cash (Colin Chapman).

Of course there will be more privitisations in the future and if the government continues to sell the shares cheaply then many of those who buy will take the money and run but, like every other scheme for soothing working class discontent within capitalism and eliminating the class struggle, it hasn't got a hope.

Vic Vanni

Glasgow Branch