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In 1994, I joined a march protesting against how the World Bank and the International Monetary Fund – backed by the US – were forcing governments in the global south to follow what was called the “Washington consensus”.
We argued that privatising state assets, deregulating markets, and liberalising financial services to attract external investment was leaving countries more unstable, more unequal and more dependent on foreign actors. Decades on, I am horrified that an approach that wreaked havoc in the global south is still being pursued in the UK.
Britain was of course the trailblazer for privatising infrastructure in the Thatcher years, and subsequent UK governments went on to use public-private partnerships to fund new schools, hospitals, roads and prisons, with much of the capital being raised overseas. While many countries in the global south have been coerced into selling off their assets, successive UK governments have done so enthusiastically, watering down our regulations and lowering tax barriers – known as “de-risking” in today’s parlance – to attract foreign entities seeking to buy up British assets.
And buy up they have. According to the latest count by the Office for National Statistics, 38% of all turnover of non-financial businesses in Britain went through foreign owned companies. US businesses have been the primary beneficiaries of Britain’s mass sell-off of its assets, with the value of (known) holdings domiciled in the US rising from £242bn to £708bn in the decade to 2023 (likely to be far greater if we knew how much they also have of the £630bn or so of further holdings being routed through low-tax regimes like Ireland, the Netherlands, Switzerland and the UK’s own crown dependencies).
I don’t think even Thatcher would have imagined that a quarter of British GDP would today be made up of sales of US multinationals like Amazon, Coca-Cola, Goldman Sachs and Uber. What that means is that key decisions are being made elsewhere, intellectual property is often held overseas, profits are extracted and taxes not paid here.
As the economist Angus Hanton argues, the UK has become a vassal state, paying economic tribute to the American owners of its assets. Indeed, some have speculated that Donald Trump may spare the UK in his global trade tariff war because the UK has already removed most obstacles to US economic supremacy and wealth extraction.
Having sold off our public assets, and hollowed out the state’s capacity to directly deliver services and infrastructure, we now rent our public services from the foreign entities that own our buses, water companies, energy networks, prisons, care homes, and provide us with the IT services needed to run the state. There is also a bitter irony that some of these foreign entities are actually state-owned enterprises.
The chancellor’s recent endorsement of airport expansion will have been music to the ears of the Qatari, Saudi and Chinese governments, who own stakes in Heathrow airport, and the foreign private equity firms that stand to profit from both Heathrow and Gatwick’s growth. But these expansions are more likely to divert money away from high streets, the domestic tourism industry and foundational economies across the UK than they are to produce any “useful” sort of growth.
This is especially true in countries where the state has dismantled the rules that protect the public from market failure and help businesses to do the right thing. The UK already has low levels of regulation by international standards. And yet, over the years, successive governments have weakened genuine public protections – from environmental safeguards, to food standards and workers’ rights – and eroded the capacity of UK regulators to enforce the rules. By asking regulators to prioritise economic growth over other important social and environmental priorities, the new UK government risks following the same dangerous path.
What UK policymakers forget are lessons being learned the hard way by many debt-laden countries of the global south: that today’s “foreign investment” can lay the ground for tomorrow’s extraction and dependency. The optimism of investors seeking new opportunities in the global south in the early part of this century has turned to horror as money has moved to what are seen as safer markets amid the global economic turbulence of recent years – and rising interest rates have meant higher debt servicing costs.
Indeed, projections by the ONE campaign show the net flow of international finance into the global south has actually gone into reverse, with developing countries collectively paying back more to international lenders than they are receiving in new funding. This is what makes the announcements of cuts to the UK’s aid budget – an important resource for softening the impact of liberalisation on the poorest – all the more painful.
Arguably the most dangerous aspect of the orthodox approach to economic development has been its wilful negligence of dangerous levels of inequality. Not only did countries that pursued these economic policies become more unequal but there was also active collusion between political and economic elites to further rig the rules to their mutual benefit. In India, we’ve seen businessman Gautam Adani – briefly, in 2022, the world’s second wealthiest man – reaping extraordinary benefits from his close ties with the prime minister, Narendra Modi. Soon after the Indian government changed its rules to allow companies with no prior experience in the sector to tender for airports, Adani had six. Adani has been charged by the US Securities and Exchange Commission in connection with a $250m (£195m) bribery plot. The Adani Group has denied the specific allegations, and more generally said that it has not benefited from political patronage. Those who think the UK is immune to corruption need only look at how the VIP lane worked when government contracts were issued during the pandemic response.
The UK has seen income and wealth inequality soar in recent years, leaving us looking far more like the US than continental Europe. The consequence of this could not be starker. Earlier this year, a report from King’s College London and the Fairness Foundation warned that growing wealth inequality in the UK could be a “major driver of societal collapse” within the next decade. And even those benefiting from rising inequality think it is dangerous, with more than half of rich people polled by Patriotic Millionaires thinking that extreme wealth is a “threat to democracy”.
The new UK government has shown some signs that it is learning the lessons of global worst practice, for example by promising to renationalise railways, create a national wealth fund that can make strategic investments, and by raising capital gains taxes. But we need a coherent new strategy that doesn’t repeat the mistakes of the past and prevents us sleepwalking into economic disaster. Forty years of liberalisation is enough.
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Dhananjayan Sriskandarajah is the chief executive of the New Economics Foundation and author of Power to the People. He is a former chief executive of Oxfam GB and secretary general of Civicus, a global alliance of civil society organisations
