AFTER almost half a century in the shadows, nationalisation appears to be making something of a comeback in Britain. Within weeks of his election as the leader of the Labour party, Jeremy Corbyn revealed his first official policy: to renationalise the rail network. But while this particular policy is popular with the public, over the past four decades policymakers have favoured privatisation over nationalisation. In the 1970s, industries that together produced over 10% of the country's GDP—from public utilities to milk distributors—were in public hands. But under the governments of Edward Heath and Margaret Thatcher, Britain led the way in returning state-owned enterprises to the private sector. In the 1990s and 2000s, the Labour party followed Thatcher's lead, selling off stakes in Britain's air-traffic control system and nuclear-energy industry, even attempting to do the same with the Royal Mint. On November 25th, George Osborne, Britain's chancellor of the exchequer, said he would expand a programme of state-asset sales that is even bigger than that of the 1980s. Why does nationalisation remain out of favour? In the 19th century, supporters of nationalisation argued that it boosted economic efficiency. State ownership benefited consumers, the argument went, by ensuring that companies had sufficient investment and profits were passed onto consumers through lower prices. Having a big single company rather than lots of little privately-owned ones would increase productivity through harnessing economies of scale. Even The Economist advocated in the 19th century that Britain's postal system and telegraph network should be in public hands. As a result, the state started to creep into more sectors of the economy. In the late-19th century, British utilities were bought up by local authorities. In the interwar period, the Conservative Party joined in, nationalising the BBC, the electricity-distribution network and the London Underground. And after the second world war, Labour governments went on a shopping spree, nationalising everything from coal mines to railways and travel agents.

There were significant efficiency improvements in nationalising the postal system and the telegraph network, but the nationalisations of the 20th century were much less successful. This was in part due to the rise of trade unions and the move towards a fully democratic political system. While nationalised companies were left to be minded by technocratic-minded officials in the 19th century, politicians with their eyes on elections started fiddling with them in the 20th. Whenever politicians needed tax cuts to win elections they tended to hack back investment in state-owned firms. They also had a free hand to bloat their payrolls in order to help governments achieve full employment in the economy overall, protected by a system of tariffs and monopolies designed to shield them from competition. And trade unions started to demand excessive pay rises and oppose efficiency improvements, knowing that the state, as owner, would always pay the bill to avoid a fuss at election time.

The most pernicious effect of this was to slow down the overall growth of the economy. In the heyday of nationalisation, between the 1940s and the 1970s, the British economy grew more slowly than its major competitors. As recent research has shown, since the 1980s the British economy has grown faster than its rivals, mainly due to supply-side reforms such as privatisation. By exposing firms to competition, state-owned firms became more efficient and were forced embrace innovation. Privatising others, meanwhile, is a way of making inefficient companies smaller, or non-existent (state-owned companies tend to stick around longer than they should). Privatisation, therefore, helped give Britain the edge over its competitors. Ordinary people have benefited from the process too. Domestic fuel prices have fallen by 30% in real terms since privatisation in the 1980s, for instance, benefiting the poor, who spend the greatest share of their income on it, more than the rich. There is still a need for more competition and reform in some industries—especially Britain's rail network—but the economic history of the last century suggests that any return to cosseted nationalised industries would be a mistake.