Past Events

PM Thatcher’s investment banker Bob Barrett provides advice on successful privatization

 


 

The Institute of World Politics (IWP) hosted Robert J. Barrett III, a long-time investment banker and prominent Florida businessman, on Thursday, June 21, 2018 to discuss how and why former British Prime Minister Margaret Thatcher embarked on one of the most ambitious rounds of privatization in history. He shared with the audience his experience as one of the foremost financial architects of that policy program.

Mr. Barrett described Ms. Thatcher as a tough, smart, and compassionate leader, whose disdain for politics drove her to uncouple industry from the government. Privatization is one of the critical tools of statecraft, and, Mr. Barrett posits, of democracy. In 1979, the debt-to-GDP ratio of the United Kingdom (UK) was high, the government owned as many as 54 important businesses, and British citizens owned less than 5% of equity in British businesses. Ms. Thatcher understood that politicians are not effective business managers. The key to prosperity, Mr. Barrett explained, was to put British profits in the hands of the UK’s own citizens.

Mr. Barrett emphasized the distinction from other government asset sell-offs, such as in the United States during the Reagan or Obama administrations, or in France. The United States has never nationalized nearly as much of the economy, and when the American or French governments did sell off private assets—such as former President Obama’s sale of General Motors—it has been less successful at stimulating broad-based economic growth due to a narrower objective and strategy. Ms. Thatcher replaced business management with skilled employees headhunted from America at top-dollar, retrained employees in firms such as British Airways and British Telecom, advertised the IPOs, and sold shares in the (now profitable) companies below market price. As a result, each sale further encouraged investors to bid on the next. The key to this approach, Mr. Barrett claimed, was reaching out to investment bankers.

 

The story of Prime Minister Thatcher’s economic turnaround is neither frequently understood nor replicated. Mr. Barrett noted that privatization can easily be manipulated by socialist governments toward corrupt objectives, a point discussed in past IWP events and research by Dr. Marek Jan Chodakiewicz.