For the last fortnight, the British public has been spellbound by an astonishing real-life story: the saga of British rentier capitalism. Walk into any pub, visit any dinner table, and you will hear talk of little else. Admittedly, people might not put it quite like that. But the Post Office Horizon scandal, which has gripped the nation since a TV drama brought it to life, has exposed, among other things, a lopsided economic model that rewards asset-owners and punishes workers.
British readers won’t need reminding of the details, in which the government-owned Post Office prosecuted hundreds of branch operators, known as subpostmasters, accusing them of theft and fraud. Many were bankrupted, imprisoned, and saw their marriages and mental health collapse, with some driven to suicide; only later did it emerge that they were entirely innocent, since the apparent fraud was caused by the malfunctioning software the Post Office made them use. All this took 20 years to emerge, largely because the Post Office was extraordinarily good at first not seeing, then actively obstructing, the truth. The whole episode is probably the most widespread miscarriage of justice in recent British history.
Yet while some of its features are tragic and bizarre, others are familiar. Take the most obvious fact: the isolation and powerlessness of the subpostmasters themselves, who had no means to challenge the dodgy software and found themselves subjected to probes and prosecutions that merit the term Kafkaesque. The obvious question is: Where was the union, to represent their concerns and confront the managers?
As it happens, there is a union, the National Federation of Subpostmasters, or NFSP, but there might as well not have been. The NFSP is funded by and umbilically linked to the Post Office. As the High Court commented in a 2019 ruling that finally brought some measure of justice to the subpostmasters, “the Post Office effectively controls the NFSP.” Likewise, in his definitive, book-length account of the scandal, the journalist Nick Wallis shows that the NFSP consistently sided with the Post Office. The one member of the executive committee who tried to raise the issue recalled that the others “just laughed.”
It was left to the fired subpostmaster Alan Bates, an activist of unusual resourcefulness and determination, to become a kind of one-man union, organizing a campaign that has now borne fruit—though for many, too late to put their lives back together. But for a growing number of nonunion British workers, there is no Alan Bates. There is just a version of the same isolation whose consequences, in this case, were catastrophic. More generally, the lack of representation and bargaining power results in something less spectacular: the blight of low pay and insecurity.
If the British economy doesn’t work for workers, then whom does it favor? According to an arresting analysis by Brett Christophers, what Britain sustains is a form of “rentier capitalism.” The rentier’s success depends on what he controls, rather than what he does.
The obvious examples are landlords who charge rents on land and the owners of patents who can demand big fees for their medicines. But Christophers argues that lots of things are actually rentierism, even when they look like something else. Take the huge outsourcing companies that hoover up a third of Britain’s public spending. The trouble with such companies, Christophers says, is that their speciality can become winning contracts, rather than doing a good job. “When simply securing new contract assets becomes companies’ raison d’être, the adequate performance of the work stipulated by those contracts tends to become a secondary consideration.” Such companies’ reports for investors, Christophers notes, generally “place a much stronger emphasis on securing new contracts, and thus shoring up existing stocks of rent-generating assets, than on the business of seeing those contracts fulfilled.”
It is dangerous to generalize from one instance. But the Horizon case is at least a parable of the perils of outsourcing. Fujitsu, which provided the bug-ridden software to the Post Office, is certainly a successful contractor. Since 2012, the firm has won 197 government contracts worth a total of £6.8 billion ($8.7 billion), according to the consultancy Tussell. The Post Office work has been especially lucrative—indeed, the contract was recently renewed. But how has it been fulfilled? As early as 1998, a government aide described Fujitsu’s then-nascent Horizon system as “hugely expensive, inflexible, inappropriate, and possibly unreliable.” Wallis interviewed an early employee who was shocked by the incompetence he witnessed: “Everybody in the building,” he claims, “knew that it was a bag of shit.” When Fujitsu had originally bid for the contract, it came bottom in eight out of 11 categories. But the government thought it was the best value for money.
“The government has set aside £1 billion to compensate Horizon victims.”
Very early, public authorities were so alarmed by Fujitsu’s work that they served a formal notice of breach of contract. The initial procurement process, the government’s own auditor concluded, had cost the taxpayer a needless £500 million. Twenty-five years on, the government has set aside £1 billion to compensate Horizon victims.
You will notice a theme in the above, which is that the government seems to be extremely helpful to corporations, and also willing to pick up the bill when everything goes wrong. That, too, is a general feature of British rentier capitalism, from the bank bailouts to the protection of landlords and utility companies during the pandemic. And as Jonathan Ford of the Financial Times has observed, privatized public services, such as gas, water, and TV transmission, have benefited from “light-touch” regulation that allows them to take major risks—while the government guarantees their future, however much prices rise:
The purpose of privatization was to pass the operational and financial risks of utilities to the private sector. In practice, over the past three decades, no business has lost its license for operational or financial failures. Instead, private owners have been allowed to transfer these risks on to the shoulders of consumers, who have no ability to manage or mitigate them.
In the case of the Post Office—a company wholly owned by the government—ministers repeatedly failed to intervene, despite many warnings. But the government effectively funded the Post Office’s lengthy and obstructive legal strategy to thwart the subpostmasters’ court action. And when that failed, the government stepped up to compensate the victims.
In a quaint, idealized image, the state is meant to be a sort of wise patriarch, nurturing society and its institutions while firmly correcting injustices. What Britain has is an absentee dad, who has little idea what his children are up to, but occasionally turns up to splurge large amounts of cash.
Some people still believe that the essential divide in politics is between the right, which believes in the market, and the left, which believes in the state. What post-1997 Britain has proved is that this is a bogus distinction; that you can, in fact, get the worst of both worlds. We have all the clumsiness and cruelty of the big state without its benevolence or watchfulness. And we have all the rapaciousness of commerce without the self-correction that is meant to be the advantage of a free market. What allows self-correction is the presence of risk. But the risks, in Britain, are not for the powerful.