The grin of the Cheshire cat

Throughout the 1990s, privatisation, liberalisation, de-regulation, in short, the 'British Model' dominated the policy agenda for electric utilities. At the heart of these reforms was a desire to transform the electricity industry from a monopoly into a competitive market so that electricity could be bought and sold like other commodities and products. However, from 2001 onwards, cracks in this policy became visible. Rather than admit the policy's failings, its advocates have tried to 'fix' the model by re-introducing planning. As planning replaces competition, increasingly, all that is left of the competitive element of the model is the free market rhetoric: 'the grin of the Cheshire cat.' But when supply security can no longer be guaranteed, politicians will be forced to act. For developed countries, the problems will be significant but they willingly opted for liberalisation and have the financial resources to deal with these problems, so sympathy must be limited. By contrast, developing countries often had little choice but to comply with the wishes of the International Financial Institutions (IFIs). Their industries have often suffered serious under-investment in the privatised market. It is these countries that the developed world has a duty to help and the IFIs must urgently re-assess their policies, and widely acknowledge their mistakes. (author)