Kerr on Privatisation
Roger Kerr writes in the NZ Herald:
With the National Party’s decision not to move any state-owned enterprises to the private sector in its first term if elected this year, we appear to have a new political consensus between the major parties in New Zealand: privatisation is bad.
I wouldn’t say that “privatisation is bad” is the consensus, more that “privatisation is very unpopular”.
Indeed New Zealand has done even more to stand out from the crowd: it has gone in the opposite direction with the buy-back of Air New Zealand and now the railways and ferries, the establishment of Kiwibank, the renationalisation of ACC, and the Auckland Regional Council’s reversal of the part-privatisation of Ports of Auckland.
Yep, the state grows and grows.
The position across the Tasman is also instructive. All governments at federal and state level are Labor, and none is opposed to privatisation. Currently the New South Wales government is battling with trade unions to privatise its electricity generators. Victoria did so in the mid-1990s, and in the five years to 2007 electricity prices in Melbourne have risen by less than one-third as much as in Sydney.
Labor in Australia is far more moderate than the counterpart in New Zealand. National has been scared off privatisation because they know a rational debate is so difficult to manage from opposition. I certainly hope that if National wins, they will govern in such a way in their first term to gain the trust of the public, so that if they then propose some modest asset sales in a second term, the debate can focus on the merits of the actual asset being in state vs private ownership, rather than an ideological holy war that all privatisation is bad and all nationalisation is good.
The worldwide moves in the past 25 years to shift state enterprises into the private sector have been driven by the evidence of major economic gains in the form of improved efficiency and profitability, lower prices and better services, and more investment and output.
Indeed. While there are some individual examples which didn’t achieve the above, the evidence if you look at the whole OECD is over whelming. And if we really want to close the gap with Australia, it will be hard to do so with the state running such a major segment of our economy.
This does not mean all private businesses are success stories and all state-owned enterprises underperform. Rather, the point is that, on average and over time, the private sector is better than politicians at running commercial businesses, and governments should not bet against the odds with taxpayers’ money.
Also owning an asset can make a Government reluctant to regulate monopoly aspects of it, because they own it. They try to do hidden regulation, where they drop hints to Directors, or appoint the right Directors, instead of having an open and transparent regulatory process.
Out of some 30 privatisations, criticism focuses mainly on just two alleged “failures”, Air New Zealand and Tranz Rail. Even if true, these criticisms would not weaken the general argument that most privatisations have been successful, but arguably the Government did not need to get involved in either case.
The Air NZ bail out only became necessary because the Government refused to allow Singapore Airlines to invest in the company.
The political aversion to privatisation is costing New Zealand potential gains in living standards. A Business Roundtable study (www.nzbr.org.nz) estimated New Zealand could gain about 1 per cent of gross domestic product a year by privatising SOEs (leaving aside local government-owned businesses).
Unless wages and other incomes in New Zealand are to drift further behind those of Australia and other countries, this is an economic reform that will have to come back on the political agenda sooner or later.
1% of GDP might not sound a lot, but over a decade or so it is massive, and long-term is the difference between having living standards of Australia or of Slovakia.
May 8th, 2008 at 9:59 am
DPF: “I wouldn’t say that “privatisation is bad” is the consensus, more that “privatisation is very unpopular”.”
But privatisation is the right thing to do whether it’s unpopular or not. We have too many politicians, and parties, making populist decisions. Political parties and politicians must be courageous enough to advocate for what is right for the country, not what is popular.
May 8th, 2008 at 10:02 am
Makes sense. Profit making is always the only incentive. Shareholders take the risks with losses and gains. This is determined by the quality of its directors.
May 8th, 2008 at 10:09 am
It is good (despite the fact that privatisation is unpopular, arguably due to ignorance) that organisations like the NZBR are prepared to stand up and point out that countries are in fact better off, on average and over time, after state businesses are privatised.
Another case of politics crowding out basic economics. National needed to defuse this issue, and did it well.
May 8th, 2008 at 10:15 am
DPF: National has been scared off privatisation because they know a rational debate is so difficult to manage from opposition.
No, National doesn’t have any core principles, so it can’t argue with conviction. That’s the problem.
May 8th, 2008 at 10:21 am
1% of GDP might not sound a lot, but over a decade or so it is massive, and long-term is the difference between having living standards of Australia or of Slovakia.
Which is ironic, because for the last decade Slovakia has being growing 1% faster than Australia.
May 8th, 2008 at 10:32 am
Roger Kerr was one of the senior Treasury Department officials that oversaw the sale of the state owned assets in the 1980s. This was carried out at the behest of the Business Round Table who contributed $3 million to Labour for the 1987 elections. After two years working closely with Roger Douglas Douglas, Roger Kerr, moved to the NZBR to advocate on behalf of our leading corporates to speed up the pace of New Zealand’s new right transformation, and he’s been doing the same thing ever since. Just thought I’d lay out his “fox in charge of the hen-house” ‘credentials’ so the discussion has some context.
[DPF: Roger does his normal trick of both lying and playing the ball not the man. He does this without fail. I can't recall exactly when Roger left Treasury but I think it was in 1986 - long before the major privatisations. And the BRT did not donate $3 million to Labour in 1987 - in fact as far as I know, the BRT has never donated a cent to any political party]
May 8th, 2008 at 10:33 am
Which is ironic, because for the last decade Slovakia has being growing 1% faster than Australia.
And how long until their standard of living catches up to Australia?
The growth rate was not the example, the example was the standard of living.
May 8th, 2008 at 10:36 am
“With the National Party’s decision not to move any state-owned enterprises to the private sector in its first term if elected this year, we appear to have a new political consensus between the major parties in New Zealand: privatisation is bad.”
This is also what Brash’s advisers, in particular Mathew Hooten, advocated that he do. It’s just political pragmatism. New Zealanders still associate privatisation with crony-capitalism – and with good reason. New Zealand isn’t the only country that has been sold off for a pittance since the 1980s. The former Soviet Union is probably the most notable other example.
May 8th, 2008 at 10:52 am
DPF:
“And if we really want to close the gap with Australia, it will be hard to do so with the state running such a major segment of our economy.”
I would wager that we still have a lower percentage of our capital in state-hands than the Aussies. They proceeded with reforms throughout the 1980s and 1990s much more slowly and cautiously than we did. So it’s nonsense to say that even part of the wage gap between NZ and Aus is due to a lack privatisation.
In fact it’s due to National’s crashing the economy in 1991 with “the mother of all budgets”, and its employment contracts act – they both acted simultaneously to destroy wage levels (inflation-adjusted median income levels were totally flat between 1991 and 1996), and we haven’t caught up since, despite economic growth being higher in NZ than Aus since Labour took power.
May 8th, 2008 at 10:53 am
Roger nome
That’s outrageous …. New Zealand was never like the Soviet Union …. we were more like Poland.
And in terms of windfall gains yes you are quite right – the Aussie shareholders of Toll have taken the taxpayer for a ride, plus they keep the trucking business which interfaces with the rail system – rent free depots for six years.
Thank goodness Cullen wasn’t in charge during the 4th Labour Government. He’s unable to sell and buys at over the top prices.
I wonder why those nasty Nats sold rail in the first place – it was such a money spinner – for over 100yrs the taxpayer raked in the cash.
May 8th, 2008 at 10:57 am
Here’s a good article by one of NZ’s foremost economists which also adds some much needed perspective to the debate.
http://www.eastonbh.ac.nz/?p=854
May 8th, 2008 at 11:00 am
“we were more like Poland.”
The fact some far right-wingers labeled us “the Poland of the pacific” in the 1980s doesn’t mean that the entirety of capital was state-owned. That has never been the case here.
May 8th, 2008 at 11:10 am
And what was the Business Round Table response to the Air New Zealand crisis at the time ? Let it go bankrupt, yep just feed it to the wolves………nice.
So what did the government pay for its Air New Zealand shares? 27 cents, and what are they worth now? $1.21, must repeat ‘government ownership bad, privatisation good, government ownership bad, privatisation good…….’
May 8th, 2008 at 11:15 am
A quote from the article I linked to above:
Maybe NZ isn’t such a socialist utopia?
May 8th, 2008 at 11:18 am
And in a stroke of genius MIchael Cullen (well the taxpayers have really) has given Toll the money to buy up more of New Zealand:
“Transport and logistics company Toll Holdings has signed a conditional deal to buy Northland trucking company United Carriers for an undisclosed sum.
Toll, which this week sold its New Zealand ferry and rail business to the Government, had expressed interest in expanding in the trucking sector.”
http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10508714&ref=rss
Not that I think that that is a bad thing but MIchael does,doesn’t he ? Or is it only bad if you are a Candian but OK if you are a Chinese billionaire and bad if you are an Australian wanting to own railways but OK for an Australian to own trucvks and it’s OK to be a Canadian if you want to buy high country land ……Oh , I give up I can’t work out the pattern. Any able to help ?
May 8th, 2008 at 11:23 am
DPF – Could you limit Dodger to say 5 comments a day please.
Its just getting silly.
2 days ago he hit his 3k, look at it now.
Not like he’s got anything particularly interesting to say.
TIA
May 8th, 2008 at 11:23 am
Rogernome said:
“Roger Kerr was one of the senior Treasury Department officials that oversaw the sale of the state owned assets in the 1980s. This was carried out at the behest of the Business Round Table who contributed $3 million to Labour for the 1987 elections. After two years working closely with Roger Douglas Douglas, Roger Kerr, moved to the NZBR to advocate on behalf of our leading corporates to speed up the pace of New Zealand’s new right transformation, and he’s been doing the same thing ever since.”
The best comment ever by Rogernome on this blog.
Good on Roger Kerr for his fantastic work in helping transform the NZ economy and long may it continue. Thanks nome for the history lesson, far better than Cullen could ever give!
May 8th, 2008 at 11:28 am
As a long time supporter of privitisation I also acknowledge that one of the difficulties NZ has faced is the lack of good governance professionals in both the private and state sector.
Success of any organisation is largely driven from the top The directors and senior management. Alas we dont have the necessary mindset to find and chose the best people for the job. In the SOEs CCMAU still persists on a quota system so you have underskilled people dealing with blalnce sheets of hundreds of millions. Similary with DHBs.
Not that the private sector is covered in glory Think the fincnace company collapses Think Feltex.
Until we get a mindset that can select the right people for the task we will never maximise the opportunities.
May 8th, 2008 at 11:32 am
I’ll put my response to RN/PM on this thread since – it seems as good a fit. My comment is linked below:
http://www.kiwiblog.co.nz/2008/05/what_is_the_total_cost_of_the_second_hand_trains_and_ferries.html#comment-443903
RN/PM …… Nice rhetorical diatribe, but I’ve got to say, not anything like convincing.
Unsurprising. As I said earlier, given the fact that billions of dollars of wasted wealth on rail has not convinced you that this is a very bad idea, mere argument was never going to succeed.
You are a living definition of the word obtuse.
What I put forward in the linked comment is the same argument that capitalists and socialists have been having for a century or more, and as far as the WSJ article is concerned I note the contrast between your rote lecture on the marketplace:
….herd mentality, where decisions regarding long term market conditions tend to be dictated by group-think rather than sound and rational analysis. This is called the “mood of the market”………… As such the market’s focus is very short-term. Because these things, the market isn’t very good for medium or long- term planing. This is where rational analysis of dedicated professionals and planners can come in….
and the comments of one of your experts:
Exactly. The nostrums about the inability of markets to plan for the ‘long-term’ always carry the implication, and in your case the outright claim, that sound and rational analysis will do the trick. That’s a myth of the living dead – Think Big being the ultimate home-grown example.
The reason that markets are not good at medium or long-term planning is not due to some inherent failing of marketplaces but to the very human inability to see into the future accurately for any time frame beyond a few years.
To return to one of the central points of my previous comment – people who delude themselves that they can foresee and plan better than a marketplace almost always wind up being proved wrong – and the more money they have to throw at their plan the more damaging the impact. From your article again:
And this very important point in thinking about $665 million dollars ploughed into rail, with more ‘investment’ to come:
And finishing up with…..
Given your argument it is ironic that the reason I ‘support’ Hamilton is that economists have a much better understanding of how to best deal with long-term vs. short-term, than expert participants in any specific market – like kaufmann.
As other commentators have pointed out, if you have so much faith in the ability of rational and sound long-term planning to ‘shortcut’ the market I suggest you direct the resources you control towards investing in those plans.
Just remember the warning that you might created poverty as a deliberate object of policy.
May 8th, 2008 at 11:35 am
That’s a very broad statement, on what basis do you make it? Australia’s path towards privatisation is very mixed as you’d expect in a federation. Will this federal Labor government do more – probably not as they’ve not got a great deal to sell outside Telstra (and the broadband investment is likely to be some variation on a PPP). So why do you say NZ Labour is unduly conservative on this issue. It’s not on telco’s, more of Telstra and for a longer time is in public hands. Rail? Not really, in NSW almost all public transport is state-owned. In Victoria, there’s a degree of privatisation, in Queensland it’s a state corporation and most other States its public also. Airlines, sure Qantas is private and so too was AirNZ – are you suggesting the Labour Government wanted the privatised AirNZ to screw-up the due diligence on Ansett so that they’d be forced to buy it back? Yeah, that’ll be it – Selwyn Cushing was actually a Manchurian candidate-like Chair and deliberately sabotaged AirNZ so that Labour could nationalise it…
Kerr’s be superceded. Why do you cite him when there’s more sensible and sophisticated advocates such as the New Zealand Institute? I checked back to their “Next 20 years” report, http://www.nzinstitute.org/Images/uploads/NZ_economy_the_next_20_years.pdf, and its striking how they talk about FDI and investing in infrastructure but don’t adopt a narrowly idelogical perspective… how refreshing.
[DPF: Paul W asks for the difference between NZ and Aust Labour. It is simple Labor in Australia decides on whether privatisation is good on a case by case basis backed by analysis. Labour in NZ refuses to consider any decrease in state ownership of assets on pure ideological grounds regardless of analysis or merit. One party has a rational approach to state ownership, and the other does not]
May 8th, 2008 at 11:38 am
roger nome: In fact it’s due to National’s crashing the economy in 1991 with “the mother of all budgets”
You keep on using that as an example. Thread after thread, post after post. You’ve been reminded a number of times that the New Zealand Labour Party hid the BNZ insolvency from National and that they had cooked the books. If National had to take a hard line stance it was because Labour had essentially stuffed up the economy. Note what it says further on in one of your favourite quotes:
But her elimination of the fiscal deficit laid a foundation for the strong economic growth of recent years.
Fiscal Deficit. Something the Labour Party created. The same situation they are pushing for now. The blame lies not at National’s door, but at that of NZ Labour.
May 8th, 2008 at 11:46 am
The BRT position I imagine was Singapore Air should have been allowed to invest into Air NZ, which would have stopped it going bust.
And Air NZ has done well in recent years – after the former Chair of the Business Roundtable was made its CEO.
May 8th, 2008 at 11:51 am
GD said:
I tend to agree. For all the benefits privatisation should have delivered, it’s sad how few it actually has. There’s simply been too many failures for Kerr’s thesis to be credible. Comparisons with overseas successes are necessary because the NZ-reality is patchy. I’d happily see more privatisation, I’m not at all ideological about ownership beyond a few key assets/functions, but I agree with the caution of the current government and I think the decision on rail is probably justified if not on present merits then on future goals (anyone remember Dove-Myer Robinson’s proposal to build an underground in Akl?)
May 8th, 2008 at 11:54 am
Pascal
I am shocked!…are you really accusing Woger Nome of telling lies?……Labour people don’t do that do they????
May 8th, 2008 at 11:56 am
Perhaps Roger Kerr is suggesting that the risk is National becomes ‘Labour Lite’?
A bit less PC stuff, but not departing too much from being poll driven – like Tony Blair’s Labour. I really worry that the closer we get to the election the more Labour is pulling National leftwards. The rail buy back looks like a set up, Labour’s mining the road as it retreats, and National seems to be pretty mild in it’s response.
So far very few (possibly none) of the election year tricks that Labour has foisted on the electorate have been vigorously opposed by National to the point that they have stated they would reverse them if the won the election.
May 8th, 2008 at 12:05 pm
Perhaps so, perhaps so. Whatever they might have done, they didn’t seek to recover AirNZ. Perhaps had the previous corporation not failed so dismally, they might have had government support for a merger… my point is that NZ Labour occupies a pretty centrist position on ownership of assets and Kerr’s kant is increasingly irrelevant.
[DPF: Back up those words Paul. Here is a challenge. List all the other Governments in the world which have a total ban on selling in full or part any assets no matter how big or small. You claim they have a centrist position, so who shares this centre with them?]
May 8th, 2008 at 12:07 pm
David says:
Never mind the relative degree of privatisation and the constitutional responsibilities of state/federal government, compare apples with oranges and ignore all evidence to the contray and yeah, I guess you’ve got a point, such as it is.
BTW, I didn’t “ask for the difference between NZ and Aust Labour (sic)”, to be frank, I don’t think you’re qualified to comment.
[DPF: As Kerr points out, Labor control all nine Governments in Australia and none of them have a blanket ban on privatisation. And Paul if you don't want to sound like a snotty teenager don't elect yourself the judge of who is or is not qualified to comment on an issue. Its about as silly as me claiming you are not qualified to comment on anything National does or says]
May 8th, 2008 at 12:09 pm
Tom -
You selectively quote the economist in that WSJ article to the point where his entire message is totally lost. You even fail to quote his concluding comments.
In my opinion, by buying up the rail system the government has taken up the risk the the private sector was unwilling to, and for the better good. You see, nearly all the best-informed people in the oil industry now agree that peak-oil will hit within the next 20 years (for those who don’t believe me, I challenge you to find a study by a reputable energy market analyst which is anti this idea).
This is a planning problem for a private business, because the exact timing of peak is impossible to predict (i.e. the markets were still buying up oil at historically average prices in the US when it peaked there in 1970-71 – and several years later the price had tripled). Of course if oil price was to triple in NZ then much long-haul freight would move from truck to rail (rail is 3-4 times more fuel efficient). So if Toll was to invest millions in the next few years to deal with this new demand it might not pay dividends for the next 15 years, but it also might pay dividends in the next 5 years. It’s a risk the a private enterprise might not be willing to take. But while it might be better for Toll to not take the risk, it is worse for our economy as a whole for Toll to not take the risk as with oil say at $300 a barrel all goods will be much more expensive if they have to be transported by truck, where they could be transported by rail if the infrastructure and rolling stock were there. This is where the government can step, to act in the best interests of the economy. Where the private sector is unwilling and/or unable to future-proof our economy against the coming oil shock, the government is willing and able.
Let me quote the economist from the journal who has built an econometric model of the world’s oil market:
http://online.wsj.com/public/article/SB112298166483102477.html?mod=todays_free_feature
Let me conclude by saying that of course I believe that the government shouldn’t run the rail system like it was in the 1980s. It should be run as close to market principals as is possible, while future-proofing our economy against the comming oil shock.
May 8th, 2008 at 12:21 pm
Big Bruv: I am shocked!…are you really accusing Woger Nome of telling lies?
No, because essentially he is correct. Those policies did bring on the recession. What he failed to mention though is the state Labour left the economy in, the lies they told the public and parliament and he fails to mention that National was only trying to rescue the nation from the brink of disaster Labour had left it in. And he fails to mention that those policies laid the foundation for what was a relatively strong economy in the early parts of the 2000’s.
And I somehow see that with that massive Kyoto bill looming, Michael Cullens’ sudden rampant spending when we allegedly had no money and so forth that Labour is setting us up for another big economic fall. I’m hardly surprised they’re trying so hard to lose this election, because they’ll need a National government to fix the economy
May 8th, 2008 at 12:25 pm
DPF:
Both of your points rest on semantic deceptions (standard DPF tactics).
“the BRT has never donated a cent to any political party” Not as a collective, but as individuals they’ve donated plenty.
http://books.google.co.nz/books?id=unFwJGU5QuYC&dq=working+free+the+origins+and+impact+of+new+zealand+s+employment+contracts+act&pg=PP1&ots=Bg4R3joPUp&sig=AryfeK2nVKLplcG2md_mTAzoI7M&hl=en&prev=http://www.google.co.nz/search%3Fhl%3Den%26q%3DWorking%2Bfree%2B:%2Bthe%2Borigins%2Band%2Bimpact%2Bof%2BNew%2BZealand%25E2%2580%2599s%2BEmployment%2BContracts%2BAct%2B%26btnG%3DGoogle%2BSearch&sa=X&oi=print&ct=title&cad=one-book-with-thumbnail#PPA29,M1
“I can’t recall exactly when Roger left Treasury but I think it was in 1986″
Yes – but the plans for the SOE sales were drawn up well before 1987, and Roger Kerr was an essential part of that in the Treasury Department. Also the NZBR was actively campaigning for the sale of the SOEs long before Kerr left in in 1986. It was Doglas, Prebble Caygel, sever members of the business round table, and several officials at the treasury department (one of which was Kerr) who colluded to raid NZ’s crown jewels in the 1980s. I think it’s disgusting that you’re still an apologist for these people. To this day you defend corporate crooks Fay and Richwhite, for their part in the wholesale plunder of our SOEs. You even defend their alleged insider trading. They paid the securities commission $27 million to halt their investigation into that – which was the smoking gun that your partisan eyes are of course blind to.
[DPF: So why do you lie about the NZBR donating when you know it to be untrue. Individual business owners donating to Labour is very different to an organisation they belong to donating, unless there is proof the organisation facilitated the donations. The NZBR has a smaller income than most unions. Many union members donate to a party, but that is very different to when the union itself makes a donation. So again why do you deliberately lie when you admit you know the difference?]
May 8th, 2008 at 12:29 pm
Indeed. But the right people need to be sourced from a global marketplace… and they are priced on the basis of global demand for their expertise. Sadly paying global rates for secure the right people attracts the ire of our resident socialists who use remuneration stats as ammunition to advance their flat-earth, flat-pay, everyone-should-be-equally-poor brand of government.
May 8th, 2008 at 12:32 pm
roger nome said “Both of your points rest on semantic deceptions (standard DPF tactics).”
That’s a bit rich coming from you roger nome. At least DPF uses his own opinions, not Wikipedia and Kiwiblogblog links
May 8th, 2008 at 12:46 pm
“The BRT position I imagine was Singapore Air should have been allowed to invest into Air NZ, which would have stopped it going bust.
DPF, you have asserted on a number of occassions that the reason Air NZ was forced to place Ansett into administration was because the Govt would not agree to SIA investment. That is patently false.
For a start, SIA was already the largest holder of publicly traded shares. Secondly, SIA played out games of brinkmanship reneging on ‘rescue deals’ that had been agreed to in the months leading up to administration that may very well have saved the airline. They were no white knight to the rescue. Rather, they were playing their own game.
Ask anyone at Air NZ about SIA’s role in all this. You won’t get a favourable response.
Who was at fault for the collapse of this private airline? Take your pick from Brierleys, SIA, News Corp, Qantas, Aust & NZ Govts and of course the Air NZ board chock full of Brierley directors (and that former Chair of the Business Roundtable).
It was a sordid little chapter in NZ’s corporate history that no one comes out of with any credit but to lay the blame at the feet of the NZ govt is simply wrong and displays a lack of knowledge on the subject.
What we do know is the govt did bail out the airline.
Just the same as that which happened in the ‘home of privatisation’ when the US govt bailed out the airlines who filed for Chapter 11 post 9/11 to the tune of US$40b plus. Huge subsidising of their airline industry continues to this day.
[DPF: I never said Singapore Air would have stopped Ansett going bust. I am saying they would have stopped Air NZ following them. The Air NZ Directors were writing begging letters to the Govt asking them to make a decision. They explicitly warned the Govt of dire consequences if they did not decide. But Anderton, Cullen and Clark couldn't agree on what to do]
May 8th, 2008 at 12:52 pm
David says:
Labour have controlled all nine governments only recently of course and only briefly (in the context of the privatisation agenda). It’s a bit rich of Kerr or you to accuse anyone of being ideological – I’d suggest its the NZBR who have a blanket rule; sell, sell, sell. Presumably it’d be National’s approach too if they weren’t so timid (and will be if they got a second term).
I’m not electing myself judge David, but it’s hard not to comment when it’s clear you’re reaching, I’m just pointing out that your record on these matters is poor. Perhaps you’ve got real insight into Australian politics, surprising as this would be, and you simply misrepresent it so that it suits your argument?
[DPF: Again your arrogance, Almighty Paul pronounces from on high my record is poor as if this is some objective fact. Stop sounding like a ****** and just act like us mere mortals, and say "I disagree with your opinion" rather than pronounce your opinion as if it is fact]
May 8th, 2008 at 12:59 pm
I don’t think privatization is unpopular these days recent polls on the Herald website have been about 50/50 regarding not exactly privatization but issues such as nationalization and foreign investment
It may be horrendously unpopular with left wing activists, reasonable popular for people who understand what a mess government and this government in particular have made of things, and a non issue for the vast majority, but who when pushed for an answer would say they are against.
It could be made very popular by structuring the privatization as a voucher privatization perhaps into people ’sKiwisaver accounts
May 8th, 2008 at 1:13 pm
DPF
“So why do you lie about the NZBR donating when you know it to be untrue. ”
As I said – that’s a semantic point. Inflation adjusted, that $3 million from NZBR members in 1987 would be nearly $6 million today. That’s almost as much as Labour and National spent in the 3 months prior to the 2005 election combined.
Is that concrete proof of collaboration? No, but the NZBR publicly campaigned for SOE sales prior to 1987, and many of its members were placed as directors of SOE boards (by Douglas and Prebble etc..), to restructure them for privatisation. They were then involved in the process of selling the SOE’s on behalf of the public to themselves at bargain basement prices! Only to soon after on-sell them at a huge profit.
So can you honestly tell me given this information that you think they didn’t make a collective decision to fund Labour in 1987? Of course not. The idea that they didn’t collaborate lacks credibility. The whole thing stinks to high heaven.
[DPF: Roger claims telling blatant untruths is a semantic point. Thsi confirms what we all know]
May 8th, 2008 at 1:16 pm
Paul W – do you have any evidence that a country is worse off after state assets are privatised? There is a mountain of research clearly showing the gains to consumers are enormous.
This argument is one about the role of government, and governments are notoriously bad at running commercial enterprises.
May 8th, 2008 at 1:24 pm
Roger Nome:
I cannot believe you are singing the tune of Government planning on energy or any other matter for that matter.
You problem is that most of wealth of the world is generated by the private sector. That is what private enterprise is: a wealth generating system.
As opposed to state planning which is a wealth destroying system which can only re-allocate wealth at huge cost – it doesn’t create wealth.
The reason for this is self evident – no one group of bureaucrats can access all the information, process it and take the calculations of risk necessary to make money.
When they are put into this position invariably they make the wrong decision or a series of less than optimal decisions.
The reason that Australia is wealthier than New Zealand, when we started off virtually the same 30yrs ago is that Australia never tried the dopy economics tried by both Labour and National here in the 1970’s.
Over time the Australia has outperformed New Zealand almost every year and this has little to do with recent mineral boom which has just added to the trend.
It is true that Australian Labor isn’t as leftwing as New Zealand Labour (i.e. supports tax cuts for example) but nor are the Australia Liberals and rightwing as the New Zealand National Party (the Liberals were seriously into social spending). But this is because the Australia economy never got into crisis like ours. Australian Labor was also out of office for most of the post war period (30yrs) and only briefly in the 1970’s.
The problem is that New Zealand politics (National and Labour) is slipping back into the behaviour that generated the economic crisis in the first place. Over time we are not making the small adjustments that reduce the size and role of government that most other nations are taking whether they be leftwing or rightwing governments.
The best that can be said of Helen Clark’s government is that it only got really bad towards the end. Unfortunately National appears to be picking up the ball from Labour and largely heading in the same direction – incrementally increasing the role and cost of government.
What is sad about DPF’s qualification regarding privatisation (something National never did prior to 1990) is that National essentially knows its right – the government shouldn’t be in business (except fibre) but it lacks the courage to go out and advocate for this, because it believes most New Zealanders won’t vote for rational economics. Thus National has decided that it cannot beat Labour on a debate about philosophy and free enterprise and so it’s decided to join in on Labour’s programme. Thus the next election is a choice of personalities who best can manage the status quo + fibre.
May 8th, 2008 at 1:34 pm
Chris Diack:
“You problem is that most of wealth of the world is privately created”
That’s a silly assumption and a smear Chis. Poor form.
“As opposed to state planning which is a wealth destroying system which can only re-allocate wealth at huge cost – it doesn’t create wealth.”
I think there are special instances where state ownership is preferable, but as a general rule, you’re right it’s inefficient. The fundamentalists on both sides of the debate are wrong. You and David appear to be placed in that camp.
I still hold that Australia likely has far more of its utilities in the hands of the state, and Paul provides evidence for this. This is why Australia can continue to incrementally and careful privatise some of its remaining SOEs. We on the other hand have been reckless in our privatisation procedure. We’ve privatised too much, too quickly, which is why our government is right to have a policy of no SOE sales.
May 8th, 2008 at 1:41 pm
“Roger claims telling blatant untruths is a semantic point”
No, far from a lie, it’s an opinion based on reasonable analysis of publicly available information. You’re the charlatan who supports these crooks. Not me.
[DPF: Accusing me of supporting crooks - well that is 20 demerits.]
May 8th, 2008 at 1:49 pm
“Currently the New South Wales government is battling with trade unions to privatise its electricity generators”
Thanks for that Kerr, too bad that you are wrong. The NSW govt is fighting against it’s own party, the people and even central govt HQ in the Labour Party. The NSW leaders are out on their own on this one, what was it, 85% of the NSW Labour party doesn’t want privatised electricity generators.
Straw Poll here, if I may David.
Which Bardford has done more harm to the economic and thus social infrastructure of the country.
Max Bradford or Sue Bradford?
No question it was dear old Max and his wonderful revolution. Glad to see that massive investment in infrastructure and capital investment promised has eventuated – not, and that the supposed competition has kept prices low – yeah right.
May 8th, 2008 at 1:50 pm
PhillipJohn/Roger Nome:
This is intellectually dishonest, PhillipJohn, and I’ve seen you repeat this grossly defamatory smear across different threads now. Time to put it to bed:
Without going into detail, I have some familiarity with the settlement negotiations – certainly more than you PhillipJohn.
Establishing insider trading (certainly under the law as it applied to Midavia/Richwhite) is a complex exercise. If you bother to do some basic research, PhillipJohn, you’ll find other cases where the Securities Commission chose to settle rather than pursue litigation. In this case, ongoing litigation would have tied up the courts for years. It’s unsurprising that a settlement was reached as it allows the parties to move on.
So I suggest you retract your statement, PhillipJohn. But, as you said to DPF, this is commentary “that your partisan eyes are of course blind to”.
May 8th, 2008 at 1:52 pm
Nome
You’re not exactly backwards in coming forward yourself when you selectively quote the economist in that WSJ article to the point where his entire message is totally lost.
I saw you had that quote in yesterday’s discussion on regulating car speeds but Hamilton’s ‘message’ is certainly lost on you. Even in the quote you give it is clear that he distinguishes himself from pure laissez-faire thinkers:
Moreover he then goes on – in your choice of selected quote – to say that private incentives are best and that he endorses…….
…..which you apparently translate into support for a government picking not just a company as a winner (i,e Sovereign Yachts) but an entire bloody industry, not to mention the ever-present lever for more police-state regulations on private transport – all for the collective good of course. That is all a very different beast from higher fuel taxes or efficiency-based taxes.
Outside of Easton and Galbraith I doubt you would find many modern economists – let alone Hamilton – who think that this sort of ‘active government assistance’ is a good idea, and a majority who think it is a very bad, very wasteful idea.
May 8th, 2008 at 1:53 pm
Gooner
“We have too many politicians, and parties, making populist decisions. Political parties and politicians must be courageous enough to advocate for what is right for the country, not what is popular”
Describe for me how the massive underfunding of the rail sector and more or less destruction of much of the rolling stock, the loss of lines and services under Toll Rail is “right of the country”?
Just a thought, I’d like to know the logic behind this gem.
May 8th, 2008 at 1:54 pm
David, I disagree with your opinion, your characterisation of the problem, your description of Labour and Labor’s positions and records – as is often the case, I think your initial post and Kerr’s article start with a false premise.
I disagree with your accusation that Labour are idelogical in their approach to economic policy, particularly in contrast with the NZBR.
I also disagree that National’s approach is rational; it’s perhaps pragmatic and possibly dishonest.
Is that a little clearer? And can I add, when accusing others of arrogance you might consider your own behaviour because, frankly, you typically come across as, what was the phrase, “a ******”.
[DPF: In other words rah rah National bad, Labour good. What an intelligent contribution. I am still waiting for you to post something of substance - such as the list of other Governments which like NZ Labour ban any partial or in full sale of state assets. None of the nine Labor Govts in Australia do. UK Labour do not. The German SDP do not. The French do not. Ireland doesn't. But I am sure you ahve the substance to back up your claims Paul]
May 8th, 2008 at 2:01 pm
POC – You can quote all the legal platitudes you like. The $27 milloin is the smoking gun.
“I have some familiarity with the settlement negotiations”
Please go into detail POC. I wouldn’t be surprised if you are the kind of person who is willing to sell their soul to these kind of people.
May 8th, 2008 at 2:07 pm
DPF, I’ll back up Mickey D’s post from 12:46. Singapore Airlines were not a constructive player in the Air NZ/Ansett debacle. There were significant differences between some of their public pronouncements and their actual commitments. They were never a realistic option for stopping Air NZ going bust. They were as much a deer in the headlights as the then Air NZ management and Board.
In the end the Crown was the only viable option for saving Air NZ from going under, and when the Crown did act to recapitalise Air NZ there was a clear understanding that Singapore were going to have to take their lumps just like all the other shareholders did.
As for who was at fault for the collapse of Ansett and the near collapse of Air NZ … as Mickey D says it was a long list. There is a strong rationale for Air NZ to operate in Australia. But Ansett was a complete dog and was never a viable platform. Then the Aussie politicians reneged on “Open Skies” and News Corp stitched up Air NZ for the other 50% of Ansett they didn’t already own. But the big killer blow was the entry of Virgin Blue to Australia. There was never room for 3 airlines in Australia and it was just a question of which of the 3 fell over first. Ansett was the one that crashed. Informed rumour has it that when Ansett went down Branson only had about 3 weeks more in him before he’d have had to fold Virgin Blue.
The rest, as they say, is history …
May 8th, 2008 at 2:08 pm
PhillipJohn/Roger Nome:
That’s sheer hyperbole from you, I’m afraid. So every out-of-court settlement ever reached is evidence of a smoking gun?
So, without knowing any details, you’re attacking my legal ethics and professional credentials now? God you’re a pompous ass.
May 8th, 2008 at 2:11 pm
Tom:
“Outside of Easton and Galbraith I doubt you would find many modern economists – let alone Hamilton – who think that this sort of ‘active government assistance’ is a good idea, and a majority who think it is a very bad, very wasteful idea.”
How about economists that specialise in the oil market such as these two fellows?
“which you apparently translate into support for a government picking not just a company as a winner (i,e Sovereign Yachts) but an entire bloody industry, not to mention the ever-present lever for more police-state regulations on private transport – all for the collective good of course. That is all a very different beast from higher fuel taxes or efficiency-based taxes.”
I agree, the government generally shouldn’t be picking winners. It may have done better to provide market-based incentives to achieve more investment in rolling stock. Having said that, I still believe that if the government runs the rail network on market-based principals, while future-proofing our transportation network against the coming oil shock, it will achieve a far better outcome than simply leaving it to the market (especially if oil peaks within he next 10 years – which is quite likely).
May 8th, 2008 at 2:13 pm
virtualmark said:
So that’s a futher element of Kerr’s false-premise misrepresentation of the government’s position we can dispense with.
May 8th, 2008 at 2:13 pm
Corr, twice in one day … Rogernome, I’ll back up Nomestradamus from 1:50pm … Midavia had a strong legal defence against the Securities Commission, which I’ve seen. I think the Securities Commission was going to really struggle to prove insider trading. Personally I would have been surprised if a Judge experienced in securities law would have found them guilty.
But Midavia knew that the legal case could drag on for years, and they’d have to pay the legal fees out of their own pockets rather than being Govt bureaucrats who can just repeatedly pull money from the public purse, and can endlessly pursue a lost cause case through every level of the legal system. The $27 million settlement was purely a pragmatic “least cost” option.
You see all sorts of conspiracies in that. I see settlements like that as the most common outcome in commercial legal cases … very few go to trial.
May 8th, 2008 at 2:17 pm
POC:
“you’re attacking my legal ethics and professional credentials now?”
You may be very professional POC, but that doesn’t mean you aren’t a soulless mercenary. As to “legal-ethics” somewhat of an oxymoron isn’t it?
“That’s sheer hyperbole from you, I’m afraid. So every out-of-court settlement ever reached is evidence of a smoking gun?”
Fay and Richwhite are no longer based in NZ. That they paid the $27 million for nothing lacks credibility.
May 8th, 2008 at 2:20 pm
Mark
“I think the Securities Commission was going to really struggle to prove insider trading.”
Perhaps, but if this is true it’s only because NZ law was under-developed at the time. I’ve seen opinion that under commercial law in most other developed countries they would have been taken to the cleaners.
JFK’s father also got away with insider trading before the stock market crash because there was no law against it at the time. Just because it isn’t illegal, doesn’t make it ethical.
May 8th, 2008 at 2:21 pm
PhillipJohn/Roger Nome:
And there you go again – a simple retraction from you would have been sufficient.
Seeing as you question my professional integrity, PhillipJohn, I’ll let you in on a secret. Try pitching this woffly (and vacuous) nonsense to a board of directors. They’d laugh you out of the boardroom and all the way down the hallway. It’s one thing to write heavily-footnoted academic text. I’ve been there, done that. It’s quite another to pitch commercially relevant messages in the real world. And you appear to have no understanding of commercial reality, yet here you are spouting all manner of nonsense about the Midavia case.
May 8th, 2008 at 2:21 pm
Paul W … for what it’s worth … Air New Zealand is (now) the perfect example of how privatisation should be done. The Government owns about 80% of Air New Zealand but the other 20% is listed on the NZX. The Government can’t “meddle” in Air NZ to the same extent it can with, say, Genesis Energy because the Govt knows that if it makes poor non-commercial decisions then that will be immediately visible in Air New Zealand’s share price.
I think National are quite right in shelving privatisations for their first term. I hope that in their second term they’ll have the strength of their convictions to float 20% of the “commercial” SOEs in the same way that they effectively have with Air New Zealand. I believe this will directly translate into better decisions, better appointments and better performance from these companies. And it will go a long way to bolstering the depth of the New Zealand capital markets, which is good thing in these days of Kiwisaver and Cullen funds.
May 8th, 2008 at 2:24 pm
PhillipJohn/Roger Nome:
I sense a flip-flop coming on…
May 8th, 2008 at 2:25 pm
Rogernome … I think you should look closely at the allowable windows that Midavia had to trade their shares. Surely your legal expertise extends to understanding the limitations on when insiders are allowed to trade their shares? Perhaps Midavia were only allowed to trade their shares on a handful of days each year, and perhaps that’s what they did? And perhaps the market wasn’t as uninformed as you think on those days when Midavia were allowed to trade?
It’s got nothing to do with NZ’s “under-developed” securities law.
Arguably it has everything to do with an overly-ambitious Securities Commission who wanted a trophy head on their wall at any cost.
May 8th, 2008 at 2:26 pm
Roger nome:
Again you don’t seem to register the point: relatively more wealthy countries can afford a higher level of dopy spending.
Thus Australia’s wealth isn’t generated by the various State Government’s owning this or that. It’s generated because the overall cost of Government is lower and both the former Liberal and now Labor Governments have committed to reducing that cost progressively over time via tax cuts with Rudd also doing some minor spending reductions.
As a relatively poorer nation we have got be been even keener we cannot afford the level of dopy spending the Australian’s have thus our public policy has to be in advance of theirs – its not.
May 8th, 2008 at 2:28 pm
Nomestradamus: And there you go again – a simple retraction from you would have been sufficient.
Phillip John does not apologize. Don’t expect one. He is always right, no matter what he has said. Get used to it. Or just ignore the odious fuckwit as much as possible.
May 8th, 2008 at 2:29 pm
[DPF: I never said Singapore Air would have stopped Ansett going bust. I am saying they would have stopped Air NZ following them. The Air NZ Directors were writing begging letters to the Govt asking them to make a decision. They explicitly warned the Govt of dire consequences if they did not decide. But Anderton, Cullen and Clark couldn't agree on what to do]
DPF, I’ll allow your memory the benefit of time for its relapses.
SIA walked away from wanting to increase its investment in Air NZ 72 hours PRIOR to the Ansett collapse. Post collapse, the only options were the govt bail out or let it go to the dogs.
The govt dithering you refer to was also pre Ansett collapse and certainly was not the cause but one of many factors as virtualmark alludes to. After Ansett went down the govt actually responded very quickly with the rescue package especially considering its complexity.
I agree that pre Ansett collapse the govt did fart about somewhat but to say the need for a bail out lay in their own hands is simply bullshit and can’t be let go unchallenged. Perhaps that was the then opposition Finance spokesman’s spin on things.
Virtualmark, you’re spot on about Virgin. In fact, 5 months prior to Ansett’s demise, Air NZ had agreed to buy Virgin from Branson but SIA deliberately scuttled that deal. From that point on it was goodnight nurse to the extent that Ansett was offered to Qantas for $1. They wisely said no.
May 8th, 2008 at 2:30 pm
Remember one of the offers for Air NZ was Qantas which the Government turned down.
May 8th, 2008 at 2:30 pm
Nome
As far as your other primary comments are concerned:
They simply demonstrate that you have still not got the main point that I have been making – that a government is no different from any other market participant in terms of it’s ability to devine a long-term future and will come to grief if they try to outguess the market – dragging society into the crap in the process.
The are several reasons that left-wing governments in particular are willing to ignore that factor and plough ahead.
First, their bedrock belief (shared by you of course) that they ‘can see the bigger picture’, that they are ’strategic thinkers’ and that they have more ’sound and rational planning’ capabilities, better risk-assessment capabilities (including the ability to define which choice is really the precautionary one) than any other participant.
Whether from a point of view of information theory, decision theory, game theory – let alone the actual bloody experience of governments owning businesses – that belief should have been dropped a long time ago. The markets do not focus on the short-term to quite the degree you state – many a company has reported strings of quarterly losses or poor profits before anything bad happens to them. They focus on whatever time frame they reasonably feel than can predict – and even then they hedge in many different ways so they can back out if their plans prove wrong. They are vastly more humble than a government in what they think they know about the future.
I think that despite your faith in long-term planning you actually do implicitly understand this when you boast that the government is willing to take the risks the private sector will not. I would not mind that so much were a government able to recover from its mistakes as quickly as an entire market. But it is not.
Which brings me to the second reason – the outright political power obtained from owning a chunk of the economy and being able to tell it what to do.
of course I believe that the government shouldn’t run the rail system like it was in the 1980s. It should be run as close to market principals as is possible, while future-proofing our economy against the comming oil shock
The whole SOE thing has managed to tone that nonsense down since the days when Muldoon could tell the Minister of Railways to hire a few more thousand people to keep unemployment down.
But the SOE Act can never prevent the larger, strategic problem, which is what arises from the second part of your comment about future-proofing – that whenever a government owns a business it can never be allowed to fail. It’s always a good idea forevermore, because it’s strategic and far-thinking and a piece of core infrastructure and …… Yada, yada, yada. It must always be enabled.
That brings in the last reason why left-wing governments act like this and why you can so easily support them – their knowledge that if it all turns to shit there is always someone else to bail them out – the taxpayer – endlessly.
We can see where this thinking is already going in the comments made by you and Tane on the railways purchase – that a new model will be found that will be successful. As I asked Tane the other day – how many railway models will be allowed to fail before government gives up? What even defines failure anymore when the company cannot even be allowed to cease to exist? What upper limit exists on the money that will be pissed away?
The answers are that there will be no such thing as failure, that there will be an endless series of models, and that they will be backed by an unending supply of taxpayer cash.
May 8th, 2008 at 2:31 pm
David’s typically rambling response included:
In other words rah rah National Great, Labour Bad. What an unintelligent contribution – did it come from the National Party Research Unit? I’m still waiting for you to backup how any of Kerr’s statement cohere in any way with what Labour’s in fact doing. Perhaps you might tell us what National’s policy is, what assets they’d sell and how we’d measure the benefits given that the last lot of sales have produced less than optimal results…. I’m sure the Research Unit will do the work for you… so that you can read what’s been previously written, by me and others, as it answers the few valid questions that remain in your otherwise pompous statements…
[DPF: Paul a stupid five year old can do better than just turn around what I said and use it back on me, The article I linked to was in fact highly critical of National. You seem seriously out of touch with politics in NZ if you don't know National has said there will be no asset sales in its first term.
And finally you resort to the last resort of the person who has run out of arguments. You refuse to back up your argument over Labour's centrist policy on asset sales, and keep trying to change the topic. And then suggest that somehow the National Research Unit would help me to come with arguments which undermine their own party's policy. Any other red herrings? Wouldn't it just be easier to go away and fine these examples of other countries which have blanket bans on asset sales? I've already given you a dozen examples of left wing Governments which have no such ban]
May 8th, 2008 at 2:34 pm
PhillipJohn/Roger Nome:
It’s still not to late to retract your intellectually dishonest and grossly defamatory smear (at 12:25 pm). And I see DPF has slapped you with 20 demerits for smearing him.
On a slight tangential point, I note Chicken Little’s plea above:
And your previous cry for help:
If DPF limited your posting privileges to 5 comments a day, you’d have more time to work and pay taxes like you expect everyone else to!
May 8th, 2008 at 2:37 pm
I agree with Mickey D that once Ansett went down the Government moved very quickly to shore up Air NZ. As much as I dislike the man I have to give Cullen credit for acting quickly, sensibly and responsibly. There was a lot of work to do ensuring that all the banks (who weren’t in a consortium and each had separate one-on-one arrangements with Air NZ) behaved properly, and ensuring that any new money going into Air NZ wasn’t immediately swiped by Ansett’s creditors.
It might look like the Government dithered for a few days, but in practice they moved bloody fast.
May 8th, 2008 at 2:37 pm
“Seeing as you question my professional integrity”
Oh dear, the pseudo name formerly know as “Peak oil Conspiracy”, and now known as “Nomestradamus” is now worried about having its professional character impugned. Next time you represent one of your clients under the name “Peak Oil Conspiricy” can you let me know? Or will you be using “Nomestradamus”? Hilarious.
Oh and as to your “board of directors” rhetorical spiel, which for all we know could be based on nothing, who cares?
May 8th, 2008 at 2:40 pm
Well looks like POC’s keen on broadening the topic of discussion out to other threads on other blogs. Time to officially rule this thread a “train-wreck”
Enjoy all.
May 8th, 2008 at 2:44 pm
Yes run along, PhillipJohn, and don’t forget to take those 20 demerits with you!
May 8th, 2008 at 2:47 pm
Julian, I don’t oppose privatisation or its variants per se, however it’s horses for courses IMO.
I thought National’s split of ECNZ was idiotic (so did many senior ECNZ officials in fact). I though the privatisation of the employer account of ACC was a stupid too… I was an employer at the time and it was a bloody mess for no obvious benefit as the different accounts could have been otherwise separated. I don’t think the government need own AirNZ but as others have noted, they didn’t have many choices in 2000. Rail’s a funny one. NZ appeared to invest in both roads and rail… maybe that was the argument for privatising rail but it’s not worked hey? I’ve got some problems with Telecom’s performance and it’s not delivered in many areas but I’d not suggest it should be bought back.
Hence my argument with David – he and Kerr are arguing some stupid ideological discussion when meanwhile the practical reality is that Labour’s adopted a pretty sensible approach – so sensible it seems that National have adopted it too (at least for now…).
May 8th, 2008 at 2:57 pm
I thought it was pitched about right in terms of your response to my comment.
Nope, I’m well aware of this. First term. Yup.
David, I’ve not once changed the topic. I tend to respond to you in much the same way you do me. I’ve found much of your commentary pretty light-weight and when I’ve said so, you tend to become a bit pompous. Would you rather only sycophants? I also note you tend to become abusive… to you self-demerit?
If you won’t do me the courtesy of reading what I write, I’ll not bother to take you seriously.
The position you and Kerr begin with is a false premise and a misleading comparison with Australia (no need to go off a read anything on this, you produce evidence you’re claim’s anything other than a strawman and you’ll at least have an argument, albeit weak). I think I’ve made this clear in my first comment – Telecoms are more state-controlled in Aus than they are in NZ, rail is largely controlled by state governments, Qantas is corporatised and so too would AirNZ had it not been for mismanagement by the Board. Electricity is broadly similar although it’s a bit of a moving feast in Australia. Unless I’m wrong on all of these matters, what’s left of Kerr’s argument?
[DPF: Paul we are all still waiting for your list of Governments which also ban all state asset sales]
May 8th, 2008 at 3:05 pm
Paul W misses the point again. Surprise surprise.
And what happens when DPF receives too many demerits from himself? Does he then ban himself? Would make for an interesting blog.
May 8th, 2008 at 3:06 pm
Paul W:
“Hence my argument with David – he and Kerr are arguing some stupid ideological discussion when meanwhile the practical reality is that Labour’s adopted a pretty sensible approach”
Except that over the course of this Government the average worker is poor than his or her Australia cousin. And that gap will continue to grow – alarming when we started off virtually the same 30yrs ago.
Lots of Government spending has counted for next too nothing. Spending in real terms is up 100% in health with ZERO productivity gains and long waiting lists for relatively simple operations.
All that the Clark government has done is put off many of the hard decisions into the future making it another government’s problem. It has deepened the pain of the inevitable adjustment.
Labour’s policies aren’t centrist (the term is meaningless) they are simply conservative status quo stuff – their re-privatisations aren’t as a result of philosophy or high policy, they are re-active – which is how many state businesses became owned in the first place. Again typical conservative stuff really.
May 8th, 2008 at 3:16 pm
Chris Diack said:
Chris, that’s a ridiculous reduction. Average workers in Australia are wealthier for many many reasons – if infrastructure is no more or less privatised in Australia than it is in NZ (it’s unclear despite Kerr/Farrar’s arguments) then your point is actually wrong.
If you’re right however, what a bunch of wussies National are hey?
May 8th, 2008 at 3:32 pm
I’m still waiting for you to back-up your claim that (a) Australia has privatised more assets than NZ (b) that NZ Labour position on assets is unusual (it’s certainly not compared with National’s is it) and (c) that selling more assets will benefit NZ consumers…
BTW, Labour sold LandCorp farms a while back and didn’t they also sell Terralink too.
How about you tell me what you think should be sold? Maybe you’ve got some insight into what Stephen Franks thinks should be sold too…
[DPF: I do not recall ever asserting A. Can you provide a quote. I have provided numerous references for (b) - the nine Australian Labor Govts, UK Labour, German SDP, Canadian Liberal Party - none of them have total bans on assets being sold. As for (c) it depends on what the asset is - there is no one size fits all approach.
And for the sixth time I'll note Paul has failed to cite even a single Govt which bans asset sales as Labour does. Come on Paul - it can't be that hard to find just one country. After all you claimed their position was centrist which would suggest dozens of OECD countries have a similar policy]
May 8th, 2008 at 3:41 pm
DPF: Paul has already rebutted you. I summed it up above. You seem to have no answer.
But of course to you there’s no such thing as too much privatisation. i.e. what about health? Would you have us with an American-style health system where 20% of the population has virtually no access to health care?
May 8th, 2008 at 3:49 pm
Aussie can get away with more inefficiency than NZ given its vast mineral wealth and higher urbanisation, etc.
And to call Brian Easton one of NZ’s foremost economists is a joke – he’s a long time left winger who used to sing commie songs to his kids – and his articles are clearly biased.
May 8th, 2008 at 3:55 pm
“National has been scared off privatisation because they know a rational debate is so difficult to manage from opposition.”
agree!!!
if National oppose privatisation, all we will hear is labour SCREAMING “they want to sell everything” blah blah “Money going overseas” blah blah “loss of jobs”
doesnt anyone remember the last election?
national wanted to cut back the bloated govt work force.. helen just screamed “loss of jobs” over and over and they won again.
National need to just keep doing what they are doing.. dont give labour an issue that they can use to polarise the country.. cause joe public out there doesnt seem to be reading a lot of newspaper and/or educating themselves!
May 8th, 2008 at 3:56 pm
“And to call Brian Easton one of NZ’s foremost economists is a joke”
He’s been doing econometric analysis of NZ for decades now and is widely regarded as being one of our best economists.
“Aussie can get away with more inefficiency than NZ given its vast mineral wealth”
That’s simply a rhetorical throw-away line. Their cautious approach to reform has provided their economy with greater stability over the last 20 years than ours. The market fundamentalist in Aus during the 1980s and 1990s said that NZ’s economic growth would outstrip Aus’s as a result of the reforms. Of course the opposite was true, and throughout the 1990s Aus’s average growth rate was double that of NZ’s and one of the highest in the OECD.
May 8th, 2008 at 4:21 pm
David, I don’t think you’re dim, I need to be clear on that, however I do think you’re being dim.
(A) The point Kerr makes, and you appeared to support, is that NZ’s swimming againt the tide – it’s not true as I’ve pointed out more than enough times. NZ’s mix is not substantially different from Australia’s. It was on this very point you feel I patronised you and since I’ve clarified and others have elaborated.
(B) No you’ve not, you’ve list countries that do essential what Labour’s done, as revealed by their policy and practice, a case-by-case approach unencumbered by a ideological prejudice.
(C) Very sensible. So much so, that you could even say it’s consistent with the current approach.
No David, I’ve not – you’re standard approach is to claim that someone said X in order to rebut it with Y. It’s a bit DebSoc don’t you think?
Your argument rests on a false premise (still and probably for sometime to come because you’re quite wrong). Labour doesn’t ban assets sales, as noted earlier, it’s even sold some. As I understand it however, it has said it doesn’t foresee any major advantage to selling any particular assets in the short-term particularly given that, as it stands right now, NZ has already privatised a fair number with mixed results… unlike, say, Australia… where they still own most of the railways and a fair chunk of Telecoms!
[DPF: You claim Labour does not ban asset sales. They do. Yes in their first term they sold a company which was about to go under, and a few farms. But since 2005 or earlier they have been against any sales what so ever and Clark gets up at conferences and denounces asset sales and claims they are a defining election issue.
And for the 7th time you have failed to list a single other country that bans asset sales]
May 8th, 2008 at 4:21 pm
PhillipJohn/Roger Nome:
I consider Brian Gaynor a far more reputable commentator on business issues than Brian Easton.
Last year Gaynor had this to say about privatisation:
Gaynor has (for many years since I’ve followed his columns) consistently expressed his dislike for the privatisation process in the 1980s and early 1990s, but he has been equally consistent in expressing his preference for privatisation.
Interestingly, Gaynor also had this to say about the Auckland International Airport saga:
On that final point, a tough stance doesn’t cost the Government from a fiscal point of view, but that was before Cullen went shopping for a train set.
May 8th, 2008 at 4:27 pm
PhillipJohn’s opening contribution to this thread:
On that basis I should also highlight this quote from Gaynor:
Serious and rational consideration was not forthcoming from PhillipJohn last year.
May 8th, 2008 at 4:55 pm
POC-
Can’t say I disagree with Gaynor’s opinion on SOEs. I’ve been saying for a while that, where public utilities are concerned it seems some form of PPP seems to make more sense than wholesale privatisation (the late 1980s and the 1990s in NZ) , or completely state-owned and state-run model (Keynesian inefficiency).
Where health and education are concerned I think it makes sense to have an state-run model (with the option of going private if you have the money). A person’s life is worth more than a small tax cut.
And on your last post – well yes Kerr, Douglas, and their brethren at the business round table have a lot to answer for.
May 8th, 2008 at 5:00 pm
On the matter of the Securities Law NZ has trailed the international standards for the past 20 yrs and the recent changes are still way off the pace.
Thats why we have always struggled to get any real investment. heh Who want to deal with an underpar corporate governance model except of course unless you want to raid the cookie jar. Watch the new owner of the Wellington lines network. They will lucky if leaves the copper wire when he departs.
The Chinese have a superior model to ours Have a look at their post 1986 legislation and regulation their PLCs work under compared to the light weight NZ.
And wait for the deals that will go the Aussies way not ours as the Chinese companies realise how off the pace our corporate governance is.
And being the inscrutible orientals that they our business people wont even know the reason they lost the deal.
Sad.
May 8th, 2008 at 5:15 pm
PhillipJohn/Roger Nome:
This may be your current thinking, but I don’t think it’s a fair summary of your Kiwiblog contributions over time. To take one example, on Bill English’s partial privatisation proposal, as DPF pointed out at the time:
But your opening contribution to that thread was disparaging:
So now you’re on record as supporting public-private partnerships – a concept that doesn’t generate widespread agreement but, in fact, is bedevilled by disagreement on crucial details – what public utilities would you like to see partly-privatised?
May 8th, 2008 at 5:17 pm
So the fact that they’ve sold some is not acceptable and yet I’m supposed to take seriously you’re claimed knowledge of Labour policy…. ok Alice, so you want me to be your March Hare…. and answer some question designed to disprove a policy that don’t exist? Perhaps you’ll pull out that policy statement Helen gave you that time you and she were chatting about how many wine corks you’ll have at the end of this year!
Bollocks to that I say, so make it a 8th time, yours is a silly dance and I be not silly.
[DPF: Are you seriously claiming that it is Labour Party policy to consider asset sales on a case by case basis, and they are not against any sales what so ever? Let me quote the PM "Our job is to tell New Zealanders that we stopped asset sales.". Pretty to the point. And Paul Swain: "Mr Swain said Labour's policy of no asset sales ...". So next Paul W will argue black is white.]
May 8th, 2008 at 5:21 pm
oh, and POC. Seeing as you seem to so enthusiastically support Gaynor’s ideas on privatisation, would you be for bringing our telecommunications and electricity networks under a PPP model?
May 8th, 2008 at 5:23 pm
PaulW. Well done. You have well and truly trounced DPF on this issue. After all this time he still refuses to address the issue that we’ve done much more privatising than Australia – which of course is the reason why they’re still privatising and we’re not. duh!
May 8th, 2008 at 5:43 pm
why thank you roger nome… it was a fun distraction… and of course that is the point… Kerr’s argument does not have the same base for any meaningful comparison… hence why I think the NZ Institute is a far better advocate for these brand of politics …. and of course Labour’s not big on privatisation, it’s not a priori good.
May 8th, 2008 at 5:48 pm
PhillipJohn/Roger Nome:
That’s a false hypothetical, if we take the status quo as the starting point.
But if we go back in time and pretend the telecommunications and electricity networks are still government-owned, then I wouldn’t necessarily object to bringing them under a PPP model, but it’d really depend on the detail.
PPP is a concept – there’s no one-size-fits-all model to speak of. Take it from me that a PPP raises complex project finance issues (including tendering process, turnkey method, and ongoing operational/management issues), all of which need to be carefully documented, and keep lawyers well-occupied. I don’t pretend to be across the finer details. What I do know is that, conceptually, a PPP (especially one involving minority ownership, if we’re talking about private sector equity investment) has marketability problems.
By the way, as I understand his position, Gaynor doesn’t necessarily oppose full privatisation over time – he simply disagrees with auctioning a block off to the highest bidder.
May 8th, 2008 at 5:49 pm
“PaulW. Well done.
why thank you roger nome…”
Vomit..
What utter crap….
May 8th, 2008 at 5:55 pm
There you are – Davey’s been struggling without you… cue abuse and bile in-lieu of discussion (until the Sherry runs out anyway).
May 8th, 2008 at 9:24 pm
POC:
“This may be your current thinking, but I don’t think it’s a fair summary of your Kiwiblog contributions over time.”
The thread which you quote from was about privatising the health sector. As I said above, I’m against health and education being privatised, because both of them are social services, rather than businesses. They’re not well suited to a market model, because if you apply supply and demand to them, some miss out, and I don’t believe that any person should miss out on an education, or having their health professionally looked after. To me they both fall into the category of fundamental human rights.
But you know this, and it’s presumably why you decided to not link through to the thread. You appear to have been dishonest.
“So now you’re on record as supporting public-private partnerships – a concept that doesn’t generate widespread agreement but, in fact, is bedevilled by disagreement on crucial details – what public utilities would you like to see partly-privatised?”
I would probably be for a PPP type arrangement for our electricity and telecommunications sectors. Telecom in particular appears to have been abusing its virtual monopoly for some time now with price-gouging and under-investment in infrastructure.
I’m not familiar with the legal technicalities, but don’t believe that a PPP would have trouble getting private money on board. A partnership with the government is a pretty safe investment after all isn’t it?
May 8th, 2008 at 9:30 pm
Just look at what an overwhelming success the privatization of Telecom was for you and me.
Look at how cheap our cellphones are and how fast our broadband is today, by world standards. The Market and private enterprise sorted it all out for us. Thank heaven for The Market!
Oh no, wait, I forgot…
PS: I quite liked that Slane cartoon in the Listener a month or so ago, with Rodney Hide as Dr Frankenstein with the jumper wires standing over the just re-animated corpse of Roger Douglas as he rises from his grave!
May 8th, 2008 at 9:36 pm
PhillipJohn/Roger Nome:
Actually it was an oversight on my part – I have a practice of providing links, as you well know. Here’s the link.
The thread was not about privatising the health sector. Here’s DPF’s post in its entirety:
About privatising the health sector you say? I suggest you stop telling lies.
The fact that you even ask this question shows you in a poor light. The answer is probably not.
May 8th, 2008 at 11:22 pm
I’m glad it’s not my money that Cullen is wasting on buying back to railways. It’s good to pay NZ$0.00 tax in New Zealand, the government can’t waste it on ill thought out schemes and the undeserving.
On the bright side at least there will be no lasting physical legacy unlike the failed Auckland Waterfront Stadium if it had gone ahead. The Railways will be eventually allowed to fail and sold off or written off. There will be no lasting monument to the fifth labour government, set in concrete, which people can point to and show what has been.
May 9th, 2008 at 11:03 am
My mistake POC, I mistook it in my memory for another thread. In any case, it’s a case-by-case basis to my mind.
If electricity and telecommunications were returned to public governance I would probably be for solid energy going PPP – though obviously the pros and cons would have to be measured up (i.e. would it affect our National energy security to let the international market dictate the extraction of our coal?). I can’t think of any other SOEs that would fit a partial-privatisation model though.
May 9th, 2008 at 11:05 am
I’d not want telcos back in public hands although I do think the current arrangements have not served NZ well. Take just one example, access to internet and speeds are far superior in Australia with it’s partially private major telco.
May 9th, 2008 at 11:10 am
RN: “A partnership with the government is a pretty safe investment after all isn’t it?”
POC: The fact that you even ask this question shows you in a poor light. The answer is probably not.
The answer is probably yes. The fact that you think otherwise shows you in a poor light.
May 9th, 2008 at 5:15 pm
PhillipJohn/Roger Nome:
Oh *giggles* that was a funny wordplay!
Afraid I have to disagree with you on the substantive point. You’ve seemingly lived a sheltered life in the academic ivory tower. In the real world, where commerce is done, I challenge you to find one example of a PPP where the private party didn’t require significant commercial protection of its interests. That fact alone tends to rebut your proposition: “A partnership with the government is a pretty safe investment“.
But of course, you know better?
July 10th, 2008 at 10:48 pm
To develop a national infrastructure like rail as part of an overall transport policy, or telecommunications and the electrical grid as an overall strategy to promote growth in the domestic economy is vital for this countries future.
Private enterprise will never do a good job of this without strict regulation from government because they are not thinking far enough ahead. There is not a single example in the OECD where a complete free market policy has not been detrimental.
Germany, Denmark, Sweden, Switzerland, France, Japan and the USA all have a history of central government dictating the direction of nationally important development to corporations. That’s called democracy. The government representing the people. Corporations have no vote. This has been highly successful for all these countries.
Some of you narrow minded neo-liberals should really learn some history. Your antiquated policies are just failed british policies of the late 19th century dressed up with a new name. You may care to note that this was the period in which the UK lost the position of lead industrial nation to America. While the US Federal government did not own the industry they did provide significant incentives to industry to build railways amongst other things.
The problem with the privatizations of the 90’s in NZ was the government was too timid to take a lead. They betrayed the trust of the people who elected them to appease business interests and as a result we now have a grossly sub standard transport system, a telecommunications system that is an embarrassment and a power grid that’s on it’s last legs.
Yes, National balanced the fiscal budget, but they under invested in other areas to do this. Notably Auckland’s motorway network received no upgrades in the 90’s and we are now paying the price.
Another example of this under investment was in social services. Many of the problems of crime etc that we have today, particularly amongst youth raised in the 90’s can be traced back to these policy errors.
The fact is that Rogernomics and privatization was absolutely disastrous for New Zealand. It may work fine in theory or even in practice in a large economy, but not in a small vulnerable one.
The fact is the only ones who were better off after privatization were Roderick Deane, Rodger Kerr, Michael Fay and the like, the rest of us got screwed. Sure some of you may have done very well off property in the last few years (resulting in an even wider gap between rich and poor), but that made nothing for the country and lets see if you can hold onto those gains in the coming years.
It cracks me up how some of you free market neo-liberals think your so smart. Your so smart you have to leave it all to the market because strategic planning is too complicated for you. But you don’t seem to ever understand that “the market” is not the be all and end all. It is just a subset of society and economic policy is subservient to democratic decisions, not the narrow minded ideas of an under educated self appointed elite.
One final point. When I was studying at university I never met a free market proponent who wasn’t studying commerce. That’s interesting because I think there can be a good argument made that people who attend university to study commerce clearly lack imagination and talent. If they had either why wouldn’t they do law, science, engineering, medicine or the arts.
Why would we even listen to unimaginative, untalented people when it comes to the future of our country?