"You just want to sell off the family silver!!"
I am sick of that line, matched with a red and angry face as it's leaned over and yelled into my confused face. It tends to be an older crowd that does it too, the ones from a cradle-to-grave care system that have benefited from a government that provides all and owns all. At the advent of Rogernomics, the government set out on an ambitious plan to free the market right up, selling many state assets like an imported rug clearance sale. Since then, we as a people have seen dramatic improvements in accountability, efficiency, and productivity of both the public and private sector activities. At another time of economic downturn and public fiscal deficit, state asset sales are on the cards again.
Emotion Not Enough
This gets the older generation understandably upset; they are the ones who've worked hard to pay taxes to buy and maintain the assets, they are the ones who voted for governments that promised to buy them the assets, they are the ones who've been served by government-run airlines and power companies most of their lives. This we can understand, it's more than fair that many people are upset that today's government want to sell off the state assets that they have paid for and are accustomed to. To add to this, younger generations get a feeling of 'inheritance' to the assets we've built up, that it has indeed been passed down to them. The emotive tone of 'selling off the family silver' comes from that attachment and fear of change. The emotive tone behind this resentment is not enough to retain state assets.
The New Zealand economy, like many, isn't in a flash state and our public fiscal situation is horrible! Our government debt is huge, and growing by millions of dollars per week, while we spend on liabilities and unproductive sectors! The rate of borrowing and spending is both unsustainable and irresponsible, and everyone with half a brain at least know John Key is not doing nearly enough. News of our sovereign credit downgrade is just the bomb ticking faster than it was before. National is proposing though partial asset sales, not whole ones like ACT would, but just selling minority stakes in some of these assets. Pretty centrist, pretty agreeable, but not everyone's happy…
Privatization Gone Wrong
While I do think this is a good idea, I acknowledge those that say that privatization hasn't worked. Back in the good ol' days of Rogernomics, we basically did do a flog-off of state assets. While necessary, the ends didn't justify the means so well. We did it too hard, too much, too fast; and it's left everyone with bad memories of the frantic deregulation of the 80's. Much of the argument against it points out the failures of the Rogernomics privatization, however the idea is not inherently bad.
However, I do criticize the same defense of socialism, that it was just 'done wrong, but still a good idea.' The fact that privatization did work in the end shows that, well, it does work! The trick to doing it a second time round is learning from our mistakes in the 80's and taking it slow and easy, something the Key government does rather well.
Even if it is only a part, this is a good thing. It is a step in the right direction, and taking a 'steady as she does' approach would probably start like this anyway. Partial asset sales put the market forces back to work, give investors and people with real interest to advance the companies a chance to make their magic work. Besides, this could easily be the first step to entire asset sales. With half the stake of each asset already sold, it would be easy to sell off the other half. We can take a steady-as-she-goes approach and gauge the results of the asset sales, if Labour (unlikely) proves true, we can reverse it much easier than the shoddy buy-back of the railways. Releasing the stakes slowly also allows for the price to rise as the stakes themselves will be in hot demand but limited supply, ensuring we get a good market price.
The Real Investment
One of the common criticisms of asset sales is that it's a short term benefit that's easily "nibbled away, for expedients, and by parts" (partial quote by Voltaire). The money raised from asset sales is a contentious issue, and right wing governments would often use it to pay for tax cuts. The point is that it is indeed a short term benefit, but it is up to a responsible government to make the money last. Lefty governments love to raise revenue and spend with no long term benefit, so the trick is to give the money raised by asset sales back to the people, and make the money last in the long term at the same time.
While tax cuts are a great way to give the money back to the people, they are a short to medium term answer, as they can only pay for tax cuts for a certain time until the money runs out. We know that the best way to make money last or even become productive is to invest it, save it, collect interest or dividends from it. The money raised by asset sales can be put to good use by investing it in something that needs investing in, maybe new schools, hospitals, for example. The money raised from selling half of the railways (valued at approximately $800m) would pay for building a hospital more than the value of Middlemore Hospital in South Auckland (sourced from Auckland Council GIS viewer). It's only fair to give back the money people have paid into the system, the fact that they charge us for services anyway means we're not paying for the services already. Investing in education, healthcare, infrastructure, defense, the environment, and other valuable services of the government improves them and improves our quality of life overall. We might as well put money into the things the government is supposed to do and that do well, then hold on to liabilities such as the railways.
No Change of Heart
One of the frustrating parts of arguing for asset sales is trying to show that taxpayers really have no ownership of state assets. Labour wants to hold on to power companies, Air New Zealand, TVNZ, railways, and other companies that we still pay for! Why is there state ownership of Air New Zealand - a company that competes well in the international market, stands on its own two feet, but has no benefit for taxpayers. Despite being one of the lucrative (not always profitable) assets we own, the benefit for everyday Kiwis is next to nothing. When was the last time we had free or discounted flights? When was the last time the government forced an unprofitable, but locally useful, airline route to stay open? For something that we all pay money into, there's not a lot of return for everyday New Zealanders. The government's stake of Air New Zealand is over $3.4 billion, which would pay for 20 million adult one-way trips from Auckland to Napier, enough for everyone to fly four or five times each.
The other issue is transparency. A good company would appease its shareholders by providing information on the company's progress, take input into how the company should be run, and consult with its shareholders on big decisions it wants to make. None of the state owned enterprises have ever asked me for any input, except for TVNZ with its ads asking me if anyone said 'fuck' on TV and if I was upset by it. For owning so many assets and having such large stakes in them, we have no power over what these companies are doing. We own them less than we do our schools, which invite parents to teacher conferences on how they think the child can improve their learning. I know that if TVNZ ever asked for my input, we'd have much better stuff on TV! We have no real connection to the companies and we've only had to pay to them twice. Not bad for our own assets...
While on the topic of shareholders, there's no dividends paid back to the owners. In fact KiwiRail is making terrible losses, prompting Steven Joyce (Nat-14) to unveil a $750mil plan to keep the company. He has mentioned that he wants rail freight to take over and eventually pay it's way, and partial asset sales would be a fantastic step to allow companies to buy shares and invest in the company.
Stop Asset Sales!!!!
ACT on Campus have retaliated to the 'Stop Asset Sales' campaign the Lefty Labourites have with yellow 'More Liability Sales' signs. As for Labour's crusade against sales, there's a YouTube video on the party website (ownourfuture.co.nz) where David Cunliffe thinks that we can use the money to pay back the colossal debt the National government has added to from the last Labour government. The problem is, the profit of $300 million per year is not going to pay it off, with a $76bn billion debt and a $300 million income, no wonder our credit rating got downgraded! They have estimated the gains to be $6-7 billion, which can wipe off a tenth of the debt in one hit, showing our commitment to financial stability and not having to wait 253 years for the capital gains tax to pay the debt back assuming no interest is added. They even estimate the cost of selling off the assets to be $300 million, surely we can find someone cheaper than that!
They did mention that the profits will likely go overseas, to foreign owners in places like Australia. Kiwibank in particular was set up by the government to oppose this, as our largest banks are owned by Australians (such as ASB owned by Commonwealth Bank). With the record that Australian banks have, it was precisely this that spared us a lot of hurt from the GFC (global financial crisis), since many of the safest banks in the world were Australian. Not to say that foreign ownership of everything is amazing, but the interest they have here is usually benign. This question was asked at an ACT meeting in Takapuna where Dr Don Brash was speaking. He cited Auckland International Airport as an example of two foreign bids for the stakes in the airport were rejected, despite the first being a 'passive' investment, where the Canadian Pension Board would have put money into the company but let New Zealanders run it having no interest in modifying it. While the second by a syndicate related to Emirates Airlines of the UAE, that wanted to turn Auckland International Airport into a major regional hub, to compete with Sydney's Kingsford Smith International Airport and the like, which would have created a lot of jobs and income for New Zealand. It's not as if the owners can pick up our power plants and move them overseas, everything will stay here.
New Zealand is troubled in that we don't have the capital to expand businesses and invest like the Hong Kongers or Americans do. While we're trying to grow our economy, there is hardly any savings or investment to try and grow. Selling to companies overseas may bring benefits such as the capital to expand and develop, employing more Kiwis, paying better incomes, and improving the goods and services for New Zealand consumers. Companies like Air New Zealand and TVNZ are capable of standing on their own two feet, encouraging mum and dad investors to get in on the shares in the company will help more New Zealanders invest and make money, as well as retain ownership, except real ownership where we can really get a say in the company. As for Labour's buzzkill campaign, their alternative is a capital gains tax. Lesser of two evils anyone? Their report supporting a capital gains tax, prepared by Dr Ganesh Nana, shows that individuals will be paying the most in that system, largely through farmers trading their own land and individuals trading property. Ouch.
The Right Argument
Where Labour have done a song and dance about 'Own Our Future,' the right-wing has retaliated with 'Own Our Furniture' (Dr Brash Twitter parody) and 'Labour - Pwn Your Future' (Whale Oil). No one on the economic right believes retention of spiraling costs, state liabilities, and competently competitive companies are the answer to our economic situation. While the Canterbury Earthquakes have contributed to the cost, National is continuing to hold on to expensive and unsustainable policies created by the last Labour government, and opposed while in opposition. Asset sales and spending cuts are our only real way of being serious about recovery, as much as we'd also like to spend money on fiscal black holes, we simply can't afford it!!
I got the idea to write this post on a bus service between Hastings and Auckland and admiring the impressive country of New Zealand. The afternoon sun beaming down on Hawkes Bay and Waikato forests, farms, mountains, lakes and bushland. The magic lakeside town of Taupō, the friendly bus driver that waits for you when you're running late, the roadside café or dairy when you're on a long journey, and all the future Burger King beef patties (cows) chilling in the paddocks. These are all examples of our real family silver, the beautiful friendly country that we've inherited from our ancestors who've worked to give us this gorgeous land. These are what we feel real ownership of, what we really benefit from, and what give us our sense of identity and belonging. They don't need government ownership, and most of the time we're not even aware if there's foreign investment or input toward them.
None of us feel any pride or connection with Air New Zealand, the power companies or the railways. If anything, we usually feel pissed off that they charge us a limb or two for flights (Napier to Auckland is usually well over $200, hence the bus) and electricity. Sentimental values over companies and investments is immensely shallow and a nostalgia not worth keeping. The arguments, the dances, and the logic is useless. The idea is not selling the family silver, we never owned it, this is about selling back to the market what is not meant to be government property, and being serious about a more stable and prosperous economic future.
David Farrar (from Kiwiblog) has an article in the New Zealand Herald website
Phil Goff's role in selling state assets back in the Rogernomics heyday