State asset sales have been a political dividing line in New Zealand for decades now, and it seems voters are again being asked to decide which side they’re on.
In his state-of-the-nation speech last week, ACT Party leader David Seymour advised New Zealanders to “get past their squeamishness about privatisation” and ask themselves:
If we want to be a first world country, then are we making the best use of the government’s half-a-trillion-dollars–plus worth of assets? If something isn’t getting a return, the government should sell it so we can afford to buy something that does.
No doubt this appealed to ACT’s core constituency. But the available evidence suggests many New Zealanders view the privatisation of state assets with scepticism, not squeamishness.
The most rigorous available data are from the New Zealand Election Study: just under 50% of those surveyed in 2020 either “somewhat” or “strongly” agreed with the proposition that “privatisation has gone too far”.
Just over 9% either somewhat or strongly disagreed with that statement. In other words, those who oppose state asset sales comfortably outnumber those who support them.
It seems reasonable to suggest this reflects the sizeable proportion of New Zealanders who remember the asset sales experience of the 1980s and 1990s under both Labour and National governments.
Writing in 2000, during the heights of this bipartisan privatisation boom, economic analyst Brian Gaynor argued:
By selling 100 per cent shareholdings in state assets, the New Zealand Government has allowed a small group of investors, mainly offshore, to make enormous profits. With just a little foresight these profits could have been kept for the benefit of domestic investors and taxpayers.
At the same time, voters have watched levels of wealth inequality rise, and the transfer of public wealth into private hands. And while asset sales can improve efficiency, they can also reduce access to services for those on limited incomes or experiencing higher unemployment.
Market failure
Research has shown a clear majority of New Zealanders would prefer the government provides social services, especially in health and education.
Just over 80% of New Zealanders trust the public service based on their own experiences. And levels of trust in the public service outstrip those in the private sector. All this suggests there is little appetite for a return to the days of peak privatisation.
More broadly, some New Zealanders will also question Seymour’s assertion that state assets should provide a return on investment.
Aside from it not being possible to turn a profit on many of the assets a government needs to serve the needs of its citizens, there are costs associated with putting a market value on certain social goods and services.
As Harvard political philosopher Michael Sandel has argued:
[W]hen money comes increasingly to govern access to the essentials of the good life – decent health care, access to the best education, political voice and influence in campaigns – when money comes to govern all of those things, inequality matters a great deal.
Furthermore, there is ample evidence of the ethical and operational shortcomings of applying the profit motive to public institutions such as prisons, hospitals and schools.
Nor are markets themselves value-free, self-correcting mechanisms. In the material economy, they have a propensity to fail. When they do, the people who suffer most tend to be those least well positioned to defend themselves.
That is why the state performs certain functions: to make sure those unable to pay for privately provided goods and services are not denied them.
The nature and extent of what the state should provide is quite properly a matter for debate. But those decisions affect everyone and should be decided in the public domain, not left to the managers and owners of private companies.
Prime Minister Christopher Luxon: open to a conversation
about priviatisation. Getty Images
Public versus private debt
Seymour also suggested a return to asset sales was justified by the country’s current levels of public debt. He referred to “the other tribe” who are
building a majority for mediocrity – who would love nothing more than to go into lockdown again, make some more sourdough, and worry about the billions in debt another day.
the real risk in New Zealand is our very high levels of private debt, which includes household debt like mortgages, student loans, credit card, hire purchases, to buying a car in instalments […] Compared to our relatively low levels of public debt our current household debt stands at 95% of GDP.
According to the Treasury, current public debt levels are “prudent”, although “an ageing population, climate change and historical trends mean governments have important choices to make”.
The risk of renewed asset sales and privatisation is that public debt might be reduced but at the expense of private debt increasing.
Prime Minister Christopher Luxon has responded by saying he was open to a conversation about selling state assets. While it was “not something on our agenda right now”, he said, he hinted National may campaign on it ahead of next year’s election.
His other coalition partner, NZ First, has a long-held antipathy to selling local assets to offshore owners. And Luxon may also remember the result of the non-binding citizens-initiated referendum in 2013, when 67.3% opposed the potential sale of the state’s energy companies.
A niche party such as ACT can safely take policy positions that have little appeal beyond its core supporters. But that’s not a luxury available to its major coalition partner, which started the year behind in the polls.
On the other hand, National does not want to be outflanked any further by ACT. Asset sales, it seems, are destined to remain a perennial political fault line.
Richard Shaw, Professor of Politics, Massey University. This article is republished from The Conversation under a Creative Commons license. Read the original article
9 comments:
There are fors and againsts privatisation. Privatising rail was a Bobby dazzler. An underperforming asset was sold off, there is plenty of competition to rail, then the spiteful Clark government bought it back so the coffers were empty after their inevitable election loss. An absolute disgrace.
Then there were the suspect 80s privatizations which made Fay and Richwhite very rich.
Partial sale of.the electricity companies brought in a lot of cash for the Key government which was welcome at the time.
So.... privatization can be good is it is done right. I trust the morally sound and incredibly clever Luxon to do it right.
Seymour got this right
Seymour is also on song with Maori takeover of public assets
To put it simply:- If we have an asset and we sell it, we never get the asset or property back. Never.
Did we not learn from the Maori's that selling land to foreigners means it's gone.?
So Blackrock, Van Guard, State Street, Bill Gates, CCP and other nefarious oligarchs hiding behind corporate fronts all good according to David.
Treasury need to take climate change out of the equation in the sense it is more the huge cost of pursuing a scam.
In essence, any service provided by Government is capable of being supplied by non-Governmental entities. But even if public institutions such as prisons, hospitals and schools are kept in public ownership, that still leaves plenty of opportunity to convert underutilised state owned assets into cash. Much energy can be wasted debating assets like the interisland ferries and BCNZ, but there isn't much chance of finding a buyer for either of those outfits, given how badly both are run. But if cash is needed in a hurry, land is the obvious choice. Why on earth does the State own farmland? And why is a third of our country locked up in the Conservation Estate, much of which has no scenic or social value? Sell the underutilised land and allow someone else to unlock its potential. But more importantly, invest the proceeds into national infrastructure that is actually of use to to the whole country.
Much govt work was very inefficient with much featherbedding. High costs were paid out to staff. Work was generally to a standard (unlike fibre optic installations and much else today) There were no super salaries. And very many were able to participate fully in society without constant worry about job security.. Similar extra cost now goes as profit, much of it disappearing directly or as spending overseas, and bypassing the lower and middle rungs..Make work is still rampant (university courses, te reo, insulation, heating scaffolding regulations etc etc)
I worked in the Electricity Supply Industry in the U.K at the time it was privatised. I couldn't understand why a system that was the envy of much of the world
I worked in the U.K Electricity Supply Industry at the time it was privatised. I couldn't understand why a system that was the envy of much of the world should be sold off to a bunch of bean-counters whose only interest was return on capital. Worse, if you want to shut a country down or hold it to ransom, there can be few more effective ways than through it's electricity supply, and this may be even more true than it was 30 years ago.
I was never a great fan of state owned Industry but I can see great benefits in the state controlling strategically essential assets.
As an aside, the U.K.'s state owned industries had extensive apprentice training programs that turned out thousands of well trained youngsters every year which would stand them in good stead for the rest of their lives, although few of us appreciated that at the time.
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