Thursday, March 08, 2012

New Zealanders already own them

Such is the cry of the impotent leftwing cry in New Zealand politics against privatisation of state owned businesses.  It is this position, and the infantile debate about privatisation that passes for political discourse in New Zealand that demonstrates how far removed the country can actually be from the rest of the world.

The only countries in the world that decry privatisation are the likes of Venezuela, Iran and North Korea.  In the rest of the OECD it is mainstream policy and has been for some time.  However, in New Zealand the debate is at a level that I think reflect a combination of the base level of debate through television and talkback radio, and the agendas sold by some in academia and education, pushing what can best be described as the Green/Alliance leftwing legend about the reforms of the 1980s and 1990s.

The latest phrase thrown in is just banal.

"New Zealanders already own them" or "You don't have a right to sell something New Zealanders own".

Of course it is cravenly misleading political rhetoric, like the bald faced lie that opening ACC up to competition is privatisation, because some of its customers will choose a private competitor. Like the complete blanking out of history by Labour politicians who happily consented to Michael Cullen seeking to sell part of the re-nationalised Air New Zealand to its arch rival Qantas - because Qantas was keen to snuff out any chance of the knee-capped airline becoming a bigger competitor, and Cullen was too inept to see through its rhetoric. 

New Zealanders do not own SOEs by any standard definition of what ownership of property means.

If you own a shareholding in a business, whether by shares, or in partnership, or private equity stake, or even as a secured creditor, you have a wide range of rights in relation to the assets and liabilities of that business.

First and foremost is the right of alienation.  You can sell, gift or surrender that stake to whoever is willing to buy or receive it.  You are not forced to own it.  After all, if you were, you'd be forced to bear liabilities as well as receive proceeds from profits.  

Secondly, ownership bears the ability to gain dividends from profits and capital gains from appreciation of the assets. Conversely, it also means you bear liabilities (in the form of your assets being devalued and shareholding able to be surrendered to creditors, or rendered worthless through the market).  Ownership is dynamic.  Like owning a home, or a painting or a car, what you own can make you money, or can lose you money, but ultimately you gain or lose value according to how it is managed, used and ultimately the market for buying it.

New Zealanders do not have either of these rights in relation to SOEs.  There must be a few environmentalists who'd rather not own a coal mining business, but they can't sell out of the state shareholding in Solid Energy.  As New Zealanders individually can't sell out of SOEs, only the state can, it is absurd to claim that the state has "no right" to do so, when in fact the elected government is led by a political party that campaigned on that platform.

The government does have the right to sell any asset it holds, and indeed it has a democratic mandate to engage in its small SOE part privatisation programme.  To reject this is to claim the state should never sell anything again, and to reject the mandate of the electorate.

New Zealanders don't get dividends from SOEs.  The state does.  New Zealanders don't get a dividend cheque to spend on their mortgage, their kids' education or their businesses.  Those on the left will argue that they do get the "fruit" of government spending, but government spending is distinctly unequal among New Zealanders.  It tends to cluster around rent-seeking groups, such as employees in the state sector, businesses that receive subsidies, the state education and health sector, state housing and welfare recipients.  Is that what people want their dividends spent on?   Of course if the state was going to spend that anyway, it is arguable taxes would increase, although again, taxes aren't equal either.  If everyone had equal shares, they would get equal dividends, but the benefits (and costs) of the state are not equally distributed.

So to claim New Zealanders "own" SOEs is a complete fallacy.  They can't sell or give away their ownership, even if they wanted to.  They can't gain the fruits of ownership.  Yet they do bear the costs.  Loss making SOEs may get additional funds from the state.  Kiwirail being the obvious example.  Those who pay the greatest tax bear the greatest loss.

This "public ownership" is effectively meaningless.  It is, legally, Crown ownership.  The government owns SOEs and it is up to the Minister of Finance to exercise the rights of ownership.  The state owning something doesn't mean you own it.  It spends the proceeds on what it wants, and if it loses money, it takes it from your taxes.

Yet have you noticed how opponents to privatisation get awfully wound up about selling businesses, but the state taking your money through taxes and buying them, that;s another story.

In the past decade New Zealand taxpayers have been forced to buy an airline and a railway, but nobody who says there is "no right to sell" argues it about buying.  Apparently the state has every right to borrow or tax to make people buy a business, or invest in an existing one (take Kiwibank).  

What does that mean?  Well if you follow it to the logical conclusion, it means the state can buy up anything it likes, but never sell it.  Ultimately it means nationalising the entire private sector and all private property.

The real debate that should be had is whether it is appropriate for the state to own businesses at all.  It gets diverted because those wanting to debate are wanting to scaremonger.

It's why the Greens, Hone Harawira and others on the left raise their racist bogeyman of "foreigners" when it comes to privatisation.   The very people who cry racist whenever they find an unequal outcome between two groups they subjectively define by ethnicity, raise hackles of what is nothing more than pure nationalist hatred regarding foreign nationals or companies owning businesses in New Zealand.  The implication being that foreigners "rip people off", New Zealanders don't.  That foreigners will "take their money and run", New Zealanders never spend their money on luxuries, foreign travel or invest overseas.  Foreigners "don't understand us", because New Zealand state owned businesses have always been a roaring success and delivered just what everyone wanted.

If you want to know one reason why Air New Zealand did not get fast approval for Singapore Airlines to lift its shareholding from 25% to 49% by the last Labour government, the word "xenophobia" might explain something.

So no kiwis, you don't own SOEs - a collective of politicians exercise ownership rights over them, spend the profits arising from them, and collect from you when things are going bad for them.  You have no more right to say they can't be sold than you have to say the state shouldn't buy a car, a plot of land, or a new locomotive for Kiwirail.

The late Roger Kerr wrote extensively about privatisation, it would be a start if some journalists in New Zealand actually took some time to read some of it, such as the review of the actual performance of privatised state businesses and their history.  It would also be nice if some of them asked the politicians who oppose privatisation whether they also oppose the state buying businesses on behalf of taxpayers.


Kiwiwit said...

"Ultimately it means nationalising the entire private sector and all private property."

Of course, that is exactly why the Greens, Harawira, et al oppose privatisation. It's not about holding the current position, it's about ratcheting up more and more "common ownership of the means of production" (to quote from their bible, The Communist Manifesto).

Bruce said...

"Like the complete blanking out of history by Labour politicians who happily consented to Michael Cullen seeking to sell part of the re-nationalised Air New Zealand to its arch rival Qantas - because Qantas was keen to snuff out any chance of the knee-capped airline becoming a bigger competitor, and Cullen was too inept to see through its rhetoric. "
I believe that was to discourage Qantas competing so strongly with Air NZ on flight routes that it would destroy Air NZ.
By owning part of Air NZ Qantas was discouraged from ruining the company because they would be ruining their own investment