I remember the time before what socialists call the “neo-liberal” era which “sold out” the country to “rampant capitalism”. Sure I was at school, at the time when people and businesses had to plan weeks ahead to get the Post Office to install a phone line (no mobile phones then, as the Post Office hadn’t deemed that to be appropriate until 1987, even though Australia had had a limited carphone mobile service from 1981 and the UK had launched mobile telephony in 1985).
It was an era when the 100% state owned Air NZ had to get Cabinet approval to buy new airliners, and was made to buy Rolls Royce engines for its Boeing 747s, because it was thought it might improve trade prospects more generally, even though the airline had the spares and the staff training for General Electric engines (and the Board had recommended such aircraft). Such is the ways of nationalised industries.
It was also an era when phones calls beyond your local calling area (which in Wellington did not include Kapiti) cost tens of cents a minute, so a ten minute call (remember no SMS or email) to Auckland might cost several dollars. Phone calls internationally cost dollars a minute, so twice a year my grandmother would talk to her sister in Scotland, for birthdays, for around 10 minutes. Those calls cost $30-$40, and it wasn’t because of technology, it was because the Post Office used money from phone calls to cross subsidise its unprofitable postal monopoly. Then there was the Post Office Savings Bank, a government bank that at a time of double digit inflation had children’s “savings” accounts paying 2% interest. Effectively a scheme for the state to steal savings from children, but hey it wasn’t privatised nor “foreign-owned” (strange how supposedly “anti-racist” socialists are so agitated about foreigners when they own businesses they use), so it was great - the socialists got kids' money to spend on "the People" (which is of course what they always say).
Wellingtonians 40 plus might remember the Wellington domestic terminal, later the Air NZ domestic terminal, which on a windy wet day would leak, with the lino floor flooded, being drafty with not enough seats for people waiting for flights. Until (foreign and local capitalist owned) Ansett NZ was allowed to fly domestically, all jet flights were boarded through steps in the wintery Wellington windy rain. The Government and Wellington City Council argued over decades about who should pay for a new one. They would also remember Wellington City Transport, which was 100% owned by the City Council and subsidised by ratepayers, so that on Sunday evenings hardly any buses ran at all, all of the routes terminated in the city centre (needed more buses and drivers for that, and the Tramways Union would hold the city to ransom if it didn’t get what it wanted). New buses required the Council to order them, and as a result the fleet would be on its last legs before new vehicles would get ordered. 30 year old diesel buses would be operating (the economic life of a diesel bus is around 15 years) and of course Wellington’s trolley bus infrastructure would be patched up for decades.
None of this is reflected on by Max Rashbrooke in the Spinoff. He wrote a piece last week that followed on from the rather awkward set of comments between David Seymour, Chris Luxon and Nicola Willis which indicated various interest in looking at further privatisation, but unfortunately Rashbrooke didn’t demonstrate a great deal of depth in thinking. Most of it was parroting the claims and slogans of former union economist Bill Rosenberg, and high level papers written overseas by leftwing researchers.
I couldn't resist, it was so full of nonsense, it deserves a response:
- “Privatised TranzRail had an appalling safety record, its staff dying at work at eight times the national average. And while cutting maintenance to a level Rosenberg labelled “abysmal”” What was the safety record before privatisation, before SOE status, before corporatisation (before there was safety regulation of rail)? Rosenberg, a former CTU economist bases the maintenance level on “what”? Bear in mind that in 1984 Booz Allen reported on how the rail network had been over-maintained in places, but also how
- “Fay Richwhite and their fellow owners took out at least $370m in profits from a firm for which they had paid just $328m”. Dividends over a 12 year period, but of course taxpayers have never taken a dividend from Kiwirail or NZRC, ever. Socialists need to decide if the state owning trading enterprises is to make money from them for “the People”, or for them to be moneypits for the “Public Good”, but that isn’t clear. Truth is most are primarily commercial but they might want certain services delivered at taxpayer expense, but this doesn’t require entire operations to be operated Soviet style.
- “Helen Clark’s Labour government was then forced to repurchase the railways, creating KiwiRail as we now know it. The whole episode cost the state around $4bn, according to then business commentator Brian Gaynor”. Nobody was forced to repurchase it, in fact there were three transactions from buying the Auckland track for $81m (Treasury valued it at $20m), buying the network and then buying the whole business. If nothing had happened, it still would exist, it just would have seen a series of lines close that carry little traffic, and the state has poured much more into Kiwirail since. For what end though?
- “Profits flowing offshore to wealthy interests rather than ordinary New Zealanders” What profits? Kiwirail has never generated a dividend, and besides “ordinary New Zealanders” wouldn’t get it, it would go to the Minister of Finance to wash in with other spending.
- “The maddest examples have come when monopolies – water, rail – have been sold to private firms, even though competition is the only thing that makes markets work” Rail isn’t a monopoly, and in NZ water hasn’t been privatised (and corporatisation was opposed by economists like Rosenberg in the 1990s, see the resistance of the Alliance to the creation of Watercare Services, and demonstrates the utter failure of the socialist model of democratic control of the provision of services.
- “A private monopoly is the worst of both worlds: no competition-based incentives to improve, and no public-good ethos pushing the organisation to look out for citizens’ interests”. Do tell us about this public-good ethos, the one that saw the Post Office take weeks to install phone lines, that gouged consumers for toll calls, that saw rampant theft of freight on the railways as a monopoly government department (it had a statutory monopoly until 1983 on long haul freight), the Post Office Savings Bank that gave kids 2% interest on savings accounts when inflation was in double digits. Please!
- “in the UK, privatised railways have been such a disaster – massively increasing costs with no corresponding rise in quality”. If you think rail travel in the UK is no different in quality today compared to the era of British Rail you need help. By any measure, frequency, number of routes, reliability, speed and capacity, and indeed patronage (which has grown to record level turning round decades of patronage decline), it is a remarkable transformation. Yes subsidies have spiralled as well, but it’s overly simplistic to think the UK has a private rail system now, as Network Rail effectively renationalised the network over 20 years ago, and most services are franchised (with the franchisees either paying to operate services on routes that are commercially viable, or pay to operate those that are not). Furthermore, rail freight volumes have increased 80% since 1983, hardly a failure if a key goal is to shift more freight off of congested roads. Socialists (mainly the unions that can’t shut down the entire system with a strike anymore) say privatisation didn’t cause the rise in patronage, but if privatisation “harmed” services, wouldn’t people have just abandoned rail in favour of buses and driving? Well of course they didn’t. The system has been highly flawed, that’s for sure, mainly because it is highly politicised and Train Operating Companies have been poorly incentivised to control costs (because their main client isn’t their customers but the state), but that’s an argument for less state control, not renationalisation. As usual, it's much more complex than simple slogans
- "Even worse has been the privatisation of British water services, whereby firms have extracted tens of billions of pounds in shareholder dividends, hiked water fees and discharged large amounts of effluent into local waterways." Yet DIA’s own report on the Three Waters reforms noted the performance of English water companies exceeded that of any in New Zealand, and Scottish Water. A huge amount of investment has gone into renewing water infrastructure in England, in fact OfWat requires it, and regulates water user fees. New Zealand HAS the model the UK had before privatisation and it’s an abject failure. NZ has local democratic control of the water and waste water system, and it is falling apart in many centres. It doesn’t generate dividends, it charges people based on the value of their property, not what they use, and effluent gets discharged into waterways regularly. We have socialist water and it doesn’t work.
- "Privatised bus companies, the OECD concluded, are cheaper than public ones only because they cut wages." This is simply false. The OECD did not conclude that, the link is to a report on a roundtable discussion involving case studies in four countries, three in Europe, plus the USA (which has few privatised urban bus services). It is not an official report from the OECD. EVEN then it said that private operators can be more innovative than public ones. The idea you can compare the performance of the Yellow Bus Company in Auckland in the 90s (let alone the ARA), or Wellington City Transport in the 1980s to their equivalents today is extraordinary. When bus services were moved into the contracting model, there were savings of around 15-20% which enabled more routes and frequencies to be offered, but it did stop the Tramways Union from being able to shut down an entire bus network when it didn’t get what it wanted.
- "Even when three of them were fully state-owned, the “gentailers” that supply our electricity were able to operate rather like a cartel, generating excess profits and freezing out potential competitors." Wait what? So it ISN’T state ownership you oppose, it is running trading enterprises as “enterprises”. So you don’t want the state to make dividends from its businesses? Well we did the socialist model before, for decades. It saw massive investment in generating capacity (politicians liked power stations then), but let the local distribution network fall apart (politicians don’t like charging people for what they use), a bit like water. Were they operating as a cartel? Well shouldn’t the Commerce Commission be dealing with that, in which case, maybe this claim of it being a cartel (which is serious), is actually not true? Maybe if they were all fully private, they could be properly subject to scrutiny because politicians wouldn’t be worried about loss of dividends. In fact there may be a case for structural separation of generation from retail, but that's about ownership. Not a lot of coherence in the issue here is there?
- US healthcare – not voucher-based, admittedly, but the nearest thing the developed world has to a private health system – is a catastrophe. It’s not the nearest thing the developed world has to a private health system, as there are umpteen other examples. Nobody, literally nobody advocating for more market-oriented healthcare thinks the over-regulated, highly subsidised US model (Medicare and Medicaid are uncapped liabilities to US taxpayers) is a model for anyone to follow, but it doesn’t stop socialists from the Anglosphere blanking out Switzerland, France, Singapore or the Netherlands. Australia’s system is a mixed model, but that doesn’t fit the narrative.
After all of this selective agitprop (yes education vouchers “fail” but let’s not mention Sweden which to this day maintains one of the most open market education systems in the world, but that doesn’t fit either), we get the philosophy:
There is a basic philosophical issue: public services – health, education – are things people deserve as of right, as a basic entitlement of citizenship. They are not the equivalent of buying, say, another item of clothing, and treating them as mere consumer goods risks degrading their deep importance.
Hold on, most of this article focuses on railways, then water, and talks about electricity, then ends with health and education. Is the claim that the state has to provide everything that is a “basic entitlement of citizenship”? Should the state own all housing? Should the farms be state owned and all food supplied by state shops (after all food is MORE important than health and education, because most can last months or years without health and education, nobody can last more than weeks without food)? The sneering comment that “treating them as mere consumer goods” says a lot about attitudes, that when the public are allowed to choose it is “degrading”. Really?
If, as is often the case, privatisation means charging for something once paid out of taxes, it is likely to have a harmful effect on poorer households. Why? Because poorer households use the most electricity, rail freight or water? Of course they don’t, but is the argument here that everything people need should be free at the point of use, but that half the population should pay taxes so the others don’t? We can see what “free” water has done to demand for it, and the infrastructure. We see it with roads everyday where consumers aren’t exposed directly to the costs of what they use, with the result of queuing. Public health systems are all about queuing after all, socialists seem to think that is fair, as long as the workers get paid well, the workers not in those systems should be grateful “is isn’t ‘Merica”!
You see the problem is, the common people are stupid and ignorant, whereas public servants, producer unions (especially those run by people paid much more than the average wage) and politicians are enlightened, capable and benevolent…
People don’t generally know what healthcare they need; in education, research suggests “competition” between schools is often driven either by parents making calls based on external factors like uniforms, or by prejudiced views about keeping their kids away from certain other children.
Well just give them what you think they deserve, parents are incompetent clearly. The state should probably feed kids too (already started with that). Parents must make lots of bad calls too, so maybe the state should buy groceries, buy clothes, maybe run activities for the children to keep fit and socialise, maybe ensure they don’t have “prejudiced views”, maybe build a sense of community. Maybe we can call them Brigades, give them uniforms. Maybe they can help identify grownups who express “hateful and harmful” views. You can see where this attitude that parents know least can head, but it is exactly the arrogance of people who think because some parents make poor choices, none should be allowed to.
I could go on, there is a misconstruing of how Telecom performed in the 1990s (which from a consumer point of view saw prices plummet across almost all services, essentially enabling people to communicate across the country and internationally affordably for the first time).
The only interesting part of the article is the claim that if only the public could be “involved” in the decision-making of state owned organisations they could be more responsive. This is quaint but delusional. Most people have the time to work, look after their families and then spend quality time enjoying themselves. A small, but vocal minority get involved in activism and inevitably those who will shout the most and get involved the most will be those with spare time or motivation, either because of their political ideology or in many cases simply having time because they are retired or not working. The citing of the “successful German model” for electricity companies is laughable given some of the highest electricity prices for consumers in the EU. If that's success I'd stick with the status quo thank you very much.
It ends with this “We could also entrust frontline public servants with more responsibility, putting them in charge of locating efficiencies and potential innovations” Sure, because public servants are well known to be at the frontline of identifying the most efficient ways of doing things, and innovating with technology and service delivery, that’s why they have jobs they rarely can lose, and don’t get paid based on performance. It's naive at best.
I get that socialists hate private enterprise at worst or are highly sceptical of it. What I don’t get are the absolutely contorted contradictions of, on the one hand hating private enterprise making a lot of money from former state enterprises, and then not wanting the state to make money from them (but rather for taxpayers to subsidise them, for no clear aim other than to make sure people don’t pay for what they use). I absolutely don’t understand how intelligent people who purport to be interested in public policy outcomes parrot agitprop slogans from trade unions. What is the point of the state owning Kiwirail? Is it to get more freight on rail and off of roads? If so, is that the best way to do it? None of this is clear. What is the point of the state owning a power company? To make it cheaper for some consumers? To reduce emissions (which will make it more expensive for someone)? Nobody knows.
Socialists have successfully scaremongered about privatisation in NZ for decades. This scaremongering stopped water getting reformed in the 1990s outside Auckland, and has stopped serious reform of ACC, and making the electricity market more competitive (by the state not having a stake in generation and retail). It’s largely banal slogans pushed by Marxists with a strong vibe of xenophobia, and it deserves to remain back in the 1990s with the Alliance.
