Bolder than expected but too timid

By   /   April 21, 2013  /   12 Comments

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At 4.4 million people New Zealand is a small country – smaller than Sydney. Yet we have chopped up our electricity sector into bits, privatising some and told them all to compete. The brainlessness has produced a spectacular market failure.

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The Labour/Greens plan to reform the electricity market is a bolder step than many, myself included, expected from Labour.

The party is notoriously neo-liberal in its economic outlook and is still strangled by its ghosts of the 1980s. Britain had Maggie Thatcher and we had Roger Douglas at whose eventual demise we can expect similar celebrations here as Britain has seen recently.

So it’s bolder than expected but how bold?

Judging by the hysterical reaction from National and the business sector the Labour/Green policy is radical. “Economic vandalism” is the cry from Business New Zealand, “Chavez-type policies” says right-wing columnist Fran O’Sullivan while National MP’s thunder about “communism” or similar absurdities. Even more bizarrely Prime Minister John Key claims it will result in power cuts and leave families huddling around candles.

Others apparently think the policy will damage Labour and make them unelectable.

All these are silly, childish responses. Just where have these people been hibernating? The public are fed up with the constant mantra that the market will give us the best deal while they watch in stupefied amazement as their electricity bills go through the roof.

It’s been obvious from the outset that the market reforms were designed to benefit shareholders rather than consumers. These fake markets created by National in the late 1990s and operated by Labour without significant change for the next decade have hammered hapless consumers. It’s been a charade with companies acting like a cartel rather than competitors.

Labour has finally made the call that the King has no clothes and the Labour/Greens policy will be popular.

The real problem is that the Labour/Greens proposal is timid. Instead of abolishing these sham markets they propose establishing a government agency, New Zealand Power, as the single buyer of electricity which would in turn sell to retail suppliers. This will not remove the markets but hopes to make them work better by inserting some kind of government referee at one point.

As a friend said the other day – why use a market mechanism to fix a market failure? – why indeed?

At 4.4 million people New Zealand is a small country – smaller than Sydney. Yet we have chopped up our electricity sector into bits, privatising some and told them all to compete. The brainlessness has produced a spectacular market failure.

Electricity is indispensable and generally cheap to produce in New Zealand and yet we have a social crisis with its cost. Children grow up in damp, cold houses and develop serious respiratory diseases because their families can’t afford to heat them and old New Zealanders stay in bed in winter because they can’t pay for the electricity to keep their houses warm enough. It’s all very well having a plan to insulate homes and for the Housing Corporation to install heat pumps in state rentals but if the families can’t afford to use them we are back to square one.

While electricity costs are moving out of reach for our most vulnerable we sell huge amounts of electricity so cheaply to the Bluff aluminium smelter that if it closed, as the New Zealand Herald pointed out two weeks ago, we could provide $80 of free power every month to every New Zealand home – forever.

In the face of such dramatic failure the Labour/Greens proposal is only a timorous step forward.

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12 Comments

  1. Draco T Bastard says:

    As a friend said the other day – why use a market mechanism to fix a market failure?

    Said the same thing myself. It’s a step in the right direction but full nationalisation should be the planned end.

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  2. Salad says:

    Thank you John for returning the discussion of this policy to reality. The response has been hysterical on both sides.

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  3. Ovicula says:

    The celebration with which the “left” has greeted this policy announcement shows just how far Labour has moved to the right and how little we expect or demand from them. We’re like abused participants in a relationship, who get bashed 6 days of the week. On the 7th our partner gives us a bunch of flowers and we rejoice. Not for me, I want more.
    Thanks for bringing this back to reality, John.

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  4. geoff says:

    The plain spoken, bald truth. Well said John. If only the leaders of the main opposition parties had the gumption to speak this way. The two main reasons they don’t is because they are too afraid to do so AND they still actually buy into the idea of free markets.

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  5. Duval says:

    It will no doubt come as a shock (excuse the pun) to our Bubble-Boy Optimist-Prime that there are already people huddling around candles – the ones who can’t afford those competitive market rates. The “growing underclass” John Key, do you remember them? You were oh so concerned about them prior to your election and full of Obama’ish hope and change – remember that “street of shame” you walked down in 2007? Do you even remember its name? Where is the shame now?

    While we’re doing Q and A…

    Where exactly are those 170,000 jobs you keep forecasting year on year?

    Why does unemployment continue to rise?

    In fact, why does unemployment ALWAYS rise with a National government??

    Is it to do with your deliberate structural unemployment to drive down wages?

    Have wages fallen enough for you yet? You did say you would like to see them fall even further.

    When will it be enough? The starting out wage? Or would you like to see that fall even further?

    What happened to closing the gap with Australia? You boldly declared you would “have a relentless focus” on and it would be “a fundamental purpose of this government to narrow the wage gap with Australia” – yet it continues to widen.

    Why did you give unaffordable tax cuts? To the “rich” I hasten to add.

    Was it to deliberately create the needed deficit as your pretext to massive cuts and asset sales??

    What do you think those tax cuts (for the wealthy), the “tax switch” (onto the poor and working class), and massive public cuts have done to that growing underclass you once spoke of? – Here’s a tip – inequality in NZ has grown under your “leadership” faster that any where else in the world and is higher than it has ever been in NZ history.

    Speaking of asset sales – do you remember when you declared you “had no interest in selling assets” instead you “want to build assets”?

    I guess you are building assets – into your blind trust. Or is that Whitechapple?

    I know these are all silly questions aren’t they – the only things relentless about your government is the attack on the poor and working class, corporate welfare, the upward transfer of wealth, and your memory lapses.

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    • Paul says:

      Questions Mr Shearer and his caucus must ask all the time.
      Go on the front foot and challenge the right wing media on their bias as well.

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      • Gosman says:

        How will get do that? It would make them look like cry babies.

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  6. MARC says:

    Yes, John, you got it right. This is supposed to look progressive, maybe even “left”, but it is something of a policy common in many US states, in Europe and South Korea. That does not mean I do not support it, I think the basic idea is great.

    Yet Labour is losing credit, having used the SOEs for years, when last in government, to get high dividends to finance government policies. Also market mechanisms, while despised, were all the go under Labour. So it is a real turn around and whatever.

    Thanks for that. But what else besides of this is going to happe? We need diversification, also more overseas investment in value added work and industries. So all this can only be a part solution. But at least, the Nats are like the possum staring into the headlights now. When did we last have that? Good luck Russel and David (to be sorted).

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    • Afewknowthetruth says:

      Might be a good idea to escape from the 1980s and get into the 2010s.

      ‘Investment’ and ‘value added’ and ‘industries’ are over.

      We live in times of global economic contraction (due to the peaking of oil extraction and ever-worsening EROEI), and global environmental collapse, due to industrialism, plis unravelling of Ponzi finance and Ponzi economics.

      The clowns and criminals in parliament are there to provide a side show, a distraction from the main events, and to allow the global elites, along with local opportunists, to profit from global collapse.

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  7. fambo says:

    All great journeys begin with a single step

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