Why real Kiwis hate Privatisation

David Seymour says Kiwis are squeamish about Privatisation, there’s a reason for that…

Seymour says Kiwis ‘squeamish’ about privatisation – history indicates why

ANALYSIS: Many New Zealanders remember the state asset sales of the 1980s and ’90s, and the transfer of public wealth into private hands. By Massey University professor of politics Richard Shaw

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.

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: “When 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.

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”.

But as the right-leaning Maxim Institute points out, “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.

…the Privatisation Agenda The Daily Blog has been warning you that was coming, which is linked to removing Treaty Rights, advancing donors interests and the far right International Think Tank Atlas Network has been a 40 year economic experiment that has robbed the country of economic sovereignty and locked entire generations out of home ownership and into User Pays debt.

They have privatised to exploit public anger and then sell it to Political mates.

We cut back tax revenue so there isn’t any to redistribute in the first place.

The tax yoke is locked onto the poor while the mega wealthy rot the rigged game of capitalism that we have.

As loath as I am to link to Dr Incremental, Max Rashbrooke, he makes the crystal clear point that the 40 year neoliberal Privatisation Experiment is what has led to our infrastructure gridlock and inequality at the expense of the common good for corporate profit…

How a failure of the imagination opens the door to privatisation

It was, as the economist Bill Rosenberg observed, “a conflict of interest fit for a post-Soviet state”. In 1993, financiers Fay Richwhite were allowed to advise the government on the sale of the state-owned New Zealand Rail – and then be one of main shareholders in the winning bid.

After that things really went downhill. 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”, Fay Richwhite and their fellow owners took out at least $370m in profits from a firm for which they had paid just $328m. 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. 

Rampant conflicts of interest, asset-stripping, disastrous outcomes, profits flowing offshore to wealthy interests rather than ordinary New Zealanders: this might be why, as David Seymour observed last week, New Zealanders are “squeamish” about privatisation. Not that the soon-to-be deputy PM has learned anything from those debacles: indeed he thinks we should plunge ourselves right back into them.

Of course the contours of the state – the services and assets it provides and owns – will change over time. But a regularity of the last forty years, following the worldwide deluge of privatisation in the 1980s and 90s, is that handing over core public functions to the private sector generally ends in failure.

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. 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. 

Hence, in the UK, privatised railways have been such a disaster – massively increasing costs with no corresponding rise in quality – that, 30 years later, Keir Starmer’s Labour government is finally bringing them back into public ownership. 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. (Unsurprisingly, a global meta-review by Spanish and American researchers found no “genuine empirical effect of cost savings” from privatisation.) Across the border, publicly owned Scottish water has achieved better performance while reducing operating costs 40% and at times cutting water charges. 

The story repeats: privatised bus companies, the OECD concluded, are cheaper than public ones only because they cut wages. Ditto private prisons.

…look what part Privatisation has done to our electricity market…

Electricity sector privatisation is destroying manufacturing industry

In 2022 and 2023, First Union, the NZ Council of Trade Unions, and 350 Aotearoa released a series of reports entitled Generating Scarcity, about the impact of the partial privatisation of Meridian, Mighty River Power (now Mercury) and Genesis under the previous National government.

They argued that in the decade since those privatisations, the gentailers – Meridian, Mercury, Genesis and Contact (fully privatised in 1999) – paid out $10.8 billion in dividends to shareholders, while total generating capacity increased by one measly percent.

For every dollar invested in new capacity over that period, the gentailers paid out $2.41 in dividends. From 2016 to 2020, gentailer dividends were around four times the scale of new investment, while consented capacity simply wasn’t built.

Gentailer debt levels remain strikingly low, especially in light of last year’s gentailer-funded “The Future is Electric” report, whose own preferred investment pathway would see annual generating capacity increase by 163 percent in the coming 25 or so years.

Our grid leans heavily on hydro, and therefore needs an engineered solution to the so-called “dry year problem”. Hedging the network with wind, solar and battery storage is the cheapest fix, but it still costs money.

We all pay the price for underinvestment. With high mortgage rates and rising rents, low-income households can’t always afford to keep their homes warm and dry, lumping costs onto the struggling health system.

…when even John Key admits that there isn’t much left to privatise…

Sir John Key doubts asset sales will boost New Zealand economy, says ‘nothing to sell’

• Former Prime Minister Sir John Key doubts selling state-owned assets will benefit the economy, saying there’s “nothing to sell”.

…you know shit is desperate because that’s what this is, desperation.

National’s Austerity Budget where they borrowed $14billion for tax cuts and $3billion for Rich Landlords has hollowed out Public Service spending so much so tat they have crashed the economy without anyone realising it yet…

RBNZ chief economist downbeat on economic outlook

• • Weak productivity, low investment, skill lack key factors in weak growth performance
  • New Zealand hasn’t been “rock star” economy for decades
  • Further rate cuts possible but won’t hit early pandemic lows

The Reserve Bank’s chief economist has painted a dim picture of the country’s economic outlook because of weak productivity, investment and trade.

In an online presentation about economic growth and interest rates Paul Conway said New Zealand has been tumbling down the international economic rankings for many years to the point that it now lagged well behind major trading partners and even emerging economies.

He said the level of productivity, private sector and government decisions, central bank interest rates and other factors would all determine the economy’s growth potential.

“Over the next three years, we currently expect potential output growth to range between 1.5 percent and 2 percent per year. This is a lower economic ‘speed limit’ than in the recent past. This subdued outlook stems from expected ongoing weakness in productivity growth and lower net immigration.”

…that’s just the beginning, throw in the effect of Trump’s Tariffs on an inflated American Dollar and petrol prices, and we could see $4.50 a litre petrol by the end of the month.

Look folks, how do I say this as simply as a I can to ya’ll.

Climate Change is going to force a level of adaptation you are not ready for, and if you allow these rich prick right wing free market acolytes to shrivel and sell off what remains of the State when you will desperately need that State more and more with each passing year, well, it’s a self mutilation to your own existence FFS.

Real Kiwis hate privatisation because they know their history.

Real Kiwis hate privatisation because they know corporate power can never be trusted.

Real Kiwis hate privatization because they know a democratic state based on community, solidarity and justice must be the solution to climate change adaptation, not profit margins and toxic growth.

The Daily Blog warned you the NZ Right would eventually unleash their Atlas Network Privatisation agenda, now is the time to pick sides.

 

Increasingly having independent opinion in a mainstream media environment which mostly echo one another has become more important than ever, so if you value having an independent voice – please donate here.