Darkhorse: Why selling infrastructure is stupid

Written By: - Date published: 6:51 am, August 23rd, 2011 - 59 comments
Categories: privatisation - Tags:

Why selling infrastructure is stupid

Public infrastructure includes a range of assets and services that enable an economy to function. Many take the form of networks where completeness of the network is essential to its functionality. Networks allow the core of the economy to interact with the periphery.

  • Networks are required to always have spare capacity
  • Networks create opportunity not value

Infrastructures do not, at their optimum service level, usually operate profitably, they create opportunity for profit making activity. It is impossible to run an infrastructure to maximise returns to the owner while also maximising economic value to the economy.

Infrastructure is typically owned by a governance entity on behalf of the collective of those who benefit from it. This agency takes a number of forms but most typically is the state, local government, or an owner’s cooperative. This has been the case for as long as history because infrastructure is both a natural monopoly and also because the economic optimum level of service is well beyond the profitable level of service.

Infrastructure also has a large beneficiary class who benefit as much from its existence as its use (think roads). This is a problem for the owner as there is no direct means of capturing the value of the indirect benefit other than by taxation (or property rates).

This is why the mixed ownership model is unsound. Furthermore it is not possible to have two owners, the state and the investor, with conflicting expectations of value.

New Zealand is full of lost opportunities to maximise the economy because privatised infrastructure over-charges and under-provides. This means that both use and utility of the infrastructure are constrained and the entire economy constrained accordingly.

Public ownership of infrastructure was never a problem and management of publicly owned infrastructure was never the problem.

What we had and still have, is a governance problem.

Those who decide on the investment strategies and management policies were the problem. The fact that Parliament is still contemplating partial privatisation of infrastructure shows that Parliament still does not understand its governance role.

The privatisation of public infrastructure has become a popular concept. After several thousand years where the logic of public ownership prevailed, it has suddenly become a good idea to sell essential public services to profit making entities. Private business love this as it gives them an asset that it can either strip of capital then dump or can be run at a guaranteed profit as a natural monopoly. Often the new owners attempt both (as with NZ rail and to some extent Telecom) only to be eventually thwarted by deterioration of the function of the asset at which point the State has to restore it to public ownership (NZRail) or regulate the activity at a cost to the inflated capital value of the business or otherwise regulate and subsidise the restoration of its function (Telecom).

Private owners usually hit these assets savagely when they first take control, stripping out much of the bureaucracy that contains the organisation’s intellectual property. Service reductions are presented as efficiencies when they are typically cost transfers from the cost of operation out to the wider economy.

When communities or states sell their infrastructure they seem to view the proceeds as a windfall. The beneficiaries of these “windfalls” do not seem to understand that nothing is free.

The taxpayer and the infrastructure user are one and the same person.

The “windfall” must be paid for and the only ones who benefit from the services of the asset they have just sold is themselves. That they have sold an essential service, something they cannot do without – to some one who has no regard for anything other than profit does not seem to register in their awareness – until the first bill comes in.

Our leaders have in effect sold the right to be taxed forever in return for a once only payment. This is a Mephistophelian deal. In all cases it would be cheaper and much less foolish for the community owning the infrastructure that they wish to sell to go and obtain a loan against the asset and spend the money. They will have to pay the money back but at least they will still both own their infrastructure and have control of the cost of debt.

This thinking seems to have reached its ludicrous extreme when it results in the Victorian State government selling parts of its electricity reticulation network to a Singaporean based retirement fund.

Every time someone throws a switch in Victoria they make another small payment towards someone’s retirement in Singapore. It needs to be asked why is it that an agency of a foreign government can do a better job of owning and managing a strategic asset essential to the economic future of Australia than the Australian Government?

This is a statement about the relative competence and strategic vision of the politicians forming the Australian Government and the Singaporean Government rather than the relative merits of state versus private ownership.

We have the same problem.

At least the Aussies stood up to their government when it came to selling the Snowy River Scheme!

59 comments on “Darkhorse: Why selling infrastructure is stupid ”

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  1. Eddie 1
    23 August 2011 at 7:44 am

    Dead right.

    We’ve seen too much of what happens when infrastructure is run on a for-profit basis. The underinvestment of the 1990s in power, telecoms, and rail as private companies tried to extract a profit by cutting their biggest expense, new investment and maintenance, and upped prices.

    Private companies, especially foreign ones, have no interest in the long-term economic health of the country, not if they can extract larger profits sooner with vampire tactics.

  2. vto 2
    23 August 2011 at 7:53 am

    Where is our glorious Prime Minister’s similarly well considered and mature outline of the case for selling these assets?

    Has anyone ever seen it?

    Has he done one?

    • vto 2.1
      23 August 2011 at 12:44 pm

      So, this was a serious question. If anyone knows easily … where could I find a considered written piece by Key or English on why this privatisation is a good thing and that answers the counter-questions?

      If it doesn’t exist then it has occurred to me during a morning drive in the exquisiteness of a blue blazer Canterbury morn that you labourites could take this and other arguments to the people. Weekly, in each of the main newspapers publish something which outlines the arguments around your main policies. Every week, same place and time in the papers. This would then surely force the nats into making their arguments in return… no?

      If they refuse to debate these things as they are now then you are letting them set the scene. Take the debate to them. Force them to answer in more than two sentences.

      Has John Key ever addressed an issue in more than two sentences that is not pre-prepared?

      • AAMC 2.1.1
        23 August 2011 at 4:16 pm

        +1

        Start to take ownership of the debate, but although more than two sentences is desirable, it still needs to be short and sharp and in layman’s terms.

      • Puddleglum 2.1.2
        23 August 2011 at 7:11 pm

        Very good idea (obviously a bit of expense involved).

        What I like about it is that it:

        (a) forces deeper analysis into the public mind (there’s always someone who’ll get the argument and want to look smarter than his or her friends/workmates!);

        (b) it provides a further lever in what I detect is an emerging ‘meme’ in the mainstream media – that Key and his ministers are trying to avoid debate and sleepwalk to the election (a ‘don’t rock the polls boat by substantively discussing anything‘ approach).

        • AAMC 2.1.2.1
          23 August 2011 at 9:27 pm

          “Very good idea (obviously a bit of expense involved).”

          group funding, it works for journalistic and art projects, just needs some clever techie person to set up some sort of donation site and a bunch of us with facebook, twitter and e-mail to draw attention to it, full page ads, totally separate from any party, a citizen like Darkhorse (assuming he/she’s not a member of a political party?) to write it, with some help to keep it succinct.

          Except, buying space in a paper is more than a bit expensive.

          or, street press! Print a small A6 2 color magazine, design it nice and put them in cafe’s, mag shops, community centers, gyms, hand them out to your mates…

          and, A3 posters, simple white, black text, asking simple questions, pasted everywhere.

          Go old school, the media won’t have the debate, so force it!

          • Colonial Viper 2.1.2.1.1
            23 August 2011 at 11:05 pm

            http://thestandard.org.nz/looting-with-the-lights-on/#comment-366141

            We may be coalescing around a very similar group of concepts 🙂

            Would comprise two parts, a printed newspaper, small format, weekly, 8-16 pages long. This paper would be sold for $2 each, the seller would keep 50c, the remainder would go back to the publisher.

            The second part would be an internet TV channel which does interviews with important NZ figures, analysis of latest events and critiques of the NZ 4th estate at large.

            • mik e 2.1.2.1.1.1
              25 August 2011 at 10:35 pm

              Maori television would be a good option here Carol Hirschfelt would be the perfect producer prime time , good income earner for them .

          • vto 2.1.2.1.2
            24 August 2011 at 8:40 am

            About $4k for a double-sided single sheet to go into the Press, plus printing costs.

            Dunno, is that affordable for the left?

            • AAMC 2.1.2.1.2.1
              24 August 2011 at 9:10 am

              Teenagers and twenty something’s all around the world produce street press around music and culture.

              Recently in nz ‘Presence’ mag which has a double as a blog, which ties into CV’s idea. That allows video’s, interviews to sit amongst the txt/stories.

              Presence funds itself through story sponsorship as far as I can see.

              Funding is the issue, I think it needs to be something with no financial barrier, rather something you pick up free because it looks interesting, take it home, leave it on your coffee table, somebody else picks it up…..

      • Blue 2.1.3
        23 August 2011 at 8:08 pm

        Of course no such piece by Key or English exists. Why would they bother creating something like that?

        They don’t need to convince themselves that asset sales are a good idea. Their ideology told them so. They don’t need to convince voters, who are still prepared to vote National in record numbers on Nov 26th. And they don’t need to convince the Tory media, who think asset sales are a great idea.

        And then of course there’s the fact that explaining themselves, being accountable and fronting up is anathema to them. They know that all they have to do is avoid, deflect and divert and they’ve got the election in the bag. Who will hold them accountable? No one.

  3. Jim Nald 3
    23 August 2011 at 8:20 am

    “What we had and still have, is a governance problem.

    “This is a statement about the relative competence and strategic vision of the politicians forming the Australian Government and the Singaporean Government rather than the relative merits of state versus private ownership.”

    We are too small
    We are isolated
    We can’t do this
    We can’t do that
    This is not profitable
    That is not profitable
    This is out of our control
    That is out of control

    Indeed, we need to be more competent, more visionary, and much smarter about governance.

    It’s time for a mindshift – with the Government!
    And with Kiwi voters come Nov 26!

  4. robertguyton 4
    23 August 2011 at 8:23 am

    Please forward this article to Bill English’s office.

    • Draco T Bastard 4.1
      23 August 2011 at 12:19 pm

      I’m pretty sure he already knows all of it. Especially this bit:

      Our leaders have in effect sold the right to be taxed forever in return for a once only payment.

      He knows damn well that selling state assets/infrastructure just adds massive dead weight loss that his rich mates can profit from.

  5. queenstfarmer 5
    23 August 2011 at 9:13 am

    A good example of pure ideology. No assessment of the circumstances where the state should fully own an infrastructure asset vs where it might make sense [edit: not] to do so. No assessment of the very specific, targetted partial privatisation plan the Govt is seeking a mandate on. Just a blanket statement that “selling infrastructure is stupid” – which conveniently fits on a road sign.

    • marsman 5.1
      23 August 2011 at 9:20 am

      ‘Very specific, targeted partial privatisation’ Specific? Where? How? English and Key refuse to debate the issue and English keeps saying they haven’t worked out the specifics yet.
      Where is Nationals detailed analysis of their shitty little plan???

    • marsman 5.2
      23 August 2011 at 9:22 am

      National’s shitty little plan IS pure ideology.

    • Bored 5.3
      23 August 2011 at 9:29 am

      Read my comment below on rentier behavoir.

      There is also the old adage of “follow the money”. In this case those with capital are running scared and looking for a safe haven in the face of a major financial crash. At the same time the Nats have to pay for tax cuts for the same holders of capital through borrowing.

      In short the whole exercise has nothing to do with economic theory or ideology, it is a pure rort of the whole population for the benefit of the few. It is a mirror of the larcenous behavoir of the finance sector world wide. What Key and his cronies are looking for is a zero balance asset transfer of a “good renter” to themselves.

      • marsman 5.3.1
        23 August 2011 at 10:29 am

        Agree with you Bored but I do think that Neoliberalism is a rort disguised as an ideology.

    • Ianupnorth 5.4
      23 August 2011 at 5:21 pm

      QSF, you probably only want to buy the shares, sell them on and then use the profit for a golfing holiday on the Gold Coast…..

    • mik e 5.5
      23 August 2011 at 10:12 pm

      Qf Because its such simple idea countries more successful than actually invest. You will need more proof than a description from a dictionary and a bit of Ryalling to lever these high performing assets from New Zealanders .Just to make a quick buck for the govt of the day which has borrowed to the hilt to make its self look good now that is Stupid.When a company is going through restructuring they definitely don’t sell their best performing assets that would be really really stupid.I’m not completely against asset sales but we as investors have a right to get a true price for our assets .Air New Zealand for example is an under performing asset as far as its income is but the value to the overall economy is huge and the last govt recognized that when it went belly up . But now we should sell down for not fire sale prices to fifty one percent their it would reduce our risk and the likes of a larger carrier like Singapore airlines which is largely govt owned as well be cause they recognize that govt has a roll in helping businesses to be successful rather than the laissez fair effectively do nothing and everything will be all right Yeah right. No planning just borrow and hope. Lets just go through the portfolio of govt assets and sell off under performing assets, while being careful not to damage downstream areas of our economy. Thats how a major corporate would operate . But when you put an inside trader in charge we taxpayers are going to get ripped of big time.John Keys investments in NZRail while he was spokes man for rail for National he pretended he didn’t Know a thing netted him $10s of thousands of dollars

  6. Bored 6
    23 August 2011 at 9:22 am

    It never ceases to amaze me that the “market” proponents who propose privatisation have not read Adam Smith on this subject. He and the classical economists were reasonably clear about what “rentier” behavoir is. Privatisation is not about governance (even if that is an issue), it is about capital seeking a safe return in a near monopolistic way, pure rent seeking.

    This of course does nothing to create wealth by way of considered risk taking: the fool who runs the NZSX seems to think asset privatisation will “grow” the economy and his humble little share trading operation. Better growth or capital efficiency would result if the output of state infrastructure was zero profit rated and the output at cost was used to help new capital investments to succeed.

    • Colonial Viper 6.1
      23 August 2011 at 12:02 pm

      the fool who runs the NZSX seems to think asset privatisation will “grow” the economy and his humble little share trading operation.

      I’m pretty sure he believes the latter, and knows that the former is bollocks.

      • mik e 6.1.1
        25 August 2011 at 10:37 pm

        Now May Chen is getting in on the ACt saying she’s neutral.Yeah Right her firm is one of the biggest benefactors v in govt asset sales

    • Draco T Bastard 6.2
      23 August 2011 at 12:25 pm

      It never ceases to amaze me that the “market” proponents who propose privatisation have not read Adam Smith on this subject.

      Market economists wouldn’t know what an economy was if it bit them. If they did they wouldn’t be spending so much of their time postulating on money and finance.

  7. Afewknowthetruth 7
    23 August 2011 at 10:07 am

    As Bored has noted, it is now ‘loot the till’ time.

    The elites can see that everything is unravelling globally and are desperate to use this last opportunity to take control of anything that might provide them with a cushion during the collapse.

    Key is just the local agent for looting and is an opportunist. The only thing we do not know is how big a cut he and his cronies will take for the sabotage they are orchestrating. Of course, if rioters carry out looting they are charged and jailed: if elites carry out looting they are rewarded and given honours, since the whole system is corrupt (and has been from the outset).

    Governments have repeatedly got away with implementing polcies that benefit corporations at the expense of the common people by churining out the appropriate propaganda. That is the system. Governments are masters at lying to the people. Practically everything the government says is either an outright lie or is founded on some kind of lie or fabrication. Until people wake up nothing will change. Unfortunately, the chance of people waking up before everything crashes is close to zero.

    I see that gold has now broken $1900. The collapse of the economic system is relentless and is accelerating. But the Dow is up a tiny bit for the moment, so ‘everything must be okay and we must be about to see a recovery’.

    ‘selling infrastructure is stupid’

    People are stupid. That’s why governments can get away with what they do.

  8. tsmithfield 8
    23 August 2011 at 11:30 am

    Equity funding is quite a cheap source of funding for future expansion of infrastructure. That is because in the case of infrastructure, the investor has to take a very long-term perspective, and may not get a return for a number of years. Compared to debt funding where the servicing costs must be “paid as you go”.

    Although equity returns tend to be higher, a NPV calculation may show the costs to be similar because of the longer delay in return for the equity investor. Also, there are less risks for the owner in raising funds through equity because the owner controls whether dividends are paid or not, whereas raising funds through debt obliges the owner to fund the servicing costs whether the cashflow is available or not.

    • Colonial Viper 8.1
      23 August 2011 at 12:00 pm

      Equity funding is quite a cheap source of funding for future expansion of infrastructure. That is because in the case of infrastructure, the investor has to take a very long-term perspective, and may not get a return for a number of years. Compared to debt funding where the servicing costs must be “paid as you go”.

      And both methods you state are more expensive than raising the money through taxation.

      The Government has to pay zero to private shareholders in that case, and has to pay zero or minimal interest to foreign banks because there is at most short term (<5 year) debt.

      • tsmithfield 8.1.1
        23 August 2011 at 12:12 pm

        Except you forget the opportunity cost. Funds soaked up in taxation for some future project that might not reap benefits for 10 years or more could have been used for creating jobs in the economy now.

        • Bored 8.1.1.1
          23 August 2011 at 12:30 pm

          Equity partnerships longer term are about sharing the profit. You will see if you read what I said about the use of capital that it is merely trying to find a safe home with a steady return. Rentier behavoir versus productive risk.

          The real issue is that infrastructure owned by NZ taxpayers can borrow at the same or preferential rates than the private sector can: so why pay out the returns to rentier capital? Surely that money would be better used to increase the use of these infrastructural assets through being deployed to the general economy.

          • Bored 8.1.1.1.1
            23 August 2011 at 12:32 pm

            PS TS you will note that I do not think raising cash from tax for this is necessary or useful.

            • Colonial Viper 8.1.1.1.1.1
              23 August 2011 at 10:15 pm

              So…how else would you fund the spending where you would not have to pay back a loan plus interest to private capital?

              I can only think of two ways
              – You tax it
              – You print it.

              If you borrow it you are then paying 5% pa or so to private bond holders.

              • Bored …
                24 August 2011 at 7:29 am

                You print it…no that is inflationary. What you do instead is to make fractional banking the concern of the people i.e. credit can only be created by the central state owned bank. The future debt created to build infrastructure is reversed out as it is repaid, and the benefits create more real wealth…owned by you and me via the state.

        • Colonial Viper 8.1.1.2
          23 August 2011 at 10:12 pm

          Funds soaked up in taxation for some future project that might not reap benefits for 10 years or more could have been used for creating jobs in the economy now.

          ? uh…building a bridge, rail line or fibre network which is government owned and operated creates jobs right now. As it is built, then operating the infrastructure, then seeing wider economic benefits from it.

    • Afewknowthetruth 8.2
      23 August 2011 at 12:20 pm

      tsmithfield

      ‘future expansion of infrastructure’

      Now that is a nice delusion.

      I suggest you read some material on the end of growth. In 1972 the idea was introduced into the public forum as ‘limits to growth’. 35 years later, having ignored the obvious, the ‘idiots’ in charge pushed the economic system to the limit and hit the wall of peak oil.

      The game is almost over. Any attempt to expand infrastructure is futile and is just pouring yet more resources down the drain.

      Unfortunately, since we do have ‘idiots’ in charge they will keep doing it till they can’t….. probably 2015 the way things are looking.

      • Bored 8.2.1
        23 August 2011 at 12:36 pm

        AFKTT, Growth per se may have ended, but capital still needs to be invested in transition and economic development there of.

        I dont have any issue with capital being made to take risks and consequent rewards in this transitionary phase to steady state economics. Investment going forward will be more about how invest effectively in production in a restrained energy environment.

        What we dont need is for capital to be used tying up profits for those who dont earn them actually “doing” stuff.

        • Colonial Viper 8.2.1.1
          23 August 2011 at 10:27 pm

          I dont have any issue with capital being made to take risks and consequent rewards

          The free market is not going to give the correct price signals to capital IMO. For ex. it is still more profitable to take infrastructure, societal or environmental capital, break it down, and sell it off and consume it than to invest in long term projects for sustainability.

          transitionary phase to steady state economics.

          What suggests to you that “steady state economics” is achievable from our current state space? How long will it take before we hit that SSE space?

          Investment going forward will be more about how invest effectively in production in a restrained energy environment.

          1) Who is going to make this investment and why would they?
          2) The salvage/scrap economy (cf brand new production) is going to be an increasing sector of the overall economy.

          • Bored 8.2.1.1.1
            24 August 2011 at 6:53 am

            CV, I think we might disagree on the role of capital: short of a complete revolution we are going to have to put up with it in its death throws. It is however important how we use corporate capital as it crumbles.

            What worries me most is that we need to produce and distribute, and I cannot envisage any system that does not have a “market” of some variety. The fear i have currently is that capital needs to be put to good use, not plundering rents. If that involves risk and reward, new ways of production with less energy then good. Let the risk takers get a reward.

            The corollary holds aswell, if capital seeks a safe home lets penalise the shit out of it.

            • Colonial Viper 8.2.1.1.1.1
              24 August 2011 at 10:59 pm

              There are very few ways to usefully apply capital at the moment. New ways of production is a bit generic to be my first choice. I would choose:

              1) Electrified rail everywhere, for freight and people. Other public transport systems where that is not feasible.

              2) Electricity generation from renewable sources. Several GW of it.

              3) Energy usage reduction initiatives. Insulating homes etc.

              4) Prepare low energy mining, refining and fabrication infrastructure.

              5) Sustainable low fossil fuel farming.

              6) Building up local industry and suppliers to do each of the above.

              Needs about $30B of investment over the next ten years, and a shedload of Government leadership.

              Unemployment problem? What unemployment problem?

  9. randal 9
    23 August 2011 at 11:39 am

    Yes well, all the bigmouths on the National party side have never taken a risk in their life. thats why they entered politics so they can get a free lunch and new elastic for their tight underpants.

  10. Treetop 10
    23 August 2011 at 1:21 pm

    Killing the golden goose which lays the golden egg is what selling any shares from energy companies will do.

  11. clandestino 11
    23 August 2011 at 4:00 pm

    Now I know why they don’t teach economics/finance in schools…so they can keep ripping us off and getting away with it

    • Colonial Viper 11.1
      24 August 2011 at 11:01 pm

      The orthodox economics that would be taught in schools is worse than nothing.

      Linear and curvilinear price/supply curves my ass.

  12. Ianupnorth 12
    23 August 2011 at 5:20 pm

    On the radio this morning it was noted that Contact energy had made $300 million profit, despite losing customers because it was the most expensive energy provider. Admittedly $150 million was from the sale of assets to Genesis Energy, but I would rather the $3 million per week profit went to treasury rather than overseas.
    Now multiply that figure by the number of companies threatened with sale and tell me it is sensible to sell a profitable going concern.

    • marsman 12.1
      23 August 2011 at 6:08 pm

      Heard on the news at noon that Meridian made a large profit as well, way up from last year, yet the head of the company said prices were unsustainable, they would have to rise! Did I miss-hear that?

      • darkhorse 12.1.1
        23 August 2011 at 9:48 pm

        And once the whole lot was run perfectly well by one outfit with a CEO paid a few hundred thousand and no electricity commissions and the electricity was distributed by locally owned lines companies and retailers. And if the country needed more electricity they built some additional capacity (political interference excepted).

        The whole show was built so that we could have a modern society and a modern dynamic economy.

        Reliable, sufficient and reasonably priced Energy is vastly more important than profit. As a “factor of production” any constraint to to energy supply is a constraining limit on total economic output.

        This is exemplified by the cost of dry years when power shortages occur. The GDP effect of the supply shortages has a greater cost to the economy than building additional capacity but the supplier doesn’t have to carry the cost of lost productivity and is rewarded by scarcity pricing.

        • Ianupnorth 12.1.1.1
          23 August 2011 at 10:22 pm

          Add to that one (locally based) call centre, locally based management, etc… The money saved by not duplicating roles could be used to build other sustainable means of generation (hydro, geothermal, wave, wind, etc)

          • darkhorse 12.1.1.1.1
            23 August 2011 at 10:48 pm

            Actually it was even worse than that – when ECNZ was broken up it was done by engineers and they lumped the engineering lemons into the Contact basket thinking that they were being clever not realising that some such as Wairakei had an essential economic role in conditioning power after it was moved north through the DC link. The whole system needs to work as one because of the nature of the system individual power stations can hold monopoly power over elements of the grid.

  13. justme 13
    23 August 2011 at 6:27 pm

    The thing is, not only does it make no sense to sell infrastructure in order to rent it back, it also makes no sense to have energy SOE’s run in their current form i.e. required to make a profit from the people they are supposed to be serving as extensions of the state.

    I think the argument that we shouldn’t sell Contact etc. because they are profitable isn’t quite the whole story – they shouldn’t be profitable in the first place. It is even more true that they shouldn’t be sold to foreign owners, who will probably run them at greater profit levels with the associated decrease in service.

    The fact that they are run as they are currently may just be making them juicier targets for privatisation.

    • Draco T Bastard 13.1
      24 August 2011 at 12:02 am

      I think the argument that we shouldn’t sell Contact etc. because they are profitable isn’t quite the whole story – they shouldn’t be profitable in the first place.

      /Agreed

      Generally speaking infrastructure should be supplied though taxes with some pricing structure to allow people to budget their use of the supplied resource.

      • rosy 13.1.1
        24 August 2011 at 12:18 am

        Generally speaking infrastructure should be supplied though taxes with some pricing structure to allow people to budget their use of the supplied resource.

        Pricing needs to incorporate future costs – i.e. investment capital so some sort of return is required. My main objection to the competitive model is that it prices for return to investors, not investment in future supply until it’s critical. In the competitive model better returns never really gets re-invested back into the company so then we get the big rounds of price hikes

  14. sinus 14
    23 August 2011 at 7:34 pm

    Partnerships in the longer term actions are the sharing of profits. You will if you read what I said about the use of capital that it is simply trying to find a home with a steady return. Annuitant behavoir against the risk productive.

  15. Drakula 15
    23 August 2011 at 10:45 pm

    What Trans-rail (which was owned by a Wisconsin company) did to the rail network was absolutely dangerous. Workers were getting killed by being overworked and under staffed.

    I knew a worker there who had the absured job of welding in the gaps on the rails so that the carriages won’t go clickty-clack. I’m not kidding.

    So what happenes in the summer when all the steel rails expand with the heat?

    Yes that’s exactly what happened.

    • mik e 15.1
      24 August 2011 at 10:39 pm

      Drakula When they had finished asset stripping NZRail they shot through

    • KJT 15.2
      24 August 2011 at 11:54 pm

      Welding is cheaper than fish plating.

      No good for the long term reliability of the network, but of course the thieves just wanted to take the money as quickly as possible, then run. Like NACT!

  16. Jum 16
    24 August 2011 at 11:30 pm

    Please enlighten me about China wanting to buy NZ farm land. Do they still refuse to sell land to foreigners? Fonterra says they are investing in China and so China should be able to invest in NZ.

    But, is Fonterra actually buying LAND in China? If not then China has no right to even think about buying land in NZ. Also, is China intending to buy that land with US$? Are the US dollars of much value? Isn’t gold the safer currency? Gattung seems to think so.

    Globally, how many countries allow the selling or leasing of their most valuable land resources? Is there a percentage rule of the amount of land, etc. that can be owned by foreigners not living/working/paying taxes in New Zealand. That would include the expat cretins who still try to control New Zealanders’ lives but don’t contribute towards NZ; instead they are extracting profits from NZ.

    • Colonial Viper 16.1
      25 August 2011 at 12:08 am

      Fonterra says they are investing in China and so China should be able to invest in NZ.

      But, is Fonterra actually buying LAND in China?

      You’ll find that all of Fonterra’s investment deals with China have to be done in JV’s with local Chinese companies (hence the poisoned baby milk debacle).

      Part of the reason that this is necessary is because the Chinese company has to be the one to own the land, not the foreign company. Fonterra might be allowed to own (invest in) the buildings on top of the land, or the machines in the factory itself. But definitely not the land. (Closest they might get is a long term lease).

      Basically the Chinese Govt is smarter than the NZ Govt. And less shy to act in their nation’s own self interest. Whereas NZ has turned into a mediocre country of supplicants.

      • Jum 16.1.1
        25 August 2011 at 12:25 am

        Thanks Colonial Viper. This really annoys me because the media leave out that info deliberately to make New Zealand sound unfair in their dealings with China.

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