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Even Bob Jones against asset sales

Written By: - Date published: 11:33 am, July 3rd, 2012 - 13 comments
Categories: privatisation - Tags:

Bob Jones may be a facetious old bugger but he knows a rort when he sees one. And asset sales are a rort: “Since the advent of the industrial revolution every business has sought the bliss of a monopoly. The competitive market economy denies that, except in unique situations, such as for example with our hydro electricity generating dams. So why sell them?”

“Here the Government becomes a little slippery. To reduce debt, says the Finance Minister, despite our public debt being low by world standards and interest rates never being lower. To enable future capital-raising, argues the PM, overlooking that if, as an appeasement to objectors, the Government intends retaining half ownership, it will still be up for 50 per cent of any capital-raising while receiving only half the previous dividend return.”

There, Jones knocks over three of the Government’s main arguments in two paragraphs:

– privatisation won’t increase competitiveness, it just provides monopolistic profits to private investors through higher power prices

– it doesn’t make sense to reduce the amount of cheap debt you’re borrowing by selling relatively high-return assets (returns that still aren’t high enough for a private investor’s cost of capital)

– privatisation would actually constrain the ability of these companies to raise capital because they’ll have to get 51% from the government every time.

That leaves them with ‘mums and dads’. And we already know that the Government expects 93% of us won’t buy shares. So, which mums and dads are these?

13 comments on “Even Bob Jones against asset sales”

  1. Karl Sinclair 1

    Go Bob, just to add:

    From The Dynamics of a Mixed Economy:

    Click to access dotmesi.pdf

    The great Viennese economist, Joseph Schumpeter, has given a
    rather different prognosis of the capitalist process on which I also
    feel obliged briefly to comment. While Fukuyama’s thesis is based
    on the proposition that the struggle of ideas propels historical events,
    Schumpeter, like Kirzner, views capitalism as driven by an
    entrepreneurial quest for profit. Unlike Kirzner, however, the forces
    of entrepreneurship for Schumpeter give rise to a process, not of
    coordinating discovery, but rather of discoordinating “creative
    destruction” (Kirzner 1973:125–31) that operates not only to fuel
    competition within the market process, but, perversely, to erode over
    time the very social fabric that supports it. Eventually, as investment
    opportunities steadily vanish, this process sets the stage for its own
    demise. Specifically, the creative-destructive process generates a
    growing hostility on the part of intellectuals against capitalists and
    capitalism and a spreading ennui among entrepreneurial innovators
    that in the long term turns activity within the capitalist process into
    mere routine. His outlook for capitalism is thus infamously gloomy:
    “Can capitalism survive? No. I do not think it can” (Schumpeter
    1950:61). The gales of creative destruction abate and history comes
    to an end for Schumpeter, not in a liberal democracy under
    capitalism, but in a workable, if uninspiring, form of socialism (ibid.:
    131–86).

  2. Our debt isn’t low by any standards. $112 Billion in off the book Derivatives of odious debt generated by John Key and his banking buddies. If we keep protesting that will all of a sudden be on the books. Just like in Greece, Spain and Ireland

  3. Tom Gould 3

    @ travellerev, do you mean off their books and onto ours?

  4. tsmithfield 4

    Um, James, it seems to me that Bob Jones is criticizing the government for retaining 50% ownership rather than flogging the lot off, as can be seen from the last half of the relevant paragraph.

    ….To enable future capital-raising, argues the PM, overlooking that if, as an appeasement to objectors, the Government intends retaining half ownership, it will still be up for 50 per cent of any capital-raising while receiving only half the previous dividend return.

    If you read further down in the article Jones says:

    One absolute certainty is that the people who bitterly opposed the construction of our dams are exactly the same types now opposing their sale. What puzzles me is why the Government doesn’t sell TVNZ. The rationale for owning it was to ensure quality public broadcasting. It’s hardly debatable that TVNZ’s fare is, with few exceptions, a diet of populist trash, yet inexplicably, its one attempt to create a channel providing a degree of quality broadcasting it’s now closing.

    Selling Air New Zealand makes sense. The financial performance of commercial airlines, being a modern business, is assessable. Their global history amounts to a net loss (more educational value from your newspaper). That’s not peculiar to airlines yet there are always buyers, for as the PM knows from his past employment, the investment industry is noted for its irrationality.

    So, it seems to me, Jones would be keen to sell the lot rather than piss around with 50% ownership models.

    • felix 4.1

      Is the govt arguing for selling the lot then? Or just for pissing around as usual?

    • mike e 4.2

      The stupid monetarist Would trust a (investment banker) Robber.A common criminal in suit. without the stocking Definition of an investment baker. When the FBI come to get old Shonkey I hope they have the right warrants

    • Pascal's bookie 4.3

      nah ts. You’re an idiot.

      He says they should sell some things they are not selling, not sell the things they are selling, and that the the MOM model is a pig.

      So he reckons they are wrong about everything, pretty much.

    • higherstandard 4.4

      You’ve have failed basic reading comprehension.

  5. Murray Olsen 5

    Any mention of Bob Jones just makes me wish journalists knew how to physically defend themselves.

  6. TimD 6

    Feels like a rant and an excuse for a few cheap shots at ‘greenies’ to me.

  7. tc 7

    Smart man who understands a good versus a bad decision having been through a few cycles. The Nats know this isn’t defendable from a rational perspective.

    So they’ll stick with the spin and mates in the media including their blogosphere cohorts like the persistent ones on this site and DPF etc as logically from any angle the hydro dam sales represent economic and sovereign stupidity and negligence which is par for the course under ‘everything has my price tag on it’ sideshow shonkey.

  8. Treetop 8

    Would it not be better to sell two energy SOEs completly and retain 100% of the other two?

    Note: I do not even want one share sold from any energy SOE.

    To have one foot in and one foot out, it is going to be/get messy.

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