Eddie explored yesterday who stands to lose from falling asset values in electricity companies resulting from lower power prices. The answer: the Crown and foreign investors. Now, JBWere has estimated those book value losses at up to $1.4b for Contact and Trustpower, meaning $4b all up. But, despite the cries from the Right, that doesn’t mean wealth is being lost, it’s moving.
It’s moving to households and businesses in the productive economy. They’re the ones who will get the wealth that the electricity companies are losing through paying less for their power. Work out the new present value of $700m a year worth of savings on power to households and businesses starting in four years’ time (with odds of Lab+Greens winning at 50%, 8% discount rate) and it comes out at about $4b. The electricity companies’ loss is our gain.
And that’s just the first round impact. Once you consider the economic benefits of having that extra money circulating and the removal of an incredibly inefficient tax via infrastructure (which is what electricity superprofits are) then the wealth gains for everyone far outweigh the electricity companies’ losses. That’s what BERL’s analysis shows – 5,000 more jobs, nearly half a billion a year more in the economy.
And, remember, this is only undoing the redistribution of wealth away from families and businesses to electricity company owners that has been going on for the past two decades.
Funny that the Right’s so-called economic experts aren’t even admitting that side of the equation exists as they run around like chickens with their heads cut off. Why would that be? Could it be neoliberalism is all about grabbing public ‘rents’ for the capitalist elite’s benefit, and they’re now seeing not only that snatched away from them in the electricity asset sales, but also the threat that other rent-seeking will be tackled?