Participate: Stop Asset Sales and Welfare Reform

Written By: - Date published: 11:02 am, March 30th, 2012 - 54 comments
Categories: democratic participation, privatisation, welfare - Tags:

Friday 13th (April) – a scary day as submissions close on 2 major government bills.

Firstly: the Mixed Ownership Model Bill. If we want to stop Asset Sales, as many submissions as possible would be a good start.  So click on the link to submit.

Some points you may wish to make in your submission:

  • A majority of New Zealanders oppose the partial privatisation of New Zealand’s best state-owned assets;
  • It makes no fiscal sense to sell assets earning 18% (capital appreciation and dividends) to pay down debt costing 4%;
  • Treasury’s 2012 Budget Policy Statement says that in 2016 the lost dividends from privatisation are $94m greater than the savings in reduced interest payments;
  • It is unfair to sell assets that currently belong to all New Zealanders to a small minority who will be able to afford to buy shares;
  • Partial privatisation is an inevitable prelude to foreign ownership of a large chunk of our energy companies. That will mean high power prices, dividends flowing overseas, and fewer jobs;
  • Individual energy assets, like Manapouri power station, can be sold off under the legislation into full foreign ownership and control;
  • The renewable energy sector is growing rapidly internationally. We own the companies that have the critical mass, the expertise, and the capital to take advantage of that growth and create tens of thousands of good green jobs here in New Zealand. Privatisation will end that opportunity.
  • Selling the assets is a form of intergenerational theft. One generation will sell the assets that past generations have built up and future generations will not have the fruits of that.
  • Power cuts are more common with private energy companies – they are more concerned with profit than continual energy supply.
  • Greenhouse gas emissions are likely to rise – privatised companies are incentivised to try and increase our energy use (and their profits). Which will hardly help us keep our commitments.
  • Water ownership is in dispute – Maori are filing for customary rights to water. Mighty River may not have full rights to the Waikato River.
  • Privatisation will not solve our economic problems.

Secondly: the Social Security (Youth Support and Work Focus) Amendment Bill.

This is the bill that has mothers of one-year-olds forced out into paid work. With 150,000 jobless, this is hardly the right time for this bill, and a serious incursion into how people wish to raise their children.

It will also have third party providers profiting off unemployment misery.

So make sure you have your say on both bills.

54 comments on “Participate: Stop Asset Sales and Welfare Reform ”

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  1. shreddakj 1
    30 March 2012 at 11:43 am

    Don’t forget the asset sales march in a month’s time too.
    http://www.facebook.com/events/334873306563769/

  2. Fortran 2
    30 March 2012 at 1:30 pm

    How can we take this Government down and get a new Election.
    The media are trying hard but need more support.
    Is this the way to go about it ?

    • shreddakj 2.1
      30 March 2012 at 3:19 pm

      I think a huge march against one of their main policies will help materialise the distaste a lot of the public are feeling. Help spread the word and get people to come along to the march.

  3. the sprout 3
    30 March 2012 at 4:09 pm

    thanks for this ben, good post
    just one point though, it’s welfare destruction, not “welfare reform”.
    no point in helping their cause by adopting their issue framing 

  4. Reagan Cline 4
    30 March 2012 at 7:05 pm

    Ben, “a majority of New Zealanders oppose” – not such a persuasive argument when a majority of New Zealanders have not read the Bill
    The purpose is not just to pay debt off, proceeds are also to go towards health, education and transport infrastructure.
    Treasuries prediction is just that, a prediction – a lot can happen in 4 years – including benefits from redployment of capital from the partial sale of the “assets”.
    “Foreign” ownership – subject to NZ law and not desirous (lets assume) of damaging profit potential by alienating the local consumers and voters.
    Privatisation might enhance the growth of the renewable energy sector – any evidence to the contrary Ben ?
    Future generations will have the benefits of partial privatisation in the returns they receive from retirement funds investing in the enterprises and from the Future Investment Fund.
    “Greenhouse gas emissions are likely to rise” – why ?
    The doubt about Mighty River having “full rights to the Waikato River” is a risk to whoever owns the enterprise – state and other shareholders.
    “Privatisation will not solve our economic problems” – probably not because they derive from our modern way of life and our beliefs, which are detrimental to many and to the environment (a false but useful concept – try imagining youself separate from an environment).
    The New Zealand Labor Party needs to put together and publicise a programme based on something other than “an individual’s right to prosper at the expense of others”.

    • McFlock 4.1
      30 March 2012 at 7:24 pm

      Reading so much drivel, it hurts.
         
      Pretty much every statement was bullshit, and it’s “Labour”, not “Labor”. 
      The funniest bit was talking about how new owners wouldn’t want to crap in the NZ market. The fact is some lambs are shorn over the long term, others go the the works for short term profit. Like Tranzrail.
           
      The government shears over the long term. If the investors are large retirement funds wanting good returns, they’ll extract as much profit as possible over the short term, then go somewhere else. Thus running down enterprises that, until this bill goes though, future generations already own. And now Treasury might be under-predicting the economic outlook resulting from National party policy? Normally they overpredict the nats, and substantially underestimate the benefits of NZ government policies.
       

    • Nick 4.2
      30 March 2012 at 7:26 pm

      Reagan, you are a bollock brained git!!!! A born to rule fuckwit. Your compassion levels are zero minus. I hate sharing my community with your type of organism.

      [lprent: I’m having problems detecting a point in there. Read the policy about pointless abuse and warnings. ]

  5. fender 5
    30 March 2012 at 7:16 pm

    I support these measures fully and will be doing my bit, but (and I hate to sound pessimistic) this Nact dictatorship have shown time and again they are too pig-headed to take notice of ANYBODY, and I suspect that even if 4 million submissions against their plans were recieved nothing would change their tunnel vision thinking. Hope I’m wrong though, so come on folks, make submissions and hit the streets in an effort to bring this madness to an end.

  6. Reagan Cline 6
    30 March 2012 at 7:55 pm

    Nick, many people believe we are all born to rule (it is fundamental to Judeo-Christian belief if I have undersood Genesis correctly). I wish you felt more relaxed about sharing your community with my type of organism (we are very very closely related after all – as organisms go).

    • McFlock 6.1
      30 March 2012 at 8:07 pm

      I wish you’d actually demonstrated that you do have capacity for compassion, rather than defending (and thus confirming) your arrogance and “born to rule” mentality. 
           

  7. Reagan Cline 7
    30 March 2012 at 8:03 pm

    McFlock – listen to soothing music – it is freely available. An obsolete rolling stock and lines, signalling, staffing etc system in a country that relies on roading to move freight is a very different proposition to Hydroelectric Power stations – your comparison does not stack up. How arrogant of you to persume to speak for future generations ! Are you a seer as well as an expert on pronunciation ? As I understand it, the government looks to Treasury for predictions rather than Treasury tayloring its advice to suit the governmant.

    • McFlock 7.1
      30 March 2012 at 8:17 pm

      I merely pointed out that your supposed advantage of selling the family silver “Future generations will have the benefits of partial privatisation in the returns they receive from retirement funds investing in the enterprises and from the Future Investment Fund.” is redundant, because future generations already have the benefits of owning those assets. 
        
      You accuse me of pretending to be a seer, yet you made the initial assumption that foreign owners would not wish to damage the profit potential of the asset by alienating “consumers and voters”. Bullshit. If they see more profit in slaughtering the sheep, they’ll slaughter it. Capital doesn’t care who it alienates, if the money is right.
         
      And aren’t we supposed to be on something like 4% growth at the moment? Yeah, right. And all through Lab5 Treasury predicted lower growth than actually occurred. I’m sure they’re not biased, it just seems to happen that way (actually, the more likely explanation is that National and Treasury both work to the same neolib textbook in which economics is more a religion than a reflection of reality).

      • Draco T Bastard 7.1.1
        30 March 2012 at 9:31 pm

        And aren’t we supposed to be on something like 4% growth at the moment? Yeah, right. And all through Lab5 Treasury predicted lower growth than actually occurred. I’m sure they’re not biased…

        No, they’re not biased. They just have a delusional theory that supports NACT policies to base their prediction upon and so when NACT are in government their predictions shoot upwards and are wrong and when Labour is in government their predictions go downward and are wrong. They, of course, fail to see this rather obvious correlation.

    • McFlock 7.2
      30 March 2012 at 8:19 pm

      Oh, and pointing out that the NZ Labour Party spells its name with a “u” is spelling, not pronunciation. Don’t use words that are too big for you to handle.

  8. Nick 8
    30 March 2012 at 8:06 pm

    Get stuffed Reagan. Arrogant born to rule twat.

  9. Reagan Cline 9
    30 March 2012 at 8:58 pm

    Mc Flock, how can we know now that these assets will be of benefit to future generations ?

    What the government has succeeded in doing is to persuade many people that a partial asset sale will be benefit this generation and I have not been persuaded otherwise.

    Some capital in NZ has gone for the quick buck I suppose – the Auckland housing bubble is perhaps an example of this.

    Not sure what “Capital” and “neolib” mean. The people I spend time with never mention these words – too busy getting on with life.

    I keep mentioning the NZ Labour Party because I think they are the party most likely to come up with a program (short enough McFlock ?) that will enable more people to live a good life.

    • bad12 9.1
      30 March 2012 at 9:14 pm

      The reverse of your query holds more truth dont you think,how can we KNOW that National will use the proposed proceeds from asset sales to the advantage of future generations,

      We can hardly turn back the clock on the sales should such ”promises” from Slippery and Co turn out to be yet more empty rhetoric,

      Ridding the country of the shysters and charlatans at the ballot box can hardly be of any recompense for the revenue stream transferred from my partial ownership,(and everyone else who opposes such sales),without having first gained my express permission to sell off my share of what generates the present income stream into the Government coffers…

    • Draco T Bastard 9.2
      30 March 2012 at 9:33 pm

      Not sure what “Capital” and “neolib” mean.

      Then I suggest you shut up, fuck off and get an education before you say anything more.

    • Colonial Viper 9.3
      31 March 2012 at 9:52 am

      Not sure what “Capital” and “neolib” mean. The people I spend time with never mention these words – too busy getting on with life.

      As philosophically blind and ignorant neoliberal capitalists, perhaps?

    • prism 9.4
      31 March 2012 at 11:12 am

      @ Reagan Cline I note the words ‘I think’ near the end of your comment RC. Is that true? You have no shame at offering up your ignorance Not sure what “Capital” and “neolib” mean. and lack of interest to get informed. (I pop up to google when I want simple information like that.) Have you tried google?

      Then why bother to write a comment at all? Get out and get on with life while you still can. Who knows what is going to happen in the near future.

    • McFlock 9.5
      31 March 2012 at 3:04 pm

      Let’s say I have a company that gives me 50k a year in dividends.
      Someone suggests selling my shares for half a million.
      Now, if I do that I will have half a million that I can use to pay off debt, and maybe leave to my kids, and buy some gadgets that will probably break after a year or two.
      But on the flipside, if I keep the shares I will be able to pay off the same amount of debt, and after ten years or so I will still be getting 50k a year.
         
      Do you think my kids will be better off if I sell, or if I keep the shares? Or is it all too impossible to know? In which case why do you bother defending your opinion?

  10. Reagan Cline 10
    31 March 2012 at 9:34 am

    bad12. We don’t know. Economic predictions are unreliable. Another government could buy back or appropriate some or all of the 49%.
    You could be right though, maybe holding on to things we believe are assets and finding some way of spending the income stream is better than letting others have a share of the ownership and income stream in exchange for their access to new capital and their input into running the enterprises. At the moment any new capital has to come from the NZ taxpayer directly or through borrowing and the ideas required to ensure that the enterprises thrive are coming from a smallish group.

    • Colonial Viper 10.1
      31 March 2012 at 10:53 am

      the ideas required to ensure that the enterprises thrive are coming from a smallish group.

      A tiny group in fact.

      The people who control the most money and capital in this country seem intent on taking control over existing enterprises instead of doing the harder work of taking risks with innovative new start ups.

  11. bad12 11
    31 March 2012 at 1:20 pm

    Reagan Cline,BULLSHIT!!!we have constantly been told over and over every time the price of electricity has risen to the consumer that this is neccessary so as to provide these energy companies with capital to enable the building of new infrastructure and the up-grading of what we all have already paid for,

    Any reputable business will tell you that selling off part of its asset stream without having a carefully costed plan on how that asset stream will be replaced is plainly stupid and a recipe for bankruptcy,

    You and the Member for Dipton DONT KNOW how much the 49% of assets sold will fetch into the Government coffers,its all at best a guess,and,we can sure as hell tell you that Slippery and Co have NO PLAN what-so-ever to build X road,X school,or,X hospital with the sale of assets that they as the Government of the day are the custodians of and not the owners of,

    So what we have here is the appearance of Slippery and Co using tax cuts as an incentive to be elected for a first term of Government,using the part sale of assets they have no ownership of as the incentive to gain a second term of Government,

    But what of a third term,surely Slippery and Co has to be the party that keeps on giving in order to be elected,which just leaves us to speculate that the proceeds of the part asset sales will be used to shore up the billion dollar hole in the Governments revenue stream caused by Slippery and co,s first tax cutting incentivsation of the voters OR Slippery and Co will simply offer the proceeds of the part asset sales as incentive to vote for them with another offer of tax cuts…

  12. Paul Walker 12
    1 April 2012 at 1:35 pm

    While I think there are good economic reasons for not supporting the partial sate of asset – full privatisation is a better option – the reasons given above don’t stack-up as I argue here.

    • bad12 12.1
      1 April 2012 at 7:13 pm

      For a bit of amusement on a quiet Sunday after tea we actually read some of what you have pointed us toward with your link to that obscure little blog,

      The 3rd word in our post 11 would seem ample answer for one so ”talented” at advancing an argument for asset sales such as you…

      • Paul Walker 12.1.1
        1 April 2012 at 8:51 pm

        “The 3rd word in our post 11 would seem ample answer for one so ”talented” at advancing an argument for asset sales such as you…”

        You mean “BULLSHIT”. Well I’m glad to see that intelligent, rational and sophisticated argument is not dead on New Zealand’s blogs. If you actually bothered to read what I wrote you would have noticed that I said there are good economic reasons for opposition to National’s partial privatisation plans. Its just that the arguments made in the posting above are not those reasons.

        • McFlock 12.1.1.1
          1 April 2012 at 9:03 pm

          Promoting full privatisation over partial is like promoting P over alcohol. If you must link-whore, at least pick your audience. Or did you cut&paste here the Kiwiblog  advert by accident?
           

          • Paul Walker 12.1.1.1.1
            1 April 2012 at 9:12 pm

            Actually full privatisation would overcome many of the problems with National’s plan. And if National don’t want to go that far then no privatisation may be the second best.

            • McFlock 12.1.1.1.1.1
              1 April 2012 at 9:26 pm

              Yeah? Well I ain’t buying what you’re selling.
                  
              Maintaining full public ownership keeps the dividends in the public coffers, management in public control and natural monopolies in public hands.

              • RedLogix …
                1 April 2012 at 9:36 pm

                Public monopolies are accountable through the political process. By contrast when you privatise it is only accountable to it’s shareholders.

                And don’t give me the ‘competition’ argument…. all mature markets, like electricity, with enormous capital barriers to entry are operated as oligopolies.

                In the real world everyone avoids actual competition like the plague because it drives profits to zero. (Which incidentally is the same profit level an SOE can be run at if it’s government owner so decreed for social reasons.)

                • Paul Walker …
                  2 April 2012 at 1:52 pm

                  Political markets are an inefficient way of trying to make any firm accountable to anyone. SOE are “accountable” to the government and to no one else. Power generators are not monopolies. There are, for sure, internal economies of scale with generation but demand is such that such economies are exhausted before demand is satisfied. The important thing about competition and profits isn’t that they are zero, its that they are not zero. Positive profits attract entry and drive innovation. What is important is the process of competition and not the end result. This suggests that barriers to entry are important. But note that regulation itself can act to reduce the process of competition. Also as Oliver Williamson has noted the idea of an efficient outcome is one in which no other feasible outcome can be implemented with welfare gains. Thus non-zero profits need not be a sign of inefficiency.

                  • McFlock …
                    2 April 2012 at 3:19 pm

                    yeah, bullshit. Lots of claims about innovation and what is or is not a monopoly, no data. 
                       
                    Keep preaching your religious catechism, mate, but it’s still bullshit.
                          
                    You might find this mantra useful:
                    OH-money-payme-NOW OH-money-payme-NOW OH-money-payme-NOW OH-money-payme-NOW OH-money-payme-NOW 

                    • Paul Walker …
                      2 April 2012 at 5:40 pm

                      “Lots of claims about innovation and what is or is not a monopoly, no data.”

                      The bit about monopoly is simply comes from the definition of a natural monopoly and the innovation bit follows from a very simple incentive argument. How much economics have you done? This is all first year stuff.

                    • McFlock …
                      2 April 2012 at 6:52 pm

                      Yeah, it is. And the world isn’t reducible to a slide rule.
                           
                      Power companies tend towards monopoly markets because of the infrastructure barrier and economies of scale. This is where you get into a debate about the theoretical possibility of effective power company competition and proceed to ignore the real world evidence, particularly in NZ.
                           
                      And the “very simple” incentive argument is only valid if you ignore the massive technological contributions made directly and through funding by governments when the private sector failed to do so. In almost any field you care to name.
                           
                       

                    • Paul Walker …
                      2 April 2012 at 7:58 pm

                      @ McFlock

                      As I noted there are internal economies of scale with power generators but natural monopolies only occur when these economies are such that demand can be satisfied without exhausting said economies. Or in other words, the cost function for the firm is subadditive up to the point where demand is satisfied. For power generation is not the case. It is more likely that such an industry is a natural oligopoly and thus Williamson’s idea of remediableness comes into play. This says that a mode of organization for which no feasible superior mode can be described and implemented with expected net gains is presumed to be efficient. This may mean that an efficient organizational form for power generation is not perfect competition.

                      As to the incentive argument I don’t see how it depends on “massive technological contributions made directly and through funding by governments when the private sector failed to do so.” Firms see profits being made and they want to be part of that industry to make profit as well. I don’t see how that argument depends on government action of any sort.

                    • Paul Walker …
                      2 April 2012 at 8:09 pm

                      @ Carol

                      Innovation comes from many different sources but business innovate for the good of all of us. They are not the only source of innovation but they are a major one. Universities, for example, do much basic research into and development of new ideas, that is, they innovate. But they also use patents and copyright to make sure they get a return on that innovation, We are not the worse for this. If fact we are better for it. Being able to make a return on your innovation is one thing that motivate innovators.

                    • Paul Walker …
                      2 April 2012 at 9:11 pm

                      @ Coral “Thus, we don’t seem to get much innovation from the right wing parties-of-business in dealing with poverty”

                      This from the Economist

                      THE past four years have seen the worst economic crisis since the 1930s and the biggest food-price increases since the 1970s. That must surely have swollen the ranks of the poor.

                      Wrong. The best estimates for global poverty come from the World Bank’s Development Research Group, which has just updated from 2005 its figures for those living in absolute poverty (not be confused with the relative measure commonly used in rich countries). The new estimates show that in 2008, the first year of the finance-and-food crisis, both the number and share of the population living on less than $1.25 a day (at 2005 prices, the most commonly accepted poverty line) was falling in every part of the world. This was the first instance of declines across the board since the bank started collecting the figures in 1981

                      A lot of the decline has been in China with its economic growth driven by its expansion of the use of markets and business.

                    • McFlock …
                      2 April 2012 at 10:51 pm

                      Gotcha. So essentially “efficient” is being redefined as “as efficient as it can get”, and the assumption is that a privately-owned oligopoly will be more “efficient” than a publicly-owned power grid. Care to support that assumption? With something other than a profession of faith?
                         
                      Oligarchies are Clayton’s capitalism – the same shite taste as a free market, but less benefit to the consumer.
                         
                      Innovation:
                      If firms saw the profit potential they would fund the primary research and initial development themselves. They do not do this all the time. Otherwise private firms would have provided all the funding for the development of, for example, the internet. Or in a NZ context, rail upgrades.
                        
                      Or, indeed, developed NZ’s electricity infrastructure without government involvement from the start. That alone suggests that “innovation” being an advantage of 100% private ownership is bunk.
                            
                                
                         
                       
                       

                    • Paul Walker …
                      3 April 2012 at 1:00 pm

                      @ McFlock

                      “So essentially “efficient” is being redefined as “as efficient as it can get”, ”

                      Well yes, since this is the only way you can define it. Even an outcome which is Pareto efficient wold satisfy that condition. The Hicks-Kaldor condition would also satisfy your statement.

                      “the assumption is that a privately-owned oligopoly will be more “efficient” than a publicly-owned power grid. Care to support that assumption? With something other than a profession of faith?”

                      On the empirical side I would suggest a reading of “The Financail Economics of Privatization” by William L. Megginson, New York: Oxford University Press, 2005.

                      The following comes from the summary of chapter 4 of the Megginson’s book.

                      “The 87 studies from nontransition economies discussed in this chapter offer at least limited support for the proposition that privatization is associated with improvements in the operating and financial performance of divested firms. Most of these studies offer strong support for this proposition, and only a handful document outright performance declines after privatization. Almost all studies that examine post-privatization changes in output, efficiency, profitability, capital investment spending, and leverage document significant increases in the first four measures and significant declines in leverage.

                      The studies examined here are far less unanimous regarding the impact of privatization on employment levels in privatized firms. All governments fear that privatization will cause former SOEs to shed workers, and the key question in virtually every case is whether the divested firm’s sales will increase enough after privatization to offset the dramatically higher levels of per-worker productivity. Three studies document significant increases in employment [Galal, Jones, Tandon, and Vogelsang (1992); Megginson, Nash, and van Randenborgh (1994); and Boubakri and Cosset (1998)], but most of the remaining studies document significant-sometimes massive- employment declines. These conflicting results could be due to differences in methodology, sample size and make-up, or omitted factors.

                      However, it is more likely that the studies reflect real differences in post-privatization employment changes between countries and between industries. In other words, there is no “standard” outcome regarding employment changes.

                      Perhaps the safest conclusion we can assert is that privatization does not automatically mean employment reductions in divested firms, though this will likely occur unless sales can increase fast enough after divestiture to offset very large productivity gains. Since the empirical studies discussed in this chapter generally document performance improvements after privatization, a natural follow-up question is to ask why performance improves. For utilities, the need to introduce competition and an effective regulatory regime emerges as key, but there is no “silver bullet” answer for what makes privatization successful for firms in competitive industries. As we will discuss in the next chapter, a key determinant of performance improvement in transition economies is bringing in new managers after privatization. No study explicitly documents systematic evidence of this occurring in nontransition economies, but Wolfram (1998) and Cragg and Dyck (1999a,b) show that the compensation and pay-performance sensitivity of managers of privatized U.K. firms increases significantly after divestment. Studies that explicitly address the sources of post-privatization performance improvement using data from multiple nontransition economies tend to find stronger efficiency gains for firms in developing countries, in regulated industries, in firms that restructure operations after privatization, and in countries providing greater amounts of shareholder protection.”

                      Also Sunita Kikeri and John Nellis write in their article, An Assessment of Privatization, “The World Bank Research Observer”, vol. 19, no. 1 (Spring 2004)

                      “This article takes stock of the empirical evidence and shows that in competitive sectors privatization has been a resounding success in improving firm performance. In infrastructure sectors, privatization improves welfare, a broader and crucial objective, when it is accompanied by proper policy and regulatory frameworks.”

                      Mary M. Shirley and Patrick Walsh write in “Public versus Private Ownership: The Current State of the Debate”, Working Paper, The World Bank,

                      “Our review found greater ambiguity about ownership in theory than in the empirical literature. In the debate over the effects of competition, theory suggests that ownership may matter and if so, that private firms will outperform SOEs. The empirical studies squarely favor private ownership in competitive markets. Theory’s ambiguity about ownership in monopoly markets seems better justified, since the empirical literature is also less conclusive about the effects of ownership in such markets. Theories that assume a welfare maximizing government suggest that SOEs can correct market failures. In contrast, public choice theories are skeptical of the benevolent government model. Corporate governance theories suggest that even well intentioned governments may not be able to assure that SOE managers do their bidding. The empirical literature favors those skeptical of SOEs as a tool to address market failures. In studies of industrialized countries, where we might expect more developed political markets to motivate greater government concern with welfare maximization or better information and incentives to overcome corporate governance problems, private firms still have an advantage. The private advantage is more pronounced in developing countries, where market failures are more likely.”

                      On the theoretical side, a summary of when and why privatisation works can be found in chapter 1 of “The Challenges of Privatization: An International Analysis” by Bernardo Bortolotti and Domenico Siniscalco, Oxfor: Oxford Univeristy Press, 2004.

                      Chapter 6 of this book looks at the data and concludes:

                      “This chapter attempts to single out some critical influences affecting privatization in monopolistic industries. It focuses upon two factors that may influence the pace of divestiture in network industries: vertical integration and regulation. The results are straightforward. First, vertical integration of a system substantially reduces the frequency of utility sales. Second, regulation appears to be crucial for the success of privatization in, the utility sector. The regulatory indicators correlate strongly with the quantity of sales of electricity, the size of the stake sold, and the revenue from sales. As the theory suggests, the public-monopoly-turns-into-private-monopoly arg~ent does not apply in well-regulated settings. Consequently, an important rationale for public ownership of natural monopolies loses relevance. This reasoning explains not only the low number of sales and percentage of stock sold in poorly regulated electricity markets, but also why sales are less frequent where vertically integrated players dominate the market.

                      Regulation does not appear to decrease the revenue generated by the sale of
                      public enterprises, although it can reduce the expected profitability of the fum
                      curbing supernormal profits. However, it provides clear rules and a framework in which investments and business opportunities can be more effectively gauged. The regressions in this study indicate that the latter factor dominates the former in investors’ decision-making. Governments should therefore not be wary of regulating first and then privatizing.”

                    • Colonial Viper …
                      3 April 2012 at 1:20 pm

                      Fuck “efficiency”

                      Time to refocus on resiliency, robustness and maximal SLA’s and fitness for purpose.

                      The bit about monopoly is simply comes from the definition of a natural monopoly and the innovation bit follows from a very simple incentive argument. How much economics have you done? This is all first year stuff.

                      1) Many of the world’s most powerful breakthroughs were not conducted due to financial incentives, but due to an interest in people and the world. Until the fucking neoliberals turned up that is.

                      2) 1st year economics – guffaw. Tell me buddy, how much use is “1st year economics” anywhere, compared to the damage it has caused?

                      3) Economics is a pseudoscience introverted cult which cannot deliver what it promises as a profession. The only good thing about 1st year economics is that it is not 2nd or 3rd year economics.

                    • McFlock …
                      3 April 2012 at 3:43 pm

                      Okay, your sources seemed to be somewhat less certain than you are in supporting the creation of an electricity oligopoly as opposed to purely public ownership.
                      Indeed, they seem to suggest that individual factors in each privatisation affected the outcome more than any general principle of efficiency, particularly regarding the relative abilities of regulators. To which I retort “Brownlee”.
                                
                      As for the definitional debate about “efficiency”, most people tend to use it as a measure of the amount of resources put in for a given output versus the theoretical minimum cost of that output. E.g. if a car burns 100kW but only 20kW goes to moving the vehicle (the rest being lost as heat and sound), it’s 20% efficient. You seem to be arguing “oh, it’s a station wagon, and those are less efficient. But as station wagons go this one gets as much traction as our lowered expectations of station wagons deem possible, so it’s actually 100% efficient”. 
                           
                      Or to put it more crudely: if economists in general have much smaller than average penises, any economist with a four-incher would by that logic purchase extra-large condoms.

                    • Paul Walker …
                      3 April 2012 at 4:12 pm

                      “Indeed, they seem to suggest that individual factors in each privatisation affected the outcome more than any general principle of efficiency, particularly regarding the relative abilities of regulators.”

                      Of course. If you do privatisation badly you will get bad results. Just look at the example of Chile in the mid 70s. Its a bit like surgery. If your doctor makes a mistake, you could die but if he does good work, you get better. Well done privatisation works well, badly done privatisation works badly. Making sure you get it right is all important. But this is true of all policy work.

                      As to efficiency, the most common definition is Pareto efficiency (or allocative efficiency) – named after an Italian sociologist. In a Pareto efficient economic system no allocation of given goods can be made without making at least one individual worse off. Productive efficiency is where a given level of output is produced using the lest amount of inputs or a given level of inputs are producing the maximum level of output. Remediableness says that a mode of organization for which no feasible superior mode can be described and implemented with expected net gains is presumed to be efficient. It says you are doing the best you can do while what you are doing may not be perfect. Perfection may be impossible.

                    • McFlock …
                      3 April 2012 at 4:45 pm

                      Of course. If you do privatisation badly you will get bad results.       

                      NZ’s track record of privatisation is not exactly admirable. We privatise badly. It’s all very well arguing that if we privatised competently we might achieve an oligarchic market that doesn’t price-gouge (and that’s gotta be idiotic for our BoP if internationals invest in our market – essentially we’d be importing at high prices power that we used to generate ourselves), but in the real world NZ privatises as stupidly as possible. FFS, they wanted to raise ACC levies simply so the private sector could compete.
                           
                      It’s like me saying that I can win the marathon at this year’s Olympics – possible in theory, but the fact I haven’t done an ounce of training suggests that in the real world I wouldn’t even qualify.
                       

                      Remediableness says that a mode of organization for which no feasible superior mode can be described and implemented with expected net gains is presumed to be efficient.

                          
                      Yeah, that’s the bit I think is a dodge. Pareto optimality is a logical limit, choosing mutual non-harm as the benchmark. Productive efficiency takes theoretical limits based on objective facts about production costs etc. But  remediableness simply says that even if a system is objectively inefficient, if it’s the best thing we can think of at the moment it’s “efficient”. No, it’s not. But we DO know that we have control (if we choose to exercise that will) over those SOEs at the moment, we know that the RoI is greater than the interest we’re paying on debt (so selling the assets, even partially, will lose govt money), and we know that every other privatisation attempt of essential infrastructure as practised in NZ has resulted in slowed innovation, less community control, and relatively high consumer costs.
                             
                          
                      So here’s what I think would happen in NZ if we privatised all the way (based on our noted inability to learn from our idiot economic mistakes): we’d fuck it up badly.
                      People would pay more, there’d be more disconnections, the government would use the one-off payment as justification for ongoing tax cuts, our trade balance will take a hit, government debt will get even worse, and then we’ll have to renationalise because the grid goes pop, spend m(b?)illions on that, and then be sued through the WTO because we renationalised. You might not think that this is likely, but we’ve managed to screw it up every other time we’ve done it, so what will be different this time?
                        

                       

                       

                  • Carol …
                    2 April 2012 at 5:43 pm

                    And why do you assume innovation is, in itself a good things always and in every case?

                    A lot of the innovation I see in the business world is either superficial (re-packaging and rebranding, and adding little bright shiny custom features) or taking shortcuts at the risk of health and safety.

                    And some innovation is just plain stupid and misguided – e.g. some (probably tallish, able-bodied young men) have recently decided it’s a great use of space to hang some women’s clothes up quite high in clothes shops. These are above or at the limits of my reach, being at the shortish end of women’s height range. But even a woman shop assistant I asked to reach one garment was stretched to reach it. She said a management guy at the firm decided it was a good idea to put it there. Have since then come across the same thing in a totally different clothes shop.

                    I have to be really motivated to ask someone to reach such items…. unlike with most items out of my reach in supermarkets…. what ever happened to customer focused service? Not new or innovatory, but a pretty good golden oldie.

                    • Paul Walker …
                      2 April 2012 at 5:54 pm

                      “And why do you assume innovation is, in itself a good things always and in every case?”

                      No. For example, innovation in nuclear weapons is not a good thing.

                    • Carol …
                      2 April 2012 at 7:08 pm

                      In lieu of missing reply buttons …@Paul:

                      No. For example, innovation in nuclear weapons is not a good thing.

                      Indeed. It seems to me that most innovation in private businesses is aimed at finding new ways to get people to part with money and improve the profit margins of the business. So any innovations that help all/most sections of the wider community is purely coincidental.

                      Thus, we don’t seem to get much innovation from the right wing parties-of-business in dealing with poverty, providing jobs for all that pay enough to live off, ways to deal effectively with climate change, global resource depletion, affordable health-care for all…. etc, etc.

                    • Paul Walker …
                      2 April 2012 at 7:27 pm

                      @ Carol

                      The economist Paul Krugman makes the point that, “Economic history offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wages. In the 1950s, when European productivity was typically less than half of U.S. productivity, so were European wages; today average compensation measured in dollars is about the same. As Japan climbed the productivity ladder over the past 30 years, its wages also rose, from 10% to 110% of the U.S. level. South Korea’s wages have also risen dramatically over time. (“Does Third World growth hurt First World Prosperity?” Harvard Business Review 72 n4, July-August 1994: 113-21.). What then underlies productivity growth, well one thing is innovation. Innovation means we can get more for less, we find new ways of doing old things and we find new things to do. An obvious example of an innovation that has helped us do old things in new ways and helped us do new things is the computer. Without this blogs would not exist.

                    • Carol …
                      2 April 2012 at 7:40 pm

                      Paul, a lot of the innovations with computing, especially in the early days when the arhcitecture of the Internet was laid down, came from hobbyists, grad students, military and academic establishments, and open source afficianados. They developed many innovations through co-operation, often by working through networks not sanctioned by the business moguls trying to make some profit from computing.

                      And many of the later innovations came from amateurs too.

                      In recent times, big business has been trying to find ways to take control of amateur/not-for-profit activities online, and by so doing, are working to stifle many innovations that would benefit the majority.

                    • Colonial Viper …
                      3 April 2012 at 1:24 pm

                      Paul, a lot of the innovations with computing, especially in the early days when the arhcitecture of the Internet was laid down, came from hobbyists, grad students, military and academic establishments, and open source afficianados.

                      Precisely.

                      Then bullshit neoliberal managerialism came along and financialised anything and everything to do with community and human motivation.

                      Frankly Paul, any mangement text book will tell you that money usually ranks 3 or 4 on the list of what actually motivates people.

                      Except for the sociopathic neolibs who rate their lives and social status according to it, of course.

              • rosy …
                1 April 2012 at 10:37 pm

                Today I received a newsletter from a local Australian organisation that reports on happenings there. An article was on the cost of electricity in Adelaide. Apparently Adelaide is set to have the highest electricity prices in the world by July… It’s prices are also substantially more than other states.

                When the former Liberal government adopted the policy to privatise the state’s electricity assets, the average household electricity bill was $770. Since then it has more than doubled, to about $1600.

                A quick wiki check shows that the vertically-integrated state electricity provider was sold off in 1999 and the electricity market was deregulated in 2003. People are now arguing that the state should invest in upgrading electricity infrastructure, not the privatised companies. It appears to be a case of the public bearing the costs and the companies reaping the profits, with infrastructure degrading over the period of privatisation. Possibly an interesting case study of privatisation with other states as comparisons. It seems to be such a depressingly familiar story.

        • bad12 12.1.1.2
          2 April 2012 at 8:26 am

          Clap,clap,clap,kerlap,well at least your lucid enough as to be able to track down the word,

          Bullshit would seem to be a perfectly rational means of addressing anything You have advanced as argument either economic,political or social either as comment in the Standard or by linking readers to some barely intelligible obscure blog elsewhere without expending anymore energy in formulating such an answer than your posts actually deserve….

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