As a senior economist at a respected company, John Carran wrote some apallingly simplistic tripe in his article, “Exorcising the asset sale bogey“, Dominion Post, 19 Dec.
It is as if the programme of privatisation in the late 1980s and 1990s never happened, and we have learnt nothing from those experiences and subsequent socio-economic consequences.
Carran states, “Consider what could be achieved for taxpayers if a proportion of that capital was freed for use elsewhere. For instance, it could be invested in much needed infrastructure such as roads, or it could be invested in schools, hospitals, and other public amenities. Alternatively, the Government could reduce the burgeoning public debt burden. .”
The second word to come to mind about that statement is, “rubbish”. The first word is unprintable here.
For the record, NZ’s crediting rating has actually worsened in the last twenty-five years since billions of dollars of state assets were privatised. Most assets were bought by foreign companies and profits were duly repatriated
offshore. Shifting billions overseas has sent New Zealand’s Balance of Payments further and further into deficit.
This has subsequently harmed our credit rating, as Standard & Poors alarmingly warns, ‘New Zealand’s AA+ foreign-currency credit rating may be cut if the nation’s current account deficit and overseas debt begin to curb growth and investment”
Carran practically insults our intelligence when he then states, “A wealth of evidence suggests that on average privately owned businesses are run more efficiently, innovate more, and provide better customer services than government-owned businesses.”
Tell that to the mum & dad investors of Hanover Finance, Bluechip, and dozens of other finance companies that collapsed in the last few years, owing billions to shareholders.
Tell that to the workers and creditors of Lane Walker Rudkin.
Tell that to railways commuters who had to put up with degraded service and railway stations, whilst NZRail was in private ownership. Almost no maintenance, upgrading, or investment took place in the 1990s, and people were often left waiting at stations as units broke down, signals malfunctioned, and heat-stressed tracks buckled in summer heat.
Tell that to the public when taxpayers had to rescue Air New Zealand from insolvency, having to re-nationalise the airline.
And tell that to banking customers who had to endure years of high banking charges – until Kiwibank arrived on the scene.
Carran blithely adds, “Sustained bad performance will put a private company out of business.”
True enough – but not always.
The four major Australian banks have rorted the NZ public with their high banking fees, mortgage rates, and lessening service as Branches closed.
It took a state owned enterprise – Kiwibank – to force banks to re-evaluate their services and fees. A couple of years ago it would have been inconceivable for a Bank to drop account fees. Now it is almost a regular occurence.
In as perverse way, competition IS working -but only because a state owned bank made it happen. Privatise Kiwibank and prepare for the re-emergent rise of account fees – guaranteed.
Perhaps the most derisable claim from Carran was when he naively says, “Foreign owners are bound by the same laws and regulations and are required to pay the same tax as New Zealand owners.”
Someone forgot to tell seven, foreign-owned banks about their committment to pay their taxes in this country. The Australian-owned Westpac has just been prosecuted for owing $1 billion to the IRD. The BNZ is next in the firing line for alleged tax avoidance and faces prosecution.
Carran continues with more ludicrous assertions, ‘Regardless of who owns the sold assets, the jobs associated with them remain in New Zealand.’
Tell that to the workers of companies that relocate their call-centres or manufacturing to low-wage economies.
But Carran’s grasp of simple economics is really questioned when he says,
‘Of course foreign owners will repatriate a share of the profits overseas. That is the return they get for the risk of investing their capital here. In return New Zealand gets capital not otherwise available locally… ‘
Carran must be aware that the difference between a foreign owned company and a locally-owned company is that the former repatriates profits off-shore, whilst the locally-owned company does not. Indeed, the locally-owned company re-invests profits within New Zealand.
Indeed, it is not even necessary for a New Zealand comnpany or SOE to be sold to foreign owners simply to acquire capital. A locally-owned company can access overseas funds and will pay interest on borrowings. But those interest payments are not likely to be as onerous as the repatriation of profits to overseas owners (which impacts on this country’s Balance of Payments a point already made in this article).
There is more in Carran’s article that merits rebuttal. Practically every paragraph consists of unproven assertions; naive notions; and just downright wishful thinking. That he ignores recent history is obvious. That he is no Rod Oram or Gareth Morgan, even more so.