Today’s Herald contains the first unequivocal defence of National’s plan to sell our assets to pay for tax cuts for the rich. It’s disappointing to say the least – confused, piecemeal, and unconvincing. Ironically, it’s written by some guy, Damien Grant, from some insolvency company – ie. someone who makes money from cleaning up after others’ poor business decisions.
Let’s take a quick look:
“The proposed sale of state assets has caused some hand-wringing by economic illiterates fretting over the risk of foreign ownership.”
The foreign ownership is just one objection. But it’s ironic that Grant starts by dismissing those who are worried about our foreign liabilities as ‘economic illiterates’ considering that overseas debt is one of the excuses for the asset sale agenda and Key and co are at pains to try to convince us that assets won’t go to foreigners. At least Grant is honest enough to admit that privatisation means more foreign ownership of our economy.
“Foreign money brings foreign expertise.”
Ah, yes. The foreign expertise that ran Air NZ into the ground. The foreign expertise that asset-stripped our rail network. The foreign expertise that makes Contact the biggest regulatory headache of the power companies. The foreign expertise that saw Telecom under-invest for 20 years requiring repeated major government interventions to try to lift telecommunications standards.
It’s not that foreign ownership doesn’t bring foreign expertise. It’s that the expertise is in making money for the foreign owners, which is often at odds with the economic interests of New Zealand.
“Today’s youth suffer anxiety attacks if they exceed their monthly text allowance. I suspect their synapses would melt if they had to endure a six-week wait for a landline phone connection, the norm from state-owned Telecom in the 1980s, before Prebble sold it to the Americans”
Has this guy tried to get the Internet wired up to a house? It still takes time to get a tech over to do the work, just like it used to.
“American capital and know-how transformed Telecom from a moribund behemoth into a dynamic enterprise driving the explosion of telecommunications infrastructure that propelled New Zealand into the internet age.”
I have never, ever seen Telecom described as dynamic before. It has been dragged kicking and screaming into each round of upgrades because the private owners don’t like the expense of major capital investment. Look at the government’s ultra-fast broadband project – it has devolved, as critics predicted, into little more than a giant subsidy to Telecom to make upgrades it won’t do itself.
“Try building Trade Me on a telecommunications network made from number 8 wire.”
Too much electrical resistance for one. Is Grant seriously suggesting that if Telecom hadn’t been privatised we wouldn’t have the Internet? The idea that we’re too useless to do it ourselves but instead need the guidance of wise foreigners like Telecom’s $7 million man, Paul Reynolds, was widely held by the Right in the 1980s/90s. I thought they had gained some pride in this country since then. But I guess they still think New Zealand sucks.
“When we as New Zealanders swap some of our assets for cash our net wealth remains unaffected.”
Umm. No it doesn’t. Christ, and he calls us economic illiterates. The value of an asset is the present value of all future returns we will earn from it (plus side benefits like a lower current account deficit, owners who live in New Zealand and so are directly affected by the quality of life here). The value of cash is the interest rate. The Crown borrows at 5.5% and has been getting 7.6% returns on the assets the Nats want to sell. If we sell $6 billion of assets (Patrick Smellie’s estimate of the piece we would get) to offset $6 billion of borrowing, we’re worse off, our net worth has fallen. And it can’t be any other way because the private buyer needs to make a higher rate of return on the asset they’re buying from us than the government can borrow money at.
“New Zealand is facing capacity constraints in our electricity infrastructure, in generation capacity and in the transmission and distribution networks. There is a need for ongoing investment in infrastructure and technology.”
Of course, but who is to say foreign private owners will make those investments? The history is that they won’t. Indeed, it is the legacy of underinvestment by the likes of Telecom that means there is such a large amount of capital investment needed. The cheapest source of funding for that capital is not selling profitable enterprises but government debt or, better, undoing the massive tax cuts for the wealthy which have made the government deficit so large.
“The debate over the benefits of foreign investment has long been settled.”
Yeah and that’s a reason that 80% of Kiwis oppose asset sales. They remember that the last time there were few benefits and massive costs to this country.