- Date published:
11:00 am, December 17th, 2010 - 42 comments
Categories: assets, business, Economy, housing, jobs, public services, sustainability, tax, workers' rights - Tags: solid energy
Three government investment decisions in the last couple of weeks have shown the deficiencies in the neoliberal way of doing things. SOE Solid Energy is preparing to wreck our environmental image and increase our carbon costs with lignite-to-liquids. Kiwirail saves itself some money by buying trains in China but costs its owners (us) millions in wages and tax revenue. Then, there’s Steven Joyce going for the cheapest broadband network option while ignoring the cost of re-creating Telecom’s monopoly.
Neoliberalism believes that government, to the extent that it should exist at all, should operate like a a group of businesses, each operating independently without reference to anything other than their own bottom lines. SOEs are the epitome of this model – government departments were turned into businesses and, before being sold, were held at arms length from the elected government. Basically they’re run just like private businesses that happen to be owned by the Crown. The corporate culture of some, Solid Energy in particular, is more akin to a soulless multi-national than a public asset.
All government bodies should have to consider the ramifications for the government, if not the country, as a whole when making investment decisions. They could use the same kind of benefit:cost analysis that NZTA does to assess the value of roads.
Going a step further, I would gather all the government’s commercial operations and financial investments into an umbrella group (call it the Kiwi Future Fund) and set it a mandate of investing in infrastructure, here and abroad, that is crucial to the New Zealand economy. People could also invest in this fund via their Kiwisaver or term deposits at Kiwibank. The aim is to get the commercial side of government all pushing in the same direction: toward an economically sovereign and sustainable New Zealand. Commercial return for the Fund and its components would be one way of delivering value to its owners (us), it would also take account of the implications for New Zealand jobs, tax revenue, and sustainability in making its decisions.
The mad situation we’re in where Kiwirail buys trains from China because they’re cheaper and that means it can pay a bigger dividend to the government even though it costs the government even more in lost tax revenue and where Solid Energy is prepared to wreck our climate account and valuable environmental image to increase the dividend it pays us should not be allowed to continue.
Of course, that’s a radical departure from the SOE model but so what? SOEs were created as a stepping-stone to privatising public assets. If we’re against privatisation, then why persist with the SOE model?
Government investment should be directed at public control of utilities where the private sector fails to operate competitively (eg. rail and electricity – I see Gerry Brownlee’s attempt to reform the sector to create competition has already pushed up prices, as predicted). In markets that tend towards oligarchy, to having a publicly-owned player to keep the others honest (eg. Kiwibank in banking, Kordia/Orcon in ICT). That means keeping the kinds of businesses the government already owns and keeping them strong.
Joyce’s decision to give 70-84% of the ultra-fast broadband contract to Telecom is the exact opposite of what I’m talking about. He’s effectively reinstated the private monopoly of Telecom (which, again, was predicted from the outset). If he had given more of that contract to Kordia then he would have been ensuring better competition (actually, the fibre network is going to be a lot like the power line network – a lot of local monopolies – so would be better all publicly owned).
Housing is clearly a market that works best when the government is one of the large suppliers. When, as in the 1990s and now, government stops building new houses the only ones that get built are targeted at the well to do either plush homes for themselves or cheap townhouses/apartments for renting out to the rest of us. State housing fills a gap. The government should undertake an aggressive building programme of eco-smart homes targeted at families on middle incomes (around $60-$70,000 a year). I don’t have a problem with the government selling to tenants as long as there’s a caveat preventing them using the house as a rental property.
Another market I think the government could usefully intervene in more is the third party employment/recruitment. There are a hell of a lot of Kiwis who are effectively employed as day labourers through labour hire outfits like Allied Work Force and recruitment agencies like Manpower. Typically, the worker is a contractor for the company, which in turn contracts to deliver their labour to another company. The worker has no employment security, no annual leave, no sick leave, nothing. The pay is usually minimum wage or near to it. The company then charges them out at as much as double their pay rate per hour and pockets the difference. It is an awful, immoral industry that treats the most vulnerable workers like disposable tools.
The government already participates in this market in a limited fashion and improves vastly on standard industry practice through Student Job Search. Rather than taking huge profits by contracting workers and delivering their labour to a third party, SJS just acts an intermediary – both employer and worker are better off as a result.
You’ll recall in my previous ‘new economy’ post, I suggested virtually eliminating the benefit system and replacing it with the guaranteed minimum income. That would put a lot of WINZ staff out of work who could be redeployed to a beefed up version of SJS to compete with the labour hire/recruitment firms. This would either operate free to the employers or with a small cost-recovery charge. It wouldn’t contract workers who use it and it would act to ensure their work rights. Employers would be required to pay leave and Kiwisaver but would still find the service much cheaper than the current market.
Finally, the government should use its huge buying power to set standards. This was something begun under the last Labour government and, for no good reason, abandoned by National. Departments should only rent eco-smart offices, only buy fuel efficient cars and machinery, only do business with contractors that have sustainable practices and good employment conditions, and only supply healthy food at schools, hospitals, and workplace cafeterias. Yes, there’s an additional cost to all these things but it’s a cheap and effective way to move the whole market for the better.