Wee gripes: private=efficient

Written By: - Date published: 10:01 am, July 21st, 2009 - 54 comments
Categories: privatisation, public services - Tags:

Can Treasury Secretary John Whitehead explain how paying profit-making companies to do what is already being done by non-profit-making departments will save money? Of course not. If there are efficiencies to be made by all means make them. Doesn’t need some company sucking off profit to do that.

We know what happens when you get a private company to provide a public service. They try to do it on the cheap to extract maximum profit. They run down the service until the public screams. Then they put their hand out for a government bail-out.

54 comments on “Wee gripes: private=efficient”

  1. Ron 1

    I’m amazed this discussion is coming from a department that got a 9% increase in the last budget.

    I look forward to paul henry interviewing some of the ex-pubklic servants who moved into the private sector in the 90’s to make a killing out of government contracts.

    I would alos love to see a discussion about why is meant by “efficiency” and “productivity”. I suspect for Treasury they mean the same thing. Lower budgets and more work?

    • Efficiency can mean a lot of things, but productivity is pretty straightforward – it is essentially output/input.

      • Derek 2.1.1

        Which is why the right-wingers going on about the so-called great productivity years of the 1990s are talking out their arse because they’re ignoring the fact that the least productive members and sectors of the workforce are the first to be laid off in times of high unemployment.

      • Ag 2.1.2

        Um no. Economic efficiency generally means Pareto optimality (although there are other kinds). A distribution is perfectly efficient when you cannot make any person better off without making someone else worse off.

        And it is a matter of fact that private does not equal efficient. Every first year economics student learns about market failure, a case where a market delivers an inefficient outcome. The usual solution to this is to have the government step in to provide the good through a non-market mechanism, which increases efficiency.

        In fact, government does more to promote efficiency than any other single institution in society. If you don’t understand that fact, then you have no business talking about politics.

    • Daveo 2.2

      Yeah, ’cause that worked out so well in practise. Tranzrail did a stellar job eh?

      Reminds me of that old saying you used to hear from old communists who couldn’t admit the Soviet Union was failing – “the theory’s right, it’s just people who keep mucking it up”.

      We’re hearing a lot of that now from the followers of the neoliberal model as their failed system crashes around them.

      • Swampy 2.2.1

        Who cares about Tranzrail? Tell me why Cullen paid so much more than they were worth to buy it back, LOL

        • RedLogix 2.2.1.1

          Because Toll Holding’s asking price was $1b. It took 18 months to hardball it down to $670m. You also make the very basic mistake of confusing ‘book value’ and ‘market price’; very often they are quite different things.

          Tranzrail was worth exactly what the price vendor and the purchaser agreed upon, on the day…. that is how a market works.

          The alternative was for Cullen to use the power of the State to nationalise the asset; but then of course all you dittoheads would still be screaming about ‘theft of shareholder value’.

  2. Derek 3

    Interesting silence from the government on this. They were no doubt warned in advance and approved of the contents of the speech. Privatising parts of the public service is quite an extreme policy position, certainly not the Labour lite we were promised before the election and which was repeated ad nauseum by our idiot media. God we were let down by them.

  3. deemac 4

    no need to speculate about how it will work, just look at the UK where this madness has cost the taxpayer billions and counting for no advantage except to the profiteers who’ve creamed it

  4. schrodigerscat 5

    Treasury who are so known for their accuracy as well.

    They produce lots of information, it seems to look rather poor quality when faced with the reality based world.

    • stormspiral 5.1

      You are so right, Schroedinger. Your name illustrates it perfectly. Now is the cat dead or alive?

  5. StephenR 6

    Privatising parts of the public service is quite an extreme policy position, certainly not the Labour lite we were promised before the election and which was repeated ad nauseum by our idiot media.

    You may have missed the fact that Treasury has always been like this. Treasury is not the government, it is just one arm of the apparatus of government.

    • Derek 6.1

      I’m well aware of that. Treasury is a bastion of right-wing activism in the public service that’s well past its use-by date. My point, if you’d read my comment properly, was that the government would have been aware of and approved the speech. I have no doubt it’s their intention to follow it through with action now that the ground has been softened. Treasury’s activist policy advice gives the Nats the false legitimacy they need to push through their agenda.

      • vto 6.1.1

        “Treasury is a bastion of right-wing activism”

        How on earth do you know it is not in fact a bastion of objective analysis as per its mandate thingy (probably).

        • Derek 6.1.1.1

          Because every piece of policy advice it has given since 1984 has been steeped in Chicago School thinking. Have a read through their reports some time vto, you’ll find they’re to the right of National on just about every issue.

          • Ari 6.1.1.1.1

            Treasury is full of trade liberals. This doesn’t make them all right-wingers, which you might remember if you took a look through the ranks of the Labour Party, given that I can’t even name a Labour member off the top of my head who is not a trade liberal. I think you’re grossly over-generalising suggesting that they’re all libertarians.

            There’s also a lot of stuff out from Treasury to the left of National too, especially on dealing with the environment and other externalities. (although you’re right in the sense that I can’t recall anything that veered left of Labour) I don’t recall how much of that work is in the public sphere though.

        • Draco T Bastard 6.1.1.2

          It uses neo-liberal economics theory, which, amazingly enough, have been proved wrong time and time again.

          • Ari 6.1.1.2.1

            Right, occasionally we have very detailed discussions on the problems with free market systems, green economics, and penalty taxes, etc…

            I think part of that is just that the education of economists is incredibly broken and has been for quite some time.

    • Ron 6.2

      I don’t hear any Ministers say “The Government makes economic policy – Treasury should stick to applying it”.

  6. vto 7

    What was Gliding On based on then?

    • Derek 7.1

      It was a comedy show making fun of a stereotype of the public service in the 1970s, you moron.

      You could just as easily ask what Mr Burns was based on. But we all understand he’s a caricature of business used for comic effect.

      • vto 7.1.1

        Yes well Mr Burns has an element of truth, as is often shrieked about on here. So too Gliding On, you bigger moron.

        • Pascal's bookie 7.1.1.1

          Gliding on mocked all sorts of things about 70’s workplaces. If you think it wasn’t equally applicable to insurance, banking and any other officeplace you’re the moron.

          Today I suspect that the private sector bureaucracies are subject to a much higher level of capture than the public ones.

    • Draco T Bastard 7.2

      The usual public misconception.

      BTW, you may not have noticed but Gliding On was comedy show not a documentary.

  7. Tim Ellis 8

    I see this post has cottoned onto a small part of Mr Whitehead’s speech, focussing on privatisation.

    Mr Whitehead has made it clear that there are efficiency gains to be made in the public sector. That seems like a good thing to me.

    Mr Whitehead doesn’t seem to be a rabid right-winger. He did a stint as deputy director of the Labour Party Research Unit.

    • Draco T Bastard 8.1

      The same way that the right cottoned onto a small part of Sian Elias’s speech you mean?

  8. At the risk of adding some balance here, I note Zorro makes no reference to the 44% increase in core government staffing.

    I’m sure no one would argue that the “outputs” of core services have improved by anywhere near 44%. Part of this is that over the 9 years of the Labour govt, the government agencies were allowed to grow without any rigour around what they were doing or why.

    It’s therefore credible to believe some cuts to services from prioritising services (as all organisations have to do) would lead to greater “productivity” without wholesale sackings.

    I do not the irony however of Treasury throwing stones in such a visible glass house. As it stands, no one listens to Treasury any way so that would be one easy productivity gain for the core government services.

    • Bright Red 9.1

      I’m sure no one would argue that the “outputs’ of core services have improved by anywhere near 44%.

      – provide some evidence that it hasn’t. It’s not true just because you keeping parroting it.

  9. Tom Semmens 10

    I think we should privatise Treasury first.

    Given how laughably inaccurate their forcasts of the surplus, the deficit, the length and depth of the recession and unemployment have been I suspect abolishing the entire Treasury and contracting out their functions WOULD lead to significant improvements in the deliverables.

    First person to go down the road: John Whitehead.

    • Ferdinand 10.1

      Nah, let him tender for his position as an independent contractor but with a minimum 10% reduction in cost.

    • jarbury 10.2

      Bang on Tom. Add to that their projection of oil prices: $US68 a barrel by the end of 2013.

      Oh that’s right, Treasury got a 9% increase in funding. Hypocrits.

  10. The Voice of Reason 11

    For mine, I’d say Whitehead not only had his speech pre-approved by NACT, it’s a fair bet they wrote it for him (TE moonlighting, perhaps?).

    Whitehead is a catspaw, fronting the proposition, while allowing the Government plausible deniability. The member for Waikiki can say it’s not my idea, but I’m glad to see the debate around it. Then the right commentators kick in, see if it gets traction and if not, drop it as one man’s fancy that doesn’t reflect Government policy (at least this term).

    And to put his argument it in a more topical way: It’s a small step for man, a giant leap backwards for mankind.

  11. StephenR 12

    My point, if you’d read my comment properly, was that the government would have been aware of and approved the speech.

    Got that. Genuinely not sure if they explicitly have to approve CEO speeches i.e. to what extent the government controls what the CEOs are allowed to say? If the two were ideologically different (Nat stopping a ‘lefty’ CEO pontificating), would the accusation ‘censorship!’?

  12. StephenR 13

    Mr Whitehead doesn’t seem to be a rabid right-winger. He did a stint as deputy director of the Labour Party Research Unit.

    Aw yeah, when was that? Can’t quickly find a biography

    • Tim Ellis 13.1

      Before he joined the Treasury. Pre-Rogernomics Labour Party when Mr Rowling was leader.

    • Ari 13.2

      Being a Whitehead myself, I can confirm that he’s not a right-winger, just an economist 😛

  13. StephenR 14

    Well let the economists do the econo-mising and let the pollies sort out what recommendations are going to get them re-elected in the short term.

    Roger Douglas was pre-Rogernomics Labour party at one point too… 😉

  14. Ari 15

    Right, and I suspect this is precisely the reason you’re hearing this from John: He advises cabinet on policy, they make the decision, then he helps them implement it and takes their line publicly.

    At least, this is the way he’s explained it to me when I’ve brought up points of disagreements that aren’t actually points of disagreement in the past. 😉

  15. Relic 16

    Mr ‘Shithead’ has an unusual, and unattractive mix of arrogance and obsequiousness. He has been nudged from his Treasury kennel blinking into the daylight to chart out the future for thousands of New Zealanders. If we comply. Are you listening PSA? Partnership is surely very difficult to achieve with a hostile government?

  16. So Bored 17

    One wonders whether Mr Whitehead and others within Treasury might have considered the proposition that “Business is innefficient”. Lets face it, several have just gone down the gurgler, most are strapped for revenue and profit…market failure..bloody inefficient.

    And what in return has business very efficiently recieved for the tax it pays (when profitable..you and I dont have that luxury). Try educated trained healthy employees, transport infrastructure, bail outs etc etc, all at a highly discounted rate, all absolutely vital for business to function.

  17. Draco T Bastard 18

    I suppose the big question is:

    Why aren’t the right and National jumping up and down about this guys political activism the same way they did with what Sian Elias said in her speech? He, after all, has the same non-political type position.

  18. StephenR 19

    Draco, I would think that when Treasury’s website says it is

    …the Government’s lead advisor on economic and financial policy, and has the overall vision of helping governments achieve higher living standards for all New Zealanders.

    The Treasury focuses its efforts on a number of key results that support the government’s goals and have a positive impact of the lives of New Zealanders. These outcomes – economic growth, macroeconomic stability and state sector performance are closely linked.

    …that it’s hardly partisan “political activism” that Whitehead is engaging in, sounds like what he’s done fits Treasury’s job description. I didn’t mind Elias sounded out either, though I do think she could probably stick to interpreting the law.

    • Draco T Bastard 19.1

      What’s wrong with our judiciary advising our parliament on judicial matters?

      And I certainly never said that his speech was partisan merely that it was political activism.

  19. Ari 20

    Here’s the speech the interview was about: http://www.treasury.govt.nz/publications/media-speeches/speeches/publicsectorperformance

    Sounds to me like you’ve misinterpreted it a bit.

  20. StephenR 21

    What’s wrong with our judiciary advising our parliament on judicial matters?

    She’s a judge, not an advisor. I don’t think it’s wrong as such. Actually…I almost don’t care.

  21. StephenR 22

    TVOR, well that doesn’t surprise me, she should go for it then! Maybe they were just pissed off they didn’t ask for her advice…

  22. RedLogix 23

    This outlines the role of the Chief Justice.

    Liaison between the Judiciary and other branches of government – The Chief Justice is the principal point of contact between the Executive Government and the Judiciary. In particular, the Chief Justice liaises with Government on policies or practices that impact upon judicial administration and the discharge of judicial responsibilities.

    Speaking for the Judiciary and explaining its role in the legal system.

    Clearly there is scope for the Chief Justice to speak on these matters.

    • felix 23.1

      Sure, but that only makes sense if you read her job description. That’s a bit fact-y for most of us.

      On the other hand Key and his ministers reckon she should just shut up and all the dittoheads reckon that’s true too.

      Hard to know what to believe, isn’t it?

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