Selling State Assets to Mum & Dad When They Already Own Them
Selling State Assets to "Mum & Dad": It's a Con Trick Because They Already Own Them
The announcement that Mighty River Power will be the first State asset to be put on the market simply confirms the wrongheadedness of this policy, for which the Government does not have a mandate, despite its claims to the contrary (every single poll on the subject has shown a majority of people are opposed to flogging off the four State-owned power generators, Solid Energy and Air New Zealand).
John Key has made a big song and dance about how private ownership will be restricted to 49% and he also promised that “Kiwi mums and dads” will be the target of the shares to be issued when these public assets will be floated. Neither of those promises stand up to any scrutiny - commentators, including Key, have admitted that even if these mythical “Kiwi mums and dads” do buy the shares, there is nothing to stop them promptly selling them to the first big corporate buyer that comes along, either from NZ Big Business or, much more likely, a transnational corporation. That is exactly what happened in the 1990s to community-owned local electricity network operators – shares were issued to their customers, who promptly became the target of offers they couldn’t refuse from corporate buyers. Nor does 49% private ownership provide any kind of protection. All you need to do is look at the Overseas Investment Act which, despite many amendments since it was first passed in 1973, still retains the same legal definition of a foreign company – one that is more than 24.9% foreign-owned. It doesn’t matter whether that percentage is held by one or many foreign owners; if it totals anything higher than 24.9%, it is recognised as a foreign company.
In other words Key is talking about accepting a level of private, inevitably foreign, ownership which is double the legal definition of a foreign company. And there is an inherently absurd contradiction in this whole “Kiwi mums and dads” nonsense – they already own these assets, because that is what public ownership means. They have paid for them by their taxes, why should they be expected to pay for them again by buying a few shares in them and diluting their ownership to the status of a minority shareholder? What happens if one of these privatised companies goes bust? Mum and dad will go to the back of the queue as unsecured creditors, just as happened with the shonky finance companies that toppled like dominos. And mum and dad will be left with nothing. Isn’t that a great bargain!
Why does the Government want to privatise public assets?
Key and English are trotting out the tired old lie that it is to reduce debt. This was used during the huge wave of State asset privatisations in the late 1980s and early 90s. It couldn’t be justified then and certainly can’t be justified now. At least Roger Douglas had the decency to tell the truth. In an early 90s’ book praising him and his cronies for the selloff of State forests, Douglas said: “I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument but we probably felt it was the easiest to use politically”. New Zealand does have high foreign debt at present but the great bulk of it is private debt, not public. Of that private foreign debt around 70% is bank debt, which is only a problem for the Australian owners of our major banks, not the New Zealand taxpayer. NZ‘s public debt is very low compared to other high income countries; it is certainly nothing like the public debt levels of countries such as Portugal, Ireland, Italy, Greece and Spain – countries with which the Government is now comparing New Zealand in a propaganda drive to panic Kiwis into accepting There Is No Alternative to privatisation. Our public debt levels provide no justification for flogging off those assets.
The answer is, of course, that the Government wants to privatise public assets for ideological reasons.
The State-owned power companies, Solid Energy and Air New Zealand are only the beginning. There is a well advanced process of privatisation by stealth. Just to quickly summarise other affected sectors: there are public private partnerships (PPPs) being set up for infrastructure projects; the extremely lucrative workplace component of ACC is being “opened up to competition”; the first contract has been let for a private prison; (in the case of both ACC and prisons, these moves continue policies started by the 1990s’ National government and stopped by Labour); PPPs are being set up to run education sector infrastructure. “Disaster capitalism” (also known as shock doctrine) is swinging into action in quake-hit Christchurch, with talk of a PPP to repair and upgrade hospitals; and calls for Council-owned assets to be privatised.
In the future there is the very real prospect of Kiwibank being flogged off – not only is it ideologically unacceptable to the Tory privatisers (and Labour’s leadership sneered at it when they were forced to establish it as part of the 1999-02 coalition deal with the Alliance) but it is also an extremely successful and innovative bank which is giving the big Aussie banks a run for their money at the lower end of the market. People ask: “Well what is left to sell?” because so much has already been flogged off. The answer is: plenty. Two huge sectors which the transnationals want to get their hooks into are water and local body services. What an indictment of New Zealand business that it can’t create any wealth by itself; the best it can do is rely on the Government to pinch things for it from the public.
People say “who cares who owns the power companies? The State-owned ones behave like bastards anyway”. True, but the solution is not to flog them off to a private owner but to enact a policy that SOEs supplying an essential service actually be a public service rather than profit-obsessed corporations, which are publicly-owned whilst exhibiting all the worst characteristics of privately owned Big Business corporations. That requires a political decision to change the business model of those and other SOEs from profit to service. Now there’s a radical concept – but it was the status quo in NZ until the 1980s and 90s. The country’s electricity system existed to ensure uninterrupted supply of an essential service, at cost.
It appears that New Zealand will have to reinvent the wheel but how long will it take?
Campaign Against Foreign Control of Aotearoa