Friday, February 25, 2005

And they thought it should be sold...

Ever since Auckland airport was spun off into a seperate corporation, right-wingers have been pushing for it to be sold. The stupidity of this is once again apparent with the airport's announcement of a capital return to shareholders. Two of the chief shareholders are Auckland and Manukau cities, and they stand to benefit to the tune of between 22.4 and 67.2 million dollars. If the councils had followed the right-wingers advice and sold their shares, those millions would be flowing into private pockets, rather than being used for the benefit of ratepayers - which is precisely the point of such privatisations. It's not about "the proper role of government", it's about who benefits - us, or the privatisers.


And what have they done with the money they have recieved? Did they buy more shares?

Posted by Anonymous : 2/25/2005 09:24:00 PM

I am not really a privatization person but to be fair the question is not that the airport makes money or not it is if the airport exceeds the return on investment the city could have recieved elsewhere.

What is the total value of the investment in the airport and what benefit could the council have achieved by using that to build highways or offset rate rises.

However airports are monopolies that probably overcharge so I expect it is still a good investment as long as the commerce commision does not beat them up to much. If it does then it could reduce the value of the airport as an investment to any arbitrary level.

Posted by Genius : 2/26/2005 09:41:00 AM

See if you can squeeze an Economics or Finance paper in that packed timetable of yours. You may find it fills out the vast gaps in your knowledge evidenced by this post. NZP

Posted by Anonymous : 2/26/2005 10:49:00 AM

Genius: oh, I agree - I want government or local-body owned companies to be well run and exceed other returns on investment. But that's just a question of what sort of revenue-generating assets to own, not whether they should have them at all.

Too many of the sales of the 80's and 90's were driven solely by ideology, and underpriced to boot. The price of an asset being sold should be based on the NPV of its expected returns. In most cases, it wasn't - or those returns were grossly underestimated in order to push for a sale to a politically favoured party (corruption, in other words). There's some interesting stuff about this in Bruce Jesson's Only Their Purpose Is Mad, relating to the attempts by consultants to force a sale of Auckland's "unprofitable" monopoly infrastructure. The representatives elected to oversee the sale process refused to do so, and instead acted like a company board of directors; they soon found themselves with some nicely profitable enterprises generating substantial revenue for the benefit of Aucklanders.

As for the monopoly issue, if anyone is going to be benefitting from monopoly rents on infrastructure, it should be the public. It's as simple as that.

(Oh, and generally speaking, offsetting rates rises or building (non-toll) roads will not produce more revenue for the city. It will however make things easier for the residents, and I don't mind the money being spent on this at all...)

Posted by Idiot/Savant : 2/26/2005 11:09:00 AM

It should be fairly easy to figure out whether privatising monopoly infrastructure is a good idea. So much of it has happened in the last 20 years, there should be plenty of examples where the private company that bought it paid a fair ammount for it, and then charged a reasonable ammount for providing the services. Unlike these guys for instance:

So, here's the challenge right-wingers: go find some examples of where privatisation of monopoly infrastructure has actually benefited the public, and come back to us.

Posted by Anonymous : 2/26/2005 06:49:00 PM

benefits of privatisation - try telecom new zealand - fits your parameters. prices come down, service levels increased, shareholders made gains. everybody happy except those 20/20 hindsight people who think the gummint shoulda kept it and coulda dun the same fing.

by your logic nrt communism is the best solution because then the people own everything.

Posted by sagenz : 2/27/2005 07:23:00 AM

When you say "those 20/20 hindsight people" you mean the people that think having Telecom as a properly run SOE would have resulted in fairer prices, lower taxes, and more money staying in NZ rather than going to overseas shareholders? I mean, when you look at it our telecommunication costs are basically an unavoidable tax - you can't stay in business and avoid paying them. It's just that we pay this particular tax to a company owned primarily overseas, rather than to our own government. And we can't lobby Telecom to drop it's prices on the grounds that this would help small business grow and encourage knowledge based businesses to move to NZ or at least _stay_ in NZ.

On the whole Telecom's massive transformation has been much more to do with the massive technology changes in that sector worldwide rather than any organisational, regulatory or ownership changes, so I'm not sure if it's a good example to work with. Proving any benefit to NZ as a whole from privatisation as opposed to modernisation sounds very difficult if you ask me.

Posted by Anonymous : 2/27/2005 11:56:00 PM

Actually, I'd say that the positive changes in Telecom have come about due to corporatisation - the idea that it should be run at arm's length primarily as a money-making concern, rather than as a giant job scheme. This is what changed the internal culture of the organisation. And having even the relatively low levels of competition we have now hasn't hurt either.

Posted by Idiot/Savant : 2/28/2005 08:01:00 AM