Thursday, January 26, 2012

Fallow on privatization

Writing in the Herald, Brian Fallow calls National's privatization programme "a solution in search of a problem". Treasury analysis of our state-owned energy companies shows that they are well-run and profitable. The dividends are about the same as the interest on money the government would have to otherwise borrow (and certainly "within the margin of error" given the uncertainties involved). Which makes the entire exercise pointless:

True, the policy would reduce the Government's gross debt compared with what it would otherwise be, releasing capital for higher priority spending while avoiding the need to approach skittish offshore funding markets.

But there is an opportunity cost to that. The private sector money has to come from somewhere.

If "Mum and Dad" investors reduce their bank deposits, for example, to invest in the SOEs then, all else being equal, the banks will have to increase their offshore borrowing.

Alternatively there may be switch out of other forms of saving, including Government stock.

It is only if the privatisation process increases national savings that it will lessen the country's, as distinct from the Government's, reliance on offshore lenders.

Fallow calls this "a lot of trouble just to ensure some New Zealanders own more of these enterprises, while the rest own less". And it is. But for National, that is the point. This was never about "improving efficiency", "reducing debt" or (and this one is truly awful) "giving (rich) kiwis something to invest in". It is about wealth transfer: about taking those assets away from us, and giving them (and their monopoly dividend-streams) to their rich mates, while letting other rich mates clip the ticket on the way through. It is about looting the state for their own profit. Everything else is just excuses and spin.

This shouldn't be surprising. It is, after all, what National exists as a party to do. But at the same time, its not acceptable. Those companies are ours. And we should not let them be stolen by a new generation of elite thieves in the style of Fay and Richwhite.