Thursday, June 28, 2012
Beyond doubtful reason
For specious reasoning it would be hard to beat this New Zealand Herald editorial on partial asset sales earlier this week. In particular, my jaw dropped when I read that 'the reason economists in the Treasury urge privatization of the power companies is that better investment decisions can be expected of private shareholders. People who put their own money into something take more care of it. The public will receive the benefit of private investors' monitoring of the power companies.' Um...what? Where to begin exposing the gaping holes in this reasoning? Did the people who put their own money into Hanover/Bridgecorp/Nathans/Lombard (you name it) take more care of their money? I don't think so. And in exactly what fashion do private investors monitor the companies they invest in? Only the big corporates have any influence; individual private investors can 'monitor' all they like but the company they've invested in will go its own sweet way regardless. The Herald then goes on to further justify the sales by saying: 'Public ownership is probably necessary for a natural monopoly such as the national grid. But the generating of electricity and its sale to consumers were put on a competitive footing in the 1990s.' Which makes it all right? Well, sure, if you say so. But many would say electricity generation is one of the most natural monopolies you can get, and two wrongs (partial privatization in the 90s and partial sales now) don't make a right. In any case, by its own admission the Herald says Mighty River Power, Meridian, Genesis and Solid Energy 'will provide the stockmarket with much-needed gilt,' which rather suggests they've been doing perfectly fine under public ownership. At this point in the editorial I was hoping to get my jaw off the floor, but then came the kicker. 'If most shares are soon owned overseas,' trills the Herald, 'so be it. We live on international trade and investment. Resources are owned by those who can generate their best value. That is how a successful economy works.' So be it? Resources are owned by those who can generate their best value? Look, go ahead and sell off the whole country while you're at it. You'll have to change your masthead name, though: 'New Zealand' clearly has no place in it.
Posted by Denis Welch at Thursday, June 28, 2012