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February 27, 2012 | by  | in Opinion |
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CREAM – Cash Rules Everything Around Me

Partial Privatisation.

It defined Election 2011. Depending on who you asked, it would either shield us from torrential debt or nudge us into a well of economic melancholy. It’s an issue that inspires and terrifies, but the most dismaying truth is this: there’s no point caring about partial-privatisation of state-owned companies. Like a school-boy hollering for a fight, our political class has insisted that the sell-off will, for better or worse, shift our scrambling society irrevocably. Returning to reality, the Government’s plan to sell shares in our electricity and coal companies is neither wedding-night escapade nor adulterous fling: the most we can hope for is a firm handshake and a sigh of relief.

The Government is paranoid about debt, but selling assets won’t help. The value of our SOEs is simply the value of the benefits that those businesses bring, the dividends we get back. Because the SOEs bring the same benefits to the Government as they would to anyone else who would own them, the Govern- ment will value them as much as anyone else. When shares in them are sold, the amount people are willing to pay for them is exactly the same as how much the Government values them. Net change in the Government’s books: zero.

“However”, I’m frequently told, “you shouldn’t sell our state-owned companies because they’re strategic assets”. That certainly sounds sensible, but I wonder, what the hell is a ‘strategic asset’? Yes, electricity generators are important, but why are they fundamentally different from an oil importer, supermarket, building company or any other business? Sure, Meridian addresses a demand, but that’s what the economy does: people figure out what other people want, provide it and charge a price. Saying that energy is special is bewildering.

As it happens, all of the arguments are pretty fucking pointless. Concerns about profits being lost off-shore are misplaced because the alternative is for interest payments to go in the same direction. Fears of collusion and sky-rocketing electricity prices are ridiculous given that New Zealand has, ya know, competition law. Similarly, it’s hard to understand what (beyond blind ideology) would see ‘mum and dad investors’ forcing the already-efficient companies to lift their game. Current law requires SOEs to run as private businesses, with the good and the bad that brings; the marginal effect on both the arsehole and the awesome of the businesses will be minimal.

New Zealand has some pretty scary problems. We have unforgivable child abuse, an appalling environmental record and stifling poverty: these are the issues worth talking about. That, instead, we spent the election debating the govern- ance structures of a handful of firms is democratically humiliating. Good people, give some credence to my hypocritical words: let’s promise to never talk about partial privatisation ever, ever again.

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