Nationalization

Understanding assets sales properly

NZ Herald

Yesterday John Roughan very clearly explained the ethos of the mixed ownership model:

Key’s relationship with the electorate is more like a corporate chief executive than any New Zealand Prime Minister I have seen. People like me sense that he looks at assets as a business person does, not as we do.

Most of us don’t sell any personal possessions that still have value for us, unless it is to replace them with a new or better version of the same thing. Most people take the same attitude to public possessions.

But business managers dispense with valuable assets all the time. When they look at their property they see a chunk of capital that can be put to possibly better use. They often sell their buildings and lease them back. Like most people I can’t understand that.

Companies lease cars and much else. They see holding costs that most of us don’t notice.

When someone like Key looks at a profitable state-owned enterprise he doesn’t simply see a stream of future dividends as most people do – and as the Greens did when they calculated the sale of power companies would be a net loss to the public.

Key looks at those properties and thinks of the cost of the capital he is having to borrow for other public purposes.

Because he is running a country, not a company, he thinks the best use of his capital is in public services that cannot operate profitably and attract private capital.

The Greens and Labour don’t understand this because to a man or woman they have never run a business…most have had a lifetime cosseted in one for or other of state employ. What Labour and the Greens do understand though is this:

Labour and the Greens think so too – that is why they haven’t undertaken to buy back the assets Key will sell. And not many of us would want them to. It is a curious thing that while there is heavy opposition to privatisation there is no public enthusiasm for nationalisation.

When the previous Government rescued Air New Zealand and bought back the railway it was more by accident than design.

It took over railway maintenance hoping to lease the tracks to the train operator, but Toll Holdings, like TranzRail, couldn’t make the operation cover the full cost of maintenance.

That privatisation confirmed the infrastructure is not economic.

Labour and the Greens have a major problem though. With the gutting of their support they are left with hard core activists who seriously believe that nationalisation is a valid option. Dyed in the wool Leninists most of them.