tip off

State privatisation schemes a dumb idea, regardless of the spin

Queensland and NSW have some seemingly well-crafted spin to try to sell their privatisation schemes. But Economist and University of Queensland academic John Quiggin says any way you cut it, privatisation will not make the states any money.

Both the Queensland and New South Wales governments are attempting to embark on a large-scale program of asset sales. But convincing the public will be tricky, as people are opposed to privatisation — as they should be.

Presumably both governments are calculating that their massive majorities and the weakness of the Labor opposition will protect them from the electoral disaster that has befallen so many previous advocates of privatisation, particularly at the state level. It’s a long list, including Anna Bligh in Queensland, Kerry Chikarovski, Nathan Rees and Kristina Keneally in NSW, John Olsen and Rob Kerin in South Australia,  and Tony Rundle in Tasmania.

Given the clear unpopularity of privatisation, why are governments still pursuing it? The simplest explanation, and clearly the most important one, is that they believe that privatisation gives them access to a large pot of money that can be used to fund desirable, and politically popular, investments in projects that cannot be justified by the financial returns they generate.

This belief is almost universal among the political class, including political journalists. Yet it is unanimously rejected by economists (including both supporters and opponents of privatisation) and is not shared by the vast majority of the general public. The economic reasoning is simple: in general, selling an income-generating asset and using the proceeds to repay debt makes no difference to the net financial position of a household, corporation or government.

Both the NSW and Queensland governments have found new spin, which they hope will enable them to sell privatisation in the face of overwhelming public scepticism.

In NSW, it’s the idea of “capital recycling”, in which the proceeds of asset sales will be reinvested in a manner that is supposed to be sustainable in the long run. This can work, in theory. But the proposals actually on the table involve selling income-generating assets and notionally allocating the proceeds to projects that generate no income. For example, according to Deputy Prime Minister Warren Truss, the NSW government “have sold the Port of Botany, and they have raised a lot of money from that which is now being put into road systems. They’re interested in selling the Port of Newcastle, and that is be used to revitalise the central city of Newcastle.”

It seems highly unlikely that the road systems can be recycled to fund new investment, let alone a revitalised central city. This is melting down your tools for scrap and using the money to pay the rent.

In Queensland, the new spin is the idea that new investments can be financed with private equity but remain under public ownership. It’s called a “non-share equity interest” (NSEI), and the Treasury web page explains its appeal to the government:

The state retains 100% ownership of the ordinary shares in the network businesses and assets.

The private sector contribution will equate to the net funding for the capital expenditure and therefore represent new capital injections.

The NSEI security is debt in its legal form but classified as equity for tax and accounting purposes, and these characteristics give the security it’s [sic] ‘hybrid’ form.” (emphasis added)

In other words, the government is replacing debt raised by the Queensland Treasury Corporation from the private sector with an instrument that’s almost identical, but is classified as equity, and can therefore be presented as a reduction in debt. Whatever the accounting treatment, my reaction as an economist is simple. If it looks like a debt, walks like a debt and quacks like a debt, it is a debt.

In both cases, the spin being offered is transparent nonsense. Why then do governments persist with these policies?  The first answer is ideological. Privatisation is a core part of the free-market ideology shared by the elite of both parties (though the Labor party is gradually weaning itself to a limited extent). The same ideology has driven the “reform” of the electricity sector. Confronted with the obvious failure of that reform, its advocates, such as the Productivity Commission, have doubled down, saying that it is the remaining elements of public ownership that are to blame.

The second answer is much simpler. If you are a premier (or treasurer), privatising assets is a great post-politics career move. You need only to look at the lucrative positions currently held by former politicians including Nick Greiner, Alan Stockdale, Peter Costello and Paul Keating to see why others would want to follow in their footsteps (to be fair, John Howard, a strong and successful advocate of privatisation, has maintained the tradition of a dignified retirement, but he is almost unique in this respect).

It remains to be seen whether, even given their exceptionally strong starting positions, the NSW and Queensland governments can overcome entrenched, and justified, public hostility to privatisation. In the circumstances, defeat for either ought to kill the policy once and for all.

57
  • 1
    The Pav
    Posted Friday, 6 June 2014 at 1:43 pm | Permalink

    Could somebody please point out a privatisation that has ever worked as promised by the proponents or not failed as suggested by the opponents.

    I still don’t like Howard but there is some character and i honestly believe he wouldn’t have tolerated Bishop as speaker.

  • 2
    Jaybuoy
    Posted Friday, 6 June 2014 at 2:08 pm | Permalink

    not to mention the slushy fees generated by the spiv end of town on the way through..

  • 3
    Luke Hellboy
    Posted Friday, 6 June 2014 at 2:27 pm | Permalink

    The common results for so-called Public Private Partnerships that I’ve seen is that if the project turns a profit, the private gets a majority of it, if it turns a debt, the public get to eat it.

  • 4
    David Hand
    Posted Friday, 6 June 2014 at 3:26 pm | Permalink

    Privatising the Commonwealth Bank, Qantas, Telstra and other entities have all worked very well.

    Those who take a different view tend to look at the profits most of these businesses make without acknowledging that they would never be a profitable under public ownership.

    The main argument for privatisation is that public servants are pretty useless at running businesses. The most compelling argument for retaining public ownership is in the case of natural monopolies. The distribution networks of electricity being a case in point.

  • 5
    Nancy Wallace
    Posted Friday, 6 June 2014 at 5:26 pm | Permalink

    Sadly no. These enterprises were all profitable before they were sold, as you can easily check. In all the cases you mention, the sale price was less than the present value of the earnings foregone.

  • 6
    Dogs breakfast
    Posted Friday, 6 June 2014 at 5:27 pm | Permalink

    The economic reasoning is simple: in general, selling an income-generating asset and using the proceeds to repay debt makes no difference to the net financial position of a household, corporation or government.”

    Thank you Professor Quiggin. This concept was completely beyond the intellectual gifts of Peter Costello, the entire media pack at the time, and consequently the general public. The general public still thinks that the libs paid off great wads of public debt (at tiny interest rates) while selling off assets that were earning returns close to double the government interst rates, and it was bought hook line and sinke by the unthinking public as a good thing!!!!!!!!!!!!!!!!

    This is melting down your tools for scrap and using the money to pay the rent.”

    Halle effing lujah!

    Now, I wonder what public project of great investment value which will be a natural monopoly and set Australia up for the future are we currently ignoring, or selling down.

    NBN anyone. The great ideologues of the free market don’t understand the most basic difference between an investment and dead money.

    Nongs

  • 7
    Dogs breakfast
    Posted Friday, 6 June 2014 at 5:30 pm | Permalink

    Those who take a different view tend to look at the profits most of these businesses make without acknowledging that they would never be a profitable under public ownership.”

    Ideological claptrap! Demonstrably false. Wrong.

    The main argument for privatisation is that public servants are pretty useless at running businesses.”

    And clearly, the only way around that problem would be to sell the business. Imaginative!

    The most compelling argument for retaining public ownership is in the case of natural monopolies”

    What, like building an NBN?

  • 8
    David Hand
    Posted Friday, 6 June 2014 at 6:18 pm | Permalink

    Nancy,
    What you do not take into account is the dramatic improvement in the profitability that these privatised businesses have achieved and the resulting tax they pay. People who oppose such privatisations just assume that the performance is as good in public ownership when it is not.

    This is evident from our latest worked example, the NBN.

  • 9
    AR
    Posted Friday, 6 June 2014 at 6:29 pm | Permalink

    One Hand - “the profitability that these privatised businesses have achieved and the resulting tax they pay.” demonstrates the Raygun/Laffer (which even the latter had the decency to recant)conjob, the trickle down effect, aka being pissed on from above and told that it’s raining.
    The main reason that electricity prices rose so steeply in the last couple of years was the gold plating of the distribution network (poles & wires) specifically to obviate the privatised enterprises needing to pay for it after being sold.
    The oldie mouldie, “social the costs, privatise the profit”

  • 10
    AR
    Posted Friday, 6 June 2014 at 6:35 pm | Permalink

    Wanker - I was laughing so much at your previous idiocies that I missed this final gem - “This (?troothiness?) is evident from our latest worked example, the NBN
    As was said of il Duce, it is impossible to parody a buffoon.

  • 11
    JohnB
    Posted Saturday, 7 June 2014 at 1:07 am | Permalink

    David Hand needs a new name.

    One with initials not shared by that famous cultural hero and social analyst, Mr Richard Cranium.

  • 12
    klewso
    Posted Saturday, 7 June 2014 at 1:26 am | Permalink

    Private enterprise - the infallibility of the free market - “GFC”?

  • 13
    Jimmyhaz
    Posted Saturday, 7 June 2014 at 9:40 am | Permalink

    The reason that Telstra, CBA and Qantas were in the hands of the public sector is because they were fulfilling a compelling public interest. Who gives a flying f*** whether or not they are posting a greater profit in the private sector. There is far, far more to these assets than the proceeds that they generate for our governments.

    And David, if you think that Telstra is now better for the people of Australia post-privatisation, then you have truly gone off the deep end.

  • 14
    The Pav
    Posted Saturday, 7 June 2014 at 11:49 am | Permalink

    Hi David @4

    You have a curious view of success I mean even nominating QANTAS is well Sir Humphrey would call that “courageous”

    Lets look at the examples you mention

    CBA….Now facing huge costs for its Finacial advice efforts The purposae of establishing the CBA was to provide competition. the common complaint now is the lack of competition. The CBA needed bailing out like every other bank in the GFC. The Big 4 now own the Fundfs management Industry,and mortgages. None of these things are healthy or what I would call a success

    QANTAS….Shut itself down…lost its Kangaroo Route…Can’t raise capital, not because of the QSA but because the locals know how badly it is run…Look at who the CEO is…Nuff said?

    TELSTRA……Could have be a good idea if they had sold the retail section only but given the CSO environment the old Telstra had to operate inthey weren’t as bad as stated. As a commercial entity they became as hated as the banks and certainly Sol was no success and only now are they recovering their goodwill. Look at the number of compliants? Look at hjow long it takes to get a service? Sorry but since privatisation they have gone downhil.

  • 15
    drsmithy
    Posted Saturday, 7 June 2014 at 2:42 pm | Permalink

    This is evident from our latest worked example, the NBN.

    The only reason the NBN even exists is because of the privatisation of Telstra.

    If it had been done sensibly, with the best interests of the nation at the forefront, then the telecoms infrastructure - a natural monopoly if ever there was one - would have remained in public hands, and we wouldn’t have to build another one.

  • 16
    old greybeard
    Posted Sunday, 8 June 2014 at 12:31 pm | Permalink

    Telstra has certainly NOT worked in regional Australia. It destroyed the reliability of landlines and allowed second class infrastructure to become the norm. Privatisation can never work in terms of essential services-there is no serious competition. Are you serious about Qantas? It is screwed by government backed airlines. Revenue is lost, and I’ll tell you that big companies are a match in bureaucratic stupidity for any government. One of my kids works for big mining- Jesus H. they’re like the bloody curia.

  • 17
    old greybeard
    Posted Sunday, 8 June 2014 at 12:34 pm | Permalink

    PS I told Abbott that they had cocked Telstra up for the bush man to man year ago. He couldn’t get it and didn’t want to. He thought two weeks was fair to fix a phone when it took two days before.

  • 18
    The Pav
    Posted Sunday, 8 June 2014 at 12:44 pm | Permalink

    Old greybeard

    Abbott and the Liberals do not get the bush full stop. The culture of selfishness & privilige that they now represent is at odds with rural values

    You would think that the Nats might give them some balance but they are so easily conned and to scared to show any independance that bthey are only paid lip service.

  • 19
    drsmithy
    Posted Sunday, 8 June 2014 at 12:54 pm | Permalink

    You would think that the Nats might give them some balance but they are so easily conned and to scared to show any independance that bthey are only paid lip service.

    Well, the Coalition is basically two opposing parties united by their fear of secularism, homosexuals and women - and the Nats know there aren’t anywhere near enough people voting for them (simple demographics) to have any influence on their own.

  • 20
    The Pav
    Posted Sunday, 8 June 2014 at 1:03 pm | Permalink

    Hi drsmithy

    Yeah …sort of… I used to think that the Nats sort of stood for not letting the bush get royally screwed. This is still kind of true although they lack ability hence Katter and the other splinters.

    With the Libs I never knew what they stood for other than anti-labor and to be a party for those who weren’t in labor. This is still tue with the added worry that Abbot has added the religious right fanaticism of the OLD DLP. The absence of any philosophy has enabled the wingnut right to move into this vacuum. Abbot has policies but he can’t let them out before elections (I mean where in their campaign was the restoration of knighthoods)This means he did anything he liked in opposition and could only use the famous three word slogans to win power

  • 21
    David Hand
    Posted Sunday, 8 June 2014 at 4:42 pm | Permalink

    Holding an opinion about whether privatisation is a good idea or not is fine. But you cannot possibly point to subsequent performance as proof of failure because you do not have a control to compare it against. Who’s to say what Telstra’s service performance would be if it was still government owned, but forgive me for being sceptical.

    What we do know is that publicly owned businesses and those regulated to death by union EBAs lack the ability to innovate and change in the same way that a private business does.

    But then again, you’re all against flexibility in business as well. The reasons no one with the levers of power ignores opposition to selling off state assets is that they know it’s good policy.

    Australia Post should go private urgently but it will probably be opposed by the agrarian socialists.

  • 22
    drsmithy
    Posted Sunday, 8 June 2014 at 6:04 pm | Permalink

    Holding an opinion about whether privatisation is a good idea or not is fine. But you cannot possibly point to subsequent performance as proof of failure because you do not have a control to compare it against. Who’s to say what Telstra’s service performance would be if it was still government owned, but forgive me for being sceptical.

    Wow. Even for you, David, that’s an absurd statement of unsupported faith.

    We cannot use the evidence of how privatisation has gone wrong, because we cannot know what would have happened otherwise.”

    What we do know is that publicly owned businesses and those regulated to death by union EBAs lack the ability to innovate and change in the same way that a private business does.

    Perhaps. But not all businesses need “the ability to innovate and change”.

    There are more important things than making lots of money.

    But then again, you’re all against flexibility in business as well.

    When it leads to the disastrous outcomes for the working and middle classes it has for the last few decades, yes. As should anyone who cares about civilised society.

    The reasons no one with the levers of power ignores opposition to selling off state assets is that they know it’s good policy.

    The evidence says otherwise. I know how much people like you hate evidence though.

    If a firm operates in a competitive industry, or in an industry where dynamic change is paramount, it is probably better off in the private sector.

    However, if it is a monopoly, or substantially capital intensive, then it should almost always be publicly owned.

    Privatising Qantas wasn’t a bad idea.

    Privatising Telstra (more accurately, not breaking out the infrastructure monopoly first) was a disastroustly bad idea. Privatising basically any utility or other natural monopoly (eg: power transmission/distribution, roads) is also a moronic idea.

    Privatised banking is OK, but as the GFC has shown, it needs to have the absolute arse regulated out of it, and there needs to be a publicly owned bank providing basic services like deposits/savings accounts and non-investment mortgages.

  • 23
    drsmithy
    Posted Sunday, 8 June 2014 at 6:28 pm | Permalink

    With the Libs I never knew what they stood for other than anti-labor and to be a party for those who weren’t in labor.

    The contemporary Liberals are a reasonably extremist example of neoliberalism. Our Boys (and lady) are racing to catch up with the destructive legacy Thatcher and Reagan left the UK and USA.

    They stand for supporting the wealthy, crony capitalism, inequality, entrenchment of hereditary privilege, minimal social mobility, minimal social services and demonising the unemployed and poor. They’re also starting to pick up some serious religious extremism, but that’s just a useful tool, not the core platform.

    The anti-Labor aspect is simply inertia. New Labor is also substantially in the thrall of neoliberal ideals, and there is barely daylight between them and the Liberals on most economic issues, and not a huge difference even on social policy.

    Labor still retains the conscience last seen with Keating and Hawke. The Liberals haven’t had for decades. Imagination the laughter if someone like Abbot, or even Howard, tried to deliver Menzies “forgotten people” speech today.

    The only centre-left party remaining is the Greens, and they seem to be in the midst of deciding whether they want to to be an environmentalist or social democratic party. I hope they choose the latter, because if they don’t then we’re buggered.

    If you read it, the Stable Population Party actually have a decent progressive policy platform. The problem is they tend to also attract racist bigots.

    I miss the Democrats.

    With all that being said, the whole “party” system is one of the biggest problems with our system. In the absence of proper Democracy, probably the least worst outcome we can hope for in this country are more microparties, hung parliments and independents. The electoral dictatorship we have devolved to is a farce and insult to civilised society.

  • 24
    David Hand
    Posted Sunday, 8 June 2014 at 6:52 pm | Permalink

    Yep doctor,
    I accept that most people here are socialists who want the government to own most businesses. Big government. High taxes. High spending. Eternal deficits. A meek group of wealth creators generating most of our GDP that can be taxed so it can be redistributed to worthy and deserving recipients. That’s why you think that private ownership of businesses is always a bad idea and no privatisation whatsoever has ever worked.

    From each according to his ability, to each according to his need.

    Just thought I’d mention that there was a good reason that the Berlin Wall came down in 1989.

  • 25
    The Pav
    Posted Sunday, 8 June 2014 at 6:52 pm | Permalink

    drsmithy@21

    David Hands reply@20 just shows the paucity of logic that proponents of privatisation have. Challenged to provide indicators of succes he puts up three. When shown that these were failures he then resorts to doctrinaire slogans that govt enterprises lack flexibility etc. and that things would have been worse. In logic a position cannot be proven by alleging that something else would have been worse. We have empirical evidence that those examples of “success” were anything but and effectively this is conceded by Mr Hand by his subsequent change of tack.

    I do not accept that govt enterprises are in truth any worse or better managed than commercial entities. I have worked in I was six, in farmining, small business, medium business, large internationals and govt departments. There are good and bad in equal measure. The simple fact is that the enterprises that are privatised are usually the better ones for rather obvious reasons.

    I mean f private enterprise was that good we should privatise the army but what is the saying we use when something goes well…”Ran with military precision”

    Of my last two employers the Govt was far more efficient and we did more and more with less. There was a fanatical determination to give value for money. If we had just been given a little of capital we could achieved miracles. The commercial one went to a great deal of trouble to destroy one of the best franchsies in the countries history. They succed in running the business down fro #1 to #4 whilst paying the CEO etc evergrowing saleries. In fact there was a direct relationship to their pay rates and the rate of decline……I couldn’t leave fast enough although I was on a package of about $150K.

    I totally reject David Hand & his ilk simplistic contention about the management of state enterprises

  • 26
    The Pav
    Posted Sunday, 8 June 2014 at 6:57 pm | Permalink

    Just seen David Hands reply at 22.

    As usual of his type when shown that his arguments have failed reverts to accusing his opponents of being socialists and of aims that they simply don’t have,

    I can assure I am neither a socialist, coomunist or capitalist. I am just a person who thinks we need to look at things logically….Simple doctrinaire “ism” thinking aint the solution.

  • 27
    drsmithy
    Posted Sunday, 8 June 2014 at 6:58 pm | Permalink

    I accept that most people here are socialists who want the government to own most businesses. Big government. High taxes. High spending. Eternal deficits. A meek group of wealth creators generating most of our GDP that can be taxed so it can be redistributed to worthy and deserving recipients. That’s why you think that private ownership of businesses is always a bad idea and no privatisation whatsoever has ever worked.

    From each according to his ability, to each according to his need.

    Just thought I’d mention that there was a good reason that the Berlin Wall came down in 1989.

    If you’re going to peddle straw men and rhetoric, can you at least try and make it interesting or amusing ?

  • 28
    The Pav
    Posted Sunday, 8 June 2014 at 7:14 pm | Permalink

    drsmithy@25

    hahaha.

    One wonders if privatisation is such a good idea then why doesn’t the likes of Abbott et al seek to privatise the Catholic Church and put it on a commercial basis

  • 29
    The Pav
    Posted Sunday, 8 June 2014 at 7:16 pm | Permalink

    Also re the Berlin Wall

    My response is that ther was a good reason that govt enterprises came into being in the first place….the failure of private enterprise….They only get interested when the heavy lifting has been doien and then seek to use their political influence to scoop up asstes on the cheap….they certainly don’t intend to run them for the benefit of society

  • 30
    David Hand
    Posted Sunday, 8 June 2014 at 7:22 pm | Permalink

    I don’t know where you guys were in 1982 but the privatisations followed a decade of stagnation, recession, regulation and debt were a vital part of the reforms.

    And can someone take me through how your various economic philosophies public ownership = good; private ownership = bad, is not the same as the failed socialist experiments of the 20th century.

  • 31
    drsmithy
    Posted Sunday, 8 June 2014 at 7:36 pm | Permalink

    And can someone take me through how your various economic philosophies public ownership = good; private ownership = bad, is not the same as the failed socialist experiments of the 20th century.

    Like I said, can you at least try and make your straw men funny ? The only person here who thinks anyone is saying “private ownership = bad” is you.

    Which “socialist experiments” are you referring to, and how are you defining “failed” ?

  • 32
    The Pav
    Posted Sunday, 8 June 2014 at 7:45 pm | Permalink

    David Hand @ 28

    A decade of stagnation…I guess that means that you concede the LNP are crap managers then

    As drsmithy states we just want the proposition proved.so far you have failed entirely and only sloganeered

    You want an indictor of govt v commercial.

    Just compare TV…ABC is vastly superior…lets compare endless 2 & 1/2 men repeats to the Gruen Factor and Checkout for example.Drama compare Neigbors to say rake…There is occaisional quality on the Commercial stations but the ABC far outdoes them.

    I am not aware of any govt enterprise that has actively marketed a product that when used as directed kills you….but the tobacco industry did and lied and hid the truth.Lets face it the tobacco industry killed mor people than Stalin so even if I was a communist it would be safer

  • 33
    Ken Lambert
    Posted Sunday, 8 June 2014 at 11:59 pm | Permalink

    Normally on David Hand’s side of the arguments seen here on Crikey; but in this case I would argue that we have to be extremely careful about privatizing Govt utilities and natural monopolies.

    Private industry is great at making things like vacuum cleaners which you don’t have to buy.

    The electricity industry is a great example where ‘competitive’ retailers have only delivered huge price rises to consumers, multiple well paid jobs for executives, tricky contracts designed to mislead for customers and SFA public benefit as far as I can see.

    And a great boon for retired and clapped out politicians who find their way onto multiple ‘privatised’ entities.

    In many privatized public assets, the hand of Govt is still there in the fine print guaranteeing returns by price regulation or other semi-monopoly means - the kind of stuff loved by the Macquarie Banks of this world particularly in the PPP type of spivvery. Public risk and private profit is usually the game for these clever players like Branson et al..

    Politicians are usually too inept in business experience to get a good deal for these assets in any case.

    The old model of Govt Loans raising money for specific infrastructure from the public - paying a secure attractive interest rate to the investing public (and their super funds) is hard to beat for soundness and equity. The public invests in its own infrastructure, Govt pays the interest and capital with future revenue which can be efficiently collected with a regulated surplus covering costs.

    This system delivered among the lowest electricity prices in the world in Australia until screwed up by political privatizations and Green ratbag renewable energy targets paying overgenerous subsidies to expensive solar and wind.

    And Banks need strict regulation by a lender of last resort - the Reserve Bank….

    And wasn’t the Catholic Church sort of privatized by Garibaldi with an encore by Mussolini?

    A remarkable organization of relatively flat management profile with an extensive branch structure with some local decentralization of decision making within strict if not infallible guidelines. Known to have a remarkable ability to have the membership voluntarily give it up to 100% death duties which no Government in history has been lovable enough to achieve.

    Unlovable Govt tends to work on the famous Shavian dictum that if you rob Peter to pay Paul you can at least be assured of Paul’s support.

  • 34
    David Hand
    Posted Monday, 9 June 2014 at 12:38 am | Permalink

    Well it’s mostly slogans down here in the crypt, Pav. I’m not going to prove anything to you and I don’t expect to. I am expressing an opinion, that’s all.

    Yep, that billion dollars a year does buy some programming as it should.

    Doctor, this whole thread, starting with the headline “State privatisations are a dumb idea” is built on the notion that private ownership is bad.

    The difficulty you lot have got is that state and federal governments of all types, apart from maybe those run by unions, have been selling off assets since the early 80s. The best you lot can come up with as to why this has occurred is that you think they’re stuffing it for future generations to secure a high paid retirement job.

    Or maybe politicians are too stupid the realise that they are “privatising profits and socialising losses” (I love that one).

    Or maybe Rupert told them to.

    Come on guys, surely you can do better than that?

  • 35
    drsmithy
    Posted Monday, 9 June 2014 at 2:07 am | Permalink

    Well it’s mostly slogans down here in the crypt, Pav. I’m not going to prove anything to you and I don’t expect to. I am expressing an opinion, that’s all.

    You are entitled to your own opinion.

    You are not entitled to your own facts.

    Doctor, this whole thread, starting with the headline “State privatisations are a dumb idea” is built on the notion that private ownership is bad.

    No, it’s built on the notion that the privatisation of state-owned assets is usually bad (as the evidence shows).

    Which is a very different argument to the “private ownership = bad” straw man you are peddling.

    There are some services that are better handled by private industry. No reasonable person thinks the corner store or local pub should be Government owned and operated (outside of a few rare corner cases).

    There are also some that it fails dismally at. Predictably. Demonstrably. Repeatedly. Inevitably.

    It is this second part the ideology of you and your ilk blinds you to.

    The difficulty you lot have got is that state and federal governments of all types, apart from maybe those run by unions, have been selling off assets since the early 80s.

    Why is this a difficulty ? The whole point of this article is to highlight why this has had negative (for the country/state/community) results.

    It’s only a “difficulty” for those whose ideological beliefs conflict with reality.

    Your only argument thus far is that “if it was bad, they wouldn’t keep doing it”, which is a begging the question fallacy - “[for those who make the decision] is it bad” ?

    The best you lot can come up with as to why this has occurred is that you think they’re stuffing it for future generations to secure a high paid retirement job.

    More accurately, I think they care nought for the consequences of their decisions, because those consequences do not affect them.

    Or maybe politicians are too stupid the realise that they are “privatising profits and socialising losses” (I love that one).

    I used to think that. I am a generous person and like to give people the benefit of the doubt. “Never attribute to malice that which is adequately explained by stupidity” are words to live your life by.

    But thirty-odd years of evidence has curb-stomped my optimism.

    Hockey’s budget was probably the last nail in the coffin. Conservatives in this country aren’t even bothering to put lipstick on the pig, now. It’s almost comical how they think their problem is simply an issue of “marketing”.

    Almost.

    It’s quite clear that, at *best*, they simply do not care about the consequences of their greed, selfishness and ideological ignorance. At worst (and I should stress that I do not think most politicians meet this definition) they are a malevolent force persecuting the weak and vulnerable for their own sadistic amusement.

    Come on guys, surely you can do better than that?

    Better than what ?

    We have suffered thirty to forty years of neoliberal politics across the Anglo world. During that time, class mobility has reduced, inequality has worsened, median wages have stagnated (if not outright reduced), job security has been mostly destroyed, bargaining power of workers has been undermined (if not eliminated), private debt has ballooned and public services have been cut.

    All this while productivity and innovation boomed. Unfortunately, most of the benefits of that went to a tiny percentage of the population, whose wealth has increased many multiples over the rest, while their responsibilities (sorry, taxes) have been slashed.

    These are not issues of opinion, but fact. Indisputable.

    We live in one of the richest countries *in history*. The _lowest_ amongst us should be working at most a 40 hour week and living in reasonable comfort from that “sweat of their brow”. Instead they work multiple jobs, more than 40 hours a week to eke out a bare existence - assuming they’re lucky enough to be able to find work at all in a system explicitly designed to avoid full employment. Then, to add insult to injury, they get called “lazy” because their employers don’t pay them enough and they need Government support to survive.

    Just so people who are already multi-millionaires can hoard a bit more, or buy another car they don’t need.

    Why do we need to do any “better” than *reality* ? The world remains, today, on the precipice of economic catastrophe, and it’s not because of people who believe that the bloke who collects your garbage or bags your groceries should be paid enough to be comfortable. It’s because of people who think the only way to measure prosperity is with a dollar sign.

  • 36
    David Hand
    Posted Monday, 9 June 2014 at 1:13 pm | Permalink

    Hey doctor.

    It’s big hearted of you to concede that corner stores might be allowed to remain in private hands in your brave new world.

    I’m entitled to my own opinion. I’m not entitled to my own facts.

    Thanks for including that utterly meaningless cliché in your post. It’s another favourite of mine.

  • 37
    AR
    Posted Monday, 9 June 2014 at 1:37 pm | Permalink

    If honest (sic!)another favourite of mine.” then please act accordingly.

  • 38
    drsmithy
    Posted Monday, 9 June 2014 at 1:54 pm | Permalink

    It’s big hearted of you to concede that corner stores might be allowed to remain in private hands in your brave new world.

    It’s very rude of you to continue to peddle straw men without even having the courtesy to make them amusing.

    Thanks for including that utterly meaningless cliché in your post. It’s another favourite of mine.

    You do seem to be a man who likes a cliché.

  • 39
    The Pav
    Posted Monday, 9 June 2014 at 5:03 pm | Permalink

    dresmithy

    Your arguments are another proof that the “Trickle Down” theory does not work. Your reason and logic just haven’t trickeld down to David.

    You are more patient thant I. Your detailed responses to his asinine comments have yet to drwa a reasoned rebuttal. There is a reason for that. He simply does not have one as it doesn’t exist and rather than admit he is wrong resorts to non sequitor, straw men and slogans to avoid having face the fact that his ideology has eliminated his capacity for free thought

  • 40
    David Hand
    Posted Monday, 9 June 2014 at 11:46 pm | Permalink

    Here’s my rebuttal.
    Bob Hawke, Paul Keating, John Howard, Anna Bligh, Jeff Kennett, Campbell Newman, Morris Iemma, Bob Carr, Nathan Reese, Barry O’Farrell, Mike Baird, Tony Abbott and a lot of others.

    All these leaders sold publicly owned assets while in office. So while you are all congratulating each other about how smart you are to oppose public asset sales, the governments we elect are doing it and have been for decades.

    And none of you have put forward any logical thinking about why that is.

    For me, I believe it promotes economic growth.

  • 41
    drsmithy
    Posted Tuesday, 10 June 2014 at 7:39 am | Permalink

    Here’s my rebuttal.
    Bob Hawke, Paul Keating, John Howard, Anna Bligh, Jeff Kennett, Campbell Newman, Morris Iemma, Bob Carr, Nathan Reese, Barry O’Farrell, Mike Baird, Tony Abbott and a lot of others.

    All these leaders sold publicly owned assets while in office. So while you are all congratulating each other about how smart you are to oppose public asset sales, the governments we elect are doing it and have been for decades.

    That’s not a rebuttal, it’s a collection of logical fallacies.

    And none of you have put forward any logical thinking about why that is.

    And that’s a flat-out lie. The article outlines several reasons “why that is” (and why they’re wrong).

    On the flipside, you haven’t offered anything supporting your belief except fallacies and faith (the bread and butter of neoliberal policy making).

    For me, I believe it promotes economic growth.

    You can believe something as much as you want. Doesn’t make it true.

  • 42
    AR
    Posted Tuesday, 10 June 2014 at 10:23 am | Permalink

    I believe it promotes economic growth.“… and have you sought treatment for this debillitating delusion?
    As DrS & others have noted - You can believe something as much as you want. Doesn’t make it true.

  • 43
    David Hand
    Posted Tuesday, 10 June 2014 at 12:05 pm | Permalink

    Yes you are right doctor and I am mistaken.
    The article expresses an opinion that governments sell off assets to get cash to fund politically popular programmes.

    But that’s not why I generally favour privatisation of state assets. I believe the reforms the owners of the privatised businesses make delivers dividends for the whole community in terms of economic growth. The enormous waste within publicly owned businesses is generally invisible to the community until they are sold and the reforms begin.

    Natural monopolies, such as the poles and wires of the NSW electricity system are a dubious privatisation option because the regulation that would then be necessary would almost certainly protect the enterprise from much needed reform.

    Of businesses I started this conversations with, CBA and Qantas are not natural monopolies. Telstra was one but lives in a world of rapidly changing technology where innovation is the name of the game - something private business is much better at than those in government ownership. That is also why Australia Post should urgently be privatised. The vital service it provided is not vital anymore and it is about to become a complete commercial basket case in the face of the technology revolution that has destroyed its business model.

    Just look at the hash being made by the NBN as it has launched its service in Tony Windsor’s seat and marginal electorates in Tasmania as a recent worked example. A private NBN would never start its services in locations such as that because it does not make business or economic sense.

    Social and political sense maybe but that supports my original point.

  • 44
    leon knight
    Posted Wednesday, 11 June 2014 at 12:50 pm | Permalink

    Smithy, the Pav, AR and others - why the hell do you continue to attempt reason with this Hand wanker?

  • 45
    Chris Hartwell
    Posted Wednesday, 11 June 2014 at 1:02 pm | Permalink

    In the forlorn hope that he might see reason.

  • 46
    The Pav
    Posted Wednesday, 11 June 2014 at 5:03 pm | Permalink

    Dear David Hand

    As the good doctor observed merely running off a few names does not form a coherent argument. If the point was that both sides do it then it must be right then again that is not a valid argument. Not only that it would support our contention that our objection is practical not political.

    As to the NBN being a smees. I’m not convinced. If you say it hasn’t gone prefectly then sure but no program of any size ever does ….private or public ( just ask BHP about their HBI)( Rememeber the Sydney Operar was supposed to take 3 years and $7m..It took 16 and $100Mplus but we wouldn’t be without it) Furthermore it has uncovered some problems we didn’t know about ( asbestos) I expect some more dramas and blow out but at the end nobody will remeber once we have a functional system Just like the SOH

  • 47
    drsmithy
    Posted Wednesday, 11 June 2014 at 5:56 pm | Permalink

    The article expresses an opinion that governments sell off assets to get cash to fund politically popular programmes.

    That’s another misrepresentation.

    But that’s not why I generally favour privatisation of state assets. I believe the reforms the owners of the privatised businesses make delivers dividends for the whole community in terms of economic growth.

    But in reality what it tends to deliver is price hikes, service drops, tax farming and corruption.

    The enormous waste within publicly owned businesses is generally invisible to the community until they are sold and the reforms begin.

    That’s a point. I suppose, at least, that the massive waste within privately owned business can be clearly seen in huge profits, overpaid CEOs and upper management, golden parachutes, and the like.

    The advantage to “massive waste” within publicly owned businessed, of course, is that “massive waste” tends to be far more evenly distributed throughout the community in the form of higher overall wages and better services.

    Natural monopolies, such as the poles and wires of the NSW electricity system are a dubious privatisation option because the regulation that would then be necessary would almost certainly protect the enterprise from much needed reform.

    At least we’ve got an admission regulation can be necessary. Baby steps.

    Of businesses I started this conversations with, CBA and Qantas are not natural monopolies.

    The GFC handily demonstrated (again, for those who do not read history) that banks cannot be trusted to self-regulate, and that certain bank functions (basic savings accounts, homeowner mortgages, etc) cannot be entrusted to them. So its clear that at least some level of banking service should be considered akin to a public utility and publicly owned.

    Telstra was one but lives in a world of rapidly changing technology where innovation is the name of the game - something private business is much better at than those in government ownership.

    The infrastructure part is not “a world of rapidly changing technology where innovation is the name of the game”.

    That is also why Australia Post should urgently be privatised. The vital service it provided is not vital anymore and it is about to become a complete commercial basket case in the face of the technology revolution that has destroyed its business model.

    I imagine many who would be at the mercy of expensive private courier companies would suggest otherwise.

    Just look at the hash being made by the NBN as it has launched its service in Tony Windsor’s seat and marginal electorates in Tasmania as a recent worked example. A private NBN would never start its services in locations such as that because it does not make business or economic sense.

    I see you’ve completely missed the point of publicly funded essential services. Again.

    There are very few, if any, remaining publicly owned assets that it would make sense to privatise (those were all taken care of by Hawke and Keating). On top of that, there are plenty of publicly owned services that have been privatised that never should have been (Telstra being the most obvious example).

    Hence, calls for further privatisation of public assets is, almost certainly, done for ideological and/or political reasons and will consequently do nothing (at best) to grow the economy, and more likely end up disadvantaging everyone.

    For similar reasons, just about any “Public Private Partnership” ever undertaken has been bad for the community.

    Tangentially related: http://heteconomist.com/why-neoliberals-pretend-private-debt-doesnt-matter-and-public-debt-does/

  • 48
    Graham Morphett
    Posted Sunday, 29 June 2014 at 1:30 pm | Permalink

    There is not one example of privatisation of state assets in Australia - from the banks onwards - which has favoured the people. In every case the outcome has been increased user pricing and reduced efficiency. The electorate is correct to oppose the current round of Asset sales which are driven by ideology, not good sense. Its time for new political parties with a non 1950’s vision of Australia.

  • 49
    David Hand
    Posted Sunday, 29 June 2014 at 4:22 pm | Permalink

    Looked at your mortgage interest rate lately, Graham? Bought an airline ticket any time in the past 20 years? Do you own a telephone?

  • 50
    drsmithy
    Posted Monday, 30 June 2014 at 7:44 am | Permalink

    Looked at your mortgage interest rate lately, Graham?

    Easy credit and unsustainably low interest rates are some of the biggest reasons for today’s economic problems.

    Bought an airline ticket any time in the past 20 years?

    From one of the Govenrment owned middle eastern airlines perhaps ?

    Do you own a telephone?

    Be thankful the Government built the infrastructure it uses.

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