Labour’s Shotgun Wedding

The Government gets ever more deeply involved in the economy. No longer can this be classified as “correction”, to use Helen Clark’s previous phrase. Her “rebalancing” formula looks increasingly like seesaw, not set of scales.
It’s all music to the Alliance and the Greens who want the Government even more involved in commercial affairs.
Alliance leader Jim Anderton looked like cat with cream at the announcement of Air New Zealand’s renationalisation. Two days earlier, in little-reported speech, Anderton pilloried the privatisations over which he left the Labour government in 1989.
There is lot of counterfactual to Anderton’s one-dimensional attacks.
For example, while the failure to retain telephone numbers in public hands and the sale of an unregulated monopoly over the local loop were serious errors in the privatisation of Telecom, the private buyers and their competitors made huge and beneficial investments that risk-averse politicians would never make. And while the sale of the rail corridor along with the rest of the rail system was another mistake, though now partially reversed as part of an attempt to solve Auckland’s transport shambles, the private sector owners greatly improved freight productivity and the Cook Strait ferry service.
The events notwithstanding, the Alliance mantra about the Auckland Regional Services Trust (now Infrastructure Auckland), set up to sell off Auckland’s publicly-owned businesses, is hollow. Bruce Jesson, as chair of an Alliance-majority trust, kept all the businesses in public hands, traded out of debt into surplus and thereby “proved” public ownership worked. But his “proof” depended on appointing commerce-savvy boards which ran the businesses on strictly businesslike (read private sector) lines.
But for all the counterfactuals to Anderton’s glee, there is deeper point that resonates.
Economist Brian Easton once coined the term “quarry economy” to describe what we have here. Loosely translated it means “mining” our natural environment: hunting fish, cutting down trees, grazing animals, taking money from tourists who flock to gawk at natural beauty spots.
In sense the 1980s’ and 1990s’ privatisations fitted that description. Foreign companies – and few locals – could ” mine” capital gain out of the former state businesses, then scarper. Hellbent on getting the businesses off the state books to pay down debt or just to satisfy an ideology, the politicians often sold for prices that in retrospect look cheap.
Contrast the sale of Air New Zealand after deregulation here with Paul Keating’s ruthless exclusion of Air New Zealand from Australia in 1994 to keep Qantas’ 1995 sale price up. The politicians here also chose the wrong buyer for Air New Zealand, to our cost.
That, I’m afraid, is the past. Any future sales, even by National-led government, are likely to be much more careful. The lasting issue in Anderton’s triumph of the past few months is how it will impact policy for the rest of this Government’s time.
Clark’s “correction” line was predicated on not reverting to pre-1984 heavy regulation and involvement in the economy. Commerce Minister Paul Swain insists his programme is nearing completion and was designed to correct what Labour identified pre-election as market failures. Energy Minister Pete Hodgson resisted calls for electricity price controls during the winter power crisis – though his re-regulation of the industry does give him sweeping backstop powers.
And, while Anderton relished making us all shareholders in Air New Zealand, Michael Cullen did not and wants another airline here sometime. Cullen also twisted and turned to avoid owning the Post Bank Anderton demanded as an Alliance trophy.
Still, there’s plenty of non-commercial swing of the seesaw elsewhere. Look at appointments to state businesses boards to reflect the (Labour and Alliance-leaning) community – not to bring commercial skills.
Look too at the destruction of shareholder value in Television New Zealand.
Look at the re-centralisation of health and education services, at considerable administrative cost in the case of health. And look at the list of re-regulations by Swain and others: electricity, the sharemarket, takeovers, insider trading, telecommunications, construction, labour laws and ACC, with decisions to come on gas, shipping, airport pricing, environmental and energy controls. And look at the super-cautious policy on genetic modification.
In short, look how unselfconsciously ministers reach for the regulatory solution when an issue arises. This is government that protests its determination not to be seduced into old-style Labourism but has convinced itself it can be little bit pregnant and little bit more pregnant and little bit more pregnant – and still be bride to business.

Colin James, Synapsis Ltd, P O Box 9494, Wellington, New Zealand Ph (64-4)-384 7030, Fax (64-4)-384 9175, Mobile (64-21)-438 434, Email:[email protected]

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