Selling state assets is a prickly issue in New Zealand and around the world. When the National Party announced plans to sell up to 49 percent oaf each of its electricity companies and some other state-owned enterprises should it be re-elected in November, it sparked heated debate and some fierce opposition. College of Business Pro Vice-Chancellor Professor Lawrence C Rose has researched the performance of privatised companies in Australia and New Zealand and believes partial sales are a critical part of improving our rate of economic growth. He speaks to Kathryn Farrow.
How did you get interested in the topic of state asset sales?
It has always been a topic swirling around in my mind: should the state or should individuals own assets? My studies on how markets work indicate that the more that assets are held by individuals, the bigger the economic pie becomes. Governments exist to redistribute the pie, not grow it; they do other things, like providing the environment for markets to flourish.
You have come out in favour of the partial sale of state assets. What is your support for the Government’s proposal based on?
It actually goes back to my reading of Socialism by Von Mises about the study of the state, originally published in 1922. He basically said that the growth of government is not the solution to the hard economic problems facing us. In fact, it is the opposite: it is the move to individual ownership of assets and taking responsibility for one’s actions that will move society forward. There has been extensive research and ongoing debate on this subject over the years. One thing that is pretty clear is that private ownership of assets by individuals has allowed great strides in individual welfare while solving the hard problems of the world in the past couple of centuries.
Your research showed that share markets and perhaps other financial markets benefited from the sales of assets in the 1980s and 1990s, but did it show whether New Zealand as a whole benefited?
One of the reasons New Zealand does not have a good productivity record – which ultimately means that our quality of living relative to Australia and the world is not growing as fast as people wish – is because the Government owns $233 billion of assets that are not performing at the level they should be. Selling off a $6.2 billion portion of them is just a drop in the bucket. We have to start getting more out of those government-held assets or our pie is not going to grow at a sufficient rate to cover the future obligations and expectations of the New Zealand public.
But if these assets aren’t failing, why sell them?
Although they are not necessarily failing, they aren’t performing at the level they should be. Plus, how do you define failure? It is legitimate for governments to have social and redistributive goals and objectives, and if they are achieving these then that is certainly not failure. But people have to understand that their standard of living might not be as high because of those redistributive effects. As the baby boomers leave the workforce, there will be more pressure on the remaining workers to provide both for themselves and for the retiring workforce. So the workers will need to be more productive.
Why has the Government chosen this moment to put forward its proposal to sell state assets?
It comes down to whether you believe that the state or individuals should own assets. That is a fundamental difference between National and Labour. To get elected, National said it would not consider asset sales until its second term. But now National is closer to the end of its first term and is debating asset sales in the run-up to the election. Naturally it wants voters to know what its policy will be so they can make rational decisions at the election. I think that is actually pretty good behaviour.
Pages: 1 2