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Greens back renationalisation

February 3rd, 2018

The Greens have announced a policy of renationalising the electricity grid, starting with transmission. Since that’s exactly what I proposed last year, it’s no surprise that I agree.

The crucial aspect of the policy is that it should begin with a reduction in the allowable rate of return to a level comparable with the long-term government bond rate. This ensures that the assets can be reacquired at their true value rather than paying the premium invariably associated with regulated rates of return based on spurious market comparators.

On a more snarky note, I can’t resist the observation that these assets were never fully privatised in the literal sense of the term. Rather, in many cases, they were sold to foreign governments operating through sovereign wealth funds.

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  1. bjb
    February 3rd, 2018 at 16:59 | #1

    In the SMH story you reference:

    ———–
    However, Grattan Institute energy director Tony Wood said nationalisation could lead to higher prices for energy.

    “I think the evidence is that the cost of distribution would be higher,” Mr Wood said.

    “Privately-owned businesses have produced better results, so why would you put it back in the hands of the public?”
    ————

    Is there any evidence to support his assertion ?

  2. Ikonoclast
    February 3rd, 2018 at 18:04 | #2

    The Chinese must be laughing at the gullibility and stupidity of the West. While we pursued self-destructive neoliberalism, the Chinese developed a clever mixed economy which retained a very strong statist or dirigist element. History proves strong statism wins every time in conflict and crisis. In times of world war all major states become statist in the effort to survive. In all great existential crises, statism proves stronger every time.

    Excessive statism has drawbacks. However, until the West shows it can meet China’s challenge and maintain a great power balance (if possible), we must become considerably more dirigist. We must treat China as potentially very dangerous, just as China must treat the USA as very dangerous. All great powers are highly dangerous and seek only their own ends. Unfortunately, Offensive Realism is the only realistic geostrategy for now and the foreseeable future (cf. John John Mearsheimer).

    Selling our strategic infrastructure to China was/is the height of economic and geostrategic stupidity. Such actions in fact are treacherous.

  3. I am and will always be Not Trampis
    February 4th, 2018 at 18:27 | #3

    States buying back the assets??

    I really cannot see that at all

  4. Ikonoclast
    February 5th, 2018 at 05:10 | #4

    @bjb

    “Privately-owned businesses have produced better results, so why would you put it back in the hands of the public.” – Tony Wood.

    It’s a dog whistle. What he means is “Privately-owned businesses have produced better results for us large private shareholders and CEOs. Why would WE put it back in the hands of the public?”

    That’s the thing. A relatively few very powerful and very rich people have done extremely well out of privatisation. Why would they want to change anything? The rest of the population has been taken to the cleaners.

    Inflation rates in power, water, education, health, health insurance and housing have been much higher than pay “rises” which usually only match general (under-measured) inflation and are thus stagnant. This is not a sustainable situation. At some point, something must give. People fall into ever greater debt. The middle class falls into the lower class and the lower class into the underclass, an ever-growing precariat. A society on this course is heading for collapse and mass unrest.

  5. John Turner
    February 5th, 2018 at 17:02 | #5

    @bjb
    None whatsoever

  6. John Quiggin
    February 5th, 2018 at 17:28 | #6

    “I really cannot see that at all”

    Argument from incredulity is not very useful. To stretch your imagination, why don’t you visualise, say, the Blair government in the UK renationalising the rail network. Then replace Blair with Shorten and rail with electricity.

  7. ZM
    February 5th, 2018 at 19:09 | #7

    Was the electricity grid ever national? I had an idea it was owned by the State government not Federal Government?

  8. Bradley Smith
    February 5th, 2018 at 21:56 | #8

    Is there any precedent in comparable countries to devaluing private assets before then buying them back? In this case by reducing the regulated returns (presumably by changing the rules that govern AER determinations).

    I can imagine an aus govt handing over billions to buy out current owners at an agreed price, but I can’t imagine them rising above the clamour of “sovereign risk” and changing the rules on the current asset owners

  9. Alphonse
    February 6th, 2018 at 09:04 | #9

    @Bradley Smith , there is a guarantee of “just terms” compensation in the Commonwealth constitution, but none that binds the States.

    Unfortunately the Commonwealth is the currency issuer and the States are currency users. It would be a mere bagatelle if it were the other way round.

  10. happy heyoka
    February 6th, 2018 at 15:21 | #10

    ZM :
    Was the electricity grid ever national? I had an idea it was owned by the State government not Federal Government?

    Early on (1900s) in Australia it was a mixture of local government and privately held; these got progressively folded into state government by about the 1920s and remained that way until pretty recently.

  11. Duncan Earley
    February 7th, 2018 at 14:59 | #11

    Sorry for being uninformed, but why would we want to do this? The “Poles and Wires” are in this country so we have control over them regardless of who owns them. If its about reducing the price then just put price controls on what they can charge. Also I know in WA our grid is still government owned yet we have crazy electricity prices and no competition.

  12. James
    February 11th, 2018 at 11:04 | #12

    The 30 minute video documentary “Up to the last drop” (20 Dec 2017) comprehensively demolishes the case for water privatisation. Examples of the experiences of several European countries, including Germany, Portugal and Greece, are given.

    In Berlin, AGAINST OPPOSITION FROM EVERY POLITICAL PARTY (presumably including even from the German Greens), citizens voted overwhelmingly to overturn the past privatisation of their water.

    Unfortunately, the documentary can only be viewed live on the Russian RT video channel at rt_dot_com / on-air . The scheduled times for today are 3:30PM, 4:30PM, 11:30PM and 9:30AM tomorrow (see also rt_dot_com / schedule).

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