For about the fiftieth time, Saturday’s Fin editorial (subscription required), bemoans the unsustainable state of Telstra with its absurd mixture of public and private ownership. Yet at the time this structure was proposed, it was supported by the Fin and lots of others. When I observed that partial privatisation was the worst of all possible worlds, I copped plenty of flak for my pains. Although it was obvious enough that partial privatisation was a stalking horse for full privatisation, its proponents were quite clear at the time that it was a sustainable and desirable policy in itself, whether or not full privatisation ever came in.
So here’s my challenge, in two parts. First, is anyone who supported the partial privatisationof Telstra now prepared to admit they were wrong to do so? Second, is anyone at all prepared to defend the partial privatisation of Telstra [as an improvement on full public ownership in itself, not as a step towards full privatisation].
PS: I linked to the article above because of the discussion of Telstra, but I hope readers will forgive me for gloating a little about the accuracy of my analysis of the National Electricity Market, and the poor understanding of basic economics shown by many of its boosters.
John Quiggin 
I’m certainly not going to disagree on Telstra, because the proposition is absolutely clear; and indeed within the bureaucracy even agencies (of which I’m aware) that argued for privatisation were not in favour of part privatisation. It’s clearly the worst of both worlds. The main pity to my mind is that Telstra’s vociferous opposition scared Labor away from the sensible plan of separation of the businesses into core (public) utility and other (private) services.
On electricity, though, I would add (and I suspect John might have if not for the limitations of space in an AFR comment piece – that he’s have blogged on elsewhere) that there is an argument in relation to electricity generation that there is a potential return for innovation and entrepreneurship. Therefore privatisation might encourage more risk-taking innovation on the part of private providers. For an industry usually regarded as incredibly boring there is actually a fair bit of scope for innovation in the ways we generate power.
You make it sound like Telstra is a basket case or something. While partial privatisation hasn’t led to full privatisation, and the company isn’t going to meet it’s full potential, it is still a quite successful company. So I’m certainly not prepared to say I was wrong to support the partial privatisation of Telstra.
Stephen:
“Therefore privatisation might encourage more risk-taking innovation on the part of private providers”
Like Enron ?
The story of the privatisation of electricity supply is a sorry tale.
See: “Power Play by Sharon Beder, Scribe Publications 2003.
“I do not know how he is a professor, but anyway he purports to be an economist.”
The stuff about Telstra and electricity prices is interesting enough, but it’s this appraisal from Richard Alston that makes the 1999 AFR piece a classic. Why isn’t it amongst the quotes on the home page under the photo?
How could I have forgotten this classic?! it’s there now!