The Bligh government’s case for asset sales rests in part on a supposed fiscal emergency arising from the global financial crisis and in part from the general ideological claim that putting infrastructure assets into the hands of the private sector will promote economic efficiency. Both parts of the case have taken a knock in the last couple of days. A study by Access Economics confirms the findings of the union-commissioned study by Bob Walker and Betty Con Walker (derided by the government and state Treasury at the time) that the budget position is much stronger than has been admitted so far.
On the second point, Liberal Lord Mayor of Brisbane Campbell Newman has conceded that the days of private toll roads are probably over. As I’ve been saying for years (getting on for decades now) these projects always involve a social loss. In the 1990s, it was almost always the public that took the loss while private operators made out like bandits. In the easy money environment of the 2000s, private investors made silly investments, and often lost the lot. Now that everyone has wised up, there will be no more deals like this.
By far the best solution would be for the state government to buy back all the toll roads, and replace ad hoc tolls with a coherent system of congestion pricing. The Bligh government instead, plans to sell off its own toll roads. As for congestion pricing, Anna Bligh has made her view pretty clear “not while this government is in office”. In reply to which I can only quote Men in Black – “Your offer is acceptable”.
H/Ts Darren Godwell, Tom Miller, Nancy Wallace
John Quiggin 
@Fran Barlow
So you accept that “They would have no case at all for compensation.” is not really correct, especially if they have a clause in their contract with government that specifically notes the need for compensation.
@Fran Barlow
years ago when I studied with a lecturer who was a specialist in human factors / driver behaviour he said there was no indication that better driver skills / reaction times etc impacted on things like safer driving (in terms of accidents). The term used was ‘risk homeostasis’ – people tend to see themselves as capable of handling a certain level of risk – increase the skills and more skilled drivers take more risks.
Of course other evidence may have emerged since then
@Freelander
That comment was based on there being no such clause in the contract … and it is hard to imagine that there could be, especially after the argument over rat runs …
Absent such a clause, it is settled law that all contracts over land usage must be specified in writing and duly witnessed. Any attempt to introduce implied terms would fail, and one doubts the toll people would dare try it anyway.
@BilB
ha ha Bilb….how I laughed…how could I have been so silly as to think any other than resource mining is good for Australia..because naturally its so profitable the rest of us should should all be genuflecting to its great omniscience…
@BilB
And Bilb…if your logic and history is correct we have indeed, as we should have done, …hacked away at all those faulty and inefficient threads across so many wasteful industries that for most of this century kept our inefficient economy growing but it was right to keep hacking away at inefficient waste in all those myriad of wasteful industries
..so now we are hanging by a single thread of pure efficiency that links one way to BHP via Macbank and onward to China. For God’s sake..dont sneeze Bilb…the whole lot could go down!
@Fran Barlow
Why would you assume there is no such clause? And you certainly didn’t put in that caveat. These types of clauses are quite common in those sorts of contracts. The parties that enter into contracts to build own and operate toll roads are not complete idiots. Even so, even if it weren’t in the contract, for the reasons you have outlined the government would feel obliged to pay compensation because if they did not do so no one would contract with them. Who would contract with government if government turns around and uses its power to destroy the value of that contract? So “They would have no case at all for compensation.” is not really correct.
The Fran Barlow inspired solution to road congestion, population, energy:
All engineers, architects, builders, scientists, mathematicians are retrained in law (adverserial) with the proviso that they must never try their skills in a court of law.
It follows: No roads, no cars, no buildings, no aircraft, no trains, no power plants, no numbers, no computers…. no congestion, no pollution of the environment ……. and, finally, no more creative essays on the screen.
But in law facts are actually relevant, as are clauses in contracts.
To quote Fran “That comment was based on there being no such clause in the contract … and it is hard to imagine that there could be”.
Might be hard for some to imagine, but never the less true.
In Private Investment in Urban Roads, Industry Commission Staff Research Paper (1997) For example:
“Risk, and particularly uncertainty, has been ameliorated by governments through the inclusion of material adverse effect (MAE) clauses in BOOT contracts.14 These typically provide for a menu of responses that escalate from changing tolls or the length of the concession period to direct government financial compensation.” pg 20. And elsewhere.
In Public Infrastructure Financing — An International Perspective, Productivity Commission Staff Working Paper (2009). For example:
“The greatest risk to the viability of a toll-road project is revenue risk associated with traffic volumes. This risk has been addressed with the inclusion of ‘material adverse effect’ (MAE) clauses in the Concession or Project Deed.
The MAE clauses typically allow the private sector to seek redress against the government should it implement policy changes or approve projects that cause detriment to the PPP project revenue during the concession period (Hepburn et al. 1997). Compensation can be in the form of an increased concession term, or a right to increase the toll or user charges, or in monetary form, or a combination of those forms (Chew et al. 2004).” pg 165. And elsewhere.
Oh, I forgot, as per Fran Barlow, since the Greek government has changed recently, it can simply cancel all financial contracts entered by its predessor under the heading: as “a means of mapping this to a maintainable and transparent system.”
@Ernestine Gross
It may still do so, but might subsequently find it difficult to borrow any more in future.
@Ernestine Gross
Ernestine..Im giving you the Paul Walter “exquisito” award.
It suddenly occurred to me that no-one here can really believe in efficiency. If we were honestly interested in efficiency (please no checklists)…. the only way to really remove those nuisance poor and disadvantaged who cant afford escalating user pays charges for roads, hospitals, speeding fines, buildings, aircraft, power, computers etc is simply to launch another wasteful war and employ them as cannon fodder. Im sure the efficiency gods would approve.
In economic terms, a rich person is so much more deserving than a poor person, that is if you believe in dollar democracy – that every dollar was created equal, and was endowed by its creator, with the inalienable right to equal pursuit of goods and services (or, alternatively, purchasing power).
@Freelander
@7. I concur.
@12. I don’t agree.
By virtue of their wealth, the rich’s desires are so much more worthy of satisfying, in economic terms and by the market, at least.
@gregh
That is fanciful nonsense promoted by libertarians to promote the idea that regulating or spending government money trying to mitigate risk, including health and safety expenditure, yields no benefit, let alone net benefit, and may even, perversely make the dangers greater. There is a famous ‘study’ which no one has been able to replicate, which claimed that mandatory seat belts resulted in drivers driving more dangerously and having more accidents resulting in more and more serious accidents and deaths. “Libertarian research” is usually only replicable by other libertarians but that one wasn’t replicable by anyone.
Alice, that’s a great “Proposition 21” concept.
Many thanks posthumously awarding me an award also. I could cry…
particularly when it is named after me.
Looks like reports of your death have been greatly exaggerated…
Unobtrusive, I am seldom noticed.
@Freelander
First … a concession from me. It is the case that when I made the above claims, I hadn’t specific knowledge of the precise MAE provisions attaching to public financed toll roads in Australia. In part, this is because, especially in the case of those in Sydney, the precise MAE provisions are not available. One may speculate about why that is, but the intersection of commercial and political advantage to the players aside, precisely specifying what constitutes an MAE would always be difficult.
This discussion here on the comparative advantages of BOOT (Build Operate Own Transfer) and CTC (Competitive Tendering & Contracting) schemes with an overview of financing and management of risk in road projects is a good start.
Let us be clear. No matter who or how infrastructure is financed, the risk and uncertainty has to be shared about. It’s a zero sum game and it’s no surprise that private consortia are no more keen than any other stockholders to bear more risk than they anticipate and factor into their projects. When recovery of costs occurs over an extended period, as is the case in BOOT schemes, anything that affects the viability of the project (financing cost, revenue streams) adversely is a risk. Unsurprisingly, the more open-ended the risk to a private consortium the higher the revenue stream has to be.
I’m not going to engage in an extended post on the specifics of public road financing here, interesting though that would be to a handful of people. It is however improbable that in most of the cases were are discussing here, that substantial compensation to BOOT operators would flow from the introduction of a scheme such as I suggest. Firstly and most obviously, the M$ is now in public ownership (as of 2010). Moreover, general tolling for example, reduces the appeal of “rat runs” which in turn can adversely affect revenue to BOOT operators. Moreover, if the state were to assume full responsibility for tolling outside the BOOT roads, it would obviously require all vehicles to carry something equivalent to a transponder so as to facilitate universal collection. It would make sense to have this occur also on the toll roads, relieving the BOOT operator of the need to collect the tolls that underpinned the project finance. The government could simply “shadow toll”, paying the BOOT operator the tolled equivalent for every vehicle that would have incurred a toll under the pre-existing arrangements. Far from adversely affecting the BOOT operator, this would lower risk and compliance cost. A proviso could be added that should the revenue stream fall below the seasonal rate mean of the five years before the new arrangements, then the deficit would be paid to the operator, less any savings on compliance costs by the BOOT operator, who now need not maintain an expensive administrative apparatus. This cost and risk would now be transferred to the state.
In these circumstances of course, it might make sense for the BOOT roads to be transferred to the state by buying out the contracts. BOOT operators have little incentive to provide road maintenance beyond the specified minimum, costs are now settled, the remaining concession deeds now have a maximum 20 years to run and this is probably more inter-generationally equitable, since more of this cost falls upon future beneficiaries of the roads.
So this is a concession, at least in practice, that the claim that roads operators would have no basis for compensation in the event of change was too sweeping. In practice, if they were adversely affected by some event closely connected with an assumption on which they were entitled to rely when assessing the viability of the BOOT projects in question, they would get compensation. My point here is that in practice, the changes I’ve proposed either wouldn’t constitute an MAE under any arbitration or court based equity process, or if it did, then the compensation would be modest. In practice, the state could make arrangements that would satisfy sovereign risk objections at an acceptably low cost to the state.
@Freelander
freelander – As I said in my post I had not followed the theory closely, however your claim primarily takes the form ‘argument X is wrong because some people I don’t like use it’ which I do not find particularly effective. (of course politically that is a winner of a strategy)
A quick search gives this recent paper which does not seem to be particularly ‘libertarian’
“The Vienna Risk-Taking Test – Traffic: A New Measure of Road Traffic Risk-Taking
Hergovich,Arendasy,Sommer, and Bognar (2007)” it is a shame you did not link to any refuting evidence, but my quick reading of Wilde indicates a single test would not be sufficient to bring down the theory – (nor did it indicate that he was/is a libertarian, but I wasn’t really looking that hard)
I would not be surprised to see disagreement in the relevant literature – but libertarians using the concept of risk homeostasis to further their own political ends seems irrelevent to the substantive issue of the theory itself.
@Fran Barlow
Fran – you say “Let us be clear. No matter who or how infrastructure is financed, the risk and uncertainty has to be shared about. It’s a zero sum game”
There is no such thing as a zero sum game. When it comes to building and maintaining quality infrastructure to support an eceonomy its a positive. I see nothing in any private construction project that says the risk and uncertainty “has to be shared about.” The risk and uncertainty belongs entirely to the builders and financers of the project. Another meaningless furphy.
I note also you suggest numerous cushions for Boot operators…. but (and its a huge “but” and often craftily obscured in the fine print of the pps deal) at the end of the day the PP builder/operator’s “cost and risk would be transferred to the state.”
I see – privatise the profits and send the invoice for any privatisation losses to the state. Charming – the poor get to pay twice (once in tolls and twice in taxes or maybe …as in the case of NSW State Labor – road fines – if you read their financial statements. I think road /parking / camera fines are keeping the rats afloat in their stinking ship.
Thats exactly what is happening (bill the state if the project fails – I guess thats what you must mean by sharing the risk Fran?) and why PPPs are, in many instances, failing to get the job done.
If you actually read the Profs links – and take the case of the Clem7 tollroad and then read the 307 comments people have posted and then count the number of people saying the bleeding obvious….the operators are not meeting volume targets because of the one thing a market economist should understand
price, price, price…they are pricing themslves out of a profit.
Thats why volumes arent what were projected. Who’s responsibility is to project volumes? A bunch of executive suits earning way above the average wage of the toll road users?
Id like to ask whether this is, in fact a deliberate prcing strategy ($4 one way when most comments say $2 should be the price). The operators can pay themselves a fortune in salaries, make a fast enriching buck for themselves personally, engineer low loss making volumes, claim they were “mislead as to volumes”, sue the government and send the invoices for the losses directly to the state and move to takeover some other public road?? All the while singing the same sad song….”traffic volumes arent what was predicted.”Chalk up another big lawyer driven contingent liability on the states books. Oops – I forgot the debale wont be on the State’s books will it? The general government was cut away from GBE’s years ago and then there is commercial in confidence provisions.
Ill put $10 on the table to anyone who can find the evidence of contingent liabilities from failed PPS private roads…in the States myriad of different “books” now (NSW or QLD). Bit like Storm except more than two sets of books.
Its a monumental con and sleight of hand against the people of QLD…plus its been replicated a number of times over now in Sydney… “Traffic volumes werent what was projected…boo hoo… snigger snigger”.
Bligh and Fraser have learned to ply this ugly trade well.
@Alice
Oh dear … what a disappointing start. Let’s see how you sustain this ostensibly outrageous claim.
So your claim is modified to building and maintaining quality infrastructure is a positive sum game i.e. there are more winners than losers or there is net utility. This abandons your first claim and is misdirection. I’m favouring building and maintaining quality infrastructure on both the above grounds. That doesn’t mean that the business of financing the infrastructure doesn’t entail risk of loss to some party. All investment, including rational investment entails at least some risk and uncertainty. And if there is a given quantity of risk and uncertainty, dividing it up amongst the stakeholders is a zero sum game. If you do it rationally, everyone bears just what they are best placed to bear, is rewarded in ways commensurate with the risk and uncertainty they accept and is efficient and effective at managing the part of the risk attached to them. Yet it is still a zero sum game.
Which can only mean you are either disingenuous, not looking or have never been in business. You don’t think that the business model for a project funded on prospective toll revenue depends in significant part on getting the predictions about toll revenues, costs, interest on loans. future government policy changes, variations in oil price, demographics and one or two other things right? If the builder of the tolled road accepts all those risks, then plainly, they are probably going to have to pay a higher cost for the finance and that will make the cost of the project higher, which means ultimately passing that cost onto the people paying the tolls. Higher risk implies higher reward, and if they can’t have a commensurate reward, they won’t build or they won’t bid and then the project is assessed in a less competitive setting. That’s one of the reasons the state indemnifies building consortia against some risks. One can argue about the model and the burden sharing, but in the end, those liabilities, including the “Black Swan” type liabilities, must be borne by someone or the project won’t proceed.
This is another of your screeds Alice. The transfer of total cost and risk to the state occurs when the state acquires full equity over the project — as it did this year over the M4 i.e. when it becomes a public asset. Nobody serious in business accepts risks without consideration in the form of a capital asset or revenue.
Well the point about zero sum games has totally disappeared into the ether, as has the fear that the state was a vehicle for paying off private business. Now we’re back to the state as some sort of self-perpetuating parasite on the poor. I don’t suppose it occurs to you that the really poor are almost certainly, for the most part, on public transport. If you are driving a car every day to work you are not poor, even by Australian standards. At worst, you are in the lower half of the bottom 80% but almost certainly not in the bottom 20%. If you observe the road rules you don’t pay camera or parking fines. Overall, we’d sooner most people stayed off the roads and went onto public transport, especially during the peak. As noted the bottom 80% suffer most by our failure to achieve this goal, precisely because we live in an unequal society.
So your plea is ill-considered, notwithstanding your desire to solidarise with the relatively disadvantaged. While there were, in my opinion, almost certainly better ways to fund this infrastructure in ways that serve general utility, the fact remains that each of the road projects funded via BOOT came on-stream ahead of schedule and under budget. Assuming these expressways were good ideas — and personally I’m not sure they were — then your claim that PPPs are failing to get the job done can’t be justified.
We have them now, so whatever one might have decided in the past, we should make best use of them, and that means de facto or de jure dealing with them as if they were part and parcel of the road network. If that means buying them out (and it need not), then IMO, so be it.
I agree with one sentence in your lengthy post Fran
“If that means buying them out (and it need not), then IMO, so be it.”
Lets get on with it then… (buying back those miserable itsy bitsy PPs toll roads; the lame excuses for lack of public investment in infrastructure) and stop the pretense at their justification with statements like “its a zero sum” when some of the few insiders on these PPs deals are making multiplied sums from loss making ventures, at the public’s expense.
You can fool some of the people some of the time etc…but there is no such thing as a zero sum game when money is involved Fran (unless you think theft from some and subsequent gain by others all balances to zero – making it all perfectly “rational” and thus”utility maximising” and acceptable).
Ever heard of morals and ethics?
The majority are not stupid Fran – I await their votes as do many others.
@Alice
The more I read from you Alice the more I wonder whether you comprehend the phrases you use.
The concept of the zero sum game is purely descriptive. It describes a situation where no stakeholder’s advantage can be improved except at the expense of some other stakeholder. Stakeholders gain advantage by externalising costs and risks to others. It says nothing about justice or fairness between the stakeholders.
@Fran Barlow
Thats the whole problem with the zero sum game Fran.
It says absolutely nothing about justice and fairness, but worse than that….. it contributes absolutely zero to justice and fairness. Contrary to your interpretation – I understand completely the concept of redistribution being a zero sum game.
I just dont buy it as any sort of justification of economic policy initiatives, whatsoever.
Alice, take no notice of Fran Barlow. Word games and creative essay writing is all that Fran has to offer.
For example, Fran B @26 talks about ‘zero sum game’ in a way that confuses a confusion of Pareto efficiency with the definition of a zero sum game. It all verbal noise. On another thread, BilB battled for hours trying to remove the misconceptions.
Your first point about zero sum game was correct. Transport networks have a positive sum (positive externalities) up to the point where ‘nothing moves’ on the roads because of grid lock. As indicated in my tounge-in-cheek posts further up the thread, if people claim they have legal training then they can demonstrate their skills in a court of law.
You referring back to JQ’s post is spot on. In his post, JQ introduces 2 transport economics problems within the context of ideologically driven public asset sales, of which the privatisation (and the hybrids, PP and BOOT) of infrastructure assets are the interesting cases. (Obviously, if a hotel, located in a city with many hotels, is publicly owned, possibly for historical reasons, then the sale of this hotel to private enterprise is not an issue that deserves comment.) Interestingly, Fran B. provides a link to a policy paper from 1997, the era of interest, regarding the ideology in question. I have no evidence that Fran B. read or comprehended it.
Please replace paragraph 2 @28,p2 with:
For example, Fran B @26 talks about ‘zero sum game’ in a way that confuses the notion of Pareto efficiency with the definition of a zero sum game. F.Bs output is verbal noise. On another thread, BilB battled for hours trying to remove F.B’s misconceptions.
@Ernestine Gross
Astonishing array of nonsense and and incredulous length to it all…pushing privatisation and nuclear, rationality and utility (and removing the poor from our roads and windscreen vision)…. I agree Ernestine..not bad for an HS teacher who has apparently done so many uni courses and knows so much jargon from so any markets (and so few genuine statistics or genuine theory as you have indicated on a number of occasions)..add law now..and peddles half baked ideas that are now dying, here, there and everywhere.
At what point does self embarrassment kick in Ernestine?
I dont think anyone has let Fran know…”the old free market, free trade, globalisation, full knowledge, no government intrusion gang is breaking up since the GFC.” Not my quote btw but it sums it up nicely…and promises a few long overdue positive externalities for a change.
@Alice
Textbook irony …
@Alice
Even more irony … You and Ernestine, (who clearly shares your confusion on zero sum games and penchant for outlandish claims), show why rational policy in this country is so difficult to attain. Plainly, you see yourselves as advocates of just treatment of the social interests of the marginalised, which is not to be sneezed at, but have nothing coherent in the way of policy to offer. So all you can manage are populist jibes about how everyone is setting out to shaft the poor and get them out of your windscreens without for a second thinking what this can mean in practice.
It is hard to imagine why anyone would want the disadvantaged to be driving one more kilometre than they absolutely had to, or running a car when there was something better, or being forced to live on the margins of the big cities and spend 10 hours a week travelling and competing for road space with others of similar disadvantage. It is hard to know why you’d demand policies that entail more air pollution in the big cities and defer action on GHG mitigation by making it more costly to mitigate. Yet you do. This is a negative sum game in which the most marginalised lose most heavily. Wealthy people are not going to be living on the city fringe or within the footprint of the pollution spewing from those plants that have to run to cover wind and solar.
You two are most curious.
@gregh
Yes, I’ve read such studies. Indeed, it is claimed that ABS braking is worthless for the same reason. How one would do double blind studies on this I don’t know.
Nevertheless, combined with other measures that restrain poor risk trading — conditions-based speed limits with real time monitoring, rewards for attaining and maintaining these skills (and penalties in status demotion for accidents and breaches) should foster a new culture around driver safety. It’s not so much the skill itself as the way in which drivers see themselves. Pride in being someone recognised on the roads as being a cut above the ordinary, measured in compliance, avoidance of accident and skill — is something I’d really like to see. Maybe qualified drivers could put badges on their cars that would signify the number of continuous days they had had their advanced driver status. Perhaps each year everyone who had had a certain number of days without infringement or collision in which they were at fault — say 500 — could be given awards and some of them cash prizes and get to have a picture taken with the Premier or some notable of their choice backing the program.
My own partner comments that whereas at 19 he saw his masculinity as bound up partly in whis willingness to test his skill on the roads, at 51 he takes pride in wringing better mileage out of the car and being a good citizen on the road. His reflexes are probably slower than they were at 19. Yet he hasn’t had even a near collision since he was 25. The idea of advanced driver training would be to start fostering this attitude as early as possible.
Interestingly, the 1997 paper referenced suggests that BOOT etc. are typically not a good deal for government. This is not made explicit, but the suggestion is there if you read it carefully.
@Alice
Off topic: Verbal noise merchants thrive on getting people upset. If they succeed, then their target may get banned.
On topic: I still believe you referrig back to JQ’s post is very important.
@Freelander
Yes it did, and you’d be wrong to conclude that I was pitching them. I rather lean towards the state assembling the finance, since it is good at that, and tendering the work with specifications about build quality, timelines and liquidated damages for non-compliance.
That of course implies the state taking on almost all the risk relating to each project’s feasibility and forfeiting the rent on land that BOOT partners were paying.
The authors of the paper seem to be suggesting the government own and operate roads but by all means put to tender the various aspects of construction. They must have been very naughty IC employees to be suggesting that!
@Ernestine Gross
Thanks Ernestine…Ive already been a target a few times because I dont agree with their nonsense that peddles..well basically vested interests and yet more inequality (the stuff that is undoing a positive approach to infrastructure investment and actually sharing the load equitably and making good use of our taxes instead of utterly wasting them on pie eyed ideas).
There is a time to call a halt…
@Ernestine Gross
You know Ernestine…I think its high time rational man and his unquestioning disciples just…well…went somewhere else!. Maybe church on Sundays?? (might suit the majority of us better as well…for them to learn some morals and ethics etc).
Church! I think that’s where they learnt their morals and ethics.
@Fran Barlow
“You and Ernestine, (who clearly shares your confusion on zero sum games and penchant for outlandish claims)”,
I strongly suggest to you to be a bit more careful with statements like the above. What may be clear to you may nevertheless be verifiably false and repeating falsehoods is not going to help you.
Setting aside the last sentence, I concur with you. I’d like to add that the paper contains a record in chronological time of the motivation for private sector involvement, namely the financing of public roads during the economic rationalism period and the rule of rating agencies. It supports JQ’s posts on this topic and it is a good refresher of memory of events.
@Freelander
Ill try anything Freelander!
However let us not digress….are we all aware here that most privatisations were started by the Labor govt in the 1980s (poor things worried about our international business competitiveness..to be referred to henceforth as the Keating Business model of deregulation).
Yet under JH’s leadership privatisation really took off such that in 1997 Australia’s divestment of publicly owned assets reached 13% of the global total, exceeded only by Brazil. Electricity, gas, airports and telecommunications all fell (and we know who the airport went to and how much we all hate it…but thats only part of the sorry story).
We have created over time, one of the worlds greatest privatising regimes. We not only kept pace with the international privatisation model – we have excelled at it and gained silver at the international privatisation Olympics.
The signal here is that the government is no longer willing to supply the services, preferring instead private operation and a system of user pays. On the other hand, the people are voting with their cars and avoiding the price signals resulting in “volumes lower than projected” and failure of private enterprise.
The signal coming from the voters is that they are not entirely happy with “the model” and that is producing electoral volatility (it has started already with the backlash against the JH government). Pro privatisation proponents continue to push the now tired arguments…”to each according to his own ability to pay” “efficiency” “utility” “rationality”…when the mass public choices are swinging, frankly on the side of preference for decent (and decently priced) public services.
The sad history of Australia’s over exuberant foray into disastrous privatisations is nicely encapsulated in the attitude of a Mr David Jull, in 1997, who suggested “if the service can be advertised in the yellow pages the government has no business providing it” (Taylor, 1997).
The reality is, that the real strength of the budget surplus the Howard Govt loved to boast about, came not from its inherent skills in building a strong economy and raising incomes, but rather from its public asset divestment programs which delivered windfall, short term gains from sell offs of assets accummulated by prior generations. under s.52 of the Trade Practices Act it would constitute misleading and deceptive conduct.
That raises yet another interesting question…are these two kilometre private toll roads like Clem7 contructed partially from roads misappropriated from the public “fit for the purpose” expecially when the purpose should be to move more traffic volumes smoothly in inner city areas.??
Jargon at the time of the mass privatisations included “its not core government business” yet for many the sell offs later soured – eg Telstra – the great “Mum and Dad” swindle. Yet to date there has been no rigorous evaluation of Australia’s international silver medal in the privatisation game. Governments have relied on anecdotal evidence concerning service quality and good governance. The reality is Australia values its public sector less, or so some would like to believe.
..but is it really so?
Perhaps its all mostly the result of a government with no real debate or opposition in the senate…and that brief, intoxicating period of Coalition power has ended, but may come to haunt the liberal party (and indeed now State labor parties in NSW and QLD) for longer than they expected.
They can ignore it at their own peril.
The study cited is additional evidence of the institutional incompetence of governments as owners of commercial assets.
If an owner is unable to sell an asset at a profit under the full glare of the public eye, imagine how hopeless they are at the day-to-day running of commercial assets which attracts far less critical attention from voters unless there is a big stuff-up?
The one saving grace is that their trying to sell these assets.
God help us if they were tying to give it away such as the recent federal free home insulation fiasco.
The Qld state government is said to be incompetent at selling assets; the Feds can’t even give them away without making a mess of it.
I also note some advocates for a rational approach here even suggest:
“We have them now (pps privatisations), so whatever one might have decided in the past, we should make best use of them, and that means de facto or de jure dealing with them as if they were part and parcel of the road network.”
Thats the worst justification for economic policy I have ever heard especially from a supposed supporter of rationalism…”we have them (pps) now so we must make best use of them?”
No policy should ever been accepted on the basis that its is “here now and we should make the best of it”.
We develop and pay economic policy makers to think, evaluate and make sound decisions, not “make do”.
@Jim Rose
Jimbo.
This does not follow. The politicians are not necessarily in the day to day business of running the road system, but they are highly involved in the selling of assets. Also, given that selling the assets is not a day to day thing, they have little expertise in this area. In addition, some of the ideologues in favour of selling assets believe that selling them for less than they are worth is a great idea. An example, of this was the Thatcher government where some argued that selling assets below their value or even giving them away was good because it would make it much harder for government to ever buy them back. Similarideas are to cripple government by restricting its ability to raise revenue, that is, tax.
The views you are propounding are probably only exceptable in some out of way, backward economy, like New Zealand. I would have said Iceland but I imagine they have now been jolted back to reality.
@Freelander
Freelander Jimbo missed the point of the post entirely.
The suggestion is that the QLD govt is incompetent and inefficient “for” selling these public assets not “at” selling the assets.
@Jim Rose
“The study cited is additional evidence of the institutional incompetence of governments as owners of commercial assets”
It seems you have a different study in mind to the one I read. Setting this point aside, I would agree that governments are not necessarily the best agent to own a “commercial asset”. The issue is, what is a ‘commercial asset’.
On “assets”.
While infrastructure, such as a road network, has a property of ‘an asset’, namely its useful life being longer than an instant in time, it doesn’t follow that all assets have the same property of a road network. I’ve given an example of the difference @28.
It is the privatisation of physical infrastructure that is the issue and not the sale of a single building, such as a hotel, or a shoe manufacturing enterprise or a coffee shop.
I am aware the term infrastructure is applied in various other contexts. For example, adhering to the physical technology, IT people speak of an infrastructure within one commercial enterprise when, for example, there is a server for several work stations. Note, as is the case with major public infrastructure, if the enterprise were to try to sell a part of its IT infrastructure, it would lose the lot. By contrast, selling one computer in the in-house IT network and replacing it with another one, possibly from a different manufacturer, does not destroy the network. Similarly, doing road works, or, more generally, extending a public infrastructure, using different contractors, does ot destroy the network of the ‘asset’.
There we have it, the short and the long, in the last two posts.
Aristotle would be smiling in his sleep just now; certain syllogistic errors are at last consigned to a rubbish bin long waiting for them.
Or can we ask if we are now in direct contact with one of the more Hobbesian proponents OF neoliberalism?
Freelander,
you make an interesting point about how “The politicians are not necessarily in the day to day business of running the road system, but they are highly involved in the selling of assets.”
So who is monitoring the day-to-day performance of these state owned enterprises?
Government owned enterprises face far greater problems from the separation of ownership and control than do private corporations. one example is the turnover of CEOs of government owned businesses is half that of private businesses.
the government solution to this problem of separation of ownership and control is to fill the boards of state owned enterprises with cronies. The recent trend towards more hiring on the basis of commercial expertise was a spin-off of the pre-privatisation process. still, SOEs are job lots for retired MPs and party officials.
What happens when the business goes bad, every state owned enterprise is too big to fail. Hardly the incentive structure to encourage value, service and innovation.
JimR,
There is an unsupportable amount of speculation and supposition in your para 4 @49, and the conclusions drawn can only be judged as false.