I’ve had a few responses to my recent report on the history of electricity privatisation and market reform in Australia. There’s one here from Lynnette Molyneux, who’s with another research group in my own school, and one from the Electricity Supply Association (doesn’t seem to be online, I’ll post a link shortly). Most interestingly, one from Sinclair Davidson at Catallaxy who starts with a couple of points of agreement.
A couple of thing where we agree:
Economists, at least when they were thinking clearly and speaking honestly, were as one in rejecting the most popular political reasons for privatisation: as source of cash for governments or a way of financing desired public investments without incurring public debt.
I made a similar argument recently in New Zealand.
Then he is critical of Public-Private Partnerships. I am too – albeit for different reasons. All too often, I suspect, they are financing mechanisms looking for infrastructure to finance, as opposed to being a positive NPV infrastructure project looking for financing.
before going on to quibbles and more substantive criticism.
I’ll try to present a proper rejoinder to the criticisms later, but for now I want to observe the striking fact that the point on which Davidson and I, and (AFAICT) all Australian economists, agree is also the focus of agreement between Campbell Newman and his predecessor, Anna Bligh, along with Peter Costello, Barry O’Farrell, and the great majority of Australian politicians. The only problem is that the politicians agree on a view exactly opposite to that of the economists
Newman was on TV tonight, saying that unless we had asset sales, Queensland would need to raise taxes and charges, be unable to fund new investments in hospitals and so on. Five years ago, the Bligh government, pushing for the sale of Queensland Rail, port corporations and so on, issued a booklet called “http://www.brisbane.apana.org.au/~cpds/Documents/External/AssetSalesMythsFacts.pdf” which asserted, among other spurious claims that
‘Keeping these businesses would cost the Government $12 billion over the next five years. That’s $12 billion spent on new coal trains and new wharves that can«t be spent on roads, schools or hospitals.
Bligh’s argument was rejected by more than twenty of Australia’s leading economists in a statement I organized at the time.
The sales went ahead. But as the LNP was eager to point out at the time, the asset sales program was based on a lie. There was no net improvement in the government’s financial position, and no money for extra schools and hospitals. The electoral consequences were disastrous, and the LNP was elected with a thumping majority. But, as Labor had done in 2009, they immediately discovered a financial crisis and began a campaign for asset sales. (To be fair, Newman has kept his promised not to sell major assets before the next election, unlike the promises he made to public sector workers).
And, rather than offer a coherent argument to the effect that privatisation would produce greater efficiency and competition (it won’t for the assets being looked at, but at least it’s logically possible), Newman has fallen back on the same tired fallacy politicians have been pushing for 20 or 30 years, that privatisation is an easy alternative to the hard work of raising enough revenue to finance necessary public expenditure.
It really does seem like a cross between Whack-A-Mole and Groundhog Day. But, so far, almost every time this nonsense has popped up from its subterranean home, the voters have been happy to knock it on the head. The polls suggest they may do so again next year
fn1. As always, this post is not an invitation for attacks on, or discussion of, Sinclair Davidson or Catallaxy. Please respond only on the topic of the post, namely the bogus case for asset sales
fn2. The main exception being the remnants of Queensland Labor. At the launch of my report, Shadow Treasurer Curtis Pitt finally addressed what he called “the elephant in the room”, saying that privatisation was not merely bad politics (that’s obvious) but also bad policy.