Queensland privatisations: good, bad and ugly

John Quiggin34 Comments

I’ve been opining in all sorts of media on the Queensland government’s asset sales programs. A couple of general points, both favorable.

1. The government has said that the sale process will take 3-5 years, and that the assets won’t sold if the offers are inadequate. They need to be held to this
2. The privatisation story has swamped the abolition of the fuel subsidy. At some level, I think everyone recognises that this program was at best an unaffordable luxury in the current environment, and at worst a counterproductive and damaging misuse of public funds.

Coming to the asset sales, and with a whole day to reflect on a $7 billion program here are my provisional views

Good: Queensland Forests. State forestry has never made commercial sense, since the timber industry has always had effective control, ensuring no proper return on the public capital investment. There were moves towards reform, but plenty of obstacles. Easier to let a private buyer set commercial prices

Bad: Queensland motorways. Toll roads are bad, private toll roads are worse. We need a comprehensive system of road pricing, with congestion as the main driver. The existence of privately owned toll roads is a huge obstacle to this goal

Ugly: QR coal freight and coal terminals. There are potential gains here, but there are also some huge traps, as illustrated by disastrous rail privatisations elsewhere. And there will be a lot of problems with wages and working conditions to be sorted out. I don’t think the government will be able to get away with using privatisation as a backdoor route to large-scale redundancies, but a sale with union conditions attached will have obvious problems

Indifferent: Port of Brisbane. A regulated monopoly asset with secure returns. Selling this and using the proceeds to repay debt doesn’t really change anything but perhaps it will fool Standard and Poors.

Queensland budget

John Quiggin29 Comments

Big news just now. The Bligh government has abolished the fuel subsidy with effect from 1 July, and announced the sale of a huge range of asset s, with QR coal freight, Port of Brisbane and others to be privatised.

I support the first of these measures (with marginal regret that they didn’t take up my idea for a phase-out starting five years ago when I first put it up).

As for the asset sales, they need to be evaluated on a case by case basis. A crucial requirement is a high reserve price and a willingness to retain the asset in public ownership if this price is not realised. In the current environment, the government’s estimates look optimistic, but I haven’t seen any detail yet.

A detailed response to come, when I get a free moment.

Update: I just did an interview for 7:30 report, so you may get to hear a minute or so of my thoughts on the subject tonight

What is to be done?*

John Quiggin54 Comments

I’m working on a bunch of essays, book chapters and maybe even a book or two in response to the global financial crisis, making the general point that the sudden collapse of the neoliberal order has found social democrats unprepared for the shift from a long defensive struggle to the opportunity (and need!) to develop a progressive response to the crisis. As obvious examples, it’s necessary to reconstruct the global financial system and to ensure that the burden of the debts that are building up so rapidly is not borne by the poor, who did nothing to create the crisis. This piece (PDF) is an example of what I’m thinking.

I have plenty of ideas about policy (though of course I’m always interested in new ones). But, I don’t have much of a feeling for the political strategies that are needed, so I thought I would try the crowdsourcing thing, which has worked pretty well for me in the past .

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Incarceration as a labor market outcome

John Quiggin100 Comments

I wasn’t all that surprised that Bryan Caplan

didn’t like my interpretation of our bet on EU and US unemployment rates, which was that the combined rates of unemployment and incarceration in the US would exceed those in the EU over the next ten years. I was, however, surprised by the vehemence with which libertarian-inclined* commenters here and at Crooked Timber objected to this interpretation.

A string of them echoed Caplan’s argument that

From a labor market perspective, though, Quiggin’s incarceration adjustment would only make sense if you thought that most or all of the people in jail would be unemployed if they were released.

Caplan has missed my main point. I’m not suggesting that incarceration is disguised unemployment (though obviously it reduces measured unemployment). Rather, I’m saying that, like unemployment, incarceration should be regarded as a (bad) labor market outcome. If you want to evaluate the performance of the labor market, you need to look at both.

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The end of the Taliban?

John Quiggin30 Comments

Until a few months ago, the Taliban seemed to be gaining ground in the war in Afghanistan, both militarily and in propaganda terms. The US reliance on air and drone attacks, with the inevitable civilian casualties, was proving disastrous. Most importantly, the Taliban possessed a crucial asset for a guerilla army, a safe haven across an international border in Pakistan, with surreptitious backing from the military and particularly the ISI, the secret police/military intelligence organisation that has historically dominated Pakistani politics. Just as Lashkar-e-Taiba was seen as asset to undertake deniable attacks on Pakistan’s historic enemy, India, the Taliban was an instrument to be used against rivals such as Iran.

In these circumstances, it seemed reasonable to conclude, as I did in August last year

, that “a military victory over the Taleban insurgency is now unlikely, whether or not it might have been achieved in the past”.

But the string of terror attacks and other outrages starting with Lashkar-e-Taiba’s attack in Mumbai late last year has changed everything.

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End the fuel subsidy

John Quiggin15 Comments

A comment reminded me that I hadn’t posted last week’s Fin article, advocating abolition or phasing out the fuel subsidy in Queensland> It’s over the fold. Also, since letters about me in the Fin usually have a heading like “Quiggin wrong”, or worse, let me thank Greg McKenzie whose letter commenting on the article was headed “Quiggin the best”. Thanks!

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Bet with Bryan Caplan

John Quiggin26 Comments

Bryan Caplan and I have now agreed on the settlement conditions for a bet on US_EU jobless rates while also agreeing to differ on the interpretation. The stake is $US100 and the agreed criterion is that, for Bryan to win, the average Eurostat harmonised unemployment rate for the EU-15 over the period 2009-18 inclusive should exceed that for the US by at least 1.5 percentage points.

Since the implied difference in the proportion of the population who are unemployed is almost exactly equal* to the difference in the proportion of the population who are incarcerated, I interpret my side the bet as follows

Averaged over 2009-18, the sum of incarceration and unemployment rates in the US will exceed that in the EU-15

Caplan wants to leave incarceration out of the discussion and focus only in unemployment. Since we’re agreed on how to settle the bet, there’s no problem with differing on how to interpret the result.

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