Gareth Morgan, Director of Gareth Morgan Investments
The recent study by Alan Bollard and Ian Duncan concluding that corporatisation and privatisation has been a commercial success, is not surprising. However, it would be surprising if a parallel study to determine whether these sales had been a political success, would come up with such a rosy conclusion.
At the heart of the matter of course is the reality that commercial success has invariably gone hand in hand with users paying directly for the outputs these enterprises produce. The purchasing public has had to front up with cash on delivery. It was far more comfortable to pick the goods up for free, or a subsidised price, with the invisible taxpayer, making up the difference. The change wrought by privatisation and corporatisation process has changed the lifestyle of many Kiwis- and they don’t all like it. This resistance to change, even though economic analysis may demonstrate a net national benefit, is landing the government of the day in the political cactus. It lies behind the seething unpopularity that Labour first, and now National provoke.
From a straight political standpoint, the momentum for continued change has dissipated. There is a political mandate not to change any more institutions and structures; to leave well alone; even to use budget deficits in a “user friendly” manner, purchasing back some of the goodwill lost. It is this promise that gives the appeal of the Alliance- an appeal that both other parties will try to poach as the election looms.
On the face of it there seems to be a conflict between the economic well-being of the nation as a whole, and the populace’s comfort with familiar and predictable structures. For government, the task remains that their fiscal dilemma demands continued State sector reform and efficiency gains, but their political dilemma screams for a halt. The two objectives may not be mutually exclusive.
The government desperately seeks to endear itself with an electorate disgusted by its duplicity. The floating of Mr Bolger’s great investment vision just days before the Tamaki by-election, was a precursor to the sort of shenanigans we can expect as the 1993 election race puts butts on the line. Rather than adopt a re- election strategy that furthers the conflict between electoral desire for stability, and economic necessity for reform, government may well do better to consider an electoral bribe that can buy off dissension.
Rather than sell-off state assets in a manner seen to be a cop-out by a grumpy and fatigued electorate, the government could take advantage of the rising desire by households to invest beyond fixed interest avenues, and have a public float of a “strategic” asset. By selling such an asset at give-away prices to the public, the government will of course be exacerbating their own fiscal mess. But if they’re nervous of electoral defeat anyway they’re bound to resort to pump priming. The public float of Telecom in Britain was just such a pre-election sweetener; and it worked.