Wednesday, January 26, 2011

Partial privatisations by a government without courage

John Boy's announcement today of his intentions for partial privatisation of so-called state “assets” is the weak-kneed response of a lily-livered government to the realisation that has taken three years to dawn on them that theirs is a government unable to pay its way—and that somehow, somewhere, there must be a way to get more without giving anything away what they’ve found under the mattress.

Partial privatisation of entities in which the government should never have been involved is the worst of all worlds.  It’s like sex without the friction.

This is a government out of control. A government deeply in debt, yet committed to spending more than one billion more every new year. The state over which they preside is already

  • The biggest owner of dairy farms in New Zealand;
  • The biggest fund managers in New Zealand;
  • The 50% owner of a large chain of petrol stations;
  • By far the biggest owner of rental properties;
  • The dominant generator of electricity;
  • The dominant owner of our trains and planes;
  • The owner of our most aggressively growing bank

The assets already controlled by government have a book value around six times the value of all the shares on the local stock exchange. Instead of turning this around, this new policy asks for that shrinking private sector to instead further prop up the inexorably expanding state—with taxpayers in their position as willing investors paying again for “assets” originally paid for by the with money extracted from them in their position as unwilling tax-victims. 

It is the illusion of real business activity that only a government could promote.

It is an alliance of dollar and gun for the benefit of everyone and no-one.

It retains government involvement in what are supposedly commercial organisations—leaving the referee in the position of writing rules for itself, and investors in the position of signing up to share in the rent-seeking have government favours (ands monopolies) may bestow up on them.

But at the same time, it pits commercial incentives against political incentives—the latter of which are always certain to triumph over the former, leaving any potential profits severely diminished by the conflict, and few of the new investors able to fully exercise their entrepreneurial acumen with their new assets.

Which means that any of New Zealand’s diminishing stock of investment capital that does find its way into the various entities of mixed ownership will produce far less value from that investment capital than it would if invested instead in purely private profit-making enterprises—leaving the already denuded pool of local investment capital all the poorer for the association.

And it leaves the co-owners in the position of being unable to establish the true value of the state enterprises divested so partially—which in the case some of them (KiwiRail being a glaring example) is a price that without continued taxpayer “investment” is virtually zero. Which means that any investors in these lemons will be in the position of constantly lobbying for more favours from their government partner, and more dollars from the long-suffering taxpayer—seeking as they do to privatise their profits and socialise their losses.

Which takes us back the first objections above.  This is an alliance between dollar and gun in which consumers (in their position as purchasers from these aggrandised monopolies) and taxpayers (in their position as ripe sucks) will assuredly be the losers.

The mild-mannered Roger Kerr deals with many of the myths concerning past privatisations, and has more on the problems attendant on partial privatisation:

_Quote We have seen partially privatised companies remain political playthings, a prime example being the former Auckland Regional Council’s nationalisation of Ports of Auckland.  Earlier experience with the partial privatisation of the Bank of New Zealand was also unhappy.
    [
The authors of a recent trial balloon for the policy that ran in the Herald] note that the New Zealand sharemarket would benefit from partial listings, as did the Capital Market Development Taskforce.  But, other things equal, it would obviously benefit more from full privatisation.  Moreover, partial privatisation of the small entities they give as examples – Quotable Value, Learning Media and Asure New Zealand – would hardly be worth the candle.  Game-changing policy must involve major SOEs such as those in the electricity sector. [But note that these are essentially coercive monopolies enjoying the use of a restricted market to extract usurious rates from consumers.]
    The article cites Air New Zealand as a model of partial privatisation but unaccountably fails to note that the company’s share price performance since the government resumed majority ownership has been poor.
    They also commend the Singaporean Temasek holding company model.  This is also dubious.  The performance of the underlying businesses is not sharply reflected in such a model.
    The authors mention the possibility of restricting privatised company shares to New Zealand nationals, and rightly note that this would depress the share price.  The arguments for such restrictions could only be political.  The idea that foreign ownership is a cost of privatisation is misplaced.  The level of foreign ownership in the economy is determined by the cumulative current account deficit or surplus in the balance of payments, not by which assets are for sale.  If foreign ownership of some assets is blocked, foreign stakes in other assets will be higher.  If this is an issue, a better approach would arguably be to simply give SOE shares to their true owners, New Zealand taxpayers.
    The value of partial privatisation should not be over-stated . . .

… and there is no serious argument against full privatisation.  By which I mean privatisation that returns whatever assets still exist to those who’ve already paid for them.

All that is lacking from National’s limp-dicks is a spine.

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DOWN TO THE DOCTOR’S: Goff robbing the rich to bribe the poor

Libertarianz leader Dr Richard McGrath ransacks the newspapers for stories and headlines affecting our freedom.

This week:  Goff proposes robbing the rich to bribe the poor

  • DOM POST: “Tax The Rich, Help The Poor, Says GoffLabour’s leader suggests making the first $5k of income tax-free, while increasing tax rates on high earners and setting up a Tax Avoidance Taskforce. . .

    THE DOCTOR SAYS: This is one step forward and several backward. Goff has taken the first step in the Libertarianz Party’s income tax policy, and despite chopping a zero off the end makes a positive move. Leaving the first $5,000 of people’s income unmolested is a good idea; allowing people to keep the first $50,000 would be better – and achievable, if governments simply stopped spending other people’s money on things that are none of their business. So far, so good.
        Goff then reverts to the standard left-wing politics of envy as he bashes successful people and suggests stealing more of their money. It appears he wants to raise the top tax rate to around 45 cents in the dollar. When you factor in GST and ACC levies, self employed people will end up paying about 60 cents in the dollar in tax. That’s heading back into Muldoon territory. 
        Goff also wants to set up a Tax Gestapo which he calls an Anti-Avoidance Taskforce: a government office with the specific purpose of stopping New Zealanders from structuring their income in order to best protect their assets. That’s disgusting, Phil. The ghouls from Inland Revenue have already driven people like Ian Mutton to suicide; why give them even more power to destroy lives and families?
        Will the Labour Party please release a statement, pledging that all its MPs are paying the maximum amount of tax possible, and are not using any legal means of tax avoidance. If not, could Phil Goff explain why he hasn’t got his own house in order first before attacking other people who are legally trying to stop their money being redistributed? 
        I am heartily sick of the success-bashing engaged in by people like Phil Goff and Winston Peters. They always view high earners as undeserving of the money they make. For some reason that doesn’t apply to people on low incomes. Those people, according to Goff and others, deserve everything they get, and more.
        The Libertarianz Party believes in the sanctity of private property, and abhors attempts by the envious to punish success. We believe that income tax should not only be abolished, it should be criminalized as another form of extortion.

 Mr Goff said 'rebalancing' the tax system would ensure
everybody paid their fair share.”
    - New Zealand Herald

“I would like to electrocute everyone who uses the word ‘fair’
in connection with income tax policies.”
-
William F. Buckley, Jr.

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Bye Bye, Keith

I’m afraid I have some sad news to impart.  The Greens's Keith Locke is retiring.  Sorry to have to break it to you.

Keith has a wasted life to look back on. A life spent backing some of the world’s nastiest horses.  His departure will however help to Greenwash a Green Party struggling to keep the veneer on.

_Quote_Idiot I'll probably be remembered as the MP who most strongly resisted legislation inspired by the 'war on terror' which has eroded our civil liberties,”

says a Keith hoping to  get in early and write his own history.

Good try, but that’s frankly wishful thinking. Because he will be deservedly remembered instead as the MP who went to bat for Pol Pot’s Khmer Rouge regime, about whose takeover Keith wrote a lead article for his April 1975 'Socialist Action rag with the banner heading: "Cambodia Liberated: Victory For Humanity"

Keith’s "liberators," of course, went on to kill most of the population and enslave the rest. A “victory for humanity” bought at the price of the death by government of 2,035,000 souls.

This was a regime about which there is nothing good to say, and nothing at all to cheer. A Cambodian friend told me that towards the end of the Pol Pot regime, when they began running out of bullets, Khmer Rouge troops were killing people with bamboo stakes instead. Such was the regime that 'liberated' Cambodia.  [RJ Rummel has a 'Docudrama' from that fateful liberation to help give you some more context.]

Copies of that fateful April 1975 edition of Socialist Action in which Keith expressed his devotion to what would become one of the modern world’s most murderous regimes now change hands at enormous prices, as well they should. You can however find a copy in the Parliamentary Library now that is has been tabled in the House by Michael Cullen. [For the record, see Frog Blog's answer to the charge here. ]

But this love of “liberators” along similar lines is not out of character. As Trevor Loudon records,

_Quote In 1980 Keith Locke was a member of Socialist Action League National Committee. On February 23rd that year (Socialist Action March 14th) Keith Locke gave a talk in Wellington "Why workers should support Soviet Action in Afghanistan."

At the time, of course, all non-Maoist communists like Keith were required to slavishly follow the Soviet line. Keith, of course, now claims that he is older and wiser. Not so, however, as another revealing incident from 2001 demonstrates. Soon after the act of war that was September 11, Keith Locke spoke at a meeting in Rotorua on a platform with Annette Sykes, at a meeting called to protest the war against the Taleban. As Keith sat there smiling and nodding his head in agreement, Sykes told the audience (as transcribed by a member of that audience):

_QuoteWhen I first saw the planes fly into the towers I jumped for joy, I was so happy that at long last capitalism was under attack. Until, it suddenly dawned on me, what about all those poor pizza delivery boys, those poor firemen, those poor policemen, those poor lift-operators, all those poor cleaners, all those other poor workers who are forced to work for and were trying to save those greedy and horrible capitalists!? My heart and head was so confused - happy that some capitalists had been killed and very, very sad for all those who had died while working for them.

Keith neither challenged nor questioned Sykes’s rant; instead he sat there and smiled and nodded and then led the applause when she finished. Nice chap. Good company he keeps. [I raised this matter on the Greens’s Frog Blog a few years back, at which time some discussion ensued.]

And the love of violence has not ceased. In 2007 he could be found supporting the activities of the Urewera 16, something even Martin Bradbury found too far beyond the pale to countenance.  And as recently as 2008 Keith was writing for a publication glorifying Palestinian suicide bombers.

So if anyone is going to write Keith’s history as in his words, “a human rights watchdog and peace advocate,” they might care to remember these incidents. They might also like to refer to Trevor Loudon ‘s four-part series on the “peace advocate,” Keith Locke-A Wasted Life, Part1,Part2, Part 3, and Part 4 (Final for Now). Loudon concluded this 2005 four-parter with the observation that,

_QuoteKeith Locke was born into a communist family and has fought for the cause ever since. He has wasted his life supporting some of the most murderous regimes and movements on the planet.

Too true. I trust the many eulogies that will now be written about the man will not fail to highlight this all-too salient point.

Here’s another billboard for Keith:

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Tuesday, January 25, 2011

Phil’s been reading Libz policy. Partially.

Good to see Labour leader Phil Goof adopting Libertarianz’ taxation policy by announcing he would like to make the first $5000 of everyone’s income tax-free “eventually.”

Sure, it’s not as good as the Libz policy itself, which is to axe the GST tax while making the first $10,000 of income wholly tax-free (raising this limit rapidly to $50,000). It’s nowhere near as good as that, but it’s a start.

And it’s not even as good as the calculations backing the Libz policy, since as Idiot/Savant points out, there’s a HUGE hole in Phil’s figures. A $1.2 billion hole, in fact—a shortfall that will require more than magic and political spin to make up.

Might I recommend then that instead of just dipping his toe in the Libz policy water, that Phil fleece the full Libz policy as a whole and Put the State Sector Through the Woodchipper, thereby saving tax victims from the enormous tax burden the sector imposes on every one of us.

It would at least serve to distinguish his party from the do-nothing dildoes presently in power.

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Houses getting less and less affordable despite the bursting bubble

Despite New Zealand’s parlous economic conditions, New Zealand housing is no more affordable now than it was before the economic wheels started falling off. In fact, according to the latest annual Demographia International Housing Affordability Survey housing in New Zealand is still severely unaffordable.

Author Joel Kotkin notes that even after the bursting of the housing bubble, the ratio of incomes to housing prices in most cities (what the researchers call “the median multiple”) has shown a steady increase.

_Quote The survey gave New Zealand a median multiple of 5.3 for housing affordability, which is above the historic norm of three.
    All major [cities] in Australia and New Zealand, as well as Hong Kong, were judged to be severely unaffordable. Of the 325 [cities] the survey covered, 115 were affordable, 94 were moderately unaffordable, 42 were seriously unaffordable and 74 were severely unaffordable.
    All of the affordable [cities] are in the United States. The most affordable  is Atlanta, with a median house price of $US129,400 ($NZ170,485). Hong Kong was the least affordable major [city], with a median multiple of 11.4, Sydney second with a median multiple of 9.6 and Vancouver was 9.5.
    New Zealand's housing was [rated as] affordable in the early 1990s, with a median multiple of under three, the survey said.
    Auckland now has a median multiple of 6.4, with Christchurch on six and Wellington on 5.5, which is regarded as severely unaffordable. Tauranga-Western Bay of Plenty was again the least affordable market [in the country], with a median multiple of 6.5.

The reason some cities’ houses remain severely unaffordable while others do not (median house price of just $US129,400 in Atlanta!) remain the same, and may be described very simply: cities in which town planners have been given powers to seriously restrict house-building are generally the least affordable; those in which they have the least power are generally the most affordable.

In other words, the more “sustainable” a city is and the more power its “planners” have, the less affordable its housing.

Now you might have thought that Prime Minister John Boy might have been working since his election to turn around the dire situation in which even hard-working New Zealanders are finding it increasingly difficult to buy a house. But you’d be wrong. Instead, Smile and Wave’s local government minister Rodney Hide just spent the last two years working night and day not to remove power from the smug self-anointed vermin who have made life worse for would-be home-owners, but instead (as a model for councils across the country) to give Auckland’s town planners even more power to make the city even more severely unaffordable.

What a creep. What a disgrace. What a tragedy.

NB: You can download the detailed survey and related commentary at the Demographia website, from whence graphs and tables like these two below are sourced.

Unaffordable

RELATED POSTS:

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“Haiti: Putting “Baby” in the dock [updated]

The headline comes from the Boston Globe, commenting on the return of thug, murderer and thief ‘Baby Doc’ Duvalier to the country in which he was formerly (he had hoped) dictator-for-life, and which he and his father did much to make the poorest and most dangerous in the western hemisphere.

_Quote During Jean-Claude “Baby Doc’’ Duvalier’s reign as dictator in Haiti from 1971 to 1986, Haitians were kidnapped, tortured, and murdered by his security forces. Now that he is back in Haiti after a 25-year exile in France he must not be allowed to escape justice either for the crimes against humanity or for his flagrant theft of enormous sums of money.

I look forward to being able to blog his obituary.

Here’s itinerant NZ muso Luke Hurley with a topical track from his 1994 album Reha:

 

UPDATE: “Who in Haiti and Malaysia can aim and fire?” asks Liberty Scott, who reckons the opportunity should not be let slip to rid the world of two extraordinary criminals “that hide behind ‘state sovereignty’ to protect their blood-dripping hands.”

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SUMMER SECONDS: Special treatment

This “Summer Seconds” series gives you a second chance to read classic posts from the NOT PC archives. This time, part of a piece written back in January 2007 when John Key visited the Ratana marae for the first time, setting the tone for his premiership to come.

Are we somehow all special? How can that be?

I ask because John Boy Key was saying at Ratana marae yesterday both that Maori are "special," and at the same time that Don Brash's "message" that everyone should be equal before the law "won't be changing." Which means either we're all special (a logical impossibility), or else he's just talking nonsense and he thinks we won’t notice, or care.

_Quote In a relaxed speech that began with a short introduction in te reo, Mr Key reiterated his view that the National Party believes Maori have a special place as the Tangata Whenua.
    He says the National Party wants to engage in dialog with Maori and develop a relationship that will stand the test of time...
    A speech by National's previous leader, Don Brash, on race relations led to some strain between National and Maori, and Mr Key concedes there may be bridges to mend. But he says fundamentally his message won't be changing from Dr Brash's - but the tone may be different.

Those two statements -- that Maori should be regarded as "special"; and at the same time that everyone should be regarded as equal before the law regardless of colour -- are so different that either he thinks we're all stupid, or else he thinks the meaning of words is less important than the "tone" in which those words are said, or the 'emotional vibrations' with which the words are delivered.

Either way, he's disgusting.

The most sensible thing said yesterday at Ratana seems to have been said by Tariana Turia. "Maori don't need patronising politicians," Turia is reported to have said.

Maori aren't the only ones.

PS: Lindsay Mitchell puts it bluntly: "When government accords one group special status they are by necessity taking from another. There can be no privilege without some corresponding disadvantage. If one individual or group is "special" then others are not." Couldn't say it better myself.

Here’s Paul Kelly:

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Monday, January 24, 2011

SUMMER SECONDS: 7 ways to leave your economy on its knees

This “Summer Seconds” series gives you a second chance to read classic posts from the NOT PC archives. This time, part of a piece written back in October 2008, before the last election, when I was among those warning that all the remedies bandied about by all the alleged economists would not generate recovery, would delay whatever turnaround might have happened, and would instead be the cause of other, further, crises—just as those remedies did when the likes of Hoover and Roosevelt used them to extend the 1929 correction for another fifteen years.

When  markets need to correct, when real savings are being consumed on malinvestments that urgently need to to closed off, then here's seven things you can do to make sure that the necessary correction will not happen [with the more rational reaction shown in square brackets]:

  1. Prevent or delay liquidation by propping up shaky businesses and shaky credit positions. [Better instead to flush out the malinvestments quickly, so recovery can get under way.]
  2. Further inflate the money supply, creating more malinvestments and delaying the necessary correction. [Better to maintain the currency’s purchasing power rather than dilute it.]
  3. Keep wage rates up --or keep money wages constant when prices start falling (which amounts to the same thing) -- which in the face of falling business demand is a sure recipe for unemployment. [Better to take your cut now, and give your business a chance to restructure.]
  4. Keep prices up (by means of the likes of green-plated building regulations) or add new costs to struggling businesses (such as the dopey Emissions Tax Scam), delaying the necessary corrections that will make businesses profitable again. [Better to let prices fall to the new level they need to post-crash. Trying to help recovery by artificially re-inflating prices is like backing over someone you’ve run over in your car, and hoping that will make your victim better.]
  5. "Stimulate" demand by spending on "infrastructure" projects just to make it look like the government is doing something -- when what that something actually does is to take money from profitable businesses in order to bid resources away from struggling businesses. [Better if government cuts its coat according to its new cloth, without competing with struggling businesses and raising the prices of now-much-scarcer resources.]
  6. Discourage saving and investment by increasing government spending (all of which is consumption spending) and maintaining high tax rates. [Better if government cuts its coat according to its newly poverty-stricke cloth, without taking now-much-scarcer resources away from struggling businesses.]
  7. Subsidise unemployment with make-work schemes paid out of money from profitable businesses that bid resources away from struggling businesses, delaying the shift of workers to fields where genuine jobs would otherwise be available. [Better to abolish all minimum-wage laws, so everybody who wants to work can work—and work in a job that pays its own way.]

As Murray Rothbard points out in America's Great Depression (from which I draw the above seven points) when you list logically the various ways that government could hamper market adjustments and hobble the adjustment process, you find that you have precisely listed the favourite "anti-depression" arsenal of government policy.

[ I said in 2008 that all these variants of stimulunacy would be used, and would fail—just as they were and did in the First Great Depression. Sadly, I was right. ]

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SUMMER SECONDS: Economists, sort out your own stables first

This “Summer Seconds” series gives you a second chance to read classic posts from the NOT PC archives. This time, a piece written three years ago suggesting that instead of extending economics into other fields, economist should instead begin repairing their own manifest professional failures.

Many folk have been talking excitedly about 'pop econ' books like Steven Leavitt's Freakonomics, Steven Landsburg’s Armchair Economist and Tim Harford's Undercover Economist, popular works works purporting to extract economic reasoning from the realms of arid economic analysis and apply it to everyday behaviour—offering dubious statistical insights everything from the use of toilet paper to the alleged impact of abortion on inner city crime.

Great fun. But there is a problem. For all the pleasure to be had in reading these light pieces of pseudo-scholarship (and the huge sales of these books show much fun is being derived from their reading), they appear at a time when the world’s economies are approaching ruin, and the ignorance of mainstream economists to explain their own field has never been more clearly demonstrated. I can’t help wondering then whether it wouldn't be better if instead of applying economic reasoning to other people's fields, these economists first began sorting out their own

Sorting out the stale hand-me-down drek that is taught so unquestioningly in university economics departments and that passes so universally as mainstream economic reasoning has never been more urgent. A collapse of the world economies that surprised virtually every mainstream economic commentator make that only too clear. Instead they are revelling in what their alleged economics has to say about your nail clippings, or  of the 'hidden' effect of what your mother calls you when you're born -- in other words, things of almost total irrelevance --  while being blithely unaware as the meddling of the world's great central bankers brought about the world's great credit crunch.

When most economists miss such an obvious blunder, when they struggle to understand the very basics of their own profession -- including where money comes from and what causes recessions and inflation and even how to properly define them -- it's clear that instead of offering others advice, the economists should begin mucking out their own stables.

Until that's done, (if I may mix a metaphor) perhaps they'd better stick to their own knitting instead of giving more dubious advice to others.

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What Bob said