John’s Place, Saturday November 26th
Privatisation is an integral part of the strategy to turn even more of this country and its economy over to being owned and/or controlled by transnational corporations. National was so desperate to get back into power at the 2008 election that, against all its own instincts (it is called “swallowing dead rats”), it promised not to sell off any public assets in its first term in office - knowing full well that there has never been a single term National government. That term finishes this year and already National has declared its hand. To nobody’s surprise, a central plank of its policy, if re-elected on November 26th, is the partial privatisation of a number of specified State-owned Enterprises – namely the four major power generators, Solid Energy and Air New Zealand. The Government knows that privatisation, specifically of State assets, is poison to the voting public, because of the wholesale pillaging of the common wealth in the 1980s and 90s, under both Labour and National.
Nor does 49% private ownership provide any kind of protection. All you need to do is look at the Overseas Investment Act which, despite many amendments since it was first passed in 1973, still retains the same legal definition of a foreign company – one that is more than 24.9% foreign-owned. It doesn’t matter whether that percentage is held by one or many foreign owners; if it totals anything higher than 24.9%, it is recognised as a foreign company. In other words Key is talking about accepting a level of private, inevitably foreign, ownership which is double the legal definition of a foreign company. And there is an inherently absurd contradiction in this whole “Kiwi mums and dads” nonsense – they already own these assets, because that is what public ownership means (that’s not that hard to figure out). They have paid for them by their taxes, why should they be expected to pay for them again by buying a few shares in them and diluting their ownership to the status of a minority shareholder? And let’s take the absurdity to the next level. What if one (or more) of these newly privatised companies goes bust? So then the mum and dads become unsecured creditors, waiting at the back of the queue while the Australian-owned banks and other transnational financial corporations get their money back, as secured creditors. Perhaps the mums and dads might get ten cents back in the dollar if they’re lucky, just like the mums and dads who entrusted their retirement savings to all the shonky finance companies. Then again they might get nothing. So wouldn’t that be a bargain? To go from owning these SOES outright as taxpayers, to maybe being “shareholders” of nothing.It’s The Ideology, Stupid
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| "I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument but we probably felt it was the easiest to use politically" |
Why does the Government want to privatise public assets? Key and English are trotting out the tired old lie that it is to reduce debt. This was used during the huge wave of State asset privatisations in the late 1980s and early 90s. It couldn’t be justified then and certainly can’t be justified now. At least Sir Roger Douglas had the decency to tell the truth. In an early 90s’ book praising him and his cronies for the selloff of State forests, Douglas said: “I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument but we probably felt it was the easiest to use politically” ("Out Of The Woods"; Reg Birchfield and Ian Grant; 1993). New Zealand does have high foreign debt at present but the great bulk of it is private debt, not public. Of that private foreign debt around 70% is bank debt, which is only a problem for the Australian owners of our major banks, not the New Zealand taxpayer. Under Labour public debt was substantially reduced as a matter of policy priority. That trend was reversed when the global financial crisis erupted and National started borrowing large sums to keep the economy afloat during very difficult times. So, increasing public debt became a policy priority for National and a sensible one in the circumstances. As it is, NZ‘s public debt is very low compared to other high income countries; it is certainly nothing like the public debt levels of countries such as “the PIGS” (Portugal, Ireland, Greece and Spain) – countries with which the Government is now comparing New Zealand in a propaganda drive to panic Kiwis into accepting There Is No Alternative to privatisation. Our public debt levels provide no justification for flogging off those assets. The answer to the question is, of course, that the Government wants to privatise public assets for ideological reasons.
In fact, it’s worth remembering the following next time you see Bill English saying that the country is going to the economic dogs and therefore everything has to be flogged off and services slashed – Time (14/3/11, “Are America’s Best Days Behind Us?”, Fareed Zakaria) accompanied that cover article with a world map listing the world’s ten most prosperous countries (out of 110 surveyed in the Legatum Institute’s Index of Prosperity, which measures material wealth and quality of life). Little old NZ was ranked fifth most prosperous country in the world (the top three were Scandinavian countries; Australia was fourth, only one place ahead of us; and the US was tenth, well behind NZ). But that’s not what we’re hearing from the panicmongerers and privatisers, is it? When was the last time we heard Key or English say that NZ is the fifth most prosperous country on Earth, five places higher than the US? Usually Tory politicians trumpet to the heavens any positive mention of NZ in Time, but not a peep about this. Guess it doesn’t fit the agenda.
Privatisation By Stealth
The State-owned power companies, Solid Energy and Air New Zealand are only the beginning. There is a well advanced process of privatisation by stealth. Just to quickly summarise other affected sectors: there are public private partnerships (PPPs) being set up for infrastructure projects; the extremely lucrative workplace component of ACC is being “opened up to competition”; PPPs are being set to run education sector infrastructure; the first contract has been let for a private prison, to British transnational, Serco (in the case of both ACC and prisons, these moves continue policies started by the 1990s’ National government and stopped by Labour. And it is worth noting that private prison owners have a vested interest in crime, in keeping their “asset” filled with “product”. They don’t have any interest in promoting alternatives to prison, in a country which already has the second highest per capita rate of imprisonment in the world, behind only the US. Nor do the private owners of toll roads have any interest in promoting alternatives to road transport or the dominance of the car).
Those are all privatisation moves underway right now. In the future there is the very real prospect of Kiwibank being flogged off – not only is it ideologically unacceptable to the Tory privatisers (and Labour’s leadership of Clark and Cullen sneered at it when they were forced to establish it as part of the coalition deal with the Alliance) but it is also an extremely successful and innovative bank which is giving the big Aussie banks a run for their money at the lower end of the market. People ask: “Well what is left to sell?” because so much has already been flogged off. The answer is: plenty. Two huge sectors which the transnationals want to get their hooks into are water and local body services. Rodney Hide went to all the trouble to restructure Auckland local government for the benefit of his Big Business mates, only to have the ungrateful voters deliver the wrong result and the wrong Mayor at the 2010 local body elections. But the structure is now all in place for our biggest city to be run as a board of directors when a future more obliging Mayor and Council are in place. And why muck around with all this tiresome democracy nonsense? In 2010 the Government simply sacked ECan, Canterbury’s regional council, and installed Commissioners to run it. Dictatorships are so much more stable and predictable and deliver the desired outcomes.
But what’s wrong with privatisation? Three examples should suffice – Telecom, the Railways, Air New Zealand. You don’t need me to spell out the details of all that was wrong with their respective privatisations (necessitating renationalisation in the case of two of them). Read the Roger Award’s Judges’ Reports where you will find copious material, year after year, on the corporate misdeeds of both Telecom and the former Tranz Rail. People say “who cares who owns the power companies? The State-owned ones behave like bastards anyway” (and don’t I know it, I’m a customer of Meridian – which gave us a $5 rebate off our power bill for our place having no power for five days after the February earthquake. I’m pretty sure we get charged more than $5 when we actually use power for five days). True, but the solution is not to flog them off to a private owner but to enact a policy that State-owned companies supplying an essential service actually be a public service rather than profit-obsessed corporations, which are publicly-owned whilst exhibiting all the worst characteristics of privately owned Big Business corporations. That requires a political decision to change the business model of those and other State-owned Enterprises from profit to service. Both the Railways and the Post Office could have been fixed, updated and recapitalised without needing to be flogged off. They are both textbook examples of what is called socialising the losses whilst privatising the profits.
I’ll put it in individual terms that all of us can understand. If you can’t afford to pay your mortgage, you can always sell your house. Fine, you’ve cleared your debt and you’ve sold your asset. But that’s the central contradiction, isn’t it – by selling your asset you’ve no longer got a house. And you now don’t have the money to buy another one. So where will you live? You could downsize to a smaller place (where could New Zealand downsize to? Stewart Island? The Chathams?). Or you could revert to becoming a tenant – and we all know who has the power in the landlord/tenant relationship. Ownership is power. This is recognised by none other than John Key who has said that he doesn’t want New Zealanders to become tenants in their own country. Well he is doing his best to bring that about.
And there is plenty that is right with publicly-owned assets. To quote from a Council of Trade Unions’ flyer entitled “If privatisation is the answer, what was the question?”, they have many benefits, including: preventing profiteering in important services with little competition e.g. electricity, Kiwibank; ensuring essential services are provided fairly and affordably e.g. water, welfare, superannuation; providing security of services e.g. electricity, coastal shipping, public transport; social solidarity, and services which are more efficient to provide universally e.g. ACC, health; providing services and development when the private sector doesn’t e.g. Air NZ, rail, Solid Energy; and providing additional income to the Government e.g. electricity, Kiwibank; Solid Energy, Air NZ. Labour’s May 2011 policy announcement of a high profile campaign of opposition to public asset sales is a welcome move and proof that privatisation will be a key (pun intended) election issue, as it bloody well should be.
I speak from the personal experience of being a Christchurch earthquake victim and I ask you to reflect on where things would be at now if earlier governments had decided to privatise the Earthquake Commission (EQC) with its very tempting pot of billions of dollars. How do you reckon the private sector would have gone if it was in charge of the whole operation? Well, the answer to that is not hypothetical, because there are whole categories of earthquake victims who are not covered by the EQC and who are reliant on their insurance companies for repair, rebuild and/or compensation. And, no surprises here, these mostly foreign-owned insurers (and their transnational reinsurers) are principally concerned with getting a good return for their shareholders and not with providing a public service. A disaster of this magnitude can only be handled by the State, not the private sector – there are plenty of private companies involved but they are operating under the direction of the State, which has the power to declare a state of national emergency and mobilise all necessary resources. This is a core function of the State; a lot of things are just too big and important to be left to the private sector. Sure the EQC and the Government, both at local and national level, could do some things better – and I could tell you a few stories about our dealings with the earthquake bureaucracy - but (theoretically at least) they are accountable to us the voters, the people who pay their wages and who determine whether they keep their jobs or not. Private company people are only answerable to their boards of directors and shareholders. And we need to beware of what Naomi Klein has identified as “disaster capitalism”. She was referring to what happened in the aftermath of the Bush Administration’s criminally negligent “response” to the 2005 Hurricane Katrina catastrophe in New Orleans, where private firms took advantage of the circumstances as an excuse for an orgy of corporatisation and privatisation (see Jeremy Agar’s review of her book “Shock Doctrine”)
Will Christchurch’s Assets Fall Victim To Disaster Capitalism?
The revelation that all of Christchurch’s publicly-owned trading assets could be in danger of being sold due to a “legal loophole” in the law establishing the new State authority to run the city whilst it is rebuilt after the earthquakes should set alarm bells ringing loudly. If that comes to pass, it would be the single biggest instance of earthquake-related looting yet seen. If such disaster capitalism is inflicted on Christchurch, that will be the “third big one” to slam into the city. And it will be the one with the most long term destructive effects.
Of course, Government Ministers have said that there is no such intention. The value of a politician’s solemn vow can be gauged from those Act MPs who publicly declared that Rodney Hide had their undying support as leader only days before he was deposed. Truth is an elastic concept in politics. Words are one thing; deeds (or, to be more precise, laws) are quite another. And having had the loophole in the Christchurch earthquake Act pointed out to it by Labour, the Government refused to plug that loophole or do anything to rectify the “oversight”, which remains in the law. And flogging off Christchurch’s assets sounds like a routine prescription from Dr Brash, Act’s new extra-Parliamentary leader, and coupmaster. There’s no secret about where he stands on the subject of public assets. His ideological soulmate, the Business Roundtable’s Roger Kerr, has already called for the sale of all or some of Christchurch’s assets to pay for the rebuild. CAFCA is sure that it’s purely coincidental that any that were sold would just happen to fall into the hands of the very same transnational corporations that make up a large part of the Business Roundtable. Ever since it branded Christchurch the “People’s Republic of Christchurch” for having the temerity to hang onto its publicly-owned assets (in social housing alone, the Christchurch City Council is the country’s second biggest landlord, after the State) the Business Roundtable and its political mouthpieces has wanted an example made of the city, and its assets flogged off.
If central or local government is foolish enough to try to go down this path, they will be buying a fight. In 2006 the Christchurch City Council came a spectacular gutser when public opposition - in which CAFCA played a leading role in setting up the Keep Our Port Public coalition - and a shrewd strategic intervention by the Port of Otago thwarted its cunning plan to hock off the Lyttelton Port Company to a Hong Kong transnational corporation (see “Lyttelton Port Company Sale Dead In The Water: We’ve Won The Battle, But Not Yet The War To Keep Our Port Public”).
And if Ministers want ideas on how to finance the massive rebuild, start by implementing the proposal to slap a small earthquake recovery levy on higher income earners. Reverse the totally unnecessary tax cuts that were a blatant hand out to the rich. And crack down hard on transnational corporate tax dodgers who suck extortionate profits out of the country whilst not paying their fair share, such as the likes of the Big Four Australian-owned banks who settled with the Inland Revenue Department in December 2009 for $2.2 billion, the biggest tax avoidance case in NZ’s history (“IRD Delivers Best Possible Christmas Present To Long Suffering Kiwi Taxpayers”). There’s no shortage of money in the country – it’s just a question of who has got it, and of ensuring that it stays here to be used for the public benefit.
Crafar Farms Bid Rejection Sets Precedent
Privatisation (either full or partial) of public assets is only part of the big picture, which is that of transnational corporate recolonisation of Aotearoa. Of course the foreign takeovers which attract the highest public attention and opposition are those involving rural land. The specifics change from decade to decade – it used to be coastal land, then it was South Island high country stations bought as hobby farms for the likes of foreign celebrities such as Shania Twain, and forests were all the go during the 1990s’ forestry boom (whatever happened to that?) – but the issue remains the same. There has been a quantum change in the past year or so, namely agribusiness transnationals snapping up the current engine room of the economy, namely dairy farms. The most notorious of these was, of course, the attempt by the Chinese Natural Dairy Corporation to buy up the bankrupt North Island dairy farm empire of the lamentable Allan Crafar. As you know this was one of the few (and certainly the most high profile in recent years) foreign investment applications to be actually rejected by the rubberstamp Overseas Investment Office (OIO), in December 2010, because it was deemed not to be in the national interest and because the individuals owning and/or controlling Natural Dairy did not meet the “good character” criteria of the Overseas Investment Act. There were certainly plenty of characters in Natural Dairy's bid, on both sides of the proposed sale - indeed, scriptwriters for B movies would struggle to invent characters such as May Wang and Allan Crafar himself, who was living proof that every man and his dog rushed into the dairying goldrush and that, in his case, the dog would have done a better job - but the lack of good character has been obvious from the outset. So the decision to refuse permission was an absolute no brainer, any other outcome would have been a travesty, and would have caused major public uproar and further exacerbated the political split within the highest ranks of the Government and its supporters on the issue of the sale of farms to foreigners. The Natural Dairy bid was just too egregious for even the Tories and their mates to stomach.
CAFCA sees this as a breakthrough precedent for the OIO, as we're not aware of any previous refusals by it on the grounds of lack of good character (and if there have been, they were on nothing like this scale). We have been making lack of good character complaints to the OIO, and its predecessor the Overseas Investment Commission (OIC), since the late 1990s. One of the most recent involved the 2009 collapse of Cedenco, caused directly by the legal problems of its American owners. Every single one of our complaints was rejected by the OIO or the OIC. For the details on this see “Good Fellas: The OIO And The Nature Of Being A ‘Good Character'” by Quentin Findlay, in Foreign Control Watchdog 124, August 2010 and his earlier article in Watchdog 123, May 2010, “Monkeys With Rubber Stamps: The Overseas Investment Office ”, . Also in that same issue: “Waste Management: Another ‘Good Character' Case From The CAFCA Archives”, Murray Horton, and “Tommy Suharto: One Who Was Never Put To ‘Good Character' Test”, Murray Horton, ). Nor was it only CAFCA that was getting the run around from the country's foreign investment rubberstampers. Back in 2000 Ministers in the Labour government overrode advice from the OIC and refused permission for Brierleys to sell its stake in Sealord to foreign fishing companies. We got the whole file from the OIC and Government, which revealed that the OIC consistently rejected advice and evidence from relevant Ministries that several of the applicants did not meet the good character provisions (“Sealord Sale: OIC Exposed”, Bill Rosenberg, Watchdog 95, December 2000). So there is a long, long history of the OIC and OIO rejecting any complaints (which were always backed up with evidence) about the lack of good character of various applicants. In the early 1990s the OIC approved Tommy Suharto, a notorious criminal, to buy Lilybank Station in the Mackenzie Country. Whenever CAFCA raised this subject their only “defence” was that they approved him before the good character requirement was included in the Overseas Investment Act.
The Natural Dairy/Crafar Farms three ring circus highlights the fact that “lack of good character” is one of the only grounds for which an application can be rejected (and it only covers the “good character” of the individuals involved, not the company itself), and the OIO has fought tooth and nail to fight off any such complaints in the past, as recently as 2009. What is different this time is that this application became the hottest of political hot potatoes, with the Prime Minister saying that he didn't want to see New Zealanders becoming tenants in our own land (language that no senior Labour figure has ever used; we're delighted that John Key has seen fit to appropriate a phrase that CAFCA has been using for years). How galling it must have been for Maurice Williamson, as one of the Ministers tasked with deciding on the application, to have to refuse it. As recently as September 2010 Williamson was denigrating opponents of foreign takeovers, specifically those involving Chinese companies such as Natural Dairy, as “racists” (“If All Else Fails, Call Them Racists”. As far as that side issue is concerned, CAFCA wishes to make clear that our opposition to Natural Dairy's bid would be the same if it was owned by Americans, Australians or Britons (or any others of our “white kith and kin”). The fact that it is Chinese-owned is irrelevant to us.
The Crafar/Natural Dairy soap opera was only the most recent example of this issue causing great disquiet within the ranks of National supporters and voters, not to mention a publicly noticeable difference of opinion at the highest ranks of the National government. In September 2010 Bill English was forced to announce that, despite the opposition from himself and Treasury, the Government accepted a review of the Overseas Investment Act that did not, as predicted, liberalise it further but tacked on a couple of cosmetic measures to give the appearance of toughening it up in relation to land sales (for details, see Watchdog 125, December 2010, “Government Happy To Be Doormat For Transnationals: But Tries To Quarantine Hot Issue Of Land Sales”, by Murray Horton.
No Let Up From Agribusiness Transnationals
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And the relentless takeover of our agricultural sector has progressed to the next level with the bid by yet more Chinese transnationals, aided by some minor NZ partners tacked on to make it more politically acceptable, for PGG Wrightson, which is a major NZ agribusiness. The more perceptive commentators have pointed out that the attraction is not the company per se, but the fact that it has the commercial rights to 90% of the technology on which NZ’s grass seed manufacturing is based. To quote a seed company director speaking to a farmers’ paper: “Having this technology controlled overseas was ‘like selling 5,000 farms to overseas buyers. Everyone was up in arms when it looked like 20 Crafar farms would be sold to the Chinese, but this is much bigger’” (New Zealand Farmers Weekly, 17/1/11, “Fears For Gemstone Of Seed Technology”, Alan Williams).
Every time there is controversy about some particular foreign land purchase, the apologists say: “Well, they can’t take the land with them”. Quite – and why would they want to, when they can own it here and milk it for all its worth (quite literally, in the case of dairy farms). What a lazy argument. Ask Maori what happened when Britain colonised NZ – the Poms didn’t take the land with them, did they, but that didn’t seem to help Maori one bit. It’s rather like saying Telecom can’t take all the phones with it. Once again, why would they want to? They’re happy to leave the phones here and take the money with them. If we don’t watch out, NZ’s agriculture will go the way of the wine industry, which did all the hard work to establish itself as a keystone part of the economy and a player on the world scene, only to be progressively bought out by transnational corporations and to now have been reduced to the level of a being a bulk grape grower for foreign booze giants. They don’t care if there is overproduction here, in regions such as Marlborough, and a consequent slump in the industry, because they can just concentrate on their more profitable operations in other countries. That is the essence of being a transnational corporation.
And land sales to foreigners, despite being so high profile (it’s the one aspect of the issue that TV news consistently covers, because it offers visuals) are only part of – an important part but only a part, nonetheless – of a much bigger picture. They pale into insignificance compared to the transnational corporate takeover of just about every sector of the NZ economy that you can think of. At most, land sales total several hundred million dollars per year (the Natural Dairy bid for the Crafar farms was touted as being for $1.5 billion but there was never any proof that it had anything like that money). Just one commercial takeover can be worth several billion dollars. I am not downplaying the issue of land sales, they are what get the strongest response from New Zealanders of all shades of political opinion, but they need to be placed into context. Who owns and profits from a particular farm or even a number of farms (those Crafar farms again) is a matter of local or regional significance, at most. Who owns and profits from our banks, supermarkets, media companies, telecommunications companies, airlines, transport companies, insurance companies, etc, etc, etc, is a matter of national significance which affects everyone in the country, and in some cases it is a matter of international significance.
The Owners Set The House Rules, Not The Guests
The Government is trying to reconcile the irreconciliable. On the one hand it is full speed ahead to privatise public assets and throw the door open to yet more transnational corporate domination of the NZ economy (for example it is still determined to give carte blanche to mining companies, both on and off-shore). Those are National’s true blue colours and exactly what you would expect from the party of Big Business. But on the other hand it is wrestling with trying to control the massive public and political opposition to the specific issue of land sales to foreigners. CAFCA calls upon the Government to instruct the OIO to cast its net much wider than that of “lack of good character” (which really does just add insult to injury) and rigorously assess all foreign investment applications to see if they really are in the national interest. The rejection of Natural Dairy’s bid for the Crafar farms has set a precedent that a foreign bid to buy up a significant chunk of the current engine room of the NZ economy (namely, dairy farming) has been rejected. This sends the message that NZ is not just there to be looted by any passing opportunist. The Government now needs to demonstrate some political will, show some balls, and lay down some much tougher house rules for those who wish to be guests in our home. This is one of the issues, in all its various manifestations, that needs to be front and centre in this year’s election campaign – because it boils down to who owns, controls and governs this country? The people who actually live here or the corporations who see it as just one among many pins on their boardroom map of branch offices? CAFCA has no doubt as to which side we’re on and we know that we have plenty of others with us. That is what worries the collaborators and ideologues who want to sell out their own people. Good, we want them to be worried and they have every reason to be. Because that sound you can hear is the sound of people waking up to what is going on and saying: “We’ve had a guts full!”