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New Zealand leads the way?

by Colman Thu Jul 3rd, 2008 at 10:19:38 AM EST

After allegedly helping lead the world into our free-market hell, New Zealand is pointing the way out, according to Seamus Milne in the Guardian:

On Tuesday, Clark's government renationalised the country's railways and ferry services, privatised in the early 90s and subsequently run down and asset-stripped by the Australian owners. Launching the new, publicly owned KiwiRail, finance minister Michael Cullen declared that privatisation had "been a painful lesson for New Zealand". Nor is this the first renationalisation by the Clark government, which took over Air New Zealand after it nearly collapsed in 2001 and has also built up a successful state-owned retail bank - named Kiwibank, needless to say.

And unlike Gordon Brown's government, which strained every nerve to avoid nationalising Northern Rock to avoid seeming "old Labour", Clark has championed the takeover of rail as exactly what is needed to build a modern, environmentally sustainable transport network. Against a background of global warming and rising fuel prices, she argues, rail is a "central part of 21st-century economic infrastructure". Given Britain's similarly disastrous experience with rail privatisation, you might think that taking a leaf out New Zealand's book would be just the kind of popular policy to help dig Brown's government out of its hole. Despite the modest improvements achieved by putting the lethal Railtrack out of its misery, Britain's railway system remains a byword for bewildering fragmentation, unreliability, overcrowding, delays and exorbitant cost - which has only now completed a high-speed link to the Channel tunnel, 15 years after its state-owned French counterpart.

Fleeced by the private train companies and rolling stock contractors (some of them pocketing 30% rates of return), it is now the most expensive, opaque and inefficient rail system in Europe. As the Campaign for Better Transport reported yesterday, walk-on fares are on average nearly five times those booked in advance - and all ticket prices are set to spiral in the next few years. Meanwhile, renationalisation is strongly supported by the public and is in fact official Labour party policy.

But far from planning to end what has been a disastrous experiment, the rail minister, Tom Harris, last month insisted that if the Tories hadn't privatised the railways, New Labour would have sold them off when it came to power in 1997. In a surreal aside that will baffle most UK train passengers, he insisted that "the private railway has provided a level of investment, innovation, imagination that wouldn't have happened if BR had stayed as it was".

The rhetoric in Ireland is still about privatising public transport, which is still mostly state owned. We'll catch up in a decade or two, maybe.


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Honest: politicians can still talk about privatising bus services here without getting laughed at by interviewers.
by Colman (colman at eurotrib.com) on Thu Jul 3rd, 2008 at 10:20:38 AM EST
One of the really nasty twists to privatisation is the ubiquity of Stagecoach buses: they're certainly the only ones around here that run a frequent timetable.

Brian Souter, the head of Stagecoach, donated £1m to fight the Labour Party's abolition of Clause 28, which had been introduced by the Conservative Party in 1988.

[Local authorities shall not] promote the teaching in any maintained school of the acceptability of homosexuality as a pretended family relationship

So: use public transport, fund homophobia.

by Sassafras on Thu Jul 3rd, 2008 at 01:55:25 PM EST
[ Parent ]
In a surreal aside that will baffle most UK train passengers, he insisted that "the private railway has provided a level of investment, innovation, imagination that wouldn't have happened if BR had stayed as it was".
Imagination, yes, I suppose. Innovation in all but actual rail service and technology, and investment in branding.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Thu Jul 3rd, 2008 at 10:27:44 AM EST
Think of all the added value.
by Colman (colman at eurotrib.com) on Thu Jul 3rd, 2008 at 10:29:23 AM EST
[ Parent ]
The original interview is here.

It's essentially an admission that NuLab was never interested in renationalisation, because privatisation has been so completely fantastic it would be silly.

It's true more people are using rail - passenger miles are 30% up on 1995 - but punctuality is poorer, services have been cut or farmed out to community initiatives, trains are less comfortable and late, the fares system is impossible to understand, huge sums are wasted in pointless franchise negotiations, interfaces between all of the players are so complicated it takes forever to plan anything, relationships are often adversarial, and after a couple of high profile disasters the system all but melted down. It's only now, five years later, that it's starting to work as well as it did back then. More or less.

But yes - lots of nice new logos. So, made of win.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jul 3rd, 2008 at 10:44:41 AM EST
[ Parent ]
To paraphrase one of your comments on another thread:

[Weeps and bangs head on desk.]

by Metatone (metatone [a|t] gmail (dot) com) on Thu Jul 3rd, 2008 at 10:54:19 AM EST
[ Parent ]
Ummm...well, Milne's tagline was

The privatisation tide is turning, from Wellington to Caracas, but public intervention has to be at the cutting edge as well

and I fail to see what is "cutting edge" about nationalisation.

My two penno'rth in among the rich crop of comments was this...

Sorry if you've read it all before.

The conventional wisdom is that there are only two alternatives: "Public" = owned and operated by the"State"and "Private" = owned and operated by a Limited Company.

As the City of Glasgow demonstrates, this is not true.

Glasgow already works with private sector partners within the framework of three existing UK Limited Liability Partnerships with at least two more to follow. However, Glasgow uses conventional borrowing to fund any necessary development.

In fact it is possible using LLP's as a framework to create "Capital Partnerships" where investors share production or revenues proportionally, thereby aligning the interests of investors and users of investment. In other words, Seumas, Labour may in fact work WITH Capital not FOR it: a happy state of affairs Marx termed the "Abolition of Labour" but eventually despaired of achieving.

Within an LLP framework there is no Profit and no Loss, merely creation and exchange of "Value" or "Money's worth" in all its many form.

More to the point it is possible using a "Capital Partnership" framework to leave assets in public ownership (as they should be) and to agree a reasonable initial rate of return for investors (say 2 to 3%, but note that Wessex Water last year raised long term finance on the basis of a 1.49% index-linked return) which would either rise with inflation, or would constitute an agreed proportion of GROSS revenues (eg fares) - before the management gets its hands on them - and would therefore allow investors to share in both the success or failure of the enterprise. Unlike bank debt, which does neither.

This simple but radical funding option creates what is in effect a a new species of "Public Equity", which wipes the floor with conventional finance since:

(a) there is no Capital repayment - a maintenance or depreciation provision will usually be necessary, although not, for instance in relation to the value of land/location;

(b) the rate of return may be set at a level considerably below bank rates;

(c) any developer/manager's interests are aligned with those of the other stakeholders.

Such "Capital Partnerships" are in routine use in the private sector eg in a hotel deal >£1bn in size.

The method opens up the way for a new "Not for Loss" synthesis between "Public" and "Private" sectors.

If he is looking for "cutting edge" he might have a look at Scotland, albeit the Glasgow model doesn't go as far as I would....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Jul 3rd, 2008 at 10:35:22 AM EST
Hugo Chávez has been nationalizing much of Venezuela's industry: oil, steel, cement, dairy, electricity, telephone, ...
 
by Magnifico on Thu Jul 3rd, 2008 at 10:45:08 AM EST
Ummm...I'm sure DoDo will be able to correct me if I'm wrong, but my (possibly faulty) recollection of travelling by train in New Zealand in 1997 is that the national timetable fitted onto half a page of a tri-fold leaflet.

So renationalising the service is quite possibly a smaller managerial undertaking than renationalising the bus service of a small town...

??

by Sassafras on Thu Jul 3rd, 2008 at 01:23:37 PM EST
Ummm...I'm sure DoDo will be able to correct me if I'm wrong, but my (possibly faulty) recollection of travelling by train in New Zealand in 1997 is that the national timetable fitted onto half a page of a tri-fold leaflet.

That's about right for national intercity passanger services.  And that was before they shut down a bunch of them.

Basically, our railways were bought by people who didn't want to run a railway, but instead were interested in asset stripping the company then flicking it off to another bunch of suckers.  Which they did.  So now the public (which has realised it actually needs railways) is going to have to pay to rebuild them.  Privatised profits, socialised risks in a nutshell.

by IdiotSavant on Thu Jul 3rd, 2008 at 10:25:42 PM EST
[ Parent ]
I think there are 2 sides to the coin.

A completely nationalized Services is in my opinion not a good idea, as well as the opposite , a completely privatized Service, is mostly disastrous.

The Problem with a publicly owned model ( I'm talking about rail here) is is that i tends to s
prevent any competition and has no need to be efficient.

The same goes for a completely privatized model (if its includes the Infrastructure), it tends automatically to suppress competition (like every monopole). Even if there a dozen+ Companies on their Part of the network they are a monopole.

For me the ideal solution would be a model where the infrastructure (Tracks, Land, Stations, Signals) is publicly owned and properly maintained.
The operations (rolling stocks, Service) can be privately operated. As long as there is no monopole in parts of the country and an equal access for competition is granted to the same conditions.

I think this would be an ideal model. Because i see infrastructure like train tracks and stations as vital part of the modern society (public life, economy) and for that reason also as big part of national security.

And to Ireland - i live in Dublin since a good while and the thought that the quality of the service could go further down through a privatization is outright scary.

by Kavalor (kavalorATwebDOTde) on Thu Jul 3rd, 2008 at 07:37:01 PM EST
"A completely nationalized Services is in my opinion not a good idea, as well as the opposite , a completely privatized Service, is mostly disastrous."

Well then, according to this theory there must be some scale factor that determines which cases can be successfully run as public enterprises. Colorado Springs, bastion of "free enterprise," has city-owned bus, water, sewer, electriciy, and gas utilities. The only competition is with other cities, but to take advantage of this competition the customer has to move. Our utilities are efficient for the most part, although there are some (serious) problems related to the sewer system capacity. However, there is no call to change this situation.

So, somewhere between city-scale and national-scale enterprises, things fall apart. Or, perhaps, the perception is that they fall apart. Is European nationalized health care worse than American private health care? Is European rail freight comparable to the American private system?

I think there are other factors at work here...

by asdf on Thu Jul 3rd, 2008 at 10:37:17 PM EST
[ Parent ]
Kavalor:

For me the ideal solution would be a model where the infrastructure (Tracks, Land, Stations, Signals) is publicly owned and properly maintained.
The operations (rolling stocks, Service) can be privately operated. As long as there is no monopole in parts of the country and an equal access for competition is granted to the same conditions.

I think this would be an ideal model.

I could not agree more.

But until 2001 the legal framework enabling the creation of a true partnership between a Cooperative of Utility Users and a Cooperative of Utility Service providers did not exist.

Now it does, and it is IMHO possible to envisage a utility like the railways being run on a "Not for Loss" basis (there is no profit and no loss within a partnership), with any necessary capital coming from units of revenues "sold forward" without selling any measure of ownership or control.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jul 4th, 2008 at 04:37:27 AM EST
[ Parent ]


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