Why the asset sales matter for Kiwi conservatism
"We must build a capital base from domestic sources. Unfortunately, the naysayers have managed to attach the emotive term 'asset sales' to this move which plays right into the hands of Winston Peters et al"Featured comment
National's mixed ownership model law made it onto the statute books this week.
If this works, it will be the most important thing the government has done.
It is not just that it has won an uphill political battle.
There was not only an election fought on this issue but years of the two left-wing parties, Labour and the Greens, using the “privatisation” as the biggest bogey word since antipodean McCarthy-ites were uttering the “communist” in the Cold War era.
Despite the conventional wisdom that any privatisation is political poison, legislation allowing share floats of up to 49% of Mighty River Power, Meridian Energy, Genesis Energy, Solid Energy and Air New Zealand got through the House.
The move is important, not only for the prospects of deepening New Zealand's shallow capital markets.
The more important aspect is its significance for the centre-right, for those on what should be called, with more accuracy, the liberal-conservaative (as opposed to the social-democratic) side of politics in New Zealand.
To grasp this, you have to look back, and not just – as Labour did throughout the debate – to the privatisations of the 1980s and 1990s. You need to go back to the 1950s.
There were no privatisations in the 1950s – indeed, it was an era when the state got more involved in large scale businesses, with ventures such as the Tasman Pulp and Paper mill at Kawerau in 1954 under National, not to mention the developments of New Zealand Steel and the Tiwai Aluminium smelter under Labour.
Even so, the parallels are with the first National government between 1949-57.
That government adopted an explicit policy of encouraging a “property owning democracy”, encouraging New Zealanders to buy their own homes.
Those in state houses were encouraged to buy those houses – and there were, at the time, more than 32,000 of them.
It was a form of privatisation, although at the time that rather ugly word was not used, and it was fought as bitterly by Labour then as Labour and the Greens fought the bill passed this week.
And for similar reasons. National was out to promote as much private ownership as possible, whereas Labour fought hard to keep as many people as tenants of the state as possible.
The philosophy behind National’s drive was to promote home ownership and self-reliance, and the policy was highly successful: it produced the highest rate of home ownership in the world at one point.
Those with a cursory knowledge of history will point out – rightly – that demographic and social pressures also produced this: the post-war baby boom pushed up demand for family homes, and the recent traumas of World War Two and, before that, a long economic depression which started earlier in New Zealand than in most of the world, provided added impetus.
The country was, arguably, primed for a housing boom – just like most of the rest of the Western world.
New Zealand went further than most countries, though, and there was nothing which required that pressure for housing investment to turn into private housing ownership.
The drive was not just about the philosophy that people are better off owning their own property – although that was certainly a part of the National Party’s thinking.
It was more the notion that people who own property are more likely to support conservative policies.
“Having a stake in the country” was the way it was put at the time.
Now, demographic pressures favour greater share ownership.
This is the corollary of the much-agonised-over wave of babyboomers we are constantly told is about to engulf us.
The ageing population issue is not just about the country’s retirement villages being filled with former hippies sporting grey ponytails and cluttering up the rest home lounges with their CDs of Carole King’s Tapestry and DVDs of The Big Chill.
It is not just about having more over-65s. It is also about having more over-45s. That is, more people who, having paid off a chunk of their mortgages, are considering expanding their savings base.
Or, if older, they might be looking for some sort of nest egg to pass on to the kids or the grandkids.
On top of that, there is a greater awareness of the savings issue in New Zealand than there has been for at least a generation.
A savings culture – which all political parties rave on about – means greater share ownership.
Philosophically, it fits with National’s principles: from a political tactics point of view, it will broaden New Zealanders “stake in the country”.
Direct share ownership is also, notably, something which tends to make the holders of those shares more conservative.
This is the key difference to the privatisations of the 1980s and early 1990s, and it is a quite deliberate one.
Most of those sales were trade sales. There was, until the end, no parallel with British prime minister Margaret Thatcher's "People's Capitalism". The sales were to plug holes in the state's balance sheet, rather than a mechanism for spreading share ownership.
They were also, in the main, rushed.
The one exception, Contact Energy, came at the end of National’s term in 1999, and it was overseen by Tony Ryall – then, as now, Minister for State Owned Enterprises.
The Contact float went to individual investors and was so well handled it was barely mentioned on the hustings in the 1999 election.
National’s hope is that the floats authorised by the legislation passed this week will be a similar non-issue by the 2014 election.
At the time, Mr Ryall explicitly linked the approach in Contact Energy to the rise of house ownership in the 1950s.
He also pointed to what John Howard was doing in Australia with Telstra and the Commonwealth Bank of Australia, and noted that share purchasers were not buying shares to flick them on but were “locking them away in the bottom drawer like a small savings account or next egg”.
The thinking, to promote a share owning democracy as a way of broadening New Zealand’s property owning democracy, is very much in keeping with National's tradition and principles.
There is evidence – largely anecdotal as this point, although you can bet polls are being put together even as you read this – that New Zealanders are cottoning on to this.
The admittedly highly unscientific vox-pop interviews with people in the street after the passage of the bill this week was illuminating.
The number of responses along the lines of “well, I didn’t like the sales, but yes, I’ll buy some shares anyway” was thought-provoking.
It seems to indicate that the political risk National took in adopting this policy – and, especially given this government’s political timidity in a number of other areas, it was a large risk – is going to pay off.