Partial privatisation

One of the very few differences between the Blue Team and the Red Team is the Blue Team’s plan to partially privatise, i.e., sell down a few shares in, a few state-owned enterprises. A very few.  Just four power companies and an airline.

But is that really any real difference at all? Remember, it’s not even a full privatisation: the Blue Team plans the government to keep a majority shareholding. And rather than pay down debt, it plans to buy more state stuff with the proceeds.

Which means the sale gets all the costs of government management, with none of the benefits of private ownership, as Tim Hazledine, Eric Crampton and Seamus Hogan point out:

• You get little of the potential efficiency benefits of full privatisation, but add downside risk.
• You get few incentives for private managers to innovate.
• There's no potential for an external shareholder to force changes in management if things are run inefficiently.
• With continued political management political incentives will continue to trump production incentives,and to minimise technological innovation.
• Partial government ownership makes bailouts or other government support (and coerced cartelisation) much, much more likely. (Think KiwiRail, not Telecom.)

So what’s the point? Because rather than persuade people about the benefits of privatisation, the results of this half-arsed, half-done privatisation will demonstrate none and persuade no-one.

Perhaps that’s why the National Party is running with it.