The privatisation of power


Rolling Back the State
By Jane Kelsey
New Zealand: Bridget Williams Books. 1993.
Reviewed by Noel Hester

Just prior to the March federal elections, the Sydney Morning Herald ran a story on its front page titled "Kiwis Love GST". This was a perverse interpretation of a survey in which the GST was seen by New Zealanders as much less significant than other fundamental attacks on living standards carried out during the preceding nine years of Labour and National government.

That SMH report is typical of the coverage to be found in the mainstream media concerning New Zealand and the political and economic transformation which has taken place there. At best it is superficial and lightweight; often it borders on disinformation.

Even reporting by the left tends to centre on the effects of the industrial relations laws, the GST and the hardships resulting from the savaging of the welfare state. Less well documented and with more critical consequences for the future has been the wholesale privatisation of the public sector and the erosion of electoral democracy as a result. This is the principal theme of this excellent book, subtitled "The privatisation of power in Aotearoa/New Zealand."

For those of us who left New Zealand prior to or just after Labour's election in 1984, it is difficult to comprehend the magnitude of this transformation, the speed of its implementation and, not least, the political direction from which it came. Besotted by an ideologically driven Treasury, the fourth Labour government under the economic stewardship of Roger Douglas decimated the role of the state in the New Zealand economy.

First came corporatisation, the conversion of state operations into profit-making enterprises. The contradictions between the new entrepreneurial goals

of the "state owned enterprises" as they are now known and the social responsibilities and democratic accountability of the state soon became apparent.

Electricorp is the classic example of failed social responsibility. Managed by high profile free-market evangelists recruited from the private sector and enjoying a monopoly position, Electricorp aggressively pursed its commercial goals. In 1991 it announced a 20% increase in electricity prices, with an estimated 53% of the new price as profit.

In 1992, following a marketing campaign which encouraged consumption and a particularly severe drought, the lakes feeding the hydro-electric dams ran low. The country was plunged into a nine-week power crisis during the most severe winter in decades. Only voluntary consumer restraint and cuts in domestic water heating averted power cuts.

The Bank of New Zealand epitomised the lack of constitutional accountability in the corporatisation process. The bank was twice bailed out by the government — once by Labour for $600 million and once by National for $720 million — after being hopelessly exposed by reckless lending during the 1980s.

The bank was eventually sold off to the NAB in 1992. A veil of secrecy was maintained throughout, denying the public and MPs the information needed to monitor the propriety of management. For many the advice given by the Treasury during the bail-outs was dominated by its ideologically driven agenda towards privatisation.

Corporatisation inevitably led to privatisation, as its architects had always intended. NZ Steel, Petrocorp, Postbank, the Shipping Corporation, Air New Zealand, Landcorp, the Rural Bank, Maui Gas Fields, State Insurance, forestry cutting rights, the National Film Unit, the Government Printing Office and many more were sold off by Labour.

After winning the 1990 elections, National continued this onslaught with the BNZ, the state forests and

Electricorp. However, opposition had become more cohesive and organised. National's assault on the assets of the Auckland Regional Council was thwarted by the election of an Alliance-dominated trust on an anti-privatisation ticket. But there wasn't a lot left to sell.

The rationale behind the asset sales was always given as the reduction of public debt. Yet debt actually rose during the period of these mass privatisations due to the continuing deficit and exchange rate fluctuations. In essence, the gains of privatisation were stolen by the foreign exchange markets, and the country's overall foreign debt merely shifted from public to private.

The real point of privatisation was the transfer of ownership of the country's economic infrastructure into the hands of a small number of transnational corporations, several of them New Zealand-based. Control of telecommunications, banking, broadcasting, energy, air and land transport, housing, electricity and fisheries is now out of the hands of the state and free from any public process of democratic accountability.

Australian capital has benefited enormously from this gold rush. By 1989 Australian investors controlled over half of the New Zealand Stock Exchange turnover, 45% of the total banking assets and 65% of life insurance premiums. The takeover of the BNZ by the NAB in 1992 even more dramatically increased Australian domination of banking.

Jane Kelsey's book clearly reveals the organic relationship between state and capital, with the blurring of lines between the political parties and between the public and private sectors.

The players providing the ideological basis of change have been the Treasury and the Business Roundtable. In 1992 the Business Roundtable was made up of 43 chief executives of the country's largest companies, whose estimated share of the share market is 85%. At one stage under Labour over half the directors of the state owned enterprises were members of the

Roundtable. Political distinctions between the traditional parties have become minimal, and there is a fluid movement of personnel between the public and private sectors.

Kelsey provides a particularly lucid analysis of the contradictions in the liberal agenda with the constitutional and social obligations of the state towards Maori under the Treaty of Waitangi. Once the state had divested itself of assets into the hands of the transnationals, it would be impossible for Maori to regain control of their resources even when their claims under the treaty had been proved.

The most sustained and organised resistance to the corporate theft of national resources came from Maori. Kelsey documents how this resistance in the courts slowed the privatisation process and how this has led to Maori being made scapegoats for the failure of the economic policies.

Jane Kelsey has produced an excellent book with a rigorous intellectual analysis of the deep social processes behind the rabid right's revolution. It will be invaluable to those in this country wishing to understand the sad transformation of New Zealand/Aotearoa under the fanatical liberal agenda of Labour and National.