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28 March 2015
by Jack Waterford

Dead heat between two bad arguments

The Labor Party presenting itself to the voters of NSW today is in several cosmetic respects different from the party rightly and decisively rejected by the voters of NSW only four years ago. But that it can expect a big swing, with even a (if very remote) chance of being back on the Treasury benches, says more about the Liberal Party's misfortunes, and the electorate's tolerance, than any sign that it has learnt much from the drubbing.

The NSW Labor leader, Luke Foley, was not in the NSW Parliament during the dreadful days of the Carr, Iemma, Rees, and Keneally Labor governments. He can, in that respect, claim distance from names of old party colleagues such as Eddie Obeid, Joe Tripodi and Ian Macdonald, with whom those reigns were associated. Personally and professionally, he has seemed a far more saleable product than his immediate predecessor, John Robertson, a man intimately associated with the management of the party by a tight cabal of self-interested trade union leaders, with a personality able to make it appear that Bill Shorten had charisma.

Foley is like almost everyone else in modern NSW Labor politics, a career suit who has never had his fingernails dirty or had a job outside the folds of the labour movement. Notionally, he is a Leftie, rather than of the right. But, like Nathan Rees, temporally NSW premier until he fell foul of Eddie Obeid, he is a beneficiary of Sussex Street pragmatism, by which the Right doesn't care much about ideology, as long as there are spoils to be divided. Foley actually has a personality, also rare in NSW machine politics, and has Catholic values, even on trendy social issues.

But Foley is by no means as removed from the essential grubbiness of the Carr era and its sequelae as he would pretend. He was assistant secretary of the party branch, occupying the token machine position allocated to the left in Labor's modern power-sharing arrangements. Once, for example during the time of John Faulkner, to be the token leftie in Sussex Street was to be entirely frozen out of even social activities. But, in these modern post-ideology days, that was hardly ever true of Foley's career. He did, however, recognise earlier than most on the left the venality of Ian Macdonald. He was, however, overruled in his efforts to strip him of his safe upper house seat by the apparently sharper political acumen of Anthony Albanese and Doug Cameron.

Foley has campaigned ably, if with little scruple about appealing to Australian xenophobia and racism. There's been innuendo about the risk of the management of NSW power poles and power lines being leased by Chinese businessmen.

Labor would like the whole election to be a referendum on the privatisation, indeed on the general principle of privatisation. But it is scarcely arguing about the principle, preferring a probably misleading argument about the certainty of higher power bills if privatisation goes ahead.

Opinion polls have, over the years, shown that government divestment of assets is rarely popular. While time tends to dilute anger about particular divestments, neither time nor experience has served to make the general idea more popular. The idea that government should get out of markets, even natural monopolies, is settled doctrine among the so-called political classes, including among most Labor politicians. But it has never persuaded, let alone galvanised or excited the electorate. Nor has the public interest case for routine privatisation ever been convincingly made out from experience as opposed to theory. That's one reason why the creed is largely English-speaking dogma.

A good many people believe, wrongly I suspect, that it was privatisation rather more than appalling arrogance and general retrenchment that brought down the Campbell Newman government after only one term in office.

The NSW Premier, Mike Baird, is, like Luke Foley, personable, sincere and not yet rich in enemies. His backers, including, enthusiastically, the Murdoch press, would suggest that he is widely adored by voters, while Foley is unrecognised and largely unknown (except, thanks to News Ltd, as a socialist monster who might eat our children, or koalas). In fact, Baird, if likeable, is hardly a household face, having recently come by the premiership almost by accident, care of a forgotten bottle of Grange.

Baird has been having visions of relieving traffic gridlocks in Sydney, particularly in north-western Sydney, which seriously missed out in those days (before the building of the Harbour Bridge) on the early development of mass transit railway systems. Like every NSW premier for 60 years, his visions embrace freeways, tunnels, and new methods of funneling more and more cars into already choked and limited spaces.

They do not not usually involve much in the way of using the power of government to co-ordinate jobs, offices, shops, public and private transport and residential amenity into cohesive plans that reduce the stress on all of the facilities. Never once, in the past 60 years, has a single NSW politician had the faith or the resolution of common or garden Victorian-era politicians whose imagined cities as living organisms. Bob Carr, perhaps the worst premier, disinvested in schools, and hospitals and transport lest Sydney attract migrants.

Both rival parties of government, even Carr, have long vied with each other in the packaging, announcement, repackaging and reannouncement of what are supposed to be complete solutions. Labor plans, over the past 60 years, have been ever so slightly biased towards incorporating public transport, such as trains and buses, into the solution; the coalition has been faintly fonder of the car, tunnels and expressways. There is also a political bias about the order in which local choke points are going to be addressed, but for outsiders most of the differences do not seem profound. This is, of course, also the casefor grand visions for the relief of Melbourne's problems, or those of Brisbane and the Gold Coast.

Many, not least among the "economically literate" class, take the virtues of privatisation as obvious and self-explanatory, and think that modern government has "no business" in the mechanical provision of facilities or goods and services, such as the reticulation of water, power, gas or telephone lines. They tend also to take it as read that private sector management and methods are by definition more efficient and effective than the dead hand of public ownership combined with bureaucratic managers and, usually, an undue influence, inside that management, of providers rather than customers. When natural monopolies have been involved, the public interest has been able to be catered for by independent price-setters, ombudsmen and the creation of competition, however artificial, usually at the retail end.

To them, resistance to, or hesitation about the idea of privatisation is prima facie evidence of being an economic Luddite, and being economically illiterate. The failure of the public to warm to the idea is, to them, perhaps proof that the public are idiots, or have been too long in the thrall of populists. In any event, they point out, "no one" any longer mourns the sale of Qantas, or Telecom, the airports or the Commonwealth Bank to private shareholders. Are not all better as a result of the infusion of new energy, new funds and the profit motive? In a Sydney or a Melbourne, moreover, has not the use of private-private partnerships to build expressways and tolls been a fabulous success?

Well no, not necessarily, and this has part of the problem. The financial press might be loud in its admiration of the smashbucking entrepreneurs who have made millions from such privatisations, but it has not always been obvious to the common punter that a great bargain was achieved. That feeling is accentuated by the occasional spectacular failure, when it is taxpayers who have had to pick up the bill. One seems then, inevitably to discover that the stewards of the public interest, political and bureaucratic, transferred all the profit to the private sector while, generally, leaving all the risk and liability to the public purse.

That a great many politicians on either side of the divide go straight from well-paid jobs proposing and rubber-stamping privatisations to post-political careers at merchants banks adds to the insult.

Moreover many of the more enthusiastic proponents miss the difference between corporatisation – or running a business, government or otherwise, on business lines – and privatisation, which is about a change of ownership. They also neglect to appreciate how essentially fictitious is the supposed division of the public and private sector when asset ownership is involved. The fiction is accentuated by nonsense about credit ratings.

A viable electricity company, for example, is an asset as much as a liability; one does not necessarily have to sell it to liberate money which can be used on the creation of fresh public assets. Borrowing for recurrent expenditure might be bad (just as selling assets for current expenditure is); but borrowing to maintain and develop assets is not.

The affection for public ownership in Australia may be different than it is in the US, Britain, New Zealand, or other countries. These have their own histories of the building and owning roads, railways, and water, power and gas utilities. Local entrepreneurs did not build our infrastructure. Such investment was seen as "too risky". The burden was picked up, or socialised, by the public at large, whether by departments of state, or, another invention pioneered in Australia, the statutory authority designed to run things at arms-length from government, from jobbers and from ever-present business corruption.

These bodies borrowed big, mostly (we can be thankful) at very low interest rates, which were the lower because the debts were backed by government. No one, least of all a very sheltered, but still demanding, private sector complained of being crowded out by government competition. They only wanted ownership and control passed over, at least cost (generally as determined by mates) after the risks had been taken.

Some public assets such as the Commonwealth Bank and bodies and Medibank Private were set up in competition with private sector entities, but with charters to keep the bastards honest. It was never apparent that such bodies were intrinsically poorly run, or had "unfair advantages" over their competitors. Almost all of the special benefits or privileges of the two-airline agreement, for example, were designed to prop up and subsidise Ansett, not Qantas.

In many cases, many privatisation and asset-sales have involved seriously bad business judgment by ministers and public servants acting primarily from ideology rather than common sense. It was, for example, a great mistake to sell government office buildings in Canberra and elsewhere in the mid 1990s. The Australian taxpayer is already out in the hundreds of millions by the need to pay modern rents. But although serious doubts about the wisdom of the transaction were raised, including by Auditors-General, no one had ever demanded a royal commission into the political and economic misjudgment of John Fahey, Peter Costello, John Howard and Peter Boxall, or those determined to make the same mistakes over again, or why we must pay for them in perpetuity. Not even an apology is demanded, or given.

It is true that the owners and developers of some airports have invested fresh money into them, but my guess is that the ongoing appropriation of public value to such real estate operations, under Anthony Albanese as much as coalition government, has involved billions more than was paid. Put simply, what happened was a transfer of public money into private hands. It's not been corruption, or theft, but business. Bad business, by fools selling to people who have been more clever.

One argument in favour of the NSW privatisation is that it will liberate money for fresh investment. But if the fresh investment is in fact a good bet, it can be borrowed for, and at interest rates that it would be hard to match. Doing that should make no difference whatever to the balance sheet.

If, as is suggested, the leasing of poles and wires is intrinsically a bad long-term bet, one can expected that this will be factored in, by potential buyers, into the prices they will pay. So the timing ought not important, unless there is something we are not being told.

Potential buyers necessarily think they can manage it better, probably by cost-cutting. Probably that will be, as such things are, by reduced staff and less maintenance. But some will also be from not having to pay that invisible tax which props up the jobs and positions of the power brokers in the ALP. In a close-run argument, that might be good enough.