HBM11 Posted May 8, 2013 Posted May 8, 2013 Hi, I'm part of group entering the 2013 New Zealand Treasury Schools Challenge (http://www.treasury.govt.nz/abouttreasury/schoolschallenge). The policy I am in charge of is Deregulation and sale of state companies. Currently in New Zeland the government is listing its power companies on the NZX and selling 49% of the shares, starting with Mighty River Power (https://www.mightyrivershares.govt.nz/). I will be advocating for further sales. Where could I find some good material on how sales of state assets can be positive for economic growth? Thnaks
ribuck Posted May 9, 2013 Posted May 9, 2013 Where could I find some good material on how sales of state assets can be positive for economic growth? Good luck with your "Challenge", but a lot of people here wouldn't recognise "economic growth" as being intrinsically desirable, or even to be a meaningful statistic. Nor would we consider floating 49% of the shares to be a "sale", being instead a "part-corporatisation".
HBM11 Posted May 9, 2013 Author Posted May 9, 2013 I know people around here would not necessarily see "economic growth" desirable as being intrinsically desirable, but the task for this year is policies for long term economic growth. I would call myself an anarcho-capitalist, so obviously would advocate for no government, but as this is a competition run by part of the government I doubt they will be in favour. So instead I am pushing my group to advocate policies for smaller government. I don't just advocate floating 49% but a complete sale of all government owned companies. After Mighty River Power the government plans to float 49% of two more power companies, there was to be a third Solid Energy (a coal miner) but through bad management almost collapsed over the last year (the former CEO under which this happened lives a dozen houses down from me). I would also advocate for the sale of NZ Post and the governments shares in Auckland Airport and Air New Zealand as well as any other government companies. I would just like to get some academic writing on the benefits of assets being in private ownership vs. public ownership. I know some of the benefits are better access to capital markets for raising funds for investment in expansion, more efficiency and more competition.
ribuck Posted May 9, 2013 Posted May 9, 2013 ... I know some of the benefits are better access to capital markets for raising funds for investment in expansion ... Hmm, I'm not sure about that. The market generally loves government-guaranteed repayments, so a bond issue by a government utility is generally well-subscribed. Most western countries have at one time or another financed large government infrastructure projects by issuing bonds. The primary economic advantage from selling a state-owned company is due to the funds raised by the sale. This enables the government to either reduce taxation or to reduce its debt (and therefore the interest that it must pay on its debt). The reduction of the burden on the taxpayer enables all of the businesses in the productive sector to prosper more. "More efficiency and more competition" should be a benefit of the sale of a state-owned company. However, it rarely works that way. In order to get the highest price for the state-owned company, the government generally makes sure that, even in private hands, the company will have the same kind of monopoly or part-monopoly position that it experienced as a state-owned company.
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