International Cat Speculators Since 2006

Sell nothing!

The left is taking another tack on the asset sales debate.

Having failed to convince the public to elect a government that won’t sell some minority stakes in state owned companies, they’re now trying to convince us that terrible things are going to happen as a result.

The boards of those companies would be legally required to maximise short-term profit for their shareholders. If it maximises short-term profit to have a fire-sale, or defer maintenance and run the company into the ground a-la Telecom or TranzRail, then they will be legally required to do it. And it doesn’t matter how big the government’s stake is; once there are any private shareholders, our assets – vital infrastructure that keeps the lights on – are in danger.

Words fail as to just how utterly stupid that is.

1. What idiot is saying, is that private owners would vote to rip themselves off by selling assets for less than they were worth.

2. Apparently, only 100% public companies invest for the long term. Yet here we have Air New Zealand, which is not 100% public owned, and they still for some mysterious reason have not sold all their airplanes. In fact, wasn’t it the government owners who wanted to make it into a small subsidiary of Qantas?

3. Telecom hasn’t been run into the ground. In fact, Telecom have just recently spent megabucks putting in a new mobile network to get ahead of the competition. Telecom today is a vastly better company than the bad old days of the post office, when you needed to write to your MP to get a phone on.  As for TranzRail, go ask the Hillside Workshops how the government owner is building up that business.

4.  Most companies invest for the long term. Sure, there are jock traders and such who buy and sell for a quick buck, but most businesses spend years building up their business, their reputation, and their customer base.

I’ve worked in a manufacturing business. The numbers to setup a factory to make certain products, usually though of as free, are staggering – and yet I know of no government company in that business.

5. Finally, what’s wrong with selling stuff?  If you’re not an idiot you are at least as well off as you were before. Sometimes, buying makes sense in the long term, and sometimes it makes sense in the short term as a way to remain viable in the long term.

Governments buy assets of all sorts all the time, and thus it makes sense to also sell them occasionally.

Heck, the government has large sums in retirement savings invested all over the world. Should those investments never be sold either? What a disaster that  policy would be, never mind the fact that selling (for a higher price) is the entire purpose of the exercise!

The fact is that government assets are there to make the public better off. One of the biggest ways of doing that is by making money. Occasionally, that will involve selling stuff, just as, occasionally it will involve buying stuff.

Because, if selling is really as bad as Idiot makes it out to be, then wouldn’t it be logical that no one would ever sell, not even to the government?


Comments on: "Sell nothing!" (6)

  1. “The boards of those companies would be legally required to maximise short-term profit for their shareholders. ”

    Directors’ are legally requried to act in the best interests of the company – which isn’tnecessarily the same as the itnerests of the sharehodlers – and that almost always means taking a longterm view.

    • Exactly. By definition, a company that thinks only about short term profitability is not a company that’s going to make money in the long term.

      Oh, and your comment is our 3,000th 🙂

  2. Daniel Lang said:

    The fact of the matter is that National borrowed over $5billion to fund the tax cuts and now they’re selling nearly $7billion worth of assets. With this estimate of $12billion making a hole in the accounts, and no corresponding increase in mainstream revenue likely to ever happen, Labour are pretty much stuffed next time they get in to Government. They will HAVE to go for a capital gains tax, or a wealth tax, a lotteries tax, an estate tax, or significantly raise current tax rates.

    • You need to check your facts. There was no tax cut – tax cut in one area was compensated by tax increases in another.

      We don’t need tax increases, we need reduction of some of the massive spending increases Labour put in place when tax revenue was plentiful.

  3. Daniel Lang said:

    I think we will need to increase taxes because we have borrowed so much money under National and we need to pay it back at some time.

  4. Daniel Lang said:

    Furthermore, tax cuts in one area (yes there was, by definition then, tax cuts (for the wealthy)) was compensated by cutting health and education budgets, so with the pending assets sales, all the money that’s going to go into health and education isn’t going to make “world class” health and education systems, it’s just bringing them up to a standard that they would already have by now if National hadn’t implemented tax cuts (yes tax cuts) for the wealthy.

    To say that there was no “tax cut” because “tax cut in one area was compensated by increases in another” is misleading. It would be better to say that there was a restructuring of the tax system, which there was. As a result, company tax was lowered (cut) from 30% to 28% and personal income taxation rates were lowered (cut) for those on higher incomes.

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