Last Updated: Oct 22nd, 2010 - 15:35:08 Newsletters : 2006 Newsletters : 22 September 2006 Thought for the Day The saddest aspect of life right now is that science gathers knowledge faster than society gathers wisdom. Isaac Asimov Sep 18, 2006, 18:47 Newsletters : 2006 Newsletters : 22 September 2006 Privatisation - Does it Work? - The Second Foundation Forum For our Second Foundation Forum we were very fortunate to have Mr Phil Barry explain to us how successful the privatisation of government businesses has been. This was a very careful analysis and illustrated that there were no ill effects and that privatisation has proven to be beneficial to all - including the work force. Peter Gallagher, our intrepid Director of Research has advanced his journalistic skills and writes about Phil Barry's speech. Barry Speech: On Tuesday 12th September the Foundation for Economic Growth members and visitors were treated to an interesting and thought provoking speech by Phil Barry on 'Privatisation'. We had an audience with a wider cross-section of views attending this forum and consequently some lively discussion resulted. The theme of Phil's talk was that the privatisation of appropriate government assets has improved economic outcomes in NZ and around the world, and indeed, further privatisations would create further improvments. He approached his subject by posing a number of questions. He commenced by asking the obvious question, "Does it work?" He firstly noted that the process of privatisation has been a worldwide phenomenon over the last 15 or so years – with the notable exception of Cuba, Myanmar and North Korea. He might have added that NZ is the only OECD country to have halted its privatisation program. He then asked the question, "Why has privatisation been undertaken?" There are 3 main answers: Changing technology, which has allowed some industries previously considered to be natural monopolies to be subject to competition. Fiscal pressures which have caused governments to raise money by selling off state owned enterprises. Experience, i.e it has worked! Phil then asked – is NZ different? The (predictable) answer was no! A number of examples were cited in defence of this proposition. One interesting statistic, given its associated negative press, was the estimate of almost $10bn in savings that have resulted from the privatisation of the railways. The next question was, "When does privatisation work best?" A list of 6 guidelines were given as follows: First of all deregulate the economy. Note that privatisation is not always the answer – each potential case should be treated on its own merits. The process must be fair and transparent. Foreigners should be included in the process. Sale proceeds should be put to good use, e.g to retire debt. The inevitable (political) tensions must be carefully managed. What about job losses? Phil noted that despite large efficiency gains from privatisations, the number of jobs, contrary to many predictions, had not decreased. In fact the numbers had improved slightly. But doesn't government ownership improve social outcomes? In answer to the criticism that government-owned entities helped improve social outcomes he observed that there were better ways to achieve these goals, namely via the tax and welfare systems. Doesn't the government's fiscal position deteriorate? In analysing the government's resulting fiscal position he maintained it was at least neutral. As already noted, a primary motivator for asset sales has been to reduce debt and hence reduce interest payments. What about foreign ownership? He noted that the most contentious question, and the ensuing discussion confirmed this, has been the implications of foreign control. He pointed out that there were many advantages to foreign control, most of which are well known and that such ownership claims did not increase NZ's net external liabilities. Hasn't it all been done? Phil showed a list of government owned enterprises, totalling over $33bn in value, that could potentially be privatised – including Housing NZ which manages over $11bn of assets. In summary then, privatisation, if done in an open and transparent way and in an orderly fashion should unequivocally improve economic outcomes for a country. Sep 21, 2006, 09:46 Newsletters : 2006 Newsletters : 22 September 2006 Sweden One of the interesting things about Sweden from my point of view is how socialists exalt in how the Swedish economy with its high taxes and large government providing high unemployment benefits (80% of last wage) and tight control of the economy produces such a great result with high wealth for all. Unfortunately they have the story back to front as a recent article from the Economist asserts; "In truth, the Swedish economy's best years are long gone. Between 1870 and 1950, average growth in Swedish GDP and productivity was, by some measures, the fastest in the world. In 1970 Sweden was the fourth richest member of the OECD. But for most of the past 50 years the story has been one of relative decline, including a deep recession in the early 1990s. By 1998 Sweden had fallen to 16th in the OECD rankings." (Doesn't this sound familiar?) If you go to our home page and view our new graph of New Zealand's efforts over this time you will see a remarkably similar picture. The Economist also goes on to point out that unemployment is very high even though the oficial figures show it to be reasonable. "The McKinsey boffins conclude that the 'true' unemployment rate is around 15-17%, which puts Sweden among the worst job-fillers in the EU." They also go on to say "an overweening public sector has stifled growth in jobs in service industries . . . and is indeed the economy's second big failing." This makes me wonder what McKinsey and Co would make of our "true" unemployment figures. So the Economist which is noted for its independence and ability to call a spade "a spade" does not think very much of "The Swedish Model". Neither do the Swedish voters, going by the recent election which threw out the socialists and voted for; Tax cuts, privatisation of state owned businesses, and steps to make hiring workers less costly. Socialism is a failed economic model and the Swedish experience proves just that. Sep 20, 2006, 10:23 Newsletters : 2006 Newsletters : 22 September 2006 W.H.O. Supports Wider Use of DDT vs. Malaria As you may have realised I am very keen that our leaders should use science and logic and the very latest understanding of economics so that we may make progress on our lamentable Economic Growth Rate. I have lambasted the Greens for their use of Junk science and hysteria in trying to impose their world view on society. They are often just plain wrong and can cause untold damage and human misery with their unthinking approach. Some time ago I pointed out that since Rachel Carson's Silent Spring the world has been in thrall to the Greeny prohibition on DDT. When I heard that there are still 1 million Africans, mostly children, dying each year from malaria I researched the use of DDT and its effect on humans. All of Google could not find one case of DDT causing sickness, illness, death, cancer, genetic alteration or any harmful effect whatsoever. And I am sure the Junk Scientists were trying. So because of Greeny hysteria one million Africans die each year and DDT does no harm whatsoever. Yet spraying with DDT will kill the mosquito that carries malaria and thus no more death from malaria. At last, common sense has prevailed and now the World Health Organisation has advocated spraying DDT around where the mosquitoes are in an attempt to save one million lives each year. We should wish them good luck in this new approach to health in Africa. I have also endeavoured to illustrate that the Greeny concept of "Peak Oil" is wrong and hysterical and should be just ignored. They use Junk science (which is not science at all) and hope to stop the world developing and growing in the way that will benefit all people. The Greenies have also now started using the term "sustainable development". This means that we should not do anything that might use up something that someone in 100 years might want to dig up for themselves. Actually most things that we dig up are not used up but merely have their form changed and can then be used in the future by anyone wanting to do so. You will notice that it is easier and cheaper to use copper that has already been mined and used for something else that is no longer necessary than it is to find a new ore location and develop a new mine. Sustainable development is a crock. We need our leaders to use scientific methods correctly, to think logically and to understand modern economics so that they may make better decisions about the future of our country. The Greeny approach to malaria causes one million deaths per year. Our welfare state approach to the economy is illogical and ensures that we have a lower growth rate than a modern scientific approach and a proper understanding of economics would bring. And we are all poorer because of that. The world economy is growing at about 5% on average over all countries at the moment. In the second half of last year our economy stopped dead. Growth was -0.1%. Projections for the near future are around 1.5% or 2%. Some would say that we get the leadership we deserve. Let us hope that we do not have to go down the low growth path too far before coming to our senses. Anyway, have a look at the article about DDT and malaria. I hope the scientific approach gets enough time to work. Sep 18, 2006, 17:59