21 April 2013

The Labour–Green power policy

Is the Labour–Green promise of creating a monopoly wholesale electricity provider a game-changer for the 2014 election?
The answer to that is probably 'yes'. This is a policy that has the potential to give some relief to the budgets of every low-to-middle or fixed-income household in the country and to appeal to their economic common-sense, as compared to superficial questions about which leader they 'like' the most. Furthermore, it gives voters a clear signal that the Labour and Green parties are able to collaborate effectively as policy-makers. And the fact that the government and its supporters have only been able to splutter lamely about the plan being 'communist' shows how they have been blind-sided and have no effective reply. National's politics of greed and asset-sales will be directly comparable to a policy of fair pricing and public ownership of an essential service.
The timing of the announcement is important, as it serves as fair warning to those who were considering investing in Mighty River Power in the coming weeks. This reminds me of Labour's promise, in 1998, to reverse the National government's privatisation of the workers' compensation portion of ACC. That too was a warning to investors, who were mainly Australian insurance companies, as it came just before the legislation was passed. I recall at the time wondering if Labour would be staunch enough to carry out the threat. They were, and they did – bringing work-injury insurance back under the ACC monopoly soon after taking office in 2000. The result is that the billions of dollars that employers have paid since then to raise ACC's reserves remain in New Zealand ownership, rather than across the Tasman.
The power companies are different, of course, in many respects. As a state-owned enterprise, Mighty River, for instance, has been creaming excessive profits from NZ households for years now. We could perhaps tolerate this if we saw it as a kind of taxation, as the profits were going to the government and then being used for public services. If private investors can pick off 49% of that asset and profit from it, then half that excess no longer comes back to the public purse, but is privatized. Those investors will, of course, be looking for good dividends from MRP as a cash-cow, at the expense of poorer households. Hence the asset-sale policy represents a huge upward mobilization of capital and of income. The rich win and the poor lose, based on a commodity that the poor have no choice but to use.
The government has tried to convince us that 'we have a highly competitive electricity sector'. But this is cold comfort for those who are watching their power bills rise. Wasn't competition meant to keep prices low? But electricity is not easily translated into a free market. For one thing, no-one (or very few of us) can do without it. In a true free market, the consumer has the option of not using that commodity at all. Just swapping providers is not good enough. Electricity supply is essential for public health and for economic survival in a modern economy. It's an essential service, not just an optional good that you can take or leave, like fizzy drink. Furthermore, much of the supply-chain is naturally monopolistic, in particular the distribution and transmission networks.
Just as it makes sense to have Pharmac as a monopoly purchaser of pharmaceuticals to get New Zealanders a better deal, so it makes sense to have a monopoly buyer of power – just as they do in places like California. It's not strictly a socialist idea, as the Key government is trying to paint it.
My hunch is that the Labour–Green power policy will make many uncommitted voters prick up their ears and shift towards the centre-left. Let's watch what this does to the opinion polls, which were already moving that way anyway.


Post a Comment

<< Home