Back in the late 1980s and 1990s, New Zealand was the talk of the town as the Labour (!) government introduced a number of de-regulations, privatisations and other types of what are known as “new public management” reforms to those in the trade. And so just about everybody who was somebody in politics visited the place to marvel at the wonders.
That economic reforms were overdue in a country which very much had adapted its farm and industry production to the increasingly irrelevant UK market was and is obvious. That the New Zealanders might have gone – if not too far, then too fast can also be argued.
The 1998 and 2006 black-outs suggested that just privatising public utilities was not a magic wand that in one stroke would solve problems with under-investment, even though privatisation wasn’t the cause of the black-outs. De-regulating electricity markets have proven to cause headaches in other countries as the promised gains haven’t shown up in consumer bills.
Via Tagesscchau, we now learn that the New Zealand government will re-nationalise the railways. The NZ press release is here. Some quotes:
“The selling off our public rail system in the early 1990s and the running down of the asset afterward has been a painful lesson for New Zealand,” Dr Cullen said.
“During the negotiations with Toll it transpired that buying the rail operating business including the ferries was the best way to increase investment in the industry and enable it to be more responsive to the needs of New Zealand customers.
“Running a commercially viable business that was able to contribute to the economic and environmental development of New Zealand was proving extremely difficult without government support.
“The government will now avoid paying subsidies to third parties and we also avoid the on-going disputes over the implementation of the National Rail Access Agreement that had the potential to destroy value in the business and erode the morale of the people who work in it.
There are reasons why NZ lessons can’t be transferred directly to Europe – whose state-run railways do not add up to a credible competitor to transnational road transport of goods – but as the fiascos of the UK rail privatisation from the mid-1990s onward are making themselves noted, I think we see the same pattern: Just privatising will not attract investments.