By Bruce Wills*
In analysing Labour’s interventionist power policy, the business journalist Bernard Hickey said in a radio interview that this policy was a reaction to the “failed” libertarian “experiment” of Margaret Thatcher and the “deregulation” of Roger Douglas.
The masterplan, Hickey said, was to “deregulate everything and let the market rule. It blew up the economy so we need to put the pieces back together and in markets where monopolies rule, you put it back together with the government in charge”.
This left me slightly bewildered because 1970’s and early 1980’s New Zealand, the good old days, was one of wage and price freezes, exchange rate controls and carless days.
To those of us who can recall this period, it was not a stellar time for New Zealand economically.
An increasingly desperate government had all but exhausted the interventionist toolkit.
We seemed to have more controls than what the international space station currently has.
Tourists would joke, “I came to New Zealand but it was closed”. From 1945 until October 1980, shops opened Monday to Thursday at 9am and closed at 5pm; late night Friday trading to 9pm was the week’s highlight. Limited Saturday trading from 1980 meant just that and families would wander the streets “window shopping” – an expression out of favour with those born from the late 1980’s. Those who now shop on Sunday should know it only arrived in 1990 and following deregulation.
Prior to the 1980’s economic reforms, the entire New Zealand tax system was a dog’s breakfast.
The largest tax burden fell upon wage and salary earners who, in 1983/84, carried 64 percent of the burden. Today, it is less than 40 percent.
Personal income taxes were eye-wateringly high with 66 percent as the top rate and that started at $38,000 ($106,817 in today’s dollars). Tax avoidance and evasion were rife due to copious tax shelters, dodges and “cash jobs”.
When it came to business and industry, if it moved it was taxed and regulated. If it stopped moving then it was protected and subsidised.
Looking back this led to some truly bizarre endeavours.
Up until the 1990’s, car manufacturers would build a car in Japan, disassemble it, put it into a container and ship it to New Zealand. Here, it would be reassembled but not necessarily as well. Today, we don’t much use the “Monday” or “Friday” car to denote reliability; indicative of car factory workers keen to get home, or to the pub.
You could also forget JetStar because the government-owned Air New Zealand had a monopoly on domestic air travel.
Trucks were limited to distance and to what they could carry to protect the government-owned railway.
Even then, the railway was legendary for high staffing and ability to wreck or lose goods.
Domestic shipping was protected to shelter the government-owned shipping corporation and the Cook Straight Ferry.
Ports were an inefficient union closed-shop.
Relevant to Labour’s desire to turn the clock back on power, private sector electricity generation was all but banned to protect government-owned generators.
Even courier services were strictly controlled to protect the government-owned Post Office’s monopoly.
As for telecommunications, you could forget moving house and having a phone immediately.
Outside of the state system, occupations behaved like guilds under legislative protection. Numbers were strictly controlled to ensure that fortunate elite had a good life and an even better income.
In agriculture, subsidies filled warehouses all because government knew much better than the international marketplace.
These helped to create an expression some may still recognise, “the Queen Street Farmer”.
It was wrong but the system was milked until Federated Farmers worked with the Lange Labour Government to row it back.
Then again, the old Producer Board’s reputedly exchanged product for Lada cars made in the defunct Soviet Union. At that time, I doubt many could have told our respective economic systems apart.
This was a New Zealand where strikes were a union tactic and going out consisted of a buffet restaurant. It was only in the late 1970’s that restaurants and sports clubs found it slightly easier to sell wine with food.
This is why I struggle with those who look back to a past that never was.
New Zealand was an introspective closed-shop proved by our evolving media.
TV3 started broadcasting in 1989 followed a year later by Sky Television. Unless there was deregulation, both would have been banned to protect, you guessed it, the government-owned Television New Zealand.
It is debateable those wearing rose-tinted glasses would have enjoyed the same career if this crazy system had somehow survived.
Perhaps we combined Thatcherism with a Western version of Perestroika, but we are much better for it.
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Bruce Wills is the President of Federated Farmers. You can contact him here »
70 Comments
Maybe Bruce is instead checking his FF logic bypass:
Going back is not going forward.
This is why I struggle with those who look back to a past that never was.
New Zealand was an introspective closed-shop proved by our evolving media.
Then again, the old Producer Board’s reputedly exchanged product for Lada cars made in the defunct Soviet Union. At that time, I doubt many could have told our respective economic systems apart.
My March electricity bill was $99 for electricity , and $97 for a cylinder of Gas delivered on the Shore .
For the life of me , I dont understand how Labour is going to reduce this electrcicity bill by $330 per annum witthout losing money.
Thats nearly a 1/3 rd reduction , which we would welcome , but I dont see how this is sustainable ?
Why dont they rather do something about introducing a single channel buyer of Milk the price of Milk is a terrible ripoff , or Petrol on which I spend $100 to $200 per week ?
Bruce I think this is a bit disingenuous, Labour don't want to go back to the protectionism of the 60's they just want to protect the most vulnerable in our society.
The electricity market has been a rort and your members have been disadvantaged by it. Our costs are too high in NZ, my electricity in California is only 12c a Kwh. What do the Feds want a lot of Kiwi families and elderly freezing througfh the winter?
Farmers over here (USA) are going to be a big problem to NZ if they keep their dollar low and we do nothing about our costs.
The world is always changing and its easy to pick a small portion of history and hold it up as example, I'm no socialist but I think National is making a hash of running the country, I also think its unwise of Fed Farmers to always be seen as a National party off shoot. I think if you talk to labour you will find them worried about the imbalances in our economy, I know because I bothered to talk to them.
Id ask Mr Goodfellow how he made so much money selling Kiwi farmers chemicals, Imakes one think there was not a lot of competition, you know the Guy the National party president, must be a mate.
I agree, but inflating your asset values so you can increase your prices isn't Kosher either,
and then paying your executives millions can be problematic.
http://www.stuff.co.nz/dominion-post/business/8577916/Power-bosses-1m-plus-salaries-revealed
They asked for it.
Why did the SOE companies take this route to profitability?
New Zealanders pay substantially more for power than consumers across the Tasman.
In 2010, Australians were paying 14.83c per kwh, while in New Zealand power was retailing for between 22.7c and 24.97c per kwh.
Bertram said that for several years, power companies were revaluing their assets on paper and using that as a basis to increase their prices.
A profitability analysis of Meridian, Genesis and Mighty River conducted by Ernst and Young in 2011 estimated that economic profit totalled $3.8 billion between 2002 and 2011, on total revenues of $42 billion.
Their invested capital rose from $4 billion in 2002 to nearly $12 billion in 2011 but most of this increase - $6.2 billion, according to the companies' annual reports - was asset revaluations, with less than $2 billion representing the historic cost of net actual investment.
Those increases in asset values went untaxed but made their returns on investment look low, which justified price hikes, he said. Genesis did not want to comment on the revaluations and Mighty River said it was a question for the Electricity Authority.
But while consumer prices have soared, industrial power prices have remained stable and commercial prices have dropped.
Bertram said it was because residential customers didn't have the power of big business.
"It's open season to screw anyone who can't fight back."
But he said nothing that was being done was illegal, because companies were free to operate in a way that maximised profits.
"If it's highway robbery, we lock those guys up. But if companies put a gun to your head and take your money, it's knighthoods and bonuses for the CEO."
He said power companies should look to do the kinds of deals they were doing with big business.
The aussies have a site that links to all their power co's.
Orign rate card for the daily saver 26.84/kWh first 1,000 kWh/qtr (incl GST), next 1,000 @ 28.05, remainder at 37.73 daily rate 69.08c
My bill with Mercury 23.057 /kWh daily rate 122.62
I get a 10% prompt payment discount, Origin offers a 2% PP discount. There is also a 12% 'base discount' but I don't know how general that is.
Dont know how representative this is? Maybe our Aussie readers can give some details
My impression was that while cellphone prices have come down over time, we are still paying a lot more than Australia, so I'm not sure the teleco market is the best example of competition.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…
Andrew
You may also want to reconsider, Its platitudinous to spout "government running xxxx is never efficient", but consider this, firstly power in NZ comes from large public works projects and if they had not been well managed how did they manage to have historically low capital investment?
This libertarian dogma the goverment should *never* have anything to do with anything business could do is simply dogma and should be treated as such. If you study the history of electricy production in NZ its quite clear it never would have been so advanced without goverment involvement.
Are we rewriting history here Bruce? The National Party was in power over the period 1970's to early 1980's with the exception of 1972-1975 when compulsory superannuation was brought in - only to be scrapped by National on return to power.
I take it you haven't tried to have a phone installed or moved lately. Service from the now private Telecom is trending back to that of the 70's. And of course there hasn't been any recent government assistence or direction to telecoms sector has there?
Neither is government involved with providing law changes to assist Convention Centres, financing irrigation schemes or setting up agricultural slush funds that bypass TSY oversight by going through MPI.
And if any those things did occur you and the Feds would be there fearlessly and impartially pursuing them, wouldn't you?
Bruce Wills is correct in saying the good old days were not so good. But he errs when he mixes up regulation with a command approach to the economy.
We need freedom and we need markets. We don't have that with the New Zealand electricity industry, banking, building and petrol. They are set up to control. The last thing they want to do is compete.
For example allowing just two supermarket chains to dominate as they do is just crazy. And those two will do as much as they can to keep it that way. Its more important to them than it is to compete.
We would be much better with 20 groupings in the supermarket industry. That would produce some competition. It would require 'regulation' but not government directing on price.
The big system is not efficient, does not furnish cheap goods, or produce any quality. e.g. vegetables. They do produce very good profits however because of their tight control of the industry.
Electricity needs some regulation to enforce competition. They are not going to reduce prices otherwise. Electricity should be about half the price it is now. The Labour / Greens proposal is not so great, and has some whiff of direction, but it's a response to some very real problems.
IMO, most of these industries need to be broken up in terms of ownership. The large ones should be made much smaller. etc.
But thats a long way from a command economy..
Does Bruce Wills really not mind that every time he opens his mouth he makes himself look like a National Party lackey?
Surely Federated Farmers must have some members who realise the world has changed immeasurably in the last 5 years and that the old 'markets should be left to decide' record is irretrievably broken? Is Wills really the best FF can wheel out? On everything from markets to climate change his views are always predictably Neanderthal.
Well I used to get a pint of milk delivered to my letterbox in a reusable glass container for 4 cents,. so that's about 14 cents for 2 liters.
Now its $2.99 for 2 litres in a plastic container that i have to drive to supermarket to get.
So milk is now around 21 times more expensive.
All i can see through my rose tinted glasses is me being ripped off.
You don't mention that the milk you got back then wasn't bastardised beyond all recognition or reconstituted from powder either. I think Bruce is being disingenous here when talking about shopping hours, the only reason they have been extended is to allow for the monopolies that are supermarkets, also the only reason we don't get milk in a glass bottle anymore.
geez moa - you must be old .. pint? .. what's a pint? .. wonder why the milk companies don't go back to home delivered fair-dinkum milk .. out on my bike last week and a small truck went past .. yep home delivered milk .. yay .. it's coming back .. don't know about the de-bastardising yet .. at current rates of progress young people of tomorrow wont know what real milk is or ever was .. reckon there's still enough olds around who hanker for a drop of real milk .. a good business opportunity there .. just think .. real milk, home delivered for cheaper
Thanks for the history lesson Bruce. NZ sure was a strange place. It's a bit disingenuous to link the Labour/Greens proposed electricity reform with your view of the State controlled activities of the 70's and 80's. My reading of recent NZ history suggests that some guy called Muldoon had a big part in most of those Government excesses.
Anyway, it might be a good idea for you and your fellow farmers to take a closer and more dispassionate view of the Labour/Greens plan. A simplistic view that they're trying to turn the clock back shows a level of ignorance displayed by numerous commentators (most of whom have a vested interest in retaining the status quo). Don't focus on wholesale (single buyer) which is getting all the attention and forget about the retail end where increased competition is proposed. Sometimes people will see and hear what they want to. This plan isn't quite so black and white.
In any case, what I really object to are the subsidised profits that are enjoyed by the power companies because no government in recent times has been brave enouge to forgo the dividend stream they provide.
By the way I also object to the subsidised irrigation that is provided to a privileged few in the country but that's another story. Maybe you could cover that in your next article. I'd like to understand a bit more about it.
The largest tax burden fell upon wage and salary earners who, in 1983/84, carried 64 percent of the burden. Today, it is less than 40 percent.
But there was no GST then.
Wage and salary earners are still the over-burdened in society - they contribute 40% of govt revenue via PAYE and another 24% via being end consumers and paying GST .. and voila!!!... combine those two and you've got the 64% Bruce refers to above.
Corporate tax (which includes the farming sector of course) contribute only 14% of the total govt revenue.
And Bruce would deny the already over-burdened a fair price on an essential commodity.
I feel he's the one living in the past. And he seems to imply that he thinks of himself a 'modern, progressive' thinker. That's actually scarier than anything.
http://www.treasury.govt.nz/budget/2012/taxpayers/01.htm#_crownrev
Kate, Wage and salary earners are not the only ones who pay Individuals Tax (as referred to in your link) - beneficiaries do also, do they not? ;-) I know my parents have tax deducted from their superannuation.
Those farmers I know who run as a company pay themselves a wage and deduct PAYE. Not all do, but a lot do, therefore it can be said that farmers also contribute to the Individuals Tax take, plus they usually also pay corporate tax. It is disengenious to imply farmers are not in the mix of PAYE/individuals tax payers. It is not uncommon for farmers who have a mix of Trust and Company to pay tax 3 ways - Trust pays tax, company pays tax and then as an individual tax is paid. The Trust income may be defined as 'Investment' not 'farming', the company may be 'farming' and the individual could be defined as farmer or in the case of many farm owners with sharemilkers - their income is earned off farm. The latter people are seen as 'farmers' but their individual tax is often paid via PAYE.
Indeed, beneficiaries are wage/salary earners and pay PAYE.
Yes, aware of all the ways farm owners might structure their tax affairs. Didn't mean to imply they weren't also PAYE contributors. So sure these individuals might pay tax three ways - they might also offset PAYE tax with losses elsewhere. And any number of other mechanisms to minimise tax paid - mechanisms the average non-business owning salary/wage earner who pays PAYE does not have available to them. Not saying these mechanisms are wrong - perfectly legal - no complaints there. Just sayin' they aren't available to all PAYE earners.
Bruce is pretty much on the money here. It is not an historical Labour/ National thing. It was Muldoon who turned this type of regulatory nonsense into an art form which ended with trying to make inflation illegal. It took a Labour Government to cut the Gordian knot but that was only because the country had got itself into deepest do do.
It is a slippery slope back into the morass one poorly constructed intervention at a time. If the answer to the question is this sort of policy someone is asking the wrong question.
I think Muldoon gets unfairly criticised for Think Big - all those infrastructure assets have been useful going forward - where the plan fell down was HUGE cost overruns on (in particular) the Clyde Dam and the upgrade/pipeline to the Marsden Point refinery; combined with a fall in oil prices just as Maui and the new electricity generation were coming on line. Think Big included the reticulation of natural gas as well .. again, all very useful infrastucture.
Agree about his problem with protectionism however. He signed the original NZCER agreement - so was 'opening up' but failed to take off the import levies quick enough - and of course much of the reason for that had to do with a strong local manufacturing lobby. And look where that's taken us now. We don't make much of anything anymore - it's actually quite scary, particularly in terms of light industrial. I suspect that in that regard the pendulum will also have to swing back someday - through necessity - as the cost of shipping to NZ will become prohibitive as the cheap oil disappears.
Obviously Bruce Wills is not old enough to realise that 70s and early 80s was not part of the market reforms that is supposed to cure all. Those times were in fact the cause and the effect of the solution is where he should be addressing.
maybe he should keep to sheperding a few cows to his milking shed.
When people are dependent on, and basically control, a particular market and it is threatened with coporate ownership extracting captive profits from them, then they are going to think plans that leave them with some control are much better than those offering them up for slaughter. I am, of course, talking about the way farmers have resisted the various ideas over the years for making Fontera a public ally traded company, as they know what will happen to them in the long run. What? You thought I was talking about the nations reaction to having it's we're generators sold?
I think Thatcherism is a half- right approach in so far as it takes a rationalising approach to the economy as though a Graeme Hart was prime minister ; it then has to deal with left- over people for whom globalisation is meant to rationalise.... and it all gets murky as that is where the human economy meets ecology and human behaviour? The claim is: "all ships rise"........
To those of us who can recall this period, it was not a stellar time for New Zealand economically.
.........
For many people owning a house with a garden will be their main economic acheivement. Neither infills or cookie cutter or a Los Angeles type scales and constant social bond destroying change is quite the same . People want to know their leaders love them not loathe them. People knew where Muldoon stood.
For those like Wills and his ilk with their slavish worship of 'market efficiency' I suggest a quick perusal of Matt Taibbi's latest offering in Rolling Stone (he of the vampire squid analogy):
'Everything is rigged; the biggest financial scandal yet'.
http://www.rollingstone.com/politics/news/everything-is-rigged-the-bigg…
A MUST read.
As that supposid paragon of the free markets, Adam Smith, was once forced to admit:
''People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices''.
That is your precious market in action.........
The theory on free trade as championed by Bruce is possibly commendable, but as a member of FF I would like to see them acknowledge and consider the flip side which is the self interest of those with most power, and implications it has for our economy, as raised by Professor Jane Kelsey http://www.radionz.co.nz/news/rural/133695/japan-entry-will-delay-tpp-deal-kelsey
If we were Bruce we'd be wishing we could write the script again, but it is what it is.... Thought the sub editor's first three words are pretty close to the mark...
What we would like from FF is comment on whats in front of us...
If farming is New Zealand's backbone, then the energy sector is our lifeblood. And New Zealanders have allowed its competitive advantage to be eroded
http://www.stuff.co.nz/stuff-nation/8214151/Lets-rethink-our-electricit…
and numbers wise its all here:
http://cadmus.eui.eu/handle/1814/12098
http://cadmus.eui.eu/bitstream/handle/1814/12098/RSCAS_2009_36.pdf?sequ…
Therefore, the ability and incentive of large suppliers to exercise unilateral market power are important determinants of the supply conditions that determine short-term wholesale prices, even after the impact of exogenous factors such as water availability and fossil fuel prices have been taken into account.
This paper uses ...... prices and quantities from the New Zealand wholesale electricity market over the period January 1, 2001 to June 30, 2007 to characterize how the four large suppliers in this imperfectly competitive industry exercise market power.
(they should put this in the propsoectus, the $ would fly in...)
Its a membership thing, $ is comng out of members pockest when need not...
FF would recognise even export trade is regulated by WTO...
Indeed, Henry.
This paper you've linked to seems very much the smoking gun in terms of how the current market fails. We all suspected it, but this paper proves it. Am sure the government, (and Labour and the Greens) will have read the paper previously, so have known for some time how broken the current system is. While the benefits nearly all accrued to the public coffers, it arguably didn't matter, as high power charges were a form of tax. Now it very much does matter.
As others have noted, it should be embarrassing for farmers that their leadership is championing a system that is costing their members a significant amount more than it should, presumably largely due to that leadership's own political leanings or ambitions.
It makes the Labour Greens proposal eminently sensible; in fact to do anything else knowing this paper exists would be dereliction of duty it seems to me.
Ah yes the what happens next question?
First thing is situations/muck ups like this are not uncommon in power privatisations. Look at Oz, eg. Snowy Hydro IPO was pulled after prospectus was printed before it went to market... these things happen... So:
FF - wise: Can't think Monday will be fun for the FF research and analysis group with Bruce above and Andres last Sunday leading from the front and looking like mild duffers...
http://www.interest.co.nz/rural-news/64095/anders-crofoot-says-househol…
Govt-wise: The opportunity of a mess not of their direct making.... we would take the high road, fix it and show our credentials of being market lead and all round good guys....
Enhance NZ free/fair markets position....
We would pull the float, establish a enquiry into power market generation operation/s and lay blame at the company and advisors (for thats what they are there for) for not disclosing the market dominance and recorded market manipulation - should also get support of NZX claiming some market rules element. We would get the lawyers involved in the float to provide a bullet proof case so as to bring it down, as they have already seen the underneath...
- mention that the discipline of market IPO process has bought poor behaviour to light (hence when fixed it is still sold).....
- govt. cannot own shares in coys that conduct poor behaviour.
- have a clear out of directors, as this and south american adventure shows poor form all round...
- beef up the regulator who acts as an umpire..... introduce jail terms for traders&coy /directors exercising market dominant power in utilities markets...
- set policy so that electricity/energy is priced as per what it costs to produce, not what it compares to for energy produced by thermal/fossil fuelled generation...
- existing listed gen companies are told to be happy, otherwise they need pay back revenues of market dominance (one time amnesty for prior activities).....
have it all done by Christmas, use same timeline as Fonterra last year..
- happy days.
What worries me about the Labour/ Greens plan is not that government will be more actively involved. It is there responsibility to act when the market fails.
My concern is that the Labour and the Greens have not learnt the lesson of the Muldoon era. That New Zealand lacks the checks and balances in our system of government to have successful active government involvement in our economy.
How will Labour and the Greens ensure their new electricity buyer acts in good faith? Especially once they are out of office. How will they stop a new Muldoon from coming to power and abusing the institutions of the state for his or hers political needs?
If Labour/Greens want a more active governmental role in our economy then they need to ensure our institutions of state are run on a meritocracy. Helen Clarke, John Key and Muldoon especially have used the patronage powers of being the Prime Minister to get some/many state institutions to act for their specific political needs. Rather than fulfilling there original parliamentry asigned task.
I think a good step in moving towards a meritocracy would be for the Governor General and the Speaker of Parliament to be recommended/appointed by a 75% majority from Parliament. Then these two players would be neutral referees in our political process. They could be given the task of appointing important but independent managers of state services, such as the state buyer of electricity.
Boatman,
I agree that was disgraceful; although somewhat defensible in that the benefits of a failed market (see Henry Tull's link above to prove it) virtually all came back to the state given they until now owned nearly all the power companies; and to a minor extent given the paper above had not yet been written.
Given the rise was so disgraceful, then surely prices should have come down say 20% -30% in the last four years. Instead they have gone up another 20%; and we are selling off the companies delivering these super profits. Staggering, when you think about it.
Labour of full of hot air and no substance , they cant show me anywhere ( not on their website or in any document or press release ) exactly how they are going to give me and my family this socialist utopia
Last week it was $300,000 for new 3 bedroomed homes in Auckland for everyone ..... when a section already costs more than that
This week its a 1/3 rd reduction in our household power bill , which is great , but I cant see how it is going to happen
Please do explain ........anyone ?
that's your story boatman - you are fortunate - must be the warm southerlies blowing north up the upper harbour
about 2 years ago, here on interest.co.nz, a poster described how he and his wife and baby were spending $700 a month on electricity for heating an old villa they were renting in Mt Eden. Then about a year ago there was a conversation from Patricia (I think), living in Christchurch and paying enormous power bills, something like $16000 a year
Here's the explanation Boatman. Production cost of those hydro stations down the Waikato built in the 1930s is about 2 cents a unit. And you pay about 25 cents at your house.
You have been screwed mate, and they even manage to convince the suckers it's proper.
The "restriction, cronyism, and monopolies" described by Bruce Wills are what we have now. And an industry protected within a cosy relationship with a protectionist government. National in this case.
I have no great belief in the Labour/Green proposal either. But any exposure to a true market will deliver your 1/3 reduction and more. We don't need a command economy, but we do need a decent referree to ensure we have actual markets.
Not srictly true, you understand the term "marginal cost"?
if not this may help,
http://en.wikipedia.org/wiki/Marginal_cost
On top of marginal cost, there is the peak cost of power and the off peak cost...so meridian assumes the risk / differences for you and gives you a flat charge of about 23cents a kwh.
BTW Meridian says their input costs are 8.5cents a kwh....
http://www.meridianenergy.co.nz/company/news/media-releases/company/mer…
That assumes (I assume) hydro, in a dry year its going to be higher.
Beyond that, yes the Govn has clearly been demanding higher profit margins in order to get teh income and make them look good for sale no matter what the damage tot he economy elsewhere.
Thanks Nats, of course the last Labour Govn were equally extractive.
So the Q is now just who do you vote for? or maybe I should be saying chose who screws you......
regards
Boatman - if this hot air BS were to ever get off the ground you will more than likely be getting small reduction in your monthly power bill followed by a larger increase in another cost elsewhere. GST, Income or CGT are all probables.
What the L/G are not telling the public is how the are going to fund existing Government costs and services.
Thread interesting in parts. Here's my 2c (oh wait, history) 5c - what - not legal tender anymore? Sheesh - ok, 10c.
For all those common taters who appear to evince a strong dislike of 'markets' and assume that every huddle in a cafe is a Cartel of Business Blokes and Blokesses, then I have two questions for you.
1 - assuming that you Eat every day or so, what is the predominant form of the Food Production and Distribution Chain?
2 - Would, in your expert opinion, this Chain be better handled by a Government?
Inquiring minds await your replies....
Waymad,
Suppose 98% of the food supply- production, distribution and retailing had in fact been built by the state over 100 years; but that 20 years ago the state had built an artificial market, still largely state controlled and funded, where all food was sold from suppliers to retailers (who were the same parties, and could pass on these prices to end consumers) at the most expensive price of the most marginally costed food. (See the link in Henry Tull's note above- for that is how the electricity market works). Suppose that market had caused the price of food to consumers to be 72% more expensive in real terms than when the artificial market was established, although it was largely still state controlled; so at least you could argue that the super prices were mostly a tax paying for necessary government expenditure.
But then the government decided to sell off 49% of this artificial market, and all its production and distribution capability.
Perhaps then some government intervention in this market might be well advised.
Thankfully the food market we have does not work like that. The electricity market- still an essential service- does.
Food Chain
Look, strategically thinking, what this all boils down is this .. the supermarket chains are secretly behind the push to limit urban boundaries and increase housing density with high rise buildings .. because the more in-fill housing and the more high rises .. less backyard gardens .. less home grown vegetables .. ooh the sneaky buggers .. and yes the supermarket chains have already got the logistics in place .. linfox etc .. distributions chains already exist .. economies of scale .. yay .. next they'll be buying market gardens .. meat processors .. squeezing little guys out .. done deal .. already decided .. your destiny is not in your hands ..
Bruce
Nice to hear you're a regular listener! :)
Interesting how Federated Farmers is such a fan of free markets and competition, yet is a big supporter of Fonterra (a legislated monopoly) and apparently supports the creation of another Fonterra style thing for the red meat industry.
I agree wih Fed Farmers on Fonterra and a red meat Fonterra.
We've all moved on from the 1980s. Let's drop the shorthand insults about "Return to Muldoonism". I'm not suggesting that and neither is Green/Labour.
But the purely free market brigade had a good go through the 80s/90s/2000s all around the world. The GFC showed it doesn't always work.
Fed Farmers is right to be looking at supporting the red meat sector's push to create a single buyer. Sounds a lot like NZ Power doesn't it? ;)
FYI for those who don't know about Fed Farmers' support for a new monoploy, here's the latest from Fed Farmers CEO Conor English on setting up a red meat Fonterra. All very sensible stuff.
http://www.interest.co.nz/rural-news/63887/conor-english-sets-out-how-r…
But some would describe it as 'turning back the clock' to the producer boards of the 1980s. I don't because it's not true. And neither does the Fed Farmers CEO.
So why is the Fed Farmers Chairman talking about stopping a return to Muldoonism? Let's drop the straw man arguments and diversionary tactics and debate the real issues.
Would farmers like lower power prices? Is legislated a single buyer a good thing for the country (ie like Fonterra), as opposed to shareholders or foreign consumers?
cheers
Bernard
Bernard - please explain WHY you think there is a free market? How can enforced regulation and legislation upon the people be called a FREE MARKET?
I would also suggest you think about the dividends NZ Governments have received from the regulated SOE's. In the case of SOE power companies inflated power prices is what has happened and it is nothing more than a tax with a different name.
To sugges that this is a failed Libertarian concept is misleading as NZ has never experienced a true libertarian time ever.
I think you should also rad Mist42NZ's post above as the milk industry is heavily regulated which distorts consumer prices.
This interest.co.nz site has become a political mouth piece for Socialist agenda's and if Socialism actually worked none of us would be here posting now. The "diversionary tactics" of the Socialists is why there has been NO real debate on the real issues.
Perhaps Bruce is concerned that once Labour attempt to sort the electrity generation rip off they with turn their attention to the dairy industry. It is interesting that in a global "free market" where NZ producers recieve similiar prices for their milk solids to other international producers New Zealanders pay twice what British consumers do for a bottle of milk (they pay less than a pound for 2L)! Infact why dont they go after the cozy vodafone/telecom duopoly and the building supplies racket as well. Im stunned by how expencive so many things are in NZ compared to most other market places! We are getting taken to the cleaners!!!!!! The exec's at these outfits must laugh we they see the "let the free market rule" comments here as unless these posters are multimillionaires with big share portfolios in the above they are also getting ripped off to the tune of thousand's of $$$$ every year like the rest of us.
The NZ market is to small and we are taken to the cleaners when we purchase many essential services, and these costs are damaging to NZ's competiveness and to small/medium sized businesses that are also battling for the consumer dollar, and actually operate in a competive market place so don't have the luxury of putting up their prices every time they want a bit more cash in their pockets.
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