The left’s lose-lose SOE strategy

If it wasn’t already over on the night of 26 November 2011, the argument about the popular legitimacy of the government’s plan to partially privatise selected state-owned enterprises was finally put to bed when the pre-registration website for the Mighty River Power float fell over shortly after it went live. Whether this was a result of intentional underprovisioning to generate buzz or genuine organic demand doesn’t matter: within 24 hours 100,000 people had pre-registered interest in buying shares. That’s about one-third of the signatures opponents of the scheme took seven months to collect to force a citizens initiated referendum. The battle over whether these assets will be sold has been well and truly lost, and expending more political firepower on it is futile. The left needs to start organisaing around how they will be run.

This episode highlights two separate failures of strategy; one from the 2011 election, and one for 2014 and beyond.

Labour mistook asset sales for a high-salience issue and tried to run a campaign on it, when in reality too few cared enough for it to work. I have no reason to disbelieve the assertion that most people don’t want the assets sold. But the evidence of the election, the sluggish uptake of petition signatures, and the general lack of traction gained by the Labour party, for whom this has been the only coherent policy frame since the election, show that it is not an issue about which people are strongly exercised.

This strategy worked quite well for NZ First, and to a lesser extent the Greens, both of whom have the luxury of being able to appeal to a smaller base who care more strongly about a narrower range of issues. But it didn’t work for Labour, and the recognition that what works for parties of a relatively activist mindset doesn’t work for a broad-based, moderate mainstream party is long overdue. It failed. Time to move on.

The notion that the government, having spent the entire year 2011 campaigning on it, lacks a mandate to proceed with asset sales is utter nonsense, as I wrote when the campaign kicked off. Labour and the Greens have decided the mood of low-level dissatisfaction with the plan that failed to win them the election will be sufficient to derail the policy now that it is on the move. They have decided that a citizen-initiated referendum, which worked so well for the opponents of the Section 59 repeal, is their best tool. Andrew Geddis wrote brilliantly about the problems with this in June last year, and here I essentially restate one of his arguments — that the Greens and Labour should be careful what they wish for. Both Labour and the Greens rely on the maxim that what’s right is not always popular. By insisting that policy be popular to be passed they risk painting themselves into a corner when next in government.

Plenty of bad policies are popular — three strikes, scaremongering about immigration, and most of the government’s welfare reforms are good examples. Despite what Josie Pagani might say, all are inimical to Labour and Green politics. How can they oppose these policies, if they’re so popular? Conversely, how can they insist on passing unpopular policies? Many of these are more central to the Greens than to Labour — the Greens are not a popular party; they poll just above 10%, so why are they embracing populism? Their policy agenda relies on making the electorate eat its greens, so to speak. Emissions control legislation, for example, will be deeply unpopular if it’s remotely effective. Likewise public transport and urban development policies, whose upfront costs are large and immediate but whose benefits are long-term and gradual, will be incredibly hard to pass if they insist on gaining the support of car-reliant suburban villa-owners.

Whether they “win” the referendum or not, at best Labour and the Greens will be vulnerable to legitimate accusations of hypocrisy whenever they propose policy that is merely somewhat popular, as opposed to being very popular. The will have demonstrated that consistency doesn’t really matter, and that could do deep harm to their long-term credibility. Worse yet, they could stand rigidly by their new-found populism and only propose policy that a clear majority of the electorate wants. Both strategies do more for NZ First than they do for Labour and the Greens.

The discussion has changed
The left has lost the argument about asset sales. Barring some sort of deus ex machina it’ll go ahead and will probably be a net vote winner for the government. But the apparent mismanagement of Solid Energy has given Labour and the Greens an opportunity to reframe the state-owned enterprise discussion, away from who owns these businesses to how they are run.

Both parties must be reluctant to do this, given that many of the bad decisions were made under the previous Labour government, and much of the lost money was poured into “green” tech like biofuels. But it is a necessary shift if the left is to own some of this debate. Regardless of what occurred before 2008, that things got so much worse under the current government, and that this was apparently a surprise to the shareholding minister is a serious failure of governance, and the public deserves answers about it. It’s a good opportunity for the left to highlight the point that there are good government managers and bad government managers, and that they will be the former, not the latter. The Greens have begun to do this by arguing that the government’s policies and directives to Solid Energy — including the lignite strategy, and changes to the Emissions Trading Scheme — effectively kneecapped the company.

Labour and the Greens should take the initiative and reframe this SOE debate now. If they persist with beating the dead horse of ownership, the risk is that the government will strengthen its case that the state simply isn’t fit to own businesses, paving the way for the rest of the SOEs to be sold as soon as they can secure a mandate to do so. The only alternative I can see for the opposition is a pledge to re-nationalise the sold assets. If they’re going to do that they need to get on with it — if they reveal this policy after the Mighty River Power float goes ahead the risk isn’t the argument that the state shouldn’t own businesses; it’s that Labour and the Greens are parties of big-government kleptocracy, trying to turn Aotearoa into the Venezuela of the South Pacific.


14 thoughts on “The left’s lose-lose SOE strategy

  1. Excellent writeup Lew.

    Only point I would make is that the numbers who signed to force a CIR and the numbers who pre-registered for MRP shares are not directly comparable. In the case of the CIR signers, the numbers correspond to individual voters, in the case of MRP pre-registrations they will normally correspond to households or trusts. Not really relevant to your argument, but I think multiplying the number of pre-registrations by 1.5-2 times would give a better indication of interest.

  2. Thanks David. I did have a couple of lines initially about how they weren’t equivalent, but deleted them. The two groups are also non-exclusive; some people who would prefer that the SOEs weren’t sold will consider investing in them if it’s inevitable, and some of those preregistering will be doing so strictly out of interest.

    But 100k in 24 hours is so many times more rapid than referendum numbers. The share float has galvanised interest in a way the campaign against it did not.


  3. Yeap. I always said National had a mandate to sell. I’m not sure I even signed the petition against the sell-off because New Zealanders deserve to reap what they have sown.

  4. “The only alternative I can see for the opposition is a pledge to re-nationalise the sold assets.”

    David Shearer thought out loud on it, then pulled back on it. The other possibility is for a Labour-led government to give the Commerce Commission sharper teeth on the electricity sector, or otherwise anything else that foments FUD.

  5. If there’s one possible wedge issue that Shearer, Norman, Peters and Harawira could exploit, it’s the hypocrisy of golden handshakes and big bonuses for under-performance. Or to put it succinctly, socialism for the rich and austerity for the rest of us. Particularly when we’re all being badgered about the cupboard being bare.

    There’s also possible links with country club cronyism, à la Jenny Shipley at Genesis Energy and Mainzeal. Brian Gaynor has more about her. And isn’t the Holiday Highway a kickback for the trucking and PPP infrastructure lobbyists?

  6. “But 100k in 24 hours is so many times more rapid than referendum numbers. The share float has galvanised interest in a way the campaign against it did not.”

    CIR’s have tighter legal requirements – in the form of the Electoral Act – than share floats, which basically means they still have to be gathered the old-fashioned pen-and-paper way. And the referendum organisers are deliberately going much further than the minimum signatures required, in order to weed out duplicates – and I wager also to send a message.

  7. Good to see you back, Lew. And, yes, a solid argument. I agree wholeheartedly on the existence of National’s mandate and Labour and the Greens’ potential pillorying of themselves by throwing their weight behind the CIR. Then again, I remember National under Brash used to claim every substantial policy from Labour needed a referendum, and nobody ever held them to that when they were in government, so… But even if there won’t be political dividends, it does show a lack of principle.

    Sadly this is a very common idea in politics “MY policies acquire a mandate by winning an election, THEIR policies require an electoral win, a referendum, positive opinion polls and personal endorsement by the ghosts of Billy T James and Edmund Hillary before they have a mandate”. The problem is that the issue is basically open-ended – you can always consult and poll further, so there is no point at which anyone can conclusively say “OK, they’ve done enough, the debate is over”.

    I thought your statement that ‘the recognition that what works for parties of a relatively activist mindset doesn’t work for a broad-based, moderate mainstream party is long overdue’ was particularly on the money. There seems to be a widespread feeling around the leftist blogosphere is that the path to electoral success for Labour involves following the trail the Greens have blazed. This doesn’t work for a lot of reasons and the above is one of them.

  8. As Labour and Greens are going on about the politically generated CIR, and how the Government should take heed of it, is the Labour Party, if they should win the next election, going to finally take notice of the Anti Smacking CIR which had over 80% support.

  9. Pingback: Should the Left keep opposing asset sales? « The Standard

  10. A lot of people I know have registered to keep the power companies out of foreign hands. But in the end it is all a charade, and selling power companies to New Zealanders can not benefit the economy. It may give the Government a shot in the arm, but with no real coherent plan it all seems a bit pointless. This also removes a lot of money from the economy that may have been used to stimulate growth, perhaps shares in startups or established companies wanting to expand. The choice of CEO is going to be critical, lest we wind up with something similar to the Australian version of the mixed ownership model, where the government sold 49% and the company basically put up prices, argued with its majority owner ad it s share value was most of the way round the S bend (from A$4.60 to A$2.49).

    The whole asset sale thing is a bit like chopping the head off your most productive hen, a quick shot in the arm, but not being able to head off consequences later on. It is just such a shame that our opposition is so crap at the moment.

  11. Of course, all this discussion assumes that the asset sales issue is all about votes, and the actual sale of assets is irrelevant. Could it be that Labour and the Greens are pursuing this policy because they don’t want to see the assets sold?

  12. There is a key difference between the pre-registration for shares and the stop asset sales petition – the former is done online and the latter requires physical signatures on paper. If a CIR could be done online it certainly wouldn’t have taken so long to get the signatures.

  13. Richard, that those opposing the asset sales want to stop them being sold is obvious. The question is: what strategy will achieve that goal?

    My answer: no strategy other than winning the 2011 election, or successfully challenging the share scheme in court would have achieved that goal, so the limited resources, political ability and capital of the opposition parties would be better deployed elsewhere.


  14. Pingback: Kiwipolitico » Blog Archive » Labour: locking in lose-lose

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