The world economic crisis appears to have passed for the moment, but nothing has really changed. The cause of the crisis was, of course, rampant greed, fed off the back of a long oil boom which encouraged people to expand their expectations. In many countries, including New Zealand, banks acted as money pushers, offering incredible deals, such as 100% mortgages, on the promise of ever-escalating property prices and low unemployment. The trigger for the crisis was rising oil prices caused by decreased production levels, and this should act as a warning for what is going to happen continually over the next 50 years as oil production nears the end of its life. The Greens are quite right in pointing out that the world is acting as if oil extraction can continue permanently, even though we know it can’t.

If oil was the trigger, the exposure of the practices of world financial markets provided a political shock that rattled faith in the foundations of capitalism around the world. Pillars of that Establishment were exposed as having feet of clay, not to mention criminal minds! At the top of the list was Mr Bernie Madoff, highly respected financier and sometime Chair of the New York Stock Exchange, who eventually confessed to his sons that the asset management arm of his empire was a giant Ponzi scheme. He got some investors, then some more investors who paid off the first lot, at the same time paying Bernie enough to open flash offices and feed a lifestyle of frenzied wealth, thus attracting even more investors, while never actually investing in anything. Never has one person so exposed the crude basis of modern capitalism. That he got 150 years in prison demonstrates that the establishment really does not like to be so exposed. These pyramid scams are still called Ponzi schemes, after Charles Ponzi, who provoked the 1925 Florida real estate bubble. Ed.

Then there was Merrill Lynch, John Key’s old firm, the one that made him rich. In 2008 it reported a loss of $US23 billion on the back of enormous investment in the absolutely dirty and unethical sub-prime mortgage market, which loaned money to people to buy houses that they could never afford to repay. Such people were assured that property prices would continue to rise forever, providing them with an equity nest egg all of their own. It must have seemed too good to be true, and it was. Merrill Lynch was taken over by the Bank of America on January 1, 2009. Just before the takeover, it gave out over $US3 billion in bonuses to its investment staff, the same ones that had just lost $US23 billion. Within a couple of months, the US Treasury was being asked for a rescue package of $US20 billion for the company. Privatise the profits and socialise the costs, the good old capitalist way.

So with governments having to carve out rescue packages and continuing revelations around financial sector malpractice, you could be excused for thinking that faith in the private sector should be shaken to its foundations. The columns of serious newspapers around the world have been filled with post-greed angst, and predictions of, if not the end of capitalism, a much more prudent future, with a bigger role for State agencies. But that was then (albeit only a few months ago), and this is now. Now, we see stirrings of a newly muscled capitalism, with new calls for the privatisation of what we own. Already we hear moves towards privatisation of worker protection under the ACC, processes that open up the way to the privatisation of water and electricity and the contracting out of parts of the health, education and prison systems at least.

NZ To Repeat Mistakes Of Recent, Painful, Past

Will New Zealand escape the grip of the privatisers? In a recent Christchurch Press article (27/10/09, “MPs embarrass Labour as it lags well behind in polls), Colin Espiner reminded us that those under 35 years of age will barely remember the first wave of privatisation, with all its dire effects. If any of you are in this category, please let me remind you. In the 1980s and 90s, Labour, and then National, fully or partially privatised a large number of State-owned agencies, many of them basic infrastructure like transport (Air New Zealand and the Railways), the Post Office bank and the Bank of New Zealand (which became Australian-owned).

Espiner argued that we may be about to experience a new round of privatisation, based on an apparent lack of political opposition. For those in favour of privatisation, leaner economic times provide a whole new justification for a range of privatisation measures. Falling Government income means that there is less to be spent, which provides, for some, a justification for selling off remaining assets. Those of us who remember protesting against privatisation the first time round may therefore have to start oiling our ageing joints to lead a new movement against the next wave of selling off the family silver – or more likely now the family water supply.

We will need to begin by reminding people – and telling the new generation – about how bad it was the first time around. Assets sold for a song to greedy speculators, literally cruising the country like sharks looking for shiny goods at knock down prices. Do you remember the sheer sleaze of it all, as the Brierleys and Fays collaborated with the Labour government in readying State assets for sale, and then bought them up for loose change? The mantra then was that the private sector was better than the public one at running businesses. With the subsequent failure, and Government buyback, of several of the highest-profile companies, that argument is not likely to work now.

This Government is already becoming a master of the fiscal trade-off. If we don’t cut adult and community education funding, we won’t be able to fund new literacy programmes for disadvantaged families. Less Government administration, more people “on the ground” to support real New Zealanders. It is a small step from those arguments to justifying asset sales to “save” national superannuation or universal ACC. In short, privatisation is coming, ready or not. Particular pressure points will, I think, be the extension of public private partnerships (PPPs), the sale of water rights and some electricity services, ACC, some prison services and possibly a whole range of juicy morsels from the local government sector, with Rodney Hide champing at the bit to reduce the size and influence of councils. See you on the streets.