When the Cameron Partners’ report on Christchurch City Council funding problems was released on August 1, the immediate reaction picked up its talk of an imminent $900 million shortfall. This number is massive all right, but it appears to be fictitious. Cameron Partners themselves conclude their analysis by remarking that the figure of “up to $800 million… is a highly unlikely (and unrealistic) scenario which combines the worst possible outcomes”. To get to $900 million there are a series of very large and very round numbers, some of which are “theoretical” numbers. The report notes accurately that many future expenses are not yet known (and the likely extra funding needed would seem to be only a fraction of $900 million). So the immediate questions are: Why the hurry? And why was all the talk at the announcement so implausibly pessimistic?

Some background first. The report came out in the wake of a Human Rights Commission finding that Christchurch’s “inadequate” housing situation amounts to a breach of human rights, our housing stock having fallen below international standards. We all know why. It’s the old matter of supply and demand, the demand being high and the supply being low.  For the tenants of the city’s social housing, whose rents are calculated to meet expenses rather than the ambitions of landlords, the Council’s involvement must be a relief.

The Commission suggests that it’s not just a matter of money. “Adequate housing implies the right to live somewhere in security, peace and dignity”. In this context it was interesting to read that the Vice-President of the Canterbury Property Investors Association wants the Council to sell its housing stock. The landlords know a good thing when they see it. As the motive for owning rental properties is to make a profit, this would almost certainly mean that rents would be raised, and less responsible investors would allow maintenance to lapse.

Sometimes the vaunted free market isn’t the best way to go, and when it comes to the simple business of creating the conditions for citizens to live in dignity, this is one such time. The first responsibility of any government is to provide peace and order, and to sell off the much-reduced supply of Council housing when the city is trying to rebuild would be to inflict gratuitous suffering on disadvantaged residents.

It should be a no-brainer: fix and restore our supply of public housing and look at building more. Yet some Councillors are echoing the siren call of the landlords, saying they want to sell, so that tenants, many already traumatised by the quakes, would face a whole new set of uncertainties.

Debt Is Poor Argument But Easiest To Use Politically To Sell Assets

Why would they? A clue can be found in the reminiscences of Sir Roger Douglas, the Finance Minister who, 30 years ago, set the pace for this latter-day neo-liberalism. Discussing in 1993 the first rush of State asset sales, Douglas said: “I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument but we probably felt it was the easiest to use politically” ("Out Of The Woods", by Reg Birchfield and Ian Grant; 1993).

Douglas was admitting that there was no financial case for the fire sales, his motives being ideological, based on the simple prejudice that publicly owned businesses are inefficient. Popular though this view might be, it does not stand up to objective scrutiny. In his immensely influential analysis, “Capital In The Twenty First Century”, Thomas Piketty* shows that the degree of regulation and State intervention in modern capitalist economies isn’t important when it comes to the overall health of the economy. “Broadly speaking, the US and British policies of economic liberalisation appear to have had little effect on this simple reality, since they neither increased growth nor decreased it”. *See Bryan Gould’s article on Piketty’s book, elsewhere in this issue. Ed.

Probably not many Councillors are doctrinaire neo-liberals. The more likely conversation will be about debt. It’s being proposed that because the Council has bigger bills than it expected, it needs must sell assets. Why this connection is made is not clear. As Douglas knew, there is no logical reason to connect debt and the need for privatisation.

Case Strengthened For Public Ownership

If anything, the present difficulties strengthen the case for retaining assets in public ownership. The funding fuss is largely the result of buildings having been under-insured. The Council’s businesses routinely return healthy profits. Selling public assets is analogous to a homeowner being under- insured and selling her one big revenue provider, her business, to cover the shortfall. But whether it’s a harried ratepayer or a panicking Council, the result would be the same. Immediate costs might be met, but the ability to generate future income would be reduced.

Those unsure of the shifting ground will probably seek what they see as a compromise by advocating the retention of key infrastructure like the port and the airport while flogging off some smaller and less controversial assets. This would make even less sense. If an idea is bad, then it’s bad, and confusions of this type, while they might be politically expedient, will only encourage the ideologues - under the guidance of the Cameron Partners recommendations - to ask for more next time.

Cameron Partners are investment bankers, a species that assumes the ideological biases of neo-liberalism are self-evidently true. Inevitably the report calls for the Council to stick to its “core” roles – code for selling its social housing – and of course there are repeated references to asset sales. But the rationale for this is not actually about any lack of money. The sales are advised because at present some Council companies retain traces of their previous roles of providing a public service. Cameron Partners insists it wants any vestige of respecting the former social, environmental and cultural outcomes to go. Council companies should have, they say, only a financial mandate. And while it is repeatedly asserted that all options should be considered, new policies which would lighten the load, most obviously a new negotiation with the central Government, are ruled out.

A further disquieting aspect is that when politicians ask for reports they always make sure they commission someone who will give them the answers they want, so the onus on the Council is to convince residents that the alarmist talk in the Cameron Report is not politically motivated, and to spell out just why, after all the gloom, the report is able to conclude that “the earthquakes and the subsequent plan to rebuild Christchurch have generated a dynamic and opportunity-rich, but also higher risk environment for Christchurch City Council to navigate”.

Canadian Naomi Klein* has written about “disaster capitalism”, the propensity of the powerful to find these rich opportunities, while others, Council tenants and red zoners for instance, take on the risks. Is the report another dose of Rogernomic shock therapy? *See Jeremy’s review of “The Shock Doctrine” by Naomi Klein, in Watchdog 117, April 2008, http://www.converge.org.nz/watchdog/17/06.htm. Ed.

We Don’t Have To Choose Between Fairness & Efficiency

We can expect the more extreme measures will be eased so that we might come to accept some lesser reduction of public spaces, but any selling of our assets would permanently shrink the city’s resources and permanently compromise its ability to control its present or plan for its future. How much this would come to be regretted by future generations is something that none of us now know. So why risk it? Piketty shows how big trends in demography and technology – and not this quarter’s balance sheet - are the decisive factors in influencing economies. His message is that we don’t have to choose between being fair and being efficient.