13.2.13

{to all you old souls}

An interesting fact about Valentines day for you - Saint Valentine, who supposedly lived in the third century and was martyred on the 14 February, is the patron saint of courtly love. Fittingly, his flower-crowned skull is exhibited  in the Basilica of Santa Maria in Cosmedin, Rome.

Nina has my heart this Valentines day.



The argument against asset sales

This post is sourced from Brent Sheather, writing for the New Zealand Herald, and can be found in its original form on the Herald's Business section. The partial (49%) sale of many of New Zealand's State Owned Enterprises (SOEs) has been the hot topic of the current electoral term, and has split much of Aotearoa down the middle. I have been wanting to write my thoughts down for a while but instead, I find that this article is succinct, well researched and frank, and most likely better than any post I would be able to write. I'm currently reading Kim Standfords 'Economics for Everyone' and it is interesting to note the prevailing idea that a capitalist/'market economy' philosophy is the only 'true' economy possible, a philosophy (almost, I would argue, a religion) that has fueled much of the asset sale dialogue. I would encourage everybody to do their research on economics and economic history - it's high time that us 'plebs' realised the importance of the economy in our everyday lives, the importance of us in the health of the economy, and the role we can play in reshaping and reviving it.





Whilst the problems in Europe are making the headlines, the elephant in the room is what Longview Economics labels "The Definancialization of the West". Longview reckons that, for example, the total debt to GDP ratio in the USA will need to fall from its current level of 353 per cent of GDP to around 250 per cent and perhaps as low as 150 per cent.

Deleveraging means much lower levels of economic growth and probably continued poor returns from the world stockmarket. However there is one very bright light on the horizon for local financial intermediaries and that is of course the forthcoming firesale of various state owned enterprises. Unfortunately however the logic behind the sales, apart from further enriching the finance sector, looks, well, stupid. The three main reasons given for selling SOEs are:

- To achieve efficiency gains within the SOE's sold
- To reduce debt
- To kick-start the stock market


Let's take a closer look at these assumptions. What has prompted this week's story is a recent article in the London Financial Times entitled "Number of State Sell-offs Cut in Half". The article reported on a recent paper by the Privatisation Barometer (PB), a joint project between KPMG and a Milan based research institute headed up by Professor Bortolotti at the University of Turin. According to PB "the pace of privatisation around the world has slowed sharply with an increasing number of asset sales delayed or cancelled due to volatile markets". For "volatile markets" read unacceptably low prices.

Commenting on the study Professor Bortolotti stated the obvious that selling in a depressed market is not a good move as sellers are better to wait. Contrast this with the mad rush the Government seems to be in to get rid of Mighty River - latest reason for urgency came from Bill English who said that our government debt to GDP ratio concerned him at the 30 per cent level. Well hello, the debt to GDP ratios of virtually all the other highly rated Western countries with the exception of Australia are double or treble that level. What is more, whilst the sale of an asset like Mighty River will of course reduce debt, at 30 per cent that shouldn't be a high priority. The key point is that the sale of the asset will reduce New Zealand's ability to service our debt and that is more of an issue. Then there is the fact that sellers in a hurry generally don't get top prices.

Next item on the agenda of non-reasons to sell SOE's is the illusion of efficiency gains from privatisation. The Financial Times article contained particularly interesting comments from Professor David Hall of the Public Services International Research department at the University of Greenwich Business School. In an email he said that on the basis of much research "there is no clear proof that the involvement of the private sector delivers higher efficiency or productivity or a lower cost of capital".

Professor Hall sent me a paper entitled "Public Private Partnerships in the EU - a critical appraisal" where he looked at the performance of PPP's in the EU. He investigated whether PPP's "provide a way of financing or running private services which is better for the public and the services". Professor Hall concluded that the private sector can't borrow money more cheaply than the government and in fact the opposite is true. Furthermore he states that "the empirical evidence shows that the private sector is not more efficient than the public sector". Professor Hall says that any PPP always starts with a handicap of a higher cost of capital which can only be offset by lower operating costs ie greater efficiency. These points have been noted by the OECD, the IMF and Martin Wolf from the Financial Times.

Professor Hall also referred me to an analysis of UK privatisations entitled "The Great Divestiture" by an academic from the Massachusetts Institute of Technology which meticulously examines all the companies privatised by the Thatcher Government and finds no evidence whatsoever of efficiency gains but clear evidence of regressive redistribution (i.e. taking money from the poorer sections of society and giving it to the wealthy). Professor Hall said that "many other comparative studies echo this finding and these findings are especially relevant for capital intensive services like electricity". Recall also that a study by our own New Zealand Treasury found that there was "little evidence of systemic underperformance" in our SOE's.

This conclusion particularly resonates at present given the recent revelations about the systemic bad behaviour in the banking sector globally and the fact that wages in the finance sector have grown much faster than wages in the broader economy.

The other important conclusions in Professor Florio's book are that the assets sold were underpriced, there was a large rise in management salaries and most important of all privatisation made little difference to long term trends in productivity and prices. No wonder all the chief executives of the SOE's to be sold are enthusiastic about the idea - they stand to benefit from high salaries and no doubt huge bonuses via employee share purchase plans.

If the efficiency argument looks silly the "reduce debt" rationale is even more ridiculous. The electricity SOE's like Mighty River Power are going to be sold at valuations whereby the net profit as a proportion of the share price is around 7 per cent after tax.

Today the Government can borrow for 10 years at just 3.45 per cent so it doesn't take a finance degree to work out that the Government could retain the asset, service the debt out of the 7 per cent return and pay off debt with the balance. In cash flow terms the contrast is even more stark - the companies like Mighty River Power have substantial depreciation charges so the cash flow yield at which the companies are sold could be 8, 9 or 10 per cent - much higher than the government's cost of borrowing.

This raises another issue and that is the fact, also highlighted by Professor Hall, that the cost of capital of a privatised asset is much higher than a publicly owned asset. Financial economics says that a higher cost of capital requires a higher return of capital which means higher prices for consumers, pure and simple.

The case for selling our SOE's looks flimsy at best and a travesty from the perspective of young people and those other sectors of society who stand to lose from the transactions. This is likely to be at least half that population. If this Government truly has the interests of all New Zealanders at heart it is time to admit it has made a mistake.

12.2.13

Peace

There are moments that slip by. As they pass in front me, casting their shadow upon where I stand, I strain to imprint them upon my memory. But these moments are rare moments, they are transient moments, they are hidden moments. So when I return to my quiet place and attempt to put pen to paper, they are gone. Wisps of a memory, tugging at my heart strings but not quite able to jump off the tip of my tongue.

However, sometimes...sometimes I am lucky. For a split-second that moment of bliss, that ethereal experience of a life force beyond recognition, a common soul, jumps in to my heart and I remember how it tasted. 


Twinkling lights across a body of shifting water.

A reminder of home and belonging.
The wind whispering on my ear as I cycle along the oceans edge.
Dirty hands plunged in to life-giving soil.
The cobwebs of the day blown away by a Westerly gale.
Sunshine warming every inch of skin.
Trembling hands.
An intake of breath.
A swaying flame and a soft-spoken prayer.
Shared laughter over steaming bowls.

I remember how it tasted, and it tasted so sweet.

8.2.13

Saudade


"The famous saudade of the Portuguese is a vague and constant desire for something that does not and probably cannot exist, for something other than the present, a turning towards the past or towards the future; not an active discontent or poignant sadness but an indolent dreaming wistfulness". (In Portugal of 1912, A. F. G. Bell)

John Lucas - Quilts, Coats and Colours

I have come to believe that it is only in being sure of our own identity that we can ever be truly happy. Identity is a person's conception and expression of their individuality or group affiliations (such as national identity and cultural identity). The term comes from the French word identité, which finds its linguistic roots in the Latin noun identitas, -tatis, a derivation of the Latin adjective idem meaning "the same." The term thus emphasises the sharing of a degree of sameness or oneness with others in a particular area or on a given point. In light of etymology, the concept of identity, or understanding oneself, is not a journey of individuality, but of community. 

We cannot know who we are, and what the implications of knowing are, within the vacuum of individuality. It is only in comparison to, and in relationship with, others that we can begin to describe ourselves. The lens through which we view ourselves is shaped by the people and environment around us. And just as our identity is formed by our community, our community is equally shaped by our identity. But identity and community are not concepts that are limited to the present. It is the roots of our past that enrich and inform our present, that teach us, that mould us. He kākano āhau i ruia i Rangiātea.

Lately I have been doing some research in to my family genealogy. There is a family legend that says that King George III fell in love with Hannah Lightfoot, a young Quaker girl living in London, in the mid-1700's. Hannah was whisked away from her family to marry the King in private, and then her and her children were shipped to South Africa so that the illegitimate marriage would never be found out. Of the King and Hannah's three children, George Rex apparently established a line of heirs (not all legitimate, mind you) which eventually leads down to my great-grandmother, Victoria Richmond Rex.
If this story is true, then I have royal English blood in me (which to be honest, I'm not too sure I like the sound of, given the English legacy of colonialism and imperialism throughout the world). Having done a bit of research, it seems more likely that the George Rex I descend from was actually an Englishman from Yorkshire who emigrated to Australia in the 1830's, and we were more likely just a family of settlers eking out a living off the land (conversations about Australia, terra nullis and settler/Aboriginal relationships aside). 

These discoveries - of who I am, where I come from, and what those before me gained and lost in their journeys, whether they were royalty, or peasants...they have given something to my soul. I am no longer just Olivia, in New Zealand in the 21st century. I am a link in the long chain of history. I have ancestors who fought in wars, who sailed months in treacherous conditions with hopes of a new life, or new opportunities, catching in their throats. My identity is sure, because it is shaped by those who came before me, and by the promises of the future moulded by lessons of the past. 

I have often felt lost. Lonely. Saudade. My journey of the past 3 years has been a journey of self-discovery, of community. But I have never seen more than what the present offers. Having begun on this journey of my genealogy and in learning about those from whom I was born, for the first time I can say to myself truthfully, "This is who I am."

Identity may not always come from historical familial genealogy. I think there is great merit in the concept of spiritual genealogy. We come from a long line of followers of Christ, who over centuries have been oppressed and exalted, rich and poor. Our line of faith extends all the way back to Christ hanging on a crucifix, all the way back to King David of Israel mourning in the mountains, all the way back to a Jewish people wandering an arid desert and clinging to their God, all the way back to the beauty of Creation. We are in God, and God is in us. Each of us

The past holds the key to both joy and sorrow. I am filled with pride at the thought of my ancestors bravery in leaving all they knew behind in order to build a new life in a foreign land, yet I am also appalled in knowing the wrong done to the Aboriginal people of Australia by British colonialism. Similarly, I am fascinated by the humble Protestant people of Yorkshire from whom I descend, yet it pains me to think of the historic oppression of the Irish Catholic by Protestant England. But I think that part of living in the present well means acknowledging not just the victories of the past, but the trials of the past as well. By acknowledging wrongs done, people hurt, or decisions made poorly, we empower our children to walk forward having learned lessons, and we do justice to those we hurt which may, hopefully, pave the way for redress and reconciliation. I wonder was the implications of a secure identity for all would be? I wonder if, by being sure of who we were and secure in our knowledge of the past, we would be further empowered and enabled to take charge of our paths and practice love, solidarity and unity? Because if identity is rooted in community, what choice do we have but to love others, be compassionate and stand hand-in-hand, while we walk the journey of our own souls?