QLD Asset Sales - More State Theft?

Over the past few months there has been much discussion in the media about the Queensland government’s plan to "privatise" and sell off the states “assets”. The public assets that are still yet to be sold are the Port of Brisbane lease, Queensland Motorways lease and the Abbot Point Coal Terminal lease. Queensland Rail National has launched its share pre-sale registration, but the share offering has not yet been made.

The largest outcry against the governments proposals comes from the special interest groups that will be directly affected.  Naturally the loudest and most vocally organised are the unions. They're mad as hell but sadly, for all the wrong reasons.

The intuitive concerns voiced by the public are often well placed. They sense something is not right about this whole process but unfortunately guided by a public debate that offers only false choices, who can really fault them for falling into the trap of blaming the market as the mechanism that will fail, as opposed to government and state intervention which already has. As pointed out in this article, the general concern from the public appears to be that “[they] are already deeply suspicious about privatisations after electricity asset sales led to higher retail prices.”

It is instructive to assess what the energy industry in Queensland actually looks like. There are currently six government owned corporations (GOCs) in the energy sector! The other sectors fare no better, with seven GOCs in Transport. What is frightening is that this is just the tip of the iceberg. Unaccounted for are the various public-private partnerships that exist. It is beyond me how someone could call this open and free competition, when nearly everything in the sector is state owned, either partially or completely.

As announced by the Treasurer Andrew Fraser in May of this year, the Forestry Plantations license was sold for $603 million. More important than the number, however, is the process and legitimacy of this so-called “privatization”. What exactly did the state sell? [1]

A closer look at the questions that often go unasked highlights the insincerity of the government’s proposals. It provides us with a much clearer picture as to what this “privatisation” really is – it’s not about the state giving up its power or control; it is merely fleecing the public yet again, this time by other means. [2]

The first question that comes to mind is: why does the state even need to sell its assets?

“Because there is a large amount of public debt”, comes the reply and good fiscal management means a balanced budget or surplus. So in order for the “managers” to achieve that, they have three options: to raise taxes, cut spending or sell off assets. Neither the first two options are attractive for the politician, as raising taxes isn’t exactly a vote winner and nor is cutting the handouts they use to win votes. [3] Instead of letting public debt get out of control, which would eventually balloon into a political time bomb we see that the Bligh government has had to grit its teeth and take this most unpopular stance of selling “public assets”, which from the point of view of the politician is far better than the alternatives.

This is the common narrative, but the unquestioned premise here is that citizens need to shoulder an increased burden to pay off a debt they didn’t create. Is there an alternative to the above “solutions”? There is – and it is appealing to nearly everyone bar the ruling political class. What is it? Repudiate the public debt. Contrary to what most people think, public debt should not be treated in the same way as private debt. [4] Murray N. Rothbard’s “Repudiate the National Debt” [5], elaborates on the alternative solution:

I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: out-right debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense? One of the cogent arguments against paying blacks "reparations" for past slavery is that we, the living, were not slaveholders. Similarly, we the living did not contract for either the past or the present debts incurred by the politicians and bureaucrats in Washington… Apart from the moral, or sanctity-of-contract argument against repudiation that we have already discussed, the standard economic argument is that such repudiation is disastrous, because who, in his right mind, would lend again to a repudiating government? But the effective counterargument has rarely been considered: why should more private capital be poured down government rat holes? It is precisely the drying up of future public credit that constitutes one of the main arguments for repudiation, for it means beneficially drying up a major channel for the wasteful destruction of the savings of the public. What we want is abundant savings and investment in private enterprises, and a lean, austere, low-budget, minimal government. The people and the economy can only wax fat and prosperous when their government is starved and puny.

The problem is that previous privatisations were anything but legitimate, in fact – they are merely another form of socialism masquerading under the guise of the free market. These “privatisations” are not legitimate ways to de-socialise or de-statise, as they line the government’s pockets with proceeds from stolen goods. Libertarians recognise that the government is essentially a criminal gang writ large. What the Queensland government is doing is selling assets and illegitimately keeping the proceeds for itself to carry out further nefarious schemes.

If there was to be a legitimate process of de-socialisation or de-statisation what would it look like?

There are several possibilities which have been suggested. As outlined by Murray N. Rothbard’s, “How to and How Not to De-socialize”, briefly they are (1) egalitarian handouts, where every Queensland citizen would receive in the mail a share of ownership in various previously state-owned properties; (2) the homesteading principle where “abolishing government ownership of assets puts them immediately and implicitly into an unowned status, out of which previous homesteading can quickly convert them into private ownership. The homestead principle asserts that these assets are to devolve, not upon the general abstract public as in the handout principle, but upon those who have actually worked upon these resources: that is, their respective workers, peasants, and managers”. 

And as is largely the case with the asset sale of the Forestry Plantations license,

A third commonly suggested route to privatization deserves to be rejected out of hand: that the government sell all its assets to the public at auction, to the highest bidder… But another, even more important flaw hasn't been sufficiently stressed: why does the government deserve to own the revenue from the sale of these assets? After all, one of the main reasons for desocialization is that the government does not deserve to own the productive assets of the country. But if it does not deserve to own the assets, why in the world does it deserve to own their monetary value? And we do not even consider the question: What is the government supposed to do with the funds after they have been received?

The slightly different approach for Queensland National Rail is that of a public share offering, which Rothbard comments:

It should go without saying that these ownership shares, to be truly private property, must be transferable and exchangeable at will by their holders. Many current plans in the socialist countries envision "shares" which must be held by the worker or peasant and, for a term of years, could only be sold back to the government. This clearly violates the very point of desocialization.

Although I assume the individual will be able to transfer and exchange the shares,

The Qld government will retain a stake in QR National of between 25 and 40 per cent. Until it decides upon the exact level of interest it will keep, the amount of shares being made available to the public is uncertain.

 Other than the Qld government, no individual investor will be allowed to hold more than 15 per cent of the 145-year-old company.

…which merely goes further to destroy any claim made by others that the state is actually interested in legitimately privatising the sectors and assets it once and still does control. How the future problems that arise out of this so-called privatisation can then be seriously blamed on the usual scapegoat of the free market is beyond me. Lastly, but most importantly:

A fourth principle of privatization should not be neglected; indeed, it should take priority. Unfortunately, by the nature of the case this fourth route cannot be made into a general principle. That would be for the government to return all stolen, confiscated property to its original owners, or to their heirs. While this can be done for many parcels of land, which are fixed in land area, or for particular jewels, in most cases, especially capital goods, there are no identifiable original owners to whom to restore property... The reason why this principle should take priority wherever it applies is because property rights imply above all restoring stolen property to original owners. Or to put it another way: an asset becomes philosophically unowned, and therefore available to be homesteaded, only where an original owner, if one had existed, cannot be found.

Given that Murray Rothbard was writing about the break up Communist of the Soviet Union and its satellites, property and land titles here in Queensland may have been better maintained due to the minimal respect for property rights in comparison, so the likihood that stolen property could be returned to its rightful owners is probably higher.

Thus, a true libertarian privatisation would not allow proceeds from a public asset sale to further enrich the state. It would not place limitations on the amount and nature of shares able to be purchased by citizens. Rather, it would return property and income to its rightful owners, if they can be identified. By failing to understand the principles involved, would be defenders of the free market err and make the tragic mistake of instead defending corporatism.

 

Footnotes

[1] It essentially sold the rights to a “99 year licence for Forestry Plantations Queensland (FPQ).”

Mr Fraser said Hancock Queensland Plantations, a company managed by Hancock Timber Resource Group on behalf of institutional investors had won the right to grow and harvest the trees. The Crown plantation land on which the majority of the business sits will remain in Government-ownership.”

[2] As elucidated by Walter Block in his article “Public-Private Parternships: The Worst of Both Worlds” we see that these organisations don’t even come close to representing a legitimate company as would be the case on the free market.

“Public – private partnerships (PPP) are thus part and parcel of both fascism and socialism; they constitute a partial state ownership of the means of production. As well, they are emblematic of fascism, and government is the senior partner, and its regulations still determine the actions of these public – private partnerships.

PPPs are thus a hybrid between socialism and fascism. How do they stack up against their more economically “pure” brethren? Not too well. They have the flaws of both. The problem with both socialism and fascism, as compared to free enterprise and private property rights, is both moral and economic. As far as ethics is concerned, PPPs, socialism and fascism, are all based on coercion. They are not based on the voluntary choices of property owners, none of the three. And, as economic efficiency is concerned, these three variants of totalitarianism do not pass muster either. Mises, in his classic critique of socialism, has demonstrated its difficulties, and the flaws in the regulatory (fascist) state are too legion, and too well known, to even deserve citation.”

[3] Fortunately for the tax paying citizens the Queensland government doesn’t have its very own printing press, so the hidden path of taxation via inflation is not an option.

[4] From the article, Repudiate the National Debt:

The reason is that the two forms of debt-transaction are totally different. If I borrow money from a mortgage bank, I have made a contract to transfer my money to a creditor at a future date; in a deep sense, he is the true owner of the money at that point, and if I don't pay I am robbing him of his just property. But when government borrows money, it does not pledge its own money; its own resources are not liable. Government commits not its own life, fortune, and sacred honor to repay the debt, but ours. This is a horse, and a transaction, of a very different color. For unlike the rest of us, government sells no productive good or service and therefore earns nothing. It can only get money by looting our resources through taxes, or through the hidden tax of legalized counterfeiting known as "inflation."… The public debt transaction, then, is very different from private debt… The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract.

[5] “Any melding of public debt into a private transaction must rest on the common but absurd notion that taxation is really "voluntary," and that whenever the government does anything, "we" are willingly doing it.” See also Rothbard’s 'Anatomy of the State':

If "we are the government," then anything a government does to an individual is not only just and untyrannical but also "voluntary" on the part of the individual concerned. If the government has incurred a huge public debt which must be paid by taxing one group for the benefit of another, this reality of burden is obscured by saying that "we owe it to ourselves"; if the government conscripts a man, or throws him into jail for dissident opinion, then he is "doing it to himself" and, therefore, nothing untoward has occurred. Under this reasoning, any Jews murdered by the Nazi government were not murdered; instead, they must have "committed suicide," since they were the government (which was democratically chosen), and, therefore, anything the government did to them was voluntary on their part. One would not think it necessary to belabor this point, and yet the overwhelming bulk of the people hold this fallacy to a greater or lesser degree.