Some of what passes for economic journalism in New Zealand is not impressive.

A case in point is this article in yesterday’s New Zealand Herald by Brian Fallow. Headlined ‘Ideology and tribalism behind questionable policy’, it poured cold water on the government’s partial privatisation announcement.

‘Ideology’?  Around the world governments of all political persuasions have been getting out of running commercial businesses for over 25 years.  Labor governments at federal and state levels in Australia, for example, have been to the fore. The only ‘ideological’ underpinning of policies in the world today seems to be the socialist attachment to ‘public ownership of the means of production, distribution and exchange’ in a few countries like Cuba – although even Cuba is changing – and North Korea, and in the policies of the last New Zealand government.

“There isn’t all that much family silver left in the cabinet.” Well, just a mere $18 billion, according to the December Investment statement, all or most of which belongs in the private sector. ‘Family silver’: is this economic analysis or politicised rhetoric?

“It does nothing to deal with the … perilously high reliance on foreign capital and credit.” This is a reference to New Zealand’s large current account deficits and increases in external liabilities under the last Labour government. These were due in part to a loss of international competitiveness as the government turned its back on efficiency-improving reforms such as privatisation.

Then the inevitable foreign ownership bogey: “once sold, it would be difficult … to prevent the new owners from selling them to foreign investors”.  No explanation is given as to why foreign investment would be a bad thing. A large part of the shareholding of companies like Telecom is inevitably and desirably in foreign hands: it would be unwise for New Zealand institutions to hold large parcels in their portfolios.

Then a real howler: “To the extent that these shares end up in foreign hands, they would increase the country’s net foreign liabilities …”  But a foreigner buying shares has to purchase them in New Zealand dollars, and the seller than acquires the same amount of foreign currency assets. The country’s net liability position is unchanged.

Fortunately, the Herald did better in an editorial the same day which supported the privatisation initiative.

Myths about privatisation abound, even though they have been debunked many times. For a rebuttal of some of them, see this report by Phil Barry.



  1. “There isn’t all that much family silver left in the cabinet.”

    To me, that was the howler from Mr Fallow. Hardly a road, port, airport, roadway, railway, airline, electricity line, generator, or water company isn’t in public ownership, and among what’s left is subject to a good deal of de facto control, especially land and housing. No family silver? Be serious, Mr Fallow.

  2. We have to bear in mind that those so called journalists in the MSM are the ones who were rejected in their applications for entry to any meaningful courses/studies when they were students. It’s obvious why they chose to do journalism. Easy entry, because the entry bar to such courses is very low or almost no pre-requisites required at all. Since they didn’t want to take a job at McDonald as flipping burgers (where they rightfully belong), they then go for journalism because its easy.

    I find Mr Fallow’s economics’ articles in the Herald almost all of them very shallow or void of economic facts. Anyway, Mr Fallow is a lefty and there is no surprise there about his recent economics misguided article.

  3. I totally agree… Brian Fallow seems to have a very shallow grasp of basic economic concepts. Bernard Hickey is even worse!

    It seems to me that the Herald has taken quite an ideological step to the left in recent times and the quality of their reporting and analysis is the poorer for it.

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