Electric Rhetoric: Sneering Instead Of Thinking

Listener 17 July 1999

Keywords: Business & Finance; Regulation & Taxation;

Concerned with what he thought was the excessive influence of women in New Zealand poetry, Rex Fairburn, writing to Denis Glover in 1934, described them as the “menstrual school.” It was a silly gibe – an adolescent using words not then mentioned in polite company. The rhetoric was unforgivable, if far too typical of the New Zealand vice of pigeon-holing one’s opponents with a superficial personalised witticism, rather than cogently facing the issue being debated. That is exactly what a recent editorial of The Dominion did when it accused minister of energy, Max Bradford, of a “Return to Muldoonism”.

For those who came in late – most of us – the electricity distribution reforms began about a decade ago. First, the publicly owned local supply companies were corporatised, followed by mergers and widespread privatisation, often to foreign owners. The government reduced its involvement in the electricity supply by selling off some of its generating capacity and splitting Electricorp into two, saying it would not sell off the smaller Contact. Later it split the residual Electricorp into three, saying it has no plans to sell them, and privatised Contact instead.

Meanwhile, for the story is a messy one, the government at last noticed that owners of the lines to most homes and businesses had a natural monopoly which could be used to give a competitive advantage in the supply of energy. Legislation was passed which restricted the companies to either lines or energy. The line companies remained a monopoly, so Bradford has legislation before parliament which would give the Commerce Commission the ability to control the line companies’ prices. In particular the Commission is likely to impose a “CPI-X” regime, in which prices are permitted to increase in line with inflation less an amount of X, forcing the line companies to seek productivity improvements of at least that rate. It may be a form of price control, but it is not the old “cost-plus” formula.

I have left out complications out (such as an oversight in the treatment of home electricity meters), for there is a more salutary lesson. Suppose a decade ago, Bradford, knowing what he knows now, had embarked upon the reforms. He may well have chosen the same final destination, but he would certainly have taken a different path from his predecessors. Even at the time, the reforms seemed driven more by ideology than by an understanding of how markets really work. Ministers before Bradford, then a backbencher, blitzkrieged the changes through parliament and ended up with the shambles that Bradford has been trying to clear up. (The perpetrators of the faulty path were his own government, so Shipley’s new-look ministers cannot blame the old-look ones for their messes. No wonder any eight year old government looks exhausted.)

Into this complexity strode The Dominion, strong on the ideology which got the distribution industry into a mess, but weak on economics. (The editorial does not even mention “natural monopoly” or related concepts such as “common carrier”.) It thundered “Muldoonism”, its bombast missing the real issues.

Rhetoric such as Fairburn’s tore Robin Hyde between her solidarity with the other women poets, and the insistent demands of her muse. Perhaps a less divisive and more supportive environment might have prevented her untimely death by suicide (in 1939 when she was 33). Her just published long (and long lost) prose poem, The Book of Nadath, demonstrates what an extraordinarily innovative and (yes) great poet she was. Had she survived, she might have modified the course of New Zealand literature. But the New Zealand practice of adolescent abuse instead of analysis did not encourage her talent.

Max Bradford is not a Muldoonist. Anyone who has followed his career, and his generation, knows that is an inane claim. It is all the more mindless when it is realised that “CPI-X” regulation of natural monopolies is considered internationally the state of the art, used widely overseas, and was first used systematically in Britain in the 1980s. If The Dominion were consistent it would apply the term “Muldoonism” to Margaret Thatcher.

Note: The family of Rex Fairburn wrote in a letter in The Listener (14 August, 199) that they thought I had been unfair to the poet.