Privatisation and Varieties of Capitalism

July 26, 2009

It was inevitable that the election of a National-led government in New Zealand would provoke debate on privatisation of state-owned assets. John Key’s pre-election assurances that National planned no privatisation in its first term in government were almost provocative in their allusion to a change in policy after that.

Colin Espiner is right to describe privatisation of state assets as a key ideological divide in New Zealand politics (Stuff, July 24). This issue is a lightning rod for heated debate from both the left and the right.

It is, however, not a new debate. The heyday of the issue was the 1970s and 1980s, when perceived poor economic performance led many countries to question their economic institutions and structures. Thus Ronald Regan and Margaret Thatcher championed a vision of small government and aimed to radically reduce the role of the state in their respective economies. New Zealand had its own shake-up from 1984 to the early 1990s under finance ministers Roger Douglas and Ruth Richardson.

Then, as now, the real debate was not around whether a certain government would sell off an electricity company, or contract out state services to private firms. The real debate was, or should have been, around what form of capitalism is best for a country.

Piecemeal and partisan discussion of specific policies is, in this context, irrelevant and unproductive. Even worse, for a country to attempt to switch from one form of capitalism to another from one decade to the next is simply a waste of scarce resources. Most countries have reached a broad (but not static – drastic change is still possible e.g. Regan or Thatcher) consensus as to which form of capitalism, paired with which brand of democracy, they are most suited.

Western countries in a post-Soviet (i.e. excluding democratic socialism) world can generally be distinguished between along two main lines:

Economic: Private Enterprise Economies vs. Mixed Economies

Political: Pluralist Democracies vs. Corporatist Democracies

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