Title: Full Circle: rail industry privatisation in New Zealand and a new theory of its fundamental conceptual weaknesses
Abstract: This paper describes how the privatization of state-owned assets, defining characteristic of the 1980s, was not restricted to the United Kingdom. In New Zealand, the Labor Government that took office in 1984, was committed to policy, which was known at the time as corporatization, converting government departments and other agencies that had commercial functions into proper commercial entities and then privatizing many of them. The railway operation had already been converted to commercial structure, in 1982, and it was eventually privatized in 1993. However, it was how the markets in which the railway operation worked that would later prove to be a bridge too far‟ for the railway‟s privatization. Although the network had not been split apart in the sale process as it was in Great Britain, the whole company eventually had to be saved from bankruptcy and it has now been repurchased completely. The purpose of this paper is to examine the situation in New Zealand, and then to compare it with other industry privatizations that have worked. This paper will argue that the critical difference between rail and other formerly nationalized industries lies in its subsidy requirement – what people are prepared to pay for railway services, only rarely bears any relation to what those railway services cost to provide – and further, that those services are provided by an effective monopoly. It is the combination of these two aspects that proved fatal for the New Zealand rail privatization.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
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