Winston Peters: It's snake oil, so buyer beware

It has long been a feature of advertising that so many of the products on sale once purchased by the consumer mysteriously fail to live up to the hype so influential to the purchase.
In the days of the Wild West in America, travelling snake-oil salesmen would appear at local county fairs offering amazing products that could cure all. Sleeplessness, acne, baldness, whooping cough, indigestion, arthritis were all a problem of the past if the buyer would only entrust his or her personal medical salvation to a pharmacy in a bottle.
The peddlers always put a time line on when the cure should take place. That time line would coincidentally be about the same as the time it would take the peddler to ride three towns away. Sadly, the snake-oil salesman was never around to share in the joy of the magical cure taking effect.
In this year's Budget, the Government signalled that it was going to enter a new round of privatisation of state assets including the announcement this week that part of the ACC account would be open to competition from private insurers.
Knowing such a policy has never been popular in New Zealand, however, its designers have chosen to call this a shift to the "mixed ownership model". Words are important, for they trigger emotional responses, so it's a given that adverse reactions are to be avoided and sympathetic responses encouraged.
Not unexpectedly, two extremes have already lined up in readiness for mortal political combat over this issue. On the one hand, there are those who believe the State should not own anything because it is incapable of efficient, effective management, and on the other those who believe the State should run everything because capitalism cannot be trusted.
As always, the truth is reposed in neither side and somewhere in between. New Zealand's recent record with capitalism is not good. Remember that Black October event of 1987 when the International Sharemarket crashed? Of the world's worst 10 crashes, six were from New Zealand, and of the worst four crashes, all were from New Zealand.
Again in 2007 to 2010, well over 40 finance houses in New Zealand went west owing, over $6 billion to mainly older investors. Which raises the question: Why should New Zealanders trust the so-called business acumen of those advocating privatisation of high-yield state assets built up by generations all the way back to Vogel's time and the birth of New Zealand Railways?
Let's examine a simple question. Is the return on infrastructure more than the cost of the debt to service that infrastructure? If so, then why would a sale be a good idea? Time does not permit an examination of all the sales totalling over $20 billion which governments since 1984 have engaged in. Just two will suffice. First, Telecom was sold to overseas interests for $4.25 billion in 1990. Since then it has made distributions to shareholders of $14.6 billion. And these interests still own Telecom, which is of real value on top of that $14.6 billion.
As Treasurer of this country in 1997, I was asked to meet Telecom's biggest shareholder, Capital Markets (America), in New York. I did. The atmosphere of the meeting was astonishing. Their only interest was whether New Zealand proposed to bust Telecom's monopoly and allow competitors in.
On my return to New Zealand, I asked Treasury to write a Telecommunications Competition paper. Within one month of releasing that Treasury paper, which supported competition, I was sacked. Twenty one years on since privatisation in 1990, Telecom still enjoys an environment of unfair competition and heaven knows how many billions have been unfairly milked from New Zealand businesses and private citizens.
Second, the Bank of New Zealand was sold to National Australia Bank for $1.5 billion in 1992. Since then, its Australian parent has enjoyed $5.2 billion in dividends whilst the BNZ's estimated value is $7.2 billion based on its 2010 net earnings of $602 million and a price/earnings ratio of 12.
So for $1.5 billion, the Australian owners were delivered a total value of $12.4 billion. No wonder the Aussies love us.
As Brian Gaynor, once a financial adviser to Prime Minister David Lange, and I suspect behind Lange's Damascus experience of 1988, wrote recently of Labour and National: "These politicians failed to realise they were establishing a domestic wealth destruction culture as wealth is mainly created through ownership rather than disposal."
Putting aside political prejudice and ideology and working on the simple mathematics, New Zealanders should be able to decide on November 26 whether two and two makes four, or some other unexplained sum.