Running Us Off The Rails

LET’S BEGIN WITH THE FERRIES. The decision to pull the plug on the iRex project was one of the earliest – and stupidest – decisions New Zealand’s new conservative coalition government would make in the first year of its parliamentary term. And that stupidity was only compounded as the year wore on.

What began as a pour encourager les autres moment – driven by National’s determination to show the country it was serious about cutting public spending – has turned into an administrative and fiscal calamity. The Finance Minister has exposed herself as an economic cretin. The Coalition partners have proved themselves incapable of agreeing on anything even vaguely resembling a coherent response to the consequences of their own folly. While the long-suffering taxpayer, whose relief from a succession of infrastructure budget blow-outs served as the pretext for Willis’s ill-fated intervention, is beginning to understand that the ultimate cost of canning the iRex Project is likely to exceed, by some margin, the cost of allowing it to proceed.

Largely unexplored (or should that be downplayed?) by those covering the ferries debacle is the not inconsiderable problem of New Zealand’s commercial reputation. This country signed a half-billion-dollar contract with Hyundai Mipo Dockyard (HMD), the South Korean shipbuilders, for two state-of-the-art rail-enabled ferries. This was a bargain-basement price, for which KiwiRail’s negotiators should have been congratulated, not condemned.

In her fatuous accusation that KiwiRail had irresponsibly opted for a Ferrari instead of a Toyota, Willis got it precisely back-to-front. What New Zealand had actually secured were a couple of Ferrari-standard ferries – at a Toyota price.

In unilaterally tearing up KiwiRail’s money-saving contract, Finance Minister Willis has signalled to the world that New Zealand’s signature on an agreement means nothing. No one living in the world’s grown-up countries will accept the excuse that this was not a government deal. KiwiRail is a state-owned enterprise: the clue to who stands behind it is in the name. That the government of this country can no longer be trusted to keep its word should be a cause for much greater public concern than has been demonstrated to date.

New Zealand will pay a high price for pulling out of this deal – just as it did 64 years ago when the Second National Government tore up the contract its Labour predecessor had signed with British and American interests to establish a large cotton mill outside Nelson. The current estimate for HMD’s break fee is around half a billion dollars, meaning that New Zealand will be left dangling on the hook for something approaching a cool billion dollars – with nothing whatsoever to show for it. And it still has to replace KiwiRail’s ageing fleet of ferries and upgrade the portside infrastructure required to support their replacements.

It is worth pausing here to contemplate the fact that pollsters repeatedly report that New Zealanders have much more faith in the National government’s ability to manage the economy than they do in the Labour Party. But when was the last time Labour tore up a commercial contract with New Zealand’s name on it? When was the last time Labour arrogated to itself the extraordinary powers of the Coalition Government’s “fast-track” legislation?

These are not the actions of serious people. Indeed, the last time economic decisions were fast-tracked in the manner favoured by Associate Minister of Finance Chris Bishop, was back in 1982, and the fast-tracker involved was Robert Muldoon.

This was the very same Robert Muldoon who, as one of a group of freshmen back-benchers calling themselves the “Young Turks”, was principally responsible for inducing Keith Holyoake’s government to tear up the contract for the aforementioned Nelson cotton mill back in 1961. Though it’s hard to believe, Muldoon’s need for fast-track legislation in 1982 was born out of the exigencies of his government’s “Think Big” projects – an industrial development strategy stolen directly from the second Labour Government’s import substitution programme of 1957-60. A programme which had included – you guessed it! – a cotton mill situated outside Nelson.

When it comes to economic management, National should not be taken seriously.

Serious economic managers do not expose themselves to the accusation that in making critical economic decisions – like safeguarding and future-proofing New Zealand’s inter-island maritime transport services – they allowed themselves to be swayed by the arguments of the road transport lobby.

The trucking companies are in direct competition with KiwiRail and will welcome the demise of a rail-enabled inter-island ferry service. For the road transport lobby, the canning of the iRex Project thus represents a significant commercial and political victory. Unfortunately, it comes with potentially devastating consequences for New Zealand’s rail transportation system in general, and KiwiRail in particular.

Not that the National Party needs very much persuading to place the interests of road users above rail users. Arising out of an unedifying blend of ideological and psychological impulses, National’s hatred of rail has driven its transport policies for the best part of a century.

By its very nature, rail transport confers benefits that are primarily public, rather than private. Trains are vastly more efficient at moving large quantities of goods than trucks. That this fact is so often obscured by the road transport lobby is because the latter are so very good at hiding what economists call “externalities”.

To be even remotely as efficient as trains, trucks need to be huge. This forces them to use vast quantities of fossil fuel and causes them to chew up the nation’s road surfaces. Their size and weight also makes them extremely challenging for other road users. The trucking companies argue that the cost of these adverse externalities are met by road user charges. While partly accurate, the larger truth remains that road user charges would not be necessary if the nation’s principal freight burden was carried by its much cheaper, safer, and more climate-friendly rail network.

To offer themselves as the more efficient freight option, road transport operators need the rail network to present a public face that is anything but. From the moment the road transport industry began to be deregulated in the 1970s, its promoters have made it their business to persuade the National Party to starve the railway network of investment, and connive in its decay to the point where people dismiss it as a “nineteenth century technology” – irrelevant to the twenty-first.

They were pushing on an open door. From an ideological perspective, the automobile is the quintessential capitalist artifact. It further freed the individual from the limitations of the horse, and continues to liberate him from the enforced collectivism of public transportation. Indeed, it is difficult to imagine capitalism developing in the way it has without the automobile. As the world attempts to mitigate and adapt to global warming, the central role played by the industries that keep our cars on the roads acquires an ever-sharper focus. Curbing the automobile means curbing capitalism.

Cue New Zealand’s Transport Minister, Simeon Brown. His love affair with cars, cars, cars, and the roads, roads, roads they run on, borders on the monomaniacal. Like a little boy varoom, varoom, varooming on the carpet with his toy cars and trucks, Brown demonstrates with particular force the automobile’s symbiotic relationship with the human male’s hunger for power and control.

No real man lets another human-being drive him anywhere, or allows himself to be restrained by petty rules and ridiculous speed-limits. That socialists and their Green doppelgangers prefer trains, trams, busses, ferries and, God help us, bicycles, comes as no surprise to Simeon. Defending capitalism, and allowing citizens to drive really-really-fast, are pretty much the same thing to him.

The ferries debacle, like so many others, arises out of the forty-year worldwide failure of governments to spend the large sums of money needed to keep the capitalist economy they prize so highly functioning smoothly. This failure is driven by the sheer cost of modern infrastructure and the all-too-evident inability of private companies to make the supply of collective goods return a reliable profit. This is a particularly irksome failing, not least because it turns infrastructure maintenance and supply into a core public responsibility, to be paid for out of the public purse and, given the cost of modern infrastructure, higher taxes

Which brings us back to where this discussion began. A year ago, Nicola Willis, fresh from the hustings, was determined to deliver her party’s promised tax cuts. But, the cost of the infrastructure needed to ensure an effective and efficient inter-island passenger and freight service for the next 50 years made those tax-cuts an economic and fiscal non-starter. Unlike her conservative predecessors, however, Willis refused to acknowledge the reality that not only is taxation the price that we pay for civilisation, but also for an economy that works.

What did Willis do? Unwilling to abandon her fiscally reckless promises, Nicola chose instead to do what the Nats have always done – run the country off the rails.

Chris Trotter is New Zealand’s most provocative leftwing political commentator, with 30 years of experience writing professionally about New Zealand politics. He identifies as a “libertarian socialist” and now writes regularly for the Democracy Project, producing his column “From the Left”.

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