Links from around the web: Is NZ backsliding?

Testing my new Bloglines clipping grabber, written in Opera UserScript, on one of the oldest clippings I have.

• Is New Zealand backsliding?

  The New Zealand story is well known. In the span of about a decade, the country went from the most regulated and socialistic OECD member to about the freest. But there have been few positive political developments since the early to mid 1990s, and a number of negative changes.

  Just a few days ago the New Zealand government renationalized the rail system for the price of NZ$1. The previous owners, Tranz Rail, had underinvested in the system and in fact stripped it of capital. Here is one bitter, anti-market account; they even complain that the private owners lived in Wisconsin, not New Zealand. Here are some earlier complaints. In response a left wing government renationalized the whole thing.

  Did privatization fail? It is unlikely that New Zealand should have a rail system in the first place. Imagine 3.6 million people living in a country about the size of California. About one-third of them live in or near Auckland. The rest are widely scattered across two (technically, three) islands. When you privatize something that shouldn't exist in the first place, you are asking for political and economic trouble. It is no surprise that the company wouldn't invest much in the system.

  Unfortunately this is not the only instance of backsliding. In late 2001 the government bailed out Air New Zealand to prevent a bankruptcy. The government put up US$567 million in return for 83 percent of the company. It was never the case that flights to and from New Zealand would cease or even dry up. But there was never any guarantee that a New Zealand company would be controlling those flights; read this whinge about a possible Qantas takeover. Again, privatization may well have been economically efficient, but it didn't deliver what people expected or demanded.

  There has long been a Kiwi "mythology" that the country, due to its flexible Westminster system of government, reformed in ways that its Australian neighbor could not. Yet the slower, more federalistic Australian reforms are now appearing to have longer legs.

  For more information on both renationalizations, see also the 2 July issue of The Financial Times.

  Addendum: A very smart New Zealander (I know him a bit) wrote me the following...