The Privatisation of Telstra
This article argues in favour of the privatisation of Telstra, with a defense of private property in general and an application to Telstra.
Private Property and the Right to Life
Private Property is an extension to the Right to Life. Perhaps Ayn Rand said it best, “The right to life is the source of all rights – and the right to property is their implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life1.”
The Myth of Public Ownership
Property cannot be publicly owned. Ownership is the right to use and dispose of property. Government ownership means that certain politicians own the property, as they are the ones who direct the use of it. The man attempting to sell his public ownership rights in Telstra would not get very far.
Public Ownership Consumes Capital
Politicians have no incentive to maintain the capital value of property because they have no security over the capital value. A politician can be replaced at the next election. The politician has an incentive to spend Telstra dividends on his own government programs before his opponent is elected into power and takes control of the property. In contrast, the private owner secure in his property can reinvest his returns in the knowledge that the capital value produced is his to keep.
Public Ownership and the Generation of Conflict
Government ownership generates conflict. Witness the argument between politicians and lobby groups; between those who are subsidising benefits and those who are lobbying to increase the benefit they receive, each party having an equal say in the use of the asset but none of them being able to dispose of it.
Private Property and Economic Calculation
Private property is vital for the rational allocation of resources. Rational allocation is impossible without market prices. Market prices can only be generated if different owners of property are engaging in exchange. If there is no market for a resource, there is no way to determine costs or estimate future revenue. Not being able to calculate price means that producers would not be able to know what to produce or how much. Neither would producers be able to estimate the most profitable method of production. Murray Rothbard in Man, Economy, and State (1962) wrote that, “as the area of incalculability increases, the degrees of irrationality increases, misallocation, loss, impoverishment … become greater. Under one owner, … there would be no possible areas of calculation at all, and therefore complete chaos would prevail2.”
This would be the case under socialism. Karl Marx wrote that, “the theory of the Communist may be summed up in the single sentence: Abolition of private property3.” The Communist Manifesto also calls for the, “Centralization of the means of communication … in the hands of the State4.” As an interesting aside, the citizen in the socialist commonwealth would not be able to experience the satisfaction of owning his own personal copy of ‘The Communist Manifesto’.
The Remaining Government Owned Shares
Why should the remaining government owned shares be sold to private owners? Ludwig von Mises wrote, “Every step that takes away from private ownership … also takes us away from rational economics5.” Every piece of government ownership introduces an island of chaos into an otherwise rational economy.
The Telstra 2 Share Offer document says, “the Communications Minister may direct the Company to act in ways that benefit the public interest even though those actions may not be in the best interests of Telstra’s other shareholders6.” So the investor’s capital in Telstra can be consumed by politicians rather than be applied to satisfying consumers.
Also because the government’s interest cannot be reduced, “Telstra cannot introduce a dividend reinvestment plan or raise new equity capital without Commonwealth participation7.” Therefore, the directors have less flexibility to change the capital structure of Telstra to adapt to the prevailing business and investment environment.
The Question of Regulation
Some say that Telstra should be privatised but regulated to provide some ‘minimum standard’ to those in country areas. That is, to force Telstra to perform unprofitable services. For example, using hypothetical numbers, to install a phone for $500 when the service actually costs $1500. But where does this extra $1000 come from? It must come from either shareholders of Telstra or taxpayers.
This suggestion of legislating minimum standards in country areas is consistent with the socialist motto of, ‘from each according to his ability to each according to his need.’ In this case the person with the ability is the taxpayer or Telstra shareholder, and the person in need is the rent-seeking farmer. It is an example of those people living in country areas using government as a vehicle for theft, an otherwise illegal act.
References
1 Rand, Ayn (1963) Man’s Rights, in ‘The Virtue of Selfishness’, p 110
2 Rothbard, Murray (1962) Man, Economy, and State, p 548
3 Marx, Karl and Friedrich Engels (1872) The Communist Manifesto, p 96
4 Marx, Karl and Friedrich Engels (1872) The Communist Manifesto, p 104
5 Mises, Ludwig von (1920) Economic Calculation in the Socialist Commonwealth, p 13
6 Telstra Corporation Limited (1999) Telstra 2 Share Offer Document, p 19
7 Telstra Corporation Limited (1997) Telstra Share Offer Document, p 47
© Danny Haynes
Wong PoKér Hu, 10 November 2005, 10:34:
I consider this post as scholarly on two points; the quality of information and the citation of credible sources. Ever since the theory of privitization was introduced, a lot of criticisms accompanied it. The most common is that the government is loosening up because of the burden of nurturing a company. The most glaring issue here is that several key government industries are privitized because of financial and management woes.MichaelC, 28 October 2010, 16:22:
Helpful post. Thanks.
http://www.la.org.au/opinion/251010/qld-government-asset-sales-more-state-theft#comment-92