Balneus

Australian Lefty on Politics, Governance, Science and Info Management

Sarkozy’s Smart Move

Posted by Dave Bath on 2008-11-09


French President Nicolas Sarkozy’s plan to "buy back the farm", which is copping flak in livemint (associated with the Wall Street Journal), is something that KRudd and Swan should seriously consider.

Sarkozy is planning to take a significant stake in real-economy companies, many of them utilities, which will help them with a capital injection.  Prices for shares are very low, the industries are essential and require support through the financial turmoil, and the French state will make a bucketload of money in a couple of years when things smooth over.

Let’s do a table-napkin calculation:

  • Prices of stocks have dropped around 50%
  • Expect prices to normalize in 2 or 3 years
  • That gives a double-your-money in 2 or 3 years return… pretty damn good!

Australia’s sovereign wealth funds could do something similar.  Buying back the good assets we’ve sold off where we can – although they’ll have a hard time buying back most of the Australian infrastructure that is already in government hands – the Singapore government that is (via Temasek Holdings), which happily runs Australian essential infrastructure at a profit after the captives of the capitalists (both ALP and Liberal) sold us out on the theory that governments couldn’t run infrastructure efficiently.

But it’s not just about the money and propping up companies.

Without some action to stem the haemorrhaging of consumer confidence, things will fall apart.  Those on contract within Australia to provide services to government (from cleaners to consultants) are nervous about their jobs, and won’t spend, so things get worse.

By getting those services back in government hands, paying these folk less money as public servants again, but offering security, more people will be more willing to buy things, which helps those in private enterprise (like coffee shops, etc) stay in business.

I’m certainly not suggesting that each government agency get all their cleaners in house separately, but creation of a mobile shared-services agency, perhaps under Finance and Administration, does make sense.

This mirrors the recommendations of the Gershon Report which pointed out the huge inefficiencies in government IT services because we are paying bucket loads to consultants (with the cream taken by multinational consulting companies) rather than the traditional way of keeping the people and the institutional knowledge in-house.

Gershon’s report was welcomed by everybody but those tied to the large consulting firms ripping us off.  It’s logic and recommended actions have wider applicability than merely to IT workers.

It wouldn’t be anything novel either – just restoring the balance of a mixed economy that served us so well for so many decades until the free-market fundamentalists got their way.

More importantly, it’s an easy sell, especially to baby boomers who are worried about their pensions and have normally voted for conservative regressive parties in recent years: they grew up with the phrase "Buying back the farm", which referred not to the dubious practice of buying water (that isn’t there anyway), but to buying back a farm that you’d sold to become a mere sharecropper.

Such investment would also signal to private enterprise that the government expected to make a bundle from investing in Australian real-economy firms: which would also help maintain private investment.

The only trick would be to keep the buybacks in dribs and drabs, first in one industry, and then another, so that we buy them at a good price.

How can any capitalist criticize anybody, even a government, for "buy cheap, sell dear".

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4 Responses to “Sarkozy’s Smart Move”

  1. […] I’ve outlined before ("Sarkozy’s Smart Move" – 2008-11-09) buying back the farm (to be sold at a tidy profit in a few years) and giving […]

  2. […] "Sarkozy’s smart move" (2008-11-09) […]

  3. […] the current position, it’s a fantastic investment opportunity.  As I wrote elsewhere (here) doing a table-napkin […]

  4. […] No wonder how, now wonder whoKrugman echoes in favor of nationalization « Balneus on Sarkozy’s Smart MoveSorry Day 3008-02-13 Reminder « Balneus on 3008-02-13Dave Bath on OMG! I’m kinda on the […]

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