Tranz Rail buyback: why they did it

– John Edmundson

On May 5 this year the Government announced that it had completed negotiations with Toll Holdings to repurchase the rail and ferry business sold by the Bolger National government in 1993. For some, this has been seen as a great blow against the post-1984 neoliberal onslaught, characterised by a string of restructuring and asset sales carried out by successive Labour and National governments.

There is no question that the decline of rail in New Zealand has been a sorry tale. Prior to the 1984 election, Richard Prebble toured the nation, stopping in at railway workshops around the country, promising to “Save Rail”. Once in power, he revealed what that actually meant. NZ Rail slashed staff and services. Thousands of workers, and many communities, were devastated by the reforms.

In 1993, the rail network was sold for $328.3 million to Wisconsin Rail, which did virtually nothing by way of infrastructure investment. Eventually they bailed out, and Toll Holdings took over the reins.

Toll continued the tradition of spending as little as possible on infrastructure. Rather than invest in new locomotives, old engines have been brought out of retirement – retrieved from museums – to keep the system working. While Michael Cullen has voiced his opposition to state subsidies to industry, the government is repurchasing TranzRail for the inflated price of $665 million plus a commitment to an undisclosed level of debt. This is estimated, according to the New Zealand Herald, to be $235 million above its book value. Certainly Toll NZ have shed no tears over the deal.

The state could hardly do a worse job than private enterprise has done. But is the buyback really a progressive move that the left should be celebrating as a victory? Karl Marx’s close friend Frederick Engels would not have said so. Speaking of state ownership during the nineteenth century in Germany, he said:

But of late, since Bismarck went in for State-ownership of industrial establishments, a kind of spurious Socialism has arisen, degenerating, now and again, into something of flunkyism, that without more ado declares all State-ownership, even of the Bismarkian sort, to be socialistic. Certainly, if the taking over by the State of the tobacco industry is socialistic, then Napoleon and Metternich must be numbered among the founders of Socialism.

This kind of state ownership is purely a measure intended to save the business from collapse, as when the New Zealand government bought back Air New Zealand only to continue to run it in precisely the same manner. State ownership on the part of capitalist governments is carried out solely to protect an element of the capitalist system when it is in trouble or when it is impossible for private capitalists to run it at a sufficient profit.

There may be some benefits from the buyback. The government may spend some money on infrastructure, which the private owners proved unwilling to do. It may be that the state will take a more responsible approach to safety. If this happens, it will be a good thing.

What will not happen, though, is the any of the kind of socialist control that nationalisation must involve to be truly progressive. Such a socialist nationalisation, where workers control the economy and the profit motive is replaced by production in the interests of human need, can only be brought about through revolution. It will not come about through the actions of a capitalist government like the current Labour-led one. The state has proved perfectly capable, through the SOE model, of applying capitalist principles to state-owned companies. This is the model the newly renationalised rail network will operate under.

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