Cocooned in Lancashire Cotton Wool

Troglodyte Reactionary Reflex Syndrome

Mike Lee--Auckland Councillor, former Chair of the now defunct Regional Council, and left-wing true believer--has weighed in on the Ports of Auckland stoush.  His argument draws upon a spurious ideology and is parlous economic on fact. 

Mike complains that competition between the Ports of Auckland and the Port of Tauranga is doing no-one any good.  It is driving down prices and operating margins so that big business (Maersk and Fonterra) can make a killing.  The people who suffer include every Aucklander (an argument likely to be less appealing to Bay of Plenty folk than a fetid, mildewed jaffa) and, of course, the unionised work force at Ports of Auckland.  This, from the NZ Herald:

Lee, the Waitemata and Gulf ward councillor, said part of the problem was that the price Ports of Auckland received for processing containers was "significantly lower" than that received by Australian ports.  "That is simply because [of] the astute manipulation by the shipping cartel Maersk and the major shipper Fonterra," Lee said.  "They've been able to keep the price right down by playing Tauranga off with Auckland."

In ordinary parlance, Mike, it is called competition.   It is some accomplishment, one supposes, to have a socialist acknowledge that competition drives down prices.  This is usually not the case.  Most socialists argue that open market competition means that prices go up because business will inevitably resort to cartel-like manipulation of the market.  When it gains control of the market, big business will gouge out the right eye of us all. 

Now the shoe is on the other foot.  Competition is driving down costs and prices at Tauranga--it is competing aggressively to take business off Auckland--forcing Auckland to do the same.  Mike implies (but does not overtly state) that this is a bad thing because it turns these ports into commodity services.  Cheap as chips; narrow margins, parlous profits, and, before you know it, every man and his dog will be shipping containers every which way through cheap ports. 

We have heard somewhere that this is one of the great virtues of open market competition.  It lowers prices so that you end up getting more of whatever it is you sell to the point where it becomes a low-cost commodity.  If you have too much of that, living standards rise exponentially, and that would be a perfectly dangerous state of affairs. 

No, Mike argues that we need to featherbed our ports through co-operation, not competition.  To the untutored ear this sounds remarkably like a call to act as a cartel and fix market prices.  It is the kind of thing the Commerce Commission tends to frown at, just before they cripple you with punitive fines. 

Lee said there was a "race to the bottom" in container pricing between Auckland and Tauranga, which did not benefit the shareholders of either port.  The two companies should collaborate and get a higher rate per container.  "It seems to me that Tauranga and Auckland need to get together, because they are both cutting each other's throats economically, and get a world-market price for processing containers," he said.

Collaborate to get higher market prices!  Mike has just said that the two ports should break the law.  Ah, yes but collusion and cartel market fixing is terrible when they (predatory big businesses) do it, but when we, the righteous, do it, its a good thing.  When we do it, it's business that gets ripped off, and we get to suck at the nipple of Monopoly.  And that, dear friends, makes all the difference in the world, if you are socialist.  It's all about redistribution--cutting up the wealth cake differently, in our favour.

To their credit, spokesmen for the ports weren't going anywhere near that.  The last thing they want is a Commerce Commission investigation for market fixing dropping on them like seagull splatter.  They quickly pointed out the only legal way you could collaborate is for the two businesses to become one.  Not going to happen, especially now that Councillor Mike has publicly stated that price fixing would be the primary objective of such a proposal. 

Who, then, benefits from lower commoditised port prices?  Every exporter in the country.  And importer.  Need we remind Mike and his colleagues that we are a very small vulnerable trading nation, depending completely on international trade for our economic existence. 

Mike makes an attempt to give some factual basis for his aspirations to illegal activity.  He claims that Aussie ports have higher charges than we do.

An Auckland Regional Holdings study released in 2009 said Australian ports received on average about 50 per cent more for processing a container than their New Zealand counterparts.

True?  Half-true, at best.  A Ports of Auckland spokesman said:

. . . when comparing prices received per container with the prices fetched in Asian ports, Australian rather than New Zealand ports were the outliers.

Mike still has not come to terms with the reality that we trade globally and we compete globally.  He gives the impression his mind is still back in nineteenth century Lancashires cotton mills.  It's sad to see a man who presumably knows of the existence of the internet and who probably drives an automobile mentally locked in a cruel warp--to a time and place where socialism was born and people wore cloth caps.

It all has the marks of troglodyte reactionary reflex syndrome.