Thursday, 21 February 2008

Losers picking losers

It's not often Jim Anderton is on the right side of an argument, but when he accuses John Key and Bill English of pork barrel politics and a return to Muldoonist subsidies ... he's spot on.

After a dinner with managers of Southland's Alliance Group meat cooperative, John Boy and Billy Bob visited Southland a week later and pledged the group a "suspensory loan" of two-hundred million dollars to fund a mega-merger -- when or if the boys come to power.  Reports NBR:

    Mr Anderton said it would be the first subsidisation of the agricultural sector since the National government of Sir Robert Muldoon. He accused Mr Key of making policy up on the spot.
    "The result is a $200 million promise to the meat industry," Mr Anderton said. The suggestion of a subsidy to the meat sector would be in breach of New Zealand's undertakings to the World Trade Organisation and its battle to get other countries to dump similar subsidies. "We would lose all credibility," Mr Anderton said.
    The fact that a senior political figure in New Zealand was suggesting agricultural subsidies was a "big embarrassment for New Zealand," he said. Mr Anderton said the idea of a mega-meat company may have its merits, but it would stand on its own commercial case.

And so it should.  The deal offers a remarkable insight into how John and Bill view government's relationship with business -- apparently they think it's their job to "pick winners" with taxpayers' money, while they pick up their own dividend in the voting booth.

As it happens, Paul Walker from Canterbury University has two insightful posts on why governments who "pick winners" invariably pick losers; the simplest answer appears to be that it's not so much that governments picks losers, it is that losers pick on governments to help them in deals that have only a weak commercial case -- or as economists Richard E. Baldwin and Frederic Robert-Nicoud argue, "... government policy doesn’t pick losers; losers pick governments policy."

On this, see: Why do governments back losers? Two parts of an answer., and    
                      Why governments pick losers ... or do they?


  1. If there were ever a reason the National Party should not be in Government after the General Election, this is it.

    Just shameful they would seek to subsidise an industry like that.

    (I should also point out that any merger of the meat industry does not actually require subsidies of this nature as financing arrangements are already in place)

    When people say 'Labour Lite' I did not realise they meant Labour circa 1950.

  2. Love the title of this post.


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