Wednesday, 27 October 2010

“Subsidising” Hobbit enterprise? Sounds like a great deal. [Update 2]

Labour leader Phil Goff isn’t dumb. He just thinks you’re stupid.

He and his lieutenants have been out in force today saying the unions were caught in “a trap” set by Warner Brothers to negotiate a better deal from the New Zealand Government—a deal, he says, that could net them “a subsidy” of several million dollars.

This, I’m afraid, is simply spin masquerading as substance.

First of all, if there were any “trap” into which local unions fell, it was one set by Australian Simon Whipp to help make New Zealand film-making more expensive. Since Warners were all set to film here before Whipp orchestrated a worldwide ban (set to film on the basis of the conditions and exchange rates already in place) all Warners have done now is take advantage of the disruption to see if they can negotiate something better.

And why wouldn’t they?

But what they’re negotiating isn’t a “subsidy,” it’s a tax break.  To describe a tax break as a “subsidy” is no more honest than to call what a burglar leaves behind a “gift.” 

It’s been objected that it makes no sense to offer tax breaks to get companies doing business here because there’ll be no revenue gain to the New Zealand Government.  Anyone saying this is more dumb than they look.  If companies come here and pay no tax at all every single person in New Zealand will still be richer by to the extent of the capital they do invest here, and by the jobs and wealth they create. And the extent they’re not stolen from by the tax man is the greater extent to which they’ll actually be able to create new wealth.

The objection to that I heard voiced this afternoon is that if Warners, or other foreign companies get a big tax break like this, then pretty soon every company thinking about working here will be wanting them.

And why wouldn’t they? Hell, even the numb nuts who object to any tax breaks being offered at all at least recognise it will make the company more profitable.

But since the reason everyone will be wanting them is because it will make them that much more productive (especially if they can re-invest here without fear or new impositions by the grey ones) I don’t see the problem.  Instead, I see potential.

What I suggest is that the New Zealand Government actually embrace this idea. Recognise that every company would like to be free of such restrictions, and embrace the idea for everyone, not just for Warners.

Use this as a kick-start for something real.

Start small. Start perhaps by declaring Enterprise Zones wherever Warners work—let’s start with Miramar and Matamata and anywhere else starting with ‘M’ in between—and announce that whatever tax breaks Warners get, and let’s whatever we do make them generous, that same deal would apply to anyone else working there, whether foreigners, NZers or anyone arriving from Mars.

Pretty soon, everyone working in those Enterprise Zones will be as rich as Croesus, and eager to work and re-invest here. (Well, everybody but the tax accountants in Matamata and Miramar, who will have to move away to seek work elsewhere.)  And everybody else in New Zealand will be able to reap the benefits of that greater wealth creation, to the extent of the much greater capital that can be re-invested here to create even more wealth.

How could anyone possibly object?

Hell, it worked for China.

UPDATE 1: You see, it solves so many political problems.

No-one can claim that the Prime Minister is offering special favours to a foreign company. What he’s doing is offering general relief for any company of whatever origin who wants to take advantage of these Zones to be Enterprising.

And while Helen Kelly objects that NZ would “lose sovereignty” if it accedes to demands from a foreign company to “trash” the employment law that protects NZ workers, it might perhaps be pointed out to her that if these Special Economic Zones were to be set up (with, perhaps, a nomenclatural tip of the hat to the Chinese success story) then no New Zealand worker would be forced to work there—all the rest of New Zealand, with all its present employment restrictions, will still be open to them.

New Zealand workers, however, being no dumber than any others, will realise very quickly one which side of their bread their employment protection is buttered, and by whom, and would undoubtedly begin stampeding very rapidly towards these Zones in search of work.

And who could blame them?

Except for Helen and her ilk who, to remain true to her principles, would have to stand astride their path yelling stop. Which would put all the naysayers like Helen quite evidently on the side opposed to workers making themselves better off.

Which is to say, in the same position as she is now, only more clearly.

UPDATE 2: Here’s some other of the sort of rubbish these Enterprise Zones can nix.  Let’s get Chuck into Miramar damn quick:

Hat tip Stephen Hicks.


  1. This is a comment about the claim that this was a "trap" by the studio, and is not related to your other arguments.

    The union, or rather it's organisers, acted incompetently. But it is important to realise that NZAE never actually instigated a boycott against "The Hobbit". They released a statement advising their members not to sign any contracts until the union had negotiated a collective agreement. This is quite different from a boycott, as the union would not have taken action against any individual who wish to sign a contract. It was advice only, not an order. Simon Whipp on the other hand, asked the SAG to support the action, and it was they who issued a full no-work order. He did this in the name of the NZAE, but without an actual mandate from it's members. There was no NZAE vote to boycott "The Hobbit". Simon Whipp, and the useful idiots who let him speak for them are to blame for that aspect of this fiasco.

    What this means, is that although the union officials acted incompetently, the threat of further industrial action has been overstated, and I think the studio is aware of that. In principle at least, a threat to take filming off-shore never really made sense because the SAG is an international organisation, so the only actors who were not boycotting the movie were actually in NZ. The studio would not have wanted to annoy all the unions who are a part of the guild. Since the union has agreed that there will be no further action for the entirety of the filming, and since the government is looking at altering the law prohibiting collective agreements (or at least changing the definition of a contractor vs employee), there is practically zero chance of further disruption.

    ..and what that means is that the studio's desire to negotiate for further incentives has very little to do with the union's actions. The amount of money lost while waiting for the dispute to be resolved most likely does not come close to what they're asking for. They've simply taken advantage of the situation. John Key even mentioned that the strong NZ dollar was a factor in the discussions, which is hardly the fault of the union.

  2. "...They've simply taken advantage of the situation...."

    Well, yes. Which is precisely what I say above.

  3. So you did :) Thought I'd just add some detail, and justification for the idea that it actually has little to do with the union now.

  4. "But what they’re negotiating isn’t a “subsidy,” it’s a tax break."

    Still looks like "picking winners". Why not give the tax break to all firms in NZ by, well ...., cutting taxes, that would a tax break and not picking winners.

  5. One Key to rule them all,

    One Key to find them,

    One Key to bring them all and in

    the darkness bind them

    In the Land of Miramar where the Shadows lie.

  6. Ironic for Hellen Kelly to refer to "losing sovereignty" when it was them who started this off initially with an Australian group...

  7. Follow the Chinese model, set up six free trade and investment zones with extensive tax exemptions (let's call them Southland, West Coast, Wairarapa, Taranaki, Gisborne/East Cape and Northland), foreshadow that another four will be created in three year's time. Cut government spending to match, declare the next four zones will be ones that have councils that will also cut spending and taxes to match, and watch them compete for it.

    The main centres will end up being last, but in the meantime will be surrounded by areas that are internationally competitive.

  8. A great post PC.
    Constructive ideas.
    Well done.


  9. Christian Libz28 Oct 2010, 11:49:00

    The story of Chuck in that video above is exactly what Sarah Palin has been a main theme in her recent speeches when she appeared in rallies that support various GOP candidates for next week's election. The message is:

    Get the government out of our way

    Palin for President in 2012.

  10. Palin campaigned for TARP in
    2008. She doesn’t have a clue.

  11. Christian Libz28 Oct 2010, 22:32:00

    Simon, humans learn as they grow or as time progresses. What you did when you were a kid, you probably don't approve of them now. Your views had changed and you would be fuck'n lying if you say otherwise.

    So, tell me who (in the US) has a clue? I bet that you would fail to come up with one.

    Ask Peter Creswell to tell you which politician in the US that has a clue? I bet that he won't & cannot find one. In real life, you live with what you have and not wish for things that you don't have (utopia). That's what reality is all about. Sarah Palin is adapting/learning fast and she's the one (& Ron Paul) that is closest to Libertarian ideologies. Who is 100% Libertarian in Washington? Please find me one. You will struggle.

  12. Christian Libz28 Oct 2010, 22:57:00

    Simon, watch Sarah Palin's speech here (her Reaganism):

    Sarah Palin at RNC Victory Rally 2010 - Orlando, FL

    Was Reagan a christian? That's beside the point, but Reagan wasn't really a 100% Libertarian or an Ayn Rand follower either. But what's so special about him? Listen to what Sarah Palin's speech and you get what I mean. Palin is not 100% Libertarian and neither Reagan. They're both christians. Reagan not so strong as Palin, but their political beliefs are pretty much the same. Look up Reagan's public speeches on youtube and you're guaranteed to find and hear most or all of them, quoting God Bless America at the end. Again, that's beside the point whether he ended his every public speech with God Bless America or not, but Palin's beliefs are almost the same as Reagan.

  13. “So, tell me who (in the US) has a clue? I bet that you would fail to come up with one.”

    Karl Denninger
    Mike Shedlock
    Robert Wenzel

    Top flight economic commentators who between have endorsed a dozen or so political candidates over the last 6 months. I am not a Lib but you would find that Robert Wenzel is closest to the Libs. He is very good on the ABCT. Got onto Robert Wenzel via Not PC link here to Bob Murphy. Murphy (who is a Lib Christian) is pretty good but it seems he keeps his cards close to his chest.

    There a quite a few others. If you are a Christian Lib I will find the link later to a guy that gave a good Tea party speech where he said he found the bible and it changed his life. He then said he later read another profound book and it also changed his life. The US constitution. He has got a good web site.

    Sarah Palin is an opportunist vegetable. The banks need to go into receivership which is why the anti-TARP Tea party originally formed. America wont even start to repair the damage until the banks go under. Hardly anyone in the GOP is talking letting the banks go under.

    The Tea Party has been hijacked by the GOP. The GOP is owned by the financial services industry. No one in the GOP is going to stop that clown Ben from printing money. This election will change nothing.


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