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Howard’s End: You Can't Call Me stupid!

Over the last ten days or so, newspapers, TV and radio have really started to beat the drums about our economy and the so-called brain-drain. Headlines such as "slippery slope" and " crisis" abound. But I smell a rat - you can call me old, but you can't call me stupid! John Howard writes.

It's truly remarkable that the media, who were so adamant in the 1980's that we must privatise and sell our assets - there is no alternative (tina) - are now starting to talk us into offering incentives, tax breaks, subsidies and government/business partnerships so that companies will invest here and "help" us solve our "crisis."

Having been stripped of our major publicly-owned assets because of the 80's "crisis", it seems that we are now to be pick-pocketed yet again for taxpayer subsidies to help solve another "crisis."

It seems to me that these people are pretty good at setting-up a crisis and then offering the solution. Of course, they mean it's our "crisis" - not theirs, and we rush from one "crisis" to another.

Patrick Henry said, " The best of all business is politics. For a grant, a subsidy, a franchise, a tax exemption, or loan is worth more than the Kimberly or Comstock lode. It requires no effort for its exploitation."

Read that again - and understand it.

Just how good was business in the 1980's and early 1990's in helping us solve our problems? Bloody awful!

Many of those who benefited most from the earlier privatisations took the money off-shore. Moreover, around $70 billion of our current overseas debt is held privately but that money has not gone into manufacturing businesses, but into property.

So, after privatisation the profits weren't invested back into New Zealand manufacturing but into property and, furthermore, business didn't create the Sunrise industries or other companies NZ needed to continue growing.

Of our $ 7.1 billion deficit, $1.5 billion goes overseas to pay the owners of "our" companies. Which means we have a two-edged sword - even if we improve, the deficit gets larger.

But just a minute - other countries are providing tax breaks and subsidies. Look at Ireland, I hear you say.

Right, but Ireland is tied to the massive market of Europe and the euro in a big way, and that's not looking very healthy at the moment. The same unhealthy financial situation goes for the rest of the world - including America.

Most people who study the global economy know that since February the investment yield curve has become inverted which means, like on every other occasion in history, that the world is moving into a recession phase - probably about May-June next year.

It usually takes about 4 to 6 quarters for the inverted yield curve to turn into recession - barring artificial propping-up which is what Greenspan is doing with the Fed liquidity at the moment. The real saving grace, certainly from US recession, would be oil again at $US12 a barrel - fat chance. And commodity prices are still on the rise.

Soon investors, particularly the US, will become desperate themselves, so let's not panic and start throwing taxpayer money at incentives and subsidies for investors and companies who will shortly be looking for safe havens - just like New Zealand.

And remember large companies and money today, is very fluid - here today, gone tomorrow.

The world is maxed out on debt and already there are signs that overseas companies are starting to look to NZ.

That's because of the excellent value of our low dollar to them, our low wage economy and our excellent infrastructure and culture - we don't need to sweeten the pot with incentives or subsidies any further at this stage, or be panicked into making irrational decisions.

Tony O'Reilly of Heinz-Wattie fame moved his factories out of Melbourne and Japan to Hastings - why, because he can likely see the writing on the wall and he isn't stupid.

I want to paint you a scenario - If you had a pretty good idea that your investments or business was starting to look shaky in say, Europe or America, wouldn't you be looking around for another country who was in a mood of desperation, had been ideological pure, but was now talking about offering incentives, tax breaks and subsidies - free money!

Not only that, but the government was actually inviting you, and 70 others like you, to meet with the Prime Minister and a whole host of other ministers in a private and confidential business seminar under Chatham House rules at the end of October to talk about ways "you" could help.

And furthermore, the government was now prepared to enter into public/private partnerships with you which means that you could likely get your hands on something like public water supplies or sewerage schemes. Why, it would almost be like owning your own money tree with your hands permanently in the pocket of the public.

What would you do? - You'd be at the seminar with bells on!

I propose an acid test which the government should put in front of those business people - You can't own our basic infrastructure assets but we'll give you a tax break or incentive. Any profits you make, however, must be invested back into manufacturing or hi-tech businesses which will create new jobs throughout NZ. You cannot take the profit or any other benefits off-shore.

Then we'll see just how many of them want to invest in our country to "help" us out. I'm rather hoping I might be surprised but then, I'm an optimist.

Look, if you've got a good idea there is plenty of money around in venture capital right now, and government is already helping the little bloke with their small, but great, idea.

At this stage, we don't need to offer tax-payer-funded tax breaks and incentives. Let's just wait another six months or so, and then review it.

However, I'm betting the media drumbeat for tax breaks and incentives for business and investors because we're in a "crisis" will continue and even get louder.

Today, it seems to me there are three more lessons for life: - nothing happens in politics by accident - follow the money - and media owners manipulate public opinion.

© Scoop Media

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