Weaning sacred cows

I know two things about Milton Friedman: his name, and that he was onto something when he said nobody spends somebody else’s money as carefully as they spend their own.

Arguments for government handouts to industry never change. Nor do results. From the 1900s New Zealand’s coal mines were gradually nationalised, and by 1950 the Crown was the country’s largest coal miner. Some mines ran at a loss to retain skills, maintain employment, and keep cheap fuel flowing for post war economic recovery. Coal heated all government buildings by law. In the eighties came commercialisation and with it State Coal became CoalCorp. In State Coal’s last year, 1986, it spent $100,000,000 on exploration and ran a loss of $76,000,000. Its total debt was $600,000,000. The nineties gave us Solid Energy, and we should’ve sold it then. Private offers in 1998 weren’t too low. Government expectations were too high. Developments like Mount Davy were abandoned upon reaching coal, and mines like Spring Creek were a financial burden until they closed. We finally left it to private coal miners, and since doing so liabilities have since been shut, and assets now operate more efficiently than ever. Had Solid Energy been sold in 1998, the taxpayer would’ve saved a great deal.

 Farming’s a similar story. Cold War conflicts put New Zealand on the sheep’s back through the fifties and sixties with the price of wool hitting the hallowed ‘pound a pound’. Oil crises, offshore competition, synthetic alternatives, and loss of traditional markets hammered meat, dairy, and fibre exporters. Farmers fleeced us with ‘we’re too big to fail’, and the subsidies flowed – Livestock Incentive Scheme (1977) encouraged farmers to carry more stock. Land Development Encouragement Loans (1978) made loans available to put scrub, forests, and wetlands out to pasture. Supplementary Minimum Pricing (1978) guaranteed prices despite reduced demand. By the eighties, 40% of some farmers’ incomes came from the taxpayer. Government support for agriculture was equivalent to 30% of its total output. With all this support gone land use has diversified and our farming sector’s efficiency worldwide is second to none.

 Be suspicious of those wanting to spend your money while telling you it’s for your own good. Whether it be farmers wanting funding for irrigation schemes that will increase their yields and private land values, or waterfront hoteliers lobbying the government to fund the America’s Cup, it’s always good enough for your pocket, but never good enough for theirs.

 Central government last year spent $111,450,000 of our taxes on marketing New Zealand offshore as a visitor destination, and $165,782,000 on recreational facilities and services. There are other fives and tens of millions here and there for cycleways and other infrastructure.

 Some councils charge property owners for tourism promotion rates which benefit a minority of businesses when really each industry should promote itself. There is no dairy, meat, or mining industry promotion rate, and nor should there be. Advertising’s worth it or it’s not. If a plumber wants to sell fireplaces, he pays, the advert goes on the radio, and you get your tip top Topper tip. Infometrics shows on the West Coast accommodation and food services employed 1,854 people in 2018/19, but MBIE figures suggest over a third were on temporary work visas. Of the roughly forty billion dollars in tourism spending (60% of which is domestic and little more than consumerism that would occur wherever a person needed to eat, sleep, or fuel up) about a quarter came from selling imports with a mark-up. Creating work for backpackers is a questionable strategy at best. Diminishing serenity at places like Hokitika Gorge is obvious. Our growing population plays a part in these pressures, but while our population has grown 42% since 1993, visitor numbers grew 300% to the year ending 2019, and until recently, were set to continue growing. We should be wary of the lust to restore that growth. I’ve worked as a guide. I liked the work. I even made a little money out of it along with lifelong friends from far flung places. But low pay and six month seasons are the reason it attracts a transient workforce. No other industry in New Zealand today receives anywhere near as much taxpayers’ money. None should. Industries can achieve greater efficiency, higher productivity, and reach a size appropriate to what they can sustain without handouts that amount to little more than crony capitalism. History also tells us the best place to start is with cutting the subsidies.

 Patrick Phelps has worked in the dairy, tourism, meat, and mining industries, and currently works as manager for Minerals West Coast.