The Dim-Post

February 4, 2012

O’Sullivan vs ‘the people’

Filed under: Politics — danylmc @ 1:22 pm

Fran O’Sullivan’s column today is about the Crafer sale and an author at The Standard classifying her ‘an enemy of the people’ for endorsing it.

I think anyone throwing around a term like ‘enemy of the people’ in this day and age should report to their political commissar for a heady dose of revolutionary self-criticism. It’s not a helpful term, because it buys into the fallacy that there’s a ‘national interest’, and that the government can make decisions that will benefit ‘the people’ of New Zealand, when mostly it’s about making decisions that will privilege certain discreet groups over others.

In the case of the Crafer farms, it’s useful for our business elite to have unrestricted access to sell their capital on international markets because they can realise maximum gains. And O’Sullivan is their most ardent admirer and able propagandist, so she’ll always endorse any policy that maximises profits for the very rich. But if you’re a small business owner in a provincial or rural setting, international ownership of farms isn’t that great because the profits will all be repatriated overseas instead of spent locally, or even domestically.

That’s the big problem with this conviction that international investment is an unqualified good – it undermines even the flawed ‘trickle-down’ theory, because the profits don’t even stay in the country where they can trickle down to anyone.

58 Comments »

  1. The value of the asset when sold is the future present value of the expected revenue streams. Further, the money raised in sales are likely to be reinvested as capital (rather than being frittered away as consumption) and that new investment could easily create domestic profits. If I sell my not-very-profitable farm to a Chinese consortium which is happy to pay 20% more than its market value, and I then invest my gains in productive New Zealand assets, how is this bad for the country?

    You speak very authoritatively, but your position doesn’t make any sense.

    Comment by Richard D — February 4, 2012 @ 1:27 pm

  2. I can’t edit my posts, but that should be the “present value of the expected future revenue streams”.

    Comment by Richard D — February 4, 2012 @ 1:29 pm

  3. The most sensible comment I’ve heard on this whole issue was on NatRadio from someone whose name I cannot recall (Katherine Ryan, a couple of nights ago) where he calmly pointed out this sale is simply a conversion of foreign debt, to foreign equity.

    i.e. Your comment re: profits, overseas, etc is a bit off. Although, I assume it’s flamebait, rather than serious commentary.

    Comment by Andrew M — February 4, 2012 @ 1:30 pm

  4. Are the current owners of the Crafar farms not foreign-owned banks? No NZ REINVESTMENT there. Scuse caps.

    Comment by Sara — February 4, 2012 @ 1:37 pm

  5. Quisling comes to mind and fifth columists.

    Comment by Minto58 — February 4, 2012 @ 1:41 pm

  6. The proceeds from the Crafer sale won’t be invested in ‘productive New Zealand assets’ – they’ll be paid to the receivers in Australia.

    Comment by danylmc — February 4, 2012 @ 1:44 pm

  7. Jesus Christ. Leave it alone.

    Comment by will — February 4, 2012 @ 2:10 pm

  8. who started the the fire then

    Comment by Minto58 — February 4, 2012 @ 2:13 pm

  9. What’s worse for New Zealand –

    (a) wages, contractors, suppliers, taxes etc paid in NZ but profits sent to China (like Crafar Farms); or

    (b) wages, contractors, suppliers, taxes etc paid in China, profits sent to NZ (like any NZ company that sources from China, say Orca)?

    Serious question.

    Comment by Rick Rowling — February 4, 2012 @ 2:18 pm

  10. Surely it’s about core-competency. China is a manufacturing economy, we’re a primary products economy (with vague pretensions to be more than that). So it makes sense for our companies to manufacture in China – we can’t beat them on price, or a whole bunch of additional metrics. But does it make sense for us to sell our primary industry to China (or whoever?)

    Comment by danylmc — February 4, 2012 @ 2:22 pm

  11. A fee simple title, that was not owned by a New Zealand entity, has been transferred to another non-NZ entity, with further caveats imposed on the new owner.

    Problem?

    Comment by Andrew M — February 4, 2012 @ 2:32 pm

  12. No problem. Except for the barely covered racism of the disaffected left.

    Comment by will — February 4, 2012 @ 4:23 pm

  13. “isn’t that great because the profits will all be repatriated overseas instead of spent locally, or even domestically.”

    You mean the Crafer Farms profits. Keep the laughs coming. Insolvent dogs breakfeast apart from the banks owing local businesses, IRD and local councils millions. In trouble with MAF & Enviroment court. Just wonderful.

    Crafer Farms and profits in one blog post. Quite good really. Am slightly surprised you don’t want Crafer Farms bailed out. That would complete the circle.

    Countries have competitive advantages in various industry, production and commerce not individual entities. Reference Team Crafer.

    Comment by Simon — February 4, 2012 @ 5:26 pm

  14. The most sensible comment I’ve heard on this whole issue was on NatRadio from someone whose name I cannot recall (Katherine Ryan, a couple of nights ago) where he calmly pointed out this sale is simply a conversion of foreign debt, to foreign equity.

    That’s a nice way to put it. But that reflects a wider reality in the New Zealand economy – the ineptitude of our business class and their inclination to bankrupt their companies, which are then bought by overseas interests. That model just isn’t working that well for us.

    Comment by danylmc — February 4, 2012 @ 6:04 pm

  15. That statement makes no sense.

    Comment by will — February 4, 2012 @ 6:18 pm

  16. If “ownership” by banks due to mortgage default is to be regarded as ‘foreign ownership”, then all such transfers should be subject to OIA investigation and miniserial approval.

    The reality as I understand it is that banks are required to hold a New Zealand Fund to cover New Zealand liabilities; so that ‘ownership’ of bank premises as well as “investments’ held due to normal trading as a bank do not need to be regarded as overseas investments. In the normal course of events, properties such as the Crafar farms would be sold to New Zealanders – wasn’t the sale controlled by the receiver rather than the bank? If New Zealand debt to the bank is repaid, it does not necessarily represent a transmission of proceeds overseas.

    The mystery is why the farms were marketed in such a way as to minimise competition, by selling as one lot. That would appear to favour an overseas investor, and possibly not maximise returns – but that is another issue.

    It is a cheap shot to accuse others of racism – I saw no such evidence in the post above – perhaps it is in your own mind, will?

    Comment by Ed — February 4, 2012 @ 6:25 pm

  17. You mean the Crafer Farms profits. Keep the laughs coming.

    Ha ha, those suckers, buying farms that can’t possibly ever make a profit because they were previously owned by Crafars… or something.

    Comment by Psycho Milt — February 4, 2012 @ 6:28 pm

  18. who is writing these dim post posts? the tag should be satire, because it makes no sense, to the point of hilarity.

    is “trickle down” (which doesn’t exist at all apparently) not just a particular case of the Keynesian multiplier? if the new owners don’t reinvest returns to fund depreciation and expand/diversify etc, you might be right, but they ain’t gonna make good returns for long. they will also need some NZ skilled labour, demand farm services (e.g. Vets, Livestock Improvement Company bull jizz if they want to be competitive with NZ milk supply). They might even provide a lower cost farm model option for domestic milk supply.

    oh, and if/when they leave (e.g. if they haven’t reinvested enough of their returns and can’t sustain the cashflow) THE DIRT WILL STILL BE THERE. That could be with improved value due to that reinvestment, or at a lower price for a good honest kiwi to afford.

    Comment by Ben — February 4, 2012 @ 7:06 pm

  19. “But if you’re a small business owner in a provincial or rural setting, international ownership of farms isn’t that great because the profits will all be repatriated overseas instead of spent locally, or even domestically.”

    Thats a value judgement not a fact. You have validated Fran’s point.

    Comment by gn — February 4, 2012 @ 7:50 pm

  20. if the new owners don’t reinvest returns to fund depreciation and expand/diversify etc, you might be right, but they ain’t gonna make good returns for long. they will also need some NZ skilled labour, demand farm services (e.g. Vets, Livestock Improvement Company bull jizz if they want to be competitive with NZ milk supply).

    So they’ll have exactly the same expenses as a locally owned (properly run) farm. The only difference being that the profits don’t stay in the country.

    Comment by danylmc — February 4, 2012 @ 8:12 pm

  21. The only difference being that the profits don’t stay in the country.

    Wrong.

    The interest expense on Crafar debt (going “overseas” to NZ banks) is now paid/written off at the end of the receivership. ‘NZ Inc’ therefore has a reduction in revenue AND expense.

    Change in net-income? Notsomuch.

    Comment by Phil — February 4, 2012 @ 9:18 pm

  22. Danyl, i am pleading that you go back to satire. otherwise Labour will become even more like NZ First.

    Comment by Ben — February 4, 2012 @ 9:58 pm

  23. The profits may or may not be physically repatriated but for the purposes of measuring NZ’s “invisibles” trade surplus the proportion of the profits owned overseas are deemed to be repatriated as they represent a future liability for the country. It sounds smart to say that foreign debt has been converted to foreign equity but the net investment position and the effect on NZ’s investment deficit hasn’t changed. This is the major problem with the proposed sale of SOEs as the effect on our investment deficit will be huge and ongoing.

    Comment by TerryB — February 4, 2012 @ 11:08 pm

  24. “…foreign debt has been converted to foreign equity but the net investment position and the effect on NZ’s investment deficit hasn’t changed.”

    @ TerryB – actually, NZ’s investment position does worsen with the sale of Crafar farms to any foreign buyer. Because debt has a finite and known cost (the interest), whereas equity has infinte profit extraction. That is, the loans on the Crafar farms will eventually be repaid for a fixed cost in interest paid, but foreign ownership means profits can be perpetually repatriated overseas.

    Profit repatriation overseas is the major source of NZ’s balance of trade problems (tho’ that has been eased by the GFC ironically), and that is one reason why there should be such keen interest in the Crafar farm sale.

    Comment by bob — February 5, 2012 @ 12:23 am

  25. O’Sullivan is their most ardent admirer and able propagandist, so she’ll always endorse any policy that maximises profits for the very rich.

    Pimp.

    Comment by Joe W — February 5, 2012 @ 12:27 am

  26. Actually, I want to expand on my last point. Think about why anyone buys an ownership stake in any business (not just the Crafar farms), as opposed to investing in debt (ie putting money on term deposit or buying govt bonds, etc).

    Investing in an ownership stake in a business is generally a higher risk (of not getting your capital back) than a term deposit or govt bonds. So you expect either a higher rate of profit, or capital gains on your investment, or a longer term of profits for your given equity stake.

    It is the latter two that are of concern (as the first is constrained by competition, at least in non-monopoly firms). In the case of farms, capital gains leads to overpriced farms that locals can’t afford to buy. The long-term (actually indefinite) profits of a foreign equity stake in a NZ firm leads to indefinite overseas repatriation of profits, which creates long-term problems with balance of trade deficits.

    So foreign ownership is actually worse than borrowing funds from overseas (unless of course the business model is so shaky that the foreign investor is likely to lose their capital, but that has other adverse impacts).

    Comment by bob — February 5, 2012 @ 12:41 am

  27. Wasn’t Key trying to scare us before the election that Labour would borrow money from the Chinese?

    Comment by sheesh — February 5, 2012 @ 1:03 am

  28. Wasn’t Key trying to scare us before the election that Labour would borrow *shit loads* of money and blow it on trinkets. There, fixed it.

    Comment by will — February 5, 2012 @ 3:43 am

  29. “It’s not a helpful term, because it buys into the fallacy that there’s a ‘national interest’”

    “the profits don’t even stay in the country where they can trickle down to anyone.”

    Nuff said

    Comment by Hugh — February 5, 2012 @ 5:22 am

  30. How is a Chinese owner doing whatever they like with the profits better or worse than a NZ 1%er using it to buy luxury imported goods and invest in overseas stock markets?

    Comment by Sam Vilain — February 5, 2012 @ 6:54 am

  31. And yet we continue to ignore the quantities of our property and business already sold to overseas interests over the previous decade – (a situation so similar to the un-criticised sale of and exploitation of land for mining purposes) – while those claiming the likes of Fran Sullivan an ‘enemy of the people’ sat curiously silent while that was going on…..

    ‘Four legs good etc. . .’ Why the brouhaha now? Fo flips sake we defer to their views on reporting here, export our human rights and pollution to China, and import their population and buy their tinny products ‘because they are cheaper’ – this protest agains farm purchases is akin to a prostitute complaining after the fact that she (or he) is suffering the indignity of getting free tickets to the theatre.

    Comment by Eric Blair — February 5, 2012 @ 7:10 am

  32. Discrete. The groups are discrete.

    There is nothing discreet about owing a Porsche. (Apparently NZ now has highest per-capita ownership of them in the world)

    Comment by Neil — February 5, 2012 @ 7:40 am

  33. And yet we continue to ignore the quantities of our property and business already sold to overseas interests over the previous decade…

    You may have heard of CAFCA? I wouldn’t say the left has been “ignoring” it. The left also generally wasn’t chuffed with Labour signing an FTA with the Communist Party of China, which has pretty much tied the govt’s hands on this.

    Comment by Psycho Milt — February 5, 2012 @ 8:21 am

  34. Can I make one or two modest proposals:

    1) Not everyone opposing the Crafer Sale is a racist, but damn… a lot of you guys do a pretty damn good impersonation of Yellow Peril dingbats.

    2) Pointing that our does not make you an “enemy of the people” – ’cause you know, a pretty reasonable chunk of “the people” are the aforementioned Yellow Peril.

    3) If you don’t like being judged by the company you keep, make better friends.

    Comment by Craig Ranapia — February 5, 2012 @ 8:23 am

  35. Lets occupy.

    Comment by will — February 5, 2012 @ 9:26 am

  36. “And yet we continue to ignore the quantities of our property and business already sold to overseas interests over the previous decade…”

    Lots of people have been unhappy with this, but it tends not to get much media attention. Like the foreshore and seabed issue became all about those scary Maori-s taking our beaches while at the same time ignoring the amount of coastline off-bounds to the public because it is owned by private interests, quite a bit of it by foreigners. But so much more sensationalist to run a scary brown people taking your birthright story than a scary rich people taking your birthright story.

    Comment by MeToo — February 5, 2012 @ 3:09 pm

  37. Shame they perpetuate the scary brown person myth thing each year at Waitangi.

    Comment by will — February 5, 2012 @ 3:18 pm


  38. The left also generally wasn’t chuffed with Labour signing an FTA with the Communist Party of China, which has pretty much tied the govt’s hands on this.

    Quite so. Phil Goff was a far greater enemy of the people in this regard than English. He also initiated negotiations on the TPP, which will mean that the government will likely be forced to abolish the OIO in order to provide a regulatory framework that treats foreign capital as equivalent. It also means sabotaging a great deal of domestic legislation on labour rights, environmental protection, and intellectual property. Yeah, Labour did us good.

    Comment by George D — February 5, 2012 @ 5:19 pm


  39. You may have heard of CAFCA? I wouldn’t say the left has been “ignoring” it.

    Insomuch as people confuse Labour with ‘the left’, that impression is a reasonable one.

    Comment by George D — February 5, 2012 @ 5:22 pm

  40. Bob @ 24 & 26, thanks for expanding on my initial point. I note that (as usual) no-one in favour of the asset sales can be bothered to address the points we’re raising – probably because to do so would involve some serious thinking and putting aside long held beliefs.

    Comment by TerryB — February 5, 2012 @ 5:23 pm

  41. That, and because it’s so much easier just to quack on about racism, xenophobia, yellow peril etc.

    Comment by Psycho Milt — February 5, 2012 @ 10:06 pm

  42. Main reason to care about foreign investment now is, I think, the upward pressure on the dollar, which is already overvalued. You really don’t want the dollar to go higher when the economy is weak, unless you have abnormal inflation or some other weird shit going on. Not saying the Crafar sales will send the NZD soaring and put more exporters out of business, but it could prefigure further purchases. Would need to think about how large purchases would have to be to make an appreciable difference. Nothing specific about China either, except inasmuch as the Chinese government is strongly encouraging investment outside of China to keep their own currency artificially low.

    There’s also some paradox of thrift argument against the sale but I don’t think it’s as big a factor.

    Comment by bradluen — February 5, 2012 @ 10:39 pm

  43. it’s so much easier just to quack on about racism, xenophobia, yellow peril etc.

    That’s right, Shearer and Peters are so not playing the race card.

    In Shearer’s case perhaps calling other people unpatriotic really is how he believes liberals should act towards those with differing points of view.

    And the lack of equivalent outrage over other purchases such as Havard University’s was merely because people weren’t paying attention.

    Comment by NeilM — February 6, 2012 @ 12:05 am

  44. Perhaps people weren;t paying attention because – oh let me count the ways. . . and please accept my apologies for asking, but I feel impelled to learn – how does one achieve ‘equivalent outrage’, and if it is achieved at which stage would it be qualified as ‘achieved’?

    sorry.

    Comment by Eric Blair — February 6, 2012 @ 7:55 am

  45. If people are worried about food security then it is a genuine national interest rather than privileging a few specific people. Everyone eats. If we lose control of our farmland to other countries who then choose to export it all we put ourselves in a position of dependence upon the international market to sell us back cheap food (which it occasionally proves unwilling to do). People who actually are in New Zealand are likely to care a lot more about maintaining a local food supply.

    In general though yes it is just the privileging of certain groups.

    Comment by Rob — February 6, 2012 @ 8:22 am

  46. Pulling the ‘unpatriotic card’ is soooo playing the nationalism card and is sooo a racist dog whistle, to suggest otherwise is disingenuous.

    Putting aside the ‘people weren’t paying attention’ spin, because it’s patently bullshit.

    What this episode has exposed is the nasty little underbelly of xenophobia inherent in the so called liberal educated left, and the wordy twisty turny attempts to pull the coat over that pasty white belly draws more attention to this dirty little secret.

    Comment by will — February 6, 2012 @ 8:24 am

  47. And the lack of equivalent outrage over other purchases such as Havard University’s was merely because people weren’t paying attention.

    Or because Harvard isn’t a front for a murderous totalitarian dictatorship, one or the other.

    What this episode has exposed is the nasty little underbelly of xenophobia inherent in the so called liberal educated left…

    Still proving much easier, then.

    Comment by Psycho Milt — February 6, 2012 @ 9:00 am

  48. When big money was invested in the USA, it was to make bigger and bigger farm units because was more profitable to run huge dairy farms and huge pig farms. This steadily eliminated the family run farms but created huge mono-culture problems. Effluent for example.
    So every decision made by this Government is aimed at “improved” returns regardless of the “side issues.” Anyone see a trend towards big money, bigger farm units, and smother individual units?

    Comment by ianmac — February 6, 2012 @ 10:09 am

  49. Speaking of US corporate farm models, as I understand they are driven off subsidised corn.

    http://www.foodincmovie.com/

    Comment by will — February 6, 2012 @ 1:18 pm

  50. Milt, it’s easier to go on about xenophobia when the left are peddling that line, yes, because it is true.

    Comment by will — February 6, 2012 @ 1:21 pm

  51. @ Eric B – ‘equivalent outrage’ is achieved by holding your breath while you type a witty blog riposte, and it is measured as achieved when the veins on your temples reach ‘talkback’ level of throbbing😉

    @ Psycho M – I wouldn’t be so sure Harvard isn’t a front for a murderous totalitarian dictatorship.

    @ Rob – yep, best example being the Irish potato ‘famine’ (which wouldn’t have been a famine if the English absentee landlords hadn’t kept exporting crops; the most recent were the food riots in North Africa/Caribbean, etc due to biofuel plantings and intl investor crop buyups.

    There is a tension there though, between nationalistic interest in ensuring food supply to NZ, and internationlist concern for all humanity – would we be okay securing our own food, while millions starved overseas? (sadly this is probably a rhetorical question, as millions do starve now and we as a nation – ie govt – don’t do a lot about that).

    @ ianmac – yeh, which raises the question of why the receivers (Key’s buddy Stiassny) are insisting on selling the Crafar farms as a block, and not individually. Smallholders can’t buy all the farms, but could buy 1, so there really needs to be business media asking questions on this. How does it improve return for creditors?

    Comment by bob — February 6, 2012 @ 2:24 pm

  52. > The proceeds from the Crafer sale won’t be invested in ‘productive New Zealand assets’ – they’ll be paid to the receivers in Australia.

    I thought Wrightsons was one of those owed money. And your point would also apply if the buyer was local.

    Comment by Ross — February 7, 2012 @ 10:53 am

  53. The cash (making up the dollars borrowed) has been long spent in NZ on putting these farms together. Fencing, Builders, equipment suppliers all benefitted long before the receivership so any discussion or wailling or moaning about whether the cash will be repatriated to Australia or wherever is like trying to change history. Where the hell do you idiots think the borrowed money went?

    Comment by DavidW — February 7, 2012 @ 4:12 pm

  54. Aren’t the same people who whinge about racism in regards to the Crafarms deal, likely the same people who had no problem with the Orewa speech & the Iwi/Kiwi billboard? If they think it’s only racist when big money is supposedly at stake, then it brings to mind the honorary whites policy of Apartheid-era South Africa:

    “Honorary Whites is a term that was used by the apartheid regime of South Africa to grant almost all of the rights and privileges of Whites to certain favored non-White groups.

    The designation was applied to Japanese people in the 1960s to assist a trade pact formed between South Africa and Japan in the early 1960s, when Tokyo’s Yawata Iron & Steel Co. offered to purchase 5,000,000 tons of South African pig iron, worth more than $250,000,000, over a ten-year period.[1] With such a huge deal in the works, Prime Minister Hendrik Verwoerd determined that it would be tactless and disadvantageous to their trade arrangements to subject the Japanese people to the same restrictions as other non-White ethnicities, since trade delegations from Japan would now regularly visit South Africa for business. Thenceforth, Pretoria’s Group Areas Board publicly announced that all Japanese people would be considered White, at least for purposes of residence. Johannesburg’s city officials even decided that “in view of the trade agreements” the municipal swimming pools would be open to all Japanese guests.[1] The designation gave Japanese almost all of the same rights and privileges as Whites (except for the right to vote, as well as being exempt from conscription).”

    Disclosure of interest: I am directly descended from the Otago Cantonese gold miners.

    Comment by DeepRed — February 7, 2012 @ 8:16 pm

  55. I had a problem with Brash’s Orewa speech. I then had a problem with Goff’s Nationhood speech. Now I thought Shearer might be different.

    In my imagination I have this vision of Labour choosing someone as leader like Obama. If the US can do it why can’t we.

    Meanwhile Russia and China continue sabotage progress towards democracy, supporting client left-wing dictatorships long after the US abandoned their own cold war right-wing proxies.

    Comment by NeilM — February 7, 2012 @ 11:08 pm

  56. In my imagination I have this vision of Labour choosing someone as leader like Obama. If the US can do it why can’t we.

    So you want someone full of empty platitudes about ‘Change’ in the pocket of bankers to run the country. Don’t we have one of those already?

    Also, not sure which reality you are living in, but the cold war is alive and well.
    It just took a 10 year hiatus so the US could parade around being the big swinging dick, and some of the players have gone up and down the ranking table.

    Proxies aplenty on all sides. Business as usual now, I’m afraid.

    Comment by Gregor W — February 8, 2012 @ 11:18 am

  57. pressing “like” button for comment 56
    Actually, if Key could drop all the AGW rhetoric, he’d be just like Obama… except that I don’t think Key has given the all-clear to assassinate a fellow countryman?

    Comment by Clunking Fist — February 8, 2012 @ 1:43 pm

  58. I hear Key and Obama are actually part of the same pod. Ya know what I mean.

    Comment by merv — February 8, 2012 @ 2:28 pm


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