Dirty Money

Ten Kilometre Chain Gangs

An unexpected outcome of secularism taking control of our society is lots of belly laughter.  There is  no shortage of material to lampoon and ridicule. 

One inanity which has generated a great deal of raucous mirth over the years has been “private-public partnerships” or “public-private partnerships” (depending on whether you are representing the gummint or the people).  These partnerships have come into vogue in a few western countries in recent years as the socialists running things have realised money was running out.  Faced with electorally disastrous options, they have scrambled to find new sources of capital.  Cutting spending was the least palatable option–elections are won or lost on the weight of bribes offered.  More borrowing was an equally hazardous route.  Rising borrowing levels and printing money risk taking countries to the brink of credit downgrades which have lots of bad consequences for voters. 

It was Margaret Thatcher who tartly observed that socialists eventually run out of other people’s money.  And so it is coming to pass.  But wait–what about public-private partnerships, or “PPP” for short, or if you are way cool, “P3”?
  A new motorway or hydro dam needs to be built.  No money in the kitty?  Well, what about getting nasty capitalists to stump up with the investment, in return for a guaranteed return for twenty years or more, to be paid for by the income generated off the new toll road or electricity supply?  Win, win, win for all parties.

It was just such capital constraints in New Zealand led to the former Labour government approving private-public partnerships for “infrastructure assets”.  But, oh so sadly, none ever got off the ground.
  The nasty venture capitalists were way too smart.  They looked at the fine print and decided that the return the government was prepared to tolerate in no way compensated for the amount of capital required and the attendant risk.  Labour governments in general hate the very thought of someone making a profit.  To the Borg-like mindset of the Left, any profit whatsoever means exploitation of workers–both directly and indirectly.  Everything–everything, mind you–runs better if it is state owned.  So, the initial foray into PPP in New Zealand produced no issue and the womb remained barren.  The Left celebrated this as a great success.  Nothing significant was built, but to the purist no money is better than dirty money, and a capitalist’s capital is always dirty.  

Things have gone little better under the current National administration.*  But very so often a project so small to be beyond the attention span of the Chattering Classes gets through.

New scanner to increase MRI capacity

26 October 2014

Radio New Zealand News

Many more people at the top of the South Island will have access to an MRI scanner because of a public-private partnership.

The Nelson Marlborough District Health Board has reached an agreement with Pacific Radiology Group to install a new magnetic resonance imaging machine at Wairau Hospital in Blenheim.  The agreement calls for a portable building to be attached to the hospital’s radiology department, meaning both private and public patients will have access.

The scanner will be available to the district health board for four half-day sessions a week out of 10 sessions, increasing the district’s MRI capacity by 80 percent.  Pacific Radiology chief executive Dr Lance Lawler said it was a good example of how balanced public private partnerships can solve the problems of access to high tech care in provincial areas.  The scanner is expected to be operational by February.

For decades the public health system “ain’t got the money, honey” despite the sick having lots of  time hanging around waiting for treatment.  At last some non-ideological, pragmatic, outcome orientated, commercial thinking has produced a win-win-win PPP.  Private capital provides an expensive machine; the public sector health system houses it in one of its buildings; both private sector and public sector access the facility and patients in both health sectors get better care.

But if anyone dare suggest that the same “model” could work in education (to take a prosaic example), the gibbet traps would be swinging open and the victims dropping before sunrise.  No.  Not really.  The gummint hasn’t got the honey-money to build gibbets, and PPP is so last century anyway. 

Postscript 1:

PPP Projects in Australia
* Southbank Education and Training Precinct, Brisbane
* Adelaide-Darwin Railway (a BOOT arrangement)
* Airport Link, Sydney
* Cross City Tunnel, Sydney
* Eastern Distributor, Sydney
* Lane Cove Tunnel, Sydney
* Sydney Harbour Tunnel, Sydney
* M2 Hills Motorway, Sydney
* M4 Western Motorway, Sydney
* M5 South Western Motorway, Sydney
* Westlink M7, Sydney
* CityLink, Melbourne
* EastLink, Melbourne
* Newcastle Mater Hospital Redevelopment, Newcastle, NSW
* Southern Cross Station, Melbourne
* Headquarters Joint Operations Command (HQJOC)construction and maintenance of a major Defence facility. Queanbeyan and Bungendore, [NSW]

PPP Projects in New Zealand
* Vector Arena in Auckland is one public-private partnership in New Zealand. The Auckland City Council and Auckland Regional Council have contributed $68 million toward the $80 million indoor multipurpose arena. Ownership will be transferred back to the city in 40 years from completion.
Wikipedia

[To this illustrious list of one successful PPP investment in New Zealand, we can now add “1 MRI scanner in Blenheim”.  That’s a hundred percent increase, folks.  Way to go.  But there is one more reason for mirth: with respect to the Vector Arena PPP, notice the people stumped up 85 percent of the required capital and the private sector a mere 15 percent.  Try that in Oz and you would be dog tucker.  And now, in return for our cleverness, we Aucklanders are confronted with a City Council whose reckless spending and indebtedness will squeeze taxpayers and their children until the eyeballs pop for decades to come.]

*Postscript 2:

To be fair, the piece above is slightly hyperbolic.  The current National government has gone some way to making some progress on PPP.  It has a couple of projects underway.  Some schools in Hobsonville are being been built under a PPP project.  A prison in South Auckland is being built with PPP capital.  And a century-long awaited motorway project just north of Wellington is slated for PPP investment.  All have been opposed by state sector unions, and the Left in general, as representing “privatisation by stealth”.  The Left replaced thinking with chanted-slogans many years ago. 

When it comes down to it, the Left would rather have schools held in mud-huts and teachers of all thirty-five gender types in grass skirts than prostitute their ideology.  They would rather have open-air prisons consisting of ten kilometre chain gangs than being enslaved to dirty, private capital.  In such line-in-the-sand matters, compromise is the Devil’s dialect.

Burger King’s Smart Move

The Capital Express Is On the Move

“Progressive”  ideology is generally anti-business, anti-profit , pro-taxes and pro-redistribution of property.   But in our modern world, “time” has moved on; capital and labour are now more global and international than ever before. Because trade is increasingly global, pay rates in China affect trading conditions in New Zealand.  Capital and labour are more mobile than ever and can move relatively freely around the world. 

In the face of this growing internationalism (theoretically favoured by progressive ideology) progressives have actually become more and more regressive, wanting to drive national economies back to a more autarkic past with higher taxes and more government interventions to control wages, prices, and business activity.  One manifestation of this retrogression is the complaint of governments that “business” is evading tax by setting up in lower foreign tax jurisdictions, channelling their profits through the lower tax regime and maximising returns thereby to their shareholders.  President Obama has moaned about this tax leakage in terms which suggest he regards the practice as unpatriotic, if not corrupt.  Left-wing politicians in New Zealand have chanted the same mantra with respect to multi-nationals doing business in New Zealand.

Naturally the most easy and straightforward solution to a shrinking corporate tax base is to lower corporate tax rates.  If taxes are lower, businesses are encouraged to stay put; international businesses are encouraged to set up shop if the tax rate is competitive.  But since progressive ideology calls for an ever vaster government, lowering taxes is a hard trick to perform.   Meanwhile, business is driven by economic rationality and the globalisation of business requires that one must remain competitive world-wide or eventually be driven under.

The most recent high-profile example is international conglomerate, Burger King which is moving its business headquarters out of the United States to Canada, where its tax burden will be less.
  The technique is known as “tax inversion” and involves a US company buying a company in a lower tax jurisdiction, and then moving its corporate headquarters to the new company, thus paying lower taxes.  This, from Breitbart:

Burger King says it struck a deal to buy Tim Hortons Inc. for about $11 billion, a move that would give the fast-food company a stronger foothold in the coffee and breakfast market. The corporate headquarters of the new company will be in Canada, which stands to help lower Burger King’s taxes. Such tax inversions have been criticized by President Barack Obama and Congress because they mean a loss of tax revenue for the U.S. government. Burger King and Tim Hortons said the chains will continue to be run independently and that Burger King will still operate out of Miami.

This has caused a brouhaha amongst the progressive chattering classes, with some talking heads proclaiming that they will never buy another hamburger from Burger King because they are “cheating” on their taxes.  The President himself has sniffed, “You know some people are calling these companies ‘corporate deserters.’” Warren Buffett, one of the world’s most successful investors and progressive Democratic Party stalwart, has said he wants to pay more taxes, and believes that tax inversion is immoral.  Nevertheless, Buffett financed the Burger King deal, which reveals just how compelling the business case must be.

News of Buffett’s investment in Burger King has sparked American ire and charges of hypocrisy, as the “Oracle of Omaha” was a strong backer of President Barack Obama and a vocal critic blasting citizens for not paying their “fair share” in taxes.

Business is now global.  Capital is mobile.  The best defence for the tax base of the state is to ensure that  tax rates are competitive with those in other countries.  The best defence against the problem of mobile capital eroding the tax base is to have lower corporate taxes than other countries.  Then capital will migrate into the country and the overall tax base will rise.  But such a rational move is likely impossible when progressive ideology is in charge.  Smaller government, requiring less tax to fund it, would be Apocalypse Now to the Progressive/regressive mindset. 

The Pillage of Progressive Government

Evasive Action Increasing

It’s a hard lesson to learn, but sooner or later even the antediluvians amongst us will begin to comprehend.  Point #1: Capital and labour are the core components of any commercial enterprise.  Point #2: Capital and labour are mobile.

Now this has not always been the case.  Before the development of technologies that can move people relatively quickly and inexpensively from one side of the globe to the other, labour was relatively immobile.  In a particular area, the number of jobs were necessarily limited; in times of recession, sometimes severely limited.  That meant that employees were effectively reduced to being “price takers”.  They had little economic leverage to increase wages.  The number of employment opportunities was small or fixed; there was often surplus labour chasing those jobs.

Now, labour is globally mobile–more so than at any time hitherto in our age.
  If labour conditions are inadequate, labour can get up and move to take advantage of more attractive opportunities–whether in the same country or overseas.  No longer is it a case of selling up everything and joining a wagon train to trudge westward for months and months, through mortal danger in search of economic advancement.  Once packed, you can be anywhere in the world in 36 hours.  The only obstacles are visas and work permits.  These, too, are eroding barriers as free-trade agreements expand and multiply.

Capital, likewise, is increasingly mobile.  Businesses will relocate to secure cheaper, more competitive manufacturing locations.

New Zealand has experienced both capital and labour mobility.  It helps keep everybody honest.  But the worst millstone encouraging capital and labour flight to more attractive locations is state-imposed costs (taxes, rules, regulations, pension costs, compliance–most of which are dead weight costs, with no productivity benefits to offset at all.) 

Consider the following in California–once the sixth largest economy in the world, but now a shrinking violet, well past its early morning glory.  California has one of the most, if not the most, “progressive” state governments in the United States.  This particular piece, documenting both labour and capital flight out of the state, published  in the Los Angeles Times caught our eye.  Toyota is on the road.

Toyota Motor Corp. plans to move large numbers of jobs from its sales and marketing headquarters in Torrance to suburban Dallas, according to a person familiar with the automaker’s plans. The move, creating a new North American headquarters, would put management of Toyota’s U.S. business close to where it builds most cars for this market.

North American Chief Executive Jim Lentz is expected to brief employees Monday, said the person, who was not authorized to speak publicly. Toyota declined to detail its plans. About 5,300 people work at Toyota’s Torrance complex. It is unclear how many workers will be asked to move to Texas. The move is expected to take several years.

Of course Texas is not dumb, despite all those long-drawled vowels.  Because it runs a low cost government, infrastructure and regulatory dead weight in that state is much less than elsewhere in the United States.  Its smart pollies have been out and about telling the good news.

(Texas Governor) Perry last month visited California to recruit companies. The group Americans for Economic Freedom also recently launched a $300,000 advertising campaign in which Perry contends 50 California companies have plans to expand or relocate in Texas because it offers a better business climate. Like these other companies, Toyota could also save money in an environment of lower business taxes, real estate prices and cost of living.

Because of the lower cost of living in Texas, employees who move from California and migrate to Texas also benefit from the lower taxes, lower real estate prices, and overall lower cost of living.  They get an immediate boost to their incomes by moving with the company.  Labour is now as mobile as capital.

What can Texas do?  Not much. 

Frank Scotto, Torrance’s mayor, said he had no warning of Toyota’s decision. He said he did know that the automaker planned a corporate announcement for Monday. “When any major corporation is courted by another state, it’s very difficult to combat that,” Scotto said. “We don’t have the tools we need to keep major corporations here.”  The mayor said businesses bear higher costs in California for workers’ compensation and liability insurance, among other expenses.  “A company can easily see where it would benefit by relocating someplace else,” Scotto said.

Both New York and Texas have aggressively pursued major California corporations by promising a number of financial incentives to get them to relocate, he said.

Progressive government progresses government–and more government rules, regulations, intrusions, feather-bedding, protections, political payoffs represent dead-weight costs to both capital and labour.  And once enacted and introduced they become permanent.  Nothing can be done to change the dead weight they represent, short of a political and social revolution.   The result: capital and labour flight–because now both are mobile.

Most politicians and bureaucrats are slow learners.  They think they are smarter then the average Joe.  They think they have unlimited license to govern, which they believe means ruling, regulating and intruding.  They also believe they know better than everyone else and can run others’ lives and business enterprises better than the owners, the managers and the staff.  They also think they have a higher calling.  They are not (they tell themselves) self-interested.  They represent the public interest.  But when it comes down to it they are captive to a cluster of pressure groups to whose interests they have sold their soul because there are votes in the transaction.  Consequently they are both self-interested and selfish.  Unlike capital and labour, they do not have to earn the right to exist every day, in the face of fierce, remorseless, unrelenting competition.

Capital and labour are both self-interested and pragmatic.  If it will make the business more profitable to move to a more attractive location they will do so, because they can–more easily now than ever before.  But competition creates another discipline: the first to move gains competitive advantage.  In the end, other (competitor) businesses, have no choice but to follow.  A trickle becomes a torrent.  Toyota could no longer earn the right to exist if it stayed in California.  It had no choice.  Its staff will be coming to the same conclusion.

The velocity of labour and capital mobility is rising.  Both are voting with their feet.  The Californias of the world end up commercial and economic Chernobyls.  We have seen their future, and it is called Detroit. 

Christian Activists

Hard Work the Highest Service

The general medieval world-view was deeply suspicious of economic motives.  Lucre was, after all, filthy.  Therefore, it had to be limited, controlled, and governed.  All economic activity had to be carried on for the public good; profits must be restricted to sustenance payments.  Clearly, the medieval world had a problem with the Parable of the Talents. 

These generalisations hold generally true.  But there were exceptions.  Gradually, as Western economies developed, the exceptions became more common, more widespread.  Medieval theology, and the economic theories it produced, were broken apart by economic realities.  Theological understanding did not catch up until the Reformation–and then, only gradually.

John Calvin argued that laws against usury were entirely inconsistent.  They simply did not make sense.
  If someone leased his land and took gain from the terms of the lease, how was that different from someone lending money at interest?  Why was the former not usurious, whereas the latter was?  Moreover, why ought income from a business not be allowed to be larger than the profits from landowning?  Surely, the merchant profited from his own diligence and industry, as did the landowner?  Both alike deployed capital.  Why is the one sanctified, and the other suspect? 

The upshot was that capital (whether in the form of land, cash, buildings, livestock) all came to be viewed alike.  They all came to be viewed as property which could be used to produce goods or provide services from which profit could be taken.  If one did not use it actively, but left one’s capital stock idle, indolence and laziness would doubtless multiply. Either way, capital would produce something–either good or bad.  

The final step in this Christian thought-revolution over work and business was to understand that the owner of capital was a steward accountable to God for the use and deployment of the capital goods entrusted to him by God, in the same was the labourer, or tradesman was accountable to God for the deployment of his skills and labour.  Here lay the final piece of the puzzle: to make profit and to increase capital came to be seen as a holy calling, not usury or greed.  This calling sat alongside the responsibility to take care of one’s family, of the neighbour, of the poor, of the orphan, and of the sick.  The more business, the more profit; the more the nurture and care of others could be facilitated.  God would require an accounting of each servant for his service. 

[The true aim of man’s existence] is not personal salvation, but the glorification of God, to be sought, not by prayer only, but by action–the sanctification of the world by strife and labour.  For Calvinism, with all is repudiation of personal merit, is intensely practical.  Good works are not a way of attaining salvation, but they are indispensable as a proof that salvation has been attained. . . .

For the Calvinist the world is ordained to show forth the majesty of God, and the duty of the Christian is to live for that end.  His task is at once to discipline his individual life, and to create a sanctified society.  The Church, the State, the community in which he lives, must not merely be a means of personal salvation, or minister to his temporal needs.  It must be a “Kingdom of Christ”, in which individual duties are performed by men conscious that they are “ever in their great Taskmaster’s eye”, and the whole fabric is preserved from corruption by a stringent and all-embracing discipline.  [R. H. Tawney, Religion and the Rise of Capitalism. (London: John Murray, 1923), p. 109.]

This theology of economic service and labour reached its logical zenith at the hands of the latter Puritans.  Whereas the medieval Schoolmen and  the Church courts sought to restrict earnings and labour to that which was necessary for survival of self and family (all else being a manifestation of the sin of greed), Puritan theologians turned the matter on its head.  If one did not apply oneself with lifelong arduous dedication to one’s calling, the deadly sin into which one would inevitably fall would be sloth–the sin of the self-indulgent sluggard.

On the lips of Puritan divines, [one’s calling] is not an invitation to resignation, but the bugle-call which summons the elect to the long battle which will end only with their death. . . . The calling is not a condition in which the individual is born, but a strenuous and exacting enterprise, to be undertaken, indeed, under the guidance of Providence, but to be chosen by each man for himself, with a deep sense of his solemn responsibilities. . . .

The labour which he idealizes is not simply a requirement imposed by nature, or a punishment for the sin of Adam.  It is itself a kind of ascetic discipline . . . imposed by the will of God. . . . It is not merely an economic means, to be laid aside when physical needs have been satisfied.  It is a spiritual end, for in it alone can the soul find health, and it must be continued as an ethical duty long after it has ceased to be a material necessity. (Ibid., p. 241f). 

From a necessary evil to an spiritual, holy duty is a long distance to travel.  But that doctrinal and theological revolution, we venture to say, has done more to release the Church to manifold works of spiritual service than any other.  It gives us the Christian ideal of the hard-working, hard-worshipping saint–the kind of person who is too consumed with his duties and responsibilities to God and to man to fall into the idle life of a busybody.