Socialising private losses in a common interest

Wanganui Collegiate is not where you would normally go to find socialists. The offspring of the wealthy and snooty go there. But it seems it may have come time to socialise this very private college’s losses.

In the current economic climate, not enough people can, or wish to, afford to pay the fees for exclusivity — and, they would say, excellence — for their kids. The college has been exploring joining the state system.

The grounds and buildings aren’t too bad. Maybe the government could get a bargain buy.

That is, maybe you and I could get a bargain buy. Which is the point. How much of your money do you want to spend to prop up operations, from schools to dishwasher makers to finance companies to railways, which can no longer get up in the morning?

The United States’s Joe Sixpacks found they had dolloped $US18.4 billion of their hard-earned cash to pad New York bankers’ swank lifestyles — the very bankers whose brilliance has put Joe Sixpacks’ livelihoods at risk. Bust banks, rescued by the taxpayer, handed on these billions as bonuses — for incompetence.

Here at home a banker-turned-Prime Minister is mulling over helping Fisher & Paykel because it is an “icon” company. The irony is intriguing: F&P is in a pickle because of borrowings to shift New Zealanders’ jobs offshore.

To F&P’s credit, it has not (yet) asked you to socialise these losses. And part of Key’s concern is that F&P’s salvation might be a foreign — read “Chinese?”– cornerstone shareholder. Note in that context the agitation in Australia over Chinese buy-ins in cash-strapped resources companies.

In any case, a Key government buttressing “icons” would be in tune with the (private-sector-funded) New Zealand Institute’s expansive proposals for Friday’s “jobs summit”.

And it would be following the leader. The United States automotive industry made a long series of bad decisions and can now survive only with enormous pumpings of taxpayer credit — which is itself borrowed, to be repaid by future generations.

The reasoning for Barack Obama’s enthusiasm for taxpayer rewards for car makers’ incompetence is that untold thousands of smaller businesses and their jobs would go under if the auto makers do. That rationale also underpins British, French and Australian auto industry bailouts.

That puts a new twist on the old adage that if you owe the bank $10,000 that is your worry but if you owe $10 million it is the bank’s worry. If you are big enough, ugly enough or “iconic” enough the taxpayer-bank (the cabinet) will see you as its worry.

Remember Air New Zealand, of which you are four-fifths owner as a result of its disastrous decisions about Ansett. Congratulate Toll, laughing all the way to its bank with money from the taxpayer-bank, leaving you, the taxpayer, with a huge lemon in the form of a nationalised rail system.

But look from the other end of the telescope. Companies pay taxes. This country’s company tax take, as a share of the whole tax take, is relatively high by international standards.

Sure, companies pay lawyers and accountants bucketloads to keep the tax they pay to a minimum. Tax lawyers and tax officials are in a constant high-stakes cat-and-mouse game.

Nevertheless, companies do pay a lot of tax (plus a stack of levies, ACC at the top, which amount to taxes).

They are entitled to something in return, besides feeling good about being good citizens.

The return is hard and soft infrastructure — roads and energy and educated, health-cared workers. But companies could — and most do — argue that they overpay for what they get. So they could claim entitlement to help in difficulty — just as a personal taxpayer can draw on the system in illness and unemployment.

Take this on a step. Companies (and farmers) are mostly undercharged or not charged for what they take from the “commons”: water, clean air, carbon or waste and so on.

Companies could argue that in part their taxes pay for that in whole or in part (though the calculations would be complex).

Turn this round. Attached to the “commons” is the “common interest”.

David Brooks, a New York Times conservative columnist who is uncomfortable with bailouts on principle, argued that beyond the immorality and stupidity that have necessitated the United States bailouts lies a common national interest in fixing up its mess.

“The nation’s economy is not just the sum of its individuals,” Brooks wrote on Friday. “It is an interwoven context that we all share. To stabilise that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent… The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilise, we don’t stabilise.”

Our economy is not as dire as the United States’s — yet. The “yet” must be added because this might not be a two-year dip but a five-, 10- or 15-year ravine. If so, a lot of losses might need a lot of socialising.