When people say, “Avatar had $50 million in subsidies” it conjures up a particular image: Joe Taxpayer ladling $50 million to a bunch of film moguls. It’s understandable, not least because it’s how things like SMPs used to work, but it’s not true. Subsidies are many and varied; I can think of at least three major types off the top of my head:
Exemption
The aforementioned subsidy for film production is a great example of this; film-makers get a break on their taxes in New Zealand. The thing is that when people toss around the idea that these cost something in a direct form they’re being, charitably, economically illiterate. No-one gave anyone anything. We simply neglected to take something. There is, you could argue, an opportunity cost, but in many cases, we can have something we wouldn’t otherwise get (Avatar work), or we can get nothing.
Framed that way, they sound quite tempting, right? Not always. We don’t have a capital gains tax in New Zealand, which means a major sink for our investment dollar in the last 7 or 8 years, even more than in the rest of the Western world, has been property speculation - not even property development, but borrowing money to buy houses that already exist in the hope a greater fool will make us rich. Unlike making movies, it’s not an activity that really spreads the wealth around; a built house requires pretty minimal upkeep. It may even have a perverse result, as rents rise to cover the costs of mortgages taken out with a view to capital gains, more money goes to service debts raised with offshore borrowing, rather than into the New Zealand economy, and we skew the view of what we invest in from activities that generate good first-world employment (special effects, software development, what have you), and into hoarding bricks and mortar.
So if we do have tax exemptions to attract foreign dollars, we ought to be quite careful that they’re an overall benefit.
Paying Your Bills
You’re a high-carbon-output business. Well, in New Zealand, I’m giving you money. Lots and lots of loverly money. That’s because I’m paying for your carbon credits.
(No-one’s paying my employer’s carbon credits, we just hand to spend a lot of money doing things like reducing the footprint of our server rooms with virtualisation and consolidation programs.)
There are no shortage of activities like this. Cities build sports stadiums for profitable sporting businesses to use. We cover the costs of businesses that might otherwise go broke.
Giving You Cash
Our domestic cultural industries are beneficiaries of this one; we ladle money into TV, local movies, ballet, opera, symphony orchestras, you name it. Outrageous Fortune collected almost $50 million during it’s run; whatever my share of that was, was totally worth it to hear the word “nungas” on TV, I might add.
In business these used to be our standard subsidy for farmers and other industries we’d decided we want to cultivate but couldn’t actually, you know, turn a profit. Sometimes that’s a good thing - I’d rather live in a New Zealand with an NZSO than not, for example - but in the case of SMPs, it damn near broke the country.
The Bigger Question
Implicit in the criticism of subsidies for Jackson’s work is that this in some way proves his companies haven’t really added value to the New Zealand economy, that he’s bludging off us in some dirty, underhanded way, slipping dollars out of our pockets.
As I noted above, it’s not really true; tax breaks cost us nothing in and of themselves, and have arguably helped funnel hundreds of millions of dollars into the country for productions involving the likes of Jackson and Rob Tapert (remember him? Been making internationally-known and profitable TV shows in New Zealand for the best part of a couple of decades?).
Moreover, the roots of the idea that there’s something wrong with encouraging particular industries is rooted firmly in the neoliberal religion that markets are perfect, governments are crap, and that governments oughtn’t pick winners. Now, if that argument’s coming from Richard Prebble or Roger Douglass, well, I think it’s a bunch of crap - after all, the East Asian neighbours, such as South Korea, we looked down on as third world countries when I were a lad have shot past us on the back of heavily controlled, directed, managed economies, not neoliberal paradises. Come to that, Britain’s economic rise was butressed by mercantalism, and China’s development is as a result of tight monetary control and a willingness to direct the economy whereever deemed strategic.
But I digress. I think it’s a load of crap. What’s odd, though, is that the flurry of concern about these subsidies so often comes from people who seem so otherwise uninterested in neoliberal dogma. The same line of thinking that argues taxs breaks distort the economy, the government shouldn’t pick winners, is the same line that says privitisation was and is good, that the Employment Courts are unfair and unreasonable, and so on. How many of the people bitching about Jackon’s “subsidies” are actually interested in that line of thinking in any genuine manner? How many are simply looking for another club to belabour someone who appears to have committed the great Kiwi sins of being very successful in his fields, wealthy, and uninterested in issuing grovelling apologies for daring to achieve these things?
