You know how the world has been through the worst financial crisis in decades? You know how countries like Ireland and Iceland who had made themselves into financial hubs via tax breaks for banks are now deep in the crap with burgeoning debt and unemployment? Why don’t we do what they did?
That is John Key’s latest half-baked master plan for the economy.
The Capital Taskforce and Key haven’t revealed how they would attract finance companies to set up backroom operations in New Zealand, but tax breaks seem like the obvious choice.
Without a hint of irony or self-awareness, Key sites the example of Ireland, which secured many finance jobs from London with tax breaks and other enducements, as one to emulate. Key himself moved many Merril Lynch jobs there from London. How many of those jobs still remain, do you think? Not many.
It was fun for Ireland while the party lasted but that’s no basis for sustainable wealth. As soon as the markets turned, as they inevitably do, Ireland and Iceland found themselves having to spend billions bailing out subsidiaries of foreign-owned banks, lest they collapse and take their domestic economies down too, and massively overextended from a spending and tax cut partly paid for by debt and premised on ever-lasting growth.
Real wealth is not created by swapping pieces of paper, it’s not created by digging up irreplaceable minerals. It is created by sustainable use of our natural resources, and the skills and talents of our people. Key does not seem to understand that.
To create a trifling number of jobs, Key is willing to expose our entire economy to an Iceland scenario. As always, he is looking for the lazy way out, the quick fix. In doing so, he puts our economy at great risk.