The other week, Lynn and I made fun of John Key’s dream that New Zealand would become the Ireland of the South Seas. Does he still believe we should emulate the Irish? The answer is yes. Key wants to abandon proper process and speed up work on an international financial centre for New Zealand, just like the one that helped get Ireland where it is today.
An international financial centre is kind of like a Thunderdome for financiers. Despite being in New Zealand, our normal rules, especially tax law, wouldn’t apply. You could see this hubs as the ultimate expression of late capitalism – enclaves carved out of nation-states specifically so that the capitalist elite can trade tokens of value that exist many steps removed from the real economy, acting with reference only to the holy ‘laws of the market’ and not the democratic law of the nation.
The Wild West nature of these enclaves spreads into the finance systems of the host countries as financiers move backward and forward between them and wide-eyed locals try to get a cut of the international action. Dublin’s international financial centre was undoubtedly the root of its runaway banking culture that has ultimately brought the country to the edge of ruin.
Why anyone who has seen the last three years of financial disaster would say ‘let’s make our economy more dependent on the finance sector’ is beyond me.
Nonetheless, currency trader and sometime spider fancier Key is determined that New Zealand should follow in Ireland’s footsteps (apparently, he doesn’t think that will result in us coming to the same destination).
And he’s getting frustrated with the pace of officials’ work on the project:
“There’s been a whole series of advice coming from MED which basically says ‘if you want to do this, you’ve got to deliver the Magna Carta of documents’,” Key told the International Business Forum audience.
“‘You’ve got to do all these things and need bipartisan support’ and [so] it goes – on and on and on.”
Of course you need bipartisan support for an international financial centre to work. The banks won’t bother coming if there’s a good chance that the rules will be changed on them in one or four years’ time.
Key went on to say MED’s approach was “absolute rubbish”.
“I don’t need the Magna Carta of documents – just get on and do something – which is why I have told Gerry to deliver me a paper that has zero rating of funds and we’ll work on that.”
MED is the most-pro neoliberal ministry by a long, long way and if even they’re saying ‘hey, let’s do this properly and take our time’, it’s worth listening. But, no, instead the spider fancier has asked the woodwork teacher to slap something together and they’re going to use that as the basis of complex financial policy. As one civil servant was saying to me the other day, Labour goes to the ministries for advice and generates policy from that advice, the Nats go to ministries and say ‘here’s what we’re going to do, make it look justifible’.
Key says “a chief executive of one of the world’s most powerful banks had told him: “If you are prepared to zero-rate foreign funds that are not invested in NZ, we’re going to move $2.5 billion of funds here in two years because you’re 50 per cent cheaper than Australia.”
Let’s break that down.
a) our only competitive advantage, seemingly, would be being cheaper than Australia. That’s hardly a business model that is consistent with closing the wage gap with Australia, is it?
b) $2.5 billion of funds is nothing, less than 5% of the stockmarket’s capitalisation. It’s not a $2.5 billion inflow into our economy, all we get is a fraction of the bank’s fees for managing that $2.5 billion from the banks’ wages and operating costs. This seems to confirm what others in the industry have quietly me – ‘don’t worry too much about a financial centre, Key can build it but they won’t come’.