Rio Tinto threatens NZ with capital strike

Written By: - Date published: 10:27 am, May 13th, 2008 - 87 comments
Categories: climate change, economy, Environment - Tags: , ,

Multi-national minerals company Rio Tinto is threatening to close its Tiwai Point aluminium smelter in Bluff and move its production offshore if the Emissions Trading Scheme is enacted because they say it will increase power prices.

This is not the first time Rio Tinto has held New Zealand to ransom using the threat of closing this economic powerhouse of Southland. In fact, pretty much every year Rio Tinto threatens to pull the plug over something, whether it be power prices (Tiwai Point uses 13% of New Zealand’s electricity and gets it at a massively discounted secret price) its desire to buy Manapouri power station, (which supplies Tiwai Point with power) or tax rates (the 10% drop in the corporate rate that came on April 1 is already forgotten). Rio Tinto is making record profits as the world price for alumina sours – profits in the last four years total nearly $500 million – but it knows the Government can’t afford to let a factory that, directly and indirectly, employs 3000 people and brings around $500 million to the economy annually to close. So it keeps on demanding more.

This is a greedy, heartless company, that always wants more, and has a record of doing what it takes to get it. In New Zealand, they exploited National’s Employment Contracts Act to break the workers’ union. They are implicated in human rights violations across the globe including the support of apartheid, have illegally mined uranium in Namibia and their “security services” have engaged in mercenary work in support of dictatorships. The company started the Bougainville conflict when it used its political muscle in Australia and Papua New Guinea to get the right to dig the world’s biggest hole, the Panguna copper mine, on Bougainville. Locals objected to the rape of their land by Rio Tinto, others wanted the gold for themselves. A civil war ignited that cost 30,000 lives. Rio Tinto made hundreds of millions and moved on.

What Rio Tinto is trying now over the ETS is a classic example of capital holding democracy over the barrel. Capital is international; it can leave a country if it wants. Democracy is limited to competing nation-states that only have limited cooperation. So, if a country’s people want better wages, or taxes to pay for social services, or to reduce greenhouse gases and big business doesn’t like it, they can threaten that country’s government with a capital strike: ‘play by our rules or we leave, and you lose jobs’.

Well, I say Rio Tinto should fuck off. This is our country and we will make the rules here, not some soulless multi-national that is only out for itself. Rio Tinto can withdraw their capital but there will still be a state of the art smelter and trained workforce in Bluff. The smelter can be brought into public ownership and run by New Zealand, with the profits staying in New Zealand.

87 comments on “Rio Tinto threatens NZ with capital strike ”

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  1. IrishBill 1
    13 May 2008 at 10:40 am

    “In New Zealand, they exploited National’s Employment Contracts Act to break the workers’ union”

    There are also stories about them influencing the nature of the ECA. When the ECA came into force they brought a crane in to move the on-site union office to the outside of their security fence and engaged in some serious union-busting.

    I agree that someone needs to call their bluff (and so far I’ve seen little sign of that in the media) but if they did leave I’m not sure we would be left with a state of the art smelter as I don’t think Rio would allow it. They’d either retain and mothball it, strip and transport it or gut it and sell the (poisoned) land.

  2. Joker 2
    13 May 2008 at 10:41 am

    “Well, I say Rio Tinto should fuck off”

    I am sure the people of Southland would really appreciate you playing tough guy with their livelihoods.

  3. Aj 3
    13 May 2008 at 10:44 am

    I doubt Rio Tinto would do anything to enable the smelter to function under public ownership.
    Of the workforce, a fair percentage would welcome the kick as they love the high wages but absolutely hate the working environment. Southland economy would easily absorb the rest. There are other big projects coming on. New Zealand needs the power and on a cost/benifit picture the country may well be better off?

  4. Tane 4
    13 May 2008 at 10:46 am

    It’s interesting that international capital is free to strike for political reasons, but if the workforce tried the same they’d be prosecuted under the ERA.

  5. Steve Pierson 5
    13 May 2008 at 10:49 am

    Joker. So you’re saying we should bend over and take it whenever a multi-national wants to f*ck us over?

    This is a democracy – the people rule, not capital.

    Irish. If the Govt was willing to offer a fair price, I’m sure we could get the smelter from them.

  6. IrishBill 6
    13 May 2008 at 10:58 am

    “Irish. If the Govt was willing to offer a fair price, I’m sure we could get the smelter from them.”

    I doubt it. I’m not sure we want it anyway as all we are doing is exporting renewable electricity and the process produces Perfluorocarbon which are greenhouse gases with thousands of times the warming potential of CO2. I’ve spent time at Tiwai and the surrounding (dead) wetlands and can tell you the local environmental impact of the smelter is also huge.

    I suspect there are ways we can find to exploit our clean power that involve less damage to the environment and more money in the public’s pocket than smelting aluminum.

  7. Santi 7
    13 May 2008 at 10:59 am

    “Well, I say Rio Tinto should fuck off.”

    Another senseless, rushed statement from S. Pierson, Professor of English.

    Actually, your political masters are already backpedalling on this matter. Just read the this morning’s press release from David Parker, bending backwards trying to keep the smelter in Southland.

    Steve, shut your mouth and follow orders.

    IrishBill says: and that’s a week’s ban. If you complain it’ll be a month.

  8. Santi 8
    13 May 2008 at 11:03 am

    “Your comment is awaiting moderation.”

    Is The Standard invoking the EFA to silence dissenting opinion? hy?

    The expletive quoted was part of SP’s posting. Smarten up!

    [calm down.SP]

  9. Steve Pierson 9
    13 May 2008 at 11:04 am

    Wait, I speak out and Santi wants me to toe the government line?

    you really bring down the standard of debate here santi.

  10. Santi 10
    13 May 2008 at 11:07 am

    I complain, hence give me a month!

    [Tane: And a month it is. See you in June Santi.]

  11. IrishBill 11
    13 May 2008 at 11:12 am

    I’m stunned Santi thinks he can come onto our blog and abuse us and expect not to be banned. What a dick.

  12. Santi 12
    13 May 2008 at 11:16 am

    Understood comrades.

  13. higherstandard 13
    13 May 2008 at 11:24 am

    It’s a banner day I’m in full agreement with Irish Bill’s first comment.

    In relation to your suggestion of buying it SP – God forbid this is not anywhere near what the government should be getting involved in.

  14. Daveo 14
    13 May 2008 at 11:24 am

    It’s a pity when trolls come on and try to ruin a thread. Nevermind, as to the topic at hand, it’s disheartening to see the media so uncritical of Rio Tinto over this. As with Don Elder’s comments the other day all it takes is for a company to threaten capital strike and the media bend over backwards for them.

    Where’s some critical journalism looking at these companies’ motives? Surely the actions of a company like Rio Tinto should be looked on with at least a little suspicion.

  15. Billy 15
    13 May 2008 at 11:24 am

    “I’m stunned Santi thinks he can come onto our blog and abuse us and expect not to be banned.”

    Haven’t you just done what you criticise DPF for doing? SP used intemperate language (by which I am not offended, I think used when one is passionate about something, it gets that accross) yet Santi is banned when he responds in kind.

  16. Lew 16
    13 May 2008 at 11:26 am

    I think this whole thing is much ado about nothing. Parker made clear on Morning Report this morning (though Sean Plunket obstinately refused to acknowledge it) that the government’s proposed but not yet drafted-in changes to the ETS will be roughly compliant with what Rio Tinto suggest.

    Steve, I think you’ve overreacted to Rio Tinto’s routine cage-rattling here, and it’s your `to the barricades’ rhetoric which has caused Santi to fly off the handle.

    Regulatory schemes must necessarily take major industrial players into consideration; the government isn’t backpedalling; it’s rewriting policy as part of the consultation process.

    What we’ve got here is posturing.

    L

  17. r0b 17
    13 May 2008 at 11:30 am

    There is no right way to handle trolls, its a lose lose situation for a blog.

    There is no right way to handle the vagaries of international capital either, a lose lose situation for a government. Instinctively Steve’s response appeals, but could the Southland economy really redeploy that many people? Where do we go for stats on regional economies?

    Captcha “New Helen” – no thanks, I like the current one.

  18. Steve Pierson 18
    13 May 2008 at 11:30 am

    Billy. it’s his trolling attitude that’s the problem. And it’s a real shame because it brings everything down.

    The more I think about it, the more I’m coming around to the idea that the smelter isn’t worth having at all – but then there’s the international problem: the production would go somewhere else, and Tiawi Point is the best smelter in the world in purity, pollution, and energy efficency. So from that perspective, it is worth having – don’t see why we should bow to Rio Tinto though.

  19. Rimu 19
    13 May 2008 at 11:31 am

    I too would welcome Rio Tinto’s departure. I’m sure all that electricity will go to good use, solving our electricity shortage! 😀

  20. Steve Pierson 20
    13 May 2008 at 11:33 am

    I was hoping to be criticised as reflexively pro-nationalisation, then we could have had an interesting conversation on the virtues of State capitalism vs multi-national control.

  21. Tane 21
    13 May 2008 at 11:33 am

    Santi’s remark “Steve, shut your mouth and follow orders” was unacceptable. I’m not going to have the integrity of my fellow posters attacked and nor am I going to tolerate this kind of ongoing abuse. Santi’s been engaging in this kind of behaviour for some time – it is not an isolated incident.

    Lew, Rio Tinto is playing politics here as they have on many other occasions. I don’t think criticism is out of line.

  22. slightlyrighty 22
    13 May 2008 at 11:37 am

    Hang on a minute. If Rio Tinto go overseas, and set up a plant in say, Asia, then the net effect of the ETS is the loss of thousands of jobs, the devastation of the Southland local economy, and a net increase in global carbon emissions as a new factory is set up in an area where Kyoto does not apply.

    Think it through. What is the ETS aiming to achieve?

  23. Daveo 23
    13 May 2008 at 11:39 am

    The question is whether Rio Tinto will actually go overseas or whether they’re using the threat of capital strike to hold our democracy over a barrell. I’m not convinced it’s the former.

  24. Brett Dale 24
    13 May 2008 at 11:40 am

    I don’t blame Rio for doing this, why should they stay and do business in a country where they are going to be tax heavily.

  25. MikeE 25
    13 May 2008 at 11:42 am

    Looks like Atlas is about to Shrug…

  26. Aj 26
    13 May 2008 at 11:43 am

    Agree with Lew. It’s all politics. I note that the Southland Times has extensive coverage/comment today – the whole stunt planned well ahead I’d say.
    Comalco NZ is associated with Shadbolts EFA campaign, along with noted supporters of the right, Talley and the local Richardson Group. Look at this as purely political advertsing….

  27. mawgxxxxvi 27
    13 May 2008 at 11:43 am

    Steve: I agree with you that its certainly worth looking at the contribution that Tiwai makes to our economy (irrespective of who owns it) versus the benefits of not having to build additional electricity generation. It would be nice if this debate could be had in a rational non-partisan way without the obvious political implications of 3000 jobs disappearing though I understand Southland enjoys 98% employment.

  28. James Kearney 28
    13 May 2008 at 11:45 am

    You’re right Brett. Those human rights and environmental standards are a real drag too.

  29. mike 29
    13 May 2008 at 11:46 am

    “If the Govt was willing to offer a fair price”

    What has price got to do with buying things for politcal gain as in the Railways
    Cullen doesn’t mind how much of taxpayers hard earned cash he spends as long as there is nothing left in the kitty. Reckless

  30. Chris S 30
    13 May 2008 at 11:47 am

    slightlyrighty: They can’t run forever

  31. James Kearney 31
    13 May 2008 at 11:47 am

    Looks like Atlas is about to Shrug

    That reminds me MikeE- who knew John Galt was implicated in human rights violations in developing countries and Dagny Taggart ran mercenaries to help dictators?

    Meanwhile: http://www.angryflower.com/atlass.gif

  32. IrishBill 32
    13 May 2008 at 11:49 am

    Rio would not go overseas over the ETS. They are hardened operators (FFS they’ve supported coups and run their own militias) and they are trying it on. They way they handled the media on the issue was quite telling in that they selectively leaked the summary of their position to particular journos but not others.

    They also have a contract for fixed electricity prices until 2030 and will continue to make big money ETS or no and Southland jobs are not at risk.

    If I were the government I would nod politely while Rio made their submission, make reassuring noises and then just go ahead with the ETS.

  33. Steve Pierson 33
    13 May 2008 at 11:49 am

    slightyrighty. you’re saying we should race to the bottom to keep soulless multi-nationals pleased. I say we shouldn’t.

  34. Lew 34
    13 May 2008 at 11:53 am

    Wow, busy busy.

    Tane: I agree, criticism is justified. But that’s not the part of Steve’s post I objected to.

    Steve: I’m not going to get embroiled in that one, but I’ll gladly watch and pick apart the symbolic issues at stake if someone else does.

    Rimu: This amazingly simplistic view (shared by several emailers to NatRad) does nobody any credit.

    Daveo: This is spot on. I’m not convinced of it either, which is why I think it’s no big deal. Ultimately there seems to be this idea that the government doesn’t care if Rio Tinto leaves NZ, or if the dairy industry goes belly-up, or whatever other issue. Comments liker Steve’s give credence to this, which is PR on a platter for those who oppose the government. But it’s plainly not true – the government plainly wants Rio Tinto to stay here, and Rio Tinto has made plain that it wants to stay. This is simple negotiation, and all we’ve got here is a bulldog journalist (Plunket), bulldog bloggers (Steve and Farrar are the two I’ve read this morning – and incidentally there’s a hilarious thread on this topic over on Kiwiblog) wanting to make out that either side is being manifestly unreasonable. It just doesn’t seem to be so. It’s imply a case of dynamic equilibrium – Rio Tinto will howl and stamp its feet and the government will make reasonable concessions and all will return to normal.

    L

    Captcha: all banana. Everyone wants the whole thing, nobody wants to share.

  35. Chris S 35
    13 May 2008 at 11:54 am

    Thank you IrishBill – that puts things a little more in perspective.

  36. Sam Dixon 36
    13 May 2008 at 11:54 am

    That aussie kid from Rio Tinto who looked about 24 and was threatening our elected leaders on the TV last night with capital flight if they followed the people;’s will didn’t look much like Atlas to me.

  37. mawgxxxxvi 37
    13 May 2008 at 11:55 am

    IrishBill: well I guess if I was a powerful multi-national ( and not a starving artist in Ponsonby) I would be fighting emissions trading schemes wherever and whenever they pop up in the world. Lets be thankful they haven’t sent in the mercenaries (yet) 🙂

  38. slightlyrighty 38
    13 May 2008 at 11:59 am

    I’m saying we shouldn’t sacrifice jobs for the sake of environmetal principles which have not been thought through.

    The purpose of the ETS is to reduce Carbon Emissions. Given that developing economies such as China and India have not signed to Kyoto, the net effect of applying any sort of ETS will be the outsourcing of manuafcturing to these areas, creating the opposite effect of it’s intent.

    This is why Kyoto is not worth the paper it is written on.

  39. Steve Pierson 39
    13 May 2008 at 12:10 pm

    slighty – that is a race to the bottom. We shouldn’t enact any environmental protection because other countries haven’t, they won’t because other countries (like us haven’t).. in fact it’s not just a race to the bottom it’s a race to the top that never gets started because everyone wants to be in last place.

    A definition of ‘race to the bottom’ would be” countries are forced by the international nature of capital and their inability to cooperate effectively to compete for capital. That means they must attempt offer the better conditions for capital than other countries, even at the cost of other priorities (public services, environmental and labour standards). Countries are forced into competition against each other, lowering taxes and protections to keep ahead of each other – racing to the bottom – in an effort to attract and retain capital.

    http://en.wikipedia.org/wiki/Race_to_the_bottom

  40. infused 40
    13 May 2008 at 12:14 pm

    ”

    Hang on a minute. If Rio Tinto go overseas, and set up a plant in say, Asia, then the net effect of the ETS is the loss of thousands of jobs, the devastation of the Southland local economy, and a net increase in global carbon emissions as a new factory is set up in an area where Kyoto does not apply.

    Think it through. What is the ETS aiming to achieve?”

    Finally, someone that has a clue.

  41. insider 41
    13 May 2008 at 12:20 pm

    Lew’s right, this is posturing, and the danger is that you won’t be taken seriously next time you try it. That’s why you should only do it if you REALLY REALLY mean it. The question is, do they?

    Steve

    If the deal’s so secret, how come you know they get it cheap? Wouldn’t you expect it cheaper than most others if you were such a large consumer?

    Anyway you are living in the past. In fact they get it at a commercial rate agreed to by an SOE. The contract was signed a few months ago.

    Meridian get the benefit of having a guaranteed customer for a significant part of their capacity at low cost to serve, rather than having to risk selling it on the spot market or trying to capture new consumers at high cost.

    Last I heard Meridian have been doing quite well commercially so it hardly seems like they are being screwed

  42. Steve Pierson 42
    13 May 2008 at 12:20 pm

    infused. aware of the argument, just refute it as a basis for policy.

    Rio Tinto won’t go anyway. It’s not worth it to them. they are just trying to make the existing sweetheart deal they have even more profitable.

  43. Billy 43
    13 May 2008 at 12:22 pm

    What is the point of having an ETS if it does not stop activity which creates emmissions? If it doesn’t do this, money is changing hands, but the world is still getting warmer. Isn’t closing down the plant exactly what the ETS was designed to do?

  44. Aj 44
    13 May 2008 at 12:26 pm

    Just a few moments ago on Nat Rad, Key: “Rio Tinto posturing….National broadly supports the ETS…..final form will not be tailored to individual companies…”

    Hell, he’s getting his lines from Labour now…

  45. Lew 45
    13 May 2008 at 12:31 pm

    Yes, this phenomenon of producers heading overseas to unregulated economies where they can emit as much as they like is called `leakage’ and is the single biggest problem with any emissions trading system which isn’t global (and even, theoreticalyl, global systems, because compliance will be differently managed in different economies). The purpose of NZ’s ETS implementation is essentially to strike a balance between leakage (caused by too much regulation) and huge Kyoto obligations (caused by watering down the scheme too much for emitters). I wouldn’t want to be on that team; they’re damned either way.

    L

  46. Lew 46
    13 May 2008 at 12:33 pm

    Billy: No. The point is to make emitters work more efficiently, and emit less. If they emit more than they’re allowed to, they have to buy credits from other companies (countries, or whoever) who have emitted less than they’re allowed. Read the wikipedia page on emissions trading.

    L

  47. Matthew Pilott 47
    13 May 2008 at 12:35 pm

    I haven’t read the comments, but I pretty much wholeheartedly agree.

    The lines from Rio Tinto’s managers were that if the ETS goes ahead, they’ll go somewhere were it isn’t, and that we should wait until other countries have one.

    There will always be a country with lower standards than us, and these type of demands can be ceaseless. Where does it stop for them – they were directly threatening to move somewhere and make more pollution if the plan went in here -they are blackmailing scum.

    Well I have a plan, a plan so cunning you could stick a tail on it and call it a weasel:

    As the plant is so important (to Southland), bring in the ETS, wait till they’re (Rio Tinto) hurting and threatening to close the plant. Then the government can make an offer and buy the plant at a discounted rate, and keep it paying well and environmentally friendly (relatively).

  48. Phil 48
    13 May 2008 at 12:38 pm

    Steve, I love the link you have on ‘breaking the union’.

    How terrible all the employees must have felt when management was being nice to them, making them feel valued, and inviting them to wine and cheese evenings.

    Those scumbags in management! how do they sleep at night?!

  49. Matthew Pilott 49
    13 May 2008 at 12:42 pm

    I haven’t read the comments, but I pretty much wholeheartedly agree.

    (As in I agree with Steve’s post. D’oh)

  50. Phil 50
    13 May 2008 at 12:53 pm

    One other thing;

    “massively discounted secret price” is inaccurate.

    The price is secret, yes. As are many other details of a great many contracts that occur in the business world. It’s called ‘commercial sensitivity’.

    The price is discounted, yes. Massively? maybe, but you don’t know that – it’s a commercially sensitive price.

    Why do they recieve electricity at a discount?
    1) they’re a large user – no different in concept to the bulk discount you or I get from supermarket bulk bins. The variable costs associated with supplying power in that quantity are lower.
    2) no middle men – Comalco buy power straight from the source. It cuts out having to dick around with the retail and transmission arms of the market
    3) Accuracy of usage – Comalco know exactly what power they need, and when they need it. They’re in contact consantly with their power supplier telling them whats happening. The generator doesn’t have to guess, and as a result faces less risk in securing supply to the grid

    [plus. Manapouri was built for the smelter and doens’t have transmission capacity to send it’s energy elsewhere (it could be done but would require investment) that gives Rio Tinto a captive supplier. SP]

  51. Tane 51
    13 May 2008 at 12:53 pm

    Phil, I don’t think they felt terrible being invited to beer and cheese evenings. The terrible feeling will have come years down the track when they realised they’d sold out their pay and conditions for the price of a sixpack and a few crackers.

  52. James Kearney 52
    13 May 2008 at 12:58 pm

    How terrible all the employees must have felt when management was being nice to them, making them feel valued, and inviting them to wine and cheese evenings.

    Those scumbags in management! how do they sleep at night?!

    As I understand it the day the ECA came into effect Comalco lifted the onsite union office up with a crane and moved it over fence outside the company’s premises. This was classic union-busting aimed at cutting wages and used both the carrot and the stick.

    IrishBill says: you might want to read my comment at the top of the thread 😉

  53. Phil 53
    13 May 2008 at 1:12 pm

    “they’d sold out their pay and conditions for the price of a sixpack and a few crackers. ”

    … and having the company pay for volunteer fire training, and having free counselling sessions for those finding it hard to make ends meet, and consulting wives/family before changing shift rosters, and making health and safety a priority, and having management demonstrate caring for the workforce, and feeling valued and part of the decision making process.

    Yep, I bet they’re all looking back to the good old days when the company didn’t bleed staff dry.

  54. Stephen 54
    13 May 2008 at 1:16 pm

    Would imagine ‘carbon leakage’ will be addressed in Kyoto-2. The US and Europe have already started putting carbon-tariff type options on the table…

  55. Phil 55
    13 May 2008 at 1:16 pm

    The union got ‘busted’ because Comalco moved the office a few yards?

    If that’s all it takes to bust a union, then it’s clearly being led by the wrong people…

  56. James Kearney 56
    13 May 2008 at 1:20 pm

    Phil- you should do some reading on union-busting. A short-term charm offensive (often met by an offer of hefty pay rises) is a small cost compared to the long-term gains to the employer’s profit margins of a union-free workplace.

    See this Wikipedia article for a broad overview:

    After vilifying the union, the second imperative of a union avoidance campaign is to humanize the executives in the eyes of workers. The goal is to portray the company as benevolent, compassionate, and caring. According to Martin Jay Levitt, a former union buster, at seminars,

    “…managers learned the tricks of evading the so-called union problem: by appearing to listen to their employees and to encourage openness, by making policies simple and clear, and by relaxing some rules. And yes, they were tricks. Sleight of hand. Perception was more than a tool for me: it was the whole game… the objective was not to empower the employee, as I pretended, but to shut him up…”

    Management must temporarily submit to the guidance of consultants concerning all communications with employees. Examples of management’s newfound kindness are publicized to all employees. Through surveys and interviews, the union buster develops a definite insight into who in management is trusted and liked, and who is not. The former are brought forward and become the new face of the company during the union organizing campaign, while the others are coached on masking or overcoming their dislikeable characteristics. Absent such transformation, their visible role is diminished.

    “Give the workers just enough rope so that they believe they are off the leash, just enough to fool them into scorning the union. The golden rule of management control, as I taught it, was: incorporate dissent, institutionalize it. They would find, I promised my disciples, that dissension won’t be half as attractive to the masses once the rebels are sitting down with the bosses…the cunning manager should embrace his workplace rebels. Be grateful for them, I offered, for they are your most effective shield against the union. If you can convince the activists that they’ll accomplish more, perhaps have more power, without a union, why, you’ve won the war.

    Managers or owners may be asked to visit worksites and exchange jokes, gossip, and laughter with workers. The theme of company-as-family prevails, with the union portrayed as an upstart outsider. Only after a union organizing drive is defeated, might company executives be allowed to return to their “tyrannical” ways.

    http://en.wikipedia.org/wiki/Union_busting

  57. James Kearney 57
    13 May 2008 at 1:21 pm

    The union got ‘busted’ because Comalco moved the office a few yards?

    When the union organiser is no longer allowed on site then yes it does make a big difference.

  58. Phil 58
    13 May 2008 at 1:27 pm

    “Manapouri was built for the smelter and doens’t have transmission capacity to send it’s energy elsewhere (it could be done but would require investment)”

    Manapouri is largest hydroelectric power station in New Zealand. About 70% of it’s output goes to the smelter. That leave the other 30% which enters the national grid, in exactly the same manner as any other generation point…

  59. Phil 59
    13 May 2008 at 1:39 pm

    James – A quick lesson in repeated-round game theory;

    You and I enter into an agreement to do something which benefits us both equally. Then, I renege and take all the ‘profit’ for myself, leaving you with nothing.

    In the next round, will you view my promise of agreement the same way?
    No, of course not.

    Same principle works here – If RioTinto renege, and go back to the dark side, the staff will no-longr trust them and the union will be back bigger than ever. It’s in Rio’s interest to continue to treat their staff well – behavioural economics at it’s most elegant.

  60. Phil 60
    13 May 2008 at 1:43 pm

    I almost forgot… Have you ever taken one of those staff satisfaction surveys that organisations are wont to do from time to time?

    In my experience (which is as an office worker – not a smelter) the results show that higher pay is not that important. Flexible working conditions, ‘feeling valued’, and being part of the decision making process, have always been much more important factors to get right in making your staff happy.

  61. James Kearney 61
    13 May 2008 at 1:45 pm

    Phil- your game theory is contradicted by reality. That’s simply not how the real world works as any union organiser will tell you.

  62. James Kearney 62
    13 May 2008 at 1:47 pm

    ‘feeling valued’, and being part of the decision making process,

    Again the question is whether workers’ input really is valued and whether they have any meaningful input in the decision making process. I’d wager the workers at Tiwai don’t. Tell me, did the company consult its workers before this latest threat of capital strike?

  63. IrishBill 63
    13 May 2008 at 1:49 pm

    “It’s in Rio’s interest to continue to treat their staff well”

    Phil, they are not. In the last five years the people I know who work there have seen a change in culture that they do not like. They have also told me that Rio has succeeded in keeping the union out by harassing union members and paying out on unfair dismissals and is in a legal wrangle because they have stopped unions from accessing the site on H&S grounds. If you had ever been to Tiwai (and I have some years ago on business) you will know that it is run like a compound and nobody gets in or out without the company’s say-so.

  64. Steve Pierson 64
    13 May 2008 at 1:49 pm

    Phil. Fact remains that Manapouri can’t send its full power load out of the region – the cables don’t have the capacity.

  65. Lew 65
    13 May 2008 at 1:55 pm

    Phil: This is an insultingly elementary view of labour relations, and if you know anything about game theory, you know it is. If it were true, no labour force anywhere would have been unionised since the first major round of strikes established the unions’ credibility. In reality, both sides regularly engage in subgames to enhance their overall strategic positions, and union breaking is a subgame which trades off a short-term cost of wage increases or whatever else against the removal of a long-term liability represented by the union’s power, and what’s more, if successful it creates a secondary reward for the company of good `we’re doing right by our people’ PR. (If unsuccessful, however, it creates a secondary cost in bad PR, but that doesn’t seem to be the overall case here).

    Your point is ultimately correct – labour forces in NZ do have recourse to organisation, signalling, and ultimately industrial action. But Steve’s initial criticism of Rio Tinto wasn’t about their negotiation strategy – it was about their subgame efforts to break the union.

    L

  66. lprent 66
    13 May 2008 at 2:00 pm

    About Santi. All I can say is that he is just damn lucky I wasn’t around this morning, and someone else moderated the comment first.

    Bloody idle kibitzer. Can’t remember him ever bringing anything interesting to the discussion. A specialist in the negative.

    Oh Billy – what I found offensive was the suggestion yet again that this site or its posters take orders from the NZLP. That is an issue that has now had a long period of insinuation and no proof. I’ve repeatably stated that is not the case, and I’d say that the posts support that. When they mention labour, the posters are almost as likely to express their disapproval as they are to support them.

    These days I treat it as being a direct personal attack and react accordingly.

  67. bill brown 67
    13 May 2008 at 2:02 pm

    In years where wage rises are kept low I have noticed that there is certainly a rise in employee inclusive consultative groups to cast the employer in a better light towards the employees.

    As I have been with the same employer for over a decade I have seen the ebb and flow of this for myself.

    It is those employees with a shorter work history that tend to get sucked into the “what a good employer, they really care what I think” trap.

    Personally, I sell my -limited- time to my employer for money (I certainly don’t go for the ambiance) anything over and above the money they give me for it is just window dressing.

  68. roger nome 68
    13 May 2008 at 2:55 pm

    Phil:

    “The union got ‘busted’ because Comalco moved the office a few yards?

    If that’s all it takes to bust a union, then it’s clearly being led by the wrong people”

    You don’t understand the ECA. An employer was able to legally disallow union officials access to the workplace when ever they wanted to, making organising impossible. They were using a union-busting piece of legislation to, well union-bust.

  69. Phil 69
    13 May 2008 at 3:15 pm

    Lew – it wasn’t meant to be an in-depth analysis of Labour relations, but a simple illustrative example. Continued unionisation is not really that different from, say, insurance, and it’s a perfectly legitimate action within the framework of game theory.

    IB – wasn’t aware of the change in culture at Tiwai. Will take your word for it.

    James –
    “your game theory is contradicted by reality. That’s simply not how the real world works as any union organiser will tell you.”

    Union organisers are part of the game, following the same types of perverse incentives and incomplete information as anyone else…
    To put it another way – you’re never playing the game on quite the same field as before

    “Tell me, did the company consult its workers before this latest threat of capital strike?”

    Touche – fair point
    =)

  70. roger nome 70
    13 May 2008 at 3:24 pm

    Phil – unions can’t afford to operate in about 50% of NZ’s industry because the operating costs are too high (small workplaces, high turnover etc).

    Game theory has nothing to do with it most of the time.

  71. barnsleybill 71
    13 May 2008 at 3:35 pm

    [Tane: Bill, drop the smears and I won’t delete your comments]

  72. r0b 72
    13 May 2008 at 3:43 pm

    BB, this blog is funded by lprent (not the Labour Party), as you well know, which makes you a liar. And the number of beneficiaries has fallen significantly under Labour, as you also well know.

    Your lies and innuendoes add nothing to this blog. Why don’t you go do something useful with your life? Go water your flowers or something.

  73. roger nome 73
    13 May 2008 at 3:56 pm

    Tane – If I madethat kind of smear over at K-blog at davey I would be banned for life. Time for BB to go?

  74. Ari 74
    13 May 2008 at 5:06 pm

    Steve- have they followed through on any similar threats in the past when they didn’t get what they want?

    Anyway… while I’d like to keep them, it’s ridiculous for them to hold the country hostage over excess profits- as Steve points out, this is a boom time for aluminium and I seriously doubt they can’t afford the ETS as proposed.

  75. Travellerev 75
    13 May 2008 at 5:22 pm

    Has anybody mentioned yet that Rio Tinto bought the New Zealand iron ore mining company that had the concession to do the exploration to see if the Seabed mining of the West coast black sands was economically viable and that Rio Tinto is now being the subject of hostile take over bids from the Chinese Government amongst others. These big Corporations; it is all to much power in to few hands. And generally of people who don’t give a toss about local or indigenous people. The Bougainville civil war being a case in point.
    What about Nationalising the smelter, it works for the Venezuelans.

  76. killinginthenameof 76
    13 May 2008 at 7:36 pm

    Maybe let slip to a few journalists something about forced nationalisation. I dont believe for a second that National\Farrar\The Herald\the Talley brothers ect believe even half of thier propaganda, but it woudl send a strong singnal to the public of New Zealand about where the Government stands on corprate bullying, likely to be a big point of difference from National

  77. vto 77
    13 May 2008 at 7:48 pm

    They are without doubt bully boys. And have seen Paul Little’s success with the train set. There’s just one option…

    call their bluff

  78. Lew 78
    13 May 2008 at 8:28 pm

    killinginthenameof: National has already taken much the same line as Labour in response to Rio Tinto, so that view is unfounded. In fact, consensus appears to be that Rio Tinto overplayed its hand on this one.

    L

  79. Idiot/Savant 79
    14 May 2008 at 1:36 am

    I’ve crunched some numbers, and we would be $26 million a year better off if Rio Tinto carried through on their threat and pissed off. And that’s using their own figures for economic benefit.

    The full petard-hoisting is here.

  81. Benodic 81
    14 May 2008 at 8:14 am

    Lew I’d say that’s the consensus now. It wasn’t the consensus from Monday night through Tuesday afternoon.

    (Captcha: “blackmailer chant” – yep, that’s Rio Tinto’s submission alright)

  82. r0b 82
    14 May 2008 at 9:08 am

    The full petard-hoisting is here.

    Nice – very nice – and you address the jobs issue too.

  83. Travellerev 83
    14 May 2008 at 10:42 am

    Hope you don’t mind Idiot/Savant but I linked your article to my blog.
    I liked it and I hope it gets more exposure that way.

  84. The Optimist 84
    14 May 2008 at 10:58 pm

    > Well, I say Rio Tinto should fuck off.

    Strong words from a bishop. I don’t even live in Southland but I hope you don’t get your wish.

    With regard to nationalisation I doubt that smelters have quite the same appeal to Dr Cullen as he has shown with his trains. But perhaps Rio Tinto could propose aluminium trains as an energy saving measure. The Audi S8 looked quite cool in aluminium.

    After the smelter, I think farms should be next. Those farmers think they own the country, and all that farting isn’t good for the planet. How about it?

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