Written By:
Steve Pierson - Date published:
11:08 am, March 7th, 2008 - 21 comments
Categories: economy, Media -
Tags: economy, Media
The two major dailies have been running bizarre editorial lines against the government’s intervention to block the sale of Auckland Airport, even as their letters columns fill up with people supporting the move.
The Herald called it ‘xenophobia’. Of course, the Herald would know a bit about xenophobia having enthusiastically supported the anti-Asian campaigns by New Zealand First and others in the mid-1990s. But since when has it been xenophobic to ensure that a vital piece of New Zealand infrastructure is run in New Zealand’s wider economic interest and protect it from asset-strippers?
The Dompost goes so far as to argue that asset-stripping is impossible: ‘it’s not like they can take the airport to Canada, ha, ha, ha’
Of course, you don’t need to move an asset to strip it of its value. For instance, you could be one of two foreign media empires that buys up all of New Zealand’s print media (under the approving gaze of National). Then, you could cut journalist jobs left, right, and centre, refuse to raise wages, out-source sub-editing, increase the amount of space taken by ads, cut out investigative journalism, force the journos you have left to churn out half a dozen stories a day, and generally run the country’s newspapers into the ground, all the while extracting as much profit as possible.
So, maybe we can’t expect better from the Herald and the Dompost editorials. After all, they themselves have been comprehensively asset-stripped by foreign owners over the last decade.
[Ed note: This story was posted yesterday but fell off the front page for some reason. Bumping it back up now to give it a decent run]The current rise of populism challenges the way we think about people’s relationship to the economy.We seem to be entering an era of populism, in which leadership in a democracy is based on preferences of the population which do not seem entirely rational nor serving their longer interests. ...
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“Of course, you don’t need to move an asset to strip it of its value.”
What you forgot to add is that you don’t even need to be FOREIGN to strip an asset of it’s value. The argument that foreign owners will bleed AIA ignores that it already had private owners, who have exactly the same incentives as any other private owner foreign, domestic, or otherwise, of an airport.
This actions of Cullen et al are a reactionary political move bourne out of populist desire. Nothing more, nothing less.
Much as I dislike the Herald today, this comment is not correct:
“… the Herald would know a bit about xenophobia having enthusiastically supported the anti-Asian campaigns by New Zealand First and others in the mid-1990s.”
The Herald did not support Peters’ campaign at that time.
I know you don’t need to be overseas to be an asset stripper, I’m rebutting the Domposts’ line that you cna’t even asset strip if you are a foreigner.
However, foreign owners are more likely to asset strip. Their senior people have no personal connection with the country, the bulk of their operations are offshroe so they don’t hurt if NZ hurts, and they are more likely to repsond to international financial imperatives than New Zealand conditions.
gobsmacked. That could be correct in that they didn’t campaign to reduce Asian immigration directly, I remember all the sensationalist articles about ‘asian crime waves’ though.
Steve
Business has little concern beyond earning a return. Your naive faith that local companies would have less compunction to “asset strip” is not borne out by the many US companies that have asset stripped their local operations and relocated to Bombay or SHanghai, or Fisher and Paykel, Sleepyhead and numerous others who have asset stripped their NZ businesses for similar motives.
Again, I’m not arguing that NZ companies don’t asset strip, I’m arguing that foreign companies have a bad record of asset stripping. It was the Herald and Dompost who were arguing that asset-stripping doesn’t happen.
By saying they have a bad record you are saying it is worse than NZ owned ones, yet where is the evidence of that? Very few NZ companies are globalised so don’t have the opportunity a foreign investor has, so naturally foreign investors may appear ‘worse’.
Phil, I guess the notion is that private New Zealand inverstors are unlikely to do anything to reduce the effectiveness of their main international airport. New Zealanders, pretty much without exception, require a functioning international airport.
A Canadian corporation doesn’t to the same extent, so the imperative isn’t there to maintain function over profit.
That’s also relevant to your comment, insider. It doesn’t matter what New Zealand investors do overseas in this case – you don’t shit in your own backyard, so to speak!
Regarding your point about asset stripping in the US followed by relocation – that’s not viable with an airport (you can asset strip it, but not for the purposes of relocation.)
CAP: automobile no (hear hear! 🙂
MAtthew
Where is the logic in spending top dollar for an asset and then deliberately running it down jus cos you are Canadian? Most businesses recognise they need to invest in their assets to maintain or improve returns no matter where they come from, unless they can’t improve returns by doing so.
insider. that last comment argues that asset-stripping doesn’t exist.
Steve
That’s a whole other argument…but read the comment more carefully – it is comparing the logic of different motivations for foreign v local owners
insider – it’s nothing to do with being Canadian, and it’s pretty clear that’s not what anyone means. If any party doesn’t have a vested interest in the functioning of an asset, they can milk it for what it’s worth. Once done, If that asset is vital to a country, you can pretty guarantee you’ll get top dollar from the government to buy it back.
This is what concerns people, with regards to critical infrastructure.
You mean, just like all the other monopolies we sold to overseas ‘investors’?
Matthew
You present Canadian investors as having no interest in an assets value and NZ investors as somehow motivated differently and collectively just because they are NZers and see some different intrinsic value in the asset. Yet those same NZ investors are signing up in droves to sell their shares to the Canucks. I think you are projecting your values onto NZ investors with no real evidence.
Insider. Last I saw, the Canadians are well short of the number of shares they need and there’s lees than a week to go.
Again. Asset-stripping happens (it happened to the Herald and the Dompost, whose staffs have been slashed, hell the dompost used to be two papers) and foreign investors are more likely to asset strip than domestic ones, and our strategic assets have been stripped by foreign investors in the past.
Insider – I am speaking from a theoretical standpoint that has been realised in other instances.
Your last comment isn’t right, because you’re talking about New Zealanders selling shares – not talking about operational policy when in control of the asset. Ask yourself – if people believed that an overseas interest would act to negatively impact AIA for profit, would they sell? Would they still do so, if they knew that their taxes may be required to bail out said asset in future…
As said – New Zealanders are more likely to protect their vital assets. Those with no vested interests aren’t as likely to do so. Those selling shares may not believe something such as is being discussed will occur, or don’t care in which case you’re getting onto the argument for public ownership again.
However I accept your point here regarding New Zealand shareholders – no one has perfect information and people can be motivated by short-term gain, even at the expense of future income. This, to me, further reinforces the need tor government intervention and explains why such regulations are common overseas…
Steved
The reason INL “stripped” the Dom and Evening Post is because NZ readers stripped it of circulation and revenue. So who is the asset stripper there?
I think there is a very interesting debate to be had as to what asset stripping is because I think you are using it in a very emotive way and it could just be a response to market conditions that would be done by any rational owner.
Matthew I don’t agree NZers are more likely to protect their vital assets. I accept that NZ politicians are likely to get up in arms and create issues in election year…
Contact has successfully owned and operated power stations in NZ and is even building more, as well as shutting others down. It is majority owned by aussies and before that by yanks. WHere is the worry about that? have any of the dire predictions come to pass?
Labour is honouring its pact with the mendacious Winston Peters. This bout of xenophobia will be another nail in the coffin of the socialists come election time.
NZ should be selling these assets to the highest bidder instead of buying them back.
Are the Canadians going to pack Auckland Airport and ship it overseas? Will Toll do likewise?
The socialist’s aversion to foreign investment is there for all to see. Excuses, excuses.
Santi. Repeating the Dompost’s stupid line that is already addressed in the post is a pretty stupid contribution.
Insider: Newspaper readership is going down internationally as well- probably due to the internet. Comparatively, the Evening Post lasted quite a long time, as most evening papers had either gone bust or switched over to morning papers quite a while ago.
That said, I absolutely agree that it’s quite possible for foreign investors to be a bit more shortsighted with their investments and want to extract immediate profits rather than keep them running well in the long-term, as they won’t be as bad off as locals if they run down the business then cut their losses and move their money into a new short-term investment.
Classifying all foreign investors that way is stupid, I agree, BUT there is much more incentive to take this kind of attitude with foreign strategic assets like railway networks, airports, telecommunication companies, etc… because there is always the hope of lucrative government buyouts on top of short-term profit. If Labour was being REALLY xenophobic, they’d simply seize the international shares for themselves. 😉 Blocking large sales to a major international stakeholder isn’t anywhere near the same thing.
Ari
“BUT there is much more incentive to take this kind of attitude with foreign strategic assets like railway networks, airports, telecommunication companies, etc because there is always the hope of lucrative government buyouts on top of short-term profit.”
Surely using that argument a local company would have much more incentive to run an asset down, as they would be better better positioned to plead poverty and being local should be better connected to make a case?