70,000,000 reasons for sale

Tim Worstall, writing at Forbes, says there’s 70,000,000 reasons for selling Lochinver Station:

There’s a slightly bizarre argument going on over in New Zealand over the ownership of a large farm, Lochinver Station. The argument is over whether it’s right or not for it to be sold to a Chinese company. There’s so many things wrong with even having the debate that it’s difficult for we foreigners to get our minds around it. For a start the very definition of private property is that you can dispose of said property as you wish. If you can’t then it’s not actually private property any more. But more than that the basis of the argument against allowing the sale seems to be that the sale should be in New Zealand’s economic interest as a whole. Which, of course, it is, there’s 70 million benefits coming into the country in the form of the $70 million that’s being paid for it. Why the debate continues after this is a mystery. . .

The debate continues because of emotion and politics.

. . . To which I would just add that one about the 70 million benefits. A foreigner (a corporation, an individual, it doesn’t matter) is bringing money into the country to pay for Lochinver Station. The price that’s being paid is, by definition, everyone’s best guess as to the total current value of all of the future profits from that farming operation. This is thus an addition of $70 million to New Zealand’s capital stock. Before, there was the farm worth $70 million. After the sale there will still be the farm, which will still employ people, pay taxes and so on. And also the family operation that used to run the farm now has $70 million. The deal adds to the capital stock of the country and what makes a place richer is increasing the amount of capital that is added to the labour of that place. Thus there’s 70 million benefits to the sale, each dollar being paid over being a benefit of one dollar.

Other than a xenophobic appeal to economic populism (and those with long memories might care to ponder on where said autarkic populism led the economy under Robert Muldoon) there’s really nothing at all to support the idea that Lochinver Station cannot be sold to anyone at all who wants to buy it.

Private property rights and economics mean nothing to the xenophobes opposing the sale.

They also fail to see the benefits to the seller and the country from those $70,000,000 and all the other money the would-be purchaser, Shanghai Pengxin,  will have to put into the farm to meet the very strict criteria of the Overseas Investment Office.

2 Responses to 70,000,000 reasons for sale

  1. Captain Fantastic says:

    It all sounds pretty good, and may settle gnawing fears. But. This is a Chinese investment, a result of Chinese savings, Chinese business success, intended to generate a flow of dividends back to the overseas owners for ever, probably.
    NZ is a developed country. It doesn’t, or shouldn’t require colonial investment. What NZ does have is a government and a State legacy of capital consumption and growing debt.
    Why can’t NZers have bought this business ? If NZ was a buoyant cash rich, country, this wouldn’t be happening. We could be doing it to undeveloped country’s overseas. We could feed off others.
    While we watch foreigners picking the eyes out of NZ, we have to put up with growing red tape, control freak governance & tax, & local government laxness & inefficiency.

  2. JC says:

    You are away with the fairies here, Capt.

    The US is a fairly sizable and rich economy so lets have a look at Foreign direct investment there..

    http://www.whitehouse.gov/sites/default/files/2013fdi_report_-_final_for_web.pdf

    “Executive Summary
    The United States has been the world’s largest recipient of
    foreign direct investment
    (FDI)
    since 2006.
    Every day, foreign companies establish new operations in the United States or provide additional capital
    to established businesses.
    With
    the world’s largest consumer market
    ,
    skilled and
    productive workers, a
    highly innovative environment, appropriate lega
    l protections,
    a predictable regulatory environment,
    and
    a growing energy sector, the United States offers an attractive investment climate for firms across the
    globe
    .
    Foreign direct investment in the United States is substantial

    In 2012, net U.S. assets
    of foreign affiliates totaled $3.9 trillion. The United States consistently
    ranks as one of the top destinations in the world for foreign direct investment (FDI), with inflows
    totaling $1.5 trillion in FDI just since 2006. For 2012, FDI inflows totaled
    $166 billion”

    Or as Wikipedia says:

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

    “White House data reported in 2011 found that a total of 5.7 million workers were employed at facilities highly dependent on foreign direct investors. Thus, about 13% of the American manufacturing workforce depended on such investments. The average pay of said jobs was found as around $70,000 per worker, over 30% higher than the average pay across the entire U.S. workforce.[18]
    President Barack Obama said in 2012, “In a global economy, the United States faces increasing competition for the jobs and industries of the future. Taking steps to ensure that we remain the destination of choice for investors around the world will help us win that competition and bring prosperity to our people.”[18]

    Foreign investment is a fundamental and vital tool in the economies of successful countries. Lack of it signals a closed and unhealthy society.

    I could go around the world showing the same thing. FDI is a feature of successful economies.

    JC

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