Sunset Industries

Commercial Reality

Back in the day, New Zealand used to make cars.  We kid you not.  In fact, when Milton Friedman visited New Zealand around 40 years ago he was aghast that we had an automobile manufacturing industry.  It existed and was nurtured by government subsidies and grants--all in the name of creating employment.  Of course NZ Autos Incorporated has long since gone the way of the dodo.  Now punters import swanky second-hand (near new) cars from Japan at a fraction of the price.

The thing about government subsidies to start and maintain industries is that they are proof positive from the outset that the industry in question is not economic from the get-go.  In order to continue, it will need perpetual injections of government money.  Before you can say "Mitsubishi", pouring more money down the crankcase becomes a political necessity because, well, all those jobs are at stake.

We have seen a modern version of the same parable recently with the NZ film industry--stimulated by government interventions over the last twenty years.
  The idea was that taxpayers would pony up some grants and initial capital, then "incentives" would be given to movie making such as tax write offs and tax breaks and hey presto, out of the primordial slime a self-supporting, globally competitive industry would emerge.

Actually, what emerged out of the slime was actually a nasty looking orc that barrelled off overseas as soon as government money dried up.  We are pleasantly surprised that the party ended so soon.  Usually these things drag on for decades, even generations, to the creeping impoverishment of tax payers. 

And so it has proved in Australia which has had its own domestic automobile industry for decades and decades, sucking millions upon millions of tax money down the sinkhole.  But in the end governments run out of money and global competitive realities finally have to be acknowledged.  Ford and Holden (General Motors) have announced they are shutting up shop in Australia.  But, hey, lots of opportunities remain.  Why not start an aeronautical industry and manufacture jet liners?  They can be called Kangajets, hopping through the skies like nobody's business.  A few billion in government start up money, a few more in ongoing subsidies and Australia will be up there competing with Boeing and the rest. 

Wise heads used to say, "You can't fight City Hall."  Neither can you fight local and global commercial reality.  A thousand government hand outs notwithstanding, in the end you have to grow up and face the real world, not the childish one where parents hand out dosh to cocoon you from reality.  Australia is facing this reality now--long past time.  Talking heads are now saying that its national airline, Qantas, long protected and soft-subsidised by the Australian government is next. 

Bloated, sclerotic, inefficient Western economies--usually the outcome of decades of soft-despotic government subsidies and interventions--cannot compete with less subsidised, more efficient, less costly emerging economies.  In the long run it will be better for us all. 

The moral of the story remains true: when secular government overreaches its God-ordained duties and responsibilities there is always a price to pay.  We, the people, end up paying it.