Colin James: State cash tempting for business

Capitalism, the left used to say, "privatises its profits and socialises its losses". So Air New Zealand goes bust and workers' taxes rescue it. Tranz Rail gets into difficulty and there the workers are again.

The other side of that coin is crass government. In the late 1980s Sir Roger Douglas kept finding hidden losses from Sir Robert Muldoon's early 1980s "think big" heavy industrialisation programme.

The massive addition to government debt - upwards of $8 billion - was one of the drivers of the sale of state enterprises that followed.

Now Michael Cullen is complaining about the bill for privatisations gone sour. His tab isn't as big as Douglas', but it diverts dollars from building hospitals, schools and roads (not from hip operations, as Richard Prebble said, because this is below-the-line capital, not above-the-line current, expenditure).

Of course, the rail buy-in is the sort of socialisation some on the left want. Matt Robson of the Progressive Coalition is a keen purchaser. The Greens like trains because, they say, they are environment-friendly.

This begs the question of whether, if there was no rail network, it would be a sensible public or private investment to build one.

The Cabinet says there is a track and an operator and it cannot let Tranz Rail stop because exports and commuters would be stranded.

Rail is part of the infrastructure. This year ministers have become particularly bothered about the link between good infrastructure and keeping investment flowing, so the rail buy-in was a foregone conclusion.

It also reflects a wider preoccupation in the Government: the social impact and responsibilities of business.

Two weeks ago Cullen said this: "Businesses must recognise that they operate in and draw resources from a wider social organisation and need to accept that there will be standards, constraints and responsibilities that go with the rights to pursue profits." Creating jobs isn't enough.

But if business is going to have to give, it may as well also take when the Government offers cash. Why not?

Federated Farmers spelled out the "why not" in the early 1980s. It told politicians it wanted good governance, not government goodies. It reckoned this was better for farm profits in the long term than huge subsidies and high import protection. So it has proved. Other business groups later agreed.

Right now, though, businesses are adjusting to having the Government back in the game. With low tariffs and policy settings broadly still geared to efficiency and market signals, where's the sin in taking a little bit of Treasury largesse? Isn't it just good business?

The issue is whether this modest corporate welfare is good for everyone or just for those who get the handout; whether it just fattens the lucky capitalist's profits or lifts overall economic growth higher than it would have been if the Government had stayed out.

Cullen, in fact, does not want to dollop taxpayer money into ailing enterprises - he let state-owned enterprise Terralink go bust in 2001. But he is keen on facilitative assistance through "partnership".

Pete Hodgson and Jim Anderton do the "partnership".

Hodgson's part - investing in research, science and technology and translation of resultant ideas into viable businesses - is largely uncontroversial, except in the science community, which disputes allocation criteria and choices.

Anderton's part is not so uncontentious. He aims to nurture businesses - new ones and existing ones. He has converted a regulatory agency into a development agency and set up an implementation arm for his bewildering array of schemes.

This is now a significant and growing charge on the Budget, siphoning money from teaching, health services and the like.

Anderton tramps the country tirelessly, a prophet in his own land. He has stirred up a lot of activity.

He has had industry groups meeting bureaucrats to identify what roadblocks can be reduced or removed consistent with the Government's taxing, environmental and regulatory stances. The wood processing group was, on balance, useful, industry participants said.

Anderton has had taskforces producing strategies, with targets and policy suggestions, on information and telecommunications technology, biotechnology, the creative industries and, most recently, design.

He has got local and regional councils and businesses generating regional development plans. Come up with a bright idea and Government support follows.

Rotorua has gone for a wood-processing centre of excellence, Hawkes Bay for food processing and Marlborough for wine production.

But is all this activity productive or is it, as his critics say, just displacement? Are local grandees and businesses just humouring him or going along in case they miss out on some goodies? Are businesses just taking taxpayer money to do what they would have done anyway?

I joined Anderton on one of his provincial tramps on Friday, to Kapiti and Horowhenua. He radiated determined optimism. It's infectious.

He dropped in on Swazi in Levin, one of those serendipitous husband-and-wife companies that make up a lot of this country's small and medium businesses.

When husband Dave Hughes hit a downturn in the possum-trapping trade, they designed some outdoor wet- and cold-weather clothing and took samples to Melbourne.

The samples sold in a flash. A decade on they are expanding fast, keep coming up with new ideas and can't keep up with demand, much of it foreign.

What does Hughes - a writer of passable doggerel for Swazi's annual catalogue - think Anderton can do that is useful? Not "leave me alone and cut my taxes". And not a "lifeline". He would value "some mentoring from people with experience".

Anderton's response: "We want you to become a world-class icon." He wants Swazi's 60 workforce expanded to "200, 300, 400".

Swazi is the new face of the textile-clothing-footwear-carpet sector. Tariffs are irrelevant. Chinese manufacturers hold no threat.

The other face is across town at Levana, a fabric knitter - high-tech machinery but not high-niche product.

A computer-modelled presentation to Anderton at the district council shows that cutting tariffs to zero (a decision is due next month) might have only a microscopic impact on the country as a whole but would hit jobs in Horowhenua, where 14 per cent are in the textile-clothing-footwear-carpet sector.

Anderton, who in the 1980s opposed even CER, is polite but noncommittal. These days he is more interested in upside than downside.

Over lunch, local politicians and businesses play the game. Their bright idea for Horowhenua is to have a textile-clothing-footwear-carpet sector centre of excellence in Levin.

They seem genuinely engaged, not just going through the motions or in it for what they can get from the taxpayer.

So maybe Anderton at the margin is making a difference and maybe (it's too early to tell) the gains outweigh the cost.

Maybe, to turn on its head a famous British Tory phrase about the "unacceptable face" of capitalist excesses, he has lighted upon the acceptable face of socialism.

We shall see.

pf* Auckland University vigorously disputes Wellington views expressed here last week that PhDs in geological earth sciences have to go to Australia for equipment - only some do - and that Massey University's animal-based science is the only internationally recognised research leader.

* Email Colin James