An opinion piece published 5 November 2010
“By blocking BHP Billiton’s bid for Potash Corp, Canada has damaged its international reputation,” Stephen Bartholomeusz wrote in the Australian web publication Business Spectator yesterday.
“The Canadian government has damaged the reputation of Canada as an open economy committed to free flows of capital by rejecting BHP Billiton’s proposed $US39 billion bid for Potash Corp,” he wrote.
This week, the Canada Pension Plan went shopping in a joint venture with a fund managed by the Salle Investment Management, buying a regional shopping centre near the German city of Cologne for €157.3 million – an asset nobody got upset about the Canadians’ buying. Back in 2007, the pension plan was in the same position of being blocked by what our nation’s free-economists saw as a spurious Government intervention over strategic assets (land). The Canadians eventually walked away in 2008 from trying to buy into Auckland International Airport Ltd.
Since then, the possible purchase of 16 farms by a Chinese group fronted by businesswoman May Wang has raised more general concern here about the sale of land to foreigners.
The Australian questionmark ignores long-running Australian Government protection of Qantas’ aviation market by preventing Air NZ from picking up/dropping off passengers in Australia en route to/from somewhere else. And in the background to that debate, some of New Zealand’s better known entrepreneurs of times gone by argued that New Zealand didn’t need its own airline because, essentially, an efficient commercial market would see that passengers got here.
Free-marketeers need to move beyond their black-&-white view in 2 ways. First, in relation to the issues above, they need to learn to regard a national interest as if it’s a cornerstone investor in the business. It’s like green building – didn’t exist, was pooh-poohed, has become integral because it makes better sense long-term. Nations aren’t the same as a tilt-slab warehouse; as the proposed Chinese purchase of farms demonstrates, nations can have feelings.
The black-&-white view of governments is that they are an evil which ought to be reduced to the minimum. The main point against them is that they shouldn’t dabble in business because their bureaucracy makes them incompetent. Take the individual out of a government business, though, and get them working in a private-sector equivalent and, miraculously, they become good & more efficient workers.
The missing ingredients on the government business side of the equation are the flexibility to change quickly to meet a new situation and the ability for funds to flow when needed, not distorted by political whim. Change those factors and a government can legitimately be regarded as a cornerstone investor or partner.
So the Canadian Government’s cornerstone position that the national interest is worth something lines up directly with the former New Zealand Government’s view on Auckland Airport and the Australian Government’s view on land rights (oh, and a few mineral deposits as well).
The stern rebuke that a government is damaging the national reputation as an investment target can, in all these instances, be rejected on the grounds that the nation is a cornerstone investor. In each instance, the cornerstone investor is protecting a wider investment value than the specific target of the interloper.
Against that, the notion that capital should be allowed to flow freely without any check is bogus. Put 2 free-marketeers together with an opportunity to increase their profit through collusion, and they will collude. A totally unregulated market would guarantee that.
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Attribution: Business Spectator, Europe Real Estate, opinion piece written by Bob Dey for the Bob Dey Property Report.