Subsidised jobs make everyone poorer

HIDESIGHT

There are many bad arguments for subsidising the Tiwai Pt aluminium smelter.

There are no good ones.

The worst argument is jobs. Its only merit is its propaganda value: journalists have jobs, they can imagine losing them and they figure they wouldn't like it.

So job losses are reported as an economic calamity, the population is alarmed, and politicians must pretend to care.

Phooey.

The number of job losses that have been huffed and puffed about over the last 30 years would see New Zealand entirely unemployed. It's not. There's a reason for that: most people – even those with arts degrees – can figure out something productive they can do to pay the bills.

People made redundant don’t stay jobless for long.

And Joe Bloggs laid off from Telecom but doing better self-employed doesn't make the news. We hear about job losses. We don't hear about job gains.

Besides, we don’t want jobs. We want money. It's just polite to say that it's a job we are after. It doesn’t sound so greedy.

But few of us would turn down money for no work and even fewer would work for no money. It's not jobs that we want but income.

Cost us all
And jobs that don’t generate income cost us all. That's why make-work schemes like subsidising a smelter are dumb. They make us poorer, not richer. They cost us what we actually want: income.

We could all pay each other to dig holes only to fill them in again. We would all have jobs but we would starve. We can readily see the silliness. But that’s the economic logic of subsidies.

To prosper, it's productive jobs we need. Subsidised jobs by definition aren't productive.

The even worse argument is the idea that one job at Tiwai Pt creates four for Southland. So-called economists get paid good money to pretend they can estimate jobs and prosperity radiating out from government spending.

Of course, jobs ripple out across the economy. It’s an interconnected system. But the ripple out is not unique to government spending and subsidy. All government spending does is shift the ripple to less productive parts of the economy.

If the smelter were to close, the 600MW of power generated day in, day out from Manapouri would flow through the national grid, providing extra and cheaper power.

There will be more business and more jobs as a consequence. And these will be real jobs. Jobs that cough up real income, not jobs that soak up taxes. 

If Tiwai closed, the job losses will be obvious and reportable. The jobs and income generated through the extra and cheaper power won’t be. But they will be there. And we will all be better off as a consequence.

The only difficulty is that these jobs won’t be spotted and will go unreported. We don’t know where they are. And we can’t point to them. That’s why the jobs argument – bad as it is – has propaganda value.

That propaganda value is exploited as ruthlessly by big business wanting to suck on government largesse as it is by power-hungry politicians wanting to boss us about. It’s been marvellous to see Meridian stick to its guns in its dealing with Rio Tinto and for government to stay out of it.

It gives hope that politics can achieve economic literacy and raise its head about the clamouring special interest to take into account the best interests of us all.

Bravo!