The payout to South Canterbury Finance investors is NZ Inc. in action - the public represenatives acting for the greater good. But if we're willing to rescue those deemed too big to fail, why not do the same for the little guy?
Just as there are no atheists in foxholes, we've seen again that there are no pure capitalists when big business fails, putting capital at risk. Not many, anyway. And not, it seems, in the National party anymore.
When the centre-right government shoe-horned South Canterbury Finance into the extended retail deposit guarantee scheme in April, and then yesterday when it paid out close to $1.7 billion of taxpayers' money to investors, there was nary a squeak of market-loving protest. Even ACT MPs, remarkably, were silent.
How far we've come from the National party under the leadership of Don Brash, Bill English and Jenny Shipley. If ever we needed proof of John Key's non-ideological view of life, it was on show yesterday.
What we saw was New Zealand Inc at work. Essentially, a subsidiary was given every chance to recover and, when it didn't, it was shut down for the greater economic good. We didn't want to risk the 'what if...' scenarios of leaving SCF to fail on its own.
And, so far at least, it's worked. Credit should go to Key and English, because when they moved yesterday, they moved with speed and decision. Having learnt from the US and Britain, amongst others, they knew that certainty was central to minimising damage to the economic body as a whole. The market and the dollar and the credit ratings agencies? They were hardly ruffled.
No-one knows how much this will cost the country in the long run. If Key has any sense, the $600m estimate of what will be lost in all this will be generously high. But who can say? It could go either way; there are too many variable to list.
But whereas the government's reaction has been impressive, Allan Hubbard's has been far from it. Instead of a humble 'sorry' and 'thank you', he has whined about being "straight-jacketed" by regulators. This, even though the current SCF boss Sandy Maier has said the company was "poorly controlled and managed for some time" and risky loans were taken out after it entered the guarantee scheme. Bloody cheek. Even English is feeling a bit unappreciated.
Of course there are some who will argue South Canterbury Finance should have been allowed to collapse, and let the farms, helicopters et al fall where they may. But they are the folk who see the market as a beautifully pure thing, rather than a mere system created and continually re-created by people and institutions, with all their flaws, foibles and genius.
'The market' is resculptured every day, with every transaction, merger and regulation, so the government's payment yesterday was nothing more than another – if somewhat mighty – swing of the chisel.
Ordinary taxpayers will feel aggrieved, but when they stop to think of the opportunity cost, they'll realise it was the right thing to do. And sure, it's tough for investors in Hanover, Bridegecorp and others to watch – the only difference between their finance companies and SCF is time and size. 9And, of course, the guarantee, which created some moral hazard, exploited by some cretinous/shrewd investors. They go into the 'how do they sleep at night' category, alongside Hotchin et al ). But as the saying goes, don't cut off your nose to spite your face. Or, if you prefer, two wrongs don't make a right.
The question I have now is why the government won't apply what could be called the 'South Canterbury principle' to other policy areas.
If the government will spend around $400 per taxpayer to save businesses, why not spend money to save jobs? The government will argue that its tax cuts have done just that. But a tax cut is an incredibly untargeted beast; a bull left to roam an entire paddock.
It's infrastructure spending? Good, as far as it goes. But with NZIER warning that the construction industry is on the edge of a "precipice", with as many as 20,000 jobs at risk, why not take seriously the Greens' suggestion to put some urgent funds into state housing? Why not aim money fairly and squarely at job incentives?
Instead, Bill English says on Q+A that 159,000 people out of work is, "to some extent", just part of rebalancing the economy. He doesn't think that's a brutal analysis at all, because "we're getting a pretty measured and considered adjustment".
To which I say, perhaps he needs to get out more. The economic mood at the moment feels more like a recession still than a recovery, and the SCF malarkey has only reinforced that feeling. Growth, confidence, retail sales and employment figures are all slipping. It's pretty brutal out there.
As English himself says, "new jobs happen when businesses decide to invest and employ another person". The fact that new jobs aren't coming along in sufficient numbers suggest the government could be doing more to create the necessary confidence.
And if it's ok to save the big fish from such brutal times, why not do more for the families doing it tough right now, especially those in need of those new jobs? It's worth remembering as politicians go about their "rebalancing" that every job, every business, and every trainee has economic value.
Speaking of which, that 'South Canterbury principle' is something the Welfare Working Group, Cabinet, and business lobbyists should remember when it comes to its planned reforms of the welfare state.
If they are going to endorse - or even stay silent - over such massive corporate welfare, they should do the same on social welfare.
If we accept that the government has a role to step in and save those getting their necks wrung by the invisible hands of the market, then the principle should apply to "the least of these", as well as those deemed too big to fail.