Rob Campbell
Time to build the new economy.
The honeypot of Covid-19 Government cash could be tempting companies to make distorted and valuedestroying decisions in a misguided rush to recreate the “old” economy, warns business leader Rob Campbell.
And the chairman of Tourism Holdings, SkyCity Entertainment and Summerset Group says he’d prefer most of that taxpayer-funded honey go to supporting businesses and families at “the bottom of the pile” rather than infrastructure building under some trickle-down economic theory.
“Most of the pain of the lockdown and the transition out of lockdown will be felt by people at the bottom of the pile socially and economically,” says Campbell.
“The theory that’s being applied — ‘let’s build infrastructure, let’s give money to this business and that business’ — is really just another version of the old trickle-down theory which is, you give money at the top and it will eventually trickle down to people at the bottom and they will be better off.
“It takes a long time to get to the people really hurting and I think we should be reversing that.
“When you think about it, the more you support those families, first, it is a human thing to do, but secondly, it gives them the purchasing power to decide what they want to spend it on and will provide businesses which are servicing their needs with the income they need to recover.”
Campbell says that when a big shock strikes, there’s a natural desire to want everything to go back to the way it was.
There’s also a tendency to want to “throw a lot of money at the recovery to pump up the engine quickly”.
“I think there are dangers in that and that it makes sense for us to constrain some of that natural impulse and not throw caution and judgment and risk-management out the window.”
Many businesses, large and small, would fail. Some might have failed anyway, while others were already earning less than their cost of capital and were destroying value instead of creating it, he says.
“One of the problems with Government money is that it always feels like other people’s money, doesn’t it? At the end of the day it’s ours or at least future generations’, who will have to pay it back in some way. We ought to be just as cautious with that money as we would be in our own businesses.
“If you give cheap or free Government money to enable businesses to continue, in doing so you may be destroying the very thing that is valuable in business, which is the ability to evaluate risks and to take risk where the benefits that flow are greater than the costs.
“So I’m suspicious and concerned about the view that when we come out of this lockdown we need to start up quickly in exactly the same form we were before, with a big injection of Government money to help us get under way.
“I think that is as likely to cause problems as it is to solve them.”
Campbell, a former trade unionist with a Master of Philosophy in economics, says “there’s no one more socialist than a businessman who has had his business go bad”.
“The hand goes out to Government pretty quickly.”
A number of businesses he is associated with are effectively closed and their leaders are planning for reopening. They’re not looking to recreate what they were, he says.
“We’re looking at what is going to work for the business and our various stakeholders in the future.
“So I think when the Government is spending money, it’s got to be very careful it doesn’t allocate money to projects that are of the old economy and not the new economy.” Investment in new energy projects would be much more appropriate than in “old energy”.
The fight against climate change isn’t over, he says, it’s just been parked.
The “housing crisis” had to be questioned, with migration-driven population growth falling away, though there was still a big housing issue for people on low incomes.
“There’s an interesting issue as to whether building roads and bridges is necessarily the most effective way to transition New Zealand to the sort of economy it needs in the future.
“In this rush to get the economy restarted and have the Government make everything come right and the pain go away, there’s a danger you throw those judgments out the window.
There’s no one more socialist than a businessman who has had his business go bad. Rob Campbell