Foreign investment explained?

Well, it isn’t explained by this cartoon.

Source:  NZ Herald.

Lets assume, for the sake of argument, that New Zealanders aren’t racist.  In this case, I can’t see the problem with “foreign investment”.

Think of it this way.  There are private individuals that happen to be New Zealanders that own things.  There are private individuals that happen not to be New Zealanders that would like to buy these things, and guess what – they value them more highly than the New Zealanders do.  So they trade.

So what the cartoon misses is that this stuff wasn’t ours to start with, it is being sold by its owners to a buyer who values it at a higher level.  Applying a feeling of ownership on the basis of nationalist sentiment is weird.

Update:  So New Zealanders should be “economic patriots” aye.  Right …

Paul Walker agrees.

49 replies
  1. StephenR
    StephenR says:

    What looks to be unsaid is that ‘along with foreign asset ownership comes foreign profit ownership’. While that may not be the point, it’s usually what any resultant dialogue (amongst ‘laypeople’) comes up with.

  2. Matt Nolan
    Matt Nolan says:

    @StephenR

    Definitely, but this is really a give-in since the purpose of having an asset is to receive some sort of rate of return, whether it be through direct consumption or income that leads eventually to consumption.

    And if people value the asset on the basis of the rate of return they receive from it aren’t we saying that foreign owners feel able to run the asset more effectively than whoever the current domestic owner is.

  3. swan
    swan says:

    Given your last couple of posts show you are prone to getting a little p***ed off with the imbeciles you have to share the world with, I wouldn’t recommend trawling Your Views for any length of time 😉

  4. Matt Nolan
    Matt Nolan says:

    @swan

    That’s a touch extreme methinks. The last two posts were complaints about:

    1) A politician manipulating a study because he wants money,
    2) People criticising “foreigners buying things” because they want the things for themselves.

    I get irritated because I think people are intelligent, and so I see this sort of action as self-interested manipulation.

  5. scrubone
    scrubone says:

    Quite. Outside of racism, it’s hard to see the difference between someone in Auckland (that I don’t know) owning a Southland farm, and someone in China (who I don’t know also) owning the same farm.

  6. Sam
    Sam says:

    One aspect of foreign ownership of our land that concerns me a little is as the owners don’t live on the land they are less likely to consider the long term impact on the land; negative externalities like river pollution are more of a concern to those whose children who play in the rivers.
    Growing up in Southland in the 80’s and 90’s I witnessed this first hand. Dairy conversion has taken a big toll on the well-being of the rivers and a fair portion of the monies for converting came from outside the region.

    In saying this, the key issue I guess isn’t who owns the land but what they do with it. Dairy pollution has not been dealt with too well so far in NZ and its hard to see that improving as the lust for overseas investment clouds our judgement on environmental issues.

  7. Malthusian
    Malthusian says:

    “they value them more highly than the New Zealanders do. So they trade.”

    they have more money to buy them because they have a huge population and cheap labour and we were silly enough to buy all the plastic widgets. In the future we (as a nation) may look back and think “shouldn’t have done that”. Not that “we” own the farms in question but that is another issue: that it is o.k to sell key assets (such as NZ property) to foreigners rather than keep it in the family (as in limit sales to poorer family members)?

    I think people should go easy on the racist claim. We have protocols for (say) dog and dog but humans are animals also and the Chinese are the other tribe. Apart from that i believe there are legitimate concerns and the parable of selling the golden goose comes to mind.

  8. Matt Nolan
    Matt Nolan says:

    “we were silly enough to buy all the plastic widgets”

    So you are saying we are in debt so we are selling off assets to pay it back right. Well that was the nations choice, it is normal for a debtor to start complaining when they have to pay something back – but that doesn’t mean that they shouldn’t.

    If people in debt choose to sell assets instead of doing whatever other option is available there is no issue – if the individual has the property right over the land we shouldn’t wander off and block the sale.

    “I think people should go easy on the racist claim. We have protocols for (say) dog and dog but humans are animals also and the Chinese are the other tribe. Apart from that i believe there are legitimate concerns and the parable of selling the golden goose comes to mind.”

    I’m not sure there is any other claim that we can make but racism – or as I’ve been told in the past its nationalism and the term racist is too strong. I just can’t help myself though 😛

    When we think about the parable of selling the golden goose we need to think about who the relevant agent is – it is an individual (or firm) selling there “possible golden goose”, not the nation as a whole. As a result, if we want to “tell anyone that lesson” it should be the person selling it.

    Now if the person still doesn’t believe in it, we should let them sell it – if it turns out they are making a dumb mistake it is there problem. The issue with nationalism is that is clouds the environment where these transactions take place, it makes people act like the barter among individuals from differing countries is somehow taking something from them – when it is not.

  9. Matt Nolan
    Matt Nolan says:

    @Sam

    Trust me, local owners have shown themselves to be just as willing to ignore negative externalities 😉

    The best solution would be to actually price the externalities, not to attack ownership structures methinks.

  10. Jum
    Jum says:

    The Chinese buyer hopefuls intend to buy 100% of our land and produce milk from dairy cattle. The product goes back to China. New Zealand apart from the person receiving the initial money from the sale ends up losing the advantage of a sizeable chunk of land. The group who want to buy it are beginners – is the fact they were a mining company mean they have two motives for buying this land – food security for their country as well as mining rights?

  11. Malthusian
    Malthusian says:

    “I’m not sure there is any other claim that we can make but racism – or as I’ve been told in the past its nationalism and the term racist is too strong. I just can’t help myself though”

    “racist’ has connotations of Mississippi, however it could mean (in this case) that as a group they will out compete us (which is a sort of compliment and not such a silly observation?).
    Is nationalism not a rational decision especially for New Zealanders who want to see farm and home prices become affordable?

  12. Matt Nolan
    Matt Nolan says:

    @Jum

    We get paid the capital value of the land and products, which we value at a lower level. The individuals that own the land can then use those funds to invest or consume, it is a voluntary trade.

  13. Matt Nolan
    Matt Nolan says:

    @Malthusian

    “Is nationalism not a rational decision especially for New Zealanders who want to see farm and home prices become affordable?”

    Given that people are nationalistic it must be rational yes. But something being rational doesn’t mean it is right.

    In this case there is some capital that someone owns – and they want to sell it to someone else. People find this trade abhorrent as the person wants to sell their capital to a person from another country – as a result they obviously value the idea that foreign people can not own bits of capital that New Zealander’s have had.

    Now this might be rational, but does it sound moral – does it make a sound basis for policy? Society was previously happy with the idea of slavery, but that doesn’t make it right.

    The kicker here is we have private land, private capital, but society has put some sort of value of ownership over it – just because they have. But society isn’t the owner, and if we were going to describe the issue openly we should recognise this difference.

  14. Malthusian
    Malthusian says:

    I think in this case people aren’t thinking “a Chinese buyer” so much as “China” (as in the U.S bought Alaska).
    Society may not be the owner of the private capital but it is the owner of the national policies and if (for example) people (as in Iceland) decide they want a low population or farmland and private property to only be sold to the citizens of that country then I don’t have a problem.

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