Translation: Foreign investment

This time from Frogblog:

Foreign investment is driving up the price of rural land to an extent that it is unaffordable for many would-be New Zealand farmers to own their own farms

Translation:  Foreign investors are willing to pay at a higher level than is appropriate given the rate of return of the land for domestic land owners – so allowing them to buy the land increases wealth.

I agree with this – but not so much with the “tone” Frogblog is giving the issue.

High land prices are driving farmers to make the maximum possible return from their land through ecologically unsustainable farming practices

Translation:  Farmers are dumb and will only maximise their revenue stream when they are struggling.

I don’t really agree with this – there could be a “competition issue” but in my experience farmers aren’t “dumb”.  Furthermore, even if we do believe there are negative externalities from farmers farming practices – shouldn’t we find a way of making them pay for the external cost of their actions.  Banning voluntary trade with people who aren’t “New Zealanders” is insanely, well, xenophobic.

Update: Turns out you can support xenophobia under the guise of democracy – as long as it isn’t actual democracy, but what the party believes society actually wants.  I am glad I have people here to explain this to me …

  • Yeah, a very strange post from frog: Bill English is trying to mollify the racists so frog pulls out “You’re trying to soothe racist sentiment and I’m only a xenophobe!” I thought the Greens were against discrimination.

  • @rauparaha

    Look here:

    It turns out that discrimination is fine when you can say it is the result of a democratic process.

    Of course, they are then willing to limit the use of the democratic process when the policy is “for our own good”.

    Bah, sounds like the Nazi party to me – I realise that this brings up Godwin’s law in only the second comment, but I just can’t dodge the fact.

  • What if offshore owners of our land can get better returns on that land than NZ owners? Given the record of business ownership, entirely possible.

  • @BigCake

    I would assume that is why they are willing to pay a greater amount for the land than the amount the domestic owner values it for – so that is fine.

    After all, if they pay the full social cost of using the land, and they own it, then I don’t see the problem with them using it … unless of course we believe land isn’t “owned” it is “rented” from society – in which case we should still allow trade, but just stick in a rental, like a land tax.

  • @Matt Nolan
    OMG, I can’t believe what I just read in Russell Norman’s blog! I am genuinely shocked to hear someone who purports to be a proponent of civil and human rights talk about “hard right policy settings that maximise… freedom”. I fully agree with you, Matt!

  • @rauparaha

    I was shocked by the undertone of his article – I’m not sure he realised quite how it sounded. I suspect he believes that the current generation will completely ignore intergenerational equity, and the only way to “fix it” will be to impose restrictions on the current generation – if that is the case I wish that this was the discussion, as the extreme nature of his assumptions would be more transparent.

    The lingo smells of populism.

  • @BigCake
    That’s exactly where the benefit to NZ lies. Suppose you own a farm and think you can make $100K on it this year. Now a foreigner thinks he can make $150K so he pays you $120K for the farm. He’s $30K better off and you’re $20K better off so everyone wins. If you’re worried about future returns then think of the values as NPVs. The idea that $150K going offshore means that the New Zealander has lost out is ludicrous; yet that’s what a lot of people appear to be worried about.

  • @rauparaha

    Its times like this I wish there was a like function on comments …

  • @Matt Nolan
    Isn’t he a lawyer by trade? They tend to know how to be careful with their words so I’m not so willing to be generous. Unless you have evidence he’s stupid, which seems extremely unlikely, I’ll take him at his word: he’s a populist xenophobe who’s willing to sacrifice NZers’ welfare in order to keep foreigners out.

  • @rauparaha

    I’m willing to say that his interpretation assumes that “the current generation will completely ignore intergenerational equity, and the only way to “fix it” will be to impose restrictions on the current generation”.

    As a result, he finds it unnecessary to open his argument up more transparently.

    I realise that economists get a lot of stick, but having an open and tractable framework to put our assumptions inside is useful. If only he had done that I’m sure he would not have come out so harshly.

    If this isn’t the case then it does really damage my view of this new version of the Green party …

  • WH

    hmm where have I effectively seen this comment before – “the current generation will completely ignore intergenerational equity, and the only way to “fix it” will be to impose restrictions on the current generation”? Thats right the Stern review – a report commissioned by the then PM Tony Blair for the UK Government – not sure what Lord Stern is doing these days, possibly peer review for BERL.

  • @WH

    Even if this extreme assumption was true – the solution would be to establish pricing that took this into account, not to restrict voluntary trade with people who are not “one of us”.

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