INDEPENDENT NEWS

The Public Stake In Private Business

Published: Thu 19 Oct 2000 10:21 AM
John Carr, a disillusioned neoliberal American kiwiphile, has published in the Herald two full-page open letters on the state of the New Zealand economy. The second was on Monday, 16 October (see www.ilovenz.co.nz/letter2.htm). One interesting statement of Carr's was: 'Think of the Government as a one third shareholder in every business in New Zealand. Ask each day what new thing your Government has done to create value in the enterprise to justify your free carry'.
He's saying that the government's 33% company tax take can be better thought of as a dividend. He's also saying that the public side of our society - indeed any society - freeloads on the domain of private enterprise capitalism. And he's saying that the government could choose to behave like an entrepreneur instead of as a parasite.
The idea that the government is a partner of capitalist enterprises is a very useful one. It goes back to the French 'economistes' of the 3rd quarter of the 18th century (also known as 'physiocrats') who coined the term 'laissez faire'.
But we need to be careful with our language. The government is an agent of the sovereign people; of the 'Crown'. It is the people and not the government who are one-third (or whatever) shareholders. Each person has an equal ownership stake in the Crown.
Shareholders, public and private, are better thought of as landlords than as entrepreneurs. They supply capital and land rather than labour. Managers, entrepreneurs, governments and many others supply labour.
The Crown contributes by supplying resources that are in the 'public domain'; resources not in private ownership that contribute to the creation of value. It also contributes through the entrepreneurship of its agent, the government. John Carr is right to suggest that the government should add value to all businesses on behalf of the people it serves; ie on behalf of the public interest, of the property interest of each member of the public.
Once upon a time, all resources were in the public domain. Our history is one of private appropriation of public property. It is not a history of the public encroachment on property that, as Mr Carr sees it, is innately private. Despite past private appropriation ('theft' is what Karl Marx's rival Proudhon called it) of property, the expansion of public domain resources has arguably outstripped the growth of private property.
Historical analysis of long-run economic growth suggests that the contribution of public domain resources to world economic growth has been and will be far more than 33%. The internet is a public domain resource. So is the knowledge that is held in the world's libraries. So is social capital, culture, liberal education, public health and law. Also infrastructure, institutions and the environment. And government.
If we think of personal income tax as an extension of company tax, then business pays about 33% of value-added to the Crown. That's a bargain, considering that public domain resources constitute the principal source of value. (The physiocrats, taking a more extreme perspective, said that 'land' was the only source of net value). But even if that 33% wasn't a bargain - ie if the Crown really was a parasitic landlord - then businesses would continue to maximise returns to private shareholders. The market system - the drive for higher profits - does not depend on profits being high.
The people of a nation, through their equal share of their nation's sovereignty (embodied by the Crown), are equal proprietors of around one-third of gross domestic product (GDP). If a substantial proportion of that revenue were to be paid out in the way that private profits are distributed, then our distribution of income would be more equal than it is.
The problem is that, as individual members of 'the Crown', we see very little if any revenue that we can identify as dividends paid to us through the Crown. Because the Government spends all of the Crown's revenue on our behalf, we fail to identify Crown dividends as a part of our incomes that should be protected and expanded. We enforce public property rights weakly, to our detriment.
If the Crown, whether considered as a landlord or as a business partner, both collected more rent/profit and distributed its revenue equitably, then we could have a prosperous egalitarian society; a system of social capitalism. As 'total factor productivity' increases - largely a result of the contribution of public domain resources - each member of the public should be depending less on his/her wages and salaries, and receiving proportionately more as proceeds of the Crown's interest in each and every productive enterprise.
By turning John Carr's proposition on its head, the responsible Left could adopt a view of the future that utilises capitalism to achieve increased equity, productivity and leisure. The bigger the stake the Crown holds, the more property income most people can lay claim to. A bigger Crown need not mean bigger government.
An objective analysis of past and present economic development suggests that returns to public property should be high and rising. Instead, right-wing ideologies continue to advocate the minimisation and privatisation of public revenue streams. One way they do this is by using words like 'government' and 'the state' in preference to terms like 'sovereignty' and 'public property rights'. The result is that our public agencies are seen as "them" rather than "us".
This century we need to learn to use our collective power as landlord, much as the collective use of labour power raised living standards in the 20th century.
(c) Keith Rankin 2000
Keith Rankin
Political Economist, Scoop Columnist
Keith Rankin has taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.
Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.
Keith lives with his family in Glen Eden, Auckland.
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