Labour bad for small business

May 26th, 2014 at 9:00 am by David Farrar

Stuff reports:

Small listed companies have performed significantly worse under Labour governments over the past 40 years because of major policy changes, a report says.

The report, produced by Massey University economics and finance senior lecturer Dr Chris Malone and associate professor Hamish Anderson, looked at the results of about 500 NZX listed companies since 1972.

“The smaller firms have done abysmally poor during Labour terms of office,” Malone said.

So why?

“We have attempted to ask the question why that has happened and it does appear to be related to policy reform.”

Companies were classified as large or small by splitting the sample at the median capitalisation.

Small firms had average monthly returns of about 0.7 per cent under Labour and between 1.4 per cent and 1.8 per cent under National.

Monthly returns for large listed firms were only slightly better when National was in power, he said.

So a National Government doesn’t help big business, but .

BusinessNZ chief executive Phil O’Reilly said the research made a valuable point.

“It’s policy uncertainty and radical policy change that will tend to destroy business confidence,” O’Reilly said.

Businesses wanted policy that was well-signalled, evidence based and supportive towards business growth.

Businesses tended to hold off investing and employing until the impact of policy changes were known, he said.

Even what may appear to be a minor change such as the KiwiSaver contribution rate can have a significant impact on a small business. Your payroll software needs to change. Your employee records need to change, and you ofte then spend weeks or months correcting errors with the IRD.

Regardless of the merits of a Capital Gains Tax, it would hit small businesses badly. It’s easy for a large business to value all its assets and work out capital gains. A small business will not have internal accountants but instead have to spend tens of thousands of dollars hiring external accountants to do this.

Large businesses have HR divisions to cope with changes in employment laws. Small businesses generally will not, and again be hit hardest with any changes.

 

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28 Responses to “Labour bad for small business”

  1. Redbaiter (7,844 comments) says:

    Yep, the RMA was the biggest thing to help small business in decades.

    Ask any small oil explorers in NZ if they think the Nats are helping them.

    So much could be done, but the Nat just tinker or make things worse.

    NZ badly needs a UKIP.

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  2. mandk (841 comments) says:

    So, socialism is not only cruel to people on Struggle Street, it is also harmful to the firms employing them.

    Mind you, it’s hardly surprising when you bear in mind that socialists equate profit with greed.

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  3. Cunningham (827 comments) says:

    Labour = bad for small business = business confidence drops = less employment = less jobs for the people they supposedly care about. Labour the party for workers!

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  4. Redbaiter (7,844 comments) says:

    Mandk, so socialism is the problem?

    When did you last hear John Key or any Nat say anything bad about socialism?

    Enjoy your dream world where there’s real difference between the Nats and Labour. In reality any differences are paper thin, and if you truly want relief from socialism, I don’t know why you would support today’s Nats.

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  5. Bill Courtney (149 comments) says:

    Two significant observations:
    1. This is a study of “listed” companies, not all companies or businesses. Therefore small means below the median size of those listed. It is not an indication of the fortunes of SMEs in general.
    2. I’m always amused by people like David Farrar who want to borrow every opportunity to put the boot into anything labelled “Labour” without considering one vital point: that includes the “Labour” of 1984 to 1990. Hardly indicative of what went before or after, is it?

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  6. igm (1,413 comments) says:

    Labour is bad for any business, they knowing nothing about commerce; living lives of entitlement, greed, and envy. Ask the wimp David Parker, he tried a small venture and went broke.

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  7. Harriet (4,607 comments) says:

    “…………When did you last hear John Key or any Nat say anything bad about socialism? ………………Enjoy your dream world where there’s real difference between the Nats and Labour. In reality any differences are paper thin………..”

    Yep paper thin alright………National hasn’t reduced the public service from the 47% increase that Labour gave it. [Nearly all of the 47% increase were young females with student loans - to hide them from the dole figures. And to hide the lack of a market for people with worthless degrees.]

    I don’t think National have the balls to get rid of females with worthless ‘studies degrees’ and student loans from the public service. Much better to have the mug taxpayers foot the bill than have Labour brand National with the dreaded mysogynist label.

    I see the department of women’s batteries is still with us – 8 yrs after we were told by National it wouldn’t be.

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  8. redqueen (506 comments) says:

    Which is why Labour will shortly be announcing a ‘KiwiBusiness’ policy: all small businesses will be merged into a single state-owned enterprise (‘KiwiBusiness’), thus eliminating the unfortunate consequences of policy changes and the unfairness of differing outcomes between businesses (‘equality of outcome’).

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  9. JC (929 comments) says:

    I’ll say something similar to what I said on WO yesterday..

    Big business is simply a replica of Big Govt. The top 30% of big business that deals with authority is the same education, social groups and culture as the politicians they deal with. They don’t marry the office girl but their peers at university and work environment.. incidentally thats why there appears to be inequality.. these people don’t dissipate their wealth and position by marrying down as happens in many small businesses.

    So Big Business does OK under socialists and small businesses have to struggle along as best they can with increased compliance issues.. you see, they can’t offer a sinecure to a politician after he leaves Parliament and the proprietor is in the wrong social grouping.

    So according to this research the Nats are better than the Labs but beware some of the recent selections.. their business experience comes from that upper social grouping of Big Business and policy.

    JC

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  10. Nostalgia-NZ (4,985 comments) says:

    It’s not yet recognised but the reaction to Pike River and the subsequent founding and funding of Work Safe NZ is bringing pressure on small business. There are a 100 inspectors in Auckland probably as much or more than Traffic police on the road. There has long been arguments that traffic enforcement is in part revenue gathering, then what will follow from 100 inspectors looking to justify their employment – check out some worksites around Botany for examples, footwear and portaloos compliance which couldn’t be classed as high risk is one.

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  11. Danyl Mclauchlan (1,065 comments) says:

    From the article:

    The main reasons for poor performance in small firms during Labour governments included market under-performance, periods of falling inflation, harsh default-risk and credit conditions and the introduction of deregulation in 1984 that opened up firms to increased foreign competition and exchange rate pressures.

    Notable features were the two Labour governments of the 1980s under Prime Minister David Lange.

    In the first term from 1984 to 1987 the mean returns were amongst the highest in the sample but in the second term the smaller firms had a mean monthly return of minus 7.2 per cent.

    So ‘ACT is bad for small businesses’ would be a better headline.

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  12. thor42 (960 comments) says:

    “Labour – thinking things through since…… yeah, nah”

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  13. dime (9,606 comments) says:

    small business is the main enemy of modern lefties isnt it?

    people making a go of it – by themselves!!!!!!!!!!!!!!!! the horror!

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  14. Ryan Sproull (7,056 comments) says:

    So, socialism is not only cruel to people on Struggle Street, it is also harmful to the firms employing them.

    Are there firms under socialism?

    Firms are basically private ownership of capital, aren’t they?

    And socialism is the negation of private ownership of capital?

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  15. Manolo (13,514 comments) says:

    Yes, a NZ version of UKIP will do our country a lot of good.

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  16. Rosa19 (22 comments) says:

    i’m sure ZERO or the like will come up with a cheap way for SME’s to measure capital gains…have a little faith in innovation and creative destruction…

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  17. Simon (706 comments) says:

    All government is bad for small business.

    What big business do is lobby the whoever the current fuckwits are to write them cheques and ring fence their industries from competition via regulation. Joyce for eg has spent the last 3 yrs paying off big business who have threaten to outsource offshore with “research grants”. Scum.

    The flip side to small business being hurt is the welfare state. No cunt in wellington has made a dent in the welfare state they have only expanded the size of the welfare state to the obvious determinant of small business and living standards generally.

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  18. tom hunter (4,532 comments) says:

    It’s not Labour specifically, it’s Left-wing ideas and general approaches to “managing” an economy and society that are the problem – and the only time they learn is when they have to operate under their own rules and regulations.

    A great example of this is the 1972 Democrat Presidential contender, George McGovern. Prior to the rise of Obama, McGovern was regarded as the most left-wing Presidential nominee in US history and he went down to a crushing defeat in 1972. A few years later he retired and started a small business in his home state of New England. Things did not go well:

    In retrospect, I wish I had known more about the hazards and difficulties of such a business, especially during a recession of the kind that hit New England just as I was acquiring the inn’s 43-year leasehold. I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.

    Mea Culpa, mea culpa – but what effect did this revelation have on the rest of the Democrat Party when he wrote that in 1992? At the time there was a youngish Democrat named David Bonior making his way up the greasy pole. Bonior was as left-wing as McGovern and then some. If there was a regulation or law that pushed Big Government he was for it: McGovern’s words sailed over his head.

    Then he retired from politics and started up a small business:

    Bonior said if he had the power, he would lighten up on pesky regulations.

    “It took us a ridiculous amount of time to get our permits. I understand regulations and . . . the necessity for it. But we lost six months of business because of that. It’s very frustrating.”

    Awwwwwww…. The scales fall from another leftist’s eyes once they actually have to live with what they’ve created. Of course such comments have made no difference to the modern Democrat Party, which has swung even further left since Bonior retired. It led to this caustic comment from a fellow Michigan member of Congress:

    About the only way to get a die-hard liberal politician to understand how the economy of business really works is to require them to run an actual business. . . For almost three decades, Congressman Bonior did have the power. He used it to increase the regulatory burden on business – especially small business. How delightful that he finally figured out what we, small business-people, were trying to tell him during those years was true. Not that it does us a whole lot of good now

    Slow learners and determined to insulate themselves as much as possible so that they don’t have to learn.

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  19. Fentex (895 comments) says:

    Capital Gains Tax is a logistical quagmire. The ambition is easy to comprehend, the implementation a problem.

    DPF glosses over a few (which is a weird, as he told us “whenever I see a report I don’t just report it. I always look at their methodology and check out what exactly they are basing their rankings on.”.

    From Stuffs report…

    The main reasons for poor performance in small firms during Labour governments included market under-performance, periods of falling inflation, harsh default-risk and credit conditions and the introduction of deregulation in 1984 that opened up firms to increased foreign competition and exchange rate pressures.

    So, does DPF recommend we do not deregulate, do not open up to competition, do not suppress inflation? All these things blamed, under Labours governance, for small businesses poor performance?

    Just taking the headline and proclaiming Labour is bad for small business seems to be cherry picking a conclusion without bothering to examine the context and reasoning.

    Some seem to take the report as showing that…

    BusinessNZ chief executive Phil O’Reilly said the research made a valuable point.

    “It’s policy uncertainty and radical policy change that will tend to destroy business confidence,” O’Reilly said.

    Which obviously was a feature of our radical, some might say structural, changes in the 1980′s undertaken by our then Labour government. Being down on them because such change occurred surely isn’t to be interpreted as recanting support for such changes, can it?

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  20. MT_Tinman (3,033 comments) says:

    JC (859 comments) says:
    May 26th, 2014 at 9:44 am
    I’ll say something similar to what I said on WO yesterday..

    Why?

    It obviously made no sense then and it certainly doesn’t one day later.

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  21. Fentex (895 comments) says:

    Oops, I made a mess of messages in my last comment.

    Regarding CGT – businesses ought prefer a good Capital Gains Tax, if a solid unobtrusive implementation can be found, for it would tax real gains rather than income needed to forge those gains.

    But measuring capital and it’s gains is not the only problem with trying to implement such a tax, a tax on capital gains will probably force the realisation of gains and therefore impose policy on a business that may wish to choose differently.

    And that highlights one of the problem with a CGT – actually getting the tax is in conflict with businesses easily altered priorities and it’s very existence creates incentives to undermine it. We shouldn’t want businesses thinking about tax in their deliberations of how best to grow.

    Thus we tend to fall back to taxing income because that reduces the distortion and encouragement for avoidance. Even though it’d be better economically if we could tax capital gains instead.

    It is likely a cake we cannot have, because we need to eat it.

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  22. kiwi in america (2,461 comments) says:

    Starting and running my own small business began my journey from a lifetime of Labour activism to being a conservative – when I had to write out a cheque to the IRD (as opposed to a PAYE deduction) I began to examine governement expenditure and ideologies towards business much more closely and found the left seriously wanting.

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  23. mandk (841 comments) says:

    “Are there firms under socialism?”

    Of course there are, if the fiscal and regulatory environment within which they operate is socialist.

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  24. wreck1080 (3,779 comments) says:

    bob jones loves a labour govt.

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  25. Nostalgia-NZ (4,985 comments) says:

    What Simon said x 2.

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  26. Harriet (4,607 comments) says:

    “…..What big business do is lobby the whoever the current fuckwits are to write them cheques and ring fence their industries from competition via regulation…..”

    Yep……just today Coles and Woolworths have demanded that opening times across Australian States should be uniform.

    Yet just last week Abbott said during the budget fallout that ‘State governments should be more soverign in the realms.’ – well they should be as they are democracies.

    Here Abbott seems to be of the free market mind where the democratic market rules – and the capitalists are of the totalatarian mind where the government should rule at their bequest!!!!!

    Besides, the fact still remains – Australia is a continent where opening at a uniform time is still going to keep Woolworths and Coles stores from being uniform across the nation – as Australia has fucken time zones!!!!

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  27. OneTrack (2,732 comments) says:

    fentex – “Regarding CGT – businesses ought prefer a good Capital Gains Tax, …”

    The problem in that sentence is the word “good”. The only games in town talking about a CGT are likely incapable of creating a CGT without masses of problems and unintended consequences. Their goal does not appear to be a coherent taxation system, but just another bat to punish the rich with and to get their hands on more money for their crazy schemes.

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  28. Francis_X (149 comments) says:

    Actually, the Stuff story was highly misleading. For one thing, it refers to Labour in the 1980s. That government was hardly “left” by any standard and was Act-in-drag. Mass asset sales; closing post offices; lay offs; etc. So not really fair to lump it with the vastly more socialist Clark-led era.

    In effect, John Anthony has judged Rogernomics as “bad for business”. Which puts a whole new light on the story. Fairly obvious really.

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