There is a small island country in which, in spite of their avowedly private market-oriented ideology,Â government leaders have directly involved themselves in negotiations with foreign film makers in order to keep production of a film series on the islands. The foreign studio bosses threaten to take their production elsewhere; the famous director–a local boy made good–Â fumes and blames union organisers for raising production costs (in a film that is mostly based on computer animation and special effects rather than humans acting, in a country where the local currency is less than 80 cents of the US dollar). Although the film production is no long-term investment and will not bring employment stability or trickle down benefits beyond those connected to its production and its purported positive impact on tourism (supposedly because foreign tourists will come to the islands to see a movie set called “Hobbitown” in which gnomes abound), the government agrees to offer the foreign studio bosses NZ$100 million in tax and marketing breaks and to change local employment law so that actors are classified as contractors rather than employees while working on feature films (should the law apply to all actors this could well extend to TV, stageÂ and radio actors working on local productions as well).
Although the film industry is currently anÂ significant source of revenue for the country and has spawned a considerable technological base associated with it, it does not add to the long-term national development growth of the island state. Compared to core national industry, it is much like a diamond in a coal mine–a source of pride and joyÂ but not a basis for long-term prosperity.
All of which is to say: foreign corporate masters involved in an industry that does not add long-term value to a nation’s economy have managed to get the island country’s leaders to bow before them in order to secure short term economic gain for a small local industry with limited direct ancilliary impact and a more hypothetical than concete follow-on revenue generation effect. To do so, not only was money offered to appease the foreign masters. The basic law of the land was changed at their behest as well.
Since the country has been engaged in a long-term debate about changing its national flag and its status relative to its colonial master, perhaps it is time to also consider changing its name.
Bananazelandia. Say it with a Spanish, French or Portuguese accent and it just rolls off the tongue.
Pablo – I realise that to some parts of the blogosphere it is important to paint everything in tribal colours, but if your are going to do so please fact check before posting. Ths additional tax rebate is up to $7.5 million per film (total of $15 million), with the govt offsetting $10 million of marketing costs, but in exchange we get to host on the premiers of the movie (not to say this wouldn’t have happened anyway) – for more information see http://www.beehive.govt.nz/release/hobbit+movies+be+made+new+zealand
A better posting might be to consider this less as a left/right story, but to consider the historical context of actors relationships to productions (see Shakespheare and companies of players), technological change (special effects replacing actors in movies) resulting in a changing of the guard (actors being replaced by skilled technicians – who know has balance of power), and then the issue of rise of Wellington vs fall of Hollywood (possibly clash of civilisation – huntington to draw on).
The last thing to maybe of interest to explore is what if any game theory training the unions/labour party has undertaken and if so/not whether there is the intellectual capacity within the left to offer solutions to todays environment (not yesterday, but today).
WH: I got the figures from the Herald story on the deal. The full estimates are as follows:
“In return, the Government will offset the films’ marketing costs by US$10 million ($13.4 million) and pay up to US$7.5 million ($10 million) in extra tax breaks for each of the two movies, subject to their success.
That would bring the total cost to the Government, including tax rebates and the marketing credit, to just under $100 million, but Mr Key said it made financial sense because of the marketing opportunities for New Zealand tourism.” (http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10683613.
So, as far as I can tell (unless the figures in the story are wrong), the tax payer winds up paying NZ$100 million to keep two films on-shore.
Your other points are well taken, especially with regards to those in your second paragraph. It will take a dedicated post to sort through them. As for the the issue of how the unions played this deal, there has already had a river of ink spilled on it so there is no need for me to add to the stream. However, I think I can sum the collective action outcome for the unions in two words: EPIC FAIL.
You appear to have it backwards. The issue was that people employed as contractors are able to subsequently ( in the atypical case of Bryson – when dismissed from the position ) take the production company to court and claim “I was not a contractor, but an employee, so pay me redundancy “. The court decided he wasn’t a contractor, but was an employee.
NZ employment law requires that courts look at the “true nature of the relationship”, and if a person is called a contractor, but doesn’t act like one, they are an employee. Some guidance is provided at the Employment Relationship Service of the Dept of Labour…
Many actors, and film workers prefer to work as private contractors, because that enables them to easily
work on multiple productions, simultaneously – if necessary, and also achieve the tax benefits of being a contractor. However under NZ law, they have to act like contractors in the relationship
The film industry also liked that option, as well as having key people as employees, but the Bryson case, along with the boycott grenade lobbed across the Tasman, spooked Warner Brothers because employment court issues could seriously interfere with production of films they were borrowing money to produce.
Bananas are healthy, and I prefer them to kiwifruit.
Also, I don’t recall any gnomes in the Hobbit….
Pablo – ok I can see where you got the $100m from and a follow if and when possible would be interesting.
I have been pondering whether another lens to look at this is Fordism vs Unionism, where an outlier (Ford) represented a challenge to unions who were seeking to lift the average rate for all workers (non-Ford employers being less well remunerated). Its not that Ford was good or evil but as an outlier it effected the possible bargaining outcomes for unions, where the total payoff (where the outlier is unionised and compensated) may have a net social/economic benefit (see Kaldor/Hicks efficiency improvement http://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiency)
The other historical antecedant could be the guild system (particularly the germanic/dutch C17/18 guilds) and the clash with labourers/non-guild with the subsequent loss of guild status during the rise of industrialisation (again change in technology effecting the status of one group with another).
Sorry about the gnomes. Trolls, gnomes, hobbits, elves, smurfs–it is all the same to me.
My point about the employment law change is not about the nature of acting and associated film work (as WH noted quite well), but about the fact that the government has used foreign corporate concern and pressure about one case to engage in a sweeping national law change that will have an impact far beyond the production of these two films. That, to me, is a stretch too far.
That, and the fact that the ostensibly pro-market PM steps into negotiate a contrived “dispute” between two private parties, uses taxpayer money to grease the skids of the deal, and now proposes to use urgency to pass a law change that further undermines union power (not that in this instance the unions did anything but facilitate their own demise)–those are the things that I find dodgy about this episode.
John Key noted at the Q&A after the announcement that the proposed change would only apply to film, not other media involving actors. Let’s wait and see if he’s telling the truth. Some vocations ( sharemilkers and Real Estate agents ) are already exempt, and the world hasn’t ended.
It’s also germane to note that the NZ actors in the MEAA(NZ)/AE union never voted to initiate any actions, such as the global boycott.
It’s a little rich for the CTU and Greens to claim the govt’s actions are undemocratic, given the behavior of the above unions, allegedly acting on behalf of their NZ members.
Helen Kelly’s father ( hard-line president of Wellington’s Trade Council in 1970s and 1980s. Quoted on retirement “I don’t think I’ve ever said anything good about an employer in my life.” ) seems to have passed his cloth cap on.
Yes, the total “cost” to the government may well be approx. $100m… but if the movie didnt come here…. that would not make the Govt coffers $100m better off….
The vast majority, (if not all?) of that money is the tax money the govt would have got from the $650m warners were going to spend in NZ. if they took away that $650m, so that 100m of “govt money” also goes away.
Before last nights deal, it was rumored to be near “break even” for the govts coffers balancing the “incentives” against the forgone revenue… so, infact last night’s top-up may well be actually costing the Govt… but only by the amount of the top-up.
So, what do we get in exchange for forging the revenue? Well, most of that $650m will be spent on paying workers and purchasing goods…. which will be taxed as per usual, and keep several hundred or even a thousand workers off the dole for 2 years.
I dont think it’s that bad of a deal…. but you can have your own opinion. Just dont be thinking the government could have spent that $100m on teachers pay, health, or anything else… because it doesnt exist if the film isnt made here.
This is the big point of understanding-fail that bothers me in this whole situation…
Virtually everyone working in film in NZ (and a lot of television) is a contractor. That is the nature of the industry. The point of the as-yet-unseen law changes is to ensure that their status as contractors is clear. Which to the vast majority of people it is.
The law change won’t force actors to be contractors, it simply clarifies that relationship. If a film or TV company wishes to hire an actor as a PAYE-employee then they can still do so, but for most actors and production companies this is very impractical and imposes impossible restrictions.
Also, I’m very dubious about the $100m number. They qualify for tax subsidies (only some expenditure will qualify however, so you can’t take the whole budget, apply the percentage and go from there), there is a $15m grant, and $10m in joint marketing funding, which seems to actually benefit NZ greatly.
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I think a few people are guilty of making National out to be a lot more ideological than this lot really are…
Your point is well taken, and if I read it correctly you are pointing out that essentially Key has given Warner a tax rebate on the investment. Fair enough, but the fact that he stepped into what should be a negotiation betwene private parties grates on me, and even if we accept that a government presence was needed to seal the deal, the Ministry for Economic Development could have led the government negotiation rather than the PM (since his presence in the negotiations guaranteed that “success” in keeping the film-making in NZ would be achieved– i.e., the outcome was pre-determined). In other words, Peter Jackson and the government had more bargaining leverage than they let on publicly or opted to use.
Dylan: As WH noted earlier and with which I agree, changes in the nature of film production have led to a natural tendency towards contracting out rather than using unionised labour. I also understand, from my own work on labour markets and labour relations, that some occupations are very hard to unionise due to the nature of their labour — waiters in tip-based economies, university professors, people working in performance bonus-based industries and actors (or “artistes” as they are called in SE Asia) foremost among them.
So, while I accept your clarification of the employment relationship in NZ film making, I still object to that side of the deal for two reasons: 1) the proposed law change is another in a series of moves towards individual contracts that continues the thrust of the Chilean inspired labour market reforms Act has pushed National to embark upon; and 2) the precedent-setting effects of a universal law change to suit one segment of the local entertainment industry compounds the atomizing impact of those reforms on the working classes in general.
Then there is the use of urgency to pass the whole thing, which Warner must be delighted with because it simply cannot happen in the US under US labour law and congressional protocols. Warner consequently benefits by using cheap foreign labour and foreign legislative “flexibility” in an insecure small country (that is not as economically vulnerable as its political-economic elite make it out to be) in order to secure favourable local government involvement in what should otherwise be a dispute between private parties over local labour rates and employment relations, thereby bypassing US labour standards, tax rates and wage standards in the quest to do things cheaply.
I wonder if flexibility with OSH standards was also on the table?
Well as one other commenter said… â€œIf Roman Polanski wanted to make a film here would Key lower the age of consent to 13?â€ which while rather offensive in various ways, succinctly makes a point-how low do you go.
I wish David Lange were here.
I remember him on Campbell when the Alamein Kopu thing hit the press. Campell couldn’t believe what he was hearing and almost choked himself with laughter.
The hopeful thing is this reminds me of the amateur hour proceedings of the Alamein Kopu saga and hopefully will have similar consequences for the government.