New Zealand’s most recently concocted public fund for industry Callaghan Innovation is already showing signs of becoming the contemporary culture version of the Development Finance Organisation.
The Callaghan fund much earlier in its career than the DFC is bestowing its funds on elements such as literary endeavour of various manifestations, and upon those such as Larry Ellison of Oracle fame who have plenty of funds of their own, much of it already derived from the New Zealand public sector.
The importance of the Callaghan fund is that it serves as an early warning about just the perils of what it is doing.
Its precursor the Development Finance Corporation had until the mid 1980s been a starchy government controlled lender of last resort into critical industries. It then became souped-up to become a lender to a surprising cross section of industry much of it anything but essential.
A very large cross section of industry in which the DFC placed public money in the event was quite unable to repay it after the 1987 crash. It was found that the corporation had invested in such “essentials” as printing presses and commercial property.
Worse still, the DFC in its wild lending encouraged the Bank of New Zealander to become an even wilder lender with the result that the nation’s only trading bank went out of business and was eventually absorbed into the National Bank of Australia. Leaving New Zealand with no trading bank of its own.
An axiom of public finance is that wherever pools of unallocated money exist, certain people will seek it and those responsible for the money will in turn allocate it to them.
The Callaghan pool shows signs of another example of a pool of public money looking for somewhere to go.
Donations to Larry Ellison’s yacht builders in Northland is one example. Money handed to publishers and journalists is another example.
Anyone with any knowledge of New Zealand industrial funding since 1985 knows that once such an organisation is started, it is impossible to eradicate it simply because it takes on a life of its own.
The best that can be done is to ensure that it is watched in order to prevent it becoming an eventual problem of the size of the Development Finance Corporation and its subsidiaries.
New Zealanders have short memories.