Hard on the heels of the story about why states are broke comes another example in the ongoing parade of horribles that is the global film tax incentive race to the bottom. Is the Hobbit a public good? If not, it's hard to understand why New Zealand gave its producers $120 million and changed its labor laws to prevent collective-bargaining, among other moves designed to keep production in New Zealand. This is a film that is expected to generate $3 billion in proceeds: they obviously don't require subsidies or labor suppression efforts in order to turn a profit.
How many steps lie between the denial of labor rights in New Zealand to the appalling conditions and loss of life in Bangladesh? Not many. And why should a state ever be involved in driving its people down that road to serfdom?
Joe Karagnis has an account of the subsidies and legal reforms: To save regular earth, kill Hobbit subsidies. He says:
Film money is the hottest of hot investment money, fast in and fast out. Production is very mobile, and studios have become adept at extracting subsidies from governments for a few trinkets and promises of jobs.
Translation: film production acts just like capital. Countries (and states) compete for it, and it flows to the most welcome jurisdiction. That probably means tax incentives though there are lots of reasons to believe tax incentives aren't enough--investors need rule of law, good physical and financial infrastructure, competent workforce, etc. Really, what companies want is:
- a highly educated workforce
- that can't organize or demand high wages
- a well organized legal system that protects contracts and property rights
- but only (or mainly) of multinationals
- a well-organized financial system that protects the investment from currency/inflationary etc pressures
- but only if multinationals don't have to support it with taxes
Karagnis demonstrates the global spread of the problem:
in the US ... state and local subsidies rocketed from US$2m in 2003 to about US$1.5b in 2012. Film subsidies are epidemic in Europe, where countries compete to attract and retain productions. And it has been a major part of New Zealand's cultural and industrial policy, where more than US$400m has been invested in The Lord of the Rings, Avatar and a handful of other productions over the past decade.
But competitive subsidies are the quintessential sucker's game, in which winning is losing.
And a part of the story I just don't get at all:
For keeping Warner Bros happy, Prime Minister John Key - a former Merrill Lynch currency trader - got a replica magic Hobbit sword from President Obama...
This is puzzling and ridiculous (not to mention kind of embarrassing on both sides). The race to the bottom in film incentives is just another form of offshoring. Of course, it spreads US culture which is apparently viewed by someone that matters as the more important objective. My view: it is well past time for a little austerity for the film industry.