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Double standard on business bail-outs

By Greg Cornwell - 16 August 2016 17

Smoque has closed down. Photo: Charlotte Harper

I was saddened by the closure of Canberra’s Smoque restaurant which saw 25 staff and numerous suppliers probably out-of-pocket – rarely do such people receive anything like dollar for dollar owed. Then I read of a Federal government financial bailout of South Australia’s Arrium steelworks to save the jobs of several thousand workers and suppliers.

And I wondered, what is the difference?

It is numbers. About 25 to thousands. No, no argument that a waiter can more easily obtain another job compared to a steelworker but the demands of politics.

Whatever went wrong with either business they were both private activities and should not expect to be bailed out by the Australian taxpayer.

This strange double standard applies not only to propping up private organisations employing thousands (why 12 submarines when we cannot man our existing fleet?) but has moved to the non-business arena.

Governments financially support the building of expensive sports stadia, where professional well-paid teams compete. If this is not enough the ACT government for example has paid millions for the Greater Western Sydney football team to play at Manuka Oval a few times a year.

The money paid to professional – the word is important – sporting or cultural bodies raises the question of why these organisations do not have sufficient popular support, including in some cases lucrative community clubs, to fund their own activities?
If they require government help, why should they continue to exist?

It is not enough to argue like any government that financial assistance either keeps people in employment or provides an important social outlet through sport and culture.

The claim the unemployed would go on welfare, ultimately costing Australia more, overlooks retraining opportunities, redundancy payouts and that the bailout might fail with more money being wasted even to perhaps the propping up of an outdated industry.
The sporting and cultural largesse is even less justifiable, relying upon questionable guestimates of profit to the State/Territory for hosting the event.

Why don’t governments in bailing out a private business, yes of any size, or supporting sporting and cultural activities do so only as a loan payable by a fixed date? This would present a responsible challenge rather than an irresponsible open cheque.
It is obvious the existing situation is discriminatory, benefiting only large organisations with large numbers of potential voters. It is further discriminatory in not requiring financial assistance to be a loan and not a grant if compared to say, government housing tenants who whatever their financial circumstances are required to pay back a percentage of their income in rent.

Politicians constantly remind us they govern for all Australians, yet they selectively bail out large workforces and financially support popular sporting and cultural bodies, leaving others struggling to fend for themselves.

A few thousand in Whyalla is important to themselves, their families and the city but 500 small businesses across the country employing four people each have a similar effect upon families and regions. Sport and culture should not even count.

What’s Your opinion?


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17 Responses to
Double standard on business bail-outs
AlbertHall 2:18 pm 19 Aug 16

Wow…comparing Arium and Smoque is akin to comparing apples and elephants. This ‘restaurant’ had no one to blame but themselves…it was a poor copy of a US pit barbecue joint which started pretty slowly then completely tapered off…we slammed it on tripadvisor after our last visit. It was awful and its closure unsurprising.

tooltime 12:36 pm 19 Aug 16

It’s just your garden variety pork barelling. Happens all over the place, all the time. I don’t like it any more than anyone else, but until politicians and powerbrokers feel a bit of heat over their questionable funding choices, nothing will change sadly…

Loviatar 9:45 pm 18 Aug 16

While I’m sad to see another Canberra business going under, I’m not at all upset or surprised that it was Smoque. The extremely poor service (if you could even call what they offered ‘service’), strange eating styles (not a relaxing atmosphere at all) and very high prices for a medium-quality product always made me think it would go under once the gimmick of pulled-meat was over.

dungfungus 8:24 am 17 Aug 16

oh_ said :

Greg, you miss that it has little to do with economic rationale, and more to do with marginal seats. Whyalla is in the Federal seat of Grey, which was very nearly won by Nick Xenophon Team, who have upset the political dynamic in SA so much so that the Federal Govt nearly fell because of its losses there (hence submarines, Arrium etc). If it was truly about economic arguments then Canberra would have got a bailout when the APS was first slashed, which was far greater in proportion than Ford closing in Geelong in 3 years time (with generous redundancies) but…wait for it…Canberra is not marginal whereas Geelong has the electorate of Corangamite, which has been the most marginal seat in the country. Why Cadbury in Hobart but not Electrolux in Orange, SPC in Shepparton, any number of tourism operators in Cairns, coal towns in Queensland or abbatoirs in regional NSW? Some of us are just more special than others!

That doesn’t explain why the ACT Government allowed its electricity offshoot to continually subsidise an internet provider until a distress sale crystallised tens of millions of dollars of losses which were ultimately underwritten by ACT ratepayers.

oh_ 10:45 pm 16 Aug 16

Greg, you miss that it has little to do with economic rationale, and more to do with marginal seats. Whyalla is in the Federal seat of Grey, which was very nearly won by Nick Xenophon Team, who have upset the political dynamic in SA so much so that the Federal Govt nearly fell because of its losses there (hence submarines, Arrium etc). If it was truly about economic arguments then Canberra would have got a bailout when the APS was first slashed, which was far greater in proportion than Ford closing in Geelong in 3 years time (with generous redundancies) but…wait for it…Canberra is not marginal whereas Geelong has the electorate of Corangamite, which has been the most marginal seat in the country. Why Cadbury in Hobart but not Electrolux in Orange, SPC in Shepparton, any number of tourism operators in Cairns, coal towns in Queensland or abbatoirs in regional NSW? Some of us are just more special than others!

Felix the Cat 8:31 pm 16 Aug 16

I notice L’Arista in Belconnen has closed recently as well.

Masquara 6:36 pm 16 Aug 16

Greg, you haven’t cased the national infrastructure element to the debate.

TuggLife 6:30 pm 16 Aug 16

I think in the case of Arrium (or any large production or manufacturing business), the government largely is held to ransom, as the company will just relocate to somewhere more favourable, but the cost of the bailout is far cheaper than the projected costs to the community of Whyalla of mass unemployment, like pinklittlebirdie stated. It’s not like there are many other employers of that scale elsewhere on the Eyre Peninsula. The losses of a small employer are easier for the community to absorb.

The skills of people working for Smoque are likely to be transferable to any other employer in the restaurant or hospitality field, but the steelworkers in Whyalla don’t have many other options. Even if another large employer was to set up in Whyalla, the skill set of the Arrium employees isn’t likely to be directly transferable.

(I’m not sure why I’m discussing Arrium and the South Australian manufacturing economy on an ACT page, but, there you go.)

HiddenDragon 6:28 pm 16 Aug 16

“Politicians constantly remind us they govern for all Australians, yet they selectively bail out large workforces and financially support popular sporting and cultural bodies, leaving others struggling to fend for themselves.”

This story, from the ABC last week, coming as it does amidst the massively-funded Olympic effort, was sobering –

http://www.abc.net.au/news/2016-08-11/homelessness-on-the-increase-werribee/7722058

wsw 1:21 pm 16 Aug 16

My comment relates to the heavy industry side of the article. This is probably an extreme case, but say if a monetary subsidy or bail out is requested by a large heavy industry (for example the steel mill in the article) and not provided by a government and say the industry relocates to a third world country with corrupt oversight or without regulation, the monetary subsidy then becomes a human subsidy. The consumer in Australia may now get the product cheaper, but the people working and living in and near the new plant will now subsidize the product– perhaps by breathing polluted unscrubbed air, or bathing in or drinking toxic water, or eating food grown in toxic soil, or working in the industry itself without proper PPE or without adequate education about why or how something is dangerous, or having no safety net if they become injured. So I suppose companies can take advantage of either the first world tax dollar, or the third world impoverished, uneducated, or desperate citizen. Out of sight, out of mind?

Holden Caulfield 11:11 am 16 Aug 16

I’ve never understood governments (state or federal) bailing out businesses either. And I’m from the other side of the political fence to the OP.

I do get the welfare side of the equation, but it’s the selection criteria (or lack of) that leaves more questions than answers.

dungfungus 10:31 am 16 Aug 16

bikhet said :

What, so no business is to go broke, whether it’s viable or not? I haven’t been following the Arrium bail-out but would assume (hope, perhaps in vain) that there’s a plan to bring it back into profitability – either that or it was just a vote buyer. Is there, or could there be, a similar plan for Smoque?

I don’t agree with funding professional sporting or cultural activities either, but any monies saved from stopping that support could find a better home than propping up businesses that aren’t making money and have no prospect of making money.

The Arium survival depends on the workers taking a substantial wage cut which the unions won’t cop so hopefully it will all fall in a heap and save the government borrowing even more money for a bailout.

pink little birdie 10:22 am 16 Aug 16

The closure of the major employer in a region means that all the small businesses in the region also go broke because their customers are the employees of the major employer. There is less call for bailouts in major cities but for a town the closure of the major employer will basically send that town in to long term decline with all the social costs of that.
Like the closure of the car makers it’s not just the few 1000’s that directly work for the car makers. It’s everyone in the supply chain and all the businesses that serve them too.
I think that the style of Smoque restaurants is great for the novelty value but after that wears off the Australian style of eating is lighter and fresher with lots of spices from out Asian neighbours with a higher quality of food so it doesn’t need to be covered in sweet sauce.
Hospitality is a tough business and the turnover of restaurants is quite high anyway I don’t agree with bailing out hospitality businesses.

dungfungus 9:12 am 16 Aug 16

Very good thought provoking post Greg.
The ratepayers money that has been creatively poured into subsidising professional sports in the ACT is scandalous.

bikhet 8:53 am 16 Aug 16

What, so no business is to go broke, whether it’s viable or not? I haven’t been following the Arrium bail-out but would assume (hope, perhaps in vain) that there’s a plan to bring it back into profitability – either that or it was just a vote buyer. Is there, or could there be, a similar plan for Smoque?

I don’t agree with funding professional sporting or cultural activities either, but any monies saved from stopping that support could find a better home than propping up businesses that aren’t making money and have no prospect of making money.

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