New Zealand and the corporate power of The One Ring

  • March 25, 2021

Capitalism & Crisis

PM Ardern’s government has been hailed as “the most progressive in the world,” but the LOTR saga reveals its unwillingness to take on corporate power.

Hobbiton, part of the LOTR’s saga film set is now a tourist attraction in New Zealand. Photo: Andrei Diomidov / Shutterstock.

You have probably heard the questionable claim that ending the British Monarchy would be a disaster for British tourism. In New Zealand we have a similar myth: just swap William, Charles and the Queen for Bilbo, Aragorn and Gandalf.

The Lord of the Rings (LOTR) is one of the country’s biggest cultural exports. The stunning scenery on display in the films has brought many pilgrims to our shores. But just like the Royal Family, those behind this undying franchise have learned how to use their pedestal to exert shady backroom influence, undermine progressive policies and suck hundreds of millions out of the public purse.

In 2017, Amazon announced plans for a new LOTR series. They began playing a number of countries off against each other to secure huge tax breaks, subsidies and handouts. For a while, they made it look like Scotland might take the prize. For some Kiwis, this seemed unimaginable. For most of us — including the 168,000 children living in severe poverty — it was not much of a loss.

But our current Labour government was determined to keep the production here, whatever the cost. After Prime Minister Jacinda Ardern gave Jeff Bezos “a friendly phone call,” and committed hundreds of millions of dollars — diverted from urgently needed public spending — to support the project, Amazon promptly “changed their mind.”

Pandering to the interests of the world’s richest man may not seem to fit New Zealand’s image as a forward thinking, progressive paradise. But the wider LOTR saga reveals both the worrying depth of corporate power in the country and the dangers of allowing multinationals to pit governments against each other in a global race to the bottom.

Enticement or extraction?

The deal reached with Amazon goes something like this: for every four dollars spent making the series in New Zealand, the government will pay the corporation one dollar — with no upper limit. With an expected cost of NZD$1.5 billion — the most expensive series in history — around $375 million of public funds are on the line, or about $76 per capita. To put things in perspective, the NZ Film Commission, the main public funding body for local cinema, received just $6.7 million in core government funding in 2019. Yet many praised Ardern’s shrewd pragmatism. The deal would create jobs, boost innovation and keep us on the map.

Or so we were told.

Even before Bezos entered the battle, LOTR held an outsized influence over our country. The government produced a series of official LOTR-themed stamps and coins and our Border Patrol service stamped tens of thousands of visitor passports with “Welcome to Middle Earth” to celebrate The Hobbit premiere. But behind the cultural kitsch, the films have been used as a Trojan Horse by major multinationals to shape our laws in their interest.

Leading this charge was Oscar-winning director Peter Jackson who, in negotiations with the government over The Hobbit films, became one of New Zealand’s most successful corporate lobbyists. In 2010, Jackson grew concerned over attempts by precarious film industry workers to improve labor conditions. He described a union-led campaign as “toxic nonsense” and threatened it might lead Warner Brothers to move production elsewhere.

This was far from the first time Hollywood corporations had deployed such scare tactics. By playing different states in the US off against each other, they helped grow state-level film subsidies from less than USD$10 million in the early 2000s to over USD$1 billion by 2010: a 100-fold increase. More often than not, the production companies would choose the very place they had intended to film all along, raking in public funding to boost their profits without generating any real new investment.

But Jackson took the strategy one step further. In a series of emails to key ministers, he described one union organizer as “a snake,” and pressured the government to restrict labor rights so foreign investors would have a more “stable employment environment.” Top Warner executives flew into the country to lobby then-Prime Minister John Key. They managed to directly negotiate new legislation: the now infamous “Hobbit Law,” which made unionizing in the sector virtually impossible, in clear breach of International Labour Organization conventions. Of course, the final deal was sweetened by an extra NZD$30 million on top of the $160 million in public grants Warner Brothers had already raked in.

The Hobbit films went on to generate over NZD$3billion for Warner Brothers, whose lobbyists handed President Obama a Hobbit sword to give Prime Minister Key as a thank you. Of course none of the public funding was ever paid back. Defending the huge cost, Key said “money talks in Hollywood. That’s just the way it works.” Meanwhile Jackson was quick to point to the thousands of film industry jobs which The Hobbit created, even if labor rights were decimated along the way. But at an estimated cost to the public of $50,000 per job — and a large number of these positions disappearing at the end of production — many questioned if it had all been worth it.

Neoliberal Zealand

For their part in this controversy, Warner Brothers and Peter Jackson received “The Roger Award.” This satirical honor, handed out by the Campaign Against Foreign Control of Aotearoa, is named after former Finance Minister Roger Douglas who, despite serving in the 1980s Labour government, implemented a series of brutal privatizations, budget cuts and pro-business fiscal changes.

While in opposition, the current Labour Party leadership campaigned on a promise to repeal the “Hobbit Law.” But once in government, they backtracked, instead introducing legislation that expands collective bargaining rights but maintains a strike-ban.

This latest corporate compromise is part of a worrying trend. Although Ardern’s leadership through a series of crises has been exemplary, her promises of social transformation remain largely unfulfilled. She ruled out ever implementing a capital gains or wealth tax while in power, ignoring her experts and decades of soaring inequality. Despite adding the word “well-being” to the budget, her government has failed to make meaningful progress in reducing child poverty, with the Children’s Commissioner describing the latest statistics as “a national embarrassment.”

In addition, the waiting list for state housing has skyrocketed, while the financialization of our housing market has seen home ownership hit its lowest rate in 70 years. Of course, these are not the sorts of things which tourists coming to check out Mount Doom or The Shire are likely to notice.

Meanwhile on the international stage, New Zealand is part of a small group of wealthy countries who still are not supporting a WTO waiver on vaccine patents, which health workers, the WHO and close to one hundred governments say is vital to ramp up production and get us all vaccinated as soon as possible. Is Ardern really willing to put countless lives at risk just so a few Big Pharma corporations can rake in monopoly profits?

This might all come as a surprise given global headlines like “Why Is New Zealand So Progressive” (BBC), “This Could Be The Most Progressive Country On Earth” (Huffpost) or “New Zealand heads for its ‘most leftwing government’ in decades” (FT). But back home, Ardern’s government has been eager to present itself as the stable standard bearer of the country’s neoliberal fiscal tradition.

Before even reaching the benches of power, Labour pandered to deficit hawks by signing a series of “Budget Responsibility Rules” — a policy straight jacket designed to restrict spending choices (and limit expectations). These very rules meant that when Bezos and Amazon took a leaf out of Warner Brothers book and came looking for a mammoth public payout to help fund their LOTR reboot, Ardern and her government had a “fiscal responsibility” problem. They could pay Amazon by increasing the Operating Allowance: the amount of new money available to spend. But, having ruled out new tax revenues, this would need to be funded through debt spending, in breach of Labour’s self-imposed rules.

The other choice was to keep the Operating Allowance the same and pay Amazon by cutting planned spending elsewhere. Treasury warned this would “limit the government’s ability to fund other initiatives” and “require trade-offs” — in plain terms, less money available for things like healthcare, education, housing and poverty reduction.

But Ardern’s government dismissed these concerns and — in the middle of a raging global pandemic — signed off on the funding diversion. More than 5 percent of last year’s Operating Allowance was set aside for film subsidies, with the lion’s share going to Amazon.

Race to the bottom?

This revelation comes at an awkward time for Labour. A resounding win at the last election has raised expectations from progressives, who want to see Ardern finally use some of her political capital to pursue bolder policies. Meanwhile in November, a global coalition of activists, trade unions and progressive politicians launched the #MakeAmazonPay campaign, to challenge the corporation’s unchecked power. Coalition member and Green MP Golriz Ghahraman said “It is important that Aotearoa condemns multinational organizations who reap mammoth profits, whilst evading tax, trashing our environment and underpaying workers.”

Instead, Ardern and her government have given Amazon one of the biggest corporate handouts in New Zealand’s history. With just a fraction of this amount, we could fund dozens of local storytellers to get their fresh and fascinating projects off the ground. They, too, would create jobs. And chances are the content would be a lot more relevant and interesting to both us and the world than another five seasons of Bilbo Blabla (which Amazon may well have ended up filming here in any case). As for our tourism industry; a poll found that just 1 percent of New Zealand’s overseas arrivals said their visit was because of The Lord of the Rings. It seems unlikely that the latest Bezos-backed revamp will move the needle.

There is a lesson here that resonates beyond the film industry and New Zealand’s shores; the public interest is not served by giving in to the bullying tactics of corporations in a global competition on taxes, labor laws and investment enticement. Just look at the way Amazon played US cities off against each other for the right to host its new headquarters, only to predictably chose New York. New Yorkers did not “win” something from Amazon — Amazon extracted over $1.7billion in pledged public funding from New Yorkers. Or the disturbing new legislation which offers tech companies who relocate to Nevada the right to form their own local governments, “including the ability to impose taxes, form school districts and courts and provide government services.” This sounds like it could be the terrifying-yet-logical finish line of the race to the bottom: a world in which our governments are willing to cede their most fundamental powers to corporations themselves.

The good news is that resistance is possible. Just look at the backlash against Facebook’s ham-fisted attempts to avoid new regulation in Australia. Or the New Yorkers who, disgusted at how Bezos was being offered terms which bookshops, grocers and workers could only dream of, managed to overturn the new Amazon headquarter plans. Mayor Bill de Blasio — despite originally backing the deal — said it was time to “change the rules before the next corporation tries to divide and conquer.” He may be a hypocrite: but he is also right.

Letting corporations game our governments does not generate “win-win” situations. Workers get shafted. Public services are left underfunded. The only real winners are the multinationals who use public funding to pump private profits higher than ever. It is time to call an end on the corporate race to the bottom.

Leo David Hyde

Leo David Hyde is a filmmaker and activist from Aotearoa New Zealand, based in Europe. He recently co-directed Call Me Intern; a documentary about young people fighting back against unpaid work. He is currently developing a film with journalist Nick Shaxson about the financialization of our lives.

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