Perennial soundbite provider Dick Smith has been very vocal in the past couple of days about the prospect of his namesake retail business falling into ‘foreign hands’. Despite him selling the electronics chain to Woolworth’s two decades ago, he is threatening to ‘trash the brand‘ if some foreign mob tries to buy it.
The logic he throws around on this (and other ‘buy Australian’ campaigns) is spurious at best. It is very unclear why so much importance is placed on the specific ownership structure of such businesses. Perhaps it reflects Dick’s own background as a business owner (and therefore someone who derived their income from the ‘surplus’ or profits of the firm). But for almost all stakeholders in the firm, and the overall health of the economy, the question of the location of the major shareholders (and principal decision-makers) should be of little importance.
Consider the Dick Smith Electronics case.
The firm operate 433 stores across Australia and NZ (we’ll get back to this Trans-Tasman dimension in a second), and made $1.8b in sales last year. The economic and societal impact on Australia of these operations is most heavily felt in terms of the 5300+ employees and the wages they earn (and then spend/invest), the flow of moneys to landlords, supply chain participants and other ancillary service providers. The ‘earnings’ of the firm (i.e. the ‘surplus’ or ‘profit extracted by Woolworth’s) last year was a paltry $20m or so.
If Dick Smith Electronics were sold to a non-Australian entity, they would be buying the right to extract such profit, but also taking on the role of paying a wages bill that presumably exceeds $250m, and feeding through a lot of income to the other parts of the Dick Smith sphere of activity. The firm would still pay taxes, rents, and provide consumers with access to products. The firm might remit profits offshore, but it’s just as likely said profits would be reinvested in Australian in an attempt to improve the business and its performance. This is hardly a case of ‘selling the farm’.
There is also one clearly irreconcilable contradiction in the jingoistic rants of Smith and other mercantilists: outward foreign direct investment.
If the logic says Aussie interests are hurt by any sort of inward investment (e.g. by acquisitions of local firms by big bad foreign folks), then surely any instance when an Australian firm expands offshore is similarly deleterious to the host nation. Where was Dick when his namesake firm made their imperialistic entre into NZ? And when they signed agreements to ally with Tata in India?