The Hobbit exposes the failings of NZ Inc.

National arrived in government promising a unified approach to economic growth, but two years into its term The Hobbit debacle revealed a reality at odds with the rhetoric

The National government has developed a liking for talking about this country as New Zealand Inc. It fits with its business-friendly ethos and gives voters the impression of decisiveness and efficiency in tough times. But The Hobbit debacle raises serious questions as to whether New Zealand Inc. is anything more but a political conceit.

If there ever was a time for a performance review of New Zealand Inc. it's now, as we reflect on this nassty business with the Hobbitses. A multi-national arrived in town to negotiate a deal worth three-quarters of a billion dollars. The deal was in the national interest and negotiations were with the Prime Minister, no less.

Indeed, the Prime Minister has said:

An important part of my job is to promote New Zealand, to help build commercial networks, and to develop a sense of where our opportunities lie with the rest of the world.

So how did we – and he – do?

If we judge the deal by the standards of last week, then we and he did pretty well. Despite forking out another $20 million (roughly 3,500 hip operations?), we kept the movies, got a significant chunk of tourism marketing on the side and the national brand was protected. As John Key said, "It was commercial reality. We did the business."

A job well done. In the short-term.

But if we take a step back the view isn't nearly as rosy.

The point of New Zealand Inc. is that we're a small country – we have a small government, small businesses, a small workforce and limited opportunities to prosper. If we want "economic step change" we need to work together to leverage every bit of scale, every relationship, every idea, product or chunk of investment capital or labour we can to get the best deal.

John Key's ambition was for his government to lead those efforts, and he had public support.

The centre-right likes the way New Zealand Inc sounds – tough-minded, with a focus on taking care of business, in every sense of that phrase. The centre-left is sympathetic because it doesn't leave the market to its own devices; it makes government an active player and acknowledges the public sector as an economic leader.

Its first expression was the Job Summit, held to unite the country's economic interests in the face of a global recession that was blowing full force. The summit was to act as a windbreak against that gale; a shindig where public and private sector bosses, unionists and corporates, came together for the good of the country/corporation.

"We know that if we work together New Zealanders will reap the rewards," Key said. "So let's roll up our sleeves, pull together, and get going."

Unions responded later in the year by inviting the PM to speak at the CTU's annual conference. NZ Inc. was muddling along OK. Old enemies weren't going to suddenly become best mates, but there seemed to be a willingness to get along.

Until the National Party conference, that is, and the government's decision to feed the base with the red meat of labour reform. Maybe it was fear that its core supporters were angry over concessions to the Maori Party. Maybe it was Key giving the right-wing of his Cabinet something to chew. Or maybe it was just National being National. But expanding the 90-day law, fiddling with annual leave and sick notes, and limiting union access to the workplace un-did all the bridge-building between the two sides since the 2008 election.

As Fran O'Sullivan has written, cutting union access in particular not only burnt bridges between the government and the unions – and Key and Helen Kelly personally – it scared the villagers and trampled their crops. This Sue Bradford post shows how many on the left viewed the policies at the time.

You might argue that the unions are over-reacting to moderate reform, but their response was utterly predictable and strategically the breakdown in relations was a major blow to New Zealand Inc. (Interestingly, it was a bit like the Hobbit debacle itself, but in reverse, with the government mis-judging unions on this occasion).

Fast forward to last week, and we were left wishing that the tentative truce between labour and capital established at the Job Summit still existed.

Instead, there was no good faith; no sense of New Zealand Inc.

For me, the MEAA had over-played its hand – trying to beat Warner Bros.' full house with a pair of bugger-all. Sir Peter Jackson over-reacted with a refusal to talk and statements full of hyperbole – was it an auter's fit of pique? Genuine business concern? Or just greed and arrogance? I don't know, but it created a crisis. Warner Bros. saw its chance and went for the jugular. Drawn into the fight, the government chose not to mediate, but joined in the union bashing.

So much for New Zealand Inc.

If we'd really been New Zealand Inc. Sir Peter would have sat down and talked, perhaps with the government as facilitator; the MEAA wouldn't have issued an ultimatum; and perhaps most crucially, CEO John Key wouldn't played up the risk of losing the movies (which was always downplayed by the knowledgeable Hollywood media) and mused that the country would have to pay for the union's error of judgment.

By doing so, he undermined his own – and the country's – negotiating position. He'd all but promised concessions before the Warners executives had even arrived. Then, to cap it all off, those executives were allowed to leave the country without a word to the taxpayers who'd so generously handed over another $20 million, the government went into urgency to pass law at the behest of a US corporation and parts of the deal remained wrapped in secrecy.

Which leads me to conclude that when the pressure came on, New Zealand Inc. went out the window. Politics trumped all. New Zealand Inc. got played. The true corporate won.

If the good faith built last year had remained, would we have offered a more united front? Could this have been cut off at the pass? I can't answer that.

What I do know is that such an approach only works if its integrity is protected. That requires political sacrifice, something no party was willing to contemplate.

Which suggests the New Zealand Inc. model doesn't and can't work. The temptation of political gamesmanship will overcome good intentions, short-term self interest is all. After all, a union's job is to fight for its members, not the country as a whole. Businesses need to grow their own bottom-line, not the nation's. And governments have to win elections.

Maybe any hope of them working together is mere Pollyana talk.

But my the strategist and patriot in me still hopes that as a small country we learn the importance of thinking nationally, thinking long-term, thinking in a way that doesn't point-score at the expense of public interest.

And it strikes me that of all the potential members of New Zealand Inc. it's the government that has to be above the fray and lead, and therefore the government that, by its own standards, failed in its duty last week.

It was a good week for the National Party; a bad week for New Zealand Inc.

We need to play to our strengths and work together, or else we'll get played again and again, just as we got played by Warner Bros. last week.