Wednesday, January 9, 2008

Wellington Delenda Est!

Well perhaps not destroyed - after all I live here too - but at least seriously deconstructed. Why? Because (in my view) our government is badly maladjusted. It has ceased to provide the population with the benefits of communal regulation and ownership that government is needed for and has become a temple for a vast community of self-serving Mandarins whose principle purpose is self aggrandisement.

The problem is at once simple and intractable. Government has forgotten who its customers are. Ask in high places of most government departments who an official serves and the answer is either a Minister or a Ministry or a set of client government agencies. The notion that the object of government is to facilitate the wealth, health and security of New Zealand citizens has vanished into the PC-waffle of an enormous library of strategies, annual reports, manuals and guidelines. Process has replaced outcome as a measure of performance. If the process is correct the outcome doesn't matter.

Perhaps the best illustration of this over the past nine years has been the Government's transition of emphasis from when it was first elected, back in 1999, to where it is today. Back in 1999 the Government made a great deal of noise about the need for New Zealand to become an innovative economy. In 2001 we had the "Catching the knowledge wave" conference featuring Professor Michael Porter with the new Prime Minister talking up innovation. Then slowly Labour lost interest in innovation as it failed to achieve anything and became aware of how badly past governments had neglected infrastructure. It threw ever increasing sums at infrastructure and yet for all the money it spent progress remains painfully slow. Then last year the Labour decided that climate change was the go and brought out plans to introduce the world's most ambitious greenhouse gas market. The result will have serious consequences for most of the productive economy. Slowly the Politicians have given in to our bureacracy which has proven itself to have no idea how to create opportunity and innovation but is very good at penalising people and burying them in regulation.

If you want a metric of New Zealanders views on opportunity one need go no further than net migration figures. The simple fact is people migrate to where they see safety and opportunity. After 9/11 foreigners fled here and kiwis either came or stayed home. Since then those who live primarily in the UK and South Africa see opportunity in New Zealand. Those who live in New Zealand see it in Australia. Today, from this metric, we can see New Zealanders are nearly as disillusioned as they were after nine years of National.

To my mind the issue of Kiwis migrating to Australia is more significant than wave of Poms migrating here. Britons (or British based kiwis) are comparing their opportunities in a very competitive labour market with their opportunities in New Zealand. Their incentive is to achieve a better life-style by trading off less income against less stress. Kiwis by comparison are simply comparing their potential opportunities in our sister Australian states with their opportunities at home. In other words the go-getters are going. The cruisers are coming. Looked as a single domestic Australasian migration market New Zealand does well at pulling in outsiders who want to take it easy but very badly in competition with New South Wales, Victoria, Queensland and most recently Western Australia for those who want to "get ahead".

The reason we do badly has nothing to do with the intrinsic qualities of any of these Australian States. Australia's advantages as a land are easily matched by its disadvantages. It has everything to do with the way we are governed - and the fact is New Zealand is governed very badly indeed. What attributes am I referring too?

  • Small-mindedness - NZ government is immensely small-minded
  • Penny-pinching - the notion of investment is unknown to our bureaucracy
  • Mean-spirited - NZ government policy is dour, harsh and grasping
  • Arse-covering - Covering butt is more important than outcomes
  • Knocking - NZ government prefers to knock citizens down than help them up

Nowhere could this be better documented than in the New Zealand short film "Here to help". Now it is certainly true that seeking broadminded, helpful generosity in any inland revenue office in any government of the world is likely to be a somewhat Quixotic venture but there is a special distinction that applies only to New Zealand government revenue agencies. That is that New Zealand has the fourth highest tax revenue/GDP ratios in the world. It is fully a third higher than Australias. Moreover the New Zealand tax surplus is nearly the size of Norway's despite the fact that Norway is primarily an oil producing nation and New Zealand's main export is cheese. In short our government is at its best when bleeding us white.

And perhaps having a high tax/GDP ratio might make sense if New Zealand had a particularly generous social welfare system, excellent healthcare and/or education system but the social welfare system is barely adequate, the healthcare system can't compete with first-world nations and the education system holds together more on good will than good management.

For what a lot of this comes down to is the apalling cock-ups perpetrated by the 'reforming' Labour government between the years 1984 to 1990 and then further compounded by the National Party from 1990 until 1993. This was a set of reorganisations and privitisations following in the line documented by Naomi Watts in The Shock Doctrine. But as
Reforming Education, 1989-1996, The New Zealand Experience, written by Graham and Susan Butterworth shows most of the reorganisation was carried out by the operationally ignorant pursuing half-baked interpretations of foreign theories. The result was a Government system which is hugely inefficient and distortionary.

A few examples are perhaps required.

The Electricity Department was broken up into a series of State-Owned Enterprises. Originally intended as an interim step toward privitisation that never happened. The result is disputes that used to be resolved in Rutherford House now get resolved in Court at enormous cost. All Electricity SOEs generate not only huge profits but also pay large amounts of tax while the price of electricity rises. The market, which was meant to encourage private sector investment in generating capacity has, in fact never done so. The net result is that we have pretty much the same electricity system we always had but pay loads more mostly for huge overheads for administration.

The Health Department was broken up into first a series of Crown health agencies and then later District Health Boards. The idea was that they would provide better financial management of burgeoning health expenditure. In fact what has happened is that nearly all of them are in huge debt to the Crown (ie spending didn't stop) any attempts to sell health services to foreigners were politically crushed (so much for innovation), the doctors are pissed off and leaving and the nurses and service workers striking to recover lost income. The notion that local communities would hve input through elected representation is, like local government democracy, a farce. And when things go badly the Minister steps in and appoints a new board (as for example at Capital Coast Health). Meanwhile important preventative functions that were once managed by the Department (food safety) have been largely lost.

And perhaps the ugliest of all the 1990 creations is our system of local government. Before the reforms New Zealand had a hotch-potch of buroughs, city councils, catchment authorities, pest destruction boards etc. This was all rolled into a system of very corporate little territorial local authorities and regional authorities based on catchment boundaries. The result was that a lot of smaller communities lost their sense of control over local resources while some mayors let their newfound corporatism go to their heads and embarked on raising debt to silly levels. Gradually over the years however more and more central Government duties have been delegated to local government on the assumption that it is 'representative' but with voter turnout averaging below 50% it is hard to claim that these institutuions are democratic at all. Left with no other levers to raise funding local Government has pressed its powers into private property at an astonishing rate such that now practically any improvement becomes a matter between a property owner and fee collecting local government rather than property owners. Local Government has also done its best to raise property prices ( on which its rates are derived) by limiting the supply of land for development. The result as this study by MED economist Arthur Grimes has shown is that prices have been unduly increased.

For the simple fact is New Zealand, with only 4 million people, is very small. Some city councils manage four million people without anything like the overheads or tax-take of the New Zealand Government. In theory the government of New Zealand should be very light, very nimble and very cheap. In fact it is very heavy, very slow, and very expensive.

All of this is basically to suggest that Wellington needs a complete and total ground-up overhaul. But instead of carrying out more 'Shock' tactics what is really needed is a serious investigation into the principles of Government in New Zealand. We need to think long and hard about the framework for governance and administration. Setting objectives and limits which do not get changed every six years when one Party finds them inconvenient.

We need to think about:

  • Who is government for? and how is that demonstrated?
  • How is its integrity to be protected?
  • What output targets should be defined either as absolutes or as ratios?
  • What must the New Zealand Government never do? (one should never constrain what is allowed only what is not allowed).
  • What are the processes for defining interim strategies and targets?
  • What are the limits of Ministerial authority?

Ideally these issues would be set in a Constitution but the practically of that is somewhat wanting. A better approach would be to begin by developing a set of principles for the State Services Commission and the Audit Office. The State Services Commission together with the Audit Office would then require the Commissioners and chief executives of the various Government agencies to work towards meeting these objectives.

If nothing else the 1980s proved that the revolutionary approach to restructuring produces hastily cobbled together structures at enormous cost and disruption. What is needed is an evolutionary approach towards clear goals and targets. Ideally in this way government will then progress toward a smaller size, greater responsiveness and a more supportive approach toward the endaevours of the private sector which ultimately supports it.

Sphere: Related Content

No comments: