Pondering localism

I’m spending much of the day at Local Government New Zealand’s Localism Symposium

When it comes to centralisation, New Zealand is an outlier amongst developed countries, with decision making heavily concentrated in central government politicians and officials. For every tax dollar spent by local authorities, Wellington spends $7.30.

This is not a record to be proud of. Comparisons with OECD countries show that productivity per capita and decentralised decision making are correlated, and on both measures New Zealand ranks back of the developed world pack. More practically, New Zealand’s diverse communities have long outgrown one-size-fits-all policy making, and there is a growing acceptance that we need to devolve and decentralise decision making to celebrate and leverage our differences.

The challenge is how do we do it?

Local Government New Zealand and The New Zealand Initiative have joined up to develop a policy roadmap on just how to devolve and deconcentrate power through our Localism Project.

On 28 February 2019, LGNZ and the Initiative will present the first cut of this work at the Localism Symposium. We invite interested parties to come and critique our work in a workshop session in Wellington to help develop a robust framework through which communities can have their decision making powers restored, and share insights into public perceptions of localism and local government.

Count me sceptical.  I’m unpersuaded the local authorities should get more power.  Given the choice between the New Zealand government –  of whatever stripe –  and Wellington City Council, I’ll take the former any day.  Not only are they generally more competent (and regular readers will know I’m no fan of any recent government) but it is a great deal easier to monitor them and hold them to account.   Then again, perhaps I’m just a died-in-the-wool central government bureaucrat (“you can take the boy out of the bureaucracy, but not the bureaucracy out of the boy”).   But what could one reasonably expect of the council of one of my old haunts, Kawerau (population <7000)?

And I’m more than a little sceptical about whether there is any meaning in that reported correlation: after all, the United States has plenty of fiscal decentralisation, but New Zealand is about the same size (population) as the median US state.

The New Zealand Initiative has been championing varieties of decentralisation models for some time.    I wrote, sceptically, here about one of their earlier reports.   As I noted, among various other points

I’m a South Islander by birth and inclination, and if someone proposed a genuine federal model for New Zealand –  South Island, lower North Island, and Upper North Island –  I’d probably be emotionally sympathetic to it.  But even then I’d refer supporters to the Australian experience, and wonder just how much genuine decentralisation would occur and for how long. 

Australia struggles to maintain effective federalism.

In the material they’ve sent out for the workshop today, there are some interesting ideas I could probably support and even champion.  For the rest, I guess I’ll be a voice of critique…..and open to being persuaded that more of the case is persuasive than I think now.  I suspect a really compelling case for decentralisation relies either on geography, strong and settled regional identity, or history.  We are a small country, fairly recently settled, and there will be few people for whom (say) the sense of being a Taranaki-ite is at least as important as being a New Zealander (unlike, say, the situation in Scotland or Texas).    To that point, US state boundaries haven’t changed in a very very long time, while two of the four local government areas I lived in while growing up simply don’t exist any more – abolished at the stroke of a ministerial pen.

Had we kept the provincial government system  –  avoided the Vogel money grab –  perhaps we’d now have a similarly long tradition of decentralised government. In days of easy travel and easier technology it is hard to create a stable and enduring constituency –  other than local government politicians and officials –  for trying to create it de novo.   And –  although we can’t run the experiment –  I’d bet against it having made much difference to things that ail us, like house prices or productivity.

I did notice however that the New Zealand Initiative’s enthusiasm for Switzerland –  which really does have lots of decentralisation –  carries over into the material.  The Initiative has long been keen on singing the praises of Switzerland, which is much richer than we are.  But, as a reminder to people, here are the productivity growth performances of the OECD countries since 1970 (when the OECD databases start).  This is total growth in real GDP per hour worked from 1970 to 2017.


Bad as New Zealand’s productivity growth performance has been over this period, Switzerland is still the only OECD country to have had (slightly) less productivity growth.    And it isn’t just the early part of the period: for the period since 2000 you need to go to two decimal places to separate the (lower quartile) productivity growth rates of the two countries.

Switzerland is rich, and pleasant in many respects.  But relative to the rest of the OECD it used to be much richer.  Appealing as the Swiss decentralisation seems in some ways –  and much of that reflects deeply rooted histories of separate distinct communities, including linguistic and religious differences –  it isn’t obvious why it offers some path to better productivity growth in New Zealand.

Fixing the housing mess is also claimed as one of the possibilities of the sort of reforms LGNZ and the New Zealand Initiative are suggesting.  Did I ever mention –  why, yes I think I did – that Switzerland not only has very high house prices, very high levels of household debt, and very low levels of home ownership?    Not outcomes to envy.   They aren’t (I presume) because of decentralisation, but they’ve happened despite it.