Author: Michael Reddell

The Greens on immigration: taking the low road

Michael Reddell Greens, Immigration, Uncategorized

Earlier this week various media outlets were carrying reports of a new speech on immigration from Green Party co-leader James Shaw.  In both Stuff and the Herald,  articles were headed “Green Party apologises for anti-immigration pandering.   To be fair to Shaw, that wasn’t quite what he said.

A year or so ago, the Greens came out with a new policy on immigration.    The aim was to produce annual population growth of around 1 per cent, and they would adjust immigration policy settings (in light of changes in rates of natural increase or of the comings and goings of New Zealanders) to meet such a target.   At the time they talked a lot about the pressure points that really big net migration inflows caused.   Shaw told Radio New Zealand

“We know that immigration is becoming more of a concern for people and in my experience the vast majority of people aren’t concerned about immigrants, they’re concerned about the impact on house prices, and infrastructure.”

They seemed mostly to be about stabilising population growth pressures, rather than reducing average net immigration very much at all.   After all, average annual population growth in New Zealand in the 20 years prior to the current immigration surge was 1.1 per cent, and rates of natural increase are slowing.

But whatever their intentions, I think everyone who thought about the issue at all seriously, concluded that their policy was unworkable, mostly because of the big –  and not readily forecastable –  fluctuations in the comings and goings of New Zealanders.  I wrote about it at the time

In a sense the fatal conceit in the Greens new policy is the idea that New Zealand’s population growth rate can be held stable from year to year.  While New Zealanders are fairly free to move –  or not –  to the much larger Australian economy in response to changes in relative economic opportunities –  and while New Zealand incomes are so much lower than those in Australia –  we will almost inevitably have the sorts of swings in the net outflow of citizens I showed in the first chart above.  Trying to manage the inflow of non-New Zealanders year by year to offset those fluctuations would be (a) impossible, and (b) something of a fool’s errand even to try.

Others pro-immigration people have made the some point about the unworkability of the scheme.

So in that respect it is good that the specific formulation of a target has been dropped.  If they were serious about a population policy –  and I think they are the only party to have one –  they could have rephrased it to aim to produce average population growth of around 1 per cent per annum on, saying, a five year forward looking basis.    That would have been less unworkable.  But, instead, the numerical target has gone altogether.

From the tone and content of Shaw’s latest speech there must have been a huge backlash in some quarters against the party leadership, and probably Shaw in particular, over last year’s proposed policy.

Last year I made an attempt to try and shift the terms of the debate away from the rhetoric and more towards a more evidence-based approach.
We commissioned some research which indicated that immigration settings would be best if tied to population growth.
Unfortunately, by talking about data and numbers, rather than about values, I made things worse.
Because the background terms of the debate are now so dominated by anti-immigrant rhetoric, when I dived into numbers and data, a lot of people interpreted that as pandering to the rhetoric, rather than trying to elevate the debate and pull it in a different direction.
We were mortified by that

I guess I’m not a Green supporter, but much of this just looks unrecognisable.  Go back and look at the mainstream media coverage, and no one then seemed to think he was “pandering”.   It looked at the time like a serious attempt (apparently backed by some commissioned research) to grapple with some pressing issues –  especially around housing and transport –  and if the solution he came up with wasn’t very workable (and probably should have had a lot more internal stress-testing before it was released for public consumption), it was a serious attempt.  It didn’t blame migrants for New Zealand policy failures, it simply recognised that very rapid population growth can create stresses for us all.   As Shaw noted then

Mr Shaw said the aim of the policy was for better planning, and less hostility towards immigrants.
“The debate around immigration is kind of being captured by those voices who are just simply anti-immigrant, and we really want to make sure that doesn’t happen.

It all seemed pretty calm and rational (even if unworkable).   In fact, at the time so calm and rational that Shaw could even use the (relatively) moderate “anti-immigrant” to describe those who wanted to pull back more significantly on immigration.

There is none of that calm moderation in this week’s speech.    In a speech of only 1350 words, “xenophobia” appears four times, and “scapegoating” three times (admittedly “racism” gets in only once).    People who disagree with the Greens’ stance are, apparently, characterised by such evils.  And on the other hand, the Greens are the party of love

I’m proud to lead a party that stands for the politics of love and inclusion, not hate and fear

and

Openness, inclusiveness and tolerance must win out over racism and scapegoating and xenophobia.   Love and inclusion must win out over hate and fear.

If that isn’t pandering, I’m not sure what is.  And all the while attempting to secure the high moral ground.   Thus

We in the Greens are deeply concerned that the debate about immigration policy in New Zealand has, over the course of time, come to be dominated by populist politicians preaching a xenophobic message in order to gain political advantage.

This ugly strain of political discourse is quieter at times of low net migration into New Zealand, but rises at times of when net migration is high – as it is now, and so, at this election, sadly, the xenophobic drum is beating louder.

“Xenophobia” is one of the favoured words of the groups –  whether from the right or the left –  in our society who favour a continuation of our unusually large-scale immigration policies.

My Oxford dictionary defines xenophobia as a “morbid dread or dislike of foreigners”.   I’d challenge Mr Shaw, or others in the media and lobby groups who like to the fling around the word –  or cognates like “fear” (widely used in this year’s New Zealand Initiative report) – as if the only basis for questioning New Zealand’s immigration policy can be something irrational, to produce some evidence for their claims.    I presume Shaw isn’t wanting to apply this description (“xenophobia”) to his Labour Party allies who recently came out with some proposals designed to reduce the net inflow of migrants (at least temporarily), using much the same sort of arguments Shaw himself was articulating, calmly and reasonably, only last year.  No doubt he intend his comments to apply to Winston Peters –  also the avowed target of the New Zealand Initiative’s report.   I’m no fan of Peters, but I’ve read various of his speeches over the years, and listened to him in interviews, and the “morbid dread of foreigners” seems to bear no relationship at all to what Peters is saying.    Do the Greens recognise any legitimate reasons for being sceptical about the merits of the large scale non-citizen immigration programmes New Zealand runs?

“Scapegoating” is one of Shaw’s other favourite words.   Here, there was a section in Shaw’s speech that I totally agreed with

Migrants are not to blame for the social and economic ills of this country.
Migrants are not to blame for the housing crisis.
Migrants are not to blame for our children who go to school hungry.
Migrants are not to blame for the long hospital waitlists.
Migrants are not to blame for our degraded rivers.
It is the government’s failure

But again, is anyone engaged in the public debate saying anything different?   I was flattered to be described recently by the New Zealand Initiative as “New Zealand’s most articulate critic of immigration”.  I’ve said repeatedly that migrants are just doing what all of us probably seek to do –  pursuing the best opportunities for ourselves and our children.  The problem isn’t the individuals, it is the policy choices governments make.  Again, is anyone who is critical of current immigration policy saying anything different?

Shaw seems to have abandoned what he described as

an attempt to try and shift the terms of the debate away from the rhetoric and more towards a more evidence-based approach.

and tried to cover his own poor specific policy proposal last year, by adopting instead the politics of the slur.   And all while pretending to claim the high moral ground.   Perhaps naively, I’d always thought the Greens –  much as I disagree with them on most things –  were better than that.

As it is, we are now left unclear what the Green Party’s immigration policy really amounts to.  To their credit, there is a 10 page densely-typed immigration policy document on their website, but neither it nor the two page summary give us much clarity at all.

They begin

We support an appropriate and sustainable flow of migrants

Which differentiates them from who how?   “Appropriate” is one of those words bureaucrats use when they don’t want to be specific.

And among their three ‘key principles’

Maintain a sustainable net immigration flow to limit effects on our environment, society and culture.

Surely any possible worries about the impact on “society” or “culture” could only stem from “xenophobia”?  Or is that only when other people make such arguments?

There are strange observations such as

Only make decisions to use immigration as an instrument of economic policy openly by an Act of Parliament

I don’t really disagree, but…..immigration policy operates under the Immigration Act, passed and amended by Parliament.  And among the purposes listed in that Act is

contributing to the New Zealand workforce through facilitating access to skills and labour

The Immigration Act, at least in its modern guises, has always been substantially an instrument of economic policy.

There is lots of detail on various aspects of the policy, but no sense at all as to how many permanent non-citizen migrants we should be seeking to take each year.  We know they are keen to take more refugees, but it isn’t even clear whether that increased intake would be in addition to the total number of non-citizens we take in each year at present, or whether additional refugees would replace some others.

On voluntary migrants they say

an open immigration policy would be unmanageable, and it is the Government’s duty to ensure that voluntary immigration is managed in the national interest. Although ‘national interest’ can mean different things to different people, the definition that has informed our national immigration policy for many years is that we should accept people who will bring skills, capital, or other desirable attributes with them.

And they have a view on the types of skills which should be favoured

Give priority in the skilled migrant category to skills needed for a sustainable society and economy, such as scientists, engineers and other trades with specialised skills applicable to fields including — but not limited to — organic farming, biodegradable materials, recycling, and renewable energy and fuels.

But there is nothing, at all, as to whether current target levels (around 45000 per annum residence approvals) is too high, too low, or about right.

Not even their general stance towards the environment gives much clue.   In discussing “yearly immigration quotas” they say we need

an assessment of the ability of our environment to cope with population increases, taking into account changes in energy use and other behavioural and infrastructural factors;

but they also talk in the same breath of

the need to have spare environmental, social and cultural ecological capacity to accommodate potential returning New Zealanders and people displaced by climate change

But what does it all mean?   You could mount a good argument, on environmental grounds, for a much lower annual target for new residents.   And the likely economic costs of meeting our climate change emissions commitments –  made more difficult by rapid increases in population – would just reinforce that, especially as the Greens are explicit that immigration policy needs to be managed for the interests of New Zealand, not the world.   But that doesn’t seem to be the Greens approach at all.

And then of course, there are the cultural dimensions.  Here is what they have to say

The Taonga of our people, and sites of historical, cultural, environmental, recreational, and general emotional significance for resident New Zealanders, should be protected from adverse impact as a result of immigration, and should not be seen as up for sale to wealthy newcomers. The Green Party will:

1. Take all reasonable steps to prevent immigration numbers, and the sale of land to rich immigrants, from having an adverse impact on Taonga.

But, again, what does it mean?   And why isn’t it what the Greens themselves would refer to as “xenophobia” if anyone else was raising the issues?

Perhaps one can only conclude that answering fairly basic questions like how many non-citizens we should take in each year, or even just what rationing devices we should use to decide which migrants to take, is altogether too hard.  That isn’t promising for a party that wants to be in government only a few months hence.

Reading Shaw’s speech the other day, I did notice this line

in fact, the Greens have the ambition of being the most migrant-friendly party in Parliament.

I did carefully note the potential distinction between “migrant-friendly” and “migration-friendly”, but when I first read the line I was struck by how similar it was to lines one sometimes sees from ACT.   David Seymour obviously thought so too, as he was soon out with a release casting doubt on the Greens’ claims in this area, and suggesting that ACT really was the most pro-immigration party.    Perhaps the Greens just want to be known as nice, while Seymour explicitly eschews niceness

We stand up for productive immigrants and the businesses that employ them, not because it feels nice, but because New Zealand needs immigrants

In fact, I suspect both parties have quite strong globalist leanings –  more so than a concern for the interests of existing New Zealanders –  but neither can quite bring themselves to consistently adopt such an approach.  Curiously, both also seem keen on values statement and the indoctrination of immigrants –  even if they probably couldn’t agree much about what ideas they’d indoctrinate the immigrants with.

If it weren’t for such leanings, it is hard to imagine the Greens –  vocal champions of clean rivers etc –  wouldn’t be much more strongly advancing an agenda that avoided government policy exacerbating population pressures on the environment.    Whether on economic grounds, or environmental grounds, the immigration programme we’ve run for at least the last 25 years (through all sorts of year to year swings in the overall net inflow or outflow) simply doesn’t look to have been working in the interests of New Zealanders as a whole.  If the Greens disagree, it would be good to see the argumentation and evidence.

 

 

 

Squeezing out business investment

Michael Reddell Immigration, New Zealand economic performance, Population, Uncategorized

I was up early this morning to talk to the breakfast meeting of a Rotary club about immigration and economic performance in a New Zealand context (similar points to my LEANZ address last week, but shorter and a bit simpler).  I hadn’t been to a Rotary meeting for decades, since going to the odd one as a teenager as my father’s guest, and somewhat alien as it was (altogether too extrovert for me, especially at 7am), it was also rather inspiring –  people working together to make a difference in their community; some of George H W Bush’s “thousand points of light”.

In the course of my talk, I’d made my standard point that in New Zealand rapid population growth seems to have contributed to crowding out business investment.   Whatever the reason, over the decades business investment as a share of GDP in New Zealand has averaged around the lower quartile of what has happened in OECD countries as a group.  Driving home I remembered that a couple of months ago I’d downloaded all the data to help illustrate some of the stylised facts that bothered me, but had never gotten round to using the resulting charts.

All else equal –  and it never is –  a country that has faster population growth would normally be expected to devote a higher share of current output to investment than countries with slower population growth.  That observation isn’t exactly rocket science.  More people need more houses, and roads, and shops, and offices, and schools, and hospital, and factories.   A country with no population growth at all could simply maintain its capital stock per person by devoting enough of current output to capital expenditure to cover depreciation.  (To be clear, in all this I am using national accounts measure of investment (“gross fixed capital formation”), which (largely) measures resources devoting to building new stuff.)

Houses make up the largest single component of the reproducible capital stock (and almost half the total in New Zealand at present –  note that this is houses, not the land under them).    And since everyone needs a roof over their head, and almost everyone does, you would expect to find a materially larger share of current output devoted to house-building in countries with faster population growth rates.   There is lots of short-term cyclical volatility in house-building activity, so it makes sense to look at average over a long enough period to look through cycles.

In this chart, I’m looking at the period from 1995 to 2014 and looking across OECD countries.  I chose the period because quite a few OECD countries –  especially former eastern bloc ones –  don’t have data before then, and when I downloaded the data a couple of months ago a few countries didn’t yet have 2015 data.    One year won’t materially alter the picture.

res I % of GDP

New Zealand is the red dot close to the line (above population growth of about 27 per cent).

The slope has the direction you’d expect –  faster population growth has meant a larger share of current GDP devoted to housebuilding –  and New Zealand’s experience, given our population growth, is about average.     But note how relatively flat the slope is.  On average, a country with zero population growth devoted about 4.2 per cent of GDP to housebuilding over this period, and one averaging 1.5 per cent population growth per annum would have devoted about 6 per cent GDP to housebuilding.    But building a typical house costs a lot more than a year’s average GDP (for the 2.7 people in an average dwelling).     In well-functioning house and urban land markets you’d expect a more steeply upward-sloping line –  and less upward pressure on house/land prices.    But that isn’t today’s point, which was simply that more people has indeed meant more residential investment.

But what about the business investment picture?  In the data, business investment is a residual –  calculated by taking total investment and subtracting housing investment and general government investment.  Again, all else equal, you would expect a country with a faster population growth rate to have devoted a larger share of current output to business investment.  Workers need “tools”, and if economies are going to maintain their trajectory of growth in income per capita, then the growth in the capital stock needs to at least keep pace with the number of workers.

(You might wonder why I look across countries, rather than just across time within individual countries.  There are two reasons.  First, in many countries there isn’t much variation in population growth rates.  And second, to the extent there is, reverse causation may well be at work –  a booming economy will tend to draw in more people. )

But here is what the cross-country chart looks like.

Bus I % of GDP

Again, New Zealand is the red dot near the line.

There is plenty of variation –  not every observation is close to the line –  but there is no sign at all of the expected upward slope.  If anything, the regression line is downwards –  the faster population growth was across these countries in this period, the smaller the average share of current output devoted to business investment.  The (non-housing) capital stock per person will have been growing materially more slowly in the average high populaton growth country than in the low population growth countries.    The countries with material falls in population were all former eastern-bloc countries, who might be thought to have lots of convergence (and investment) opportunities anyway.  But even if one deleted them from the chart entirely –  and recall that we too were supposed to have lots of convergence opportunities –  the regression line is still very slightly downward sloping (basically dead flat).

It is a chart that should be pretty troubling.    Even a modestly upward-sloping line would still be weaker than ones prior might lead one to expect.

Some readers with more of a background in formal economic research don’t like these scatter plots at all.  They rightly note that it captures just a relationship between two variables, and there is a lot of other stuff inevitably missing.  The relationship may be causal, but it might not be.    One protection against that risk is the use of long period averages for 30+ countries.    But, as importantly, scatter plots of this sort have to be taken together with the wider context –  other stuff we know.

For example, is there a plausible mechanism that might account for such a relationship?  Well, the notion of “crowding out” is a pretty well-established one in the economics literature.  When the government increases its expenditure, the typical result (in a reasonably fully employed economy) is for private sector spending to fall.  Higher interest rates and a higher exchange rate are part of the mechanism by which that happens.   Whether or not there is a full offset is debated, but no one seriously doubts the mechanism or the direction of the effect.    Investment spending tends to be more sensitive than consumption spending, with the exchange rate channel making tradables sector activity (sales and investment) particularly likely to respond.

Increased demands associated with faster population growth may well work in much the same way.   The summary, scatter plot, data certainly isn’t inconsistent with such a story.   In the New Zealand context, one of the stylised facts we have to grapple with is that our real interest rates have been persistently higher than those in other advanced countries, and our real exchange rate has fluctuated around persistently high levels.  (And when I restrict the business investment chart only to countries with floating exchange rates, the downward slope is still apparent.)

So I don’t find the scatter plot in isolation conclusive, but it is troubling nonetheless –  and should be for those who like to invoke the empirical estimates of large per capita income gains from immigration, again in a cross-country context.  How likely are such gains, if countries with relative fast population growth rates (almost all, on account of high immigration inflows) are also the countries that, on average, have relatively modest levels of business investment?  Firms invest to take advantage of the new opportunities that arise.

I’ve asserted that high levels of planned immigration have a disproportionate effect on investment in the tradables sector.  These aggregate data don’t shed any light on that split –  they are just total business investment.   But, at least in a New Zealand context, it makes sense that things will have worked that way.   Higher real interest rates than in other countries –  unmatched by faster productivity growth – will deter all long-lived investment here, regardless of sector.  But when the exchange rate is also boosted, firms considering new investment in the tradables sector are exposed to a double-whammy: highest cost of capital, and a less competitive position relative to foreign firms.   Domestic demand tends to be strong in countries with fast population growth, while international demand is something New Zealand firms just have to take as given.   As our export share of GDP hasn’t been growing –  if anything shrinking –  while those in most other OECD countries have, it seems reasonably likely that investment in theNew Zealand tradables sector has been much weaker than otherwise, and weaker than that in the non-tradables sectors.  That weakness in tradables investment is likely to affect both our natural resource based industries (deterring more capital intensive modes of production) and in the struggling (where unsubsidised) other parts of the tradables sector.

For many countries, population growth isn’t that materially influenced by national policy.   In the former eastern bloc countries, the fall in population is about natives leaving.  In some other countries, illegal immigration can be a big issue.  But in New Zealand –  and Australia –  policy makes a big difference.   We have full control over our borders, and let in lots of legal non-citizen migrants.   In New Zealand, in particular, it looks as though discretionary policy choices have worsened the business environment, and in particular skewing things against the prospects for strong investment by firms that could successfully take on the rest of the world.

(In case anyone is interested, somewhat to my surprise I discovered that there is also a downward-sloping regression line when one plots general government investment and population growth.   I’d expected to find that the government investment just happened anyway –  governments not being subject to market tests.  But over these countries in this period it didn’t.  If, optimistically, you think that government investment is a complement to private investment in improving economic performance, that should be particularly worrying.  Even if the lagging government investment is just about keeping up with the numbers of schools and hospitals (say) a higher population requires, it doesn’t exactly look like a mark of success –  whether in New Zealand, or across the OECD.)

 

Affordability is in the eye of the beholder

Michael Reddell Uncategorized

Silly and meaningless as the category “affordable housing” is, perhaps this  –  which my wife spotted last night – must be what Nick Smith had in mind when he claimed that affordability was in the eye of the beholder?

$990,000, and supposedly aiming at first home buyers……

What have our governments brought us to?

http://www.trademe.co.nz/property/residential-property-for-sale/auction-1338386026.htm

Attention First Home Buyers

  • Asking price: $990,000
  • Listed: Thu 1 Jun, 10:20 am
  • Watchlist

Listing #: 1338386026

Location: 12 Quadrant Road
Onehunga
Auckland City
Auckland
Rooms: 3 bedrooms, 1 bathroom
Property type: House
Land area: 663m2
Price: Asking price $990,000
Parking: 2 offstreet carparks
Open home times:
Sat 8 Jul, 1pm – 1:30pm
Sun 9 Jul, 1pm – 1:30pm

Switzerland as our example – again

Michael Reddell New Zealand economic performance, New Zealand Initiative, Productivity, Switzerland

A month or two back, the New Zealand Initiative arranged a study tour (Go Swiss) for members (and a friendly journalist), “to learn more about their success story”.

I’ve written about this a few times, mostly because I’m genuinely perplexed that the smart people who run the Initiative really seem to think that Switzerland is much of an example for us, or even these days that much of a “success story”.

Sure, Switzerland is richer and more productive than we are.  Most advanced countries are.  But productivity levels in Switzerland now lag behind those of the leading OECD countries.  And over the last 45 years or so, Switzerland has had the lowest rate of productivity growth of any of the OECD countries for which there is a full run of data.  Just a little worse even than New Zealand.

switz 70 to 15

If I were sponsoring a study tour to places that had put in really strong performances in recent times, the Czech Republic, Slovenia or Slovakia look like they might be rather stronger contenders.     They’ve been catching up quite rapidly, not drifting back in the pack.       The Slovakia picture looks particularly impressive.  Here is the Conference Board data on real GDP per hour worked for each of New Zealand, Switzerland and Slovakia, relative to the average for France, Germany, Netherlands, and the United States (four of the higher productivity large OECD countries).

slovakia

Of course, New Zealand Initiative members are free to take their holidays wherever they like.   But it becomes of somewhat wider interest when they return trying to proselytise.

A few weeks ago the Herald’s Fran O’Sullivan provided a vehicle for some of that, relaying some rather questionable stories about the Swiss labour market (which does, among other things, feature a low youth unemployment rate), while ignoring such potentially relevant features as the absence of a generalised minimum wage in Switzerland.   Somewhat surprisingly, from a bunch of leading business people, Switzerland’s much lower company tax rate also wasn’t mentioned.  Then again, neither was its poor long-term productivity growth performance.

Sometimes the Initiative has been directly purveying the material.  Their chairman, Roger Partridge, had a piece in the Initiative’s newsletter recently extolling the contrasts between Italy and the Ticino, the Italian region of Switzerland.  “The secret to Swiss success”, so we are told, is down to “can solve”, reputedly the approach adopted by Swiss officials and politicians.    Now doing better than Italy isn’t such a great boast these days, but actually as the chart above shows, over the last 45 years Switzerland has done worse than Italy –  at least on productivity.  And then there are some of the summary indicators: on the World Bank’s ease of doing business index (not, of course, a perfect indicator of the state of regulation), Switzerland beats Italy by a substantial margin.  But Switzerland comes in at number 31.  New Zealand is number 1.

But what prompted this post was the editorial in the business section of this week’s Sunday Star-Times.   It doesn’t appear to be on the Stuff website, but if you go to this link to one of Initiative director Oliver Hartwich’s tweets, you can read an image of the whole piece.

Do you fancy living your lives more like the Swiss?…..It means entering into a radical experiment which could turn this country into another Switzerland.  A country with a high wage economy that manufactures and exports quality products, welcomes thousands of immigrants without any problems and has a fast and efficient public transport system

And, once again, we are told that

the ‘big picture” answer, according to the NZI, is in Switzerland’s decentralisation, where more than 2000 local councils have their own tax-raising powers.  Their argument is that it leads to greater pro-activity in devising strategies to attract business investment and power growth.

So, again, that would be the OECD country with the worst long-term productivity growth record?

And the other strand of the answer is, it is claimed, the education system.

Education is a dual system, which sees 80 per cent of young people enter vocational training, with only the remainder going to university.  But there is no stigma in that,

Then again, this is the OECD country with the worst productivity growth record over the last 45 years.  And, as OECD data I highlighted in the earlier post showed, actually a larger proportion of Swss 25-34 year olds have completed tertiary qualifications than in (a) most OECD countries, and (b) New Zealand.

One business leader is quoting waxing lyrical

As Fraser Whineray, boss of Mercury, said:  “an aluminium welder can be earning $150000 a year and living in a village like Queenstown”

I had no idea how much aluminium welders earn here, but this website suggests about $22.75 an hour.  That’s a bit under $50000 a year and given that Swiss GDP per capita is not even double New Zealand’s you’d have to be a little sceptical about that $150000 number (and this site offers some Swiss numbers).

But, picturesque as Switzerland is, what about the housing situation?

According to the New Zealand Initiative, as channelled by the Sunday Star-Times

Swiss house prices haven’t changed for three decades (inflation included) –  houses are still affordable compared to salaries.

The first part of that sentence is quite correct.    Real house prices (having had various ups and downs) haven’t changed much in 30 years.    But they were eye-wateringly expensive 30 years ago, and they still are today.   At the level of anecdote, I recall doing a course at the Swiss National Bank in 1990 and being told by our guides that prices in the capital Berne were so high that only senior managers at the central bank owned their own houses.

Good statistical data appears to be harder to come by: Switzerland is not, for example, in Demographia’s annual collection of house prices to median income data.   I stumbled across one website that offers data (of what quality I”m not sure) on rents and house prices in all sorts of cities.   Here is what they suggested for price to income ratios in various Swiss cities.

Zurich                                         9.5

Basle                                            9.2

Geneva                                       10.5

Lucerne                                      9.0

Berne                                        12.3

Whole country                       10.4

From what I could see, actual house prices don’t look any more “affordable” than those here (although, of course, interest rates are lower).  And, consistent with that, residential mortgage debt as a share of GDP is materially higher than that in New Zealand, in fact one of the highest ratios anywhere.

Oh, and how about home ownership rates?  Ours have been slipping, something that makes a lot of people uncomfortable (except a few –  economists mostly? –  who seem to have a vision that we’d be somehow better off if even more of us rented).  This chart is a subset of a table I found.  I’m sure not all the numbers are strictly comparable, and they are all for slightly different years, but I think most people will take New Zealand’s poor outcome over Switzerland’s any day.

home ownership

And, of course, none of this New Zealand Initiative material ever mentions the rather considerable advantages of location Switzerland enjoys –  at the heart of one of the wealthiest and most productive regions on earth, in an age when proximity and location seem to matter more than ever.    Or that, when international agencies look at Switzerland, one of the things they highlight most is the need for reforms to lift productivity growth.  The latest OECD report on Switzerland highlighted how relatively poor Switzerland’s productivity growth had been.  The press release for that report was headed “Focus on lifting productivity to guarantee future prosperity”, and part of the text read

The main objective has to be raising productivity, which will remain the key to boosting growth and maintaining a high quality of life and well-being.  The Survey suggests that Switzerland launch a new reform agenda to boost productivity, including renewed efforts to add flexibility to labour and product markets, improve public-sector efficiency, education and the business environment, and boost competition.  Increasing competition in the telecoms and energy sectors, including the privatisation of Swisscom, will be critical.

As I’ve said repeatedly, in many respects it would be nice to enjoy the material living standards the Swiss do, but……they are slipping backwards, and there is little sign that there is anything very systematic about how Switzerland does things that offers positive lessons for us, whether in beginning to reverse our dreadful productivity performance, or reverse our housing market disaster.

The mystery is why the New Zealand Initiative thinks otherwise.

But on a lighter note, I did find something from Switzerland that New Zealand could emulate.    I know Eric Crampton was one of those a bit upset about the loss of the rugby sevens tournament from Wellington.  Well, how about replacing it with office chair racing?  We spotted this on the BBC news the other night, and there is video footage here.  As the New Zealand capital of office workers, what better place than Wellington for a New Zealand leg of this sport.   Bowen Street looks as though it would offer a nice gradient, ending right in front of Parliament perhaps.  Think of the promotional opportunities.   It probably wouldn’t even take $5m of public money to get it going.

 

Donald Trump & lessons from NZ’s economic boom of 1996-2001

Michael Reddell IMF, New Zealand economic performance, Productivity, Uncategorized

Late last week I was scrolling through a story about the IMF’s latest comments on the US economic outlook, short-term and more medium-term.   As the story reminded readers

The Trump administration says its economic platform — including cutting corporate and ­income taxes, boosting infrastructure spending and reducing regulations — will push growth up to a sustained rate of 3-4 per cent a year and cut unhealthy government debt levels.

At present, the Federal Reserve’s FOMC members collectively think potential GDP growth rates in the US are a touch under 2 per cent per annum.

The IMF has just finished its Article IV “mission” to the US (the US Treasury and the Fed being each a few blocks’ walk from the IMF), and released the team’s Concluding Remarks.   The Fund is, understandably, (more than) a bit sceptical about prospects for such an acceleration in the rate of growth of potential output.  But they are international public servants, and the US has a lot of clout on the Fund’s Board –  and, what is more, the Administration is currently looking to cut back US funding of various international organisations.

So the IMF can’t just come out and talk about the unlikelihood of any sort of large-scale acceleration of potential economic growth because of (a) a fundamentally unserious President, with little interest in policy and no apparent ability to deliver on an agenda anyway, or (b) a US Congress which has, if anything, (and on a bipartisan basis) lower approval ratings than the President, or (c) the corrupting influence of vested interests.  Instead, the Fund has to fall back on fairly bloodless technocratic arguments and illustrations.   But one thing they should be able to bring to the table is authoritative use of perspectives from other countries –  the Fund, after all, undertakes monitoring and surveillance of virtually every country’s economy, other than North Korea.

And whereas I’ve never seen a chart in the IMF’s Concluding Remarks for New Zealand, there were five in last week’s US document, four of which looked quite useful.  A couple even found their way into the Wall St Journal, and given how little attention the IMF’s view on the US usually get in the US, that probably counts as success.

Little old New Zealand was even singled out in one of the charts.

IMF growth accelerations

Looking at advanced countries since 1980, the IMF found this smallish sample of cases where countries had achieved at least a one percentage point lift in potential output growth (per working age adult) that lasted at least five years.    On this chart, New Zealand’s experience over 1996 to 2001 looked pretty impressive –  fourth best seen among IMF advanced countries in the last 35 years.

But it was a bit puzzling.   I sat around the Reserve Bank’s Monetary Policy Committee table right through that period, and “startingly impressive economic performance” wasn’t one of the descriptions that came easily to mind.     Even though the Fund’s asterisk describes us as “coming from recession” during that period, it was actually one that began at the end of a (pretty strong) four or five year recovery, encompassed another mild recession, as well as some chaotic monetary policy, an odd mix of fiscal policy, and towards the end of the period, increased marginal tax rates and a considerable slump in business confidence.    Through quite a bit of volatility, interest rates and the exchange rate fell a long way.

But perhaps I’d missed something, through getting too close to the short-term ups and downs.  So I dug out the data and had a look.

Perhaps if the IMF had had a quick look at this chart first, they’d just have left New Zealand off the chart (I’ve used the average of our two GDP measures, and the official HLFS working age population data).

Real GDP per WAP

Nothing stands out about that 1996-2001 period (average growth for which is highlighted in orange).  By our standards. it wasn’t a bad period, but it wasn’t obviously one I’d be wanting to send other countries’ officials and ministers to learn from.  There was no acceleration in real growth, let alone a sustained one.

But I had read carefully the labels on the IMF chart, and they were using “potential output growth” (per working age adult).  The problem with “potential output” growth is that it isn’t directly observable, and even years later it often hard to get a reliable handle on.

The OECD publishes estimates of potential output growth for its member countries including New Zealand.  And one can back out IMF estimates of potential output growth because they publish output gap estimates (actual growth adjusted for the change in the output gap is potential output growth).   Adjusting both for growth in the working age population produced this chart.

potential growthThere isn’t anything startling about 1996 itself, but at least on these measures potential output growth in the late 1990s was estimated to have been stronger than before or since.

So over the period the IMF highlights, actual real GDP growth (per working age person)wasn’t anything out of the ordinary, but the international agencies think that potential growth (per working age adult)  was pretty impressive  –  more of an acceleration than seen almost anywhere in the advanced world in modern times.

One possible reconciliation could be that New Zealand went into a severe recession during this period, leaving lots of excess capacity (but lots of underlying potential growth, as trend productivity grows rapidly).  It does happen –  it was part of the story of the US in the 1930s for example.

But that certainly doesn’t look to have been the story here.

Labour util

The unemployment rate was a bit lower in 2001 than it had been in 2006, and the labour force participation rate was a bit higher.

Another way to try to make sense of what was going on is to look at:

  • growth in the capital stock (per working age person)
  • growth in multi-factor productivity,
  • growth in hours worked per working age person, and
  • growth in labour productivity (real GDP per hour worked).

Here is the growth of the real capital stock per working age person, shown in two different ways –  the total capital stock, and the capital stock excluding residential dwellings.

cap stock

The period from 1996 to 2001 certainly saw stronger growth in the capital stock (per person) than in the previous period, and thus there is something to the IMF point about growth in potential during this period being somewhat influenced by the previous recession.    But even on this measure, nothing really stood out about the period.  Growth in the capital stock was no faster than it had been at the end of the previous boom, and was lower than we experienced in the last few years prior to the 2008/09 recession.

What about multi-factor productivity growth?   Measured properly, this is stuff everyone is after –  more outputs for the same inputs.    This is annual growth in the OECD’s measure of MFP.

MFP growth

Nothing stands out about the 1996 to 2001 period (consistent with the IMF chart itself, in which the contribution of MFP growth is all but invisible).

Here is (HLFS) hours worked per working age person.

hours worked

Again, nothing stands out about the 1996 to 2001 period.  There had been a big contribution in the previous few years, as demand recovered, drawing more labour back into employment, but by the period the IMF is focusing on there is nothing notable.

And, finally, what about labour productivity (growth in real GDP per hour worked)?    Here, at last, perhaps there is something to the IMF story.

IMF GDP phw

Using the average of the two real GDP measures, labour productivity growth actually was a bit faster in this period than in, say, the five year windows either side.     Even by New Zealand standards (among the weakest productivity growth in the OECD over 45 years) it is not that strong a performance, but the recovery in investment growth (see capital stock chart above) must have made a helpful difference for a time.

I got to the end of all this reassured that I hadn’t in fact missed any great lift in New Zealand’s economic performance over 1996 to 2001.  People are simply better to look at our actual experience, rather than the IMF or OECD estimates of unobserved “potential”.  Perhaps the other country examples the IMF cited work better?

I don’t suppose Donald Trump will be taking any notice of the IMF’s analysis or advice,  but if any minions do pay some attention to the IMF piece, the Fund’s use of the New Zealand case won’t do anything to lift anyone’s confidence that the IMF really has anything very compelling to offer.   Sadly, they didn’t have much useful to offer us either (here and here).

 

Who did Iain Rennie consult?

Michael Reddell Governance, Norway, Rennie review, Reserve Bank, Treasury

I’ve written a couple of times about the review former State Services Commissioner Iain Rennie has been conducting, at the request of the Minister of Finance, into two aspects of the governance of the Reserve Bank:

  • whether something like the existing internal committee in which the Governor makes his OCR decisions should be formalised in legislation, and
  • whether the Reserve Bank should remain the “owner” of the various pieces of legislation (RB Act, as well as the insurance and non-bank legislation) it operates under.

An earlier OIA request from a journalist saw The Treasury refuse to release the terms of reference for the report, but they did release the terms of engagement.  I wrote about that here.    We learned from that release that the report had been delivered to Treasury in mid-April.    We also learned that

In completing the work, the author will engage with an agreed set of domestic and international experts.

and

The key deliverable is a report, which will be peer reviewed by a panel of international experts.

I was interested to know who these experts were, and lodged an OIA request with Treasury.  No doubt, they could readily have responded in a day or so, but after four weeks they did finally respond yesterday.

Anyway, this was the list of “agreed domestic and international experts”.

experts

and this was the list of reviewers

reviewers

It is a curious list in many ways.    Setting aside the SSC people, of whom I know nothing but who are presumably knowledgeable on issues of governance of New Zealand public sector institutions, not a single one of the central bank experts (first list) has any experience of, or exposure to New Zealand (let alone actually being a New Zealander).

And Rennie, with Treasury’s agreement, appears to have consulted only current serving central bankers.   No doubt several will have had useful perspectives to offer on their own central banks’ experiences.  But the world of central bankers is a fairly clubby (or collegial) one, and you would have to think it unlikely that Rennie would have heard anything from these people that would cast doubt on how the arrangements their New Zealand peers operated under were working.   And among those current central bankers only one (Poloz, the Canadian Governor) has any stature in his own right; the others appear to be “corporate bureaucrats”, able no doubt to pass on information about how things work in their own central banks, but not self-evidently qualifying as “international experts” on central bank governance etc.

One might have supposed that any number of other people (even from abroad) could have provided valuable perspectives and insights.  For example, retired Governors and former members of decisionmaking committees, who are freer to speak their mind.   Lars Svensson, the leading academic and former monetary policy board member, wrote a review of our Reserve Bank in 2001 for our then-government.   Having had extensive experience as an insider since then, and retaining an interest in New Zealand, he would have seemed like a natural person for Rennie to have consulted.    In fact, there is not one academic on the list.   Not, for example, Alan Blinder, former vice-chair of the Fed and author of academic work on decisionmaking by committee.   There are no private economists on the list.  Not, for example, Willem Buiter now chief economist of Citibank and a former academic and member of the Bank of England’s Monetary Policy Committee.  And no one from abroad with, say, a Treasury perspective, or the perspective of a Minister.  Bernie Fraser, for example, had been both Governor of the Reserve Bank of Australia, and Secretary to the (Australian) Treasury.

And not a single person from New Zealand made the expert list?  Not Arthur Grimes, who was heavily involved in the design of the current system and later chair of the Reserve Bank Board.  Not Don Brash, who was Governor under the current system for 12 years.  Not thoughtful former Board members such as (for example) Hugh Fletcher.  Not people who had been involved from a Treasury perspective (especially in the years since Rennie himself left Treasury).  And, of course, no one who has written on the issues domestically.

You might, incidentally, be wondering why people from the Bank of Canada and the Bank of Israel top the list of experts.  That is likely to be because Canada is the only other advanced country central bank with the Governor as (formally) single decisionmaker (Canada has quite old central banking legislation, and the Bank of Canada has much narrower responsibilities than our Reserve Bank).  And until relatively recently, Israel also had the Governor as a single decisionmaker, before the legislation was overhauled and a mixed committee (internals and externals) took over the monetary policy decisionmaking role.  The Israeli experience should be interesting, but again you have to wonder why Rennie didn’t consult Stan Fischer, former Governor of the Bank of Israel, and now vice-chair of the Federal Reserve.

What of the international peer reviewers?  There were three, and each will have been likely to have added something in commenting on Rennie’s draft.    But, again, there is a distinctly “let’s keep this inside the club” feel to it all.   Goodhart, for example, is a respected academic economist, and former staff member and Monetary Policy Committee member at the Bank of England.    But he is now rather elderly, and has had a very strong relationship with the Reserve Bank of New Zealand over the years –   including as guest speaker at the (rather extravagant) 50th anniversary celebrations of the Bank, and then someone used as an expert witness  by the Bank at the parliamentary select committee when the current Reserve Bank Act –  governance and all – was being legislated (rather controversially) in 1989.

Donald Kohn is pretty highly-respected in international central banking circles.  So much so that Treasury omit to note in their description that, having retired from a career at the Federal Reserve, he is now a member of the Bank of England Financial Policy Committee, so still entirely within the central banking club.  He has visited the Reserve Bank and, from memory, wrote up his experiences pretty positively.

The final reviewer is David Archer, former Assistant Governor and Head of Economics at the Reserve Bank (and sometimes mentioned on lists of potential future Governors). He now holds a senior position at the Bank for International Settlements, a body owned by central banks (including ours) which describes itself thus

The mission of the BIS is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.

I worked with David closely over a long period, and he was usually pretty willing to speak his mind.  He certainly knew the Reserve Bank well –  at least in the days before financial regulation became so important, and before the Reserve Bank moved more back into the mainstream of central government as a major regulatory institution –  but you have to wonder quite how free he will have felt to offer views the Reserve Bank might be uncomfortable with – the Governor visits the BIS pretty frequently –  especially as those views will themselves presumably be discoverable in time.

So the offshore people consulted, or used as reviewers, seem as though they will have been a rather partial perspective on the issues at hand. No doubt, all provided some useful information and perspectives, but you can’t help thinking there could have been a lot more there if Rennie had sought it.  Then again, as State Services Commissioner his reputation was hardly that of someone keen on open government.  What is perhaps more troubling is that The Treasury was okay with all this.

Despite this published list, you have to wonder who else Rennie in fact consulted.  Why I do suppose there was anyone else?  Because, somewhat by chance, I also yesterday got a response from the Reserve Bank to an Official Information Act request for minutes of the Reserve Bank Board.

In the minutes of the Board meeting held on 30 March this appears

Rennie board

There follows almost three pages recording the details of the Board’s discussion with Rennie (and his supporting Treasury staff). every single word withheld (on somewhat questionable grounds).    Nothing else ever gets three pages of text in the Board minutes –  in fact, the process for appointing a new Governor is still not being minuted at all, even in this latest set of releases.

I don’t have any particular problem with Rennie consulting with the Bank’s Board.  They are likely to have some useful experiential perspectives to offer, but if the discussion covered almost three pages of minutes and –  according to Treasury –  no one else in New Zealand with any familiarity with central banking issues was consulted, it does all have the feel of an insiders’ job.  Perhaps that is what Steven Joyce wanted.  It isn’t what the situation requires.    Meanwhile, one can only hope that the report itself, along with the terms of reference, will be released before too long.

New Zealand isn’t the only country looking at these issues.  The Norwegian government just this week released an independent report they had commissioned looking at the future governance and mandate of their own central bank.  The summary report is very easy to read, and includes specific draft amendments to the law to give effect to the report’s recommendations.  Among those recommendations is a streamlined system of governance, with proposals for a monetary policy committee (40 per cent of whose members would be externals appointed by the government), and for a separate Board to which the Governor would be responsible in his role as chief executive of the Bank.    We can only hope that the completed Rennie report will be as clear and crisp.

 

 

Best small central bank?

Michael Reddell Reserve Bank

Earlier this week the Reserve Bank published a Statement of Intent for the next three years (starting tomorrow).     The preparation and publication of these documents is now a statutory requirement.  All manner of government agencies have to produce them.  In principle, such statements are part of a democratic accountability process.  In practice, they are mostly bureaucratic hoop-juumping exercises, containing very little that is both new and valuable, and one has to wonder if anyone in, say, Treasury has ever done a proper cost-benefit analysis to assess whether citizens are really getting value for money.

I haven’t put myself through the pain of reading any other agency’s Statement of Intent, so I have no idea whether the Reserve Bank’s SoI is better or worse than the average.  But on this particular occasion, the Reserve Bank’s effort is almost certainly more pointless than average.   The new SoI covers the three years to June 2020, and yet the Governor –  chief executive and sole decisionmaker at the bank, by statute, will be gone in three months’ time, and his deputy will follow him out the door a few months later.    Whatever the merits of Graeme Wheeler’s views on the priorities for the Bank over the next few years, they are really no more than (a) descriptions of what the Bank is doing at present, and (b) advisory opinions which his successor can simply ignore if s/he chooses.   When Cabinet ministers talk about the government’s plans for next year, there is at least (say) a 50/50 chance their party will be in office to carry those things through.  Graeme Wheeler won’t be.    Governance models shouldn’t be devised to fit bureaucratic practice and preferences, but an SoI might make a little more sense if the Bank were governed by a Board, the members of which don’t all change at one time (as most crown entities and similar agencies are).

I’m not going to bore myself, or you, with a detailed commentary on the SoI, but a couple of things did catch my eye (as well as an error on p34).

The first, perhaps trivial, one was under “People and culture”.   There we read

Embed the Bank’s high-performance culture

The Bank has largely established its high-performance frameworks. The priority now is to deliver stronger management performance and greater staff engagement. This will be achieved through the greater empowerment and skill development of staff, and accountability for results by managers.

Whatever a “high-performance framework” is, it doesn’t yet seem to be delivering results.  After almost five years as Governor, the most that appears to be able to be said is that the “frameworks” are in place, but the outcomes –  “stronger management performance and greater staff engagement” –  apparently are not.    Perhaps the Board will feel prompted to comment on that in their Annual Report on the Governor’s performance?

The second point I noted was something missing.  Whether in the list of strategic priorities for the next few years, or the list of what the Economics Department is working on this year, there is nothing at all about preparing for the next recession.     That is so even though the OCR is now 1.75 per cent, years into this growth phase.     They simply don’t seem to be taking seriously the limitations of conventional monetary policy, even though our central bank (and Treasury) have been forewarned and have had much more time than most to prepare.       It is an abdication of responsibility, and citizens (not central bankers) are the ones who risk paying the price.    There is no hint of looking again at the inflation target, or looking at whether  levels-targets might provide greater resilience, and no hint of any work looking at easing or removing the technological constraints that cause the near-zero lower bound on nominal interest rates, and which arise from the Bank’s statutory monopoly on note issuance.

The third point I noted was this

Policy Target Agreement renewal and governance review: engage effectively with external agencies on the upcoming renewal of the agreement and the review of the Bank’s monetary policy governance framework.

Unfortunately, there is no suggestion of engaging with the public on issues around the next PTA (unlike, say, the appproach taken in Canada), and no suggestion of any serious research programme around the appropriate specification of the target(s).    I was modestly encouraged to see the reference to “the review” of the monetary policy framework.  It suggests that the Reserve Bank has some work actively underway in this area, perhaps to complement or react to the, as yet unpublished, Rennie review.  On the other hand, nowhere in the SoI is there any recognition that the decisionmaking issues are at least as important around financial regulation (because there is nothing like the PTA to constrain gubernatorial choices and whims), and no suggestion of any review of the question Rennie was also asked to look at, as to whether the Bank should retain primary responsibility for advice on its own legislation (an unusual arrangements for an entity that isn’t a core government department).

The fourth item I noticed was something mentioned in the Minister of Finance’s annual Letter of Expectation to the Governor, also published this week.    In that, mostly, rather pedestrian letter, in which the Minister seems unbothered about the Governor’s repeated failure to keep core inflation close to target, the Minister does make a request

I expect the Statement of Intent to refer to the Bank’s plans to take forward its regulatory stewardship responsibilities over the coming years.

Regulatory stewardship has specific bureaucratic meaning.  From Treasury’s website

Regulatory stewardship is a responsibility of government regulatory agencies.  It involves them adopting a whole-of-system, lifecycle view of regulation, and taking a proactive, collaborative approach, to the monitoring and care of the regulatory system(s) within which they have policy or operational responsibilities.

If that sounds wordy and bureaucratic to you (as it does to me), there is a separate document –  only seven pages long –  outlining government expectations of regulatory agencies.    I liked this bit.

The government expects any regulatory system to be an asset for New Zealanders, not a liability.

By that we mean a regulatory system should deliver, over time, a stream of benefits or positive outcomes in excess of its costs or negative outcomes. We should not introduce a new regulatory system or system component unless we are satisfied it will deliver net benefits for New Zealanders. Similarly, we should seek to remove or redesign an existing regulatory system or system component if it is no longer delivering obvious net benefits.

But despite the Minister of Finance’s explicit request, there appears to be almost nothing in the Reserve Bank SoI on the Bank’s regulatory stewardship responsibilities.   At the end of a list of 12 initiatives in the regulatory area, suggesting it was added late after the Minister’s request, there is this

develop plans to take forward the Bank’s regulatory stewardship
responsibilities over the coming years.

But they currently appear to have no developed sense of how the Bank, as a major regulator (operating to considerable extent on what is, in effect, the whim of an individual), should operate in a way consistent with regulatory stewardship guidelines first put in place some years ago.  Consistent with that, the “success measures” they list bear little relationship to anything in the statement of expectations of good regulatory practice.   And, as far I can I could see, there was no suggestion anywhere of looking to get rid of redundant, or excessively costly, regulation.  The mindset doesn’t seem to encompass that possibility,

But in many ways what most interested me, and surprised me a little, was the Governor’s statement that the Bank’s vision is “of being the best small central bank”.    It was a line one used to hear from the Governor from time to time when I worked at the Bank (somewhere I think I still have a copy of a paper that attempted to elaborate the vision), but it hasn’t been seen much outside the Bank, and if I’d given the matter any thought at all I guess I’d have assumed the goal had been quietly dropped.   Apparently not.

As an aspiration, it is one that has always puzzled me.

It is good to aim high I suppose, but isn’t it really for the owners to decide how high they want the Reserve Bank to aim? Then it is the manager’s responsibility to deliver.  I’ve not seen the Minister ask the Reserve Bank to be the “best small central bank”.    That isn’t just an idle point, because the ability to be the best will depend, at least in part, on the resources society chooses to make available to the Reserve Bank.  There are some gold-plated, extremely well-resourced, central banks around, particularly in countries that are richer than New Zealand.   I suspect New Zealand probably skimps a little on spending on quite a few core government functions including the Reserve Bank (but I’m probably somewhat biased, having spent my life as a bureaucrat), but that is a choice.    If we asked of the Reserve Bank what we ask of it now, but made available twice as many resources, we should expect better results.   As it is, there are limitations to what we should expect from 240 FTEs, covering a really wide range of responsibilities (the Swedish central bank, for example, appears to have about 40 per cent more staff, for a materially narrower range of responsibilities).

And then I’ve been a bit mystified as to who the Governor proposes to benchmark the Reserve Bank against.    I was pretty sure the Reserve Bank of New Zealand excelled relative to, say, the Bank of Papua New Guinea or the Reserve Bank of Fiji.  But they are much poorer countries.   And so I tried to make a list of advanced country small central banks.     There was Norway, Sweden, Israel and the Czech Republic and then the list started to thin out rather quickly.    There was Iceland of course, but the population of Iceland is about 330000; in relation to our 4.8 million that is about how we compared with the UK.  The Bank of England is demonstrably better than our Reserve Bank, and on many dimensions our central bank really should do better than Iceland’s.   Of course, there are lots of small countries in the euro, but individually they don’t have much clout, and can’t really be meaningfully compared against central banks of countries that make policy for themselves.      There was also Singapore and Hungary  –  not too different in population from New Zealand, but neither are from countries  that represent liberal democracy at its finest.

Unfortunately I couldn’t think of a single dimension on which I would regard the Reserve Bank of New Zealand as being better than the Norwegian or Swedish central banks.  (The Swedish central bank is so transparent they even published the details of their staff engagement survey, in English, so that we know that 73 per cent of staff consider the Riksbank “close to being a perfect employer”).  Perhaps we  shouldn’t be surprised.  Norway, in particular, is much richer than us.  What of the Israeli or Czech central banks?  They are countries more similar to us in GDP per capita.  It is hard for outsiders to evaluate, but from what I’ve read of those central banks, and what I could find on their websites –  whether around governance, transparency, policy, or the range and depth of research – it wasn’t obvious why one would think our Reserve Bank was doing better.

Given that the Governor has now restated the vision of having the Reserve Bank as the best small central bank, I assume he must have some benchmark comparators in mind, and assume they must have done some work to assess how they compare.  Since I assume any such documents would be readily to hand, I’ve lodged a request for them.

I’m not sure that “best small central bank” is the appropriate aim.   But we should want an excellent one.  At present, unfortunately, we are a long way from that (not in all cases for reasons under the control of the Governor).  One could think of:

  • a governance model that is out of step with both international practice, and with New Zealand practice for other governent agencies.  Far too much vests in one person, no matter how good that person may be,
  • a Board, which exists (at least on paper) to hold the Governor and Bank to account, and yet which is practice seems to see its role primarily as providing cover for the Governor,
  • serious monetary policy misjudgements (eg 2014) and while misjudgements are an inevitable part of the game, very little evidence of self-critical scrutiny and evaluation,
  • an approach to transparency which emphasises what the Bank wants us to know, not what citizens might reasonably need to hold a powerful agency to account,
  • relatedly, an obstructive approach to compliance with the Official Information Act,
  • little or no published research or analysis on major areas of the Bank’s discretionary policy activities (prudential regulation),
  • infrequent, and mostly unenlightening, speeches,
  • and an approach to criticism that appears to have been exemplified recently in the sustained (apparently somewhat successful) campaign by the Governor and his senior staff to “silence” (materially alter and content and tone) of commentary by a leading economist who happens to work for an institution the Reserve Bank regulates.   Was that the collective wisdom of the much-vaunted Governing Committee working well?

It is the sort of list that candidates applying to become the next Governor –  applications close a week from now –  should be reflecting on pretty carefully.   We deserve something considerably better than we are getting.

Of course, it isn’t that the Reserve Bank is necessarily much different than many of our other policy agencies and institutions.  A very senior figure observed to me recently that the climate for good policymaking was now worse in New Zealand than that person had ever known it.  There may be isolated exceptions, but around too much of official Wellington there seems to be an unwillingness to ask hard questions or do hard analysis, or put up difficult options,  Instead, the incentives seem to reward a desire to simply go along, and fit in, or devise schemes that look good for some quick publicity, however little merit they have longer term.  And all the while our economic performance continues to disappoint,  But no one seems to much care, so long as the minister of the day is happy.  And there is little sign that ministers –  or their opposition counterparts –  care, or want anything much different.

I was reading yesterday an article about the current global political malaise.   Near the end was a quote from Edmund Burke, writing about the government of George III.  He wrote

“it was soon discovered that the forms of free, and the ends of an arbitrary Government, were things not altogether incompatible”

In some ways, it isn’t so unlike modern New Zealand.  On paper, many of our institutional arrangements look strong  –  thus, for example, the Reserve Bank can repeatedly boast how transparent it is –  but in too many cases the substance has been emptied out, and just the forms are left behind.

 

 

 

A question for the Minister of Education

Michael Reddell Uncategorized

I usually don’t pay much attention to the output of the Ministry of Education or its ministers.  I often fear that if I did it would turn out to be about as disconcerting as MBIE’s output.   I focus on getting my own kids through the school system with as little enduring damage as possible  (one of the real joys of being a stay-at-home parent is the time to counter the “indoctrination” that comes from, say, fourth form social studies teachers).

Every time I walk past the Ministry of Education’s head office in Wellington, their slogan or motto emblazoned across the front of the building gets my goat.  It reads

“Lifting aspiration and raising educational achievement for every New Zealander”

It must have sounded good to the bureaucrats and their PR people, but frankly it is the sort of slogan that shouldn’t be seen outside an authoritarian state –  Singapore, Turkey or the like.   Ideally it wouldn’t be seen even there.

I don’t particularly want to have my “educational achievement” raised, and certainly not by the government and its ministry.  As it happens, I’m always keen to learn and am a voracious reader.  Many people aren’t.   But, either way, what business is that of the government?    My “aspirations”, such as they are, are my own, and also no business of the ministry or the government.   The Ministry would, only can only assume, have strongly disapproved of St Paul, who wrote that “for I have learned, in whatsoever state I am, therewith to be content”.

If one took it seriously, it is the stuff of a mindset that sees citizens as a resource of the state, owing it to the state to get with the programme (whatever it is).    Many ministers must be able to see the slogan from their Beehive office windows: does it never occur to them that they are from the National Party?  Among National’s values are, supposedly

  • Individual freedom and choice
  • Personal Responsibility
  • Competitive enterprise and reward for achievement
  • Limited government
  • Strong families and caring communities

I’m pretty sure that list doesn’t really fit that well with the Ministry of Education trying to lift your aspirations or achievements.  Come to think of it, the ACT leader is a Parliamentary Under-Secretary to the Minister of Education, and as a party they claim to be even more strongly in favour of limited government.

Do government departments need slogans at all?  Perhaps “administer our legislation and advise the Minister of Education” doesn’t have quite the same ring to it, but it is what officialdom is really supposed to be doing.

That quote has been annoying me for a while, but this post was prompted by news that the Minister of Education has announced that “computational thinking” and “designing and developing digital outcomes” will become compulsory parts of the national school curriculum from next year.     Perhaps there is a good case for adding those items to the curriculum (I’m frankly a bit sceptical –  apart from anything else, in ye olden days when I went through school we didn’t teach typing to everyone).  But I looked through the Minister’s speech announcing this change, and have read newspaper articles on it, and listened to other media stories.  And in all of that material, I’ve seen not a hint of what the Minister wants schools to stop teaching, or teach less of.

I’m sure there aren’t many economists in the Ministry of Education, but the idea of constrained optimisation shouldn’t be too difficult to grasp, even for Cabinet ministers.   It is easy to add new items that sound or feel good, but there are only so many hours in the day, so many weeks in the school year (and I’m not one of those who thinks that year should be lengthened).    Perhaps there is room for increased productivity in schools, but there isn’t any suggestion that that is the answer either.  It feels a lot like an initiative that will squeeze other stuff out, and we’ll never quite know what, but the Minister concerned and her officials will long since have moved on by then.  But surely the Minister should be able to tell us what she wants schools teaching less of?   Because it is a real choice, and something will be lost, either consciously and deliberately or by default.

I think I’ll always remember the evening, shortly after our oldest child started school, when the then Principal of the local school –  a vocal union advocate for teachers, staunch opponent of National Standards, and prone to somewhat convoluted prose (I often thought he must have been angling for a job at the Ministry) – declaimed that he had no interest in teaching specific knowledge because pretty much everything he had learnt at school had been superseded.   I’m a history buff, and I kept asking myself whether somehow Dick Seddon, Michael Joseph Savage, Sid Holland or Keith Holyoake were no longer significant figures in our history?  Or did World War Two, or the Russian Revolution no longer take place?  Is gravity no longer a force?  Does Shakespeare no longer influence our language and cultural reference points?

It is old ground, but worth repeating. It is all very well to teach general problem-solving and analysis skills, but without context, without specific structured knowledge, those skills aren’t really that much use at all.    And so when the Minister says that schools must teach “designing and developing digital outcomes”, which

“is about understanding that digital systems and applications are created for humans by humans, and developing knowledge and skills in using different digital technologies to create digital content across a range of digital media”

I can’t help thinking that rather better use might be made of the time the Minister wants to devote to matters digital. For example, in teaching New Zealand history, in the context of the history of western civilisation (or even global history), than preparing to use Facebook or whatever newly trendy medium is around a few years hence.    And if there are more resources to train teachers,  I’d suggest some be devoted to improving teachers’ own communications skills.  The local principal (a new one) recently began her newsletter this way

Last week I began a conversation about dispositional ways of being.

I still have no idea what it meant.

C S Lewis, professor of English at Cambridge, once wrote a letter, replying to a young American fan, offering five guidelines for good writing.    Thanks to the wonders of the internet, it is freely available to all our teachers, and to Ministry of Education bureaucrats as well.    George Orwell offered similarly sound advice.

UPDATE: I put the text of the Minister’s speech into Readable.io, which provides statistical measures of readability.  It came back with this summary

RATING: D
Your average sentence length is too high. Try to shorten or split up some of your long sentences.
You are using too many long words. Try replacing some of them with shorter alternatives.

On the Flesch-Kincaid grade, the speech came out with a score of 13.1, apparently as hard to read as a typical US law.    Ernest Hemingway, apparently, managed a score of 4, and the website observes that a document needs to have a score of 8 to be readable by most people.   It would seem a reasonable benchmark for a Minister of Education to aim for.

 

 

 

Who has been getting residence visas?

Michael Reddell Immigration, Uncategorized

Someone called Keith Ng (who is apparently quite pro-immigration), has gone to the effort of downloading some of MBIE’s (not at all user-friendly) visa approvals data and formatting it in a reasonably readily usable way.  The resulting spreadsheet is here.   I was particularly interested in the analysis by occupation, and particularly that for those granted residence here.  (He has provided the data for work visas as well, but it conflates all sort of work visa types, short and long term, and isn’t that informative as it stands –  I suspect that 30000+ tour guide visas in the last seven years or so mostly captures a lot of people who are here for very short periods of time.)

In their annual Migration Trends and Outlook publication MBIE do provide a table of the occupations of the principal applicants for skilled migrant category residence visas.  But, unlike most of their tables, there is no time series provided.  In 2015/16 –  the latest publication –  these were the top 10 occupations.

Chef 860
Retail Manager (General) 675
Cafe or Restaurant Manager 598
Registered Nurse (Aged Care) 520
ICT Customer Support Officer 372
Software Engineer 323
Carpenter 281
Developer Programmer 267
Baker 213
ICT Support Technicians nec 206

I was a bit curious how many chefs there were in New Zealand in total.  At the last census, there were only 16218.

But Ng’s table enables one to easily look at the main occupations of people being granted residence over the last decade or so.  He presents the data for  each of the years 2006/7 to the present, with only partial data for the incomplete (June) year 2016/17.  Here are the occupations with more than 1000 approvals over the decade.

Occupations of approved residence visas applicants: 2006/07 to present
Chef 6729
Retail Manager (General) 3765
Registered Nurse (Aged Care) 3609
Cafe or Restaurant Manager 3585
ICT Customer Support Officer 1993
Software Engineer 1943
University Lecturer 1789
Secondary School Teacher 1656
ICT Support Technicians nec 1439
Registered Nurse (Medical) 1393
Developer Programmer 1338
Baker 1294
Carpenter 1214
Early Childhood (Pre-primary School) Teacher 1192
Accountant (General) 1191
Office Manager 1145
Motor Mechanic (General) 1080

And this is the most skilled half of the people who are granted residence (others get in on non-skilled bases –  family, refugees, Pacific Access etc).

The list is quite dominated by the first few entries, and those occupations don’t stand out as occupations of exceptional skill, even though MBIE used to like to tell us that our immigration policy was a “critical economic enabler”.    And remember that this is about people getting residence, not about work visas which, notionally at least, are supposed to partly reflect specific temporary areas of skills shortages (and, hence, where one might expect bunching in particular occupations, but where the particular occupation would change over time).

The large numbers of aged care nurses (and there are many more, and aged care workers, in the work visa numbers) stands in striking contrast to the recent pay equity settlement. In that settlement, the government concluded that employees in the sector were so badly paid that a direct government intervention was needed to drive up the wages.  I don’t usually focus much on the arguments about whether immigration lowers wages –  my focus is more on overall economic performance –  and I’m not (at all) a fan of “pay equity” interventions, but it is hard to look at these two things and not conclude that there is a certain incoherence about policy.   Had fewer aged care workers from abroad been granted visas, it seems likely that market wages in that sector would have been rather higher.

Of course, among the occupations on that list are some that seem genuinely quite highly-skilled.  My eye was caught by the number of university lecturers and “developer programmers”.

The number of developer programmers getting residence visas has increased from almost nothing, and at an even faster rate than the (presumably) rather less skilled ICT Customer Support Officers.

res approvals IT

On the other hand, rather fewer university lecturers (and secondary school teachers) have been getting residence.

res approvals teachers

How early childhood teachers qualify at all is a bit beyond me.

And just in case you, charitably, supposed that some of the less skilled occupations were becoming less important over time, here are the food-preparation ones on my list.

res approvals food

And here are the trends in the remaining top five roles

res approvals other

If there is a serious economic strategy behind all this, it is pretty hard to spot.  No wonder the government was casting around for other ideas when they ran into the Monahan brothers and came up with the global impact visas.  But just because something different needed to be done, didn’t make  “just anything” –  especially something with a rather hip or with-it feel to it –  a sensible thing to do.

The only really compelling story that makes much sense of the residence approvals numbers is official (political and bureaucratic) determination to drive up the population.  If that is the goal, I guess one can’t be very picky and we get a bunch of modestly-skilled people coming.  But there isn’t much sign that driving up the population has been a successful economic strategy anywhere –  unless, of course, one counts survival as a precondition, which partly motivates the Israeli policy of open doors to any Jews –  particularly not in places that remain heavily dependent on what they can do with fixed natural resources.    Sometimes rapid population growth can be a complement to economic success –  people will be keen to come and there might be plenty of prosperity to go round.  But New Zealand’s policy –  and Australia’s actually –  continues to put the cart before the horse, as if drawing more people here will somehow conjure up great new higher-productivity opportunities for them and for us.     But there is simply no basis –  and certainly not in New Zealand’s experience –  for such a belief.

 

 

 

Global impact visas

Michael Reddell Immigration

Almost two years ago, in July 2015, the government announced that it was planning to introduce a new visa class.

Mr Woodhouse says the Government is also considering a new Global Impact Visa to attract high-impact entrepreneurs, investors and start-up teams to launch global ventures from New Zealand.

At the time, I noted

The Global Impact Visa idea sounds superficially promising. But my impression from the Pathways Conference last week was that existing entrepreneur visa schemes had not worked particularly well.  It will be interesting to see the analysis behind this proposal, including an assessment of how the risks around it will be managed and overcome.  I remain a little sceptical of the attraction of New Zealand to “younger, highly talented, successful and well-connected entrepreneurs from places like Silicon Valley”.  The flow of people in that sector would seem more naturally to be in other direction.  I hope it is not an example of the old derogatory adage used about Britons working in Hong Kong:  FILTH  (“failed in London, try Hong Kong”).

But since then I’d paid no more attention to the Global Impact Visa, until my son pointed out a large article in last Saturday’s Dominion-Post.   And it seems that I had missed the first part of what was actually a two-part series on the new visa, and the role two wealthy young Americans appear to be playing in determining who gets these visas.

The second article is really focused on the new visa scheme itself.  It begins this way

They’re young, rich, Silicon Valley idealists who want to change the world from New Zealand. How did the Monahan brothers come to influence our immigration policy – and what’s in it for us? In part two of our series, we look at how the Americans convinced Immigration NZ they should be the ones to pick the best entrepreneurial brains to come here.

In it there is lots of high-profile publicity for Nigel Bickle, the public servant who runs the Immigration New Zealand division of MBIE.  Bickle was last noted on this blog after he appeared on Nigel Latta’s advocacy TV programme championing large scale immigration thus

Bickle  –  that “front-line service delivery expert” –  argues that we need lots of immigration because a country “can’t get wealthy trading with ourselves”.  There seemed to be quite a bit of confusion there.  Of course, small countries (in particular) need to trade internationally, but that tells one simply nothing about the case for (or against) large scale immigration.  As it happens, and as I’ve pointed out before, most countries –  and especially most countries of our sort of size (population) –  export and import a much larger per cent of their GDP than New Zealand does.

Under the Global Impact Visa scheme (approved by Cabinet as a four year pilot), up to 400 visas (plus spouses/partners and families) will be granted.   As MBIE puts it

The policy is designed to attract those with the drive and capability to launch global ventures from New Zealand who may not be able to qualify for other visa categories. They will have the combination of drive, risk appetite and global connections which enables them to launch or significantly contribute to successful innovation-based ventures in New Zealand.

After three years, whether the ventures work out or not, recipients of global impact visas will be able to apply for residence visas.

Legally, of course, only government agencies can grant visas.  But MBIE will be granting these visas only to people who are recommended by their private sector partner, the Edmund Hillary Fellowship  (EHF).  EHF is itself a joint venture, again as MBIE puts it

between the Hillary Institute for International Leadership, a not-for-profit organisation that identifies and celebrates mid-career leaders from around the world; and Kiwi Connect, an organisation promoting and connecting high-impact entrepreneurship in New Zealand.

It isn’t quite clear what a non-profit that “identifies and celebrate mid-career leaders from around the world” has to bring to either (a) New Zealand immigration policy, or (b) New Zealand policies around innovation and technology, especially when this particular programme seems to be mostly fairly oriented towards young people (“early in their wealth cycle”).  It looks a lot like they just offer access to the Hillary name.

As for KiwiConnect, it doesn’t really seem to exist any more.  Their website says

Kiwi Connect originally set out to be a bridge between New Zealand and the world for impact-driven talent to be able to engage with the NZ startup and business ecosystem. We have succeeded in that mission with the creation of the Edmund Hillary Fellowship, and consequently have put Kiwi Connect into hibernation to focus our team’s efforts 100% on delivering a world-class Fellowship programme.

You can read their burble, on their transition, here.

We also identified that the ecosystem growth wasn’t matched with the necessary level of global connectivity for New Zealand to be internationally competitive. This connectivity is important in turning size and distance from what has been a disadvantage in more traditional industries, to a new advantage for innovation.

Since founding Kiwi Connect, we have focused on filling the gap to connect New Zealand with world-class talent, impact capital, and cutting edge innovation, so that NZ can create a critical mass of entrepreneurial activity within a thriving ecosystem. We started with more questions than answers, facilitating multi-disciplinary, global conversations on what it will take for New Zealand to lead in innovation.

It is a certainly a novel proposition that distance and remoteness will not just be overcome, but might apparently be “a new advantage for innovation”.    One would hope MBIE rigorously evaluated that propostion.

Anyway, the Edmund Hillary Fellowship it now is.

The Edmund Hillary Fellowship (EHF) is a global platform that brings together the best of humankind’s creative potential and entrepreneurial spirit in New Zealand, to create a lasting positive impact for the world.

They are being paid quite a lot of public money ($4m) to get the global impact visa programme going and, according to their website, the first visa approvals are expected to be granted next month.

The Fellowship has a very useful set of FAQs on their website, which I’m drawing from here.

What is it?

The Edmund Hillary Fellowship (EHF) is an end-to-end programme that gives impact-driven entrepreneurs, investors and startup teams a platform to incubate positive impact ventures from Aotearoa New Zealand, and contribute towards a thriving innovation ecosystem in the country. EHF offers exclusive access to Immigration New Zealand’s new Global Impact Visa.

Who is it for?

EHF is for entrepreneurs and investors who are innovating in the industry or sector they operate within, with the ambition to build or support globally scalable ventures to solve significant challenges and influence the course of humanity. This programme is for individuals who align with our values, and who have the skills, capabilities, relentless drive and desire to leverage the unique opportunities New Zealand offers, and make game-changing impact on the world.

Which is where things start getting a little troubling.  Little old New Zealand, keen to develop its “innovation eco-system”, actually puts official weight and money behind a focus on influencing the “course of humanity” and drawing people who will “make game-changing impact on the world”.    If the Monahan brothers, or any else, want to pursue such dreams, I wouldn’t want to stop them –  I’m sure we could all think of ways in which the world could be a better place.  But this is almost “on another planet” stuff, with no sign in any of the published material as to how they think this might actually come to something, let alone offer something worthwhile for the citizens of New Zealand.

They go on

What are the personal qualities you are looking for in candidates?

Model Fellows are highly capable and motivated individuals who view the problems in the world as opportunities to significantly improve it. They are big-picture thinkers at the top of their game, who are able to unpack complex problems to understand all the angles, and come up with holistic solutions that connect the dots. They have unwavering passion, relentless drive, and the ability to execute with excellence. Edmund Hillary Fellows also take advantage of the unique opportunities that New Zealand offers.

Walking on water looks as though it might almost qualify one.   But one has to wonder whether even Bill Gates would have qualified.

After all, when asked about proposed “impact” they write

What do you mean by impact?

We define “impact” as solving problems of significance to humanity in a way that creates positive lasting economic, social and environmental value.

All three at once.  It is a tall order.  Did Microsoft or Google, let alone Facebook, create “economic, social, and environmental value”?

And it doesn’t seem very likely that any card-carrying conservative would qualify for this programme.  Perhaps you noted earlier that the Fellowship is looking for people who “align with our values”.    Here are their values.

The first marker of the left-liberal orientation is the repeated use of “Aotearoa New Zealand”.  It might be old-fashioned and conservative to make the point, but the country is actually called New Zealand.

Much of the rest is the sort of babble that probably appears on any agency’s “values statement”.  But these ones caught my eye from the longer list.

Simplicity inspires us.

We value collaboration over competition to help raise the tide for all.

We strive to act with care for people and land, and to improve intergenerational wellbeing through creativity and entrepreneurship.

Our work is not about us but about those we serve. We actively strive to be better versions of ourselves

and while they talk about how “We love challenging assumptions”  a bit further down the page we read that their person described as “Candidate Attraction Lead”

believes that startups will solve the world’s problems only when they represent the diversity of the world’s people.

Perhaps she is right –  although actually for the last few hundred years most really useful innovations have come from a handful of cultures and countries –  I suspect she might not welcome a candidate challenging that proposition.

And this stuff matters because it isn’t just about getting accepted into the Edmund Hillary Fellowship in the first place.  To get a residence visa, you have to stay on good terms with the programme for three years.   I suspect there are many people who could genuinely make quite a difference, who would struggle to put up with the globalist waffle, and what social pressure goes with it, for three years.    Being able to put on a good front looks a highly valuable skill in this context.

And if you don’t already get the sense of what part of the political spectrum these people are coming from, I refer you back to the first of those Dominion-Post articles.   Take their annual innovation festival held near Wellington.

Every February since 2014, an eclectic bunch of people from around the world have descended on Whitemans Valley, an easy 30-minute drive from downtown Wellington, for a week-long “eco-innovation” festival called New Frontiers, a kind of techie’s version of Nevada’s Burning Man.

Think yoga, yurts, giant domes, composting toilets, campfires, more yoga, drum circles, dancing, vegan food and talking – lots of talking.

Guests have included film director James Cameron, Immigration NZ head Nigel Bickle, Conservation Department director-general Lou Sanson, regional mayors, US digital artist Android Jones and dating site guru Eben Pagan, poets, painters and inventors, as well as curious locals. It’s either a beautiful gathering of like minded thinkers or a weird cult, depending on your point of view. “There’s some freaky looking punters down there camping out in their domes, doing yoga and singing Kumbaya to the moon,” one local says.

Mike O’Donnell, a tech investor formerly of TradeMe who attended last year’s festival, was impressed by the diverse range of people and open exchange of ideas.
“They’re kind of 21st Century cyber hippies,” he says. “It’s a little bit overwhelming, but it’s quite cool. It’s a combination of 60s values, together with sustainable business models, truckloads of vegetarian food and exotic fruit juices.”

and then of the sorts of view championed

Matthew [Monahan] nominates Charles Eisenstein, who has spoken at New Frontiers, as his favourite author. That’s instructive of the brothers’ world outlook – Eisenstein is known as a proponent of “degrowth”, a movement based on “ecological economics” that rejects consumerism and capitalism.

Brian [Monahnan] raps about building a culture “not based on commerce, but on kindness”.

The brothers gave $4m to set up their non-profit Namaste Foundation, which has gifted money to everything from Black Lives Matter to climate change groups.

The Monahans’ philosophy is, of course, the polar opposite of Trumpism.
​”I’m definitely not a Trump supporter,” Matthew says. “I think the environmental challenges we have ahead of us are real. They are really giant problems that require all hands on deck.”

Doesn’t give a strong sense of a place with the Edmund Hillary Fellowship for, say, the large number of Americans with a different take on the world, politics and so on.

And all this is even aside from the bigger challenges a programme of this sort faces.    Adverse selection, notably.  Groucho Marx once famously remarked that he wouldn’t care to join a club that would have him as a member.  Realistically, why should we think that anyone who applies for this programme, to come and live in relatively poor remote (albeit non-Trumpian) New Zealand, is really likely to be the sort of person who can build a business that would “change the world”?        Take just the other OECD countries: every single one of them (even Chile) is closer to “the world” (markets, suppliers, knowledge clusters etc) than we are.   Most put on a pretty good show of democracy and the rule of law.   Quite a few have English as their first language –  and, of those, all look more attractive places in most respects than New Zealand does, for such transformative businesses (even Trump will be gone in, at most, seven years and seven months).   There  are isolated areas in which our regulatory provisions may be world-leading, but looking across the range of policy settings, we don’t really stand out.    And, frankly,  clusters of industries –  be it in Silicon Valley in tech, or London in finance, or wherever, exist for a reason.  The economics of agglomeration are real.

And when even venture capitalists, with their own money on the line, expect that relatively few of their investments will really pay off, why should we suppose that the Edmund Hillary Fellowship will manage even that sort of performance?  Is there any reason to suppose that they will successfully identify any people who will really turn out to “change the world”, or even add much sustained value to New Zealand?  Where are the focused incentives?   Perhaps there is such a basis, but it isn’t clear what it is.

As I noted a couple of years ago when the programme was first mooted, it would be “interesting to see the analysis behind this proposal, including an assessment of how the risks around it will be managed and overcome”.    As it happens, the government pro-actively released the Cabinet paper from last April on the proposed new programme.

But there was very little there.  There was no Regulatory Impact Statement, and although there is lots of talk about the scheme could be scaled up even before the pilot finished if the programme is “more successful than foreseen”, there is not a single indicator or marker in the entire paper that would have given Ministers (or now us, as citizens) any basis for knowing what counts as success, let alone whether any actual success is more than was foreseen.

There is lots of detail about the programme –  and the choice between MBIE running something directly or going with a private sector partner –  but almost no supporting analysis of the substance.   In putting the paper forward, the Minister of Immigration never touches at all on the incentive or potential adverse selection issues and risks.  There is lots of talk of the Business Growth Agenda, and aspirations to have New Zealand as an “innovation hub” (whatever that is), but nothing at all robust or rigorous on what MBIE thinks holds us back.   There is also really nothing on how a handful of people, focused on “changing the world” are really likely to favourably affect the economic performance of New Zealand and New Zealanders, including (in their strange words),  meeting “the entrepreneurial needs of New Zealand”.   Apart from anything else, if the rare one succeeds, are they likely to stay?

One’s confidence isn’t greatly enhanced when the Dominion-Post reports that one of the first proposals (and remember EHF provided this to the Dominion-Post, so they presumably thought it was one of the leading propositions) was “research into legal innovations that might arise from the recent granting of “person” status to the Whanganui River”.  World-changing?  Productivity-enhancing?

As the Dominion-Post article notes, there is plenty of disquiet about some aspects of the scheme in the immigration community.  Some of that may just be sour grapes and business rivalries –  the Monahans got the ear of the government when the critics didn’t.

I don’t have anything against the Monahans, although their much-vaunted respect for all seemed to run into a roadblock when they bought into Whitemans Valley –  named for a pioneer 1840s farming family –  and thought it was both a terribly amusing and  unsettling name, and decided to refer to the place as Aroha Valley instead.  But it isn’t hard, reading the MBIE material and the EHF material, to conclude that a bunch of idealistic, probably well-intentioned, Americans, ran into a government that wanted to look like it was “doing something” innovative, and out popped a programme with little hard-headed rigorous analysis to back it, not that much prospect of success, but which was good for some feel-good headlines for a while (note that back in 2015 even my initial comment was guardedly positive).

On the government’s side it looks a lot like another play from the MBIE “smart active government” playbook, which very rarely (and not surprisingly) seems to come to anything much.   I dug out a few articles last night about assistance to Sovereign Yachts –  lauded by a then Minister for Economic Development.  And there was a Simon Collins Herald article from 2003 on the “benefits of a helping hand” from the government

Most spectacularly, support for business and regional development jumped from $14.2 million to $100.5 million.

In the year to last June, Industry NZ handed out $7 million to 89 companies to help “significant expansion”, did business appraisals for 252 firms and helped 38 of them raise capital.

It gave $1.5 million in total to 15 business incubators and brought together 22 “clusters” ranging from organics to software.

It put $10.4 million into regional strategies, including $2 million each for four big projects – a technology park at Hamilton, forestry training in Rotorua, food processing research in Napier and wine research in Marlborough.

It gave a $500,000 “guarantee of assistance” to the American company Jack Links to build a meat snack factory in Mangere, another $500,000 to US company Media Lab for a research centre in Wellington and $50,000 to Hit Lab, a joint venture between Washington and Canterbury Universities.

Trade NZ’s investment arm helped expatriate yacht-builder Allen Jones set up in Whangarei, and this year gave $1.5 million to computer giant EDS to install call centres and researchers in Auckland and Wellington.

Less successfully, Industry NZ and Technology NZ promised $1.6 million to the Ericsson-Synergy software joint venture which closed late last year, and helped Sovereign Yachts to get land at Hobsonville, only to see it lay off staff last February.

Meanwhile, our productivity performance remained as weak as ever, and our tradables sector has been under even more pressure.  Why, one wonders, should this latest clever-sounding programme be so much different?  Why, for example, are the incentives right?

 There is a real reluctance in MBIE, and apparently among Ministers, to believe in New Zealanders.  OECD data tells us that New Zealanders are, on average, among the most skilled people, including in problem-solving skills, in the OECD.  And so many New Zealanders do impressively well abroad.      But still the cargo cult mentality seems to hold sway.  Nigel Bickle –  service delivery expert, in charge of Immigration New Zealand –  provides the concluding quote to the Dominion-Post series.  Matthew Monahan is quoted thus:
“Probably the best summation is the kaupapa set by Nigel [Bickle] at the outset,” he says. “Go get the world’s best people New Zealand needs to prosper.”

Plenty of foreigners have done well in New Zealand, and no doubt will continue to do so.  But New Zealand has the people to prosper –  the skills, the drive, the energy –  as it did 100 years ago.  Successful countries mostly make their own success, from their own people, institutions and cultures.   It isn’t clear why Michael Woodhouse, Bill English, and –  for that matter –  Nigel Bickle seem to think the answer lies in people over the water.