Saturday, July 3, 2010

Owen McShane: The Economic Meaning of Village Markets

Flea markets and garage sales have been around for years. But for most New Zealanders, produce markets have been associated with old European villages, or the ethnic markets of Hong Kong and other exotic locations. Village markets focus on locally made crafts, while Flea Markets are essentially centralized garage sales. At the true Farmers’ Market vendors may sell only what they grow, farm, pickle, preserve, bake, smoke, or catch themselves from a defined area. There are now over 50 “official” Farmers’ Markets in New Zealand. But when all the flea markets, village markets and less formal markets are tallied up there must be hundreds throughout New Zealand.

When I grew up they simply didn’t exist – unless we count the school “Bring and Buy” and Church fetes. We simply shopped in shops.

Why is this? Why did my parents feel no need for such markets?

I suspect my parents would have regarded such markets as somewhat old-fashioned and even primitive. The sort of thing our forebears left behind in Ireland in the 1830s.

However, they are now a part of our lives. For the last few years I have routinely – effectively every Saturday Morning – shopped at our local market at Mangawhai. It’s where people sell their own produce, but also sell books, bric-a-brac, power-tools, and other bits and pieces.

The market works for me because it is just across the road from my excellent butcher, and next door to the local lending library.

So what’s the new appeal?

The conventional theory is that the rise of these markets reflects a desire for fresh healthy food, and fruit and vegetables grown locally and in season rather than imported from far away, buying local and supporting local, supporting local cultivars, and eco-sourced native plants and so on.

They are also a good place to meet for a chat.

Also, many who have retired to the country soon find the country-cottage is bursting at the seams, the bookshelves are overflowing, while numerous “priceless objects” grow mould in the garage.

Indeed, last weekend, my wife and I decided to win back some space and earn some ready cash. Setting up a stall at the Mangawhai market was easy. We simply phoned the market organizer (from the local Cheese Shop) and booked a trestle table.

We thought our real cash-cow would be the plants and seedlings but the biggest and most regular seller was our collection of vinyl records dating from US pressings of jazz giants from the sixties. Our first major sale was a high-quality Akai turntable. It was fun to see grandmotherly types shuffle up to the table and enthuse over early discs by Oscar Peterson, Miles Davis, and Billie Holliday. As a bonus we gave the turntable buyer a 1950s 10” LP of Bill Hayley and his Comets – Don’t Knock the Rock.

The last time I thought about these markets was two weeks ago when I wrote the sad story of the Onehunga Market that had to close because Auckland City demanded a resource consent that would have cost maybe $30,000 dollars.

I presume our Mangawhai market operates without such costs because it is housed in the Village Hall, on public ground, shared with the Library and the Museum.

Consequently our stall space and trestle cost us only $10 for the morning.

But if the Council had demanded say $30,000 for a land use consent, then a twenty trestle market at $10 a trestle would take 150 weeks to recover just the consenting cost. Obviously, there would have to be many more spaces or the rental would have to be much higher.

On our first morning we netted about $80. This represented about $20 dollars an hour – not huge but better than the minimum wage. On the other hand it was an $80 dollar return on our $10 dollar capital investment. (Using simple “homespun” economics.) Remember the stuff we were selling had negative value, and I drive back and forth from the village every Saturday anyhow.

And it was fun.

Economists are beginning to notice that heavy-handed regulation is dramatically reducing the productivity of capital even while labour productivity is increasing.

The high costs of land and development, and the burden of consenting and development contributions, make it near impossible for small corner stores to make any return on capital.

Yet, the stall renter’s capital-productivity is massive. (This is simple ‘household economics’.)

Of course the big-city regulators cannot stand to see such an opportunity slip from their grasp. So the Onehunga market had to close.

These village markets remind us of the “power of markets”.

As the heavy-handed regulators drive down capital productivity, entrepreneurs have responded by rediscovering the outdoor markets of much earlier times when capital was scarce and labour was plentiful.
Market economies are like water-beds – push down on one corner and they bounce up in another.

We are beginning to see similar responses in the residential and commercial property markets.

For example, many of us in the rural areas have learned that the costs and stresses associated with building a garage or shed are greatly reduced by using one of the many pre-fabricated kit-sets now available throughout the country. Because they are fully engineered, and standardized around a module, the company needs only a sketch design laid out on the graph paper they supply. Costly working drawings are eliminated and building consents are issued in a few days and cost very little.

If the steel framed and clad shed is insulated and lined, and then plumbed and wired, the end result is a fully habitable dwelling. Some companies now supply steel frame kits with timber cladding. These shed houses are popping up all over the countryside.

But let’s go the whole hog. The regulators have so severely constrained the supply of coastal land that people like my parents, who bought a batch at Tairua out of their working class income, no longer have a hope of enjoying the sprint from the Kiwi bach straight into the sea.

Those who have generated this scarcity then complain that only foreigners can afford to buy our coastal land.

But many of us really do want to occupy a beach side property for the best weeks of summer, and then return home to our rural dwellings in the regional towns and villages.

Enter the motor home.

As farmers become more and more regulated by central planners who know nothing about agricultural economics, but are determined to ‘save the planet’, enterprising farmers will look for new ways to supplement their incomes.

Well, let’s solve our mutual problem.

First, buy a quality self-contained motor home. Then use Google Maps to find what looks like an ideal bay, with a farm track connecting the main road to the beach.

Then approach the farmer and negotiate a “right to occupy” this little patch of heaven. It could be no more than the right to park on the spot for say eight weeks a year, but could include an obligation to fence off the area to contain any children or pets.

No resource consent, no title, no lease – just a right to drive on to the farm, park on the spot, and drive away if it rains.

Farmers supplement their income and Kiwis reclaim the low cost bach.

The Environmental Puritans will gnash their teeth at the prospect of so many people having fun – but this time we might be ready for them.

First published in National Business Review.


Anonymous said...

You certainly have pointed out that OUR council's have become insitutions. I suspect this is because councils have become larger (through amalgamation) and taken on their own personailities instead of taking on the character of the community.

The Auckland super city will be yet another example of this.

Anonymous said...

Well said Owen, we shudder to thing what top down blanket policies are going to be foisted upon us now we are "in the super city" some 80kms from the sky tower.

Anonymous said...

Couldn't agree more. We reap what we sow don't we. I to have watched farmers markets grow and have wondered about taxation issues around what essentially is a 'underground' economy.

One visited regularly is estimated to generate approx. $50,000.00 cash in half a day !

Anonymous said...

Very well written article Owen. You have nicely summed up the over-bearing effects council's are having on very simple things - like local markets.

I recall the Far North District Council regulating a jam making mum out of decades of charitable work because she was not making her jams in a commercial kitchen. Those bureacrates should be bottled and cast out on an angry ocean, only to land on a well deserving beach in Cuba.

It is said that people get the government they deserve. No one deserves the local government we have got.