Saturday, July 29, 2023

Brian Easton: Governing A Region Far Far Away.

The Chatham Islands may offer insights on to how to govern New Zealand better.

It is said that our first minister of regional development – in the early 1970s – claimed that he wanted all our regions to have above average incomes. Duh! You would expect that there would be some variation in regional incomes. They are probably not large (partly because ours is a small country). They are not measured but we do have estimates of per capita regional domestic production (similar to GDP) which in March Year Ending 2022 ranged from 17 percent above average for the Wellington Region to 34 percent below for Northland. Because of income tax and social security benefits, the income range will be narrower. (Another factor which narrows the income range is that some of the profits of a region will go elsewhere; for instance Taranaki does well on the GDP measure but much of its profits from its hydrocarbon resources do not stay in the province.)

Should we worry about these disparities? There is a simple answer if the disparities arise out of central government prioritising the richer regions over others, as it often does with its infrastructural spending. But what if, for any of a number of reasons, the region is less productive on average?

One could argue that this is a question of fairness to be resolved by the tax and benefit system. However, that ignores the effects on social structure. People tend to migrate out of low productivity regions because there are fewer opportunities and poorer pay. That means that those left have to struggle with the costs of infrastructure, civic amenities, education and health services spread across fewer people, which makes them more expensive on a per capita basis and more limited, with lower quality. The effect is compounded by those more likely to migrate being at the younger end of working age, which undermines the local tax base as well as the social structure and balance.

(A friend recently wondered whether it was ‘racist’ to observe that our two lowest productivity regions – Northland and Gisborne – are more Māori. It is nothing to do with race. Māori are more likely to live in their rohe, while non-Māori are less likely to be attracted to low productivity regions.)

These meditations form a background to Hugh Rennie’s recently published Chathams Resurgent: How the Islanders Overcame 150 Years of Misrule. Rennie, a greatly respected lawyer, has connections to the Chathams going back almost 60 years to when he began to give legal advice to the Chatham Island Council. His book focuses on constitutional issues and gives little room to environmental and conservation history, fraught Moriori-Māori relations, or economic development. Constitutional issues tend to be a bit dry and, so, initially is the book. Don’t let that put you off; once it gets to the postwar era it is a fascinating read.

At the heart of the problem is that the Chatham Islands are an anomaly – some 0.3 percent of New Zealand’s land area and 0.02 percent of its population sitting 800kms plus to its east. (For the record, we are 0.2 percent of the world’s land area, 0.06 percent of its population and pretty isolated too.)

Whether the Chathams is inherently a low productivity economy, its great handicap is its occasional and expensive transport links (almost New Zealand and the world again), which lowers its ability to generate effective income. The islands’ governance hardly existed in the nineteenth century which left the Wellington government greatly troubled about its legal status; the easy solution was neglect. It was not until 1926 that the Chatham Islands County Council was established, some 50 years after the introduction of councils for the rest of New Zealand. Even then, there was much travail getting it to be effective. Today, central government administrative responsibility rests with the Ministry of Local Government, which is part of the Department of Internal Affairs. On Rennie’s account it has not done a very good job. Very often, decisions were dominated by insensitive officials who had never been to the Chathams.

Instructively, Rennie describes a 1985 official options paper for the future of the Chathams as ‘offensive’ to islanders. It was certainly not designed to engage with them and would end in a stalemate. The subtext was that the market would set the right level for effective regional development; that social considerations were irrelevant. In any case, the government was blind to its past failures, and refused to take them into consideration in future policy settings. This was Rogernomics as it seeped into all our thinking.

Not much later, Treasury paper by Treasury when it was out of control – or at its Rogernomics peak which was much the same thing – proposed to pay Chatham Islanders to relocate to New Zealand rather than continue to subsidise core utilities and other services that made livestock farming viable (like keeping the meat works going).

Perhaps not surprisingly, an independence movement was triggered. When the independence proposal was put to a later Prime Minister, ‘pleasantly and firmly’ advised that ‘declare independence one day, and there would be soldiers on the Island the next’. (Jim Bolger had more confidence in their speed of response than I have.)

Some islanders seemed to think that the Chathams would be economically viable without central government financial support if they controlled all the fishing quota that arose from the oceans around them. They overestimate the fiscal value of the quota and the capacity of the Chatham Islands navy to enforce its use.

Slowly and tortuously a solution was found. (Secretary of Internal Affairs, Perry Cameron, played a very honourable part.) The Rogernomics solution of a commercial Local Authority Trading Enterprise (LATE) was rejected in favour of the Chatham Islands Enterprise Trust. (Rennie was chairman for its first 11 years.) Its responsibilities include the airport, sea port and transport connections plus electricity generation and meatworks. In June 2022 the Trust was worth a net $63m (almost $80,000 an Islander).

You can read the book for the details but I was struck that the Trust handled its responsibilities far better than these same responsibilities had been previously handled by central government. They knew more about what was going on, were more focused and the locals had confidence in them. There were still some government grants, even though the Trust reduced some of the previous waste because of its greater focus. I get the impression that central government could trust the integrity and competence of those who managed the Trust despite the small pool of talent it drew upon – given there were only about 800 people.

While you might read Rennie’s book for its insights into the Chathams, it also shows the possibility that we could have a stronger, more decentralised system of New Zealand local government.

Hugh Rennie (2022) Chathams Resurgent: How the Islanders Overcame 150 Years of Misrule. (Fraser Books)

Brian Easton is an economist and historian from New Zealand. He was the economics columnist for the New Zealand Listener magazine for 37 years. This article was first published HERE

1 comment:

Basil Walker said...

Stewart Island of southern New Zealand would be far better off being run by the same principles as the Chatham Islands . The issues are absolutely similar, if not identical. Basically ignored by Government for everything apart from IRD services.