Monday 28 February 2011

GUEST POST: Make Christchurch an Enterprise Zone not a Ward of the State.

In this timely Guest Post, Peter Osborne questions the conventional wisdom that “the gummint” must rebuild Christchurch, and suggests instead it remove its shackles that restrain New Zealanders rebuilding themselves.  It involves something sometimes called an Enterprise Zone . . .

Thought is already being given to the recovery of Christchurch, and the repercussions that this disaster will have on the New Zealand economy.

The direction taken now will set the tone for generations to come. Rather than proceed with the standard taxpayer bailout for Christchurch, we should pause and question whether this is efficient or even effective.

Rather than provide an adrenalin shot, bailouts have proven to be expensive placebos.

The situation with Christchurch has thrown us all into a higher level of vulnerability. Even before the earthquake, New Zealand industry had slowed and looked to be settling into stagnation. We were already feeling the pressure of higher costs across the board, and with events in the Middle East rising fuel prices will compound our problems.

New Zealanders can ill afford increasing taxes or forced levies to help its second biggest city back on its feet, as if it were just another welfare case. Such a drain of individual resources would finish us off as a first world nation, and deny the industry and expertise contained and presently lying shackled within the city itself.

The Prime Minister has already hinted how “the government” is going to inject some financial life into Christchurch’s recovery. However, in actuality, this makes it a taxpayer-sponsored injection—taking money from one group trying to build their own economic recovery to sacrifice to another trying to build an earthquake recovery.

It is a recipe for long-term and possibly permanent stagnation. It is also quite possible that many New Zealanders will regret having being so generous in voluntarily donating money and resources in the last few days, when the government will force them to pay again further down the road.

If we factor in the reality that Christchurch is already experiencing an exodus, be it more from trauma than economic strife, the struggle for recovery is compounded.

It is my opinion that for the good of Christchurch and New Zealand, our government must readdress their thinking on state-mandated economic “stimulus.” It has already failed everywhere it has been tried, and with the unique problems that Christchurch faces not only will it fail again there but it will take the rest of New Zealand with it.

If we are to make the best of a bad situation I can only see that government take a massive rethink and consider that neither rebuilding nor recovery requires any sacrifices from anybody. What that requires is that government reconfigure itself more into a moral boosting and motivating force only.

As we have already seen, when put to the test, New Zealanders are very resourceful and are very quick to help when others are suffering. In the long term, this is our chance to shine. We do not need our government to shine at our expense.

Rather than simply expanding the machinery of wealth redistribution to another round of “soak the rich,” and rather than expanding and raising again all the existing hurdles to growth and economic progress, I say it would be far better to remove hurdles altogether, and allow wealth to transfer freely and voluntarily.

What I’m talking about is making Christchurch an Enterprise Zone instead of a ward of the state.

  • Christchurch must attract resources. Grant Christchurch a complete 3-year tax-free status, to be extended at discretion. Do this and the problem of attracting resources will disappear. The object is to change our view away from a coercive patch job to a freewheeling environment of entrepreneurial opportunity.
  • Christchurch must have thousands of new and rebuilt homes. Our government should make immediate steps to remove  the bureaucratic hurdles that have stifled growth and rebuilding, and made building affordable houses completely unaffordable. This includes the existing regulatory system of permits and inspections.
    Let those who own their own property determine between them and their insurance company what they wish their building standards to be. Such a system can be set up very quickly as it already exists in reports.
    Building is productive. Letting things lie idle while waiting for permission from people who have no genuine interest is not.
  • Cantabrians don’t needs the grey ones breathing down their backs. Make Christchurch an ETS and RMA free zone.
  • Cantabrians don’t need to be told where and how they will rebuild their city—they don’t need another centrally-planed “worker’s paradise.” Bus town planners out of Christchurch permanently and allow the city to reinvent itself spontaneously. This would be a wonder to see.
  • Cantabrians don’t need barriers to employment. Remove the minimum wage. In a situation like Christchurch’s it is better to be earning something than nothing at all. And it is better to be achieving something with the diminished resources available than achieving nothing at all.
    We must trust that consenting adults can come to their own voluntary financial agreements.

We have two polar directions in which to take things from here: either central planning, or the unleashing of “spontaneous order.” I fear however that vested interests will instead prevail and take us down a road to third world status. For all concerned this would be a grievous mistake for which all New Zealanders will pay dearly now, as will generations that follow.

After every tragedy our preconceptions about human nature are re-evaluated. We realise the benevolence and strength of the average human being—and we’ve seen the power of voluntary cooperation even in the face of disaster, and of overbearing authority.

If the disaster experienced by Christchurch has bought out the reality of the average Kiwi, then we have already begun moving forward.

PS: What Peter is talking about in essence is this: Instead of impoverishing New Zealanders by rebuilding Christchurch from the top down in the image of the central planners (Galt forbid!), let’s unleash the power of spontaneous order and produce a new city the likes of which no-one presently thinks possible. The sort of spontaneous order John Stossel talks about here:


Libertyscott said...

But but but this is an opportunity to tax the rich more (envy driven saliva dripping off chin with grated teeth in anger) don't you understand? The only fair way say the Greens is for the "rich" to pay, pay, pay and if they leave then...

DenMT said...

I reckon 'permits and inspections' are actually a bloody good way of ensuring life safety in an earthquake.


Peter Cresswell said...

I reckon leaving risk with those who understand it is a far, far better way.

Because it's not the permits and inspections so much as the people who are doing them, the incentives they have in carrying them out, and the risk they assume on ratepayers behalf in doing so.

And a better way already exists, and is on the books as a discussion document at DBH.

Sam P said...

Excellent Mr Osbourne. This would be the best possible response, and would turn a lemon into a fine wine.

This is more what the country should & could get behind. And you're right; if our second largest city becomes an ongoing welfare case, NZ will have to cut up its First-World membership card. On your watch Mr Key?

Anonymous said...

I recommend the link P C gives in his comment above. This is the best comment I have seen on risk in the building industry, and shows that there are those who know tax payers and ratepayers are being exposed to risks, by the current bureaucratic system. Send this link to anyone you know in the construction industry. I know some in the industry are concerned that upcoming changes will disadvantage many small business. This will raise the cost of building, as many will be forced to become employees, or will leave the industry.


Libertyscott said...

Yes the worst kneejerk will be tougher building standards, the state bailing out all of the infrastructure and increasing tax.

A useful suffix to this is that the NZTA does collect enough fuel tax and RUC to fully rebuild Christchurch city's roads if they are not fully insured. It simply needs to delay big new works, which might include the big Christchurch southern motorway. Canterbury always pays far more in road taxes than it gets in return (more than any other region because the roads are cheap to maintain and there has been little work needed to expand them over the years). Time to get some of that back, and no new taxes needed.

Anonymous said...

This discussion reminds me of what has been achieved in a building code free environment, in Alabama, with the Rural studio - - a thirteen year programme under Auburn University. refer also this artilcle
" It's an open secret that Mr. Mockbee liked to work in Hale County because there was no building code enforcement - allowing the students to experiment with unconventional materials and forms". I have seen pictures of some of the buildings built through this studio and they are truly remarkable, but for their inventive creativity and ability to use and recycle amazing materials. the average building cost was quoted to me by a studio participant as $20K USD

Lemon Juice

Peter said...

Great idea. Why not make the whole country an "Enterprise Zone"?

Peter Cresswell said...

@Peter: Baby steps. :-)

Shane Pleasance said...

Synthesises my thoughts precisely.
May I repost please?

Falafulu Fisi said...

I think that spontaneous order was first coined by Friedrich von Hayek (not by Stossel) in his description of Emergence/Self-organisation in a Complex Systems.

gregster said...

Beat me to it. Mine's half written. (And probably adds a few better ideas than mine)

Great piece.

Peter Cresswell said...

@FF: Yes, Hayek developed the idea of spontaneous order. Stossel explains it.

Dale B. Halling said...

There are examples of your proposal (sorry I don't have citations) but one was an earthquake in San Francisco where doing nothing (by the government) resulted in complete rebuilding in less than a year. Note one private railroad tycoon was instrumental in this rebuilding - no inspectors slowing him down. (approx 1880s)

Another example was a typhoon or famine in India 1930s

Owen McShane said...

The Mesopotamian Code of Hammurabi, written around 1790 BC, contains a few laws that appear to constitute a performance-based building code. They may be an excellent example of Epstein’s “simple rules for a complex world.”
Law 229 says:
If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death.
Which probably eliminates the need for building codes, structural design codes and building inspectors.

Anonymous said...

And you're right; if our second largest city becomes an ongoing welfare case, NZ will have to cut up its First-World membership card.

NZ is a "First World" country?

The whole fucking country is an "ongoing welfare case" and has been since Ruth was kneecapped in 1991. Hellen just made eveything so much worse.

At least bludgers are going to have their noses wiped in the shit - because pretty soon things will be clear: there simple isn't anywhere enough money in NZ to rebuild; no-one is going to lend us any more; and (like Iceland, Greece & Ireland) we can't service our debts.

pollywog said...

rather than repeat what i think here, just go there...

jh said...

One thing you ignore with your spontaneous order is that in nature growth has its limits.

Even before the earthquake, New Zealand industry had slowed and looked to be settling into stagnation. We were already feeling the pressure of higher costs across the board, and with events in the Middle East rising fuel prices will compound our problems.

If a farmer reaches his max should he build a theme park? 60% of job growth up until 2007 were due to the property boom and the fact that development is so expensive has a lot to do with the fact that the economy is running to a large degree on inward migration.

Peter Cresswell said...

@jh: In general terms, the more free we are to innovate then the more able we are to adapt to our context. However straitened the circumstances might otherwise.

But are we at our limits? Well, consider that all the energy and materials the planet is endoed with are still here. They haven't gone anywhere. That the earth itself is a solidly packed ball of resources--of materials that only become resources by virtue of ourt identification of their use to us and our freedom to put them into a causal connection to that end.

So I don't buy that we're at our limits, but if we are then it's even more imperative that we be free to innovate anew.

You're right however that even before the earthquake New Zealand industry looked to be settling into stagnation, and that 60% of job growth up until 2007 was due to the property boom.

I would argue however that between stifling of innovation (by regulation, town planning and occupational licensing) and the creation of new money by the Reserve Bank, we set ourselves on the path to creating a bubble in housing--the illusion of prosperity created by nothing more than inflation, which proved in the end to be not prosperity but malinvestment.

But this is not an argument for LESS enterprise and MORE regulation. It is an argument to reverse the trend--even in one small place like Christchurch.