Archive for March, 2011

March 17th, 2011

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Dinosaur Economics: Bill English loads up more debt

Bill English, the NZ Finance Minister, has predictably gone for the traditional response when considering how to pay for the rebuilding of post-quake Christchurch: he wants to borrow $10bln and add further to the mountain of debt New Zealand already struggles under.

At current government bond yields this is likely (presuming the issue is in longer term bonds) to cost over half a billions dollars a year. That’s right $500-550m a year in cost, just to access the money we need.

Bill English has our recent proposal to use new public money in front of him but so far we have heard nothing back on it. Other than an earthquake levy, which has been ruled out also, there are no other proposals on the table.

I look forward to hearing why the Finance Minister thinks paying $500m a year is a good idea for something we could do ourselves.

March 17th, 2011

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New Zealand 2025: Envisaging the Future

Before the earthquake of February 22nd I had been working on an outline for where I saw NZ today and where I believed it could be in 2025. It’s very much a hi level view but it’s a starting point. Though things have changed since the big shake my vision hasn’t. If anything it has simply reinforced my thoughts. Over time I will flesh out the different ideas and hopefully make it more accessible to all. In the meantime feel free to think about where you believe we can be in 2025.

As Yogi Berra said, “if you don’t know where you are going, any road will lead you there”.

March 13th, 2011

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Welfare Working Group: On Yer Bike

The Feb 22nd rumble has delayed my analysis of the WWG report into long term benefit dependency but in between shoveling silt, delivering chemical toilets and getting our chimneys removed, I have managed to have a peek. I only looked at the executive summary paper but there is a fuller report for those who want to look at some of the detail behind the argument.

There has already been some outraged commentary on some of the more sensitive aspects of the report but it’s worth a closer look. Clearly we have a serious problem with the benefit system at the moment: there are 376,000 people on some form of benefit (79,058 on unemployment (UB), 68,056 on sickness (SB), 99,269 on invalid’s (IB) and 99,289 on the domestic purposes (DPB) plus other smaller categories). Having 167,325 people unable to work through ill health or disability is a major issue but that’s really a health problem not an economic one. Having nearly 100,000 sole parents on benefits is a serious social problem reflecting the breakdown in the family as well as unstable and unhealthy relationships. That leaves 79,000 unemployed and actively looking for work. That is a big number at a time when the economy is heading for a double dip recession.

So those are the important numbers but what does the WWG have to say about them? They outline 8 key reform themes amongst 43 recommendations (42 would have suggested a dark sense of humour!)

1) The key theme of the report is the importance of paid work. That’s interesting because I imagine most people would like to have paid work to do. Unfortunately with 79,000 unemployed it suggests there isn’t enough paid work around (certainly not enough suitable jobs). So it’s all very well saying paid work is the way forward but if the jobs are not there then it becomes a platitude. The focus on paid work also ignores the fact that many people do very important unpaid work: this includes child rearing (100,000 sole parents on the DPB), caring for the unwell, volunteering and other unrecorded contributions. This is where the report really misses the target. By only offering up paid work as a contribution to society it misunderstands how society functions, seeing society as a simple economic structure. If we valued unpaid work then that might be the case and actually there is a very sensible way of doing that which I will come to later.

2) Reciprocal obligations: this reinforces the paid work theme by making sure people are taking all reasonable steps to find work even if this means moving about the country (echoes of Norman Tebbit and his infamous and misquoted “on yer bike” remark). 2 comments here: Reciprocity is important. A benefit is a gift from the taxpayer in times of hardship. In return one is expected to do one’s best to find a job or at least re-train in order to find a different job. The problem with treating labour as a highly mobile input is that families are disrupted. Still it’s a fair point to make. With online job search sites now available, people can find suitable jobs all over the country. However, relocating may not be as easy (or cost efficient) as it sounds. This leads into the next theme.

3) Taking a long term view: the WWG recognised the need for further investment into education, training and job finding services. This makes sense. Every time someone becomes unemployed they need a thorough assessment of their abilities and potential opportunities. At that point upskilling and retraining can be offered. From what I have heard the current system is a bit lackluster in this department.

The remaining 5 themes are fairly standard fare: measuring outcomes, focus on Maori (31% on welfare, 41% of DBP recipients), focus on at-risk children (220,000 living in benefit households), cross government approach (bringing in health and education departments as well as the community) and more effective delivery (new outcomes focused agency). All standard stuff.

There has been a bit of an uproar over 2 recommendations:

- One is over the 14 week return to work proposal: this is actually about addressing the issue of having further children whilst on welfare and it is designed to act as a disincentive. This ties in with the expectation to look for work once your youngest child reaches 3 (up to 20 hours a week). It is quite specific to people who already have children and go on to have another one whilst on welfare. I think it’s reasonable to ask people to put off having further children until they are in a stable financial situation. Otherwise we do get into the potential situation of multiple children to extend time on benefit. The WWG notes that the government should monitor this policy closely and apply further financial disincentives if necessary. John Key has already said he’s uncomfortable with this proposal and this demonstrates how difficult this issue is to address.

- The other is the furore over teenage pregnancy and contraception. One of the proposals is to offer free long term contraception to women on welfare as a way of helping to ensure no further pregnancies. This ties in with a post from 2008 which looks at incentives around teenage pregnancy. It’s always preferable to see behaviours change intrinsically but it is likely to require some serious incentives to capture the attention of young people and use that to show that there are alternatives. Whether it’s annual payments into a savings scheme such as Kiwisaver or housing deposit. Incentives do matter and can help bring about lasting change.

Two fundamental changes have been proposed from these 8 key themes:

-  A new single work focused welfare payment called Jobseeker Support (with more focused supplementary benefits above that).

- A new agency called Employment and Support New Zealand (ESNZ) to implement new approach.

Interestingly enough they ruled out a guaranteed minimum income on the basis on large costs and transitional problems (they relied on a Treasury report which I will discuss in an upcoming post) but have tried to move the various benefits to a single payment, the Jobseeker Support. This really is the crux of the problem: how can people be supported whilst they are in between jobs, yet at the same time not penalised or disincentivised not to work at the margin and how can we make sure people are gainfully occupied when there are no jobs available. The UK has had a go at welfare reform as well coming up with a Universal Credit which again tries to simplify the payment process whilst incentivising the work search.

To summarise the report:

- Paid work is where it’s at.

- Labour is mobile and should go wherever the work is with appropriate support.

- Better training, support and rehabilitation is needed to help people into new employment.

- We should discourage women from having further children on welfare, teenage pregnancy and get sole parents in the workforce when their youngest turns 3 (or 14 weeks if you’ve been silly enough to have another one whilst collecting your benefit).

- Reciprocity and obligation: there’s no such thing as a free lunch.

- Invest for the future.

- Reduce beneficiaries by 100,000 by 2021.

- Improve efficiency in structure and delivery of benefits and employment prospects.

All in all these are sensible suggestions in a perfect world so what’s missing? Jobs for a start. As well as poor outcomes from an education system under strain, poor health from a section of society living in poverty and wages which for many have gone nowhere over the last 20 years. Unfortunately the WWG were given a poisoned chalice (governments have become good at outsourcing bad news) since the problems of welfare are deep seated and structural. I think they have made a reasonable fist of it despite the headline hysteria. So what’s my take on it? I’m a big fan of basic income, which comes in many forms, because I believe we have a structural decline in the availability of jobs which is going to get worse as technology strides ahead. However, there is never going to be a shortage of work. That’s the critical difference. Work can be paid or unpaid. By ignoring the value of unpaid work the WWG leaves itself with few options other than the ones they have recommended.

This is why I personally favour a conditional basic income to replace all benefits and superannuation (which I will discuss in more detail in another post). I’m glad the WWG raised the issue of reciprocity and obligation as I think it’s a very positive way to look at welfare. I’m also in favour of more investment into education and training for the workforce (the recommendation for all 16/17 year olds to be in paid work or training is good). Overall there is a need to really look at the future of work in a changing society, the embedded inequality and lack of positive pathways for many. The WWG is a very worthwhile effort at bringing some issues out for debate. It certainly doesn’t have all the answers and it does look at work through a very narrow lens but it’s a discussion we need to have with clear heads. This is just the start.

March 5th, 2011

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A Green Dream: Executing a Vision for Christchurch.

My last post on rebuilding Christchurch produced some interesting feedback. Most were excited, the odd one horrified and a few came through with some alternative thoughts and modern examples. The videos I put up were meant to provoke people into thinking and questioning: what is a city, what do we need from it and how can we make it work for each other? I wanted people to release themselves from previously held beliefs and challenge them, test them out: does it really make sense, does that really work, does it enable, does it support?

It’s one thing to have fantastic futuristic designs but are they practicable? maybe, maybe not. They are certainly buildable. We should not forget that we are moving into a resource challenged time. By 2050 we could have 9 billion people living on this planet. So we do need to build smart, we do need to think about the nature of the built environment as well as the type of city people want Christchurch to be. We have a wonderful brand being well known as the Garden City, as well as being a city with a strong record in technology, manufacturing and the arts. It has a strong farming hinterland and wonderful natural assets reaching from the sea to the snow.

It can easily build on all of those strengths. Here’s a recent example of a city flattened by an earthquake.

On January 17th 1995, Kobe, a city slightly larger in population to Auckland, was hit by a massive 6.8 earthquake, which shattered the city and killed nearly 6,500 people. The total cost was $102 billion. The rebuild process was difficult but according to this 2005 report, the economy eventually recovered to about 75-90% but with the loss of much of its port business. The government was the major funder of the rebuild and tried to focus on specific industries such as biotechnology. Whilst it’s not particularly known as an eco-city or rebuilt along sustainable principles, Kobe was ranked no 9 in the list of world eco cities in a 2010 Mercer report (Wellington was no 5). The lesson Kobe offers are that rebuilding takes time, the economic impact is major and recovery is a long term process.

But Christchurch is very different to Kobe. It is really a very low rise city and should no doubt remain that way. We don’t need some gargantuan high rise marquee building though there is certainly room for some interesting design structures. The human-building interface is very important to the people of Christchurch and that is probably were the focus should be. I agree to some extent with Gerry Brownlee, the Earthquake Minister, that we should only keep the very best of our heritage buildings (The Cathedral, the Arts Centre, the Provincial Buildings and other key sites) and build around them. How we define the best of them and which ones to invest in will no doubt be a heated topic. It’s important to keep the fabric of the city in place whilst recognising that a new layer will emerge.

How we execute this is the tricky bit. There needs to be representation and there needs to be leadership. We will need input from outside especially from people with expertise in sustainable design, both buildings and urban planning. The demolition bit is easy. As Gerry says

As I’ve said repeatedly, heritage is both forward and back and from this point on, we decide what the heritage of this city will be“.

That’s a good start as long as we know who the “we” will be. Perhaps a good place to start is to set out a wish list and work from that. So here’s some of my wishes for how we approach this:

- People first: This must be a people centered process both in design, form and function. We want a living, breathing, vibrant and safe place to live and work with buildings and green spaces that sing to us.

- The Garden City: This is a wonderful brand but needs updating. We can incorporate ideas related to the Garden: permaculture, hydroponics, leisure, tranquility, beauty, shelter.

- Zero waste: We can make Christchurch the greenest city in the world. Recycling is great but true efficiency is in designing wasteless products and systems.

- Ecological clustering: We can create business clusters where organisations can leverage off each other. We can focus on our core strengths and build around that expertise as well as minimising waste streams

- Hagley Park: This could become our Central Park. Surrounded East, North, West and South by business and residential areas. This could help the CBD spread but keep itself anchored at the same time.

- Trains: This is a bit of a long shot. But we have train tracks going through key areas in the city and a train station in a potentially key area. With the current rebuilding we could look at a city loop to connect into the north south line from the central station. If there was ever a time to look at light passenger rail then this is it. We could also fit cycling into this work as well.

- Energy: All new buildings to be fully fitted for solar and small scale wind and then be connected to an integrated grid for feed in tariffs.

As people start to put their wish list together, we will start to see common themes appearing. That may be the best way to get a bottom up blueprint for rebuilding and redevelopment. So I invite readers to list their 5 top wishes below.

Then we can bring in the experts to make it all happen :-)

March 1st, 2011

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A Green Dream: Rebuilding Christchurch as a Sustainable City

170 years ago Christchurch was just a dream, a utopian vision of a green and pleasant land, planned out in England and transported by boat,

the London-based Canterbury Association envisioned Christchurch as an English utopia in the South Pacific. They planned an orderly, tiered society (the first settlers had to brandish a reference from an English vicar attesting to their ‘sobriety and respectability’), with an aristocracy and the Church of England as its head and an underclass of artisans and minions to serve them. They named their fledgling city after an Oxford college (Christ Church) and laid it out like an English city, complete with a Cathedral, University and a boy’s school, Christ’s College, modelled on Eton”.

170 years later it’s been challenged by natural forces and has come off second best: down but not quite out. The CBD has seen between 25-30% of buildings completely destroyed and another 25-30% seriously damaged. The Eastern districts, long known to be built on land of dubious quality, are in serious distress. How does a city recover from this type of disaster?

Well the first thing to remember is that cities have been completely leveled before and have been rebuilt. Lisbon is a fine example of this. On November 1st  1755 an earthquake and tsunami pretty much flattened the city killing tens of thousands and causing damage that reverberated Europe wide. The people of Lisbon responded in an incredible fashion. Wasting no time

On December 4, 1755, little more than a month after the earthquake, Manuel da Maia, chief engineer to the realm, presented his plans for the re-building of Lisbon. Maia presented five options from abandoning Lisbon to building a completely new city. The first plan was to rebuild the old city using re-cycled materials; this was the cheapest option. The second and third plans proposed widening certain streets. The fourth option boldly proposed razing the entire Baixa quarter and “laying out new streets without restraint”. This last option was chosen by the king and his minister.[13]

I would like to consider option 4: razing the entire city and starting again.

Why don’t we demolish the whole CBD and start again, create another utopian vision, this time for a sustainable city: a living breathing system with an integrated energy grid, hi technology buildings in an urban landscape designed for people, creativity and innovation. Of course, we could and should repair and keep our finest historical buildings: the Arts Centre, the Cathedral, the Museum, Christ’s College and any others of a similar standing. There may be some key sites we will have to rebuild but let’s get real: many buildings in Christchurch are/were a complete eyesore; many streets are not that exciting to walk down (for example Colombo Street); many tired shops with very average retail offerings. Many will not be missed and as the most over shopped city in the universe, we can surely survive the loss of many of these. The key challenge will be in how we managed our old heritage with our future one.

So let’s dream a little, not so much as think big but dream big. This is a chance for a new beginning just as it was 170 years ago. We have the opportunity to shape a new future, to create a world leading city and environment, to lead the way and to create new jobs in a hi technology based ecosystem. Our CBD could be smaller and nestled into and around Hagley Park. We simply need better, smarter and healthier buildings, not bigger ones.

I’m going to share some design thoughts just to give people a taste of what dreams can generate, what imagination can create. We want to create something amazing out of this…to somehow make those we have lost proud of what we chose to attempt, to make good out of bad.

Start dreaming now. Lisbon managed it in 1755. I’m sure we can.

About

"I’m a Londoner who moved to Christchurch, New Zealand in 2002. After studying economics and finance at Manchester University and a couple of years of backpacking, I ended up working in the financial markets in London. I traded the global financial markets on behalf of investment banks for 11 years. Since moving to NZ, I have been an angel investor, budget advisor, director, trustee, mentor and business consultant. I'm currently a Councillor at Christchurch City Council and a Trustee of the Volunteer Army Foundation and the Christchurch Arts Festival Trust. I write about the intersection of economic, social and environmental issues."

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