The business of NZ Inc

Among the world's top economic trading units, New Zealand is at 83rd place, just behind computer maker Hewlett-Packard. Are we just a big corporation and being run like one? JOHN McCRONE investigates. 

There is a theory that governments use disasters as opportunities to shove through their political agendas. Big change can be rushed past a population still in shock.

So is this what is happening in Christchurch with the Government's remarkably ambitious - and remarkably interventionist - plan for the rebuild of the central city?

Is the business-friendly Blueprint masterplan with its convention centres and covered rugby stadiums, formulated with great speed and secrecy, then launched with stage-managed fanfare by Prime Minister John Key live on the evening news, just a cunning strategy to get rid of the old "people's republic of Christchurch" and create a new corporate-run town?

In her 2007 best-seller, The Shock Doctrine, Canadian social activist Naomi Klein called it disaster capitalism.

Klein's thesis is that neo-liberal free-market thinkers have been seizing opportunities to wire in a Right-wing way of doing things ever since economist Milton Friedman and his 'Chicago Boys' took advantage of General Pinochet's military coup in Chile in 1973.

Under Pinochet's dictatorship, and with the United States' encouragement, a radical programme of deregulation, privatisation and market fundamentalism was forced through.

Klein argues similar changes happened in Argentina, Bolivia and Uruguay, then Poland and Russia, following their periods of financial or political turmoil. Economies were remade to suit Western interests.

On a more local scale, says Klein, it explains how Thai fishing villages were turned into high-end beach resorts after the 2004 tsunami, and New Orleans public schools became privately-funded charter schools after Hurricane Katrina.

Big money knows what it wants and a crisis is the best time to slip it through.

Some are already claiming this is what the Government is up to in Christchurch.

A few weeks back, writing in the Perspective pages of The Press, Australian commentator Ian Maxwell argued that the central city blueprint was a classic neo- liberal manoeuvre, one designed to deliver riches into the hands of the powerful few.

"When it comes to rebuilding Christchurch, the process couldn't be more regulated and secret. Doesn't that just sniff of an unstated objective, like some sort of sneaky wealth transfer?" he asked.

Others, like Green Party earthquake spokeswoman Eugenie Sage, agree.

Sage remarks on the "monumentalism" of the anchor projects in the plan.

"What happens is you get big facilities that potentially benefit the big construction companies and big architectural firms. You don't see the community having a say in the scale."

Sage also notes a hardening in attitudes. She remembers how Roger Sutton, a "people person", was hailed as the ideal chief executive to front the autocratic powers of the Canterbury Earthquake Recovery Authority (Cera). But now there is its offshoot, the Central City Development Unit (CCDU), run by Warwick Isaacs.

And with the CCDU a more definite agenda appears to be showing, Sage says. For example, over the campaign to save the damaged Centennial Pool, now earmarked as part of the land the CCDU wants to take for the central city's "green frame, supporters have two letters.

"There's one from Roger Sutton which is supportive of the pool being restored, another one from Warwick Isaacs which is totally hostile."

Sage says with every day the Government is sounding more prepared to steamroll any opposition. She is also finding that Cera is taking an unexpectedly broad view of its role in economic issues.

"Canterbury's irrigation development is part of Cera's business development strategy, which I think is . . . interesting, as not much of the region's irrigation infrastructure was damaged in the earthquakes, so far as I was aware."

Before people realise it, says Sage, with so much change taking place so rapidly, whatever economic model the Government thinks right is likely to be embedded locally in a way that will later prove difficult to unpick.

"Cera may only be going until 2016, but by then all the contracts will be signed. All the key decisions on expenditure and big projects will have been made," she says.

But the real question is what model exactly? People have been saying it is all about neo-liberalism - the unfinished business of Rogernomics, the Business Roundtable and the ACT party.

Yet the way the Government has been prepared to take such hands-on control of the recovery does not seem much like market fundamentalism.

The buyout of the red-zoned suburbs, the willingness to compulsorily buy blocks of the central city and turn private owners off their land, the suspension of normal planning appeals, the proposal for an urban design panel to review building designs?

Sage agrees that it appears more like the Government is intent on setting up a mini- Singapore - a technocrat's vision of planned innovation and directed capitalism.

Something must be going on that explains the increasingly interventionist approach the Government has been taking to the Canterbury earthquakes. To see what it is, we probably need to step back to ask about the economic model now being applied to the country as a whole.


Political commentators have had a tough time pigeonholing John Key and his National-led Government.

Other countries, such as Britain, have gone in for branding their politics. For a while there was Tony Blair and his middle-of- the-road Third Way, now it is Conservative Prime Minister David Cameron with his return-to- the-community Big Society.

But the only "ism" that people seem to have been able to pin on Key's approach has been pragmatism.

Some have argued Key's blokey non-ideological stance is simply a front.

As political columnist John Armstrong recently put it, the suspicion is that "behind the friendly visage lurks a cool- blooded animal as keen to push a free market-oriented agenda as any disciple of the New Right".

Yet Armstrong says there is little evidence of this so far.

"Key is into his fourth year as prime minister, so that alleged alter-ego would surely have emerged long before now."

It seems Key does not want to be that kind of market radical. But pragmatism - which suggests a lack of any concrete theory, a willingness to make it up as you go along - does not really explain it either.

Listen carefully, say commentators like University of Otago politics lecturer Bryce Edwards, and the Government is speaking quite openly about applying an "NZ Inc" model of economic development - the country run like a business with the prime minister as its chief executive and the voters as stockholders looking for the best possible return from the national enterprise.

It is not an anti-market approach. Instead it recognises that neo-liberalism has indeed remade the world, removing the barriers to the flows of trade, capital and skills to create a globalised economy. So now, especially for a small country, it makes sense to play within this great marketplace as a tightly- organised business with a clear market strategy.

A startling fact is that of the world's 100 largest economic trading units, 56 of them are states, the other 44 are corporations. New Zealand finds itself nestled down in 83rd place, sandwiched between computer maker Hewlett-Packard and German investment bank Allianz.

The argument is that to prosper, small-fry nations must be managed at the scale where much of the market competition is actually taking place.

Edwards says it is indeed the Singapore model of a strongly interventionist approach to running an economy. And Key, who lived in Singapore while working for Merrill Lynch in the mid-1990s, signalled his admiration for it from the moment he was first appointed leader of the Opposition.

Addressing a National Party meeting in 2006 just after another visit to Singapore, Key said it was hard to believe that New Zealand once sent foreign aid there.

He said the Singapore economy is run so much like a business that the government even pays its citizens bonus dividends in a good year in the form of cash or retirement account top-ups. And he marvelled at the lengths to which Singapore invested in its education and infrastructure, citing the example of a new innovation park, Biopolis.

"They currently have people working on developing advanced aquamarine technology, while another is considering by-products of milk. All this from a country that doesn't have any fish farms or fishing capability, and doesn't own a single dairy cow.

"Why then the investment? Simple. They know that if they develop and own the intellectual property then they can license it or sell it, maybe to New Zealand but most probably to China or Latin America. In the future they want to be the brains behind developing good ideas."

So an NZ Inc approach looks to have always been in Key's mind.

And it has showed in the many actions the Government has been taking, from the heavy borrowing for a $11 billion Roads of National Significance programme, to the acceleration of broadband investments, the abortive attempts to open up conservation land for mining, and the formation of a Business, Innovation and Employment "super-ministry" to concentrate the Government's ability to drive change.

Edwards says there is nothing much hidden about National's economic model.

"This Government has clearly inherited a neo-liberal framework and in some ways increased some of the neo-liberal elements of it. But it is following a trend now visible throughout the West where neo-liberalism is no longer taken as gospel any more as the global financial crisis found it wanting."

However, he says people may have not yet recognised the extent to which NZ Inc thinking is itself a positive economic philosophy that is going to have its winners and losers.

A top-down corporate approach to running New Zealand - one people united under a single business plan - sounds reassuringly centralist and commonsense.

It promises to move us beyond the stale old political dichotomies of Left v Right, or liberal v conservative.

But any definite political position is going to create its own new polarities.

Massey University associate professor of resource and environmental planning Christine Cheyne says the consequences of an NZ Inc philosophy seem easy enough to predict.

A Singapore style of governance is top-down and directive. From on high, experts produce their studies and create their plans. To make it all happen demands a centralisation of power.

So what an NZ Inc approach ends up becoming opposed to, whether consciously or otherwise, is bottom-up, community-led democracy. And haven't we been hearing all about that particular tension ever since Christchurch's earthquake recovery got started, Cheyne asks?

She says New Zealand already stands at a political extreme in terms of its centralisation of power.

New Zealand has no written constitution, no federal system. It did away with an upper house to its Parliament in the 1950s. And local government has traditionally been kept very weak.

Because there is no constitution, says Cheyne, Wellington can rewrite the rules of local government at any time - which is why Environment Minister Nick Smith was able to sweep in and replace Environment Canterbury's (ECan) elected councillors with state-appointed commissioners in 2010.

A sign of how one-sided the relationship between central and local government has been is that central government controls 90 per cent of all public spending here. This compares to Britain at 70 per cent, and highly decentralised nations like Germany and Switzerland where it is as low as 20 per cent.

"The problem with New Zealand democracy is that we don't have very good checks and balances on central government power."

Yet look around, Cheyne says, and the Government is pushing through its Better Local Government Bill this year in a bid to further rein in local authority responsibilities.

Cheyne says the view being promoted is that a slight expansion of council powers under the Local Government Act 2002 - one which encouraged councils to become involved in local economic development strategies and policies for community wellbeing - has got out of hand. Centralised control needs to be clawed back for the sake of NZ Inc.

Edwards suggests this centralising tendency has a lot to do with New Zealand's legacy as a settler colony - the need for a strong hand to carve out a new country.

"What surprises people is that this current Government is being so interventionist, because we associate that with being Left- wing. But New Zealand has always had very interventionist governments when it comes to the economy. It goes right back to Vogel's days of the 1870s and 1880s where the government had to build the railways, build the infrastructure."

Through the welfare era, there was the extreme centralisation of health and education. Then came the Muldoon era with its state corporations and Think Big projects.

Edwards says this accounts for the rather paradoxical flavour of New Zealand politics. Pakeha settlers brought with them a profound belief in self-reliance, property rights, and the autonomy of local communities. And yet the country has needed a healthy dose of the nanny state to make it function.

Cheyne says this explains much about recent political events. Put simply, the Key Government is faced with the problem of wanting to impose an Asian-style corporate discipline on a population which is not naturally that compliant.

Cheyne says when it comes to mining, dairying, or just about any attempts to drive the New Zealand economy harder, the Government is finding that communities rise up with objections. They just don't want to see that much change in their backyards.

That frustration is in turn forcing the Government to make ever more-determined attempts to exert top-down control.

Again, says Cheyne, the 2010 toppling of ECan is the classic case in point. Canterbury's water was seen as a key NZ Inc asset, yet irrigation schemes of any scale were being blocked.

This is also what the Auckland super-city merger was about, she says. With globalisation, cities too are in international competition for people and investment. So the same NZ Inc logic of intervening to foster the conditions for more rapid growth applies.

"The goal is to create space for business to flourish. It is about freeing up the resources for certain actors, the bigger corporates, to have more opportunities. It isn't about the little local businesses. With actions like the Roads of National Significance, it is about how it will benefit the larger players."

So there is a model driving New Zealand politics that goes beyond any simple notion of the pragmatic. And Cheyne says the Government is so determined to create change that she even sees an element of shock doctrine at work in its constant harking on a need to close the gap with Australia and the continuing threat of the global financial crisis.

If economic growth can be framed as a matter of national survival, she says, then drastic measures to make growth possible start to seem like a matter of pragmatic necessity and not merely an ideological choice. There is a reason to talk up the fears if you are pushing through an agenda.

"But our economy is just not in the kind of parlous state that the European or North American economies have been in. So it just seems a convenient excuse to justify central government directing everything in this way."


So what about the story back in Christchurch?

When it comes to politics, former Wigram MP and Christchurch mayoral candidate Jim Anderton says he believes in cock-up theories over conspiracy theories.

Personally, he does not believe the Government arrived in the immediate aftermath of the Canterbury earthquakes with the idea they were an opportunity to ram through a particular economic model.

"The managers of the recovery have just been scrambling to keep their heads above water, taking it a day at a time. It's a crisis management thing. They're fighting bushfires everywhere. That situation belies a long-term coherent strategy really," says Anderton.

Earthquake Recovery Minster Gerry Brownlee and Cera may have been granted draconian powers, but so far, the feeling is that they have been remarkably shy about using them.

Insurance companies have got away with causing too many holdups, he says. Another emerging issue is the amount of commercial property belonging to offshore owners who seem in no hurry to get things done.

"There are many places where you've got overseas landlords who haven't lifted a finger. They should be put under the hammer, in my view. They should be told fix this up or we'll buy it at market rates, compulsorily."

Anderton says the Government has made a problem for itself because it has created such high expectations.

"I remember Key coming down and saying no-one in Canterbury will be allowed to be worse off because of this earthquake. But that was ridiculous."

The same with the deadlines it set for classifying people's land and getting on with the rebuilds.

All this hands-on involvement appears largely reactive, he says. None of it has the look of a shock- doctrine execution of some broader political objective.

However, others like Edwards and Sage say even if the intentions are not explicit, an NZ Inc approach is bound to come through simply because this is the way the Government is now thinking about everything it does.

And it is certainly how the CCDU's central city blueprint appears with its ambitious spending on civic architecture and urban design - an investment justified because it will produce greater growth for Christchurch Inc.

As Cheyne argues, says Sage, by amalgamating land for big projects, by funding the building of convention centres and innovation precincts through public-private partnerships, the scene is being set for a Christchurch likely to be dominated by a much more corporate scale of player.

Sage says this is not in itself automatically a bad thing. Economic growth may in fact be what most Christchurch people want.

But she says it does cut across other possible political responses, like, for instance, a call for Christchurch to be rebuilt in a way that maximises the green values of community-connectedness and sustainability - other futures that could have been embedded in the city.

The point is that there is no such thing as purely pragmatic politics. So even if the NZ Inc approach does not fit neatly into the familiar polarities of Left v Right, or liberal v conservative - making it sound like centralism - it must still create its own new enduring polarity. Namely, that between the forces of top-down control and community-led planning.

At least being aware of this dynamic will make the Government's remarkably hands- on involvement with the recovery seem rather less surprising as time goes on, says Sage.

The Press