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Jennings for PM
Expat Kiwi billionaire Stephen Jennings made $5 billion as the only non-Russian oligarch in post-Soviet Russia. Now he has a more ambitious plan to transform Africa as an urban developer, creating modern satellite cities for 70,000 people outside major African conurbations. When he spoke in New Zealand last week, the most popular question was, when are you running for PM?

Homecoming
He gave New Zealand politics a lovely jolt last week. Building on last week’s Free Press, which argued that domestic politics has been a little backward looking, this week we build on Jennings’ argument that New Zealand is sleepwalking against serious global trends.

See for Yourself
If you were not at Jennings’ sell-out New Zealand Initiative dinner and didn’t see him interviewed on Q&A Sunday morning, you missed a treat. It is worth watching the video or reading the interview transcript at your own pace.

What he Said in a Nutshell?
Third world workers haven’t finished entering the global labour force, or putting downward pressure on low-skilled wages in the west. As Chinese and Vietnamese factory workers enter the middle class, there are hundreds of millions more waiting in Bangladesh and Africa. Meanwhile New Zealand has poor productivity growth, and shares it unequally due to dysfunctional education and housing markets. We are on course for a very rough time as more and more get left behind and turn to the Donald Trumps of the world, unless we reform underperforming institutions.

Who Needs SOEs?
The Government continues to own a post office, a bank, a railway, a number of electricity assets, and a lot of farms among many other businesses. They typically underperform, and in some cases absorb large subsidies. The Government continues to hold them because the political class who understand this are too timid to stand up to emotional arguments.

Fonterra Failure
Fonterra was supposed to be the saviour of New Zealand Dairy, building brands and adding value. In 15 years most of the growth has been volume based. Put it another way: imagine if the Government had legislated over normal competition law to create one big wine selling cooperative and the New Zealand wine industry sold generic wine as a commodity? A bit unfair on Fonterra, but Jennings has a point.

That R&D Problem
One of New Zealand’s great laments is not enough expenditure on Research and Development. As Jennings points out, most of New Zealand’s largest companies are either subsidiaries of offshore companies, co-operatives, or SOEs, none of which are typically big R&D investors. A better way to boost R&D would be to address the structural features that the Government can control.

Capital Gains Tax
Nobody is perfect, as proved by Jennings’ advocacy of a Capital Gains tax. He is right that New Zealanders have got a little overexcited with housing investment, but so have people overseas despite paying CGT. The real problem, as Free Press readers are no doubt tired of hearing, is housing supply.

Jennings on Housing Supply…
“These issues are made to sound complicated but they are actually very simple.” As Free Press readers have heard before, land use planning regulations are the reason for short housing supply. Jennings points out that affording a house would significantly cushion workers under pressure from global competition.

…and Education
We have one of the most unequal education systems in the developed world, and it’s not going to get better while avoiding the wrath of teacher unions is the major preoccupation of education policy. Again, “these things are made to be complicated but they are actually very simple…” Unions or kids?

The Upshot
The New Zealand project is about creating a wealthy equalitarian society in the South Pacific but as has been the case too many times in our history, a “she’ll be right” approach to policy is slowly eroding the project. What’s lost is the belief that anyone can make it with enough effort. The project will slowly die if populist political soothsayers are allowed to carry the day.

And ACT?
ACT’s DNA is in the reforming Fourth Labour Government, which looked into the country’s future and boldly confronted its challenges. ACT remains New Zealand’s only reforming party, for example Partnership Schools are the beginning of a more flexible education model that helps disadvantaged kids the most. Next year ACT will be the choice for voters who want proactive reform instead of constant avoidance and political pragmatism.

ends

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