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Insights 23: 23 June 2017
Event invitation: Amplifying Excellence Panel Discussion
What's the key to Swiss success? It's the education - NZ Herald
The Overseas Catch: The state of recreational fisheries management abroad

Policy-based elections
Dr Eric Crampton | Chief Economist |
Last week brought some hope that this year’s election would have a stronger policy focus. The OECD released its report on the state of the New Zealand, and the moves necessary to improve outcomes in education, productivity and economic growth.

Though media attention quickly turned to Todd Barclay's dictaphone and Labour's foreign interns, it is worth looking back to the OECD’s report, and its recommendations.

Every two years, the OECD casts its analytic eye over the policy and performance of its members. This year’s report highlights New Zealand’s poor productivity performance, despite strong growth in real GDP. Labour productivity has lagged, and New Zealand remains well below the average of the top half of the OECD.

New Zealand’s productivity performance continues to disappoint. In the long run, productivity determines wages, so improving productivity performance is critical for improving standards of living.

Though New Zealand’s policy settings overall are among the best in the world, the penalties attached to being small and distant seem to have worsened. And so the OECD focuses on the policy areas where New Zealand lags, and can usefully improve.

New Zealand’s overseas investment regime hinders investment. Even New Zealand construction icon Fletchers’ finds itself hindered by overseas investment rules because of its ownership structure. The OECD recommends progressively loosening those restrictions.

Where the Initiative’s report on Special Economic Zones recommended investment liberalisation for councils willing to try better rules, the OECD recommends liberalising on a sector-by-sector basis.

The OECD also points to the pernicious effects of urban land supply rules on economic growth. And, mirroring the findings of a host of Initiative reports, the OECD concludes that the problem stems from poor incentives facing local councils.

Making economic growth be in councils’ best interest would not only help end the housing crisis, it would also help encourage stronger business growth.

The Initiative’s study tour to Switzerland made abundantly clear the difference that strong incentives can make, as Roger Partridge explains in our second column this week.

And where New Zealand’s poor productivity performance has sometimes been blamed on high rates of immigration, the OECD reinforces the importance of the international connections that migrants bring.

We hope that the weeks to come are able to turn back from foreign interns and dictaphones to policy. The issues facing New Zealand are too important to be left to the sidelines.

The secret to Swiss success in just two words
Roger Partridge | Chairman |
Some things just sound odd when delivered with an accent. Imagine a French exposition on the virtues of Marlborough sauvignon blanc or an Australian singing the praises of New Zealand’s weather.

But nothing sounds stranger than the words “bureaucracy” and “can solve” with an Italian accent. Except that when we heard them they made complete sense … simply because they were not referring to Italy.

As part of the Initiative’s recent visit to Switzerland, our group spent a day in Italian-speaking Ticino. Situated south of the Alps, it is to Switzerland what the West Coast is to the South Island.

Ticino is a place that does not only speak Italian but feels Italian. Its commercial centre Lugano is much closer to Milan than to Zurich, and the whole place breathes Mediterranean lifestyle.

But unlike its larger southern neighbour, Ticino is genuinely Swiss. It has the same ‘can do’ attitude that we encountered in other parts of the country.

Ticino is also Switzerland’s second-richest canton on a per capita basis. And during a reception featuring the city’s mayor, we quickly learned why.

In talks by the mayor and local business people, we got an introduction to “Doing business in Ticino”. It was not what you would have heard in New Zealand.

Instead of listing regulatory obstacles faced by foreign investors, our Swiss-Italian hosts got straight to the point. Their message was clear: “We want your business and we will solve any regulatory problems standing in your way.”

Or as one of the slides stated under the heading “Bureaucracy”: “Can Solve”.

Of course, Ticino has the usual array of business laws. It is after all part of Switzerland.

But Ticino has every incentive to be hospitable to foreign investors. Switzerland’s decentralised tax system means it shares in the tax revenues from the business activity it generates.

Little wonder that Ticino is host to scores of multinational companies, many of whose origins lie just south of the border in Italy. Think of companies like Ermenegildo Zegna, Gucci and North Face.

If only we had the same incentives in New Zealand. The lesson from Ticino is that it does not matter which language you speak or which lifestyle you prefer. All that matters is the right set of incentives.

Perhaps Switzerland’s secret recipe is that simple: Can solve. Perfetto.

News about Niue
Dr Oliver Hartwich | Executive Director |
We may not often hear about Niue, that small Pacific island state. But within the past week, we heard about it twice. First as a paradise in need of culturally sensitive help, and then as a potential libertarian sanctuary.

Bill English included a stop in the capital of Alofi on his island-hopping tour of the South Pacific. There the Prime Minister opened a new hotel development made possible by New Zealand aid money.

Despite such generosity, English was criticised by his Niuean counterpart for bringing in food for the ceremony. Apparently, that was disrespectful of the island’s culture. New Zealand was warned that in the future the insulted Niueans might turn to other countries for aid instead.

Apart from such occasional political dissonances, Niue is described as a near paradise on earth. At least that is what Niue Tourism tells us on their web page. It is a place “where people are friendly, adventure activities are amazing, there’s no air pollution, phone numbers have 4 digits and the New Zealand dollar is official currency.”

That four digits suffice for a phone number is of course because there are only 1,612 residents on Niue. And this is where the second story comes in.

In the Facebook group of the Australian Libertarian Forum, a user suggested that Niue’s small and decreasing population could make it an ideal candidate for a takeover. “The country may be totally abandoned in the next few years and become a natural tropical paradise or ... a libertarian utopia.”

Noting that it only takes three years in the country to become a citizen, an invasion of thousands of committed libertarians could turn the island into a libertarian wonderland.

Though such a new way for Niue sounds exciting, pitfalls remain. As one commentator wryly observed, “Being a libertarian country is one thing. Earning income might be another thing entirely.”

The next question concerns the head of state, a position currently held by Elizabeth II in her capacity as Queen of New Zealand. As it turns out, even anarchists feel queasy about removing Her Majesty.

As a final complication, and given enough of a libertarian influx, Niue might even need a fifth digit for their phone numbers.

Alas, a libertarian Niue might over time become quite a complicated place. But hopefully it could still turn to New Zealand for foreign aid.
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