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Insights 29: 7 August 2020
NZ Herald: Bryce Wilkinson says the RMA reform is heading in the wrong direction.
Oliver Hartwich talks to CIS about NZ's post-pandemic future.
Research Report: Pharmac - The right prescription?

Donít fix the PGF. Abolish it.
Dr Eric Crampton | Chief Economist |
The problem isn’t just that the Provincial Growth Fund is poorly managed with slipshod standards and politically-driven spending decisions. The problem is that it exists at all.

This week, the Auditor General released a scathing report on the Provincial Growth Fund.

The PGF is a notorious political slush fund and many see it as less concerned with regional development than with securing New Zealand First a seat in Northland.

The Auditor General said it was difficult to tell why projects were funded or how they were chosen. The report said the PGF’s spending on “manifesto commitments to the regions” acted as a “fund within a fund” with “no easy way for Parliament to scrutinise the appropriations for the Fund as a whole.”

In response, National’s Michael Woodhouse promised a National Government would keep the Fund but improve how it runs.

That would be a mistake.

Regional development matters. But it hardly requires giant, politically-driven slush funds run from the capital.

Instead, Wellington should be working with and listening to the regions to find out whether central government policy settings work for them, or whether they need the flexibility to try out new things.

The City Accord model used in Greater Manchester is a great example.

In 2012, the boroughs of Greater Manchester struck a deal with the UK central government. Greater Manchester would take on more responsibility that traditionally sat with the central government but also receive extra funding to do the job.

The Initiative’s 2015 report, In the Zone, suggested ways of letting New Zealand’s regions trial policies tailored to local conditions. Successful trials could roll out more broadly to any region wanting to take them up. Unsuccessful trials would be wound back. And if a successful trial led to higher tax revenue, then local government would get a slice of the pie.

Regional development should not require local businesses to ask a granting agency, or Minister, for favours. No matter which party is in charge, the temptation is too great to use a slipshod regime for political ends. New Zealand could also risk its clean standing in Transparency International’s corruption indices.

Reforming the Provincial Growth Fund is not enough. Abolishing it, and enabling real regional development, is in order.

Pharmac good, subsidies bad
Dr Bryce Wilkinson | Senior Fellow |
Last week, The New Zealand Initiative released a new research report: Pharmac: The Right Prescription?

Pharmac’s core role is to get the best health benefits from medicines for New Zealand within a fixed budget. Its incentive is clear. The lower it can negotiate the prices, the greater the quantity for medicines it can fund.

The report benchmarks Pharmac’s price performance against Australia’s Pharmaceutical Benefits Scheme. Pharmac’s absolute and relative performance is remarkable.

First, the quantity aspect. Prescriptions per capita rose 30% in Australia, from 6% in 1993 to 8.1% in 2017 (years ended June). In New Zealand they rose 90%, from 5.1% to 9.6%. The year ended June 2010 was the cross-over year.

Second, the pharmaceutical budget. In 2017, gross subsidy spending per prescription was only 10% higher than in 1993 for New Zealand. In Australia, it was four times higher. In 2018, Australians were paying, converted to New Zealand dollars, twice what Kiwis were paying per capita ($543 versus $275). Furthermore, Pharmac negotiates bigger rebates, as a percentage of gross spending than does Australia.

When Pharmac achieves lower prices for imported medicines it increases real national income. Otherwise, lower prices would benefit consumers at the expense of local producers.

Pharmac's cost control achievements are impressive. But they are not the full picture. They do not prove that the system is improving Kiwis’ wellbeing, or even their overall health.

Exactly, what is the problem for which the subsidy system is the remedy? There should be a presumption against subsidising people not in financial need. And those in financial need may often prefer a cash option.

The current system cuts again both presumptions. Are there good public policy reasons for doing so? The report recommends that Government set up a process for clarifying the real purpose of the subsidies.

Without the subsidy, people not in financial need would pay for medicines out-of-pocket, or via insurance policies. They would consume a different mix of prescription medicines. That might be good.

An offsetting consideration is that Pharmac might be less able to negotiate low prices if fewer people were subsidised.

The report also recommends that Pharmac be required to benchmark its price performance against the world’s best. Doing so would reveal if its performance was faltering as its role changed.

Cultural enrichment
Dr Oliver Hartwich | Executive Director |
There must be a German word for it: That feeling when you are enjoying something that is just not quite right. Not a guilty pleasure, more an incorrect one.

Whatever you call it, I have that feeling each time I visit the München beer house on Wellington’s waterfront. Supposedly a German pub, it’s really a masterpiece of ‘cultural appropriation.’

Until a few years ago, no-one had ever heard of cultural appropriation.

Since then, we have learnt the term refers to the act of taking or using things from a culture that is not your own. It is one of the deadly sins of identity politics and punished by social ostracism.

Examples of cultural appropriation abound. Singer Rihanna was accused of it when she dressed in classic chola style. As a style invented in the 1960s by denigrated, Mexican-American, working-class women, its appropriation is a big no-no.

Actor Zac Efron faced similar criticism when he briefly tried a dreadlock hairstyle. He found himself rebuked for appropriating Rastafarian culture. How could he?

And this week, Auckland restaurant Coco’s Cantina announced it would consider a name change. Why? Because the former owner of Coco’s Cantina had just accused another restaurant, Kingi, of appropriating the Māori word for king.

In turn, one of Kingi’s advisors complained that Coco’s Cantina appropriated Latin culture (which itself had historically appropriated the word Latin from the Romans). That was offensive given its owners are not from Latin America but from Kaitaia.

Which brings me back to my Wellington watering hole, München. Or as its owners sometimes call it: Munchen.

München is as German as Toyota. There are no German chefs or waiters. They are creative with German orthography on their Facebook page (“Gutentag!” should be two words). And ‘Chicken wings with buffalo hot sauce’ is not a Bavarian specialty.

But München has some nice German beers on tap and a good selection of schnapps. It also makes a yummy new interpretation of Cordon Bleu with ham and cheese on top of instead of inside the breading. It’s a Swiss dish in any case, but never mind.

We should not expect too much authenticity from München’s owner Kāpura anyway. Formerly called Wellington Hospitality Group, Kāpura runs 35 bars and restaurants in New Zealand. Their venues include the traditional British pub ‘The Churchill,’ a place called ‘Master Kong’ that promises “seriously kick-ass Asian street food,” and the Italian-style Rizzo’s Pizzeria.

Oh, and Kāpura is the Māori word for fire.

Is any of this ‘cultural appropriation’? Of course not.

But there is a German term for it. It is ‘kulturelle Bereicherung’ – or cultural enrichment. And despite the raging identity politics wars, there is nothing wrong with that, in any language.

And while there is a Purity Law for German beer (since you asked, it’s from 1516), there is no such law for culture.
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