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Insights 43: 16 November 2018
Read: New Zealand's climate change policy could stand to be a bit more vanilla, says Dr Eric Crampton in the NBR
Blog: Joel Hernandez writes about his model, which will help evaluate secondary schools on a variety of outcome measures
Listen: Dr Oliver Hartwich discusses the Brexit deal on Newstalk ZB

Financial innovation beats Kiwibuild
Dr Oliver Hartwich | Executive Director |
The Government has copped much criticism lately for its Kiwibuild policy, including from our chair Roger Partridge writing in Insights two weeks ago. So it is only fair to praise Housing Minister Phil Twyford when he deserves it.

This week’s announcement of a new government infrastructure partnership north of Auckland is indeed praiseworthy.

Crown Infrastructure Partners, Fulton Hogan, and Auckland Council have teamed up to deliver $91 million worth of new residential infrastructure at Wainui. Funding will be organised through a Special Purpose Vehicle, for which long-term fixed-rate debt has been raised from the Accident Compensation Corporation.

All this sounds technical, and it is. However, the bottom line is simple: This financial construction enables building 9,000 homes. Their future owners have to pay for their infrastructure with an extra rate worth between $650 and $1,000 per year.

There are several advantages to this scheme. First, it speeds up building new homes. On its own, Auckland Council would struggle to afford the infrastructure investment for projects like this. By taking that burden off the council, more housing projects can get off the ground – and sooner.

Second, instead of paying for the infrastructure upfront into the purchase price, buyers will be able to take on a smaller mortgage and pay for the infrastructure over time.

Third, by outsourcing infrastructure finance, New Zealand will develop a new market segment for infrastructure assets. These will be attractive investment options.

Fourth, the private provision and management of infrastructure could also result in improved efficiencies, especially if special purpose vehicles are shouldered by private capital.

Twyford is right when he calls the project an example of innovative new approaches to financing infrastructure. He is also correct in saying this funding model can be used in other high growth areas to help build more houses more quickly.

We appreciate the Government’s leap into private infrastructure finance all the more because the Initiative first proposed it in our 2013 report Free to Build.

Besides, the construction of 9,000 homes is more than 26 times the number of buyers who have qualified for Kiwibuild so far. It’s a pity that complex finance initiatives do not make for great photo opportunities with the Prime Minister.

Regardless, this initiative deserves support and praise. We want to see more of it.

The end game of identity politics
Roger Partridge | Chairman |
The American mid-term elections were brutal. Indeed, no liberal democracy may have ever witnessed an electoral campaign so characterised by lies, racism and hate.

Just how did America become so divided?

When it comes to the blame game, globalisation is a fashionable culprit. The deindustrialisation of middle America, as US jobs were exported to Asia, caused unemployment and poverty among America’s working classes. The resulting economic stagnation provided the perfect incubator for Trump’s jingoism and patriotic nationalism. Or so the theory goes.

But is there something else going on?

Stanford professor Francis Fukuyama thinks there is. His latest book, Identity: Contemporary Identity Politics and the Struggle for Recognition, points the finger directly at identity politics.

Fukuyama says throughout history humans have been driven as much by a struggle for economic wellbeing as by a struggle for “universal recognition”. By a desire to be respected and treated as inherently equal.

But Fukuyama says today’s identity politics is different. All around us, society is being divided into ever-smaller groups, each claiming they have been overlooked or victimised. And each claiming some sort of special preference or other. Whether religious, racial, ethnic, sexual, gender or otherwise, the politics of identity has been a game-changer in American political debate.

The problem with political patronage focusing on just a few identified groups is the risk of polarisation. No one likes being overlooked – or being invisible. And least of all those – like Trump’s working-class supporters – who once felt on top.

Fukuyama suggests it is the perceived feeling of invisibility that is stoking Trump’s success. America’s white working class are not just underemployed. They are also resentful that the political elites look past them to the ever-growing groups of minorities claiming and receiving special treatment (at least as they see it).

Fukuyama says it is little wonder identity politics has moved from the left of the political spectrum to the right. From the political patronage of minority groups to populist nationalism. Nor that white working-class voters, especially conservative rural working-class voters, form the backbone of populist patriotism.

As Trump and his supporters have shown, there is no rule saying the identity game is only for minorities.

Proponents of identity politics should take heed. Identity can bind us as well as blind us. And as we are seeing in 21st century America, identity politics is just one step from a tribalist abyss.

The One-Trillion Tree Empire
Joel Hernandez | Policy Analyst |
New Zealand was never home to a great empire for one simple reason. We don’t have enough trees.

Historians have often credited Rome’s massive deforestation of the Mediterranean to its success as an empire. During Rome’s five centuries of power, it used wood and coal for everything from housing to fuel to its massive military.

At one point, the Roman Empire had a population of 56.8 million people. From recollection, the history books never had anything on ‘Romanbuild’ because Rome didn’t have a housing crisis.

Rome also didn’t have a 20-year 100% renewable program because it was already predominantly using wood (a renewable energy source) to fuel energy consumption within the empire.

Finally, wood was used extensively to arm the Roman Empire’s massive 645,000 strong army.

Forestry Minister Shane Jones is a clever man. He’s acknowledged New Zealand’s mistake.

His One Billion Trees Programme is a start, but it doesn’t go far enough if we want a chance to grow into the size of the Roman Empire. New Zealand needs a One Trillion Trees Programme.

Think of all the things you can do with all that wood. 

More trees mean more houses. Houses built of wood are more earthquake resistant, they are green (literally, if you keep the leaves), and they smell nice if you choose the right trees (pine or cedar, perhaps). Everyone loves a polished wood floor, too. The housing crisis would be fixed in a short 20 to 30 years.

An additional 999 billion trees would help our agricultural industry grow tremendously over the following decades. New Zealand would become the world’s leading wooden furniture, bird house and rocking chair exporter. Think of the contribution trees would make to GDP.

Trees can be used for more than just building infrastructure; they can be used to build warships, too. New Zealand could have a world-leading Navy on top of a world-leading furniture manufacturing industry. Wooden boats and wooden chairs are just the beginning. Building a Trojan Sheep to invade Australia would be the next step.

Planting billions of trees will of course be a difficult job. But it will be made easier if you fuel your workers with wood-fired pizza.

Finally, with more trees you can make more paper diaries. And Jones could use one of them to record his 61 undocumented meetings about the Provincial Growth Fund.

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