DECIDING whether Bernard Hickey or Megan Woods deserves a big fat raspberry is the task I’ve set myself. To understand why, I’m afraid you’ll have to visit The Spinoff website (a trial, I know, but there’s no other way) and read their respective contributions. (Spoiler Alert: Bernard gives up all hope for a better future, while Megan struggles to keep hope alive. ) What are they arguing about? Housing supply and affordability – what else! Is there a clear winner? No. Neither of the protagonists offers much in the way of convincing answers. Even so, after considerable cogitation, I’ve decided that the big fat raspberry should be blown at Bernard. Self-flagellation, middle-class guilt, and a gutless capitulation to the status-quo is a pretty ghastly combination – but Bernard pulls it off.
At the root of Bernard’s despair lies his inability to think outside the market square. Like so many of his generation he drank deeply of the neoliberal Kool-Aid, and it left him with a permanent aversion to left-wing ideas. Being born and raised in rural Waikato (New Zealand’s equivalent of Alabama) wouldn’t have helped. Nor would his decision to become a financial journalist. (You don’t find many Marxists on the world’s business pages!) It does, however, explain why, when confronted with the irrefutable evidence of the markets’ failure, Bernard flounders in ideological and moral confusion. Like those poor old codgers who invested all their intellectual and emotional capital in the Soviet Union, he had nowhere to turn when reality laid his ideology low.
Conveniently missing from Bernard’s history of the Neoliberal Era in New Zealand is any reference to Jim Anderton’s Alliance. Now, he would no doubt object that he was out of the country for most of the 1990s – earning the big bucks in Australia and Europe. But that’s the whole point. People like Bernard bade their country farewell at the first opportunity. All that free education and health care, all that social security: the tens-of-thousands of dollars invested in him by his fellow citizens; it all went to foreigners. If all the Bernards and Bernadettes of the 1980s and 90s had thrown in their lot with Anderton and his followers, the tragic failures detailed in Hickey’s Spinoff post might have been avoided. But Bernard and his ilk sneered at Anderton and the Alliance. The Left were economic Neanderthals. Losers.
Which is why, even now, with the evidence of neoliberalism’s failure all around him, the best advice Bernard can offer young New Zealanders is to do what he did. Leave their country to its fate. Run away. Refuse to stand and fight for a future worth living in. Abandon ship. Abandon hope.
But he’s not alone. Something tells me that a great many young New Zealanders remain secret adherents of the debunked mythology of free market forces. That underneath all that lovely woke window-dressing (which Bernard buys into with his guilt-ridden confessions about “endowments”) lies a disreputable grab-bag of neoliberal assumptions about how economies work, and, perhaps more importantly, about why economies run along any other lines won’t work. With a guilty thrill, Generations X and Y will own up to being racists and sexists – but not socialists. At least, not the sort of socialists who refuse to be guided by properly credentialed professionals and managers.
How I wish this country possessed a playwright of Edward Albee’s skill. Someone who could give us our very own version of Who’s Afraid of Virginia Woolf. A dramatist with the ability to peel back all the layers of posturing political rectitude and fashionable self-criticism until we are able, finally, to look upon the hard-boned determination of those who “have”, to make sure that nothing of theirs is wasted on those who “have not”. To see the grinning neoliberal skull beneath the superficial “progressive” smile.
Not that Housing Minister Megan Woods vouchsafes too many smiles these days – progressive or otherwise. These days Megan’s more into frowns. The earnest frowns of the political realist who knows that there is no simple or quick fix to New Zealand’s housing crisis. The stoical frown of the left-wing politician who yet remains unflinching in her determination to keep on doing what she can with what she’s got.
The problem, of course, is that what Megan’s got is a bunch of Labour people whose view of “practical economics” is not that far removed from Bernard’s. I’m pretty sure that Megan – who did join the Alliance and did battle against the forces of neoliberalism – would like nothing more than to initiate a full-scale mobilisation of the state’s resources to build, build, build and build some more. Build until, at last, the supply of houses exceeds the demand, and – horror of horrors! – the upward curve in the price of housing flattens-out and – yes! – commences a slow but unmistakable decline.
Frustrated? I’m sure Megan is incredibly frustrated. Angry? That too, undoubtedly. But for all the obstacles placed before her; for all the stupid and unhelpful decisions of her colleagues; for all the carefully rehearsed talking-points prepared for her by overpaid former journalists who should be ashamed of themselves; Megan Woods is still fighting. Still hoping for a better tomorrow.
Unlike Bernard, Megan hasn’t given up.
So, a big fat raspberry for Mr Hickey. And for Megan a gentle (but no less sincere for being just a little bit muted) round of applause.
This essay was originally posted on The Daily Blog of Friday, 2 July 2021.
Oh dear, despair, Hickey and Woods et al.
Currently our ratio of average house price to average wages is in the vicinity of 12. Historically it is around 3.5.
When something seems too good to be true it generally is. Housing prices are not wealth in terms of liquid money, you have to live somewhere. Wealth is not having a huge debt to the bank.
Supply and demand can over time be balanced, we can increase supply by building and diminish demand by limiting immigration. This however is a bubble. Speculative greed, fear of losing out. And like the Dutch moneyed classes with tulips all sanity has gone.
The next act in this play is the reckoning, may the Devil take the hindmost.
Well, I'm a believer in "the Market" but I can acknowledge when the market fails, in this case to produce sufficient of a fundamental public good. While we cannot ignore the regulatory constraints that stifle the housing market and they should be removed as soon as possible, I believe many people would strongly support a massive investment by the State in public housing. The government seems after all to have money to burn from their secret money tree, nearly a billion dollars for a bike bridge over Auckland Harbour for example. I would far rather see that money and much more besides spent on importing pre-fabricated housing from abroad and the workers to install it as a matter of the greatest urgency. But let's focus on a new separatist constitution and shutting down free speech instead, these are Labour's clear priorities today.
Yes NZ could have elected the Alliance and followed a social democratic path but we would have been an outlier and subject to Muldoons fate I suspect...she's a hard row to hoe against the tide in a global economy.
Having said that both Bernard and Meagan deserve raspberries, the former for his persistent aggregate view and the later for her deliberate care to maintain the status quo.
Megan's rebuttal was empty PR fluff.
We are changing things, it was not caused by us. We are improving things, it was not caused by us. It is complicated, it was not caused by us. And on and on.
Bernard may be wrong, who can really say, but at least he gave it an honest shot. Megan just waffled on ad nauseum, much like any good politician.
Megan has given up, she just pretends to be doing something and some swallow her platitudes. The question is why, do they do so because they are too lazy, or because to disagree would require some soul searching on personal beliefs.
I cannot remember what the Alliance stood for, but if it stood for more wealth redistribution on welfare consumption without a built in factor of increasing personal and national wealth ownership creation (apparently relying on the latter only by the already wealthy?), then the Alliance was not really very socially egalitarian at all, and no better than the "neo-liberalists" on widening socio-economic polarization into haves and have-nots, and possibly worse.
There is no massive house building or any other sustainable assets creation without saving and profitable investment, and it is well known that NZ is a lower wages earning country because we have invested and own a lower rate of capital per citizen than the countries with higher earnings.
Yes, which way should we go - more wealth redistribution for higher consumption potential now, or more saving and investment for a sustainably higher consumption potential through more capital ownership per citizen in the future?
How many times does it have to be repeated, that an imposed 20% retirement wealth savings rate raised initially poor Singapore to one of the richest per citizen within one generation !?
Still trying to leverage the capital invested in our house to try to the son buy a house of his own. Discovered that our house is probably worth about $1 million. Woo hoo, I'm a millionaire. Unfortunately, every other bugger's house is worth about the same so it's meaningless. And Labour has done sweet FA about it. Although to be fair, they have finally built houses on all the empty statehouse sections that have been sitting around in Lower Hutt for years. But if we ever needed evidence of middle-class capture – there it is. Labour is afraid of upsetting homeowners. National doesn't give a shit about people who can't actually afford a house, because they probably regard them as losers. So who to vote for? Or whether to vote at all.
Great post Chris. It fits the facts, it is an amusing read, it cheered me up which I needed, and is an impressive example of what a tradesman magician you are, always able to pull a rabbit out of the sorting hat. And rabbits have teeth and are fast movers, not just the timid little furry things they seem at first glance, as anyone who has tried to catch a runaway rabbit would know.
Wow, There's a lot here to unpack. Too much for one comment. But let's take this first:
People like Bernard bade their country farewell at the first opportunity. All that free education and health care, all that social security: the tens-of-thousands of dollars invested in him by his fellow citizens; it all went to foreigners. If all the Bernards and Bernadettes of the 1980s and 90s had thrown in their lot with Anderton and his followers, the tragic failures detailed in Hickey’s Spinoff post might have been avoided. But Bernard and his ilk sneered at Anderton and the Alliance. The Left were economic Neanderthals. Losers.
That's an extraordinarily bitter take on the perfectly ordinary and long-time practice of the Big OE. People like Bernard and me headed off primarily for exploration (and even love). Only as time went by did we find ourselves in the position of earning far more money than we could in NZ, and paying lower costs. For example I didn't buy my first new car until I turned thirty, and that was in the USA of course, where they were cheaper and 5-year financing was bog-standard.
Yet even had we stayed you are correct that my generation would not have supported Anderton and company, for we had just dumped his National party doppleganger and all that he stood for. And given how poor we already felt in terms of income vs cars and houses in the little world of Anderton/Muldoon/Trotter you're damned right that we thought they economic Neanderthals and losers.
Okay. Second comment to the primary point of this post: housing.
The overwhelming driver of housing costs has been the incredible lift in land prices. My Auckland house rating estimate has hardly budged in the last decade: it's the land that's changed. And while it's nice to see Woods and company trying to tackle that I'm suspicious of the claims since Twyford already correctly identified the problem in 2017 (unlike National) and had plans to deal with it, something I was impressed by. But then those plans just seemed to vanish after that election. Perhaps they're in Woods's proposals but why the four year delay amidst this crisis? It surely can't be that it's only Twyford's now well-established incompetence.
But for the houses themselves the problems come in the form of a marketplace oligopoly over housing materials, and the stupid amounts of prescriptive legislation enabled over the years to "protect" homeowners. The RMA is a pain, but for both of my Auckland renovations in the 2000's the long delays came in complying with the building regulations. Delays that caused building to stop for three months as we'd gone as far as we could with the approvals we had, plus splitting the projects up further. Both of those added some $250,000 costs and nothing more.
I realise that his Libertarian philosophy - hell, he's actually an Objectivist FFS - will get up your nose, but Peter Creswell is actually an architect who knows all this all too well. You can read a general collection of his observations of housing problems and solutions here. In particular The housing crisis in four Tweets
Finally I would suggest you looking at Michael Reddell's Croaking Cassandra blog on housing and his anger about housing and how it's screwing the poor in NZ. But be warned he has graphs that show that your beloved First Labour government's state housing program actually made bugger all difference to the NZ housing supply. Shocking I know, but then that what you often get with numbers vs grainy B&W propaganda films.
The latest Roy Morgan poll will surely be a warning sign for Labour. In my view the public are effectively saying Labour has taken their eye off the ball. That hate speech, He Puapua and cycle bridges across the harbour are not the concerns of swing voters, in fact they are a distraction from the real challenges. Which are primarily housing, health and jobs. No doubt some other things, but these are top of mind for many.
Labour needs its top Ministers, especially the PM and the Minister of Finance to be focussed on these issues if they want to arrest the slide.
Right at the moment National is not getting much traction, but I expect they soon will. I reckon the Roy Morgan poll will have demonstrated that the next election is actually competitive. So if National can put together a suite of policies focussed on the critical concerns then the political dial will begin to shift more to the right.
I have tended to think 2023 was a lost cause for the Right. I am no longer sure that is a correct analysis. My original assessment is that Labour would know they have govern from the middle in order to keep the voters who shifted across in 2020. That would mean actual policies specifically targeted at the middle, even if they were supplemental to some left policies. As far as I can see, Labour is not doing that. Instead Labour has abandoned the middle. Their votes are now up for play.
Labour's strategy is very different to that of Boris Johnson. He knows his big majority comes from the middle, so he is doing everything to keep them. In contrast in New Zealand, Labour has seemingly abandoned the middle. They seem more interested in Grey Lynn and Wadestown, and are indifferent to Birkenhead and Glenfield.
Oh Chris, just when I am starting to agree with you more and more, you raise the old canard that the state can solve all housing woes with a giant chequebook.
The market has not failed in housing it has simply acted logically within the cage into which it has been thrown. The best analogy I have read is that of a dog, chained, starved, beaten and abused being criticised for its viciousness and lack of manners.
We have a lack of supply of land created by density rules, urban boundaries and development cost structures.
We have local authorities incentivised to make developments and zoning as costly as
possible because they lack sufficient revenue to fund existing infrastructure much less green field aspirations.
We have a tax system that rewards land banking, pyramid house investment, selling houses to each other and screwing tenants.
The list of structural issues has been well catalogued.....
To say simply that the neoliberal market has failed is akin to blaming Poland for WW2 as it allowed itself to be invaded by Nazi Germany and Soviet Russia.
Let's not even get started then on preferences and how a government can know best where, how, when millions of free individuals should live...
Climate change matters, 1000 times the 1939 crisis. Good point, Chris, but not in 1939.We carry on with the story of comfort when we, the intelligent, best of the wise ape, know it's over. We can't do crises unless we're forced to it, and by then, with the billionaires' Tobacco Institute level disinformation, we're buggered.
The people need sales on the same level as the foulities who rule us now. But this warm bed of comfort produces ...
Some strange angular mutant god for the Left is needed like the Right warped for Trump.
Though for me Sanders would do.
The main problem, as Chomsky has said, is the American plutocracy. Every other Western country has accepted the rights of the plebs from the war for freedom and democracy.
The latest figures (year to end of May '21) show a 32% house price increase - a new record for a single year: "it was the highest annual percentage increase in house prices since REINZ began its records". Clearly, what measures have been taken are not working - unless you take the view that prices would have been higher without them.
High prices and homelessness indicates we need more houses so a combination of freeing up the building and development sectors as well as more direct state building would seem to be appropriate. This governments failure on both those fronts doesn't mean that either approach is flawed, rather that the execution has been abysmall.
GS, doing same thing for my son I discovered how risk averse banks were when it came to even using collateral from over 60s. Yet they gladly hang 25 year half million dollar albatrosses around younsters necks. Banks are a large part of the problem.
National can take a flying jump on housing, they have no answers and still reek of Keys immigration based "growth" policies. I have never voted for them, I'd confidently imagine neither have you. So they are no help to us in getting Labour back on track.
My advice, and I could be wrong is that buying now is to risk going "underwater" in the crash.
I read Creswells blogs and dont disagree much. What he calls assett inflation I call a bubble. To explain prices will rise if there is more supply than demand, but demand is dependent upon other factors. Need is high, but greed is also present. Fear of losing out has an input. Now add in people unable to get capital returns elsewhere. And they all view assett value rises as eternal, never reversing.
Alls good until the loans become less available, or more expensive. The most leveraged fail first, a few mortgagee sales and doubt sets in. As wages fail to keep up with prices more fail, fear sets in, investers sell or try to. Then they see the fall and everyone runs for the door together. Pop.
I always enjoy your contribution, but the fundamental flaws in this analysis is locating the center as a fixed point.
I suggest the center, middle New Zealand, the great unwashed is more diverse than either the left or right ends of the spectrum. Conversely, the political demands of 'the center' are not uniform. Jacinda has recognized the commonality is the diversity. The rights of one, is the rights of all.
Cultural wars will not bring this government down unless an economic collapse can turn sectors into isolated groups.
I know that geographic mapping of the economic middle is traditional, but I am sure that if you survey the political motivation of those in Grey Lynn, Wadestown, Birkenhead or Glenfield you will find commonality, differences, diversity and uniformity within and between those communities.
So then - which is the more promising priority direction to take - towards more borrowing and wealth redistribution for immediate consumption -
or towards more wealth creation through a higher savings rate for more national and personal capital ownership per citizen and higher debts repayment potential ?
Are we too highly educated so as not to clearly see the simple, basic answer to that ?
Here's some hope for you Chris. Last year over at No Minister I wrote a post contrasting the attitudes of 80's kids like me with those of my Mill/Gen Z children when it comes to economics, The Seeds of 21st Century Socialism?.
What I did was show them two classic movie clips of the age: the infamous "Greed is Good" speech from Wall Street and a lessor known movie, "Other People's Money with the "Prayer for the Dead" speech from Larry The Liquidator:
But the second OPM clip with DeVito’s speech brought forth anger: real hatred of the character and what he was about to do. Why could the company not be saved? Why could investments not be made to grab those new opportunities in fibre optics and the like? Why did it have to be destroyed? What would happen to the town that depended upon it?
So perhaps there's hope for you socialists yet?
The Barron - by economic criteria, the fixed Center between Socialism on Left and Royalty based Feudalism on the Right on the traditional political spectrum is easily defined by at least a minimally meaningful level (or more) of individual wealth ownership by all citizens eventually.
If you cannot accept that, please give your reasons why.
If there are no critical comments on that, would it not be reasonable to assume that it is accepted as truth, or established reality ?
Nick J I think I know what you meant to say, as below.
...a bubble. To explain prices will rise if there is more supply than demand, but demand is dependent upon other factors.
Did you mean - ...'prices will rise if there is more demand than supply usually, but demand is dependent upon other factors, and at present demand is variable, (because of Covid19 and demands on landlords uncertainty).
I have given up hope. My generation - most of us have had a good life. Our country was organised for the good of the people. Not now. Too much hui and not enough doey. There is now two generations who do not know that there is a better way. I sometimes think we are living an economic life that is very much like England of the 1800s. Everybody regards the poor as victims of their own misfortune. Our media has the ability to make the people angry but, except for a few examples like the recent whistle blower video of clips, does nothing.
I think if you actually read what the Hon. Dr Wayne is talking about is a middle NZ voter, hence the reference to what can be seen as middle NZ suburbs.
The ability to read and context can help expand your established reality
Yep Grey, written in hurry. Theres plenty of inputs to demand, blaming it all on supply doesnt account for fear of missing out, greed, lack of alternative investments, easy money etc.
No need to give up hope, Patricia.
Under the perfected altruism through compassionate capitalism which does not only donate charity to the poor, but also helps and guides them to become more self-sufficient in their own prosperity and welfare creation, poverty can be clearly overcome more successfully than than with welfare donations alone, which actually can encourage widening poverty in order to qualify for the welfare benefits.
That was the case 70 years ago, and became unsustainable by the time Muldoon eliminated our Mickey Savage initiated Super Fund, when it ended up as nothing but public debt for (welfare) consumption above what was available through taxation revenue.
Our NZ Super Fund now is a good example of fair and "compassionate" capitalism, because higher income earners pay more into it for the same benefits as lowest income earners - and with even welfare beneficiaries also participating in contributions through their GST.
During WW2 taxes were raised and consumption reduced for the war effort.
With participation in the "war" against poverty also by the poor, it should not be too hard to get the rich also enthusiastic about it, when they know their higher contribution do not vanish into a bottomless pit, but actually participate in widening wealth ownership creation.
So you see, Patricia, where there is a will as during the war, there is a way - and hope.
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