How does change happen?
“The coal mines closed, the dairy factory shutdown and then State Highway 1 cut Hikurangi loose. Once, there were so many reasons for Hikurangi being. Then, not so many… ‛The government, like in other provinces, stopped seeing Hikurangi,’ says Ross Campbell.”
Large parts of New Zealand are facing a wave of economic and demographic decline. The warning signs are here already, but we’ll see the full force of the wave over the next few decades. In a context where banks and post offices are closing down, jobs are scarce, and access to health care and other key services is dwindling, New Zealand’s “one-size-fits-all” policy solutions are falling short for our regions. It is no wonder communities feel overlooked and left behind by the rest of the nation. They deserve better.
The Labour-New Zealand First coalition Government has brought with it a renewed focus on regional development policy. On top of the previous Government’s Regional Growth Programme (RGP), this now includes a dedicated Minister of Regional Development armed with a $1 billion a year Provincial Growth Fund. We welcome this focus on regional development but reiterate that “simply spending money will not bring lasting growth.” Spatial policy introduces “serious risks” like “misallocating resources, creating a dependency culture and favouring rent-seekers over innovators.” Even the Minister of Regional Economic Development has outlined that the new Provincial Growth Fund is a “bloody big risk…” It is important to bear in mind that this type of spatial “[p]olicy experimentation implies a certain tolerance for failure. Regions can be excellent laboratories, and policy makers need to be given space to learn from mistakes.” If we are going to spend $1 billion a year on regional development initiatives, we need to be confident that the policies we choose will make a positive difference to the lives of New Zealanders.
Maxim Institute’s previous paper, Growing Beyond Growth, showed the goals of regional development spending need to be clear, transparent, and based on solid evidence about what works to bring long-term health to our regions. The problem is that the goals of local and central government lack clarity and are focused primarily on a “counteract” mindset; often attempting to maximise growth even when this might simply exacerbate the underlying decline. Even worse, while local and central government have aspirations for growth in the regions, there is a concerning lack of clarity on what this means, whether it is possible, and even how to get there. While government regional development tools like the Business Growth Agenda and RGP show potential, we need more robust tools if we are going to make the most of regional policy spending in New Zealand.
To this end, and to help New Zealand prepare for the long-term economic and demographic challenges, we recommended customised regional development pathways that include both smart growth and smart decline policy options. Instead of denying there is a problem or focussing solely on growth, we should adopt an “accept and adapt” strategy that focuses on growth where growth is possible, but also accepts that population ageing, stagnation, and even decline is a reality for many communities.
Smart decline is a way to enable “planning for less— fewer people, fewer buildings, fewer land uses” but also for a better place for those that remain. It offers communities a way to plan that gives them the best chance of flourishing, or at the very least, declining well.
This policy paper picks up where the first paper left off, drilling down into this “accept and adapt” response by considering the international evidence for and against a wide range of regional development policy options. The lessons come from a broad set of academic disciplines and harness a wide array of experiences of places that have grappled with forces like globalisation, automation, ageing populations and climate change.
Drawing on a range of smart growth and smart decline policy options spanning 24 countries and covering more than 90 individual place studies, we aim to provide the reader—from regional or economic development planners to national policy-makers—with practical next steps and key overall lessons for communities, towns, cities, regions, and our nation.
To make long-term gains in the regions, the international evidence suggests that New Zealand needs to rethink its Goals, Governance, Funding, and Focus:
- Goals: Communities and governments must be clear in what they want to do to enable evaluation of outcomes and the resulting adjustment of initiatives;
- Governance: Multi-level governance is crucial to success—neither top-down nor bottom-up solutions are sufficient on their own;
- Funding: Regional development funding needs to support multi-level governance and minimise the creation of dependencies; and
- Focus: Regional development strategies need to be comprehensive and include both growth and decline policies at the same time to be successful.
Our four policy recommendations related to these key lessons are practical next steps on a 30-year journey, seeking to work towards a future where every person in New Zealand, regardless of where they live, has the opportunity to thrive. Implemented well, this long-term framework combined with our short-term next steps should give our regions the chance to flourish that they deserve. We hope this evidence-based contribution will inform and inspire those seeking to improve the long- term health and well-being of our regions.
Spatial policy is always about trade offs
Spatial policy is often known as “place based” policy because it allows policy to account for a place’s social, cultural, and institutional context. As such it aims to maximise the development potential of each place by taking this context into account and leveraging it where possible. The alternative is to treat all places the same. This means that spatial policy is always about trade-offs. It is relatively easy to alter a place’s development path if enough money can be brought to bear, but these local gains may well come at a significant cost to other places. Thus, it is important not only to uncover what works locally but to also understand how these local gains interact within the wider economy and the impact that this has on overall welfare. Spending a lot of money on improving the Auckland waterfront for the America’s Cup, for example, can alter the growth path of the waterfront and associated industries, but at what cost? Should the public funding for this mean that it gets harder to access libraries in South Auckland? Hard choices need to be made in regards to not only overall welfare but the distribution of this welfare.
UNDERSTANDING THE LOCAL, NATIONAL AND GLOBAL DYNAMICS OF SUSTAINABLE ECONOMIC DEVELOPMENT
Before we get to the policies, it is important we first understand the national and global context that local dynamics sit within. The model in Figure 1 below, based on work from the OECD, is a good starting point. It incorporates the local dynamics, social factors and regeneration policies that influence local sustainable development. These three areas form the heart of Figure 1 below. Here we see the interaction between:
- local dynamics like a place’s natural resources and cultural environment;
- social factors like fertility rates and social inequalities; and
- regeneration strategies (i.e. what can be done to encourage regeneration at the local level).
In Figure 1 we see how local sustainable development depends on the way the above elements both sit within and are shaped by the wider national policy context and global dynamics.
National Policy Context: Policies set by national government have a significant influence on the outcomes of regions. The influence of national policy on local sustainable development can be seen, for example, by:
- the way overall revenue policy sets the boundaries for local Government revenue gathering and finances;
- how changes in the Resource Management Act can impact on planning models, a place’s environmental risk profile or the ability to sustainably use local natural resources; and
- how the Treaty of Waitangi settlement process and outcomes impacts on a place’s cultural heritage, development opportunities, and overall regeneration strategies.
“When I came up here 15 years ago I thought this place was on the verge of blowing up and turning into a surf town. Then came the global downturn and nothing happened. Malley: ‘I’ve been here 15 years and Ahipara hasn’t really changed at all.’”
Global Dynamics: Local sustainable development happens within a range of global dynamics. The influence of global dynamics on local sustainable development is evident by, for example:
- the health of and access to global markets (can the fish caught off the East Coast or Napier be sold overseas or are administrative hurdles or trade tariffs too high and costly?);
- the availability of international finance (can local fishing firms borrow—domestically or internationally—the money they need to expand or renew their fleet?); and
- access to international labour and innovation (can these fishing firms find the right staff, have access to or make use the latest technology and fishing innovations to improve their productivity to remain competitive?).
The global, therefore, profoundly influences the local. There is no point, for example, for a local business person to invest in an export opportunity (or for a local government to fund research into it) if there are insurmountable trade barriers or if overseas tariffs are too high to sell the product overseas. Local regional development encompasses a wide range of policy fields, regulations, and governance areas, all of which need to align if opportunities for development are to be maximised.
An understanding of path dependencies is critical for change
It is also helpful to understand how path dependencies influence a place’s development. Path dependence occurs when the outcome of a system or process evolves as a consequence of the history of that system or process, including a place’s power structures, institutions or established ways of doing things. This effectively means that past decisions cast a long and sometimes sub-optimal shadow on decisions today. A process can become imbedded and “resistant to the equilibrating and self-correcting set of market forces,” meaning that the growth or decline path of a place becomes sticky and not easily amenable to change. An example of this could be inferior technology becoming dominant, like an older fishing boat or style of fishing being required by law due to some legal, regulatory or local government requirement, rather than what may be optimal for a fishery. Poor decisions then, can become “locked-in.”
Figure 2, illustrates this concept. Two places might start at the same place at time t and be faced with multiple possible development pathways forward to t+1 (the dashed lines). Both make similar choices and end up closely aligned at t+1. Place A then makes a series of decisions that mean it ends up at on a slightly higher development path (perhaps building a university), while B makes different choices (doubling down on its mining industry instead of starting something new, for example) and ends up on path B—a slightly lower path. But even here and in the next time period their development path possibilities still overlap (see the convergence of dashed lines). By the t+4 period we see that the path possibilities of place A and B no longer overlap and their trajectories have become path dependent—for better and worse.
What most regional development initiatives are interested in, then, is building new pathways or positively altering existing pathways. This is twofold: not only making good choices that keep the trajectory moving up (growth strategies), but also overcoming place dependencies from previous decisions (smart growth strategies). More recent literature also highlights that while new growth pathways are extremely important, it is also important (where necessary) for places to consider how to decline well (smart decline). Where could Place B be now, for example, had it decided to use smart decline strategies and ended up moving forward from the red dashed pathway as opposed to the solid blue line?
This is an extract from Julian’s research paper “Taking the Right Risks | Working Together to Revitalise our Regions” Policy Paper. (Released 2018)
 David Fisher, ‘Heartbeat: Hikurangi Rising like a New Dawn’, New Zealand Herald, 28 August 2017, http://www.nzherald.co.nz/nz/news/article.cfm?c_ id=1&objectid=11900279. In the lead-up to the 2017 election, the New Zealand Herald’s Heartbeat series travelled to small towns around New Zealand interviewing people on their hopes, fears and dreams for the future of the “heartland” of the country. These snapshots provided a human pulse on the problems and opportunities facing regional New Zealand raised in our previous paper, and will be interspersed throughout so their voices are heard.
 Paul Spoonley, ed., Rebooting the Regions: Why Low or Zero Growth Needn’t Mean the End of Prosperity (Auckland, New Zealand: Massey University Press, 2016); Natalie Jackson and Jonathan Boston, eds., ‘The Ebbing of the Human Tide: What Will It Mean?’, Policy Quarterly 13 (June 2017): 1–72; Rachael Christina McMillan, ‘Anticipating Subnational Depopulation: Policy Responses and Strategic Interventions to Regional Decline’ (University of Waikato, 2015), http://researchcommons. waikato.ac.nz/bitstream/handle/10289/9873/thesis.pdf?sequence=3&isAllowed=y; Julian Wood, ‘Growing beyond Growth: Rethinking the Goals of Regional Development in New Zealand’ (Maxim Institute, February 2017), https://www.maxim.org.nz/growing-beyond-growth/.
 Maxim Institute, ‘$1B Regional Development Fund Needs Coherent Vision’, accessed 4 January 2017, https://www.maxim.org.nz/1b-regional-development-fund- needs-coherent-vision/.
 Fabrizio Barca, Agenda for a Reformed Cohesion Policy (European Communities, 2009), 11.
 Henry Cooke and Marty Sharpe, ‘Shane Jones Doles out Millions of Dollars to Northland, Hawke’s Bay, and Rail Regeneration’, Stuff News, 23 February 2018, sec. Politics, https://www.stuff.co.nz/national/politics/101706620/Shane-Jones-doles-out-millions-of-dollars-to-Northland-Hawkes-Bay-and-rail-regeneration.
 OECD, Innovation and Modernising the Rural Economy, OECD Rural Policy Reviews (OECD Publishing, 2014), 63, https://doi.org/10.1787/9789264205390-en.
 In the recent survey undertaken by Local Government New Zealand over 60 percent of regional and rural councils replied that that they did not have a documented and well-known definition of economic development. See ‘Better Economic Development in Local Government’, Discussion Paper (LGNZ, July 2017), 7, http://www.lgnz.co.nz/assets/Uploads/44475-LGNZ-Economic-Development-6-FINAL.pdf.
 The 2017 evaluation of the RGP highlighted that the Programme showed potential, but could be significantly improved. The report commended how the RGP: integrated local perspectives; helped key regional stakeholders work together; and enabled a more joined-up governance between Ministers, senior officials, and regional stakeholders. The authors recommended, however, that the Programme needs restate and update its strategic purpose, better align and support Māori economic development plans, and be clear and consistent when it comes to systems and processes. See Judy Oakden et al., ‘Evaluation of the Regional Growth Programme Implementation and Ways of Working’ (Pragmatica Limited, December 2017), http://www.mbie.govt.nz/info-services/sectors-industries/regions- cities/regional-economic-development/pdf-image-library/evaluation-rgp.pdf.
 Deborah E. Popper and Frank J. Popper, ‘Small Can Be Beautiful’, Planning 68, no. 7 (July 2002): 23.
 Fabrizio Barca, Philip McCann, and Andrés Rodríguez-Pose, ‘The Case for Regional Development Intervention: Place-Based versus Place-Neutral Approaches’, Journal of Regional Science 52, no. 1 (February 2012): 139, https://doi.org/10.1111/j.1467-9787.2011.00756.x.
 Barca, McCann, and Rodríguez-Pose, 145.
 David Fisher, ‘Heartbeat: Ahipara, Where Not Much Has Changed since the GFC Stopped the Boom-Town Talk’, New Zealand Herald, 23 August 2017, http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11900276.
 Ron Martin and Peter Sunley, ‘Path Dependence and Regional Economic Development’, Journal of Economic Geography 6, no. 4 (2006): 399.
 Harvey A. Goldstein, ‘Theory and Practice of Technology-Based Economic Development’, in Theories of Local Economic Development: Linking Theory to Practice, ed. James E. Rowe (England: Ashgate Publishing, 2009), 243.
 This is partly why having enabling macroeconomic settings is so key. If a places macro settings inhibit dynamic change, it may lock in poor performance.