Julian Wood

By Julian Wood - 09/01/2020

Julian Wood

By Julian Wood -

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Rethinking the current goals of regional development

The current goals of regional development policy, and especially the RGP (Regional Growth Programme), align well with the modern paradigm and are increasingly place-based. However, we would argue that they can still be improved in three important ways:

  • First, there is a mix of implicit goals, explicit goals, and unclear goals. New Zealand’s regional development goals must be clearly articulated
  • Second, these clear regional development goals must be ranked and prioritised
  • Third, we must stay focused on growth where possible but also acknowledge the reality of decline, enabling customised regional development pathways.

As such we suggest three ways to rethink New Zealand’s current regional development goals.

Rethink #1: New Zealand needs to clearly articulate its regional development goals

International literature highlights that as regional development policy becomes increasingly place-based there is an underlying need for regional development policy to be transparent, verifiable, and subject to citizens’ scrutiny.[1] The goals of regional development policy must therefore be clearly and explicitly stated. Unfortunately, some of the current goals are merely implicit.

For example, the ongoing goal to ensure Auckland grows well to become an international globally competitive city is not a current Cabinet directive or explicit goal. Instead it is one derived from earlier regional development history and implicitly understood as so. It is extremely difficult to have transparency and accountability with implicit goals. As such Auckland’s role is unclear within the Business Growth Agenda (which it is part of) and Regional Growth Programme (which it doesn’t seem to be part of). It also makes any evaluation of potential Auckland initiatives problematic and open to ad-hoc rather than co-ordinated regional development planning.

Similarly, the goals to “support the quality of life in all parts of New Zealand” are unclear. It would be far better to develop clear indicators of regional wellbeing and include these as specific and measurable goals. Recent research into subjective wellbeing by the New Zealand Productivity Commission highlights a number of key elements that may translate into indicators of regional wellbeing.[2] Based on their summary of international findings, regional wellbeing (if it aligns with individuals’ wellbeing) is likely to be positively associated with outcomes like: higher incomes, low rates of unemployment, good access to physical and mental health services, a good work-life balance and less time spent commuting, good social connections, democracy and higher levels of generalised trust, a higher quality environment, and lower crime.[3] Developing regional wellbeing indicators that actually define the desired quality of life will be key to evaluating regional development initiatives.[4]

Rethink #1: All regional development goals need to be explicitly and clearly stated to enable clarity, transparency, scrutiny and co-ordination. “Regional wellbeing indicators” should be explicitly developed and included in regional development goals.

Rethink #2: New Zealand needs to clearly prioritise and rank its regional development goals

Not only is it important to be clear about what you are hoping to achieve via your regional development interventions, it is also important to rank or prioritise the different goals so as to make them fit for monitoring and evaluation. This is because, as Philip McCann points out, spatial policy exists within a complex fabric of economic, environmental, wellbeing, social inclusion, and quality of life questions, with “many of the most important and also difficult challenges of development [being] … related to the interrelationships between these different … dimensions. … It is always absolutely essential from the beginning to make the chosen priorities clear and understandable.”[5] Relative priorities or ranking of “economic growth” and social or “quality of life” objectives are especially important. Unfortunately within the current goals there is almost a complete lack of prioritisation. This can lead to confusion on a number of levels.

First it can lead to confusion and conflict between economic goals (business growth) and social goals (supporting the quality of life). These quality of life goals need to be explicitly defined within the BGA and elsewhere as regional wellbeing indicators. For example, it may be that a town might feel comfortable with boiling their drinking water rather than renewing their water infrastructure (as it meets end of life) to meet national safe drinking water standards. This could enable them to invest their scarce rates in other assets that are more productive or more highly ranked by the community (for example they may choose to invest in the education of their children, or to improve access for tourism). With clearly ranked and prioritised goals these sorts of decisions can become transparent and able to be evaluated and changed should voters decide either way.

It can also lead to conflict between spatial regional development growth goals and the largely space-neutral goals of the BGA to build a productive and competitive economy. As Barca et. al. (2012) argues, “space neutral policies will always have explicit spatial effects, many of which will undermine the aims of the policy itself unless its spatial effects are explicitly taken into consideration.”[6] An example of this type of conflict can be seen within the role of non-spatial innovation policy, which as it currently stands is largely captured by major urban centres, and, instead of enabling regional solutions, simply reinforces regional divergence. While regional research institutes may offset some of this capture it would also seem that there is room to explore more spatially focused innovation interventions (potentially using a smart specialisation approach) to meet both regional and national innovation needs.

Rethink #2: Regional development goals need to be ranked and prioritised with tensions, trade-offs, or subservient relationships between the goals explicitly outlined and prioritised.[7]

Rethink #3: New Zealand needs to enable customised regional development pathways in place of its sole focus on maximising economic growth everywhere

The current regional development goals are unrealistic because they are squarely focused on maximising economic growth everywhere. But sustained population and economic growth in the long-term will be more dream than reality for many small towns and TAs. As Spoonley points out, “those responsible for governing… regions facing population stagnation or decline…need to consider a significant shift in approach from one anticipating growth to one of ‘no growth’ or even decline.”

Based on the taxonomy of Rachel McMillan[8] there are three potential options available to respond to the economic and demographic change outlined above: Do nothing, Counteract, or Accept.

We have outlined in detail the incoming wave of change facing New Zealand. The question remains: how well does each of the above strategies respond to this wave, the effects of this change on economic growth prospects for the regions, and the consequent impacts on quality of life and wellbeing? We will now assess each strategy with this question as our primary criterion.

Option A: “Do nothing” – let the market work

This strategy aims to let the market solve any potential long-term issues. New Zealand’s economic history of protection from market forces pre-1984 highlights how risky market interventions can be. By relying on the allocative efficiency of markets and clear price signals, people will have the information they require to make rational decisions and the right incentives to act on this information. This option would scale back spatial regional development initiatives that interfere with clear market signals.

Instead, Option A allows the market to allocate the factors of production efficiently over the regions and provides economically optimal outcomes, providing the right incentives for business growth. As an option, it relies heavily on the existence of good information, clear price signals, the mobility of factors of production, and the assumption that people will act to maximise utility or happiness.

One major weakness of Option A is the underlying assumption of full factor mobility. Labour or people, it turns out, are both mobile and immobile depending on a range of attributes like age, health, education, and place- based societal ties and relationships. Recent research by Sin and Stillman confirms this. Their research shows that in New Zealand there is a significant difference in mobility between Māori “who live locally to their iwi and those who do not [showing that although] … the migration responses to labour market shocks of Māori are on average, roughly comparable to those of Europeans … there exists a large subpopulation of Māori whose location choices are almost entirely unaffected by labour market considerations.”[9] People may well be reluctant to move from a certain location even in the face of a declining or stagnant local labour market and employment opportunities, when there are strong relational, family, or cultural ties to their location.

The second weakness of Option A is that it assumes individuals make decisions based on good information, and on what is going to maximise their happiness, rather than what is best for broader notions of family or community (although these can align in many cases). For example, people may remain in a declining town to care for ageing parents who are unable to leave because of economic “lock in”[10] for far longer than would be personally optimal. Because of this cultural or social path dependence, this immobility can quickly turn into a second or even third generation regional “lock in.” It can reach a point where even if someone wanted to move they might find themselves unable to afford to do so because of spatial differentials in house price, income, cost of living, or educational outcomes. This can especially be so for those most vulnerable or not in the labour market due to health (sickness), age (especially the very young and very old), or lack of qualifications. One can potentially illustrate this by pointing to the high correlation between areas of regional disadvantage and corresponding rates of youth not in employment, education or training.

This ties into the third weakness of this option, as by default it requires spatial change including decline and exit without explicitly stating so. It assumes that there will be winners and losers, and that people will shift to take advantage of new opportunities without clearly articulating decline and exit on the policy agenda. In doing so it misses an opportunity to engage communities in a discussion regarding how they might manage population decline and eventual exit (which is one of the advantages of Option C below).

On the other hand, Option A does have a number of benefits. It minimises fiscal costs on the government, as it doesn’t attempt to manage or focus on improving the wellbeing of people in places of regional decline (like Options B and C). It also clearly places individuals at the centre of decision-making responsibility and allows individuals choice to maximise their overall wellbeing (while assuming no mobility issues or conflicts between individual and family or community wellbeing).

Overall, while this strategy is efficient, it does not fully consider the wellbeing implications of the changing global economic and demographic forces outlined above. It neither aims at preparing for change, nor places exit explicitly into the public discussion. Rather it expects both of these things to happen via individual choice. As such it places an enormous emphasis on the individual and information provision without considering the wider institutional and community settings in which individuals in New Zealand live. In this way, it ignores the reality that for some “lock in” may already exist. In this respect, it is the least preferred option.

Option B: “Counteract” – growth should remain centre stage

This is a continuation of the “status quo”—the current focus on growth in all regions. It argues “that growth should be promoted in all regions, as all regions have growth potential.”[11] It is built on two major underlying strategies: (1) to attract and retain people; and (2) stimulate economic growth.[12] This is both via a suite of economic growth-centric space-neutral national policy as part of the BGA and via the more spatially focused RGP.

As we have seen, looking out to 2043, Option B is a good fit for the majority of the New Zealand population. Unfortunately, as we have also seen, the combined impact of globalisation and demographic change means that for the majority of regions and TAs this overall growth narrative is increasingly unlikely. The major weakness of Option B is that it doesn’t prepare regional New Zealand for a future without population growth. There is a need for a “growth everywhere” reality check. It is too easy to hide the reality faced by some regions behind current national level figures. Similarly, at a regional level it is also easy to hide behind regional growth numbers; forgetting that individuals, towns, and communities that form the region may be facing stagnation and decline.

Option B acknowledges that change is happening, but it denies the magnitude of the change that is coming. It aims to counteract this population growth and aim for broad-based regional growth, but it misses the opportunity to plan for spatial decline and to make a conscious policy effort to enable people to thrive in the midst of population stagnation or decline.

Option C: “Accept” – adapt to the broad forces at play

This option is a subtle shift from the counteract strategy above in that while it continues to focus on maximising the growth potential of regions it explicitly “accepts” the forces of population ageing, stagnation, and decline and their consequent spatial implications. As such it aims not only to maximise growth but also to managethe rate of decline and the wellbeing implications of this decline where possible. As part of this it explores exit strategies for communities in terminal decline.[13] This can be broadly defined as a “smart growth” and “smart decline” strategy.

It proposes to focus not only on growth but also on how to manage stagnation or decline through customised regional development pathways led by local communities and supported by government. It is consistent with the current strategy but places it within a spatial framework that accepts an economic reality of population stagnation and decline for most of the country. As such it not only focuses on maximising growth, it also seeks to utilise the opportunities that an ageing population and the demographic profile of Māori and Pacific peoples bring, while managing the rate of population decline where appropriate, and developing exit strategies for communities in terminal decline.[14]

While it is often hard for us to imagine communities that would desire to manage decline or contemplate exit, both decline and exit are part of economic reality, as Rachel Clayton outlines in her news article,“Historic New Zealand: towns that used to thrive, then disappeared.”[15] This is a radical, but realistic departure from the overall growth strategy of Option B. At the same time, it explicitly states what Option A leaves unsaid and unplanned for. Given the gravity of the economic and demographic change that is coming, managed decline and exit are not options to be taken lightly or left unspoken. The managed or “smart” decline options are also placed within the context of multi-level governance arrangements whereby these options are under local ownership and control, supported but not led by higher levels of governance (see Box 1 below).

As part of a wider collaborative approach to regional planning, managed decline and exit can achieve surprisingly positive results. An example of how this collaboration might work is the Seamless Boundaries arrangement between Kawerau and Matamata-Piako, winner of an excellence award from Local Government New Zealand:

The scheme began with a conversation between Kawerau mayor Malcolm Campbell and Matamata-Piako mayor Jan Barnes, who are both strong advocates of the Mayors’ Taskforce for Jobs. They discussed how a number of people in Kawerau were struggling to find jobs while Silver Fern Farms, one of Matamata-Piako’s largest employers, was having difficulty fulfilling recruitment needs. The programme provided wrap-around support which has helped 40 Kawerau people, of a range of ages, to relocate for employment with Silver Fern Farms in Te Aroha.[16]

Customised regional development pathways could also include proactive local decisions over the provision of health and education services. This could enable sequenced responses to be planned, enabling a region to manage a transition from growth to decline, and then into exit. Along these lines, additional education funding could be agreed to and provided by central government to ensure children receive the best education possible while a community manages decline, on the understanding that at a certain point in time these services would be removed. An example of this from Japan is a train that continues to stop at a remote station, allowing the last school student remaining in that community to travel to school, with the understanding that when that student graduates from high school, the train service will cease.[17]

It might also mean that certain infrastructure investments are curtailed to “right size” infrastructure expenditure based on future population need, rather than over investing based on current population structures. One example of this could be less infrastructure spend on playgrounds for young people, freeing up funds for better recreational walkways that can be used by elderly people. In contrast, the do-nothing strategy could result in lost educational opportunities for youth at risk as services decline along with population; and the counteract strategy could result in potentially inefficient over investment in infrastructure for short term political gain (should the funding of infrastructure become an election campaign issue with a corresponding lack of transparency around effectiveness).

We have been discussing decline and exit, but one must not forget that part of this “accept” option is to focus on maximising growth where possible. For example, this could mean continuing to ensure that our major urban hubs like Auckland and Christchurch grow well and exploring potential economic linkages with growing areas outside of these centres. More specifically, this may mean exploring:

  • the role of second tier areas
  • the role of economic complementarities within these second-tier areas

As McMillan describes, it also includes “finding innovative solutions and opportunities in these challenging circumstances – with a particular emphasis on developing economic opportunities from supplying the ageing population with services.”[18] We would also argue that “[a]s the Māori and Pacific Peoples populations today are almost identical to the age structure of European populations in the 1960’s, when the baby boom was in full swing”[19] there is opportunity for New Zealand going forward, if we invest wisely to ensure these pockets of population growth realise their full potential.

Note: endnotes in box amended to #20, #21, #22, and #23.

Summary of option analysis

Option A largely fails to account for the barriers to mobility that exist or deal with issues related to existing regional “lock in.” Significantly it includes the reality of exit without explicitly stating this.

Option B, by attempting to counteract regional decline and promote growth everywhere, fails to adequately account for the reality of demographic change that the majority of regions are facing.

Option C accepts demographic change, and not only focuses on growth but also forces planners to confront the demographic change ahead, and look for opportunities that come with this change. It also enables customised regional development pathways whereby local communities are empowered to manage population decline (and may therefore literally keep a train running for one person if this person’s education is deemed important enough) while also explicitly placing exit on the agenda for public discussion.

Rethink #3: New Zealand needs to rethink its sole focus on economic growth, shifting to a framework that also empowers communities to meet both the economic and social needs of their populations in the midst of “no growth or even decline.” This means re-focusing the future goals of regional development policy into a smart growth and smart decline model to enable customised regional development pathways.


This is an extract from Julian’s research paper “Growth Beyond Growth | Rethinking the Goals of Regional Development in New Zealand” Discussion Paper. (Released 2017) 

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ENDNOTES

[1] Ministry of Business Innovation and Employment, The Business Growth Agenda 2015/16 -Towards 2025 (2015), accessed on 26 September 2016, http://www.mbie. govt.nz/info-services/business/business-growth-agenda/pdf-and-image-library/towards-2025/mb13078-1139-bga-report-00-intro-09sept-v9-fa-web.PDF.
[2] Fabrizio Barca, An Agenda for a Reformed Cohesion Policy: A place-based approach to meeting European Union challenges and expectations, Independent Report (2009), 11.
[3] Kevein Jia and Conal Smith, Subjective wellbeing in New Zealand: Some recent Evidence, Research Note, New Zealand Productivity Commission (2016).
[4] Kevein Jia and Conal Smith, Subjective wellbeing in New Zealand: Some recent Evidence, 2.
[5] Appendix B provides a brief primer to this work—it includes an overview table of the current regional wellbeing indicators available for New Zealand published by the OECD, the New Zealand Social Policy Evaluation and Research Unit (Superu) and one taken from the work by the European Union Social Cohesion work. What becomes clear from this data is that this is a rich area for future work as the regions are very diverse. The Superu research found that “for each indicator, the wellbeing result for any region did not stand out as being particularly different from that for all the other regions. Usually, however, for each indicator a small group of regions were found to have results that were notably different from the results for the regions not in the group…the South Island generally did better on wellbeing results than the North Island.” Social Policy Evaluation and Research Unit, Families and Whānau Status Report 2016 (2016), 49-50. This also suggests that while Auckland outranks many regions on a host of economic wellbeing indicators, there are some where it lags behind, like housing affordability and pollution.
[6] McCann, The UK Regional–National Economic Problem: Geography, globalisation and governance, Regions and Cities, 88-89.
[7] For a discussion on place-based versus people-based policy, see also Paul Dalziel and Caroline Saunders, Economic Development: A review of key themes in the International literature – Research to improve decisions and outcomes in agribusiness, resource, environmental and social issues, A report prepared for the Ministry of Transport by the AERU Research Unit (Lincoln University, 2014), 41-46.
[8] Paul Spoonley, “Regional Futures: Diverging demographies and economies”, in Rebooting the Regions: Why low or zero growth needn’t mean the end of prosperity, ed. Paul Spoonley (Massey University Press, Auckland, 2016), 23.
[9] Brian Easton, National Development Strategy – Where do the regions fit in? New Zealand Institute of Economic Research, Address to the Otago Division of the Institute of Management, 23 February (1983), 1.
[10] Isabelle Sin and Steven Stillman, Economic Liberalisation and the Mobility of Minority Groups: Evidence from Māori in New Zealand, Motu Working Paper, (Motu Economic and Public Policy Research, 2015), 2.
[11] Rachel McMillan, “The shrinking pathway: managing regional depopulation”, in Rebooting the Regions: Why low or zero growth needn’t mean the end of prosperity, ed. Paul Spoonley (Massey University Press, Auckland, 2016).
[12] McMillan, “The shrinking pathway: managing regional depopulation,” 218.
[13] McMillan, “The shrinking pathway: managing regional depopulation,” 224.
[14] McMillan, “The shrinking pathway: managing regional depopulation,” 224.
[15] As outlined in McMillan, “The shrinking pathway: managing regional depopulation” and Natalie O. Jackson, “Major demographic shifts are coming say Natalie Jackson. ‘Quality of life’ and ‘attractiveness of place’ will be key for sustaining a regional population.”
[16] Rachel Clayton, “Historic New Zealand: towns that used to thrive, then disappeared” Stuff News, 4 November 2016, accessed on 4 November 2016, http://ssl-www. stuff.co.nz/national/85447628/Historic-New-Zealand-towns-that-used-to-thrive-then-disappeared.
[17] Katrina Tanirau, “Fresh start in Te Aroha for 42 workers”, Stuff News, 10 August 2016, accessed on 14 October 2016, http://www.stuff.co.nz/business/82980898/Fresh- start-in-Te-Aroha-for-42-workers.
[18] Julian Ryall, “Train Keeps going for only one passenger”, New Zealand Herald, 12 January 2016, accessed on 14 October 2016, http://m.nzherald.co.nz/world/news/ article.cfm?c_id=2&objectid=11572479.
[19] McMillan, “The shrinking pathway: managing regional depopulation,” 219.
[20] As Natalie Jackson writes, we need to “invest in today’s children if we are to ensure the opportunities on offer are in fact able to be capitalised on by Māori and Pacific people, both for their own benefit and for all New Zealanders.” Jackson, “Commentary on the family wellbeing of different ethnic groups,” 47.
[21] Philip McCann, The Regional and Urban Policy of the European Union: Cohesion, Results-Orientation and Smart Specialisation (Edward Elgar, 2016), 81-85.
[22] Kevin Guerin, Subsidiarity: Implications for New Zealand, New Zealand Treasury Working Paper Series, 02/03, March (2002), 1.
[23] Subsidiarity is applied within the European Union (EU) in such a way that it limits the EU to not acting “where objectives can be sufficiently achieved by member states acting individually.” Benjamen F. Gussen, “Subsidiarity as a Constitutional Principle in New Zealand”, New Zealand Journal of Public and International Law 12, no. 1 (2014):129. Within the New Zealand context this would require a rethink of the allocation of political authority between central and local government, because, as it currently stands “local government in New Zealand tends…to operate (to varying degrees) as an agent of national government, administering or interpreting rules set centrally…[a]ny change to this balance of power would require a “comprehensive constitutional review, the discussion of which is outside the scope of this paper.” Guerin, “Subsidiarity: Implications for New Zealand,” 12.

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