Past policies of banging on about economic growth have failed. A new report argues we should strategise differently with more comprehensive goals.

The response by some regional leaders to Julian Wood’s Growing Beyond Growth: Rethinking the Goals of Regional Development while not unexpected was so typical of much public policy discussion. They had not read (or understood) the report but they would march on as though the issues it raises did not apply to them. 

At the heart of Wood’s report is the fact that in a nation of slow population growth there will be regions whose population will be stagnating or even falling. Complicating the story is that in these regions there will be an increasing proportion of elderly, more than elsewhere. Wood argued that faced with this reality the stagnating regions need to rethink their goals.

The regional leaders denied this, instead claiming that they would go on pursuing policies which stimulate economic growth in their regions. Not that they are doing anything effective; the slow growth of many regions has been going on for decades despite the promises from its leadership. There are two major reasons for this hollowing out of the working population.

First, the labour intensity using the regional resource base has been falling – farms are getting bigger but using less labour. This has knock-on effects since the fewer farmers, and other resource-based workers, the fewer there are servicing them in rural towns.

Second, improved connectivity and economies of scale and scope have shifted economic activity from townships to towns and thence to cities. Of course the connectivity is two-way. Many urban New Zealanders spend their weekends and holidays in rural locations because it is so much easier to get there.

Some would add a third: that rural regions do not offer the social and cultural diversity that the urban centres (increasingly) do. Perhaps, but they have their own attractions which the weekend visitors from the big cities value.

Is there a problem then? The character of rural life is changing, which the nostalgic may regret (while taking associated positive changes as ‘normal’). But that is true elsewhere. However the population aging in some regions presents an intense version of the challenge the nation faces. As the share of the working population diminishes – in absolute terms it may be falling in some regions – one has relatively more dependants in the population. Some of the costs of those dependants, such as New Zealand Superannuation, are shared nationally but other impacts are more regional. For instance, a greater share of the rates burden will be carried by the lower-nominal-income elderly, so that a whole range of locally funded activities will become harder to finance.

Almost as an aside, some of the legal regions of New Zealand are practically connected to urban centres as retirement suburbs; the Kapiti Coast has such a Wellington retirement community. If the region becomes too dysfunctional the retirees may move back to their city centres or amalgamate their local authority with it.

This is a reminder that there is considerable diversity among regions. Other regions may not have the retirement suburb role and will find themselves struggling with an imbalanced, and ultimately impoverished, population. Promising to increase the working age population is not really a solution as not every region can do it. For instance, every region sees part of its salvation in tourism. I do not question the case for improving tourist facilities (providing the subsidies are at a responsible level) but while that will be of benefit to visitors (and sometimes locals), not every region can increase its share of the tourist trade.

Wood argues that while regions talk about improving the quality of life, the goals of regional development are solely focused on maximising economic growth. He advocates explicitly developing regional wellbeing indicators and including them in regional development goals. He is reflecting a shift within economics which recognises that material economic output does not reflect wellbeing as much as it is too frequently assumed.

While the report talks about what these indicators might be, I sometimes think the economist’s approach can be too top down. An alternative would be to pay more attention to particular problems that regions face.

For instance, consider regional healthcare. Now we must accept that someone with a heart attack living next to a base hospital is going to get better care than if the same incident occurs in the wop-wops. Moreover, it is not clear to what extent rural healthcare grumbles are simply reflecting the general under-funding of public healthcare. Even so, we need to ask whether, subject to these limitations, we are providing adequate rural healthcare. Rural doctors claim that we are not. It is easy to say that this is not a local authority responsibility but a concern of the District Health Board. Surely though, this is where local councillors could make a difference by investigation and advocacy.

But we should not completely abandon traditional economic instruments. The healthcare challenge reminds us that the physical linkages – by road, broadband and air – to the urban centres are important for quality healthcare. They may be important for economic development too, by tying in the countryside better into booming cities.

There is a risk here, because better connections might encourage the population to move into the city and to relocate town activities there too. On the other hand, there are a number of services which are individually small but collectively large whose providers like to escape the cities. I come across consultants working overseas whose home bases are rural. Living in, or a little outside, a medium-size provincial city has its attractions, especially as congestion intensifies in the biggest cities.

What is required is some hard thinking at the national and local level along the lines Wood advocates. Better that than the piety of local leadership promising economic growth and failing to deliver. By the time their failure is evident they will have retired with a gong from the Queen.

 

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