The inequality debate reaches beyond individuals to towns and regions, so what can we do when an entire town is in the doldrums?

One of the main topics on The Nation this past weekend was inequality, with Paula Bennett being the main guest, supplemented by a very interesting interview with Shamubeel Eaqub, NZEIR's principal economist.

His NZEIR paper with John Stephenson, Regional Economies, (and forthcoming book Growing Apart) seems to be a must read for anyone wanting to understand the structure of the contemporary New Zealand economy.

Shamubeel’s most startling revelation in the interview was the existence of “zombie towns” in New Zealand.

"Lisa Owen: So if there are no quick solution as you point out then is there irreversible decline in some town some towns? Does someone need to close the door and switch the light off in certain cities and say ‘it’s a lost cause’?

Shamubeel Eaqub: It’s horrible to say but yes we have zombie towns and some of them do have to close. And you know it’s going to be devastating for those communities but it will be better for New Zealand if we target our resources in places that have some hope of growing and creating prosperity."

I once got an OIA on the government’s strategy to deal with a zombie attack. After thorough research I was surprised to find we did not have one. But apparently the enemy lurks within. Perhaps a new role for the Counter Terrorist Action Group (CTAG)... except they would need to be renamed CZAG.

Interestingly Shamubeel made the comment that parts of New Zealand - Northland - has incomes comparable to Timor Leste, which rather recalls Jonathan Boston’s comment that the worst of poverty resembled India. This does not mean that whole regions are so afflicted, but there are parts of Northland (Kaikohe), the East Coast and Central North Island (Murupara), where life is pretty bleak, and people do not see a way out. I grew up a few miles from Murupara. Back then it was a busy forestry town, admittedly a bit rough, but work was plentiful. Over the years I have occasionally driven through it, and its decline is very evident. It is less the problem of material wealth, but more the air of hopelessness that pervades the town.

Interviewing Paula, Lisa Owen concentrated on the recent MSD report on inequality and Jonathan Boston’s work on child poverty. In particular, the plight of the poorest 35,000 children was the focus of the interview. She asked Paula whether increasing the general level of the benefits was necessary. Paula’s answer was “no”, that another $20 or $30 added to all benefits would not solve the problems of these children. Rather the focus needed to be on specific health, welfare, education and housing programmes aimed at this group.

We don’t yet know Labour’s view on increasing general benefit levels, but I suspect the answer will be similar to that of National. If it is significantly different, that will mean unwinding the consensus on this subject that has prevailed between the two major parties for 20 years. However, one would expect Labour to have more programmes aimed at these children, especially in the provision of state housing.

This leads back to the issue of the “zombie towns”. I imagine the population of these towns and related small communities is upward of 30,000. The great majority of the children will be in benefit dependent families and will be in severely inadequate housing, which may have had no maintenance for 30 or more years. Perhaps as many as one third of all the most poverty stricken are in these zombie towns.

Shamubeel asked whether it was worth spending hundreds of millions in these towns, when there will be little prospect of employment and opportunity.

Is there are better solution? Should people be encouraged with incentives, such as a new state house, to leave these towns? But as the town de-populates, life will become even more restricted for those who stay. It is a bit like the problems that face the residents within the red zones of Christchurch who for whatever reason choose to stay within the zone. But they are likely to be ultimately subject to a compulsory purchase order, which however reluctantly received, will enable people to start again.

Is this what we have to do for the zombie towns - make an offer so attractive that people will want to leave and re-establish themselves in places where there is more opportunity?

It seems a drastic solution, and could be seen as effectively forcing people to shift from where they live and then closing down the town. It hardly seems the New Zealand way. It may be OK for a national calamity, such as the Christchurch earthquake, but would it really be possible where the problem is a slow and insidious decline?

But for instance a case study could be made into whether it would make sense for say Kaikohe, Moerewa and Kawakawa to be consolidated into one place which had more opportunity for growth and opportunity. Yes, it would be economic and social engineering, but so was the establishment of the timber and power towns of a former era. 

Or are these questions now simply too hard to ask?

Comments (9)

by william blake on July 15, 2014
william blake

But for instance a case study could be made into whether it would make sense for say Kaikohe, Moerewa and Kawakawa to be consolidated into one place which had more opportunity for growth and opportunity. 

It might be useful to use the case study to find out who lives in these towns and why they want to live there, the reasons may go beyond economics. It may be that there is family support and land for subsistance growing, fish stocks and rivers to drink and swim in, wood to burn. Pigs and deer and goats in the bush and eels in the rivers. ie real garden growth and meaty opportunities.


by Kat on July 15, 2014

Based on the writers logic Julius Vogel was economically and socially engineering when he instigated the pubic works scheme in the 1870's. When will polititians, especially from the right of the spectrum, realise that communities are the living fibre of the nation. You don't just call them 'zombies' and close them down at will, although I am sure 'Paula' probably has a zombie town 'solution' to implement, given to her by someone higher up her food chain.

If the govt underwriting appropriate industry in places such as Kaikohe is "economic and social engineering" then I am sure you would find only the free market and linch pins of farmgate politics would oppose that notion.


by Chris de Lisle on July 16, 2014
Chris de Lisle

India is again something to think about. Attempts to rehouse the people of the Dharavi slum in Mumbai have been disastrous. The people of the slum, used to a very communal organisation of space, often self-employed as craftsmen, were shifted into apartment blocks.

The result was disastrous: in apartment blocks communal spaces are nobody's business instead of everybody's and craftwork is largely impossible. Crime, vandalism, and unemployment rose; community died, because the government failed to investigate what made people want to live in the slum, what sort of life they were accustomed to lead, and how a relocated community might continue to function. But that's not to say that people were happy - or their standard of living acceptable - in the slums.

As william says, it is absolutely essential that any attempt to 'fix' zombie towns involve extensive input from the zombies themselves. They're the ones who know the most about their communities - where they work and where they don't. And especially if the problem is that the people have 'lost hope', the solution has got to be restoring their agency.

by Wayne Mapp on July 16, 2014
Wayne Mapp

Yes, I totally agree on community involvement as an essential part of the process. And in truth, even if most people agreed to relocate, which they would only do if there were obvious benefits, some people will want to stay in the original towns.

The remainder part would become a village, and that transition would have to be facilitated. The one thing you would not want is a 100 or so people living in a derelict town. As William notes every place has some attraction for some people, but I can't imagine a derelict town is among the attractions.

And I only use "zombie" because Shamubeel did. I guess it has the shock value that causes people to think about the issue, when otherewise it is all too easily ignored.

by Tim Watkin on July 16, 2014
Tim Watkin

Kat, "zombie towns" was Shamubeel's phrase and a particularly compelling one, to be fair. It's generated some talk. And also, to be fair, it's unusual for a centre-right politician to talk about 'command economy' ideas - centralised thinking like this tends to come more from people comfortable with big government.

We say moving people has been a disaster... and it may be for them. But to play devil's advocate, is there a 'greater good' argument here? Or a 'for their own good' argument? While it offends our political sensibilities, most powers-that-be down the centuries have moved people around and we'd do it with a lot of compensation and consultation.

In truth, it's probably beyond our pale now. But it's interesting at least theoretically to ask why a town should exist just because it made sense 100 years ago. Lots of places just don't make as much sense in the modern world. Whanganui or many other estuary towns - great idea when there was river trafficand coastal shipping, but is a whole city and the required related infrastructure a good investment now? What about the opportunity cost? It is confronting to really ponder that.

On the other hand, just as tides go out so they come back in. Chicago was a bit of a dog but has re-invented itself; maybe some of these towns will come again. But still it's a drain on the purse.

by william blake on July 16, 2014
william blake

Post Keynsian, neo liberal economics have killed off parts of provincial New Zealand, bugger, we'd better do some management on that.

Zombie towns or zombie capitalism? Or just traditional down the ages victim blaming.

Should this have been an election issue 30 years ago? and what are the different political parties offering to stop this rot.

by Kat on July 17, 2014

Tim, unfortunately for this country the National govt 'is' big govt poorly managed.

People, towns and communities exist because there are real and human connections that can never be denied. Those connections are indelibly linked to the physical locality of the community.

by John Hurley on August 30, 2014
John Hurley

The NZEIR is relentlessly pushing a bigger population on NZ.

Their latest push used their own computer modelling, but this is what treasury has to say:

New Zealand Treasury Working Paper 14/10

2.3 Changing policy expectations

While useful, models do not capture all the effects policymakers expect from immigration.

When New Zealand moved to increase the numbers and skills of immigrants in the 1980s and 1990s, policymakers appear to have considered that these changes had the potentialto have major beneficial impacts on the New Zealand economy, reinforcing the gains from the other liberalising and deregulating economic reforms undertaken during that period.


At that time, it was considered that skills-focused inward migration could: improve growth by bringing in better quality human capital and addressing skills shortages; improve international connections and boost trade; help mitigate the effects of population ageing; and have beneficial effects on fiscal balance. As well as “replacing” departing New Zealanders and providing particular help with staffing public services (for example, medical professionals), it was believed that migration flows could be managed so as to avoid possible detrimental effects (such as congestion or poorer economic prospects) for existing New Zealanders.


 Since then, New Zealand has had substantial gross and net immigration, which has been relatively skill-focused by international standards. However, New Zealand’s economic performance has not been transformed. Growth in GDP per capita has been relatively lacklustre, with no progress in closing income gaps with the rest of the advanced world, and productivity performance has been poor. It may be that initial expectations about the potential positive net benefits of immigration were too high.


 Based on a large body of new research evidence and practical experience, the consensus among policymakers now is that other factors are more important for per capita growth and productivity than migration and population growth. CGE modelling exercises for Australia and New Zealand have been influential in reshaping expectations.

The latest book about the regions seems to be an attempt to justify population growth in light of cognative dissonance over the Auckland experience.

Some years back Professor Kenneth Cumberland's Landmark series covered the development of New Zealand. Development is mostly past tense, yet it is being suggested that immigration of skilled people will be a panacea?

Reserve Bank Senior Economist Michael Reddell says:

In New Zealand, migration policy has made a large difference to population growth,

throughout history and over the past 20 years.

In the late 19th century and early 20th century, immigration to New Zealand could be seen as reflecting a favourable shock to the tradable sector. Opening up new lands to production, falling transport costs, refrigerated shipping combined to lift the population capacity of New Zealand while still offering high wages and high rates of return.

By the middle of the 20th century, New Zealand was settled and producing, and

technological change in the key export sectors was no longer as rapid (relative to other producers). The factor price equalisation justification for strong population growth had dissipated, yet population growth remained high. Across the OECD, there is some evidence that rapid population growth in post-war advanced countries was associated with an apparent cost to per capita growth rates.

So which planet are we on here?

by John Hurley on August 30, 2014
John Hurley

How come NZIER is more influential than Treasury or the Resrve Bank?

Is it time to make economists political appointees?

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