Politics

The Demise of Excellence – New Zealand is falling behind

Leonard HongLeave a comment

Introduction: 

One of the core cultural values I found quite hard to grasp in New Zealand is the inherent egalitarian nature of Kiwis. It shows that Kiwis are friendly, respectful, and courteous of others. Prime Minister Jacinda Ardern’s viral catchphrase “Be Kind” symbolically embodies our culture. However, are there potential negative consequences because of our egalitarianism? I wondered whether if it was why we have a ‘tall poppy syndrome’ problem.

As Dr Oliver Hartwich mentioned in his recent column for The New Zealand Herald, New Zealanders have a lax attitude towards excellence. Although, we have a few world-class sportspeople, business CEOs and others. But as a society, it seems as though we put more emphasis on equality rather than excelling in anything. I’ve personally witnessed this through the Kiwi nature of the ‘Yeah, nah, yeah bro’ attitudes towards life. ‘She’ll be alright mate’ is the common answer we raise whenever we face internal troubles or domestic difficulties. This has had unintended consequences across the country reflected in our economic and social outcomes. I think New Zealand has a broad cultural problem – if most Kiwis take a complacent attitude towards life, we will witness a further decline. This starkly contrasts countries that outperform us such as East Asian nations like South Korea and Singapore. 

Economic and Social Indicators: 

Our ‘average’ international rankings speak for itself. Our international education standards have fallen substantially in the last few decades. In PISA, our scores dropped for Maths, Science and Reading substantially shown in Briar Lipson’s book ‘New Zealand’s Education Delusion’. Our productivity gap between Australia has continuously widened closer to 20%. Our economy is still heavily reliant on primary industries and international tourism, despite being a developed economy. Our FDI restrictiveness is number one in the OECD. Our Universities are nowhere near the top 50 in the world (In contrast to our neighbours Australia, which have more than 5 Universities). There are other economic and social indicators that I could mention, but the reality is that if Kiwis continue to be satisfied with mediocre economic, social and government policies, then our whole society will ‘pay’ for such mediocrity in the long term. 

The Dramatic Turnaround of East Asia: From Developing to World-Class

Figure 1: Labour Productivity Levels Relative to the United States (%), 1950-2019 (S. Korea & NZ)

Internationally, countries in Asia (especially North-East Asia) witnessed a remarkable economic recovery beginning during the post-WWII period. Beginning with Japan’s industrialisation, the new four Asian Tigers – South Korea, Taiwan, Hong Kong and Singapore followed suit with the ‘flying geese’ model of economic development. Economists have coined these four countries’ world-class economic outcomes as the ‘East Asian miracle’. Coincidently, this contrasts starkly with New Zealand’s mediocrity witnessed in the last 70 years. 

Economist Dr Üngör of Otago raised this in his recent Newsroom column. As shown in Figure 1, South Korea’s labour productivity level was less than 12% of US labour productivity in 1950, but by 2019 it was 63%. New Zealand was at 92% of the US in 1950 but dropped to 62% by 2019. The figure provides a humbling picture for New Zealand – The South Koreans have overtaken New Zealanders and we are falling behind the best performers in the world today. Back then, New Zealand was once one of the few nations with one of the highest GDP per capita in the world, but since then we have faltered into a mid-tier economy. 

South Korea’s overlap of New Zealand should signal warning signs for New Zealand policymakers. The turnaround was possible because South Koreans built a prosperous nation by changing the cultural narrative towards competency, strived for excellence, and took greater communitarian responsibility towards long term prosperity. A similar change of mantra can be said about the Taiwanese and the Hong Kong people. 

My personal favourite example is the South East Asian city-state Singapore. With the brilliant leadership of Lee Kuan Yew, the nation went from a wasteland with no natural resources into one of the finest economics in the world. His style of government was highly technocratic. Singapore is very competitive, meritocratic, and pursues economic policies that were practical and results-driven. A combination of state-intervention and liberal free markets, it’s the fourth-highest in the world for GDP per capita. Not only is the country extremely efficient, but it is also environmentally friendly and clean. A perfect combination of sustainable development and world-class governance. Whilst the nation is regarded as a semi-democratic society, there are many things New Zealand can learn from Singapore’s system, institutional mechanisms and broad culture. Lee changed the mindset of the Singaporean people to strive to excellence and competence.   

Competent Response to Covid-19: South Korea and Singapore

In the earlier months of 2020, when Covid-19 hit the globe, the most effective responses were from East Asian states. I researched Taiwan, Singapore and South Korea during that period. They all had an exceptional public administration, competent execution of contact tracing, regular mask-wearing, mass testing of people and a well-mandated epidemic response team in their governments. These countries did well because they had a well-functioning society with the high-level expectation of competence and excellence. With these cultural factors in mind, they have world-class healthcare, government bureaucracies, a knowledge-based education curriculum and of course a competent response to Covid-19. This would have been impossible without having excellent administrators and a well-educated population. 

New Zealand’s Covid-19 Response: Mixed Bag 

New Zealand did very well responding to Covid-19 as well. However, I give much of the credit to our geographic proximity from the world. We were far away from epidemic centres such as China and Europe during the early stages of the pandemic. In addition, having Prime Minister Jacinda Ardern – not some of her Cabinet members – at the time was essential to keeping the public disciplined in our efforts to contain the virus. The lockdown was effective at stamping out the virus, but with an economic cost. Our Debt/GDP ratio is now projected to be 56% by 2026, despite beginning at 19.2% earlier before the national shutdown occurred. 

Although this global pandemic is unprecedented, if we had the ambition and the drive to stamp out the virus without a national lockdown, I truly believe that would have been entirely possible. Our border quarantine procedures are still mediocre at best – after more than 9 months of Covid-19 – and blunders have caused the continuous resurrection of the virus in Auckland for the second time after complete elimination. It seems New Zealanders are ‘happy’ with the outcome without realising the combination of luck, public discipline, geographic proximity, and sound leadership. We have witnessed numerous examples of bureaucratic incompetence and administrative blunders in contrast to the East Asian states I mentioned before. Our contact tracing, testing, and border quarantine are still woeful in comparison. 

Confucianism: The Cause of East Asian prosperity? 

Perhaps some people might consider this East Asian trait of “excellence, merit and competence” as a broad Confucian phenomenon. Although Confucius himself did say: 

“The will to win, the desire to succeed, the urge to reach your full potential… these are the keys that will unlock the door to personal excellence.”

But I can’t entirely agree with the view that it’s just a Confucian phenomenon. Cultural change across societies depend on the decisions policymakers or what individuals themselves make. For instance, Japan industrialised as a result of forced trade embargoes imposed by the Americans under Commodore Perry which led to the prosperous Meiji period. Historical critical junctures and circumstances are what changes societal culture. 

The same thing can be said about the state of the Western world. Our cultural values have moved away from excellence towards equity. Previously, the West was leading the world on every economic, social and civilisational metric as indicated by historian Niall Ferguson. But now, the West – including New Zealand – are not as reputable as the past and the rise of Asia proves this declining trend. The West has lost the vital cultural component to its prosperity – The Weberian characteristics of work ethic, hard work and most importantly the strive for excellence. 

Conclusion: Cultural Rejuvenation is an Imperative

New Zealand needs to renew this virtue of competence, excellence and merit. Whilst egalitarian values are important to keep society strongly harmonious with good social cohesion and trust, it is imperative that we recover our prioritisation towards excellence once again. We see this with our excessive cultural obsession with diversity and inclusion. Tolerance and social justice values are indeed important, but without a prosperous and thriving domestic economy, these values mean nothing. We must rejuvenate our old virtues of excellence in New Zealand. Across our education standards and our economic performance in the last few decades, we have so far settled with mediocrity. 

The comparison and contrast between East Asian nations and New Zealand show us a few things. New Zealand is not good enough, we have been mediocre and sub-par at best across multiple performance indicators. We need to be more ambitious as a society for the long-run and we must rebuild our cultural values towards discipline, hard work, excellence and competence.  

Why the Housing Crisis in New Zealand?

Leonard HongLeave a comment

It is clear that so far both sides of politics have failed to address the ongoing problem of housing unaffordability. It’s been more than five years since the leaders of both major political parties acknowledged the housing crisis. Now, it’s 2020 and housing has become even more unaffordable with prices increasing by 19.8% with the median price of $725,000. Despite Covid-19 ‘supposedly’ cutting aggregate demand, how on earth did this phenomenon occur? It’s caused by multifaceted reasons which I will explore by sections:

Migration and Foreign Investment – Not the core factor

There is a fundamental misunderstanding of the housing crisis. Many New Zealanders believe that migration flow and population growth are the core reasons for growing housing prices. On face value, that is correct. Growing demography does mean growing housing demand. However, this would not be a problem if the growing demand is matched by a growing supply. Anti-developmental sentiments from central and local government artificially restricted land supply and housing development. In fact, migration is critical to our prosperity (especially those that are young with high skills and educated). The housing crisis is a supply problem rather than a demand problem.

Foreign investment and speculation are also conjectured by many in the public as the cause of housing hyperinflation. This is also incorrect. Much of the housing inflation is caused by local New Zealanders purchasing property and spurring up demand. In fact, only 3% of housing purchases were from foreigners between January and February 2016. Whilst further should be done to see the extent of the speculation over a long period of time, such evidence suggests that the effects are minimal.

Housing Supply < Housing Demand = Price increase

The core reason for the housing crisis is simply because growth in demand has exceeded growth in supply. One of the core fundamental economic principles is supply and demand. Housing has become extremely expensive because we have not built enough housing in New Zealand to address growing demand. In 1974, New Zealand was building 34,400 annually. However, because of the oil crisis in the 1980s and our unsustainable fiscal position, new annual dwellings dropped to 15,000 in that era. The current government have made some changes that resulted in a growing supply with 24,100 houses built in 2019. We need to note that the population in NZ was 3 million and now just over 5 million. Population growth and demographic ageing do mean that there is consequently excess demand. My research paper released in the new few months will explore this. 

In the last three years, the current government has attempted to curb aggregate demand and expand supply with Kiwibuild. There has been progress with better infrastructure financing to aid local councils and important changes to the National Policy Statement on Urban Development. This removes unnecessary regulations that so far prevented intensification. On the negative side, the government passed new laws such as the ban of foreign buyers (with the exception of Singaporeans and Australians), extended the bright-line test to 5 years, amended the Overseas Investment Act, and tried to legislate a new capital gains tax. For supply, Kiwibuild was a colossal failure with only 548 houses being built. There has been some definite progression in contrast to the previous government, but also multiple failures.

The Reserve Bank’s Impact in Housing

The global Covid-19 pandemic has forced many central banks around the world towards expansionary monetary policies. The Reserve Bank of New Zealand (RBNZ) is no exception. Under Adrian Orr, the bank committed to $100 billion of quantitative easing and also cut the OCR rates to 0.25%. This is unprecedented regarding the scale of the policy (a third of our GDP). These two decisions alone will raise the returns from investment in housing and increase pressure on house prices. Low-interest rates mean cheaper mortgages incentivise investors and consumers into the housing market. These policies led to higher equity and asset prices. Although, some of their policies are completely understandable considering Covid-19’s impact on employment and the economy. However, regardless of the pandemic, this level of quantitative easing is unprecedented. Saying this, it is undeniable that RBNZ’s policies have made a significant contribution to greater aggregate housing demand.

Lacking incentives for local government 

One of the key reasons for the current state of the housing market is because of poor local government incentives. Much of the infrastructure financing is imposed on the local councils, meanwhile, the revenue is centralised to government officials in Wellington. The current system gives far too much political leverage for those in central government, rather than allowing local officials to make important decisions on urban development. There are questions on whether the centralisation of such power into a larger government institution such as the Super City of Auckland Council led to efficient outcomes.

New Zealand’s current system does not incentivise local councils to grow but slows down development. Local government officials don’t want more people in their area, because that means greater demand for water, schools, housing, local parks, and other public infrastructure to accommodate growing demand. Meanwhile, the central government does not allocate funds based on proportionality, but rather on ‘democratic means’ of serving respective electorates and other political factors. The finance gets imposed on the councils with growing demand, but not given the finance from the central government. For example, more than 40% of newly arrived migrants settle in Auckland rather than other regions that need people. Auckland Council currently has growing debt and it wants to tackle that problem rather than expand urban development outwards. The same applies to many other local councils across the country. Without sufficient revenue provided by the central government, why would they want to grow? They would not want to free enough brownfield nor greenfield areas for housing development because all the costs are imposed on them.

To address these problems for New Zealand’s local governments, I advocate for ‘localism’ as it provides greater political leverage to local governments and decentralises decision-making. Countries such as Germany and Switzerland follow this form of local administration. In the United States, Houston in Texas also has a very decentralised governance system. At the federal level, they simply set out basic regulatory frameworks and for the implementation of policies, they leave it to local councils.

For instance, let’s take the case of Essen and Dortmund – the two regions have a competitive and cooperative governance arrangement. The reason is that the tax revenue created is tied to the number of residents in their area. It is essentially a form of a ‘means-test’ requirement for local officials to get their revenue. Because of the incentives to have more residents in their area, the government understands that they need to have good institutions, a clean and green environment, affordable housing and sound public infrastructure. the two cities needed to allow enough land supply available in their area to deal with growing demand. If certain residents leave their regions, they lose tax revenue consequently. In essence, a solid local structure that incentivises competition. Currently, both Essen and Dortmund have affordable housing. Since the 1980s, prices have only risen by 10% in the last 30 years. Simply by changing the tax incentives with a decentralised local government system, it leads to more optimal urban development that matches growing demand with sufficient supply.

Germany’s economic system is a strongly Keynesian-oriented system with high levels of taxation, a generous welfare system and a decentralised form of governance. Localism is neither a right nor left policy subscription, but an example that has worked in these areas. Experimentation in New Zealand wouldn’t be a bad start and we can learn from these international examples. I am not advocating for the de-amalgamation of Auckland Council, but rather changing the tax structure so that local councils get the incentives. Decentralisation of command towards district councils, for instance, is a potential alternative without removing the Super City’s institutional arrangement. As stated by renowned American investor Charlie Munger stated,

“I think I’ve been in the top 5 per cent of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it.”

Basic economics is about incentives. Incentivising local government to grow public infrastructure and push for housing development requires the officials to have the incentives. This will help the expansion of supply – both housing and infrastructure. 

Conclusion

These are the many reasons why housing is unaffordable. Housing is an extremely complicated subject but this post attempted to explore fundamental factors as to why house prices increased in New Zealand despite housing demand ‘supposedly’ very low under the current era of Covid-19. It is clear that housing supply has not expanded fast enough to accommodate growing demand. RBNZ’s policies have exacerbated the problem fueling investment into the property market, and the current set-up of local governments prevents them from wanting to expand development because most of the costs are imposed on them, rather than the central government.

It is imperative for the new Labour government to push for the expansion of housing and land supply rather than continuing to just curb growing housing demand.

Picture of Houses in Suburbs.

The Democrats have been hopeless

Leonard HongLeave a comment

It was in 2016 when I first watched and observed the outcomes of a US Presidential election. I detested Hillary Clinton back then – I still do now – but I didn’t expect Donald Trump to win, yet he did. Following on from Brexit, this was another shock to the American Establishment and symbolic of the rise of national populism. Back then, I was a hardcore social democrat, and I was disappointed and sad that America lost the opportunity to elect a 21st-century version of Franklin Delano Roosevelt, Bernie Sanders. I consider myself a moderate centrist today, but that’ll be discussed in another blog post.

The world witnessed four years of a Republican White House and boy it was a period of pure entertainment and a complete mess. Now it’s 2020 and the Democrats have selected an old, weak and out of touch politician – Joe Biden – as their candidate. Throughout 2019 and 2020, I felt that the liberal establishment learnt absolutely nothing from 2016, and it shows. Despite the polls suggesting that it will be a landslide for Biden, they were completely wrong. The US election is still an ongoing dispute and it is still too close to call for either of the candidates. The rustbelt states such as Michigan, Pennsylvania, Wisconsin have moved back towards the Democrats, but only because of Trump’s incompetency regarding Covid-19. They have lost seats in the House and also the Senate is in the strong hands of the Republicans. If Trump didn’t have to deal with Covid-19, the President may have indeed had a landslide victory against Biden.

The question is why did the Democrats perform so poorly despite the expectation? The Americans have faced a period of complete chaotic governance by the Trump Administration but many still voted for him. The fact of the matter is that many Americans are sick and tired of political correctness, wokeness, and identity politics. And this is taking into account Trump’s disastrous policies. Many people including Sam Harris, Andrew Sullivan, Eric Weinstein, Paul Graham, and Niall Ferguson and others have previously warned centre-left people about this form of politics.

One prominent scholar that understood this problem for the Democrats was Stanford’s Francis Fukuyama. He covered this topic of identity politics in his book, ‘Identity: The Demand for Dignity and the Politics of Resentment’. The core thesis of the book surrounds the concept of ‘thymos’. Fukuyama described it as “part of the soul that craves recognition or dignity.” Fukuyama says that the thymos of blue-collar, white Americans was not recognised by the political and economic establishment in America in 2016. The craving of status and recognition is not a new phenomenon, which is evident from the cultural movements of the 1960s – the civil rights movement of African Americans, Women, LGBT, and even the environmental movement. These movements were legitimate and necessary but extended far beyond its necessity up until 2016. Because that sense of dignity was ignored by the Democrats, but recognised by Trump in the form of nationalist sentiment and protectionist economic policies, they switched to him. Even with his racial rhetoric, many didn’t care, they were just glad someone wanted to talk about the negative externalities caused by globalisation. The former core of the Democratic Party was on socioeconomic issues, but it moved on entirely into cultural matters, even in 2020. 

Another scholar regarding this is Charles Murray. His book ‘Coming Apart: The State of White America, 1960–2010’, explored the economic consequences of globalisation and how there is a growing gap between white working-class Americans and the urban white-collar class. The sad state of working-class America was largely ignored by the liberal establishment. The state of white America is increasingly divided along economic lines, not cultural lines. The Democrats didn’t even talk about this topic in 2016, nor did they refer to it in 2020. The Party has taken the votes of traditional blue-collar Democrats for granted.

Hence many former voters of Obama switched to Trump. This is why they lost 2016, and may only just marginally win 2020 because of Covid-19. Instead of trying to legitimately deal with the adverse consequences of globalisation, and help those people that lost their jobs to China and Mexico, their mantra was focused on intersectionalism, transgender bathrooms, and the dangers of white supremacy. Think about it, if you are a former worker of a manufacturing factory in Pennsylvania, and you lost your job, got divorced and on unemployment benefits, and the Democrats are talking about 50/50 quotas, gender pronouns, refugee rights, global governance and so on – you would feel politically unrecognised. They ignored the former core base that has voted for them from the 1930s to the 1990s. The embodiment of woke politics is symbolised by Democratic politicians like Stacey Abrams, Kamala Harris (the unlikable Vice-Presidential candidate), Alexandra Ocasio-Cortez and others.

George Mason University Professor Alex Tabarrok’s Tweet sums this phenomenon quite well:

My takeaway is that a large number of people HATE the cultural left (not the econ left) and are willing to put up with almost anything, including incompetence, chaos, corruption and bad policy, to signal their views loud and clear.

The Democrats need to move on from identity politics and move back to the core economic issues of our time – this also applies to the New Zealand Labour Party and the Greens by the way. The world is witnessing the rise of a new technological revolution and developments in Artificial Intelligence and automation. This will disrupt the international labour market significantly. This will be far more pervasive than the Industrial Revolution and exponentially more consequential. We also have global warming and climate change that requires vigorous economic and scientific analysis to legitimately solve this international problem. We also have an ongoing geopolitical competition with the West and China. Are Democrats taking these challenges seriously? In my eyes, the answer is ‘No’. The economic left of the party needs to regain control of the narrative and the cultural left need to understand that this style of woke politics will drive more voters towards the right. There is a legitimately strong case for competent centre-left politics that can try to correct structural dislocation of manufacturing work and increasingly precarious jobs (including repetitive white-collar jobs too). I see politicians such as Andrew Yang and Tulsi Gabbard as the potential embodiment of the Democratic Party’s future (coincidently they are American minorities as well).

The Democrats have so far been absolutely hopeless. Regardless of what the 2020 election outcomes will be, they need to take socioeconomic issues far more seriously. As a fan and admirer of the United States, I hope they sort their domestic affairs out.


Third Option for the International System – Rodrik and Walt

Leonard HongLeave a comment

With the ongoing Covid-19 pandemic, the Sino-American relationship is worsening. Tensions are heating as President Trump recently imposed sanctions on China’s largest chipmaker, SMIC.

American actions are becoming a self-fulfilling prophecy towards direct conflict. The world is getting closer to falling for the Thucydides Trap. As foreign policy experts continue to reiterate the inevitabilities of a New Cold War, will conflict be the destiny of the two great powers?

Harvard’s Stephen Walt and Dani Rodrik offered a third alternative in their paper ‘Constructing A New World Order’. The aim is to set an international institutional framework that creates as much stability and cooperation as possible.

First, the authors reject the ‘deep integration’ goals of the liberal internationalists. Rejuvenating multilateralism and hyper-globalisation are well-intended policies. But it creates unintended consequences that undermine the economic stability of western liberal democracies. China would also be unwilling to further integrate into the global trading system from its state-led developmental model.

Second, they disregard the hard-line hawkish approach advocated by the Trump Administration. The current decoupling strategy against China creates ‘beggar-thy neighbour’ effects on other nations. This also prevents mutually beneficial cooperation occurring with the Chinese, especially regarding global public health, improving nuclear security, and addressing climate change.

The goal is setting a pragmatic and realistic approach within the Sino-American relationship. The international system should allow the nation-states to set their own foreign and economic policies.

There are four categorisations of policies that fit within their institutional theory. There is Universal Agreement; Cooperative Negotiations; Autonomous Policy; and Multilateral Governance.

Indeed, Walt and Rodrik’s ‘Modus Vivendi’ international system is a pragmatic institutional mechanism. But, can Uncle Sam stay committed to mutually beneficial cooperation and reduce the risk of falling for the Thucydides Trap?

The Sino-American competition will shape the next few decades of the world order. As both powers strive to compete for power and international influence, the goal for the world is to keep the competition away from a hot war within bounds.

Institutionalising a set of rules on foreign and trade policies could help assuage great power politics. This could also incentivise foreign policymakers from both sides towards restraint as both a peaceful international order and continued globalisation is critical for small powers like New Zealand.

The leaders of the two great powers in the system are two egomaniacs. Their recklessness may make a third alternative for the international system as impossible. But let us hope for the best.

The Vestiges of Machiavelli

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Political discussions in liberal democracies are supposed to be about the battle of ideas, heterodox exchanges, and civil debates. Politicians and leaders present their arguments for a better and productive society through public discourse.

However, recent scandals in Parliament have indicated that it is not really the case. People have forgotten that politicians do not operate under the guises of morality, but manoeuvre based on strategy within established rules of the game — the game of survival in politics. Politics is rife with clever duplicity and manipulation.

Every member of Parliament has two main interests in mind — maintaining power and being perceived as a noble, honest fellow. As Machiavelli once said, “Everyone sees what you appear to be, few really know what you really are.”

Should the public expect more ‘Machiavellian’ behaviour as the election campaign goes underway? If so, what can we learn and observe from the late 15th century philosopher’s wisdom?

Political marketing to Machiavelli is a seductive tool and the use of charming to mislead the public. “It is double pleasure to deceive the deceiver” and “one who deceives will always find those who allow themselves to be deceived.” — A tool the Prime Minister utilises to perfection with her omnipresent slogan, ‘Be Kind’.

Regarding the competence of our leadership, he states that “the first method for estimating the intelligence of a ruler is to look at the men he has around him.” If you do not have a competent team, pointless blunders will hit the spotlight, shown by recent resignations.   

Unfortunately, public policy will not be the driver of electoral success. Machiavelli states that “princes have accomplished most who paid little heed to keeping their promises, but who knew how to manipulate the minds of men craftily.” Cunning political strategies are the best ways to preserve or gain power.

Machiavelli always maintained the importance of being effective without being impotently pure. Regarding leadership, he recommends that “Whosoever desires constant success must change his conduct with the times.”

What are the ultimate lessons? Even under liberal democracies, politicians will always use cunning deception to attain or maintain power. Machiavelli was a republican and an astute observer of human nature, that politicians will always strive to serve their main interests — this is just reality.

We must understand that despite the imperfections of our system, liberal democracy still allows us to have a voice in contrast to autocracies. Multiparty systems still provide a check and balance of power on the leadership and their potential to abuse it.

Self-interests are the norms of politics, but if we genuinely want to have competent and effective leadership, the public must understand this aspect of human nature — effective politics require some level of Machiavellianism.  

Research Note: Safe Arrivals

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Dr. Eric Crampton and Leonard Hong

Research Note: Safe ArrivalsDownload

Up to a million Kiwis live overseas with a right to return to New Zealand. While the country is now effectively free of Covid-19, with cases only in the country’s quarantine facilities, the pandemic rages abroad and is unlikely to abate anytime soon. Even if a vaccine is developed this year, scaling up its production will take time. In the meantime, the Government must scale up its own capabilities and capacity within its managed isolation and quarantine facilities.

This report provides a pathway toward safer scaling-up of border capabilities. It begins from the principle that safe entry should be allowed, and that risky entry must be made safe.

Beginning from that principle, the report argues that the New Zealand border should be reopened to travellers arriving from places that are similarly free of Covid-19. Islands in the Realm of New Zealand depend on travel to and from New Zealand and are currently Covid-free. Taiwan has no community transmission and has pandemic control systems at least as strong as New Zealand’s. Maintaining border restrictions against travel to and from safe places imposes substantial harm. Continued closed borders to the Pacific Islands imposes an onerous humanitarian burden along with economic calamity.

Like kayakers in stormy seas rafting up together for safety, New Zealand should ‘raft up’ with other Covid-free places.

Entry from other locations must be made safe. And while closing borders entirely can feel like the right response when other parts of the world are in dire straits, it is impossible. Too many Kiwis live abroad and may wish to return. The managed isolation and quarantine system must be able to scale up to accommodate those people along with potential non-citizen visitors from similar locations.

This report argues that the Government should shift its approach. Rather than considering charging some arriving Kiwis for their stays in managed isolation, it should instead directly subsidise the stays of returning Kiwis whose stays the Government would wish to support with a voucher system.

Under the proposed voucher system, those wishing to come to New Zealand – citizens or not – would be required to present before boarding proof of a booking in one of the approved managed isolation facilities. Eligible returning Kiwis could apply their vouchers toward the full or partial cost of their stay in managed isolation. Vouchers could be set at a level consistent with the cost of a stay at a basic facility. Other returnees would need to bear the full cost of their stay. Facilities would be free to set their own room fees, but the Government would charge each facility for the full cost of police, military and other staff involved with managing isolation.

The Government would continue to oversee safety in managed isolation and private accommodation facilities would continue to provide the rooms. But this shift would make it far easier for returning Kiwis, and others, to manage their own arrivals while freeing the Government of the burden of scrambling to place arriving visitors into scarce spaces in managed isolation. It would also encourage other facilities to shift into providing managed isolation services (under Government oversight and supervision).

The present system is strained. It struggles to accommodate need, but must scale up substantially if Kiwis abroad choose to exercise their right to return home. Allocating scarce positions in managed isolation by Ministerial discretion forces Ministers into impossible positions in deciding whose need is greatest.

Being able to scale up safely is critically important. The entire country made incredibly costly efforts to make New Zealand effectively Covid-free. Some Kiwis continue to bear those costs through family separation, unemployment or failing businesses. And for a long time yet, the country will be paying off the new government debt accrued to help the economy survive lockdown.

Improving border protocols to allow for safe entry at scale would not only help those worst affected by the collective elimination efforts, it would open up opportunities that simply were not available in the pre-pandemic world. Rather than trying to estimate the extent of New Zealand’s likely economic losses, the country could be looking at stronger economic opportunities.

Recommendations
The New Zealand Government should:

  • Set a principle to allow safe entry into New Zealand;
  • Recognise that entry from safe places by people who have not recently been to risky places is safe. Re-open the border to entry from Taiwan and the Covid-free Pacific Islands and assess whether individual Australian states could be considered safe;
  • Support the Pacific Island neighbours in ensuring safe external borders;
  • Continue to assess the adequacy of safety protocols on flights to risky places and at airports handling passengers from risky places;
  • Allow greater scaling-up of managed isolation by:
    o Allowing those arriving to take up a greater portion of the cost: full user-pays for non-citizens and a voucher-based co-payment scheme for returning residents and citizens;
    o Certifying facilities as authorised providers of managed isolation or quarantine services;
    o Charging isolation facilities for the isolation management services provided by the government;
    o Allowing facilities to provide their own management services if they are able to credibly demonstrate capability of doing so safely, but only under strict supervision and process auditing;
    o Requiring all arrivals book their own accommodation in authorised isolation facilities and provide proof of booking before boarding flights to New Zealand;
    o Training potential isolation management staff;
    o Charging isolation facilities for the isolation services provided by the government on a full cost-recovery basis;
  • Layering additional safety protocols for non-citizens arriving from risky places to further reduce risk as numbers increase, such as post-isolation testing and daily health check-ins;
  • Consult with New Zealand’s epidemiologist community over the medium term as both testing and app-based technologies develop to assess whether alternative sets of restrictions could reduce risk at lower cost for travellers from less risky but not risk-free places.

Prime Minister has the Beehive in the bag — 2020 General Election

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Figure 1: Prime Minister Jacinda Ardern. 

 

New Zealanders have witnessed partisan nonsense from both sides of the House of Representatives during the Covid-19 pandemic. Ranging from Hamish Walker’s disgraceful letter about quarantine arrivals, Michelle Boag’s woeful decisions, David Clark’s resignation as Health Minister, and in addition blunderous border management by few incompetent Cabinet Ministers. Whilst such partisanship is not surprising to me in politics, the severity of some of these scandals leaves a nasty taste in my mouth. Instead of focusing on the main task of keeping our team of 5 million safe from Covid-19, many politicians in Parliament would rather shoot cheap shots at one another. During the midst of all of this, the centre-left Labour Party will almost certainly win the election and the main key asset for this instrumental task is the Prime Minister herself. 

Why do I think the Prime Minister will win? Multifaceted reasons. I’ve known the Prime Minister for a few years beginning in 2016 when I volunteered for the NZ Labour Party initially as a young undergraduate at The University of Auckland. She has always had the personal charm and likability to woo, charm, and make people feel important. I am sure the late Dale Carnegie would approve of her social competence. Without her, the Labour Party would still be in opposition under Andrew Little or some other Labour leader in another universe. Jacinda was the only person that would have had the abilities and leadership qualities to lead Labour to victory, which she did in the 2017 General Election. It was no wonder that for years people touted her as the next leader of New Zealand before. Now as the incumbent, I expect her to win.

Why do I think the Prime Minister will win? Multifaceted reasons. I’ve known the Prime Minister for a few years beginning in 2016 when I volunteered for the NZ Labour Party initially as a young undergraduate at The University of Auckland. She has always had the personal charm and likability to woo, charm, and make people feel important. I am sure the late Dale Carnegie would approve of her social competence. Without her, the Labour Party would still be in opposition under Andrew Little or some other Labour leader in another universe. Jacinda was the only person that would have had the abilities and leadership qualities to lead Labour to victory, which she did in the 2017 General Election. It was no wonder that for years people touted her as the next leader of New Zealand before. Now as the incumbent, I expect her to win.  

Jacinda is the most charismatic, likeable, and respectable politician that I have personally witnessed. The masterful political marketing on social media, her genuine smile and exceptional communication skills are nothing short of remarkable. If there was a textbook that I would use for my hypothetical communication class, I would use her as the main role model. I know rarely anyone besides her in the Labour Party with this kind of talent. Some may even claim that she was born for the role…perhaps. This is the key factor that will win her the election. Simply put, the New Zealand public really likes her. The Covid-19 pandemic also may have helped her in the polls, as incumbents tend to do better during crises. Evidenced by President George W. Bush’s approval rating skyrocketing to above 88% during 9/11. But the personable qualities of the Prime Minister helped the Labour Party to climb well above National today. Her identity also shaped her likeability, especially for a small, young and progressive country like Aotearoa. As a female who is young, attractive, relatable, and extremely charismatic, she had all the cards that helped her seem relatable. 

In contrast, National has not had anyone on a similar level as Ardern since Sir John Key. Although Simon Bridges is very good when you meet him privately, however, on television and social media, he didn’t have that key spark required to get people on your side. His negative approval rating and his image as a bitter, resentful person hasn’t helped. Although his successor Todd Muller has a positive net approval rating but is someone known as a simple ‘boring old white guy’. Neither does he have personal social competence equal to the Prime Minister and I expect him to be out once the election is over. Until National find a person as equally sociable as Jacinda, they will struggle for years to come. The Key/English years are over, and they must find a long term solution to this missing gap in National’s leadership. The other alternative is for the current leadership self-improve themselves on the basis of mimicking Jacinda’s abilities. The rebuilding stage needs to happen now. For now, they can hope for at least 35% to save most of the caucus, but the pinnacle difference between the two major parties is charisma and charm of the leadership. 

Why do I think the Prime Minister will win? Multifaceted reasons. I’ve known the Prime Minister for a few years beginning in 2016 when I volunteered for the NZ Labour Party initially as a young undergraduate at The University of Auckland. She has always had the personal charm and likability to woo, charm, and make people feel important. I am sure the late Dale Carnegie would approve of her social competence. Without her, the Labour Party would still be in opposition under Andrew Little or some other Labour leader in another universe. Jacinda was the only person that would have had the abilities and leadership qualities to lead Labour to victory, which she did in the 2017 General Election. It was no wonder that for years people touted her as the next leader of New Zealand before. Now as the incumbent, I expect her to win.  

However, the Labour Party have a clear competence problem within its hierarchy. The Prime Minister has been exceptional as a communicator throughout the pandemic, illustrated in her excellent press conferences with Dr. Ashley Bloomfield. But you cannot run a country well without a great team. There is a reason people like Clare Curran and David Clark were targeted by the opposition – they were incompetent. Period. 

Although there are a few very competent Ministers such as Grant Robertson, David Parker, Kris Faafoi, and the new Health Minister Chris Hipkins — on top of his three additional portfolios. After the election, they need to build a broadly new cabinet with the competence, skillsets and abilities to keep New Zealand safe, not just from Covid-19, but also from our precarious economic position. The Prime Minister may be able to rely on her sociability for now, but she must be far more decisive in either sacking or removing incompetent people in Cabinet. As Machiavelli once said, “He who wishes to be obeyed must know how to command.” I’m glad to see the addition of Epidemiologist Dr. Ayesha Verrell in Parliament soon and I know she will make a good contribution for New Zealanders. Hopefully, Ardern realises soon that incompetence will get punished in the next poll in 2023. 

The Prime Minister has this in the bag, for now. But until the actual election results, we won’t find out until October.  

Political Distraction

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If the Covid-19 pandemic had happened in a non-election year, would this or any Government’s response have been different?
 
At the best of times, election campaigning can be a distraction for politicians. But supposing the Government’s first decision early this year after it learned of the approaching pandemic was to postpone the election by perhaps six months, might leadership decisions have been more focused?
 
After all, it is hard to see how a fragmented parliament spending precious energy on politics as Kiwis struggle to recover from a major crisis is the best situation for New Zealand.
 
Without an election in the back of their minds, Ministers would be solely focused on protecting the country from Covid-19. A postponed election may even encourage – and make it possible for – members of the Opposition parties to pitch in and help with the recovery effort without anyone concerned about others making political gains during that time.
 
Such a process has existed before. For example, prior to the Second World War, the United Kingdom maintained an all-party coalition War Cabinet under Sir Winston Churchill. The Brits knew normal politicking was a distraction that only drew precious mental energy away from the greater national effort.
 
So, assuming that political distraction is partly to blame for some recent scandals and mishandling of border quarantine, had New Zealand adopted a similar War Cabinet model it could have avoided much of the political drama. Then again, other scandals might have replaced these stories. In other words, it is hard to tell if the election distraction is part of the problem or not.
 
Yet a mechanism to set up a War Cabinet in times of national crisis is worth considering for the future. Such a mechanism must include all MPs with the best and most relevant leadership experience across parliament and clearly outline a sunset clause when the election process can be resumed.
 
After all, an effective government must be able to deal with emergency circumstances with as few distractions as possible. In Select Committees, parties already cooperate on a broad consensus basis when debating new legislation. Temporarily connecting them as a solid front during a crisis would not be too much of a precedent. 
 
The last few months have proven that a distracted Government, like a tired driver, makes mistakes which can put the country at greater risk. Should Kiwis expect that elections are to be delayed by default in times of natural disasters? Perhaps.  

Research Note: Lessons from Abroad: East Asia’s Covid-19 Containment Model

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Leonard Hong with assistance from Joel Hernandez

East Asia’s Covid-19 Containment ModelDownload

Since the first cases of the Covid-19 virus emerged in the Chinese province of Wuhan, several East Asian countries including Singapore, South Korea and Taiwan have successfully ‘flattened the curve’ of infection rates. The three countries used common public policies in the first 50 days since each registered their 100th case.

This report summaries how the three countries prepared for a pandemic to create the best possible position for dealing with Covid-19. It offers lessons for New Zealand’s efforts to set up efficient epidemiological controls and tracking efforts to help fight any future pandemic.

Research Note: Lessons from Abroad: Taiwan’s Covid-19 Containment Model

Leonard HongLeave a comment

Leonard Hong with assistance from Joel Hernandez

Taiwan’s Covid-19 Containment ModelDownload

Alongside South Korea, Taiwan is one of the few countries to “flatten the curve” of Covid-19 without a national lockdown due to its prior experience with the SARS epidemic of 2003. New Zealand’s pathway is similar to Taiwan’s and there are lessons to be learned as New Zealand moves into Alert Level 2. Last week, Deputy Prime Minister Winston Peters suggested creating “international bubbles” for countries with Covid-19 success to introduce new trade connections and travel links. His reasoning is that direct inbound travel to New Zealand from Taiwan cannot be riskier than travel within New Zealand at this point.

As of May 11, Taiwan is 53 days into its Covid-19 response compared to New Zealand’s 49 days (measured by the date of the first 100 cases). Judging by cumulative cases per capita (see figures 1 and 2), New Zealand has 24.8 cases per 100,000 while Taiwan only has 1.9 cases per 100,000. 

In early January, when the first outbreak began in Wuhan, Taiwanese Professor Dr Jason Wang from Stanford University predicted Taiwan would have the highest number of cases outside mainland China.1 As of May 10, Taiwan only has 73 active cases and 366 recoveries from a total of 438 confirmed cases.2 It also has a low case fatality rate (CFR) of 1.3% or 1.36% deaths. Italy, Spain, the US and New Zealand have CFRs of 13.9%, 10.1%, 5.9% and 1.4%, respectively.

The Taiwanese Government dealt with the initial rise in cases while maintaining an open economy by using optimal border controls, strict quarantine requirements, targeted testing measures, an advanced national healthcare system, effective contact tracing system, maskwearing public policy, tight enforcement of new Covid-19 rules and general government competence.

This report outlines eleven key examples of Taiwan’s pandemic approach.