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(Photo: Getty Images)
(Photo: Getty Images)

PoliticsJuly 24, 2019

Cheat sheet: Bold plans to remake the much-loathed RMA revealed

(Photo: Getty Images)
(Photo: Getty Images)

The government have announced plans to reform the Resource Management Act, a hideously complicated piece of legislation that gets a bad rap for all sorts of reasons. Here’s what it all means.

What’s all this then?

Imagine a set of laws which covered pretty much all of the physical space in New Zealand, and how that space gets used. It’s big, it’s hairy, it’s complicated and it’s tremendously important – it’s the Resource Management Act. And it’s in line for major changes, environment minister David Parker has announced this morning.

What’s the problem with it?

Basically, no matter what your views are, there will be something in the RMA that pisses you off.

You might be an environmentalist who wants stronger legal force behind action on climate change. You might be a property developer wanting to build new housing, but be stymied by regulations which many see as contributing to the housing crisis. You might be concerned that the RMA is breached thousands of times a year, but almost nobody is ever prosecuted. You might think the conditions on farming which contribute to the state of freshwater are too strong or too weak.  You might, like Don Brash, think Māori get too much preferential treatment under the RMA, or like the Māori Party think consultation with tangata whenua has been inadequate. You might think the required levels of consultation are too arduous. You might be a mediocre journalist considering sitting down and reading the law in full and deciding it’s just too damn long.

Haven’t we been here before?

For all of those reasons outlined above and more, reform of the RMA is one of the catch-cries of almost everyone who takes a legalistic approach to politics. As the defining tool of environmental regulation, it is the context in which pretty much all decisions take place – therefore reform plans send an extremely strong signal about the general direction of travel of a government.

In fact, National leader Simon Bridges has said he regrets that the previous National government wasn’t able to push through RMA reforms in their final term, in part because they couldn’t square it with their coalition partners, and were instead left with a few small-scale amendments. A similar announcement on direction of travel was made by the current government last year.

So what will this government do?

At this stage, it’s looking a little bit like all things for all people, nothing less than an attempt to “comprehensively overhaul the RMA to cut complexity and costs, and better enable urban development while also better protecting the environment”. Minister David Parker points to delays in house building and urban development as a reason for concern, saying while the RMA is “not the sole cause of the housing crisis, planning rules are partly to blame.”

As well as that, he sympathises with the plight of the lazy journalist, and says the law has become far too complicated since it was first introduced in 1991. “Further ad hoc patch-ups and workarounds are not the answer. We need a thorough overhaul.”

Will the National opposition support this reform, then?

Judith Collins zapped out a press release within minutes of the embargo lifting. She said, “We are open to working with the Labour-led government on this reform if it can present sensible solutions that will deliver New Zealand the infrastructure it needs.” But also: “My concern is that by waiting so long to undertake this piece of work, the government has left it too late in the electoral cycle to act on it. This suggests they aren’t confident of getting NZ First and the Greens on the same page … The last thing New Zealanders want or need is yet another working group that kicks an important issue to touch until after the next election.”

Sounds like there may be a bit of work involved, will it take long?

Yes, it will take ages. A draft bill will be introduced in the next few months with amendments requiring immediate attention, and proposals for wide-scale reform will be delivered in the middle of next year. It’s highly unlikely that such wide-scale reforms will be legislated in by the time the next election rolls around, which means some of the issues will potentially become part of the campaign. Given that National have their own plans to reform the RMA, the details of each plan could become points of differences for voters to assess.

What about Māori and the consultation process? 

Parker has also promised the review will make recommendations for “effective – but not overly complex – participation” by the public in RMA decisions. In a cabinet paper about the review, the importance of the RMA to Māori was highlighted – “RMA provisions for Māori participation are some of the most significant expressions of how the Crown provides for the Treaty of Waitangi (the Treaty) and the Māori-Crown relationship.” The paper promises that Māori will be engaged throughout the review.

How will this affect other stuff going on?

The government is currently working on a review of freshwater laws, and has the Zero Carbon bill before parliament. The existence of both is a reflection of the fact that existing laws weren’t doing enough to protect the environment or reduce emissions. In the draft terms of reference for the review, there was this Venn-ish diagram to visualise how the RMA would interact with other legislation.

Simple enough, right?

Finally, will any of this make people like the RMA more?

Well, probably not. The cabinet paper says the review “must resolve debate on key issues” in how the RMA is written and applied. But fundamentally what the law is designed to do is navigate a path between competing interests and groups. Arguably, all of representative democracy is an effort to navigate that path. So even if the law is made more simple, and somehow achieve the unicorn of both streamlining housing development and better protecting the environment, those various competing interests will still exist. No matter how the law is changed, expect calls to reform the RMA to continue approximately until all life on earth is extinguished.

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The key art from the film Captital in the 21st Century (dir. Justin Pemberton, 2018)
The key art from the film Captital in the 21st Century (dir. Justin Pemberton, 2018)

PoliticsJuly 24, 2019

Piketty’s Capital comes to the big screen, urging us to make the world less terrible

The key art from the film Captital in the 21st Century (dir. Justin Pemberton, 2018)
The key art from the film Captital in the 21st Century (dir. Justin Pemberton, 2018)

The 700-page Thomas Piketty economic treatise Capital in the 21st Century was a surprise blockbuster five years ago. Now it’s been made into a documentary film, directed and produced by New Zealanders. The message is out there, Danyl Mclauchlan writes – but are enough people listening?

Thomas Piketty’s Capital in the 21st Century enjoyed about six months of Very Important Book status when it was translated into English in 2014. It was a work of popular – still though rather difficult – macroeconomic history, arguing that high inequality was built into the fundamental nature of capitalism, and I sometimes wonder if Piketty might have been the last intellectual to enjoy a widespread impact on the public conversation, now that our cultural attention span cycles endlessly between problematic retweets, edgy TV shows, live-streamed atrocities and celebrity cancellations. If you want to know what all the fuss was about, and maybe even purchased Capital in the 21st Century but couldn’t quite wade through 700 pages of macroeconomic statistics, the documentary version playing in this year’s film festival might be for you.

Capital in the 21st Century is directed by New Zealand film-maker Justin Pemberton, who co-wrote and directed the Richie McCaw film which is, inevitably, the highest grossing New Zealand documentary of all time, and it’s co-funded by the NZ Film Commission – all of which helps explain why a film about a French quantitative economist features commentary from Bryce Edwards, Lorde songs and clips from Utu.

The film adopts the style of the post Adam Curtis genre: artfully curated music matched to artfully edited archival footage punctuated by talking heads explaining things to you. So we jump from a scene from The Grapes of Wrath to news footage of riots during the Great Depression to a voice-over from Francis Fukuyama matched to clips of shirtless New Deal workers who look suspiciously like male models breaking rocks to techno, then onto to Hitler’s Nuremberg rallies, all in the space of about ninety seconds. The historical narrative is punctuated by modern images of skyscrapers, homeless people, private jets, more haunting children and capitalists in suits walking towards the camera in slow-motion to hip-hop, like they own da club. Which they do.

Makes u think (not actually an image from Capital in the 21st Century). Photo: Getty

The film does a brisk job of compressing two hundred years of global economic history into a hundred-odd minutes while communicating Piketty’s thesis. The modern conception of a successful capitalist, he argues, is often an entrepreneur or business leader: someone who builds and run companies, invents things, creates wealth, grows the economy, which shares that wealth around to everyone else. But that conception, so common in contemporary economics, is based on the performance of free market economies during the mid 20th century: a very atypical period marked by high economic growth, high taxation and redistribution and unusually high returns to labour. If you want to see what a successful capitalist really looks like you need to look at Darcy from Pride and Prejudice.

Darcy is the most eligible bachelor in Derbyshire, which is nice for Elizabeth when she (spoiler) marries him, but in terms of his wider contribution to society Darcy doesn’t actually do anything. He inherited a vast estate and a huge manor house, and he probably owns a fortune in government debt. This gives him ‘ten thousand a year’, as the Bennett sisters constantly whisper to themselves, translating to profits of approx $600,000 a year in today’s money. The early capitalist economy of the Regency era has low inflation and low growth, so every year Darcy can just sink a proportion of his income back into buying more land and more government debt. And every year Darcy and his class own a little bit more of everything, and every year everyone else – the people who do all the work and create all the value – earn a little less.

This system was disrupted by decades of sustained shocks: the industrial revolution, large-scale colonialism, globalisation, the war, the depression, hyperinflation, the socialist and fascist revolutions, then another war, all culminating in the economic boom of the post-war progressive democracies: a period in which you get high growth and massive wealth transfers from rich to poor via the tax and welfare systems and this leads to the creation of a vast, prosperous, capital-owning middle class. But that class is now declining, slowly in Europe, very sharply in the United States; the benefits of economic growth are shifting back to owners of capital rather than labour.

Part of this change – not the whole part, there are other factors, but not a trivial one either – comes from the neoliberal reforms of the 1980s and 1990s: the decline of organised labour, the deregulation of the financial system, drastically lower taxation levels and the reduction of the welfare state. All of this leads to greater inequality, but it was all done on the basis that it would boost the economy and ‘grow the pie’ so there is more for everyone because ‘a rising tide lifts all boats’.

If there’s one thing Piketty wants you to take away from his history of capitalism, it’s that none of the neoliberal reforms delivered any detectable increase in economic growth, overall corporate profits or more entrepreneurship. Instead they incentivised corporate executives to transfer wealth out of their companies and into their own bank accounts, and the financial sector to transfer wealth out of the real economy and into the financial economy, and from there into their own accounts, tax shelters, yachts, luxury homes etc. The advanced capitalist economies seem to be drifting back towards the pre-Industrial Revolution model of capitalism in which a tiny, Darcy-like elite gets rich by extracting rents without doing any work or creating any value. And this, Piketty argues, is the default mode of capitalism: the natural order of things.

Five years ago this critique of capitalism was seen as radical, shocking; Piketty was attacked as a Marxist by mainstream commentators. How dare he question the economic system? Why didn’t he move to North Korea if he didn’t like it? It’s a sign of how quickly the global conversation has shifted – and his book played a major role in this – that every woke activist now knows that capitalism is evil and that the solution to all our problems is to destroy it. Bernie, AOC, Jeremy Corbyn, Russell Brand and the podcasters at Chapo Trap House all say so, and they’re very confident this will work out well and have no conceivable downsides.

But Piketty thinks this would be an awesomely bad idea. He argues in his book that Marxist theory is based on an understanding of economics that has been obsolete for over a hundred years, and the film begins – very pointedly – with the collapse of Communism in the late 20th century. Complex technological societies have deep problems related to information and coordination; free markets (partly) solve them and planned economies do not, which is why they always fail at scale. The dream of improving society by putting the bureaucrats at Work and Income or Housing New Zealand in charge of every single aspect of everyone’s lives is not as well thought out as it seems. And you also don’t want low economic growth, or degrowth, because that is a fundamental driver of inequality. Capital can always earn about 5% of its value per year so if your economy is static or shrinking capital simply owns more and more.

Thomas Piketty and the book that made his name

So what do we do? Piketty believes we can reform capitalism. It’s been done before, he points out: the progressive governments of the mid 20th century managed it with spectacular results. And the talking heads – Fukuyama, Gillian Tett from the Financial Times, Piketty himself, Bryce – all warn us that without proper mechanisms to redistribute wealth, capitalist democracy descends into revolution and fascism. Cue footage of Trump rallies.

Piketty’s main policy tool is a progressive tax on capital. This gets really high at the top end: he wants to tax billionaires 5-10% of their total wealth every year, because at that net worth you’re almost certainly not creating any new value; you’re Darcy, extracting rents. The wealth tax raises revenue, obviously, but it also prevents capital from accumulating too much power and capturing the political system and setting all the rules to advance its own interests. Taxing wealth – especially property – is vital, so it sure is a shame that the Ardern government has ruled out such a tax in perpetuity.

Also vital: capturing and taxing the money hidden in international tax havens. Piketty’s collaborator Gabriel Zucman appears in the film: back in 2015 he estimated there’s at least US$8.7 trillion concealed in international tax shelters, a significant fraction of all planetary wealth. The world’s rich essentially operate their own separate financial system in order to escape their obligations to the countries that have rewarded them so handsomely. (I say: confiscate it all.) The tech companies are especially adept at avoiding paying tax. This is an easy problem to solve, Zucman argues: you simply tax them based on where their customers are instead of where they register their profits. Let Google and Facebook operate out of Ireland, Bermuda etc: you tax them based on where the money is coming from rather than where it’s going.

Piketty’s last important lesson, which doesn’t come across in the movie, and is probably impossible to communicate without an audience-killing deluge of charts and statistics, is the power of incremental macroeconomic change over time. The mid-20th century progressive governments and the late 20th century neoliberals were very good at this: picking the right policy settings to shift the economy in the direction they wanted. You change homeownership rates or the ratio of return to labour by a percentage point a year, and then let it compound, year after year, and in twenty years you’ve transformed your entire country and the public isn’t really sure how you did it.

The last National government transferred about half a trillion dollars of wealth to property owners over a period of nine years, much of it from workers paying rent to a cohort of Darcys in Rodd and Gunn polo shirts. National didn’t campaign on this, they just found the right policy settings and did it. The capital gains tax and KiwiBuild were supposed to attenuate this wealth transfer but failed, so it’s still ongoing; locked in no matter who is in government.

That’s what real transformative political change looks like. Given its nature and who it benefits, how hard it is to overturn – we can’t even put a price on carbon – it’s difficult to feel optimistic about Piketty’s invitation to recapture our democracy and fix the system from within. Piketty is sceptical, too, when interviewed. He’s a smart guy; he knows how the world works. But, he points out: we know the problems, we know the solutions; we have no other credible options. And we have an obligation to the generations who’ll be born into capitalist systems of the 21st century to try and make their world less terrible than it was in the 19th, or most of the 20th.

Capital in the 21st Century screens a final time at the NZ International Film Festival in Auckland on July 24 before playing at the Wellington festival and then around the country.

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