There is a presumption in the New Zealand political economy that the free market is the most efficient method of allocating resources and an assumption that everybody gains from the wealth that is created (trickle down). This is the heart of governance policies that gained traction and credibility under the leadership of Thatcher and Reagan…..
But are markets free, and are public benefits inevitably produced, especially in urban development?
An example of a genuinely free market might be the settler who walked up Gabriel’s Gully in Otago almost two hundred years ago, spotted gold lying in the stream, picked it up and took it to the bank in Dunedin. But most markets aren’t free. They cost. They take and they don’t replace in the case of natural resources, and they rely upon publicly funded regulatory systems to protect trades that occur between people. Markets exist where people want something someone else has, and rather than stealing it or killing the person to get it, money changes hands or some other contract is entered into. These market transactions have legal protections that can be enforced and infringements punished. The associated administration, legal and enforcement systems all have to be paid for. Free markets are never free.
Just as there is a difference between private goods and public goods (goods in common – or common goods), there is a difference in markets used to trade private and common goods. A private goods market (private-market) offers the buyer the greatest freedom and the most competition (shoes, clothing, electronic goods, package holidays). While they offer freedom of choice, because private-markets are regulated (consumer protection, guarantee protection, health and safety, law of contract), they are not free of cost.
Not very long ago public goods were provided entirely by publicly funded agencies. Typically these are services and commodities that are shared and essential in urban life (water and wastewater services), that have large common costs (roads, wastewater treatment plants), that are used in common (parks, libraries and stadia), and which provide social services (health, education, correction). The prices for these goods are not set by a “free” market, but by a regulator or public agency that owns and manages the commons-market (or public market) and which decides how much of the cost of those services will be paid for privately (user pays) or shared in common (publicly funded by property rates for example).The "free" market was generally put off the public goods market by uncertainties such as unpredictable demand, high infrastructure costs, unquantified maintenance obligations, and difficulties identifying revenue streams.
Ways and means have since been developed to enable more and more of these public goods to be subject to market forces of one sort or another, enabling the private sector to become involved in the provision of public goods, and to profit from it.
So what about wealth?
In a country like New Zealand, the concept of private-wealth is straightforward. Your house, your car, the money you have in the bank, and the other assets you own in sum generally equate to your private-wealth. But adding those private-wealth totals for all of the people who live in a city does not add to the total city-wealth. The missing amount is the common-wealth of the city.
Every city, and every part of every city, every community, has common-wealth, just as every citizen who lives in a community has private-wealth. These two different components of wealth usually overlap. Thus the sales price of a house in a high-amenity suburb (in Auckland suburbs like Epsom, Herne Bay, Devonport come to mind) includes a common-wealth component which is effectively embodied in the value of the land, plus the value of the physical house itself (capital improvements).
It is the common-wealth of an urban community that is particularly attractive to speculators. It is like the gold in Gabriel’s Gully. It is an untapped and un-mined resource. Central government and Auckland Council alike – given their mutual commitment to GDP growth - are motivated by the increased economic activity and taxes and rates and other revenues that would accrue from enabling developers and speculators access to this common-wealth.
If only it were as easy as picking gold from between stones in a Central Otago river.
Governance of urban redevelopment and intensification that fails to transparently account for urban common-wealth when freeing urban areas up for redevelopment typically leads to a reduction in community common-wealth which is banked as investor private-wealth gain. Obvious examples of common-wealth loss include larger school class sizes; more congested roads; increased risk of sewer overflows; perceived stranger dangers with an influx of settler residents; loss of community cohesion with increasing rentals and temporary occupants. Any one of these losses or damage to the common-wealth is felt by existing common-wealth owners. Unregulated speculators profit from a good level of common-wealth, and leave it depleted.
Mutual benefit collaborative planning includes common-wealth accounting and cost-benefit assessment of options. Without such processes a state of revolt is predictable when a community is faced with the unknown impact of a “free” market redevelopment project. Without an appreciation of community common-wealth, an exciting redevelopment project (in the eyes of developer, investor and public authority leaders) becomes an act of piracy (in skeptical community eyes).
Stake-holders in community common-wealth will defend it from damage and loss partly because they believe it’s theirs (they paid for it with their taxes and rates) and partly because it’s home. This predictable and human behaviour is happening across Auckland’s residential commons because of the perceived threat of the new Unitary Plan. (Calling it “Nimby-ism” won’t make it go away.)
It is an unfortunate tragedy of the Auckland commons that Auckland Council believes it is appropriate to feed and fund its hungry and bloated self from private development of public space and assets. These are part of the common-wealth of the city, and should only be traded in exchange for commensurate or better public space and assets.
This is an important matter because the common-wealth of communities, of cities and of the nation is a measure of the quality of life. City common-wealth should not be sold to the highest bidder. Private markets exist to exploit and reduce the common-wealth for private-wealth. An important role local and central government is to promote, protect and build the common-wealth of citizens, for citizens. Politicians and officials and advisers who exploit or enable exploitation of the common-wealth of citizens beware.
You are all on notice.
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