Maybe allow competition?

The Initiative's Insights newsletter generally concludes with a more light-hearted column.

The case that our Michael Johnston took on in it this week lent itself to lots of different approaches. 

This was my take on the same topic - but from a different angle. Because I tend to think about things in terms of statutory barriers to entry. And Jennifer Roback Morse lives in my head. 

Imagine that you lived in a small town with one pharmacy. The next town is a long drive away.

And the town’s pharmacist is the most culturally insensitive, if not outright racist, person you’ve ever met.

Friends avoid going there to avoid being ridiculed for their health conditions.

You’ve had enough. You know that the town would be better off with another pharmacy. So you decide to open one.

You buy a shop right across the street from your soon-to-be competitor.

You’ll hit your first roadblock pretty quickly.

You aren’t a pharmacist. You’d obviously planned on hiring a pharmacist, but you were going to own and control the business.

The pharmacist cartel has ensured that nobody except for pharmacists can compete with other pharmacists. It’s in the Medicines Act. And it helps protect the shop across the street.

Because you care about your community and because you refuse to give up at the first bureaucratic impediment, you find a solution.

Instead of hiring a pharmacist, you partner with one. You loan that pharmacist a lot of money to buy into the business. Your partner gets 51% ownership and effective control of the pharmacy’s operations. You get 49%, interest payments on that loan, and the joyful anticipation of driving the other guy out of business by providing your town with better service.

But then you hit your second hurdle.

You need a license to dispense funded prescription medicines. That licence comes from the government. And the government prioritises applications for licenses in places that are underserved.

Your town is small. It can’t sustain two pharmacies. Your plan is to drive the racist across the street out of business by providing a better and more inclusive service.

But your application to dispense funded medicines goes to the bottom of the pile. Because the town that can sustain one pharmacy already has one.

The Pharmacy Councill this week announced that all pharmacists will be required to undertake ongoing cultural competence training and activity.

Their guidelines are as cringe-inducing as you might expect. And I doubt that cultural competence training does much to help a racist to achieve enlightenment.

I wish instead that it were legally simple for new pharmacies to drive culturally incompetent ones out of business.

It would be more effective.

But I doubt the pharmacists’ cartel would like it.

Misuse of land use planning

If you thought McDonald's was some kind of public health hazard, using processes under the Resource Management Act to try to block one from opening in Wanaka would be among the stupidest possible ways of dealing with it. 

The country already has food safety regulations. If you thought that (in fact delicious and fine) McDonald's food were actually toxic waste, food safety regs would address the problem across all existing 170+ outlets across the country. 

Objecting to a single restaurant would just be dumb. 

The land use planning system doesn't even work this way. The consent in Wanaka was to operate a restaurant type activity. 

If some other restaurant got a consent to open there, a McDonald's could buy the site and flip it to being a McDonald's without much land use consenting hassle unless they needed different transport links for a drive-through. 

If you wanted to handle this kind of thing through the land use planning system, every time a restaurant turned over it would have to go through a new consenting processes checking that the characteristics of the restaurant were substantially equivalent. 

It would be insane. 

So even if the National Public Health Service's submission against a McDonald's consent application in Wanaka hadn't been a steaming pile of anti-corporate buzzwords fresh out of a 1990s anti-globalisation rally (I mean, just look at the darned thing), it still would have been a terrible idea. 

The submission really was mad though. Here are a couple of snippets.

...there is no evidence supporting the fact that transnational (TNC) or multinational (MTC) create a prosperous, resilient, and equitable economy in the District"

...We are not aware that a holistic assessment of the value that this proposed new corporate business will add to the social, economic, and cultural wellbeing and physical health of the people and the community of Wānaka has been undertaken.

...To summarise, NPHS Te Waipounamu:

• strongly encourages further meaningful engagement with the community.
• reminds council of its Te Tiriti obligations to Kāi Tahu as mana whenua.
• is concerned about the impacts of MNC and TNC, such as McDonalds, on planetary health and the health of current and future generations.
• recommends a comprehensive HIA (including cultural impact assessment to analyse the cultural impact for Kāi Tahu). We would like to see such an assessment demonstrating that the outcomes for the individuals and the community of Wānaka would mostly be positive before granting consent for this proposed fast-food restaurant.

NPHS Te Waipounamu wishes to be heard with respect to this submission.

[Note that the changing acronyms MTC vs MNC are in the original.]

They didn't just put in a written insane submission. They also headed on out to the hearing to be heard about it.  

It reflects an NPHS that has lost sight of what it is meant to be doing and is off pursuing other objectives, in a time of tightly constrained resources. They were even intervening in the nutritional aspects of food carts in Invercargill. 

I'd covered it in my column in Thursday's New Zealand Herald, ungated here. 

A snippet:

The submission urges further measures that seem aimed at increasing McDonald’s legal costs – like demanding a comprehensive health impact assessment and a cultural impact assessment. The NPHS also weighs in on other matters about which it has no competence – like the visual amenity of the proposed restaurant.

And it provides a remarkable chart asserting that “GDP as a measure of economic growth” contributes to ill-health and health inequalities.

This is not a one-off. This is how the NPHS sees its role. This is its baked-in ideology.  

Mr Barry had previously inserted himself into discussions of whether Invercargill’s food trucks’ offerings have sufficient nutritional merit.

The letter from Health in All Policies Advisor Monica Theriault, which concludes the submission, notes, “We are eager to enhance how the concepts of health promotion can be effectively applied within the RMA framework.”

They want to do more of this.

The NPHS has revealed what it considers a priority in a time of restraint.

I draw a few conclusions.

First, the government’s coming reforms to the land use planning system must prevent the weaponisation of consenting processes.

Second, the Commerce Commission needs to pay a lot more attention to the anticompetitive effects of the land use planning system.

Finally, Minister Reti has not gone far enough with proposed budget cuts. He might consider razing the NPHS to the ground and starting over with an agency sharply focused on infectious disease. It is hard to see what else could fix it.

I also chatted with Sean Plunkett about it yesterday morning. 

Today, Minister Reti published a serve back to Health New Zealand, reminding them to focus on their core business. 

A snippet of that:

Minister of Health Dr Shane Reti says the National Public Health Service should concentrate its focus on prioritising serious public health issues facing New Zealanders.

“Earlier this week I was informed about an 8-page submission by the southern arm of the NPHS regarding a proposed fast food outlet in Wanaka,” Dr Reti says.

“I have raised my ongoing concerns about the content of submissions like these with the Chief Executive of Health New Zealand.

“Content within the submission, including observations about planetary health, landscape values, traffic and Te Tiriti do not match my over-arching view of what the NPHS should be spending its time on.

“Whooping cough, measles and raising immunisation rates are among the most pressing issues facing health today.

The serve was needed. And is welcome. 

I think Bob Edlin over at Point of Order missed the point here. 

A public health service focused far from main business, and using exceptionally stupid methods for achieving ends outside of their main business, has to be steered back, and hard. It will be hard for it to get anything else right without that direction, or without my alternative (and still preferred) solution of razing it and starting over. 

As David Farrar pointed out over at Kiwiblog:

Around half the public health staff (those who deal with infectious diseases) do amazing work, but around half seem to be taxpayer funded lobbyists who lobby the Government that employs them, or local governments.

I have an OIA in with Health NZ asking for the resourcing that went into that submission process, and for the decision-making process around it. And one in with the Ministry of Health just ruling out that they'd ever given Health NZ advice about this kind of thing. Will be interested to see what I hear back, eventually. 

And really, a better land use planning system ought to take this NPHS submission as a benchmark for "This is the kind of vexatious submission that should not only be dismissed summarily, but also result in a fine assessed against the submitter."

This will not end well

I still think Rod Carr had this stuff right two decades ago when he'd argued against having deposit insurance at all, and instead making very clear that government would never bail out depositors. 

People can argue the toss about hard caveat emptor versus some perfect deposit insurance scheme with full risk-based pricing and whether following through with minor depositor haircuts after burning through investor equity under OBR was credible. 

But that makes the mistake of comparing an imperfect status quo with an assumed-to-be-perfect government policy. 

Here's what the government is doing.

The Herald can reveal Cabinet has decided levies will be risk-based. So, big banks will pay less, relative to the value of insured deposits, than risker deposit takers.

But only a small portion of the risk will be priced into the levies.

The levies won’t be as risk-based as the Reserve Bank, which regulates deposit takers, recommended.

Credit unions and building societies will also be given a hand-up by being allowed to pay lower, flat levies until 2028, before moving to the risk-based model.

The Commerce Commission, which is interested in increased competition, had recommended all deposit takers initially pay flat levies (worth a certain percentage of insured deposits) until the impacts of the scheme were better understood.

I suppose I could look at it the other way. 

Remember when the government set up a hasty deposit guarantee scheme in response to the GFC over worries that deposits would flee from risky places into safer places, so it set a scheme that encouraged money to fly from safe places into risky places whose high returns were suddenly government guaranteed? 

One of our sharper students maxed out his 0% student loans to invest in South Canterbury Finance at, I think, 8%. 

We could all take a page from his book. If you can borrow at less than the deposit rate offered at the riskiest places that Nicola Willis is going to guarantee through 2028, it's free money! Fiscal stimulus for those of us who are most meritorious, as demonstrated by our credit-worthiness. 

The lowest three-year-term mortgage rate is currently 5.65%. 

The highest three-year term-deposit rate that I think might be covered is currently 6.75%.

So.

Borrow $100k and you get a risk-free $1,100 on it per year. 

This Is Not Financial Advice. You'd probably need to do it through a company structure so you could write the interest cost against the interest earnings. Unless you had access to zero-percent student loans. 

Where are the food carts?

I still don't get why there aren't more food carts on Wellington's waterfront. On a good sunny day, you might find, along a stretch of gorgeous waterfront more than two kilometres long, all of it close to downtown, 2-3 food carts. 

Meanwhile, downtown Christchurch restaurants are worried about the Arts Centre's plan to host around 30 carts not just on weekends: every day. They point to the rates bills they pay and consenting hassles they deal with that food carts avoid; they want Council to cut its subsidy to the Arts Centre if it doesn't abandon its food trucks plan. 

My column for this week's Post, Christchurch Press, Waikato Times etc:

Assessing council rates on land value alone, while abolishing the punitive ratings differential assessed on businesses, would be a better way of levelling that part of the playing field. The piece of land would pay the same amount in rates regardless of whether a restaurant, a shop, or some carts sat on it.

Similarly, radically easing consenting burdens would level the playing field while improving outcomes more generally. This week, results from the UK Growth Survey were released. Forty-four top UK economists were asked what their government should do to pursue growth. They overwhelmingly pointed to planning reform. We have the same problem.

Building a restaurant should be a simple by-right activity.

And letting food carts serve beer would remove a distortion that currently works in restaurants’ favour.

Christchurch council should only reduce the subsidy it provides to the Arts Centre to the extent that having food carts reduces the value of the public amenity that the centre provides. And really, food carts seem more likely to improve that amenity than impede it.

Christchurch’s problem then brings us back to Wellington’s puzzle. Food carts do not have to deal with resource and building consents, though they do need a food registration certificate. They enjoy a ratings advantage, and Wellington’s business ratings differential is even worse than Christchurch’s. And everywhere in Wellington’s downtown is a short walk from the waterfront. Christchurch is more dispersed.

So, on a good day, to steal a line from an old Australian tourism commercial, where the hell are the waterfront food carts?

Better to level playing fields by removing shackles rather than by adding them. But if food carts do have such an advantage, why are there so few on Wellington's waterfront? 

An ungated version of the column will eventually turn up here.

Generation screwed?

I gave a short talk for a new student group last week, Generation Screwed. The event was joint with Students for Liberty, who seem to be setting up in NZ!

They'd asked about debt, tax burden, and intergenerational issues. I put together a few starter-notes to let them know where I was coming from; I've copied those below. 

1. The cleanest measure of the tax burden is government spending. Governments will try to hide the burden by shuffling it off to future through debt. Always watch spending rather than just taxes. The only real tax cut is a spending cut. The Public Finance Act tries to constrain govt use of debt, but it doesn’t enforce itself.
2. As a rule of thumb, governments should not spend more than they earn in tax revenue. Fine to take on debt in a crisis or downturn and pay it back on the upswing. But funding normal expenditure through debt is a terrible idea. It only works until it doesn’t. And when it doesn’t, things can get very bad indeed.
3. Debt for long-term infrastructure, funded by payments from the use of that infrastructure, is of a different category entirely – so long as the accounting is sound. What’s a good way to make sure the accounting is sound? Ban bailouts of that debt from government’s main balance sheet. Interest rates on it will be higher because they reflect real commercial risk. If a project is then not viable, it was a bad project to begin with.
4. Getting that kind of ring-fenced debt in order is vitally important in bringing housing costs down. Why? It lets the beneficiaries of the infrastructure needed to support new housing pay for that infrastructure over a long period of time, rather than spreading its cost across the entire community over a shorter period of time. The current setup means every other ratepayer has incentive to restrict new infrastructure because they’re stuck paying for it. Going back to basic principles of beneficiary-pays means we’d get to have more nice things. The housing shortage is fundamentally a zoning issue, and it’s a zoning issue because councils experience housing growth as a cost to their balance sheet to be managed through zoning rather than a benefit to be sought through infrastructure provision. Fix that and most of the problem is solved.

Seems like a fun group. I had fun anyway! 

Rebuilding one bit of state capacity

New Zealand's immigration bureaucracy isn't in the best of shape. 

So it's interesting to read this piece from the Niskanen Center on Biden's refugee resettlement programme, and how it provides an example of rebuilding state capacity. 

President Biden set ambitious refugee resettlement goals—62,500 for 2021 and 125,000 for 2022. However, the U.S. lacked the capacity to meet these targets. The resettlement system, significantly weakened by previous cuts, struggled to reach even 10% of the target. While the policy was clear, the necessary infrastructure was woefully inadequate. There was little state capacity. 

The challenge was clear: How could the U.S. government, along with its global partners and local resettlement agencies, restore a refugee system that had once been a global leader but had since deteriorated? The task required swift action to rebuild the infrastructure, resources, and capacity needed to meet the ambitious resettlement targets set by the administration. It was a race against time to revive a program that, only a few years earlier, had been a cornerstone of U.S. humanitarian efforts.

To understand how the U.S. refugee program rebounded, it’s essential to first look at how it was dismantled. Donald Trump campaigned on the notion that the program posed a security threat, particularly emphasizing risks from refugees from Muslim-majority countries due to what he claimed were inadequate vetting procedures. Shortly after taking office, he implemented a travel ban, paused refugee admissions for 120 days, and reduced the annual refugee admissions target. Each subsequent year, the admissions cap was lowered further, causing over 100 resettlement offices across the country to close.

When COVID-19 hit, the already weakened refugee system collapsed, reaching its lowest point in history. Refugees who had completed the rigorous security and medical checks saw their approvals expire as the program came to a standstill. By the time Joe Biden took office, the resettlement pipeline had been hollowed out. It wasn’t just a matter of restarting the program — it was about rebuilding U.S. state capacity for refugee protection from the ground up. This was far from a simple flip-the-switch scenario; restoring functionality required a comprehensive overhaul. 

Niskanen’s Jen Pahlka identifies three essential strategies for increasing state capacity: 1) recruiting the right people, 2) focusing them on the right things, and 3) reducing unnecessary burdens on their work. This straightforward framework delivers dramatic results and offers a clear lens to understand how the U.S. refugee program was successfully rebuilt.

Probably worth writing up as a proper column sometime.  

What planet are they on?

New Zealand's newspaper chiefs' views on how the Fair Digital News Bargaining Bill works is somewhat at odds with the text of the Bill. 

Google today, admirably, said they'll stop linking to New Zealand news outlets in search if the Bill goes ahead. 

News Publishers' Association's Andrew Holden and Stuff's Sinead Boucher aren't happy about that. But contrast what they say with what the legislation says. 

News Publishers' Association spokesperson Andrew Holden said Google had deliberately misrepresented the legislation in its blog and demonstrated “the kind of pressure that it has been applying to the Government and news media companies”.

The bill would create the environment for media companies to “sit down and have a proper commercial negotiation with ‘big tech’ companies about their use of our journalism”, he said.

The Bill creates an environment for a proper commercial negotiation? Let's look at the Bill.  

Clause 21 lets news media companies apply to the Authority to have a platform registered as an operator. A designated operator must comply with the bargaining code (26), under a duty to bargain in good faith (27), and a duty to participate (31). If the negotiation period ends without agreement it moves into mediation (34, 35). It moves then to final offer arbitration if they fail to reach agreement (39), they submit final offers (45), and the arbitration panel selects its preferred final offer (49). There are matters to which the Panel must have regard (50) but there's no way of forming reasonable expectations about what that Panel might decide. 

Does any of that really sound like 'proper commercial negotiation'? 

If I would like to buy your house, and you do not want to sell me your house at the price I've offered, would proper commercial negotiation mean that it ends there, or that I get to drag you into arbitration where you might be forced to sell me your house at the price I've set as my final offer if the Panel thinks that that number seems fair?

Has Andrew Holden read Section 49 of the Bill or is he deliberately misrepresenting the Bill?

Let's move on. 

“To make it clear, no one is asking Google, or anyone else, to pay for linking to news,” Boucher said.

Oh really?

Here's the preamble to the Bill - the explanatory notes. 

The Authority may only register an operator in respect of a news media entity if, in the Authority’s opinion,—

the operator’s digital platform makes the news media entity’s news content available; and

there is a bargaining power imbalance between the operator and the news media entity that favours the operator and is more than minor or insignificant.

Let's check Clause 22: 

22 Grounds for registering an operator

(1) The Authority may register an operator in respect of a registered news media entity only if, in the Authority’s opinion,—

(a) the operator’s digital platform makes news content produced by the news media entity available to people in New Zealand; and

(b) there is likely to be a bargaining power imbalance between the operator and the news media entity in respect of the terms on which the news media entity’s news content may be made available by the operator’s digital platform; and

(c) the imbalance is—

(i) more than minor or insignificant; and

(ii) in favour of the operator.

(2) When deciding whether to register an operator, the Authority may take into account the following matters:

(a) the size of, and resources available to, the operator and the news media entity:

(b) the extent to which the news media entity is reliant on the operator’s digital platform to carry on its business:

(c) the extent to which the operator is reliant on the news content produced by the news media entity to carry on its business (including the extent to which the operator can substitute content produced by the news media entity for content produced by another news media entity):

(d) an estimate of the benefits and detriments (monetary or otherwise) for the operator and the news media entity of the news media entity’s news content being made available by the operator’s digital platform:

(e) the extent to which the news media entity has been able to negotiate the terms on which its news content is made available by the operator’s digital platform, including—

(i) whether the operator has subjected the news media entity to unfair pressure or tactics or otherwise unfairly influenced the news media entity in respect of news content made available by the operator’s digital platform and, if so, the nature and extent of that conduct; and

(ii) whether, taking into account the particular characteristics of the news media entity, the news media entity is able to protect its interests in respect of the news content it produces:

(f) any other matters that the Authority considers relevant.

If the Authority views a link to a news site with a short fair-dealing snippet of what the story is about as "making news content produced by the news media entity available to people in New Zealand", the platform can be designated.

If there is no intention to capture a platform that simply provides links, it would have been easy to specify that in the legislation. Simply put in a 22(1)(a)(i) that reads something like:

(i) for clarity, linking to a news site by a search engine, or by users of a platform, with or without a short snippet describing the linked story, cannot on its own be sufficient basis for designation as an Operator.  

Without that kind of restriction, I can't see how linking to a news story on its own is guaranteed to be insufficient basis for designation. It doesn't matter whether Boucher says she doesn't want to force Google to pay for links. What matters is whether the legislation precludes that as being sufficient, on its own, for designation. 

Shayne Currie, over at the Herald, also doesn't seem to like Google's offer to stop stealing from them by linking to their news stories. 

But his summary of the state of play in Canada is a bit jarring for those of us who've been following the state of play in Canada. 

Here's Currie. 

What happens in other countries?

Google has been ruled exempt from the Online News Act in Canada, after agreeing to pay an annual sum of money – $C100 million ($119m) – to be shared amongst news media companies.

The Google money will be allocated on a formula based on the journalist headcount at each company.

The money will be administered and distributed by the Canadian Journalism Collective, an organisation set up of independent publishers and broadcasters.

The collective was committed to distributing the funding in a “fair, transparent, and inclusive manner”, said CJC independent board director Sadia Zaman.

“We look forward to working with the full diversity of the Canadian news ecosystem, including traditional print and broadcast organisations, and independent local news publishers, including those who serve indigenous, black and racialised communities and francophone communities.”

It is understood Google would want a similar arrangement here, but for the minister to administer the pool of money.

Any pool of money is likely to be well short of what the media industry believes it should be paid, and even what it receives now.

Media industry representatives have previously stated Google should not be exempt.

You might have noticed a few things missing. 

First, Facebook's withdrawal from news hit small news outlets kinda hard. There's no mention of that at all, but he could argue that this is just about Google's side.

But on Google's side, a lot of what they're paying to avoid designation is recycling of funds they'd already been putting into journalism development. 

If you want to know what is happening in Canada on this stuff, you just have to read Michael Geist. He's the expert in it. He's the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa and has been on this file from the beginning.  

Here was his summary as of 25 September. 

The disaster that is Bill C-18 is by now well known. Blocked news links on Meta platforms have had no discernible impact on Facebook traffic, but it has sharply reduced referral traffic to Canadian news sites and led to the cancellation of millions of dollars in previous agreements with publishers. Meanwhile, the Google money remains in limbo as the sector awaits CRTC approval over the governance of its distribution. With prior Google agreements folded into the new $100 million contribution, some organizations will garner less than they did prior to the legislation. Moreover, as demonstrated by the recent response to a controversial tweet from Heritage Parliamentary Secretary Taleeb Noormohamed or the backlash against a CTV report that stitched together comments from Conservative leader Pierre Poilievre to create a fake clip, the government’s policies have only exacerbated public mistrust of the media with every error viewed through the lens of government funding for the media. Far from preserving an independent press, the policies have actually placed them at greater risk.