GUEST BLOG: Christine Dann – Rottenomics – how to build an unfair leaky economy

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Twice in my lifetime the National and Labour parties have had a consensus on housing policy and practice. The first time, when I was growing up in the 1950s and 60s, the consensus was that every New Zealander needed to live, and should live, in a well-built, comfortable, affordable home. (Affordable meant – and still means – costing no more than three to four times the annual household income.) Putting the consensus into practice ensured that lots of affordable homes were built, regardless of who was in government, and reasonable loans to buy them were advanced by the state. Some were built by the state, but the majority (over three quarters) were privately built. The state supported their building with the aforementioned loans, and also by setting building standards and regulations and providing trade training to ensure that those building the houses knew what they were supposed to be doing, and did it properly. (Check out what this looked like in practice in the 1956 newsreel ‘Homes – Auckland Builders Show Their Wares’.)

In his just-published book Rottenomics The Story of New Zealand’s Leaky Buildings Disaster Peter Dyer describes why and how this effective system was changed. It began with the takeover of Treasury by neo-liberal ideologues in the 1980s. Their advice to the incoming Labour government of 1984 was eagerly received by finance minister Roger Douglas. And so the rot – literally – set in. Neo-liberalism in housing policy (as in health, education, agriculture and other important sectors of life) has destroyed health and even lives, and it has certainly destroyed wealth. The most recent estimate of how much leaky, rotting homes have cost the country so far is around $47 billion. Dyer thinks it is an under-estimate of the true damage since this number applies only to houses, and there has yet to be a proper survey of the commercial and public buildings which were built from the 1990s onwards. There is great cause for concern here. Just after Dyer’s book was published the results of building surveys using a new imaging technology which can reveal whether buildings have the amount of concrete or reinforcing steel that they should have were released. The investigators found that “critical structural parts were defective or missing in 1100 of the 1200 buildings scanned since 2016.”

All this is the (scary!) result of the second housing consensus between National and Labour, which runs from the 1990s until now. This consensus ticks all the neo-liberal boxes. Successive governments have taken the “leave everything to the market to sort out” approach, including safety regulations, quality standards and trade training. Dyer tells three heart-wrenching stories from people who were victims of this new consensus, leaving them sick and a lot poorer. There are many more, and they keep coming as buildings continue to fail.

It is a bleak situation, which has been blighting the lives of thousands of New Zealanders for nearly three decades now. Given that nothing worth beans has been done to improve regulations, standards, inspections, skills training and education, let alone reinstate the important institutions which formerly ensured that things were done properly, we can have little confidence that things can or will get significantly better – no matter how many ‘well-being’ budgets we have between now and the next election. The leaks, the rot, the mould and everything else that is wrong with the thousands of poor quality buildings erected in the past thirty years will continue to make things difficult for people who can (just) afford homes, while the numbers of the homeless continue to grow.

It is clear that there is no understanding in the current parliament of what the democratic social contract between citizens and the state used to look like, and should look like. Perhaps we should not be surprised at this, given that most of today’s parliamentarians grew up during the second (market and money rules) consensus period, and have never known anything different. They have also been consistently lied to by the marketeers and their captive media about how ‘bad’ things were in the ‘old days’ before market rule.

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Dyer concludes Rottenomics by noting that the current government’s Kiwibuild scheme, which aims to have private builders constructing 100,000 new homes by 2028, is being applied within the context of a de-regulated, low standard, and minimally-skilled industry. Therefore it is extremely likely that a lot of these buildings will be as shoddy as those which preceded them. This will end up costing the country even more billions of dollars. He believes that the ‘revolution’ of the 1980s and 1990s is long overdue a big rethink. Amen to that – but who can or will do the re-thinking? Probably only the generation which grew up as the perfect storm gathered, in leaky homes on a leaky planet. A generation smart enough to see that there IS an alternative, and strong enough to build it.

I hope against hope that I will see a third consensus in my lifetime – a democratic consensus based on valuing and caring for all life.  If the people forming that consensus want a guide to what went wrong in the past, and what therefore needs correcting in the present, they will find Rottenomics an incredibly useful and comprehensive guide. A guide not just to the origins of leaky buildings, but also to the leaky and unfair economy which gave rise to them.

Christine Dann is a political activist and blogger with an MA Hons in Political Science and a Ph.D. in Environmental Policy.

10 COMMENTS

  1. Neo liberalism is, taken to its ultimate extreme , a murderous ideology.

    Think deregulation and Pike River , for example.

    At its best it is a social destroyer. History has shown time and again that certain opportunists are always ready to exploit others for their own ends. It is really not that different to the priesthoods of the Mayan empire that practiced blood sacrifice to maintain their positions of power by the use of fear. Thus the very strong and compelling reasons to REGULATE. Its to nip those sociopaths tendencies in the bud and ensure they do not ascend to positions of power over others.

    Unfortunately , the very nature of democracy is such that evil people can still gain ascendancy , such as did happen starting 1984 with the newly elected 4th Labour government. It was not that the govt was inherently evil , – but certain factions within it ran a deceptive campaign, lying low until they became govt. However, it did not matter which major party one voted for ie : Labour or National ,… those factions had embedded themselves in both. Those factions received their instructions from the London based Mont Pelerin society,- a far right wing ideological think tank whose goal was to recapture the global ( and mainly western economy’s’, – and by doing so , – wielding power over eastern economies , think the fall of the old soviet union…) economy. Two were actually long standing board members of the Mont Pelerin society , – those two being Roger Douglas and later on , Ruth Richardson . The ideology is fiercely anti trade union , demands deregulation in all trade and export / import affairs, touts small government and thus low taxation which benefits the already wealthy , leaves essential services such as health , education and housing necessary to an advanced civilized society up to the whims of the penny pinching free market , and thus, in this articles main thrust, the origins of the NZ leaky building fiasco.

    The very fact we have so many homeless ( and beggars on the streets ) is testament to the failure and ruthless application of this ideology. Indeed no less than the International Monetary Fund ( IMF ) stated quite candidly some years back that neo liberalism is a failure. It is the same ideology that caused the global credit crunch and in 1929 , under Lazze faire ( essentially the same thing as neo liberalism ) – the Great Depression.

    Neo liberalism gained massive impetus under Ronald Reagan and Margret Thatcher. Th latter even had Mont Pelerin advisers several doors down from number 10 Downing St. But nowhere did neo liberalism gain such a stupendously enormous foothold than in New Zealand.

    Here in New Zealand we were lied to , – as think tanks such as the Business Roundtable ( now the NZ Initiative ) plied bogus and fictitious reports to those govts and the news-media to justify these changes , – and so our democracy was run roughshod over by the 4th Labour govt , then followed by the Bolger led National party. Interestingly in both govts, – the Finance Ministers were none other than Roger Douglas and Ruth Richardson, both board members of the Mont Pelerin society. And despite massive nation wide protests clearly demonstrating their utter repugnance towards the implementation of these neo liberal politicians and their agendas, – these treacherous politicians continued to ram through what THEY wanted.

    The curious thing about all this , – is that the answer to the Great Depression was the wholesale acceptance in the west – and even Japan , – of Keynesianism. Developed by Cambridge University lecturer in economics John Maynard Keynes,… it was to be the template followed from around the mid 1930’s to the 1980’s. On average, – those country’s that adopted it moved from the red and into the black in six months on average. And thus that was, the ‘consensus’under which Michael Joseph Savage operated under. It was the consensus that successive NZ govts after Savage also operated under.

    It was also the consensus that the Mont Pelerins sought to destroy for the above reasons.

    Because a wealthy prosperous state means massive personal financial gains if dismantled correctly, ( NZ being easy pickings because of its isolation and its small population ) and this was the motivation they had in the sell off and privatization of publicly owned assets, and by asset stripping ( euphemistically called ‘downsizing ‘),- even more can be gained. And to do that means import tariffs have to be abandoned , wages need to be lowered and trade unions needed to be neutralized. Hence Ruth Richardson’s infamous 1991 Employment Contracts Act , – another evil little thought up scam to rip working people off. And again, the massive public protests meant nothing to these treasonous politicians who voted them in unbeknown as to their true intentions.

    Such is their proven contempt for democracy.

    In the mid 1960’s, … agents from the Mont Pelerins gained access to the IMF, hence massive loans for development – WITH , – the catch that at a certain date those loans had to be repaid. Robert Muldoon was sent by Holyoake to negotiate , which he objected to,… seeing the writing on the wall…and herein lay the future developments of the ‘austerity’measures seen a few years back with Greece, Spain , Portugal.

    Neo liberalism also gained popularity with public faces such as Milton Freidman, and American Mont Pelerin public speaker and lobbyist , – as well as being one of the Mont Pelerin chiefs. So now we see a concerted effort of infiltration of major political and economic institutions , combined with anti democratic ruthlessness in absolutely ignoring the very people who elected them to office.

    The leaky building crisis in NZ is but one of a very long, long list of the symptoms of the destructive and subversive ideology known as neo liberalism. Yet we are not left to scratch our heads in what can be done because the answer is relatively simple : a return to Keynes economic and political policy’s, modified to today’s conditions.

    It worked , it was efficient , and it inured the populace to the effects of mass poverty and social breakdown , … so much so , – that in 1969 , – NZ was the 6th wealthiest per capita nation on earth – after Denmark. Hence also the desire of so many to immigrate here. These days, the goals of many immigrants is to gain NZ citizenship as a means to get to Australia, – then ditch NZ citizenship and hopefully become an Australian citizen instead. That is how far backyards this country has become because of neo liberalism ,… in fact , a few years back under Keys govt,… 32nd ,… after Mexico.

    And it ( Keynesianism ) would work again, but it would involve the necessary voting out of the current neo liberals , and to do that , – would need mass education in a basic form to recapture the public’s mind. It would also need political party’s whose sole aim, – like Michael Joseph Savage before them , was to gain power and dismantle the key power bases of the neo liberals.

    It is all there for the taking , and clearly recorded for us to learn by. History’s examples. Relatively recent history , no less.

    Rest assured, there would be no more leaky buildings and mass homelessness such as we currently see today in NZ . Nor would NZ be known as a ‘low wage economy ‘anymore. And neither would our health and education and social services be in such a shocking state of disrepair .

  2. Great Rottonomics is being highlighted.

    Scary how the construction industry, politicians and councils are not concerned and have learnt nothing from the last 30 years of leaky buildings, and merrily piling on more construction risks for their ideology.

    Possibly because someone else downfall is another’s windfall. Aka NZ has 25% more lawyers per capita than the UK!

    I seem to remember in a state child abuse case the lawyers for the abused kids got more awarded in the settlement than the abused kids.

    Does not seem very just!

    Just like the lawyer green lighting all these risky construction ventures get more work when it all goes wrong and the lawyers being abused in the law firms say nothing, they are not exactly idealists out there as a role model for NZ lawyers.

  3. Child poverty: Commissioner says need for housing, income levels to improve
    https://www.rnz.co.nz/news/national/405107/child-poverty-commissioner-says-need-for-housing-income-levels-to-improve?fbclid=IwAR3XJQfeiihxWAxqaNbH2WaNN40XwjKpU1qpG1UyhmcBV_7zB8ORaD_JH9c

    Sadly most of his ideas are a mash up between Rogernomics and Woke thinking, aka either impractical or unsustainable, because it now costs the government around $650,000 to build an ‘affordable’ home and even when they renovate them using private providers, they don’t get much better.

    “The family is squeezed into a two-bedroom HNZ home, which meets current building standards for insulation and ventilation and has been through the agency’s ‘warm and dry programme’.

    Sara said that made no difference, with the home constantly freezing and cramped.”
    https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018701842/family-desperate-to-leave-freezing-hnz-home

    The Greens and Labour only managed 2300 state houses since they have been in office and housing was their huge policy, instead the COL have increased homelessness and the state house waiting lists under their watch because they all have a group think on housing and did not do what they set out to do when they won the election which was to reduce demand. Instead they did a ‘Natz’ and reduced some immigration while radically increasing other areas like temp permits which put huge pressure on all the social services in NZ.

    “On Thursday, Labour leader Andrew Little vowed to cut immigration from 70,000 to 25,000.

    “We’re just shoving more and more people in,” he told The AM Show on Thursday. “Auckland cannot cope anymore.”

    https://www.newshub.co.nz/home/politics/2017/04/labour-s-immigration-policy-build-a-wall-judith-collins.html

    You can’t have your cake and eat it too.

    Labour should have stuck to their guns and stopped all immigration that required housing, until the mythical housing and public transport and hospitals actually exist. Not just on paper or a working group conference on the subject.

    The ‘cash’ construction economy, https://www.stuff.co.nz/business/117551892/death-of-a-migrant-under-the-table-workers-building-aucklands-multimillion-dollar-homes, is a free for all, and not helping NZ build affordable homes, instead it is just creating leaky McMansions for profiteering people, many victims, and the next generation growing up in a hotel with jobs with lower wages and more competition and an expensive degree that is useless, to pay for.

  4. Great article – highlighting that despite the growing understanding of the failures of “let the market” decide economic policy in democratic countries – it remains the popular choice for most voters.
    It has become so entrenched in peoples minds that businesses are better at solving all social and economic problems that even when evidence to the contrary is slapping them in the face they can not make the connection.
    Try winning an election on the merits of government engagement and management of the economy in any Western democracy and you will be going no-where on a rail system that’s extracting tax payer subsidies into the outstretched hands of private investors.
    The business-man knows best mythology was epitomized by the popularity of John Key’s government and your average voter will need a lot more then the weekly stories of cancer patients dying from perfectly preventable causes – due to deliberate under funding – to break free from this cherished belief.
    For irrefutable evidence of this look no further then the current UK election where swathes of working class voters are about to elect a government openly hostile to the types of wealth redistribution and public services which improve the quality of their lives. They are doing this because they believe completely that Eton educated millionaires and ruthless monopolized industries must be left in charge of the country to keep the economy working as is and in order to maintain their demeaning place within it. There is no alternative.

    • Yes,… the catchphrase of the neo liberal ” There is no alternative ” ( TINA ) has become a cliche yet sadly people have been so brainwashed over 3 decades they cannot even dream there once was a system that vastly outperformed it. The problem is partially education, and all these universities that teach the unorthodox practices of neo liberalism in economics, business and politics degrees. What they are teaching is a lie in order to perpetuate it, and these young eager beavers look forward to embedding themselves in the workforce armed with this falsehood. These young graduates have grown up not knowing any other alternative,- which is sad because a very short history lesson would teach them something entirely different.

      That 35 years ago there was the alternative.

      It was not socialism , it was not communism, it was Keynesianism. It consisted of a mixed economic and political setting, and led to the most prosperous time on earth of all time for many nations. It was loosely called social democracy for many nations , ( it is no accident that those country’s still practicing a form of it such as the Scandinavian country’s still enjoy the highest standards of living globally ) and it also ensured those from poor family backgrounds had every chance to raise themselves socially and financially. For those neo liberals who want to argue the point one only has to have them recall that there were many , many millionaires under that system. Which moots that argument.

      Neo liberalism does the opposite. It ensures that wealth is concentrated with the already wealthy and does that by creating an unbalanced society with the vast majority struggling to survive in any true measure. The neo liberal wants this because it forms a pool of cheap labour increasing their profits , – and creating a cowed and servile workforce that will not resist these policies. This is why many of these far right wing neo liberals want to relocate production to poor / third world countrys ,… it ensures they pay the minimum in wages and at the same time , lowers wages in the west by sheer production competition.

      TINA ,…” There is no alternative’, is just another lie as was the ‘trickle down effect’, – or in the case of Roger Douglas and Ruth Richardson , – selling us the lie that their measures to break trade union power was to provide ”choices”. It is interesting that when John Howard tried the same thing and tried to sell the idea of ‘choices’to the Australian public , they saw right through it after seeing what happened in New Zealand and conducted such massive protests and campaigns including many radio stations that in 6 months John Howard was out of office at the next election , and shortly thereafter,… was out of politics.

      So yes the term TINA ,…nicely packaged, promising wealth and freedom , but in reality ,… was nothing more than a carefully crafted, viscous and cynical mechanism dreampt up by far right wing think tanks such as the Mont Pelerin society and others to disenfranchise not just individuals, – but whole nations.

      Well the good news is that yes, there IS an alternative and that alternative is Keynesianism economics.

  5. Pay Peanuts, You’ll Get Some Rotten Money Business

    Import Babel, Export Liability .. It’s the feudal Hobbit way !!

    – Builders are notorious for being an exclusive bunch, not much diversity.
    – The government is obviously notorious for building regulations WHILE providing few pathways for apprentices.
    – Building material merchants are notorious for their monopoly.
    – New Zealand is notorious for its low wages and high living costs.

    For years we’ve just been importing builders/construction workers .. many, maybe most of whom are NOT familiar with our building codes [at first] and a few with actual language barriers.

    I’ve met building apprentices who are enthusiastic, diligent and extremely talented .. HOWEVER, they’re expected, On MINIMUM WAGE to:
    1. Pay their own ACC levies
    2. Pay their travel expenses
    3. Provide all their own tools – down to a craft-knife
    4. Have no clear work hours
    5. Pay study/qualification fees

    Unless such apprentices come from a trade family, they don’t last. The building industry is harsh and unless you give young people the ability to bypass the Boomer roadblocks, nothing will change.

  6. One aspect that might have been overlooked is that 47 billion gets added onto GDP, which really does show how rotten the whole system is.
    People suffer because of neoliberalism yet the “economy” booms.
    The whole system is corrupt BS.

  7. After the personal saga of a leaky home (total reclad), researching how this came to be, the emotional trauma and eventually court action that saw Auckland Council pay well over $300,000, I can say everything in this blog is true and correct. Rogernomics, Rottenomics what a disaster !!!!!!!

  8. 15 years litigating these claims – acting for plaintiffs, builders, professionals, sub contractors and insurers. The misery and waste I have seen is crushing.

  9. I’m not sure if this is in the book, as I haven’t got a copy yet, but if I recall correctly, Roger Douglas specifically singled out consensus 1.0-era agency called the Building Performance Guarantee Corporation as an example of useless bureaucracy, devoting a whole (short) chapter to why it should be abolished in his 1980 personal manifesto There’s Got to be a Better Way.

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