Christchurch’s Economic Success is Associated with A Tradition of Civic Community. Wellington, Take Note.
Listener: 7 September, 1996.

Keywords: Governance;

The church hall was packed, and the audience angry. In a few days the Wellington city Council was going to decide what to do with its majority share in Capital Power, its local electricity supply authority (ESA). Everyone expected them to divest their control, despite the populace supporting the maintenance of the asset in public hands. A citizens’ jury had favoured public ownership, an opinion poll had supported them, everybody seemed against the divestment of control. Yet the decision seemed destined to go against the majority wishes. Just as a few years earlier the Council had agreed to sell a minority share to a private investor.

Various speakers argued against the proposed sell-off. I contributed too, pointing out that the promised financial and price gains came with the caveat that the consultants would not stand by the accuracy of their predictions. (Even so Councillors were happy to quote these figures when it suited them.) I also pointed out the main argument in favour of the amalgamation with the Power Direct the neighbouring ESA in the Hutt because of the fear of competition, was contradicted by the Commerce Commission. It approved the merger because it judged that the two ESAs were not able to compete effectively against one another.

The last speaker was David Close a Christchurch City Councillor, who had been flown in funded by donations from people concerned with the Wellington Council’s attitude. David is a small dark man, far from prepossessing, and by no means a great orator. But within a few electric sentences the audience went silent.

For the speaker was also the chairman of Christchurch City Holdings Ltd, a Christchurch City Council company which held substantial ownership in three major city assets: 65 percent of Port Lyttelton, 75 percent of Christchurch Airport, and 87 percent of Southpower, their equivalent of Capital Power. (The remaining shares reflect the interests of other local authorities.) Thus the local ESA is a public asset and, so David Close told us, that was the way it was going to remain. The trading enterprises are, he said, “efficient, socially responsible, and profitable,” a conclusion he supported with a table which showed that of the large urban ESAs, Southpower offered lowest residential charges, with the exception of the Dunedin ESA summer time rate, perhaps because it has own power station. (Energy Direct was near highest, and Capital Power in the middle.) The chairman of Southpower thinks their electricity prices would be 10 percent higher had the company been privatized.

Perhaps the audience was even more impressed by Close’s description of how Christchurch managed their assets. They had seen coming the sort of pressures Wellington was under, and planned an alternative. The trading enterprises operated commercially subject to a annual contract with the holding company which set down the financial, community, and energy conservation objectives it required. You could see the audience thinking “why, oh why, was Wellington not as far sighted?” (Some must have wondered why the central government had not made a similar arrangement in the 1980s when the state owned enterprises were corporatized. The explanation is that the central government corporatization was designed as a step to privatization, not as a means of retaining public ownership.)

My thoughts strayed to a book published a couple of years back, Making Democracy Work: Civic Traditions in Modern Italy (by Robert Putnam with Robert Leonardi and Raffaella Nanetti) which although hardly touching the New Zealand public policy debate thus far, is a major centre of attention elsewhere. It asks why some parts of Italy developed more successfully than others. The book concludes that economic success was associated with a long tradition of civic community. The careful argument explores other possible explanations but finds them to have insufficient explanatory power. Nor can successful economic performance explain the superior civic virtue. The patterns of social cooperation based on tolerance, trust, and widespread norms of active citizen participation go back to the 13th Century, preceding the economic development.

The implication is that, after allowing for differences in resources, those regions with greater civic virtue will perform better than those which have less. At which point one might wonder to what extent New Zealand once had a culture of civic community, and to what extent it has been undermined in the last decade. And one might also wonder about differences in civic virtue among the different New Zealand regions, and whether this affects economic performance.

The outcome of the meeting was that a few days later the citizens’ desires were over-ruled, and Capital Power was sold off. I was not surprised because the Wellington City Council, unlike its Christchurch counterpart, had no strategy of public ownership of key assets, such as local natural monopolies, and had been trapped into an invidious situation by the earlier sale of the minority holding.

A recent survey by Consumer found the Christchurch City Council the most popular of local authorities, and Wellington City Council the least popular. Robert Putnam can probably tell us why.