Polity by Rob Salmond

My former colleague Sarah Austen-Smith recently posted some observations from her experience of America. I had an experience last weekend that caused me to think about the same NZ vs US comparison from another perspective: health care.

Of course, a lot has been written about this before. Their system is more than twice as expensive, their system is very bureaucratic, our system delivers better population-level results, and so on.

Our system generally comes out looking pretty good. But those broad comparisons don’t tell the full story.

First, there are things the US health system does better than ours. If you’re really sick, with a rare disorder, you want to be living in the US, not New Zealand. I saw this sharp end of the American medical system first-hand caring for my late daughter Sophie, and it is very impressive.

The US has many of the best specialist doctors and largest, most successful specialised hospital units in the world. The reasons are fairly simple: salaries and scale.

As a general tendency, the larger and more specialised your unit, the better your chances, because the doctors are more likely to have seen lots of cases like yours before. Practice makes perfect and all that.

That’s why those New Zealanders advocating for a South Island Starship hospital are so mistaken. Having two high-complexity children’s hospitals rather than one dilutes our expertise, meaning if your kid gets a rare disease, the doctors you see are less likely to have seen it before. They get less practice, which means the treatment is less perfect.

Yes, South Islanders will travel less time to see their sick kid in the hospital. But it’s more likely their kid will die, too.

I’ve often wondered why New Zealand’s system of escalation for really complex illness goes usually to Australian hospitals first, then to British ones. US hospitals are closer than British ones, and are often better, too, due to scale. Why not send the really complex kids to Australia first, then to the US?

So the US system is better at some big, complex things. How about small things?

This weekend my little Miss 2 presented with an angry rash. Our home medical centre was closed, so I packed Miss 2, Miss 4, and myself off to Wellington urgent care.

I’ve been to urgent care in the US, so I thought I knew what was coming. I packed my computer, DVDs, books, colouring pencils, toys, and food. I expected a four-hour adventure.

I’d made my first visit to American urgent care after picking up a hot charcoal briquette like a drunk dunce. I sat with a burning hand in the waiting room at UCLA. Several people came past with GSW. They got priority. Fair enough. Four hours later I went home, unseen.

I went a few times with Sophie, starting when she was 16 days old. She’d got out of hospital the day before, and promptly developed symptoms the specialists had told us to look out for. She was immune compromised, but it took an hour in the waiting area before we got a room, then four more hours before an overworked junior doctor sent us home, looking out for more of these same symptoms.

Other trips with Sophie got a bit better in terms of treatment – as parental Bolshie-levels rose towards 11 – but no better in terms of efficiency.

On all these occasions, there were complex insurance forms to fill out, and co-pays to pay or co-pays to argue about for months and then not pay.

Last weekend’s Wellington urgent care adventure wasn’t like that. At all. From leaving my house to getting home again was 57 minutes. I filled in one name/address-type form on arrival, then Miss 2 was seen by the nurse within 10 minutes of arriving, then 10 minutes later we saw the doctor. The doctor prescribed some antibiotics straight away, which I got filled in 5 minutes in the pharmacy next door.

No money changed hands.

And, even though some New Zealanders do pay to see the GP, we don’t pay as much as the “free” GP visits included with American health insurance plans, because the plan itself is massively expensive (average cost well over $1,000 a month for a family), and economists generally agree this is mainly money that would have otherwise gone into salary, especially for modest-wage workers.

I think our health system is better than the US’ for most people, but not for all people. But that’s no reason to ignore all lessons from the US, nor a reason to avoid all parts of the US system. Some of our sickest Kiwis need US-level care, and we’ve got the means to give it to them.

As Public Address readers will have seen, Labour has announced it will not support New Zealand joining the Trans-Pacific Partnership Agreement unless it meets five conditions:

1. Protecting Pharmac
2. No corporate litigation against NZ law changes
3. NZ still allowed to restrict land sales to foreigners
4. Te Tiriti upheld
5. Meaningful gains for NZ farmers

David Farrar broadly agrees with these conditions, and even wants to add another:

1. No changes to New Zealand IP laws that would hurt our internet experience.

Here’s my personal take on this: There is no way the TPPA will meet those five or six conditions. No way. That means Labour will be opposing, not supporting, the agreement that makes its way finally out of the smoke-filled room. And I think that is a good thing. Here’s why.

First, New Zealand has no credible bargaining chips on free trade. When we ask another country to make a concession, and they ask “or you’ll do what?,” we have no answer. That’s because New Zealand unilaterally dismantled most of its tariffs and other trade barriers in the 1990s, without asking for anything in return. Who was the author of such a self-defeating, masochistic exercise? Why, none other than MFAT’s trade negotiations surpemo of the time, one Tim Groser.

Now, thanks to Groser and friends, we show up at these negotiations with a long list of things we need, and nothing to trade for them. It’s like showing up naked to a strip poker game, or going to the store with a shopping list but no money. I’ve written academically about this error before.

That means when New Zealand turns up at the TPP and demands the agreement include this thing but exclude this other thing, the rest of the room has no incentive to pay attention. Countries, like people, respond to incentives. No incentive; no response.

Second, the agreement Labour and David Farrar is seeking, with…

• no extra rights for Big Pharma or other firms harmed by our social legislation;
• no extra rights for Americans with spare cash to invest globally;
• no extra rights for American copyright holders;
• but still with gains for our dairy farmers in the US, harming US farmers;

…is not the slightest bit palatable to the US Senate. If the agreement meets Labour’s bottom lines, it fails the Senate’s. It’s that simple.

Yes, it is possible there will be a TPPA agreement that the Senate can ratify, and that several other countries can ratify, too. But that agreement will not do what Labour needs, meaning Labour will inevitably end up opposing this deal.

I’m ultimately pleased about that, despite being an advocate, in general, of freer trade. That’s because this deal is not ultimately about creating freer trade; it is ultimately about restricting trade. Here’s Paul Krugman on this aspect of the TPPA:

In any case, the Pacific trade deal isn’t really about trade. Some already low tariffs would come down, but the main thrust of the proposed deal involves strengthening intellectual property rights — things like drug patents and movie copyrights — and changing the way companies and countries settle disputes. And it’s by no means clear that either of those changes is good for America.

On intellectual property: patents and copyrights are how we reward innovation. But do we need to increase those rewards at consumers’ expense? Big Pharma and Hollywood think so, but you can also see why, for example, Doctors Without Borders is worried that the deal would make medicines unaffordable in developing countries. That’s a serious concern, and it’s one that the pact’s supporters haven’t addressed in any satisfying way.

On dispute settlement: a leaked draft chapter shows that the deal would create a system under which multinational corporations could sue governments over alleged violations of the agreement, and have the cases judged by partially privatized tribunals. Critics like Senator Elizabeth Warren warn that this could compromise the independence of U.S. domestic policy — that these tribunals could, for example, be used to attack and undermine financial reform.

So I’m pretty clear that, given its current position, Labour will oppose the eventual TPPA text. The bigger question is: what will Labour do in government if it passes? Unraveling an agreement like this is massively harder than opposing it in the first place. Sadly, my own guess is that, if National saddles us with an agreement that does undermine our social legislation or our rights to regulate who owns our country, then Labour will be pretty much stuck with it.

Note: While Labour is a client of mine, I have played no part in formulating its position on the TPPA. This post represents my views alone.

Last week, Labour released figures indicating ethnic Chinese recently purchased 39.5% of Auckland homes, while the Auckland population is only 9% ethnically Chinese.

Not surprisingly, there was much scrutiny of this decision, and the analysis that lay behind it.

I did the data work for this story, and I stand by both the analysis and by Labour’s decision to raise this issue of offshore real estate investment in Auckland .

Labour cares about this because the Kiwi dream of home ownership is rapidly slipping away from young New Zealanders of all ethnicities. Labour wants more restrictions on offshore real estate investment, in order to protect that part of the Kiwi lifestyle.

So far, the Government’s inaction and half-measures are only making the problem worse.

If releasing these data gets us any closer to protecting that dream for all New Zealanders, it did a good thing.

The Financial Times recently reported a rapidly rising tide of investment capital from China flooding cities like New York, London, Sydney, and Vancouver. We believe we’re seeing the same in Auckland. Labour’s data adds more evidence for that conclusion.

Some suggested the analysis was basically Phil Twyford and me sitting in a room asking: “who sounds Chinese?”

Of course, that’s not what we did.

After I published Labour’s method online, Keith Ng, Tze Ming Mok, and Chuan-Zheng Lee - all skilled analysts, all otherwise critical on this topic - all agreed the name-based ethnicity analysis was statistically sound, robust, and accurate.

Of course, they and others retained other criticisms of our work, relating to the steps after the main data analysis. I’ve engaged with them online through the last week, addressing their concerns and presenting additional data to support Labour’s conclusions.

Other commentators, however, have demeaned themselves with cartoonish hyperbole. Phil Quin resigned his role as Labour’s resident fly-in-its-own-ointment while comparing the data release to the Rwandan genocide. That’s obviously absurd. Anyone repeating his claim showed the same lack of perspective.

Their overreaction was mirrored, in less extreme forms, by others on the left of New Zealand politics.

Many were quick to accuse Labour of overt racism, despite Labour’s proud record on race relations in New Zealand.

Labour’s intention was always to talk about offshore money, and never to conflate ethnicity with nationality, or to make life more fraught for any group of New Zealanders.

In some of the reaction, self-appointed experts decided Labour had lost all its principles entirely, and instantly transformed itself into a pack of nihilist, racist, poll-driven Machiavellis. Those same activists decried those same Labour MPs in 2014 for being too PC, and too consumed with identity politics.

The kneejerk, instant 180-degree shift in their long-held assessment betrays how little thought went into it.

For some of those activists, I’ve come to the disappointing view that the only thing they enjoy more than progressive change is criticizing the pragmatic agents of that change.

If they sat in Goldilocks’ chair, they would rubbish the porridge as both too hot and too cold.

Here’s my challenge my fellow travellers on the New Zealand left: just once, let’s have a discussion about a sensitive issue without eating ourselves in the process.

Having said that, one group I think did not overreact – despite their strongly critical stance - was the New Zealand Chinese community, including Keith, Tze Ming, and Chuan-Zheng. Their criticism was less about Labour’s intentions, and more about the impact of these revelations on ethnically Chinese New Zealanders.

I want to be clear on this: Nobody should read anything in our data analysis as being critical of Kiwis who happen to have Chinese ethnicity. I do not see them as part of the offshore real estate speculation issue. Far from it. They are among its victims, along with every other family trying to buy the roof over their head in Auckland.

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This column was originally published in the Sunday Star Times. It has been republished here for discussion.

As people will have seen, Labour has obtained real estate data, scrutinized and published by the New Zealand Herald, showing 39.5% of the Auckland houses sold went to people who appear to be ethnically Chinese. This is a large discrepancy from the 9% of the Auckland population who are ethnically Chinese.

Labour believes this analysis illustrates the large scale of foreign investment in the Auckland real estate market, particularly from China, pushing up prices and denying New Zealand families of any ethnicity the opportunity to own the roof over their heads. 

Critics – including PA’s own Keith Ng – believe the data show nothing at all and argue Labour is showing racism or xenophobia.

I did the quantitative analysis for Labour on this, and I think critics are operating under some misconceptions.

First, and to get it out of the way, these data to not – repeat, not – 100% prove the residency status of any particular buyer. Everyone agrees on that.

But the standard for using data in policy debates has never been: “you’ve got 100% proof at an individual level, or you’ve got nothing.” If it were, then we would have nothing pretty much all the time. Opinion polls, for example, never prove anything at the individual level, but it’s quite the nihilist who says they don’t provide any helpful information.

As always, the aim is to reasonably know more today than we reasonably knew yesterday. We, collectively, triangulate on the truth.

So, what are the objections to what Labour did? There are two main alternative explanations offered for the statistics Labour uncovered:

• Resident ethnically Chinese Aucklanders buy much more property than members of other ethnic groups; or
• The data are biased.

 Do Chinese Aucklanders just like buying houses?

Of course that is possible that 126,000 Chinese Aucklanders bought the 1500 or so houses in this data set.   But it is plausible given these data?

First, Chinese Aucklanders tend to be young, and tend to have low incomes. While the ethnically Chinese population makes up 9% of Aucklanders, it makes up only 5% of Aucklanders on high incomes.

Second, the leaked data show that the ethnically Chinese house buyers tended to purchase flash houses. While ethnically Chinese buyers made up 39.5% of all sales, they made up over 49% of all sales worth over $1 million. That is another striking discrepancy.

This explanation now requires a small, relatively low income percentage of the population to be buying a very large percentage of the most expensive houses. At face value, that sounds unlikely.

Critics, however, believe this discrepancy can be explained because the Chinese population is growing strongly through immigration, meaning lots of people coming in with cash in hand due to the migration rules, and with the need to find somewhere to live, explaining disproportionate house buying.

Well, we have a good comparison case to test this idea: the ethnically Indian population in Auckland. It has 8% of the population, 6% of the high-earning population, and it is growing even more quickly than the ethnic Chinese population, including through immigration at similar rates. That means the Indian population is subject to similar dynamics of incoming capital for new residents, and has the same need to find new places to live.

So what proportion of Auckland homes are being bought by the ethnically Indian population? The data show they are buying 8.6% of the houses, more or less in line with their population share. Again, the discrepancy between ethnic Indians and ethnic Chinese is striking.

The “resident Chinese Aucklanders on a real estate bender” theory now additionally requires that population to buy homes at about four times the rate of another ethnic group in broadly the same socioeconomic and immigration position.

I think you have to string a pretty long bow to believe all those things at once. The explanation, while possible, is implausible.

 

Are the data just biased?

The short answer here is that nobody knows, because nobody has the proper industry-wide information. Actually, Labour has been calling for those data for years now. But we can glean clues from elsewhere:

First, the Herald says sales from this firm account for 45% of all house sales in Auckland. That’s a substantial segment of the market. It’s a bit like doing a non-random opinion poll on around 2 million New Zealanders – while it won’t be perfect, it’s likely to tell you something pretty helpful.

Second, further – previously unpublished – analysis of the leaked data show that there is a strong correlation between the ethnicity of the sales agent and the ethnicity of the buyer. From the data:

• Ethnically Chinese agents make about 71% of their sales to ethnically Chinese buyers;
• Ethnically European agents make about 13% of their sales to ethnically Chinese buyers.

This means if there are multiple real estate firms in Auckland with large numbers of ethnically Chinese agents, they are also likely making large numbers of sales to ethnically Chinese purchasers.

One such firm is Harcourts, whose market share is less than 45% meaning it is likely not the subject of the leak. This morning I found no fewer than 89 Auckland-based Harcourts agents with common, ethnically Chinese names. This suggests at a minimum that a second large Auckland real estate firm is making large numbers of sales to ethnic Chinese buyers, whether resident or not.

The combination of the size of the leaked dataset and the presence of agents likely to target the ethnic Chinese market in at least one other large firm suggest that any bias in these data is likely to be modest.

 In sum, the large disconnect between the ethnic distribution of Aucklanders and the ethnic distribution of Auckland house buyers has three explanations. The prima facie explanation is that the two groups draw from different populations, with non-resident ethnic Chinese making a large impact. The alternative explanations are both not “contradicted” but certainly “contra-indicated” by other analysis of the leaked data, and by other relevant data.

Can Labour prove that any individual buyer is foreign? No. All we have is their last name.

But can Labour conclude on the preponderance of all available evidence from the aggregate data that there is likely a large impact of offshore investment from China in Auckland’s real estate market? Yes.

Yesterday, the Treasury released a large pile of documents showing the advice public servants gave to the government in advance of this year’s Budget, causing nerdgasms among a small, tragic group of political anoraks, myself included. (Step 1 is admitting you’ve got a problem…)

What the documents show is a government that is perfectly happy to bluff on policies it wants to pursue, regardless of what the evidence says. This is really great for Type-A Ministers’ egos, but not very good for New Zealand. Quelle surprise.

Here are two classic examples from the document dump:

KiwiSaver

In the Budget, National cut the $1,000 kickstart payment for new KiwiSaver accounts. Defending this announcement, John Key said axing the incentive would “not make a blind bit of difference” to the number of new people signing up for KiwiSaver, saying his conclusion was backed by IRD advice. Everyone agrees having more people sign up for KiwiSaver is a good idea; Key just believes he could take some money away without deterring anyone.

First, for a government dedicated to the cornerstone economic idea that “people respond to incentives,” this blasé attitude seems out of character. Next we learn from the Budget documents that, in fact, the IRD specifically warned Ministers that axing the $1,000 would lead to lower numbers of new enrolments, especially among the very young, meaning Key flat-out lied to Parliament about the advice he got. And third, the country’s largest KiwiSaver provider is already reporting new enrolments dropping by half since the incentive was cut.

The government needed to save $500m, so it cut an incentive that means the most to young people and people on modest incomes, knowing it would lead them to save less for their retirements. That’s what really happened. Then it lied about the likely impact of that cut, and its lies have been exposed. John Key gets to bluff for a month; modest income New Zealand gets a lower savings rate long-term.

Housing

Nick Smith’s breathless announcements about freeing up public land in Auckland for new housing always had the whiff of an 11^th-hour homework assignment about them. As I mentioned in the NBR, I think the idea behind this policy is a good one, which has sadly been ruined by childish execution.

Now it turns out from the Budget documents that Smith hadn’t got anything about his policy through Cabinet in time for the pre-Budget cut-off. Not a sausage. As late as three weeks before the Budget, when the gates are usually closed, Smith and officials were arguing about how much money he needed to get the policy implemented, how much land he could actually expect to build on, and so forth. Senior Treasury officials recommended to Ministers that the government follow its standard rules and delay any funding announcement for a Crown-land building policy until Nick Smith had found the time to figure out exactly what the hell he was doing. But the government chose to bluff it instead; with the sadly predictable result the policy is mired in confusion, embarrassing oversights, and now court battles.

Yes, Type-A Minister Smith got to stand up and loudly proclaim things for a while, until the house of cards came down around him. But, much more importantly, the government’s bungling of this half-baked proposal means Auckland families will have to wait even longer for more housing supply, as National does battle with Iwi through the courts. Nick Smith is a (very) temporary winner; Auckland renters are long-term losers.