Some thoughts on the political implications of regional demographic shifts and imbalances

[These comments are set in a 2013-43 timeframe but necessarily with a stronger focus on the 2013-23 period. The comments were to accompany Professor Natalie Jackson’s analysis and projection of demographic change* and the focus on that change, not other change, except incidentally.]

The demographic age and ethnic imbalances projected for the next 30 years are likely to influence local and national politics by adding region-to-region socioeconomic disparities to the national socioeconomic disparities which have developed over the past 30 years. Disparities reduce social cohesion which is the bedrock of political stability.

This will play out at both local and national level. If imbalances in the age structure within a region or locality grow, that will likely affect local socioeconomic profiles and so local social cohesion. Region-to-region differences in socioeconomic profiles and/or such differences between rural/provincial areas and major urban centres (especially Auckland) result in variations in material welfare. Such geographical variations would affect, and could undermine, national social cohesion.

At the local level, territorial authorities with higher proportions of post-working-age people and so a smaller working-age-population tax base in relation to total population would likely have less capacity to invest in and maintain infrastructure and ensure the supply of some social and administrative services. But there may also be specific local characteristics or innovative entrepreneurs or politicians who develop opportunities.

At the national level, governments will face demands to balance the national interest in maximising the economic development potential in cities or regions with lower proportions of post-working-age people with action in, or with, those regions with higher proportions of post-working-age people to ensure disparities don’t undermine that potential by threatening national cohesion.

These responses to the threats and opportunities are likely to fluctuate through the 30-year projection period as pressures intensify or ease.

The national background
National social cohesion has been reduced through the past 30 years by widening income and wealth differentials as the real incomes of a relative few have risen while the incomes of most have either fallen or risen only a little.

This has been driven by a combination of rapid technological change, which has eliminated many well-paid production and clerical jobs, policy changes which have reduced or eliminated protection for many well-paid jobs or reduced job protection through labour market flexibility and geo-economic change, including globalisation, which has shifted many jobs offshore to lower-wage economies. The result has been that many who pre-1985 would have had well-paying jobs have low-paid in-person-service jobs. The higher-paid replacement jobs are mainly in larger urban centres and are likely to be located there for some time ahead and possibly through to 2043.

And those higher-paying jobs go mainly to the better-educated, who, according to research, are more likely to be the children of higher-educated parents than children of less-educated parents. If those higher-educated parents, and so higher-educated children, continue to be more likely to live in higher-income urban centres, that will reinforce the difference with rural and provincial areas.

It is possible that at the national level replacement of workers with new technology will maintain total material goods output and total output of some in-person services and, as a result, a fall in the national ratio of working-age people to pre-working-age and post-working-age dependents may not reduce overall economic welfare as much as some fear. But there may be wide regional and local variations.

The ethnic dimension
In addition to changes in age distribution there are also growing regional and local disparities in the racial or ethnic mix – the proportions of Maori, Pasifika and immigrant Asians. (See ChenPalmer news release note below as a reflection of that trend.) Ethnic differences in education, employment, business, income outcomes and social integration which have different effects on potential prosperity and social cohesion in different regions and localities will pose policy challenges at both the national and territorial authority level and if unresolved cause tensions within councils and between councils and the central government.

Addressing those challenges – coupled with possible inter-ethnic tensions – may need innovation in representation to ensure all voices are heard, including council seats or official consultative bodies or informal mechanisms. (See comments on representation below.)

The populist risk and core-party responses (or not)
If people in Dargaville or Gore or Palmerston North feel Aucklanders are privileged or if they feel resentment or are under stress because in their locality or region earnings are lower or services and infrastructure are lacking or inadequate, they will be more likely to resent, and less likely to form common cause with, urban dwellers they think are getting a better deal from the economy and/or the government.

Alienation, resentment and stress breed recruits for populist politicians. This has been the case across Europe in the wake of the global financial crisis and the subsequent slow economic growth or contraction in some countries. Support for the traditionally dominant parties of the centre-left and centre-right (the core parties) has fallen as voters have defected to fringe parties and turned those parties into significant actors.

Votes by stressed, resentful or alienated people for populist politicians and parties are less votes for their specific programmes, at least initially, than votes against elites and parties they associate in some way with the origins of, or failure to counter, their stress. (* See longer explanation below.)

The Northland by-election on 28 March 2015 reflected that “against” phenomenon. Many people in the electorate feel they have not shared in Auckland’s and other major urban centres’ apparent growth and material welfare. Much the same happened in the economically weak late 1970s across much of rural and provincial New Zealand when Social Credit attracted many “protest” votes. Social Credit’s attraction beyond its small core vote was not that it had an economic policy that promised a golden dawn. It was that it was not Labour or not National or not both.

In New Zealand greater – or different – stress in rural or provincial areas than in urban centres could erode support for core parties in those localities. Different age distributions could compound that. The National party found in the Northland by-election that retelling what it felt had been a strong national story in the general election in September 2014 and even breaking down the information (for example, job numbers) to specifics for the Northland electorate did not resonate even with many National supporters. Those receiving this message did not feel they were a local microcosm of a good national story. Auckland was Auckland and Northland was Northland.

Winston Peters’ win in Northland was a localised populist response. If local-urban difference grows, such a populist response could develop over the next eight years to 2023, either through New Zealand First or a new movement. While there was no post-by-election transfer to national opinion poll figures, Northland may have reflected – and some familiar with conditions in rural and provincial areas say did reflect – a wider alienation, resentment or stress in provincial towns and cities and rural areas which a credible party or movement could tap in general elections.

In fact, both National and Labour had already by the 2014 election produced some policy response to regional economic imbalance. The National party required Statistics New Zealand to produce regional gross domestic product growth figures which it used to translate a national story to the regional level. The centrepiece announcement at National’s 2014 conference was a programme of road and bridge building designed to counter the story of decline in infrastructure investment in provincial areas. (Councils responded by saying that was welcome but reversing or at least ending the reduction in councils’ share of fuel taxes would be better.) The Labour party proposed a regional development fund and geared much of its economic development policy around regional projects.

These were in essence ad hoc responses by the two core parties. If the disparities continue to grow and populist sentiment and voting grows with them more ad hoc responses can be expected. These may be designed to reduce the attraction of populist parties or be influenced by populist parties that gain a voice in governing arrangements. Being ad hoc, the effect on tension and national solidarity will be uncertain and might be indirectly counterproductive if the policies divert economic resources from higher-productivity activities in Auckland or elsewhere and there is a knock-on effect.

The local reaction, the prosperity factor and opportunities
It is also conceivable parties could emerge representing specific areas or regions or generally representing “country” against “town” and either win electorate seats or clear the 5% party vote barrier. This is unlikely – attempts to set up country parties over the past 30 years have failed. But there is a post-1950 precedent in Social Credit’s initial mainly rural appeal – it held the Hobson seat from 1966-69. (Later Social Credit extended its appeal into the suburban mortgage belt, winning East Coast Bays and Pakuranga in Auckland.)

There could also be localised electoral responses, for example, the election of maverick councils which then behave in unpredictable ways and with results that may need the intervention of the national Parliament – for example, if they were to get unmanageably indebted.

New Zealand is probably too small for secessionist movements to develop critical momentum – if they do in fact emerge. But district councils could be captured by local movements that, once in office, act in a quasi-secessionist way, that is, with erratic programmes and policies at odds with central-government-determined national standards, frameworks and policies. Electorates and elected councils might also be more likely to resist attempts to promote amalgamation – localness could become more important.

The alternative possibility, looking beyond 2023 to 2043, is that workable policy responses are developed at national level and between the national government and local councils, which settle or ameliorate urban-provincial prosperity differentials and improve national social cohesion. This was the case in many countries, including New Zealand, in the wake of the 1930s depression.

Also, note that income and wealth are not the whole of prosperity. Other ingredients include strong institutions including the rule of law and democratic representation, access to education and health services, safety and security, personal freedoms and social capital. New Zealand generally scores much higher in global rankings on such broader prosperity indexes than on strict gross domestic product per capita indexes. The same goes for some regions within New Zealand.

So there may also be opportunities for territorial authorities to build on elements of prosperity which are strong in their areas to offset weaker elements and thereby reduce the impact on stability of the projected demographic disparities. Some may develop specialist tourism. Some areas, such as Golden Bay, are very popular retirement destinations for better-off people who may add to the prosperity of the region or locality, including income generating capacity). Golden Bay also illustrates the attraction of parts of New Zealand to immigrants seeking a particular living environment who can add value and add to overall prosperity. As increasing numbers of well-off Chinese and other Asians seek an alternative to a highly materialist lifestyle in their home countries and bring in capital and spending power, this could conceivably also be to the advantage of some regions or localities.

And at a time when small-scale enterprises can challenge dominant ones (see, among others, Naim 2013) and when some see “local” and/or “small” as more trustworthy than “big” and/or “out-there”, prosperity may develop from bottom-up activity, either self-driven or fostered by territorial authorities or the central government.

Also, necessity might generate mayoral or council innovation to offset unemployment (as some have done) and other deficit indicators.

Territorial authorities’ role, revenue and the subsidiarity principle
One issue likely to grow in importance, at least as seen through local eyes, is the constitutional role of territorial authorities and their spheres of responsibility, action and power. At the moment councils are the creation of Parliament, which also arbitrarily devolves responsibilities on to and imposes constraints on councils in ways that complicate councils’ ability to respond to their constituents. Some more formal recognition, with clear boundaries and delineation of spheres of activity and responsibility, will be needed if councils are to respond well to constituents at a time of growing regional and sub-regional disparities of prosperity and social cohesion. The core parties so far have refused to consider formalising the relationship.

A second issue is related to the first: revenue sources for local government. The core parties in the central Parliament so far have refused to countenance significant new sources. One complication: if more sources of revenue are agreed by some future Parliament, the politics of regional disparity suggest there will be demands for local control of new revenue sources, not central allocation with strings.

These two issues both raise the principle of subsidiarity. At a time when national sovereignty is increasingly constrained by international/global regulatory bodies and treaties and when younger people increasingly feel they are global citizens (for example, in access to entertainment, in goods purchases, in communication with friends and in travel/work), this principle may come more into play. What is the case for a sovereign Parliament which now rules even small local matters (for example, dogs) if Westphalian national sovereignty is being steadily eroded?

Changing democracy
Another issue likely to grow in importance is demands for better representation. That is not just of identifiable groups as noted above but of the population at large. This is a national issue as well as a local one but the politics of regional disparity may give it more traction at local level, both within large urban council areas and – and possibly more acutely – in smaller provincial and rural council areas.

There is a trend to supplement the liberal democratic practice of delegating to elected representatives (and their parties) full authority to act on behalf of those who elected them, subject only to endorsement or rejection at the next election.

This is recognised implicitly by the representatives themselves through increasing consultation on national legislation and local projects, either formally through committee processes or the likes of interactive websites. Parliament-originated referendums on constitutional, quasi-constitutional and electoral matters are now conventional.

The current government has used the Land and Water Forum of all relevant interest groups to develop foundation – and from this year more detailed – policy on fresh water management. There is some application at local or catchment level. Officials are scoping a similar approach to future climate change policy.

The current government is also extending this contributory-consultative concept more generally to “stakeholder” advisory groups in some other areas, such as the “open government” programme. It has also used “working groups” of “experts” to develop policy in tax, investment and welfare reform. In developing its long-term fiscal forecast in 2012-13, the Treasury brought in an external reference panel. There is no compelling reason to think territorial authorities cannot or will not go down this track.

There is a wide range of other mechanisms, including citizens assemblies and juries, deliberative polling and consensus conferences. These were scanned in my paper for the long-term fiscal forecast external reference panel: pp26-35. They are as applicable at local level as at national level.

Supplementation of representative democracy is also developing from the bottom up — lumpily, unevenly and sporadically. There have always been interest groups, pressure groups, ad hoc movements and mass petitions (and occasional riots) and some have recruited or persuaded the wider public to endorse them. But their aim has necessarily been to present a case to elected representatives and pressure or persuade them to act accordingly.

In the case of the modern bottom-up movements, there is reason to think the organisers and adherents see them as supplementary to the role of elected representatives. If anything, this tendency will gather strength through to 2023 and possibly all the way to 2043. (Again, see, among others, Naim 2013.) And, if that happens, it could readily be applied to local issues.

That is in part because society is more diverse and more segmented (and more globally connected) than in the classic twentieth-century period of core-party dominance of legislatures. It is also in part because trust in elected representatives has been eroding for some decades and that erosion shows no sign, yet, of a reversal. That erosion of trust suggests there will either be more such bottom-up activity or recourse to populist parties/movements as noted above.

One push likely to gain momentum over time is to make citizens-initiated referendums binding, as in Switzerland, which could be at either national or local level. [See the paper referred to above.]

Another option may be for more responsibility/power for local boards/committees and reconstitution of those boards to be actively representative. This seems from the outside to be a neglected element of local governance which could develop momentum over time and there is some evidence it is doing so already.

Devolution of services
Another potential localising tendency comes through the rise of not-for-profits in number, range and funds over the past decade or so and an emergent willingness in the current government to explore the possibility of devolving more provision of services, with greater contractual flexibility, to not-for-profits. In return social services policy might benefit from not-for-profits’ on-the-ground knowledge – and presence as part of their communities – and their potential to innovate and to tailor services more tightly to individual and local need. Coupled with a growing government willingness to move to “client-directed services” (with safeguards), this might potentially have a localising influence, which in turn might result in more regional and local self-determination and consequently reduce perceived disparities. The Productivity Commission picked up this theme in its draft report on social services in April 2015. (Productivity Commission 2015)

Other drivers
A final point: Demographic change should be seen in a political context as one of a number of drivers of political change, as touched on the reference to global influences above. One, for example, is the distinctive development of cities (McKinsey 2014). All political responses to demographic change will be tempered by, and in some cases overshadowed by, those other influences, notably, for example technological change, geo-economic and geopolitical rebalancing and people movement. The centenary we are now marking is an excellent example of how exogenous events can swamp endogenous evolution.

The three specific references above:
Naim 2013: Naim, Moises, The End of Power (Basic Books, New York, 2013), particularly pp76-106. While Naim writes breathlessly and appears often to exaggerate his argument, the general tendency he describes is supported by evidence.
McKinsey 2014: McKinsey Global Institute, A Blueprint for addressing the global affordable housing challenge (McKinsey and Company, October 2014). See also McKinsey Global Institute, Urban world: Cities and the rise of the consuming class (McKinsey and Company, June 2012) and Philip McCann, “Economic Geography, Globalisation and New Zealand’s Productivity Paradox” (New Zealand’s Economic Papers, 43.3, December 2009, pp279-314.
Productivity Commission 2015: New Zealand Productivity Commission, More effective social services: draft report (New Zealand Productivity Commission, Wellington, April 2015), notably p6, p9, pp12-13 and pp217-226.

Two other general references, one on economic disparities and the other on social disparities:
Eaqub, Shamubeel, Growing Apart. Regional Prosperity in New Zealand (BWB Texts, Bridget Williams Books, Wellington 2014).
Salvation Army: Mixed Fortunes. The geography of advantage and disadvantage in New Zealand (Salvation Army policy and parliamentary unit, Auckland, 12 May 2015)

The note referred to above:
ChenPalmer news release, 12 May 2015: “Superdiversity law, policy and business stocktake announced”. ( This said a Superdiversity Centre for Law, Policy and Business would compile a stocktake of statistics and analysis. The news release defined “superdiversity” thus: “A superdiverse society is one with over 100 ethnicities or where more than 25% of the population was born overseas.” The news release did not break this down but Auckland would qualify and Hawkes Bay would not but overall the society is more diverse than 10 years ago. This rapid remix of the population is likely to continue through at least the early stages of the 2013-43 period.

The asterisk reference:
* The nominal or actual ideological positioning of European populist parties ranges from far left to far right or they are simply anti-establishment (for example, Germany’s Pirates or Italy’s Five Star Movement) or they are regional or autonomy-seeking or secessionist, either from national governments (as in Spain or Scotland) or from the European Union. Voters transferring support from the once-dominant core parties are not endorsing ideologies or programmes, though they may approve specific policies or slogans (for example, opposition to migration within or into the European Union). Essentially those transferring voters are expressing disillusion with ruling elites and core parties and with policy settings which they associate with those elites and core parties and which they feel in some way contribute to their stress, strain or disadvantage. It is the populist dimension, not the ideology or programme, that is the principal or initial attraction. Populist parties present themselves as on the side of the people against the elites. They are votes against, not for. (Though over time their voters may come to share the ideologies and approve the programmes.)
The two-major-party – core-party – dominance in Anglo and European electoral systems through the middle third of the twentieth century coincided with a period of widely shared prosperity and opportunity and generally cohesive societies. Economic stress and unequal distribution of economic growth in the last quarter of the twentieth century and the first two decades of this century have eroded that core-party dominance. That led in New Zealand to proportional representation and coalition government but even in the least proportional systems (such as Britain and the United States) support for the two main parties and/or participation in elections has fallen.
* Natalie Jackson’s paper is at