Wednesday, January 13, 2016

How to get your land rezoned: A QLD story

My previous research looked at favouritism in land rezoning via the Urban Land Development Authority (ULDA) in Queensland. By looking at the characteristics of landowners inside and outside the boundaries of the rezoned areas I was able to show that that main determinant of getting rezoned is not you land size, or location, or any other planning considerations, but how well connected the landowner is in network of connected elites in Queensland.

So it is interesting to see one of those landowners who missed out (partly) on the favouritism of the ULDA seeking favours from the Logan City Council using exactly the type of textbook methods of influence I uncovered in my previous research.

The project is called Flinders, and it is situated outside the southern boundary of the Greater Flagstone ULDA area (which after a change of government is called a Priority Development Area). When I came across materials for this development proposal I thought it quite unusual; it’s not in a priority area, there are plenty of identical “new town centre” developments planned within a 10km radius, and there seems to be quite a lot of marketing fluff online considering the thing isn’t even approved and probably shouldn’t be according to existing planning controls.

For someone who has spent four years investigating dodgy planning approvals in this area it was a case that seemed quite interesting.

In the image below, from the documents submitted for planning approval, you can see the priority development area (GFPDA) hashed on the right of the blue line. The land owned by Pacific Holding Pty Ltd (applying for the development approval) is in yellow, and they are seeking to approve a massive new township on this whole area (which is currently agricultural). If you want to look up all the details go to the Logan Planning and Development Enquiries page (here), and search for application MCUI - 38 / 2015. It applies to Lots 1, 2, 3, 19, 32, 42, 79, 80, 390 and number 194 Mount Elliot Road, Undullah.

The proponents state in their application that they missed out in being fully within Greater Flagstone Priority Development Area (GFPDA), and are arguing that they should be treated in a similar manner in terms of planning outcomes. They say
The subject part of the Flinders development will provide a logical extension to the GFPDA and will be a key landholding contributing to land supply to accommodate forecast growth in the region. Ultimately it is anticipated that the population of Flinders will be in the order of 50,000 people (32,000 of those will reside on the subject site) with 15,000 permanent jobs created in a range of occupations.
Note the ambit claims of future population. Sure, maybe at some point this century there will be 50,000 people there. But not in the next couple of decades. It’s also lovely to see claims of how well-connected the site is. I drove through there recently. Trust me. It’s not well connected.

In any case there are some more interesting parts of the application which show a textbook effort in gaining political favour, after having missed out on the last round of favours at the ULDA.

Who is this?

Darwin and Michelle King are the children of Philip Cea, a fruit grower who was embroiled in the citrus canker outbreak in 2005, and was claimed to have bypassed quarantine to import fruit trees and vines in 2001. Aside from the fruit business, he has also has built relationships with government, and was part of a 2013 trade mission to China along with a number of other high profile property industry people, including professional lobbyists (some being former politicians), many land developers, and real estate agents.

The relationship building

I found this video of the King’s hosting a one-day development forum about Cities of the Future, which provides a picture of the next generation’s own efforts to build relationships. Invited were various State agencies and local government representatives, planning consultants and property industry organisations. It’s quite interesting to see their investment in relationship-building documented this way.

It’s almost as if the development cannot be justified through regular planning routes based on its own merit.

Some of the names of consultants employed or appearing in the video include, Mike Day from RobertsDay planning consultants, Gavin Johnson and John Harrison from Mortons Urban Solutions. Daniel Parker and Alexander O’Reilly from MacroPlan for the “needs assessment”. Stephen Harrison from iLiv group, who is also Vice President of the industry lobby group the Urban Development Institute of Australia (Qld), is the project director for the Flinders development.

I'm not accusing any of these people of doing anything other than what they are employed to do. But hiring the "right" consultants has always been part of relationship-building, something the King’s have been undertaking with vigour in order to secure their planning approval. Does anyone really think they would have the same chance of success if they only hired consultants who had never dealt with the local council or State government before?

The cover fire of urgent demand

The “Housing and Non-Residential Needs Assessment” submitted as part of their application is quite something. It asserts that when there are 50,000 people living there, than there will be demand for many services and facilities. I’m stunned. But I don’t see anything about where the 50,000 number comes from.

They also try to hitch a ride on the back of the neighbouring Priority Development Area again, this time by stating how much their development will “amplify” all the gains. It’s a real magic pudding story devoid of any realism.

But we know this is all nonsense. Another Priority Development Area, Yarrabilba, which is a very similar urban fringe development, has a 30 year timeframe for their build out to 45,000 residents. With both of these substitute developments competing for buyers and new residents, I expect that it will take half a century or more to get close to building what is proposed.

To be more clear, population growth in the whole of Queensland was 70,540 people in the year to June 2014. What share of Queensland population growth will go to this one development each year? Maybe a percent? So at 700 people per year, that's 71years to build out the development.

So why the urgency? What exactly is the pressing need? Is this just cover fire - a distraction for the public and an legitimate-looking excuse for the council to approve what might otherwise be a nonsense application?

The lies?

On page 44 of their application they commit to
Develop an Innovation Precinct in partnership with Massachusetts Institute of Technology (MIT) and CSIRO.
They also reiterate this on their “Housing and Non-Residential Needs Assessment”, stating
Flinders was a core partner (along with CSIRO) in a submission to the Australian Government earlier this year seeking to establish an Industry Innovation Precinct focused on urban development. Its goal was to provide the opportunity to integrate innovation into existing urban development practices that could create an exemplar sustainable community and be replicated nationwide. It is not apparent whether this program will continue under the LNP, however Pacific International Group has secured Massachusetts Institute of Technology (MIT) and Bond University as innovation partners to build on the work done to date. This may also include a tertiary education facility.
They go on to explain the value of having an MIT facility in the area. That would be quite something. My guess is that they are talking up “inviting someone from MIT to a conference” as some kind of commitment to a remote campus. Again, if the demand for this development exists there, why the need to name drop so outrageously?

Trusts and hiding financial interests

It is common to use trusts and other structures to hide what is going on. Flinders is no exception. Here it’s the Pacific International Development Corporation (PIDC) Trust making the application. The land is owned by Flinders Land Holding Pty Ltd.

As it typical in Australia, knowing exactly who owns what land is often quite tricky. After years of being unable to truly enforce our own tax laws, the Australian Tax Office has now requested from each state 32 years of land ownership records. It remains truly bizarre that land titles and corporate records are not freely available online. Knowing who's who is a business for insiders only.

Weakness of political donations

What I didn’t find is also notable. I didn’t find any records of the Kings, or their various businesses, donating to State politics in the last few years. This is one of the findings I made when studying rezoning in other ULDA areas. Political donations weren’t as useful at gaining favours as being well-connected to insiders.

If my research has merit, and if the King’s continue to build their relationships with property insiders, than I have no doubt they will be granted extremely valuable rezoning gifts soon enough. If only they had been working their relationships this much back in 2005-2008 they might have had their whole property declared inside the Greater Flagstone ULDA (now GFPDA) the first time. 

Saturday, January 9, 2016

#ResistCapitalism


My twitter feed has been aroused into fierce anti-capitalist protest. Welcome to 2016 I guess.

This situation gives me chance to flesh out some important points that cannot be made effectively on Twitter.

Resisting power
My view is that the hashtag has arisen out of a resistance not to the capitalist idea of private property ownership in particular, but the exercise of political power under the veil of capitalist ideology (much like the Occupy movement). Bailouts of banks not for people. Money for weapons and war but not public services. Increasing legal protections for the rent-seeking elites, such as extending patent and copyright protections. Removal of the power for workers to organise in their interests. A hollowing out of welfare based on ideology, rather than an extension of it based on our accumulating wealth abel to shared.

But these types of power conflicts arise in all systems eventually. So while the protest is brought together by a common enemy of the current system, many involved have vastly different ideas about what alternative system would better deliver their desired outcomes.

Sclerosis
Mancur Olson spent a career making the point that stable systems begin to break down over time due to infighting over economic rents. That is what we are seeing now, to an elevated extent, in many of the major Western economies. What sort of system do we have that allows the rich to become so insanely wealthy while leaving others poor, homeless, and struggling for find a productive social niche for themselves? The answer is a system suffering from heated internal infighting. My view is that this occurs after a period of stability and a lack of external threats to the existence of the group (i.e. country). You see after a war that it suddenly become easy to distribute wealth to returned soldiers and their families, providing cash allowances, public healthcare and housing. Yet when the war is amongst internal interests, these desirable institutions suffer.

An ecosystem of institutions
What most people want is a set of institutions that allows for private investment and risk taking while ensuring the negative external effects of these activities are limited. They want stable basic services provided in a manner that ensures equitable access, rather than access based on wealth and income. These basic services will obviously expand as nations become wealthier and luxuries become necessities for functioning in the modern world.

Another thing is that some kind of welfare state is essential for maintaining the dynamism of the capitalist part of the economy. Without this cushion against failure, who would risk their life savings on inventing and investing in new products and innovations? Essentially we all want a mixed economy, a level of safety net that reflects the wealth of the country, and basic services provided in an equitable manner. It sounds a lot like the basic economics. Go #MixedEconomy! The main argument is around which institutions can deliver this effectively, given the realities of politics.

The role of economics
Strangely enough, the core of mainstream economic theory assumes that these desirable systems of institutions have already been met. Even more strongly, models that deal with a “representative agent” assume that a government agency is constantly redistributing wealth in the background so that all people are equally wealthy. This then allows the nice results in terms of efficiency to not have implications on equality.

Let me quote from the world’s most popular advanced microeconomics textbook.
The idea behind a social welfare function is that it accurately expresses society’s judgments of how individual utilities have to be compared to produce an ordering of possible social outcomes.

Let us now hypothesise that there is a process, a benevolent central authority perhaps, that, for any given prices p, and aggregate wealth level w, redistributes wealth in order to maximise social welfare. (MWG p71)
So why aren’t all economists raging with the Occupy protestors? Or arguing for a massive redistribution of wealth as an immediate first step to social improvement? Has the discipline sold out to the highest bidder? My view is that economists need to stand up and point the finger at sellouts as a first step in cleaning out this unusually influential discipline, and hopefully in the cleanup process ensure that economic advice arriving at the political level does not suffer from conflicts of interest.

Back to access to political power
Such protests boil down to the inability for the vast majority of people to get a fair say in democratic processes. Obviously bailing out private banks is not capitalism. Severely unequal trade agreements are not capitalism. The Wests selective involvement in destroying “democratising” countries with oil, while ignoring atrocities elsewhere in the world. The inability to invest in public goods in the face of ideological push back by vested interests. They're not capitalism. Occupy Wall Street had similar motives against entrenched interests.

A mixed economy, with a fair share of “capitalist” private ownership of property is a great thing. But when the political power of a select few capitalists overwhelms the system to the extent that the other non-capitalist parts of the mixed economic suffer, there are obvious and genuinely satisfying moral grounds for protest.

Minor tweaks
So what simple changes could #ResistCapitalism argue for? Here are some
  • Annual taxes on wealth 
  • Taxes on inheritance 
  • More proportional representation in government 
  • An independent watchdog seeking out conflicts of interest in politics and business
  • Public investments based on local need, and as a way to support local labour demand
Temporary fixes
Any system will start being gamed as soon as it’s created. We need the general public to continue to be politically active and organised, protesting about particular single policy ideas that could be implemented should the movement gain momentum. Be clear that replacing capitalism does not automatically mean replacing the tendency towards plutocracy or oligarchy.

Thursday, January 7, 2016

Still more unpopular economic opinions

I have two recent popular posts on my unpopular economic opinions (here, and here). Over the Christmas break I spent time reading and thinking. Here are some more opinions.

1. Democracy is not part of the recipe for a nation’s success. The historical evidence is pretty overwhelming here. Democracy can be useful to appease competing internal interest AFTER overall stability of the legal and economic system is obtained. Introducing democracy BEFORE this generation-long period of stability is a recipe for instability because there is no reason to trust the ballot box.

We also forget that the word democracy captures a vast array of different political institutions. There is no ‘one democracy’. Indigenous Australia’s could not vote in Queensland until 1965. Women in 1905. The voting age was lowered from 21 to 18 in 1973. Making voting compulsory came back in 1924. All of this democratisation happened after the country was quite politically stable. Not before. This is the empirical trend. The Asian Tigers weren't known as the democratic Tigers.

UPDATE: Yanis Varoukafis makes similar points and more in his TED Talk here.

2. The economics blogosphere reveals that economics is often just a clash over competing metaphysical explanations for a phenomena. “No it’s not secular stagnation, it’s a savings glut”. For an outsider it might seem intelligent. But in reality it is chest-beating about preferred ways to label the residual.

3. Improving economics is not about the mainstream versus the rest. It’s about social scientists being able to communicate big ideas to each other, and about empirical strategies to try an eliminate bad or useless ideas and refine the domains in which particular models may apply. Read Evonomics.

4. The long peace since WWII is an historical anomaly. Expect either a) another war between superpowers in your lifetime, or b) a perpetual skirmish against nominal out-group "enemies" who are mostly fabrications.

5. There is no ‘willing driver shortage’ in our car-based transport system. Robot car driving is not in demand. Also, any economic benefits of replacing the labour of a car driver are even great for rail and bus transport. Driverless cars do not rescue car-based urban transport from its inherently bad economics. Even Uber is using ‘smart routes’ that look like mini-bus routes.

6. Robots are not coming for our jobs. Why is this a thing? Even if robots are intelligent, they will just be a really advanced tool. Like a modern slave. The owners of robots would see advantages. But if they are so smart, wouldn’t they take over the role of capitalist rather than worker to make the big bucks? Or is it all just nonsense. After all, a monkey can’t own copyright, on their own photo, so I’m sure a robot can’t. Nor can it own the product of its own “labour”. To me the robot commentary it is all made up nonsense that ignores basically all of the history of mechanisation and the rise of services.

7. Ageing is bloody brilliant. There is nothing good or bad about population growth. It just is. But a stable population makes per capita economic gains much easier, reduces conflicts over resources and so forth. What makes ageing "bad" in some economic analysis is that we seem to pretend that at arbitrary birthdays people in society go from productive contributors to leeching resources. It’s not so simple.

And seriously, if non-workers we such a major economic problem, we would eliminate private ownership of capital anyway. We can't let those capital owners make an income without working can we? They would be economically costly, just like old people. 

Sunday, January 3, 2016

The bizarre politics of child care policy

The latest news doing the rounds is a “crackdown” on childcare rorting to the tune of $7.7million a week (about $400million a year).

Ah yes, cracking down on the really important big items. Put that corporate tax avoidance to one side. Save the crackdown on political expenses for another day. The big news is here.

Unfortunately the logic at play in this childcare crackdown is absurd.

To consider what is going on we first need to understand that in Australia we have a system of childcare subsidies designed to get mothers into the formal workforce. Yet, with carer to child ratios mandated at 1:6 on average for non-school age children, we should expect that a fair proportion of these working Mums trade home-making for childcare work in order simply to make up the numbers.

If the average additional mother entering the workforce as a result of childcare subsidies has two children, then each additional women entering the workforce has about a one third chance of working in childcare. Essentially the policy requires that for every three Mums entering the workforce there must be one child care worker, giving a net gain in the non-childcare workforce of 2 out of 3.

What this “crackdown” is designed to target is Mums running what are called Family Day Care centres, where they care formally for their quota of 6 children in their own home. Obviously their home must meet various size and safety standards and so forth.

The “loophole” is one where

“… parents who run a family day care receive childcare payments for having their own child in a different day care service at the same time.”

But what is exactly wrong with this? If we go from a world of no formal day care, to one with formal day care at the 1:6 ratio, than we should expect that a third of Mums entering the workforce work in childcare. And their children will also go to childcare so that Mum can work.

Do we hear complaints that staff at formal day child care centres whose children are in care at other formal centres are “rorting the system”? So simply changing the location from “non-house” to “house” means the system is somehow not working as designed.

That’s bogus. The system is designed expressly for this to happen. It was clear and obvious to anyone who has thought about it for five seconds.

This is what happens when you create policy designed to juice the economic statistics by making the informal economy formal.

Meanwhile, the government is expanding child care subsidies to nannies this year with a pilot program covering 10,000 children. For the life of me I can’t understand what the difference is between this and the family day care “rort”. Should we expect that older siblings or cousins becoming nannies all of a sudden. Probably. But what would be wrong with that exactly? The economic effect is exactly as desired.