\n In March, National Party MP Maureen Pugh posted an invitation to a fundraising event offering dinner with Christopher Luxon for $10,000. The post was quickly deleted from her Facebook feed but the screenshots show organisers were careful to refer to Luxon as \u201cthe leader\u201d. If they were selling access
\n to the Prime Minister it could be seen as a corrupt practice. But auctioning off time with the National Party leader is perfectly appropriate.\n <\/p>\n
A few weeks earlier, the chief executive of the Teaching Council, Lesley Hoskin, resigned after it emerged she\u2019d spent more than $1 million on communications contracts with a company run by her husband. She had declared a conflict of interest, which satisfied the council\u2019s procedural requirements, but key shareholding details were not disclosed.<\/p>\n
Professor Natasha Hamilton-Hart is an expert in political economy at the University of Auckland. She completed her PhD at Cornell University, New York State, then spent years researching the financial systems and governance structures of Southeast Asia while teaching in Singapore and Australia. When she returned to New Zealand in 2011, she found her home country \u2013 which she\u2019d always thought of as well-governed \u2013 had devised rules allowing practices that in Southeast Asian countries would be considered corrupt.<\/p>\n
\u201cOne of the things happening was the failed finance companies,\u201d she tells the Listener. \u201cMost of my early work was on the financial sector and banking systems, and it took me a long time to realise what exactly had gone wrong in New Zealand. They kept talking about related-party lending but that wasn\u2019t what they were trying to prosecute them for; they were actually trying to prosecute them for failing to declare, according to these minutely detailed rules on disclosure.<\/p>\n
\u201cThey weren\u2019t trying to get these people on the substance; it was these weirdly detailed technicalities about what was disclosed, and when and according to what format.\u201d<\/p>\n
Hamilton-Hart also noted the sales of state property that took place under the Key government. \u201cThere was a great piece by Nicky Hager on how property developers at what is now Albany town centre had made an absolute killing buying the land cheap from the state, getting it reclassified and flicking it on.<\/p>\n
Natasha Hamilton-Hart: Argues the market will sometimes deliver, but a\u00a0lot of the time it won\u2019t. Photo \/ Supplied<\/p>\n
\u201cAnd the same happened to high-country leasehold land: lakefront land bought for a pittance and sold for a few million in a month\u2019s time. And I thought, \u2018This is really weird. If this happened in Asia, everyone would assume someone had been paid off. That probably wasn\u2019t the case. It was probably all by the book, but that book would be quite complicated. There\u2019d be disclosure rules and process rules and this and that. But it wasn\u2019t stopping these egregious abuses.\u201d<\/p>\n
Market failure<\/p>\n
Fifteen years after her return to New Zealand and its mystifying rules, Hamilton-Hart has published Stupid Rules: Reducing Red Tape and Making Organizations More Effective and Accountable. It\u2019s a theory of what has gone wrong in New Zealand and in comparable democracies \u2013 she pays close attention to the UK.<\/p>\n
Like so many academic accounts of our decline, she begins with the neoliberal revolution of the 80s and 90s: the privatisation of state industries, private-sector outsourcing, mass deregulation, the dismantling of the old command-and-control state.<\/p>\n
The demi-gods of the free market succeed through imposing authority on large, hierarchical organisations.<\/p>\n
Danyl McLauchlan<\/p>\n
But, she writes, the decades since those reforms have seen a counter-revolution: a Great Reregulation. The many failures of the neoliberal project \u2013 the private monopolies, financial crises, shoddy buildings, failures in healthcare and delivery of core services (water, electricity) \u2013 prompted a vast re-expansion of the regulatory state. Rules, regulations, standards, metrics, codes of conduct, compliance requirements, occupational licensing, consent regimes \u2013 all addressing the perceived failures of the market.<\/p>\n
The rules don\u2019t solve the underlying problems, though. They just pretend they do. The National Party can still auction off access to the Prime Minister, so long as it doesn\u2019t refer to him as the Prime Minister. Key markets such as groceries and electricity are fundamentally broken despite having big regulatory bodies overseeing them.<\/p>\n
Hamilton-Hart\u2019s key concept here is the \u201cfake market\u201d. She sees this as a kind of self-deception by governments: \u201cWe\u2019ll pretend we\u2019re dealing with market-based providers even though we\u2019re not, and we will contract and have KPIs [key performance indicators]internally which people will work to.\u201d<\/p>\n
Fake choices<\/p>\n
When public services such as healthcare, education and social welfare are outsourced, governments create elaborate contracting and monitoring systems for transactions that have none of the features of real market exchange. <\/p>\n
Hamilton-Hart writes, \u201cPrisoners \u2018consuming\u2019 the services of private prison providers do not have a choice of provider; in public healthcare settings, few patients have a choice of surgeon.\u201d<\/p>\n
Fake markets generate enormously complex regulatory regimes \u2013 KPIs, accreditation requirements, compliance standards \u2013 attempting to simulate the accountability that emerges naturally from genuine competition.<\/p>\n
Government authority has been replaced by process. If something goes wrong, no one is responsible because no single individual decided anything. Photo \/ Getty Images<\/p>\n
Stupid Rules\u2019 case against the modern regulatory state begins with the British economist Ronald Coase. In the 1930s, he asked a simple yet confounding question of free market economics: why do firms exist? If markets are as efficient as their advocates claim, why doesn\u2019t everyone just contract everything out to everyone else? Why would a private company hire an in-house lawyer instead of contracting to a law firm? <\/p>\n
Coase\u2019s answer was: transaction costs. This is the price you pay in terms of time, effort and money when you find a supplier \u2013 the law firm \u2013 negotiate and enforce the contract then monitor their performance. It\u2019s often easier and cheaper to bring someone inside the organisation and just tell them what to do.<\/p>\n
Every successful firm operates as an internal hierarchy. It\u2019s funny when you think about it: founders and corporate executives are celebrated as the titans of the free-market system but the demigods of the market \u2013 Rockefeller, Ford, Jobs, Bezos, Musk \u2013 succeed through imposing their authority on large, hierarchical organisations.<\/p>\n
Hamilton-Hart\u2019s critique of the neoliberals is that they ignored this very obvious fact about modern capitalism.<\/p>\n
\u201cMost economists accept that things such as infrastructure (roads, railways, electricity and sewerage systems, healthcare and education) are not efficiently provided by markets alone,\u201d she writes. <\/p>\n
\u201cIt should have come as no surprise that this shift would incur very high transaction costs and, too often, appalling failures: regular sewage overflows under private waterworks providers, failures to build sufficient generation capacity and the delivery of services that are both shonky and expensive. The incentives were skewed from the outset.\u201d<\/p>\n
Regulation redux<\/p>\n
The Great Reregulation is an attempt to correct for this fundamental error. The result is the modern managerial state. Government authority has been replaced by process; decisions are litigated by committee, delegated to consultants, validated against metrics. If anything goes wrong \u2013 and things are constantly going wrong; nothing works properly \u2013 no one is responsible because no single individual decided anything.<\/p>\n
Stupid Rules quotes the investment analyst and author Dan Davies, who calls these systems \u201caccountability sinks\u201d. In 2024, the Ministry of Education spent $715,000 paying external consultants to tell it how to downsize its organisation.<\/p>\n
Hamilton-Hart: \u201cI thought, so nobody inside this had enough of a grip on who does what and what\u2019s essential that they have to bring in outside advisers to tell them what\u2019s valuable and who\u2019s actually performing? And if you\u2019re not across that as the CEO? To me, this is a flight from authority, which is also a flight from responsibility.\u201d<\/p>\n