Systemic and other risks of the Auckland Super City
July 21, 2009
Government proposals will mean Weaker not Stronger Local Democracy in Auckland
The government has called for submissions about the role and functions of local boards in the new governance structures in Auckland. It sees the role of local boards as vital to the functioning of local democracy but doesn’t appear to want them to have any powers other than the right to be consulted. Currently the seven territorial local authorities in Auckland have much greater autonomy and powers than the proposed local boards. There is a risk that this reduces local democracy. Such an outcome could, in turn, undermine local decision-making and reduce social cohesion. You can’t take away the power and strengthen communities at the same time. At least local boards must have the capacity to make effective decisions for their areas and communities and an expectation that they will be implemented.
The possible justification for the proposed structure is service efficiency. This can be delivered by aligning local and regional interests, on the one hand, and ensuring the appropriate agencies are used to deliver services on the other, as provided for in the government’s proposal. However, it is important both in the interests of good decision-making and in the interests of the city’s and its communities’ development that we do not overlook social issues. Social exclusion has a way of creeping up on us and destroying the gains from efficiency anyway; witness the reaction to Margaret Thatcher’s “efficiency” reforms of the late 1970’s and the street riots that followed in 1981 in London and Liverpool.
Is there a Danger in Making the Auckland Council Too Big?
With the collapse of the world’s financial markets, questions are being raised about organisations or systems that become too big and too important to fail. The bailing out of the US and UK banks is one example, another is the difficulty a monolithic General Motors had in adjusting to the new realities of the global car market:
Concerns about dependency on large organisations are receiving increased scrutiny under the heading of “Systemic Risk”. Some commentators[1] suggest that we should have limits on the size and power of organisations to avoid over-dependence on one organisation. Increasing efficiency from economies of scale is the argument for ever larger organisations, but we need to consider the point at which diseconomies set in, and the amplified risks that come from their failure.
Governments, as the biggest monopolies in most states are also subject to systemic risks, the same as private organisations. The risk lies not just in their possible failure – usually a prelude to a coup d’état – but more often in the magnitude of the mistakes that they can make. If they don’t work we can’t abolish them, we just have to pay to fix up their mistakes! At the moment, commentators are becoming increasingly concerned at the amount of debt governments have decided to shoulder in response to the threat of global recession. Closer to home, the principle of government failure was illustrated by the impact of Think Big projects. Benefits turned to costs as the assumptions about world energy prices underlying this bold but risky programme of public spending proved unfounded.
In local government, the principle of “subsidiarity” is one antidote to this risk. This is the principle that decisions (and power to make these decisions) should be taken at the level closest to the people and organisations affected wherever possible. This spreads the risk of failure, and reduces the consequences when it does occur. It should enhance efficiency by ensuring that outcomes are well targeted. It empowers local communities to make their own decisions, and strengthens social cohesion through local participation.
As a starting point, this places the onus of proof on the larger organisation to back its case for managing powers and functions at a higher level. The question of decision-making delegation and sharing may be an appropriate starting point for the new council as it deliberates on how it will implement a governance regime that is an improvement on those of its predecessors.
There is a risk that the reforms underway assume an opposite starting point: start with large, centralised decision powers unless smaller, devolved arrangements can be proven to present no encumbrances to the top down structure proposed. Yet, the more centralised decision-making becomes, the greater the risk of systemic failure.
Think of the proposed transport CCO for example. It looks attractive to have all the transport functions under one umbrella but what if it’s just too complex to manage? Or becomes captured by vested interests? The current structure may be unwieldy but we need to build checks and balances into a new one, especially if it is to be all-encompassing, as a sensible, risk avoidance measure.
In conclusion, considerations of risk, effective decision-making, social equity, and community development mean that we should think hard about the benefits of subsidiary in determining the range of powers and responsibilities assigned to the local boards and the scope of activities delegated to the new Community Controlled Organisations and adopted by the Auckland Council under the new structure for Auckland’s governance.
[1]e.g. Duncan Watts “Six Degrees” from Harvard Business Review.
