Thinking outside the box to solve the Three Waters debacle


Back in 1997 I edited a national newsletter called The Indicator. One day I reviewed a book by ecological economist, Richard Douthwaite called The Growth Illusion: How Economic Growth Enriched the Few, Impoverished the Many and Endangered the Planet.  He had also written  Short Circuit: Strengthening Local Economics for Security in an Unstable World, 1996) which gives dozens of examples of currency, banking, energy and food production systems which communities can use to make themselves less dependent on an increasingly unstable world economy.

Jeanette Fitzsimons, Deirdre Kent and Richard Douthwaite 1997

It wasn’t long before I was in contact with Richard and he agreed to come to New Zealand to promote his books. I drove him round New Zealand and recall visiting the then Green Party co-leader Jeanette Fitzsimons. We had many conversations in the car and I recall him saying that if a community wanted more self sufficiency, then it needed both a community currency and a community bank.

So hold that thought.

After its announcement, we hear all this talk in the media about how the government is going to change the centralised model Three Waters to a less centralised model. The new one is called Affordable Water but it seems nobody is satisfied. The supporters of Three Waters are now a bit disgruntled and its opponents are either somewhat satisfied or still are very unhappy.

Let’s ask the question: What was the problem that Three Waters tried to solve? Answer: Local authorities couldn’t afford the necessary expenditure on the unsexy topic of maintaining or upgrading their underground pipes. Depending on the degree of debt the Council already had, they could or couldn’t borrow enough to do it and the ratepayers wouldn’t appreciate it enough when it came to the ballot box.

Okay then. Is there another way of paying for this? Yes of course there is. Let’s talk about what happened in Guernsey Island early in the twentieth century when their infrastructure was in dire straits. The island had used British pounds as currency exclusively, but, by a quirk of history had been granted the right to issue its own currency way back in 1690. By 1916 its infrastructure was falling apart. The sea was encroaching on the land due to the bad state of its dykes. The roads were narrow and unsealed. It had a low income, high debt and they struggled to pay the interest on the debt. After a year’s deliberation they decided to issue their own notes and spend them into existence. With it they built a thriving market near the port.

Despite opposition from commercial banks over the years the Guernsey pound is still used today in conjunction with the British pound. Taxes are low and so is unemployment. According to a 2017 study of a Hungarian PhD student, “Whereas money supply in most countries consists primarily of privately issued bank-debt money (about 95%), Guernsey (States of Guernsey) finance its public spending via quasi state issued money since 1817.”

So if we gave Councils the power to issue money, what would that look like? It could be in the form of a rates voucher, good for the payment of rates to that Council. The former leader of the Social Credit Party Bruce Beetham when he was Mayor of Hamilton in 1976 proposed financing municipal projects with “rates vouchers”. The public were getting behind it when the council’s lawyer advised it was illegal, and it never got any further. He said three laws would need amending: The Banking Act 1908, the Municipal Corporations Act 1954 and the Local Authorities Loans Act 1956.

There are two caveats:

  1. Local inflation needs to be managed. There should be a local committee monitoring inflation so that adjustments in the money supply can be made if it occurs.
  2. There needs to be a community bank which accepts the rates vouchers.

We simply must come to terms with the fact that if sovereign governments can create money, so should local governments.

I notice I have written that councils need to create their own money twice before. Once in May 2020 when it became clear that Auckland Council was in dire straits financially and once in early March 2023 after a Kapiti Coast Council meeting had discussed its inability to employ more staff when they were discussing the district wide climate action policy. Cyclone Gabrielle was in everyone’s minds at the time.

The words of Richard Douthwaite, who died at aged 69, are still valid today. The titles of his books give us hope for strengthening local economies in a full and unstable world.