In this month’s Prospect magazine, Robert Paarlberg, makes the telling observation:

In today's commodity markets, changing behaviour by private investors can temporarily influence prices more than changes in production or consumption. All commodity prices are up – for petroleum and minerals as well as farm products – in part because of a big shift of capital out of equity markets and real estate (as those bubbles have burst) into commodities, which are favoured as a hedge against inflation at a time of rate-cutting. Pension funds and large institutions have poured roughly $200 billion into commodity linked index funds since 2001, helping to drive prices temporarily higher. This bubble, too, could soon burst.

Back in the mid-nineties the planning fad now known as “Smart Growth”, spread from California round the world. The Auckland Regional Council’s Metropolitan Urban Limits around Auckland began to bite around 1996, and have been biting harder ever since.

Wherever “Smart Growth” took hold, residential real estate markets began to inflate into classic “bubbles”. House prices began to rapidly outstrip normal inflation as constraints on the supply of land meant developers could not respond to changes in demand.

George Magnus, senior economic adviser at UBS investment bank, in the same issue of Prospect, also writes:

Lower inflation means lower interest rates, and that means a bigger incentive to boost returns. Most often, you do this by using leverage – borrowing money to invest in something. As asset prices rise, investors borrow more and more against them. History shows these periods of sustained low inflation tend to be accompanied by asset-price bubbles.

Consequently, these inflating residential properties became a target for investment, and security for borrowing at the same time.

Eventually, this bubble burst, causing immediate havoc where sub-prime lending had become commonplace, and more recently inflating all commodity markets as financiers look for other places to park their investment funds.

We are now paying high prices for food, petrol, and any commodity you care to name.

Those central planners who first drew their “Urban Fences” or “Greenbelts” around great cities have a lot to answer for.

Remarkably, planners and councillors in the Auckland and Canterbury Regions continue to promote their policies of containment on the grounds that this is the only way to avoid the hidden costs of “urban sprawl”. Both the Auckland and Canterbury Regional Councils want to draw their MUL nooses even tighter.

Some early and somewhat shaky research from the US suggested that suburban lots might cost an extra $ 12,000 per dwelling to service, compared to infill development.

In California house prices in some cities have generated a $1,000,000 dollar “planners' penalty” per dwelling. (Selling a house in San Jose and buying a similar house in Houston can put US$1,000,000 in your pocket.)

We now have to add the cost of those savings lost by investments in failed finance companies, and the soaring prices for commodities, including food and petrol.

Incredibly, the planners insist the response to high petrol costs should be more “Smart Growth”.

As Freidrich Schiller observed, “In the face of stupidity, even the Gods contend in vain.”

The planners enthusiastically seized on Global Warming Alarmism to support their Smart Growth theories but this has been totally undermined by Consuming Australia by Sydney University’s Australian Conservation Foundation. Inconveniently, this study found that lower density areas, which rely more on automobiles, tend to produce less in GHG emissions than the high density, more public transport dependent areas that are favoured by urban consolidation policies.”[i]

Wendell Cox of Demographia has prepared a more detailed analysis of the base data to examine the effect of urban form and household type on greenhouse gas emissions.

The “inconvenient truths” established by the Wendell Cox report (p 8) are:

Lower GHG emissions are associated with

· urban fringe locations, not the core.

· higher rates of detached housing.

· greater automobile use.

· lower population density.

To top it off, there has been no global warming for the last ten years. The arguments for densification are disappearing fast.

Densification and other Smart Growth policies were promoted as the antidote to the dreaded “urban sprawl”.

The “fear” of urban sprawl was largely a response to the massive migration from the countryside to the cities over the decades following WWII. The regions depopulated and small towns struggled to survive. Remember Regional Development subsidies? Land around the main centres was gobbled up by uniform housing developments that spread like a bland and monotonous carpet over the landscape.

Now NZ demographer, Phil McDermott, is generating data showing that urban sprawl has also stalled.

Metropolitan Auckland is now losing population to the regions of New Zealand, and to countries overseas. The immigration from the regions into Auckland is no longer sufficient to replace the losses. The birthrate of Auckland’s population is below replacement level. Consequently, Auckland’s future population growth is now entirely dependent on inward migration from overseas. Presently more New Zealanders are leaving for overseas than overseas migrants are coming to New Zealand – and high housing costs are partly to blame.

Furthermore, these international migrants are now more willing to live in the regions too. The recent murders of Chinese and Indians in South Auckland may well boost this trend.

This depopulation of the biggest cities is not unique to New Zealand, because many global factors are at work. Retired people seek active lifestyles and employment in small towns and rural areas, while technology makes them less dependent on the central city. The “rural rebound” driven by high commodity prices, gourmet produce, and tourism provides plenty of opportunity for full and part time employment. People seeking leisure and scenic environments drive “the sea change, the tree change and the ski change”. Divorced women with only half their city house price in their pockets, leave the cities seeking affordable, safer housing.

Yet Auckland’s central planners keep projecting from past trends and delude themselves that Auckland will have to accommodate a further one million people. I have no idea where they think they are coming from. The trains will run empty.

Planners still quote with approval statements such as “the only thing that will get people out of their cars is congestion.” Sorry. Congestion is the best way to drive people out of the cities.

I love my congestion-free life at Kaiwaka. No traffic lights and I never have to look for a carpark. Why would I go back to Auckland City? High petrol prices actually encourage further decentralisation in spite of what the alarmists say.

Global Warming Alarmists are also Urban Sprawl alarmists – probably because both offer excuses for control over our lives.

In 1999 The National Review reported:

Vice President Al Gore thinks he's found his Big Issue for the 2000 campaign: suburban sprawl. Sprawl, according to the vice president, is a “threat” to our well-being. We have to stop sprawl, he told the Brookings Institution in September, so that “our kids will see horses, cows, and farms outside books and movies.”

No wonder he and his followers are now so strident. Both global warming and urban sprawl have stalled over the last ten years.

Malcolm Muggeridge, when asked why he thought the League of Empire Loyalists were being so shrill and strident at the time, replied:

“It must be difficult being loyal to something which no longer exists”.

Shrill voices go with lost causes.