How is it that countries like Iceland and Switzerland with many small councils have a higher GDP/capita than New Zealand?

Why this question is important:

The core assumption of the proposed amalgamation is that a bigger council will be more effective at economic development.

The core assumption

The whole case for amalgamation is based on the premise that a bigger council is better and will be better able to "facilitate economic performance".

There is an expectation that:

"The Wairarapa is a single economy and job market. The business community’s view is that the continued lack of commitment from the existing councils to a coherent Wairarapa-wide economic strategy is a significant limitation of the status quo. A single district council is seen as the best opportunity to provide Wairarapa-wide strategies across key economic drivers."

 

Competition: Is it a good or a bad thing?

Seems somewhat paradoxical that the business community doesn't like competition. That is generally touted as the main driver of business growth, excellence and innovation.

Having a single council: "It also would remove the incentive for the Wairarapa councils to compete with each other, lifting councillors’ decision-making mandate to match the geographical scope of the Wairarapa."

The observations and studies made by the New Zealand Initiative on local government and its influence on economies strongly suggests that competition between local bodies is a good thing. Sophisticated businesses these days adopt a principle call "co-opetition"; they cooperate with each other where that makes sense and compete with each other in other areas. Who supplies a large measure of the componentry of the Apple iPhone? Samsung. 

What is the correlation between size of local government and economic performance?

 

There is no impediment to economic development or high-level economic performance in having small local bodies.

There is some argument to indicate that these countries' high levels of performance are because decision-making and ownership are devolved down to small units.

Quite simply, again the data and real world cases do not demonstrate that bigger is automatically better.

Some links to associated material

When smaller is better - Jason Krupp from the New Zealand Initiative

Learnings from the New Zealand Initiative's visit to Switzerland

 

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