Political Stability: The Infrastructure You Can’t See

Why foreign investors don’t trust reforms alone. Real confidence comes from bipartisan stability and durable regulatory infrastructure.

It is said that capitalism thrives on the promise of profit - but what is rarely admitted is that the promise must be credible, the rules of the game stable, and the umpire above suspicion. A statute can declare the door open to investment, but if the hinges creak each time Parliament swings, capital will hesitate at the threshold. The New Zealand Government’s latest reform to the Overseas Investment Act, reducing approval times to 15 working days and carving out a niche for ultra-wealthy investor-visa residents to buy homes above $5 million, comes dressed as a bold pro-growth signal. But as any economist worth their salt will tell you, it is not what the law says - it’s what investors expect will happen next. And in New Zealand, that next election always looms like a reset button.

Let us start with the purported benefits. The Bill promises “more jobs and growth” from these tweaks. It offers a less “onerous” test for foreign investors, a truncated decision-making period, and a new presumption of approval unless national interests are at risk. The intention, one gathers, is to tell the world: we are open for business.

But this very sentence - “we are open for business” - has been uttered by every government of every hue since the 1980s, sometimes even as they simultaneously rewrote the rules under which business was allowed. The RMA, Local Government Act, Health and Safety legislation, foreign buyer bans, housing tax switches, emissions regimes, Three Waters, and so on: the national regulatory story is not one of consistency but of lurches, each claiming moral high ground. The investors may be allowed to play, but they cannot trust the scoreboard to stay fixed.

Dani Rodrik, in his lucid treatment of globalisation’s trilemma, notes that international capital flows are allergic to unpredictability. Rodrik’s insight, echoed by Joseph Stiglitz, is that the institutional environment - not simply headline rates or official welcome mats - determines whether foreign direct investment (FDI) enhances local capacity or turns extractive. And when that environment shifts with each change of government, investors price in political risk. Even Milton Friedman, often caricatured as a laissez-faire absolutist, argued that consistent rules trump discretionary interventions - even “good” ones - because consistency allows for rational economic calculation.

The irony, then, is that the very promise of pro-investment reform carries within it the shadow of its repeal. The current Government promises a faster process and lighter touch. The Opposition, perhaps justifiably, frames it as a gift to the rich. Whoever is right, the consequence is the same: foreign investors now know the pendulum may swing again in two years’ time. The promise is tainted by its own temporariness. That, dear reader, is not reform - it is risk.

Slavoj Žižek might interject here with a Lacanian twist. Imagine a suitor promising eternal fidelity at the altar. “I will always love you,” he says, but the very act of saying it introduces doubt. If the love were truly eternal, why would it need verbalisation? So too with investment promises: the louder a government declares its friendliness, the more it reveals its fragility. A truly stable investment climate does not need to shout. It whispers through precedent, not policy press releases.

The problem, of course, is deeper than statutes. It lies in the structure of our politics. Parliamentary majorities, when inflated by party loyalty, grant governments the illusion of omnipotence. But omnipotence without continuity is tyranny of time: each electoral mandate wipes the regulatory slate clean. One Government slashes red tape; the next encases it in triple-glazed glass. And so, we oscillate, pleasing no one, attracting less and less long-term capital. Infrastructure plans stall. Energy investments wait. The productivity frontier lies untouched, as ministers recite their press releases into the void.

Which brings us to the quiet revolution already brewing: the rise of independent MPs. It would be easy to dismiss them as eccentrics, the margin of the margin. But history tells us otherwise. James Madison warned in The Federalist Papers that parties tend toward faction, and faction tends toward instability. John Stuart Mill observed that “the worth of a state in the long run is the worth of the individuals composing it.” Edmund Burke, too, cautioned against the party machine’s prioritisation of obedience over conscience.

Independents, by their very nature, are not beholden to the binary contest of ideological supremacy. They do not need to undo what came before in order to justify their existence. In a Parliament riven by performative politics, they may yet be the only actors capable of genuine bipartisanship - not because they are centrists, but because they can move laterally, across party lines, with the freedom to prize principle over party. The role of the independent MP is not to hold the balance of power in a numerical sense, but to hold the flame of continuity in a philosophical one.

Imagine, then, a new political norm: major regulatory settings, especially those relating to investment, infrastructure, and long-term capital, require not just a majority vote but cross-party endorsement. Independent MPs, in this scenario, are not a nuisance but a constitutional backstop - a mediating force able to convene, cajole, and constrain. They might insist that any future changes to the Overseas Investment regime come only after consensus is built, public impact assessments are shared, and the risk of partisan whiplash is contained.

Such an approach is not fantasy. Australia’s Productivity Commission, itself born of bipartisan recognition of long-term priorities, has repeatedly warned that regulatory churn undermines competitiveness. New Zealand’s own Treasury, in its more lucid moments, has highlighted that “policy instability and poor regulatory quality” are among the top barriers to private-sector growth. And yet, every three years, we pretend anew that the solution is a fresh reform, drafted in haste, targeted at headlines, designed to stand only as long as the current government’s polling lead.

It is no surprise, then, that the OECD consistently ranks New Zealand low on indicators of policy stability, despite its high scores for transparency. We tell investors what we’re doing, yes - but not for how long. We have a reputation for honesty, but not for predictability. And predictability, to quote economist Barry Eichengreen, “is the lubricant of international capital.” Investors do not need deregulation per se - they need credible commitment. If that commitment cannot be offered by two major parties locked in oppositional choreography, it must come from somewhere else.

Perhaps it is time to treat political bipartisanship as a form of economic infrastructure. Just as roads enable transport and schools enable learning, a shared regulatory baseline enables productive investment. But like all infrastructure, it must be built, maintained, and protected. That task cannot fall solely to Cabinet ministers drunk on victory, nor to opposition leaders scheming their revenge. It must fall to those who stand outside the fray - who can see the longer arc and hold both sides to it.

New Zealand’s economic malaise is often misdiagnosed as the result of size, distance, or lack of capital. But capital exists in abundance globally. It seeks out places where rules are legible, systems are stable, and political actors do not treat legislation as confetti. If we want to attract not just money but meaningful investment - patient, productive, employment-generating capital - then we must offer more than reform-of-the-month. We must offer something rare: the absence of reform, the confidence that today’s rulebook will still be recognisable tomorrow.

This is not a call for paralysis or refusal to adapt. Regulation must evolve with society and technology. But it must do so deliberately, not spasmodically. And its evolution must be buffered by consensus, not whipped through select committees like a goose through foie gras production. The deepest signal we can send to international investors is not that we are “open for business” - but that we are mature. That our institutions, like our landscapes, endure beyond the weather.

As Hayek warned in The Constitution of Liberty, the rule of law requires general and abstract rules that apply equally and do not change capriciously. It is only under such conditions, he argued, that individuals and businesses can plan, invest, and act with confidence. A law that bends to every political gust is not a law, but a suggestion - and suggestions are not bankable.

What, then, should we do?

We should treat bipartisan regulatory accords as sacred. We should empower independent MPs to act as guardians of these accords, able to block reckless deviation and broker sober evolution. We should establish thresholds - not for ideology, but for change itself - so that reversals require genuine deliberation, not partisan zeal.

In this vision, the role of the independent is elevated: no longer a lone voice or protest candidate, but a bulwark of continuity. Not the enemy of reform, but the steward of its credibility. The investor, looking at our little archipelago on the edge of the world, will not be persuaded by slogans or statutes. But they may be persuaded by the sight of a Parliament in which not everything turns over on cue. Where the law, like a good fence or a well-laid foundation, stays where it was put.

We can keep writing new laws, promising new dawns, erecting new signage that says “this time it’s real.” Or we can pause, look around, and ask what kind of polity we want to be - not just for this quarter, but for the next generation of workers, investors, and citizens alike.

If our politics cannot guarantee permanence, then let our institutions do so. And if our institutions falter, let it be the independents who rise - not to rule, but to remind. That governance is not theatre, that investment is not about sentiment, and that reform, when done right, leaves behind no need for the next one.

The rules matter. But the rule of rules matters more.