The New Zealand Economy.

Links to outside references are found further down.

A fairly naive view of a nation-shattering process.


The structural changes made to the New Zealand economy following the 1984 General Election are often held up to the rest of the world, or seen by the rest of the world, as a meritorious example to follow. After all, the changes came about through non-violent internal forces in a democratic country, so they must be OK, mustn't they? All around the world, commentators speak of them in glowing terms, especially those commentators and observers from other, especially capitalist states who were uncomfortable with the successes of the New Zealand democratic socialist state that preceeded it.

The purpose of this web-page is to draw attention to some recent books, economic research papers and articles that detail also the other side of the changes; the down-side, all the stuff that it is more convenient to sweep under the carpet and forget. And a lot of the space is occupied by the naive observations and experience of one who was there and whose life quality has been significantly worsened by the events.

Jump to the most recent material.

Because the truth is, that fifteen years after this "economic experiment' began, much of the New Zealand population is still paying miserably for the process. There has been little or no improvement for most people, and for many life is much worse. The structural changes were not soundly based. Neither were they implemented with suffficient consideration of the consequences.

There is a dearth of succinct writing about the events of the 1984 - 1994 decade, and I fear that historians who might chronicle this history will leave it until many people who were there and who can still provide facts and insight, have departed this life.

Index. (Click on the entries below to move there directly)

Historical Background.

From at least about the time of the 1930's depression, New Zealand has had a mixed socialist/capitalist economy in so far as the country was considered to be one society and the socialist part of this meant that the less fortunate members of society were 'looked after' by the more fortunate members. In fact - to use current jargon - the Government 'delivered' or did, the 'looking after'. Rather similarly, the State carried out major operations that from the beginning of New Zealand in the European colonialist era were considered too expensive, long-term, and critically important to be left to the devices of private enterprise to carry out.

Among these were; Post and Telegraph, Railways, Inter-Island ferries, electricity generation and transmission, major public construction works (Ministry of Works) including construction and maintenance of major roads, most Forest management (both indigenous and exotic) and protection, scientific research, National Publicity, teaching, Police, transport supervision, Defence, prisons, geological survey and mining, universities, some banking (Bank of New Zealand), some insurance, hospitals, dental care for children, care of the elderly, agriculture advice training and planning, Customs and excise, air transport, airports, management of freshwater and marine fish stocks and their exploitation, Treasury (financial manipulation and minting money) , broadcasting (radio and television), much intercity bus transport, affordable, good quality State housing for the needy. That's about 34, and I've probably missed some.

Some of these activities, such as electricity generation, railways, P & T, and State forestry, were considered strategic activities with particular importance in times of war, and to provide basic commodities for New Zealand industry and the citizens anyway.

For much of the activity, an underlying premise was that because New Zealand is so far distant from potential trading partners in the rest of the world, self-reliance was to be encouraged and developed. Writers Bill Sutch and Wolfgang Rosenberg have covered this topic in the past.

The fact that these State organisations could employ people who just had to get on with the job, resulted in New Zealand being a world leader in such activities as exotic forest management and research, forest utilisation, hydro-electric dam construction, pastoral agriculture, agriculture research and land-related information.

For many years, un-employment in New Zealand was at less than 1%; even 0.4%, which did make it difficult to carry out some activities; but as a result most New Zealanders had the essentials for a good and reasonable life, and the New Zealand economy was in these regards much envied by other countries. Many outsiders just did not believe that the low un-employment figure was the truth - practically no other country had that.

As an aside, it can be noted that much of the real power of the country lay in the hands of the Heads of Government departments. Typically, MP's (especially new MP's ) knew little of the functions and functioning of any department, let alone any one that they might be made responsible for, and after each election there was a scramble to get to the new Cabinet Ministers in order to educate them. Many Ministers distrusted their departments, a distrust grounded in that very ignorance, I suspect, and senior public servants often had a cynical disdain for these people who had been put in a position of power over them but who knew little or nothing of what they had in their hands. Norman Kirk was one such who knew little of Government departments and was reputed to distrust them; I suspect that David Lange was practically the same.

The 1970s' - 1980s' National Government.   To Index.

By the time late 1984 arrived, New Zealanders had had enough of the then National Party (Conservative) Government. In particular, their leader, Prime Minister Rob Muldoon, really got up peoples' noses. When confronted by an opposing politician's argument, typically Rob would attack the opponent and not the argument being put up. He was very good at character assassination and similar diversionary tactics.

For example, during a difference of opinion with the Public Service Association (= PSA, the voluntary 'union' of public servants) in one of these attacks, when he asserted that 'de-registration' of the PSA would paralyse the Public Service Investment Society (PSIS) he nearly caused the failure of the PSIS, the co-operative savings and financial institution owned and run by public servants. It took years to resolve the instability he created in that moment. In fact, because the PSA wasn't registered under the Act that governed most trade unions, it could not have been de-registered! But most members of the PSIS did not know that, and the resultant run on funds as depositors tried to withdraw their savings nearly caused the collapse and failure of the PSIS.

The country also had increasing exterior balance-of-payment problems; Muldoon could do little better than tinker with the problems, and the interest bill on the resulting overseas loans was itself a challenge to pay.

New Zealand also had a pretty-much strongly controlled economy, overseas currency was difficult to obtain, and imports were controlled by a system of import licences. This had the good spin-off that what the country could not import, was manufactured here. Hence there were strong and wide skills and industry bases in New Zealand. However, capitalist and entrepreneurial Aucklanders in particular must have had a strong sense of frustration at this situation. Note, the Business Round Table (BRT), is based in Auckland.

The 1984 General Election.   To Index.

Due to challenges to Muldoon, an early General Election was held in June 1984.

A wildcard entered the scene in the form of Bob Jones, a wealthy property investor who had no liking for Rob Muldoon; his New Zealand Party soon developed a sizable following although I suspect that Jones' main objective was to get Muldoon out of office.

In addition to the right-wing National Party (the party in power) the other main political party was Labour; traditionally left-wing socialist, opposing the capitalist National party, and taking care of working people (as well as everything else of course). For this election it had a very explicit and detailed printed Manifesto which detailed their plans to continue their traditional work and enhance it along the same lines.

There was also a vigorous environmental movement.

It should be noted now, with the benefit of hindsight, that the following features/things were of significant importance ;

    1. Bob Jones' new political party was such a novelty that it provided a diversion and smoke-screen, it was also a vote-splitter. National was the main loser of votes to Jones.
    2. Most people ignored or were unaware of the book written by accountant/pig-farmer Roger (now Sir Roger) Douglas "There has to be a better way." (which foreshadowed events to come). This book was the formal shape of an 'alternative budget' he prepared in 1980, when as a member of the Labour Government Cabinet, he did not agree with the then party line. Those of the general public who were aware of it probably considered it to be the aberrant product of a loose-cannon politician in opposition, and failed to give it serious consideration.
    3. At the time, despite the fact that Roger Douglas was the third generation of politician in his family most New Zealanders didn't know him and when he issued his alternative budget in 1980 considered him to be some kind of nutter. The publishing of his book a little later was considered by many to be some sort of joke in bad taste. Later, when David Lange as new PM endorsed Douglas' theories and ideas, the question very many people asked was "What does Lange know about economics - he's a lawyer, isn't he? - can we trust him that he knows what he is doing with the basis of our economy?" People ( especially after having got rid of Muldoon and hoping for a better and honest deal from Labour ), expected policians to be honest and up-front with their policies, and the hidden agenda came as a very nasty surprise. Mike Moore, in one of his books (Hard Labour), writes that the voters had had adequate warning of Douglas' ideas from his book, debates, printed position papers etc, and therefore voted Labour in on that understanding and basis (see footnote 9). To that, I say "Rubbish".
    4. The New Zealand Forest Service had persistently angered a wide group of environmentalists by continuing to convert into productive 'exotic' pine forest plantations large geographic areas of manuka and kanuka scrubland (manuka and kanuka had for decades been significant weeds and pests to exotic forestry, so the opposing camps saw the plants from very different perspectives). Such low forest was not able to be used for any productive purpose, but the environmentalists said it had great environmental importance: (the environmental lobby supported Labour and subsequently were to be rewarded first as you will shortly find out).
    5. That there was a senior official in Treasury, Roger Kerr, who was making such statements at that time which seemed ludicrous, as, 'the New Zealand Forest Service should be sold off and privatised'. (The Forest Service with good business reason but political blindness, considered itself to be an indispensible and strategic resource for the New Zealand benefit.) Kerr, in 1998, is the senior executive of the Business Round Table - perhaps the most right-wing organisation in New Zealand - a strange place for a senior, supposedly impartial, public servant to come to.

To cut a long story short (for a while), Labour won the Parliamentary Election, Rob Muldoon in a fit of characteristic bad grace refused to hand over power for at least a week, and during that period managed to surrepticiously borrow another $20 million dollars from overseas.

The new (1984) Labour Government.   To Index.

The came the astounding event of the century. David Lange, the new Prime Minister, ostensibly on learning of this new borrowing on top of the existing National debt, in a broadcast to the Nation, and in contravention to what was in the Labour Manifesto, said something like, as I remember it:

"It has been decided that New Zealand has no business being run like a Central European (i.e. Socialist) economy, and that the Government departments and activities will be progressively sold and privatised. The sale proceeds will be used to pay off the National (overseas) debt."

Import controls and subsidies to production were to be reduced and phased out. A free-market economy after the style promoted by the USA economist Dr Milton Freidman, was to be instituted.

And, commencing with the New Zealand Forest Service (3,000 employees) in 1986, that's just what happened. (See footnote 2)

I'll go into this on another page; but the other astounding feature of this period is that, having voted the Labour Party into power by an excellent margin - the Party that stood for good socialism, the working person and so on - when that Party then proceeded, as it did, to place into positions of executive power members of the (primarily Auckland-based) Business Round Table, an organisation standing for the very opposite of what Labour did, the New Zealand voting public by-and-large stood by dumbfounded, stunned by the (very considerable) pace of change, and unable to comprehend the significance of what was taking place.

As an aside, I mention that I recently heard a social commentator say on radio (Ian Collins, journalist, Lincoln, Sunday Supplement, National Radio ) that New Zealanders were iconoclastic and had little or no respect for authority. In my opinion that is a naive and erroneous point of view; time and again New Zealanders have shown themselves to be as putty in the hands of skilled orators; Muldoon, Kirk and Lange to name three*. New Zealanders are the opposite; due to strong Protestant influences in at least the upbringing of an older generation, they are in fear of authority and do not dare to challenge it. Such* people have shown time and again that no matter what the truth of a situation, if they say something often enough and loud enough most of the New Zealand populace will come to accept it as the gospel truth and indeed ridicule anyone who vocally opposes the new socially accepted flavour of the month. (In my opinion, we are largely a nation of woosses). The 'tall poppy' syndrome is also highly active; if you stick your head up (and give out a contrary view), it will be knocked off.

It seems to me that this turn of events had been planned for many months, and the major decision for David Lange was whether the New Zealand voter would accept such an about-face by a new Government, or be totally outraged, and if he could put the blame for the switch on Rob Muldoon. In fact, he succeeded brilliantly on both counts; the public were not enraged but bemused and confused by this totally novel and outrageous turn of events and he succeeded pretty well in putting the blame on Muldoon. (See footnote 1) Actually, since I began writing this, I have begun to read contemporary writing on this topic, and I find that there is widespread confirmation of the preplanning I had begun to guess at. ( See footnote 9 ). The rage of the public came later, and is still widespread.

They then began a process of change. One of the cornerstones of their practice was to move and introduce new laws with extreme rapidity so they could have changes initiated and well under way before any opponents could gather and mount an effective opposition. The pace of change was bewildering, and it was maintained for months. It can be likened to trying to put out fires during a severe and windy time of drought when a group of dispersed under-cover arsonists are all over the place lighting new fires every night (or any time at all).

The Labour Party under Lange had done what no other government had ever had the gall to commence, and it is noteworthy that succeeding National Party governments have chosen to continue along the same path as if they had started it.

A major feature of many or most of the significant changes is that they are now practically impossible to undo.

Government Restructuring, Social Cost.   To Index.

The effects of the great sell-off of the activities and resources that all New Zealanders had so assiduously created and maintained during the preceeding 50 years have been apparent to many; transfer of wealth to a few and overseas, greatly increased un-employment, increasing poverty, increasing lawlessness (senior politicians typically denying any connection between the last three), casualisation of the workforce, huge loss of skills in the workforce, and so on. Several social commentators have remarked on the increased self-centredness of New Zealanders, with a concomitant reduction in sense of social duty, that have come out of these reforms. (See footnote 5.)

And the National debt was not all repaid.

One major thrust of these so-called reforms has been to take Central Government out of the direct governing equation. Not only are the numbers and sizes of government departments much smaller, but there have been persistent moves to shift the direct costs of any activity that was once carried out by Central Government onto individuals and groups that may be identified, and to shift other government activities onto Regional and Local Government (regions and cities).

Other changes made during the period of reform commenced in 1984 include; removal of direct Government assistance to producer groups, removal of tariffs, removal of control of imports and import licencing, removal of many QUANGOs (QUasi-Autonomous Non-Governmental Organisations) which were empowered by statute, and sale of most of the Government assets, sometimes at fire-sale prices (Government Print being a classic example).

Important skills lost to New Zealand as a result of these activies include (1998) automotive assembly as the plants of Honda, Nissan, Toyota, Peugeot and Nissan closed down; (previously) glass making, metal alloying and heat treatment, carpetmaking, research in all kinds of basic natural science.
It was interesting; sales of new motor vehicles in the few months prior to the removal of the last tariffs protecting the car assembly plants had been sluggish, and the economic pundits said that prospective buyers were waiting to take advantage of the new lower prices that were to come after the NZ assembly plants closed. What happened? Sales remained just as sluggish, hundreds of NZ jobs were lost, hundreds of NZ families began to suffer huge long-term decline and disruption, plant closed, millions of dollars in wages were effectively sent overseas instead of going to New Zealand pockets. No gain to anyone in New Zealand. Big deal!

There has as a result been significant social restructuring, and huge social cost. Large and significant groups of society that formerly were in a comfortable financial postition and employed productively became to be in a perilous financial state, and a great proportion of the populace has become impoverished. In contrast, some people have done very well out of all this; notably senior company management, and many businesses.

Skills that are now being wasted or which have gone overseas include forest management, research in agriculture and horticulture,

Many commentators on this process and set of events seem to have missed that a major effect of these changes was a significant major shift in the balance of political, industrial and economic power. One of the sets of legislation that the 1984 Labour Government brought into effect had the effect of crippling the power of the industrial unions of workers, and simultaneously casualising much of the work force. The Employment Contracts Act gives most of the industrial power to employers. The change of the base of industrial and economic power was from employees and their unions, to employers and entrepreneurs.

The Prime Minister, Jenny Shipley, is well aware of this. This day, 2 December 1998, Independent Backbencher Deborah Morris (a defector from "New Zealand First"), gave notice that due to 'lack of consultation' over a major defence debate, she was quitting Parliament and commentators noted that this would give the Shipley Government a majority of one, and that an early election could be likely. As I recall, Mrs Shipley said on National Radio that voters had elected National for a full term of three years so there would be no early election, and she had a vision to improve the economy for all New Zealanders, and would ensure that the country was not going to be run by unions. Employers go along with this; today also, from Tranz (Rail) Link which recently terminated contracts with about 35 owner/drivers because they would not sign new contracts, their spokesman Fred Cockram was quoted as saying that Trans Link was prepared to negotiate with individual owner/drivers, 'but we are not prepared to have external organisations come in and represent the drivers.' "The Press" p. 2.

Another major effect of these changes has been to introduce into employment and all kinds of government structures a climate of uncertainty, change and doubt. This has had effects of being a disincentive and catalyst for caution. Apart from the 10 percent or so who relish change and opportunism, New Zealanders function best in a climate of security and assuredness in which they can give of their best without having to watch behind their backs all the time. The employment tactics of some employers include fostering uncertainty also. So one marked result of the changes from 1984, acknowledged by very many people, is that staff loyalty to employers has flown out the window; and similarly with employer loyalty. Nobody has gained from this process. There have always been bad employers, but these days, Government, once setting the example of a good employer, nowadays tends to set the opposite example. The bad example is displayed from the top down.

There are some exceptions; Dick Hubbard of Hubbard Foods in Auckland and Hugh Fletcher have conspicuously behaved in the best way to their employees, much to the publicised annoyance, it seems to me, of Doug Myers (Lion Breweries), head of the Business Round Table.

For some reasons that I do not understand, it seems that the very people who have been worst affected by these political changes have continued to support the agents of these changes. One has to admit that the politicians seem to have read the collective mind quite effectively. Against that argument however, it must also be noted that the political party that initiated these covert changes to the economy is still paying for its perfidy by being left out in the cold; most voters, after nearly 15 years, still will not trust Labour with power.

The social cost of all this has been huge, but few good factual studies of it have been carried out and published until this year (but see books below).

A Published Research Paper worth reading, and what it doesn't quite say.   (Links below.)   To Index.

Read what two economics researchers have found up until September 1998 about the effects on New Zealanders of the "New Zealand Experiment" since 1984; here. You will need Acrobat Reader to decipher it ( in W'95 search for file 'Ar32e30.exe' and install it - it's very easily found through an ftp search).

Professor S. Chatterjee and Dr N. Podder at the Department of Applied and International Economics, Massey University, New Zealand, have written this paper entitled "Sharing the National Cake in Post Reform New Zealand : Income Inequality Trends in terms of Income Sources". To do this they analysed information from the National Census that had hitherto been kept unavailable to non-Government personnel. The work that they have done is the first that could be done by university economic and social researchers using such valuable, factual and comprehensive data. I heard Professor Chatterjee interviewed on radio. He gave a succinct and powerful summary of their findings that I found startling although not surprising, and I followed up on his talk to find information on the Internet. He is not so outspoken in his economics paper above, not even in the summary.

For an article that gives explicit interpretation rather like that given by Professor Chatterjee in that public broadcast during September 1998 (unlike the restrained explanation given in the published paper), go to here.. You will perhaps find this article by Mr Keith Rankin easier reading, in it he analyses and translates conclusions of the main paper into layman's terms that are rather more full and understandable.

Mr Rankin takes the matter further along the same track in an article he submitted to the New Zealand Herald (the major Auckland daily newspaper) here. and you might find this worth looking at too.

For those who wish to re-structure their country to benefit it, this is vital information for a better country.

Printed references.

By the way, there are published books on this general topic. I have ...    To Index.

Kelsey, Jane. 1996. the New Zealand Experiment; A World Model for Structural Adjustment?. pp 406. GP Print, Wellington. ISBN 1 86940 130 1 Price about $NZ 40. (at the time of writing, Dr Jane Kelsey was associate Professor of Law at the University of Auckland.)

McLauchlan, Gordon. 1992. The Big Con. The death of the Kiwi dream. pp 222. GP Publications Limited, Wellington. ISBN 1 86956 082 5. (Gordon is a TV presenter and maker of documentaries, author and social critic.)

Russell, Marcia. 1996. Revolution; New Zealand from fortress to free market. Hodder Moa Beckett. pp. 255. Still in print; price about $35.

Sinclair, Keith. 1960. A History of New Zealand. pp 320. Pelican Book A344. Penguin Books Limited. No ISBN. (Keith is/was an eminent historian, Professor of History at the University of Auckland.)

The book by Dr Kelsey is well worth reading if you want a much fuller and objective account than the impressions I have given on this web-page. She has consulted widely, dug deep for reference material, assembled her writing very well, and shows real concern about the processes she writes about.

For another summary of the salient points, I have added a paragraph that will give a guide to what the three papers above give out.

Other books that are essential ( or at least important ) background reading are:-

Douglas, Roger. 1980. There's got to be a better way. A Practical ABC to Solving New Zealand's Major Problems. Fourth Estate Books Limited. pp. 79. ISBN 0-908593-13-9

Douglas, Roger. 1993. Unfinished Business. Random House New Zealand Ltd. pp. 305. ISBN 1-86941-199-4

Moore, Mike. 1987. Hard Labour. Penguin Books. pp. 198. ISBN 0-14-010235-3

Back to the top.

Hikoi of Hope   To Index.

In September 1998, the Anglican Church organised a march to Parliament from each of the two geographic extremities of New Zealand. The marchers gathered information about the changed circumstances of New Zealanders as they went along their way, and they met in the middle at Wellington and presented a copy of their findings to all parliamentarians.

Among the facts they discovered were the following:

   1. One third of all New Zealand children are living below the poverty line.
   2. Hospital waiting lists are five times the rate of those in Australia.
   3. There are 200,000 New Zealanders who can not afford to make the visits to the doctor that they need.
   4. One in eight of the New Zealanders seeking work cannot find it.
   5. $NZ 3,000,000,000 ( three thousand million dollars ) will be owed at the end of 1998 by NZ tertiary students
       who have had to borrow to get the adequate education they need.
   6. 365 foodbanks operate daily to assist New Zealanders in severe need of food, and more foodbanks are being
      opened regularly, in response to need.
   7. One-half of all the country's tenants ( both public and private ) must spend more than 60 percent of their income
       on rent alone.

What has also has become clear is that people have become insensitised to the wide range and extent of the pain in the community; it is no longer 'news'. This makes it more difficult to obtain remedial responses from potential sources of remedy (Central Government).

Here is a post-script to the above: on 10th November 1998, Government announced that from next July it was cutting nearly $150,000 p.a. funding to three voluntary sector umbrella groups that help more than 6,000 voluntary agencies nation-wide by co-ordinating their responses to the Government when policy advice was called for, and by providing all kinds of operating assistance. The three agencies are:

To read about it, go to here.

The move, according to Associate Social services Minister Nick Smith, was to ensure that the money from CFA (Community Funding Agency) went direct to the services needing it and not to bureaucracy. He did not say how or if the money would be supplied otherwise. A doubly strange move, when a few months ago, Government reduced CFA funding to the Canterbury/Westland Region by $850,000.

That is, by July next year, Goverment contribution to the nation's needy will have been reduced by $1,000,000. I do not have the figures for the rest of the country that accompany the Canterbury/Westland reduction.

Not surprisingly, the three umbrella organisations, already running on shoestring budgets, are appalled by this nit-picking reduction, and, probably correctly, interpret it as a move to silence any voice from the grass-roots of the needy.

Lesson for all other countries where such tactics might be employed.     To Index.

After twelve years of restructuring, the following is New Zealand's situation:

It may well be that some countries need to restructure their economy. It may well be that there are inefficiencies that need to be solved. Don't use the New Zealand method. To use an old saying, if you do so you may 'throw the baby out with the bath-water'. Go through the problems and process them logically; get each segment operating efficiently, using existing staff where ever possible.

Sir Roger Douglas has been in high demand from many other countries since the structural adjustments were carried out in New Zealand. Unlike the Australians who, with characteristic forthrightness have cut through the hyperbole and aptly labelled the process "the New Zealand disease", would-be reformers in Canada, the USA, and other countries have sought to learn directly from him how to apply "Rogernomics", as the process has been labelled. For example, take a look at the following page from COG Associates of Canada here, but check first that your VDU is strong enough - the link contains a picture of Sir Roger himself!

Not only has inaccurate and biassed information been given out, but sometimes unvarnished lies have happily been published by overseas writers.

It was a surprise to me that one of the organisations pushing information on the Internet in the direction of Canada, for example, is the New Zealand Treasury. In their "pubs"-"Canada"-"report1" directory, they show the processes in New Zealand in a favourable light that is not well supported by the facts - the clear difficulty the have in finding much corroborative evidence supports my contention. To see their pages, go to here and here and see what you make of it.

It is vital that politically aware people overseas take heed of what has happened in New Zealand, and maintain a steady level of alertness regarding the activity of those of their fellow citizens who want to follow the direction of Douglas, and/or use his techniques in any kind of revolutionary process. It must be understood that Douglas and his two lieutenants of the time, David Caygill and Richard Prebble, developed a high degree of skill in pushing change through rapidly and confusing their opponents.

At the end of her book quoted above, Prof. Jane Kelsey lists a set of actions that people should take in order to protect themselves and their country from the disaster of this kind of reform, and I list them below, with permission.

List of essential actions, from Prof. Jane Kelsey's book.   To Index.

From Canada come abridged (and somewhat watered-down) details from this chapter of Prof. Kelsey's book on 'the Web', click here.
I list the headings only, the complete list, from the book.

* Take economic fundamentalism seriously ..
* Nip it in the bud ..
* Be skeptical about fiscal and other "crises" ..
* Watch for the blitzkrieg ...
* Remember, the conservatives are not always the worst ..
* Take economics seriously ..
* Expose the illogic of their theory ..
* Evaluate the arguments carefully ..
* Challenge hypocrisy ..
* Expose 'stacking of the deck' ..
* Maximize every political obstacle ..
* Maintain a strong civil society and popular sector ..
* Work hard to maintain solidarity ..
* Do not compromise the labour movement ..
* Employ the politics of political embarrasment ..
* Reinforce the concept of an independant public service ..
* Encourage community leaders to speak out ..
* Avoid anti-intellectualism ..
* Establish well-resourced critical think-tanks ..
* Develop alternative media outlets ..
* Raise the levels of popular economic literacy ..
* Educate popular and sectoral groups in advance ..
* Resist 'market-speak' ..
* Be realistic and avoid nostalgia ..
* Be pro-active and develop real alternatives ..
* Re-think identity and alliances ..
* Challenge the TINA ( there is no alternative ) syndrome ..
* Promote informed debate and critique ..
* Promote participatory democracy ..
* Embrace the Treaty of Waitangi as a liberating force ..
* Encourage progressive counter-nationalism ..
* Develop multi-level strategies ..
* Hold the line ..
* Localise politics ..
* Ginger up party politics ..
* Invest in the future ..
* Support those who speak out ..
* Promote ethical investment ..
* Think global, act local ..
* Think local, act global ..

Before I forget (at October 1998) , some other more recent activities of this right-wing Government are;   To Index.

    1. Reduction of income taxes expecially at the top level, in circumstances when such was neither necessary nor being called for. The last two tax cuts, benefitting only the wealthy, are reported to have cost Government $2,600,000,000 per year. Consequently, National say they have to cut back on social programs since they cannot afford to fund them - I wonder why! It is ironic; the news headlines recently pointed out that student loans will exceed $3,000,000,000 by the year 2,000, and people make a great fuss of that. Yet nobody clamoured for the tax cuts - 500,000 would have got the full cut of $45 p.w., and 1,500,000 would have got a cut of about $15 p.w. - each group would hardly notice the difference; but what a difference it would make to the students if it were applied to their benefit!

    2. Following (1.), as the so-called Asian crisis hit home Government took measures to save about $400 million, saying that it not longer had sufficient income for current expenditure (I wonder why), and did some re-adjustments which include to the old-age pension a reduction of the percentage of the average wage to which it will be kept - from 72.5% at 1995, from 65% in 1998, to 60% by about the year 2,000.

In fact, these re-adjustments have nothing to do with the "Asian Crisis". What we are seeing is a Government which, in a spiteful manner, is driving home the points of its dogmatic views on individual self-sufficiency and lower taxes, in such a way that those least able to defend themselves must suffer. It is the way that this National Government is using to revenge itself from the crushing defeat handed to it by the voting public when, in a national referendum in 1997, the Government's recommendation for a compulsory National savings scheme to fund superannuation was resoundingly rejected.

    3. In doing away with the NZ Housing Corporation which had the job of providing low-cost good housing for the least well-off people, and thus cutting them off from low-cost housing, this Government substituted a means-tested 'housing supplementary payment' whereby poorer people could have their unemployment, DBP or other benefit increased to help meet the cost of rent. Currently this costs about $700 million per year. It has been observed that all this has done is transfer that $700 million straight into the pockets of private landlords as they increaed the rents they charged, being fully aware of the process. It was reported to me by one person who knows from family experience, just recently (9 Oct 1998) that since people on a benefit are paid directly from the Department of Social; Welfare, landlords can apply (and are routinely granted) that rent be paid direct to them from DSW. So what happens? They increase rent whenever they like, are guaranteed payment, and the tenants have no say in it. Landlords know when their tenants get increases in benefits, and increase the rents they charge to soak up the new financial allowance straight away. With direct charging, they are assured of rent payment no matter what, whereas even with wealthy people in business as tenants they are not assured of due and timely payment.

It is of interest that on 3 November 1998, an economic commentator as the sharemarket began to rise, said that after two kinds of Bonds, the domestic rental market was the best investment for investors to make.

Why am I writing this? I still have a strong feeling of betrayal and injustice arising from the deeds initiated and perpetrated on New Zealanders by a new Government freshly elected and from which they had hoped so much after the tyrrany of Muldoon. Often, New Zealand is held up to the world to see as a shining example of how to reform an economy in the late Twentieth Century. As I hope I have given some insight, this is not the case. And the present National (Right-wing) Government mostly cannot see past restructuring as a means of improving the economy, when there is practically nothing left to restructure. (see footnote 4).

I still have a great sense of loss, as do many others, since the N. Z. Forest Service was done away with. This was a very cohesive, highly disciplined, very productive and sound organisation with a history of achievement equalled by few if any. Using investment from the nation, and primarily initially to create substitutes for depleted indigenous forest which had provided the raw material from which the early houses of the nation were constructed, it created a resource for the whole Nation to benefit from - and after 1984 Labour gave it to the private sector for a pittance. (See footnote 3).

Footnotes.   To Index.

Footnote 1.

   New Zealand had, until about 1993, a system of electoral practice called 'First Past the Post', meaning that regardless of the national distribution of votes per political party, the political party that won the most individual electoral districts gained the most seats in the House of Representatives, and thus held held the power. It was known that a party could poll the most votes throughout the whole country and yet lose the election because it did not win an equivalent proportion of the seats. Associated with this possession of power and the 'First Past the Post' system, was the sort of behaviour I have described when discussing Muldoon and Lange; exercise of almost absolute power with little or no regard for what the 'defeated' 40 - 50% of voters wanted (or in the case of Lange, what was wanted by the voters who put him into power).

From about 1993, the electoral system was changed to one of MMP (Mixed Member Proportional) representation wherein each political party may win seats by winning votes in an electorate, and is granted an additional number of so-called List seats in proportion to their overall national support. These List Seats are filled by people nominated by the party, and there is not necessarily any requirement for the people so nominated to have had any particular success in the election; they are the choice of the each Party who may use whatever criteria they decide in selecting the incumbents. By opting for this form of representation, voters hope that representation in the House of Representatives will be more co-operative and less antagonistic, and especially that unbridled power will be checked. David Lange remarked after MMP was introduced, that he could not possibly be an MP in such an environment, and ceased to participate as an MP. I thought that this reaction provided quite some insight into his modus operandi.

Some time about March 1998, Ms Alamein Kopu, a List MP of the Alliance Party (headed by Mr Jim Anderton), defected from the Alliance. She became an MP solely because the Alliance party had selected her to serve as Alliance MP for the 'n'th List seat allotted to them on the basis of numbers of votes cast nationally for Alliance. The seat was awarded primarily to the Alliance Party, not to Alamein Kopu. The question then arose as to whether or not she should be required to give up her seat to the Alliance Party for them to fill with another person, or if could she continue on her way as an independent MP, or alternatively, join another Party. The National-controlled Government later decided that it would not legislate for defecting List MP's to be required to step down from office ... but that is another story.

The reason that I raise this issue is due to a discussion on radio at about that time, in which Mr Jim Anderton took part. Mr Anderton is currently the Head of the Alliance Party. He spoke for some time about the ethics of the situation, and honesty. He then briefly alluded to the events of 1984, and events before and since that year.

Prior to 1984, Mr Anderton was President of the Labour Party. Not 'Prime Minister', but Head of the political party of that name. He said that because of the way that Labour had so betrayed the trust of the people who voted Labour into power; by ignoring the detailed Manifesto and by taking such actions that were totally in contradiction to what they had campaigned on and promised, he considered at that time that he could no longer stay on as President of the Labour Party.

In fact he went on then to found a new political party called 'New Labour'. New Labour is one of the components of the 'Alliance Party'.

He said that politicians needed to have some honesty, some good ethics, and he used the instances of his own actions as examples. Then he called upon Alamein Kopu to follow his example (and comply with the written undertaking she had signed for Alliance prior to accepting the List Seat) and show some moral fibre by resigning her List seat for the Alliance to fill again. She has not done this to date.

He then went on to say something like; "The Labour Party had planned before the 1984 election to carry out the actions and restructuring that in fact it did, but kept these details well secret from the voting public prior to the election." And he very much opposed this political deceit.

This caught my attention, because it provides some insight as to the real background to the changes that occurred from 1984. Jane Kelsey's book provides good records of the sources of the ideas, and their timing.

In that case, questions might be asked such as,   1. Was David Lange 'planted' in the Labour Party by the Business Round Table, or   2. was there just a close societal link between him, (he is a prominent Auckland lawyer), and other prominent Aucklanders during which time their ideas brushed off onto him (and Roger Douglas).  3. From whence came the idea to use so many members of the BRT in important positions during the period 1984 - 1988 (Alan Gibbs in Forestry, for example).     4. Just what was the chain of events that led to the adoption of the plan to deceive the nation?

As I write this, I note that General Pinochet of Chile is under arrest in London at the request of the Spanish Government in respect of the killing (in addition to 3,000 Chileans) of Spanish citizens following and in relation to the coup engineered by the General, so that he also could carry out right-wing structural changes. While the changes initiated by Messrs Lange and Douglas in New Zealand have not been accompanied by such a dramatic tally of obvious deaths, the legacy of misery they created is scarcely less painful.

Footnote 2.   To Index.

The net cost in 1984 of running the State exotic production forests (managed pine plantations to some!) run by the New Zealand Forest Service was $NZ 100 million per annum. Today, in 1998, the same dollar value is spent by the Department of Social Welfare every 57 hours of the year on various forms of payment to the needy. In the meantime, along with the other losses, hundreds of people have lost highly productive, satisfying jobs, skills have been lost to the country, and a very large (but as far as I know unquantified) income has been lost to the nation. It is noteworthy that the organisation charged with the responsibilty of collection of income from those organisations leasing the State Forests was in early 1998 or in 1988 found to have missed some required opportunities to claim some payments due to the State.

Footnote 3.   To Index.

It has been fashionable for several of the senior politicians to repeatedly state (in an attempt to mould public thought) that departments of Central Government are inefficient in the extreme, and that the private sector is the epitome of good and profitable management. During the last 15 years there have been the most spectacular business crashes in the private sector that one could imagine, and all have been due to inept management. I am thinking of EquitiCorp, Waitaki Frozen Meat, The Bank of New Zealand ($800 million, bailed out by the taxpayer!!), Skellerup Group ( Levenes, collapsed in 1987-8), and BIL or Brierley Investments Limited, the archetypal corporate raider that has come close to going belly-up in 1998. Sir Roger Douglas is Chairman of the Board of Directors of BIL - yes, the same Sir Roger as above. As I write this now on 11 November 1998 the Annual General meeting of BIL is being held and it has just been reported that for the last year just ended BIL LOST $900,000,000 !! No Government Department ever operated half so badly!

Footnote 4.    To Index.

MMP as an alternative to 'First Past the Post' was voted in by a populace sickened of the tyrrany of the likes of Rob Muldoon, and the devious, deceitful actions of a Lange/Douglas government, as a means to slow down the worst excesses. Five years after MMP began, New Zealand politicians are still struggling with the co-operative mode of government it needs and is supposed to foster. They still haven't got the message very well.

Footnote 5.   To Index.

Some time during the summer at the end of 1997, a black African student who was accompanied by his wife and children, was set upon violently by a group of 'skinheads' at a crowded beach at Sumner, Christchurch. It was ages before a person came to his aid. Ten years previously, such a lag in response would have been unthinkable. People would have come to his rescue immediately.

Footnote 6.   To Index.

It occurs to me that there are some similar events unfolding at the moment.

Sir Roger Douglas (at October 1998) is the Chairman of the Board of Directors of BIL. BIL is in considerable strife at the moment, as the value of its shares has tumbled to half or less of what they were a year ago. The same person was Minister of Finance in the Labour Government that started New Zealand on the helter skelter skateboard ride of change that has caused so much social and economic strife for the country since. It was his ideas that were put into practice.

Could it be that there is a causal link somewhere close-by, to these unfortunate events?

Footnote 7.   To Index.

During the first week of November 1998, the long awaited unemployment figures were released for the quarter. Contrary to expectations, instead of showing an increase, the numbers were down. As revealed on 6th Nov 1998, it has dropped from 7.7% to 7.4%; it was expected to rise to about 8.1%.
Economists at the Bankers Trust advised that the fall in the unemployment rate came about entirely from a drop in the numbers saying that they want work. The drop in numbers in the labour force ( in work or seeking work ) from 1,863,000 by 4,000 on a seasonally adjusted basis accounts for the decline. The total number of unemployed also dropped 4,000 to 138,000 for the September quarter.
Clearly, more people realise the hopelessness of trying to get conventional work and don't even bother to register.

Footnote 8.   To Index.

Another note to illustrate the way Robert Muldoon exercised power.

Some time during the 1970's Labour Government of Norman Kirk, a Payroll Tax was put in place. In these days it seems ludicrous, but then, with unemployment at about 0.4% the very few unemployed really were practically unemployable. Good labour was very hard to find, and to discourage employers taking on more staff than they absolutely needed, they were taxed according to the number on their staff roll.

After the election that brought Muldoon to power, and before any legislation could be enacted, he made a Press announcement that the Payroll Tax would be abolished. Practically all employers ceased forthwith to pay the Tax, and although it was quite some time before the Act was repealed, and although it was illegal to fail to pay the Tax, no employer was prosecuted for such failure.

Hence, we had 'Government by Press Release.'

Footnote 9.   To Index.

Mike Moore states in his book "Hard Labour" (Penguin Books, 1987, pp. 198, ISBN 0 14 010235 3), on page 113; " The nervous members of caucus who couldn't keep up with what we were doing were impressed by the groundswell of support. Yet Labour didn't have time for a political honeymoon. We had the luxury of a one-night stand without foreplay; then it became an orgy of overdue change and ruthless Douglas reform. But why so many commentators were surprised by Rogernomics is, in itself, surprising. Roger had signalled his intent more than any other economic leader in history. Four years before he'd published his Bible: There's Got to Be a Better Way. He'd printed position papers and unleashed his Alternative Budget on an apathetic public and a nervous Labour Party. He'd signalled his interest in the changes now being put in place in Parliament during his address-in-reply and many Budget speeches over many years. Perhaps politicians talk so much that people eventually fail to hear; maybe it's simply that commentators are more interested in splits and interparty play than substance."

To me it is just about as interesting that he ignores the deceit practiced on the populace by not adhering to the Manifesto on which Labour were elected.

Back to papers.

Well, what did the papers (and more recent material) reveal?


As at September 1998, the number of people in work is 1,720,000 out of the population of 3,700,000, and 138,000 are out of work (7.4%).

Distribution of wealth.

Based on the Household Economic Survey of pre-tax gross incomes, the study finds that only 20% of New Zealanders are better off as a result of the structural reforms.

Growth of the economy.

From the start of the reforms (1985) until last year (1997), the economy grew 10%; 0.8% per year over the 12 years. It grew 9% in the two years prior!

The growth rate since 1986 is half that of the average rate for the previous 90 years.

In the 12 years through the worst depression New Zealand has had, from 1929 to 1941, the economy grew 35% or 2.5% per annum, three times the rate in the twelve years since structural reform began in 1985.

The growth of the economy following the 1980s reforms is pathetically low by any reasonable standard.

Tax cuts

There have been four rounds of tax cuts since 1983; 1986, 1988, 1996, 1998; and all of them have favoured higher income earners. The last two of these tax cuts have reduced the Government income by about $2,600,000,000 per annum; that is, two thousand six hundred million dollars each year, and the only people to benefit from this are the most well-off 15 percent or so of the population. People on $16,000, the median income, have had virtually no tax cut.

To Index.

Other data from later dates.

21 June 1999.   Southern Cross Health, a major health insurer and provider of private hospital facilities, advised that they are keeping their fees constant and not increased for the coming year.   They also noted that the percentage of the population holding private health insurance has reduced from about 1/2 in 1991 to 1/3 in 1999. There are clearly many reasons for this; it could be said that confidence in the public health system has been improved (especially since the new waiting-list system seems to work), but also an increasing proportion of the population can not afford the cost of health insurance.

22 June 1999.   The Minister of Finance, Bill English, is under pressure to lower taxes again - there have been six decreases of tax since 1992.

He pointed out that the country's balance of payments situation is in the worst state it has been in the last 14 years, and clearly is not in a hurry to reduce taxes again.

Following the combination of increased personal disposable income (to the income groups with the highest incomes in particular) following the tax decreases, and reduction of tariff barriers, there has been a large increase in spending of consumer goods sourced from overseas, with no parallel increase in investment in local industry (dismantled in the reduction of tariff barriers) and no increase in overseas income.

The previous week, financial commentator Murray Weatherston talking on the 'Kim Hill" show, pointed out that the current overseas debt of New Zealand now is $NZ 100 billion, or 200% of ( = twice) the amount of the Gross Domestic Product. That is, $100,000,000,000, (this calculates to $29,641 for every man, woman and child in the country). This, he said in comment to me, is probably the worst it has ever been.

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Author: Brian Swale. Back to homepage

Back to base at Caverock

From 23 June 1999.