By Steve Painter
Since 1984, the New Zealand economy, already staggering because of its loss of traditional export markets for primary products, has been brought to its knees by New Right policies similar to those proposed in the Australian Liberal Party's Fightback package. Paradoxically, it was the New Zealand Labour Party which introduced the New Right agenda.
If New Zealand was in difficulties when the Labour government came to office in 1984, it was in the midst of a full-scale disaster by the time Labour was thrown out in 1990. While the stock market crash of 1987 was a temporary, if deep, shock to most capitalist economies, it marked the beginning of a recession that still has not ended in New Zealand.
Nothing has happened since then to turn the situation around. Unemployment is 15% and rising, and there are some predictions that it could reach double that figure. Meanwhile, the government has slashed pensions, welfare benefits and all state services. Labour was devastated in the 1990 poll, losing more than half its seats, but within a few months the incoming National Party government had become one of the most unpopular in the country's history.
All this began when Labour came to office in 1984 following a no-issues campaign focussed largely on the personality of David Lange, who was to become prime minister.
In Lange's case, the no-issues image was probably an honest one, writes commentator Bruce Jesson in Fragments of Labour (Penguin 1989). Lange "had frequently been derided in 1981-82 for several character faults: a lack of concentration, inattentiveness, laziness. And he didn't have any thought-out political philosophy, or even much idea of what he wanted to do."
But if Lange wasn't sure what to do after the elections, some other Labour MPs were. Political leadership fell to a mainly Auckland-based grouping that had begun forming in the mid-1960s. At that time, Jesson writes, the old generation of Labour supporters was replaced by younger members and the party became, even more than previously, "a party of expediency rather than principle ... The processes of politics became more important to these people than the content. The young careerists of Labour politics were intensely political in the narrow sense of thriving on the rough-and-tumble of the battle for political power."
Among this group was Roger Douglas, who in the course of trying to develop an economic policy for Labour around 1983, came upon a ready-made one — a 352-page document, known as Economic Management, drafted in the New Zealand Treasury department. Essentially, this document was the blueprint for what was to become known as Rogernomics.
The New Zealand Treasury was at this time dominated by economists of the New Right Chicago School, whom Jesson describes as "free market fundamentalists". He sums up their views in an article for the Republican, an Auckland-based magazine of "left-wing analysis and discussion":
"The Chicago School believes that the marketplace will move to an equilibrium if left to itself. It has a phobia about inflation. It believes in the individual as the sole reality. It believes that private property is invariably preferable to public property. It is hostile to the state. And it is hostile to trade unions. In effect, the Chicago School has reproduced the 19th century mixture of political belief and economic theory. Together they constitute a cohesive ideology, with an obsessive individualism being backed up by a sense of scientific certainty."
While Chicago School influence became dominant in the '80s, in few countries did it dominate so completely as in New Zealand, writes Jesson. "Chile is one example. (By an unhappy coincidence Chile sent its economists to the University of Chicago for post-graduate training. When Pinochet took over he put the economy in their hands.) And New Zealand is another. Since 1984, New Zealand has been the extreme case of Chicago School influence, the one country where the New Right experiment has run its course."
Douglas' policies won him support and influence in quarters previously closed to Labour. In particular, he became close to the Business Roundtable, a right-wing business group, which included figures from the same Auckland middle-class circles that produced Douglas and other Labour government figures, such as Richard Prebble.
Jesson says New Zealand's road to ruin is mapped out in three main Treasury briefing papers beginning with Economic Management, which Jesson maintains was written in expectation of a Labour victory since outgoing National prime minister Robert (Piggy) Muldoon would never have even considered it, being an old-time conservative. It foreshadowed the Labour government's policies of financial deregulation, corporatisation of government services and a goods and services tax.
Next, in time for the second Labour government, elected in 1987, came Government Management, outlining policies such as privatisation, user pays, greater commercialisation of the state sector and, in particular, health and education.
Then, for the incoming National government in 1990, the Treasury delivered its Briefing to the Incoming Government, calling for welfare benefit cuts, the anti-union Employment Contracts Act and a general undermining of universal state benefits for the aged, unemployed and other welfare recipients.
The main economic result of all this, writes Jesson, was a decline of New Zealand's productive industries, including rural industry. "A shift occurred in the structure of New Zealand capitalism in the ment of an elite of financiers, sharebrokers, foreign exchange dealers, corporate raiders, PR firms, advertisers and so on. Basically the unproductive sector has flourished at the expense of the productive sector. And within this unproductive sector, New Right attitudes have become the orthodoxy."
"The strength of New Right policies is not their intellectual power, but their appeal to the basic attitudes of the more affluent strata of society", Jesson adds.
Jesson maintains that New Right policies were simply imposed by Labour, not put to the electorate, and now "Labour has been annihilated in the 1990 election, and the succeeding National government has become the most unpopular in recent history. It has become clear that most of the electorate is fundamentally opposed to the New Right agenda. An egalitarian ethos is still embedded in the public consciousness. Studies such as Massey University's New Zealand Values Today show that most New Zealanders would like greater intervention in the economy, greater regulation of business, more spending on health and education, and higher taxes for the wealthy. Most New Zealanders believe that big business has too much power ... The basic difference is a philosophical one. The New Right believes absolutely in the market, and the rest of the country doesn't."
Today, New Zealanders are paying a high price for their unwitting role as guinea pigs for the New Right. "The productive sector of the New Zealand economy was reduced to chaos", writes Jesson. "And a large number of core New Zealand companies ended up in foreign control: NZI, ASB, Progressive Enterprises, Feltrax, Yates, NZ Steel, Amalgamated Theatres ... None of this was of any benefit to the New Zealand economy. It was just an exchange of assets for debt, with the government getting in on the act too. Since 1987, the government has sold Telecom, the New Zealand Shipping Line, State Insurance, Government Life, part of Air New Zealand, and some state forests into foreign ownership."
Jesson maintains that all this has cast New Zealand without any defence against becoming a permanently poor part of the world in a global market over which it has no influence. He says it already has a set of economic policies that are more usually imposed on bankrupt Third World countries by the IMF. The country is at the mercy of international capital markets:
"The ratings agencies Moodys and Standards and Poor have a direct effect on our economy. The worse their rating, the higher the interest bill ... Investor confidence has become an important criterion of the acceptability of government actions, which shows what happens when a country loses control of its economic direction. It loses control of social policy too."