A Left Turn in New Zealand

By Rosenberg, Bill | Canadian Dimension, May 2000 | Go to article overview

A Left Turn in New Zealand


Rosenberg, Bill, Canadian Dimension


After 15 years of one of the most radical voluntary experiments in neoliberalism, New Zealand voted in November, 1999, to change governments. The new government, a coalition between the centre-left Labour Party and the leftist Alliance Party, is in power courtesy of the further-left Green Party. The vote is a clear but incomplete rejection of the experiment, and coincides with increasingly widespread skepticism, even amongst business people and economists, that it was achieving its declared objectives.

Background: the Experiment

Since 1984 the country has undergone a textbook process of structural adjustment. What has distinguished this program is that it was carried out not as a condition of creditors, but unilaterally, through democratically elected governments.

The programme was started in 1984 by a Labour government, whose party had traditionally embraced a social-democratic philosophy. It was continued after 1990 by a purportedly free-enterprise, but traditionally interventionist, conservative National government.

The "fundamentals" of the program -- market liberalization and free trade, limited government, a narrow monetarist policy, a deregulated labour market and fiscal restraint -- formed an ideologically coherent package that was consciously embedded to make it extremely difficult to reverse.

The program included widespread privatization in a so where large areas of industry and commerce had been built up by both central and local governments. The sales produced enormous windfalls to local and foreign merchant banks, and the great majority of the sales went to overseas investors.

Many functions that were not privatized were commercialized to force a competitive, managerialist ethos. These included the post office, hospitals, many social services, state housing, tertiary education and public television.

These led to some of the most bizarre and unpopular effects of the regime. For example, Work and Income New Zealand (WINZ), which is responsible for payment of social-security benefits and placement of unemployed in work schemes, has been embroiled in end-on-end scandals due to its internal extravagance, in contrast to its harsh and unsympathetic "business" approach to its "customers." Hospitals (renamed Crown Health Enterprises) had increasing amounts spent on them with apparently little to show except increased numbers of highly paid managers. Undiminished waiting lists, patient deaths due to mismanagement and spectacular management fall-outs with medical staff gave a continual impression of crisis and chaos. The miserable, commercially dominated television fare and the lack of good-quality New Zealand content has become as much part of common experience as the weather.

Meanwhile, economic successes were few and far between. Economist Paul Dalziel summed up the position in a 1999 analysis, in which he compared New Zealand with its most similar economy, Australia. Although it, too, instituted many neoliberal reforms, Australia carried them out at a much mote measured pace, and retained many more social underpinnings and protection for collective bargaining.

Rather than experiencing exceptional growth, Dalziel found that over the period from 1987 to 1998, New Zealand had "sacrificed a large volume of real, per-capita GDP." Over the period, $30,000 had been lost per person. Rather than reduced unemployment, Dalziel found that "New Zealand's average unemployment rate moved from well below that of Australia before 1988 to comparable values thereafter." New Zealand had enjoyed an exceptionally low unemployment rate since the Second World War: near to zero until the mid-seventies, and never much above four per cent until 1984. It is now above six per cent -- at least 50 per cent higher than at the beginning of the experiment -- with a peak of 10.9 per cent in 1991.

The labour market was deregulated under the 1991 Employment Contracts Act. …

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