Forty years on from the election that remade New Zealand, its truths are still as much obscured as they are explained by the stories that left and right tell about it.
The final episode of Juggernaut: The Story of The Fourth Labour Government, is out now. Listen to the whole series here.
For the left, the fourth Labour government’s victory on July 15, 1984 was the beginning of everything bad. A country in which people looked out for one another became, through privatisation, deregulation and attacks on the welfare state, a nation of diminished community, dwindling social cohesion and care, and rampant poverty. For the right, that election – and the 15 years that followed – were a glorious revolution. A Soviet-style economy of stultifying regulation and cossetted industries was swept away, and in its place sprung up a forest of dynamic, entrepreneurial companies.
Both stories, in fact, hold an element of truth. And failing to recognise this has harmed both right and left – the latter especially so.
The left is correct to point out that post-war New Zealand had one of the world’s highest – and most evenly distributed – standards of living. The profits of farm and other exports were widely shared via strong trade unions, near-zero unemployment, state house-building, high income and inheritance taxes, and a reliable welfare state.
But by the early 1980s that economy was in real strife. Lacking diversity, it was hit hard when meat exports to Britain declined. It was also immensely protected, a kind of pre-covid Fortress NZ. It was hard to acquire foreign currency, or even import magazines without a licence. Bureaucrats determined which businesses had licences to import certain goods. Some manufacturers enjoyed a virtual monopoly in their sector, leading to over-priced, poor quality products.
Compounding matters, prime minister Robert Muldoon responded to the 1970s oil crisis and concomitant inflation shocks with a King Canute-like attempt to freeze prices and wages. “You can’t run the economy like a Polish shipyard,” opposition leader David Lange famously said. (Muldoon tried to do it anyway.)
The New Zealand economy in 1984 was not, in short, especially dynamic. Productivity had barely risen since 1970. So when Lange was elected prime minister and, more importantly, Roger Douglas became his finance minister, there was pent-up demand for change of some kind. That promptly arrived in the Rogernomics revolution: subsidies were swept away, protected industries exposed to competition, state assets sold and taxes slashed. Following this lead, the subsequent National government decimated unions, sold state houses and viciously cut benefits.
At the frequent talks I give on economic inequality, an older, more left-wing member of the audience invariably asks a question along the lines of: how were Douglas and co able to perpetrate such a fraud on the New Zealand public? Part of the answer is the exploitation of circumstance: Douglas used a minor crisis – the fact that the country was exhausting its foreign currency reserves trying to prop up the dollar – to pretend there was a more widespread economic catastrophe in train. (There wasn’t: government debt, for instance, was at a manageable – though certainly not ideal – level of 60% of GDP.)
Another part of the answer is blitzkrieg: Douglas deliberately moved fast to prevent opposition. As he told the Spinoff’s Juggernaut podcast, “If you do it quickly, people don’t have time. They can’t adjust.” This repugnant, anti-democratic attitude ignores the fact that countries like Australia made similar adjustments, but more gradually and with less damage to their communities. Douglas’s approach was disgraceful, and built on a lie; but it helped him get his way.
A wider point, though, and one that the older left has never fully grasped, is that egalitarianism had become tarnished with the brush of mediocrity. It was seen as having led to conformity, an aversion to risk-taking and a distrust of success. As the political scientist Leslie Lipson had noted decades earlier: “In its anxiety to raise minima, the country deemed it necessary to lower maxima.” Egalitarianism had become – or been seen to become – “levelling down”, rather than, as the Brits might say, “levelling up”.
The New Zealand economy did have to be made more open, more dynamic, more entrepreneurial. But – and this is the crucial point that the right, for its part, has never quite grasped – more open did not have to mean more unequal. At the time, politicians insisted that it did. Bill Birch, a National minister in the 1990s, said income disparities “are widening and they will widen much more. That doesn’t worry me.” Wealth, after all, was going to trickle down. Newsflash: it didn’t. Between 1984 and 1999, the period of right-wing change, incomes declined for the poorest half of the country.
Economic damage on that scale – which can be sheeted home to the likes of Douglas, Birch, and 1990s finance minister Ruth Richardson, still sitting on the board of the Taxpayers’ Union – is extraordinary. It was also unnecessary. The fact that farmers were over-subsidised didn’t justify slashing benefits by one fifth. The fact that manufacturers were sheltered from competition didn’t justify cutting the top tax rate from 66% to 33%, or attacking trade unions, or selling off state assets at fire-sale prices.
New Zealand could have become the Denmark of the South Pacific: open, dynamic, and still egalitarian. Instead it became a kind of low-rent Britain, even more deregulated but even less successful economically. Since the Rogernomics reforms, New Zealand’s standard of living has steadily lost pace with those of comparable countries. Productivity, though rising compared to the Muldoon era, has actually fallen further behind that of our competitors.
The lesson the right hasn’t learnt from this, and seems incapable of recognising, is that there isn’t anything wrong with trying to shape the economy; it just needs to be done the right way. To succeed, economies need heavy investment in infrastructure, education and health; they need children to be lifted out of poverty in order to guarantee a productive future workforce; they need governments to regulate cowboy firms out of existence, and encourage a shift to higher value exports. All that a hands-off approach to the New Zealand economy has done is let predatory monopolists and oligopolists make hay, while other businesses potter along in their low-value, low-skill, low-wage ruts. Our elevated levels of poverty and inequality, meanwhile, are a constant drag on economic growth.
The lesson the left hasn’t consistently learnt, for its part, is that there’s no point in nostalgia. One can’t recreate the 1970s, and shouldn’t try: even leaving aside the Fortress NZ aspects, it was a much more racist, sexist and homophobic time. Better, surely, to ask what a modern, dynamic form of egalitarianism would look like. What does fairness mean in the future? What is an optimistic take on this century’s potential? What opportunities will New Zealand seize only if long-term poverty is swept away and the wealthiest pay their fair share of tax? Since we live still in its long shadow, it is reasonable to keep looking back to 1984 – but only as a springboard into the brighter days ahead.