How the juggernaut reforms of the 80s and 90s played out in the pages of the Economist and other foreign outlets.
Last month the Economist published one of its big, chunky “special reports”, cheerfully titled “Governments going broke”. And, yes, New Zealand gets a cameo, but not for the brokenness or otherwise of 2025. Instead, there’s a fleeting reference to the reforms of more than 30 years ago, and our brave nation’s greatest contribution to global fiscal lexicon. “New Zealand, in its 1991 ‘mother of all budgets’,” says the Economist, “responded to sovereign ratings downgrades with deep austerity, then wrote strict budget rules enforcing long-termism.”
Long before Jacinda Ardern was on the cover of Vogue and hailed as the hero that would destroy Donald Trump forever, New Zealand was making headlines in world media for its pioneering and sometimes puzzling strides in the political economy. Before, even, the glorious dawn of the worldwide web and the information superhighway, reporters and commentators were watching with some fascination a burst of reforms that ran from 1984 through to the mid-90s that tested the laws of political physics for speed, depth and breadth.
(If you’re interested in a podcast telling the story of those two juggernaut governments – the fourth Labour of Lange, Douglas and co, and the fourth National of Bolger, Richardson, etc – then we have just the thing for you here.)
The international media attention had more than superficial impact, too. In a 1998 speech in London, Reserve Bank governor Don Brash said: “Perhaps because of the extent to which the reforms have attracted the attention of newspapers such as The Economist and the Financial Times, there has been a steady procession of people – politicians, bureaucrats, and journalists – from a wide range of countries, keen to know what can be learnt from New Zealand’s experience.”
The big experiment
The waves of reform across the last decades of the 20th century have often been called an “experiment” – a word chosen by the most cogent critics and cheerleaders. Jane Kelsey titled her 1997 book The New Zealand Experiment; over the years the Economist magazine – a kind of bible of economic liberalism – keenly watched what it routinely called the “experiment”, or variations thereof (“a hothouse for radical economic reform”, for example).
That experiment began with the snap election of 1984, with the protectionist approach of Rob Muldoon’s National replaced by a Labour Party led by the charismatic David Lange and a finance minister, Roger Douglas, absolutely bursting to reform the economy.
Lange attracted a lot of attention in the international media in relation to his stance on nukes; he became the “poster child” of nuclear demilitarisation for a time. What he enjoyed less was the reputation the country gained as a poster child for radical deregulation. When he read the acclaim, for example, from the Economist, he was “not particularly happy about it”, he’d later write. It’s a fair bet he wouldn’t have loved the time the publication characterised the fourth Labour government and Rogernomics as “out-Thatchering Mrs Thatcher”.
‘Close to disaster’
Watching the Labour Party meltdown ahead of the 1990 election, Guardian economics editor Will Hutton said Roger Douglas’s approach had “brought the country close to disaster”, while “the Labour Party, every conservative party’s darling, stands to bear the electoral consequences”.
An Economist editorial from the same moment – headlined “The Kiwi experiment” – saw things differently. Yes, on the basis of much of the data, ”the experiment looks as if it failed”. But: “in truth it didn’t. New Zealand’s industry had been insulated for so long that competition was bound to be painful.”
It explained: “The former Labour government did only part of the job-the easiest part. It left the least responsive market to last: the labour market remains riddled with restrictive practices and a wage fixing system which suppresses pay differentials and prevents wages from adjusting to market conditions. Here lies the real blame for job losses. But the hope is that where party politics prevented Labour from taking on the unions, the National party seems intent on abolishing compulsory union membership and decentralising wage bargaining.”
After a landslide win at the end of October 1990, National began at a sprint, with a dramatic mini-budget delivered before Christmas 1990. In the Australian Financial Review, John Stone looked on approvingly at the new finance minister Ruth Richardson’s reforms under the headline “Important things are happening in New Zealand”.
The former Australian National Party senator saw in the package from the incoming government across the Tasman “three very important things”. Those being: “the move to review the whole rationale for the welfare state, the move to totally deregulate the market for labour, and the continuing move to eliminate inflation.”
There was much Australian politicians could learn from, he said; they and the media should “sit up and take notice”.
‘Roger’s daughter’
As early as March 1991, the Economist was worried: “Despite the most radical freemarket reforms of any industrial country, New Zealand’s economy has seen no net growth since 1985, and is now suffering the OECD’s severest recession. Has the economic experiment failed?” Well, no, was its answer – it just takes some time to reap the rewards. The question was: “Do Kiwi voters have the patience to wait for the policies to bear fruit?”
A few months later, on the back of the mother of all budgets in 1991, the Economist reflected: “When Sir Roger Douglas, New Zealand’s the minister of finance, was sacked from the cabinet in 1988, it seemed to some the end of New Zealand’s brave experiment in economic reform. The Labour Party was roundly defeated in last year’s general election. Conventional wisdom said that Sir Roger had gone too far, too fast.”
And yet! “Conventional wisdom was confounded by the budget of Ruth Richardson,” it said, in approbation of “extraordinary changes”. The headline on the piece: “Roger’s daughter”.
The 1991 budget marked a bold departure from a generous welfare state, said Melbourne’s Age newspaper In an editorial headlined “The land of the long, black cloud”. “Given the economic problems of recent years, it was surprising that the handouts continued so long. In its 1991 budget, the Bolger National Party government has decided that the generosity must end if a burgeoning budget deficit is to be reduced. Those less well-off will still be looked after but other New Zealanders are about to come face to face with the philosophy of user pays.”
Its conclusion: “The sad truth for New Zealanders, facing 12 per cent unemployed within two years, is that there will be no early end to the recession. They must live in hope that the drastic economic surgery eventually restores health.”
In the middle of 1992, the Times of London’s economics commentator Colin Narbrough explored “the sweeping reforms quietly taking place in a far-off land”, by which he meant New Zealand, a “sparsely peopled antipodean country, best known in Britain for its butter, lamb, kiwi fruit and rugby players”.
The “bold reforms” had delivered “mixed success so far,” Narbrough judged. “The country has been transformed from a heavily protected, over-regulated, high-inflation economy to one of the most open in the world,” he wrote, while noting that New Zealand had increasingly pegged its fortunes to a growth in free trade around the world. Oh, and: “The dark side of the New Zealand success story has been six years of stagnation and recession.”
At the tail end of the first term, a commentary in the Economist in October 1993 began,: “During the past decade New Zealand has implemented free-market reforms more radical than any other industrialised country’s.” Hailing Ruth Richardson as “the mother of all reformers”, it observed: “Having been the first country to introduce a cradle-to-grave welfare state, New Zealand might become the first to dismantle it.”
‘The revolution is over’
Warning New Zealand voters against going back to Labour, the Economist assessment was clear: “New Zealand’s economic experiment has been a success.”
“The New Zealand revolution, heralded or condemned but studied nonetheless around the world, is over. At least for a long while.” That was the opening reflection on the 1996 election – New Zealand’s first under MMP, which delivered the balance of power to the fledgling New Zealand First Party – from Jeffrey Simpson for the Toronto Globe & Mail.
“New Zealanders have had enough. Yes, some people want to push the revolution onward while others wish to rewind it. But the bulk of the population, judging by their political decisions, want neither to return to prerevolutionary days nor to press on,” he wrote.
“They want instead what a former New Zealand prime minister, David Lange, once called a ‘cup of tea’, a break from rapid, upsetting change. They want, in other words, more normal politics – a bit more or less spending there, a slight move forward here or a slight retreat there.”
Writing in the UK Independent in August 1997, Peter Walker, fresh from a visit to New Zealand, assessed a mood of disaffection after successive reforming governments. “The radicals’ promise was clear: cut government and the economy would be free to soar, carrying the people into a new heaven of material prosperity where they alone would choose what to spend on their health, social security and so forth,” he wrote. “What the revolutionaries did not add was that their version of Reaganomics would make New Zealand a much less equal society and now also a less safe one. They did not care to foresee that the reforms would create a new class of high-rolling consultants and business executives for whom greed was good and some of the most attractive features of a pastoral, egalitarian society would be lost forever.”
The country had chosen MMP, he judged, because “people feel betrayed by governments that have pushed change too far and too fast. People said to me: we voted Labour in the 80s and we got right-wing radicalism; we voted conservative in the 90s and we got right-wing radicalism; something is wrong with the political system.”
Casting its eye back across the juggernaut years from the vantage of the new millennium, the Economist began a 2000 piece like this: “New Zealand, a small, far-off country of which most people know little” – you can hear it pause here to sip on cognac – “has attracted disproportionate interest from economists over the past two decades.”
It continued: “Most New Zealanders accept that some reform was necessary, but many feel that it went too far and too fast; and some think that the social cost, notably through increased inequality, has exceeded any modest economic gains.” In the view of the Economist, however, there was an urgency to the reforms: “The longer the delay the more painful the adjustment would have been.”
It added, without reference to its own enthusiasms of previous years, “initial expectations from the reforms may have been too high. Indeed, international hubris about the Kiwi experiment may have exacerbated a financial bubble in the 1980s that left the economy horribly vulnerable when global stockmarkets crashed in 1987.”
Yes, it noted, “the reforms could have been better managed, with better results, but the economy would today be in a worse state had the reforms never taken place.” And – godspeed, concluded the Economist – New Zealand should “press on with reform, as most other economies around the world are now doing”.
Listen to Juggernaut 2 – the story of the fourth National government on Apple Podcasts, Spotify and all other podcast apps.
