I think people forget the perilous state of economic affairs NZ was in when Labour took over from Muldoon.
What other economic choices did Labour have to turn the economy around before we went broke? I notice that there are no complaints that they removed most of the subsidies to farmers and the protectionism offered to local manufacturers was reduced over time which, at the time, benefited consumers.
Did Labour get it right? Don't just tell me they didn't...what were the other options to stop the country going broke?
Yeah. See the issue here to me is conflation. The rogernomes broke the chokehold of overregulation and control of the economy by the state enabling the private sector to flourish. This place would be much worse off if they had not. They removed many, but not all, distortions in the economy stopping us from being productive.
House price inflation outstripping wage growth however, is primarily driven, somewhat ironically, by a combination of:
1) overregulation in how many dwelling units you can provide and where, we stop people from building both up and out leading to shortages and therefore price rises, and;
2) We tax advantage property investment(1) (with owner-occupier housing being the most advantaged (2) ) over other forms of investment. This pushes housing prices up.
3) New Zealand is a nicer place to live. Higher amenities leads to higher house prices.
4) The international banking regulation through the Basel accords enables less risk-weighted capital to be held against housing assets than other assets. This leads to lower interest rates being enabled on housing over other investments, therefore making housing a better investment (all else equal). This would have happened anyway, and has nothing to do with Rogernomics :)
In summary, there are areas where we can make further progress, removing overregulation and distortions in the economy, and finish the work the Rogernomes started! Doing so would reduce house prices relative to incomes!
I've heard all these arguments before, Matt. Mostly between 1984 and 1990. Always the Rogernomes cried "More! We haven't done enough!" Yeah, well, most New Zealanders would say that you and your neoliberal mates have done more than enough.
What was never tried cannot, logically, be said to have failed. Rogernomics was a choice. New Zealand could, with a little more courage and a lot less greed, have taken another path - still could.
Sure. I mean to be fair Chris, my criticism is mostly that stopping in the middle can create the worst of both worlds. E.g if we want to distort the housing market to suit political goals, then a large state housing provider to shield the worst off from the outcomes that result is probably not a bad idea.
Personally I would want to remove both the inefficiencies of the distorted housing market, and the inefficiencies of the state housing provider, to maximise economic growth, prosperity, and living standards in aggregate, but doing one without the other leaves those with the least means among us in a precarious position.
A nice piece of remembering Chris. I remember that an ideology of privatization took over with Rogernomics, and anything that wasnt privatized was considered evil. I thought it was an incredibly narrow-minded view of economics, and quite irrational, unless you are a capitalist, out to exploit people.
I remember reading a few years ago that actual courses on "economics" deliberately didn't teach the HISTORY of economics, I presume so that the bright young things, unhindered by that, might come up with some glorious solution that everyone would be happy with. Problem was, so the article laid out, most of the ones who went on to jobs using their economics degrees kept re-inventing policies that had been tried already and had failed already, but not being aware they inflicted them on whichever sphere of influence they had landed amongst 😒 Surely not?
As someone who has studied economics, this is incorrect :) there are 'history of economics' courses, and most areas will take you through the development of thought in their area. Those that don't however, tend to teach you the most solid and foundational way of looking at things. Poorly implemented policies are examined as case studies of course...
A wonderful column, thank you. I have just read the book "The Invisible Doctrine.....the secret history of neoliberalism" by George Monbiot and Peter Hutchison. It summarizes this evil economics doctrine and its history brilliantly. It reads like the bible for the current incompetent government which is so committed to destroying anything decent in our society.
I worked in excellent restaurants in both Dunedin and Auckland before Rogernomics. My travel home after certain hours was paid for by my employer, I received a shoe and stocking allowance( union award) and my uniform was provided. Such luminaries of the NZ culinary world as Ray McVinnie and Tony Astle were running fabulous eateries far superior to ANYTHING available today. Good coffee was everywhere it just that most people were unsophisticated and ignorant in their knowledge of good food. So yeah nah life was bloody good and Labour are lying thieving scumbags.
Damn right, Shona! I remember 1970s Wellington coffee-bars like the Aztec and the Matterhorn, where the coffee - and the food - was the equal of anything you might find today. In Dunedin, the Giselle Restaurant, run by Mr Steiner, a refugee from the 1956 Hungarian uprising, and named for his wife, the chef, served food that was out of this world - especially her cold apple soup! New Zealand was opening-up in a genuinely exciting way in the 1970s. Muldoon's government did its best to stuff the genie of democratic socialism back in the bottle. Lange and Douglas blew the bottle, and the genie, to pieces.
Thanks Chris, I’m an enthusiastic reader of your columns although being an old fashioned liberal (now likely classed as an ultra right extremist) I’m on the other side of the political fence. Much of what you say about pre ‘84 is correct. There was a sense of security and certainty and people did have jobs. The cost though was huge. Those that could afford import licenses or had protected businesses gouged the rest but no worries we’ll get another wage award. The wealthy had overseas funds and new cars the rest kept junkers going forever. And don’t forget the absurd subsidies to those that didn’t need them.
While rogernomics only answered some problems and created others the question you fail to answer is what was the other option?
A stultifyingly smug country had to change to live in the world.
I’m not sure I entirely like where we are but I’m certain I wouldn’t like where we would be if there hadn’t been change.
Collective amnesia is being cultivated for political ends, perhaps it always has to some extent.
But this?
"This amnesia is not just personal. It wipes away all patriotic feeling, all care for the polity that gave one life and liberty. It annihilates cultural and historical memory, the rich topsoil of the past from which all future growths spring."
"Today, the Harris campaign has cleverly repackaged oblivion as a panacea. Forget about the spirit of Tennyson’s Ulysses, who urged his men “To strive, to seek, to find, and not to yield”. The way forward, we are told, is to lay down our citizenly oars — to forget where we’ve been or where we thought we were going, and submit to being carried along in a joyful stupor by the ship of state. Never mind that it’s unclear who is steering that ship, or the destination they have in mind.
In Homer’s epic, Odysseus dragged his scouts away from the Lotus, lashed them under the rowing benches, and once again took to the heaving seas. Ours, though, is an age not of heroes, but of know-nothings and buffoons who wish only to take us for a ride. This is more the stuff of comedy than of epic. Many would agree, of course, that it would be tragic to succumb to the political equivalent of a lobotomy. Yet in the blank and leaden eyes of those who have traded their human past and future for a zombie-like narcosis, such an exchange would not rise even to the dignity of error."
This article - like every other one deploring the 1984 'revolution' mourns a mythical past of the NZ made up of happy, decent, simple folk perfectly content with two TV channels on locally made TVs, and unionised jobs for life down at the meat-works or in the public sector. Or a university job.
The term 'Neoliberalism' was not made up by NZ journalists or writers. It comes from the 1930s.
Ah the Marxian dialectic. A small country we are, too easy to be buffeted by the big ideological winds that blow in the northern hemisphere. From a pale imitation of state socialism to a fawning imitation of unrestrained capitalism. The pendulum is swinging back now, who knows to what. May we hope that this time we find our own ideology, one that works for us. As always Chris, thank you
And we are the necessary resistance. We still seek enabling health services for all, achievable home ownership, free education and adequate priced power - Dreams and their weavers remain essential
Within ten years, Rogernomics and Ruthinasia wiped one hundred years of working people’s struggle and progress off the map. We talked about not “turning back the clock” to that "old-fashioned antiquated regime" of social demcoracy. But we, in fact, turned back the clock even further - to a 19th-century liberal economy based on inequality and greed.
Economist John Kay wrote in the prestigious Financial Times in 1999 that “Since the experiment began”, with National and Douglas in charge, “economic growth in New Zealand has been much slower than in the rest of the developed world". "Productivity and living standards had barely risen while almost all other rich countries have enjoyed sustained expansion.” During this period, suicide rate went up 300%. Crime skyrocketed. Unemployment went up to 11 percent.
Labor unions had since been all but destroyed with the introduction of employment legislation that was fundamentally copied from on USA Texas-style “right to work” laws. The income stream to pay for was slashed with the rudimentary Capital/wealth tax, the NZ land tax was thrown out. Meanwhile, the top income tax level was cut in half and replaced by a regressive GST tax. Taxes were flattened to the point that famously, a cashier pays more per person than a billionaire, creating high tax resentment. And spending was cut so that we spend among the lowest per GDP in the OECD (23rd). Meanwhile, publicly run entities were practically given away to the new oligarchy.
Certainly, reform was needed to weed out the vested interests, but the baby was thrown out with the bathwater in order to “fix” the economy. Instead of a "fix" it went from bad to worse. Other nations at the time, particularly in Scandinavia, managed to keep most of their social democratic institutions intact throughout the global neoliberal phenomenon of the 80's-90's. Their economies were more resilient, inequality far lower and productivity was much higher in part due to investment by their governments with policies the opposite of our new neoliberal dogma that has indoctrinated most of us as.
There is no perfect system.
I think people forget the perilous state of economic affairs NZ was in when Labour took over from Muldoon.
What other economic choices did Labour have to turn the economy around before we went broke? I notice that there are no complaints that they removed most of the subsidies to farmers and the protectionism offered to local manufacturers was reduced over time which, at the time, benefited consumers.
Did Labour get it right? Don't just tell me they didn't...what were the other options to stop the country going broke?
Yeah. See the issue here to me is conflation. The rogernomes broke the chokehold of overregulation and control of the economy by the state enabling the private sector to flourish. This place would be much worse off if they had not. They removed many, but not all, distortions in the economy stopping us from being productive.
House price inflation outstripping wage growth however, is primarily driven, somewhat ironically, by a combination of:
1) overregulation in how many dwelling units you can provide and where, we stop people from building both up and out leading to shortages and therefore price rises, and;
2) We tax advantage property investment(1) (with owner-occupier housing being the most advantaged (2) ) over other forms of investment. This pushes housing prices up.
3) New Zealand is a nicer place to live. Higher amenities leads to higher house prices.
4) The international banking regulation through the Basel accords enables less risk-weighted capital to be held against housing assets than other assets. This leads to lower interest rates being enabled on housing over other investments, therefore making housing a better investment (all else equal). This would have happened anyway, and has nothing to do with Rogernomics :)
In summary, there are areas where we can make further progress, removing overregulation and distortions in the economy, and finish the work the Rogernomes started! Doing so would reduce house prices relative to incomes!
(1) https://www.interest.co.nz/public-policy/129449/andrew-coleman-looks-tte-versus-eet-methods-taxing-retirement-savings
(2) https://taxworkinggroup.govt.nz/sites/default/files/2018-09/twg-bg-taxation-of-capital-income-and-wealth.pdf
I've heard all these arguments before, Matt. Mostly between 1984 and 1990. Always the Rogernomes cried "More! We haven't done enough!" Yeah, well, most New Zealanders would say that you and your neoliberal mates have done more than enough.
What was never tried cannot, logically, be said to have failed. Rogernomics was a choice. New Zealand could, with a little more courage and a lot less greed, have taken another path - still could.
Sure. I mean to be fair Chris, my criticism is mostly that stopping in the middle can create the worst of both worlds. E.g if we want to distort the housing market to suit political goals, then a large state housing provider to shield the worst off from the outcomes that result is probably not a bad idea.
Personally I would want to remove both the inefficiencies of the distorted housing market, and the inefficiencies of the state housing provider, to maximise economic growth, prosperity, and living standards in aggregate, but doing one without the other leaves those with the least means among us in a precarious position.
Thank you Chris Trotter. No left turn is one of the best books I have read. You are true to form in Forty Years of remembering to forget.
Such a relief when people touch on the truth.
Thankyou, Maryanne, for those kind and encouraging words. I'm delighted you enjoyed "No Left Turn".
A nice piece of remembering Chris. I remember that an ideology of privatization took over with Rogernomics, and anything that wasnt privatized was considered evil. I thought it was an incredibly narrow-minded view of economics, and quite irrational, unless you are a capitalist, out to exploit people.
I remember reading a few years ago that actual courses on "economics" deliberately didn't teach the HISTORY of economics, I presume so that the bright young things, unhindered by that, might come up with some glorious solution that everyone would be happy with. Problem was, so the article laid out, most of the ones who went on to jobs using their economics degrees kept re-inventing policies that had been tried already and had failed already, but not being aware they inflicted them on whichever sphere of influence they had landed amongst 😒 Surely not?
As someone who has studied economics, this is incorrect :) there are 'history of economics' courses, and most areas will take you through the development of thought in their area. Those that don't however, tend to teach you the most solid and foundational way of looking at things. Poorly implemented policies are examined as case studies of course...
A wonderful column, thank you. I have just read the book "The Invisible Doctrine.....the secret history of neoliberalism" by George Monbiot and Peter Hutchison. It summarizes this evil economics doctrine and its history brilliantly. It reads like the bible for the current incompetent government which is so committed to destroying anything decent in our society.
I worked in excellent restaurants in both Dunedin and Auckland before Rogernomics. My travel home after certain hours was paid for by my employer, I received a shoe and stocking allowance( union award) and my uniform was provided. Such luminaries of the NZ culinary world as Ray McVinnie and Tony Astle were running fabulous eateries far superior to ANYTHING available today. Good coffee was everywhere it just that most people were unsophisticated and ignorant in their knowledge of good food. So yeah nah life was bloody good and Labour are lying thieving scumbags.
Damn right, Shona! I remember 1970s Wellington coffee-bars like the Aztec and the Matterhorn, where the coffee - and the food - was the equal of anything you might find today. In Dunedin, the Giselle Restaurant, run by Mr Steiner, a refugee from the 1956 Hungarian uprising, and named for his wife, the chef, served food that was out of this world - especially her cold apple soup! New Zealand was opening-up in a genuinely exciting way in the 1970s. Muldoon's government did its best to stuff the genie of democratic socialism back in the bottle. Lange and Douglas blew the bottle, and the genie, to pieces.
You left out the iconic Gypsy Cake!
My God! The Gypsy Cake! I'd forgotten the Gypsy Cake. Thanks for reminding me, Shona. Giselle was such a great place to eat.
Thanks Chris, I’m an enthusiastic reader of your columns although being an old fashioned liberal (now likely classed as an ultra right extremist) I’m on the other side of the political fence. Much of what you say about pre ‘84 is correct. There was a sense of security and certainty and people did have jobs. The cost though was huge. Those that could afford import licenses or had protected businesses gouged the rest but no worries we’ll get another wage award. The wealthy had overseas funds and new cars the rest kept junkers going forever. And don’t forget the absurd subsidies to those that didn’t need them.
While rogernomics only answered some problems and created others the question you fail to answer is what was the other option?
A stultifyingly smug country had to change to live in the world.
I’m not sure I entirely like where we are but I’m certain I wouldn’t like where we would be if there hadn’t been change.
Imperfect then imperfect now we blunder on.
Collective amnesia is being cultivated for political ends, perhaps it always has to some extent.
But this?
"This amnesia is not just personal. It wipes away all patriotic feeling, all care for the polity that gave one life and liberty. It annihilates cultural and historical memory, the rich topsoil of the past from which all future growths spring."
"Today, the Harris campaign has cleverly repackaged oblivion as a panacea. Forget about the spirit of Tennyson’s Ulysses, who urged his men “To strive, to seek, to find, and not to yield”. The way forward, we are told, is to lay down our citizenly oars — to forget where we’ve been or where we thought we were going, and submit to being carried along in a joyful stupor by the ship of state. Never mind that it’s unclear who is steering that ship, or the destination they have in mind.
In Homer’s epic, Odysseus dragged his scouts away from the Lotus, lashed them under the rowing benches, and once again took to the heaving seas. Ours, though, is an age not of heroes, but of know-nothings and buffoons who wish only to take us for a ride. This is more the stuff of comedy than of epic. Many would agree, of course, that it would be tragic to succumb to the political equivalent of a lobotomy. Yet in the blank and leaden eyes of those who have traded their human past and future for a zombie-like narcosis, such an exchange would not rise even to the dignity of error."
https://unherd.com/2024/09/kamalas-seductive-amnesia/
This article - like every other one deploring the 1984 'revolution' mourns a mythical past of the NZ made up of happy, decent, simple folk perfectly content with two TV channels on locally made TVs, and unionised jobs for life down at the meat-works or in the public sector. Or a university job.
The term 'Neoliberalism' was not made up by NZ journalists or writers. It comes from the 1930s.
Ah the Marxian dialectic. A small country we are, too easy to be buffeted by the big ideological winds that blow in the northern hemisphere. From a pale imitation of state socialism to a fawning imitation of unrestrained capitalism. The pendulum is swinging back now, who knows to what. May we hope that this time we find our own ideology, one that works for us. As always Chris, thank you
And we are the necessary resistance. We still seek enabling health services for all, achievable home ownership, free education and adequate priced power - Dreams and their weavers remain essential
Great artcle.
Within ten years, Rogernomics and Ruthinasia wiped one hundred years of working people’s struggle and progress off the map. We talked about not “turning back the clock” to that "old-fashioned antiquated regime" of social demcoracy. But we, in fact, turned back the clock even further - to a 19th-century liberal economy based on inequality and greed.
Economist John Kay wrote in the prestigious Financial Times in 1999 that “Since the experiment began”, with National and Douglas in charge, “economic growth in New Zealand has been much slower than in the rest of the developed world". "Productivity and living standards had barely risen while almost all other rich countries have enjoyed sustained expansion.” During this period, suicide rate went up 300%. Crime skyrocketed. Unemployment went up to 11 percent.
Labor unions had since been all but destroyed with the introduction of employment legislation that was fundamentally copied from on USA Texas-style “right to work” laws. The income stream to pay for was slashed with the rudimentary Capital/wealth tax, the NZ land tax was thrown out. Meanwhile, the top income tax level was cut in half and replaced by a regressive GST tax. Taxes were flattened to the point that famously, a cashier pays more per person than a billionaire, creating high tax resentment. And spending was cut so that we spend among the lowest per GDP in the OECD (23rd). Meanwhile, publicly run entities were practically given away to the new oligarchy.
https://www.theguardian.com/world/2023/apr/27/new-zealands-millionaires-pay-lower-tax-rates-than-cashiers-its-time-to-fix-the-system
Certainly, reform was needed to weed out the vested interests, but the baby was thrown out with the bathwater in order to “fix” the economy. Instead of a "fix" it went from bad to worse. Other nations at the time, particularly in Scandinavia, managed to keep most of their social democratic institutions intact throughout the global neoliberal phenomenon of the 80's-90's. Their economies were more resilient, inequality far lower and productivity was much higher in part due to investment by their governments with policies the opposite of our new neoliberal dogma that has indoctrinated most of us as.
We are #5 in median wealthn yet we spend 23rd in the world while we are “so poor” that people with disabilities have benefits cut, mothers go without toast due to budget free fall, and 1000 people die a year due to inadequate cancer care. https://www.visualcapitalist.com/top-10-countries-with-the-highest-wealth-per-person/ and https://www.rnz.co.nz/news/national/511249/about-1000-fewer-cancer-deaths-in-nz-every-year-if-patients-lived-in-australia-study
We now relive Rogennomics version 2.5
(my 2 cents copied from Bryce's comment page).