Neoliberalism - leave it in the ‘80s

40 years ago this month, Roger Douglas started the transformational change that brought neoliberalism to New Zealand and fundamentally reshaped the country. 

Set amidst a background of constitutional, financial and economic crises, Muldoon’s snap election brought David Lange and Roger Douglas to power in 1984. Over the next six years the Fourth Labour Government’s sweeping economic reforms washed away the bi-partisan accord that had stood since the First Labour Government’s introduction of the Welfare State in the 1930s.

That was replaced by a new consensus - neoliberalism. Successive governments believed a more individualistic, competitive society organised around market principles, smaller government with less power for workers would deliver greater freedom and prosperity. The promise was that this would unleash corporate profits which would trickle down. In the U.K., it was known as Thatcherism, in the U.S., as Reganism, here we called it Rogernomics.

Economic systems are dynamic and change in response to the challenges of the age. Change was needed in 1984 and it was a response grounded in the economic thinking of the time. Post-Treaty Aotearoa New Zealand has seen three periods of big transformational change, the 1890s, 1930s and 1980s. Four decades on, it is right to ask if this 1980s approach is still the best way to deal with the issues and aspirations of the 2020s or if we should be looking for a newer, better system?

A generation or two ago, before Rogernomics, it was normal that large families could be supported by a single income earner. Now, two-income households are struggling to get by and even office workers are turning to food banks. Millennials are set to be the first generation to be less well-off than their parents, with homeownership, job insecurity, and the cost of living exacerbating the race to the bottom. 

“For too many New Zealanders today, our economy isn’t delivering the basics like houses, food and work.”

For too many New Zealanders today, our economy isn’t delivering the basics like houses, food and work. We have our highest level of homelessness, record state house waiting lists and the highest percentage of stressed renters (paying over 40% of their income) in the world. In a land that exports food that feeds an estimated 40 million people, one in five New Zealand kids are growing up in food insecure households. 

Douglas’ reforms, especially tax changes, saw New Zealand experience some of the fastest growth of inequality in the developed world. Today the poorest half of New Zealanders own only 2% of the wealth and the ultra-wealthy pay half the effective tax rate as teachers and nurses. 

Ruth Richardson’s Mother of all budgets in 1991 slashed the social safety net leading to greater in-work and child poverty rates. The Employments Contracts Act weakened the bargaining power of workers who then often missed out on the fruits of economic and productivity growth. This has led to crumbling social cohesion to match our crumbling infrastructure. According to ASB economists New Zealand has a one trillion dollar infrastructure deficit over the next 30 years. 

Today New Zealanders work some of the longest hours, for the lowest wages and pay some of the highest costs of living in the developed world. Key industries are now controlled by a handful of companies who are using their wealth and power to make sure the rules work in their favour. An IPSOS poll this year found two-thirds of the country think that New Zealand’s economy is rigged to advantage the rich and powerful. 

New Zealand remains reliant on a polluting economy with the sixth highest per-capita emissions in the OECD and 4000 of our species remain threatened with extinction. We even produce less renewable electricity as a share of our grid than we did in 1980.

Looking back across the last forty years, the idea that wealth would trickle down has not created opportunities for large numbers of New Zealanders while creating environmental damage that will limit the opportunities of future generations. This should be a concern across the political spectrum, even Former National Party Prime Minister Jim Bolger believes neoliberalism has failed New Zealand.

“Systems are products of design and can be redesigned to respond to the challenges of their age. ”

No one thinks we should go back to how it was before 1984. Systems are products of design and can be redesigned to respond to the challenges of their age. We have modern challenges to face - getting to a zero carbon economy, making our economy more resilient, sharing wealth more fairly, making housing affordable again, investing in modern infrastructure and building a country where everyone has opportunity and can thrive.

We can lay down new economic tracks with human and planetary needs at the centre. Back in the 1980s it was said about neoliberalism ‘There is No Alternative’ but people are, today in New Zealand and around the world, showing a new way. 

For example in Porirua, Te Rūnanga o Toa Rangatira are growing a tikanga and values based economy that’s circular, sustainable, with multiple bottom lines from Māori world view. Many businesses now put purpose at their heart, not just profit. Rather than competing, people are sharing tools and land to grow kai. 

These examples of local economic self determination fit within the place-based economic development approach, Community Wealth Building. In two weeks I will be launching a new report exploring Community Wealth Building opportunities for Aotearoa and lessons from transformed cities such as Cleveland in the United States and Preston in the United Kingdom.

There is a good foundation to build upon in Aotearoa New Zealand. We have strong values of care, fairness and connection to nature. We have been world leaders in social reforms, at the forefront of implementing new measures to monitor living standards, and most recently trialling new policies based on social investment and wellbeing budgets. 

We can be world leaders in designing a Wellbeing Economy. It will take us all. Community leaders, local and central government, the Māori economy and iwi entities, think tanks and academics, businesses and social enterprise, and NGOs and philanthropy. We need leadership at every level for economic system change, what’s your role? 

 We need to leave neoliberalism where it belongs, back in the 80s.