There's No New Zeal and Zest

After 40 years of radical neoliberalism, Kiwis are giving up hope

That was the cute headline a sub-editor at the Fin picked for an opinion piece I wrote back in 1998. It’s paywalled, but you can read it here.

Today’s Guardian has a familiar story about New Zealanders emigrating to Australia, notably mainly for the policy response of the rightwing government

To boost the economy, the centre-right National party government has said it will cut new spending by $1bn to reduce borrowing and debt.

The governing parties, National and ACT are the same ones who gave NZ radical reform in the 1980s (ACT was formed by Labour Finance Minister Roger Douglas, who started the process). At the time, it was hailed as a miraculous success. But the critics, notably including Brian Easton, Jane Kelsey and (from across the Tasman) me, have been proved right.

In fact the biggest puzzle is how NZ can have done so badly. I had a go at answering this question in a paper I wrote with Tim Hazledine in 2006, called No More Free Beer Tomorrow Economic policy and outcomes in Australia and New Zealand since 1984 (non-paywalled here) The abstract is

There are no controlled experiments in macroeconomic policy, nor in systematic programs of microeconomic reform, but a comparison between New Zealand and Australia over the period since 1984 provides as close an approach to such an experiment as is ever likely to be possible. From quite similar starting points the two countries pursued liberal reform programs that differed sharply, mainly as a result of exogenous differences in constitutional structures and the personal styles of the central actors. Australia followed a more cautious, piecemeal, consensus-based approach, whereas New Zealand, in contrast, adopted a radical, rapid, ‘purist’ platform. The NZ reform package was generally seen by contemporary commentators as representing a ‘textbook’ model for best practice reform. However, Australia since 1984 has performed much better than New Zealand, whose per capita GDP growth indeed ranked at or near the bottom of the OECD. In this paper, we assess a variety of explanations for the divergences in policies and outcomes.

The other big puzzle is why these architects of failure keep getting re-elected. In the forty years since radical reform began, the only government to stand firmly against it was that of Helen Clark (1999-2008). Jacinta Ardern’s two-term Labour government from 2017 to 2023 seemed to promise much but delivered little (despite being seen as a radical, Ardern was a centrist in the mould of Tony Blair, for whom she had worked).

As Lenin is supposed to have said, New Zealanders are voting with their feet. If you prefer a more academically sophisticated version of the same point made by AO Hirschman, they are choosing exit over voice.

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