The revolution that changed our lives

July 15th, 2014 at 3:00 pm by David Farrar

The Dom Post editorial:

It was years ago today that the Lange Labour Party won the election that would change all our lives. This proved to be one of the major reforming governments of our history, comparable with the Liberals of the 1890s and the Labour government of the 1930s. It made profound changes in our economy, our foreign policy, and in race relations. Some of these changes were for the better, and some were not. We are still wrestling with the legacy of David Lange and Roger Douglas.

National’s Robert Muldoon was a backward-looking leader who had in many ways painted his country into a corner. Douglas used the economic crisis – massive internal and external deficits, a frightening overseas debt – to push through a Right-wing, top-down revolution which never figured in Labour’s election manifesto. New Zealand was hauled into the era of Thatcher and Reagan by stealth. At the end of six years, the government had a deserved reputation for failing to tell the voters of its real intentions.

Some of the economic changes were clearly needed. A brutal assault on costs was inevitable. An excessively protected economy imposed unnecessarily high costs on ordinary New Zealanders. Exchange rates, wages, prices and interest rates could not continue to be set by prime ministerial fiat.

Has someone told Labour today this?

But Douglas and his friends went way beyond sensible reforms and deep into the swamps of ideology. His massive privatisation and flat-tax proposals of December 1987 were shrink-the-state Hayekian politics dressed up as economic orthodoxy. That forced the fatal showdown between Douglas and Lange killed the government. It was a civil war that Labour had to have.

Douglas said his revolution would put New Zealand on a new, high-growth path. It didn’t. His excuse was that the job was left unfinished. Only ACT and Tea Party Republicans still believe that. The last 30 years have seen huge changes in economic theory that have demolished central parts of the Reaganite-Rogernome credo.

That’s the assertion of the editorial, but I don’t accept that. I think it is a shame Lange destroyed his own Government by going against the wishes of his own Cabinet. It would have been great to see a flat tax implemented.

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59 Responses to “The revolution that changed our lives”

  1. redqueen (521 comments) says:

    Ah yes, the ComPost, one of the great pillars of intelligent commentary…oh wait…

    But seriously, they really believe their own drivel…how sad…

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  2. ROJ (104 comments) says:

    In those days I don’t think Douglas was truly “Right-wing”. he got given a raw deal to sort out, and he acted to give us an economy which could give freedom and grow, rather than slice a miniscule cake smaller.

    He certainly didn’t give to cronies directly (that happened by govt and bureaucratic naivety), it was intended to give work to workers by getting the country working.

    The second term the unions got toey when their control and dearly held shibboleths got broken …

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  3. labrator (1,849 comments) says:

    Only ACT and Tea Party Republicans still believe that.

    Says a lot about the editor’s politics that they need to associate ACT with the Tea Party.

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  4. pedrogarcia (52 comments) says:

    “It would have been great to see a flat tax implemented.”

    Yeah cause we’d have been in GREAT company

    http://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems

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  5. David Garrett (6,774 comments) says:

    Jesus…I dont take the Dom…but are its editorials always as one sided as that?? (It’s been four years since I read it regularly, I cant really remember)

    I was a Labour supporter in 1984…and most certainly not a “Rogernome”…the editorial is quite correct that what Roger did was not heralded in the manifesto…in fact I think manifestos pretty well died out after ’84…

    I regard Roger as a friend, and we used to have some good talks late at night when he tried to teach me the basics of economics, and why privatization was such a good idea…Now I am no longer an ACT MP I can say I remain somewhat unconvinced…But then no-one under 40 can have any real understanding of just what a bunker economy we had in ’84..the comparison of the country to a Polish shipyard was a perfectly valid one…I think Richard Prebble probably articulated better than Roger just why the brutal reforms were required…the story of the signals gang on a branch railway line which hadn’t been used in years was a classic…and that was just the best of the anecdotes Preb told…

    ROJ: I think that’s pretty well right…and the deal was that Roger could do his reforms as long as the unions were left alone…it took the Bolger government and the ECA to deal to those bastards…and self serving bastards is what they had become by 1984…Note how everyone flocked back to join them once the ECA was repealed…not

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  6. Manolo (13,517 comments) says:

    It would have been great to see a flat tax implemented.

    What is stopping National from implementing this idea?

    If the party were truthful to its founding principles, it would have acted on taxation and fiscal reform log time ago. But no, it prefers to follow Labour’s dismal example and walks the same path.

    Why are we paying an ETS tax? What about Key’s GST increase? Why the difference between personal/trust and company tax brackets? Why the high ACC levies on car registration, GST on local government rates, etc, etc.

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  7. Bob R (1,357 comments) says:

    They also began a demographic revolution from NZ being primarily European to opening up immigration from Asia so in the future it will ultimately be predominantly Asian.

    “In this scenario, enriching the multicultural fabric of New Zealand society entailed turning away from traditional sources of immigrants from Europe and turning towards Asia by abolishing national origin as a factor in immigrant selection. This expansion of the sources of immigrants was founded more on economic motives than the liberal rejection of the former racial preference for European migrants. The Government felt that the inflow of capital is more likely to proceed in an environment which welcomes human as well as financial investment.”

    http://www.thesocialcontract.com/artman2/publish/tsc0402/article_316.shtml

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  8. hj (6,742 comments) says:

    We aren’t there yet

    2.3 Changing policy expectations
    While useful, models do not capture all the effects policymakers expect from immigration.
    When New Zealand moved to increase the numbers and skills of immigrants in the 1980s
    and 1990s, policymakers appear to have considered that these changes had the potential
    to have major beneficial impacts on the New Zealand economy, reinforcing the gains from
    22
    the other liberalising and deregulating economic reforms undertaken during that period.

    At that time, it was considered that skills-focused inward migration could: improve growth
    by bringing in better quality human capital and addressing skills shortages; improve
    international connections and boost trade; help mitigate the effects of population ageing;
    and have beneficial effects on fiscal balance. As well as “replacing” departing
    New Zealanders and providing particular help with staffing public services (for example,
    medical professionals), it was believed that migration flows could be managed so as to
    avoid possible detrimental effects (such as congestion or poorer economic prospects) for
    existing New Zealanders.

    Since then, New Zealand has had substantial gross and net immigration, which has been
    relatively skill-focused by international standards. However, New Zealand’s economic
    performance has not been transformed. Growth in GDP per capita has been relatively
    lacklustre, with no progress in closing income gaps with the rest of the advanced world,
    and productivity performance has been poor. It may be that initial expectations about the
    potential positive net benefits of immigration were too high.

    Based on a large body of new research evidence and practical experience, the consensus
    among policymakers now is that other factors are more important for per capita growth
    23
    and productivity than migration and population growth. CGE modelling exercises for
    Australia and New Zealand have been influential in reshaping expectations.

    http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10
    Migration and Macroeconomic
    Performance in New Zealand:
    Theory and Evidence
    Julie Fry
    New Zealand Treasury Working Paper 14/10
    It doesn’t stop the NZIER from proclaiming Migrants Increase Our Income.

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  9. JMS (314 comments) says:

    and why privatization was such a good idea…Now I am no longer an ACT MP I can say I remain somewhat unconvinced…

    DG, in which areas do you think privatization may not be such a good idea?

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  10. big bruv (13,559 comments) says:

    Sir Roger Douglas is the greatest living New Zealander. That man saved this nation from economic ruin, each and every Kiwi owes him a debt of gratitude that we can never repay.

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  11. burt (8,030 comments) says:

    Of course they needed to reverse the changes and not implement a flat tax – If they had continued they might have reduced dependency on welfare and created an environment where people became responsible for living within their means. Hardly Labour party positioning !

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  12. Nigel Kearney (918 comments) says:

    The key fact that has been forgotten is how popular it was. Voters didn’t abandon Labour when these changes were being put in place, they abandoned Labour after the changes stopped. Same as happened with National and Richardson.

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  13. David Garrett (6,774 comments) says:

    JMS: No particular area…but Roger never satisfactorily (to my mind) explained why privatized industries were so superior when you had – for example – both the BNZ and Air New Zealand bailed out massively by governments of both hues when they were privately owned….Roger’s answers: “sometimes the market fails” and “they should have been let go bust” didn’t really work for me…I cant say why precisely, but I dont feel particularly comfortable that the BNZ is owned by Australians…but then I bank with the wholly NZ owned TSB so why should I care?

    BB: That I do agree with…it was frightening learning just how close we came to economic ruin with the Pig running the show…

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  14. burt (8,030 comments) says:

    David Garrett

    The King of Tonga also had an airline while his people lived in poverty. Relatively different but conceptually the same to our government owning an airline.

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  15. burt (8,030 comments) says:

    David Garrett

    The Pig was a great socialist – his policies were clearly awesome or Labour wouldn’t be wanting to try them all again. Nationalise everything, increase taxes, regulate and control.

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  16. hj (6,742 comments) says:

    This is Michael Reddall’s Hypothesis:

    Despite the huge, decades-long, and continuing deterioration in New Zealand’s relative
    productivity, the real exchange rate has not, on average, fallen. The persistently (and
    perhaps increasingly) “overvalued” exchange rate – itself a symptom of imbalances across
    the economy – is central to understanding why, despite the far-reaching reforms of the late
    1980s and early 1990s, the large gap between New Zealand’s standard of living and those in
    other advanced economies has not even begun to close. The exchange rate hasn’t adjusted
    largely because average New Zealand real interest rates have, surprisingly, remained so
    much above those abroad. That gap, in turn, appears to reflect New Zealand’s own choices
    (including policy ones) which mean that at any particular interest rate (the “world interest
    rate”) there is a bigger difference here between desired investment spending and the
    available national savings than is typical abroad. Higher New Zealand real interest rates
    have simply been the rationing device, reconciling the conflicting desires. There is little
    evidence that our policy frameworks adversely affect savings more than those in other
    countries, and little sign that house prices can explain much, if anything, about New Zealand
    longer-term savings behaviour. By contrast, population growth seems to have been much
    more important than has previously been recognised. New Zealand’s population growth
    slowed sharply in the 1970s and 1980s, as more New Zealanders pursued better
    opportunities abroad. But the marked liberalisation in immigration policy in late 1980s and
    early 1990s resulted in New Zealand once again experiencing materially above-average
    population growth. In combination, the substantial real domestic resources required to
    accommodate a fast-growing population and the quite modest savings of New Zealanders
    appears to have crowded out (through higher interest rates and a high average real
    exchange rate) other productive investment. Materially higher productive investment,
    especially in the tradables sector, was probably required if the big challenge of catching up
    again with the incomes of other advanced countries, and reversing the decline in New
    Zealand’s relative productivity performance, was to be met. If the rate of population growth
    over the last couple of decades had been materially lower, that would have resulted in lower
    average interest rates and a much lower real exchange rate. And New Zealanders’ long-
    term income prospects would, most probably, have been much improved.

    He finishes with:

    When a family has fallen on hard times, and has to devote lots of energy to stabilising the
    situation and restoring the family finances, having another child at the same time isn’t a
    terribly prudent economic choice. Having another child then will almost invariably worsen the
    family’s economic position (whatever other joy it brings). It is a folksy comparison and breaks
    down at some points, but New Zealand is in some respects that family: choosing to have lots
    more kids, as it were, with all the attendant pressures, just when we were otherwise getting
    into a position to capitalise on the reforms put in place in the late 1980s and early 1990s and
    restore the family finances and income prospects.

    http://www.rbnz.govt.nz/research_and_publications/seminars_and_workshops/Mar2013/5200823.pdf

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  17. alwyn (402 comments) says:

    hj @ 3.19pm.

    Research reported in the latest Economist doesn’t appear to agree with you, or with Treasury.
    Freeing up immigration, according to this work, appears to raise the income of the people who already live in a country, as well as that of the immigrants themselves. it also helps to not have too generous a welfare state.
    I guess it depends on which academic you choose to believe.

    http://www.economist.com/news/united-states/21606860-evidence-stingy-welfare-state-helps-america-absorb-immigrants-they-cant-imagine-not

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  18. Mike Wilkinson (71 comments) says:

    @ big bruv, some of us have thanked him. He knows New Zealand would be such a different and very much poorer place without him.

    For my small part, I identified the fundamental role his reforms played in the development of our EFTPOS system. I wrote this Kiwiblog guest post on the issue a few years back. I quote a key part:

    New Zealanders have benefited from their successfully developed EFTPOS system because the country’s comparatively light regulation of banks fostered cooperation, and because at no stage has our Government become involved by choosing among the relevant systems. In my view, were it not for the Lange-Douglas reforms, New Zealand’s EFTPOS would have developed much less successfully.

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  19. Liam Hehir (120 comments) says:

    …shrink-the-state Hayekian politics dressed up as economic orthodoxy

    What a strange construction… Do you think the author has actually ever read any of Hayek’s influential works?

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  20. Simon (715 comments) says:

    “This proved to be one of the major reforming governments of our history”

    Basically under instruction from the IMF. If labour hadn’t reformed (ie defaulted) NZ’s overseas creditors via the IMF would have appointed someone else to run NZ. To sell those assets.

    The Labour reforms allowed creditors to be repaid but never addressed monetary policy which caused to the mid 1980s crack up boom leading to the 1987 crash.

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  21. David Garrett (6,774 comments) says:

    burt: Not a valid comparison at all…Royal Tongan failed because they leased a totally wrong plane ( a 757 which could only be serviced in Singapore, not here or Oz) from Royal Brunei airlines which meant they couldn’t serve booze…And it was run by a bunch of incompetents.

    I don’t think there was serious suggestion that Air NZ was run by incompetents…I could be wrong…

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  22. Adolf Fiinkensein (2,833 comments) says:

    “The last 30 years have seen huge changes in economic theory that have demolished central parts of the Reaganite-Rogernome credo.”

    Really? Where else have I heard all about theory trumping empirical evidence?

    Global warming theory as the world cools??

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  23. MT_Tinman (3,050 comments) says:

    big bruv (13,078 comments) says:
    July 15th, 2014 at 3:26 pm
    Sir Roger Douglas is the greatest living New Zealander. That man saved this nation from economic ruin, each and every Kiwi owes him a debt of gratitude that we can never repay.

    So well said it deserves repeating.

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  24. burt (8,030 comments) says:

    Sir Roger Douglas briefly wrestled control of the Labour party away from the unions. Shame that didn’t last and now the party wants to track back to the failed policies of their failed past.

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  25. Scott Hamilton (297 comments) says:

    Fascinating to see the history of the eighties being reinterpreted in the last few years, as the GFC and its aftereffects prompt changes in attitudes towards Douglas’ preferred brand of capitalism. And in a universe not too far from our own, the man was not knighted but put on trial on treason at the end of the eighties:
    http://readingthemaps.blogspot.co.nz/2014/05/after-end-of-history.html
    Roger Comics’ time may yet come…

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  26. burt (8,030 comments) says:

    Scott Hamilton

    Meanwhile Labour claim Muldoon was terrible – then in the next sentence want to revert to his style of governance – but it will be different with a red logo rather than a blue one !

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  27. flipper (3,847 comments) says:

    About the only person who could accurately talk about the events of those times (as opposed to those that quote or write useless academic papers), and those that think they know what the real situation was, apart from Douglas himself, is Michael Bassett who can be reached at
    michael.bassett@xtra.co.nz

    I had several long conversations with Patrick Millen, Cabinet Secretary at the time, after silly Lange poured his cup of tea.

    It is a reflection of the politics of the DominionPost editorial staff, and a lack of training, that they fail to understand what New Zealand missed. Two or three more years and we would have made it to grade AAA+ The garbage promoted by DomPost is superficial, and ignores the other major economic changes like the abolition of import licensing, the abolition of the cost plus economy, the removal of foreign currency restrictions, and the floating of the dollar, to mention a few.

    And on the flat tax, unilaterally sunk by Lange, I recall, a Huka Lodge dinner conversation with several US visitors. They were astounded by Lange’s rejection of a flat tax as a consequence of the influence of his extra marital bint.

    But for her, and a bunch of gutless pol sci Auckland labour activists, we would have made it to the tiop. It has taken J Key and W English, and the World wide GFC, to get us back near where we could have been.

    But now we have a bunch of crazies who want to out-Lange, Lange . Dumbass shits, all of them.

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  28. mikenmild (11,246 comments) says:

    Nice myth there flipper. An the idea that Michael Bassett could be the only unbiased commentator on the fourth Labour government is pretty entertaining too.

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  29. Bob R (1,357 comments) says:

    *** appears to raise the income of the people who already live in a country, as well as that of the immigrants themselves.***

    @ alwyn,

    The NAC actually found the cost of each low skill immigrant to the US cost $130,000 in todays dollars! That’s with their relatively miserly welfare system :)

    Whoever wrote that hasn’t witnessed the decline of California from years of low skill immigration from Mexico.

    http://www.npr.org/templates/story/story.php?storyId=112167023

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  30. cha (3,856 comments) says:

    To be fair mike, flibber really does believe the claptrap he makes up for himself.

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  31. flipper (3,847 comments) says:

    Milkysop…

    Of course M Bassett is biased.

    The truth is biased.

    Only fools believe the left wing narrative.
    En passant, it was that narrative that gave us the GFC…which f/wits like you now choose to ignore and seek to take
    us back along the road to Perdition…..

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  32. Kimble (4,410 comments) says:

    …shrink-the-state Hayekian politics dressed up as economic orthodoxy

    Hayekian politics? What the fuck is that?

    Apparently the pig ignorant editor considers Hayek a politician unlike that saint, Keynes. You know, because Hayek was embedded in political circles. Hayek was the one who was embraced and promoted by politicians for telling them they were the annointed who could plan everyone to prosperity.

    Hayek was political only inasmuch as his economic theories CHALLENGED the expanding power of politicians and questioned their ability to command and control an economy.

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  33. unaha-closp (1,140 comments) says:

    The last 30 years have seen huge changes in economic theory that have demolished central parts of the Reaganite-Rogernome credo.

    Today Europe and USA and Japan (OMG) Japan have a theory that “massive internal and external deficits, a frightening overseas debt” are nothing to worry about. Which is great news (for politicians) as it allows them to send vast QE into work funding their banks and share markets. And their share markets generate growth by spending this money and loaning it to each other. It is the party that never ends. It is crony capitalism or big socialism

    Funnily enough the only people who think their might be a tiny chink or two in this dreamy scenario are Marxists and Neo-Liberals.

    Marxists are upset, because even though this growth is being created on the soundest of all fundamentals (according to Marxism), it is showering money on greedy capitalist banks and therefore wrong. It should be showering money on good Marxists, not bankers.

    And neo-liberals are upset because they see any application of socialism (where the state hands out vast sums) as being inherently unstable. Likely to lead to inflation and conflict.

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  34. wiseowl (829 comments) says:

    It was Douglas that ruined the country .He told the financial markets he would devalue so they shifted all the money out of NZ creating a crisis.
    He also talked of medium term that never ended.Interest rates would be high in the medium term. Yeah for years and years.And he kept saying everything was inevitable until everyone was saying it.

    Treated the farming community like shit and ruined many.

    A disaster of a man and one of the worst governments we have ever had.

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  35. tom hunter (4,565 comments) says:

    What would you have liked to have happened in 1984 wiseowl?

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  36. thor42 (971 comments) says:

    “The last 30 years have seen huge changes in economic theory that have demolished central parts of the Reaganite-Rogernome credo.”

    I disagree.

    It is *only* because New Zealand has taken the “Rogernome path” (and somewhat timidly) that the economy has done so well in the last six years.

    “Small government” is “in” – it’s the way of the future.

    “Big government” – control of everything, big spending, not touching welfare – is *out*.

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  37. David Garrett (6,774 comments) says:

    wiseowl: You are a complete fuckwit…Here’s the best piece of evidence: You find any writing by anyone who is credible in the farming community who wants to go back to Muldoon’s ridiculous schemes and subsidies and a box of chocolate fish are on their way to you…The former President of Federated Farmers is now fourth or fifth on the ACT list…

    What does all that tell you? It tells me that farmers – those most pragmatic of men – realised long ego that the Douglas reforms saved their industry…Yes, the poor bastards who had recently bought farms at hugely overvalued prices went bust…that bothered Roger greatly, but he knew it had to be done…

    His removal of manufacturing subsidies cost Alan Gibbs 20 million 1984 dollars…Gibbs is a major backer of ACT…what does that tell you?

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  38. Tauhei Notts (1,650 comments) says:

    Presently the Inland Revenue Department is talking about needing $1,600,000,000 to upgrade its computer systems.
    An unbelievable amount of computer space is needed to administer a graduated tax system. Possibly only beancounters like me appeciate that basic fact. A flat tax rate would make income tax administration so much easier it is incredible that Lange’s cup of tea floored it all.
    I recall Trevor Di Cleene who said that the only thing that stayed flat under Lange was what David sat upon.

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  39. mikenmild (11,246 comments) says:

    Someone will correct me if I’m wrong, but I understand very few countries followed New Zealand’s path to economic liberalisation. In Australia, for example, the path seemed much smoother, and the Australian economy didn’t seem to suffer unduly. I have noted before that John Key no longer talks about ‘catching up with Australia’.

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  40. bringbackdemocracy (416 comments) says:

    A Flat tax is still a possibility

    http://www.standforsomething.org.nz/your-first-%2420%2c000-tax-free-and-a-flat-tax-after-that.html

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  41. adze (2,003 comments) says:

    How is the Australian economy faring at the moment mike?

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  42. tom hunter (4,565 comments) says:

    In Australia, for example, the path seemed much smoother, and the Australian economy didn’t seem to suffer unduly.

    One of the things that I love/hate about blog comments is that you wind saying the same things repeatedly:

    I hear this all the time but the fact is that Australia had already been reforming on things like tariffs and subsidies since the early 1970′s, as well as starting to hold extensive debates within government agencies and NGO think-tanks about reforming state ownership, taxes and regulations. Hawke and company had a solid base of thinking, agreement and the accomplishments of previous Labor and Liberal governments to build on in 1983. They did not just have to start from scratch.

    By contrast politicians in NZ really did not want to know until the late 1970′s (and even then the discussion was minimal) and thanks to Muldoon effectively nothing happened until 1984, by which time we were much farther in the shit than Australia, with a commensurate need to do more and do it faster.

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  43. mikenmild (11,246 comments) says:

    I think I’d contest that tom. Economic liberalisation only really got under way in Australia with the Hawke government. The Australian economy at that time was pretty much managed in a similar fashion to New Zealand’s.

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  44. UrbanNeocolonialist (231 comments) says:

    Australia is exceptional because they have almost unlimited money (per head of population) available to dig up in places no one gives a shit about (because urban greenie fuckwits don’t drive through them once or twice a year). About $8,000 in minerals exports per year per person, off which the govt creams a huge chunk.

    They are just like the gulf oil states – rich because of mineral wealth rather than any entrepreneurial effort or organisational efficiency and despite a fucked-up govt. Take it away (as is slowly occurring as China’s infrastructure build slows) and their economy tanks. Without mineral wealth Aussie is a basket case.

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  45. Paul Walker (50 comments) says:

    “The last 30 years have seen huge changes in economic theory that have demolished central parts of the Reaganite-Rogernome credo”

    I would love to know what these changes are. As I’m working on a survey of the post-1970 theory of privatisation and can see no “huge change” in the economic theory in that area what areas relevant to the NZ reforms are being talked abut?

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  46. Miritu (29 comments) says:

    Sadly there is a large amount of economic illiteracy in NZ. Regardless of which side of the Keynes/Hayek fence you sit, there needs to be more understanding and awareness of the these two influential figures. This rap video production by Russ Roberts of Stanford should go some way to encourage more interest, especially for our younger generation …..

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  47. bruceh (102 comments) says:

    Love the video. Lower flatter taxes are on the election agenda again. Jamie Whyte’s Alternative Budget is the clarion call, he needs support to come through this election from flat tax supporters and economic liberals in general.

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  48. publicwatchdog (2,291 comments) says:

    Where’s the ‘cost-benefit’ analysis, locally, nationally or internationally, which substantiates the ‘Rogernomics – public is bad – private is good’ mantra? Who has benefitted from running central and local government in a more ‘business-like’ way – apart from those businesses which have won the privatised contracts? Penny Bright

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  49. hj (6,742 comments) says:

    alwyn (378 comments) says:
    July 15th, 2014 at 3:33 pm

    hj @ 3.19pm.

    Research reported in the latest Economist doesn’t appear to agree with you, or with Treasury.
    …..
    National wont know what to do. :wink:

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  50. big bruv (13,559 comments) says:

    Penny

    Paid your rates yet?

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  51. G152 (231 comments) says:

    In the meantime the hall from whence Labour sprang on the West Coast is falling to pieces.
    And for some reason Labour have not jumped in to finance the resurrection of this part of their history.
    Are they now ashamed of their working class roots?

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  52. hj (6,742 comments) says:

    alwyn (378 comments) says:
    July 15th, 2014 at 3:33 pm

    hj @ 3.19pm.

    Research reported in the latest Economist doesn’t appear to agree with you, or with Treasury.
    …..

    that research is talking about outcomes on the labour market and finds that the welfare system makes a large difference.

    The study also suggests that most countries could handle more immigration than they currently allow. In America, a one-percentage point increase in the proportion of immigrants in the population made the native-born 0.05% better off. The opposite was true in some countries with generous or ill-designed welfare states, however. A one-point rise in immigration made the native-born slightly worse off in Austria, Belgium, Germany, Luxembourg, the Netherlands, Sweden and Switzerland. In Belgium, immigrants who lose jobs can receive almost two-thirds of their most recent wage in state benefits, which must make the hunt for a new job less urgent.

    None of these effects was large, but the study undermines the claim that immigrants steal jobs from natives or drag down their wages. Many immigrants take jobs that Americans do not want, says Mr Peri. This “smooths” the labour market and ultimately creates more jobs for locals. Native-owned grocery stores do better business because there are immigrants to pick the fruit they sell. Indian boffins help American software firms expand. A previous study by Mr Peri found that because immigrants typically earn less than locals with similar skills, they boost corporate profits, prompting companies to grow and hire more locals.

    http://www.economist.com/news/united-states/21606860-evidence-stingy-welfare-state-helps-america-absorb-immigrants-they-cant-imagine-not

    It doesn’t address the effects of adjusting to a larger population (interest rates, exchange rate, business investment), so it doesn’t contradict Treasury or Reddell at all.

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  53. Fletch (6,148 comments) says:

    Hey, don’t go comparing Rogernomics to anything Reagan did. America prospered wildly in the 1980s under the changes Ronald Reagan brought. I don’t see where the writer gets off in comparing the two.

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  54. cha (3,856 comments) says:

    America prospered wildly in the 1980s under the changes Ronald Reagan brought.

    Yup, he had a sunny disposition to go along with his optimism and self-deprecating humour while, in no particular order, he tripled their national debt, traded arms for hostages, diverted money to drug runners, worked with China and ASEAN to reinstate the Khmer Rouge to power, supported Pinochet, apartheid and central American death squads, looked the other way when his Salvadorean allies raped American nuns, armed Hussein and the Mujahedin and pissed billions up the wall on his star wars fantasy.
    //

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  55. thedavincimode (6,590 comments) says:

    cha

    Nobody’s perfect.

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  56. Paul Walker (50 comments) says:

    @publicwatchdog

    “Where’s the ‘cost-benefit’ analysis, locally, nationally or internationally, which substantiates the ‘Rogernomics – public is bad – private is good’ mantra? ”

    That would be a good question if anyone use that mantra. Take as an example the literature on privatisation. Consider the paper Hart, Oliver D., Andrei Shleifer and Robert W. Vishny (1997). `The Proper Scope of Government: Theory and an Application to Prisons’, Quarterly Journal of Economics, 112(4) November: 1127-61.

    Here the provider of a service, either public or private, can invest his time in improving the quality of the service or reducing the cost of the service. The important assumption is that investments in cost reduction have negative effects on quality. Investments are non-contractible ex ante. For the case where the provider is a government employee he must obtain approval from the government to implement any innovation he has created. Given that the government has residual rights the employee will gain only a fraction of return on his investment. This gives him weak incentives to innovate. If the service provider in an independent contractor, i.e. the service has been contracted out, then he will have stronger incentives to both cut costs and improve quality. This is because he keeps the returns to his investment. The downside to private provision is that the incentives to cut costs are strong and the provider does not fully internalise the negative effects on quality of the reductions in cost. With public provision the incentive for excessive cost cutting are reduced as are the incentive for innovation and quality improvements. Costs are always lower under private ownership but quality may be higher or lower under a private owner. Hart, Shleifer and Vishny argue that the case for public provision is generally stronger when (i) non-contractible cost reductions have large deleterious effects on quality; (ii) quality innovations are unimportant; (iii) corruption in government procurement is a severe problem. On the other hand their argument suggests that the case for privatisation is stronger when (i) quality-reducing cost reductions can be controlled through contract or competition; (ii) quality innovations are important; (iii) patronage and powerful unions are a severe problem inside the government.

    Hart, Shleifer and Vishny note that the above argument suggests that the case for government production is strong in such services as the conduct of foreign policy, police and armed forces. The case can also be made reasonably persuasively for the case of prisons.

    So what we have is an argument that in most cases private provision has advantages, but not all. There are some areas where public provision is preferred.

    Thus a look at the literature on privatisation would tell us that the mantra should be public is good sometimes, private is good sometimes.

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  57. thedavincimode (6,590 comments) says:

    It has taken J Key and W English, and the World wide GFC, to get us back near where we could have been.

    … you mean … this is as good as it would have got … ? :( No wonder that Lange pulled the pin.

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  58. wikiriwhis business (3,883 comments) says:

    “An excessively protected economy imposed unnecessarily high costs on ordinary New Zealanders.”

    So what has changed. Govts are made to control us otherwise we would have direct democracy and councils could not waste billions and sent their electorates into huge deficit.

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  59. wikiriwhis business (3,883 comments) says:

    Shipley’s bank role ‘treachery’, says Peters

    Former prime minister Jenny Shipley’s involvement with the latest Chinese banking giant to set up shop in New Zealand has been described by Winston Peters as “economic treachery”.

    But the chair of the country’s newest bank says it will inject fresh competition into the market and support “exceptional growth” between China and New Zealand.

    CCB New Zealand, a fully-owned subsidiary of the state-controlled China Construction Bank, received its licence from the Reserve Bank yesterday.

    http://www.stuff.co.nz/national/politics/10270498/Shipleys-bank-role-treachery-says-Peters

    Financial terroist Reserve Bank handing us more over to Chinese imperialism.

    J Key knew this too stating our children need to learn Chinese to speak the language of our new imperial masters.

    Predictable English will be considered as neothandal as Kiwibloggers label Te Reo.

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