Richard Shaw, Massey University
It’s easy to look back at the bad haircuts, beige clothes and brown Beehive carpets and chuckle. But whatever one’s views on its aesthetics, the Fourth Labour Government – elected 40 years ago on July 14 – was no laughing matter.
After nine years of economic nationalism and social conservatism under National prime minister Robert Muldoon, David Lange’s new broom left no corner unswept. In the space of a few short years, fuelled by a high-octane blend of neoliberal theory and neoclassical state minimalism, it reinvented the nation.
The incoming government was helped on its way by Muldoon precipitating a constitutional crisis just days after the election, and by a political system that allowed a government with a parliamentary majority to legislate with relative impunity.
Lange and his finance minister Roger Douglas also relied heavily on the intellectual support of senior Treasury officials who had spent the Muldoon years absorbing the free market philosophies of the Chicago School of Economics.
Labour deployed the political resources of a new, reforming government to full effect. And the list of its reforms says as much about the country we once were as it does about the one we have become.
The rise of Rogernomics
During its first term in office, public subsidies in the agriculture and forestry sectors were removed. Foreign exchange and interest rate controls were lifted. The dollar was floated and financial markets substantially deregulated.
The goods and services tax (GST) was introduced, the personal income tax structure simplified, and the top tax rate for individual income earners fell from 66 to 48 cents in the dollar.
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Government businesses and departments were corporatised. Many were then privatised, particularly after Labour’s increased support at the 1987 election. One of the most regulated economies in the world rapidly became one of the most open.
It was dubbed “Rogernomics”, but the Lange-Douglas government’s social and foreign policy reforms were almost as significant. Rape within marriage was finally outlawed, homosexuality was decriminalised, and nuclear-free laws passed as part of a newly assertive and independent foreign policy.
Attorney-general Geoffrey Palmer revised parliament’s Standing Orders, transforming our legislature into one of the most open in the parliamentary democratic world. Palmer also shepherded the Constitution Act (1986) through the House, which formally ended the outmoded provision that New Zealand governments could ask the British parliament to legislate on their behalf.
The past shapes the present
The Lange government would drive other, deeper transformations over time. The manner in which both Labour and its National Party successor threw their executive weight about, for instance, goes a long way to explaining the advent of the MMP proportional electoral system in 1993.
Many, perhaps naively, hoped MMP would clip the wings of the political executive. But the more astute architects of reform recognised MMP was the perfect system for locking in the structural changes made in the 1980s and 1990s by Labour and National.
The sort of radical politics that would be required to undo the neoliberal reforms enacted since 1984 are much harder to achieve in a multi-party system than in one dominated by two parties which swap executive power.
Moreover, the DNA of Labour’s Lange-Douglas era can still be found in the party system that has evolved under MMP.
Most obviously, the ACT Party was co-founded by Roger Douglas. It draws its intellectual inspiration less from Ayn Rand’s Atlas Shrugged than from the Treasury’s epochal briefing to the incoming government in 1984, Economic Management. NZ First leader Winston Peters still adheres to aspects of the world Lange and his core cabinet ended.
And Te Pati Māori is the latest in many attempts to wrangle something for tangata whenua out of our Westminster parliamentary arrangements. The political environment in which it operates was shaped by Labour’s expansion of the Waitangi Tribunal’s powers.
A new orthodoxy
Perhaps the Fourth Labour Government’s most enduring legacy, however, is the least visible: it changed the way we talk and think about politics, especially what we now consider either politically possible or beyond the pale.
We have voluntarily chosen to constrain our ability to control fiscal and monetary policy. And these self-imposed limits on state power are now so embedded in legislation that any form of fiscal activism – such as saving jobs and businesses during a pandemic – seems extraordinary.
The notion that the human condition amounts to the rational pursuit of individual self-interest is similarly pervasive. By this reasoning, wealth inequality – of which there is a great deal more than in 1984 – is a moral not a market failure. Not even a global financial crisis or pandemic could really shift the paradigm.
These things are now widely accepted as natural and immutable, rather than the political choices they are. Without anyone really noticing, two equivalent fictions – the “dead hand” of the state and the “invisible hand” of the market – have assumed the status of both lore and law.
In France, one of the crucibles of modern democracy, the fall of the ancien régime during the revolution is commemorated on July 14, Bastille Day. On that same day in 1984, an old New Zealand order also fell. It was replaced by a new orthodoxy that has effectively smothered an alternative political or economic imagination.
We are all still living in the shadow of 1984. That is the real legacy of the Fourth Labour Government.
Richard Shaw, Professor of Politics, Massey University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Thank you for posting this.
An even-handed yet critical summation.
Inequality growing, two main parties that are very close to each other, lack of ability for fiscal activism etc.
I have a question, what is meant by "transforming our legislature into one of the most open in the parliamentary democratic world."?
Clearly those senior Treasury officials who were adherents of the Chicago School of Economics would not usher in something that was against their interests.
If only there was an ability for the working class and the poor to have their voices heard when decisions are made…
A timely reminder of the continued disaster inflicted on New Zealand, by ideological zealots in the 80's and 90's, as we have a Government hell bent on doubling down on it.
New Zealand’s low productivity, diminishing balance of trade/capital flows, and declining standards of living, compared with countries such as the Nordics and Australia, date from that time.
Yes, another reminder that ideological zealotry in any form is to be avoided.
This is an excellent summary of the underlying basis for present day NZ politics.
Just to say however that the influence of the legislative framework governing fiscal and monetary policy can be vastly overstated. The fiscal framework largely governs public reporting and other standard policy procedures. Of course its fundamental here that no policy can override the fiscal sovereignty of the government anyway and were the constraints to become binding these would always be loosened by a government that found them restrictive on policies it wants to carry out.
The handling of monetary policy is more significant but again the independence of the Reserve Bank can be vastly over-estimated here. Was the Reserve Bank to actually go against government economic intentions their ability to do so would be quickly curtailed.
The actual importance of this framework is about public perceptions. In practice we borrow government spending as a policy, not because this is necessary in any way, but because it allows the RBNZ to maintain an elevated Official Cash Rate. If on the other hand the treasury leaves surplus clearing funds in the system then the OCR becomes irrelevant to banks in the clearing system and the RBNZ doesn't have control over their main monetary policy lever any more (this can be observed in countries implementing extensive QE so leaving surplus clearance funds in their banking systems). But at the same time implementing this borrowing framework implies (incorrectly) to the public that NZ has a fiscal constraint and is dependent on financial markets being willing to lend. Of course when the fiscal challenge becomes important (such as during the pandemic) then it becomes evident that the country isn't fiscally constrained in that way.
The final upshot of both fiscal and monetary policy is that the government has all kinds of ways to hand off the budget, monetary policy and economic choices it makes and try to so convince the public these as not plainly optional choices it is making. We should clearly not overstate the case for that, its presently the case that the government is underfunding health (among many other budgets) and its presently a choice that the government is giving tax breaks to its landlord base. Its making both choices separately rather than trading off a policy choice for an election promise which may be perceived as a quasi justifiable trade off.
No shit…
lets see…State Sector Act, Reserve Bank Act, SOEs, contracting out, flogging off the people’s infrastructure, cap on debt to GDP, penetration of the public sector by private capital…
Indeed MMP has not changed the neo liberal state yet, it just rolls over after each election. That is the challenge for new gens–boot Roger’n’Ruth’s toxic legacy.
It's a permanently smaller state (barring national crises) and a permanently dumber economy based on finance, insurance, real estate, and dairy.
Much like Australia (replace dairy with coal), but much weaker.
Also very weak innovation and R&D cycle to improve us.
And a much larger strata of permanent poverty and homelessness.
"A nation reinvented: 40 years on from its 1984 victory, the Fourth Labour Government still defines New Zealand"
Don't you mean "…defiles…"?
I heard Duncan Garner on the radio talking about 'kids/youth criminals of today' and how in an 'earlier age' the local cop and the dad would give the kid a 'kick up the arse' but now the dad is 'on a benefit or in jail'.
In an 'earlier age' it's likely that the dad would be employed, perhaps by a government department that deliberately sited depots or offices in a smaller town to create and spread employment around. And likely the kids uncles were also employed there, and maybe a cousin or 2 who had left school. the was a reason to get out of bed in the morning, some routine and stability in life. there was enough money to pay for a home, feed the family and pay for the necessities of life. Maybe the dad and uncles and cousins socialised at some sports teams or clubs based around their work. Not necessarily perfect families, nor necessarily amazing jobs or the economy being lean and super efficient, but families had income, housing and routine. A defining moment for the kid/youth offender now versus 40 years ago, the election of a neo-liberal labour government.
I also heard a discussion about the broad matter of housing and the homeless. A shortage of houses, a shortage of affordable housing, unaffordable rents. Housing used to be something that provided a need, a place for people to live and to provide some security and permanance, whether owned or rented. Now housing for a significant many is a source of income, an 'investment', a source of wealth, a business asset, something to buy and sell for profit. A defining moment between a house fulfilling a social need and a house being an investment and a capital gain and a source of wealth? The election of a neo-liberal labout government and the rise of unfettered financialism, speculation and market bubbles.