Paradise Lost: How short-term thinking, top-down governance and weak economic policies squandered NZ’s potential
New Zealand was once one of the world’s most prosperous countries but it’s been (mainly) down hill since the 60s. Danyl McLauchlan identifies what’s gone wrong and the changes needed to keep us afloat.
In 1937, the philosopher Karl Popper fled Austria ahead of its Anschluss with Nazi Germany, eventually finding his way to New Zealand and a teaching position at Canterbury University.
During his time here, Popper wrote his most famous book, The Open Society and its Enemies, a celebration of liberal democracy, one of the 20th century’s most influential works of political philosophy.
It was inspired, in part, by his impressions of New Zealand, which he later described as “the best-governed country in the world”. Economic and social data seemed to support this. During the postwar era, we enjoyed one of the highest per capita incomes in the world: higher than the UK and the rest of Western Europe. A cradle-to-grave welfare system delivered longer life expectancies and near-zero unemployment. When we congratulated ourselves on being the best country in the world for a child to grow up in, there was a wealth of evidence to prove it.
The decades since have been a period of steady relative decline. By 1996, our GDP per capita fell below the OECD average. Although we think of ourselves as a trading nation, exports as a percentage of GDP have declined since the 2010s: we are now one of the lowest-ranked OECD nations for trade-openness.
Our productivity has been falling relative to the OECD and has remained stagnant in real terms since 2012. We are being overtaken by more dynamic economies in Europe and East Asia. In a recent Curia poll for the Taxpayers Union, 53% of respondents said they thought the country was “moving in the wrong direction”. Outwards migration has never been higher.
What has gone wrong? For politicians, the nation’s problems can always be attributed to the government preceding them. For our intelligentsia, all of our failings can be attributed to former finance ministers Roger Douglas and Ruth Richardson and their economic reforms of the 80s and 90s (Read the 1984 Revolution series here).
Many economists note the external damage inflicted by Britain’s 1973 entry into what became the European Union and the oil crises of that decade. But the indicators of our decline preceded the neoliberal revolution and have endured after it, unsolved by governments of the left and the right.
Command and control
Australia was also affected by the shocks of the 1970s; it’s not still complaining about them 50 years later. Maybe our problems are deeper? New Zealand is an unusual nation both in the arrangement of our government and the structure of our economy – perhaps this radical divergence from the standard operating procedures of other developed nations is holding us back?
“We have a powerful unitary government with no upper house, no checks and balances to speak of, and a very small Parliament,” says Sir Geoffrey Palmer, a former prime minister, former head of the Law Commission, a key architect of the introduction of the MMP voting system and a lifelong campaigner against this country’s constitutional arrangements.