Making Thatcher Look Timid: the Rise and Fall of the New Zealand Model

Abstract

Over the course of the past 20 years, the remote South Pacific nation of New Zealand has attracted a great amount of interest from policy-makers, journalists, and academic analysts alike. Formerly renowned as the home of a paternalistic comprehensive welfare state, green politics, and its pioneering role in granting females the right to vote, the Lange Labour government and ambitious Minister of Finance, Roger Douglas, commenced a comprehensive and radical program of economic liberalization, deregulation and privatization in 1984. This remarkable comprehensive package of neoliberal macro-economic reform measures was implemented at breakneck speed. Despite the absence of pressure from international financial institutions, the nature and even the sequencing of this new ‘New Zealand Model’ very closely resembled Washington Consensus-style structural adjustment programs. Obvious parallels to the United Kingdom appear as well, though New Zealand policymakers were ‘out-Thatchering Mrs. Thatcher’ (The Economist, 1991). Within less than four years, the country’s economy changed from being one of the most regulated in the OECD to being among the least deregulated (The Economist, 1996; Goldschmitt, 1996), receiving high marks by the right-wing Fraser’s Institute in its index of economic freedom. The ‘Kiwi School of Economics’ impressed international press, foreign policy-makers, and academics.

Social — we had quite enough of that. What we needed was the market, was liberalization.

Roger Kerr, former New Zealand Treasury official, quoted in Der Spiegel, 2 September 1996: 36

Do not try to advance a step at a time. Define your objectives clearly and move towards them in quantum leaps. … Once the programme begins to be implemented, do not stop until you have completed it. The fire of opponents is much less accurate if they have to shoot at a rapidly moving target.

Roger Douglas, former New Zealand Minister of Finance, in Douglas 1993: 67