An Early Laboratory for Neoliberal Reforms

Overall I have enjoyed numerous lifestyle advantages living in New Zealand. There are a few notable exceptions, of course, beyond the emotional isolation of being separated from my family and American friends. Most relate, either directly or indirectly, to the role New Zealand played in the 1980s as the Chile of the South Pacific – that is as a “laboratory” for the neoliberal reforms subsequently implemented by Ronald Reagan and Margaret Thatcher.

Theoretically neoliberalism is a “market-driven” approach to economic and social policy that stresses the efficiency of private enterprise by opposing any government regulation of corporate abuses or any government role in providing public services other than law enforcement. In practice, neoliberal policies have been universally pro-corporate and anti-free market, promoting vast amounts of legislation (tax law, government contracts, and direct corporate bail-outs) that favor large corporations at the expense of both small business and ordinary citizens.

Milton Friedman

The University of Chicago is usually credited as the birthplace (in the 1960s) for neoliberalism and Milton Friedman as its father. A frequently overlooked aspect of the 1973 CIA-sponsored coup in Chile was the direct role University of Chicago economists played in assisting Chilean dictator Augusto Pinochet to set out the neoliberal economic and social policy followed by the brutal regime that replaced Chile’s democratically elected government. New Zealand played a similar role in the early eighties, by (voluntarily?) trying out neoliberal reforms that were later adopted by Ronald Reagan and Margaret Thatcher.

Pinochet

New Zealand: a Second World Country

As I have blogged before, New Zealand is a relatively poor, second world country – at present it stands 22^nd in GDP for OECD countries. Americans are always struck by the high cost of living here relative to wages and salaries. Professionals earn far less – a sacrifice most American and British doctors, teachers and managers are happy to make for New Zealand’s “lifestyle” advantages. Although average income is much lower in New Zealand than in most of the developed world, the cost of basic necessities is just as high – and at times much higher, in the case of gasoline, home energy costs, “export” fish and meats,” and fresh vegetables. Central heating is virtually non-existent – in part because so few people can afford it and in part because the (colder) South Island has no access to low cost piped natural gas. Just so no one has any illusions about our climate, the New Zealand winter is relatively short. However except for the far north, it gets just as cold here as in London, Washington D.C. or New York City.

In New Zealand They Call It Rogernomics

In part New Zealand’s relative loss of wealth (in 1975 it was 10th in per capita GDP) relates largely to a 1980s policy decision in Britain, which was always the main importer of New Zealand lamb and dairy products, to favor EU over Commonwealth trading partners. However many New Zealand economists also blame draconian reforms implemented by Minister of Finance Roger Douglas in the mid-eighties. “Rogernomics,” as it’s known was directly responsible for the institutionalization of a large and steady wealth transfer (as profits and dividends) to overseas corporations. This in turn has led to a large, chronic accounts deficit (negative balance of trade) that is directly or indirectly responsible for many other economic problems.

Sir Roger Douglas

It’s only with the 2008 economic collapse and the non-existent US recovery that American analysts are beginning to appreciate the devastating impact that “Reaganomics” (the Reagan-Bush neoliberal agenda continued by Bill Clinton and Bush Jr.) – leading to  the virtual collapse of American manufacturing – had on the US economy. In a country 1/60^th the size of the US, the damage was much more immediate and harder to conceal.