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III Newspaper columns  VI A Brief Biography

Does Anyone Care About New Zealand's Economic Future?

Speech delivered to the Institute of Economic Research AGM
Thursday 30 August 2007

Sir Joseph Ward

Text of the British Dictionary of National Biography entry prepared in 1995.

Joseph Gordon Coates

Text of the British Dictionary of National Biography entry prepared in 1997.

“How Ideal was the Savage Ideal”

M.J. Savage Memorial Lecture, La Trobe University, 4 September 1998.

Peter Fraser

"The Political Context of the Prime Ministerial Years", conference paper August 1997.

"Politics versus the Economy 1940-1975"

Speech given at the Stout Centre conference in April 1999 at Parliament Buildings.

"An Overview of the War History Branch",

Lecture to Department of Internal Affairs seminar, Wellington, 1997.

"Unofficial Channels"

Review published in International History Review, vol.22, 2000.

Jock Barnes

Obituary for Barnes published in the Dominion, Wellington, on 6 June 2000.

Sir Apirana Ngata

Review of He Tipua: The Life and Times of Sir Apirana Ngata.

Sir Keith Holyoake

Review of Sir Keith Holyoake: Towards a Political Biography, in the Dominion, 18 April 1997.

Norman Eric Kirk (1923-1974)

Dictionary of New Zealand Biography, vol. 5, Wellington, 2000.

"Martyn Finlay"

Obituary for Martyn Finlay published in the National Business Review, February 1999.

"His Way: A Biography of Robert Muldoon"

Review of His Way: A Biography of Robert Muldoon, in the Dominion, 21 August 2000.

"The Collapse of New Zealand’s Military Ties with the United States"

This Fulbright lecture was first delivered at Georgetown University on 2 December 2002.

"James Brendan Bolger: An Early Assessment"

Dominion, December 1997.

"The State Sector"

Paper given at the Legal Research Foundation's conference "Shaping the Future State Sector", Parliament Buildings, 21 September 2000.

The National Years 1949-1999

Published in the Dominion, December 1999

The Conflict of Visions about New Zealand.

Paper given at ACT's Northern Regional Conference, November 2001

"Jim Anderton"

Published in the Dominion, 23 February 2002 after Anderton, the Deputy Prime Minister, fell out with yet another band of supporters and began his third political party.

John Banks: A Biography

Review of Paul Goldsmith's book, Auckland, 1997.

“Sowing the Wind and Reaping the Whirlwind”

Welfare Reform Seminar: 14 August 2004

David Lange

Obituary for David Lange, August 2005

The Conflict of Visions about New Zealand

Paper given at ACT's Northern Regional Conference, November 2001

By Michael Bassett

Foolishly I agreed to accept Catherine Judd’s invitation to speak before thinking carefully about the topic. A conflict of visions about New Zealand? That’s a tall order. We must surely rank as one of the least ideological societies on earth. Our early settlers were so busy establishing themselves that they lacked the leisure time to think seriously about ideas. Some complained it was difficult to get a serious discussion going on anything but the weather, the cost of living, or the difficulty of borrowing money. William Rolleston, an early superintendent of Canterbury, was learned enough to swear at his bullocks in Greek, while John Salmond wrote his learned disquisition on Jurisprudence in Temuka. But our universities did not teach political theory until after World War Two. Even the best educated parliamentarians were a pretty basic lot. A rudimentary check of indexes to Parliamentary Debates found me a few mentions of John Stuart Mill and Karl Marx, one of Friedrich Hayek, and none for Ayn Rand. I’m conceited enough to doubt whether much has changed for the better since my time.

Yet, of course there was an underlying ideology to those early years. One of the shrewdest observers of early New Zealand, the Frenchman Andre Metin, noted in 1904 that we seemed to practise what he called “socialism without doctrines”. It wasn’t that New Zealanders knew anything about socialism; quite the reverse. Individual initiative was much prized; the early settlers knew the value of hard work. But by 1900 they had long since harnessed the power of the State for a variety of early colonial causes. In the absence of much capital among the predominantly young settlers, and with a banking system that was slow to develop, early politicians used the State to borrow in London for development. Private railway construction firms were pushed aside in the name of faster progress. Only the State, it seemed, could prioritise according to the three–year election cycle. And the ministry provided venture capital for those searching for minerals, or new industries with the potential to expand New Zealand’s industrial base. The two visions of individualism and collectivism moved hand in hand, the State taking the riskier side of the road. As an old friend of mine used to say: every pioneer wanted to capitalise his gains and socialise his losses.

In time, came groups who believed that the State should provide cash assistance for those they deemed less fortunate. As the population aged, politicians agreed that friendly societies and other charities were not sufficiently well-developed to look after the old. Around 1900 more often than not they were men. So we got Old Age Pensions, then, later widows’, miners’ and blind persons’ pensions. They helped society’s unfortunates. But assistance gradually widened into child allowances for those with too many children, then after 1938, Social Security with its medical and universal superannuation components. New Zealand led the world as the balance tipped in favour of collectivist solutions to virtually every perceived social problem. People who favoured individual liberties protected by firm constitutional guarantees were on the back foot by the 1940s. By the end of World War Two the State was planning, directing, and regulating most aspects of our day-to-day life. “They” know what they are doing, my father always told me; I was never quite sure that he meant it. Was there a touch of sarcasm in his voice? One thing is clear: the group whom Thomas Sowell calls “the anointed” believed they were doing God’s work on behalf of us all, and that a fairer society would result.

This collectivist ideology didn’t change much when National came to power in 1949. Sid Holland’s government talked a great deal about “freedom”, and the rights of the individual. But after removing a few subsidies in 1950, National kept import licensing, controlled interest rates, regulated indiscriminately, and thought nothing of pouring money into Tasman Pulp and Paper and New Zealand Steel. They both had to be bailed out again in the 1970s and 1980s. Collectivism remained alive and well in New Zealand. Robert Muldoon was its most reckless practitioner.

He went too far, of course. He damaged the notion that the State was the embodiment of wisdom and could produce better outcomes for society than individuals themselves. There was now no option but to change direction. Kiwis have always been pragmatic in their attitude towards authority. By 1984 many realised that governments had been better at bestowing privileges such as import licensing on a few, than at creating opportunities for the many. New Zealand’s declining economic status from the 1960s encouraged a reassessment of collectivism. Britain’s shift towards Europe, the decline in world commodity prices, high New Zealand taxes by world standards, and virtually the lowest economic growth rate in the OECD after 1960, played their parts in shifting opinion towards a new vision. Thanks to an excess of collectivism we no longer seemed to be “leading the world”. Bureaucrats, teachers and public health professionals who in the 1930s looked like the midwives for a new society, were now seen as self-perpetuating elites, more anxious to improve their wages or retirement benefits than doing the Lord’s work. And nothing was more certain than that civil servants lacked the skills and incentives to run state trading enterprises profitably. Most were losing money hand over fist by 1984.

What pushed along the growing debate between collectivism and individualism was something very practical - a growing realisation that lots of social interventions just didn’t work. Many of today’s collectivists still refuse to accept this. But they are, to use Thomas Sowell’s phrase, “dangerously close to sealing [themselves] off from any discordant feedback from reality”. In the 1980s and 1990s others were prepared to re-assess their thinking. The reality is that while many state interventions such as funding children to stay at school longer have been hugely beneficial, others developed nasty side effects. They produced what surgeons call iatrogenic consequences; you know the sort where you go in for an operation. It’s successful, but you are left with an uncomfortable hernia, or worse still, an instrument, or a bandage inside. Let’s take a random sample:

*Import licences were introduced in 1938 to ration scarce foreign exchange. They did that in a haphazard way. But they produced a generation of inefficient industries whose products couldn’t compete either by way of price or quality with overseas goods - had they been available. Forced to depend on the local product, New Zealanders’ cost of living kept rising at a faster rate than our trading partners’. Import licences actually accelerated economic decline. Walter Nash’s great idea of 1938 eventually played a major part in the collapse of 1984.

*Another example: Interest rates on home loans were rigidly controlled. The trouble was that while those lucky enough to get a loan benefited, banks and insurance companies lent as little as possible on homes. In my youth, getting a home loan was a privilege.

*Other examples can be found in the health sector where all sorts of benefits were introduced in the name of facilitating access to publicly-provided services. The General Medical Services Benefit helped keep down the cost of a doctor’s visit. But the wealthy over-used GP, pharmaceutical and pathological services, while the poor couldn’t afford to see the GP who was the gatekeeper to those other benefits. In effect, the whole system soon became an exercise in income churning. Some thought it help for Remuera, paid for by South Auckland. Winston’s free GP visits for the under sixes have been disproportionately helpful to the same suburbs for different reasons, instead of for South Auckland which was meant to benefit.

*Another example: After 1974 ACC created a privileged class of worker who, because of an accident, received more generous treatment than an envious mate unfortunate enough to suffer from illness.

* Yet another example: The DPB was introduced in 1973 after the report of the Social Security Royal Commission. As David Green has shown, it simply assumed that people were entitled to a standard of living they had not earned. The DPB quickly created an environment where the benefit became a viable career choice. As Green has shown, the DPB has been the biggest single creator of poverty in this country, with a series of deplorable down-stream social consequences that are still with us, and multiplying.

*Another slightly odd example: The Rates Rebate of 1973, so dear to the heart of my old friend Henry May, was designed to assist old couples stay in their homes when rising rates threatened them with eviction. The rebate became a dodge used by all-too-many. They fiddled their incomes so they could fall within the qualifying parameters.

*Or a current example: Jim’s Bank. You don’t have to be a rocket scientist to work out that the reason why the PSIS was advertising on prime time last week was that it – and all the other credit unions that the political left, including Anderton himself, used to champion – are afraid they will be the first victims of his state-funded bank. Helping the poor? At our most charitable, all we can say is that some poor might benefit to a very small degree, but their gain will be at the expense of other deserving poor who have had the wit to save for their old age.

Historically, social engineering has often had untoward consequences. In excess, collectivism slowed our rate of economic growth, and injured innocent people going about their daily lives. Perhaps the greatest lesson that we have been forced to learn from decades of collectivism is that our self-anointed do-gooders, as Hayek warned, and Isaiah Berlin always suspected, will usually be defeated by the baser sides to human nature. Practical experience of collectivism’s excesses, more than any blinding revelation of the merits of individual liberty, has been, and still can be the greatest educator of people prepared to learn.

The reforms of the 1980s and early 1990s were good for New Zealanders and for our economy. They liberated us from the shackles of much collectivist experimentation. Regulations were scrapped, taxes lowered, and entrepreneurs were encouraged to take risks for a change. For the first time in New Zealand’s existence, a relatively free market emerged. Economic growth improved, though not spectacularly. Individual rights were enhanced, both in greater business opportunities, and in the choices available to individuals to shop, dress, drink and conduct their personal lives outside the puritanical strait jacket that we had been forced to wear. If there were such a thing as a freedom barometer, its seriously-rusted main spring would have burst at the release New Zealand has experienced this last two decades.

Yet there is no room for complacency. Quite the reverse. New Zealanders experienced more than a century of collectivism prior to 1984. It wasn’t all bad. State creation of what are often called “public goods” , such as roads, bridges, tunnels, and harbours, coupled with public education, helped everyone realise his or her individual potential. That was good for the economy. Our standard of living was among the very highest in the world in 1914. However, collectivism went too far. An increasingly elaborate array of welfare benefits and a dumbing down of education in the name of opportunities for all have damaged New Zealand’s relative position in the world. We need to remember that today every New Zealander over the age of 35 spent his or her formative years within a jerry-built welfare state where one experiment had been piled on another, each with conflicting end goals. Nothing was clearer by 1984 than that the collectivist world was incapable of producing miracles. It still isn’t. Yet, such has been the conditioning of so many New Zealanders, that they still incline to the notion that one more experiment here, or a bit more public spending there could be the elusive silver bullet. The fact that history shows this most unlikely, is not understood. All too few Kiwis study history; sadly, those who do, are taught for the most part by people still nurturing out-of-date collectivist agendas. In recent scholarship exams, only a tiny minority of seventeen and eighteen year olds sitting history knew the difference between the words “production” and “productivity”.

Well, what to do about all this? Are we condemned to suffer still more generations of politicians whose principal goal seems to be a triumph of faith over experience? Some thoughts: No answer to this can be adequate if it doesn’t first acknowledge the depth of faith in collectivism. New Zealand’s small, relatively intimate society where no one is too far removed from the levers of power, encourages people to the belief that a bit more intervention might fix whatever ails. The battle for reality won’t be easily won. There is too little debate about political ideas and outcomes. Some media icons like Kim Hill are as silly as two-bob watches when it comes to government spending, as any of you who heard her interviewing Al Morrison yesterday on paid parental leave will readily appreciate. Only last week a naïve young Herald reporter breathlessly recounted a students’ association claim that 44% of students from decile nine and ten schools made it to university, while only 9% from decile one and two schools did, and that the Government should do something about it. What she didn’t realise was that her figures showed that poorer areas were doing somewhat better now than they were in the 1960s when university education involved virtually no fees! In fact, the end to what was known as “free education” in my youth, and the shift towards user-pays in many aspects of our life, has been accompanied by a faster, not slower pursuit of skills, and we should be celebrate the fact, not whinge..

In my opinion, the retention of user pays is essential to the future of this country. For too long the politically correct have preached the value of their nostrums while flatly refusing cost-benefit analyses. The writing that has been done outside our universities is equally important in the battle for ideas. Some of it has been done by visitors to our shores brought here by the Business Roundtable. Roger Kerr would be the first to concede that he isn’t always right, but he has an unequalled capacity to challenge baseless assertions. I am awaiting the day when his opponents in government engage in rational discourse with him, rather than the kind of ad hominem attacks that Thomas Sowell so derides in his book The Vision of the Anointed.

A more optimistic observation: New Zealanders’ lack of interest in ideas has always been balanced by a pragmatic outlook on life. That endearing quality can be harnessed by those who have worked out ahead of the mob where things went wrong. Yes, it’s true: some on the left will always refuse to listen. They will continue to treat non-believers as selfish sell-outs, insensitive, even evil. But Kiwis can be surprisingly quick to arrive at sensible answers, as any careful follower of, say, the NBR’s opinion polls will notice. Tapping into that pragmatism is a must for people who want to grow New Zealand. Take for example, the debate about the DPB: if it can be moved on from woolly ideals, and the wider public can be shown that benefits of this kind encourage wrong career choices, and that those choices when exercised invariably lead to more, rather than less poverty, which in turn creates greater social disharmony, then the public is likely to condemn such recent decisions as those reducing the work requirements for a benefit. Politicians will indulge misguided romanticism at their peril. The challenge to all people of goodwill is to educate. It is to describe reality as it is, and not to be scared of being tagged a racist or any of the other terms that the anointed sanctimoniously dish out against their critics. NOT to deal in facts produces worse, rather than better social outcomes. Reach over the heads of the politically correct. At the rate they are going, their challenge to us to “close the gaps” will soon involve bridging a canyon.

Finally: Supporting individual excellence. Whether it is in the classroom or on the sports field, a sense of achievement is absolutely essential to a brighter future for all New Zealanders. Concentrating on today’s under 35s is an investment in the future of our economy, and hence all its citizens. As has so often been said, a rising tide lifts all boats; without it the poor have no chance. Freedom, healthy debate and the buzz of individual success are so much more liberating than political correctness, so much more useful than the blinkered, “see no evil, hear no evil” political prejudices that fill the muddled minds of many ardent, current day practitioners.



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