The Fourth Labour Government and the Destruction of the Welfare State

by ISO editor

By Keith Davies

Ever wonder about the days when universities were free and not run as a business? When the social welfare safety net was available to all that needed it and could sustain a decent living? When the government worked towards a goal of total employment, not enabling a system that requires unemployment to function? When vital services were owned by the people, serviced the people and could subsidise each other? When employment was secure, people were trained and skill bases maintained instead of short term contracting? Not all of this was benevolent, of course; some of it suited the needs of capitalism at the time, and others parts had been won only after long battles by workers. But it is a stark contrast with today’s world of debt, privatized services and shortages in areas, like housing, of crucial public need. New Zealand before neoliberalism was no paradise, and workers, women, Māori and migrants had to fight hard against Muldoon’s converative government. But the neoliberal transformation was in the interests of the rich, and serves them to this day.

One event, person or condition cannot be solely blamed for the introduction of neoliberalism into New Zealand – like most things in history, it was a perfect storm coming together that allowed it to take hold and run rampant. However, one group holds much more responsibility than others for allowing it to occur and not stopping, or at least tempering, it when it had seen the outcomes. That group is the Fourth Labour Government.

In 1984, a snap election was called by National Prime Minister Robert Muldoon. His third term government was growing increasingly unpopular with the public, the economy was in a so-called crisis and the seas of change were on the horizon. The Labour Party campaign ran on social, anti-nuclear, and Treaty of Waitangi issues. Their manifesto and campaigning had no real mention of the brutal economic reform that would be forced on the population. In fact, many candidates had little insight into economics, something the right was able to use against any lingering left-wing doubts in MPs minds.

In the background of all this political turmoil Treasury had been flooded with Chicago School economists and business elites. Tired of being ignored by Muldoon and having to compete with the Ministry of Works for attention and helped by the Business Roundtable lobby group, it set about its plan to open up New Zealand’s economy to the free market. Going behind the government’s back in a pretty unconstitutional move, Treasury had been espousing their ideas to Labour MPs. Unfortunately for the public, one MP took this idea hook, line and sinker: Roger Douglas.

Once the election was won by Labour, Douglas, with his handbook from Treasury, acted swiftly. This economic experiment, with theories never tried let alone proven anywhere else, was forced on the public as the only answer to New Zealand’s economic troubles. In fact, this was the only plan ready to go and had a squad of cheerleaders to chant its virtues. If time was taken to consider alternatives, New Zealand could have avoided a lot of social and economic harm. With lightning pace, financial deregulation was rolled out and New Zealand was opened up to the free market. This set the stage for massive spending cuts on social services, the introduction of GST, personal and corporate tax rate reduction, relaxing of labour laws, state assets (banks, infrastructure, communication etc.) converted to State Owned Enterprises (SOEs), run as businesses ready for sale, then partly or wholly sold for short-term gain, and education reform on all fronts, including the introduction of student fees. Redundancies were high – as well as the newly minted CEOs’ pay. All of this was done with no regard to the real life social consequences.

Read much more here:

Published by peter petterson

Father of four, grandfather of thirteen, and great-grandfather of eight. Resides in Taita, Lower Hutt, Wellington, New Zealand. Living happily in retirement and enjoying the company of my many young descendants.

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