By Chris Trotter*
The radical impulse is to be treasured; without it individuals accommodate themselves to the status quo and societies stagnate. New Zealanders were once renowned globally for their willingness to embrace and implement radical reforms. So much so, that the country was hailed as the “social laboratory of the world”.
But New Zealand’s last great burst of radicalism came in the 1980s and 90s. Our “quiet revolution” (as political journalist Colin James called it) is now more than three decades old.
The world is much changed since New Zealand’s years of radical reform. Indeed, the rising tempo of this global transformation is prompting a growing number of New Zealand economists, business leaders, public servants and commentators to insist that another burst of radical reform is needed urgently.
According to their grim analyses, New Zealand is stumbling blindly into a future overstretched by unsustainable obligations and overburdened by ruinous debt. Every year that passes without action, they argue, the cost of inaction rises.
A day of reckoning cannot be avoided. Either radical changes will be made by us, or they will be made for us.
The problem with this argument is that the radical changes being called for are neither radical, nor changes. What this clutch of agitated Cassandras is calling for is not a departure from the ideas and practices underpinning the status quo, but their intensification.
What New Zealanders are being invited to endorse and endure is more of the same – only nastier. Unsurprisingly, the “experts” advancing this argument are reluctant to say the nasty parts out loud.
Their stance on New Zealand Superannuation, for example, is driven by what they argue is its manifestly unsustainable generosity. There are too many Baby Boomers. They are living too long. The country can’t afford them.
To deal with this demographic problem a number of solutions are offered.
The age of eligibility for NZ Super must be raised to somewhere between 65 and 75 as quickly as possible.
The formula for calculating the quantum of NZ Super must be changed with the aim of reducing its pressure on the public purse.
The recipients of NZ Super must be means-tested.
There is something odd about these proposed solutions to the superannuation problem.
For a start, a big majority of the Baby Boomers are already drawing NZ Super.
With the Boomers’ generational boundaries extending from 1946 until 1966, there are only about five more years to go before every Boomer is 65 or older. Which means that even if every citizen signing-on for the pension in 2029 lived to be 100 (which, don’t worry, they won’t!) the whole Baby Boom generation will be gone by around 2064.
In the years after 1966, the years in which the Baby Boomers themselves started having families, the number of children being born in any given year began to decline. The parents of the Baby Boomers typically had 3 or 4 kids, the Boomers themselves 1 or 2.
The Boomer’s kids, “Generation X”, might (emphasize might) have one child. What’s more, they generally wait much longer to begin a family than their parents and grandparents.
Once the “pig in the python”, the huge demographic bulge of the Baby Boom generation, has been excreted from the population, the number of people aged 65+ will decline steadily.
Which is ironic. All the nasty solutions proposed to solve the affordability problem of NZ Superannuation will be felt not by the Boomers, but by their children and grandchildren. All that nasty, ageist, anti-Boomer fury of the Gen-Xers will end up falling on themselves.
It will not be pretty. When its victims are elderly, poverty takes on a particularly hateful aspect. There is a reason the civilised nations of the world erected comprehensive social support mechanisms for their older citizens. The dreadful circumstances of the aged poor are a moral blight on any society that refuses to address them.
It is certainly no accident that prior to the creation of New Zealand’s welfare state, its politicians and business leaders were guided by economic theories indistinguishable from those that were presented as new and radical in the 1980s and 90s.
Nor is it accidental that the most successful aspect of the policy revolution of the 1980s and 90s is not in what it created, but in what it destroyed.
By almost any measure, most New Zealanders are worse off in 2026 than they were in 1986. Whether measured by the purchasing power of Kiwis’ wages and salaries; the percentage of them owning their own homes; the length of time they are forced to wait to see a doctor and/or receive treatment in a hospital; the reading, writing, and mathematical skills with which their children are equipped at primary school; the quality and reliability of their nation’s basic services; the ability of their government to commission, design, build, and pay for major infrastructural projects; and, most importantly, their nation’s ability to retain the skills, enthusiasm and commitment of its best and brightest citizens; New Zealand is failing.
The solutions promoted by those contemplating this failure, and calculating its impact on New Zealand’s future, are in no way radical. Indeed, they are simply a reiteration of the same old prescription: spending cuts, deregulation, privatisation, user-pays. Policies which, for the past forty years, have been presented to New Zealanders as the only rational way of running their economy and governing their society.
Expunged from the nation’s memory is the radical truth that made New Zealand possible. That in a thinly populated, geographically challenging country located at the ends of the earth, the only realistic driver of economic development; the only reliable protector of the population; and the only institution with the power and resources to create and preserve other institutions – is the New Zealand state.
That was the one truly radical aspect of the reforms of the 1980s and 90s: the ruthlessness with which the reformers set about dismantling and disempowering the New Zealand state. Not only did they transfer all key financial, industrial and infrastructural institutions and enterprises into private hands, but they also persuaded New Zealanders that it was only through such transfers, only by ending state intervention, that the country’s future prosperity could be assured.
Forty years later, as New Zealanders survey the extraordinary record of failure in housing, health, education, infrastructure, and the environment, and contemplate how it might be rectified, only a tiny minority would argue that the solution to New Zealand’s problems lies in the state.
Even when the only way to ensure that the old are properly cared for is by reassuring the young that the society into which they have been born is equally committed to their welfare.
Even when the only feasible source of such reassurance is the state.
Even when radical statism built New Zealand, and only radical statism can restore it.
*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. He writes a weekly column for interest.co.nz. His work may also be found at http://bowalleyroad.blogspot.com.
36 Comments
Nice piece of analysis CT. I'm forever fascinated that those who choose to have an opinion and express it re things such as the Boomers superannuation, blame the Boomers rather than the generations of politicians. Although they appear enamoured of their own opinions, their clear sense of analysis is left somewhat wanting. On superannuation, it is only unaffordable due to the betrayal of the people by the politicians, who it must be added have ensured they will never go short in retirement while they impose austerity on others.
The current government are messing with the economy when it is clearly patent that they do not understand how money actually works in the modern economy and are imposing clearly flawed ideology on the economy. But would the voters recognise the change when it is offered and vote for it?
On superannuation, it is only unaffordable due to the betrayal of the people by the politicians
Superannuation was a tenuous proposition from the get go. Never in history has it been attempted to financially sustain such a large population of elders. Doing that as a pay as you go system makes it extra tenuous.
I'm still a couple decades from retirement, but I'd factored much in the way of state support out of my budget since mid mid 20s.
Well Kirk’s Labour government was on to it and provided the solution. Muldoon’s government not only disposed of that, but set in motion the unsustainable scheme of today. Successive governments have failed to give it even much of a glance. It is time for the two major parties to face up to their duty and responsibility to the nation and reach a consensus. If they lack the expertise then engage a panel of independent experts to arrive at a solution. Pass that through parliament, share equally the blame and kudos and the minor parties can agree or disagree until the cows come home.
Well Kirk’s Labour government was on to it and provided the solution
Is it the solution though?
Over inflated share and asset values have been driven by expanding pension funds. The assumption has been for 8-10% compounding returns on retirement investments, but those investments are driven by ever increasing market performance - creating it's own feedback loop. So we have values of assets that well exceed their ability to return a profit.
There will be a tipping point where the number of people needing to withdraw from their pensions exceeds those still needing to put in. At that point, we will end up in deep doo-doo.
it is already well established that if Piggy had not stolen the GSF as he did, NZ today would be one of the wealthiest nations per head of capita. It was clearly affordable, until it was stolen.
When I hear this argument I cast my eyes (and ears) westwards to Australia with its 4 trillion in super investments and wonder if the average Australian is any better off because of it....some undoubtably are, just as some here undoubtably are here due to our settings but they have the same problems we do in toto.
It would appear its not how much you have its what you do with it.
I think even Norway is in this boat. Huge sovereign wealth fund, but they still really fund their day to day operations using a similar system as us, and have all the same cost of living and affordability issues.
That is very true. Back in the day though our GSF was well invested. A few commentators have suggested that Piggy was more than a little annoyed at the fund as it was exposing his incompetence in matters finance and economics and he considered it an embarrassment.
I dont know if you could claim our GSF was well invested, it barely started before it was scrapped. One argument against it was it would end up owning all the assets in the country.....whether that was the result and whether that would be a negative we will never know.
Then again Murray, who voted in those that went back on the GSF? We can point to politicians to some degree, however if they carry through on promises and the majority give them the power to do so with their votes, especially if those votes were specifically to enact such changes, is it the politician to shoulder the blame, or those that empowered them?
Yip - I've had that line of argument with Murray before who just want to 'blame the politicians' as if the politicians are some 'other beings' that are completely detached from democracy and the people of the society at the time (you know, the ones that Murray would have been voting for).
I remember my relative (won't say who) who was a managing director of a large NZ company who retired in the mid 1980's (WW2 veteran) completely pull his hair out when the boomer generation took over the board in the late 80's (after he left the company) and 90's made a complete mess of everything by trying a lot of crazy strategies for short term gains for shareholder wealth, while completely ignoring the culture that had existed within that company that had made it so successful in the 80 years prior since it was established. One that was focused on providing quality goods and services to the community and employing local workers/tradespeople - many who joined the company worked there their entire lives because the culture was so good (like my relative - he was there 40 years). The boomer generation who took over focused on takeovers and cost cutting (ie redundancies) and sending roles offshore all in order to try and maximise shareholder wealth. The strategy almost caused the company to go bankrupt - after being such a stable and balanced (and profitable) firm for nearly the 80 years before this. Since then it is now a complete shell of what it was and I think this is representative of what has happened to a lot of NZ society. All about maximising profit for a few people today, while ignoring society as a whole and the future generations.
My challenge for Murray and boomer generation is this: if you are going to make society better through the lens in which you view the world, when are you going to do so? The clock is ticking, and if you are not, then step aside and let the next generation make changes. 50% of your generation are going to be dead in the next 10 years. Time is running out if you are going to make a positive impact. In this case you 'better be quick'. My experience is that they want to continue the status quo of the last 40 years because it worked out quite well for them - it has made them very wealthy on paper, but in doing so, they have turn what was so good decades ago, into something that young people resent today.
Muldoons 1975 election win was by less than half of the popular vote (FPP) so generalized boomer abuse is misplaced (the generation that stopped the Vietnam war & raising Manapouri, racist rugby tours, legislated equal pay, etc - all of which large parts of the WW2 generation criticised & resisted).
https://en.wikipedia.org/wiki/1975_New_Zealand_general_election
In my last full time job I worked for the NZ division of a multinational that had survived for nearly a century. Average service was ~20years & while approx half were boomers, rest from later generations 50/50 gender split & many cultures. It wasn't the boomers that killed it off, it was the overseas company hierarchy of self entitled generation X pursuing short term numbers to get their annual bonuses who were enabled by global Internet & broadband connectivity.
IO and Interesting think about the environment back then. The internet did not exist. Information was gained through radio and newspapers. Even TV was new. What we and our parents were told was what the politicians wanted us to hear. There was little to no way to independently test the information coming out of Wellington. Society was built entirely on trust and the pollies were at the very top of that pyramid. You say we voted them in. That's true but based on what? Compare it with today. What are our pollies offering Kiwis, yet they are still being voted in! IO you say the boomers have to change the world. What conspiracy theory are you drinking from? (Don't tell me it's the 4th Turning!) There are no boomers left in Government except maybe Winnie. The voter blocks that are not boomers are all bigger than the boomers, but the system is still not changing. Ask yourself why?
Yes boomers destroyed companies through greed. They almost killed AirNZ, but that's a very tiny majority and is more relevant to their character and egos than their generation, just as those from other generations who have done and are doing the same thing.
It's all politics and the real truth it is less the generations of the players, but their motivations, egos and character. For you to persist in blaming a whole generation is as stupid as the people who did the damage then and those doing it now!
I agree with you on many things IO but perhaps we also need to consider that the capitalist model will always lead to consolidation of power in a free market without adequate regulation and enforcement, and environmental degradation also. There's some boomers who have multiple rentals and comfortable in retirement, and others living on the breadline be it from divorce, medical issues draining life savings, widowed, lack of financial planning, and more. We have to consider this before putting blame into one basket in our analysis. And yes there are others who will sit on decades of free capital gains and lecture to the rest saying it was from hard work and risks were taken etc that will never understand or reflect on the economic conditions allowing this in the golden age of property.
Not a lot to disagree with there
I have at times given this situation a considerable amount of thought.
A possible solution is to leave the Commonwealth, and institute a constitution that affirms bottom up deal breakers about what being a New Zealand citizenship entails and provides. This would have to accompany a significant reform of the laws and regulations that service the middle and upper classes. For those two cohorts have pretty much dominated politics and political reform for centuries.
"By almost any measure, most New Zealanders are worse off in 2026 than they were in 1986".
CT has chosen his 1986 benchmark carefully, which is the year the Douglas tax reforms started to impact: I remember it differently.
- introduction of GST at 10%
- The top marginal rate was transitioning down from 66% to 48%, and subsequently to 33% by 1988.
- Corporate Tax Rate: Increased from 45%–50% to 48%–53% for the 1986/87 year.
- etc
Edit: "etc" included starting to get rid of the colonial hangover economic deadweight tax rorts such as stamp duties & death duties
You'd also remember then that GST was implemented on the promise that it would completely replace PAYE income tax when it hit 15% (or was it 12%?). Just another betrayal in a very long list.
I don't remember that. I remember Douglas floating the idea of a 20% GST with a 20% flat income tax & 20% corporate tax.
Unfortunately Lange chickened out.
First railway was private. Refrigeration of meat was a private enterprise. Farming was a private enterprise. Electricity started out as private use. Chris is just being his socialist idealism usual self.
Every idea ever had started out private (an individual), development and continuation however.....
I think wifi was the other way round. Although it took the private market to make it economically mass consumable.
A team (at CSIRO) but some individual must have proposed the idea originally...google credits Vic Hayes.
Whether a private venture or state funded the original idea forms in the private mental space of an individual....how they chose to further develop that idea will depend but ultimately its adoption will come under the control of the state, one way or another...be it by support or regulation either direct or indirect.
Sounds like Chris is describing 'The 4th Turning'. And the article describes the move from the 3rd turning (the 'unraveling') into the 4th turning (the 'crisis') (ie the past 40 years of an 80 year cycle).
https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory
Turnings
While writing Generations, Strauss and Howe described a theorized pattern in the historical generations they examined, which they say revolved around generational events which they call turnings. In Generations, and in greater detail in The Fourth Turning, they describe a four-stage cycle of social or mood eras which they call "turnings". The turnings include: "the high", "the awakening", "the unraveling", and "the crisis".
High
According to Strauss and Howe, the first turning is a high, which occurs after a crisis. During the high, institutions are strong and individualism is weak. Society is confident about where it wants to go collectively, though those outside the majoritarian center often feel stifled by conformity.
According to the authors, the most recent first turning in the US was the post–World War II American high, beginning in 1946 and ending with the assassination of John F. Kennedy on November 22, 1963.
Awakening
According to the theory, the second turning is an awakening. This is an era when institutions are attacked in the name of personal and spiritual autonomy. Just when society is reaching its high tide of public progress, people suddenly tire of social discipline and want to recapture a sense of "self-awareness", "spirituality" and "personal authenticity". Young activists look back at the previous High as an era of cultural and spiritual poverty.
Strauss and Howe say the U.S.'s most recent awakening was the "consciousness revolution", which spanned from the campus and inner-city revolts of the mid-1960s to the tax revolts of the early 1980s.
Unraveling
According to Strauss and Howe, the third turning is an unraveling. The mood of this era they say is in many ways the opposite of a high: Institutions are weak and distrusted, while individualism is strong and flourishing. The authors say highs come after crises when society wants to coalesce and build and avoid the death and destruction of the previous crisis. Unravelings come after awakenings when society wants to atomize and enjoy. They say the most recent unraveling in the US began in the 1980s and includes the long boom and the culture war.
Crisis
According to the authors, the fourth turning is a crisis. This is an era of destruction, often involving war or revolution, in which institutional life is destroyed and rebuilt in response to a perceived threat to the nation's survival. After the crisis, civic authority revives, cultural expression redirects toward community purpose, and people begin to locate themselves as members of a larger group.
The authors say the previous fourth turning in the US began with the Wall Street Crash of 1929 and climaxed with the end of World War II. The G.I. generation (which they call a hero archetype, born 1901 to 1924) came of age during this era. They say their confidence, optimism, and collective outlook epitomized the mood of that era. The authors assert the millennial generation (which they also describe as a hero archetype, born 1982 to 2005) shows many similar traits to those of the G.I. youth, which they describe as including rising civic engagement, improving behavior, and collective confidence.
We have the wrong incentives in place today, incentives that lead to the aggregation of market powers. Take for example the supermarket duopoly. We have this whole twisted corruption of planning rules and health and safety and lack of workers rights, which results in worse outcomes for consumers. It’s such a big mess of conflicts that only a bonfire seems appropriate. And that is never a solution.
Yet we have supposedly rule of law parliamentarians who vote for back dating laws to cut beneficiary support, but would not tax windfall profits. Who would not see a perverse outcome and use the same power to right a wrong. If it’s not a solution for Bank profits / power companies / AirNZ rorting the regions, why is it suitable to apply to the weakest?
Back in those days of supreme statism, building the hydro schemes say, we also had massive inefficiencies. Getting a new telephone line. And later that crazy Muldoon came along and completely destroyed any credibility for so much centralised power without guardrails.
While I can understand CTs call, I am not sure thinking in terms of nostalgia makes the boat go faster.
My proscription? Accountability needs to form a much more important part. We need a revolution in our governance. We need to promote and prioritise real benefits to our society. We need to link the benefits that those at the top get to those at the bottom. We need shame the freeloaders, be they those elements claiming more for their part of our society or the forestry slash providers or the international software providers who make no tax contributions. Or the Judges who presume to be superior. Let’s learn from the past but , no, we don’t need to go back.
I think you misdirect CT's message. He discusses history with the perspective of learning from it, not returning to it. He is calling for radical change having built the basis that what had been done historically hasn't served us well.
Ok, I hear you.
so what makes the boat go faster? Is there any other question?
What is the solution?
I've suggested taking heed of the lessons from the free market, COVID and all the other effects.
Understand how money works in today's economy. Change the entire basis for taxation. We are told we must tax to spend that is at best a gross distortion, at worst an outright lie. Tax is used to manage the amount of money in the economy. The government can fully fund critical spending. Taxes need to be targeted at the big profits. Taxing ordinary people at the spending level kills the economy. Use tax at the commercial level to promote employment and better pay. Stop funding foreign companies to big profits in NZ. Control and regulate the amount of money being created into our economy (only the government should be doing that!).
That is just a beginning, but it is a radical change from the existing ideologies.
Understand how money works in today's economy.
The issue i see today murray, is that we are a much more global world with ease of access to information. People can get golden visas for tax advantages at a price, and countries seem to some degree to have dropped taxes over and over to compete for global business (e.g Ireland). For any example of the impact of this see Dubai and the number of people taking up residence there to pay no tax, do business around the world, have their cake and eat it. They can then purchase assets with the accumulated wealth wherever they wish and are buying it with gross earnings, not net.
The globalisation and information flows mean that any time high taxation is enforced, the level of alternative countries and options available to people is enormous compared to say 1970. People can take their capital elsewhere to a better more advantageous place, and IMO unless there is some kind of global, collective action around this, I can't see an easy solution.
Yes I see the same things. I don't suggest it would be easy. I suggest that taxing ordinary workers is counter productive. Encouraging people to build their wealth and invest. Create a tax structure that promotes investment in NZ, or bringing foreign funds back. Dubai is oil rich but has lessons that we can learn from, and you point to that.
Our current economy favours wealthy over the ordinary workers. Restrict and regulate investment in social housing. Support and encourage investment that builds employment and national resilience. Support investment that lifts the incomes of working Kiwis. Tax the major wealth accumulators to discourage excess profits.
The 'free market' and capitalism are both flawed ideologies that have just led to slavery being reinvented in a different form; minimum wages and high living costs that trap working kiwis in an inescapable grind. Those ideologies need to be scrapped through bringing back democracy, recognising that a nations wealth lies in its people, not the bank accounts of the uber rich and big corporates.
Expunged from the nation’s memory is the radical truth that made New Zealand possible. That in a thinly populated, geographically challenging country located at the ends of the earth, the only realistic driver of economic development; the only reliable protector of the population; and the only institution with the power and resources to create and preserve other institutions – is the New Zealand state.
Apparently expunged from Mr Trotter's memory it that the New Zealand state by 1984 had been borrowing heavily ever since the Oil Shock of the early 70's It was at that point that the earning power of New Zealand's farmer's selling soft commodities lot their ability to carry the country against the rising cost of hard commodities, and cheap air tickets leading to an International Tourism boom was still a long way off. By 1984 the "reliable protector of the population" was dead broke and the country faced an "IMF" moment, and so had to sell off the crown jewels-its simply like that when the liquidators move in. New Zealand Government was out of options and to deny that reality and to pass over the facts as though all of Rogernomics was simply an optional choice is untruthful.
I"m continually amazed at how few young people seem to know the economic history of the country that started the country on this neo-liberal course. And here we are 40 years later and who is still carrying the economy-Agriculture, Tourism, and Manufacturing.
Only 12 months ago the RBNZ chief economist had this to say
In terms of New Zealand’s long run performance we haven’t been a rockstar economy for decades. “We did get a sort of productivity surge in the mid to late ‘90s when the effects of reform in New Zealand in the ‘80s and the early ‘90s kicked in and we were coming out of a huge recession in the early ‘90s, but it kind of faded away. “Our economic performance to my mind at least has been – and you see it in the data – you know, we have been declining in all sorts of metrics relative to the rest of the OECD. And I think it is really important that we do look around internationally to gauge our performance and what’s possible. So, I think in terms of New Zealand being a rockstar economy – there’s been glimpses in the past – but I think if we play our cards right the best is yet to come."
Bottom line-I think Mr Trotter holds the cards.
We did get a sort of productivity surge in the mid to late ‘90s when the effects of reform in New Zealand in the ‘80s and the early ‘90s kicked in
I would love to read some stats on this if anyone has a source, vs the lowering real interest rates of property allowing people to leverage housing and make the numbers look better with expanding private credit.
Agree, agree, agree. Great article, Chris.
The 80s/90s neo-liberal turn was more a zeitgeist, than a long-term vision;
Scholars have long maintained that each era has a unique spirit, a nature or climate that sets it apart from all others. In German, such a spirit is known as Zeitgeist, from the German words Zeit, meaning "time," and Geist, meaning "spirit" or "ghost." (This same Geist, when combined with poltern, meaning "to knock," led to the English word poltergeist referring to a noisy ghost.) It is common nowadays to read about something "tapping into" or "capturing" the zeitgeist, as doing so often entails popularity or profitability in appealing to a great many people, though sometimes the zeitgeist of a particular time and place is only recognized in hindsight, either due to nostalgia or with the benefit of (one hopes) greater wisdom.
Perhaps appropriate for its time, but no one in power has been bold enough, or intellectual enough to find that "greater wisdom".
For radical statism - or any state-led initiatives - to be successful, the citizens need to believe the state is trustworthy and competent.
That is no longer the case.
What would the state solutions be?
How can NZ generate new wealth for all?
In a capitalist society, there is no wealth for all. It relies on some winners and some losers and the winners gobbling up the competition eventually, growing the wealth gap.
However England broke this mold to some degree with high taxation on the rich to allow for greater social supports and the growing of the middle class way back when.
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