Trying Economic Times Just Make ‘Kiwis’ Try Harder
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WELLINGTON, New Zealand — This faraway, mountainous land where a straight road is as rare as an American Indian (53 are citizens) has taken several sharp turns of late, some down, some switchbacks.
Scarcely 15 years ago United Nations figures gave New Zealand the third-highest standard of living in the world. Now it is about 30th. Inflation has been double-digit for 10 years--more than 10% in May.
It has been cast aside as a South Pacific ally by the United States; outraged by what it deems a terrorist attack by the French government. These rankle in a nation that was an ally to both in two world wars.
It has a racial problem where it thought it did not.
It has discovered that being at the end of the Earth also means you are at the end of the oil pipeline. At one point during the 1979 oil crunch New Zealand was down to a 10-day supply of fuel.
Startling Reversal
The response has been typically New Zealandish. The country junked the old to try something new in as startling a reversal of form as a merino sheep biting a wolf.
The Kiwis have embraced free trade and discarded self-protection. They elected a Labor government in 1984 that has outdone the Ronald Reagans and Margaret Thatchers of the world. The party that for 90 years had been a pioneer of advanced if not radical social legislation said government had become too big and must be trimmed. Then, perhaps even to its own surprise, it did so. Cold turkey.
The government of Prime Minister David Lange did away with farm price supports. Land values dropped a third or more overnight. Farmers were furious. Other cutbacks angered the trade unions, which represent 97% of the industrial laborers and 42% of the overall work force of 1.8 million. Businessmen, on the other hand, were delighted.
“It was a kick in the groin, but we needed it,” says one.
“But the trouble with turning everything around 180% is that you don’t know, if it all comes out OK, just what did it,” says Tony Bowen, professor of economics at Christchurch University.
Many Changes
On April 1, nine government agencies, including railroads, coal mines, forestry, electricity, the post office and telecommunications, were turned from bureaucracies into profit-making corporations with the government as stockholder. Almost 4,000 jobs were lost.
Trains that carried few passengers were discontinued, little-used post offices closed. Trees henceforth will be planted where they grow best, not where they would create the most jobs--and votes. Eliminating coal subsidies cost 836 miners their jobs.
“We had 320,000 tons of coal stockpiled that had to be hosed down regularly so it wouldn’t spontaneously combust,” Lange says. “We decided that wasn’t kind, either.”
Ten years ago, Lange’s conservative predecessor, Sir Robert Muldoon, passed one of the world’s most generous pensions: retirement at 60% on 80% of average pay. The costs were enormous. Labor has taxed away the benefits for the well-to-do.
New Zealand has opened its doors to foreign competition at the same time it withdrew government crutches from under its farmers, who account for much of the nation’s overseas trade.
“If the United States or Europe had the guts to do what we have done, the world would be a better place,” says Anthony Malcolm, a former Cabinet minister in Muldoon’s National government. “We’re not going to do what the Europeans do, pay a peasant to drive 12 cows to help produce a mountain of surplus butter. We’re not going to subsidize mountains of grains like the Americans.”
New Zealand, somewhat smaller than Italy, consists of two main islands and 3.25 million people. It has some coal and natural gas, ample rain, but a stingy volcanic soil that clever technology has made the most of. Its industrious and ingenious people could, conceivably, exist on their own.
“But I don’t think Kiwis would accept self-reliance,” says Tony Haas, a business magazine editor. “They want cars and TVs and the fruits of international culture.”
To get such goods of the world, New Zealand’s English colonists early on became a trading nation. Recent history showed the Kiwis how vulnerable this left them to shocks they could not control. World wars. The entry of Britain, buyer of almost half her exports in 1966, into the European Common Market, which cost New Zealand her preferred status as dairy and sheep ranch to the mother country. Finally, the oil crunches of the 1970s.
“After World War II we decided never again to be subject to the vagaries of world politics,” Malcolm says. “Government put up trade restrictions and spawned a manufacturing capacity in what had been an agricultural land. This deprived us of quality imports and gradually lowered living standards. So what if the Koreans could make shoes cheaper and better than we could? We had 100% employment.”
Lack of Clout
But the oil crises showed New Zealand that it had no purchasing clout abroad. The cost of buying oil or producing it at home from natural gas set off prolonged inflation. It required considerable intervention from government at a time when many New Zealanders were questioning the broad role government had historically played.
In the 1984 national election, New Zealand, as it had done before in times of crisis, voted in Labor.
“It was a mom and apple pie election,” says Simon Walker, then one of Lange’s tacticians. “His slogan was ‘Bring New Zealand Together.’ Nothing risky there.”
But the country was choking on inflation, deficits and slumping trade. At one point New Zealand was down to three days’ foreign reserves and in danger of defaulting.
“Labor, a party which would have been unrecognizable to its trade union founders, didn’t know what to do,” says John Roberts, a political scientist at Victoria University here. “They were blind men. But in this blind world there was a man with one eye: Roger Douglas, the new finance minister. He said things weren’t working. Broadly speaking, he wanted to decouple government from its traditional outlets.
“We were getting poorer and had to get richer, and you couldn’t do it with a government that was captive to the interests--labor, industry, farmers.”
Lange called a three-day conference of national leaders, then stunned the country by turning about-face from 90 years of government paternalism.
“In the course of three days we stripped the country from the all-pervasive tentacles of a state-controlled economy with regulations on wages and prices and foreign exchange and everything else you could think of,” Lange recalled in an interview.
Before 1984 it had been illegal to start a bank. Now anyone could. If a farmer had a question of the Agriculture Department, he had to pay to get an answer. If Tony Bowen wants a transcript on a public school student, it now costs $10. The farmer would no longer be subsidized to grow what he couldn’t sell. The shoemaker would have to take his chances with the Korean competition.
If the buck didn’t stop at Lange’s desk in the Parliament building, known as the Bee Hive because it looks like one, it slowed down considerably.
‘High-Risk Strategy’
He told government agencies such as the post office they would be reimbursed for essential social services “because that’s what government is for. But once you’ve gotten past that, go out and make a buck.”
“This was and is high-risk strategy,” says Walker, now out of government. “It’s much easier to be nice guys.” But these are brave, innovative people deciding to take a chance. You don’t make money at the end of the Earth just growing sheep.
An election by September will show how risky these policies have been. It is generally deemed too close to call. But it has been traditional in New Zealand politics for Labor’s innovations to become the orthodoxies of succeeding National governments. Kiwis say: “Labor proposes, National disposes.”
The rest of the world, of course, is beyond the government’s control. This includes New Zealand’s South Pacific neighborhood, an area Kiwis claim to understand better than anyone else for reasons of history, culture and geography. The Kiwis and their island neighbors have declared the South Pacific off-limits to the atom despite French nuclear tests in the region.
When two secret agents of the French government in 1985 blew up the Rainbow Warrior, a Greenpeace vessel protesting the tests, New Zealanders were outraged at what they regarded as a terroristic act.
When Washington did not share their anger or at least express sufficient sympathy, the Kiwis, who have fought alongside Americans in all their wars in this century, wondered who their friends were.
They scoff at French assurances that the nuclear tests present no danger. “If that’s so, set them off in France,” Malcolm says.
U.S. Ships Banned
Lange, perhaps reluctantly, banned U.S. naval ships when Washington refused to say, in accordance with longstanding policy, whether or not they carried nuclear weapons. In retaliation, Washington froze New Zealand out of the ANZUS Pact with Australia.
“I have no problem with nuclear vessels,” Malcolm says, “but the typical New Zealand reaction is, we love America but not her weapons. We do have a right to tell our best friend: ‘You have b.o.’ We’re saying that there has to be another way.”
Tony Haas thinks the United States is acting “like a bully in the schoolyard. Please don’t expect us to see the world through American eyes. Let us be sympathetic, but have our own view.”
“There is a logic to nuclear deterrent,” Lange says. “A compelling series of sequential bricks that make up a compelling argument. It’s just that we don’t put the first brick in place.”
A more astute American reaction than muscle, he says, would have been for the United States “to have adopted a rather remote appearance of self-righteous grief.”
At first glance, one might agree with Professor Roberts that “we contribute nothing to American strategic interests except the empty assurance that we are on their side.”
But with 400,000 Maoris of Polynesian blood in its population, New Zealand stands firmly in two worlds. There are more Togos in Auckland than Togo, more Cook Islanders than in the Cooks. Kiwis argue that this gives them a special relationship in an area of the Pacific that is of strategic importance to the United States.
The Kiwis know the territory. Tiny Tongareva in the Cooks was losing its vital coconuts to the rhinoceros beetle that bred in fallen palm fronds. Schoolchildren dragged the fronds away one by one to be burned. Rather than send flame throwers or an insecticide airplane, New Zealand sent the kids wheelbarrows so they could carry off a load at a time.
Within 10 years, it is estimated, 30% of New Zealanders will have some Maori blood. Banks are beginning to cash checks written in Maori. National radio has a daily segment of news in Maori. There are about 300 language centers where Maori preschoolers are being taught their language.
‘Not Servant and Master’
And there is the rub, in microcosm.
“If the result is multiculturism, we’re doomed,” says Sidney Mead, professor of Maori culture at Victoria University and himself a Maori. “Biculturalism is the only model, a relationship between brother and brother, not servant and master. A minority suffers from being powerless. People become dispirited, poor, jobless.”
The mass migration of Maoris, particularly the young, to the cities has frayed the historic tribal societies. The group bondings of the village have become street gangs in Auckland and Christchurch. Sixty percent of the prison population is Maori. Maori life expectancy is eight years less than that of Europeans. Far fewer Maoris complete high school. Their unemployment is high. Available jobs are menial.
“Our guilt stares us in the face every day,” Roberts says.
“The state pays for the maintenance of Western culture but is only just beginning to accord the same privilege to the Maoris,” Mead says. “The pakeha (white man) has to realize we have a great contribution to make.”
Says Lange: “We’re rather torn at the moment with the whole question of the Maori dimension. We’re wrestling through that.”
It’s worth noting that under the influence of Hollywood, Kiwi youngsters play cowboys and Indians. They have never, says historian Sir Keith Sinclair, played settlers and Maoris.
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