Rogernomics
Encyclopedia
The term Rogernomics, a portmanteau of "Roger" and "economics", was coined by journalists at the New Zealand Listener
by analogy with Reaganomics
to describe the economic policies followed by Roger Douglas
after his appointment in 1984 as Minister of Finance
in the Fourth Labour Government
. Rogernomics was characterised by market-led restructuring and deregulation and the control of inflation through tight monetary policy, accompanied by a floating exchange rate
and reductions in the fiscal deficit. Douglas came from a background of Labour Party
politics. His adoption of policies more usually associated with the political right, and their implementation by the Fourth Labour Government, were the subject of lasting controversy.
member of parliament at the 1969 general election
. He showed his interest in economic policy in his maiden speech, in which he argued against foreign investment in the domestic economy. His case for external protection of the domestic economy and government involvement in investment was characteristic of the Labour Party of the time. From 1972–1975, Douglas was a junior minister in the Third Labour Government
, where he won a reputation for his capacity for innovation. This government followed a broadly Keynesian
approach to economic management.
As a minister, Douglas was innovative in context of the public sector
. As Broadcasting Minister he devised an administrative structure in which two publicly-owned television channels competed against each other. He was among the government’s leading advocates of compulsory saving for retirement, which he saw not only as a supplement to public provision for retirement but as a source of funding for public investment in economic development. The superannuation scheme he helped design became law in 1974, but was disestablished by Robert Muldoon
almost as soon as the National Party
won the 1975 election
.
Douglas maintained his interest in economic issues in opposition. He framed his chief concern as the deep-seated problems in the structure of the economy that had contributed to deteriorating economic performance and a standard of living that was slipping in comparison to that of other developed countries. In 1980, he described New Zealand as a country living on borrowed money, unable in spite of the record efforts of its exporters to pay its own way in the world.
The economic policy of successive governments had left the domestic economy sheltered and unresponsive to consumers. Inflation, which was more than ten per cent a year throughout the seventies, was high by the standards of the country’s major trading partners. There was a persistent fiscal deficit. The public sector was inefficient. A large part of the economy was controlled by regulation, some arbitrary or inconsistent. The political consensus of the post-war years produced stability at the cost of innovation. Both major political parties maintained the high levels of protection introduced by the First Labour Government
from 1936 onwards, and since 1945 both parties had aimed at maintaining a structural shortage of labour. Beneficiaries of the regulated economy flourished in both public and private sectors.
Douglas argued that only radical action would improve the economic outlook. In 1980, he released an "Alternative Budget" that attacked what Douglas called the Muldoon government’s “tinkering” with the economy. He wrote that twenty years of pandering to entrenched interests had dampened productive investment. The Labour leadership saw his proposals and their unauthorised publication as unfavourable comment on Labour policy. The Labour leader Bill Rowling
publicly rebuked Douglas. Douglas then published his thinking in the form of a book. Alongside far-reaching proposals for reform of taxation and government spending, it advocated a twenty per cent devaluation of the dollar to increase the competitiveness of exports. Although radical, it took an eclectic approach and did not hint at the abandonment of Labour’s Keynesian policy framework.
Douglas became increasingly frustrated by what he saw as the Labour Party’s reluctance to deal with fundamental issues of economic policy. He claimed in 1981 that Labour had an image as a party that would promise the public anything to be elected. He argued that the party should agree on its economic policy before it agreed on anything else, and allow economic reality to play a part in its decision-making. Unable to convince Rowling of the merit of his case, a disillusioned Douglas decided to stand down from parliament at the 1981 election
. One of those who persuaded him to stay was Labour’s deputy leader David Lange
who offered to make Douglas Minister of Finance
if Lange was prime minister after the 1984 election.
After Labour’s narrow loss in the 1981 election, Douglas found a growing audience in the parliamentary party for his view that Labour’s established approach to economic policy was deficient. His colleague Mike Moore claimed that there was a public perception that Labour policy sought “to reward the lazy and defend bludgers”. Douglas’s case for a radical approach was strengthened by the belief among many of his parliamentary colleagues that the economy’s deep-seated problems could only be solved by extensive restructuring. It was understood that some restructuring must follow the Closer Economic Relations
agreement with Australia, which took effect in 1981 and reduced barriers to trade between Australia and New Zealand. At the same time, many economists were arguing for the greater use of competition as a tool of policy, and expressing concern about excessive or inappropriate regulation of the economy. In 1983, Lange succeeded Rowling as Labour leader. He gave Douglas responsibility for economic policy and made it clear that economic policy would determine other policy.
Although Douglas was innovative in his approach, and his open disregard for Rowling had earned him a reputation as a maverick, he remained within the mainstream of economic thinking in the parliamentary Labour Party. He argued in 1982 that the government should actively support small business, and intervene to stop the aggregation of assets by big business. In his view, the government should use the tax system to encourage productive investment and discourage speculative investment. Until the end of 1983, Douglas saw exchange rate, tax and protection policies as means of actively shaping the business environment. In August 1982 he supported a contributory superannuation scheme as a means of funding industrial development and in February 1983 he wrote a paper called “Picking Winners for Investment” which proposed the establishment of local consultative groups to guide regional development. In a paper dated May 1983 Douglas argued that an unregulated market led to unhealthy concentrations of market power.
At the end of 1983 there was a marked change in Douglas’s thinking. He released a paper called the “Economic Policy Package” which called for a market-led restructuring of the economy. The key proposal was a 20 per cent devaluation of the dollar, to be followed by the removal of subsidies to industry, border protection and export incentives. The paper doubted the value of “picking winners” and saw only a limited place for government funding of economic development. His colleague Stan Rodger
described the paper as a “quite unacceptable leap to the right”. It immediately polarised opinion in the Labour Party.
Douglas characterised the policy package as restrained and responsible, and an appropriate response to the country’s economic difficulties. He acknowledged the contribution to the package of Doug Andrew, a Treasury officer on secondment to the parliamentary opposition, among others. W H Oliver noted the close alignment of the package and Management, Treasury’s 1984 briefing to the incoming government. His assessment was that Douglas was predisposed towards the Treasury view because greater reliance on the market would require decisive action and solved what Douglas saw as the problem of interest-group participation in policy-making.
Division in Labour over economic policy crystallised when a competing proposal was submitted to the Labour Party's Policy Council. Its proponents included Rowling and others who had resisted his replacement as leader. It argued for a Keynesian use of monetary and fiscal policy. It was sceptical about the ability of the private sector to promote economic development. Economic restructuring was to be led by the government, which would act within a consultative framework. In this way, the social costs of restructuring would be avoided.
There was stalemate in the Policy Council. As the 1984 election
drew closer, Labour’s deputy leader Geoffrey Palmer drafted a compromise that contained elements of both proposals. The Palmer paper was broadly worded. It made no mention of devaluation. It anticipated some form of understanding between government and unions about wage restraint. It allowed for extensive consultation about economic policy and stated that necessary structural change would be gradual and agreed. When Muldoon unexpectedly called an early general election, the Labour Party adopted Palmer’s paper as its economic policy. Lange said that Labour went into the election with an unfinished argument doing duty as its economic policy.
, Douglas hastily began to reform the New Zealand economy, under the government’s slogan of "We will do the right thing". The speed of the reforms can partially be attributed to the ‘currency crisis’ that resulted from Robert Muldoon
’s refusal to devalue the dollar after being advised to do so by the incoming government. Labour had planned to devalue the dollar but had not announced devaluation as part of its election policy – Douglas later stated that doing so "...would wreak havoc in the foreign exchange market and invite a run on the New Zealand dollar". The business community became aware of the government's plan and speculated against the dollar, converting New Zealand funds and credits to foreign currency, and then back to a larger quantity of New Zealand dollars.
The reformers argued that the speed with which the reforms were made was due to the fact that New Zealand had not adjusted to Britain’s abandonment of the empire, and had to move quickly to ‘catch up’ with the rest of the world. Douglas claimed in his 1993 book Unfinished Business that speed was a key strategy for achieving radical economic change: "Define your objectives clearly, and move towards them in quantum leaps, otherwise the interest groups will have time to mobilise and drag you down". Political commentator Bruce Jesson
argued that Douglas acted fast to achieve a complete economic revolution within one parliamentary term, in case he did not get a second chance. The reforms can be summarised as the dismantling of the Australasian model of state development that had existed for the previous 90 years, and its replacement by the Anglo-American neo-classical orthodoxy based on the monetarist policies of Milton Friedman
and the Chicago School
. The financial market was deregulated and controls on foreign exchange removed. Subsidies to many industries, notably agriculture, were removed or significantly reduced, as was tariff protection. The marginal tax rate was halved over a number of years from 66% to 33%; this was paid for by the introduction of a tax on goods and services (GST
) initially at 10%, later 12.5%, and a surtax
on superannuation, which had been made universal from age 60 by the previous government.
s were not uncommon; the most spectacular occurred at a pulp and paper mill owned by Fletcher Challenge
and led to changes to work practices and a no-strike commitment from the union. Later settlements drew further concessions from unions, including below-inflation wage increases, a cut in real wages. There was a structural change in the economy from industry to services, which, along with the arrival of trans-Tasman retail chains and an increasingly cosmopolitan hospitality industry, led to a new ‘café culture’ enjoyed by more affluent New Zealanders. Some argue that for the rest of the population, Rogernomics failed to deliver the higher standard of living promised by its advocates.
Between 1985 and 1992, New Zealand's economy grew by 4.7% during the same period in which the average OECD
nation grew by 28.2%. From 1984–1993 inflation average 9% per year, New Zealand's credit rating dropped twice, and foreign debt quadrupled. Between 1986 and 1993, the unemployment rate rose from 3.6% to 11%.
was paralysed by infighting for most of the next six years, as former Trade Minister Mike Moore became Leader of the Opposition (1990–1993), followed by Helen Clark
, whose first term as Leader of the Opposition was undermined by Moore's populist personal faction. However, Clark survived and steadily gained ground during the third and final term of the Jim Bolger
and Jenny Shipley
administrations. Much like Tony Blair
in the United Kingdom, Clark decided on a compromise solution, combining advocacy of the open economy
and free trade
with greater emphasis on fighting the New Right
consequences of social exclusion
.
The policies of Ruth Richardson
, sometimes called "Ruthanasia
", are often seen as a continuation of Rogernomics. Richardson was Finance Minister in the National Party
government from 1990 to 1993.
In New Zealand advocates of radical economic policies are often branded as "rogergnomes" by their opponents, linking their views to Douglas's and the supposed baleful influence of international bankers, characterised as the Gnomes of Zürich
.
New Zealand Listener
The New Zealand Listener is a New Zealand magazine. First published in 1939 and edited by Oliver Duff and the Monte Holcroft it originally had a monopoly on the publication of of upcoming television and radio programmes. In the 1980s it lost its monopoly on the publication of upcoming television...
by analogy with Reaganomics
Reaganomics
Reaganomics refers to the economic policies promoted by the U.S. President Ronald Reagan during the 1980s, also known as supply-side economics and called trickle-down economics, particularly by critics...
to describe the economic policies followed by Roger Douglas
Roger Douglas
Sir Roger Owen Douglas , is a New Zealand politician who formerly served as a senior New Zealand Labour Party Cabinet minister. He became arguably best-known for his prominent role in the radical economic restructuring undertaken by the Fourth Labour Government during the 1980s...
after his appointment in 1984 as Minister of Finance
Minister of Finance (New Zealand)
The Minister of Finance is a senior figure within the government of New Zealand. The position is often considered to be the most important Cabinet role after that of the Prime Minister....
in the Fourth Labour Government
Fourth Labour Government of New Zealand
The Fourth Labour Government of New Zealand was the government of New Zealand from 26 July 1984 to 2 November 1990. It enacted major social and economic reforms, including reformation of the tax system. The economic reforms were known as Rogernomics after Finance Minister Roger Douglas...
. Rogernomics was characterised by market-led restructuring and deregulation and the control of inflation through tight monetary policy, accompanied by a floating exchange rate
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
and reductions in the fiscal deficit. Douglas came from a background of Labour Party
New Zealand Labour Party
The New Zealand Labour Party is a New Zealand political party. It describes itself as centre-left and socially progressive and has been one of the two primary parties of New Zealand politics since 1935....
politics. His adoption of policies more usually associated with the political right, and their implementation by the Fourth Labour Government, were the subject of lasting controversy.
Douglas and the Development of Economic Policy, 1969–1984
Douglas became a LabourNew Zealand Labour Party
The New Zealand Labour Party is a New Zealand political party. It describes itself as centre-left and socially progressive and has been one of the two primary parties of New Zealand politics since 1935....
member of parliament at the 1969 general election
New Zealand general election, 1969
The 1969 New Zealand general election was a nationwide vote to determine the shape of the New Zealand Parliament's 36th term. It saw the governing National Party win a fourth consecutive term, under Prime Minister Keith Holyoake.-The Election:...
. He showed his interest in economic policy in his maiden speech, in which he argued against foreign investment in the domestic economy. His case for external protection of the domestic economy and government involvement in investment was characteristic of the Labour Party of the time. From 1972–1975, Douglas was a junior minister in the Third Labour Government
Third Labour Government of New Zealand
The Third Labour Government of New Zealand was the government of New Zealand from 1972 to 1975. During its time in office, it carried out a wide range of reforms in areas such as overseas trade, farming, public works, energy generation, local government, health, the arts, sport and recreation,...
, where he won a reputation for his capacity for innovation. This government followed a broadly Keynesian
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...
approach to economic management.
As a minister, Douglas was innovative in context of the public sector
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
. As Broadcasting Minister he devised an administrative structure in which two publicly-owned television channels competed against each other. He was among the government’s leading advocates of compulsory saving for retirement, which he saw not only as a supplement to public provision for retirement but as a source of funding for public investment in economic development. The superannuation scheme he helped design became law in 1974, but was disestablished by Robert Muldoon
Robert Muldoon
Sir Robert David "Rob" Muldoon, GCMG, CH served as the 31st Prime Minister of New Zealand from 1975 to 1984, as leader of the governing National Party. Muldoon had been a prominent member of the National party and MP for the Tamaki electorate for some years prior to becoming leader of the party...
almost as soon as the National Party
New Zealand National Party
The New Zealand National Party is the largest party in the New Zealand House of Representatives and in November 2008 formed a minority government with support from three minor parties.-Policies:...
won the 1975 election
New Zealand general election, 1975
The 1975 New Zealand general election was held to elect MPs to the 38th session of the New Zealand Parliament. It was the first election in New Zealand where 18-20 year olds and all permanent residents of New Zealand were eligible to vote, although only citizens were able to be...
.
Douglas maintained his interest in economic issues in opposition. He framed his chief concern as the deep-seated problems in the structure of the economy that had contributed to deteriorating economic performance and a standard of living that was slipping in comparison to that of other developed countries. In 1980, he described New Zealand as a country living on borrowed money, unable in spite of the record efforts of its exporters to pay its own way in the world.
The economic policy of successive governments had left the domestic economy sheltered and unresponsive to consumers. Inflation, which was more than ten per cent a year throughout the seventies, was high by the standards of the country’s major trading partners. There was a persistent fiscal deficit. The public sector was inefficient. A large part of the economy was controlled by regulation, some arbitrary or inconsistent. The political consensus of the post-war years produced stability at the cost of innovation. Both major political parties maintained the high levels of protection introduced by the First Labour Government
First Labour Government of New Zealand
The First Labour Government of New Zealand was the government of New Zealand from 1935 to 1949. It set the tone of New Zealand's economic and welfare policies until the 1980s, establishing a welfare state, a system of Keynesian economic management, and high levels of state intervention...
from 1936 onwards, and since 1945 both parties had aimed at maintaining a structural shortage of labour. Beneficiaries of the regulated economy flourished in both public and private sectors.
Douglas argued that only radical action would improve the economic outlook. In 1980, he released an "Alternative Budget" that attacked what Douglas called the Muldoon government’s “tinkering” with the economy. He wrote that twenty years of pandering to entrenched interests had dampened productive investment. The Labour leadership saw his proposals and their unauthorised publication as unfavourable comment on Labour policy. The Labour leader Bill Rowling
Bill Rowling
Sir Wallace Edward Rowling, KCMG , often known as Bill Rowling, was the 30th Prime Minister of New Zealand. He was in office for just over a year, having been appointed Prime Minister following the death of the highly popular Norman Kirk...
publicly rebuked Douglas. Douglas then published his thinking in the form of a book. Alongside far-reaching proposals for reform of taxation and government spending, it advocated a twenty per cent devaluation of the dollar to increase the competitiveness of exports. Although radical, it took an eclectic approach and did not hint at the abandonment of Labour’s Keynesian policy framework.
Douglas became increasingly frustrated by what he saw as the Labour Party’s reluctance to deal with fundamental issues of economic policy. He claimed in 1981 that Labour had an image as a party that would promise the public anything to be elected. He argued that the party should agree on its economic policy before it agreed on anything else, and allow economic reality to play a part in its decision-making. Unable to convince Rowling of the merit of his case, a disillusioned Douglas decided to stand down from parliament at the 1981 election
New Zealand general election, 1981
The 1981 New Zealand general election was a nationwide vote to determine the shape of the 40th New Zealand Parliament. It saw the governing National Party, led by Robert Muldoon, win a third term in office, although the opposition Labour Party, led by Bill Rowling, actually won the largest share of...
. One of those who persuaded him to stay was Labour’s deputy leader David Lange
David Lange
David Russell Lange, ONZ, CH , served as the 32nd Prime Minister of New Zealand from 1984 to 1989. He headed New Zealand's fourth Labour Government, one of the most reforming administrations in his country's history, but one which did not always conform to traditional expectations of a...
who offered to make Douglas Minister of Finance
Minister of Finance (New Zealand)
The Minister of Finance is a senior figure within the government of New Zealand. The position is often considered to be the most important Cabinet role after that of the Prime Minister....
if Lange was prime minister after the 1984 election.
After Labour’s narrow loss in the 1981 election, Douglas found a growing audience in the parliamentary party for his view that Labour’s established approach to economic policy was deficient. His colleague Mike Moore claimed that there was a public perception that Labour policy sought “to reward the lazy and defend bludgers”. Douglas’s case for a radical approach was strengthened by the belief among many of his parliamentary colleagues that the economy’s deep-seated problems could only be solved by extensive restructuring. It was understood that some restructuring must follow the Closer Economic Relations
Closer Economic Relations
Closer Economic Relations is a free trade agreement between the governments of New Zealand and Australia. It is also known as the Australia New Zealand Closer Economic Relations Trade Agreement and sometimes shortened to...
agreement with Australia, which took effect in 1981 and reduced barriers to trade between Australia and New Zealand. At the same time, many economists were arguing for the greater use of competition as a tool of policy, and expressing concern about excessive or inappropriate regulation of the economy. In 1983, Lange succeeded Rowling as Labour leader. He gave Douglas responsibility for economic policy and made it clear that economic policy would determine other policy.
Although Douglas was innovative in his approach, and his open disregard for Rowling had earned him a reputation as a maverick, he remained within the mainstream of economic thinking in the parliamentary Labour Party. He argued in 1982 that the government should actively support small business, and intervene to stop the aggregation of assets by big business. In his view, the government should use the tax system to encourage productive investment and discourage speculative investment. Until the end of 1983, Douglas saw exchange rate, tax and protection policies as means of actively shaping the business environment. In August 1982 he supported a contributory superannuation scheme as a means of funding industrial development and in February 1983 he wrote a paper called “Picking Winners for Investment” which proposed the establishment of local consultative groups to guide regional development. In a paper dated May 1983 Douglas argued that an unregulated market led to unhealthy concentrations of market power.
At the end of 1983 there was a marked change in Douglas’s thinking. He released a paper called the “Economic Policy Package” which called for a market-led restructuring of the economy. The key proposal was a 20 per cent devaluation of the dollar, to be followed by the removal of subsidies to industry, border protection and export incentives. The paper doubted the value of “picking winners” and saw only a limited place for government funding of economic development. His colleague Stan Rodger
Stan Rodger
Stanley Joseph Rodger was a New Zealand politician of the Labour Party.He represented the electorate of Dunedin North in Parliament from 1978 to 1990, when he retired and was replaced by Pete Hodgson. He was the Minister of Labour and formerly employed by the Public Service Association...
described the paper as a “quite unacceptable leap to the right”. It immediately polarised opinion in the Labour Party.
Douglas characterised the policy package as restrained and responsible, and an appropriate response to the country’s economic difficulties. He acknowledged the contribution to the package of Doug Andrew, a Treasury officer on secondment to the parliamentary opposition, among others. W H Oliver noted the close alignment of the package and Management, Treasury’s 1984 briefing to the incoming government. His assessment was that Douglas was predisposed towards the Treasury view because greater reliance on the market would require decisive action and solved what Douglas saw as the problem of interest-group participation in policy-making.
Division in Labour over economic policy crystallised when a competing proposal was submitted to the Labour Party's Policy Council. Its proponents included Rowling and others who had resisted his replacement as leader. It argued for a Keynesian use of monetary and fiscal policy. It was sceptical about the ability of the private sector to promote economic development. Economic restructuring was to be led by the government, which would act within a consultative framework. In this way, the social costs of restructuring would be avoided.
There was stalemate in the Policy Council. As the 1984 election
New Zealand general election, 1984
The 1984 New Zealand general election was a nationwide vote to determine the shape of the 41st New Zealand Parliament. It marked the beginning of the Fourth Labour Government, with David Lange's Labour Party defeating long-serving Prime Minister Robert Muldoon of the National Party. It was also the...
drew closer, Labour’s deputy leader Geoffrey Palmer drafted a compromise that contained elements of both proposals. The Palmer paper was broadly worded. It made no mention of devaluation. It anticipated some form of understanding between government and unions about wage restraint. It allowed for extensive consultation about economic policy and stated that necessary structural change would be gradual and agreed. When Muldoon unexpectedly called an early general election, the Labour Party adopted Palmer’s paper as its economic policy. Lange said that Labour went into the election with an unfinished argument doing duty as its economic policy.
Reforms
After the snap election of 1984New Zealand general election, 1984
The 1984 New Zealand general election was a nationwide vote to determine the shape of the 41st New Zealand Parliament. It marked the beginning of the Fourth Labour Government, with David Lange's Labour Party defeating long-serving Prime Minister Robert Muldoon of the National Party. It was also the...
, Douglas hastily began to reform the New Zealand economy, under the government’s slogan of "We will do the right thing". The speed of the reforms can partially be attributed to the ‘currency crisis’ that resulted from Robert Muldoon
Robert Muldoon
Sir Robert David "Rob" Muldoon, GCMG, CH served as the 31st Prime Minister of New Zealand from 1975 to 1984, as leader of the governing National Party. Muldoon had been a prominent member of the National party and MP for the Tamaki electorate for some years prior to becoming leader of the party...
’s refusal to devalue the dollar after being advised to do so by the incoming government. Labour had planned to devalue the dollar but had not announced devaluation as part of its election policy – Douglas later stated that doing so "...would wreak havoc in the foreign exchange market and invite a run on the New Zealand dollar". The business community became aware of the government's plan and speculated against the dollar, converting New Zealand funds and credits to foreign currency, and then back to a larger quantity of New Zealand dollars.
The reformers argued that the speed with which the reforms were made was due to the fact that New Zealand had not adjusted to Britain’s abandonment of the empire, and had to move quickly to ‘catch up’ with the rest of the world. Douglas claimed in his 1993 book Unfinished Business that speed was a key strategy for achieving radical economic change: "Define your objectives clearly, and move towards them in quantum leaps, otherwise the interest groups will have time to mobilise and drag you down". Political commentator Bruce Jesson
Bruce Jesson
Bruce Edward Jesson was a left wing journalist, author and political figure in New Zealand.-Early life:Bruce Edward Jesson was the son of Victor John and Edna Cavell Jesson and the great-grandson of an immigrant from Leicestershire,UKHe was educated at Christchurch Boys' High School Bruce Edward...
argued that Douglas acted fast to achieve a complete economic revolution within one parliamentary term, in case he did not get a second chance. The reforms can be summarised as the dismantling of the Australasian model of state development that had existed for the previous 90 years, and its replacement by the Anglo-American neo-classical orthodoxy based on the monetarist policies of Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
and the Chicago School
Chicago school (economics)
The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of The University of Chicago, some of whom have constructed and popularized its principles...
. The financial market was deregulated and controls on foreign exchange removed. Subsidies to many industries, notably agriculture, were removed or significantly reduced, as was tariff protection. The marginal tax rate was halved over a number of years from 66% to 33%; this was paid for by the introduction of a tax on goods and services (GST
Goods and Services Tax (New Zealand)
Goods and Services Tax is a value added tax introduced in New Zealand on 1 October 1986 at 10%. It later increased to 12.5% on 1 July 1989 and was further increased to 15% on 1 October 2010....
) initially at 10%, later 12.5%, and a surtax
Surtax
A surtax may be a tax levied upon a tax, or a tax levied upon income.-United Kingdom:In 1929, Supertax was renamed Sur-tax...
on superannuation, which had been made universal from age 60 by the previous government.
Immediate results
New Zealand became part of a global economy. With no restrictions on overseas money coming into the country the focus in the economy shifted from the productive sector to finance. Finance capital outstripped industrial capital and redundancies occurred in manufacturing industry; approximately 76,000 manufacturing jobs were lost between 1987 and 1992. During wage bargaining in 1986 and 1987, employers started to bargain harder. Lock-outLockout (industry)
A lockout is a work stoppage in which an employer prevents employees from working. This is different from a strike, in which employees refuse to work.- Causes :...
s were not uncommon; the most spectacular occurred at a pulp and paper mill owned by Fletcher Challenge
Fletcher Challenge
Fletcher Challenge is a now defunct multinational corporation from New Zealand, formed in 1981 by the merger of Fletcher Holdings, Challenge Corporation and Tasman Pulp and Paper...
and led to changes to work practices and a no-strike commitment from the union. Later settlements drew further concessions from unions, including below-inflation wage increases, a cut in real wages. There was a structural change in the economy from industry to services, which, along with the arrival of trans-Tasman retail chains and an increasingly cosmopolitan hospitality industry, led to a new ‘café culture’ enjoyed by more affluent New Zealanders. Some argue that for the rest of the population, Rogernomics failed to deliver the higher standard of living promised by its advocates.
Between 1985 and 1992, New Zealand's economy grew by 4.7% during the same period in which the average OECD
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
nation grew by 28.2%. From 1984–1993 inflation average 9% per year, New Zealand's credit rating dropped twice, and foreign debt quadrupled. Between 1986 and 1993, the unemployment rate rose from 3.6% to 11%.
Legacy
After Rogernomics, the New Zealand Labour PartyNew Zealand Labour Party
The New Zealand Labour Party is a New Zealand political party. It describes itself as centre-left and socially progressive and has been one of the two primary parties of New Zealand politics since 1935....
was paralysed by infighting for most of the next six years, as former Trade Minister Mike Moore became Leader of the Opposition (1990–1993), followed by Helen Clark
Helen Clark
Helen Elizabeth Clark, ONZ is a New Zealand political figure who was the 37th Prime Minister of New Zealand for three consecutive terms from 1999 to 2008...
, whose first term as Leader of the Opposition was undermined by Moore's populist personal faction. However, Clark survived and steadily gained ground during the third and final term of the Jim Bolger
Jim Bolger
James Brendan "Jim" Bolger, ONZ was the 35th Prime Minister of New Zealand from 1990 to 1997. Bolger was elected on the promise of delivering a "Decent Society" following the previous Labour government's economic reforms, known as Rogernomics...
and Jenny Shipley
Jenny Shipley
Dame Jenny Shipley, DNZM , served as the 36th Prime Minister of New Zealand from December 1997 to December 1999, the first woman to hold this office and the first, and to date only, woman to serve as parliamentary leader of the National Party of New Zealand.-Early life:Shipley was born as Jennifer...
administrations. Much like Tony Blair
Tony Blair
Anthony Charles Lynton Blair is a former British Labour Party politician who served as the Prime Minister of the United Kingdom from 2 May 1997 to 27 June 2007. He was the Member of Parliament for Sedgefield from 1983 to 2007 and Leader of the Labour Party from 1994 to 2007...
in the United Kingdom, Clark decided on a compromise solution, combining advocacy of the open economy
Open economy
An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border...
and free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
with greater emphasis on fighting the New Right
New Right
New Right is used in several countries as a descriptive term for various policies or groups that are right-wing. It has also been used to describe the emergence of Eastern European parties after the collapse of communism.-Australia:...
consequences of social exclusion
Social exclusion
Social exclusion is a concept used in many parts of the world to characterise contemporary forms of social disadvantage. Dr. Lynn Todman, director of the Institute on Social Exclusion at the Adler School of Professional Psychology, suggests that social exclusion refers to processes in which...
.
The policies of Ruth Richardson
Ruth Richardson
Ruth Richardson served as New Zealand's Minister of Finance from 1990 to 1993, and is known for her strong pursuit of free-market economic reforms .-Early life:...
, sometimes called "Ruthanasia
Ruthanasia
Ruthanasia, a portmanteau of "Ruth" and "euthanasia", is the pejorative name given to the period of free-market economic reform conducted during the first term of the fourth National government in New Zealand, from 1990 to 1993...
", are often seen as a continuation of Rogernomics. Richardson was Finance Minister in the National Party
New Zealand National Party
The New Zealand National Party is the largest party in the New Zealand House of Representatives and in November 2008 formed a minority government with support from three minor parties.-Policies:...
government from 1990 to 1993.
In New Zealand advocates of radical economic policies are often branded as "rogergnomes" by their opponents, linking their views to Douglas's and the supposed baleful influence of international bankers, characterised as the Gnomes of Zürich
Gnomes of Zürich
Gnomes of Zürich is a disparaging term for Swiss bankers.Swiss bankers are popularly associated with extremely secretive policies, while gnomes in fairy tales live underground, in secret, counting their riches...
.