Roger Douglas, former Labour Finance Minister and co-founder of the Act Party, is plainly unimpressed with modern politics.
“Look at the last 20 years, you tell me anyone, any Government that’s done anything,” he says.
Douglas, now 86, probably has more right than most to make that claim, having been the key driver of an economic revolution in his four years as Finance Minister, from 1984 to 1988.
To many Kiwis it was a revolution that saved the country from bankruptcy, pulling it out of a spiral of debt and depression.
But others see the reforms - “Rogernomics”, they were dubbed - as a right-wing coup which sought to dismantle the welfare state.
Actually, Douglas wouldn’t argue with the second part of that statement.
He still advocates what some would describe as radical reform of the welfare system.
But Douglas says that back in the 80s, there was never a grand plan that he and his Labour colleagues were following.
“I think it was more organic,” he tells the Money Talks podcast. “We were faced with a problem, we needed to fix it. Had I been tribal in the sense of Labour right or wrong, I don’t think we would have necessarily done it.”
So where did the term Rogernomics come from? He laughs: “From one of you guys! The media.
“Cabinet was a real mixture of people who decided that they were gonna do the right thing, and if they lost, so be it, but they were gonna do what they thought was right. I don’t think we have that anymore.
“John Key lived by the polls and it’s very dangerous. If you want to help people, you have to tell them the truth,” he says.
“The problem is that the politicians of today, they want to help themselves. So they poll in order to know what to say and it’s disgusting.”
Unsurprisingly, Douglas doesn’t have much love for the Greens, who he describes as a mix of those with a “communist agenda” and those pushing “policies based on fear”.
As for Labour, he sees the party as having reverted to 1960s-style centrism and doesn’t regard National as much different these days.
Even Act - the Association of Consumers and Taxpayers, which he co-founded in 1993 - has strayed too far from the pure path of economic reform, he says.
“They moved away from the savings element back around 2000. But just more recently they’ve moved away from some of the other basic points relating to choice,” he says.
He accepts that the party has filled a conservative spot in the political landscape.
“Absolutely, and they’re doing it in a brilliant way, but it ain’t gonna solve some of these problems!”
Douglas still argues that the country would be much better served if it had a low flat tax to cover the basics and a savings regime which gave people back their own money to allocate to services such as health and retirement.
“I’ve always had the view that choice and competition is the direction in which the welfare state has to go,” he says.
He cites a recent Treasury report warning that New Zealand could be on track for a deficit blowout in 40 years if we don’t take some sort of serious action.
“The present path isn’t possible,” Douglas says. “I think we’ve got to move forward.”
The answer, in many ways, is the same as it was in the 1980s, he argues.
But it was that belief that New Zealand’s welfare system wasn’t sustainable that eventually brought conflict within the Fourth Labour Government to a head.
Douglas’ attempts to introduce a flat tax rate and reform the welfare system caused a rift with Prime Minister David Lange, who resigned in 1989 to head off the policies.
“That was the big debate, it was about welfare, it was whether we continue with Government running all the welfare institutions, if you had the Government deciding whether you got an operation, the Government deciding where your kids go to school ... or whether we change that.
“David [Lange] was adamant that he was not going to move and he said to me one day: ‘even if it’s more efficient, I’m not going to do it’.”
Liam Dann is the Herald's Business Editor. To read the full article, please click HERE.
3 comments:
Dear Mr Dann.
Please correct me if you think the following is wrong - you forgot to add to your article on Roger Douglas, that he was the proponent of the - Closer Economic Relations (CER) Bill -being his "attempt" to improve business & trade relations with Australia.
And YES it did. But.
The 'improvement' was the arrival, in NZ of "Big Business Australia with open cheque books". Our Banks, suddenly became Australian owned & operated - BNZ being an example. The Taranaki Saving Bank (TSB), being one of the many "smaller banking operations that had established in NZ, much to chagrin of the then Major NZ Banks, at the time, "said NO" to a buy up, the others quickly folded - a point the TSB used in later advertising. And is still the only NZ owned/operated Bank within NZ.
Since then, the number of NZ business that have been brought up by Australian Business operations is something to be hold. The interesting factor, what NZ Business people moved West to buy into Australia?
Oh, that is right we send people to work there!
I find it interesting, your comment (quoting Douglas) - "Douglas still argues that the Country .. " if he thinks that now, then why as Minister of Finance in the Lange Govt did he not introduce legislation to establish same.
I think the less we "ask Roger Douglas for an opinion on current matter Political" we will be better off. He had the opportunity, along with Prebble et all of the duly elected Labour Party then, they failed, they lost an election - just like Chris Hipkins.
Well said Anon. Trust ex MP's at your peril, as they were part of the system (problem).I consider them to be 'controlled opposition' to that system (problem) for life.
We need a new political culture, a culture that re-appreciates the value of Truth Telling. We need a new political discourse, a political discourse that leaves the shallow, hollow rhetorics, and propaganda behind and speaks from the soul, from the heart; we need politicians to become true leaders again, leaders who lead rather than mislead the population.
Roger Douglas did save NZ from massive debt Muldoon had accumulated during his regime of State Owns everything - from Marsden Point Oil refinery to Road Services buses.
Near 50% of the workforce was government and the best way to keep your job in any government department is do nothing. That's called 'playing it safe,'
Private sector compels investors to take risks. Carefully evaluated, risks results in rewards. Notwithstanding the annon observation that NZ banks were taken over by Aussie banks under CER, the reality is, Australia was our salvation after France locked NZ out of UK when the Poms went int EEC.
Lower Tax is a winner.
Theory
Calculations demonstrate arithmetically higher taxation rates yield greater taxation revenue for IRD.
However empirical studies suggest that the economic effect of punitive taxation provides incentive for non-disclosure of taxable income by both individuals and companies (this is especially relevant to many Asian operated businesses) leading to substantial loss of potential revenue.
The importance of the Laffer curve (i.e., that there is a particular rate of tax that maximises government revenue,) is that it identifies the positive impact that lower taxation rates have on workers attitudes, productivity and company expansion: i.e., expansion of employment and also, disclosure and compliance of taxable income.
Empirical
Many companies respond to higher taxes by simply moving the head office offshore to a more friendly tax jurisdiction. Empirical data supports the view that corporations have been departing New Zealand for some time; either to Australia (where costs of labour may be higher but is offset by lower taxation) or to other jurisdictions such as Malaysia, Singapore, Chile and China.
The consequence of this is that it not only removes a source of direct revenue from IRD due to exiting the company but it also causes the loss of employment within New Zealand and thus a further erosion of the tax base.
Validation
The positive effects of the New Zealand experience in the 1980s of reducing the top rates of tax confirmed that New Zealand’s tax rates were above the maximum of the Laffer curve and that reducing tax rates did lead to significant gains in IRD revenue.
The tax revenue was higher than the government predicted. Roger was of the view that many people saw the new tax rates as being fair and dismantled their tax avoidance schemes. People started to make investment decisions based on the return rather than the tax benefit.
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