I took a writing trip to New Zealand last month to report on some of the eye-opening progress it has made economically. Here's a good statistic to start with: New Zealand once had 70 million sheep. Today it has only 48 million -- 13 per resident. That's because the nation has removed almost all agricultural supports yet become more prosperous than ever. New Zealand turned
its economy aroundBeef is taking up the slack for lamb. Farm products remain the No. 1 export.
New Zealand has moved from being one of the world's most protectionist states before 1984 to the third or fourth most open economy, rated just ahead of the U.S. Its growth has gone from sick to healthy. Delegations from almost everywhere come to study it, including a U.S. farm group last month.
Even critics agree New Zealand economically was like a train headed into a wall in 1984. Inefficiencies were rampant. The economy was stagnant. Debt was overwhelming it. Inflation topped 10 percent. Something had to be done.
A Big Bang was set off by, of all people, a Labor government that took over from a conservative one in the mid-1984 elections.
Changes were rammed through in short order that made competition paramount, ended protectionism, welcomed foreign investment, freed the New Zealand dollar from exchange controls, started a massive slimming down of government with a focus on privatization, and brought government more financial discipline and openness.
Personal and corporate income taxes were cut up to 50 percent but loopholes were pretty well wiped out.Wholesale taxes were abolished. A sweeping 12.5 percent retail goods and services tax (GST) took their place.
In the first years unemployment surged to nearly 11 percent. It has dropped to about 6 percent since 1991. Average incomes are up. National revenues are up. The government has begun running surpluses.
New Zealanders still have only 60 percent of the per capita income of Americans but are closing. Growth has slowed recently but is considered to be on a sound long-term track. Inflation is being held close to 2 percent.
New Zealanders have gained cheaper and vastly better telephone service and stores that stay open longer and have more goods. The post office now sells greeting cards. Businesses still state-owned must pay the government dividends instead of adding to debt. Steadily they are being sold off.
There is grumbling about more co-payments for health and education (still small) but the national social welfare structure remains largely in place.
The national election last October appeared to validate the changes.
THE Alliance Party that wants to go back to the old ways got only 10 percent of the vote. Assuming that some of the Labor voters may have felt the same way, a political science professor and national election commentator, Nigel Roberts of Victoria University, thinks the back-to-the-past sentiment may be only 15 percent.
The First New Zealand Party preceded the campaign with attacks on foreign investment that sounded like Pat Buchanan in the U.S. It muted these well before election day. It now is part of a coalition government pledged to maintain openness and competitiveness.
American investors have flooded into New Zealand including rail and telecommunications. But of 360 companies in the American Chamber of Commerce all but 18 have New Zealand CEOs. That may be a softening influence.
First of eight articles THURSDAY: The Negatives
New Zealand Series Archive
