Issue 208 of SOCIALIST REVIEW Published May 1997 Copyright Socialist Review

Feature article: New Labour, New Zealand

Andrew Geddis and Grant Morgan

The experience of New Zealand under its fourth Labour government should interest everyone wanting a preview of what Britain may be like under Tony Blair's New Labour.

Labour romped into office with a massive majority in 1984 on the back of widespread hatred of a conservative National Party (the equivalent of the British Tories) government. It was dumped six years later in the biggest reversal of political fortunes in NZ history.

During those six years Labour unleashed a blitzkrieg on its working class supporters, who were sent reeling by attack after attack from the party they'd traditionally backed. Labour's policies became known as 'Rogernomics', named after Roger Douglas, finance minister until 1988. These policies involved the privatisation of state assets, restrictions on the right to strike, tax cuts for the rich, massive unemployment, the slashing of wages and the downsizing of the welfare state.

This was all depressingly similar to Thatcherism in Britain and Reaganomics in America. But there was one important difference. While it was the open political representatives of the employers who unleashed the New Right offensive in Britain and America, it was a Labour government that did so in New Zealand.

Rogernomics was a response to the crisis that began in the New Zealand and global economy in the mid-1970s. During the postwar 'long boom', NZ's gross domestic product averaged 4.67 percent growth a year. From 1974 to 1987, however, growth slumped to just 0.59 percent a year. Inflation and unemployment soared while NZ's terms of trade fell. Most critical for the ruling class was the slump in the levels of profitability of NZ businesses.

Because Labour was committed to managing capitalism, it accepted the need to rescue the falling profits of NZ business and made itself available to carry out the demands of New Zealand's ruling class.

The Rogernomics programme was based on the economic blueprint of the 'Top Tier Group' (comprising the Employers' Federation, Chambers of Commerce, Manufacturers' Federation, Fed- erated Farmers and Retailers Federation). It was drawn up in secret by Labour's ruling cabal before the 1984 poll, and was kept well hidden during the election campaign. Labour sold off $2.5 billion of state assets at bargain prices. It gave the rich their biggest single handout in New Zealand's history by slashing top tax rates from 66 percent to just 33 percent. Company taxes were similarily cut, while workers' incomes were squeezed by a new Goods and Services Tax. The right to strike was limited, and employers' attacks saw real wages decline by as much as 10 percent. Meanwhile unemployment doubled from 8.5 percent to 16.2 percent. Welfare benefits were slashed, and the dole for those under 18 was abolished.

The methods used by Roger Douglas and his colleagues in the Labour cabinet also hold lessons for those now living under a Labour government in Britain. The cabinet deliberately set out to overwhelm all opposition by the sheer pace, scale and ruthlessness of change. In his book Unfinished Business, Roger Douglas draws these lessons from his time in cabinet:

'Do not try to advance a step at a time. Define your objectives clearly and move towards them in quantum leaps. Otherwise the interest groups will have time to mobilise and drag you down... Speed is essential. It is almost impossible to go too fast... Once you build the momentum, don't let it stop rolling... The fire of opponents is much less accurate if they have to shoot at a rapidly moving target... If [public] confidence starts to waver, push the reform programme forward the next big step, and do it quickly.'

The attacks carried through by Labour created a huge amount of bitterness and anger. But this anger was unfocused and lacked any sort of leadership. While big protests erupted against many of Labour's policies, there was no organisation on the left commanding mass support able to lead a fightback to defeat them. Labour, which workers had considered their own party, had crudely and cruelly betrayed them. Yet the leadership of the unions refused to organise a united fightback against Labour's attacks. The Council of Trade Unions (CTU) instead preached a 'new realism', arguing that workers must accept sacrifices in the interests of the nation.

In 1988 CTU leaders began advocating a 'compact' with the Labour government and big business so that union leaders would be consulted in policy formulation. The result of this weakness on the left was that workers' anger at Labour's betrayals did not automatically result in a shift to the left. While Labour was hammered in the 1990 election, the result was a National (Tory) government prepared to carry on where Labour had left off.

However, the working class voters who took their revenge on Rogernomics didn't all turn to National. The slump in Labour support was about two and a half times more than the additional votes given to National. Many workers simply stayed at home. Only 75 percent of the electorate voted in 1990, down from 94 percent in 1984.

Just days after winning the election, National introduced the Employment Contracts Bill, drafted by the Employers' Federation, into parliament. This outlawed all strikes except after the expiry of a contract, imposed harsh penalties for illegal strikes, restricted the job access of union officials and wiped out the legal status of unions.

In the biggest protest wave in New Zealand's history, 300,000 workers (one in five of the total workforce) took to the streets. Many went on strike, sometimes against the wishes of their officials. But the CTU leaders managed to head off calls for a general strike. National was able to pass the bill. That led to a massive slump in workers' confidence as well as in union membership, which has fallen by 40 percent since 1991. The defeat of this struggle also led to massive attacks on the welfare state. Benefit payments have been slashed by 10 percent and more, and health spending cut dramatically.

One economist estimates $1.2 billion of wealth has been transferred from workers to bosses over the last six years. Despite a recovery in profits since 1992, there has been no 'trickledown'. It has been a flood up.

These policies were introduced mainly because Labour paved the way for them in 1984-90. But the actions of Labour in power gave birth to a reformist rival. Unlike Blair's 'New Labour', New Zealand's New Labour Party was a left wing split from Labour. After Labour's membership had plummeted from 100,000 in 1984 to just 7,000 five years later, Labour MP Jim Anderton left the government caucus and set up New Labour as a home for disillusioned Labour supporters. Its founding conference pledged to put as much emphasis on grassroots activism as on parliamentary electioneering.

But New Labour was soon consumed by parliamentary campaigning, which meant it wasn't seen as fundamentally different from Labour. Although Anderton was returned as New Labour's solitary MP in 1990, his party was regarded by most workers as too small to be worth voting for. In 1991 New Labour joined with four fringe parties, including the Green Party, to form the Alliance. It promised major reforms to revitalise the welfare state and help low paid people. In the 1993 election the Alliance took 18 percent of the vote, and many predicted that it would soon eclipse Labour.

Yet the more success at the polls enjoyed by the Alliance, the more it became a purely electoral machine. Grassroots activism was discouraged, and the pledge to organise mass struggles was forgotten. Promises of reform, such as buying back the newly privatised Telecom, were quietly abandoned.

The concentration on winning seats in parliament rather than supporting the day to day struggles of workers, students and Maoris meant that its support fell away. Its vote collapsed to 10 percent in the last election, in October 1996.

A lot of Alliance support flowed to a populist conservative party, NZ First, which combined a campaign against immigration and 'foreign control' with promises to put more money into health and education.

During the election campaign, NZ First blasted National and posed as a natural partner of Labour. The new leadership of the Labour Party insisted that social justice depends on market economics, yet it is the market which denies justice to the vast majority. In 1996, 51 percent of the vote went to the three parties which campaigned on an anti-National platform Labour (28 percent), NZ First (13 percent) and Alliance (10 percent) which was about the same overall percentage as in 1993. After the election, however, NZ First entered a coalition government with National, betraying its supporters. NZ First's spending promises were watered down in coalition talks with National, and the new government is pressing ahead with National's previous 'more market' programme.

New Zealand's experience of Rogernomics and its aftermath carries important lessons for British workers facing the prospect of a Labour government pulled to the right under Tony Blair. When in government, Labour will launch vicious assaults against its own supporters to rescue capitalism and protect bosses' profits. Union leaders don't provide a fighting alternative, instead confining their opposition to top level lobbying. Unless there is a socialist organisation able to lead opposition to Labour's attacks, the result may not be a swing to the left, but instead a rejuvenated Tory Party using Labour's betrayal as a springboard to launch even worse attacks on the working class.


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