Mention New Zealand, and most Americans conjure up an image of aboriginal natives, exotic wildlife, spectacular scenery, wool and wheat exports, and world-class sports figures, including great Olympic runners and unmatched international yachtsmen. Less well known on this side of the Pacific is New Zealand's long history of radical political experimentation and its status, until relatively recently, as a model social-democratic state.
The initial political impact on the world stage of this small island nation (population: 3.7 million) came in the 1890s, a half-century after its founding by English, Irish, and Scottish colonists. The catalyst was Richard J. ("King Dick") Sedden, a charismatic, if mildly despotic, politico who dominated the New Zealand scene around the turn of the 20th century. Sedden's quasi-socialistic rule brought such then-novel innovations as land nationalization and redistribution, women's suffrage, the regulation of working hours, wages, and factory conditions, compulsory labor arbitration and the creation of a government-owned bank.
Sedden's pioneering Liberal party, which held power until 1912, was a precursor of welfare-statist and social-democratic regimes to come worldwide. It drew pilgrimages by a host of well-known radical activists, such as British Fabian socialists Sidney and Beatrice Webb and American populist Henry Demarest Lloyd, all of them seeking a role model for international reform. Lloyd, a progressive icon in the US, even wrote an admiring book celebrating New Zealand's advanced approach to labor relations.
The groundwork laid by Sedden and his cohorts led to a second, more extensive era of cutting-edge legislation in the late 1930s and 1940s under the succeeding Labor party; it was based on a philosophical mixture of Keynesianism and democratic socialism, and firmly established the New Zealand welfare state. This wave of social reform encompassed a progressive tax system, low-rent public housing, minimum-wage and maximum-hour legislation, old-age pensions, family allowances, and a free national health service -- later expanded into full-fledged socialized medicine. By the end of the immediate postwar period, writes native historian Keith Sinclair, New Zealand had effectively abolished poverty and the fear of illness.
The mid-century spasm of Labor activism did more. On the economic front, New Zealand's social democrats created a non-Marxist approach that favored socializing the means of distribution and exchange, though not production, and moved steadily in the direction of state planning and economic nationalism. Starting with the creation of a regulatory Bureau of Industry in 1936, the Laborites constructed a system geared to mitigating the unfavorable effects of international trade and safeguarding domestic industry and agriculture from full exposure to world markets.
Selective nationalization (of banking, broadcasting and transportation, for instance) was combined with state marketing, import controls, subsidies, producer boards, tax incentives, and tight financial and currency regulations to (as Sinclair puts it) "insulate" New Zealand's economy from international capitalism and thereby protect the country's gains in human welfare. Farmers and manufacturers sold their products, at guaranteed prices, to the government, which then shipped them abroad -- mostly to Commonwealth partner Great Britain under a negotiated-price regime of trade preferences, quotas, and bulk-purchase agreements. This web of state-directed arrangements was considered crucial to an island nation that had the highest per-capita external trade in the world and exported fully half of all its products.
For roughly a half-century, New Zealand's planned mixed trading economy, strange to American eyes, worked admirably, eventually producing one of the highest global living standards. But despite energetic government stabilization policies, the economic dislocations that plagued the Western world in the 1970s and early 1980s -- stagflation, oil shocks, currency crises -- also reached New Zealand, undermining the model welfare state and leading to a painful reevaluation. As in other afflicted countries (Argentina and Mexico come to mind), a new generation of political leadership opted for the Washington-inspired IMF/WTO formula of domestic conservatism and all-out globalization.
Beginning in 1984 and continuing up to what proved to be a transforming election in November 1999, New Zealand endured a long, dark night of the right and, with it, the complete reformulation of the country's approach to the world. Rejecting the past, it gambled on the ephemeral promise of laissez faire and free trade, scaling back much of its welfare state, privatizing the bulk of its state sector, dismantling its framework of economic planning and regulation, and opening its markets wide to foreign interests.
For a time, New Zealand was an enthusiastic participant in the new globalized world order. But a strange thing happened on the highway to free-trade nirvana; bumps, then potholes, gradually appeared. The first was the Asian financial crisis of 1997-98, which severely impacted New Zealand's favorite new trading partner and investor, Japan, and brought on recession. Soon after came confirmation of what New Zealanders already sensed: the new global order was adversely affecting their lives. The national standard of living, third in the world a decade earlier, had fallen to 25th by 1999, while the nation's trade deficit had ballooned to its highest level in 15 years. Privatization and other factors, meanwhile, had led to fewer full-time jobs, lower wages, and deteriorating working conditions. Most damning of all, studies showed that although the top 10% of households in income were better off after 15 years of neoliberalism, the next 20% were barely holding their own, and the bottom 70% were demonstrably worse off.
By the 1999 parliamentary election, New Zealand voters had had enough. A Labor-led left-of-center coalition assumed power with a clear majority of seats, installing Helen Clark, a former academic, in the prime minister's chair. Clark's chastened Labor party, initially complicit in globalization, set out to change direction. It froze further tariff reductions, halting the free-trade juggernaut in its tracks, and created two Crown corporations charged with using interventionist government once more to plan and coordinate economic development and trade. Labor increased public investment in health and mass transit, raised the minimum wage along with taxes on upper incomes, and reversed electrical, telecom and securities-market deregulation.
In short, New Zealand ended its flirtation with corporate globalization and reverted to its historic policy of economic nationalism. The result: over 100,000 new jobs, an unemployment rate that reached a 13-year low in 2002, and the Labor coalition returned to office that year by a comfortable margin. There's a lesson here for those willing to look: the surrender to global market forces by individual governments is not inevitable. If a nation of 3 million can fight back successfully, perhaps one of 300 million can as well.
Wayne O'Leary is a writer in Orono, Maine.