New Zealand Politics 1984-1993

On July 6 1984, the fourth Labour government were elected into parliament after defeating the National party in a snap election. 1984 can be regarded as a major turning point in New Zealand political history in the sense that significant political changes affected the whole of the New Zealand society, economy and political structure. New Zealand government's experimented with radical Neoliberal policy programmes to achieve economic and social progress during this period. The essay shall discuss the central features of the process of policy change over the period of 1984 to 1993 in New Zealand. These reforms were among the most sweeping in scope and scale within any industrialised democracy. There are a significant number of historical and institutional similarities between Australia and New Zealand which make them a fertile ground for comparative analysis. This essay shall compare industrial relations reform in Australia and New Zealand during the 1980s and 1990s, integrating both institutionalist and interest-based approaches.

Within comparative politics there are two main approaches to the impact of economic change on national policy patterns. The first, new institutionalism has been very influential in comparative industrial relations. The second, which focuses on the role of interests, has also been significant in New Zealand and Australian politics.

The concept of institutionalism is central to the analysis of the reform episode that took place in New Zealand. Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction (North,1990:3). Zucker defines Institutionalism as a fundamentally cognitive process (1983:25). In comparison, Immergut argues that the theoretical core of the new institutionalism is the view that there is a tendency for certain arrangements in social life to persist over institutions and for these institutional arrangements to affect not just strategic actions but also the preference formation of social actors (1998:7). Immergut stresses the fundamentals of the concept of institutionalism can be problematic as there are many conflicting definitions and analysis. "Since the common research interest is in the black box between potential political demands and ultimate outcomes, it does not make sense to predefine the contents of this box. A standard definition of "institution" is not desirable; the common research agenda is the study of institutional effects wherever, or however, they occur" (1998:25). Thus, the author suggests that "the representation of interests is shaped by collective actors and institutions that bear the shape of their own history" (Immergut 1998: 17).

It is important to analyse the role of institutional arrangements in the development of national economies in New Zealand and Australia, and assesses their reaction to the pressures brought by the processes of social and economic reforms. It presents the main theoretical traditions in comparative political study, thus, one can apply these theoretical perspectives to the study of Australasian economies. In the early 1980s, both countries elected labour governments after long periods of conservative rule (Castles, 1996:96). In response to international economic demands, these governments introduced market-orientated reforms. Four major institutional characteristics of these two democracies shall be scrutinised further, including the various structures of the political system, the welfare state and the relationship between organised interests and the state (Castles, 1996:97). This essay is particularly concerned with the extent, direction and causes of changes in these four institutional arrangements in the period 1984-1993, in a comparative study of New Zealand and Australia. North identifies that institutional change took place in many cases, but it has been path-dependent and incremental (1990: 89). The level to which institutions played a fundamental role in the reform period shall be examined further,

The first wave of reforms examined here are those that took place under the Labour government in New Zealand between 1984 and 1990. When Labour won the snap election, economic and social progress became paramount to directional policy (McClure, 1998:210). The 1984 Government undertook a rapid liberalisation of the New Zealand economy, with the removal of the price and freeze wage, deregulation of the labour market, devaluation and floating of the New Zealand dollar, and the removal of all foreign exchange controls.

Labour had made significant changes to the role played by the state in the society and economy. Boston comments that Labour reforms were motivated by a concern to establish structures and procedures which would contribute to, rather than impede, organisational efficiency and effectiveness (1991:?????). On Decemeber 1988, Rodger Douglas, Minister of Finance for the Labour party announced an economic and social package which provided repayment of government debt. This was to be done by the privatisation of state assets. Labour intended to corporatise many government departments into privately owned enterprises, which were to be commercially profitable and have separate funding for any social objectives (Boston, 1995). Under the new program, orchestrated by Douglas, the government devalued and then floated the New Zealand dollar. The government stripped away regulations first from the finance sector and then from many other areas (James, 1992:2). It reduced the top income tax rate from 66 per cent to 33 per cent, and imposed an indirect goods and services tax (Easton, 1994:80-81). The role of the government in the functioning of individual markets is of particular interest during this period. "The most conspicuous examples include the rapid abandoning of a myriad of controls in financial markets... complete abolition of price controls by tariffs, and the subsequent substantial reduction of tariff levels" (Bollard and Buckle, 1987, cited in Easton, 1994:81).

The New Zealand Treasury were instrumental in many of Labour's reforms, and indeed, in the second wave of reforms under the National government. To forestall a move in the locus of authority, the New Zealand Treasury restructured itself in the 1980s so that it would be in alignment with a reformist advocacy coalition committed to imposing and institutionalising a government failure paradigm. After the 1984 election, the new Labour government accepted Treasury advice that substantial reform was essential to rectify the Nations troubled economy. "Government's policy needs to move towards a comparative systems approach... [assessing] alternative institutional structures... according to the processes and outcomes they involve, utilising generally accepted criteria