Did neoliberalism fail to shrink the state?

PLUS: Upston’s positive steps on Taskforce Green

Summary:

• A new paper presents evidence that the government was not as radically shrunk in the 1980s and 1990s as is sometimes claimed

• The evidence may, however, fail to capture the fundamental way in which the state has changed in the last forty years

• Elsewhere, jobseekers will be offered work helping repair flood damage in the South Island

The ‘myth’ of the diminished state

It is a frequent complaint on the left, and almost a commonplace of political debate, that New Zealand’s abrupt and sweeping economic reforms in the 1980s and 1990s left government much smaller than it previously had been. Through privatisation, deregulation and tax cuts, the argument runs, the state’s reach and influence on our lives was greatly reduced, with negative consequences for both people and planet.

However, a new paper from three Victoria University researchers, ‘The Myth of the Shrinking State in New Zealand Revisited’, argues that this is not so. Derek Gill, Norman Gemmell and Arthur Grimes suggest that during this period of reform, sometimes known as neoliberalism or Rogernomics, “the shrinking of the state … is an urban myth”.

Spending and taxing

Looking first at government spending as a share of annual national income, the paper shows that although this spending appears to have fallen sharply in the 1990s under Ruth Richardson and Bill Birch, it only returned to its late-1970s level.

Unsurprisingly, the government’s tax revenue follows a roughly similar pattern. The relatively high tax take of the late 1980s looks, on this reading, more like an anomaly than a steady state.