Restoring Accountability in New ZealandWith Maurice P. McTigueThe Amazing Results
increased productionWhy not in the USA? If we look back through history, growth in government has been a modern phenomenon. Beginning in the 1850s and lasting until the 1920s or 30s, the government's share of GDP in most of the world's industrialized economies was about six percent. From that period onwards ˆand particularly since the 1950sˆ we've seen a massive explosion in government share of GDP, in some places as much as 35-45 percent. (In the case of Sweden, of course, it reached 65 percent, and Sweden nearly self-destructed as a result. It is now starting to dismantle some of its social programs to remain economically viable.) Can this situation be halted or even rolled back? My view, based upon personal experience, is that the answer is "yes.-- But it requires high levels of transparency and significant consequences for bad decisions ˆand these are not easy things to bring about. Restoring Accountability in New Zealand, They Reduced Spending and Taxes When a reform government was elected in 1984, it identified three problems: 1) too much spendingThe question was how to cut spending and taxes and diminish government's role in the economy. The first thing is to figure out what you're getting for dollars spent. Towards this end, we implemented a new policy ... with the following results ... When we started ... ... the Department of Transportation, had 5,600 employees. ... the Forest Service, had 17,000 employees. ... the Ministry of Works, had 28,000 employees. When we finished ... ... the Department of Transportation had 53 employees. ... the Forest Service had 17 employees. ... the Ministry of Works had only one employee. The government stopped employing people in those jobs, but the need for the jobs didn't disappear. The workers, some months after they'd lost their government jobs, were quite happy. They were now earning about three times what they used to earn -- and they were surprised to learn that they could do about 60 percent more than they used to! We achieved an overall reduction of 66 percent in the size of government, measured by the number of employees. The government's share of GDP dropped from 44 to 27 percent. We were now running surpluses: We used most of the surplus to pay off debt, and debt went from 63 percent down to 17 percent of GDP. We used the remainder of the surplus each year for tax relief. We reduced income tax rates by half and eliminated incidental taxes. As a result of these policies, revenue increased by 20 percent. Yes, Ronald Reagan was right: lower tax rates do produce more revenue. Restoring Accountability in New Zealand, They Tackled Subsidies and Education By 1984, New Zealand sheep farming was receiving about 44 percent of its income from government subsidies. With subsidies eliminated, by 1989, they had succeeded in converting their $12.50 lamb carcas into something worth $30. By 1991, it was worth $42; by 1994 it was worth $74; and by 1999 it was worth $115. In other words, the New Zealand sheep industry went out into the marketplace and found people who would pay higher prices for its product. You can now go into the best restaurants in the U.S. and buy New Zealand lamb, and you'll be paying somewhere between $35 and $60 per pound. Corporate farming moved out and family farming expanded. New Zealand had an education system that was failing as well. It was failing about 30 percent of its children ˆ especially those in lower socio-economic areas. We had put more and more money into education for 20 years, and achieved worse and worse results. It had cost us twice as much to get a poorer result. We converted 4,500 schools to a new system all on the same day. Eighty-five percent of our students went to public schools at the beginning of our reform. That fell to only about 84 percent over the first year or so of our reforms. But three years later, 87 percent of the students were going to public schools. More importantly, we moved from being about 14 or 15 percent below our international peers to being about 14 or 15 percent above our international peers in terms of educational attainment. Restoring Accountability in New Zealand, They Decreased Taxation We carefully designed a new tax system to produce exactly the same revenue as we were getting before and presented it to the public as a zero sum game. But what actually happened was that we received 20 percent more revenue than before. Why? We hadn't allowed for the increase in voluntary compliance. If tax rates are low, taxpayers won't employ high priced lawyers and accountants to find loopholes. We rewrote the environmental laws, transforming them into the Resource Management Act, reducing a law that was 25 inches thick to 348 pages. Restoring Accountability in New Zealand, They Began Thinking Differently About Government What was their new way of thinking about government? What was the new policy that they implemented by which they achieved such results? These were only a few highlights of a lecture delivered on February 11, 2004, on the Hillsdale campus, during a five-day seminar on "The Conditions of Free-Market Capitalism," co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series. Read the whole story of restoring accountability in New Zealand. Copyright © 2004. "Adapted, with quotes, by permission from IMPRIMIS, the monthly journal of Hillsdale College ( Maurice P. McTigue is a distinguished visiting scholar at the Mercatus Center at George Mason University, where he directs the government accountability project. Previously, he was a member of the New Zealand Parliament and New Zealand‚s ambassador to Canada, and was closely involved in New Zealand‚s deregulation of labor markets, deregulation of the transportation industry, and restructuring of the fishing industry through the creation of conservation incentives. He also served as Minister of Employment, Minister of State Owned Enterprises, Minister of Railways, Minister of Works and Development, Minister of Labour and Minister of Immigration. Among his many honors, Mr. McTigue is a recipient of the Queen‚s Service Order, bestowed by Queen Elizabeth II in a ceremony at Buckingham Palace. In the U.S., he was recently appointed to the Office of Personnel Management Senior Review Committee, formed to make recommendations for human resources systems at the Department of Homeland Security. He also sits on the Performance Management Advisory Committee for the Commonwealth of Virginia. The Good News for U.S.A.The remedy for restoring accountability is simple and is already in the Constitution. We don’t have to invent new law and hope it works. We know it works because it rescued our nation from certain oblivion in its infancy. The Constitution needs less to be repaired than to be restored to supremacy. Discover the simple solution. Discover the series of frauds that shifted power and accountability which have led to the FTAA, and what can be done about them. Jean Carpenter spent years researching the facts and tells the story. Have You Information or Knowledge
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