I recently attended a meeting with Maurice McTigue, director of
the Mercatus Center at George Mason University, a former member of
the New Zealand Parliament, and a man with wide experience in
government reform. Attendance at the meeting, arranged by state
Sen. Sylvia Allen, should have been required for everyone in our
state government.
Prior to comprehensive reforms 20 years ago, New Zealand was an
economic mess, suffering from debt, continual deficits and a
stagnating economy. Out of desperation, New Zealand’s political
leaders reduced government spending and enacted fundamental,
wide-ranging reform. Since then, New Zealand’s national government
has seen a single deficit; it was this year and due to the
worldwide recession.
One instructive example given by McTigue concerned agriculture
subsidies, which, among other things, were artificially inflating
land prices. Everybody knew land prices would collapse when those
subsidies ended. Some estimated 31 percent of farmers and at least
seven major banks would go bankrupt. Yet, with no bailout or any
other government involvement, only one-half of 1 percent of farmers
went bankrupt. And not a single bank went under.
An outbreak of “spontaneous economic order,” as McTigue
described it, resulted. Banks re-valued loans to avoid defaults.
Farmers renegotiated payment schedules. People figured out how to
navigate the changing economy without government intervention.
This example may seem most applicable to federal financial
policies in response to the U.S. real estate meltdown; but, the
lesson is broader. We commonly hear stories that if Arizona cuts
spending on parks or education or health care, our economy will
collapse. Yet New Zealand’s experience illustrates that fundamental
reform, rethinking and shrinking of government should be welcomed,
not feared.
Byron Schlomach, Ph.D., is the director of the Goldwater
Institute’s Center for Economic Prosperity.
Home
New Zealand rolled back government, rebuilt economy
Posted: Tuesday, February 16, 2010 12:00 am | Updated: 8:16 am, Thu Dec 2, 2010.
New Zealand rolled back government, rebuilt economy Commentary by Byron Schlomach Ahwatukee Foothills News | 0 comments
I recently attended a meeting with Maurice McTigue, director of the Mercatus Center at George Mason University, a former member of the New Zealand Parliament, and a man with wide experience in government reform. Attendance at the meeting, arranged by state Sen. Sylvia Allen, should have been required for everyone in our state government.
Prior to comprehensive reforms 20 years ago, New Zealand was an economic mess, suffering from debt, continual deficits and a stagnating economy. Out of desperation, New Zealand’s political leaders reduced government spending and enacted fundamental, wide-ranging reform. Since then, New Zealand’s national government has seen a single deficit; it was this year and due to the worldwide recession.
One instructive example given by McTigue concerned agriculture subsidies, which, among other things, were artificially inflating land prices. Everybody knew land prices would collapse when those subsidies ended. Some estimated 31 percent of farmers and at least seven major banks would go bankrupt. Yet, with no bailout or any other government involvement, only one-half of 1 percent of farmers went bankrupt. And not a single bank went under.
An outbreak of “spontaneous economic order,” as McTigue described it, resulted. Banks re-valued loans to avoid defaults. Farmers renegotiated payment schedules. People figured out how to navigate the changing economy without government intervention.
This example may seem most applicable to federal financial policies in response to the U.S. real estate meltdown; but, the lesson is broader. We commonly hear stories that if Arizona cuts spending on parks or education or health care, our economy will collapse. Yet New Zealand’s experience illustrates that fundamental reform, rethinking and shrinking of government should be welcomed, not feared.
Byron Schlomach, Ph.D., is the director of the Goldwater Institute’s Center for Economic Prosperity.
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Posted in Commentary on Tuesday, February 16, 2010 12:00 am. Updated: 8:16 am. | Tags: New, Zealand, Government, State, Meeting, Economy, Experience, Reform, Desperation, Years
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