How the Left Helped Make New Zealand One of the World’s Freest Economies

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It was in 1644 that Maurício de Nassau became the first Brazilian governor to be deposed for administrative impropriety.

Despite being of German origin, Nassau worked for the Dutch, who at that time occupied part of the Brazilian Northeast.

Little known in the process of great navigation, the Dutch dominated overseas trade for centuries and were responsible for mediating business and making great discoveries, such as that of a territory in southern Australia.

Discovered in 1642 by the Dutch, New Zealand pays homage, as you may have noticed, to Zealand, Dutch territory on the border with Belgium.

It was the English, however, who first among the Europeans settled in the region, until then occupied by the Maõri, a tribe still hailed as part of the local culture.

Like other English colonies, New Zealand would become a parliamentarian, following the tradition of its colonizer.

Unlike the United States and following the line of Canada, New Zealanders never waged a war of independence against England, being part of the so-called Commonwealth today and recognizing Queen Elizabeth II as head of state.

The parliamentary regime is a crucial part of understanding the turn that the country suffered in the 1980s, when Labors, David Lange’s labor party, started the reform process.

In practice, to govern in a parliamentary regime, a party needs a majority in parliament, which in turn can be won directly, with an absolute majority or through alliances.

It is precisely these alliances that allow different phases under the same government. In Germany, for example, a parliamentary republic, Angela Merkel, of Christian Democracy, has already ruled with the support of liberals and social democrats.

In the last election, Merkel implemented a national minimum wage in Germany for the first time. Until then, wages were defined by categories. There was also a more positive attitude towards immigration. The reason? Requirements of the Social Democratic Party to form the governing coalition.

In the Lange government, however, in 1984, the alliance had to be sewn internally. Having won by a wide advantage at the polls, Labors faced internal cracks.

In another rule of parliamentary regimes, internal splits must be discussed by consensus. Thus, even if they disagree, members of the internal minority must support the party, avoiding cases like those of 2015 in Brazil, in which the allied base promoted opposition to government measures.

Having emerged with socialist principles and implemented an interventionist policy for years, the party would return to the government facing what could be described as the most protectionist and statist among the capitalist democracies.

The external situation, however, was dissociated from the post-war boom, in which the country’s agricultural products were widely demanded from abroad, which guaranteed resources to finance less efficient industries. In the 1970s, the world faced high inflation and reduced growth, in the so-called “stagflation”.

The process would cause countless victims around the planet, such as Brazil and Argentina, who, from then on, went on to their lost decade (when high interest rates in the United States would make the foreign debt priceless).

In New Zealand, which saw its inflation and unemployment reach more than 2 digits, the situation was the last straw.

In the period before World War II, the country had the 3rd highest per capita income on the planet. In 1984, it was the 27th, alongside Portugal and Turkey. The diagnosis, therefore, was that something should change.

In the following years, the labor party would carry out a reform model that would become an example in the world, through the so-called “New Public Management”, or “new public management”. The country was responsible for inventing, for example, inflation targets, which would become an anchor in Brazil in the 2000s.

With the internal union of the party, Roger Douglas began the reform process by attacking what was one of the greatest symbols of Labor governments until then: agricultural subsidies.

Thanks to government support, the country’s agriculture had ample resources to supplement income. It is estimated that up to 44% of farmers’ income was just a transfer of resources by the State.

The end of subsidies forced the country’s farmers to compete with the international market and seek an increase in productivity that would guarantee them greater returns.

Until then, producers received US $ 1 in subsidy for each US $ 1 obtained from the sale of the product. With the end of subsidies, a team was organized to propose solutions and seek a price equivalent to the interior. The result was the country’s entry into new markets and the use of new means of production and processing, which raised the price of lamb to US $ 30, and subsequently US $ 42 (previously sold at US $ 12.50).

Within the principles of the “New public management”, which can be called a broad administrative reform, the directors of public agencies started to receive goals according to the budget that was given to them. Failure to meet the targets, as in the private sector, resulted in layoffs.

Public agencies that were previously only responsible for implementing public policies and financed by taxes were transformed into autonomous agents, with the mission of seeking their own revenues and even paying taxes.

An example that has become common around the planet has been the transformation of the system responsible for air traffic into an autonomous body, whose revenue comes from the collection of user fees and no longer taxes. This measure is still struggling to be implemented in Brazil.

Public agencies, which became autarchies (a system now adopted in Brazil), had autonomy under their budgets (in this case, something still utopian here) and competed in some cases with private services.

In education, the diagnosis was similar to the rest of the public service. After finding out that of every $ 1 spent in the area, about $ 0.70 was spent on administrative expenses, New Zealanders adopted a different model. For it, each school should receive resources according to the number of students enrolled, and then manage its own budget as it is most interesting.

Private schools were also affected and could be financed in the same way if the parents so wished.

Other processes took place in the country, such as the privatization of state-owned companies that would lead to the creation of so-called regulatory agencies (another invention that Brazil would copy).

The agencies were responsible for proposing sector planning, setting targets for privatized state-owned companies and regulating the area, following the logic of public agencies: complete financial autonomy.

In Brazil, to be on a single example, Anatel has already collected R $ 77 billion in fees on the telecommunications sector. The resources, however, remain unused in the universalization funds and the lack of autonomy prevents the agencies from executing the programs that would take broadband to the interior, for example, or cut costs from users.

As a result, New Zealand today has fewer state-owned companies than a state like Rio Grande do Sul.

In foreign trade, the country adopted a gradual tariff reduction plan, which started in 1987 and continued until 1999, when 95% of the products were exempt from import taxes.

In the labor field, the reform took place in 1991, already under the right-wing nationalist government, which in practice demonstrates a continuity in the process.

Right-wing nationalists have also implemented their fiscal responsibility law, similar to the spending ceiling, which would culminate in reducing public debt from 65% to 27% of GDP.

Within this period, however, there were moments of divergence, especially when the 1987 world crisis slammed the door. The labor party again faced internal splits due to social spending.

What New Zealand’s history shows, however, is that certain principles, such as fiscal responsibility, and a focused state, return better public services and greater economic freedom.

After 9 years of government of the Nationalist party (between 2008 and 2017), the country was once again governed by the Labor Party, with the election of Jacinda Ardern.

Today it is a country with relatively large coverage of social programs, but a lower tax burden than Brazil, and a much lower public debt, demonstrating that the basic principles established more than 3 decades ago are still firm.

Source: Infomoney

It was in 1644 that Maurício de Nassau became the first Brazilian governor to be deposed for administrative impropriety.

Despite being of German origin, Nassau worked for the Dutch, who at that time occupied part of the Brazilian Northeast.

Little known in the process of great navigation, the Dutch dominated overseas trade for centuries and were responsible for mediating business and making great discoveries, such as that of a territory in southern Australia.

Discovered in 1642 by the Dutch, New Zealand pays homage, as you may have noticed, to Zealand, Dutch territory on the border with Belgium.

It was the English, however, who first among the Europeans settled in the region, until then occupied by the Maõri, a tribe still hailed as part of the local culture.

Like other English colonies, New Zealand would become a parliamentarian, following the tradition of its colonizer.

Unlike the United States and following the line of Canada, New Zealanders never waged a war of independence against England, being part of the so-called Commonwealth today and recognizing Queen Elizabeth II as head of state.

The parliamentary regime is a crucial part of understanding the turn that the country suffered in the 1980s, when Labors, David Lange’s labor party, started the reform process.

In practice, to govern in a parliamentary regime, a party needs a majority in parliament, which in turn can be won directly, with an absolute majority or through alliances.

It is precisely these alliances that allow different phases under the same government. In Germany, for example, a parliamentary republic, Angela Merkel, of Christian Democracy, has already ruled with the support of liberals and social democrats.

In the last election, Merkel implemented a national minimum wage in Germany for the first time. Until then, wages were defined by categories. There was also a more positive attitude towards immigration. The reason? Requirements of the Social Democratic Party to form the governing coalition.

In the Lange government, however, in 1984, the alliance had to be sewn internally. Having won by a wide advantage at the polls, Labors faced internal cracks.

In another rule of parliamentary regimes, internal splits must be discussed by consensus. Thus, even if they disagree, members of the internal minority must support the party, avoiding cases like those of 2015 in Brazil, in which the allied base promoted opposition to government measures.

Having emerged with socialist principles and implemented an interventionist policy for years, the party would return to the government facing what could be described as the most protectionist and statist among the capitalist democracies.

The external situation, however, was dissociated from the post-war boom, in which the country’s agricultural products were widely demanded from abroad, which guaranteed resources to finance less efficient industries. In the 1970s, the world faced high inflation and reduced growth, in the so-called “stagflation”.

The process would cause countless victims around the planet, such as Brazil and Argentina, who, from then on, went on to their lost decade (when high interest rates in the United States would make the foreign debt priceless).

In New Zealand, which saw its inflation and unemployment reach more than 2 digits, the situation was the last straw.

In the period before World War II, the country had the 3rd highest per capita income on the planet. In 1984, it was the 27th, alongside Portugal and Turkey. The diagnosis, therefore, was that something should change.

In the following years, the labor party would carry out a reform model that would become an example in the world, through the so-called “New Public Management”, or “new public management”. The country was responsible for inventing, for example, inflation targets, which would become an anchor in Brazil in the 2000s.

With the internal union of the party, Roger Douglas began the reform process by attacking what was one of the greatest symbols of Labor governments until then: agricultural subsidies.

Thanks to government support, the country’s agriculture had ample resources to supplement income. It is estimated that up to 44% of farmers’ income was just a transfer of resources by the State.

The end of subsidies forced the country’s farmers to compete with the international market and seek an increase in productivity that would guarantee them greater returns.

Until then, producers received US $ 1 in subsidy for each US $ 1 obtained from the sale of the product. With the end of subsidies, a team was organized to propose solutions and seek a price equivalent to the interior. The result was the country’s entry into new markets and the use of new means of production and processing, which raised the price of lamb to US $ 30, and subsequently US $ 42 (previously sold at US $ 12.50).

Within the principles of the “New public management”, which can be called a broad administrative reform, the directors of public agencies started to receive goals according to the budget that was given to them. Failure to meet the targets, as in the private sector, resulted in layoffs.

Public agencies that were previously only responsible for implementing public policies and financed by taxes were transformed into autonomous agents, with the mission of seeking their own revenues and even paying taxes.

An example that has become common around the planet has been the transformation of the system responsible for air traffic into an autonomous body, whose revenue comes from the collection of user fees and no longer taxes. This measure is still struggling to be implemented in Brazil.

Public agencies, which became autarchies (a system now adopted in Brazil), had autonomy under their budgets (in this case, something still utopian here) and competed in some cases with private services.

In education, the diagnosis was similar to the rest of the public service. After finding out that of every $ 1 spent in the area, about $ 0.70 was spent on administrative expenses, New Zealanders adopted a different model. For it, each school should receive resources according to the number of students enrolled, and then manage its own budget as it is most interesting.

Private schools were also affected and could be financed in the same way if the parents so wished.

Other processes took place in the country, such as the privatization of state-owned companies that would lead to the creation of so-called regulatory agencies (another invention that Brazil would copy).

The agencies were responsible for proposing sector planning, setting targets for privatized state-owned companies and regulating the area, following the logic of public agencies: complete financial autonomy.

In Brazil, to be on a single example, Anatel has already collected R $ 77 billion in fees on the telecommunications sector. The resources, however, remain unused in the universalization funds and the lack of autonomy prevents the agencies from executing the programs that would take broadband to the interior, for example, or cut costs from users.

As a result, New Zealand today has fewer state-owned companies than a state like Rio Grande do Sul.

In foreign trade, the country adopted a gradual tariff reduction plan, which started in 1987 and continued until 1999, when 95% of the products were exempt from import taxes.

In the labor field, the reform took place in 1991, already under the right-wing nationalist government, which in practice demonstrates a continuity in the process.

Right-wing nationalists have also implemented their fiscal responsibility law, similar to the spending ceiling, which would culminate in reducing public debt from 65% to 27% of GDP.

Within this period, however, there were moments of divergence, especially when the 1987 world crisis slammed the door. The labor party again faced internal splits due to social spending.

What New Zealand’s history shows, however, is that certain principles, such as fiscal responsibility, and a focused state, return better public services and greater economic freedom.

After 9 years of government of the Nationalist party (between 2008 and 2017), the country was once again governed by the Labor Party, with the election of Jacinda Ardern.

Today it is a country with relatively large coverage of social programs, but a lower tax burden than Brazil, and a much lower public debt, demonstrating that the basic principles established more than 3 decades ago are still firm.

Source: Infomoney

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