Bryce Edwards
I am Political Analyst in Residence at Victoria University of Wellington, where I run the Democracy Project, and am a full-time researcher in the School of Government.
Last month, many journalists and political observers were reflecting on the 40th anniversary of the election of David Lange’s Fourth Labour Government. The events of the 1980s do indeed deserve to be re-examined, especially because some of the lessons from that period are even more relevant today. In particular, the new forms of vested interests and elites that arose then to dominate the political processes are still with us in 2024 and need to be understood.
The Fourth Labour Government and vested interests
The revolution that was the Fourth Labour Government obviously had a huge impact on New Zealand economy and society. There were plenty of reminiscences last month that reviewed the upheaval the incoming government of 1984 caused through Rogernomics and social reforms. But less attention has been given to how the era changed power relations in New Zealand, such as the changing mechanisms the elite were able to use to dominate the country.
Many of the retrospectives about the 1984 election point to just how backward, conservative, and inefficient New Zealand’s economy and society were prior to the election of David Lange and Roger Douglas to the Beehive. Plenty of excellent features have starkly conveyed that New Zealand before July 1984 was like “another country”, and how transformative the incoming government was to just about every aspect of our lives. For the best of these accounts, you can listen to Toby Manhire’s Juggernaut: The Story of the Fourth Labour Government podcast for the Spinoff.
Danyl McLauchlan has also recently written two fantastic cover stories for the Listener about the fourth Labour government, and these deserve a much wider audience and debate – see: 1984 Revolution: The rise of Rogernomics and how it still shapes NZ lives (paywalled) and The 1984 Revolution Part II: Crash and burn (paywalled).
His first instalment deals with how the Rogernomics revolution took hold and nicely explains how it was intended to remove privilege and the power of vested interests that dominated the economy. This is because the pre-1984 economy was extremely regulated, with many private businesses dependent on state-favoured monopolies.
McLauchlan explains how Finance Minister Roger Douglas viewed the status quo of his predecessors: “they’d built a bloated administrative state overseeing a private sector dominated by a handful of incumbents who stifled all competition, making profits via government subsidies and monopoly rents. The result was a low-productivity, low-growth economy organised around a primary export sector that cost a billion dollars a year in subsidies.”
Douglas was influenced by neoliberal economist Fredrick Hayek, who highlighted how vested interests profited in highly regulated economies like New Zealand. McLauchlan summarised Hayek's explanation for how politicians would get captured by vested interests and how this led to inefficient economies:
“politicians would realise they could manipulate the economy for their own electoral interests. They would promise social justice and economic growth, but they would use the power of the state to deliver cronyism and patronage. Their interventions would serve the wealthy and powerful. The more they interfered, the more damage they’d inflict on the productive sectors. As economic conditions deteriorated, the public would demand more security, more welfare. To pay for all this, planners would impose more radical interventions, more control, trapping the economy in a doom loop until everything collapsed.”
Therefore Douglas restructured the economy, removing regulations and subsidies, mostly in line with Hayek’s prescriptions. This meant that the old productive base of the economy became quickly overtaken by new forms of capitalism. The sharemarket was the celebrated symbol of this shift in economic focus.
As McLauchlan points out, about 40 per cent of New Zealanders became shareholders, and New Zealand’s sharemarket rose 600 per cent in just five years. Of course, it wasn’t to last. Infamously, in 1987 the sharemarket crashed, and part of the problem was, according to McLauchlan, the government had decided to have a light touch regulation on business:
“the suddenly impoverished nation discovered that the shady trading practices that most developed economies ban as a matter of routine – insider trading, pump-and-dump schemes (boosting the price of stocks through misleading statements), brokers taking positions against their own clients – were possible. There were no restrictions on the amount of leverage investors could take on, no interest rate caps or credit restrictions, no capital requirements.”
The crash was huge and continues to have an impact on New Zealand in 2024 according to McLauchlan:
“The Douglas-era sharemarket became a gigantic, fraudulent, speculative bubble, and when the international markets fell, New Zealand’s collapsed. Share values halved over the subsequent months; tens of billions of dollars were wiped out. The nation’s capital markets took decades to recover. Most New Zealanders looking to invest shifted their money to residential property, permanently traumatised by the sheer scale of the wealth destruction and the lawlessness that enabled it.”
1980s privatisation created new oligarchs
In his first Listener essay, McLauchlan points out that Labour carried out its reforms with strong backing from particular business people, who were also the beneficiaries of the new policies: “Some of the nation’s entrepreneurs and business leaders – Ron Brierley, Michael Fay and David Richwhite, Alan Gibbs – were becoming extremely rich, and they were outspoken supporters of Douglas’s reforms. It later emerged they were advising him, alongside Roger Kerr, the head of the Business Roundtable, the nation’s most influential lobby group.”
But McLauchlan’s second Listener essay goes into more detail about one of the key policy issues that involved these business people – the privatisation of state assets. The fourth Labour government took many of the state-owned and operated companies and sold them off to business people, who were enriched by buying them at sometimes rock-bottom prices, which they then milked for profits.
The problem was that many of the privatised assets were monopolies operating in markets that could deliver super-profits by providing sub-standard services – something New Zealand is still experiencing in many sectors in 2024.
Here’s how McLauchlan covers it:
“The merchant bankers Michael Fay and David Richwhite made an estimated half a billion dollars off the asset sales of the ’80s and ’90s, and successive governments struggled to explain how this happened and what value the financiers delivered, especially considering the very poor quality of the deals that were made. In June 2000‚ the NZ Herald business columnist Brian Gaynor estimated that asset sales amounted to a loss of about $8 billion to the nation – worse than Muldoon’s Think Big project that the neoliberals considered the epitome of state failure.”
Some have likened the sell-off to what also happened as the Soviet Union fell apart, where those well connected to the powerful in Russia could buy giant state assets and become extremely wealthy oligarchs almost overnight. However, in the New Zealand situation, the loss of $8b is proportionally much greater than what the Russian public lost in 1991.
1980s political donations, corruption, and the decline of scrutiny
One of the most important accounts and critiques of the business-political nexus was the TVNZ Frontline documentary, “Pro Bono Publico/For The Public Good”, which was broadcast in April 1990. This one-hour documentary was an explosive exposé of vested interests and alleged corruption.
The documentary is now very difficult to get copies of or watch – TVNZ has destroyed all its files. This is because some of the corruption allegations were deemed to be defamatory, especially to the Labour politicians involved, who banded together and successfully sued the state broadcaster.
This landmark and important account of political finance and vested interests became a turning point for the New Zealand media. The journalists involved were dispatched and essentially never allowed to work on political issues again. From this point onwards, the media became extremely shy about investigating corruption or vested interests. To this day, such issues are deemed ‘too hot to handle’.
One TVNZ documentary maker, Phil Wallington, who died in 2020, also said this about the documentary in 2015:
“the Pro Bono Publico episode forever changed the face of news and current affairs broadcasting in New Zealand… no journalist, editor or media organization is now capable or even willing to indulge in deep and intrusive scrutiny of the motives of the government and to make the connection with day to day policy action. Such analysis is time consuming and it also costs too much at a time when we all told, ‘we have to do more with less’. Shrinking budgets and staff cuts encourage us to look cursorily at what the powerful do and to then move then on without questioning too much, why they did what they did.”
The Pro Bono Publico story about political donations in the 1980s
The election of the fourth Labour government 40 years ago marked a significant shift in how business interests influence the policy-making process. During this period the business community became highly disillusioned with Muldoonism and many transferred their loyalty from National to Labour at the 1984 election.
Business therefore helped bankroll Labour’s 1984 election campaign, which cost about $650,000 (or $2.6m in today’s money). Then, in 1987, Labour’s expenditure rose dramatically to about $3.5m (or $9m in 2024 money) – in what appears to be the highest recorded campaign expenditure in New Zealand history.
According to TVNZ’s Frontline documentary, about $3m had come from business donations, greatly overshadowing the much lesser contributions of unions (about $300,000) and party members (about $150,000).
Evidence of substantial corporate funding was provided by ex-businessman Allan Hawkins, who donated $250,000 (or $650,000 in 2024 money). Hawkins is interviewed in the documentary saying that this “was probably a fairly common sort of level at that time... I knew of others that were talking about amounts like that.”
Hawkins also wrote in his autobiography that he gave Roger Douglas the donation “in recognition of the good work he had done in deregulating the New Zealand economy, something Equiticorp had benefited tremendously from”. However, his Equiticorp company later collapsed and Hawkins was jailed for fraud.
The Frontline documentary detailed plenty of other corporate help for Labour’s electioneering. For example, the then business giant UEB provided a jet plane for David Lange to use to get around the country. And another Cabinet minister, Trevor de Cleene, was recorded in the documentary explaining why the Labour Party was now targeting wealthy people for help: “You can sell raffles for a trailor-load of groceries – but nothing beats a three or four hundred thousand dollar subscription.” Therefore, with the days of the mass party over, the modern electoral-professional political parties were now being bankrolled by a small number of patrons.
According to TVNZ’s documentary, “it took only a dozen of the country’s richest men to fund a 3.5 million dollar campaign. They did it through a mixture of company and personal cheques. The people targeted for $100,000 or more included: Allan Hawkins, Sir Robert Jones, Michael Fay and David Richwhite, Sir Ron Brierley, Alan Gibbs, Douglas Myers, and Sir Francis Renouf... Most were members of the Business Roundtable”.
However, the documentary also alleged that the Labour Party wasn’t receiving and recording the business donations. Instead, Cabinet ministers like Roger Douglas put the cheques into a separate bank account to fund campaigning in parallel with the party organisation. Much of the money was also being spent on polling – the Frontline documentary reported that their election campaign spent $1m on market research, which meant the party had run the first professionalised campaign in which they could tailor specific messages to the electorate.
According to the Frontline documentary, some of the advertising agency costs in 1987 were also not paid. Labour allegedly promised instead to give their advertising agency lucrative government contracts in lieu of payment.
Allegations of the “sale of honours” also arose, as there appeared to be a correspondence between the awarding of honours and the donors to the party in government. Among the major donors on the Fourth Labour Government’s honours lists were Sir Ron Trotter, Sir Robert Jones, Sir Ron Brierley and Sir Michael Fay.
However, Labour’s privatisation programme was where the real quid pro quo was alleged to have occurred. According to TVNZ’s Frontline documentary, the business donors were also those wanting to buy the state assets:
“Among those in the queue were many who had bank-rolled Labour’s return to office. Some of them were already asserting their influence on the boards of SOEs even before the move to sell prime public assets. So who got what? Allan Hawkins for Equiticorp got New Zealand Steel, Sir Ron Trotter for Fletcher Challenge picked up the Rural Bank and Petrocorp, Sir Ron Brierley got ‘our Airline’ Air New Zealand and badly wanted the BNZ. The BNZ instead went to merchant-bankers Fay-Richwhite. And as consultants in the sales process, firms like Fay-Richwhite and Jardins – firms with ex-Treasury officials on their staff – earned millions of dollars from the public purse.”
Although David Lange was one of those that sued TVNZ over the allegations, his colleague and later wife Margaret Pope confirmed in 2011 that the privatisation process lacked propriety: “You would have to be deaf and blind to be working in Wellington in the ’80s and not think there was something askew about the asset sales process… Treasury’s handling of the sales was incompetent. Assets were sold at fire-sale rates. Ministers were actively involved in the sales process.”
Pope also confirmed another key allegation in the documentary: that businessman and donor Frank Renouf had set up and managed personal share trading accounts for Lange and Douglas, in which they made profits of about $40,000 each. As Lange’s wife stated, “It was a good scoop, especially given that the following year Renouf was knighted by the Crown and financially slammed by the 1987 market crash.” She points out that the share accounts were “blind trusts”, and “nothing illegal about that at the time”.
How Political influence and persuasion changed in 1984
The role of ‘influence’ in the 1980s is also dealt with in a number of retrospectives on the election of the fourth Labour government. This is because politics and the political process changed considerably from this point. Partly this related to the professionalisation of politics in this period. The Labour Party was modernising how to communicate, electioneer and create policies. The party was by 1984 taken over by a new cadre of very middle-class professionals, who were determined to govern differently to former Labour parties.
This has been well explained recently by lobbyist Mike Munro, a press gallery journalist during the fourth Labour government, before switching to spin doctoring for subsequent Labour administrations. In his recent article for the Listener, 1984 Revolution part III: How Lange-Douglas govt ushered in the age of spin (paywalled), Munro explains that the incoming government of 1984 overturned the tradition of public service communications staff working in ministerial offices, taking them from neutral public servants to partisan spin doctors who were there to control the narrative and get their minister re-elected.
Previously, publicity staff were simply seconded from the tourist and publicity departments. However, Lange and Douglas were determined to have real spin doctors who would actually sell the policies and personalities of the new government. Munro says that this involved the elevation of the hollow arts of persuasion to equal that of policymaking: “Messaging, market research, style and image would be getting just as much attention.”
Although there had always been an element of manipulation in politics, according to Munro, the Rogernomics team represented “the dawning of the age of organised spin in Kiwi politics”. Certainly it was in this era that the numbers of professional staffers skyrocketed in the Beehive. Plus, all the parties in parliament were also given new multi-million dollar budgets to officially spend on “parliamentary activities”, but in practice could be spent on electioneering, and PR and comms staff.
In this regard, TV producer Phil Wallington also pinpointed these developments as a central dynamic in the decline of the power of the media: “The second reason the powerful get away with so little scrutiny is the rise and rise of media communications and professional spin-doctors. We who still describe ourselves as journalists are a beleaguered band, vastly outnumbered by platoons, battalions and armies of ministerial, departmental, and corporate communications staff.”
Issues of influence and persuasion that developed in the fourth Labour government have also been discussed by AUT professor of communications Wayne Hope, whose essay about the time, published on the Daily Blog recently, identifies the government department of Treasury as the nexus for getting neoliberal ideas into the Beehive, but says there were other key influential vehicles:
“The entire process was coordinated by Treasury. From July 1984, it became the conduit between corporate interests such as the Business Round Table and the most influential cabinet ministers. Treasury’s neoliberal rationale was bolstered by a new strata of think tanks, lobbyists and public relations mediators. Organisations such as the Centre for Independent Studies, Consultus, Strategos and Communicor formed lines of communication among financiers, stockbrokers, corporate heads, SOE managers, Treasury, the Reserve Bank and key ministers aligned with Roger Douglas. This network reduced the government policy influence of traditional pressure groups (i.e., farmers, producer boards, manufacturers) and parliamentary watchdogs such as the Ombudsman and Auditor General.”
Conclusions
The 1984 reforms were supposedly about getting rid of vested interests from politics and economy. And in a sense they achieved this quite well. But it’s also clear in retrospect that they ended up empowering a brand new set of vested interests.
These new vested interests have a dominance that might be less visible than the old Establishment but they are possibly even more powerful than the old elites. As writer Max Harris wrote in his 1980s retrospective recently, the new economic consensus is now “upheld by a network of well-resourced thinktanks, lobbyists, and spokespeople.”
The problem of vested interests and influence in 2024 is arguably much worse than it was in 1984. It’s certainly clear that in New Zealand more and more markets have become dominated by oligopolies, and the possibilities for corruption in politics seem to be increasing.
For what it’s worth, Roger Douglas has even spoken out recently about how much danger he thinks the economy and political process are in. He says it’s akin to the situation he inherited 40 years ago.
Danyl McLauchlan also ponders in his conclusion whether New Zealand now has a vested interests problem that is every bit as bad as in 1984:
“There is a doomed, Muldoon-era quality about the macroeconomy, an aggregate of corporate welfare handouts and election bribes across multiple governments: protected industries, an incoherent tax system, a vast system of tax subsidies, transfers and rebates, deteriorating trade, low productivity, low growth, bleak fiscal projections, crumbling infrastructure, mass immigration to Australia.”
And he points out that primary production and manufacturing – where productivity and job creation occur – are being diminished, superceded by property speculation and banking. This is, he says, in line with the arguments made by law professor Jane Kelsey that the neoliberal revolution has created a “FIRE economy” – one based on finance, insurance and real estate.
So, does this mean that New Zealand is due for another big political-economic shakeup? Is this what Christopher Luxon’s coalition government is doing? It’s not clear yet. But McLauchlan makes the case in his Listener features that New Zealand seems to have a major transformation about every half-century – The Treaty of Waitangi in 1840, the Liberal government of 1890, the first Labour government of 1935, and then the fourth Labour government of 1984. And so, here’s McLauchlan’s interesting conclusion:
“If New Zealand maintains its historical pattern of dramatic political change every 40-50 years, we are due another revolution. Conditions are ripening, if not yet ripe, for some political entrepreneur or ideologue to change everything – some descendant of Michael Joseph Savage? Muldoon? Douglas? Something we haven’t seen before?”
Postscript
News broke this week that journalist Rod Vaughan died on 25 August, age 77, after a short battle with cancer. Vaughan, who worked on TVNZ’s Frontline documentaries was one of the tireless fighters against injustice and corruption – the likes we now need more of. Even in retirement, he was still very much concerned about integrity issues.
Last year he sent me an email titled “Corruption” with a colourful account of investigating the scampi scandal involving political donations:
“As you may recall, under cover of parliamentary privilege, Peters alleged there was major corruption in the scampi fishing industry involving bent officials in MAF and Simunovich Fisheries. Not surprisingly Simunovich was not impressed and leant on him to withdraw the allegations. Much to everyone’s amazement Peters complied, saying his allegations were, in fact, directed at another sector of the industry. However, he failed to disclose that Simunovich was almost certainly one of NZ First’s major benefactors. I broke the story on TVNZ’s Assignment programme and asked him whether his retraction was influenced in any way by donations from Simunovich to NZ First. Not surprisingly he became incandescent and stormed out of the interview, threatening me with all manner of lawsuits.”
The issues Rod Vaughan so tirelessly pursued aren’t going away any time soon. We need to keep asking questions, pro bono publica.
Dr Bryce Edwards
Key Sources
Frontline (TVNZ), For the Public Good, TV One, TV One, 29 April 1989.
Max Harris (the Post): The 40-year-long shadow cast by Rogernomics (paywalled)
Wayne Hope (Daily Blog): 1984, Year Zero: The Juggernaut story of the fourth Labour government and Unwinding neoliberalism in Aotearoa New Zealand
Toby Manhire (Spinoff): Juggernaut: The Story of the Fourth Labour Government
Danyl McLauchlan (Listener): 1984 Revolution: The rise of Rogernomics and how it still shapes NZ lives (paywalled)
Danyl McLauchlan (Listener): The 1984 Revolution Part II: Crash and burn (paywalled)
Rachel Moore (Stuff): Former TV reporter Rod Vaughan, who was once punched by Bob Jones, dies
Mike Munro (Listener): 1984 Revolution part III: How Lange-Douglas govt ushered in the age of spin (paywalled)
This article was originally published on the author’s Substack.
