“Those who don’t know history are doomed to repeat it.”

― Edmund Burke

I watched a documentary from New Zealand television from the 1990’s which covered the lead-up to the neoliberal  “Rogernomics” reforms of the mid and late-1980’s.

It made a one sentence allusion to New Zealand deciding how to spend its surplus from its trade with Britain in the 1960’s and painting the orthodox picture that there was “no alternatives” to the reforms that tore the country apart. 

On the basis of that I decided to have a to online to have a look at what was available. 

Not only has there been no book on the economic changes in New Zealand been published but looking for information on this important subject is like looking for hens’ teeth.

There is practically nothing online.

What there is are one paragraph references on official New Zealand encyclopedias. 

This is official information and so brief as to be almost uninformative. In one entry the encyclopaedia item is so inaccurate and ahistorical that it links events to the European Union, which did not even exist until 2 decades later!. 

No information was forecoming until I widened my search to include academic economist, Brian Easton, who has been a major critic from the Left, of the Rogernomics reforms. 

Here is a recent academic paper from him:

Learnings from The New Zealand Economic History of Shocks Working paper

That was the sum total of it all until I came across a reprint from an article in the Victoria University student magazine, Salient, from May, 1979.

OIL CRISIS! WHOSE OIL CRISIS?

I can think of no more important discussion for discussion than this.

The Rogernomes of the past and even more, the people that rule over us desperately do not want us to know our history because that provides context that helps us to understand where we are today. 

I am old enough, however, at 67, to remember much of this history because I lived through it.

I can remember to this day the pain of my grandmother, tied to her colonial route at learning that Britain had joined the Common Market (not the European Union!). New Zealand through the 1960’s was prosperous – back then Britain took 90% of New Zealand’s butter exports and 75% of cheese exports.

New Zealand had now to find its own way.

To this day I can remember Brian Talboys, Trade Minister in the Holyoake government, travelling around the globe trying to find new markets.

Here is a young Winston Peters interviewing Brian Talboys in 1978.

Remember, the New Zealand First Party came out of a criticism of Rogernomics in his own party.

This is what the New Zealand encyclopedia, te Aro has to say about this period:

“In 1970 Britain took more than 90% of New Zealand’s butter exports and 75% of cheese exports. The Luxembourg agreement reduced the butter quota by roughly 17% and the cheese quota by roughly 68% over 5 years. Quantities were reduced further after 1977, to about half the 1973 levels. New Zealand continued to have butter quotas in the 1980s and 1990s – although at much reduced levels.

“In 1980 imports from Britain had fallen to 14.5%. In 2007 they were less than 3%. In the late 1930s Britain took more than 80% of New Zealand exports. By 1960 it took 53%, which reduced to 36% in 1970, and 5% in 2007”

Here is a recent retrospective in the New Zealand media that is pretty uninformative:

Did Britain abandon New Zealand in 1973?

As if that were not enough, there were TWO oil shocks.  The first oil shock came after the 1973 Yim Kippur War in the Middle East.  This is what a history site has to say:

“The decision by Arab oil producers to cut supply in the wake of the Yom Kippur war with Israel in 1973 saw oil prices soar from US$3 a barrel to close to US$20 virtually overnight. Like all industrialised economies, New Zealand relied heavily on crude oil and suffered severe consequences. Higher petrol prices meant higher freight costs, higher costs for goods, higher wage rates and inevitably higher retail prices. This first oil shock (a second followed in 1978–9) contributed to New Zealand’s decline into recession by 1976. The government responded by burning gas from the recently discovered Māui gas field in Taranaki to generate electricity and extracted the accompanying condensate for use as fuel.”

My own personal memories of the 1970’s are of inflation combined with economic stagnation.

“The oil shocks of the 1970s had a profound effect on New Zealand’s macroeconomic indicators. One of the most immediate impacts was a sharp increase in inflation. As oil prices rose, it led to higher production costs for businesses, which were then passed on to consumers in the form of higher prices for goods and services. This resulted in a surge in inflation rates during this period.

“Furthermore, the oil shocks also led to a decline in real GDP growth. The increased cost of imported oil reduced consumer purchasing power and business profitability, leading to a slowdown in economic activity. The decline in GDP growth was particularly evident in sectors that were heavily dependent on energy, such as transportation and manufacturing.

“Another macroeconomic indicator affected by the oil shocks was the balance of payments. New Zealand, being heavily reliant on imported oil, experienced a significant increase in its import bill due to higher oil prices. This led to a deterioration in the country’s trade balance and current account balance” 

https://en.m.wikipedia.org/wiki/Carless_days_in_New_Zealand

The 1970’s, after the prosperity of the 50’s and 60’s was one of stagnation. It was the first time that we had mass unemployment after the prosperity of the 1960’s. Infltion was at a rate that we can scarcely imagine.  The interest rate on my first home was an unimaginable 18%! 

The following is from Wikipedia:

“The oil shocks of the 1970s had a profound effect on New Zealand’s macroeconomic indicators. One of the most immediate impacts was a sharp increase in inflation. As oil prices rose, it led to higher production costs for businesses, which were then passed on to consumers in the form of higher prices for goods and services. This resulted in a surge in inflation rates during this period.

“Furthermore, the oil shocks also led to a decline in real GDP growth. The increased cost of imported oil reduced consumer purchasing power and business profitability, leading to a slowdown in economic activity. The decline in GDP growth was particularly evident in sectors that were heavily dependent on energy, such as transportation and manufacturing.

“Another macroeconomic indicator affected by the oil shocks was the balance of payments. New Zealand, being heavily reliant on imported oil, experienced a significant increase in its import bill due to higher oil prices. This led to a deterioration in the country’s trade balance and current account balance.”

https://en.m.wikipedia.org/wiki/Carless_days_in_New_Zealand

Also:

The 1970s oil shocks had varying impacts across different sectors of the New Zealand economy. The transportation sector was one of the hardest hit as it heavily relied on oil for fuel. The increased cost of fuel led to higher operating expenses for airlines, shipping companies, and road transport operators. This resulted in reduced profitability and increased fares or freight charges for consumers.

The manufacturing sector also faced challenges due to higher energy costs. Industries that relied heavily on energy-intensive processes, such as petrochemicals and plastics, experienced a significant increase in production costs. This led to reduced competitiveness and, in some cases, forced businesses to downsize or shut down operations.

The agricultural sector, although less directly affected by the oil shocks, still experienced some repercussions. The increased cost of fuel and transportation had an indirect impact on farmers through higher prices for inputs such as fertilizers and machinery. Additionally, the decline in overall economic activity resulted in reduced demand for agricultural products both domestically and internationally.

The 1970’s was a period of diversifying our economy and finding new markets.

As opposed to now things were done in a way that were in the national interest.

As opposed to today’s imposed sanctions, the. Muldoon agreement reached barter agreements with countries such as Iran and the Soviet Union.

Those were the days when we had Russian Ladas and Hungarian locomotives. After the first oil shock of 1984 New Zealand found itself in a pickle again after the Islamic Revolution in Iran:

“…Deals that bartered oil for sheep meat were made with Iran, and markets in other oil-producing states were also developed. Agreements were signed with state trading organisations in the Soviet Union and China. New Zealand also had some success in expanding markets in Japan, particularly for aluminium, fish, wool and kiwifruit. In 1980 no single market took more than 20% of New Zealand’s exports. Diversifying the product range took longer and was still ongoing in the 2000s.

https://teara.govt.nz/en/overseas-trade-policy/page-5

“The Iranian Revolution and the subsequent 1979 oil shock led to a reduction in oil imports. As a result of the revolution, in March 1979, the country was receiving approximately 10-15% less oil than it normally would. By June 1979, this had reduced to approximately 5%“

Here is a conventional view of the oil price shock from the Guardian:

Background: What caused the 1970s oil price shock?

International oil prices increased by a factor of 15 in nominal terms or a factor of 7 between 1972 and 1980. Despite price controls on petrol, prices in New Zealand also rose rapidly from $0.10 in 1972 to $0.62 in 1980.[2] Before the introduction of the carless days scheme, a 24.8% price increase in May reduced petrol demand by 11%.[3] New Zealand in the first half of 1978 had been sourcing 39% of its oil from Iran. 

https://en.wikipedia.org/wiki/Carless_days_in_New_Zealand

The reponse of the Muldoon government was in the interests of the nation. 

The government  introduced energy conservation and efficiency. For example, there was a scheme to introduce incentives to convert cars to run on CNG.

All of this disappeared in the “market  decides” reforms of the 1980’s.

“In response to the oil shocks, the New Zealand government implemented various policy measures to mitigate the impacts on the economy. One of the key strategies was to promote energy conservation and efficiency. This included initiatives such as encouraging the use of public transportation, implementing energy-saving measures in buildings, and promoting research and development in alternative energy sources.

Additionally, the government introduced policies to reduce dependence on imported oil. This involved diversifying energy sources by investing in domestic hydroelectric power generation and exploring other renewable energy options. The development of the Maui gas field in the late 1970s also aimed to reduce reliance on imported oil.

Furthermore, the government implemented measures to stabilize prices and manage inflation. These included wage and price controls, import restrictions, and subsidies for essential goods. However, these policies were not without their challenges and faced criticism for their effectiveness in addressing the root causes of the oil shocks.”

In 1979 the government introduced carless days whereby one day a week became a carless days and people were encouraged to economise and to car pool.

 

“Under the carless days regulations, the owners of most private petrol-powered motor vehicles under 4,400 pounds (2,000 kg), with the exception of motorcycles, were required to refrain from using their car on one day of the week, that day being designated by the owner. Exemptions were issued for essential services and those with no alternatives to using their own vehicles.^[11] Each vehicle displayed a coloured sticker on its windscreen which noted the day on which it could not be used. Infringements were punishable by a fine of up to $400 (approx. $2500 in 2022 dollars).

“Thursday was the most frequently chosen carless day. By the time the regulations were suspended, 43% of registered vehicles had exemptions.^[3] A black market for exemption stickers and imitations of them quickly developed, weakening the effectiveness of the scheme. There was also a distinct problem in inequality—households that could afford to run two cars could simply choose different days for the two cars and continue to drive on all seven days as before.”

https://en.wikipedia.org/wiki/Carless_days_in_New_Zealand

Here is another uninformative retrospective from NZ media:

Friday flashback: remember the oil crisis and carless days?

To give an idea of what New Zealand was faced with:

“International oil prices increased by a factor of 15 in nominal terms or a factor of 7 between 1972 and 1980. Despite price controls on petrol, prices in New Zealand also rose rapidly from $0.10 in 1972 to $0.62 in 1980″

I don’t think people can even imagine that.

I recall at the time there was a lot of public discussion of developing alternative sources of energy.

It was a time when environmental groups rose and the predecessor to the Green Party, the Values Party was popular.

However, a major policy plank of Muldoon’s was his “Think Big” policy which aimed to insulate the country from the worst ravages of the oil shocks. Ecologically, much of it was a disaster but in terms of energy self-sufficiency it made complete sense at the time of huge increases in the price of oil.

“Think Big was an interventionist state economic strategy of the Third National Government of New Zealand, promoted by the Prime Minister Robert Muldoon (1975–1984) and his National government in the early 1980s. The Think Big schemes saw the government borrow heavily overseas, running up a large external deficit, and using the funds for large-scale industrial projects. Petrochemical and energy related projects figured prominently, designed to utilise New Zealand’s abundant natural gas to produce ammonia, urea fertiliser, methanol and petrol.

“The core Think Big projects included the construction of the Mobil synthetic-petrol plant at Motunui, the complementary expansion of the Marsden Point Oil Refinery near Whangarei, and the building of a stand-alone plant at Waitara to produce methanol for export. Motunui converted natural gas from the off-shore Maui field to methanol, which it then converted to petrol on-site. Declining oil prices rendered this process uneconomic and saw a reduction in the production of synthetic fuel; however, the industry still remained at large due to prior investment. New Zealand would abandon the manufacturing of synthetic petrol in February 1997, allowing the plant to switch the focus to methanol.^[3].

“The construction of the Clyde Dam on the Clutha River formed part of a scheme to generate electricity for the national grid. A proposed smelter at Aramoana on Otago Harbour was never built—largely owing to resistance on the grounds of the environmental damage that would have been a consequence.”

https://en.wikipedia.org/wiki/Think_Big

The propaganda from the documentary above implies that the economy was in a terrible state.

It makes scant reference to the underlying reasons for all of this that we have discussed here and was all the fault of the actions and policies of one man, Robert Muldoon.

The propaganda says that the Rogernomics reforms saved the country from disaster from which it recovered.

However, leftist economist Brian Easton gives a very different picture.

“Growth was stronger in the early 1980s (partly as a result of the ‘Think Big’ major projects, which proved less valuable than expected, when oil prices fell in the mid 1980s). Then the ‘Rogernomics’ policy regime of almost unconstrained market liberalisation heralded a ‘long recession’ from 1987 to 1993″.

The Rogernomes would have you believe that the economy “recovered” due to their “wise” policies. 

Sure, we got espresso coffee and easy access to stuff from overseas but we also had the destruction of industries, multi-generational unemployment and great suffering.

As it turns out, oil prices went down again:

“The 1980s oil glut was a significant surplus of crude oil caused by falling demand following the 1970s energy crisis. The world price of oil had peaked in 1980 at over US$35 per barrel (equivalent to $124 per barrel in 2022 dollars, when adjusted for inflation); it fell in 1986 from $27 to below $10 ($72 to $27 in 2022 dollars). The glut began in the early 1980s as a result of slowed economic activity in industrial countries due to the crises of the 1970s, especially in 1973 and 1979, and the energy conservation spurred by high fuel prices”

New Zealand is a small country at the end of the world and we are very much affected by what is happening in the wider world.

Sitting where I am, in 2023, New Zealand and in the context of the government closing down Marsden Point (began by Muldoon’s Think Big”, the “Fortress New Zealand’ policies of Sir Robert Muldoon do not seem quite so silly any more.

The fortune of the country does not depend so much on politics but rather on external economic facts.

And, I can think of nothing more important than the availability of cheap energy.

This is the largest determinant of our country’s prosperity and even national survival.

For a new generation that is unaware of what came a generation (or perhaps even two?) I would strongly suggest watching this documentary from the 1990’s. “Someone Else’s Country”.