Ruthanasia

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Ruthanasia, a portmanteau of Ruth and euthanasia, is the pejorative name (typically used by opponents) given to the period of free-market economic reform conducted during the first term of the fourth National government in New Zealand, from 1990 to 1993. As the first period of reform from 1984 to 1990 was known as Rogernomics after the Labour Party Minister of Finance, Roger Douglas, so the second period became known as "Ruthanasia", after the National Party's Minister of Finance, Ruth Richardson.

Ruthanasia and Rogernomics can be viewed as complementary reform packages implemented by successive governments which were aimed at liberalising the New Zealand economy after a period of intense protectionism and fiscal control, particularly under the administration of Sir Robert Muldoon's National government between 1975 and 1984. Muldoon's protectionism had culminated in a three year wage and price freeze imposed by Muldoon, who simultaneously held the posts of Prime Minister and Minister of Finance, in an attempt to suppress rampant inflation.

Ruthanasia was controversial as the National Party had fought the 1990 election on a manifesto promising "The Decent Society" and implicitly repudiating the radicalism of the fourth Labour government. The Prime Minister, Jim Bolger, defended the move in his memoirs on the grounds that he had been badly misled in the runup to the 1990 election as to the actual state of the New Zealand economy. Upon winning the 1990 election, Bolger and Richardson quickly became aware of two unrelated financial crises: firstly, that the Bank of New Zealand required an immediate injection of capital to avoid insolvency as a result of the poor performance of a NZ$2.8bn loan portfolio in Australia, and secondly that the outgoing finance minister David Caygill's projection of a modest fiscal surplus was inaccurate, and that the country instead faced a fiscal deficit of NZ$5.2bn if action were not taken immediately.

Where Roger Douglas had deregulated the industrial, financial, fiscal and agricultural sectors of the New Zealand economy, Ruth Richardson, under the auspices of a National (predominantly conservative) administration, was able to focus on social services and labour relations, sensitive areas which the preceding Labour administration had not been willing to reform in light of its traditional working class constituency.

Richardson and the then Minister of Social Welfare, Jenny Shipley, immediately reformed Social Welfare programme by reducing available benefits and allowances across the board, and in 1993 the National government enacted the Employment Contracts Act (ECA), which effectively demolished New Zealand's post-war industrial relations framework, replacing collective bargaining and compulsory union membership in many sectors with the concept of the individual employment contract. Whilst the ECA did not directly address unions, the practical effect of removing the requirement for employees to be members, and allowing those employees who did want union membership to choose which union they wished to join dramatically reduced the bargaining position of the unions in the New Zealand economy. This reform of labour laws had already been outlined in the 1990 National manifesto.

Ken Douglas, then president of the Council of Trade Unions, said:

Ruth Richardson was very clear, very blunt, very honest about (the ECA's) purpose. It was to achieve the dramatic lowering of wages, very quickly, by allowing the high levels of unemployment to pull the cost of labour down; that the market would determine and an oversupplied market would reduce the price. The other reason, of course, was to de-unionise and that's why the government is in trouble with the International Labour Organization because the ECA doesn't enhance or promote collective bargaining.

Roger Douglas, minister of finance in the preceding fourth Labour government, said (after his retirement from politics):

I think the labour market changes in 1990 were first class. I think, unfortunately, Caygill and the Labour party had let the fiscal situation slip from where it was in 1988 and Ruth put that back on the road."

Ruthanasia came to an end after the 1993 election, when National's majority was reduced from 18 (out of 99 seats) to 1. Bolger responded by replacing Richardson with Bill Birch.

[edit] Sources

Marcia Russell, Revolution: New Zealand from Fortress to Free Market (1996), ISBN 1-86958-428-7 (based on a 1996 Television New Zealand Television Series)