coffee grounds

the American Revolution in an Antipodean mirror

Never in the history of blogging has New Zealand history so wrongly informed American views of their own history.

Tyler Cowen argues that New Zealand was a "nanny state" from the beginning.

No. There was a good 40-50 years before the government got into the business of social insurance and assuming individual risks in the 1880s and 1890s. Government actions in New Zealand before that point was largely of four kinds (1) Police and military action and (2) Actions establishing the British legal system over the whole country. i.e; the New Zealand wars, (3) Internal transportation developments (railways), and (4) Sponsored immigration.

Only the last distinguishes NZ government actions from what federal and state governments did in the U.S.

Cowen has been to New Zealand [and written a contract report about the electoral system], so he has some understanding of the history, but his argument here is misleading:

3. The United States was founded on the pro-liberty ideals of the eighteenth century; the nineteenth century might not have provided such propitious foundations. For instance New Zealand was conceived as a nanny state from the beginning [emph. added]

"Nanny state from the beginning?": What on earth does this mean? To be sure, New Zealand was not formed as some sort of libertarian ideal; but where does Cowen get the idea that there was some sort of nanny state there. Let's review the beginnings of the colony ...

• The early (pre-1840) settlers were principally whalers, sealers and traders, with some being escaped or released convicts from Australia. The British government, which had sent these convicts to Australia, was motivated to negotiate the Treaty of Waitangi, because
  
  
  
  1. It accepted the responsibility of bringing some form of legal system to cover the transactions of Maori and settlers, many of whom the British government was responsible for bringing to the area [as convicts]
     
  2. Officials in the Colonial Office perceived that some settlers were unscrupulous and would not pay a fair price for Maori land, or renege on agreements they had made. Hence the Crown prerogative to buy and sell land with Maori. Whatever your views of whether Maori understood European views of property, the point is that the Colonial Office perceived the issue as being establishing a functioning market and legal system, not guaranteeing the outcomes for individuals in that market. Establishing the legal and civil society mechanisms that support a market economy is not the same as providing social insurance; even libertarians will acknowledge that the former is a proper role of government.
     
  3. Rightly or wrongly, the British government in NZ initially tried to protect the interests of Maori; and there was no "nanny state" for early settlers, who thought they would do better without the Colonial Office protecting Maori.
     
  
  
• At the time the Treaty was signed, the Wakefield's New Zealand Company was establishing four settlements, and plans were afoot for the churches to sponsor settlements in the South Island -- the organization of the church settlements informed by NZ Company ideas.

  The NZ Company, and Edward Gibbon Wakefield in particular, espoused [if not always practiced] ideas that could nowaday be called communitarian, as a response to the problems of establishing a new outpost of British settlement, far from its original locations.

  To be sure, there were aspects of the NZ Company's organization that might be termed "nanny state"ish, such as the idea that land-owners would find a job for any unemployed laborers in the community. But this was a concept closer to noblesse oblige, since it was the responsibility of private individuals to look after other individuals -- not the governments.

  As it happened, of course, there was periodic unemployment in the NZ Company settlements, but the unemployed were not picked up by the landlords -- they often moved out of the community.

• Whatever demands there were for the government to provide some form of social insurance, it took until the 1880s before they were enacted. This is hardly the beginning of the colony -- it is some way into the period of responsible government. What's more it only predates American state governments social insurance and labor market regulation efforts by a decade or two.

• The development of the "nanny state" was a significant break with previous practice; a point more than adequately made by David Thompson's book A World Without Welfare.
  

In response Matthew Yglesias writes

Free marketers would do well to avoid mentioning New Zealand, however, whose welfare state was producing sub-par economic growth, provoking a major bout of neoliberal reform after which they started doing even worse (interestingly, New Zealand and Argentina provide just about the only historical examples of rich countries becoming un-rich and they don't seem to have much else in common).

... which takes us forward to the twentieth century. Using NZ economic history to inform an understanding of the American welfare state is strange; as New Zealand is a very open economy, with trade being a major share of GDP, whereas in the United States it was and is not.

In both New Zealand and Argentina the terms of trade turned against them, and it took decades to unwind the political-economic structure that had previously redistributed the gains from being efficient producers of protein from grass (i.e; selling meat to the world), but which were ill-equipped to cope with a world where people weren't prepared to pay monopsonistic prices for meat anymore.

As for the success of the "bout of neo-liberal reform", well yes, the late 1980s and early 1990s saw particularly slow growth in New Zealand, but growth since the mid-1990s has been relatively strong.

Again, however, there's substantial debate about whether this is just a favorable terms of trade, or whether it really is the long-awaited results of neo-liberal structural change.

In any case, Matt would do well to salute the New Zealand lesson in getting rid of agricultural subsidies. Just remove them and be done with it.

Posted by robe0419 at July 8, 2004 4:33 PM