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Saturday, November 19, 2005

This Week's Imprimis

Rolling Back Government: Lessons from New Zealand
By Maurice P. McTigue

Maurice P. McTigue is a distinguished visiting scholar at the Mercatus Center at George Mason University, where he directs the government accountability project. Previously, he was a member of the New Zealand Parliament and New Zealand’s ambassador to Canada, and was closely involved in New Zealand’s deregulation of labor markets, deregulation of the transportation industry, and restructuring of the fishing industry through the creation of conservation incentives. He also served as Minister of Employment, Minister of State Owned Enterprises, Minister of Railways, Minister of Works and Development, Minister of Labour and Minister of Immigration. Among his many honors, Mr. McTigue is a recipient of the Queen’s Service Order, bestowed by Queen Elizabeth II in a ceremony at Buckingham Palace. In the U.S., he was recently appointed to the Office of Personnel Management Senior Review Committee, formed to make recommendations for human resources systems at the Department of Homeland Security. He also sits on the Performance Management Advisory Committee for the Commonwealth of Virginia.

The following is adapted from a lecture delivered on February 11, 2004, on the Hillsdale campus, during a five-day seminar on “The Conditions of Free-Market Capitalism,” co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.


Rolling Back Government: Lessons from New Zealand

If we look back through history, growth in government has been a modern phenomenon. Beginning in the 1850s and lasting until the 1920s or ’30s, the government’s share of GDP in most of the world’s industrialized economies was about six percent. From that period onwards – and particularly since the 1950s – we’ve seen a massive explosion in government share of GDP, in some places as much as 35-45 percent. (In the case of Sweden, of course, it reached 65 percent, and Sweden nearly self-destructed as a result. It is now starting to dismantle some of its social programs to remain economically viable.) Can this situation be halted or even rolled back? My view, based upon personal experience, is that the answer is “yes.” But it requires high levels of transparency and significant consequences for bad decisions – and these are not easy things to bring about.

What we’re seeing around the world at the moment is what I would call a silent revolution, reflected in a change in how people view government accountability. The old idea of accountability simply held that government should spend money in accordance with appropriations. The new accountability is based on asking, “What did we get in public benefits as a result of the expenditure of money?” This is a question that has always been asked in business, but has not been the norm for governments. And those governments today that are struggling valiantly with this question are showing quite extraordinary results. This was certainly the basis of the successful reforms in my own country of New Zealand...

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