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[Music] my involvement in politics uh or local body politics led me to central government and I think it's really quite important if you're going to be in politics to ask yourself a very simple question and that is why I'm in politics and if if you're only there uh you know for your own ego uh but the truth is is if you're there and you want to do something worthwhile then you have to be prepared uh you know to put yourself in some cases at risk and and I've always had a philosophy that at

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the end of the day you can't win unless you're prepared to lose and I think it was Thomas Soul who said if you want to help people you tell them the truth if you want to help yourself then you tell them what they want to hear and the truth is far too many politicians are all about telling people what they want to hear they do polling uh they tell them what they want to hear rather than telling them the truth of the situation I country as New Zealand's former Finance Minister from 1984 to 1988 sir Roger

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Douglas earned Global Acclaim for orchestrating pivotal economic reforms for the country following his entry into parliament in 1969 he became a cabinet minister in 1973 during the tenure of the third labor government here he handled portfolios of broadcasting post office and later housing transitioning to the fourth labor government he assumed the role of Finance Minister in 1984 leading comprehensive changes including deregulation currency floating State Trading corporatization and privatization sir Roger was acknowledged

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with prestigious Awards including the euram Money Magazine award in 1985 Frederick won Hayek medal in 2002 and the tget freedom prize in 2008 post parliament he managed Roger Douglas Associates held directorships and co-founded act andz his International work spans the globe over including countries such as the USA Russia China and India contributing to their economic restructuring a few of his notable Publications include toward Prosperity completing the circle and no second class citizens he joins us here in our

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latest episode of advocat conversations welcome sir Roger uh from Sri Lanka all the way from Sri Lanka good day to you how are things with you not too bad uh you know when you 86 things don't always go smoothly uh I managed some somehow to fall over the other day that wasn't quite what I was hoping for but there you are welcome to today's advocat conversation uh you have a tremendous track record as being one of the greatest structural reformers in the world and I think your story is very

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interesting if I may start with uh could I know a little bit about your personal story well I've been in politics if You' like all my life uh uh I come from a political family my grandfather was a member of the New Zealand Parliament uh for um I think TW 25 years uh my father was also a member of parliament for 15 years and uh a trade unionist and um uh president of the labor party for a period of time so you know my background was politics in those circumstances you either like it love it or hate it and uh

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I my background is an account uh I got involved at a local body level in politics and I in a sense at the end of the day I had to make a a decision will I stay in the commercial world or will I move into the political field so um you did a lot of important structural reform economic reform Now by training uh if you were an accountant how did you get so engrossed in economic reform well you know as an accountant you are interested in what's going on uh but my involvement in politics uh or local body politics led

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me to central government and I think it's really quite important if you're going to be in politics to ask yourself a very simple question and that is why I'm in politics and if if you're only there uh you know for your own ego uh but the truth is if you're there and you want to do something worthwhile then you have to be prepared uh you know to put yourself in some cases at risk and and I've always had a philosophy that at the end of the day you can't win unless you're prepared to

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lose and I think it was Thomas Soul who said if you want to help people you tell them the truth if you want to help yourself then you tell them what they want to hear and the truth is far tooo many politicians are all about telling people what they want to hear they do polling uh they tell them what they want to hear rather than telling them the truth of the situation I can PR it it's interesting that you mentioned Thomas Soul because for us in advoca his book basic economics is quite literally a

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Bible here uh presume you have read the book also should he's H you know I uh I quote him quite a bit uh I met him once he came to New Zealand and and spent a well couple of weeks two or three weeks deal with it and uh you know he's an amazing person he has the gift of making really complex things um quite simple yes we we tend to agree with that um so C can you please explain for the benefit of our audience you said that your whole family was with the labor party uh why uh what was it exactly that the New Zealand labor party

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stood for what is their political ideology well the the labor party um uh really was born out of the Trade union movement uh and early on um you'd say it was a socialist party but there was really at the heart of the people uh who founded it and were its leaders in the early years their main aim really was to have for their children and and the people they represented the same same things that uh the more affluent do for example in 1972 which was three years after i' been in par three years um I introduced into

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Parliament a private members bill for superannuation for everyone now the concept with there was I when I'd work at bremworth carpet I'd had a super annuation scheme I became a member of parliament I had a super annuation scheme and the simple question was why can't everyone who works have a super anation scheme if they want one uh for the benefit of my audience uh super annuation is it a contributory pension system oh in New Zealand my my scheme was uh which I introduced in 1972 but our current

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scheme is not it's a pay as you go uh scheme um and for the retired it's quite generous and frankly it's going to cause New Zealand real trouble in the future it might be 20 years off 15 to 20 years but unless it changes uh we're in great difficulty I'm a very strong advocate of get from moving uh away from the payers you go and having a savings scheme and in other words savings not taxation we tax and then we hand out the government hands out the pensions and it's it's just going to get uh too

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costly because really uh in retirement it's not just pensions it's healthare here as well and and the whole population is eligible for the super annuation yes any I once you hit once you're 65 then you automatically get the super annuation yes there are certain rules but you know uh it it is getting more and more expensive um the estimates are that um super for the retired and health care for the retired is going to increase by over 6% of GDP by 2061 that's a huge amount and um quite

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frankly s the country broke or there'll be a a lot of taxpayers so I'm I'm just not going to contribute and and how will they not contribute they come and live in Sri Lanka or Australia so sir Roger uh you wrote seminar piece for uh a paper that you delivered to the Mont Pellerin Society in 1989 called politics of successful structural reform and in your introduction uh you say the following and I would like to read it out po politicians tend to close their minds as long as they can see the need for

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structure Al reform because they believe that decisive action must inevitably bring political Calamity upon the government as their country's economy drifts closer to crisis and a structural problem are no longer deniable they persuade themselves that action within a relatively short time of an election would give the advantage to their political opponents they convinced themselves that this stance is justified by pretending that the opponents are deceitful and interested only in their own gain not the countes

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well-being when the economic situation is serious enough to arouse public concern in many cases both parties May seek to evade the issue by offering electoral bribes to distract voters from the real problem when I read this I was wondering whether you were talking about Sri Lanka uh perhaps uh to give some context can you explain what was going on in New Zealand before you started your political career or the reform process well we started the reform process in 1984 uh and essentially uh we were faced on winning

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government in August of 1984 with a real crisis the banks were closed uh to Foreign Exchange dealing so we came into office I became Minister of Finance and we had a real problem on our hand we devalued by 20% uh we lifted uh all the interest rate controls and and some made um major changes of that nature and and I I I think that we thought about this quite a lot but the first point I make in that paper I think is is that if you're going to be successful in terms of structural change then you have to

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have quality change there's no absolutely no point in making having compromise uh change because if you do that if you only sort of go halfway what happens uh it won't work and it comes back to bite you and uh if you do that then and you want to do it later it makes it a lot even more difficult than facing it uh right up front so in your paper uh you talk about 10 principles and the first principle that you say is for Quality policies you need quality people and you go on to say the following the policy starts with people

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it emerges from the quality of their observation knowledge analysis imagination ability to think laterally to develop a wide range of options the success of our policies sector reform since 1984 depended on the people as much as policy replacing people who cannot or will not adapt to new environment is pivotally important you also talk about you know the the team that you had in the labor party that came into power can you elaborate a little bit about what the environment work was during that period and how you

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attracted this Talent into the party well I think to be honest I think the leader of the national party which supposed to be the conservative party he he attracted a lot of people into the labor party for us uh what I mean his policies he had interest rate controled price controled uh you name it he he tried to control it and it obviously uh didn't work it was never going to work and we and that brought into the Parliamentary labor party uh some young bright people who want to make change and I think one of the things which

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wasn't actually we didn't talk about but one of and it helped us in terms of being successful in government was that we may had a feeling that you're going to do the right thing whatever we were going to do the right thing if it meant we lost the next election so be it the truth was in the end of the day uh despite all the major changes we made uh we won the next election with a couple of extra seats but the quality of the people in the parlamentary party but more particularly to than the quality of the people that

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we put into position uh in in positions in say the health department uh in the S so like electricity and these were people we didn't pick them for political reasons I mean politicians who appoint people who frankly because they're a mate or part of their party who aren't up to it they crazy because at the end of the day if they appoint a mug and that mug frankly does a bad job the politician looks terrible I might be a mug as a politician but if I appoint someone who's great and he does a great job oh

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what are you guess what I look like a champion whether I am or not so it's important to appoint good people and there are good people out there and when you're talking about a country when New Zealand was in trouble a lot of our big business people took on roles in the government and they wanted to make a contribution and uh we quite a competitive position the you know the head of electricity uh he was competing to show that he was uh more outstanding than the head of Forestry Etc and I just

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give you one turnaround in forestry the last year in the state as a state uh um run organization the expenditure exceeded the revenue in forestry by $180 million two years later we had Alan Gibbs who was running it and he gave uh Richard pble who was a state Enterprise Minister myself as minister of finance a check for 132 million so we went from 184 million to a positive of 132 in two years you know that's amazing really so you you mentioned about appointing quality people so uh you also have like the British tradition an

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independent civil service right with permanent secretaries yes uh there was uh particularly in treasury uh treasury uh um were the key driver uh to to um what happened within the Civil Service um and but there were also so appointments uh made from the state Services Commission and there were some quality people there we ensured that and um in the end of the day it was interesting a lot of the treasury people went out and became heads of other departments okay uh so the the private sector people that you attracted uh they

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gave up their positions because of the crisis and they came into government well well they didn't really come into government because the where we appointed them was say we had we had state-owned Enterprises which were really businesses like electricity so someone from the private count sector came in and became the chairman of the board so they had a board of director they came in and became the chairman of that and generally the first thing that they did was find uh a top class um chief executive and we we had

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appointments uh from all around the world for example uh Post New Zealand post uh the new appointment as chief executive of new Zeal post came from Australia uh in the case of Telecom um the chief new chief executive came from the United Kingdom a lot of new zealanders came through uh a little later but initially there were a number of appointment for overseas uh there was no nationalistic thinking saying that you know we should not appoint foreigners and we should give these positions to locals uh

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well we said it up in the end of the day um it wasn't our job with appointed say alen Gibs as head of Forestry it his job to uh appoint uh the chief executive that was one case where he appointed the person who had lost 184 million uh but that person in two years turned it around same person and and gave us a check for 132 and I think I say in that paper you know if you change the climate sometimes uh you change the performance so in order to attract this foreign Talent you would have had to pay

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above average wages uh and that was okay by yall yes uh we uh um they determined um the uh who was employed and how much uh the top people were I mean we were interested in the bottom line I mean we I don't know how much we pay at 184 million loss and we got 132 million profits and a check after he been the chief exe been paid I wasn't too worried about how much they got paid frankly okay um the second principle that you talk about is Implement reform in Quantum leaps using large packages

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and you go on to say do not try to advance a step at a time Define your objectives clearly and move towards them by Quantum leaps otherwise the interest groups will have time to mobilize and drag you down would you like to elaborate on that well what we instead of doing a sort of step by step process um we um we made major changes in terms of pack ages uh so it wouldn't be fair for example to take away all the subsidies that the farmers had the farmers support before we came in was about 30% of their

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income we took it away a whole lot gone uh I think they had their support was down to less than 1% that 1% was like the work the overseas trade and government did uh on on behalf of farmers now you know that that's a big change now if we'd only made that change to Farmers Farmers um wouldn't have been able to cope but we got rid of import licensing um we lowered tariffs we did a whole range of other things which Ena Farmers um to uh adjust because it lowered dramatically their cost structure uh we improved the ports the

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performance in the ports uh went up by 100% so it lowered the cost of the farmer getting their goods to Market and at the end of the day I you you might get a few Farmers but I don't think you get any farmers in New Zealand who want to go back to the position they were in in 1984 so there was the tradeoff you know and and that's important I remember when I did my first budget I met with uh the heads of uh all the um U various business entities in New Zealand and in the end of the day the

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only people who complained was the truckies the who had faced an increase in their costs of around 48% uh um in the and now the and everyone else actually you know got stck in because it was a tradeoff now sure Farmers lost their subsidies but when we lowered tariffs when we got rid of import licensing they were able to buy uh their produce cheaper accepted their input and and so whilst you lose when a privilege I call them privileges is taken away from you you actually had a vested interest in other

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groups losing their Privileges and and of course in the process you got rid of the government out of it and you lowered cost generally in your paper you also say the economy operates as an organic ho not an unrelated collection of bits and pieces structural reform aims to improve the quality of interaction within the whole I think you were alluding to this just now uh were there any other examples uh well a big example uh was dismantling Privileges and uh and allowing uh people to you know get on with the job

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themselves um and and so the Improvement in productivity uh was quite remarkable um because they became business focused take the post off one of the first things they decided was we want 95% of the male to arrive the next day and they did it and they but at the same time they lowered cost I mean there were sacrifices obviously made I mean uh let's take Telecom they went from a staff of 27,000 down to 7 or 8,000 and their and and their output went up and and and that Improvement in productivity what was was what drove the

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economy and improve um improved profitability and and lowered cost when I talk about Telecom it sounds you know 27,000 down to seven the thing was that new businesses just sprung up in the telecommunication area so you had almost 30,000 employed but they were doing they were doing things that we we hadn't done telecommunications before so I I will quote directly from your paper uh winning public acceptance depends crucially on demonstrating that you are improving the opportunity for people as

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a whole while protecting the most vulnerable groups in the community so how did you protect the most vulnerable groups well when we made changes for instance we had tax changes we took the top tax rate from 65 C down uh to 33 C uh we dropped corporate taxes down from I think 48 cents down to 33 but in any of those changes we made sure that the low income were better off uh and and more particularly uh we made sure that there was protection for lowincome families uh in particular so the the we thought through the

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process uh of helping those who might be uh disadvantaged or find the change uh more difficult principle three speed is essential it is impossible I to go too fast speed is essential and it is impossible to go too fast even at maximum speed the total program will take some years to implement the short-term trade-off cost start from day one wested interest seeking to preserve past privileges will always argue strongly for a slower pace of change it gives them more time to mobilize public opinion against the

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reform uh in our conversation before we started and I asked you what would you have done differently you said you would have gone faster U would you like to talk a little bit more well look where we did not make the reform and that's where ultimately I fell out with David longy uh was in the social policy area uh we didn't change education we didn't change uh in a fundamental way Health uh and these are the areas which are creating the problem for New Zealand today welfare education

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and and when I say I'd go gone faster if I if it had just been my me in in control I would have made fundamental changes in the areas of Education Health and Welfare because those groups you know um got into a position where they were able to protect themselves and and the result of that is our health system's not working well our education system is not working well uh Etc I tried to get Alan gibons who who changed forestry uh from a deficit of 180 million uh one year to Surplus two years later

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132 um to move into the health area we got it managed to get him to do a report but unfortunately David long he decided um that he wasn't going to have a bar of it and in fact uh replaced Michael bassard who was the minister of health and very supportive and making those changes um was someone El so you you argue in your paper that you shouldn't be sequencing reform that you should do the reform all together like a big Bank why do you argue like that because fairness in some ways I mean you cannot

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change I it's more what I said before you can't actually take all the farmers support and subsidies away unless you change the things which are making it difficult for farming uh to be productive or profitable uh if you have import licensing uh and they have to pay too much for their inputs then you're putting them as a disadvantage and so if you want to be fair and you want to get support you've got to do it across the board with regard to the the welfare policies I believe that your country has

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socialized healthare and socialized education system um you wanted to change the system let's take education what did you want to do well probably we I I wanted to do more in health but any education essential uh my view is that we the money which we give to the education department uh for them to spend should go directly uh to the individual and the individual chooses what school they want to send to uh you could be a private it could be a public school uh it has to be approved um but after that people should

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have the choice of where they send their child at the moment we have this crazy system in new where it's s so if you live in a certain area say you might live in ellersly you have to send your child to the ellsley primary school you can't send them send that your child somewhere else and you know the big thing is choice and composition and that I mean we could have got the same sort of improvement in productivity in health and education as we managed to get in forestry electricity and Telecom Etc So when you

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say give the money to the people uh were you going to do that through a voucher system or how was the transfer designed what well I I what we' probably do um is simply say to people you have um a tax credit or a vouch or whatever worth $10,000 you can spend that at any uh approved uh school you go there you enroll and the school then claims that money from the Inland Revenue de now any money that they have left over if they've got 10,000 and only spend five then that 5,000 stays in the name of that child and they can spend it

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in some future year possibly University for example so uh this is I mean what you're essentially arguing is that welfare should be uh exposed to the rigors of a market system where there is competition and there is choice I mean on the face of it uh there is a lot of Merit with this idea but all over the world there is resistance to do this uh there are only very few places and countries that have implemented this kind of market system what what is the problem sir Roger well in in power it's all about power the

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education teachers unions have got too much power the politicians like the fact that they got the power to make these decisions um you know they're not putting the child first and if we did that uh we would go to uh a system along the lines I talked about um essentially you could reduce taxes and so that people have got the money uh but in the case of Education that sort of stands out Health Universal everyone um in the case of Education well not every person has a child going to school and

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um and if they do it might be only for another 10 years Etc um but the power of the teachers unit in New Zealand is very very strong and the performance of the education system is terrible at the moment uh we about 30 40% of our children quite regularly don't get to score so your fourth principle talks about once you start the momentum never let it stop rolling government can develop public awareness of the key issues by structuring the content and sequence of its packages to dramatize the relevance

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of the fundamental economic linkages U Can you can you further elaborate well that a lot of That's Got to Do with the what I've been talking about the removal of Privileges and if you're going to take away one person's privileges you need you know to take uh any privileges that anyone else has and the withdrawal of privileges is is is fundamentally in my view to being able to uh uh make the changes that we did and that many countries require if I can move on to principle five consistency plus credibility equals

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economic confidence continuous credibility is essential to M to maintain public confidence in the structural reform and minimize the cost the key to credibility is consistency of policy and communication when the government lacks credibility people refuse to change until the clash between their old Behavior and the new policy imperatives has imposed a large avoidable cost on the economy so I think you touch on the need for communication uh we are also having this issue that perhaps our government is not

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sufficiently communicating all the changes that are being done how did you approach Communications whilst youber doing these reforms oh it was fundamental really you have to be upfront uh we could go back to Thomas Soul couldn't we uh you if you want to help people you tell them the truth and the problem with most governments around the world is they don't necessarily tell the the the people of the country the truth they actually and we've had add here I could name crie ministers they do

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polling having ped and found out what the public want they then promise it to them uh even if it's going to hurt them so you you've got to have courage and you've got to be prepared to tell people uh what you the truth and you've got to do that consistency and if you do it like long enough you'll get credibility and once You' got credibility you're likely to get confidence amongst the community the other point is that when you talk about um structural change in a way it has its

00:41:47 - 00:43:26
own internal logic you make one change and it becomes almost evident that you need need to do uh something extra and I used to operate generally when I was making these changes I I wouldn't do it from a report I'd have the report I read it I'd get the people in and we'd sit down and debate and argue and I never went away from that one of those meeting without realizing that we needed to do something else as well in the did you get a lot of support from your cabinet yes yes um there was opposition

00:42:37 - 00:44:25
um I won't name Nam but not surprising there were some people who wanted to go slower some people who sort of wanted to stopped for a while and um and longy was in that category um but frankly as I say in the paper once you got the ball rolling uh you need to keep it rolling uh otherwise you get to a situation where people um some of the interest groups um will start to defend their position and the changes that should be made um uh can't be made you need to remember that some changes you can make just like

00:43:31 - 00:45:13
that other changes uh might take a couple of years in the planning for example we move from our indirect taxes we had taxes on all sorts of products at different rates uh and we got rid of those taxes and introduced a goods and services tax on everything and that sounds easy but it took two years work before we were actually able to implement so you need to take that into consideration as well when you're doing these some things uh I mean we got rid of import licing price control uh rent controls we

00:44:23 - 00:45:45
did that in one day one afternoon sat down and and pass the laws to get rid of them but you couldn't do that when you talked about um the goods and services s now uh Sri Lanka also has recently widened we have a vat system and there were lot of exemptions uh in the v system we have none right you have none yes so there are people arguing in Sri Lanka that you should have differential rates that you should have exemptions Etc but you took the decision everything flat rate of GST of 10% what was your

00:45:04 - 00:47:06
thinking why should it be for on everything no exemptions well it's fair isn't it uh and it's simple uh and if you don't have so at 10% let's assume I put it in introduced at 10% and we got $1 billion as soon as I if if if I said um I will um not have it on food L for example that's what happens there you have to have it at a rate of 13 or 14% on everything else and it's crazy because the government say needs 10 billion the best way to do it is do a flat rate and uh it's simple if I'm if

00:46:03 - 00:48:00
I'm uh got to pay my um um GST if it's a flat rate of 10% all I need to do is go down my bank statement add up all the sales I've made and pay the government 10% but you know if if you have exemptions you can imagine a supermarket who um is selling 100 million uh a month uh all of a sudden um don't need to pay it on um apples or oranges well it's just crazy I I'll give you an example the diplomats in in New Zealand came along and they didn't want they don't pay taxes and they didn't want to pay GS and

00:47:03 - 00:48:55
I just told them go away and they pay it so uh one of the things that when you have exemptions that it distorts relative prices so you know some some goods are advantaged over other Goods yeah absolutely that's another reason uh but but you keep it flat and low and um why you know if you you have politicians um making decisions uh on a lower rate for item a uh but an increase rate on Item B what you avoid all of that rubbish and it's worked well very well you have the odd person who wants to

00:48:01 - 00:49:47
make changes but not too many I was uh reading oecd document on consumption taxes and I noticed that uh the concept there's a metric called the vat ratio and New Zealand has 100% that means that you have uh GST across everything do you have GST on Financial Services no that's a one thing we couldn't work out um but uh they um they can't claim it back on certain items uh they're expenditure so you know we just could not find and we tried find a way of doing it on financial services so Sri

00:48:54 - 00:50:02
Lanka I have read the literature on this the problem I think is the input credit problem because otherwise every depositor will have to be registered but Sri Lanka incidentally has something called the financial V8 so you don't pass it on but it is imputed on the value addition then there is a tax impos so what happens is that the net interest margin Etc expands to Encompass that well the banks don't pay it if you on but they don't they they buy a lot of goods that they don't claim

00:49:28 - 00:51:30
black necessarily the um their import costs when it comes to direct taxation income tax you also have been a proponent that uh of a flat rate am I correct instead of a progressive system uh well yes and no I I was uh wanted a flat rate and in fact uh we produced a flat rate until I had my problems with David longy of 23 cents but it was we had really had two rates we had zero and 23 cents so you had a sister I had a system where families they didn't pay start paying the 23 Cent until say they' earned

00:50:28 - 00:52:24
$25,000 so there was in one sense of uh two rates n and um and 23 so what why did you propose a flat trade not a progressive system because the argument goes the people who argue for a progressive system says the rich people should be paying more more taxes and that is the argument for progressivity well what I see I mean everyone should pay tax but what the basis of having the zero was that people people you want them to earn income in order to look after themselves so if I'm a couple and I'm

00:51:29 - 00:53:18
got four children then for a couple and four children to live they might require $25,000 or an estimate and so they start to pay the flat rate from 23 c a single person can start you know from one so sir Roger that that I understand that you have a minimum threshold but why didn't you want the Richer people the high income earners instead of paying at 23% to say maybe pay at 40% well I I think at the end of the day they're going to pay a lot more anyway are they not uh and they every and it's an incentive for

00:52:22 - 00:54:13
them to earn more I I should tell you U maybe I can say this Trevor declean who was my associate uh Minister he was not in the cabinet but he was minister of Revenue and he was the person who put all my tax legislation through select committee and I went with him one day or one evening we I had a new business had been opened and I'd opened it but in the evening Trevor de clean um was the uh after dinner speaker they had an evening where they food and wine Etc he was there after dinner speaker and quite a

00:53:19 - 00:55:03
character tror and and this we had reduced at that point taxes down from 65 down I think to maybe 48 and then later on we did to 33 and he said we've lowered taxes we've done that and he said the money's just flooding in and the third floor it pouring in and that was true even though with low the tax from 66 to 33 we got more money in door and then he said the only problem is we send it to the down from the sixth floor to the fifth floor and they flush some of it down the toilet character so when you uh reduce

00:54:14 - 00:55:44
the rate you also re removed many of the deductions right [Music] um o you know I can't think of any we may well have done if if there were if there were what I would call privilege deduction they would have gone but I can't actually think of any if I can move on the sixth principle let the dog see the rabbit let the dog see the rabbit people cannot not cooperate with the reform process unless they know where you are heading go as fast as you can but we predictable give them notice by spelling out your

00:55:04 - 00:56:44
objectives and intentions in advance where programs can or will be implemented in stages over time published a timetable upfront um would you like to elaborate well it really is important if you want people to cooperate the more uh notice you can give them of the changes uh the better for example an example of that would be when we uh reduce tariffs so we published a 4year program said tariff is say 100 it's in the end of the first year it's going to go down to 70 the end of the second year

00:55:56 - 00:57:30
it's going to go to 50 end of the third year it's going to go to 25 and the fourth year it's going to go to 10% or whatever or or zero and so that gave people time uh to adjust it gave people the capacity to think about whether they wanted to stay in the business they were in take a manufa urer a manufacturer would then make a calculation by say I've got 60% protection now I'm in four years time I'm only going to have 20 so they might decide to become an importer rather than

00:56:42 - 00:58:06
the manufacturer or they say I can make changes and I can still be in business in fact I can become an exporter or whatever but when you give time say you upfront indicate how you're going to do it don't you give space for vested interest to organize and rally and try to stop the process oh they did they tried that for a while but they gave up we used to have people in Wellington who were there lobbying on behalf of say that car importers or someone else but they gave up and in the end that most of

00:57:25 - 00:59:05
them felt it was fair so long as you're even handed um you've got to remember that whilst a change some of these changes might have adversely impacted uh a particular industry though that same industry benefited from the changes that were made in other areas so they had a vested interest you know once you're you the change You've Lost Your Privilege you actually become an advocate for everyone else to lose their privilege because you that's the only you you win you're a winner so so what is the trade regime

00:58:17 - 00:59:49
like now in New Zealand you don't have import tariffs on many items is it completely taken away oh no we still have um tariffs I I don't know that look I'm not really up to date uh I don't think uh tariffs have been reduced dramatically over the last few years except when we've uh you know gone into free trade groups which New Zealand which New Zealand supports very strongly your seventh principle is never fall into the Trap of selling the public short do not mistake fears of the

00:59:05 - 01:00:54
politicians for ignorance lack of guts or lack of realism on the part of the voting public very profound words why do you say that well the you need to tell the public if you're going to get the public cooperation you need to take them into your confidence you need to tell the public what the problem is and how it arose you need to tell the public what damage it is doing to their own uh particular interest you want to need to tell the public what your objective are are in making the change and how you intend to

01:00:00 - 01:01:32
achieve those objectives you need also to tell them what the cost and the benefits of the action will be and why why your approach is better than what exists at the present time so um you know taking the Public Public make lots of decisions if decision within the family Union and generally if you're open and honest with them uh and tell them the truth they go along your eighth principle don't blink public confidence rests on your composure structural reform in New Zealand involve ministers in making some

01:00:46 - 01:02:01
of the most radical decisions announced to the public for the 50 years or so relax matter of fact composure is essential every time you face the public their confidence is always based on yours so it was like uh when I first did Toast Masters they said Importance of Being Earnest so I think that is the essence of your argument here that you should believe what you're saying oh absolutely well if you don't why would anyone else and you've got to present it uh and if um people start to um come

01:01:24 - 01:03:06
back uh at you uh you can't afford uh to Blink I mean that I mean I can't actually think about where when we change but when with representations that maybe small changes when it went in the tax area when um we took the legislation through but the truth is if you blink then why should the public have any confidence in your program at all so sir Roger I mean if I can probe this a little bit about your own personal convictions I mean you were a revolutionary reformer in a time when this was not in Vogue were there

01:02:13 - 01:04:18
specific things in your life or your surroundings that made you like this no not really um I think uh over my I learned a lot I went into politics in 1969 uh I became Finance uh um minister in 1984 I think I I learned a lot during that period um and became more familiar with some of the economics of choice and competition um Etc and uh I I wasn't tribal in in the sense that a lot of people are both in the conservative party and in the labor party uh they're tribal um and it's sort of

01:03:19 - 01:04:48
um right or wrong uh I'm going to support a particular Viewpoint so sir Roger you also you you also argue about what a traditional labor party was I mean you in your opening you said the labor party represented the interest of unions but in your paper you really say that the labor Ordinary People and what matters to them are they also consumers so they should as consumers get a fair deal oh absolutely um well I mean the labor party was formed at uh what in 18 whatever uh and it was formed um out of

01:04:02 - 01:05:30
the trade Union uh it it changed even in 1969 um it did represent working people uh but uh and the Trade union were still active within the labor party but they but there were a lot of other uh views at as well I don't know whether you are familiar with the work of the McKenzie Global Institute but they B bought out a seminal piece called The Power of productivity and one of the key messages that they gave is governments should put the interests of consumers first why is it that governments put the interests of

01:04:46 - 01:06:42
producers first well we I I actually formed um when I left the labor party um at New Zealand which was the association of consumers and tax payers so we saw the role looking after the interest of the taxpayer and the um the consumers the consumers and and taxpayers and um in the end of the day um I I think uh that's basically uh what political parties should be about they're not about representing one particular interest group you look after consumers which is everyone but you also need to have uh

01:05:44 - 01:07:43
pay a lot of attention to the taxpayers the people who are paying to make sure that to the extent the government involved uh this fairness in in who pays um in and of course I would argue that that or our goods and services tax which is flat rate across the board uh is a fair tax and and I would also Advocate uh understanding what any family or individual needs you to in order to live reasonably comfortably and they pay tax beyond that level so I'm quite keen on a zero uh rate up to a level where the person can look

01:06:44 - 01:08:16
after themselves and they pay into the government on the money they earn beyond that which means that the higher income are going to pay uh by Far and Away the most when Australia did lot of Reform uh they set up a productivity commission uh does New Zealand have a productivity commission and was that set up when you were in office they did they did uh we did but we've just got rid of it um the main reason we got rid of it we had um well I better be careful the person who was the head of it uh

01:07:31 - 01:09:08
was um supposed to be an economist but I found I I probably agreed with him one once out of a hundred and the new government have decided they just get they just got rid of it I'm not sure that that was the right reaction um but uh um I think they wound it up rather rather than just move the gym so the ninth principle is incentives Choice Monopoly get the fundamentals right a sick economy cannot be regulated back into Health economic dynamism is the liberated energy of people at every level personally choosing and using

01:08:19 - 01:09:46
opportunities that benefit them government's role is to create a framework that widens their opportunities for Choice improves the incentives to productive activity and sees that their gain benefit society as a whole so this is a very uh like a social market economic thinking that you leave it to the market economy AB absolutely yeah we people need to there needs to be competition there needs to be in Choice uh we need to understand that incentives matter we need to understand that there's no free lunch we need to

01:09:03 - 01:11:20
understand that volun uh exchange uh is what promotes uh economic uh progress um all of those things are are are important we need to understand too I think um you know what what of the major um sources of economic progress uh i' put in there obviously the things like uh low tax rate free trade um monetary stability and having an efficient Capital Market competitive markets uh absolutely um freedom of Exchange um and private ownership all those things are fundamental um to a a prosperous economy um governments are there to do

01:10:11 - 01:12:23
those things that the private sector can't um like defense um um and um um you know looking after prisons uh things of of that nature uh after that uh unless government can do it as efficiently as um the private sector they shouldn't get involved um in terms of health there are obviously areas of Health uh with the private sector uh um wouldn't do it because they couldn't earn any Revenue by doing it but uh we need um to fundamentally think about what drives productivity what drives uh investment and and get on with

01:11:16 - 01:13:01
it you know your your beliefs uh I think fundamentally are that uh people should be self-reliant and um incidentally Singapore uh I said incidentally Singapore well I Singapore model is is close to where I would be uh Singapore had a social compact in its early days where its government was pushing its population to be self-reliant um did you by any chance ever get an opportunity to interact with Leon you I did on one occasion I mean he's a remarkable man uh and um Singapore uh today's singaporeans uh I I'm

01:12:10 - 01:13:50
sure um would you know think highly of him they have to you know and he had couraged too and he was prepared to tell people the truth there was a story that I heard um it was in the health area related to medication and they were free and he changed that and started to charge for medication and the reason was he said if I went to go to someone's home and I opened the cup in the bathroom there's all this medication people um haven't taken that has been prescribed for them he said if people pay for her they take it

01:13:01 - 01:14:34
you give it to them free they don't necessarily so he was prepared to tackle some of the tough issues as well he's a great man did you interact with any other world leaders who impressed you who fundamentally transform their countries oh I think well I I I don't know of anyone else uh who changed it in the way uh um lean you well I mean New Zealand's standard of living uh in 1960 was at least double what Singapore today their standard of living is at least double what New Zealand is and the

01:13:50 - 01:15:43
difference between the two is they've made fun mental changes the ACT party which I formed in 1993 with Derek Quigley who was a member of the national party so we' been on opposite sides of the fence in Parliament um that was basically based around um pensions Health Care uh getting housing people being able to do all all of those things for themselves and we created the position uh in other words um savings not taxation now that party uh unfortunately got into the hands uh policy wise of the

01:14:46 - 01:16:32
libertarian uh libertarian group who basically uh didn't believe in welfare at all uh and said if you don't have welfare uh well there'll be Charities that will look after people um after a hundred years I'm not sure about that uh and and uh but and so act moved off the policies that we had of super annuation for everyone health care for everyone um and and some other change education um being able to go wherever they like and and um but you know they didn't replace it they just um went to

01:15:39 - 01:17:21
where the conservative and labor party were more government so your 10th principle when in doubt ask yourself why am I in politics I think you spoke a little bit about this at the beginning of our conversation can you further elaborate well I I I think it is important Point why are you there are you there because for your own ego are you there for the power or are you there really to help people and if you're there to help people then be honest and up front uh with them and um and you know follow policies that you know uh or

01:16:30 - 01:18:12
quality policies that you know will work and it also involves a bit of Courage uh having some Vision having some imagination but also courage if you lose so be it but be honest and and and determined to do what you know to be the right thing and quite often politicians know what the right thing the problem is they don't do it because they'll lose power and they like the power so sir Roger um Sri Lanka is going through an enormous economic crisis it's a Once In A generational crisis economy has

01:17:22 - 01:19:04
contracted almost almost 15% um you know we had 70% inflation and we are in a critical juncture in our history post Independence history that we can make the type of changes that you made in New Zealand that put it on a different path uh what is your advice to us elect politicians who who will do the job they are elected for you need you need you need people who in a way have other options and don't need politics uh you need to elect people who essentially know what needs to be done and are brave enough to do it I I think

01:18:16 - 01:20:11
if you can design it in a way where the most vulnerable people are protected largely protected uh you're going to uh uh have an easier ride through but um you know I don't know enough about circumstances to be specific but um it won't get any easier and you do need to to do it uh in you know in a with speed and determination I mean we got elected and in August 84 and as and before we had actually sworn in we had made a decision that we're going to get rid of rent controled interest rate C price controled we were

01:19:14 - 01:20:54
going to devalue by 20% and a whole lot of other decisions and we did that day one and I would imagine there are a whole list of things which uh Sri Lanka could do which will would help uh not just over the long year uh but also in some ways on the short term because one of the things that helped us once we started to make those sort of changes we got an awful lot of support from people uh um businesses and foreign individuals who were prepared to invest in New Zealand and did and they if they see that the

01:20:04 - 01:21:36
government is determined and is consistent and doesn't back down every time someone throws you know brick at them uh they'll they'll you'll find there's a lot of people offshore who who would come support I'm sure of it you are a senior person and when you look back at your life what is your legacy what would you like to be remembered for uh I hav't really thought about but I'm not very good at at um dwelling on things like that uh I I think still be a mix I mean there are still people who

01:20:52 - 01:22:35
who think think I'm the devil uh there are other people who in New Zealand who think I saved New Zealand um I'm not sure what that mix it um but I I think uh history will be maybe kinder to me than some people were in the 1980s because I think maybe I should uh maybe I my legacy in a way is the changes I made are basic still in place and and that is proof I think or evidence that we did the right thing and you know not many governments can say that 40 years later the legislation they put

01:21:43 - 01:23:07
in place uh is is still in place it might have changed slightly but the lower taxes the lower tariffs and all those things uh have remain uh in price sir Raju Douglas this has been a fascinating conversation thank you very much for joining advocat today you are indeed a unique person and I wish you the best of health and happiness thank you [Music] sh