Rolling Back Gov't: Lessons from New Zealand

When a reform government was elected in New Zealand in 1984, it identified three problems: too much spending, too much taxing and too much government.

We asked some fundamental questions of government agencies. The first question was, “What are you doing?” The second question was, “What should you be doing?” Based on the answers, we then said, “Eliminate what you shouldn’t be doing” - that is, if you are doing something that clearly is not a responsibility of the government, stop doing it.

When we started this process with the Department of Transportation, it had 5,600 employees. When we finished, it had 53. When we started with the Forest Service, it had 17,000 employees. When we finished, it had 17. When we applied it to the Ministry of Works, it had 28,000 employees. I used to be Minister of Works, and ended up being the only employee.

Some of the things that government was doing simply didn’t belong in the government. So we sold off telecommunications, airlines, irrigation schemes, computing services, government printing offices, insurance companies, banks, securities, mortgages, railways, bus services, hotels, shipping lines, agricultural advisory services, etc. In the main, when we sold those things off, their productivity went up and the cost of their services went down, translating into major gains for the economy.

We achieved an overall reduction of 66% in the size of government, measured by the number of employees. The government’s share of GDP dropped from 44 to 27%.

Read more from Maurice P. McTigue (formerly a member of New Zealand's Parliament, and also Minister of Employment) here.