Ruth Richardson was New Zealand’s Minister of Finance from 1990 to 1993, when she played a pivotal role in the radical transformation of her country’s economy. Since then, she has developed an extensive international practice as a public policy consultant, and serves on the boards of a wide array of businesses in the fields of information technology, agri-business, biotechnology, finance, public policy, and sports apparel.
What happens when interventionism, protectionism, and burdensome government debt hobble an economy? In New Zealand, when this situation could be sustained no longer, two successive governments implemented tough reforms to right the ship of state. As Ruth Richardson recalls in this in-depth interview, she took over from Roger Douglas as Finance Minister and completed a sweeping transformation that continues to serve the island nation well to this day.
It took courage to challenge the status quo, even though the country’s problems were evident, but Richardson believed in the ideas behind the measures. And importantly, people saw that the radical reforms produced some concrete positive results. “Early labour market reform when I first took office yielded the highest rate of job growth in the OECD. I took a huge, huge scythe to public expenditure—halved some welfare benefits—and within a year, interest rates, which had been in double digits when I first took office, were in single digits and falling.”
Also under Richardson’s watch, the government instituted a fiscal framework giving politicians an incentive to pursue the country’s long-term interests rather than short-term political ones: the Fiscal Responsibility Act of 1994. By 1996, New Zealand was one of the few countries running a budget surplus.
Such deep structural changes are not painless, however. The party paid a price for so-called “Ruthanasia” in the 1993 election, and Richardson was replaced as Minister of Finance. But the political reward was to have spent her time in office achieving important change that has stood the test of time: “I went into politics to conduct a free-market insurgency. It was about a status quo that was discredited, and I wanted to be an activist in the cause of liberating the economy and securing a basis of freedom as the principle that would drive all policy.”
Links of interest: Ruth Richardson (NZ) Ltd | Making a Difference