I got published in The Post, showing the mechanism of nzs failure
https://www.thepost.co.nz/business/360944401/ruthenasia-changed-where-our-money-went-and-we-are-poorer-it
Tadhg Stopford is a historian, high school teacher and small business owner. (I’m on Substack)
OPINION: Ruth Richardson received the Companion of the New Zealand Order of Merit last year. For many New Zealanders, that is hard to reconcile with what followed her “reforms”. It has been 35 years since “Ruthanasia” - changes so disruptive they helped drive the shift to MMP - yet most of us still don’t clearly understand what those policies did to the country.
Is it too early to say they didn’t pan out?
Poverty has risen. Public infrastructure is visibly in deficit. Essentials cost more. Young people leave. Meanwhile, private monopolies thrive. Australian owned banks and supermarkets report world-leading profits from our small market. Mining companies pay very low royalties to extract gold and other resources. Our “blue gold” - water - is exported ultra cheaply too.
What exactly is the “public service” achievement we are honouring?
Public service is supposed to leave the next generation stronger. With reliable hospitals, affordable homes, sound infrastructure and higher productivity. Real public service builds a country that grows more secure over time, not more fragile.
For over three decades we’ve been told “fiscal discipline” means responsibility: shrink the state, trust markets, and let private finance allocate capital more efficiently than government. We were promised we would be leaner, richer and more productive.
Instead, we have record house prices, deferred maintenance, strained hospitals and households carrying more debt than ever.
So it seems reasonable to ask what that discipline has delivered - and for whom.
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But first, a simple question: where does money actually come from?
For many people it’s a surprise to learn that it’s created “ex nihilo”, (out of nothing). As the Reserve Bank of New Zealand explains in “Money Creation in New Zealand”, most money today enters the economy when commercial banks issue loans. In other words, most “money” is bank credit.
Whoever creates that credit largely determines what gets built.
Around the world, countries that treat credit creation as a public tool tend to build things. The United States used national finance under Alexander Hamilton. Germany, Japan and Korea relied on state / public backed banks to industrialise. China still funds infrastructure through large public policy banks.
For much of the 20th century, New Zealand followed the same path of self development.
Railways, power stations, state housing and wartime mobilisation were publicly financed. Public credit built public assets. That is how young nations grow.
Then Parliament suddenly changed the rules.
Between the late 1980s and mid-1990s, the Reserve Bank Act, Public Finance Act and Fiscal Responsibility Act reframed government from builder to bookkeeper.
Investment was treated as “spending”. Borrowing became something to minimise. ‘Balanced budgets’ became the goal.
At the same time, private banks became the dominant creators of new money. And banks, quite rationally, lend mostly against housing rather than pipes, hospitals or water systems.
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Credit follows collateral. Collateral is property. Prices rise. Debt rises. Profits flow to lenders rather than productive investment.
Even our measuring stick reinforces this bias. Statistics New Zealand’s Consumer Price Index excludes land and house prices (because they are considered asset investments) - but they are the very assets most credit flows into. We target consumer inflation while overlooking asset inflation. Meanwhile, cheaper Prada bags, electronics, and holidays further obscure the rising costs of essentials, keeping the RBNZ from reining in the real cost of living.
In older language, those are false weights and measures. I call it the “Treasury trap” - if you measure the wrong thing, you make the wrong decisions; and you get bad outcomes.
Just rule requires honest measures.
The consequences are visible everywhere: boil-water notices, crowded wards, ageing infrastructure, young families locked out of ownership, and tens of thousands leaving for Australia each year.
But we did not forget how to work. Ruthanasia changed where the money goes.
Recent history shows the constraint was never purely financial. During Covid, tens of billions of dollars were mobilised within weeks. When government chose to act, the money was there. The limit is political design, not national capacity.
And that design was advanced by identifiable institutions and interests. Privatisation benefited merchant banks and asset buyers. Business lobby groups argued for shrinking the state’s building role further still.
The result is simple: public capacity shrinks, private lending expands, and families carry debts the state once carried.
Infrastructure falls behind. Privatisation follows.
This is not a left versus right argument. It is about stewardship.
Every successful country treats credit as a nation building tool. We treat it as something to fear while handing its creation to banks for property speculation.
These settings are not laws of nature. They are legislation. Parliament can rewrite them.
Our problem was never that we built too much. It is that we stopped building for ourselves, sold assets cheaply, and now rent them back at higher cost.
The Treasury trap was a choice made 35 years ago. Discarding it is also a choice. Or it would be, if any politician were prepared to offer it.