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Ruthanasia, a portmanteau of "Ruth" and "euthanasia", is the pejorative name (typically used by opponents) given to the period of free-market policies conducted during the first term of the fourth National government in New Zealand, from 1990 to 1993. As the first period of reform from 1984 to 1990 was known as Rogernomics after the Labour Party Minister of Finance, Roger Douglas, so the second period became known as "Ruthanasia", after the National Party's Minister of Finance, Ruth Richardson.
Ruthanasia and Rogernomics can be viewed as complementary reform packages implemented by successive governments which were aimed at liberalising the New Zealand economy. The packages came after a period of intense protectionism and fiscal control, particularly under the administration of Sir Rob Muldoon's National government between 1975 and 1984. Muldoon's protectionism had culminated in a three-year wage and price freeze imposed by Muldoon, who simultaneously held the posts of Prime Minister and Minister of Finance, in an attempt to suppress rampant inflation.
Conflict with manifesto
Ruthanasia was controversial as the National Party had fought the 1990 election on a manifesto promising "The Decent Society" and implicitly repudiating the radicalism of the Fourth Labour Government. The Prime Minister, Jim Bolger, defended the move in his memoirs on the grounds that he had been badly misled in the run-up to the 1990 election as to the actual state of the New Zealand economy. Upon winning the 1990 election, Bolger and Richardson quickly became aware of two unrelated financial crises: firstly, that the Bank of New Zealand required an immediate injection of capital to avoid insolvency as a result of the poor performance of a NZ$2.8bn loan portfolio in Australia, and secondly that the outgoing finance minister David Caygill's projection of a modest fiscal surplus was inaccurate, and that the country instead faced a fiscal deficit of NZ$3.7bn (4.8%) for 91-92 if current fiscal policies continued. Current net public debt was 52% of GDP (43% after Telecom sale). By current standards that was not the extreme situation portrayed.
Where Roger Douglas had deregulated the industrial, financial, fiscal and agricultural sectors of the New Zealand economy, Ruth Richardson, under the auspices of a National (predominantly conservative) administration, was able to focus on social services and labour relations. These were sensitive areas which the preceding Labour administration had not been willing to reform in light of its traditional working class constituency.
Richardson and the then Minister of Social Welfare, Jenny Shipley, immediately reformed the Social Welfare programme in the "Mother of all Budgets" by reducing available unemployment, sickness and welfare benefits across the board. In 1991, the National government enacted the Employment Contracts Act (ECA), which effectively demolished New Zealand's post-war industrial relations framework, replacing collective bargaining and compulsory union membership in many sectors with the concept of the individual employment contract. Whilst the ECA did not directly address unions, the practical effect of removing the requirement for employees to be members, and allowing those employees who did want union membership to choose which union they wished to join, dramatically reduced the bargaining position of the unions in the New Zealand economy. This reform of labour laws had already been outlined in the 1990 National manifesto.
Ruth Richardson was very clear, very blunt, very honest about (the ECA's) purpose. It was to achieve the dramatic lowering of wages, very quickly, by allowing the high levels of unemployment to pull the cost of labour down; that the market would determine and an oversupplied market would reduce the price. The other reason, of course, was to de-unionise and that's why the government is in trouble with the International Labour Organization because the ECA doesn't enhance or promote collective bargaining.
Roger Douglas, minister of finance in the preceding fourth Labour government, said (after his retirement from politics):
I think the labour market changes in 1990 were first class. I think, unfortunately, Caygill and the Labour party had let the fiscal situation slip from where it was in 1988 and Ruth put that back on the road.
Long-term consequences: 1993–2008
Internal party ideological tensions also led to the secession of Winston Peters from the National Party caucus and the formation of New Zealand First in 1993. Peters was viewed as an acolyte of Rob Muldoon's protectionist economic policies and had a substantial support base amongst New Zealand's senior citizens and their related lobby organisations.
Peters' erstwhile prominence was due to the other consequence of Roger Douglas and Ruth Richardson's New Right economic policies, which fuelled a movement for electoral reform in New Zealand after Sir Geoffrey Palmer convened a Royal Commission on the Electoral System in 1985–1986. In two electoral reform referenda, the general public endorsed the Mixed Member Proportional electoral system as a response to what they perceived as an unaccountable New Right government.
Despite Richardson's resignation, internal tensions continued to wrack the National Party. Several MPs seceded to form non-viable centre-right satellite parties before the 1996 general election. After that election, the Bolger administration went into coalition with Winston Peters and New Zealand First. It proved unpopular, and party rightists launched a coup against Jim Bolger in 1998. As a consequence, Peters abandoned the National/New Zealand First coalition, splitting his party. National then governed for a further year, with the support of post-split ex-New Zealand First MPs, but the 1999 general election saw Helen Clark lead a centre-left coalition to victory. She would remain Prime Minister for most of the next decade, as National was paralysed by factional infighting over ideology and direction. When National won office again after the 2008 general election, it was reconfigured as a centrist political party, disavowing the 'radical' New Right industrial relations and welfare state and public sector retrenchment of the nineties.
As for Richardson herself, she became a member of ACT New Zealand, her philosophical successors.
- Dudding, Adam (10 July 2011). "Despicable me: Empathy on trial". The Sunday Star Times. Retrieved 4 October 2012.
Ruth Richardson...the architect of Ruthanasia.
- Allen, Patrick (8 September 2010). "EU Debt Crisis - 'Bankrupt' Western Governments Need 'Ruthanasia'". CNBC. Retrieved 4 October 2012.
Ruth Richardson, the former New Zealand Finance Minister whose anti-welfare message and austerity cuts were dubbed 'Ruthanasia'...
- Dickson, Sandra (11 November 2008). "From ‘Ruthanasia’ to ‘dead fish’ – I give you Helen Clark". NewsWire.co.nz. Retrieved 4 October 2012.
But the 1991 ”mother of all budgets” released by Ruth Richardson dispelled these promises by continuing reductions in state spending, and subsequent policies continued where “Rogernomics” had left off – and were quickly dubbed “Ruthanasia” by critics.
- Marcia Russell, Revolution: New Zealand from Fortress to Free Market (1996), ISBN 1-86958-428-7 (based on a 1996 Television New Zealand Television Series)