The fulcrum on which individual liberty and government control in our lives are balanced is, in New Zealand politics today, reasonably firmly founded in favour of freedom.

     Dig beneath the surface, though, and you'll find remarkable anomalies still remain. An economic crisis 20 years ago enabled some determined politicians, supported by some key business leaders, to initiate reforms that now give New Zealand consumers the freedom to purchase goods in a global market. You don't need to travel far to realise that most items can be bought as cheaply in New Zealand as anywhere, at least in the developed world.

     Sadly, I can't say the same for New Zealand producers as political inertia in reform elsewhere continues to see our exporters facing huge hurdles in selling our products in the global marketplace.

     The fact remains, however, that New Zealanders today can choose to buy from what the world has to offer at generally competitive prices. They are free to invest their money wherever they are able around the world. And no political parties are seeking to change these things except for those on the extreme left in New Zealand, particularly the Green Party.

     New Zealand today would be towards the freer end of the spectrum, globally, in terms of a free market for goods and investment.

     In terms of personal freedoms, New Zealand would be politically more mainstream today. Historically, we were the first to give women the vote. Our treatment of our indigenous people and race relations in general were the envy of many in the world. However, homosexuality was still illegal in New Zealand 20 years ago and even today, efforts to provide all New Zealanders with similar protections and opportunities under the law remain highly controversial.

     But it's in some sectors of the services market where New Zealand trails woefully behind much of the world, and the political appetite for dealing with it has yet to grow.

     Some progress is being made. A few years ago some Australian eye surgeons offered to perform cataract operations in New Zealand at about half the price being charged by local eye surgeons. Somehow, the local eye surgeons were able to block out that competitive offer. The matter has since been dealt with by our Commerce Commission and the penalties dispensed will hopefully discourage further attempts to limit freedom of choice in the health services market.

     But it is in our education services where the greatest anomaly today remains. In New Zealand, the Government will fully fund your child's education only if you send your child to a school the Government owns. With the exception of a few largely Catholic schools, if you dare to send your child to an independent school the Government will subsidise barely a quarter of the cost and pocket the rest of the taxes you’ve paid to support schooling in this country. Worse still, the current government has imposed a cap on the total pool of funding available to subsidise independent schooling, thereby limiting diversity and freedom of choice.

     The tragedy of this is that education services are not hugely different from other markets where competition has been proven to enhance both affordability and quality.

     We shouldn't be surprised to see New Zealand now drifting down educational rankings in the OECD as other countries allow more diversity and choice and New Zealand maintains an almost 96% State monopoly over the provision of schooling.

     One can't help but smile at the paradox wherein Communist China, where children's schooling is to be funded regardless of whether or not the State owns the school, seeks recognition as a "market economy" from New Zealand, while New Zealand continues to exclude the market from our schooling services.

     And so it can be seen that while the fulcrum between government control and personal liberty may be founded more firmly in freedom, there is no great consistency across the sectors that contribute to our wellbeing as a nation and our individual quality of life.

     To help build an understanding of where the politics of liberty lie in New Zealand today, I'd like to share with you a little of my personal journey.

     It is exactly 20 years since I entered Parliament in July 1984. At the start of the current parliamentary term, no member of this Parliament had served as a Cabinet Minister longer than I had. My roles in the governments of the '90s were not totally inconsequential, having served as Minister of Education, Minister of Agriculture, Ministry of Forestry, Minister of Tourism, Associate Minister of Immigration, Deputy Finance Minister and Minister for International Trade. I Chaired the APEC Trade Ministerial in 1999 as well as one of the main working groups of the World Trade Organisation at Seattle the same year.

     I must say I didn't enter parliament as a "political junkie". I'd only been a member of a political party for 3 years prior to my election. I was previously an agricultural scientist and, just prior to entering parliament, Marketing Manager for the New Zealand Dairy Board for all of Central and South East Asia. I certainly wasn't a disciple of Hayek and hadn't even read "The Constitution of Liberty".

     I take no great pride in confessing I wasn't particularly outraged at the extraordinary government controls that existed in New Zealand at the time, that is 1984. And so the enormous value I now place on liberty, 20 years later, is not driven by philosophical ideology, it's not driven by what someone has taught me, rather, it is driven by hard experience as a Cabinet Minister observing first hand what kind of policies work and what kind don't. My work as Deputy Finance Minister and International Trade Minister also meant I spent time at the OECD as well as the World Trade Organisation and saw firsthand the impact of government policies around much of the world.

     When I came into parliament in 1984, New Zealand, by OECD standards, had some extraordinary restraints and controls over economic freedom.

     There were only two TV channels in New Zealand and the Government owned them both. The Government also owned pop music radio stations, the telephone system, the railways, the airline, a fertilizer factory, hotels, banks, insurance companies, a shipping line and a steel mill. Maybe in those days that wasn't so unusual but it did represent a significant hunk of the economy and, as a television satire of the day, Gliding On, used to highlight, it wasn't that efficient. Shifting house might mean a wait of several weeks before the Post Office could reconnect your phone.

     In hindsight, it was the government interventions in the economy and the way one led on to another, that perhaps caused the greatest damage.

     Following the second oil shock in the late '70s, the value of the New Zealand dollar became an issue. It was controlled by the Government of the day and some would argue held too high.

     That meant exporters struggled to survive and so the Government intervened with export incentives and a supplementary minimum prices scheme to support farmers who, of course, derived most of their income from exports.

     Those incentives and subsidies grew to consume almost $2 billion of taxpayers' money and so an extensive borrowing programme had to be embarked on to cover the deficit. The public external debt grew from less than a billion to over nine and a half billion dollars, and almost half of all private investment in New Zealand was borrowed by the Government.

     The money supply was expanded, claimed by some to be up to 26% in one year, with the consequent impact on inflation. To try and limit that inflation the Government introduced a freeze on wages and prices and, finally, controls on interest rates too.

     Maybe it wasn't all bad. In 1980 we did allow Saturday shopping.

     The incoming Labour Government of 1984 implemented a rapid programme of economic liberalisation, and you'll hear much more about that from Sir Roger Douglas.

     Some have questioned whether the sequencing of the reforms led to the best possible outcomes, but the impact on the overall prosperity of most New Zealanders of those reforms initiated by my political opponents in 1984 and carried on by my government colleagues in the 1990s has been spectacular. New Zealand's underlying growth rate has doubled and all New Zealanders have benefited from that.

     While in the '90s and during the first term of the current Labour-led Government, some politicians of the left continued to criticise the market reforms of the late '80s and '90s, by and large they have not moved to overturn them. The rhetoric has even changed. Whereas we used to hear tirades from the left of the Labour Party and the Alliance, now the Progressives, against opening our markets through further trade liberalisation that has now receded with only extreme left, the Green Party making such utterances.

     Certainly, a belief has continued in the centre/left of politics, not just the extreme left, that government intervention remains necessary to help prevent the poorer in society from missing out on the benefits of overall growth. The Labour Government's "flagship policy" Closing the Gaps, initiated in 2000, was implemented with huge resources to try and close the economic and social gap between Maori and non-Maori New Zealanders.

     Just as hard experience taught me as a Minister, so is experience teaching the current government that throwing even large amounts of resource at these kinds of policies produces limited results. The "flagship policy" has been abandoned with little to show for it beyond the usual stories of wasted money.

     In that regard it's instructive to look at the work of David Dollar and Aart Kraay of the World Bank. They published in 2000 results from a study covering 80 countries and extending over four decades in which they examined that very issue of the gap between the rich and poor. They analysed the extensive data to see whether it could be established that the rich benefit from economic growth more than the poor, and whether globalisation in recent decades has changed that relationship.

     To the chagrin of the interventionists, their detailed study showed that with economic growth the incomes of both the rich and the poor rose simultaneously at about the same rate. Globalisation did not change that nor did openness to trade. All the latter did was clearly improve economic growth to the benefit of both the rich and the poor, but had no discernible impact on distribution.

     The most compelling finding to emerge from that World Bank study was that only two government policies appeared to have a systematically biased effect on the distribution of income as well as on growth in incomes overall.

     Those two government policies, out of all the range of interventions that ingenious well meaning governments pursue, were first,

• Reducing inflation and, second,

• Cutting public spending.

     Both those policies were shown to consistently increase growth, as might be expected, but in what to many might have been a counter-intuitive result, they also improved the distribution of income, benefiting the poor twice over.

     On deeper reflection, we probably shouldn't be surprised by these findings. Clearly the wealthy are more able to protect themselves from the ravages of inflation, as their overall wealth is less dependent on wages, and increased government spending almost inevitably ends up in the hands of the wealthy.

     One of the more gross government interventions in the world today demonstrates that quite powerfully, and that is the Common Agricultural Policy of Europe. Research shows that 80% of that massive 130 billion USD government intervention ends up in the hands of the 20% wealthiest farmers. What's more, being a tax on food, it hits the poorest families hardest.

     Perhaps worst, is the impact of the Common Agricultural Policy on the poorer people of Europe through its negative effect on overall economic growth. Had those billions of dollars over the years been invested in growth areas of the European economy by the private sector, the impact on jobs across Europe could have been huge.

     And since this is a world forum, this is where I want to challenge my fellow politicians internationally. The protectionist policies of so many politicians in the developed world are a stain on the morality of the world.

     In the poor West African nation of Mali, 3 million people, that is a third of their population, depend on producing cotton for their survival, and I mean survival. But 25,000 cotton farmers in the US are paid almost US$4 billion a year in subsidies. Some might say "ah, but the US gives Mali US$38 million a year in aid"! The problem is those massive US cotton subsidies cost Mali US$43 million a year in lost trade.

     What’s obscene is that those agricultural subsidies in the developed world are two thirds of Africa’s total GDP. Abolishing those subsidies would return three times all the official development assistance for developing countries put together. When UN Secretary-General, Kofi Anan, wanted US$10 billion to fight Aids, that was just 12 days of the developed world's subsidies to farmers.

     Sadly, internationally, politicians have been less ready to accept the benefits to their people of freeing up international markets than they have been prepared to accept the vested interests of protected, privileged groups.

     Right from the early experience of reducing famine through repealing the government controls imposed by the Corn Laws in Britain in the 1840s, through the negative impact of trade protectionism in the lead up to the Great Depression of the 1930s, to the job losses resulting from the recent steel tariffs decision in the US, one would think politicians would see only too clearly the stupidity of excessive government control and protectionism.

     In understanding and acting on this, I venture to suggest New Zealand politicians are towards the leading edge of liberalism on this issue in the world. An interesting question is – why?

     Some could argue it's because New Zealand has such a small domestic market we're relatively highly dependent on international trade and, therefore, understand the value of open markets.

     It could equally be argued that our basket of goods traded internationally is heavily weighted towards agricultural products. That means we face higher barriers to the freedom to trade than most other developed countries. For example, if all our exports went to Japan, we'd pay an average tariff of 50% compared with the US and the EU, which would pay less than 2% if all their exports went to Japan.

     And it's not just Japan. If all our exports were to go to Europe we'd pay an average tariff of 45%, while Japan and the United States would pay less than 6%.

     Clearly these realities do impact on the attitude of most New Zealand politicians to trade liberalisation and market freedom. And it also helps explain why governments of both the left and the right in New Zealand have worked pretty assiduously towards opening and freeing up markets at bilateral, regional and multilateral levels.

     But I'd like to suggest there is another phenomenon that in my observation affects the political attitude in New Zealand towards liberty and freedom.

     Because New Zealand inherited the Westminster system of parliamentary democracy and government, many politicians, like me, have not just represented a local constituency and the particular interests of that constituency, but we have also had to face up to the responsibilities of Executive Government. In the United States, of course, the system is different. Members of the Congress, the Legislature, have only the responsibility of representing their local constituents. They do not have to individually share the responsibilities of Executive Government.

     It's been my experience over some years in international politics, that while the United States Administration may be in no doubt about the benefits of market opening, trade liberalisation and economic freedom, they can move no faster than members of Congress will allow, members whose priorities, through the need for frequent re-election, focus back on the interests, sometimes sectional interests, of their constituents.

     I can't help but wonder were that to have been the case in New Zealand over recent years, whether New Zealand would have made the same progress in embracing the benefits of market liberalisation. The fulcrum in the balance between government control and liberty would not have shifted as far to the right as it has in the past 20 years had it not been for the fact that a significant proportion of our politicians have had to face the responsibility of the impact of policies on the nation as a whole rather than particular constituency interests.

     Naturally, having offered that thought, I invite challenges as to why that has helped in achieving wider acceptance of the liberalisation of markets for goods in New Zealand and yet not achieved the same shift in the political middle ground for services, including education.

     Many will remember the hue and cry in New Zealand just a few years ago when the OECD was exploring its Multilateral Agreement on Investment. The outrage was totally inconsistent with the benefits New Zealand has seen from liberalisation in trade and reinforces my earlier thesis that current political thinking tends to be overall more liberal, yet has moved far less in the liberalisation of services.

     Whereas I would argue that the economic crisis of the early 1980s and the benefits of economic reform and trade liberalisation have been pretty plain for all to see, the same cannot be said for education.

     By 1990, the only obvious crisis in education was our participation in tertiary education and in that sector liberalisation has seen us go from the bottom of the OECD to near the top in that regard.

     But it’s in our school sector where our international decline has been more gradual, leaving the need for reform far less apparent and the success of alternative, more liberal policies, less obvious.

     However, as we look to the future, education probably will have the greatest impact of any endeavour on the ability of individuals to gain the full benefits from liberty and freedom. It will have the greatest impact on prosperity and wellbeing.

     Add to that lack of sense of crisis in New Zealand schooling, the fact that there is a 96% State monopoly and an associated hugely powerful teacher union movement, and the challenges facing the reformer are great.

     The balance between politicians' responsibility through Executive Government to the nation at large and their accountabilities to their local constituency is different in this case. It's no longer a local constituency altering that balance; it is a powerful national union confronting Executive Government at a national level. The teacher unions have been far more successful in preventing liberal reform than were the trade unions in preventing reform of the wider economy. Even they could not ignore the economic crisis and job losses of the early ‘80s.

     What’s more, the benefits of improved education take much longer to be seen and felt than the benefits of increased access to cheaper consumer goods and lower input costs.

     While the liberalisation of schooling has trailed far behind other economic liberalisation, just as communism was doomed to failure, in a globalising world, so too will a State monopoly in schooling eventually find it impossible to keep up with more rapidly changing needs and diversity in demands. Both New Zealand and the United States with significant State monopolies in schooling are starting to perform less well in international comparisons.

     And so to today. While it’s fair to say that the current Labour-led Government has supported moves towards greater social liberty, across the wider economy we’re seeing a pause with more centralised controls being imposed in both the labour and educational markets. While the fulcrum has shifted to the right overall in the past 20 years, there remains a significant difference in view between the main political parties of the centre/left and centre/right as to the value of greater economic liberty.

     The final question that should be addressed is the impact of MMP on the politics of liberty in New Zealand. Mixed Member Proportional Representation came in in 1996 following a very close referendum. Its impact hasn’t been clear cut as, on the right, the Act Party argues the benefits of economic freedom and liberty, while on the left the Green Party strenuously opposes economic liberalisation but does support greater social liberty.

     In the centre the New Zealand First Party often argues for greater government intervention while the United Future Party seems more preoccupied with the damage it perceives greater social liberty could do to traditional family structures and values.

     When you throw all that into the melting pot of Parliament, it would be difficult to argue that MMP has shifted the fulcrum between government control and greater liberty significantly one way or the other.

     What it has done though is create greater political inertia. For those who see the need to free New Zealand still further from the shackles of State control, that increased political inertia with MMP represents a significant impediment to further progress.

     In conclusion, let me complete my personal journey. If there's one thing my 20 years in Parliament and many years as a Minister have taught me, it is that despite all the best intentions and all the political goodwill behind so much government intervention, much of it fails to deliver the benefits hoped for, and too often ends up standing in the way of our people achieving the things they've dreamed of.