The Treasury

Global Navigation

Personal tools

4.2  Relevance of Empirical Evidence to New Zealand [19]

Much of the evidence on the growth effects of governance and social cohesion comes from large cross-country data sets that include both developed and developing countries. The differences across countries, in terms of the details of their institutional and social arrangements, necessitate caution in interpreting the relevance of the results to New Zealand – although it is possible that a broad panel of countries will generate a sufficiently strong signal to overcome the “noise” in the data created by inter-country heterogeneity. In fact, it might be argued that a wide sample of rich, middle-income and poor countries has the advantage of incorporating a wider than usual range of variation in institutional variables affecting growth. This may make it possible to draw more accurate inferences about the relative importance of different factors for economic growth than is possible when looking exclusively at richer countries. For example, evidence on the importance of the rule of law, which shows up from large cross-country samples, serves to remind policy makers in richer countries of the need to maintain and reinvigorate the framework of law and regulation which enables economic life to thrive, and which may often be taken for granted.

It does nevertheless seem likely that developed countries such as New Zealand are located on the flatter part of any curve relating economic and social outcomes to the quality of governance. Our institutional heritage gives New Zealand reason to be confident of the basic soundness of its underpinning institutions. New Zealand’s rating on international surveys, such as the quality of institutions in the Global Competitiveness Report, and the perceived absence of corruption as measured by Transparency International’s Corruption Perceptions Index, lend support to such a conclusion. [20]

It may be, however, that continual attention to the quality of governance is most important in developed countries to prevent a country falling behind in terms of average material standards of living. As in all areas, it also seems likely that a reputation (in this instance, for high quality governance) takes time to build but can be quickly eroded. Furthermore, governance reform has been high on the agenda of most developed countries in recent years. This suggests that New Zealand needs to keep making progress in order just to stay still in relative terms.

These broad observations on the relevance of governance to New Zealand’s prospects are strengthened considerably by the challenge of establishing a more solid basis for inter-group co-operation and cohesion in New Zealand. In particular, the large size and over-representation in lower socio-economic groups of the indigenous Maori population, and the Maori sense of historical injustice, place New Zealand in an unusual position in comparison to many other OECD countries.

There is also evidence of significant diversity in underlying world-views across different cultural groups in New Zealand. The evidence comes from a small number of national surveys conducted over the last fifteen years or so, chiefly the New Zealand Study of Values,which has seen three surveys (1985, 1989 and 1998).[21]

Webster has analysed these surveys and, on the basis of respondent self-identification, considers there are at least six distinct cultures in New Zealand, which he labels (in descending order of size) New Zealander, Pakeha, European, Maori-Maori (Ethnic Maori who identify as “above all a Maori”), Maori-New Zealander (Ethnic Maori who identify as “above all a New Zealander”), and Pacific Peoples. [22] On the basis of an analysis of the patterns of values revealed in responses to the more than three hundred questions in the surveys, Webster argues that the presence of these distinct cultures is further borne out by distinct clusterings of views across these groups.

Of particular interest in the current context is evidence Webster presents on divergent views towards various aspects of governance and social norms, which he suggests illustrate the potential for future social conflict in New Zealand. For instance, on the basis of Webster’s analysis. [23] Strength of support for democracy: while 73% of “Pakeha” considered a strong leader who does not need Parliament to be very bad, only 34% of “Maori-Maori” thought so; while only 13% of “New Zealanders” thought democracy was ineffective due to poor decision-making, 47% of “Maori-Maori” thought so; and while 84% of “New Zealanders” considered that rule by the army would be very bad, only 59% of “Pacific Peoples”, 64% of “Maori-Zealanders” and 64% of “Maori-Maori” thought so. Support for the Treaty of Waitangi: while only 1% of “Maori-Maori” wanted to abolish the Treaty, 49% of “Europeans” did. Civic morality: while 91% of “New Zealanders” considered accepting bribes in the course of duties to be unjustifiable, only 72% of “Maori-Maori” thought so; while 83% of “New Zealanders” considered claiming unentitled benefits to be unjustifiable, only 47% of “Pacific Peoples” thought so. Interpersonal trust: while 57% of “New Zealanders” considered that most people could be trusted, only 33% of “Maori-Maori” held this view. Confidence in the Police: 84% amongst “Pakeha”, but only 55% amongst “Maori-Maori”.

Of course, while self-identified cultural grouping may be associated with distinct clusterings of beliefs, factors other than culture may be causing these differences. Webster has cross-tabulated the above results by education level, self-reported social class, and household income. Views on the ineffectiveness of democracy were strongest amongst those with only primary education (44%), and lowest amongst those with completed tertiary education (28%). Support for abolishing the Treaty was highest amongst those with only primary education (42%) and those in the lowest income bracket (47%), and lowest amongst those with completed tertiary education (20%) and those in the highest income bracket (24%). Confidence in the Police, on the other hand, was highest amongst those with only primary education (86%), and lowest amongst those with completed tertiary education (75%). [24]

Commenting on these results, Webster suggests that, by themselves, beliefs such as those referred to above may be fairly inconsequential. He considers, however, that the way in which the beliefs are clustered illustrates that there is fertile ground in New Zealand for mutual antagonism and manipulative politics, with the potential for democracy to be restricted in the name of individual freedom or historical rights. “Destabilization will be most conspicuous when the heart of the culture – in our case a belief in democracy – is seriously disregarded. Such is not yet the case in New Zealand, but there are disquieting signals.” [25] He also states: “There is extreme conflict on the Maori rights value, which puts great stress on the core value of respect. It also exposes the fragility of the sanction against violence, since it could be asked whether desecration of rights is such a failure of relationships between people that violence is an inevitable outcome.” [26]

Elsewhere Webster has suggested that the evidence shows there is a quite narrow core value culture in New Zealand. “For example, while the ideal of a fair go for everyone is certainly a piece of our national wisdom, it is held in entirely different ways by different segments….consensus is today not nearer but farther away, and ..the solutions we look for must involve not biculturalism but a dynamic multiculturalism…In this light, the search for common values, while not mistaken, may miss the real question, which is to do with the conflicting values of significantly distinct cultures in this country.” [27]

The existence of a large disadvantaged indigenous minority, and the comparative uncertainty that exists over legitimacy and property rights, may well mean, therefore, that the quality of governance is more important to New Zealand’s future prospects than is the case for many other similarly advanced countries.

Easterly (2000), for instance, draws attention to the potential role of institutions in helping in the management of ethnic diversity. He found evidence that ethnic diversity had a more harmful effect on economic policy and economic growth when key institutions were susceptible to corruption and were incapable of protecting the interests of minorities. Collier and Hoeffler’s finding – that the importance of governance is heightened by the presence of two or three large and competing ethnic groups – also appears to be relevant.

Further observations from the 1998 New Zealand Survey of Values relevant to discussion of governance in New Zealand are [28] 70% of respondents agreed that the country is run by a few big interests looking out for themselves (the corresponding number in 1989 was 54%). 71% rated New Zealand’s political system in 1998 on the “bad” side of the continuum, while only 29% rated the pre-MMP system as “bad”. Only 15% had confidence in Parliament. While 29% had confidence in the public service, this was down from 49% in 1985.

Beyond these considerations based on the reported views of New Zealanders, there are also features of our economy that make us vulnerable to international sentiment about the quality and integrity of public sector governance. These features include a large and chronic current account deficit, and the highest external (total public and private) debt to GDP ratio of any OECD country. The 2000 IMF review of New Zealand concluded that the high degree of policy transparency and accountability is a key mitigating factor limiting New Zealand’s exposure to international investor concern over our degree of foreign indebtedness.[29] From another perspective, a reputation for high quality governance might be a source of competitive advantage, by making New Zealand a more attractive destination for foreign direct investment.

There are, in addition, a number of other risks to the quality of governance in New Zealand. These include the increasing international exposure of our society and economy, including the higher levels of interaction of New Zealanders with people from countries in which corruption is the norm or at least widely tolerated. Relevant also is the deterioration in governance in our immediate region (for example, in Fiji and the Solomon Islands). Possible transmission mechanisms include trade, foreign investment, immigration, tax evasion, and criminal activity.

A public sector management environment with an unusually high level of delegation of authority within central government. Discarding the thick rule-book by which the central agencies regulated in detail the operation of the public sector was a necessary means to creating a more responsive and efficient public service. However, it has placed a premium on ethics and integrity to maintain public confidence in a more decentralised system of government. A number of incidents of corruption and mal-administration in recent years may well have reduced public confidence in the public service (as suggested by survey results). Concerns have also been expressed about a breakdown in the convention that Ministers should defend public servants from attack. [30] This convention is part of a broader set of norms related to the duties of public servants to be loyal and politically neutral. The scope for conflicts of interest given our small size.

The increasing heterogeneity of New Zealand society. A particular risk here is the degree of self-justification that people can advance in the presence of multiple and conflicting norms, for behaviour that breaches previously widely accepted standards. There is a perception that New Zealand is susceptible to large policy swings and policy instability, compared to a number of other developed countries. This may be due to our small size and relative lack of institutional checks and balances – for example, no Upper House of Parliament, few independent public policy think tanks - compared to many countries. Indeed, one of the explanations for the extent of the reforms in the 1980s is likely to be New Zealand’s failure to adjust its policies earlier and more gradually to the changed economic circumstances after 1973.

Public expectations of government by New Zealanders are also probably higher now than a decade ago. For instance, recent discussions with the Voluntary Sector Working Group, as well as Treasury’s more limited contacts with NGOs, suggest there is a demand for a more open and genuinely consultative approach by government.

Beyond these general considerations, that suggest attention to the quality of governance in New Zealand is likely to have pay-offs for economic performance and the quality of democracy, there is a range of specific governance issues warranting closer examination, discussed in the next section.


  • [19]The first three paragraphs in this section are drawn from material drafted by Nick Mays – see Mays and Petrie (2000), pp. 35-41.
  • [20]See World Economic Forum (1999) and Transparency International (2000a).
  • [21]On the latter see Perry and Webster (1999).
  • [22]The two Maori ethnic groups were of approximately equal size in Webster’s sample. Webster also identifies a common core of values, defined as those values on which the main cultures do not disagree, which he labels Kiwi culture.
  • [23]Webster reports the results cited below as being at the 95% confidence level.
  • [24]Source: personal communication with the author.
  • [25]Webster (2001), p. 88.
  • [26]Webster (2001), p. 164.
  • [27]See the “Core values” debate facilitated by the New Zealand Herald.
  • [28]See Perry and Webster (1999), pp. 42, 44 and 47.
  • [29]See IMF (2000), pp. 22-23.
  • [30]See Palmer (2001), pp. 15-16 for discussion of the risks to the quality of public administration in New Zealand from what he sees as an unhealthy recent increase in the tendency of politicians to criticise public servants publicly.
Page top