09/07/2025
In 1984, New Zealand faced a crisis.
The government was broke, spending more than it could afford, and agriculture—their economic backbone—was heavily subsidized.
Farmers received roughly one-third of their income from taxpayers. Sound familiar?
Unlike today's politicians who promise gradual reform "with transition periods," New Zealand went cold turkey.
They eliminated virtually all farm subsidies overnight. The agricultural lobby was furious.
Thousands of farmers protested in Wellington, literally releasing sheep on government property.
Critics predicted catastrophe. How could farmers survive without government support?
Surely production would collapse, rural communities would die, and New Zealand would lose its agricultural edge.
The doomsayers were about to be proven spectacularly wrong.
What happened next defied conventional wisdom. Instead of collapse, New Zealand agriculture exploded with innovation.
Farmers who had been producing what bureaucrats incentivized suddenly started producing what consumers actually wanted. Market signals replaced political signals.
The numbers are staggering.
Before 1984: 1% annual productivity growth. After subsidies ended: nearly 4% annual productivity growth. Agriculture didn't shrink as a share of GDP—it grew from 14% to 16.6%.
New Zealand became more agricultural, not less, without subsidies.
Here's the part that would make any central planner weep.
They had 70 million sheep producing meat nobody wanted—so much excess that 6 million lambs were turned into fertilizer.
After reform, they cut the flock to 40 million but produced the same amount of meat, better targeted to consumer demand.
Today, New Zealand farmers get less than 1% of their income from government programs.
Compare that to Japan (40%), the EU (20%), or the US (10%).
They're competing globally without crutches—and winning. Their agricultural exports hit $31 billion in 2022.
The lesson cuts deeper than agriculture. Protection doesn't create strength—it creates dependency.
When you shield any industry from competition, you don't get innovation, you get stagnation. You don't get efficiency, you get waste. You don't get resilience, you get fragility.
This applies everywhere protectionists want government intervention: steel tariffs, tech subsidies, trade wars.
Every "protected" industry becomes a zombie sector, alive only because taxpayers keep feeding it, unable to compete because it never had to learn how.
Meanwhile, on campus, you're probably hearing professors praise industrial policy, government intervention, and protective regulations as enlightened economics.
They're teaching you to be sophisticated by embracing ideas that New Zealand proved disastrous 40 years ago.
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