Mike Moore was briefly the Prime Minister of New Zealand in late 1990, just before the Labour Party’s richly deserved loss in a landslide. Apparently he saved the Labour Party from completed annihilation under the previous leader, Geoffrey Palmer, a former law professor, whose academic approach to everything did not have any electoral appeal. Moore was still Labour leader for the next general election in 1993, which the National Party nearly lost, after vigorously pursuing Thatcherite policies, including swingeing welfare cuts, and passing employment legislation that removed the role of trades union.

So now Mike Moore has died aged 71. The eulogies continue, as do the myths about his abilities and achievements. Although this may seem bad form to try to correct the historical record, someone has to. The current Prime Minister, Jacinda Ardern, has called him a “huge intellect”, but she is too young to remember the disastrous period in the late 1980s, and the effect of opening up completely to international finance. Moreover, the news media in New Zealand love to call Mike Moore a ‘working class hero’. This is more interesting, since the media almost never talk about class. True, Moore came from very humble beginnings, lost his father when young, grew up in poverty etc. But the result of the government policies that he voted for was mass unemployment in the 1980s. This severely weakened the trade union movement, which was permanently undermined in 1991 by the National Party, and is no longer capable of mobilising the working class.

This is a particularly appropriate photo of Mike Moore in the 1980s, seen here with the financier, H. Michael Fay, the principal of the merchant bank Fay Richwhite. Those that have read certain previous posts, or heard of the Winebox, will know exactly who Fay was. The photo of the sheep is a fantastic metaphor, both because Fay is obviously the wolf (in an expensive suit), and Moore was the one being led astray. For someone who was apparently a working class hero, Moore spent an awful lot of time fraternising with the rich, and perhaps famous, once he became the director-general of the World Trade Organisation. A working class warrior would have been more wary of rich white men.

But rather than name-calling I want to highlight a few key points about H. Michael Fay, as an example of how the Auckland-based money men compromised the Labour Party and the process of government in New Zealand. Fay, in particular, knew the value of good publicity. This saw Fay Richwhite sponsor all sorts of events, from ballet to the emergent sport of triathlon. But Fay is mostly associated with the New Zealand challenges for the Americas Cup, the rich men’s yacht race, and for succeeding with the New Zealand team. This followed Australia’s successful challenge in 1983, which was bankrolled by Perth businessman Alan Bond. Sadly, Bond’s dodgy business dealings, including in tax havens, led to him going to prison. Whereas, the New Zealand money men, such as Fay, donated money to the Labour Party and got knighthoods. Although you could argue that Fay was more deserving of his than Ron Brierley, for example.

Less well known is Fay’s role in quangos like the Market Development Board, and his chairing role, which is no doubt where he worked closely with Mike Moore. As I noted in my book, Tax Haven New Zealand Part 1, one of the reports that Fay put out argued for the removal of non-resident withholding tax for foreign investors. This was initially rebuffed by officials because it was too obvious as a creation of a tax haven. As we now know, there was a change in the trust law in 1988, approved by the Labour finance minister, R.O. Douglas, that did create a tax haven. But the officials continued to debate the role of the removing the non-resident withholding tax during the second term of the Labour Government. Besides the advocacy of domestic players like Fay, the American bank Citicorp also wanted to get in on the action, and their proposal was actually supported by Mike Moore in 1990. So you have to question whether Moore was too easily led by associations with financiers, and supported proposals which were too good to be true.

Of course, a bigger problem by 1990 was that the Bank of New Zealand was on the verge of collapse, after disastrous lending practices in Australia during the 1990s. This had followed the collapse of DFC NZ in 1989, the former Development Finance Corporation, which had been ‘privatised’ the year before, but was actually owned by the State department for government employee pension savings, known as the National Provident Fund. To cut a long story short, the obvious strategy of the Auckland financiers was to get control of the government institutions that had a financial presence, whether through its savings or foreign exchange deals. The NPF chairman was Paul Collins, the chief executive of Brierley Investments, and Ron Brierley himself had been the chair of the BNZ up until the time of the privatisation phase in the late 1980s. After a brief reprieve H. Michael Fay became the chairman, despite the fact that his own firm owed the BNZ hundreds of millions, and having the bank involved in all of his firm’s tax evasion deals. BNZ Papers I have seen show that Fay Richwhite was actually insolvent through this time.

But what happened in late 1990, after the general election, was that the BNZ had to be bailed out. In actual fact this was a bail out of Fay Richwhite, and a cover up of the BNZ’s financial position, which even Treasury and Reserve Bank officials could not follow. The new management for the BNZ had already sacked most of the managers in the Australian branch, and dismantled its investment banking operation there. The National Party leader, Jim Bolger, continued to claim that there was no evidence of fraud in the BNZ. But he did use the enormous sum that had to be used to save the BNZ in 1991, and to maintain confidence in the financial system, to justify the savage cuts in welfare benefits and parts of the public service. These cuts were never restored by subsequent Labour Governments, especially those led by Helen Clark. But the Labour Party continued to observe its 1980s commitment to open borders, and free trade, which is Mike Moore’s legacy, as well as turning a blind eye to tax evasion and money laundering.