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This is an important occasion.

I want to seize the opportunity tonight to talk about what I see as New Zealand's top priority if we want to make this country a better place in the 1990s and beyond.

I believe the economy should be the least of your worries. Assuming that nobody throws away the enormous gains we have made in the last four years, the right structure has been set in place. It is going to pay off if we stick with it and finish the job.

Obviously it will take time for unemployment to wind down, politicians, employers, unions, a whole lot of people, can help or hinder that process. But the economy is on the right road, it has a good future, it is moving ahead.

What will make or break this country as a place to live in the 21st century is not the economy. Far more important than that, I believe, is whether we manage to achieve racial harmony, racial co-operation or whether we fall down on that job.

Race relations are obviously a minefield and not one where Ministers of Finance, in the past, had a lot to say. But every one of us - Maori and Pakeha - has a contribution to make for better or for worse, to the future of our race relations.

My job as Minister of Finance revolves round two questions:

To my mind, they also lie at the heart of the race issue.

As individuals, every one of us plays a role in the nation's wealth through our own productive work, and the income it earns. To do that successfully, we all need the right opportunity, motivation, incentive, and know-how. Otherwise we don't have what it takes to make a positive contribution. That undermines our own personal well-being, and it undermines society.

The Maori people have been through at least four different phases since the first European settlement. Up to roughly 1850, they played a leading role in coastal shipping, farming, flour milling and a lot of other economic activities.

They took to the opportunities offered by European ideas and technology the way a duck takes to water. They were dynamic members of a growing community. From 1850 through to the mid-1890s, a rising European population thought it had better rights to the income involved. Maori fought and lost that battle. Europeans rifles and European diseases pushed them off their land, and out of those activities.

Colonial institutions justified that by classifying Maori as second class citizens of an inferior race.

From the mid-1890s to the 1940s, however, the Maori people moved into a new era of reconstruction and hope. They produced political leaders who became national figures. They established a viable rural society. It didn't give them big incomes but it had cultural identity, and cultural strength. They had economic independence. It worked pretty well.

New Zealand got a world reputation for good race relations. The Maori people began to thrive again. Their population doubled in that period. It doubled again between 1945 and 1966.

That triggered the next phase. Their rural economy could not give those people a decent standard of living. They were forced, by the thousand, to move into the cities, to look for better things.

That migration broke the ties of young people with their tribes and their own culture. They had none of the work skills that help you in a big city. Neither their parents nor their country schools had given them the right survival gear.

Simultaneously, from the mid-1960s, the New Zealand economy began to fail in its task of healthy job creation. You can read the outcome of the next couple of decades in the statistics on Maori exam results, incomes, unemployment, crime, and social welfare dependency. This time round, the problems were not located somewhere in the rural outback: They were bang in the middle of New Zealand's biggest cities.

We moved into phase four from 1975 on. A lot of Maoris started saying "this is too much of a bad thing." They could not accept their fate. Maybe they rediscovered some of the spirit they showed a century ago in their wars against the redcoats. Anyway, they rebelled. They dramatised their situation by undertaking land marches. They started holding Hui to regain their cultural identity and work out an agenda. Some of them banded together in gangs of tough guys.

They examined past grievances. They started using the courts. The extremists said they were the rightful owners of the country and its real name was Aotearoa not New Zealand. One way and another, they showed us that the Maori people were not going to go down for the count and stay down.

Some of the things they said and did were pretty mad, probably just as mad and unfair as what various Europeans used to say and do, back in the 1860s and 1880s. But, in a funny kind of way, the rest of us have some cause to be grateful for that. Nobody wants a future where Maori are confined to slums and ghettos, more prone to disease, worse educated; more imprisoned than anyone else and far less employable. The time had come for us to do something practical to stop the rot.

Now I don't really care whether you want to look at the problem in an altruistic way, or a purely selfish way. We end up with much the same conclusion. If a cure is not found, bad race relations will destroy our ability to co-operate effectively to run a better economy and a better society.

If you want to be strictly selfish, it is a problem that can end up costing New Zealand an arm and a leg. Billions of dollars we could have used productively over the years will be wasted dealing with misery, disease, social welfare bills, court costs, unemployment, the whole mess of social disruption that attends world-wide on neglected and mismanaged racial problems.

It is worth spending thought and spending money to fix the race problem. The difference between that mess and 300,000 Maori people putting their shoulder to the wheel to help lift New Zealand out of the mud is not one we can afford to ignore.

A few very simple things are important. One of them is fairness. Okay, the Maori people have problems. A lot of white families don't have much income or education. Like Maori children, their kids enter the world at a handicap. They deserve a hand just as much to get at least one foot on to the rungs of the social ladder.

Their problem is not different in kind, and often no different in degree from the one Maori families face. They do not deserve to be penalised because their ancestors got here later than Kupe did.

Any government has an equal duty to all of its citizens. In both cases, disadvantaged children deserve something extra from us if that will turn them into satisfied citizens leading constructive lives. We are starting to see it happen now in the dramatic development of Maori Te Kohanga Reo and in the ever-growing demand for better child-care and pre-school facilities for all our children. Those early years are the most critical years in anyone's life. They are the soundest investment in the education system.

You have to let the minority groups play a large part in the decisions about what shall be done, and how it shall be done. I was involved for a while 13 or 14 years ago in Te Puke Otara, a multi-cultural centre planned by the youth of Otara. Those young people taught me three things: first, those young people themselves wanted to be together. It was their parents, elders and so-called leaders among the Maori, European and Pacific Island communities, not the young people, who wanted separate community centres for each separate race.

Two, such programmes have to be built on self-help and personal esteem. They know if you are conning them, or just trying to humour them. But if you create a situation where they can achieve their ends by their own effort, 99 percent of the problems will go away.

Three, they backed that project because they believed in it. It made them feel important and wanted, in some cases, for the first time in their lives.

We had 300 pupils from Hillary College who volunteered to go out into factories and talk about the project, to raise funds. If they can achieve satisfaction and recognition in their own eyes, yours and mine don't really matter. They are on the first rung of the ladder to personal success which satisfies their own standards.

I believe the Picot report will give Maori and Pakeha parents fresh opportunities to see their children get what they need from school, in the future. We are making schools accountable to parents, in a way they never were before for what is done for pupils and to them.

But let me say this: it will not be enough in the future for Maori children to shine solely in Maori subjects. Like the Czechs, the Africans, the Chinese and the Eskimos we all live in one global village. We all depend on a shared international technology. We all have to understand it, to survive and to thrive. There is no way back for any of us to the simplicities of a past era; the only road open is the road ahead.

Better schools will not help those who have already left school. A lot of them, Maori and Pakeha, did not get what they needed to overcome the handicaps of their personal background. They failed in school. They are now failing through lack of motivation, lack of incentive and lack of skill to find a constructive role in the adult world. They do not know how to remedy their own problem.

If society does not move in, a lot of them will be stuck with it for life no matter how many jobs we create in a reformed economy.

Schemes like the Maori access-training programme are not luxuries or frills; they are not there to distract people from the unemployment figures. If we manage them properly, they can get some of those people back into the mainstream, change their life for the better, and avoid a lot of social strife.

It is not easy however, to get good programmes up and running. Past efforts have a patchy history. The basic system is, the government pays money to people with the skill to provide a service to people who need help. In practice, you find that the providers swoop down like vultures and carry off most of the benefit you wanted to give the disadvantaged.

If the providers can keep a fair chunk of the resources for themselves, they tend to think it's a pretty good programme. A lot of altruistic people out there have grown fat over the years on the taxpayer without making much visible dent in the plight of the disadvantaged. That usually justifies the providers in coming back to tell you the programme was under-funded, the job needs a lot more money.

When you vote it, they snap up the lion's share again. They get that much fatter; the service is as bad as ever. Provider capture is a disease that rots off our good intentions at the root.

A growing number of people now begin to think the payment should, one way or another, go to the person in need instead of direct to the provider. That person can then make a choice among the services offered by competing providers who would then have to give value for money, or go out of business.

The rich have often said they know how to spend their own money better than the government does. Maybe low-income people can get better value out of government money if they somehow get it, and buy those services for themselves. Power to the people, not power to the bureaucrats or power to the providers has a lot to be said for it.

That is what we are starting to do now, with some of the new programmes that devolve power of decision to Maori institutions at local levels. We are doing it on a basis of full, strict accountability: They will be accountable to government not only for the money they spend, but also for the outcomes they produce.

Maori independence has been devastated, over many years, by badly-designed assistance programmes. They lacked the skills, motivation, opportunity and cultural background to get jobs at the average wage or better.

We did not pour our resources into giving them better preparation for an independent life in 20th century urban society. We poured our resources into giving them handouts, so that there was no need to acquire new skills. Once they were on the benefit, with housing assistance, we arranged the tax benefit system to make sure they stayed there.

Every time they earned an extra dollar by personal effort or initiative, we hit them with effective marginal tax rates higher than the rates paid by the richest people in our society, forty-eight cents in the dollar, 90 cents in the dollar:

At one stage under National, the government took $1.12 off some of those people, every time they had the temerity to earn an extra buck for themselves. Then the red-necks who do not understand the vicious way the system works will turn round and tell you: "bloody Maori, too lazy to do anything except live off the taxpayer."

Maori react to positive incentives, just as fast as Bob Jones or Alan Gibbs. The real problem is, a long line of governments forced negative incentives on them and on very large numbers of low-income Pakeha families as well.

This is not a uniquely Maori problem we all know that. I tackled it head-on last December, that particular effort came unstuck. So what? That's life. That's politics.

The fundamental fact is we cannot afford to kill off the wish those people all share for personal independence.

The social security system designed by the first Labour Government was intended to help people up, not hold them down. We have to go back to that principle.

I want to deal next with Maori business enterprise and I freely confess that this is a hobbyhorse of mine. A lot of Maori run thriving, successful businesses just as Maori did in the period before 1850, but the Maori people as a whole are behind the rest of us, in their economic development.

It is not good enough for them, or for New Zealand, if they simply match the pace of development in the rest of the economy. Maori enterprise has to go faster than the average for the economy: they have to bridge the gap.

Successive governments have had a closely related problem trying to manage state trading organisations on a successful, businesslike basis. Experience shows some structures work: they make money. You can invest the profit. You can create jobs. You can make more profit. You get growth in output, employment, and growth in wealth.

Other structures breed inefficiency and waste, no matter how hard the managers try to do a good job. Those organisations lose money perpetually; they become a burden on their owners and the community. They drain wealth, instead of creating it.

But even more important, I think, is the way you look at the object of the whole exercise. It is superficially very tempting to set up business projects for social reasons, to create jobs, subsidise cultural projects, as a vehicle for community aspirations, and so on.

But where social goals are adopted, instead of strictly commercial goals, you rapidly find that the project ends up with a low rate of return. Less income is generated than you could have had - not more income - to invest in future job creation. Ability to pay staff competitive wages is reduced, instead of increased.

Approaches adopted to help the community end up delivering less benefit, not more, to everyone involved. When the relative poverty of the return from the enterprise puts it in danger of collapse, people tend to come to the government for a subsidy to help it get back on its feet. The subsidy gets built into operating costs it helps pay better wages, maybe, but the project ends up further away than ever from genuine commercial success and the whole community of taxpayers is that much poorer at the end of the day.

That is, in fact, an extreme version of exactly the problem the whole New Zealand economy found itself facing at the end of the Muldoon era. It is not a uniquely Maori problem.

Restoring commercial objectives and competitive efficiency is an extremely painful process. To a lot of people, it looks at first like a backward step. They feel you are throwing the baby out with the bathwater.

The simple fact is, unless you run an efficient operation, and produce what the market wants at the right price, for a profit, you end up without a business.

If Maoridom runs the enterprises of its people that way, they all end up dependent on the rest of the taxpayers for support. If we all run our business that way as a nation, the living standards of the country as a whole keep on going down the gurgler.

There is more social benefit in doing things well than we can ever get by doing them badly, however good our intentions may be. That is what we have been trying to do, in New Zealand, this past four years, to start doing a lot more things well.

We had got into the habit of doing them badly because thinking is a pain, learning is a pain, change is a pain, challenge is a pain. Doing things badly for 20 or 30 years, seemed to be so comfortable until the debt piled up, the bills came in.

Finally, we were faced with the real discomfort, the real accumulated cost, the cost of our own long-term failure to seize on and make use of our opportunities as a nation. That is what the white community is facing today, in its relations with Maori people. It is also what Maori face today, just as acutely, in relation to themselves and their personal past.

Certainly there has been legal theft. There are demonstrable grievances, some of them major grievances. They have to be faced; they have to be settled. They are fundamentally important. They will be settled. But I think we all, every one of us, need to think very hard about the principles on which we want them settled.

Fairness has to be at the heart of any acceptable principle. The question about fairness always is - fairness to whom? Fairness to the whites? Fairness to the Maori? Are those two different fairnesses fully compatible anyway?

Those questions are a bog we can all drown in. I want to suggest to you tonight that there is only one kind of fairness that really matters and that is fairness to the future. The future of this country which we have to share. There is no choice about that. We are bound to it by 150 years of history which not one of us can reverse. The road back is closed. The only road open is the road ahead.

Our job together is to resolve the problems of the past not on the principles of the past but on a basis that makes the future a country worth living in, for our children and our grandchildren. We are the ancestors of generations to come who will read about us, I hope, in schools better than any we have provided.

They will read and they will judge us, Maori and Pakeha alike, on what we do now to take care of their future interest in the country they inherit from us. Just as we inherited this New Zealand of the 1980s from our ancestors, their gift to us of their achievement and their mistakes.

Fairness to the past is important. None of us can afford to neglect it. But fairness to the future, not the past, is what will make this nation something that deserves celebration, a hundred years from now.

I wish the organisers of the evening the very best for their activity on behalf of 1990 and beyond.

I hope my few remarks tonight endorse the feeling this occasion was designed to dramatise. If we fail to serve the future, we fail in the heart and soul of everything we undertake.