Perspectives for New Zealand in 2011

This year’s New Zealand perspectives document has just been produced, which should be read in conjunction with previous perspective documents as they are a continuation from them. In addition they should be read together with the latest World Perspective analysis and associated material from the International Marxist Tendency (IMT) and Socialist Appeal NZ.

Introduction

This document constitutes a continuing analysis of the socio-economic crises facing New Zealand Capitalism. It applies the methods of Marxism to these processes, seeking the trends and processes within to serve as a guide to action for all workers and youth who want to struggle for the socialist transformation of society.

The last twelve months have certainly not been dull affair as far as the world is concerned. The crisis of capitalism is no ordinary crisis as the bourgeoisie and their apologists would have us believe. Their idea that some form of normality is just around the corner bears no serious consideration. Within a New Zealand context bourgeois economists from 2008 onwards, at every published analysis, have been generally predicting this saying that in the next 6 months or so strong economic growth will return etc. What such generalised comments expose is that they do not have the slightest understanding of the laws that govern the capitalist system.

Perhaps here we shall take a moment to enlighten them! Inherent within the capitalist system is crisis. This arises from the anarchy of capitalist production. The capitalist system itself erects barriers to its own development that periodically end in slump. The present crisis is no ordinary crisis, after which everything will simply return to normal. Capitalism has entered a 'blind alley', due to the existence of private ownership and the nation state that now act as a colossal brake on the development of the productive forces.

The social and economic consequences of this crisis are now being borne out on the world stage whether that be the sovereign debt crisis and the upswing of the class struggle in Europe or the magnificent revolutionary movements of the masses in North Africa and the Middle East. On this point - this is not the endpoint of struggle of the masses but the beginning point. In fact what the above events and the world situation illustrate is that this is a major turning point in world history as the events are having an effect on the consciousness of workers around the globe.

Economy

The New Zealand economy has been limping along after coming out of recession in mid 2009 as indicated by very weak GDP figures published by Statistics NZ. This is far from the economic fireworks of recovery that were predicted at the height of the recession by the government and the various bank economists. In fact the economic recovery, as far as the vast majority of workers are concerned, has been barely or not noticeable at all. This is due to the fact that on the one hand the recovery has been a 'jobless ' one and on the other hand the brunt of increases in the cost of living as fallen mainly on the shoulders of workers and beneficiaries.

The economy in the September 2010 quarter recorded a decline in GDP of 0.2%. The December 2010 quarterly report from Statistics New Zealand showed a derisory 0.2% of GDP growth*. This was enough to avoid a technical recession. The economy isn't in a boom, nor even in a boomlet; it is stagnant. The growth in the economy in this quarter was due to growth in manufacturing activity of 2.5% (mainly due to exports to Australia and the very weak NZ$ to the A$). This is still 1.3% down on last year and 12% down on three years ago. Other growth factors were construction up 1.7% but this still has a long way to go to recover to the levels before the recession and only partly reverses declines in construction activity for the year. Agriculture also recorded a decline of 0.5%, but forestry activity reported a 6.6% increase due to favourable export markets. The service sector that represents two-thirds of the economy was flat over all and retailing, accommodation and restaurant sectors declined 2.1%, their weakest performance in two years. (*Radio NZ reported that approximately 20% of the December 2010 data is unobtainable due to it being located in earthquake-ravaged Christchurch. This casts doubt on the accuracy of the data.)

A recent article in The New Zealand Herald (25/03/11) qualified the above when it stated:

“... output grew just 0.8% during the year and almost all that growth happened a full year ago. The last three quarters of 2010 saw the economy expand a cumulative and mere 0.1%. In per capita terms, output is 5% lower than it was at the pre-crisis peak three years ago. By the end of last year, economic output had recovered only half the drop that occurred during the 2008 /09 recession.”

Certainly, the recent February 22nd 6.3 aftershock in Christchurch and the subsequent devastation of the city and the surrounding areas will further deepen the economic woes of New Zealand. It is a major manufacturing hub of the country and equates to around 15% of the country's GDP. There will be no economic fireworks and a return to normality as the capitalists hoped for in 2011!

As a consequence of a lack lustre economic recovery that has now stalled the government's finances have worsened to the point where they are rolling over $300 million in government debt per week to maintain the public services. Added to this is the cost of rebuilding Christchurch after the September 7.1 earthquake and February's 6.3 aftershock.

The National led government's response has been a policy of cuts in public spending coupled with counter-reforms with regard to worker rights and beneficiaries. The economic argument of the National led government is that public debt is high. The latest forecast is for public debt to rise to 30 % of GDP by 2014, and this takes into account the economic consequences of the earthquakes and aftershocks in Christchurch. Most western countries would be envious of such a position. The reason for New Zealand's low public debt is quite simple. None of the major banks in New Zealand were bailed out in the past period like in the USA or Europe. In fact the big four Australian owned banks maintained the banks here in New Zealand during that period. They were able to do this due to the regulatory framework within Australia that didn't allow the banks to dabble in sub-prime lending, as well as, the fact that Australian economy didn't go into recession. However, when the housing market goes down in Australia then a very different picture may emerge!

Additionally, within the New Zealand context the sub-prime lending collapse occurred in the second tier lenders - finance companies - of which 26 have gone bust and several directors face potential fraud prosecutions. The vast majority of the finance companies went bust prior to the downturn in the world economy and prior to the government's deposit guarantee scheme kicking in. In fact only 3 finance companies have been bailed out the most notorious being South Canterbury Finance.

Therefore unlike other western countries private debt was not nationalised! The problem for the New Zealand economy is that private debt both corporate and individual stands at 85% of GDP. To illustrate this indebtedness an article on the important agriculture sector in the New Zealand Herald (07/02/11) said the following:

“...Since its creation, Fonterra's payout to dairy farmers has risen from $5.35 per kg of milk solids in 2001 to $7.90 in 2008. This year, it is expected to be around $7.35.

“While that should translate to a healthy income for most dairy farmers, in inflation-adjusted terms the payout has mostly fallen since the 1970s, with only a very recent rise. And in the meantime, like their city cousins, many farmers have committed themselves to huge amounts of debt.

“Between 1990 and 2000, the price of rural land doubled. It doubled again between 2000 and 2005, and again between 2005 and 2008.

“Prices were largely fuelled by a flood of cash from the banks. According to data collated by the Reserve Bank, over the past seven years alone the amount banks have dished out to the agricultural sector has more than doubled from $19 billion to $47 billion.

“Two-thirds has gone to dairy farmers, or to people wanting to convert land to dairying.

“The dam burst in early 2008, and since then land prices have plummeted. In some parts of the country, values have halved and many farmers now owe more to their banks than their farms are worth - a situation known as negative equity.”

Further in the article it added the following:

“In fact, anecdotal reports of farmers committing suicide are beginning to emerge. Whether or not these are exaggerated, townies can't afford to be complacent."

While urban land prices have not yet fallen to anything like the same extent as rural land, there is a rough correlation between the two. And more importantly, the rural economy is what underpins the New Zealand economy.

In the aftermath of almost all crises, some people are inevitably tempted to shout: "I told you so". Before the global financial crisis, many Kiwis were too busy feeling smug about the rocketing value of their houses to take much notice of warnings from the Reserve Bank, and others, that things were getting out of hand.

But former banker and registered valuer Bruce Wills can quite correctly point to a paper he wrote in 2006, while taking part in the Kellogg Rural Leadership Programme at Massey University, which has indeed proved prescient.

The paper, titled The NZ Rural Property Market: Where To From Here? concluded that the market was experiencing "irrational exuberance", and that the prices being paid for rural land could not be justified by farm incomes. It predicted prices would fall by 20 to 30 per cent.

"I did a number of presentations of that around the country and in several of them the room was full of bankers, and basically I got bollocked from pillar to post," he recalls. "They just wiped their hands and told me I was completely out of touch."

Indeed the private sector is in deep hock to the world money lenders, not the public sector. At some point the international money lenders will come to 'collect this debt'. Already world credit agencies such as Standard and Poor are threatening to downgrade the country's credit rating. When this happens then servicing debt will become more expensive on the international markets which will have negative repercussions on the domestic economy that is already in trouble.

At present the domestic market is truly in the doldrums as the Statistics New Zealand figures and associated material above show. This is due to the indebtedness of the private sector. Two trends are evident. Both corporations and individuals are still paying down debt and cannot buy consumer goods as in the past, and secondly there is an aversion to major spending on high-end consumer goods and housing due to people being uncertain of their future, i.e. whether or not they will remain in employment / get pay rises or that the company will be in business in to the near future.

Added to this is the rise in world commodity prices and the rise in basic consumables such as food and the inflationary pressure from the world economy.

  • CPI increased 4% in the year to December 2010 quarter.
  • 91 Octane petrol rose to $2.16/l on March 8th. 
  • Diesel rose to $1.60/l.
  • Food prices rose 3.8% in January 2011.
  • Grocery food up 3.9%.
  • Fruit and vegetables up 8.1% (Vegetables alone up 10.2%).
  • Milk, cheese and eggs up 10.2%.

The domestic economic woes have been exacerbated further by government policy that has seen the cutting of public spending in real terms and associated public service cuts, a recent example being early childhood education which according to the PSA was cut by $400 million. The cuts came into effect on the 1st February 2011 and parents are expected to find an extra $50 or more a week for childcare. Obviously this will lead to children being removed from early childhood education as it is unaffordable. New Zealand's spending on such a provision is well below the OECD average even before these cuts.

Further pressures on the economy have been caused by government policy through the hiking of GST to 15%, and increase in other levies such as ACC. Adding to workers uncertainty is the anti-labour legislation known as the '90 day Hire and Fire ' law which will come into effect on April 1st.

The policies of the government, as we have explained in the past, of cutting state expenditure and holding down wages, will mean that investment will fall as the market is cut, and production will decline further.

What this above briefly describes is the sickness inherent in New Zealand capitalism. Certainly the only future on offer to workers from the New Zealand bourgeoisie is austerity, and cuts in the social wage and declining living standards. New Zealand capitalism is at an impasse. The consequences of such an impasse will be a heightening of the class struggle within New Zealand. It is only a matter of time that the events being witnessed on the world stage will break out here in New Zealand.

National Led Government

The National led government has continued to attack the living standards of workers, - through increases in GST and government levies such as ACC - in order to reduce the social wage (public spending on health, education and social welfare) in an attempt to recover the profitability for the capitalists and place the crisis of capitalism firmly on the backs of the working class.

As we have explained previously, on the basis of capitalism, state expenditure can only be financed in so many ways. That is , either through taxes on capitalists or on workers and the petit bourgeoisie. If taxes are levied on the capitalists it will be a further incentive not to invest which will result in further closures of enterprises and rises in unemployment. If taxes are levied on the workers it will mean a cut in the market. Therefore, what is gained on the swings is lost on the roundabout. The third option is for the government to resort to the printing press and print more money, which if the government resorted to such a measure would cause inflation as it would be done without the backing of the increased production of goods. In fact this would also lead to having the same effect as the other two methods and higher interest rates.

The government has chosen to raise indirect taxation which means the tax burden is put squarely on the shoulders of workers. On the other side of the class balance sheet, the government has introduced 'bourgeoisie welfare' with cuts in income tax for the rich paid for out of government borrowing and cutting corporation tax from 30% to 28% in last May's budget. However, it hasn't worked as the government had hoped as the capitalists have used their government handouts to pay down horrendous levels of debt instead of investment in plant and machinery etc. The more far sighted capitalist also understand that attacking the living standards of workers means that the market is being cut and is a further disincentive to investment to kick start the recovery.

To date the National led government has also passed into law the pernicious 90 day 'Hire and Fire' law that comes into effect on April 1st. The hatred towards the working class was further exposed during the Hobbit dispute between Equity and the anti-union Sir Peter Jackson / Warner Bros, which saw the government pass new employment laws reclassifying film workers as contractors and handing over significant further tax payer $s as a sweetener to Warner Bros in the form of new government subsidies.

Additionally, the National led government is 'tightening the screws on beneficiaries' entitlements and the government's aim is to dismantle what is left of the Welfare State and take workers back to the inter-war period. This can be gleaned from the prime minister's comments when he said that people who receive food parcels are making a 'lifestyle choice'! The prime minister conveniently forgot that Work & Income staff actually refer people to the food banks when they are in distress. Additionally, Paula Bennett, Minister of Social Development, stated that the reason why unemployment is still high is that there aren't enough jobs out there! In fact perhaps we should re-name Paula Bennett the Minister of Social Distress as the government is doing very little to create meaningful employment, as well as, constantly scapegoating beneficiaries for all the ills of capitalist society.

2011 is the year of the triennial general election. The prime minister has already set the date for the general election at November 26th. This is an unusual move on behalf of any government. The National Party is aware that even though they are well ahead in the polls the economy is not in their favour. Originally, the cynical tactic was probably based on the hope that New Zealand will becoming rugby union world champions at the international tournament that is being held here in September and October and the feel good factor would work in favour of the sitting government, as well as, being seen as good sports by removing the election day uncertainty before the tournament.

The National Party's manifesto will contain the part-privatisation of the 3 state owned power generators and Solid Energy, as well as, reducing the government’s stake in Air New Zealand (51% state owned and 49% private shareholders). The prime minister is on the record that they will privatise state assets regardless of public opinion. This is deeply unpopular as people have had bitter experiences of flogging off the family silver in the past. The excuse from National is so that ordinary 'mum and dad' New Zealand investors can buy a stake in these profitable State Owned Enterprises (SOEs). What they actually mean is that they will sweeten the privatisation pill with giving preference to New Zealanders knowing that the shares will very quickly end up being owned by big business. The nonsensical argument is just a smokescreen. It does not take a genius to work out that ordinary mums and dads haven't got any spare cash to buy shares and why should they bother when they already own these SOEs. Part-privatisation will reduce the dividend back to the government as the private shareholders will demand 49% of the profits made by these SOEs. This will further cut government finances to fund the public services.

In fact the money raised from privatisation would hardly reduce the government's debt much at all. The National Party hopes this will stop a possible downgrading of the country's credit rating. We predict that sooner or later the country will have its credit rating downgraded and that if part-privatisation occurs big business internationally will asset strip these SOEs and demand full privatisation of more SOEs such is the parasitical nature of international capital on the one hand and on the other hand the weakness of the New Zealand bourgeoisie to say no and protect its interests.

The recent earthquakes in Christchurch have also played into the National led government's hands and this is giving them the excuse to bring forward plans for major cuts in public services on the pretence of paying for the re-build of the city. This is on top of either doubling or trebling the Earthquake Commission Levy on all household insurance policies. Bill English, the Finance Minister, is preparing a black budget to be delivered May 19th. The information to date is that there will only be a miserly $800 million increase in spending for education and health. This will barely keep pace with inflation, and the funding will come from cuts in other public service budgets. The budget is already being compared to the National government's budget delivered by Ruth Richardson, which infamously was called the 'mother of all budgets' and where the word 'Ruthanasia' came from.

The National led government will deliver this budget a mere 6 months out from the general election. They are hoping that the public will accept public sector cuts under the guise of re-building Christchurch. This may work for a short while, but people will very quickly realise they have been duped. Whether this anger will come through prior to the general election is greatly dependent on effectiveness of the Labour's opposition – which leaves something to be desired at the moment!

National's two main coalition parties are in disarray. The Māori Party is now splitting on class lines as can be seen from the expulsion of Hone Harawira MP. The Māori Party has in fact become the de-facto National Party Māori caucus and has supported pro big business legislation that has caused working class Māori to become further impoverished, along with the working class as a whole. The majority of the rank and file of the party are very unhappy with the present leadership and there is the beginnings of a general drift back towards the Labour Party.

The repeal of the Foreshore and Seabed Act with a the new Marine and Coastal Areas (Takutai Moana) Act, which leaves Māori in a worse position with regard to having to prove continuous customary title since 1840 was the 'straw that broke the camel's back'. It is likely that Hone Harawira will form a new Māori Party and he is likely to win his Tai Tokerau seat. However if a new party is formed it will not have mass appeal with the rest of the working class and will fall apart very quickly. In all likelihood the Labour Party is almost certain to win back in the first instance the majority of the parliamentary Māori seats.

The Act party under the leadership of Rodney Hide has been riddled with internal division. Its credibility has been brought into question on two occasions with the perk buster Rodney Hide being caught out and the David Garrett passport scandal. A new right wing party has been created due to disillusionment with Act and will cause more divisions. At present Act's membership stands at about 600, and it is polling between 0.5% and 1%. Act desperately needs to keep its Epsom seat if it is to return to parliament. This all depends on whether or not the National Party now see Act has a major liability as a coalition partner and will stand a credible candidate in the Epsom seat to win it back.

With the National Party so far ahead in the polls - consistency in the high 40 to low 50%, and the Labour Party polling in the mid 30%, it is highly likely that National will form the largest party and may be able to form a coalition government. However with such political volatility in the situation and this far out from the general election, this position may turn in favour of the Labour Party who may come close to winning the election and forming a coalition with the Greens. The point here is whoever wins the general election and forms the next government, it will be a government of absolute crisis with an inevitable rise in the class struggle, as the working class will have no alternative but to fight to maintain its living standards.

Labour Party

The Labour Party is abandoning its support for neo-liberal pro-capitalist economic policies of the past and adopting, if in words only, a more reformist mixed economy model. The problem for the Labour Party is the leadership. Labour leader Phil Goff appears suspicious in the eyes of many workers as he was closely associated with rightward lurch of the Labour government in the 1980s and the subsequent counter-reforms.

However, the general mood amongst workers is that a Labour government is needed and this will begin to solve their problems even though they are highly suspicious of the present leadership and are further concerned that the leadership is not capable of leading the Labour Party to victory at the general election. This is why Labour lags in the polls and it is reflected within the present Labour caucus with constant rumblings about Phil Goff's leadership; as the expulsion of Chris Carter MP highlight, along with the recent Darren Hughes MP affair expose.

The more advanced layers are moving to the political front to try and secure a Labour victory. However, a defeat of the Labour Party will mean a move toward the industrial front by the more advanced layers in order defend themselves from the bosses onslaught. Certainly, this year's general election will not be a dull affair like the last one!

The Labour leadership has come under pressure from the party's rank and file to change its economic position. It has been strongly influenced by the Council of Trade Unions (CTU) Alternative Economic Strategy, that in a nut shell exposes the 'pitfalls of the Swedish model of social democracy'. Except that the CTU document actually BELIEVES in the merits of the Swedish model. This is a highly utopian position to have with regard to New Zealand capitalism! There are illusions by the right wing (reformists and the pro-capitalists elements) in the Labour Party that long lasting meaningful reforms can still be won within capitalism.

The truth of the matter is - there is no longer a middle ground for the right-wing to hide in. It either sides with the interests of the working class or those of the bourgeois. The reformists are left with no reforms to give on the basis of capitalism in its death agony.

In the period that is unfolding workers will start to look towards the Labour Party and begin to transform it and shift it to more to the left (whether the Labour Party wins or loses the general election), thus opening up good prospects for the ideas of Marxism. The working class does not abandon lightly the party it has taken generations to build and will move to regain the Labour Party from the careerists. In such a process workers will demand policies in its interests and the democratic accountability of the parliamentary caucus. However, with the likely defeat of the Labour Party we expect for this to take time as workers will initially look toward the trade unions in the first instance to solve their problems.

The Green Party

It is expected that the Green Party will remain in parliament after the next general election. The Green Party portrays a left image and does gain influence amongst youth concerned about the environment. The right wing nature of the Labour Party also adds to this sense of perceived radicalism.

However, the Green Party has moved to the right. After the general election the Green Party will start to lose this thin veneer of left radicalism and move further to the right This is due to a number of 'left' Green MPs who have already stood down such as Sue Bradford, shortly after failing to win the leadership, and a number of other veteran Green MPs who will stand down at the general election. These MPs gave the Green Party its left image.

Co-leaders Russel Norman MP and Metiria Turia MP have already signalled that there is a possibility of doing a coalition deal with the National Party after the general election. The reason for such a signal is to move the party further to the right over time. If a coalition deals is cobbled together with the National Party then the Green Party will lose its basis of support.

Trade Unions

The trade unions are a key area of work in the building of Marxist ideas. Under the conditions already outlined we can expect growing militancy on the part of the workers. The potential militancy of the workers was shown when the CTU 'Stop Work' Fairness at Work rallies were held across the country against the 90 Day 'Hire and Fire” Bill on October 20th..

The CTU leadership was surprised with the magnificent response of 22,000 workers from around the country. There were 28 Stop Work rallies held and even in provincial towns there were big turnouts. For example in Kaikohe 80 workers turned out to the rally, one of the highest turn-outs of unionists in the town's history.

The Stop Work rallies were used to allow workers to let off steam, as there was no serious attempt to build the movement. The potential of building towards a 24 hour general strike was there. This was the only logical course of action if the CTU leadership were serious about stopping the legislation and bringing the National led government to its knees.

In the coming period workers will instinctively turn to their traditional mass organisation, starting with the trade unions, to begin addressing the problems they face. The present leadership of the CTU will be found wanting and workers will quickly conclude the need to elect representatives that will reflect their views and aspirations and begin to transform the union movement into a militant one to defend their interests. In such a process that is beginning to unfold the ideas of Marxism will gain a tremendous echo and we can win the best militant workers to the banner of Marxism through patient work in the movement.

In these conditions a Marxist tendency working patiently in the mass organisations of the working class can make important gains recruiting the best militant trade unionists. This will prepare the ground at a later stage for the building of a serious left opposition within the unions.

Youth

The winning of youth to Marxism is crucial as they are the key to the future. Today young people in New Zealand have grown up in the conditions of a "deregulated" economy and, like the youth of many other countries, face huge student debts, low paid jobs, high unemployment and a future with no hope.

Such an outlook has intensified under the National led government. Youth are bearing the brunt of the recession, and the so called recovery. Youth unemployment has been persistently high at over 20%. The period of the 'death agony of capitalism' will further radicalise a whole section of youth as they look for answers to the problems they face. This will probably take a similar path to that of the student movement in Britain. At some point the anger of youth, with no real future, will be transformed into mass street protests and demonstrations. A spark that may set the movement alight is the forthcoming budget and deep cuts in public services.

This is where a genuine Marxist tendency can play a crucial role. We must win the most radical youth to the ideas of Marxism. We must educate them in the perspectives, methods and ideas of Marxism. The youth is also the starting point of our work. They are the most radical and open layer of society. By systematic work on the university campuses and within the new young layer entering the trade unions, we can win the best over to the ideas of Marxism and build the tendency.

Conclusion

New Zealand capitalism has entered a new period: a period of extreme turbulence and struggles between the classes characterised by economic instability of booms and slumps and an economic system that is an absolute fetter on the development of the productive forces. Under such conditions the ideas of Marxism in New Zealand will gain ground and the building of the revolutionary party is the key to the socialist transformation of society here in New Zealand and the world. Forward to international socialism!