Where is New Zealand going?

As the world economic crisis continues its squeeze and the bosses continue their offensive, the next period is set to see sharpened class struggle in New Zealand. In this document the comrades of Socialist Appeal, the New Zealand section of the IMT, explain the main contradictions in New Zeland society today.

This perspectives document is a Marxist analysis of New Zealand.  Such an analysis provides Marxists with a guide to the developing situation of the country.  This perspective document is not intended to be a blueprint of future events which is beyond the scope of scientific socialism and nor is it our intention to present it as such.

The intention of this perspectives document is to better understand the general underlying processes taking place within New Zealand society so that we are not caught out by events.  Perspectives take on a heightened importance when the world situation is taken into account with ever increasing sharp turns and sudden changes occurring.  Having an understanding of perspectives is an important educational tool for the tendency.  It enables the preparation for the undoubtable storms and stresses, as well as the opportunities ahead.

At the international level there has been a qualitative change in the situation.  Such a qualitative change  at this level is having an effect on the situation within New Zealand.  Without doubt we are witnessing the breaking down of capitalists developments since the end of the  Second World War that has been prepared for, over this period, by the gradual accumulation of contradictions  turning quantity into quality.

Globalisation (long ago predicted by Marx) and the integration of the world economy that allowed capitalist development in this period has now produced a global crisis.  The capitalist system has reached its limits.  We are facing another epoch of deep crisis for capitalism potentially on a level not witnessed in the history of the capitalist system.  Capitalism has once again entered into a protracted death agony. 

Capitalism is no longer capable of developing the productive forces, i.e. industry, science and technique,  in any meaningful way.

The key to the development of society is the ability of the social system (capitalism) to develop the means of production: when the social system proves incapable of doing so then it ushers in an era of social revolution.

Unlike many on the left, Marxists understand that this does not mean that the capitalist system simply collapses and the capitalists voluntary leaves the scene of history under their own volition.  It fact the capitalists will vehemently resist this  and will need to be overthrown and defeated by the working class.  This is the task ahead of the working class here in New Zealand and internationally in the period that is opening up. With capitalist development being on a downward path, capitalism is likely to suffer another deep slump in the forthcoming period. Within the New Zealand context, that escaped the worst excess of the 2008 downturn,  a future slump will have a profound effect in New Zealand similar to what the advanced countries in Europe and the USA are experiencing at the moment.  What this downward path means is years and perhaps decades of austerity coupled with falling living standards for the majority.

Therefore we will witness an upswing of the class struggle in New Zealand and catch up with (if not overtake) our brothers and sisters internationally.  World events are having an effect on the consciousness of New Zealand workers. New Zealand is not immune from revolutionary convulsions that are beginning to engulf the world.

Economy

The New Zealand economy is continuing to “enjoy” a feeble recovery.  According to Statistics New Zealand (SNZ) GDP in the July 2012 quarter was 0.3% and in the September quarter was 0.2%.  In the year ended September 2012 GDP was 2.5%.  Growth in the economy is being driven by the construction sector (4.5%  GDP) mainly as a result of the Christchurch rebuild. Without this “creative destruction of capital”  that Mother Nature has bestowed upon us the New Zealand economy would be in dire straits and teetering on recession.

To illustrate this feeble recovery further, household consumption was flat in the September 2012 quarter (0%). Investment in fixed assets in the same period was -1.8% with large declines in investment in plant , machinery and equipment being offset by increased investment in property as a property bubble is inflating in both Auckland and Christchurch.

Most workers in New Zealand have not noticed the upturn in the economy.  This is due to the bourgeois having a conscious policy of attempting to maintain profitability by reducing wages, and increased exploitation in the workplaces.  This is backed up with the further undermining and cutting of the social wage (public services, health, education, WINZ etc.) and continuing to push through parliament anti-worker legislation. To illustrate this point in 2012, 45% of workers did not receive a pay rise.

The so called recovery is a jobless one with unemployment high at 6.9%.  This is an improved figure based on the fact the decrease is caused by people giving up looking for work as employment opportunities are at best limited to non-existent.

When this pernicious approach by the bourgeois is coupled to the fallout from the international economic crisis, then the New Zealand economy is heading for serious trouble. 

The New Zealand dollar (NZ$) is at record highs against its major competitors, except for Australia. This is due to having a high relative Official Cash Rate (OCR) of 2.5%, when compared to other advanced countries that have generally OCR of  0% to  1%.  This is causing major speculation on the NZ$ causing the currency to appreciate strongly to near record highs.  In fact for such a small country and economy the NZ$ is one of the 10 most traded currencies in the world.

According to the IMF the NZ$ was overvalued by 10 to 20% in mid-2012.  This is also the position of OECD as well.

The effects of such speculation are having a dramatic effect on exports and the manufacturing sector. The manufacturing sector is in crisis.  According to the Reserve Bank of New Zealand (RBNZ) report (“Manufacturing decline not just a dollar story”, February 2013) the manufacturing sector has declined from 25% in the early 1980s to 12% in 2013.  The RBNZ does not see this as a problem as the New Zealand economy can survive on the  service sector and the “knowledge economy” and that manufacturing is best placed in cheap labour emerging Asian economies.  What the RBNZ fails to understand is that as these countries develop their manufacturing capabilities they too will develop science and technique in to the future and will no longer require “New Zealand's knowledge”!  If this policy is further pursued of abandoning the manufacturing base then we have only to look at countries such as Britain that was the workshop of the world to where it is today:  a rentier economy in serious economic decline, to see where  New Zealand is heading.

In fact with the overseas policies of competitive devaluations through quantitative easing (or  in plain English printing money) in the major advanced countries are allowing New Zealand goods and services to become uncompetitive on the world market with a knock on effect of exporting unemployment to our shores.

Already the manufacturing casualties are mounting up:  Summit Wool Spinners, Oamaru, closed with 192 jobs lost. Cavalier Corp closed its Onehunga plant. Godfrey Hurst has decided not to rebuild its Bromley plant destroyed in the earthquake with the loss of 195 jobs. 100 jobs are to go at the Tawai Point Aluminium Smelter, and $70m of capital projects have been mothballed as the smelter is no longer profitable due to falling aluminium price and the high NZ$.  Over 130 jobs were lost with the closure of  Kiwirail's Hillside Works with what remains of the Hillside foundry being sold to Australian firm Bradken.  This is a direct result of the government ordering engines and wagons from Korea and China rather that placing the order with the State Owned Enterprise (SOE)!  Solid Energy have laid off 220 miners at the mothballed Spring Creek Mine, 163 head office jobs have gone and 60 jobs at the Huntley East Mine with reduced pay and hours at the Stockton mines.  Solid Energy is on the verge of bankruptcy.  Telecom is expected to announce over 1000 redundancies in May.  This casualty list grows with every week that goes by.

Added to this is the drought. This drought is the worst in the post war period with the whole of the North Island and now parts of the South Island are officially being in drought.  This will have a major impact on both the domestic economy and the country's exports.  Some commentators suggest it will possibly knock an estimated 30% off GDP.

This does not paint a positive picture of an economy going forward.  The New Zealand economy is extremely weak and vulnerable to both internal and external shocks. Another major downturn in the world economy will have a more devastating effect than the events of 2008.  The reason for this is explained by the RBNZ.

“... the major domestic factors behind New Zealand's high exchange rate over many years are the low level of savings (relative to our business and residential investment desires), our desires for high levels of consumption, and our dependence on foreign savings to achieve this..... Our net national savings rate over the past 30 years has averaged 3% of GDP – almost 5% points below the OECD median.  Our net household savings as a percentage of household disposable income averaged -2.25% over the past 25 years – this is the lowest rate in the OECD (where data are available) and 10% below the OECD median.  Our current account deficits over the same period have averaged 5% of GDP, and our foreign debt levels relative to GDP are little different from some of the smaller countries at the heart of the Euro crisis.  This poor savings performance comes at a cost it increases the vulnerability of our economy and it means that higher interest rates than elsewhere are necessary to achieve similar inflation outcomes.  The higher interest rates results in upward pressure on the exchange rate.”

Indeed with such an economic prognosis this can only mean the heightening of the class struggle as workers have no alternative but to struggle to maintain their living standards.  The questions are not if but when the workers will move into struggle.  It certainly will mean that the ideas of Marxism will grow under the unfolding conditions as workers struggle towards socialism to end the anarchy and nightmare that is capitalism.

National Party

The National-led government is continuing to follow a monetarist policy of cutting public expenditure in an attempt to recover the profitability for the capitalists and place the crisis of capitalism firmly on the backs of the working class.

The National-led government remain highly popular in the polls.  The reason for this is the ineffectual labour opposition who offer no real alternative to National's capitalist economic policy which in a nutshell is to do nothing except cut public spending and hope the economy comes right.

Like all bourgeois parties, the National Party is riddled with various forms of cronyism and scandal. This can be seen with government legislation that has or is overtly changed to suit the interests of big business with Warner Bros being a good example of this.  Additionally we have the “sweetheart deal” with Sky City paying for the Auckland Convention Centre subject to the gambling laws being relaxed in Sky City's favour.

However, the National Party has learned how to become populist by allowing a liberal social agenda such as not openly opposing private members bills on issues such as gay marriage / adoption or the Mondayising of public holidays.  This fig leaf of populist sentiment allows National to pursue such an economic policy for the time being.  National understands that to critically support the liberal social agenda of the opposition is key to remaining in power as the opposition have no real alternative to the economic position of government.  At the moment with meagre economic growth and a better economic outlook to that of Europe and the USA the government can be seen as good economic managers in the eyes of the masses, even if the economic medicine is not very palatable, as there is no credible alternative to the government's position. 

However, the idea of the government being good economic managers is beginning to falter with the debacle over the teachers' pay system Novopay or more correctly put No Pay.  It  has  been  revealed that the government asked the SOEs in 2009 to take on excessive debt so that the  SOEs could pay the government a larger dividend.  This was highly convenient for the government as it was seen as not taking on excessive borrowings at the height of the downturn in the economy.  Unfortunately, for the National Party this is now causing them a problem as the SOE Solid Energy is now teetering on the brink of bankruptcy due to the collapse in the coal price and the high exchange rate.  It has been revealed that Solid Energy's advice to the government in 2009 was not to take on more debt.  This advice was ignored by government and the debt increased from $13m to $313m.  Therefore the taxpayer, today, is no doubt going to have to bail out Solid Energy, which was one of the best performing SOEs and was on the block for privatisation.

In May the government is to sell-off 49% of the SOE Mighty River Power.  The propaganda surrounding this is to allow New Zealanders the chance to own part of the company.  The fact that they already own it 100% is not lost on the public who overwhelmingly oppose the sale. The reason given for the partial sale is an attempt by the government to prop up the NZX stock market that lacks scale and depth of other stock markets. Whilst this is true, the reality is this sale will be one of the biggest transfers of wealth from the bottom of society to the tops of society. Certainly the idea that mum and dad New Zealanders are at the front of the queue so that it doesn't fall into foreign ownership is just another political stunt. It can be guaranteed that within a short space of time the majority of shares will be foreign owned as well as it being fully privatised at a later date when private shareholders demand greater and greater returns.  A good example of this is the privatisation of Contact Energy in the 1990s.  Due to ineffective opposition we can expect the other part-privatisations to go ahead.

Such a policy of privatisation linked to further undermining of the public services, workers' rights and what remains of the Welfare State is a recipe for class conflict that is at the moment being muted by the labour and trade union leadership.  However, this cannot last forever as the growing discontent from below will inevitably break through.

If a general election was called tomorrow the National Party would undoubtedly win and be able to form a government.  However, such a position could change very quickly with the volatile situation that is developing in New Zealand and in the world.  Therefore it is uncertain under MMP whether National will retain power at the next triennial election.

Maori Party

The Maori Party is a rump of its former self.  It is unlikely to survive the next general election as the Maori electorates are likely to go Labour and continue the swings to Labour at the last election (apart from Te Tai Tokerau which is likely to remain a Mana Party seat) .  The Maori Party has lost credibility in the eyes of Maori workers due to it being in government with National.  The fact that Tariana Turia MP is standing down at the next election and the debacle of the parliamentary co-leadership are all indications of a politically spent force.

Labour Party

The right-wing labour leadership under David Shearer is an ineffective opposition to the Prime Minister John Key and the National-led government.  At best they offer a Keynesian policy with regard to direct taxation, capital gains taxes, the regulation of the exchange rate, RBNZ and a policy in favour of the industrial capitalists.  This is an attempt to solve the crisis within the framework of capitalism.   The Labour leaders fail to understand the depth of the crisis.  Fiddling around the edges of the capitalist system will not make capitalism work better.  Capitalism works on the profit motive. The capitalist will only invest in profitable markets and they will not prop up failing market sectors.

The enquiry into manufacturing by the opposition parties is an attempt to align themselves with the industrialists.   What this means is that the taxpayer will be used to maintain the profitability of these companies through either direct or indirect state subsidies.  This will not stop the decline of the manufacturing sector like in the past when these methods were last used in the 60s and 70s.

The Labour leadership response to privatisations of state assets is to organise a petition with the CTU, Greens and Grey Power to hold a non-binding citizen referendum asking the public whether or not they support privatisation.  The polls suggests that three quarters of the population oppose the sales so this is already known and regardless of the referendum result the government will just go ahead anyway.  The line of Clayton Cosgrove, who is Labour's spokesman on SOEs,  is that once they're sold they're gone forever!  If Labour was serious about stopping the privatisations it would immediately re-nationalise them on coming to power.  This would stop the privatisations process dead in its tracks. However, the leaderships response is that we may not be able to afford to so.  The leadership see everything from the capitalists' viewpoint and have no real socialist backbone within its caucus.

The Labour leaders are far removed and lag behind the present situation. The only solution is socialism and changing society.  It is unlikely that David Shearer will be advocating for socialism. It was revealed that he failed to declare to parliament his bank account with  an alleged $100,000 that he garnered whilst working for the United Nations.  We do not know of any workers who would forget that they had such an amount in their bank account.  The fact that most workers only dream of earning such an amount shows how out of touch the leader really is.

Within the Labour Party itself the rank and file is beginning to assert itself and starting to turn the party to the left. The rank and file won significant reforms at the last Labour Party conference with regard to the rank and file electing the leader of the party and that the annual conference is now the sovereign policy deciding body.  This was pushed both by the electorates and the affiliated unions. The affiliated unions came under tremendous pressure from the caucus to bend, but the affiliated unions stood firm and the remits were approved overwhelmingly on a card vote.  The parliamentary caucus was shocked at the victory of the rank and file and got a bloody nose in the process.  Within this process the Marxist played a significant role as this was anticipated with the growing militancy and anger amongst the working class.

There is a growing disconnect between the rank and file and the leadership. Without doubt the rank and file will push for more reforms that democratise the party and bring the caucus into check.  There is a growing concern that unless the party goes to the left then it will be defeated at the next election.  This is a correct assumption by the rank and file.  There is also a growing concern that if the leadership is not fully accountable to the rank and file then the fear is that the next Labour government will turn into another rogernomics government like in the 1980s but be far worse.  This is a correct assumption and is being borne out throughout the world were social democratic governments are carrying out austerity in the interests of capitalism.  The rank and file is attempting to move the party to the left.  This is not happening in a coherent worked out manner yet but under the prevailing conditions the need to adopt a genuine socialist programme will eventually come to the fore.  In such a situation that is developing within the Labour Party then the ideas of Marxism hold good prospects for the future.

The Greens

The Green Party leadership is continuing to attempt to move the party to the right. This can be seen by adopting a Keynesian approach to economic policy and further adapting themselves to capitalism.  Since the general election the Greens have remained static in the polls and are now beginning to consistently drop below 10%.  In all likelihood the Greens will be in the next parliament as a coalition partner with Labour.  This is a conditional perspective if Labour can secure enough seats to form a government.

CTU

The trade unions are a key area of work in the building of Marxist ideas.  At present the trade union leaders are being forced to the left by the rank and file as the employers take on a more “tooth and claw” approach to industrial relations. 

It is apparent that the CTU leaders are incapable of leading a generalised movement against the government. There have been important victories against specific employers which have strengthened the present leadership.  Due to the lack of any real lay member control of many unions and the lack of general branches it is difficult for the rank and file to organise effectively at the local level outside of the workplace.  Activists are at present being directed onto a political front into the Labour Party. The CTU affiliated unions are vigorously pushing policies for a new awards system under the guise of Industry Standards and the Alternative Economic Policy – in other words capitalist state interventionism and Keynesian economic policy.  However, the unfolding process to democratise  the Labour Party will take place in the unions.

At present only about 20% of workers are in unions and the employers are on the offensive to further reduce organised labour in the workplace. Without doubt in the period that is opening up workers will turn to the traditional mass organisations starting with the unions to begin to address the issues they face.  When the present leadership of the CTU is found wanting workers will 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  the ideas of Marxism will gain ground and we can win the best militant workers to the banner of Marxism through patient work in the movement.

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.

Youth unemployment has been persistently high at over 20%.  The National-led government's response to youth unemployment is to re-introduce the youth minimum wage rates.  This will lead to growing exploitation of young workers and anger.  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.   At some point the anger of youth, with no real future, will be transformed into mass street protests and demonstrations. 

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!