New Zealand Perspectives 2011

Friday 22nd April 2011

New
Zealand perspectives 2011 should be read in conjunction with previous
years’ perspective documents as they are a continuation from them.
In addition these perspectives should be read in conjunction with the
latest World Perspective analysis and associated material from the
International Marxist Tendency (IMT) and Socialist Appeal NZ.

 

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 affect 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 22^nd,
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 milksolids 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 8^th.

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 1^st
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 bellow
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 1^st.

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
1^st.
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 26^th.
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 become 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 governments 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 form 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 20^th..

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!