The
events of the melt down on the world stock markets and the ensuing
economic crises have overtaken the general election in New Zealand.
At present opinion polls vary enormously from giving National a 3%
lead over Labour to 18% respectfully. Quite clearly volatility is
building up within society.
The
recent opening of the Crown accounts show that the government from
having modest cash surpluses, in the recent period, has now turned
into a deficit. It is anticipated that the country will be in debt
for at least the next decade. Cash deficits will rise to NZ$5.9
billion in 2009 to NZ6.8 billion in 2012 and NZ$7.3 billion in 2013.
The deficits are based on predictions prior to the present meltdown
on the world’s stock markets and are probably a conservative
estimate. One thing is absolutely clear the government’s cupboard
is bare and further government spending will mean increasing the
national debt to pay for it. This is just icing on the recessionary
cake, with rising unemployment, rising inflation and the collapse of
the housing market.
With
this in mind the National Party has announced their tax cut packages
which if elected would mean seriously undermining Kiwisaver (The
State Pensions provider) and the abolition of tax credits for firms
carrying out research and development to pay for it. This is an
unpopular move to many voters. Whilst we are critical of the
government’s market approach to saving for retirement (one only has
to look at events to prove our point) the policy is popular at the
moment thanks to the government’s incentives and forced employer
contributions. Additionally, New Zealand languishes at the bottom of
the OECD league with regard to research and development. The tax
credits are an attempt to improve competitiveness of New Zealand
companies. The outcry from the exporters and what remains of the
industrialists exposes the dominance of finance capital not only in
the National Party but the country as a whole.
The
National Party released its manifesto at roughly the same time as the
Labour Party. The dominating theme from National is “a time for
change”. It reveals little about their economic policy except the
need for strong leadership. Quite clearly the question starting to
be posed in people’s minds is do we want a party in power that
supports the principle of the free market and a prime minister who
used to be a ‘spiv’ for Merril Lynch running the country? The
analogy that comes to mind is putting Dracula in charge of the blood
bank!
Whilst
all politicians repeat the fact that our banking system is sound and
the banks have been rather conservative in lending they haven’t
exposed themselves to such high risks loans as overseas banks: the
storm clouds are gathering. New Zealand has been borrowing more and
more from offshore markets. In 1998 this was 22.6% of total
liabilities. This has now increased to 35.5% and the debt stands at
$NZ126.8 billion, mostly borrowed on a short term basis. It is not
ruled out that a similar fate awaits us here as to what has happened
recently in Iceland. At the end of August a whopping NZ$90.1 billion
of the NZ$126.8 billion of overseas borrowing was either to be
refinanced or was due to be repaid in 90 days. Added to these woes
is the fact that the net household deficits have increased from NZ$15
billion in 1998 to NZ$78.3 billion today. In real terms household
borrowings now stand at NZ$160 billion and household deposits stand
at NZ$81.9 billion. These do not seem like conservative figures and
show quite clearly New Zealand is extremely financially exposed. The
extension of credit has gone far beyond what it is meant to do so and
is a financial bubble that has indeed burst. It has gone way beyond
the productive capacity of capitalism here in New Zealand as well as
internationally.
The
NZ$ is falling against all major currencies, in particular the US$,
and it is not ruled out that if it is weakened further then the
chances of New Zealand banks defaulting will increase significantly.
Coupled to this is the fact that most of the banks here are owned by
Australian banks and any banks going belly up in Australia will have
serious repercussions here too. No amount of money that the Reserve
Bank has will stave off a major financial crisis. Neither will the
government’s tax $ either!
Helen
Clark in delivering the Labour party’s manifesto said ‘A curtain is
being drawn on the era of the free wheeling unregulated money traders
and financiers whose greed has shaken the international finance
system to the core… Co-ordinated international action will be
needed to ensure that the greed merchants don’t ever again get the
chance to destroy the lives of ordinary people in real jobs trying to
put food on the table for their families.’
The
Labour Party has announced the guaranteeing of bank deposits, a
programme of useful public works to mop up rising unemployment,
retraining of workers that lose their jobs through redundancies as
well as the phasing in of universal student allowances. This is at
best a reformist manifesto and cannot be paid for on the basis of
capitalism without significantly increasing the national debt and
stoking up inflation. It is doubtful on the basis of capitalism that
any meaningful reforms will be delivered to match the rhetorical
speech of the prime minister.
With
this in mind Labour needs to further clarify and deepen its manifesto
by adopting bold socialist policies. It needs to clearly explain the
crises of capitalism that is unfolding if it is to stand a good
chance of winning the election. Unfortunately, the present leadership
of the movement does not have a socialist perspective. They are
wedded to market solutions that will not deliver and are in danger of
allowing a National government to be elected..
Helen
Clark is absolutely right, co-ordinated international action is
needed but such a sweeping statement needs clarification. The
co-ordinated international action that is needed to solve this
economic crisis is the co-ordinated action of the working class to
expropriate the capitalists. The capitalist system is not fit for
purpose and the only solution to the problems faced by humanity is
the building of a socialist society here in New Zealand and
internationally.