New Zealand society is entering an extremely turbulent period as the effects of the economic recession are felt. As previously mentioned in 2008 Perspectives New Zealand will not be immune from the global downturn. In fact the notion that our so-called “good economic fortune” in the past will save New Zealand from the worst excesses of the global downturn is evaporating before our eyes.
Introduction
New Zealand Perspectives 2009 constitutes an analysis of the deepening socio-economic crisis facing New Zealand capitalism. It applies the method of Marxism to these processes: seeking the trends and processes within and to serve as a guide to action for all workers and youth who want to struggle for the socialist transformation of society.
The general trends as outlined in the 2008 Perspectives have been borne out by subsequent events. For the majority of 2008 bourgeois economists had been predicting a soft landing for the New Zealand economy, pointing out that the national debt was at a historic low of about 19% of GDP due to the policies of the former Labour-led government and due to New Zealand’s deregulated economy which would place us in good stead to weather the downturn. However, these so called “economic experts” failed to understand the gravitas of the crisis of capitalism that was unfolding before their eyes, unlike the Marxists.
1. Economy
New Zealand society is entering an extremely turbulent period as the effects of the economic recession are felt. As previously mentioned in 2008 Perspectives New Zealand will not be immune from the global downturn. In fact the notion that our so-called “good economic fortune” in the past will save New Zealand from the worst excesses of the global downturn is evaporating before our eyes.
The shortsightedness of the New Zealand ruling class and their cheerleaders is being exposed as falsehoods on a daily basis as the latest predictions are for negative growth for 2009 and perhaps 2010. This exposes the lie from the bourgeoisie of a quick turn around in economic fortunes by the fact that we are looking at the start of a protracted downturn.
The recent New Zealand Institute of Economic Research's quarterly survey of business opinion (QSBO) for the December 2008 quarter paints a bleak picture indeed. In the third quarter of 2008 the QSBO reported 7% of businesses stated they expected to lay off staff in the run up to the year’s end. In the event 21% of businesses had laid off staff. The latest QSBO suggest that 32% of businesses are likely to lay off staff. This is the highest number recorded in the survey since 1991, when the country went through the economic counter-reforms of the National government under the auspices of the then Finance Minister, Ruth Richardson.
The QSBO goes on further to state that the figure will be still higher in the upper North Island at 36%. From an industry sector point of view the QSBO points out that in retailing 43% of businesses expect to lay off staff, with manufacturing and building predicting a 39% and 36% figure respectively.
Additionally, 53% of retailers surveyed reported lower sales in the past 3 months and the same amount expect a further decline in the March quarter. Retailers expect profitability to fall and their expectations on this matter are at a 26-year low.
Investment intentions are also very weak. 39% of businesses are intending to invest less in plant and machinery in the coming year. This is the weakest indication on investment intention since the question was first introduced in the QBSO in 1975. Bank of New Zealand economist Craig Ebert summed up the situation rather nicely when he said, “It’s looking very, very ugly out there”.
The Reserve Bank of New Zealand (RBNZ) briefing paper released in November 2008 to the incoming National Party led government's Finance Minister, Bill English, on the fiscal and economic conditions of the country adds further weight to the notion of a severe recession unfolding in New Zealand.
It is clear that the incoming Finance Minister was taken aback by the report. On page 11 of the report under its live issues heading it states “New Zealand, like other countries, is facing a difficult combination of influences not seen since the oil shocks of the 1970's and possibly the 1930's [in the case of global financial markets]. Financial market developments are having a significant impact on the prospects for maintaining macroeconomic stability and the lines between financial and macro stability are being increasingly blurred”. In plain terms, this means the financial crisis on the world stock markets is now affecting the real economy and that the RBNZ doesn't think that there will be a soft landing!
Had the Finance Minister read Marx's Capital he would not be taken by surprise! Marx explained that capitalist production is divided into 'department 1' which is the production of the means of production (capital goods, machinery and buildings etc), and 'department 2' which is the production of the means of consumption (consumer goods). Therefore, the two sections are inter-dependent.
The overextension of credit way beyond its natural means until very recently is now seriously affecting the real economy. Capitalism needs rising production, investment (which is now choked off by the 'credit crunch' epitomised by the 'toxic loans of mass destruction') and an increased market. In the end the extension of credit to unprecedented levels and associated unprecedented levels of indebtedness at all levels of society has ended this and has exceeded the limits of the capitalist system and has lead to bust.
At the time of writing, unemployment stands at approximately 4.1% of the labour force. It is anticipated that this will climb to 7 to 7.5% in the next 18 months. Obviously the true rate of unemployment will be higher as the official measurement of unemployment, the Household Labour Force Survey, regards all persons who are working for more than one hour a week as employed. It does not take into account underemployment, which has become a major concern amongst New Zealand workers.
Alongside this the RBNZ has reduced the official cash rate (OCR) through a series of dramatic cuts from 8.25% to 5%. The OCR will fall much further as the RBNZ attempts to stimulate the economy. Apparently the RBNZ isn't worried about inflation which is dropping due to the collapse in the economy. Presently, deflationary pressures are at work within the economy. In particular, the recent falls in the price of petrol, the collapse in housing prices, the loss of $5 billion or more in the collapse of over 25 finance companies and the subsequent drop in consumer spending. However, this will turn into its opposite when state expenditure increases and the government tries to spend its way out of a recession. It is predicted by 2013 that national debt will be 40% of GDP and this is without any major 'priming of the pump'!
Added to the economic woes is the credit rating agency Standard & Poor has warned the government (along with the governments of Ireland and Greece, amongst others) of a possible downgrade to the country's credit rating to poor due to the deteriorating balance of payments and general fiscal outlook.
The collapse in export commodity prices as the demand for commodities on the world market decreases as the global recession bites is an important factor in this downgrade notice, coupled with the collapse in the NZ dollar against all major currencies thus making imports more expensive, which is further choking off spending in the domestic market that has been accustomed to receiving the majority of its manufactured goods from cheap imports. Some economists have predicted a fall in living standards of between 10-15% because of this.
What the above illustrates is the impasse in which New Zealand capitalism finds itself. The social and political consequences of this will be a heightening of the class struggle in New Zealand. This will provide a fertile ground on which to build the ideas of Marxism on.
2. National Government
John Key, leader of the nationalist party, is embarking on a campaign of attacks on the working class after his election victory. Photo by kelvinhu. The recent election of the National-led government is a direct result of the bankruptcy of the reformist and pro-capitalist leadership of the Labour Party. The National government will be a government of absolute crisis. At present there is a belief that the Prime Minister, John Key, and his government can resolve these matters outlined above but this will be short lived.
The government will have no alternative but to attack the living standards of workers and reduce the social wage (e.g. public spending on health, education, and social welfare) in order for the capitalists to maintain and recover their profitably and place the crisis of capitalism firmly on the backs of the working class.
The National Party came into government promising 100 days of action. The immediate thing they did was to introduce the 90-day “fire at will” rule under urgency whereby workers can be sacked for any reason with no recourse to the employment courts in the first 90 days of their employment. This will affect over 90% of workplaces as the law applies only to workplaces with less than 20 workers as well as teachers. This is a direct attack on trade unions and to date the Council of Trade Unions (CTU), despite vocal condemnation, has done little to combat this assault on workers’ rights.
Furthermore, tax cuts that will benefit primarily the wealthy and better off New Zealanders was also passed under urgency.
The 100 days of action have turned into inaction as the government went into 28 days of 'summer holiday' recess. While the economy burned, John Key fiddled at his luxury $5.6 million holiday home in Hawaii!
It is quite clear that the fiscal package to pay for infrastructure public works mooted by the government will be woefully inadequate to stimulate the economy. State expenditure is going to be cut. Already, future upgrades to the newly nationalised railways has been canned due partly to National's ideological dislike of the railways and due partly to National's friends in the trucking lobby, whose spokesman is former National Cabinet Minister and MP Tony Friedlander, who will no doubt wish to benefit the most from any public works.
On the basis of capitalism, increasing state expenditure can only be financed in so many ways. That is, either through taxes on the capitalists or on the workers and petit-bourgeoisie. If taxes are levied on the capitalists it will be a further disincentive 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. This will be done without the backing of the increased production of goods and will lead to inflation resulting in the same effect as the other two methods and higher interest rates.
Further attacks on workers’ rights are also planned. Rather cunningly, the National-led government will extend collective bargaining rights to non-unionised workers. This is an attempt at a scabs charter. Due to the strengthening of the unions in the past period and the balance of class forces it would be extremely difficult to repeal the limited collective bargaining out of the Employment Relations Act. However, it is a double-edged sword for the government, as non- union workplaces may set up collective bargaining as the first step in the awakening class struggle. This is not ruled out under current economic conditions.
The government is extremely cagey with regard to privatisation of state assets. They would clearly like to do this but public opinion is against this through bitter experience and the economic outlook as a whole. It is likely in the short term that they will soften up the public sector for privatisation using back door methods such as public-private partnerships, hoping for a more favourable period to arrive. This will lead to opposition to such proposals as delivery of public services are reduced and profitability is put first.
The Māori Party is becoming the political pet poodle of the Prime Minister (left), who has barely delivered on any parts of the agreement made with the leader of the Māori party (right). Photo by nznationalparty. National's coalition partners in government are ACT, United Future, and the Māori Parties. ACT will, no doubt, urge the government to attack workers quite openly and wish to see progressive taxation weakened further and more indirect taxation in its place along with more 'user pays'. Any such moves in this direction will be met by opposition from the workers. The leader of ACT, Rodney Hide, has been made Minister of Local Government. This is clearly in line with future attacks on the public service. No doubt (counter) reform of local government will be announced once the Royal Commission on the governance of Auckland is concluded. The aim of any reform will be to ensure that big business is freed from the costs of the regulatory framework of local government and the rules which govern them such as the Resource Management Act. This will lead to the further distancing of elected politicians from the communities they are supposed to be serving.
The Māori Party is becoming the political pet poodle of the Prime Minister after agreeing to a few baubles of office and limited concessions on issues of concern to them. They wish to pursue a right-wing economic and social agenda of what could best be described as Victorian values. They have said they are in favour of Māori administering welfare to (no doubt) the Māori deserving poor. Once this comes to the fore politically it will meet with the wrath of Māori workers. This is confirmed by the recent announcement by co-leader Pita Sharples, who is going to have an economic summit of Māori business leaders to address the problems that Māori will face in the recession. Up until this point the only thing that has occurred is the demand that a Māori flag be flown on the Auckland harbour bridge on Waitangi Day!
As we have said before, the Māori Party represents a “wealthy” elite and ignores the class basis of politics. This is clearly expressed when Pita Sharples talks about 'our people' and completely ignores the class basis of Māoridom. This will be their undoing and the party will implode and lose any credibility it may have in the eyes of Māori workers.
United Future will further expose its political opportunism under its leader Peter Dunne. It is not ruled out that by the next election that United Future will not be returned to Parliament as the centre ground in politics is eroded further and the opportunism becomes apparent to the electorate.
The perspective for the National-led government is one of instability lurching from crisis to crisis. This will put enormous strain on the National Party and their coalition partners. It will increase internal division and splits within the National Party as the New Zealand bourgeois have no clear way forward for capitalism and await further instructions from the major imperialist powers. It is highly likely the government will survive its term in office. This is because of the weak reformist leadership of the mass organisations of the working class, in particular the Labour Party and the CTU, who have no socialist perspective or programme and will initially yield to bourgeois ideology, as in the past, and look to the past for solutions. They are incapable of organising or leading a generalised movement of the working class.
This does not rule out a generalised movement of the working class, coming from below, and certainly one which may start in the more unorganised layers of the working class, in particular the youth. Such a movement will not only frighten the ruling class but also the present leadership of the labour and trade union movement as they will be unable to control it. In the present conditions this is entirely possible and cannot be ruled out once the consciousness of the working class has caught up with events. If such a movement occurs it will have the potential to remove the National-led government from office and force a general election.
3. Labour Party
The election defeat promted no self-criticism among the leadership of the Labour Party who proceeded to elect right-winger Phil Goff (above) to leader. Photo by policy netowrk. Having lost the general election the parliamentary Labour Party caucus spent no time in regrouping swiftly electing right-wingers Phil Goff and Annette King as leader and deputy leader. No doubt, despite the appearance of unity of the parliamentary Labour Party caucus, cracks will appear as the pressures from the working class, the New Zealand bourgeois and world imperialism come to bear down on them.
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 the left, opening up good prospects for the ideas of Marxism. However, we expect for this to take time, as workers will initially look toward the trade unions in the first instance to solve their problems.
4. Greens
The Green Party returned 9 MPs to Parliament at the 2008 general election. This was 3 more than in 2005. Obviously they were able to capture some disillusioned Labour voters, but they were disappointed that they didn't do better. The Greens advocating green taxes as a solution to climate change and putting the burden on workers is an explanation as to why the Greens didn't poll better, as well as the swing to the right during the election. As we have said before the Green Party portrays a left image of itself and is attractive to a layer of youth.
The reason the Green Party did better in this general election than in the 2005 is because it was outside of government and able to critically support or oppose the government giving it more of a radical left veneer than in previous parliaments when it was part of government. The Green Party will maintain its basis of support in the short and medium term, but they will be seriously exposed as the class struggle unfolds and workers look to find the political answers to their problems.
5. 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. This will lead to a further strengthening of the unions. As a new layer comes into the unions there will inevitably be conflict between the rank and file and the bureaucracy that sits at the top.
Workers will turn to the trade unions in the coming period and demand a militant leadership to replace the current one. Photo by Finsec. 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.
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.
6. Youth
The youth are the most radical and open layer of society and the starting point of the work of the Marxists; here protesting against the invasion of Gaza earlier this year. Photo by rbnstubbs. 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, unemployment and a future with no hope.
The election of a National government will further radicalise a whole section of youth as they look for answers to the problems they face. 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 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!
What We Stand For
- Labour to power on a bold socialist programme!
Labour must break with big business and pro-capitalist economic policies. - For a programme of useful Public Works
For a crash programme of constructing new infrastructure to meet the needs of New Zealand workers, such as schools, housing and hospitals, good transport infrastructure including roads, rail, ports and airports as part of an integrated public transport policy for the nation. - The right to work
No to unemployment! Work or full maintenance for all and the sharing out of all available work without loss of pay. - Nationalisation of all workplaces threatened with closure under workers’ control and management
Open all books to the Workers to reveal information about all the excessive profits, speculation and swindles to expose who is really responsible for the mess. - No to wage cuts or wage freezes
The trade unions are to work out the real index of the cost of living in place of the official index which does not reflect the real state of affairs, with guaranteed wage rises to at least match this. - A national minimum wage of at least two thirds of the average wage.
$17 an hour as a step toward this goal with no exceptions. - Repeal Individual Employment Contracts enshrined in the Employment Relations Act 2000
End casualisation of the workforce. Support collective trade union bargaining in the workplace. Repeal all anti trade union legislation. - For a 32-hr week without loss of pay
No compulsory overtime and voluntary retirement at 55 with a decent full pension for all. - Education for all
Fund our schools and colleges. End corporate encroachment into the classroom. Scrap tuition fees and loans, for living grants and life-long learning for all. No to private education. - The right to a decent home
For a crash building programme of state houses, which are energy efficient and eco- friendly, and the introduction of fair rents in place of market rents for all. - Abolition of the Monarchy and the role of the Governor General
Establish democratically run workers’ democracy and end colonial anachronisms. - The protection of Māori rights with regard to the Treaty of Waitangi
We recognise the historical significance of the Treaty of Waitangi. Only by abolishing the capitalist system and the introduction of workers’ democracy and a democratic socialist plan of production can there be a cast iron guarantee of upholding the principles of the treaty. To achieve this we call for the maximum unity of Māori workers and Pākehā workers in the fight for socialism. - Abolish the free market model for State Owned Enterprises (SOE)
Workers’ control and management of SOEs and integrated under a democratic socialist plan of production. - Break with the anarchy of the capitalist free market
Nationalise the big monopolies, banks and financial institutions that dominate our lives with compensation to be paid only on the basis of need. All nationalised enterprises to be run under workers’ control and management and integrated under a democratic socialist plan of production. - Action to protect our environment
Only public ownership of the land and major industries, petrochemical enterprises, food companies, energy, transport, and primary production can form the basis of a genuine socialist approach to the environment. - Free healthcare for all
For a fully funded public health system free at the point of use. As an immediate step abolish doctors’ fees, prescription charges and all private health care. - Socialist Internationalism
For a socialist New Zealand linked to a Socialist Federation of the South Pacific as part of a World Socialist Federation.