The Great Tightening 2.0

Trading Sovereignty For Investment Capital - Again: The suppression of local democracy is absolutely crucial to the success of the second “Great Tightening” exercise in New Zealand history. Unless the responsibility for making critical resource allocation and/or conservation decisions is taken out of the hands of elected local representatives and placed in the hands of unelected officials appointed by central government, then foreign investors will not feel sufficiently confident to risk their capital in major development projects.

 

ECONOMICALLY SPEAKING, it is difficult to define New Zealand as anything other than a colony. Its biggest export earner, agriculture, remains a price-taking not a price-making industry, and the other big foreign exchange earners: tourism and education; are essentially extractive. The former “mines” our spectacular scenery; the latter our status as a first-world, English-speaking nation.

 

That New Zealand is able to classify itself as a first-world nation is actually rather remarkable. A reliance on agricultural commodity exports and tourism is an economic condition generally associated with third-world states – most of which, only a century ago, were colonies of the major European powers. Officially, these former colonies are now free and independent states. But, if post-war history teaches us anything, it is that winning political independence, and becoming economically independent, are two very different things.

 

In order to grow and prosper, price-taking economies require a patron. For most of New Zealand’s history that role was fulfilled by Great Britain. It was British capital which financed the extensive infrastructure of its far-off farm, and it was in British markets that the produce of that far-off farm was sold. Without her capital and her markets, Great Britain’s far-off-farm would have failed. Certainly, New Zealand’s home-grown capitalists were too few and too poor to build a “Better Britain” in the South Pacific on their own.

 

More recently, the role of New Zealand’s principal economic patron has been taken over by China – which currently absorbs the lion’s share of New Zealand’s agricultural exports. If its history as a British colony is any guide, then the capital required to finance New Zealand’s future development will, increasingly, come from the Peoples Republic.

 

Like their British predecessors, Chinese investors are already attempting to secure control of the key supply chains to their domestic market. Just as New Zealand lambs were once raised on farms financed by British-owned banks; slaughtered in British-owned freezing works; transported to Smithfield in British-owned ships; and their frozen carcasses sold to British-owned retail outlets: New Zealand milk will soon be extracted from Chinese-owned cows; raised on Chinese-owned farms; processed into infant formula in Chinese-owned factories; shipped in Chinese-owned containers; and sold in Chinese-owned supermarkets.

 

One of the most interesting themes developed by the New Zealand historian, James Belich, in his 2001 book, Paradise Reforged, is what he calls “The Great Tightening”. In a nutshell, this describes the ways in which New Zealand politicians bound their countrymen ever more tightly to the British economy. New Zealand’s primary production went out to Britain; British manufactured goods came back; and woe betide anybody who got in the way (like visionary economic nationalists, socialist trade unionists, and other assorted pests).

 

It is rapidly becoming clear that a very similar tightening exercise is underway in twenty-first century New Zealand. In order to attract the foreign direct investment it believes New Zealand must have to keep its economy growing, the National Government of John Key is methodically emptying the statute books of every legislative impediment to economic development.

 

The suppression of local democracy is absolutely crucial to the success of this second “Great Tightening”. Unless the responsibility for making critical resource allocation and/or conservation decisions is taken out of the hands of elected local representatives and placed in the hands of unelected officials appointed by central government, then foreign investors will not feel sufficiently confident to risk their capital in major development projects.

 

Stripping local politicians of their power to manage and develop key infrastructure is an equally vital element of the same tightening programme. It’s what lies behind the draconian provisions of the Local Government Reform Bill currently before Parliament. Under this new law the unelected Local Government Commission will have the power to force local councils to hive-off key services, such as water reticulation, energy, ports and transportation to so-called “Council Controlled Organisations”. These Orwellian entities are, of course, anything but council controlled – as anyone living in Auckland, where they have been operating since the creation of the “Supercity” in 2010, will attest.

 

Auckland has not been the only laboratory in which the anti-democratic elements of National’s tightening have been tested. The people of Canterbury have been without democratic representation at the regional level since the Government sacked Ecan’s elected councillors and replaced them with appointed commissioners – also in 2010. With commissioners safely installed, the irrigation schemes deemed essential to dairy intensification in Canterbury could proceed without fear of democratic interference.

 

When most of the population of colonial New Zealand could trace their origins directly to Great Britain; and when the patriotic mists of Imperial Albion largely obscured the predatory commercial interests of the City of London, the first Great Tightening proved broadly acceptable.

 

The second will be very different. Those wondering how it feels to see one’s country subordinated to foreign interests should probably consult a Maori.

 

This essay was originally published in The Press of Tuesday, 6 September 2016.

Labour's Choice: Free Trade, Or Free Nation?

Historically Incorrect: Labour's claim that it has always supported Free Trade simply isn't true. For two-thirds of its history, Labour regarded trade simply as a means to its end of transitioning New Zealand from economic colony to free and independent nation. The party's embrace of Free Trade actually dates from 1983, when Labour threw its support behind the CER agreement. Thirty-three years later, independence is as far away as ever - and the TPPA will not bring it any closer.

 

“LABOUR HAS ALWAYS BEEN a Free Trade party.” This is the bald assertion from a chorus of past and present Labour leaders desperate to escape John Key’s “anti-Free Trade” label. There is, however, a very large problem with Labour’s claim. It simply isn’t true.

 

Prior to 1984, Labour is much more accurately described as a party committed to ending New Zealand’s status as a cultural and economic colony of the United Kingdom. This mission necessitated a radical expansion of the range and sophistication of New Zealand’s exports. Obviously, such a policy also required that serious attention to be paid to the size and scope of protective instruments applied to imported goods by this country’s potential export markets.

 

By the same token, however, any broad expansion of New Zealand’s industrial base would require the development of its own array of protective instruments. For at least as long as it took new, export-oriented industrial concerns to become firmly established, the price of goods imported from their international competitors needed to be artificially boosted by tariffs.

 

Tariffs, and an import licencing system, were accordingly utilised by all pre-1984 Labour Governments. Not only was the system needed to protect infant industries, but it was also vital if New Zealand’s always vulnerable reserves of overseas funds were not to be frittered away on non-industrial imports.

 

To make the policy work, as the Second Labour Government made every effort to do between 1957 and 1960, a significant degree of state planning and co-ordination would be required. In June 1960, an Industrial Development Conference convened in Wellington to determine the way forward.

 

One of Labour’s “From Colony to Nation” mission’s strongest supporters, Industries & Commerce Secretary, Bill Sutch, recorded that:

 

“The conference recommended a Development Council, better regional distribution of industry, much more industrial research, an Industrial Finance Corporation, advisory aids to industry, the negotiation of bilateral trade agreements [and] various methods of promoting external trade.”

 

Not “Free Trade”, then, but trade as a means of advancing New Zealand’s economic independence: by expanding its industrial capability, diversifying its exports and making it less reliant on both foreign capital and the imported goods of New Zealand’s creditors.

 

Not surprisingly, Labour’s From Colony To Nation policies were met with fierce opposition from the National Party and its key backers. Farmers, importers, merchants and retailers had little to gain and great deal to lose by such a fundamental reordering of New Zealand’s economic and cultural priorities. It was from these groups, the most prominent beneficiaries of New Zealand’s colonial status, that the cry for Free Trade was most loudly voiced.

 

The commitment of Norman Kirk’s Third Labour Government to the From Colony To Nation mission was, if anything, stronger than the Second’s. Aware of the extent to which New Zealand’s limited industrial base remained overseas financed and foreign controlled, he was determined to establish a pool of domestic investment capital from which New Zealand could build its own future.

 

The precise nature of the vector which carried the Free Market/Free Trade virus into Labour’s ranks in the early 1980s is still not 100 percent clear. Part of the answer no doubt lies in the examples made of the governments of Chile’s Salvador Allende, Australia’s Gough Whitlam and the UK’s Harold Wilson, by the enemies of Democratic Socialism. The policies of the New Right governments of Margaret Thatcher and Ronald Reagan had, similarly, made it plain to New Zealand’s Labour politicians that democratic economic planning and the preservation of national independence were well-and-truly off the “Free World’s” political agenda.

 

What should not be overlooked, however, is the impact of the decision of the Bill Rowling-led Labour Opposition to support “CER” – the Closer Economic Relationship with Australia sealed by Rob Muldoon’s National Government in 1983. Critics of CER like Wolfgang Rosenberg struggled to make Rowling (his former student!) understand the consequences for Labour’s From Colony To Nation mission of facilitating Australian capital’s gradual take-over of New Zealand’s economy. To no avail. As the British colonisers were departing for Europe via the front door, the Aussies were being smuggled in the back!

 

Historically-speaking, Labour’s pro-Free Trade stance has been around for just 33 of its 100-year existence. If its dream of transitioning New Zealand from colony to nation still endures, then Labour’s opposition to the Trans-Pacific Partnership is, indisputably, the more natural fit.

 

This essay was originally published in The Waikato Times, The Taranaki Daily News, The Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 12 February 2016.