Armageddon Outa Here! Confronted with the brute economic power of a recalcitrant business community, Dr Michael Cullen, Minister of Finance in the Labour-Alliance Government of 1999-2002 was forced to repudiate the radical implications of his infamous "We won. You lost. Eat that!" quip to the National Party Opposition.
THE IRREPRESSIBLE Martyn “Bomber” Bradbury, displaying an entrepreneurial spirit not generally associated with the Left, has persuaded some of New Zealand’s largest trade unions to back The Union Report, a half-hour television show about unions and unionism which he hosts every Monday evening on Auckland’s Triangle TV and, via web-casts, across the country. Occasionally, Bomber invites me to participate.
This week’s show featured James Ritchie, former head of the
Dairy Workers Union, who’s just taken up a prestigious post with the
International Foodworkers in Geneva. The discussion ranged over many matters,
but the topic that provoked the liveliest discussion was how constrained both
unions and union-friendly governments have become under the present,
globalised, variant of capitalism.
With an extension of Paid Parental Leave (PPL) once again on
the parliamentary agenda, we recalled the infamous “Winter of [Employer] Discontent” that gripped the
country in the first year of the Labour-Alliance Government of 1999-2002. The
left-wing Alliance MP and Associate Minister of Labour, Laila Harré, was
proposing an employer-funded PPL scheme, and New Zealand’s bosses were not
happy. It seemed to them that Helen Clark had a socialist tiger by the tail and
its claws were threatening their bottom lines. In debating the new Employment
Relations Bill, hadn’t the new Finance Minister, Dr Michael Cullen, taunted his
National foes with: “We won. You Lost. Eat That!”
The degree of employer disaffection could be read in the
sudden and sustained fall in the value of the New Zealand dollar, which
bottomed-out at an alarming US$0.32. As the opinion polls turned against the
government, and business confidence plummeted, Dr Cullen warned that the
Right’s propensity for “Armageddon economic analysis” could become
self-fulfilling.
By late May 2000, with economic Armageddon getting closer –
the Government caved. At a series of breakfast meetings, Dr Cullen set about
reassuring business leaders that his government was not composed of
sharp-clawed socialists: “We want to be a government that moves forward with
business,” he told a Wanganui business audience, “not one that watches
indifferently from the sidelines.” For good measure, the Prime Minister
declared that employer-funded PPL would be enacted “over my dead body”.
It was a U-turn executed under duress. In early June, at the
funeral of Jock Barnes, the militant leader of the watersiders in 1951, CTU
President, Ross Wilson, quietly informed me that, only days before, the Prime
Minister had warned him the country was facing an “investment strike”.
Shortly after Monday’s screening of The Union Report a viewer contacted me with a question. What would
have happened, he asked, if Helen Clark had gone on television and told the country
what the bosses were doing? If she had challenged the business community, both
at home and abroad, to let New Zealand’s democratically elected government
carry out its mandate, and called her supporters out into the streets. Would
the Prime Minister have prevailed?
Possibly. But in doing so she would have raised the
political stakes to a such a dangerous degree that 99.9 percent of politicians
(even social-democratic ones) would simply have run the other way. To openly
pit “the people” against “the bosses” is to place the option of full-scale
revolution – or repression – on the table. Having done so, Ms Clark would very
quickly have discovered that breaking an “investment strike” is in no way
comparable to breaking an ordinary strike. In the latter case, only the future
of a single company and its employees is on the line. With the former, you’re
hazarding the future of an entire social class. Most political parties, even
left-wing ones, would rather keep control of the losing side than lose control
of the winning side.
Perhaps this explains why the Labour Party remains so
reluctant to promise the opponents of partial privatisation that it will
renationalise the assets if re-elected. Global markets take a dim view of such
uncompromisingly anti-capitalist behaviour. The world would simply stop lending
us money.
And even revolutions (some might say especially revolutions) need credit.
This essay was
originally published in The Dominion Post, The Waikato Times, The
Taranaki Daily News, The Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 3 August 2012.
Thank you for this very well-reasoned response to my question. In my original email to you I pointed out the false equivalency of what workers strike about (fairer pay, better working conditions, better hours, etc) compared to what business strikes about (paying for Paid Parental Leave). However you rightly point out the difference in the scale of consequences. Whereas one side holds the profits of their employees at ransom, the other side holds the entire economy at ransom. In your article your answer essentially points to this difference as to why business is never stood up to when they threaten government leaders. In fact, it is implied that because of the scale of what is held at ransom by business, they can never be stood up to. This is a profoundly depressing notion, for no other reason that, if it is actually true, then business will always win. The screws that business tighten have no limit to how tight they can go. The endgame is that they will have everything and we will have nothing, which is exactly the kind of environment which sparks revolutions- credit, or no credit. Are you to say that there is no middle ground between these two points? That there can only be timid government trapped in an endless placation to business until the people can no longer tolerate it any more and rise up? Or can there ever be a legitimate way to successfully break an investment strike that holds the entire economy to ransom? I hope one day we find out.
ReplyDeleteThose businesses who currently complain about he dollar's value (now US¢80 vs the above quoted US¢39) may rue their actions.
ReplyDeleteThank you, Mat. One of the possible strategies is that adopted by the government of Michael Joseph Savage - which was essentially to strike at capital indirectly - rather than attack them head-on. See "No Left Turn", Chapter Six, Page 149.
ReplyDeleteThere are many ways the power of capital could be challenged.
ReplyDeleteThe starting point is having the will to do so.
The other option is for Government to provide the capital.
ReplyDeleteOh the irony!
ReplyDelete"If she had challenged the business community, both at home and abroad, to let New Zealand’s democratically elected government carry out its mandate,..."
Like the current government's democratically elected mandate for the partial sale of some state owned power generators?
I was a joint owner of service business at that time whose main cost of business was staff salaries and we were receiving signals from the government that there were potentially a raft of additional employer funded costs in the pipeline.
ReplyDeleteFor many businesses success is making sure the difference between 2 large numbers is carefully managed (income minus costs). It does not take a lot of additional costs and/or a drop in revenue for a profitable company to become a money sink.
So, what do you do in times of uncertainty or where you can see additional costs in the pipeline? You carefully manage investments in to the business by deferral or even cancellation until you have a better understanding. The inability to invest is reducing the ability to increase returns. So, you don't do this out of any sense of spite or as a means to blackmail the government, especially as ours was a relatively small company. Many others in the same boat as me did precisely the same.
This is a purely rational economic response not some great collusion.
Silly time wasting stuff in my view.
ReplyDeleteChris, if after all your experience you must cling to the notion that Labour is not a party of capitalism, that's up to you.
The problem with that fantasy is, it puts off asking the hard questions.
I'm wholly in favour of lengthy periods of paid parental leave. But I don't see why employers should pay for it.
ReplyDeleteI'm also in favour of affordable dentistry (that would be the day!) but don't see why that should be a charge to employers either.
As a Social Democrat, I believe the state has a duty to provide those social goods that the market cannot provide. It should do this on the basis of progressive taxation, primarily of incomes and capital gains (and also, perhaps, of unused capital).
The New Zealand state is better placed to meet such additional costs because of our admirably low government debt to GDP ratio.But it can only meet these costs on a continuing basis if our economy is able to deliver respectable levels of growth. Loading social costs onto business is no way to achieve this necessary goal.
Yes, I agree, Social Democratic governments have a duty to assert the public interest in the face of corporate power. And there may certainly be times when they have to stamp their feet and show who's boss. But it makes no sense to strangle the only goose that's remotely capable of laying something distantly approaching a golden egg.
"But in doing so she would have raised the political stakes to a such a dangerous degree that 99.9 percent of politicians (even social-democratic ones) would simply have run the other way."
ReplyDeleteNot really. The bosses had a better poker face. We are talking about a modest paid parental leave scheme, and not the institution of a NZ version of Gosplan, after all. Other countries have such schemes and they aren't suffering the horrors of underinvestment. In the end, it is small beer.
You seem to forget that markets also provide incentives to punish stupid bosses. Irrational overreactions just provide cheaper opportunities for the rational. The class unity of capitalists becomes a fragile thing when there is a chance to make money at another capitalist's expense. The rational thing to do in this case was to wait it out.
It also seems silly to complain overmuch about a lower dollar, since this makes our exports more competitive and New Zealand a cheaper place for foreigners to invest in.
Scouser said:For many businesses success is making sure the difference between 2 large numbers is carefully managed (income minus costs). It does not take a lot of additional costs and/or a drop in revenue for a profitable company to become a money sink.
ReplyDeleteOh, that's all right ,then; no problems with people on the minimum wage still waiting for the light at the end of the tunnel. Always thought that support mechanisms like WWF and rental supplements were simply a sop paid for by the people to keep faux entrepreneurs in the style they've become accustomed to.
Metaphors are tricky things, aren't they?
ReplyDeleteThat successful strategy you refer to in you book, "No Left Turn", equates the collected power of Capital with the legend of Medusa, a figure who cannot be attacked directly. You then equate the efforts of left-wing political leaders as Perseus who must use indirect attacks against it. The metaphor suggests that left-wing leaders fare much better if they attack the reflections of Capital in our society rather than attack it directly, for if they were to ever attempt to go face to face with their enemy they would be tragically turned to stone. My favourite part of this metaphor though is that it implies a beheading.
Unfortunately, however, I feel the Medusa metaphor is being far too generous to Capital here- endowing it with an insurmountable power. I don't want to take too much creative licence on this, but... If Perseus instead called for everyone to look upon Medusa at the same time (ie. a call for transparency) then I believe something altogether different would happen. If one left-wing leader attacks Capital and, as you say 99.9 percent of everyone else doesn't, then yes, s/he would definitely be turned to stone. But if everyone looks upon Capital, the populace included, then Capital's insurmountable power would vanish, and then you wouldn't need to cut of its head- it wouldn't even be an enemy anymore -it would behave accordingly. Capital, left to its own devices however, does not do this. Indeed, what perpetuates Capital's abuse of its own power, like the Medusa legend, is the fact that no-one can see what it's doing. Or even dares to.