From Class Struggle 48 December 2002/January 2003
Argentina goes from IMF ‘show case’ of economic development to’ basket case’. Is the same fate in store for New Zealand/Aotearoa? Here we put forward some ideas in the hope of stimilating a debate on this question. We make some further comparisons with Australia and South Africa which have similar origins. The solution we come up with is for Socialist Federations of the Pacific, Latin America and Southern Africa! We welcome feedback from readers aboiut where they think New Zealand/Aotearoa is going.
Some History
Some basic facts: Argentina 40 million people. NZ 4 million people and 40 million sheep. Both settler semi-colonies; dependent development based on pastoral exports in 19th and early 20th centuries and post WW2 economic insulation. NZ’s competitive advantage is agricultural - dairy production, meat processing, woool –textiles etc. The semi-colonial problem is dependence on exports to maintain imports of primary and secondary manufactures. NZ’s development was limited to import-substitution secondary manufacturing (eg car assembly, whiteware, electronics etc to serve local market)
Argentina has competitive advantage in pastoral production. Its balance of payments problem was lessened by protection. Argentina was able to substitute some heavy manufacturing, such as steel, petrochemicals etc. But it never became a big regional exporter of these commodities. Argentina’s heavy industry was highly protected and uncompetitive. Thus Argentina’s dependent-development was somewhere between that of NZ (which did not substitute heavy industry) and South Africa and Australia (who produced cars, electronics etc for regional markets). We suggest that the limits to dependent-development in each case are set by the extent to which a country has competitive advantage in the manufacturing of heavy machinery (i.e. capital goods).
Semi-colonial development and crisis
Dependent-development reaches its fullest extent with the export of a limited range capital goods on the world economy. Yet competitive advantage exists only during the periods of boom and fails during recessions as regional markets contract and the small-scale economies and higher costs in the semi-colonies cannot sustain competition.
Enter the MNCs to concentrate and rationalise production globally. This has been the story of so-called globalisation. In SA and Australia, the biggest operations were internationalised. In SA most of the major industries are Multinationals. In Australia minerals (BHP) General Motors Holden/Ford etc have been globalised.
De-industrialisation
In the case of Argentina where capital goods production could be integrated profitably it survived. But most was not competitive so Argentina was de-industrialised and its import substitution capacity in heavy steel and petro-chemical industry lost. Thus import volumes rose. Import prices were reduced as the peso was pegged to the dollar, but export prices rose with the US dollar, so that overall the trade deficit increased. The balance of payments was plugged with IMF borrowing until this exceeded the capacity of exports to pay and debt mounted.
So the crisis of a re-colonised dependent economy means bankruptcy and devaluation of assets which are then sold off cheaply to multinationals and big banks. Argentina’s plight is that of all semi-colonial economies whose capacity to develop independently has been destroyed by globalisation. But the severity of the crisis is directly proportional to the depth of restructuring in the primary industry sector. How does NZ compare?
New Zealand compared
NZ’s primary sector always involved foreign investment through banks and loan agencies and the export of profits. In agriculture (dairy, meat, textiles etc) production depended heavily on imported capital, technology and machines. New Zealand never substituted for heavy industry except in isolated, exceptional cases (NZ Steel based on Iron sands).
Thus NZ was always exposed to chronic balance of payments crises. The postwar development of import substitution in secondary manufacturing for consumer goods was a weak attempt to solve the ongoing dependency of the economy. This insulation reached its limit as soon as protected industry outgrew the local market.
So, unlike SA, Australia or Argentina, the neo-liberal reversal was less deep because it affected only the post-war import substitution in the secondary sector of the economy. De-industrialisation did not hit primary production as it was already partiallly globalised. Pastoral production has always been technologically advanced, and continues to be so. The primary agricultural sector (e.g. meat, dairy, wool etc) has become more internationalised with the giant dairy monopoly Fonterra, now a multinational in its own right. The problem with this however is that little of the rent from agricultural value-added production is available for redistribution inside NZ but falls into the hands of international capital.
To complete the comparison, Argentina was able to insulate itself from extreme economic dependence by setting up internal capital goods manufacturing. In some ways similar to the situation in SA where apartheid was like the military dictatorship in regimenting social production based on super-exploitation. Like SA, when the crisis came in the early 90’s, Argentina fell further and was more severly affected by the neo-liberal crisis measures than Australia or NZ.
Solutions
Argentina’s dependency, more like Australia and SA, is acute. Yet all these are relatively large economies with a broad resource base where there is the potential to resolve the crisis by socialising the economy. In Agentina the collapse of industry leaves the majority of the population out of work or underemployed. Half are under the poverty line. 20% are hungry or starving.
The most similar case is SA, and it is no accident that in Argentina the masses are frightened of becoming “Another Africa”. Like SA, nationalisation without compensation under workers’ control of the large businesses and banks is the way to revive the economy and feed the people. This has to become linked to revolutions in the rest of the region, to establish a Federation of Socialist Republics of Southern Africa, and of Latin America, to create potentially powerful regional socialist economies.
NZ’s dependency is chronic
NZ is in reality a tiny US and Australian dominated semi-colony. Its capitalist future will see it integrating with Australia as part of a larger US client state. Even that won’t buy much time for the bosses. Australia is in a similar position to Argentina. Marxism is not an exact science and predictions have to be reviewed constantly. But we would suggest Australia’s prospects over the next tens years are that it is likely to suffer a similar economic decline to Argentina.
If this is correct, NZ’s relation to Australia will see it sucked into this vortex. Therefore, workers in NZ must prepare to unite with Australian workers for the nationalisation under workers control of the assets of all the big banks and businesses and to socialise the economy as part of a Federation of Socialist Republics of the Pacific.
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