Socialist Republic(s) of Australasia?

The Australian ruling class is making a play to takeover its poor cousin kiwi capitalists. Aussie corporations already own large chunks of the NZ economy and dominate banking, energy, transport and retail sectors. But last month the Qantas chief headed a joint conference of business, government and academic bigwigs calling for a common currency and further economic integration. What’s going on? And where to workers fit into these plans? The Communist Workers Group has not got fully worked out position on these questions. So Class Struggle opens up a debate among workers on Australasian Union.

NZ the seductive semi-colony

The drive to integrate the two economies has been going on for 200 years. NZ began its colonial life as part of NSW, and was a self-governing colony within Australia until 1901 when it refused to go into the Australian federation. There is still a clause in the Australian federal constitution that allows NZ to join as a state of Australia.

The colonial capitalists in NZ led by then Prime Minister Dick Seddon had delusions of grandeur, of beating Australia as the “Britain of the south seas’’ with plans to rule the Island states to the north on behalf of the British Empire. From 1901 to 1984, NZ applied a policy of economic nationalism. This was the social democratic ideal that NZ was an independent nation whose economy could be controlled for the benefit of all. It tried to insulate its economy from Britain and Australia so that it could keep as much of the wealth generated in NZ as possible. And depending on which political party ruled this wealth was to be distributed among the various productive sectors in NZ.

However, the weakness in this national plan was that to develop industry internally, NZ had to turn to investment, technology and marketing agreements with overseas firms. So by the 1980s economic insulation had not stopped Aussie and UK (and increasingly Japanese and US) firms acting as the Trojan horses of globalisation and setting up ‘branch plants’ behind the protectionist barriers, and from sneaking profits offshore by ‘transfer pricing’.

Studies of foreign ownership since the early 80’s show that NZ was no longer run by a bunch of local families and the British banks, but that UK firms like Unilever, Aussie firms like Comalco, Japanese companies like Nissan and US corporations like Mobil had a dominant stake in the economy. NZ was still overseas owned but that ownership and control had shifted so that NZ was now, according to Bill Sutch, NZ’s foremost economic nationalist, only a ‘book entry’ in the accounts of the Multinationals.

Globalisation whacks home

What the century up to 1984 proved was that capitalism could be implanted and thrive under state protected hothouse conditions only until the local firms got too big for the domestic market. Once the biggest firms outgrew the market protectionist barriers had to come down, the economy deregulated and opened up to the global market. Barriers to trade and investment were largely removed and the NZ economy was now up for sale to the highest bidder.

Overseas companies moved in to buy out poor performers or undervalued companies or state enterprises (some already carved up for sale by asset strippers like Brierley and Alan Gibbs) like NZ Rail, Telecom, BNZ, Air New Zealand, NZ Steel etc. Ownership and control of homegrown industry rapidly passed from local and state hands into Australian, British, Japanese and US corporate hands.

CAFCA which documents trends in foreign investment produces statistics which back this up. Direct Foreign Investment (DFI) grew rapidly after 1984. By 1995 DFI in NZ had reached nearly 47% of GDP, and made about half the total profits. (Bill Rosenberg, Foreign Investment in NZ: The Current Position). Rosenberg showed that the overseas corporations tend to be the biggest, but employ fewer workers and pay less tax (25% average). They accumulate profits of the order of $30,000 per worker a year (compared with $20,000 for local firms). Today the foreign domination of the economy is higher still. Between 1994 and 2003 foreign corporations made over $42 billion in profits. http://www.canterbury.cyberspace.org.nz/community/CAFCA/keyfacts.html

What all of this proves is that the NZ economy has been integrated into the global capitalist economy so that the main industries are owned and controlled by large monopoly corporations with their bases in the Australia UK, US, EU, Japan and the rest of Asia. China too, looms on the horizon as a major economic force in NZ. This is all part of the globalisation of production under the influence of the monopoly corporations (to say it is no longer imperialism is so much globalony). What motivates the corporations is access to cheap resources and labour and the lowest cost barriers imposed by national governments (taxes, environmental and labour laws etc) as possible. This explains the drive to free trade and investment agreements allowing global capital free movement in search of lowest costs and biggest profits.

Aussie bosses own a third of New Zealand

Of all the overseas countries to increase its stake in NZ, Australia now dominates. It owns 100% of the trading banks, NZ Rail, NZ Steel, major road transport companies, shopping malls and supermarkets (Westfield).

To facilitate the smooth operation of Australian capital to further its ownership and control of NZ capital, the bosses are now making a play to remove all the barriers to form a common market like the EU. What is planned is a common currency which would be run by the Australian Reserve Bank, a single stock market, and a common border for citizens and travellers. This would certainly reduce the compliance costs for Australian capital.

But Australian capital is itself dominated by US (and to a lesser extent Japanese) capital. The Australian-US free trade agreement has opened up Australia to US investment. So an Australian-NZ common market would facilitate the ability of US capital to piggyback into NZ and increase its holdings and profits. The US (along with its Canadian partner-state in NAFTA) already owns a large slice of key industries such as merchant banking, power and communications, forestry, tourism etc.

Australia and NZ as ‘Pacific Powers’

Jane Kelsey’s recent paper “Big Brothers Behaving Badly” (http://www.arena.org.nz/)

attacks Australia’s and New Zealand’s role in forcing free trade onto the small Pacific nations. In particular she accuses them of bullying these nations to remove tariffs, export subsidies and any protectionist measures for agriculture, so they can sell more goods. As Kelsey points out in the case of Tonga’s agreement to remove $6 million tariffs on NZ meat exports (mainly mutton flaps) will be a cut of 40% of state revenue for services to a people made up of 80% subsistence farmers!

Behind all this is the plan of Australia to subordinate NZ and the rest of the South Pacific into its ‘EU-style’ Pacific Economic Community in the interests of Australian imperialism. NZ grandiose delusions of 100 years ago that it could be a junior imperialist power in the South Pacific are now fully deflated. Via its subordination to Australia, NZ, along with the rest of the South Pacific, is being further incorporated into the US imperialist bloc as a semi-colony of US imperialist finance capital.

What’s it got to do with the workers?

But this is the way the capitalism operates. It doesn’t matter which country owns capital, workers are still exploited. The question is: what is the workers position on the future of NZ as a semi-colony exploited by imperialism? And in particular being dominated by its nearest imperialist big brother, Australia? Should we fight to remain economically independent of both Australia and the US? Or should we fight to speed up the move towards a united states of Australasia in preference to union with the US? Then, maybe we should remain neutral in what is like a game of musical chairs where it doesn’t matter which boss sits down on us when the music stops, we still get shat on?

Our starting point has to be to distinguish between our interests as workers and those of the bosses. We fight for our interests and oppose those of the bosses. We fight against the bosses measures to make us boost their profits and pay their debts whatever the nationality of the boss. Our basic fight has to be the defence of our jobs and conditions. Without these the working class becomes divided and demoralised. Regardless of the nationality of the companies that own industry we demand nationalisation without compensation. Any closure or sacking of workers has to be met by occupations under workers’ control.

Because the Aussie and NZ bosses are heavily integrated, struggles against them must obviously unite NZ and Aussie workers - but not at the expense of foreign workers. For example we should fight for a common border to allow free movement of workers. But the common border has to be an open border. We don’t beg our bosses to legislate to protect our jobs at the expense of foreign workers. On the contrary we unite with the workers of all countries against the global corporations that exploit and oppress them, so that the demand for nationalisation becomes socialisation on a global scale.

Workers’ control means workers’ planning

How would this solidarity between Aussie and Kiwi workers operate? If we take those sectors where Australian and NZ capitalist ownership is most integrated, the unions should also be integrated. In Banking, NZ workers cannot fight the Aussie banks without the support of Aussie workers. As soon as we get into wage and job negotiation the boss plays one off the other. We need to call for the nationalisation of the banks under workers control. The division of the banks assets between Australia and NZ workers would automatically raise the need to unify the two countries.

Same with NZ Steel, 100% owned by BHP the largest mining corporation in the world. BHP jointly owns the huge Cerrejon Zona Norte coal mine in Colombia where it ‘manages’ its relations with the indigenous Wayuu and the unions by using the notorious paramilitaries to kill their leaders – the same death squads that recently entered Venezuela to kill President Chavez. http://www.thewest.com.au/20040607/business/tw-business-home-sto126156.html

The US United Mine Workers and United Steel workers unions have taken solidarity action with the Colombian miners. Australian and NZ workers need to demand the nationalization under workers control of BHP!

Same with Toll Rail that now owns NZ Rail. Nationalising Toll Rail under workers control would call for workers in both countries to exercise ‘joint control’ and pose the question of a single shared planned economy. Automatically the demands for workers control mean workers planning and a workers state. Would this be a single socialist republic or a union of socialist republics? We can’t say until workers have come to power and decided democratically what workers states would look like.

For Occupations and Nationalisations without compensation under workers control!

For a workers’ planned economy!

For a Socialist United States of the Pacific! 

From Class Struggle 56 June-July 2004

WILL NEW ZEALAND BECOME ANOTHER ARGENTINA?

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 19^th and early 20^th 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.

It's Not an Asian Crisis, it’s a Capitalist Crisis [March 1998]

The current so-called "Asian Contagion" is pictured much like the "Asian Invasion" as some disease that originates in Asia and spreads around the world. This racist picture of Asian "Values" becomes the convenient scapegoat for international capitalism to hide behind and to justify draconian IMF medicine at the expense of Asian workers and poor peasants. Class Struggle argues that the so-called Asian "crisis" is not the result of anything unique to Asia, but the necessary outcome of imperialist Globalisation, and should be opposed by workers and poor peasants everywhere.

The Asian Tiger "cubs" Grow Up.

The Asian Tiger "cubs", South Korea, Thailand, Malaysia and Indonesia, are experiencing big economic problems. The standard Western view has been to wheel-out racist arguments about "Asian values", corruption and cronyism. A version of this view is that held by the `Economist' and Paul Krugman, a prominent economist at MIT. They say that the Asian `crisis' was caused by short-term, high-risk speculation in assets such as company shares and land by local and foreign banks which assumed that their loans were backed by governments, something like the "soft credit" in the former Soviet Union. According to the Economist this creates a "moral hazard" as bankers do not have to risk losses from bad investments, since they can rely on getting bailed out by the state.

If correct, this is a supreme irony. It seems that the "moral hazard" can’t really be blamed on Asian values at all. It was the large multinational banks, which are the international arm of finance capital, that allowed themselves to speculate for super-profits in countries where there were no effective checks on company profitability! Something to do with "western values" perhaps? Not really. Speculation is endemic under late 20^th century capitalism as excess finance capital scours the globe for the biggest bucks. So it is with state intervention! This is not some nasty Asian family nepotism after all, but the state of the art. Despite the protests of some extreme right-wingers like Milton Friedman who wants the IMF junked, the imperialist states are using the IMF to protect their investments in the "tigers". So it is the Western banks and not the Tiger companies that are being baled out by the IMF. Not only will the IMF loan billions to cover the most immediate debt to Western banks, on the pretext that they are bankrupt, the Tiger economies will be radically restructured so their devalued assets can be bought up cheap by US, Japanese and EU multinationals. Who’s bailing out who?

How cynical can you get? It seems that the Asian crisis, far from something originating in Asia, or even the Pacific, is part of the process of global concentration of financial and industrial assets into the hands of the major imperialists powers. This in itself is a process which has been going on for the whole 20th century as the world's economic resources have been increasingly concentrated and centralised into the hands of a group of giant Trans-National Corporations -TNC’s. So it is the height of hypocrisy for the IMF to come to the "rescue" of the Tigers when its purpose is to oversee a bonanza of takeovers by imperialist powers. But then this is nothing new, in the march of imperialism the super-exploitation of the colonies and semi-colonies has always been justified ideologically as "saving them" from barbarism and for the cause of civilisation!

History of colonialism.

All of these countries started off as colonies. South Korea was a colony of Japan. Thailand and Malaysia were colonies of Britain, and Indonesia a colony of the Dutch. They were raw material colonies where the mother countries extracted rubber, timber, minerals and so on by super-exploiting cheap labour. When they gained their political independence they had to insulate their economies to achieve any economic independence. This meant putting up barriers to foreign ownership and foreign goods so as local industry could get off the ground. Otherwise they would have remained just like colonies with their raw materials extracted and shipped off to the mother country.

This wasn't something unique to Asia. It is something that all new capitalists states have to do. The US did it when it became independent from Britain. Japan did it by rejecting all attempted imperialist takeovers. So in Korea a group of wealthy merchant banking families diversified into all sorts of industry to form the chaebols after the model of the Japanese cartels. In Thailand and Malaysia a group of prominent families ran the economies and the military. In Indonesia the ruling family of General Suharto, pretty much came to dominate the economy.

Protectionism creates a national capitalist class which owns and controls most of the economy and runs the state including the military machine. While production is for the local market, it doesn't matter a lot that production is inefficient based on cheap labour and inferior technology. The political ideology which accompanies protectionism is called "economic nationalism". The national capitalists get rich, but rising living standards also creates a middle class and a strong working class which become committed to a "national consensus" around the policies of economic nationalism. Dissent is eliminated by appealing to nationalism, as was the case when Suharto killed millions of communists in 1965.

Read On:

From Class Struggle, no 20 Feb/March, 1998