“NO LEFT TURN”

Chris Trotter, Random House, Auckland, 2007

- Jeremy Agar

When systematic European colonisation of New Zealand began in the middle of the 19^th Century, Britain was a very different place from what it had been in the already distant past when many of its people were emigrating to North America and Australia. Enlightenment ideals of equality were spreading, slavery had been abolished, inherited privilege was being challenged. Democratic ideals, pressed by writers like Tom Paine and William Hazlitt, trickled up to Parliament. This is why contact between the arriving Europeans and the indigenous population was more benign here than it had been in Britain’s older empire. For the deprived masses, emigration was the chance of a new start; for the authorities, it was a way to relieve the pressure of too much potentially dangerous riff raff.   

British migrants came here to make a new life free from strictures, while the Colonial Office wanted to export a more ordered Britain, imagining a kinder, gentler class system. But tension between hopes of individual freedom and the government’s utopia of bourgeois order Down Under was inevitable. The Colonial Office hoped to keep on track by allowing only the State to buy land. The new world would be run efficiently and profitably, from London. The New Zealand Company, an expression of the vigorous capitalist energy of Victorian Britain, had a competing idea. Pragmatists, they wanted a free market in land. Trotter says that a company hack referred to the Treaty of Waitangi as “a praiseworthy device for amusing and pacifying savages for the moment”.  

Three impulses had been exported: an “anarchic individualism”, a paternalistic statism, a thrusting bourgeoisie. Chris Trotter’s political history of New Zealand starts here, in Chapter One, with “EG Wakefield’s Wicked Dream”. It’s a good choice. We’re still coping with the consequences of this colonial trinity. That’s not to say our settler history was easy. Trotter points out that during the Musket Wars, which flared for two decades from around 1810, one in five died. This, he claims, is relatively the second heaviest war toll in history. Only the former Soviet Union in World War 2 lost comparatively more. The chaos was a catalyst for the Treaty, colonial authorities and Maori seeing mutual benefit in a strong state. Waitangi, Trotter further argues, coincided with the emergence of the UK as the world’s superpower, so that British hegemony was inevitable. He compares the era to the Roman Empire - when to be Roman was less a mark of nationality than an announcement that you were a privileged global citizen - and to post-war American dominance. Trotter’s strategic sense of the sweep of history is impressive, but the conclusions he draws from the last of these examples are problematic.

Tipping Points

Rather than a chronological narrative, Trotter picks out several key moments, tipping points, to trace our halting path to formal independence - and to the yet to be concluded transition to actual independence. Trotter suggests that an 1885 call by Defence Minister John Ballance to not send troops to help Britain in Sudan signalled some developing national maturity (though Prime Minister Sir Robert Muldoon gave kneejerk backing to the Brits in the Falklands War a century later). Pushed by his egalitarian Minister of Lands, Jock McKenzie, Prime Minister “King Dick” Seddon broke up the big squatter estates. The invention of refrigeration and the new smaller farms encouraged dairying and allowed more diversified breeds of sheep. The economy, Trotter explains, had become less dominated by crude extractive industries like mining, gold and flax. The age of “anarchic individualism” was giving way to an export-based agricultural economy. Seddon’s enduring popularity is based on the advances made early in the 20^th Century by the middle classes, whose values and culture have so strongly shaped future generations.    

Around World War 1, with the Liberals defeated, the Massey Government rolled back popular gains. Trotter’s method allows us to see the dialectical movement of action and reaction following each other in a broadly regular pattern. A fight back against Massey, the Labour Government of Michael Joseph Savage brought in the Welfare State. That’s the state that 50 years later a successor Labour Government dismantled. Savage is Trotter’s hero, praised for doing as much as he could to advance the lot of working families. John A Lee, Labour’s famous rebel, feuded with Savage, claiming Savage was a sellout for not going further. Trotter will have none of it. NZ was in the grip of foreign shipping companies and the Bank of England, its source of development capital. Trotter tells of the horror with which the Reserve Bank greeted the Government’s planned nationalisation. Governor Leslie Lefeaux wrote to his counterpart at the Bank of England: “Events appear to be moving towards a crisis. My view is that transfer of our responsibility to the Government thus opening the way for unlimited inflation would render the Reserve Bank a menace instead of a useful part of the financial machine”. He got a soothing reply, reassured that the Bank “had unrivalled opportunities for pressing its views on the Treasury thus gradually provoking recognition of them”.

This vignette is telling, a glimpse at the permanent assumptions of such people. The details and the names change, but little of the essence. Then it was the Bank of England; now it’s the International Monetary Fund and the World Trade Organisation. They know that real power does not necessarily have to be exercised explicitly. As long as the Lefeauxs of NZ, the safe pairs of hands, are entrenched at the head of the civil service, Savage would regard the more colourful demands of Lee as mere gesture.

The new National Party, then as now dedicated to aiding and abetting whatever and whoever was rich and foreign, urged the populace to take out their money, a rabble-rousing gambit of shocking irresponsibility. In a better, more democratic NZ a troop of cops would have battered down Lefeaux’s door, rounded up his colleagues, and charged them with economic terrorism.

Savage is the one and only PM that Kiwis revere - Seddon and 1970s’ Labour PM Norman Kirk probably rank next in the public imagination - and Trotter’s defence will find few credible detractors. But does he praise too much, giving Savage the benefit of every close call? The Government ran out of steam early. By the end of the war, under Prime Minister Peter Fraser, it seemed content to merely preside. In the hesitancy, Trotter sees statesmanship, noting that by 1946 there was a need to “convince” the US, the UK and Australia of NZ’s “reliability” in rooting out “Communists” and defending the “free world”. Fraser was obliged to comply with the Allies’ call for him to start ‘ruthlessly purging friends and comrades”. Having done so, and with luck, “without a stumble”, it would be time to activate ‘the Government’s plans for creating a sophisticated, highly creative, urban culture based on solid social-democratic principles ... [and thereby] consolidate the Labour Government, and the Leftist vote, in ways that would make it extremely difficult for National and its Rightwing sponsors to dislodge”. It all would have worked, “had the militants held their fire”.

This Is Where The Narrative Goes Off Track

For a social democrat, these are surely misjudgements. How do you create a sophisticated, highly creative, urban culture based on solid social-democratic principles by ratting on your mates? By a know-nothing subservience to US foreign policy? By siding with the Farmers Union against workers in the cities? By a puritanical hostility to artistic expression? Of course it was said then, as it’s always said when opportunism submerges principle, that it’s better to be inside the tent pissing out than outside the tent pissing in. But it’s often better only for those keen to don the baubles of office. There are few examples in history - are there any? - of a reforming impulse that found itself after losing its way in such circumstances. Trotter would have us think that the retreat was tactical, but it was much more than that. It was a strategic surrender whose ill effects are still with us.  

In the circumstances you have to ask what these principles of social democracy are supposed to be. There’s a further question: as Trotter himself continually and pertinently reminds us, the broad sweep of history has a certain inevitability. In NZ’s case, our small size, our recentness, our distance from markets has been critical. A strength of Trotter’s analysis is to show how factors such as the economy, trade, geography and demographics have to a large extent determined our fate in ways that at first glance might seem unrelated. But he infers from this only what suits his argument, which is in fact an ideological one. Trotter has adopted a sort of cold war exceptionalism. But given global trends, why would resisting an imported Cold War hysteria have destroyed the hope of a democratic NZ, a decent NZ?

Fraser was fervently helped in his endeavour by the union leader FP Walsh, whose hostility to progressive ideals gives every impression of having been enthusiastic. Given their vituperation, to say that Fraser and Walsh were no more than pragmatic or defensive is a stretch. The sad culmination of their McCarthyism was the waterfront lockout of 1951. Like most historians, Trotter personalises the blame on Jock Barnes, the uncompromising leader of the Waterfront Workers’ Union. Barnes might have been manipulated, he might have allowed himself to be goaded into indiscretion, but he was up against a unified State and business class that had been manoeuvring against the interests that Barnes represented well before the particular issues at the ports had emerged. The setback of 1951 was not the fault of Jock Barnes; it was the predictable climax of a decade-long reaction to the early boldness of Labour. Why would average New Zealanders have led less fulfilling lives had the Labour Government and the trade unions been led by more resolute men? It makes you think again about John A Lee (who was more populist than socialist).  

Just what would have “worked”? Trotter is saying that the operation would have been a complete success because the patient was dead. The quote marks around terms like “Communist” and “free world” are Trotter’s, an indication that, yes, of course, he knows they’re misused. Again it has to be asked: Why is it helpful to demonise your activist supporters by falsely labelling them? These pastiches bedevilled most of the 20^th Century. To take another example: NZ’s involvement in the 1960s and 70s’ Vietnam War - another bastard child of appeasement - was legitimised by the distortions these concepts allowed. Our collective understanding had been corrupted. When social democratic leaders enact their enemies’ agenda, their constituency has nowhere to turn. The - inevitable - consequence was the disaster of Lange-Douglas neo-liberalism, made possible because by 1984 the creation of a currency crisis was all it took to confuse and divide. 

Tory Sycophants

“I hope my country and I will prove worthy of the confidence President Truman and his cabinet have shown”. So said a sycophantic Sid Holland, the first National PM, as he returned from talks in Washington at the height of the McCarthyist hysteria. Coming shortly after the Battle of the Coral Sea in WW2 and during the Korean War, the sentiment of these more innocent times - as the cliche-mongers dub the 50s - should not surprise. Only the frankness of the pre-“Hollow Men” language differs from how Holland’s successors currently express the same idea.  Holland’s unspun naivete that “I have no views that are contrary to American views” is an identical sentiment to that of Don Brash circa 2004. And when Holland asked the Americans to “tell me what do and I will do it”, he was foreshadowing John Key circa 2005 (the 2007 version, the Prime Minister-in-waiting version, prefers to admit to no particular view on anything to do with foreign or defence policy).  

Beyond the phrasing prepared by the spin doctors, nothing has changed in the National Party. The difficulty for those hoping for a more robust alternative from Labour is that its leadership has been similarly consistent - and similar. Trotter wants to approve this as necessary, with the ironic result that he doesn’t mention those few flickering stirrings when Labour might have remembered its purpose. Poor Walter Nash, Labour’s leader at that time, trying so hard to be “responsible”, trying to be as worthy of Washington’s regard as Holland had been, is remembered for having been “neither for nor against” the watersiders, but at least at one stage he tried to call National’s bluff and negotiate a settlement on the wharves. It couldn’t have worked, not after the ministrations of Fraser and Walsh had established that the Government could keep asking for more.

Strategically for Walsh, as for Trotter, what mattered was the bedding in of compulsory unionism. Until 1950 the National Party and the Waterfront Workers Union both opposed it, National because it legitimised unionism, Barnes because he feared the result would be tamed company unions. The lockout persuaded National that Walsh, a safe pair of hands, was right. He could be trusted to play his part in the compromise between capital and labour that kept the peace until the Rogernomic assaults a generation later.    

Trotter might well have made more effort to draw perspective by allowing that the wharfies were targeted because they had set the pace for New Zealand’s workers. They had squeezed concessions from the ship owners which Holland wanted to reverse. The immediate trigger for the local front of the Cold War was the hot Korean War, but not because of the global war on so-called Communism. Wool prices surged to the extent that for a few years after 1951 Kiwis were told that they had the second highest standard of living in the world. The resulting inflation merited a general 15% cost of living increase. The watersiders were offered 9% - effectively a cut of nearly 50% at a time of rising prosperity when their work was in greatest demand. If they had not responded then, when might they have? (it’s worth noting that the year of the lockout was the year that wartime restrictions were due to be lifted. The Government needed a crisis lest free bargaining got serious).

Neither is at all coincidental that in the US, at the same time, as Senator Joe McCarthy swung into full Communist-hunting demagoguery, wages were lagging inflation by a degree that was unprecedented in recent history. If there is a consistent correlation between State repression and any other factor, it’s not the Russians, and it’s not the Arabs. It’s not even trade unionists with the accents of Glasgow or Tyneside. It’s the desire of the corporate elites to keep costs down and profits up.    

Trotter makes several references to Norman Kirk, all of them favourable, to what he sees as Kirk’s principled opposition to US foreign policy. Gough Whitlam, a contemporary Labor PM of Australia, betrayed and deposed by the Aussie Establishment, gets the same sympathetic coverage. As does the UK’s Harold Wilson. All three, it seems, were being harassed by the various spy agencies. That’s a good call, but exactly what made it OK to stand up for your rights in the 70s and not the 50s? Other decades don’t get this global consideration. Trotter puts in a word for Chilean President Salvador Allende, killed in a US Central Intelligence Agency-sponsored coup (also on September 11 – 1973). He should recognise that Fintan Patrick Walsh, a Cold War hawk all the way, would have cheered Allende’s demise. What was possible in the 70s hadn’t been possible during the Cold War. That’s Trotter’s view. But there are other ways of looking at it. Perhaps the historian views more favourably the events from his own young life, when his ideology was developing, than he does the received version of events from a generation which were disowning their parents.

Distance lends enchantment to the view when Trotter discusses the 1912 death of Fred Evans, during the brutal repression of a miners’ strike in Waihi, in the context of the previous historical defeat for progressive forces. In its review of “No Left Turn” my daily paper, the Christchurch Press, sneered at all those “socialist martyrs”, implying that hounding a man to death because he stood firm with his mates is a bit of a joke. But if we’re allowed to be accurate we have to note that Evans’ martyrdom - yes, it’s a good word for what happened - remains unique in NZ, and if you want to know why Labour won in 1935, it helps to know what went down in 1912-1913. Here Trotter is happy to use good and honest words like “scab”. Walsh would not have approved.       

Muldoon & Rogernomics

The economy was stuck in fresh crisis in the 1970s during Muldoon’s watch. Trotter admits that it is only “with hindsight” that he assesses now that all that Muldoon did was motivated by his anti-union stance. This is surprising in that Trotter’s critiques of Edward Gibbon Wakefield, of William Massey, of Sid Holland, of all the rogues’ gallery, are predicated on the assumption that always the strategic need of the State is to preserve its side’s economic interests. It was another decade when inflation was eroding earning power and the union movement was under attack. Muldoon could be so unpleasant that, like Barnes, he could divert attention from what mattered. He had that effect on people. As Trotter remarks, not only did he like to infuriate liberals with overt appeals to a racist and sexist prejudice, but also, “over and above all of these wedge issues and [his] superlative rhetorical ability to imbue each one of them with hidden influence and menace, glowered the still-unanswerable accusation of Communist affiliation. Well supplied with ammunition by his allies in the Security Intelligence Service, Muldoon proved to be the most accomplished Red-baiter since Holland”. But he wasn’t as accomplished as Walsh (compare Nicky Hager’s take, in his blockbuster 2006 book ‘the Hollow Men”, on the Brash National Party, with its tactic of appealing to “Mike Moore” Labourites).

Yes, we remember Muldoon chiefly for his uncool bluster, the obvious example being his exploitation of the 1981 Springbok tour for the shirt-tucked-into-the-underpants crowd, and for his constant - and unsuccessful - tinkering with regulatory controls. As relief from Muldoon’s Big Government persona, Labour’s David Lange was swept into office by appealing as the not-Muldoon. The good news about that was that we got some decent social and foreign policy. The bad news was that we had forgotten about economic and labour policy. We got Rogernomics, which Trotter rightly dismisses as a “gargantuan exercise in misdirection”. But one of the reasons we went gargantuanly wrong was that in the union leadership there was no one remotely like Jock Barnes to point a better way.

With Lange tossing off one-liners that the Muldoon economy resembled a “Polish shipyard”, it became the norm for Muldoon to be dubbed a “socialist”. Unfortunately, it still is. Trotter is as astute a guide as any, but at the time, he admits, Muldoon’s essential agenda was not obvious. The conventional wisdom tagged him a meddler, and therefore a socialist, a slightly less irascible Jock Barnes. With Muldoon, Trotter veers towards the popular tendency to play the man and not the ball. It’s easy to forget that Muldoon’s policies were as influenced by international trends as were those of the other bad guys. Fumbling interventions were the norm as Organisation for Economic Cooperation and Development governments reacted to a global economic crisis.     

Fascism – The F Word Of NZ Politics

“No Left Turn” is the history of how the NZ State has used its various powers to help its masters. When Muldoon campaigned that Cossacks were dancing into our streets, he was alluding to those Russkies and their dupes, still up to their fiendish tricks in 1975! It would be your last free vote, said Muldoon, reprising National’s demagoguery of the 1930s (and it’s said that it’s the Trotters among us who evoke outmoded and overwrought fantasies).

If only the electorate had a memory, we would have thought not of a 60 year old American hysteria about Bolsheviks, but of a real, organic moment in our own history. Like the Russian originals, “Massey’s Cossacks” of 1913 were reactionary volunteers, often young farmers, sanctioned by the State to ride into our cities and bash striking workers. Trotter shows how, whenever their dominance was threatened, employers, whether ship owners or exporters or bankers, could rely on the Government of the day to mobilise force to bail them out. He describes events and attitudes which unhappier places would call fascist. We wouldn’t, because in NZ it’s always been hard to use the sort of direct political language that other traditions use. Here mainstream opinion writes you off if you’re not understated.

Unless the emotive words come from the Right. We need only scan the daily headlines from Iraq, and now, amazingly, from the Ureweras, to note the present scapegoat. Like Communism, terrorism sometimes needs to be wrapped in distancing quotations to indicate the term might or might not have an agreed meaning. Notoriously, George Bush uses ‘terrorism” and “Communism” as synonyms. That’s the same Bush whose rhetoric is of his presiding over a shrunken  Washington liberated from “Big Government” but who in reality runs the biggest, most bureaucratic State, capable of the most coercive power in world history (does that make him a socialist?). Bush is entirely consistent, a direct successor to Fraser, Holland and Walsh, Secretary of State John Foster Dulles’ Wellington coalition of the willing. Bush and Tony Blair’s infamous weapons of mass destruction didn’t exist. But the Holland-Walsh fiction of local WMDs on the wharves of NZ is still potent. 

So there’s a blind spot in the analysis. But let’s put that disagreement aside and recommend Trotter’s book as a sharp and entertaining synthesis. As a history of the power and the methods of reaction it’s a useful background companion to the foreground of Nicky Hager’s “Hollow Men” (Jeremy’s review of ‘the Hollow Men” is in Watchdog 114, May 2007 and can be read online at http://www.converge.org.nz/watchdog/14/03.htm. Ed.). They’re two great reads. Trotter’s got a nice turn of phrase. National Prime Minister Sir Keith Holyoake is said to have “stretched himself out like a smug family cat over the sunny years of the early 1960s and purred”. And, in the 19^th Century, capitalism spread “as gorse” in the raw new land. That’s a comfort. We now know that if you leave gorse, it’ll eventually nurture a new generation of natives, which will grow tall and kill it. Call it historic inevitability.

“STUFFED AND STARVED”

Raj Patel, Black Inc., Melbourne, 2007

- Jeremy Agar

“Ordinary citizens take a more holistic view of the food system than the Government does. They want to know where their food comes from, how it was grown and processed and exactly what is in it. But when consumer freedom of choice comes up against corporate welfare in the form of “free trade” - trade free of ethical, health and environmental considerations - the NZ Government consistently sides with the corporations””. This is the Greens” Christine Dann (who is also a CAFCA founder and Watchdog writer. Ed.), as quoted by Raj Patel. The remark encapsulates the theme of his “Stuffed And Starved”, a lively analysis of the world’s food. Patel is interested in how these global patterns came about. 

He’s also got something to say about how citizens might respond. The corporates don’t want to know: their power and their profits depend on denying democratic control. As Dann has found, in NZ dissent tends to be marginalised, as it needs must be if the Government is bent on encouraging practices which have neither scientific nor popular support. Governments like to talk about sustainability, but they don’t always want to walk the talk. ‘that’s what we’re up against”, Dann notes. ‘the emperor has no clothes, but we’re not allowed to say he’s nude”.

In the poorer parts of the world, where transnationals have come to control food more absolutely, alternative visions are often crassly put down. A feature of “Stuffed And Starved” is the ease and authority with which Patel moves between rich and poor worlds. He’s unusually well qualified, having worked at the key agencies, at the World Bank, the World Trade Organisation, and the United Nations - and he’s been an activist campaigner against the policies of his former employers. He’s walked both sides of the street, and he seems to have lived in both worlds too. Currently Patel is a researcher based in South Africa, a country which is itself at once ‘rich world” and “poor world”. 

The result is an apparently effortless blend of the theoretical and the practical, of the general and the specific. That’s probably why the book has had so much good publicity. Patel wears his learning lightly. If the term had not been misapplied so often, you’d want to say that his tone is marked by common sense. The title derives from a paradox that has become uncomfortably familiar. It used to be that a bit of girth was celebrated as a sign of health and prosperity, but not now. All over the world people are getting at once fatter and malnourished. We all know why. It’s the spread of Western-style fast food. In telling the story of how this has happened, Patel makes it clear that poor eating habits are the fruit of a corporate marketing strategy. 

“Freedom Of Choice”? Yeah, Right

The corporates brand the world with “freedom of choice”, but the ability to make autonomous decisions is precisely what individuals are losing. In fact, most of the real world runs opposite to the sloganed world of Big Food. We keep hearing about how the genius of the market lies in its reading of price signals, but nothing could be more opaque or less predictable than the situation faced by farmers in the developing world, the people who are supposed to be served by the new order. What do you plant in India or Brazil? Traditionally, you were guided by your local experience of soil and custom and weather. In the globalised market, this knowledge is irrelevant. Future prices are engineered by the suits in the boardrooms continents away, and their decisions are based on factors which might have nothing in common with good husbandry or sound financial planning.

Patel shows how farmers are trapped by a lack of capital. They have to borrow at rates they cannot afford to sell into a market they cannot affect. They have no real choice, as the artificially induced world food market has force-fed monocultures. Patel discusses Mexican corn, South African cotton and Brazilian soy, examples of the poverty traps engineered by a global dependence on the transnationals. There Is No Alternative (TINA) rules. Crops are what can be grown and distributed on a big scale, and the choice of crop is determined by the manufacturing uses to which it can be put. The one constant aim is standardised and cheaper production lines.

Culturally the effect has been devastating. Mexican farmers have been walloped by NAFTA. The North American Free Trade Agreement kicked off the current liberalisation frenzy, with disastrous results for Mexico (and for most in the US and Canada). The American elites, in whose sole interest NAFTA was negotiated, allowed their domestic corn farmers to keep their subsidies (you might view this as hypocritical, as the removal of subsidies was the stated main objective of NAFTA, but you mightn’t be surprised). The result was another mad paradox. Already poor Mexicans could not compete for price with cheaper American exports. As the food market and all the middlemen were similarly trapped into monoculture, the farmers” immediate reaction to falling prices was to grow more corn. Neo-liberal theory says that falling prices mean you switch crops; neo-liberal practice says that transnational control condemns you to keep on failing. Meanwhile Government social programmes to relieve distress were flashing signals of neo-liberal heresy so they were dismantled. As another, NAFTA-induced consequence, the exchange rate of the peso was tumbling. Fourthly, the price of tortillas, the staple food of the poor, rose.

In India, as the local economy was similarly distorted by the rush to export, living standards fell to historic depths. Patel argues that Indian urban elites have never cared about the lot of their country cousins, but villagers had previously got by with charity from local landlords. Indian free marketeers had eradicated feudal ties, which would have been an advance had they substituted another ethic of community. Patel describes the world’s food system as a bottleneck. Millions of people grow food for millions to consume. In between, a small number of transnationals control that relationship. 

Global Solidarity Between Producers & Consumers

There are the big supermarket chains. Patel dates the first supermarket to 1916 in Tennessee, when Clarence Saunders opened his Piggy Wiggly store, designed so that customers were forced to go only one way. The concept was a huge success. We now willingly push our trolleys through the rat maze. And there are the food producers. Patel has a germane focus on Monsanto’s public relations efforts in the States. As they had said about Mexico, US presidents and Monsanto have claimed that modern agriculture was helping the poor world, and that those of us who live in the rich world were ourselves rich, and if we didn’t like free trade it must mean that we were selfish. Monsanto recruited a prominent African-American to play the race card. Africans, it was being suggested, were being saved from those white greenies by George Bush and his pals.

Patel’s point: “The tactic involves the presentation of the needs of people in the Global South, who want genetically modified (GM) crops, but who are being stopped by white middle-class environmentalists in the European Union and US who scaremonger among consumer groups.... It is not an argument intended ... to persuade farmers in the Global South at all, but people in the Global North. For it is in the North ... that consumers have put up the most effective resistance to GM food”. Clear thinking and unified action is easier said than achieved. Western middle-classes need feel no guilt about pushing for global solidarity. On the other hand, Patel notes that our current obsession with obesity has tended to be moralistic and self-righteous. It’s had overtones of ethnic and class prejudice. He’s a shrewd and balanced guide.    

“TRADERS, GUNS AND MONEY”

Satyajit Das, Prentice Hall, UK, 2006

- Jeremy Agar

The world’s economy adds up to $US50 trillion. That’s 50 with twelve zeroes after it. Or is it fifteen zeroes? We need to get used to mega-numbers. A man’s been arrested in Tauranga on a charge of trying to defraud the Bank of England of 40 or 50 billion pounds. There were twelve zeroes - I think - so in our money that would be $75,000,000,000,000. Quite a heist. Unless it was an American billion. Then it would have been only $75,000,000,000. 

One person who has no trouble thinking in terms of huge numbers is Satyajit Das, a trader on financial exchanges for over three decades. After having published some books about the markets aimed at specialist readers (which I haven’t read and wouldn’t grasp), he’s explaining the world of derivatives to a popular audience. Das tells us that the global markets in derivatives totals $NZ660 trillion. So derivatives are priced thirteen times higher than all the world’s assets. Is that an unlucky proportion? It’s certainly a hard one for the layperson to appreciate.

A derivative is a market instrument whose value is derived from something else. That’s a tautology, but coming up with a clear definition is tricky. Warren Buffett, the multibillionaire Oracle from Omaha, is the richest, most successful stock investor in the world. He calls derivatives financial WMDs - weapons of mass destruction. So let’s go with that. Das says that the mass market in derivatives dates from 1973. That’s when theorists associated with the so-called Chicago School - the same neo-liberal fundamentalists who redesigned the NZ economy - popularised options and puts. A form of betting on future prices, these have became the norm. They were heady days. Das says that in the course of putting together deals as a trader with Citibank (the dominant US bank) and Merrill Lynch (a leading stock broker) he was crafting derivatives - even if, at the start, he didn’t have a word for what he was doing. The boys (traders were almost exclusively young men) made it up as they went along.       

The Language Of Derivatives Is The Essence Of Current Capitalism

Das takes us through the spectacular and well-known flops. In Singapore in 1995 Nick Leeson lost 900 million pounds on futures and options, though Das notes that the losses weren’t losses - they were amounts owed to Barings” by a non-existent client. Choices, options, self-invention, interchangeable fact and fiction: the language of derivatives is the essence of post-modern capitalism. 

When dotcom fever raged and the gurus of futurism were preaching that this time it was different, that cyberspace technology would lift us all to a “new paradigm” of wealth, Buffett wouldn’t hold technology equities. He said the market was a bubble, and was thus derided for his dinosaur ways. Buffett said then - and says now - that wealth depends on supplying real things to real people. In 2003 Buffett and Bill Gates had a spat with Alan Greenspan, the then Chairman of the US Federal Reserve and a derivatives bull. The three best-known money men in the world were disagreeing on basic premises on how the global economy worked. Buffett insisted that “derivative contracts had hidden losses that would eventually emerge”.

Again he was prescient. Since mid 2007, when the sub-prime mortgage mess started to worry markets, others have been asking who owed whom what, and still, at the time of writing, no-one seems sure. Das” former employers have suffered. Citibank apparently is out by a few billion, but some say that’s a mere irritant as the bank’s worth a couple of trillion. Everyone seems to agree that the flaps we’re hearing are the sound of chickens coming home to roost, but no-one seems to know how many chickens are still airborne.   

All the high flying, all the weightlessness, has enabled the free marketeers ‘to avoid responsibility for retirement savings - they use laws and (sometimes) tax incentives to shift the burden of saving to the ordinary person, who does not have the necessary skills to do it well. They turn to investment professionals who - seeing their ignorance - fleece them.

“Poor performance is not necessarily a problem. Ordinary investors can only shift investments at high cost and then only to another predator. Companies and institutions often do not shift underperforming investments at all”. They don’t need to, Das says, because everyone is flying blind - and in circles. “Banks make a lot of money trading, but no money is ever really made in financial markets. They merely transfer wealth: the trick is to tap into the money that flows through the markets.... It doesn’t matter where it comes from - you can gouge clients, you can gouge other firms, you can gouge others within your firm. In fact, appropriating profits made by other desks is a major blood sport within dealers”.

Dumb, Dangerous, Unregulated, Inefficient

In this post-modern frenzy, the old metaphors about capitalist endeavour - it’s the law-of-the-jungle, a dog-eat-dog-world - find fresh relevance. When derivatives traders invent numbers and deals to meet an often random need, a Parkinson’s Law is at work in the markets: ‘the time taken on a decision is inversely related to the amount of money spent. Large expenditures, say millions of dollars on a new computer system, are approved with minimal discussion. Small expenditures, whether chocolate biscuits should be served for coffee breaks, require endless discussions”. There’s another variant of Parkinson’s Law you could suggest:  When it is least regulated, capitalism is least efficient.

Das says he’s keeping the story basic so that the vast majority of us, for whom this world is exotic, can understand. The mathematics that explain his work and the often bewildering logic of structured note asset packages and binomial option pricing are doubtless simple - for some. If, like me, you get confused, you can skip bits and not lose the thread. 

There’s a paradox at work. Das says that derivatives trading is dead easy, a matter of bluff and hope, but there’s no denying that it involves keen analysis and ingenious thinking. As a precursor of the type, Das discusses the 1960’s “Whiz Kid”, Robert McNamara, who ran Presidents Kennedy’s and Johnson’s war in Vietnam and went on to Ford Motors. McNamara devised all manner of brilliant, technical schemes. Everyone was in awe. But the real world didn’t work the way the model said it should. Smart people can be really, dangerously, dumb. And, these days, a narrow, grounded rationalism often co-exists with airy mysticism. The same numbers whiz who calculates to the last decimal point might subscribe to the trendy silliness that a stirring of a butterfly’s wings might unleash global catastrophe. Which part of their brains is writing up the billion-dollar currency swap? My rule of thumb: if someone in finance or technology is said to be a guru, stay away. 

Traders posture like cartoon villains, so when they stumble we’re all delighted. They had it coming, we say. But human nature works both ways. Just as the dealers puff themselves up, critics are always pricking the balloon. We predict failure not because we know our money markets but because we hope for failure. As a corrective, consider the principle of interest. It’s always been part of our daily lives, so we all understand it. Yet when lecturing in China not very long ago, Das found that his class couldn’t grasp the idea that money could grow or wither as though magically. Interest was once a “derivative”. The traders might be greedy and arrogant. They’ll include crooks and moral fools. But they’ve already changed forever the way we think about money, and some of Das” students are out there now hedging the Thai baht and risk modelling and arranging inverse floaters. 

“GHOST PLANE”

 Stephen Grey, Scribe, Melbourne, 2007

- Jeremy Agar

Rendition. It’s never been a common word, and these days it seems to have only one meaning. If the Americans are going after a suspect in someone else’s country and they ask the local authorities to nab their man for them, that’s a rendition. Not many states can ask other states to pick up people without due process in either country. First and foremost, rendition is an expression of our times, with its meeting of American power and Islamist terrorism.    

In this closely observed analysis, Stephen Grey traces the origins of Bush Junior’s unrestrained rendition policy to the presidency of Bush the Elder. In 1982 Dad let it be known that his Administration might routinely ask for a “local government’s assistance in a rendition, secretly putting the fugitive on a plane back to America or some third country”. Fair enough, it might be said. That’s only a hurry-up for what Interpol does. There was, however, a secret corollary, revealed during Bush the Younger’s 9/11 term. A rendition “may be effected without the cooperation of the host government”.

This Bushite rendition has an imperial swagger, but the practice had been a compromise, born of frustration. The demise of the Soviets and the end of the Cold War meant budget cuts and policy confusion. In the short historic gap between the focussing crusades against Communism - a foe that never deployed terror as a tactic - and Islamist terrorism, rendition was a random ad hoc business, a matter of nudges and winks between mates. It was used, for example, to return Egypt its criminals. 

In a sense rendition is as old a habit as the bounty hunter riding into Dodge City to rope in some black-hatted cattle rustlers. Until recently, everyone agreed on who the bad guys were that needed to be put away. Gray cites the case of Carlos the Jackal (the Western media’s nickname for Ilich Ramirez Sanchez, a notorious international terrorist in the 1970s and 80s, currently serving a term of life imprisonment in France. Ed.). After 1998, when the US Embassies in Kenya and Tanzania were bombed, Osama bin Laden attracted attention, bringing about our present obsessions. A Clinton official spoke of “extraordinary rendition”“. Previously, the US Central Intelligence Agency (CIA) could “lure” its targets into traps but it could not arrest people. 

Bush’s Counter-Productive Obsession With Saddam & Iraq

Richard Clarke was the Counter-Terrorism Coordinator for the National Security Council under both Clinton and Bush (he retired in 2003 and became a major thorn in the side of the Bush Administration with his blockbuster expose book “Against All Enemies” and his testimony to the 911 Commission. His thesis was that Bush’s obsession with the late Saddam Hussein and invading Iraq diverted the US from the War on Terror and the ‘real threat”, namely that posed by bin Laden). Interestingly, four years before bin Laden forced his attentions on Washington with his public denunciation of the evil empire, Clarke had been unsuccessfully urging the White House to attack him. So it was that the same US official twice made himself persona non grata with his boss, the first time for wanting bin Laden targeted before that was trendy, and the second time for getting in the way of Bush’s plan to instead attack Iraq - in order, Bush still says, to target bin Laden.  

Grey discusses Craig Murray, a former UK Ambassador in Uzbekistan, who was as offside with his Government as Clarke was with his. Murray told London that the Uzbek government used British spying support to sideline its domestic enemies. He argued that torture was inefficient in that it produced poor information for the obvious reason that its victims often have nothing useful to reveal but will make things up to stop the pain. Murray was eventually fired. He had too much integrity for a career in diplomacy. 

Of course torture often works, but, even when suspects talk, Grey is dubious as any short-term advantage is often negated by the resentment that torturers create in the subject population. Ultimately, popular goodwill is decisive. In the longrunning late 20^th Century British war in Northern Ireland, for instance, torture was found not to work. Grey reminds us that an apparent Islamist unity is misleading. Often rebels who happen to be Muslim have separate agendas and their link with al Qaeda is tactical and contingent. Chechens are after independence from Russia; Egyptians oppose the Mubarak government.  

“In the end”, Grey concludes, “what happens in the torture room becomes public”. This favours the insurgents because any news is bad news and bad news helps popularise and unite the otherwise often disparate struggles. In the case of Chechnya, for instance, it’s an unlikely and temporary common opposition to the states of Russia and America that brought about an Islamic solidarity. So terrorists want chaos. As a Brazilian tactician spelled out his tactic of indiscriminate terror: ‘the Government has no alternative except to intensify its repression”. This will recruit more fanatics. And so on. Grey’s specific motivation is to bring to light American rendition practices, or, more precisely, what follows: American torture. The bulk of his book is a series of case studies.  

What might we expect next? Grey quotes a British expert who suggests that the ‘threat from al Qaeda is over-rated, but the overall threat from Islamist militancy and insurgency is underestimated... Much of what we face is better called an insurgency, not a terrorist campaign”. In which case, torture won’t achieve anything decisive. Meanwhile, Bush and al Qaeda, locked in a deadly embrace of violence, both think they prosper by the pretence that they’re combatants in a “war on terror”. 

“WATER: WHO OWNS IT?”

A DVD By Christian World Service

- Jeremy Agar

It’s a good question, one of more than passing interest to New Zealand, where the politics and economics of water look like becoming increasingly significant. In this DVD the focus is on Sri Lanka, where the Government’s rush to re-engineer its economy by privatising water has meant that traditional farming practices have had to be abandoned. The local farmers we meet can no longer grow rice, a social as well as an economic staple.

This is an effective documentary. Its modest and specific scope allows the people involved the room to speak for themselves. The central metaphor of water flows through the film. Once water was husbanded in a myriad of small scale, sustainable uses. Now, it rushes pompously past the village in a concrete culvert, hurrying to the more important functions devised for it by the World Bank and the Asian Development Bank. Questions and notes, intended for group discussion, are included. One intriguing seminar suggests itself: To what extent are the situations in Sri Lanka and New Zealand similar?

Contact Christian World Service, Box 22 652, Christchurch, cws@cws.org.nz

GLOBALISATION, CHINA, AND TRADING CATASTROPHE

A Review Of “China Shakes The World:
The Rise Of A Hungry Nation”

by James Kynge, 2006, Phoenix

- Dennis Small

“If everyone lived like Americans, then you’d need three planet Earths . . . to sustain that level of consumption”. Peter Raven, botanist and conservationist, National Geographic, March 2004, p90.

“It is simply that the world does not have the resources to cater for 1.3 billion Chinese behaving like Americans”. James Kynge, “China Shakes the World”, p147.

“Whom the gods would destroy, they first make mad”. Euripides.

Something seemingly very mysterious started happening on the global scene early in 2004. In various cities across the world, people and vehicles began stumbling into holes in the road where previously there had been manhole covers. In places from Taiwan to Kyrgyzstan, from Kuala Lumpur to Chicago, and Montreal to Gloucester, manhole covers were vanishing in the night. Financial Times China Bureau Chief, James Kynge, came to see this phenomenon as marking the time that China first really made its growing economic impact felt internationally.  The manhole covers were being stolen for the scrap metal market and destined to help meet China’s rising rapacious demand. China’s economic growth was continuing on an upward trajectory that today appears truly awesome, drawing in natural resources from all over the world – from Sudanese oil to Australian iron and NZ coal.

As the New Zealand Government eagerly presses its suit for a free trade deal with China, a book by Kynge, in which he makes his observation on the vanishing manhole covers, has much to portend for the future – both regarding China and closer commercial relations between it and Aotearoa/NZ. In “China Shakes the World: The Rise Of A Hungry Nation”, Kynge charts this country’s chaotic capitalist emergence and raises a raft of issues that should prompt us to firmly reject the notion of greater collaboration through trade/investment liberalisation, especially via the comprehensive and detailed pact now being negotiated between the Chinese and NZ governments (intended for conclusion by April 2008). Ironically enough, Kynge’s book is eminently significant because it is written from the viewpoint of a true believer in capitalist democracy, the free market and free trade. “China Shakes the World” (CSTW) was the winner of the 2006 Financial Times & Goldman Sachs Business Book of the Year Award. Kynge has 19 years’ journalistic experience in Asia and is a regular mainstream media commentator on China.

Subverting Standards And Stability

Corporate globalisation is a process geared to the lowering of standards: i.e. standards of safety, labour, environmental protection, health and welfare, and product/service quality.  Moreover, globalisation undermines democratic accountability as the citizens of a country find they have diminishing control over their lives, except for those few able to exert any meaningful influence on events. Politicians operate increasingly at the behest of powers beyond democratic reach within a country. Ever since the turmoil of the 1980s’ Fourth Labour Government, the story of NZ politics has indelibly registered all this on the minds of a good number of us.

One of the paradoxes of the current China relates to the energy unleashed of hundreds of millions of people struggling to raise their standard of living. As Kynge emphasises: “The extreme frailty of its physical environment contrasts with the prodigious strength of its human capital” (p126). In the immediate personal circumstances of their lives, clearly a great many Chinese feel that they are actively involved in a process of positive change.  On the other hand, there is much suffering, frustration and deprivation. Protests keep mounting in both incidence and number of people involved. As expectations rise, people are demanding more accountability from their leaders, and better standards, including improved environmental, food safety and public health regulation. But in the current China a prevailing complex of factors can adversely influence economic and social relations with another country wanting “free trade”.  Whether with China, the US, or some other powerful country, a small country should always exercise the precautionary principle – be alert, beware, and avoid insidious links! Chinese governmental attitudes have already impacted adversely on our own Government’s conduct – from the issue of Tibet to the treatment of Falun Gong (e.g., see article on human rights, including local government ties, in the Press, 4/11/06).

For various reasons summed up in the word “profit”, companies can seek out countries where compliance costs are less than those of their homelands. Some NZ firms have already moved their operations or part of their operations to China. Given the comparative advantages of very cheap labour, suppression of independent unions, weak environmental and health standards and/or lax or ineffectual governmental enforcement, etc., the incentives are expanding and enlarging for such a move by more and more firms.  Indeed, in the next few years China’s appeal could be considerable to say the least, with consequent job losses in NZ. An important theme of Kynge’s book is the threat that he sees Chinese production presenting to Western prosperity. We can elaborate on Kynge’s position here, articulating worries that he fails to pursue to their full implications. Market forces drive standards down as the global race to the bottom takes over. Economic enterprises, and countries too, are playing off one country’s laws and regulations against another’s in a beggar-my- neighbour competition. For those who see themselves as winners, the benefits may well seem to outweigh the liabilities yet the debt for everyone in terms of the environment and resource depletion always continues to accumulate while eventually destabilising inequities and competition only deepen in the meantime. Most importantly, globalisation will prove unsustainable because it is destroying its ecological basis, all amounting to boom and bust on a truly horrendous scale.

Broken China

In China’s case, some 400 million people have experienced a rise in their material standard of living. Officials and citizens are also increasingly engaged in efforts to upgrade standards and control deleterious behaviour, especially in response of late to a flood of international governmental and consumer criticism. However, significant social support systems and protections have been radically dismantled. Most significantly, the principle of social welfare has been largely cast aside by a government which still calls itself “Communist”. Kynge remarks that from the onset of the 1997 Asian financial crisis, China laid off “more than 25 million workers from its inefficient and heavily subsidised State-owned enterprises. The fruits of that stern therapy are now evident in the competitive shock that is hitting Europe and America” (p95). China smashed the “iron rice bowl of socialist welfare” and brutally crushed worker dissent. “The result has been that State-financed social welfare has, in the space of less than a decade, ceased to be a millstone for the corporate sector. The housing, schooling, healthcare and pension obligations that over 300,000 State companies used to meet on behalf of their workers have now been eliminated, reduced or privatised. China today is a great deal less socialist than any country in Europe; the 120 million or so migrant workers, for instance, receive no welfare at all” (ibid.).

Just recently, in fact, China passed a labour law in support of migrant workers (Press, 10/7/07). In 2006 it initiated a programme for a supposedly more socialist countryside, the place where the vast majority of Chinese still live (Time, 13/3/06). But the conditions that Kynge describes overwhelmingly prevail. And this in turn accounts for much of the mounting pressures on both employment and welfare in countries as far apart as France and Aotearoa/NZ. In “China Shakes the World”, Kynge records his visits to a number of places in the West affected by manufacturing competition from China, and his subsequent reflections on these visits. “The competitive strain that is visible in the artisan communities of Italy and in the industrial heartlands of America, Germany and France is spreading. Yet China’s impact on these developed world economies is uneven. Not everyone is being adversely affected. Broadly, the powerful, the international and the wealthy are reaping huge benefits, while those in the middle are suffering in either relative or absolute terms.  Middle class people in medium sized enterprises in industrial heartlands comprise the group most likely to be laid off, downsized or offered wages that do not keep pace with inflation” (p118). These days, the Chinese government even has investments in Western businesses like the private corporate raider Blackstone Group as well as IBM (see “Broken China: A Dysfunctional Nation”, cover story in Business Week, 23/7/07). Chinese businesses could take over key NZ resource companies.

In his examination of employment effects, Kynge more or less overlooks those in the lower socio-economic strata deeply affected by the loss of jobs in factories and workshops. Taken altogether then, his findings point to a widespread impact on employment in the West that may just be in its incipient stage.  Rogernomics – NZ’s local implementation of the globalist vision - largely created the so-called “underclass” in NZ/Aotearoa, as well as “the Rich List” upper class of which multi-millionaire John Key, former Merrill Lynch currency trader and now National Party Leader, is so symbolically representative. The prospect now looms of greater inequality, job loss and downgrading.

Globalising Socio-Economic Gaps

Kynge foresees a hollowing out of the Western middle class and subsequent major social disruption. “So far, the trend to outsource has been concerned mainly with manufacturing industries, but over time the number of service jobs moving to China and India could eclipse those that have moved from manufacturing. The McKinsey Global Institute has calculated 9.6 million US service jobs could theoretically be sent offshore today” (p120).  Kynge notes that a similar capacity for this exists in European countries. Here in Aotearoa/NZ, the Government has touted the sunrise of the “knowledge economy”. Yet there is no guarantee, even if such an ethereal economy were to materialise to any degree, that NZ businesses would retain sufficient control over intellectual property for benefits to trickle down to the rest of us. Lately, there has been some shift back to commodity trade thinking with the “white gold” of the dairy boom on the back of Asian demand.  Capitalist “cargo cult” get rich yearnings go on as ever.

Robert Reich, once President Clinton’s Labor Secretary, highlighted the global challenge in his book, “The Work Of Nations: Preparing Ourselves For 21^st Capitalism - A Blueprint For The Future” (Simon & Schuster). Writing in 1991, Reich described the emerging interlocking, international webs of entrepreneurially-oriented knowledge specialists, whom he called “symbolic analysts”. In a globalising world, these people would gain hugely from the dominant trends whereas production workers would face a drastic decline in their incomes – explaining “Why The Rich Are Getting Richer And The Poor, Poorer” (Reich, chapter17). In the early 21^st Century, while corporate executives and associated top echelons enjoy unprecedented incomes and grossly exploitative rentier* rewards, the workers are experiencing job losses or, relative to their bosses, an enormous slide in their earnings. Kynge’s findings bear out Reich’s analysis and predictions in this respect (see also “The Economics Of Innocent Fraud”, by JK Galbraith, Penguin, 2004). A free trade agreement between China and Aotearoa/NZ would accentuate the same evident trend in our own country to a pronounced degree. * Rentier – a person living on income from property or investments. Ed.

Andrew Little, the National Secretary of the Engineering, Printing & Manufacturing Union (EPMU), has aptly criticised the outsourcing of NZ manufacturing overseas (now reinforced by special new Government funding after the failure of its “greenfield” approach here). Little states that: “Anybody who suggests production can be shipped wholesale to another country with research and design left here doesn’t know manufacturing or the Asian countries of today . . . China is already producing engineers and industrial designers at a cracking rate. They don’t need design disconnected from production . . . As we gradually lose manufacturing, we will lose the infrastructure that accompanies it, including training and education that support it” (Sunday Star Times, 13/5/07). Again, Kynge’s investigations testify as graphic confirmation of Little’s assertions. China is escalating up the ladder of technology by all kinds of ways and means, whether by imitation and copying, industrial espionage, or the conditions exacted for the right of investment there, or whatever other means opportunity provides.  All this, of course, is very understandable given China’s situation and background. But for Aotearoa/NZ where Government policies have already rendered us overly vulnerable to market forces, any further such exposure would represent the height of stupidity.

In Kynge’s view, globalisation’s great failing is that although goods, services and capital are mobile across borders, jobs are much less so. “The result is that the beneficiaries of the cheap, diligent and often skilled labour available in China are overwhelmingly the transnationals. And the benefits they have reaped have been handsome. According to a recent study, about 25% of the profits that American transnationals make these days derive from their foreign subsidiaries. Or, to put it another way, 25% of the market value of these companies – a whopping US$2.7 trillion – is built on profits earned by overseas arms. But, ultimately, these profits come at the expense of the industries and jobs that sustain Middle America” (p119). Walmart, in particular, undermines standards with its demand for goods at the lowest possible production cost. It can be added that a lot of the environmental damage and other abuses in China have been spawned by the transnationals there. For centuries, the West has enriched itself by plundering Third World resources and outsourcing many of its environmental costs, which has allowed global capitalism so far to maintain its vast inequities and the obscene extravagances of its wealthy. The Keynesian warfare state that both protects and drains all this is due to close in a fatal embrace with China and other new capitalist-type competitors unless the world’s peoples intervene.

Chicago Tribune economic journalist Richard Longworth was one analyst who foresaw the huge threat to jobs and argued for alternatives. Commenting on the free trade thesis of McKinsey consultants Lowell Bryan and Diana Farrell, authors of the “Market Unbound” (1996), Longworth observed their thesis holds that: “. . . the disruption of stable societies and decent lives is the price that must be paid to achieve the profits of efficiency and the high incomes for those who own or exploit it” (“Global Squeeze: The Coming Crisis For First-World Nations”, Contemporary Books, 1998/9, p220). In “China Shakes the World”, Kynge is worried about this sort of thing but is caught in the contradictions of free trade.  He fears the danger to what he terms “the social democratic model” in the developed world and yet is also committed to free trade as somehow still ultimately beneficial to the Western middle-class (p95/6 & pp120/1). At the same time, he anticipates a fierce voter backlash against the ruling orthodoxy as the pain really bites. Kynge wonders too whether Western European countries like France and Germany – faced with the challenge of China – “possess the will or ability to smash their own “iron rice bowl”” (p95). He remarks that “the rhetoric sometimes seems to be moving in the opposite direction” (ibid.). He refers in this regard to comments by German politicians about threats to democracy by greedy capitalists, adding that while such criticism was apparently directed at the US and the UK, it “could just as easily have been talking about China” (p96).

Sacrificial NZ Lamb On Free Trade Altar

Aotearoa/NZ has rushed to be the first developed country to negotiate a free trade agreement with China. In the considered judgement of the Ministry of Foreign Affairs & Trade (MFAT): “Securing preferential access to China’s economy has the potential to deliver significant gains to our exporters. It is the fastest growing major economy, currently growing at 9.5% per annum. China is our fourth largest trading partner, taking over $1.6 billion of NZ’s merchandise exports and over $1 billion of services” (www.mfat.govt.nz). MFAT is looking forward to further gains in milk powder, wool, education, and other lines, as well as the cultivation of new or emerging products/services. The Chinese and NZ economies are seen as complementary. For MFAT, NZ’s “key priority” is to get “high quality rules and commitments”. But Kynge’s study indicates that this is very probably a mirage.

Recently, even certain NZ manufacturing executives like Fisher and Paykel’s John Bongard have criticised the Government’s push for free trade deals with China, Thailand and India as being “very unsuitable” for our national interests (Press, 27/4/07); and of course Fisher & Paykel is actually moving a substantial part of its production to Thailand!  Symbolic analyst Malcom Abbott, Adjunct Professor of Economics at the Chongqing University in China and an economic consultant/researcher in NZ, Australia and the US, has cited Fisher and Paykel as one of the success stories of NZ’s commitment to globalisation (“New Zealand And The Global Economy”, Dunmore 2007, pp114/5). Abbott also cites NZ Aluminium Smelter Limited as another success story (ibid. p115). The major owner of the smelter at Tiwai Point is mining monster Rio Tinto. CAFCA cut its teeth in opposition to Rio Tinto and its smelter. Today, Rio Tinto Aluminium NZ (which is much better known by its former name, Comalco. Ed.) gets its electricity – around 15% of the national supply! - cheaper than the rest of the country in a long-term special deal, grossly distorting and damaging the nation’s energy use. Smelter profits go to swell Rio Tinto’s coffers. Such are the benefits of free trade as assessed by symbolic analysts like Abbott.

So far as imports to Aotearoa/NZ are concerned, consumer standards are constantly under fire from trade threats. Kynge demonstrates in detail that China is struggling to establish the international brand names and quality control that, say, Japan has been able to do. “China is facing a global crisis of consumer confidence as the country’s food safety watchdog acknowledged that almost a fifth of the domestic products it inspects fail to reach minimum standards”; and this state of affairs has been reflected in exports from pet food to fake birth control pills despite export standards being higher (Sunday Star Times, 8/7/07: article from Guardian News & Media). NZ has encountered problems with items from toothpaste to clothing. Indeed, by August 2007, the issue of Chinese suspect imports was getting plenty of media discussion with the Government trying to justify a free trade agreement (Press, 21/8/07). As Kynge and others have vividly reported, environmental pollution is rife in China and hence the likely contamination of products. In the March 2007 issue of National Geographic, a reporter well wonders whether China is swapping the problem of poverty for “ecological suicide” (p81).

Sustainability And Sino-NZ Relations

Some commentators like Economics Nobel Laureate, Joseph Stiglitz, are optimistic that China can solve its problems of rampant growth; environmental damage; political accountability; corruption; nepotism; commercial piracy and counterfeiting; quality control; lax regulation; etc., and that the success of its new economic model will in the end benefit the world (Press, 18/4/07). But Stiglitz, a former Chief Economist at the World Bank and now caustic critic of the Bank’s development model, fails to address the contradictions to which Kynge is so sensitive. After visiting China, Stiglitz says that China “knows it must change if it is to have sustainable growth” and that at every level ‘there is a consciousness of environmental limits and the realisation that the resource-intensive consumption patterns now accepted in the US would be a disaster for China and the world” (ibid.). However, “sustainable growth” is a contradiction in terms and China has not adopted anything like a “new economic model” at all. China opens a new coal power plant almost every week. One of the indicators of progress for China in the eyes of some Westerners eager to espy entrepreneurial opportunities has been the dwindling number of bicycles in Beijing and their replacement by cars. Today, the Chinese leadership is struggling to reduce the capital’s air pollution before the Olympic Games in 2008.  Incidentally, Beijing economists “are fond of saying, China is like an elephant riding a bicycle. If it slows down, it could fall off and then the earth might quake” (p52). And yet they now also want to cool the country’s dangerously overheated economy!

Stiglitz talks about China moving away from export-led growth and emphasising domestic consumption. He hopes China will develop new technology using fewer resources. There may be some slight signs of this, e.g. the Worldwatch Institute has signalled how China is developing cheap solar energy panels (Press, 24/5/07).  But as ever, in China like NZ, the dominant export growth model forges on, whatever the rhetoric. Certainly China is dedicated to coal as its major energy source far into the future. Australia, the US and NZ, and even a number of European countries are also dedicated to the long term exploitation of coal, as well as “developing countries” desperate for cheap energy sources. Pan Yue, Vice-Minister of China’s State Environmental Protection Administration, while appealing to a legacy of much greater nature awareness in past tradition, has sounded a far more realistic note than Stiglitz. After reviewing the problems and the urgent need for positive action, Pan Yue concluded that: ”China is dangerously near a crisis point. The country’s enormous environmental debt will have to be paid, one way or another. China must exercise the foresight needed to begin paying this debt now, when it is manageable, rather than allowing it to accumulate and, ultimately, threaten to bankrupt us all” (Press, 30/11/06).Meanwhile, the NZ Government remains completely blind to the final implications of free trade.

In “China Shakes the World”, Kynge ponders the question of whether reality will force China to adopt a whole new green approach to resource use. He comments that the cost of “such a strategy would seriously erode the country’s industrial competitiveness, so progress is unlikely to be rapid.  And in the years that it takes to reach that hazy goal of environmental responsibility, the international tensions released by China’s appetite for foreign resources and the abuse of its own environment may escalate sharply” (p147).  This seems an understatement of a crucial dimension of the global crunch coming upon us all. By joining China in a free trade agreement, Aotearoa/NZ is actually committing itself to a suicide pact, helping further foment conflict over the planet’s diminishing resources rather than sharing them more equitably and sustainably.

Even the American Establishment has openly voiced concerns regarding China and the environment.  Elizabeth Economy, Director for Asia Studies at the Council on Foreign Relations, also quotes Pan Yue on the danger to the "economic miracle" from a failing ecology (‘the Great Leap Backward?" [cover story titled "China’s Coming Environmental Crash"] Foreign Affairs, September/October 2007, pp38-59, quote on p38). In a positive vein, Economy argues for US-China cooperation on improving environmental management.  But she does acknowledge some of the US’s own failings in this field and, of course, the American fantasy about environmentally sustainable corporate globalisation still rolls on.   

Kynge tellingly quotes one of the world’s foremost environmentalists, Dr. Lester Brown, President of the Earth Policy Institute, a non-governmental organisation (NGO), based in Washington: “A new era of international relations has dawned, one defined by the geopolitics of scarcity” (ibid., p214). Kynge says he first heard of the phrase “geopolitics of scarcity” when Brown was speaking at a meeting in Beijing in early 2005, where Brown noted that China now consumes more grain, meat, coal, steel, copper, cement, fertiliser, cellphones and refrigerators than the US (ibid.,p235). Former head of the Worldwatch Institute and now head of the Earth Policy Institute, Lester Brown has long charted alternatives to the current system (see: www.wikipedia.org; one can access a link there to read or even download his book, “Plan B2.0: Rescuing A Planet Under Stress And A Civilization In Trouble”, WW Norton & Co., 2006).  In a revealing irony, Kynge at one point notes how Chinese loans (as well as cheap goods) provide the US with various benefits, including funds for the war in Iraq! (Contact The World in Action Website www.avaaz.org to participate in campaigning on climate change, global justice, Iraq, and other international causes).

Beyond The China Syndrome

In an emerging tumultuous era of resource wars, peak oil, and human-induced climate change, we desperately need new thinking, new development models, and new forms of international interaction. So much of this is already conceptually available and practically modelled but has been systematically suppressed and/or marginalised by corporate forces. More specifically, if China was serious about its supposed new economic model as proclaimed by Stiglitz, then it would not want a free trade deal with NZ which would only act as an incentive down the more export path. On the contrary, it would be reaching back to its Nature-attuned Taoist tradition, rejecting much of its Confucian-Maoist inspired technocratic approach, let alone hellbent globalist capitalism in general, and instead be seeking to apply greener and genuinely socialist ways of working and living across the whole spectrum of society. China and Aotearoa/NZ should step aside from the pitfalls of free trade, and co-operate on sustainable development for both countries.