REVIEWS

- Linda Hill

OUR LIVES IN THEIR PORTFOLIOS
Why Asset Managers Own the World
by Brett Christophers, Verso, 2023 ⁽¹⁾

This is an absolutely-must-read for everyone concerned about overseas investment in Aotearoa. Or concerned about the government betting our energy future on BlackRock. In Watchdog 162 (April 2023) I reviewed Brett Christophers' 2020 book on modern forms of rentier capitalism. Here he hones in on rentierism in infrastructure and housing, and the "asset management" companies who specialise in and profit from this. Companies like Macquarie, KKR, Blackstone (2) and BlackRock.

Since 2008, capital investment has shifted into privately managed pooled funds which quietly buy up particular kinds of assets, squeeze them for income, then sell them on for capital gains. It's a complex financial world, little known to most of us. Christophers explains in plain language how asset management works, and how this form of investment and trading in infrastructure and housing impacts adversely on ordinary people.

In the run-up to the October 2023 election, the then Labour PM Chris Hipkins announced that the Government is working with global asset management company BlackRock to launch a $2 billion New Zealand Net Zero Fund that will help us achieve 100% renewable electricity. The Fund will invest in green energy infrastructure - wind, solar and green hydrogen production, battery storage and vehicle chargers. Hipkins said the Fund will "look to crowd in" investment from Crown entities, including our superannuation funds, and private sector funds. (3)

Christophers was in New Zealand in August 2023, at the time of the Net Zero Fund announcement. He is a Professor of Political Economy and Geography at Uppsala University, Sweden, with academic links to the University of Auckland. He met with MBIE (Ministry of Business, Innovation and Employment) and others in Wellington and Auckland, as well as speaking publicly and on various media, including excellent Sunday Morning and Q&A interviews.

He expressed concern about the balance of risks and rewards between BlackRock and the Government, what co-investment BlackRock will expect, how the energy will be sold, and so on. To reach this point, he says, there'll have been a huge amount of discussion about the terms and conditions in the deal. "It's better that investment occurs than that it doesn't occur," he told Newshub. "But it's one of those cases where the small print is going to be very, very important". (4)

What Is BlackRock?

BlackRock is a private financial firm that manages money on behalf of investors, often institutional investors such as insurance companies and pension funds. As at June 2023, it had $US117.6 billion of its own assets, together with $US9.42 trillion - that's a "t" - in "assets under management" for others (Wikipedia). Christophers calls it a "universal owner", along with Vanguard and State Street (the "Big Three"), in that it has a stake in all major publicly listed corporations, though these are largely "passive" investments. It also invests, and invests for others, in private equity. As capital shifted away from traditional banks after 2008, BlackRock has been called a "shadow bank". "Private equity won the financial crisis", a 2019 Bloomberg report concluded.

World's Largest Manager Of Other People's Investments

That $US9.42 trillion makes BlackRock the world's largest manager of other people's investments. Christophers categorises it as a "generalist", i.e., mostly dealing in traditional stock equity, bonds and cash, with a smaller proportion of "alternative" investments in physical assets such as infrastructure and housing. Since 2010 its name has appeared as part-owner in 13 acquisitions consented by our Overseas Investment Office (OIO).

Since 2021 BlackRock has been chief investment portfolio manager for our second largest KiwiSaver provider, the ASB - keep that in mind as you read on. It already manages more than $20 billion of New Zealanders' money, says Andrew Bevin of Newsroom and is about to open a beachhead office here. The Net Zero Fund is "just one part of future opportunities in New Zealand", BlackRock's Australasian Chief Executive has said. (5)

Globally, BlackRock's current investments include fossil energy, an oil pipeline, coal development, and gun makers and retailers, as well as residential housing. In 2021, Chief Executive Officer (CEO) Larry Fink announced at COP26 (Conference of the Parties) that they were opening Climate Finance Partnership Funds for renewable energy infrastructure, and told his shareholders that the transition to "net zero" afforded "a historic investment opportunity". By July 2023, BlackRock had opened its fourth such Fund, for investments across Organisation for Economic Cooperation and Development (OECD) countries. The NZ Net Zero Fund will invest in green infrastructure in this country only.

BlackRock "has its tentacles firmly wrapped around the European Union polity", says Christophers, despite conflicts of interest. It has influenced Biden's climate programme and other policy via the "revolving door" between the finance sector and the highest levels of the US State. (6) For several years, Fink has been making a case that "de-risking" is needed to propel infrastructure investment in the Global South.

In 2021 Blackrock established a ten-year closed-end fund targeting Kenya, Morocco, Egypt, Peru and Vietnam, that has been invested in and explicitly de-risked by philanthropic institutions and State development banks from France, Germany and Japan. Fink says the International Monetary Fund (IMF) and World Bank should stop acting as development financiers, but be insurers de-risking private sector investments.

In July 2023 the World Bank named Larry Fink and 14 other CEOs, mainly financiers, as the core group of its new Private Sector Investment Lab (7), charged with addressing climate challenges and "barriers to private sector investment in emerging markets". The Bank is the biggest multilateral funder of climate investments in developing countries, its Website states. New President Ajay Banga referred to the Bank's longstanding mission to end poverty, "but on a liveable planet". See Silent Coup, reviewed below, on the Bank's record to date. Its authors' response to this green investment programme was: "The Bank has actually been very successful - just not for the poor it's claimed to serve". (8)

In "Our Lives In Their Portfolios", Christophers reflects on BlackRock's green infrastructure strategy - and our Government's - from the perspective of neo-liberal thinking. Human-induced climate change has finally been declared a crisis, but is seen as a "market failure". The market failed to recognise the full costs of fossil fuelled energy. The neo-liberal answer is to try and make markets work better, by getting the price right (hence our Emissions Trading Scheme, ETS), or increasing investment. The appropriate role of governments is, at most, to modulate markets and price signals, definitely not to substitute for market (private sector) actors and opportunities with public financing, ownership and provision - as proposed by Bernie Sanders and Jeremy Corbyn.

In this neoliberal age, public infrastructure has already fallen into private hands, and it would be very much against the grain of recent political history, Christophers says, if the private sector were not at the very centre of infrastructure transformation. In OECD countries, the private sector already controls the lion's share of new green power infrastructure, with the role of the State being that of de-risking the private sector's investments in construction and to protect its profits in volatile electricity markets. Asset managers are unlikely to invest, Christophers says, unless a significant amount of that risk is being absorbed by others.

Now Registered In NZ

On 22 August 2023, BlackRock Investment Management (Australia) registered with the Companies Office as an Overseas ASIC company (Australian Securities and Investments Commission), and on 5 September 2023, BlackRock Investment Management (NZ) Ltd was registered as a New Zealand company, listing its "ultimate holding company" as Blackrock Incorporated (New York Stock Exchange-listed). There's also a BlackRock (NZ) Management Ltd, registered in 2016 and owned by a New Zealand-registered Trust. (9)

At the time of writing, no detail on the New Zealand Net Zero deal has been made public. We don't know who will invest, or what assets are to be acquired or constructed. These things take a while. Presumably OIO consents will still be required. We don't know the details of BlackRock's ownership and control of the fund, what form Government support or risk absorption might take, or the extent of investment of our money by New Zealand public agencies and retirement funds.

We don't know for sure that the deal will follow the template described below, or whether it might have some ownership or contract-for-service aspects more resembling a PPP (public private partnership) agreement for roading infrastructure. One thing BlackRock has said, Christophers told a Fabians meeting, is that it doesn't expect to be involved long term. So, it's a "closed-end" Fund, a cut-and-run investment.

$2 billion seems a big deal to us. Not to BlackRock, but it is a money-making venture. Renewable energy is risky business. Christophers' "confident guess" is that BlackRock will have wanted some "pretty significant risk mitigation" in its deal with our Government. Yet governments can always borrow more cheaply than the private sector, and New Zealand currently has a low debt-to-GDP (gross domestic product) ratio and an AAA rating. So, never mind the election grandstanding about fiscal prudence.

As Chistophers asked Jack Tame of Q&A: "Wouldn't it potentially be better if the public sector borrowed the money and undertook that investment itself?" (10) 350 Aotearoa agrees. "Instead of begging for private investment, the Government should be taxing big polluters, then investing directly in renewable infrastructure projects for public good. The profits are there - between 2014 and 2021, the Gentailers (electricity generators and retailers) distributed $3.7 billion in excess dividends" (11)

So, What Is Asset Management?

In "Our Lives In Their Portfolios", Christophers gets into the "small print" on asset managers in general. Asset managers manage investments in financial or physical assets on behalf of clients with large chunks of capital - on a scale that has "transformed the dynamics of capitalism itself", he says. While the term "asset manager capitalism" has been used to describe passive investment in share markets and corporations, "alternative' asset management is fundamentally different, says Christophers. Both the investments and the assets invested in continue to be actively managed and controlled.

Investment funds established by asset managers are increasingly significant owners of housing and infrastructure (particularly energy) - which is Christophers' focus and concern. (12) Globally, such funds hold, at a minimum, $US4 trillion's worth of such assets. As this financial strategy has grown, along with privatisation of public infrastructure, social housing and growing "build-to-rent" markets, Australia, Ireland, Spain and the UK are increasingly becoming what he calls "asset manager societies". Asset manager funds "own and extract income from things - schools, bridges, wind farms and homes - that are nothing less than foundations to our daily being".

Asset managers' financial and legal arrangements, as Christophers documents, are complex and vary between funds and between countries. Most are private unlisted companies managing private unlisted (13) investment funds. Little public reporting is required, making investigation difficult. But here's a thumbnail sketch of how it all works.

Asset managers launch a "closed-end" investment fund and invite major investors to commit sums to it for a certain period, usually 7-12 years (or it could be an open-ended "perpetual" vehicle allowing investors opportunities to invest or redeem their capital). For managed funds invested in infrastructure from 1990 to 2020, investors are sovereign investment funds, banks, high net worth individuals, insurance companies, and public or private pension funds - in descending order of average size of total investments. Pension funds make more commitments, but of smaller amounts, spreading their risk. Large investors are likely to get discounts off management fees.

The pool of committed money is then leveraged with heavy borrowing. This debt is loaded onto the eventually-to-be-sold asset or its holding company, and may be in the form of loans (not investments) from the investors, kicking interest upstairs. After the 2008 financial crash and covid closures, borrowing was enabled by rock-bottom interest rates, intended to stimulate job creation. Christophers notes how much higher a profit-to-finance-cost ratio is than a profit-to-invested-capital ratio - a point so obvious I'd never thought of it!

Once the target sum is reached, it is the fund that makes acquisitions or purchases shares, typically focusing on a particular sector or a particular region or country. Around three quarters of infrastructure acquisitions are in existing, earning, assets, not "greenfield" construction or ones requiring modernisation or renovation. The fund is a legal creation controlled by the management firm, perhaps via an insulating portfolio company, and is not generally subject to tax on profits. The investing partners are. (14)

The investors in the fund are its "limited partners", who receive a quarterly return from the assets, and capital gains (occasionally losses) from sale of the assets when the fund is "exited". (15) The asset management firm is the "general partner" and may have specialists with skills in the chosen sector or country. The general partner may or may not invest a little of its own money, to show "skin in the game". Mainly, asset managers' earnings come from a small percentage of the partners' earnings as management fees, which they get regardless, and larger performance fees, which are "carried" to be taken as a percentage of the capital gains from asset sales when the fund closes.

Big Earnings For Little Risk

Most countries tax capital gains at a lower rate than corporate income - or not taxed at all. This fee arrangement is often referred to as "2 and 20". That is, asset management firms, especially senior partners, earn a great deal with little risk. Christophers reports that the net worth of Blackstone's CEO is estimated at $US40 billion, Brookfield's CEO's net worth is around $US3 billion, and in the year to March 2022 Macquarie's CEO received $US20 million in remuneration. Wikipedia puts BlackRock's Larry Fink's worth at a modest $US1 billion.

Public or private pension funds and insurance companies have a need for long term stable income (not high-speed speculation in stocks or money markets). But this requires scale and expertise, making pooled managed funds attractive. Some large institutional investors do have in-house expertise - e.g., the big Canadian pension funds that have acquired assets here in recent years. Investing in physical assets makes good long-term sense.

Not so long ago, Christophers notes, local public pensions and other local institutions helped fund local infrastructure - roads, schools, hospitals - by investing in Government or municipal bonds, in a virtuous circle called "fiscal mutualism". From the 1980s the privatisation of public assets opened infrastructure and public housing to what he calls "fiscal extractivism" by private finance managers. He points to a mismatch between institutions' interest in long-term investment (though they do need some liquidity for pay outs) and asset managers' interest in short term capital gains.

Jack Tame asked Christophers if, in a sense, "we the people" don't still own these assets, through our retirement funds? Christophers thinks it is unsatisfactory to grow retirement savings by ratchetting up the rents or energy bills of other workers. Also, retirement wealth is extremely unequally distributed within and between countries. Pension holders are the better-paid workers of the Global North and the investment income may be coming from housing projects in Rio and Sao Paulo, or toll highways in India.

Thirdly, Christophers says investors are by no means just the firemen, nurses and teachers that asset managers regularly speak of. Managed funds in infrastructure and housing are increasingly owned by sovereign wealth funds or similar. For example, half of one $US20 billion Blackstone managed fund is owned by oil-state Saudi Arabia.

With insurance companies, Christophers points out that, it is the company's capital that is invested. Gains or losses will not directly affect premiums or pay-outs. With pension funds, however, it is pension holders' contributions that are invested directly, and may grow or shrink - as with our KiwiSaver accounts. Pension fund managers, like asset managers, risk other people's savings, not their own.

Investments Can Fail

For example, in 1989 a Blackstone managed fund lost 84% of its partners' invested capital. In 2006-7, Pennsylvania public school employees suffered catastrophic losses on four different managed funds in real estate. The limited liability of investment partners means total losses will not be more than the total amount of the fund - except that, on top of that, retirees will pay their pension fund's expenses and the management fees, performance fees and costs of the asset management firm. Christophers goes through the arithmetic on this.

With infrastructure investments, purchase agreements on privatisation by Government and PPP agreements for new construction are not infrequently tailored to the need for dependable financial returns for investors. Government may guarantee a certain level of customer demand, or fixed volumes or unit prices, or a minimum annual revenue. With energy infrastructure, such guarantees are highly inappropriate in the face of climate change. Christophers gives detailed examples from the US, UK, South Korea, Scotland and Ghana, in which the risks and costs of private investment are transferred by such guarantees to the State, and "can easily turn into a budgetary time bomb".

It is the asset managers' job to make sure that dividends and their own fees flow during the term of the fund, growing the expected market value of the assets. Good earnings look attractive to new buyers and increase the capital gains when the fund closes. Asset managers are "essentially glorified traders", says Christophers.

But they control the investment strategy and how the infrastructure or real estate asset is managed - by their own specialists and by the contracted operating company and its subcontractors (who do the actual work). Christophers explains how, all the way up the chain of contracts and legalities, it is the limited partners who are the clients, not the renters or utility users or the public interest. The purpose is return on investment - and fees.

Assets managers are relentless in squeezing maximum profits out of homes and infrastructure, Christophers says, by raising rents and utility rates, by pushing down wages, and by neglecting maintenance or ongoing capital re-investment - before they sell and move on. He gives numerous instances from his own research and that of others. Because asset managers are almost never involved in actual operation of the assets, their involvement is in significant measure invisible.

Research on housing and care homes shows that asset management-owned properties are worse landlords than other owners.8 They profit from decisions to allow housing estates to deteriorate, or evict people and renovate for higher income tenants, and load their fees and profits onto household bills, but are unreachable by those whose lives are affected.

The scale and impacts of the major asset management companies are huge, operating across many countries and creating cross-cutting webs of combined housing and infrastructure ownership. These are particularly concentrated in places like Copenhagen, Berlin, Ireland, Spain, the US and the UK. A managed fund may acquire, as one of its investments, just 10-15% of a particular infrastructure or real estate asset, with similar percentages owned by other asset managers.

Most may have a share of other infrastructure or real estate investments in the same area. Christophers describes this in the county of Kent. Entire communities come under direct pressure from the above profit extraction methods applied to all local infrastructure - energy, water, housing, roads, transport - inescapably "shaping in direct and tangible ways the conditions of everyday life for ordinary people". They are living in what Christophers calls "asset manager society".

Or, a fund might acquire and control the whole of an infrastructure asset or company. An egregious example is Macquarie's 2006 to 2018 ownership of Thames Water. I've picked it because Macquarie is Australian, (16) it pretty much started the asset manager trend and, like BlackRock, it's enormous. It currently has $A871 billion under management in infrastructure that, as it likes to say, "a hundred million people rely on every day".

Thames Water alone has 1.5 million wastewater customers. It was challenged by the UK regulator in 2013 for hiking rates while under-investing in sewage treatment, sewer flooding prevention, and failing to maintain its waste water drainage network. It was prosecuted by the Environmental Agency for extensive pollution of the Thames in 2012-14, and for ruptured pipes in 2018 that left 12,000 households without water. It was fined £120,000 - but Macquarie had already sold its last shares and moved on.

BlackRock & Renewable Energy

Let's have a BlackRock story about renewable energy. BlackRock acquired the Tellenes windfarm in Norway in 2016 and immediately entered a multi-year agreement with a Swedish power company Arise AB to manage operations and maintenance. Arise manages a total of 14 windfarms, as well as owning ten of its own. The ones it manages are mostly owned by asset managers, including BlackRock with four.

So, in Scandinavia, BlackRock is neither an energy company nor an investor in an energy company - it owns and controls physical assets. It is a pure rentier, Christophers says. It profits from owning, without doing a thing. And Arise's client is now BlackRock, not the public. Why would we invite BlackRock to shape our future in this way?

This book offers a wealth of explanation and detail about how capital investment operates in the 21st Century. There's much more than I can cover. I hope it will become a text for a new post-neoliberal generation. I like Christopher's occasional flourishes of hard-Left analysis, which contrast with his milder-mannered media presence.

An Easy Target

Why would the world's largest asset manager take an interest in a piddling $2 billion capital requirement at the edge of the map? Because we are ripe for the picking? We have market-fixated Governments and public service, tethered to neo-liberalism by the Public Finance Act. Our two main political parties still think green infrastructure for green growth will fix our planetary problem, and relieve political pressure for change.

They may chip in pools of our savings from State and private pension funds - BlackRock already has its fingers in one - as well as ACC (Accident Compensation Corporation) and EQC (Earthquake Commission) funds. Our energy infrastructure is already fragmented and almost entirely privatised. We are accustomed to construction by PPP, including paying extra for mistakes and overruns.

We have rubber-stamp consenting of overseas investment, that could be fast-tracked for "partners". Australian-owned Downer is already on the ground to organise multiple-subcontracted, casualised workers. We once built our own hydro dams and railways, but no longer have that engineering capacity - or even a belief in it. We'll be a quick buck.

NZ Housing The Next Target?

There is also potential for asset managers in New Zealand housing - the other main area of Christopher's concern about "asset manager society". We have no rent controls or capital gains tax. Our over-heated, under-supplied housing market means an ever-growing demand for rental houses. The Government has required councils to allow large intensive housing developments - just the kind that asset managers like. Since 2017, non-resident non-citizens have not been permitted to buy residential housing here, as it contributed to high prices. Overseas developers are welcome but must immediately sell on.

The National Party has announced that it will remove this restriction and has planned to sell $2 million houses to Silicon Valley bolt-holers and similar to raise tax revenue (until that was vetoed by New Zealand First as part of its coalition deal with National). This proposal is so silly - but it may be partly smoke and mirrors. National's policy solution to the housing crisis features "renting to buy" - which logically requires housing owners "buying to rent". This could be existing large developers (often overseas-owned, often Chinese companies).

But, at scale, it could be an opportunity for companies like BlackRock to expand in their other favourite area of asset management. Clearly, the lobbyists are already in town. Our climate policies, and our economic thinking in general, needs to be broader than just plugging the renewables gap in electricity generation, until the rarer metals run out.

Endnotes:

Available in hard copy or e-book, but shop around on price.
Not to be confused with Blackstone, founded by former Lehman executives in 1985 and now the world's largest "alternative investments" asset manager and largest real estate investor. BlackRock was founded by Larry Fink and others in 1988, but initially funded by Blackstone, who fully divested by 1994. Blackstone also created and controlled Invitation Homes from 2012 (∼48,000 properties by 2016), fully divesting in 2019 - but BlackRock currently holds 8% of its shares. Since 2011 Blackstone manages its own investment pools of post-Global Financial Crisis distressed-mortgage homes, "a vast transnational programme of acquisition... arguably without parallel in history", says Christophers.
Rt.Hon. Chris Hipkins, "First Of Its Kind Climate Fund To Back 100% Renewable Electricity", media release, 8/8/23.
NewsHub, "BlackRock's Deal With Government A Money-Making Venture", 9/8/23.
Newsroom, 7/9/23.
Blackstone had similar input into Obama's post-2008 housing policy, becoming the biggest single institutional owner of foreclosed single-family homes.
BlackRock, HSBC, Macquarie, Mitsubishi UFJ Financial Group, Ninety One, Ping An Group, Royal Philips, Standard Bank, Standard Chartered, Sustainable Energy for All, Tata Sons, Temasek and Three Cairns Group. World Bank media release, London, 10/7/23.
Matt Kennard, Claire Provost, "World Bank Reform Will Prove Illusive Unless This Is Understood", Opinion, Al Jazeera, 6/10/23.
As well as various current or expired Blackrock companies that may well be about black rocks.
Q&A, TVNZ 13/8/23.
Media release on Scoop, 8/8/23. See also "Generating scarcity: How the gentailers hike electricity prices and halt decarbonisation" 350.org Aotearoa
He also notes a trend, thanks to low interest rates and high food prices, towards investment in farmland by asset managers Brookfield, Macquarie, Manulife and Nuveen.
i.e., partnerships in these funds cannot be publicly traded.
CAFCA has noted a growing number of private equity funds, as well as corporations, acquiring businesses and land in New Zealand whose investors apparently live in tax havens - see my article "Private Equity Funds. The Swirling Billions Of The 1% Reach NZ", in Watchdog 154 (August 2020).
In 2023 Pitchbook reports that rising interest rates are slowing "exits" by deterring new buyers.
The Group's name and logo appropriately references Lachlan Macquarie, the early New South Wales Governor who largely eradicated Aboriginal people from land east of the Blue Mountains.

SILENT COUP
How Corporations Overthrew Democracy
by Claire Provost and Matt Kennard, Bloomsbury Academic UK, £18 e-book, or $NZ39.60 hardback from The Nile, 2023

This book, say its authors, is a guide to the rise of the global corporate empires that now dictate how resources are allocated, how territories are governed, how justice is defined, and even who is safe. It is wrapped in the story of the authors themselves - two young but experienced investigative journalists who were given two years' salary, a windowless office and a travel budget, and allowed to work on whatever they chose. (1)

As they investigate local issues around the world, interviewing the people involved, they pick at threads of ownership and investment that unravel a larger story. This book is about the legal and financial infrastructure that capitalist corporations have quietly set up to underpin and reinforce their supranational power.

World War II shifted financial and political power from Europe to the US, via the Bretton Woods institutions which the US largely controls. Empires crumbled as colonies demanded independence but, in the post-war decades, profit-seeking interests moved to ensure that global business-as-usual would continue in private corporate hands.

The authors identify and investigate four different systems and trends, including their origins, which they present in sections entitled "Corporate Justice", "Corporate Welfare", "Corporate Utopias" and "Corporate Armies". These systems enable private global corporations to evade State regulation and democratic control or to tap into different State-funded revenue streams, with adverse impacts on local people and environments.

"Corporate Justice"

This is private non-State systems through which transnational corporations sue governments for loss of profits as a result of regulatory decisions. Investor-State Dispute Settlements (ISDS) will be familiar to Watchdog readers - we've all spent years trying to stop New Zealand governments from signing up to World Trade Organisation ISDS clauses in their enthusiasm for free trade agreements. Here we're talking about an older, larger ISDS system as part of bilateral investment treaties and development projects funded by the World Bank and its International Financial Corporation (IFC).

In Provost and Kennard's first story, I spot a New Zealand connection, so I'll give a bit of detail. They attended a rally against mining on El Salvador's Independence Day, the same day as a World Bank ISDS hearing against the Salvadoran government. Pacific Rim, a smallish Canadian mining company, alleged the Government encouraged it to explore for gold, then blocked it from extracting it; it was seeking compensation for exploration costs and lost hypothetical future earnings. The Government's defence was that the company had failed to obtain the necessary environmental permits and land rights.

There was widespread public opposition to gold and other mining because of past pollution of river waters. Pacific Rim had bought a previous company's exploration licences in 2002 and filed the case in 2009. In 2012 Pacific Rim and its case was taken over by - guess who! - OceanaGold, which owns gold mines in Waihi and Otago. (2) In 2016 the ISDS tribunal sided with El Salvador, ordering OceanaGold to pay just two-thirds of the Government's costs. In March 2017 El Salvador became the first nation to prohibit all mining of gold and other metals. By 2019 OceanaGold had sold its property, dissolved its assets and departed.

Readers may remember that in 2019 Green Minister Eugenie Sage blocked OceanaGold's overseas investment consent to buy land for a large and environmentally risky tailings pond, necessitated by extension of its Waihi mine. OceanaGold's re-application was promptly granted consent by two Labour Ministers with the usual rubber stamp. It has since bought properties in Waihi township, to extend mining below them. (3)

Provost and Kennard then visited the World Bank's ICSID (International Centre for Settlement of Investment Disputes) archives in Washington, learning that ISDS policy was pushed through in 1966 against strong opposition from developing countries. Cases exploded from the 1990s, totalling almost 900 by late 2021 - around a third in Latin America. Investment arbitration is big business for specialist lawyers and financiers. ISDS procedures take years and are extremely expensive for Governments (even if they win, as El Salvador did). This has a known chilling effect on policy.

The authors reviewed past cases, then travelled to South Africa where Italian mining companies had filed an ISDS claim for $US350 million because a new law required them to give a 25% ownership stake to their impoverished Black African mine workers. After four years, the South African government settled this Foresti claim, but began terminating its international treaties with ISDS clauses.

The authors believe that the corporations' purpose is not really to win the enormous sums claimed, but to hasten Government capitulation, allowing profitable mining or construction projects to proceed - despite environmental or social damage. The ISDS system, they say, offers foreign investors "a sort of secret insurance against any threat to their interests, present or future".

ISDS cases aren't just happening in the "developing world". The US, Canada and Mexico have been hit by dozens of ISDS claims under NAFTA (North American Free Trade Agreement). European Governments and municipalities have been sued when, under pressure from residents, they have regulated privatised energy or water companies to protect the local environment. A growing number of cities worldwide are deciding to end their experiment with privatisation. For example, the city of Hamburg, after a referendum, is allowing its contracts to expire before building "a socially just, democratically controlled and climate-friendly energy supply from renewable sources."

"Corporate Welfare"

Provost and Kennard's investigations start with a visit to a Liverpool expo for Aid-Funded Business, organised by British officials. There's "$US70-100 billion worth of business opportunities" in the UN's peacekeeping, famine and disaster relief and emergency aid work, and "we're here to help you win some of that". All those tents, sacks of rice, water purifiers and other equipment delivered by aid agencies and NGOs (non-Government organisations) are typically made by contractors in donor countries, with UN payments assured.

US food aid is dominated by global grain traders Cargill, ADM and Bunge. For companies, development aid provides a steady revenue stream and a humanitarian crisis is a business opportunity - all publicly funded. The authors tell how, in the post war-decades, procurement, logistics and payments units of former colonial Empires morphed their on-the-ground expertise into the new overseas aid business - e.g., Crown Agents Ltd and CDC plc. (4)

We talk about overseas aid as if it is an international social security system that redistributes money from richer to poorer countries - but mostly it doesn't. The Organisation for Economic Cooperation and Development (OECD) defines "official development assistance", and it can include loans to be paid back with interest, loans cancelled or rescheduled (but counted anyway), and money spent on training or scholarships that never leaves the donor country.

Most aid is routed through a web of agencies, NGOs and for-profit contractors and sub-contractors. Much of it is spent on goods or services from the donor country. Development money for infrastructure may be cycled back through construction contracts - or worse. Thatcher gave Malaysia development aid to build its Pergau hydro dam in a quid pro quo for buying British armaments.

Public money is channelled into aid and development via the Commonwealth Development Company plc (CDC, renamed British International Investment in 2021), the US's Millennium Challenge Corporation and the intergovernmental World Bank (189 member countries), all increasingly run like businesses. Through the 1980s and 1990s, poor countries needing loans were required to adopt deregulation and privatisation policies.

In 2002 the World Bank replaced its much-criticised Structural Adjustment Programmes with Poverty Reduction Strategies Papers, with similar-seeming requirements. Of development projects by global corporations with adverse impacts that the authors investigated, a surprising number had received funding from the World Bank's IFC. These included upmarket shopping malls, luxury hotels and gated neighbourhoods across Central America, private hospitals in India, Lidl supermarket expansion into Poland and Romania, 50-year land leases for agribusiness in Ukraine, water privatisation in Manila, and diamond mines in Tanzania.

The IFC was set up in 1956 to help private companies expand in developing countries; from 1961 it could make equity investments and in 2009 it hived off a wholly-owned "asset management" subsidiary. By 2013 the IFC accounted for 36% of the World Bank's spending. Interviewees described it as "profit-seeking", "pretending to be an investment bank" and questioned whether it would see its primary role as poverty reduction, which is the World Bank's mandated mission.

In 2015 UN member states adopted Sustainable Development Goals, financing of which was expected to move "from billions to trillions". Proposals from developing countries for an intergovernmental tax body failed to pass; "crowding-in private finance" was presented as the way forward. Critics of this approach say partnerships between aid charities and businesses often mean accepting an ideology of economic growth and jobs through deregulating the "climate for investment", and taking a limited view of how poverty is created or who benefits from it.

"Corporate Utopias"

This is about different ways in which global business carves out geographical areas of exemption from tax, regulation, labour laws and democratic government. The first Special Economic Zone (SEZ) was next to Shannon Airport in Ireland, and was emulated at scale by China in Shenzhen, next to Hong Kong. Provost and Kennard visited both, then an SEZ outside Yangon in Myanmar on rural land seized without compensation, and an access-restricted, union-free industrial zone in Cambodia.

Global companies moved manufacturing to SEZs throughout Asia, as countries competed for investment. As with Shannon, weak regulation in a SEZ tends to act as a pilot programme for weaker regulation across the rest of the host country. In India and Vietnam, they visited corporate carve-outs of entirely private residential cities. Coming home, they visited a new "enterprise zone" at the old Royal Docks, London, on 35 acres sold to Chinese investors by the Greater London Authority. Entirely governed by its private owners, the public will be allowed to visit the "privately owned public spaces".

A similar form of corporate carve-out - another utopia - is tax havens. Small islands (Bermuda, the Virgin Islands, City of London) and even large states (US, Netherlands) attract company registration fees and financial throughput by charging no tax on profits from business activities "elsewhere", with little or no regulation and complete secrecy about corporate affairs. (5) Owners or shareholders investing in, let's say, New Zealand, route their profits through a shell company registered in such tax havens, so as to not to pay higher tax in the country in which they reside.

Supposedly invented to avert "double taxation", the point is to pay none - legally. The authors visit Mauritius to investigate how it works as a tax haven for companies operating in Africa, with details of one growing mangoes in Malawi for the London market. The UN Economic Commission for Africa says that the financial flows illicitly avoiding tax through "transfer pricing" and forms of "round tripping" could be as high as $US50 billion a year - double the international aid to Africa. The IMF says revenue losses to developing countries could exceed $US200 billion a year.

"Corporate Armies"

This last section is a must-read for Anti-Bases Campaign members and other peacies. State monopoly on violence probably only existed in Max Weber's* day, say the authors; at other times giant corporations have in effect used private armies to control land and labour. They look into the violent history of United Fruit Company (UFC)/Chiquita in Central America, and visit Colombia where the company has links and has made payments to far Right paramilitary groups.

In 2017 a class action suit was filed against aggression and violence by Honduras' largest palm oil exporter, with UFC accused of reaping the benefits. *Max Weber (1864 -1920) was "a German sociologist, historian, jurist and political economist, who is regarded as among the most important theorists of the development of modern Western society" (Wikipedia).

Public money for law-and-order and defence is a growing revenue stream for corporations, like development aid. Government contracts for construction and/or private operation of prisons and migrant refugee camps allow extra profits to be squeezed from poor maintenance and poor treatment of both inmates and employees. The authors look at the global handguns market, still dominated by Beretta, and exports of "battle-tested" small arms and security equipment from Israel.

Worldwide, security guards are hired, directly or indirectly, by the rich to protect themselves and their growing wealth - not to keep poor communities safe. From what data is available, the authors found that half the world's population lives in countries where there are more private guards than police. In the US a third more; in India four times more.

Military functions, as well as supply, are being contracted out to private companies. For example, post-war "clean-ups" in Iraq and Afghanistan involved the UK's overseas aid favourite Crown Agents and privately-owned US engineering giant Bechtel. The authors' last chapter is truly scary. I knew about US military industrial complex and lucrative defence contracts, sure, but I didn't know George W Bush had auctioned off the Los Alamos lab, home of the atomic bomb (with 10,000 employees and its own county), to a consortium led by Bechtel. Also, its sister lab, and related facilities.

Much of the US nuclear security infrastructure is now "Government owned, contractor operated" - enriching uranium, producing plutonium, designing, building and maintaining bombs, managing nuclear waste disposal. A small group of large firms, including Bechtel and Lockheed, dominate this business, in charge of whole programmes. Safety records and employment practices are private commercial information, with whistle-blowing scientists victimised. This is nuclear weapons, not power. I had no idea how high up the hierarchy of preparation for nuclear war that private profit-seeking interests now reach.

This book is detailed, but highly readable. It's written for a broad audience with clear explanations and a very visual style. We go with the authors as they travel to different locations, investigate local issues, meet community activists and policy insiders, and delve into archives and history. They interview local people harmed by profit-seeking corporations - and the corporations' executives, if they'll talk. They follow the money that flows upwards to corporations from profits extracted from other people's lands, resources and labour, and also the public money that flows from the investment funds of international agencies and from Government contracts.

Provost and Kennard use a wide journalistic lens to give us a global picture, but reference narrower, deeper studies by other researchers. I could have wished for a final chapter that drew their analysis together, but the introduction and the book as a whole get the message across. And it's in the title. You knew already that global capitalism is undermining democracy. Provost and Kennard investigate exactly how. The book has an accompanying video on YouTube, where there's several other interviews with Matt Kennard - try PoliticsJoe.

Endnotes:

The fellowships were from the Centre for Investigative Journalism, in south London, 2014-2016. The book includes updates until about 2021.
As well as South Carolina and the Philippines.
See CAFCA's website for OIO decisions in May 2019, January and October 2020 and October 2021.
Whereas the private company with a royal charter to colonise Nigeria was swallowed whole by Unilever for its palm oil.
Try Nicholas Shaxson, "Treasure Islands" (2011) - and Tax Justice Aotearoa.
Note also the October 2023 election of Rightwing banana scion Daniel Noboa as president of Ecuador. The Noboa Corporation (also owns 50% of Bonita) has a history of child labour and using shell companies and violence to avoid tax and workers' rights (Wikipedia).
A privately-held engineering procurement, construction and project management company, second largest in the US, with revenue of $US17.6 billion in 2020. They quote Sally Denton ("The Profiteers: Bechtel And The Men Who Built The World", 2016): "The US government is like one public policy arm of Bechtel rather than the other way around".

THE FINANCIAL COLONISATION OF AOTEAROA
by Catherine Comyn, Economic & Social Research Aotearoa 2022, $30

If you think financial giant BlackRock moving in on this country to extract maximum profits is something new and different - well, it is and it isn't. Global finance, its institutions and practices were integral to the colonisation of Aotearoa right from the beginning, as Catherine Comyn's work shows. While other histories document political and economic developments in colonial New Zealand, this slim volume 'is concerned specifically with finance as a related but distinct field of capitalist economic activity'.

After the Napoleonic Wars, Comyn explains, surplus capital, surplus labour and lack of economic opportunities within Britain had created falling profits, rising unemployment among a growing population of workers, and growing political unrest. However, fortunes - including speculative fictional ones - were being made in other people's lands.

Political theorists of the time identified land (or lack of it) as critical to securing "capitalist social relations" (i.e., workers' dependence on wage labour). For John Stuart Mill, the "essential requisites of production" were labour, capital and land. With slavery being abolished, Edward Gibbon Wakefield contributed to political debate by proposing that capital investing in new lands should take its labour with it. Land acquired cheaply should be sold to settlers "at a sufficient price" to fund immigration and reproduce British class relations.

Colonisation Of Aotearoa Began With Private Venture Capital

In 1837 Wakefield formed the New Zealand Association, whose Committee comprised aristocrats, financiers and MPs, chaired by "renowned banker and merchant prince" Francis Baring. This Committee was to have "no pecuniary interest" in the venture, and Wakefield asked Parliament for a loan of £100,000 and authorisation to buy land purchases from "the natives" for sale to the British public. That is, the Association would establish New Zealand Inc. with other people's land, other people's labour, and other people's money - a bit like BlackRock.

The Whig government, the Church Missionary Society and the Colonial Office opposed this because it "would infallibly issue in the conquest and extermination of the present inhabitants" and because "unbought land could not seriously be considered as collateral". An offer was made of incorporation by royal charter (the East India Company model) if, in addition to investments by subscription, the Committee invested their own money, with proper liability. This offer was declined.

Instead, the Association formed a joint-stock New Zealand Colonisation Company with paid-up capital of £25,000 in 50 shares - funds drawn from the Stock Exchange, rather than the Government. A charter would grant monopoly over colonisation and trade, Comyn explains, but a private joint-stock company was a not-uncommon way of circumventing State authority, enabling regulatory efforts to be influenced or out-manoeuvred.

An aside from me on Francis Baring as a founding father. Barings Bank of London, established in 1762, financed the wool trade, then US cotton and slaves. In 1802 it helped finance the Louisiana Purchase from Napoleon, the US War of 1812 against British North America, and the British takeover of South American trade following independence from Spain.

In the 1820s, Barings financed huge flows of cotton to Britain's mills and dabbled in slave mortgage financial derivatives, which crashed in 1828(1). The point to be taken from Comyn's mention of Baring is that in 1837 the British Empire had a highly sophisticated global banking system, a key player in which chaired the venture to colonise Aotearoa from its very beginning.

Wakefield's "systematic colonisation" of Aotearoa relied on the logic and practice of speculation at every step, says Comyn. Hearing the Government might legislate to control land purchases in New Zealand, putting their potential private profits at risk, the Company quickly fitted out the Tory and dispatched Wakefield's brother William to buy land from Māori.

By November 1839 he claimed purchases of 20 million acres for about £400 - mere koha - though his dispatches home indicate that he knew these were dodgy. But already by August 1839 the Company had sold "land orders" for 100,000 unspecified, un-surveyed acres at £1 each. These "land orders", explains Comyn, were financial assets on the London market, tradable claims to speculative value.

Proceeds from land sales were to fund emigration. To encourage sales, emigrant workers no older than 30 could reclaim passage costs, including for a wife, children and single female relatives, up to 75% of the price of land purchased. This made the overall venture more dependent on non-emigrating speculative buyers. Lots of 100 country acres and one town acre were allocated to purchasers by lottery in London using entirely fictional maps. The town acres were publicised for their speculative potential, Comyn notes, as their value would rise quickly with town development. The mere circumstance of British possession, it was claimed, would raise the value of land that was, in Māori hands, "worth nothing".

These might seem excessively risky investments, Comyn says, were it not for an assumption of British entitlement to land based on the concept of terra nullius - which apparently rendered indigenous people invisible. Secondly, John Locke had posited that it is labour - i.e., European-style agricultural labour - that removes land from a state of nature and fixes it as a private property right.

"Savages' Waste Lands At The Disposal Of Europeans"

Wakefield wrote of the lands of "savages" as "waste lands" at the "disposal" of Europe; that Māori land was "of no real value" without the outlay of capital on emigration and settlement. He went so far as to say that the 10% of land reserves set aside for Māori - the Wellington and Nelson "tenths" - would be worth more than the whole of the land they had previously owned, thanks to British settlement.

When Wakefield's settlers arrived in Wellington, the Company's surveyors plotted out the lines and allocated the lots of the map drawn up in London, including the Māori tenths, as if the local marae, kāinga, gardens, and wahi tapu simply didn't exist (Pipitea matched up with a "tenth" lot, so survived). This was necessary to "spacialise speculative value claims circulating among traders in the City of London", Comyn writes.

It was a different reality in Aotearoa, where Māori knew every tree and creek personally, and greatly outnumbered the settlers. Highly dubious land purchases led to pissed-off Māori, pissed-off settlers, and the Wairau Incident. Moreover, the speculative investment that got the Wakefield scheme off the ground undermined the settlements' chances of success. Few "capitalists" came to the colony to give "workers" employment (so they could save the "sufficient price" to buy land themselves).

The Company had given labourers a guarantee of work, which drained its funds. The large numbers of empty "investment" sections between sections to which labour was being applied meant the settlements struggled to fund shared infrastructure like roads, drainage and boundary fencing. The settlers reversed Locke's logic, saying absentee owners should not have property rights.

Meanwhile, Britain had a change of mind (or Government) on colonisation and Hobson was sent out with instructions to "treat with the aboriginals". Article 2 of the Treaty guaranteed Māori tino rangatiratanga over their lands, villages and taonga katoa, then gave the Crown an "exclusive right of pre-emption" to buy any land Māori wished to sell.

By this means, the colonial administration was expected to be financially self-sufficient. Comyn cites Keith Hooper and Kate Kearins who see the Crown buying cheap and selling high as a form of capital gains tax on Māori. The overall effect was an immense transfer of wealth from Māori to the coloniser, says Comyn. Wakefield's colonisation system was now being expanded as the policy of an official Government, equally dependent on land sales for its finances. The "land, labour, capital" theory of development continued on through the century. (2)

By May 1843 the New Zealand Company was effectively insolvent but falsified reports to continue trading on investors' speculative expectations and sending out more emigrants. Lord Stanley described it as "a great bubble" but, when Earl Grey took over as Secretary for the Colonies in 1846, his Under-Secretary was a director of the Company. To restore public confidence, Earl Grey loaned it £236,000, plus the Crown's right of pre-emption over land purchases in the south for a period of three years.

Land sales in Wellington, Nelson and New Plymouth continued to dwindle, however, and in 1850 the Company ceased operations. As per the loan agreement, and on the argument that successive Governments inflicted "irreparable" injuries on the Company by failing to secure its land titles, the New Zealand government (not the British) took over its land claims and its debt, which was slowly repaid from Customs duties. The Company's paid-up capital was repaid to its British shareholders in full. How's that for a bail-out? With no consideration of irreparable injuries to Māori.

Hobson's administration began with a flurry of land purchases, while trying to sort out earlier deals. Its high prices to settlers were soon constrained by an 1843 law passed in New South Wales. The alternative source of revenue was Customs duties, on flour, wheat, alcohol, tobacco and other imports. This was a tax on Māori, as they were the main population. Comyn says there were Customs signal balls on the flagstaff that Hōne Heke chopped down. Ngāpuhi were pissed off that Customs charges reduced the shipping from which they derived trade and £5 anchorage fees.

From War To Fiscal Means To Gain Māori Land

Following the expensive and inconclusive land wars, the Government turned to fiscal means of obtaining land and revenue. The Native Lands Acts of the 1860s limited Māori land titles to just ten individuals, but their main purpose, in Comyn's view, was a "thorough-going financialisation of Māori land that prefigured and enabled division and privatisation". The Acts assimilated collectively-owned Māori customary title into British property law, allowing the partition of Māori land into "exclusively held, alienable and transferable assets".

The costs of this were borne by Māori. "Credit was the lynch pin". To protect their land, Māori had to apply to the Māori Court to have land rights recognised - incurring debt from over-priced surveys and long court hearings in distant towns that had to be attended personally by multiple customary owners. Purchase agents, storekeepers, publicans and the courts all mediated a cycle of debt that cash-poor Māori could only defray by selling land.

The system facilitated the alienation of ten million acres of Māori land in the first 30 years of the Court's operation. Colonial fiscal policies, property rights, credit and taxes, as well as land confiscations, dispossessed Māori of the fundamental element of economy and life itself - and helped assimilate them into the "labour" element of capitalist development of Aotearoa.

War being expensive and inconclusive, some forms of Māori resistance were also financial. The Kīngitanga movement ran its own retail bank, Te Peeke o Aotearoa, from 1881 to 1905. Comyn tells of the long resistance to dog tax, one of a series of taxes resisted by Māori. The 1880 Dog Registration Act, enacted to protect sheep, failed to recognise the economic role and traditional importance of dogs in Māori communities.

Māori went to court and to jail, refusing to pay and denying that they "owned" the dogs that lived with them. A near-skirmish over non-payment in the Hokianga in 1898 was described as "the last armed rebellion against the Crown". The Kīngitanga opposed the tax until 1912, with many Māori registering dogs with the Kīngitanga Parliament instead. From evidence Comyn provides, Māori clearly recognised the right to tax as a matter of sovereignty. A Pākehā tax on Māori dogs was an infringement of tino rangatiratanga under the Treaty.

Paucity Of Compensation

Comyn concludes by considering the financialisation, and the paucity, of Waitangi Tribunal and fisheries compensation for historic losses to Māori, in the light of the £730.7 million bail-out (in 2022 £s) of the company that illegally initiated colonisation of Aotearoa. Settlements by the colonial State can never be "full and final", she says, as the relationships are ongoing. But there would be political power in acknowledging that the debt owed to Māori exceeds calculability or recompense.

I really enjoyed this book's sharp focus on finance, and learned a lot. History is so much more interesting when the writer has an analytic perspective and draws conclusions. Comyn embeds her account in the political and economic theories of the time - including the Māori ones. This is the history we need to teach our kids. In the latest issue of Counterfutures (14, 2023), Arama Rata, Jane Kelsey, Simon Barber and Comyn herself offer thoughts on the book, and on the legacies and ongoing ruptures of financial colonisation. Also, very worth reading.

Endnotes:

Edward E Baptist, "The Half Has Never Been Told: Slavery And The Making Of American Capitalism", Basic Books, 2014. The bank's colourful career continued until 1995, when it collapsed with huge losses from fraudulent investments in futures contracts, and was bought by a Dutch bank for £1. Back in 1955, however, it had started doing financial assets management for others, first in London, then globally, as Barings LLC. Various splits, takeovers and mergers followed, but the Baring name lives on, with $US347+ billion in assets under management in 2022. The Baring family, one of the most titled in the UK, also lives on: the current Francis Baring, 6th Baron of
See also Hazel Riseborough, "Days Of Darkness: The Government And Parihaka" (1989, 2002), a close study of Parliamentary debates and political correspondence in 1870s-early 1880s, which mentions the dependence of Government finances on sales of confiscated or any other Māori land, and borrowing capital on the London market for a railroad to open up "the King country". Re the labour component, my great grandmother arrived as one of PM Julius Vogel's assisted immigrants in 1873.

REVIEWS

- Greg Waite

THE DRINKING GAME
How Big Business, The Media And Politicians Shape The Way You Drink
by Guyon Espiner, Allen & Unwin, Auckland, 2023

If you want to check if you are drinking safely, look up the online alcohol use disorders identification test (AUDIT). Nearly one million New Zealanders qualify as dangerous drinkers. One in five. This book is Guyon Espiner's exploration of why alcohol does so much harm in New Zealand but is so lightly regulated. He was a heavy drinking journalist until recently, when type one diabetes forced him to quit.

His quality of sleep improved, his digestion improved, he had more real conversations - and he remembered them the next day. It's a good read, with plenty of relevant stories mixed with challenging investigative journalism. For example, he recounts a rural callout of the Armed Offenders Squad (AOS) and Special Tactics Group (STG) where a person was shot dead. 14 of the 32 had drunk alcohol within the previous ten hours, with one drinking five pints of beer within five hours of the callout.

The review said no action would be taken because "there was confusion about the requirements of Police policy in respect to alcohol consumption by officers while off duty but on call for AOS and STG duties. There are limited specialists in rural areas so they are always on call; the right to drink apparently took precedence over public safety.

"Any public health expert you can shake a martini at will tell you the three most effective ways to reduce alcohol harm are to increase the price, reduce availability and restrict the advertising". Guyon takes you through each of these responses, laying out the various evidence-based reports presented to a series of Governments, and how the alcohol industry made sure that little changed. Remember too, booze was made an essential product under covid-19 lockdown restrictions in NZ, delivered to your door when butcheries and bakeries were unable to sell.

NZ Littered With Great Reports Which Don't Get Actioned

The most thorough is "Alcohol In Our Lives: Curbing The Harm", chaired by Geoffrey Palmer in 2010. The report points out that when people drink to excess, they harm not only themselves but those around them. "For that reason, the idea that society must take great pains to protect the interests of reasonable, moderate drinkers, rings somewhat hollow. It is the interests of society as a whole that must have the first claim on the priorities of policy". Did that happen? No.

153 recommendations were made including increasing alcohol prices by raising excise taxes; phasing out alcohol advertising and sponsorship over time; raising the purchase age from 18 to 20; cutting back opening hours for licensed premises; and allowing more local input into liquor licensing decisions. The National government originally supported 126 recommendations, then the liquor lobby swung into action. Example: "The Government has decided to give the alcohol industry the opportunity to introduce its own measures to limit the harm to young people from RTDs" (ready-to-drink alcohol mixes targeted at young drinkers). The alcohol content went up from the original 5% to 7%.

Particularly interesting is Espiner's description of how New Zealand's largest lobbying firm, Saunders Unsworth, works. In 2012 there were about 15 lobbyists with swipe card access to Parliament; by 2017 it was 93, though Trevor Mallard cut it back to under 60 after the 2017 election. We have very weak laws around lobbying, with no rules around Parliamentary staff or Ministers transitioning direct into the world of lobbying, unlike Australia, Canada and France.

PM Jacinda Ardern hired lobbyist GJ Thompson as Chief of Staff to help set up the new Government in 2017, and after four months reading all Cabinet papers and the appointment of over 100 ministerial staff, he returned to lobbying at his firm, Thompson Lewis. Another director there was Chief of Staff for National's Don Brash, John Key and Bill English. Before Parliament, he headed public affairs at DB Breweries.

One of the most influential Rightwing think tanks, the Business Roundtable, which promoted free market economic policies from the 1980s to 2002, was led by beer baron Sir Douglas Myers. Now you're getting the picture. Big Tobacco lobbying on the other hand has to be recorded and made public, because in 2008 NZ signed up to the United Nation's Article 5.3 of the Framework Convention on Tobacco Control. It's interesting that alt-Right crazies love to seize on UN agreements as secret plans to control us, yet here's one doing so much to hold back corporate harm in New Zealand.

Guyon sums it up like this: "The alcohol industry, despite the immense damage caused by the consumption of its product, has escaped the pariah status of Big Tobacco, and maintains an easy, even snug, relationship with the Government. The effect of this is that health officials offer the NZ government scientific evidence of the harms of alcohol and evidence-based advice about how to mitigate this harm, but they don't act on it". In 2018 Ministry of Health officials prepared the paper "Strategies And Interventions For Reducing Alcohol Related Harm". In 2021, with Labour holding an absolute majority, they tried again - with no result.

The World Health Organisation recommends that Governments do not collaborate with the alcohol industry when setting policy, but collaboration is common here. The industry's preferred alcohol education programme has been rolled out to a quarter of NZ schools, and it conveniently omits the link between alcohol and breast and bowel cancers, despite breast cancer being the leading cause of alcohol-related death in NZ women.

"Freedom" - To Peddle A Drug Unhindered

Ultimately the industry always pushes for "freedom", meaning individual responsibility, and normalising alcohol use through advertising. This is one of the critical policy controls for products which cause harm. Many countries are reducing alcohol advertising and sponsorship, but NZ is becoming more permissive. And the high number of liquor outlets you see in poor areas is no accident.

One of Guyon's saddest case studies covers a South Auckland high school encircled by several licensed premises, including one on the doorstep. Despite the pleas and protestations from the principal, Police, community leaders and other stakeholders, licenses were renewed, which eventually led to the school relocating its main entrance. Local objections rarely make a difference in NZ against the well-funded alcohol industry. The Auckland Regional Public Health Service analysed 16,478 licence applications over just four years. Only 180, or 1%, went to a District Licensing Committee to hear objections, and then 86% of those were approved.

How much harm does alcohol do? A 2010 study by Professor David Nutt published in the Lancet applied a standard measure of harm to user and society, and found alcohol was the clear leader ahead of heroin, crack cocaine and methamphetamine. These others are more harmful to the user, but alcohol is streets ahead for harm to others - crime, family breakdown, community and economic cost.

Espiner shows how alcohol companies have successfully targeted females as a growth market, with the health risks for women ignored, using the "cloak of empowerment and equality" to increase profits. Each year, between 1800 and 3000 babies are born with foetal alcohol spectrum disorder (FASD) in New Zealand, leaving them permanently harmed. A 2023 study by Romeo et al estimated FASD prevalence in the population to be 1.7%. The alcohol industry deferred warning labels on bottles for as long as possible.

To provide some global context, I checked our comparative alcohol consumption using World Health Organisation data on the OurWorldInData Website. Uganda leads with 15L of alcohol per person per year; Germany, Ireland, Spain, France and Portugal drink 12-13 litres, the UK drinks 11.5L while Australians drink 10.5L and New Zealanders 10.6L, the US 9.9L and Canada 8.9, Japan and Italy 7.9L, Norway 7.4L and lower income nations drink much less (these rates count the pure alcohol, not the volume of beer or wine drunk).

While international research shows that statutory strictness in alcohol control policies is strongly associated with lower levels of alcohol consumption, we now live in an age where all challenges to individual rights will be used to criticise and ultimately diminish good Government. These are difficult times.

THE AGE OF SURVEILLANCE CAPITALISM
The Fight For A Human Future At The New Frontier Of Power
by Shoshana Zuboff, Profile, London, 2019

How many "terms-of-service agreements" have you agreed to? How many of them did you understand? They are designed so you don't, of course. A survey of over 500 people familiar with privacy law issues found that, when asked to join a new online service, 74% opted for the blind "quick join" option. The researchers estimated it would need an average of 45 minutes to absorb the content they were agreeing to; but the average time taken by even these experienced experts who paused to skim the conditions was 14 seconds.

A 2008 Carnegie Mellon study found that a reasonable reading of all the privacy policies a person encounters in a year would require 76 eight-hour workdays, one day in five of your life - and that estimate would be much higher today. So, you "agreed", in legal fiction, to your phone and computer tracking your movements, communications and purchases to be on-sold for profit. You "agreed" to the decimation of good journalism. You "agreed" to support vast US monopolies with so much income and influence that they are beyond regulation and minimise their contribution to taxes. Most of us would agree to none of these, if we were asked.

Zuboff's book tells you the full story of what Google and social media have been up to in recent years. The book is a bit academic, coining new language like "behavioural surplus" to define the extraction of saleable value from our data, but here I'll stick to the facts. Zuboff's title of "surveillance capitalism" certainly rings true. When all our life's data is available for sale in ways we cannot see or control, we are all more vulnerable to manipulation and coercion. Political parties with more money buy data, test and target messaging which distracts us from their policies to focus instead on threats and divisiveness. Autocratic governments buy spyware and kill, blackmail and imprison.

Real Story Of Ruthless Corporations

The depth of analysis here fills out the real story of these ruthless corporations, not the happy fantasy they feed us through the media (like the Google comedy "The Internship"). To be clear, I don't mean that like the usual alt-Right claim of media bias. Today's news and journalism is underfunded so under-resourced, because most advertising revenue goes to these online giants. That makes the media vulnerable to the influence of better-funded corporations who have well-oiled media management divisions pumping out a convenient fiction about innovation and good intentions.

The story of "Surveillance Capitalism" starts with the dotcom crash, which exposed many new online emperors' lack of clothes. All those overpriced Internet companies that went bust refocused the remaining corporations on ruthless pursuit of revenue. It wasn't enough to dominate a market, you had to extract money from your monopoly. Ethics were out, and avoiding regulation was essential.

After Google's initial public offering (IPO) on the share market in 2004, investors were happy to take the money and not ask awkward questions. Google also pioneered an unusual structure of corporate governance which gave the founders and leaders of the company absolute control. They issued dual-class shares, controlling the "B" voting shares which each carried ten votes.

In the absence of the usual checks and balances, shareholders were asked to put their trust in the founders and their dynastic leadership. Sounds a bit Trump-like, doesn't it: "I alone can fix the system". In 2011 Google went even further, adding a new "C" class share which gave you returns, with zero voting power. You can do this crap when you make rich people richer.

But stop and think about this. This is a corporation which routinely undermines regulation, steals your data and sells it to the highest bidder; actively supports and weaponises political manipulation of voters by the most corrupt parties around the world; and the only people it's responsible to are three or four people who have made billions by creating all this corruption. Today, the top five corporations in the world by market value are 1 Apple, 2 Microsoft, 3 Saudi Aramco, 4 Alphabet/Google, 5 Amazon (Facebook/Meta was 6th in 2021, Tencent 7th but both fell from the top 10 by 2023).

Since selling your data was necessary for revenue, secrecy came to be institutionalised in the policies and practices that govern every aspect of Google's behaviour onstage and offstage. The then Chief Executive Officer (CEO), Eric Schmidt, instituted what he literally called the "hiding strategy."" Google employees were told not to speak about what its patent referred to as its "novel methods, apparatus, message formats and/or data structure". While insisting their technology is too complex to be legislated, these companies spend billions lobbying against oversight.

Google Sweeps The Streets

Here's a practical example of Google's unethical business model. You may remember some controversy about privacy when Google's StreetView began in 2007, expanding round the world to capture streetscapes on video using cars with rooftop cameras - but did you know the vehicles were also designed to secretively capture local wifi communications as they travelled, including names, telephone numbers, credit information, passwords, e-mails, records of online dating, pornography, browsing behaviour, medical information, location data, photos, video and audio files?

You didn't, because Google did their best to undermine global investigations, claiming this was an error by a single engineer. Nobody would believe such an impossible lie - imagine the planning required to store and order all that data - but lies are Google's way of operating. These were major investigations, and embedded the Google media-shutdown technique in their management.

The US Federal Communications Commission (FCC) wasn't fooled and opened an investigation in 2010, sending Google a letter requiring documentation. Little was received and a second letter was sent in 2011. Google responded again with incomplete information and lack of cooperation, requiring the FCC to follow up and chase down individual and evasive executives for another year. The eventual report got nowhere, other than noting Google failed to identify relevant individuals, redacted important information, asserted the information requests "served no useful purpose", "failed to provide" and "failed to respond".

Legal affidavits were requested five times, but the company did not respond to any of these until September 2011, after the FCC threatened a subpoena. The mystery engineer refused to speak to investigators, citing the Fifth Amendment. Ultimately, Google's lawyers won, defending Google's data sweeps of neighbourhoods across the world with a single obscure passage from a decades-old wiretap law. Does anyone believe this is credible? If it sounds extraordinary, this will make much more sense after you read the next two paragraphs.

In the wake of 9/11 (11 September 2001) the US Central Intelligence Agency (CIA) threw its weight behind Silicon Valley. For example, in 2003 Google had a $US2 million contract to outfit the Agency with Google search technology capable of searching 15 million documents in 24 languages. In 2004 Google acquired Keyhole, a satellite mapping company backed by CIA venture firm, In-Q-Tel.

Keyhole became the backbone for Google Earth. By 2010 former US National Security Agency (NSA) Director Mike McConnell was writing in the Washington Post about the need for an effective partnership with the private sector because of its larger pool of personal data - "Cyberspace knows no borders, and our defensive efforts must be similarly seamless".

On a parallel track, in 2008 and 2012 Eric Schmidt, the Google CEO from 2001 to 2011, personally had a leading role in organising teams and guiding the implementation of cutting-edge data strategies for Barack Obama's election campaign. Research found the campaign compiled significant profiling data on 250 million Americans from sources including Facebook. In the media they portrayed this as a friendship between disruptive innovators, not the corruption of democracy it clearly was.

Selling Behavioural Modification

Zuboff uses the term "behavioural surplus" rather than "selling data", because online corporations are selling something more than data to their customers - they are explicitly selling their demonstrated ability to modify our behaviour. How do these apps modify your behaviour? Plenty of money goes into refining the techniques. "Tuning" selects the right subliminal cues, driven of course by the pool of sensitive personal data previously collected. "Herding" relies on digital nudges to guide your behaviour. "Conditioning" provides rewards, recognition or praise to encourage lucrative behaviours. And monopoly of these addictive social apps means you're looking at their messaging all day long.

To boost its sales revenue and push traditional media out of the advertising market, Google developed "quality scores", measures of click-through rates from search to product warehouse, and increased its charges. It also misrepresented the results of its hidden internal research, for example driving the push to replace Web pages with videos because it profited from the resulting online addiction.

In 2012 Google even tried to legitimatise these techniques by publishing an article in Nature magazine on its experiment with 64 million people randomly assigned to either receive prompts to vote or be in the control group. No ethics approval required, for Google. Of course, it is happy to publish about a one-off event which increased voting at a time it was actively backing Obama for President. But you will only read about the increasing abuse of privatised personal data by autocrats around the world if it's leaked.

Secrets And More Secrets

In 2016 an obscure tech newsletter called Register observed that the Google Play preinstalled on the latest Android phone continuously checks a user's location. The data is used to target behaviour-modifying advertisements, and is sent to Google for on-sale to other "service providers". In 2017 Quartz investigative reporters found that since early 2017 Android phones had been collecting location information by triangulating the nearest cell towers, even when location services were disabled, no apps were running, and no carrier SIM card was installed in the phone.

More recently you will have heard personal discussions about your phone recording your conversations, which will be translated to digital data and used and on-sold. But where is the discussion of regulation for such an unbelievable invasion of privacy? We can joke about it privately, but we can't do anything? This is the shape of the social media powered world.

As a last example, consider Facebook's News Feed, where hidden predictive algorithms, derived from more than 100,000 data elements which are continuously computed to determine the "personal relevancy" score of thousands of possible news posts as it "scans and collects everything posted in the past week by each of your friends, everyone you follow, each group you belong to, and every Facebook page you've liked", wrote Will Oremus in Slate.

"The post you see at the top of your feed, then, has been chosen over thousands of others as the one most likely to make you laugh, cry, smile, click, like, share, or comment". This is stage one of the digital future of news. Stage two will follow soon enough, when the paid content overwhelms us and that's all most people see.

Many of us got an automated call from Chris Luxon this election. Do you know how they got your number? Knew your age and location? How much the information was targeted based on information from commercial providers? How much was spent manipulating our election? My retired Mum tells me her message included a promised rise in her pension.

National's election commitment was simply restating the automatic indexation of pensions to wage movements, but it creates the impression something new is offered, and by implication will not be received if National is not Government. There should be laws against this, but there aren't. This type of abuse drives Government into the hands of the most dishonest and best-funded parties, the parties of the rich.

Using Our Stolen Data Against Us

What is crucially different about this new form of capitalism is that it seeks to use your own stolen data to shape, direct and control every aspect of everyday life. This is so creepy, yet we live with it. The benefits of fast search results and instant driving directions overshadow the deeper social impact of surveillance capitalism, which is profoundly undemocratic and exploitative. And the corporate world wants life this way for maximum profit, so they ensure the process is well hidden and hard to think about, just as it's hard to think about climate change, a process that has already started reshaping society as know it.

So where does the book end? Cutting out some of Zuboff's jargon:
"There is a fork in the road. In one direction lies the possibility of ... strengthening democratic institutions... If we follow the other road, we find our way to surveillance capitalism's antidemocratic vision...". More specifically, Zuboff recommends:

The first step begins with naming the abuses, establishing our bearings, re-awakening our astonishment and sharing a sense of righteous dignity;
Becoming alert to the harms of surveillance capitalism by reasserting ordinary values and expectations we had before it began its campaign of social numbing;
Giving voice to collective outrage and refusing this diminished future we are heading for;
Establishing new centres of countervailing civic power backed by laws that reject surveillance capitalism's secrecy and social damage.

THE PALESTINE LABORATORY
How Israel Exports The Technology Of Occupation Around The World
by Antony Loewenstein, Scribe, Victoria, 2023

"The Palestine Laboratory" is an overdue eye-opener, revealing Israel's global role selling tools for secretive monitoring of citizens and other weapons used by authoritarian governments. Loewenstein sheds light on both the tools, and just as important, the State and private companies which create, promote and sell them.

Israel's privatised security industry is so immoral it was sanctioned even by Trump - for selling weapons to both sides in Sudan. Loewenstein's book details that immorality, from supplying weapons to Pinochet right up to population-surveillance software to Saudi Arabia, the state which murdered then chopped up Jamal Khashoggi in its Istanbul Embassy. Anything for a buck, anything to buy votes from autocracies to limit criticism of their ever-expanding occupation and apartheid in Palestine.

Occupation Linked To Global Autocracy

Thinking globally, this book also highlights the connection between Israel's occupation and growing autocracy around the world. In secret dealings with corrupt regimes, shadowy Israeli companies sell the tools of their occupation as a success story, an example of how Governments can spy on their populations, bomb them with drones, control their movements, limit and manipulate their lives to subdue opposition. This is a very scary future, and one which is also starting to make inroads into countries which are less authoritarian, pushing them further down that path.

As Loewenstein points out, "Israel has worked closely with Washington for decades, often operating in places where the US preferred covert support rather than public backing. For example, Israel supported the police forces of Guatemala, El Salvador, and Costa Rica during the Cold War when the US Congress had blocked US agencies from officially doing so". Both Israel and the US trained and armed death squads in Colombia well into the 2000s.

The Israeli arms industry was an integral part of the economy from Israel's foundation, but grew rapidly after 1952 when massive reparations from West Germany and aid from France and the US were covertly diverted into weapons development, including nuclear bombs. Since then, export clients have included Burma/Myanmar, South Africa, Iran under the Shah, Indonesia, Romania, Haiti, Paraguay, Nicaragua, Honduras, El Salvador, Panama, Guatemala, Colombia, Afghanistan, South Sudan, Sri Lanka, Equatorial Guinea, Bahrain, Belarus, the Philippines, Uganda, Morocco, Nigeria, Syria, Russia, Azerbaijan, Bahrain, United Arab Emirates and Saudi Arabia. The Israeli Ministry of Defence admitted selling weapons to about 130 countries in 2021.

Ethnonationalist regimes, states that target one ethnic group over another, are over-represented in this list because that is the approach and expertise Israel has developed in Palestine. Readers of "How Civil Wars Start", which I reviewed in Watchdog 163 (August 2023), will recall these are the states most likely to descend into civil war. In 2021 "defence" exports reached an all-time high of $US11.3 billion, rising 55% over the previous two years. And in 2021, Israeli cyber companies also took in 40% of the world's funding for this sector, to develop new tools of surveillance and social manipulation.

New Weapons For Political Suppression

Dictators, autocrats and generals around the world are not just looking to Israel for specific weapons or software. They admire and want to emulate Israel's comprehensive and systematic suppression of opposition based on physical separation and/or forced emigration. Gaza is the most effective example of this separatism, with a 65-kilometre $US1.1 billion wall around the entire border, supported by constant drone surveillance.

After Operation Cast Lead in 2008-9 resulted in 1,400 Gazan deaths, the Israeli Defence Force (IDF) updated its social media strategy with coordinated live-tweet military operations and infographics, encouraging Israel's supporters to post and tweet to show their support. War was recast as a spectacle, with the IDF funding 70 officers and 2,000 soldiers to design, process and disseminate Army propaganda. More recently it has coopted coverage breast cancer campaigns and gender diversity on its military social media.

Ultimately, this is a military campaign to weaponise Jewish trauma and deny Palestinian oppression while legitimatising perpetual occupation - and it is effective. People around the world read the news they are fed by the media machine with the most money to spend. The Internet may have made it easier to post real-life clips of settler and Army abuse, but funded campaigns overwhelm alternatives with automated content, while algorithms ensure the relatively amateur Palestinian content is rarely seen. This messaging strategy is now being copied by despots around the world.

Every subsequent conflict has seen new weapons tested, profiled/advertised around the world, then marketed. The 2014 Gaza War brought the Elbit Hermes surveillance and target identification drone, the peaceful 2018 Great March of Return protest along the Gazan wall with Israel saw the introduction of drones dropping tear gas, and State justification for snipers shooting fenced-in civilians who might represent some hypothetical threat. From 2022 armed drones were formally approved for targeted killings, which inevitably kill civilians. This is not war; this is brutal political oppression based on dehumanising your opposition.

Spying, Hacking And Surveillance

The intelligence unit of the IDF, Unit 8200, carries out mass monitoring of Palestinians as well as intercepting communications from allies and foes across the world at its Urim base in the Negev Desert. The US and its Five Eyes allies (one of which is NZ. Ed.) also share information with Israel, although the US National Intelligence Estimate also notes that Israel is "the third most aggressive intelligence service against the US".

In a 2014 open letter to the Prime Minister, 43 reserve soldiers who refused to serve in the occupied territories explained that this intelligence was routinely used to blackmail and recruit collaborators. One of the signatories explained further in an interview: "Any Palestinian may be targeted and may suffer sanctions such as denial of permits, harassment, extortion, or even direct physical injury".

"Such instances might occur if the individual is of any interest to the system for any reason. Any information that might enable extortion of an individual is considered relevant information. Whether said individual is of a certain sexual orientation, cheating on his wife, or in need of (medical) treatment in Israel or the West Bank - he is a target for blackmail".

Selling Israeli Occupation To The World

Israeli phone-hacking tools like the NSO Group's Pegasus software have been widely sold, and abused, around the world. In Mexico, for years NSO's most profitable market, drug cartels collaborated with corrupt officials to eliminate mutual enemies; journalists critical of the Government had their phones hacked and were killed; and over 50 people linked to Mexico's President were on a leaked monitoring list. Privatised cyber-surveillance is completely unregulated, so the potential to drive a whole nation into a downward spiral of violence and distrust is clear.

Ban Commercial Sale Of Cyber-Hacking Tools

US National Security Agency (NSA) whistle-blower Edward Snowden put it bluntly: "The entirety of this industry's business involves cooking up new kinds of infections that will bypass the very latest security updates and then selling them to countries that occupy the red-hot intersection of a Venn Diagram between "desperately craves the tools of oppression" and "sorely lacks the sophistication to produce them domestically". An industry like this, whose sole purpose is the production of vulnerability, should be dismantled".

That means an outright ban on the commercial sale of cyber-hacking tools. That's a clear and simple response - the hard part is creating the global movement capable of rebuilding the necessary social support for effective national and global regulation in an era where neoliberalism dominates rich countries and autocracy is on the rise in poorer countries. In his conclusion, Loewenstein says: "This book is written as a warning of the frightening world that could be born if Israeli-style ethnonationalism continues its ascent in a century already dominated by the unaccountable State power from Russia and Israel to China and the United States".

Note: A longer version of this review is available in Peace Researcher 66.

This book and review were written before the October 2023 surprise major attack by Hamas out of Gaza into Israel demonstrated the most spectacular failure ever of Israeli intelligence and surveillance of Palestinians. Ed.

SECRET HISTORY
State Surveillance In New Zealand, 1900-1956 Volume 1
by Richard S Hill and Steven Loveridge, Auckland University Press, Auckland, 2023

One thing stands out for me on reading this book. In writing a history of secret State surveillance, the authors are writing a history of the suppression of Māori independence, pacifist resistance to wars and, most of all, the labour movement. As the authors say, the "mandate to keep 'peace and good order' essentially meant that any perceived challenge to broad social, economic and constitutional arrangements could be seen as justifying further scrutiny and potentially covert surveillance - were any justification required.

On behalf of the political executive, then, humint (human intelligence. Ed.) practitioners conflated the interests of the existing political economy with those of the State and society as a whole. Any threat to a part of the order of things could be perceived as a threat to its entirety. Thus, while very few targets wanted to fully overturn the institutions or legitimacy of the State and all that it stood for, advocates of many types of political or social reform were surveilled in the name of the 'public good'". Put more bluntly, the secret world was a tool to preserve existing economic power and the conservative political world view in a constantly changing world.

Special Branch

Surveillance during this period 1900-1956 was through a Special Branch in the Police rather than a specialist intelligence service. Recruiters sought young men with an unquestioning attitude towards authority, suitable material to be "reprogrammed" into appropriate Police ideas and behaviour - "to divide people into the reliable versus the radical, the compliant versus the criminal, the respectable versus the disreputable".

Once the early colonial imposition of power and law was complete, the Special Branch's emphasis shifted to mainly monitoring the growth of industrial unionism and its connection to socialist organisations. And politically, after the great 1890 maritime strike, a Liberal-Labour alliance introduced compulsory conciliation and arbitration, which facilitated quicker and fairer settlements. This worked well enough for most workers to lose interest in more radical groups like the Wobblies (Industrial Workers of the World).

Special Branch detectives still tended to regard most advocates of reform as potentially threatening peace and good order, though. And there was little pushback for this stretching of the boundaries - the book quotes several cases of politicians on the Left and Right of Centre using intelligence on labour activists to break disputes.

One of the tensions throughout the book is between Police-driven methods, characterised as more-rules based, and the eventually successful drive to set up a specialist security service. The first attempt turned into a patch battle, clearly not just about how the work is done but who gets the jobs, and the first independent service reverted back to Police control in 1944 after a conman conned the new agency. One thing is clear though, both models relied on extra-judicial coercion. A specialist security service just goes further, with less oversight.

Employers, co-workers, colleagues, friends and family of targeted individuals would be visited in factories, offices and homes, actions which could lead to social ostracism or sacking. Attendees of a discussion group on "social democracy", for example, might find the political police visiting officeholders in their organisation; landlords would be told of tenants' supposedly subversive activities and evict them; protests might be sabotaged by off-record suggestions to hall managers. "Hands-on policing was at several removes from the world of legal niceties".

Mass enrolment of Special Constables as strike-breakers was used as part of coordinated Government campaigns to break strikes in 1913, which went as far as militarising their Wellington barracks with machine guns and soldiers with fixed bayonets to repel hostile protesters. Eventually the "Great Strike" lost momentum as strikers were gaoled or lost their jobs and unions returned to work under the arbitration system.

Spying On Māori, Unemployed Movement, Communists

Māori communities were also watched, despite their population falling to around 40,000 at the beginning of the 20th Century. Resistance and self-determination movements, especially among tribes who suffered large land confiscation, were monitored through rural constables, liaison with Native Constables on the Police payroll or appointed by Māori Councils, and through Pakeha storekeepers and missionaries, teachers and farmers, postal and Native Affairs staff.

It was interesting to read here about differences in support for recruitment in the First World War, with tribal groupings who lost land much more resistant to conscription. There were few informants from iwi when local constables were tasked with collecting draft resistors for Army service. The armed invasion of Rua Kenana's movement in Te Urewera's mountains was an extreme example of political control, resulting in deaths on both sides. Despite his acquittal on sedition charges Rua was imprisoned as an example.

Later, the Rātana movement became the main independent Māori voice for the return of confiscated land, working across tribal groups. Again, extra-legal and secretive methods were used against its founder Tahupōtiki Wiremu Rātana, for example obstructing the development of what became known as the "Rātana Pa".

The Unemployed Workers' Movement arose as a prominent and very effective national organisation of protest during the Depression. It clearly formed a necessary voice about the poor wages and conditions of relief workers, especially those sent to camps, but was treated as a communist organisation by security police, though Communist Party of New Zealand (CPNZ) members were in a minority.

Here we also saw the use of simplistic and deliberately misleading propaganda. The New Zealand Observer wrote "the real root cause of last week's turmoil can still be traced to those fomenters of discord, militant communists and 'Red' agitators" or as the NZ Truth put it: "Behind the recent Auckland and Wellington riots lies the sinister hand of Communism". Scapegoats were found to blame, when the only cause was greed, job losses and bad Government. In one quoted example, the well-known academic historian JC Beaglehole lost his job for writing in support of the strikers.

And in a telling incident about colonial bigotry and ignorance, the journalist AN Field published multiple print runs of his "Truth About The Slump" which - gasp - revealed the Depression was a Jewish plot to enslave the British Empire. At its peak the New Zealand Legion, an offshoot of the fascistic Australian New Guard, claimed some 20,000 members and called for the dissolution of political parties in the cause of national unity.

The rise of organised labour through the Depression led to a corresponding increase in the use of informants, with fears of a general strike in 1931 leading the Police Commissioner to send a memorandum to Police stations around the country to actively recruit more informants. A constable in Ngaruawahia, for example, had sources of information in all the town's main industries.

This is a worrying side to our cultural history which I wish we knew more about, and also raises the question of how informants are used today. A related concern is the intrusion of personal biases resulting in inaccurate information. In a relatively modern example, a 1960s' official review of records noted that 1660 names were recorded as communists, at time when the CPNZ membership totalled 99, and concluded that in terms of analysing real political threats, the files were "of no value whatsoever".

By 1935 the Labour Party was looking close to winning Government. Radio host and Jesus-style socialist Uncle Scrim (Colin Scrimgeour) was seen as likely to advise his large audience how to vote. Stations like his 1ZB were watched by Post and Telegraph officials with controversial items censored, sometimes live. Uncle Scrim's words were jammed and in the inquiry which followed the responsible Minister used the classic defence of deniability, while clearly authorising the action. This is another side of our political culture which continues today.

Labour won, regardless, in 1935, and began a major programme of reforms including the Social Security Act which delivered old age, invalidity, widowhood, unemployment, maternity and hospital benefits. It would be tempting to conclude that abuses of the Special Police were wound down, but wrong. Communists and pacifists continued to be seen as major risks to the State, and fascist sympathisers received more attention as the Second World War approached.

One big lesson which jumps out from the pages is that secret service abuses became much more intrusive in times of major strikes and war. During the First World War the scope of "seditious utterances" regulations was expanded to muzzle anti-conscription activists. Even by the Second World War, conscientious objectors could be sentenced to hard labour or lose their jobs after a quiet word with their employer. And Government reaction to wartime strikes was much more confrontational.

Cold war tensions after the Second World War fed a rise in Soviet espionage and an atmosphere of fear and suspicion. Militarily, New Zealand helped with the 1948-49 Berlin airlift which broke the Soviet blockade of West Berlin; pledged in 1949 to deploy troops to the Middle East if war broke out with the Soviet Union; passed a referendum to return compulsory military training, and signed up to ANZUS in 1951 (ANZUS was the military treaty between Australia, NZ and the US. Ed.).

Birth Of Five Eyes; 1951 Police State

New Zealand also took an active role in signals intelligence ("sigint") after the War, with arrangements evolving into the UKUSA Agreement, later publicly known as the "Five Eyes". For the first three decades, New Zealand as the junior partner sent its communications with United States sigint agencies through Australia and Britain.

On the industrial front, fears of communist subversion were also raised as militancy increased after the War. In 1949, for example, the Government responded to a go-slow campaign by the Carpenters' Union, which had a few communist members, by withholding social security payments. The Federation of Labour, which was aligned with the Government, deregistered the union.

A more militant Trade Union Congress was founded in 1950 and the big waterfront dispute of 1951 followed. In response to a simple overtime ban, employers responded with dismissal threats followed by a lockout. Labour disputes were seen through the Cold War lens and Prime Minister Sid Holland claimed anyone limiting the handling of goods was "a traitor", and should be treated accordingly.

Waterfront Strike Emergency Regulations prohibited anyone from aiding a striker, infamously including providing food to the hungry families of locked out workers, and imposed nearly total censorship on the union. Police were empowered to enter premises where officers believed a breach of regulations was "about to be committed", the military were brought in to work the wharves.

Propaganda War

The State also worked to influence newspaper editors, broadcasting officials, anti-communist unions and the Returned Servicemen's Association to distribute anti-communist material. The Government developed a Publicity Division and linked with Britain's Information Research Department, established in 1948, to recruit intellectuals, journalists and writers to "counter Soviet propaganda" by creating propaganda of its own. Spin from overseas was complemented by leaks from the security police to "friendly" outlets like the NZ Truth which specialised in Red-terror sensationalism, and with gagging orders to prevent "unfriendly" reporting.

Further support was sought from allied security agencies in June 1951, with the National government "not satisfied with the Special Branch and the security work of the New Zealand Police (and) considered that the Police had a good deal to learn about the methods of watching and penetrating Communist organisations".

The Director of Britain's MI5, Sir Percy Sillitoe, visited, wrote a report, the Government accepted it, and MI5's Michael Serpell, who accompanied Sillitoe on his visit, stayed behind to assist with implementation. Not much changed but a string of scandals followed centred around phone tapping, until the Commissioner was helped into retirement by an embarrassingly generous retirement package.

Birth Of Security Service (Forerunner Of SIS)

Reform followed, with Special Branch singled out as not performing. A 1955 report listed some obvious organisational problems - "the Branch is leaderless", "it has no charter or directive", "it has not the personnel to cope with its real function" - and the usual ambiguous language - "it has not the 'aids' of a modern security service and, if it did have them, it might be politically inexpedient, and in practice almost impossible, to operate some of them".

The authors describe this as "discussion centred on the appropriateness of nestling secret surveillance within a rules and-consent-based Police system". Which sounds like the Government wanted to provide more secrecy for the agency to do more things we wouldn't approve of, if we were able to find out about them.

Debate continued into 1956 about the independence and oversight of this new entity, until in November 1956 an Order-in-Council quietly established a stand-alone security service by noting that the Public Service Act of 1912 was declared not to apply to employees of the New Zealand Security Service. The new constitution, responsibilities and functions were based heavily on British and Australian services.

Where To Next?

Inevitably, this long history of anti-labour and anti-Left interventions by the New Zealand secret service raises the question of how we could manage our security service differently, so the real risks are prioritised and the biases and failures of the past don't continue. What should we make of their recent shift to smooth public relations, with the Security Intelligence Service (SIS) making joint public statements with a private company on the threat of Chinese knockoffs? - just four years after its complete failure to identify and stop a murderous Rightwing terrorist, and a long history of targeting harmless Leftwing activists.

Is it doing a better job, or doing spin better? What share of its resources still support business against labour or US military aggression and covert interference? Today, information and political context of all types is more available if you look for it. The SIS has no excuse for not knowing what anyone experienced on the Left knows - we have very little power and are uninterested in violence. We are simply not a threat to anyone. We are however very interested in mustering what public power we can to create a fairer and more sustainable world. We are doing valuable public work for free and it's ludicrous to waste public money monitoring us.

In conclusion, this book is different to most we review because it's an academic publication. That means it's lengthy, thorough and reliable, but tends to be a bit high-level and reserved compared to the investigative books we usually cover. The books of Nicky Hager ("Secret Power" 1996, "Secrets And Lies" 1999, "The Hollow Men", 2006, "Other People's Wars" 2011, "Dirty Politics" 2014 and "Hit And Run", 2017) are great examples.

Looking ahead, a second volume is intended covering the period after 1956. It would be good to see some analysis there of key incidents - the Rainbow Warrior sinking in 1985, the illegal SIS break-in to the Christchurch home of Aziz Choudry in 1996, the 2007 Urewera raids, the 2014 Whale Oil leaks, the 2019 mosque murders, today's Rocket Lab support for space weaponry - and some recommendations, or at least options, for improving service scope and political management.

PAINKILLER
The Origins Of USA's Opioid Epidemic In Prescription Painkillers
Netflix, 2023

This series is well worth watching, but grim, because the human stories are very realistic. They provide convincing examples of how people can slide into drug dependency when the medical system which should keep you safe is just chasing more and more money. Most of us are likely to be prescribed opioids at some time in our life, perhaps after an operation. Watch this film so you remember why you need to get off them quickly.

The Purdue Pharma "Success" Story

The Metropolitan Museum of Art features the Temple of Dendur, built by the Nile 2000 years ago. This is the Sackler Wing, also a monument to one of America's richest philanthropic dynasties. Brothers Arthur, Mortimer, and Raymond Sackler, all doctors, donated lavishly: the Sackler Gallery in Washington; the Sackler Museum at Harvard; the Sackler Center for Arts Education at the Guggenheim; the Sackler Wing at the Louvre; Sackler institutes and facilities at Columbia, Oxford, and a dozen other universities. The Sacklers have also endowed professorships and underwritten medical research.

The family business, Purdue Pharma, developed the prescription painkiller OxyContin. The drug became a blockbuster, generating $US35 billion dollars in revenue for Purdue up to 2017. OxyContin's sole active ingredient is oxycodone, an opioid, meaning a synthetic drug derived from opium. The addictiveness of opioids was well known, but Purdue launched OxyContin with a marketing campaign that hid the risk and aimed to change the prescribing habits of doctors. The company funded research and paid doctors to make the case that concerns about opioid addiction were overblown, and that OxyContin could safely treat an ever-wider range of maladies.

With no irony, sales representatives were trained to market OxyContin as a product "to start with and to stay with". Millions found the drug helped with pain, but many also experienced debilitating withdrawal between doses. Many addicts, finding prescription painkillers too expensive or too difficult to obtain, turned to illegal heroin. According to the American Society of Addiction Medicine, four out of five people who try heroin today started with prescription painkillers.

This shift in the culture of prescribing was carefully engineered by Purdue. "If you look at the prescribing trends for all the different opioids, it's in 1996 that prescribing really takes off", Andrew Kolodny, the Co-Director of the Opioid Policy Research Collaborative, said. "It's not a coincidence. That was the year Purdue launched a multifaceted campaign that misinformed the medical community about the risks".

Arthur Sackler had a background in marketing. He got rich during the 1960s marketing the tranquillisers Librium and Valium. One Librium ad depicted a young woman carrying an armload of books. Such students "may be afflicted by a sense of lost identity," the copy read, adding that university life presented "a whole new world . . . of anxiety". The ad ran in a medical journal.

Sackler promoted Valium for such a wide range of uses that, in 1965, a physician writing in the journal Psychosomatics asked: "When do we not use this drug?" One campaign encouraged doctors to prescribe Valium to people with no psychiatric symptoms whatsoever: "For this kind of patient - with no demonstrable pathology - consider the usefulness of Valium". Roche, the maker of Valium, had conducted no studies of its addictive potential. By 1973, American doctors were writing more than 100 million tranquilliser prescriptions a year, and countless patients became hooked.

The Addiction Cycle

The truth was that the dangers of OxyContin were intrinsic to the drug - and Purdue knew it. The time-release formula meant that, in principle, patients could safely ingest one giant dose every 12 hours. They could sleep through the night - a crucial improvement over conventional painkillers, such as morphine, which require more frequent dosing.

But internal Purdue documents, which have emerged through litigation, show that even before the company received Food and Drug Administration (FDA) approval it was aware that not all patients who took OxyContin were achieving 12-hour relief. The Los Angeles Times revealed that the first patients to use OxyContin, in a study conducted by Purdue, were 90 women recovering from surgery in Puerto Rico. Roughly half the women required more medication before the 12-hour mark. That study was never published.

For Purdue, the business reason for obscuring such results was clear: the claim of 12-hour relief was an invaluable marketing tool. But prescribing a pill on a 12-hour schedule when, for many patients, it works for only eight is a recipe for withdrawal, addiction, and abuse. Opioids are problematic even for users who don't succumb to addiction. Opioids really do afford pain relief - initially - but that relief tends to diminish over time. That's partly why people increase the dose. They are chasing pain relief from a drug that has failed.

Selling Addiction

Because OxyContin was so powerful and potentially addictive, the public health goal should have been to sell the least dose of the drug to the smallest number of patients. Purdue set out to do exactly the opposite. OxyContin's launch was one of the biggest pharmaceutical marketing campaigns in history. According to internal documents, Purdue officials discovered that many doctors wrongly assumed that oxycodone was less potent than morphine - a misconception that the company exploited.

Sales reps received training in "overcoming objections" from clinicians. If a doctor inquired about addiction, reps had a talking point ready: "The delivery system is believed to reduce the abuse liability of the drug". A sales manager from the company told a state investigator in Florida that Purdue executives "told us to say things like it is 'virtually' non-addicting". The marketing of OxyContin relied on a closed circle: the company convinced doctors of the drug's safety with literature that had been produced by doctors who were paid, or funded, by the company.

Purdue had a speakers' bureau, and it paid several thousand clinicians to attend medical conferences and deliver presentations about the merits of the drug. Doctors were offered all-expenses-paid trips to pain-management seminars in places like Boca Raton, Florida. Such spending was worth the investment: internal Purdue records indicate that doctors who attended these seminars in 1996 wrote OxyContin prescriptions more than twice as often as those who didn't.

The company advertised in medical journals, sponsored Websites about chronic pain, and produced promotional videos featuring satisfied patients - like a construction worker who talked about how OxyContin had eased his chronic back pain, allowing him to return to work. The videos, which also included testimonials from pain specialists, were sent to tens of thousands of doctors.

The chart below shows three distinct spikes in opioid deaths. The first is from overdosing on prescription opioids, the second is when users of the new synthetic opioids found it harder to get prescriptions and switched to purchasing heroin - where illegal supply grew to meet the created demand - and the third is the continuing growth in deaths from synthetic opioids. As yet there is no end to the rapid upward trend in deaths, now 26 per 100,000 population which is roughly 1 in every 4,000 Americans every year.

Three waves of opiod overdose deaths

Today, the United States accounts for roughly a third of the global market for opioid painkillers. According to the American Society of Addiction Medicine, more than two and a half million Americans have an opioid-use disorder. Around 600,000 Americans have died from overdoses related to OxyContin and other prescription opioids since 1999. 600,00 deaths and the only consequences are fines or settlements. The Sackler family and company executives are still rich. That's life in the United States of America.

The Limits Of American Law

In July 2001, Richard Blumenthal, who was then the Attorney General of Connecticut, wrote to Richard Sackler. "I have been increasingly dismayed and alarmed about the problems and escalating abuse of OxyContin," he began, citing overdose deaths, addiction, pharmacy robberies, and "the astonishing growth in State funding" that was being used to pay for OxyContin prescriptions through Medicaid and Medicare. "OxyContin is different", he wrote. "It is more powerful, more addictive, more widely sold, more illicitly available, and more publicised". He urged Purdue to "overhaul and reform" its marketing of OxyContin.

The Sacklers disregarded his recommendation, so in 2004 Blumenthal filed a complaint on behalf of the State of Connecticut citing data indicating that a fifth of OxyContin prescriptions were now for dosing intervals shorter than 12 hours. Blumenthal obtained Purdue records indicating that company officials knew by 1998 that prescriptions for eight-hour intervals were becoming more and more frequent.

Purdue has since been sued thousands of times over OxyContin. In 2003, New York trial lawyer Paul Hanly assembled a lawsuit, signing up 5,000 patients who said that they'd become addicted to OxyContin after receiving a doctor's prescription. In discovery, Hanly obtained thousands of documents. "They demonstrated that this company had set out to perpetrate a fraud on the entire medical community," he told me. "These pronouncements about how safe the drug was emanated from the marketing department, not the scientific department. It was pretty shocking. They just made this stuff up".

In 2006 Purdue Pharma pleaded guilty, in a case brought by federal prosecutors in Virginia, to criminal charges of misbranding, and acknowledged that Purdue had marketed OxyContin "with the intent to defraud or mislead". A few executives received probation, and were ordered to pay nearly $US35 million dollars in fines. Purdue Pharma agreed to pay an additional $US600 million.

In 2007, the State of Kentucky sued Purdue. Before the case could go to trial Purdue was allowed to settle for just $US24 million. Purdue Pharma filed for bankruptcy in 2019. A 2021 investigation by the US House Oversight Committee estimated the family, "who have owned a controlling share of Purdue Pharma since 1952, are collectively worth a total of $US11bn". In May 2023 the Sackler family won immunity from further opioid lawsuits in exchange for a $US6 billion settlement.

Purdue Pharma's Plan B

In August 2010, Purdue quietly replaced OxyContin with a drug that was subtly different. The company had been granted patents for a reformulated version of OxyContin. If you crushed these new pills, they became not a fine, dissolvable powder but an unwieldy gummy substance. Purdue had long denied that the original OxyContin was especially prone to abuse.

But once it received patents for the reformulated drug, the company filed papers with the FDA, asking the agency to refuse to accept generic versions of the original formulation - because they were unsafe. The FDA obligingly agreed, blocking low-cost generic competition for Purdue. Since Purdue made it more difficult to grind OxyContin pills, prescriptions have plummeted by 40% This suggests that nearly half of the original drug's consumers may have been crushing it to get high.

Yesterday America, Tomorrow The World

As a result of these legal setbacks, the Sackler family stepped up its marketing abroad, pushing the drug through a Purdue-related company called Mundipharma into Asia, Latin America, and the Middle East. The company still has the same marketing approach, organising junkets and paying doctors to give presentations extolling OxyContin's virtues. Some of these high-profile doctors promoting OxyContin abroad, called "pain ambassadors," came from Purdue's earlier team of advocates for the drug in the US.

That's the problem when you allow the creation of a totally corrupt industry. You also create a whole class of corrupt promoters who are only too keen to latch on to the next corporate scam to stay well-paid. In July 2023 YahooFinance quoted Research Nester's forecast that global oxycodone revenue will reach $US21 billion a year by 2035, without any reference to deaths or side effects. The same article highlighted growing rates of global cancer prevalence as context, because more cancer means more pain, increasing product demand.

Knowing the history of cigarette companies, who promoted death-by-cancer in poor countries when exposed in America, we should all be worried for what happens next around the world. Fortunately for us, in August 2023 Mundipharma advised that it is leaving the Australasian market. According to its Website, Pharmac is exploring other options to supply oxycodone, which is used here mainly at end of life and with children too young to take pills. There's clearly not enough money in real medicine for Purdue/Mundipharma.

A Comparison With Covid-19

With covid having such a big impact in the last few years, I'll close by comparing the two. There have now been over 1.2 million deaths in the United States above normal trends. This will be mostly from covid, but will also include part of the 600,000 deaths associated with opioids since 1999. The difference is covid deaths are now low and stable, while opioid deaths are growing in America and spreading around the world.

Excess Mortality: Cumulative deaths from all causes compared to projection based on previous years, per million people

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Non-Members:It takes a lot of work to compile and write the material presented on these pages - if you value the information, please send a donation to the address below to help us continue the work.

Non-Members:
It takes a lot of work to compile and write the material presented on these pages - if you value the information, please send a donation to the address below to help us continue the work.