Serving The People Or The Global Economy?

By Jim Anderton, New Zealand MP, People's News Agency, 26 February 1998

Editor's Note: The New Right World Order, so full of contempt for many human values, indigenous cultures, the environment and people's basic material needs, seems to have captured the loyalty of government leaders everywhere. Though not fully challenging all NRWO tenets, such as the right to large-scale private ownership and the non-democratic, self-centred nature of the modern economy, Jim Anderton of New Zealand is taking one clear step in the humanistic direction we need. Desiring income security for all, he at the same time wants to hit the NRWO one place where it will hurt: its right to use international freedoms against local socio-economic networks and even national governments.

Politics is about positive visualisation—daring of think of the world as being different from the way it is at any one particular point in time and then taking action to bring that vision about.

One of society's biggest limiting factors is the self-imposed restriction that, for one reason or another, things cannot be different from the way they are now. In the 1980s we had TINA—There is No Alternative—and more recently we have had the view that the financial markets or the World Trade Organisation won't let us do things differently from the way are doing them at the moment.

My political experience, reinforced by the experiences of other social movements around the world, is that, not only can things change, but when people really want them to, they can change surprisingly fast.

The New Right World Order

At the moment were living in a world system which has been re-fashioned by the New Right over the last twenty years. One way of thinking about this world system is to see it as consisting of a series of market structures accompanied by various control mechanisms. It is the combination of these which produces the social, economic and environmental results which we see around us.

NRWO Market Structures

Key market structures are:

• De-regulated industry sectors
• A de-regulated financial system
• Free trade (or at least, strenuous moves towards free trade)
• Free cross-border financial and direct investment flows
• Competitive labour markets.

These are the market structures within which some of the more obvious policies—e.g., privatisation of state assets and reduction of taxes on high income earners—have proceeded.

Both a cause and an effect of the NRWO is that the transnational corporation has replaced the national company as the key form of capitalist organisation. International financial corporations have become particularly powerful.

In the Third World, transnational corporations frequently ally themselves with right wing elites who suppress civil liberties, prevent worker organisation and maintain an extremely unequal distribution of land ownership. This makes it even more difficult for the majority of the population to break out of poverty and permits only a very lop-sided form of economic activity—the provision of raw materials, plantation crops and cheap labour.

Aid flows are small and declining and much aid is tied to meeting the economic needs of the donor country rather than those of the recipient.

On top of these structural problems, the international banks have played a major role in enticing Third World countries into debt, with the result that how to deal with crippling interest and repayment burdens has dominated economic policy in much of the Third World since the early 1980s. As a condition for on-going finance, the banks and international organisations like the IMF [International Monetary Fund] insist on the adoption of the structural adjustment programme of the New Right—the familiar package of cuts to wages and public spending, deregulation and a high interest rate monetary policy. The increasing inequality we have experienced in New Zealand is a microcosm of this much larger world problem.

The whole system operates with an over-supply of labour in the form of unemployment and a continuous rural-urban population shift. The production of cheap labour manufactured goods (and, increasingly, tradeable services) in the Third World sets in motion a transmission mechanism which eventually affects the entire global labour market. Cheap manufactured goods are imported into the developed countries, leading to unemployment in the traditional manufacturing sectors. This in turn puts pressure on the labour market in the services sector (e.g., shops, restaurants, hotels, transport) because displaced manufacturing workers seek work in other activities.

The only people to have seen substantial increases in real income in recent years are those with higher skills in the financial and business services sectors (most of whom, in New Zealand, are still white and male).

The market structures of the NRWO are designed to widen the pre-existing inequalities of the global economy. Competitive pressures keep wages low, or even force them down, while the rate of return to capital (profits and interest) rises to extraordinary heights. Corporate executives wallow in this new trough through salary packages and share incentive schemes which almost take one's breath away with their audacity.

NRWO Control Mechanisms

The key control mechanisms of this world order are: the governments of individual nation-states (which share the new right consensus), the international organisations or understandings established by these nation-states (e.g., the WTO and APEC) and the international financial sector, particularly the worldwide network of central banks.

Although lacking a central committee, the international financial markets have become one of the world's chief disciplinarians. Any deviation from the New Right prescription results in the threat of disinvestment. While this is a problem for countries which try to embark on new policies alone, it will not be a problem when a significant number of countries decide, together, that it is time for a change. More of this later in this presentation.

In the meantime, one should note that following the New Right prescription does not guarantee the fidelity of the capital markets. In fact, it can actually put you into an economic crisis—as the Mexicans found at the beginning of last year.

The inflow of international money into Mexico maintained an unrealistic value for the peso and caused a current account deficit of such proportions that the capital markets eventually took flight, with devastating consequences right through Latin America. They love you, then they leave you.

Of greater organised effect, from a political point of view, are the activities of the international network of central banks.

The world's central banks are wedded to the concept that the most important policy goal is to keep down the rate of inflation and that this can be done by a combination of the market structures described above and a restraining monetary policy.

In particular, the world's leading central banks (and many smaller central banks, such as that of New Zealand) believe that a certain, and substantial, level of unemployment is necessary to keep down the rate of inflation.

This has been crystalised in the economic theory of the non-accelerating inflation rate of unemployment—NAIRU. In the U.S.A., the NAIRU is believed to be six percent of the workforce. In New Zealand, Treasury and the Reserve Bank place it between five and seven percent of the workforce.

In view of the fact that unemployment has just begun rising again under the impact of the Reserve Bank's anti-inflation policy, it would appear that, in the Reserve Banks view, the NAIRU would be closer to seven percent than five percent.

The future under the New Right policy framework is therefore one of continuous substantial unemployment—a level fluctuating (on the narrow official measure) between maybe six percent and eight-11 percent as the economy accelerates and slows.

This monetary policy control mechanism complements the NRWO market structures already described.

Low income people are placed in a situation in which they are continuously in a buyer's market for labour, while the finance sector operates in a seller's market for loan finance (high interest rates) and the corporate sector in a seller's market for goods and services (high profits).

The Relationship Between Human Beings and Nature In addition to exploiting human beings, the present economic system exploits the natural environment. Non-renewable resources are plundered (especially the energy resources) while resources which may, in principle, be renewable (e.g., fish and tropical forests) are used far beyond their replenishment rates.

The eco-system is pushed past its limit in terms of being able to absorb the waste products of industrial society.

The NRWO has inherited the exploitative environmental practices of the earlier phases of capitalist development, but given them a new twist, in that the NWRO claims that market forces alone will fix the problem. If a resource is running out, it will signal this fact to us through a rising price and we will curb our consumption accordingly. If action has to be taken against a dispersed pollutant such as CO2, then it should be taken by selling tradeable pollution permits rather than by having regulations which prescribe the limits or simply outlaw the pollutant in question.

If one happens to own a resource which is running out, then the rising price of that resource has the happy side effect of enriching you. This acquisitive motivation is not confined to the private sector. For example, the electricity industry in New Zealand is presently establishing a competitive wholesale electricity market. One of the effects of such a market is that all of ECNZ's electricity will be priced at the cost of producing electricity from new generating plants. A large super-profit will be realised on all of ECNZ's cheap hydro resources, which will accrue to our NRWO government in the form a revaluation of ECNZ's assets and the payment of large special dividends to the government. This is a circumlocutory form of taxation, levied on the whole population, which, in part, enables the government to give tax cuts to middle and high income earners. Society's present environmental behaviour still proceeds from the mindset which used to say that it is man's destiny to dominate nature.

Such a view contains a fundamental misconception about the relationship between human beings and the natural world, which only now are we beginning to correct.

Human beings are a part of nature and we have to establish a mode of economic development which is detached from resource exploitation and the discharge of waste products into the atmosphere and the sea.

Making the Political Economy Serve the People Before proceeding to the question of how to bring about change, we must first decide what are the alternative policies that we want.

In the first place, we want policies that are enabling. Just as transnational corporations seek policies to enable them, through for example the free trade and investment rules of the World Trade Organisation, so a people's alternative must be based on policies which enable ordinary people, as individuals and in groups, to get the best out of life.

In this respect, the last century offers a rich pool of experience as to what works for ordinary people. Many of the policies of the Alliance draw from this pool of experience, which has led to our opponents calling us backward looking. But we are no more backward looking than is, for example, a physicist who uses the work of Einstein in his or her experimentation. There are certain things that, once discovered, are never fully abandoned—they become part of the general experience of the human race and are incorporated in the leading ideas of the next progressive development.

The Alliance's particular aim is to combine the insights of the welfare state era of the mid-twentieth century with the popular democracy of the sixties and the seventies and the imperative of establishing a new relationship between humanity and the global environment. In New Zealand's specific context, an important part of the process is to establish a new relationship between the tangata whenua (people of the land) and the rest of the population.

Some of the policies which are of proven value to ordinary people are:

• Universal, free health and education services
• A system of income security
• Progressive taxation, including taxes on inherited wealth and, in principle, capital gains (though a capital gains tax is not in current Alliance policy)
• Full employment
• Regulation of the labour market
• Border controls on immigration, trade (e.g., tariffs, standards), and capital (eg. foreign investment, regulation, controls on hot money).

The combined effect of these policies is to give people the opportunity to develop their potential to the full and to sell their labour, or goods and services, in a market in which there is a fair balance of market forces. That is, a market in which they get a fair return for their work. The government of each country has a duty to counterbalance the power of the large concentrations of private wealth (i.e., the corporate sector) in favour of ordinary people and their social organisations. For example, monopolies in strategic industries such as telecommunications and energy should either be subjected to full competition or regulated to limit their ability to extract excess profits.

The formation of unions and collective bargaining should be encouraged by the government.

The formation of other types of representative social organisations should also be encouraged, so that people can pursue their interests in a de-centralised fashion.

New forms of economic activity should be tried—such as co-operatives—and these should receive official support.

An Analysis of Power

The final step in making a strategic plan is to analyse the prevailing power structure and to seek out its points of weakness. At the same time we need to identify the sources of strength for the achievement of an alternative.

There are a number of significant sources of power within the world today.

Firstly, there is the power of the environment. In relation to our current economic system and lifestyle, the dimension to which we should pay most attention is the environment's power of veto. There are certain things we are doing which we simply cannot continue to do for very much longer. If we continue to destroy the natural resource base of our society then eventually the environment will veto our economy and may even veto us as a species. The power of the environment is a dispersed power but it is unavoidable and irresistible and we must adapt to it.

Secondly, there is the power of the people themselves, as it resides in what is sometimes called 'civil society'—that is, the sphere of the self-organisation of people in society, apart from the state. The power of civil society is the ultimate social power. It is here that systems are made and unmade and the course of social life is ultimately determined.

However, the power of civil society is a dispersed power. As anyone knows who has formed a new organisation—whether it be a political party, a church, a business or any other type of social organisation >—the achievement of the initial critical mass is the hardest thing. One starts out with hardly any money and few people and, while still paying the day-to-day bills, has to somehow get the activity to the point where it becomes self-sustaining. Politically speaking, people tend to follow their established habits and it is relatively easy for the powers that be to divide people against each other and neutralise the potential of people's power. The occasions when people really 'get it together' to effect change in their society are relatively few and far between, but, of course, when they happen, they are dramatic moments indeed.

Thirdly, there is the power of the transnational corporate sector (including the international banking industry). The corporate sector has become extraordinarily powerful over the last few decades and it pursues its interests with little inhibition. It also has the very important attribute of concentration. The number of transnational corporations is fairly large, however each of them concentrates enormous financial resources within an hierarchical power structure.

They have the wherewithal to be politically effective—their executives can travel at will, communicate at will, hire policy analysts to write policy recommendations for government and fund right wing political parties. It is the concentration of power which gives the relatively tiny number of corporate leaders the ability to dominate the bulk of the population.

Fourthly, there is the power of the nation-state. Much has been made of the alleged decline in power of the nation-state (i.e., the governments of individual countries) in relation to international big business. However, there are still far fewer nation-states than there are transnational corporations and the nation-state also has the attribute of concentration. It brings together a vast concentration of resources within an hierarchical power structure. And, unlike the transnational corporation, it usually requires some sort of popular democratic vote for its legitimacy. In my view, much of the loss of power by the nation-state is a self-inflicted loss. It has come about because forces representing the New Right have come to political dominance. But if the people vote for a different sort of Government, then this loss of power by the nation-state can be reversed.

Importantly, for the majority of the people, the government of the nation-state is the only force which can potentially neutralise the unfair dominance of the corporate sector within contemporary world affairs. It is only through the decisions of governments that the rules governing the world economy can be changed.

Fifthly, there is the power of the international institutions—such as the World Bank, IMF, WTO, ADB, APEC, etc. If they were a single country they would be known as Acronymia. These are frequently spoken of as if they are independent powers in their own right. However, they are institutions which have been established by the joint action of individual governments, amongst whom the U.S.A. is particularly pre-eminent.

Their policy and authority derives from the decisions of nation-states. If the policies of the collaborating governments change, so will those of the international institutions.

A Strategy to Place Politics and the Global Economy in the Service of the People

In terms of the above analysis of the sources of power, it is relatively easy to see that at the present time, the two main sources of concentrated power—the transnational corporate sector and the nation-states—are in alliance, under the political leadership of the New Right. Acronymia—the sphere of the international institutions—is necessarily part of this bloc.

On the other side, are the ultimately decisive, but dispersed, sources of power—the environment and the people.

The key link is the role of the nation-state. The concentrated power of the nation-state can curb the exploitative activities of the international corporate sector and change the direction of the international institutions. The people, therefore, need to wrest back control over national policy from the New Right and set government upon a different social path, one that establishes environmental sustainability and social justice.

Such a strategic vision implies a high level of political participation on the part of the people, in groups and as individuals. The relationship between a popular democratic government and civil society must be one of reciprocal support and reinforcement. Such a government, as a necessary part of counter-balancing the power of the corporate sector, must use its resources and law-making ability to facilitate the activities of representative popular organisations—whether they be iwi, trade unions, churches, pressure groups or other forms of association.

Furthermore, there is a necessary international dimension to the social and environmental changes which we seek. One single country acting in isolation cannot change the power structure of the world economy. It requires the international collaboration of a substantial number of governments of the leading developed countries. This in turn requires a change in public opinion in those countries, expressed at the ballot box. While this might sound like a tall order, the truth is that there is a high and growing level of scepticism about New Right policies around the world. When the international tide turns, it turns with incredible force, as we have seen on at least two occasions in the last half century—the establishment of the post-war consensus in the mid 1940s and the collapse of the Soviet bloc in the 1980s.

The defeat of the New Right requires a similar sea change in public opinion and the expression of that opinion through political action. This is a process to which we can all contribute, both as individuals and through the organisations to which we belong. In saying that, I know that at this venue I am speaking to people who have contributed to this sort of strategy over a long period of time, and I acknowledge your dedication and persistence.

In addition to our local activities we can also contribute internationally through the growing worldwide networks of people's organisations and practical support activities, whether in the form of aid, trade, collaborative trade union action, joint campaigns or information sharing. The international dimension is one to which John Curnow paid particular attention and, in sharing your remembrance of him, it is the note on which I would like to conclude.