The Globalisation Bell Tolls for us All
The decision taken in New York to close the Colgate Palmolive factory in Petone and supply the New Zealand market from production in Australia and elsewhere is the latest demonstration of just how far this country has lost control of its own economic destiny.
Successful New Zealand companies – Trade Me, 42 Below, Ihug – are snapped up by overseas investors. Failing New Zealand companies, like Feltex, are bought at a knockdown price by overseas competitors and the domestic workforce forced to accept poorer wages and conditions. Overseas owners of our basic infrastructure threaten, as in the case of Toll Holdings, to limit the service they deliver in the interests of maximising their profits. Even the most New Zealand of New Zealand companies, like Air New Zealand, propose to take large chunks of their operations offshore, and invite foreign contractors to deliver supposedly cheaper services by driving down wages and conditions.
In most of these instances, it is the workforce that pays the immediate price. But none of us escapes. Workers may lose their jobs and suffer wages cuts, but we all bear the loss of that growing volume of profit that is repatriated – profit produced from our economy but, by virtue of increasing foreign ownership of that economy, benefiting others. We all bear the cost of the high interest rates needed to attract the “hot money” without which our record current account deficit could not be sustained, a deficit made larger by precisely those selfsame high interest payments and profits repatriated across the exchanges. And we all suffer the loss of control over our economic lives as a result of decisions increasingly made in boardrooms which may hardly know where New Zealand is, let alone care about it.
These are high prices to pay for our enthusiasm to offer ourselves up to the global economy. Whereas once, an overseas company wishing to operate in New Zealand could be required to meet conditions stipulated by our government – conditions designed to protect the workforce, and consumers, and our social and environmental interests – our governments are now powerless to stipulate anything. If they should indicate any wish to establish minimum protections for our interests, they will smartly be told that the investment will go elsewhere.
Now, as the economic and industrial news reinforces every day, our ability to establish our own conditions and pursue our own policies in the interests of our own people, has well and truly slipped through our hands. We have sold so much to foreign interests that we have little left to sell. We are no longer able to take the decisions needed to protect what is left. We are rapidly being absorbed into the economy of Australia, and – if not Australia – then further afield, without a single democratic vote being cast.
Overseas interests now dictate a whole range of policies. Wage rates are increasingly set according to the benchmark of Chinese wages. Tax rates have to follow the Australians. Employment and industrial relations law, health and safety legislation, rules about the re-investment of profits, have to comply with the requirements of overseas investors, not of New Zealanders. Even environmental issues – so much in the news following the Stern Report – are determined according to the wishes of overseas operators. When a carbon tax was proposed in order to meet our Kyoto commitments, it was rapidly scuppered by the threat from Comalco and others to move their plants elsewhere.
It is not, in other words, only economic power which has moved decisively out of our hands. It is political power as well. The political debate is now shaped and constrained in the interests of a small, self-interested and ideologically unrepresentative group of immensely powerful investors who could never have secured support for their extreme positions if they had had to seek a democratic mandate.
Their influence extends as far as deciding what the macro-economic policy settings should be and how they should be decided. This week, we had yet another meeting of top businessmen to consider the question of how we, as a country, could improve our economic performance. The best they could apparently come up with, as a “big idea”, was that the removal costs of people appointed from overseas should be tax-free!
No one apparently questioned the policy settings which are largely dictated by international capital and which mean that central issues of economic policy are decided by unelected officials, that the chosen instruments – like tinkering with interest rates – are increasingly ineffective as a counter-inflation strategy but do great damage to the real or productive economy, and that the economy as a whole is forced to pursue a dizzyingly damaging course up and down an exchange rate roller coaster.
No one would want to put up the shutters, or to see a “fortress New Zealand”. But we should surely be debating the question as to whether our wholehearted readiness to hand over our economic fortunes to the whims of a more and more concentrated number of international investors is not exacting too high a price in terms of lost economic benefit and diminished democratic control over our own future. Isn”t it time – if democracy is to mean anything -to restore the power of governments to govern, in all our interests?
Bryan Gould
2 November 2006
This article was published in the New Zealand Herald on 7 November 2006