14 June 2002


“ If policymakers and politicians began with an image of New Zealand that was built around communities, hapu and families, towns, cities and farms, instead of markets, human capital and "low well-being neighbourhoods" ... the project of nation building, and ideas of inclusion, well-being and partnership, would look very different ...”

— Jane Kelsey, from At the Crossroads (2002)

Essays at the Crossroads

THESE THREE ESSAYS are well timed for an election year.
Jane Kelsey, a professor of Law at the University of Auckland, is one of New Zealand’s leading left-wing intellectuals committed to economic and social justice. Her previous books — Reclaiming the Future (1999) and The New Zealand Experiment (1995) — contain a meticulous analysis of the impact on New Zealand of the “new right” political agenda and globalisation. This book of essays summarises her previous arguments, and brings the issues up-to-date for a country about to go to the polls again.

No commentators seriously expect the Labour Party to lose the coming election. The ballot may be, in effect, more of a referendum on whether or not Labour should govern alone. Yet Kelsey argues that this year is indeed a “crossroads” time ... and she calls for a deeper debate on current economic and social choices.

Kelsey concedes that, under the Labour/Alliance coalition government, aspects of social, environmental and foreign policy have shown some genuine redirection. But her overall view is that the “Third Way” brand of government is more about “short-term political management rather than transformation”. And it is a political style that enables centre-left governments to claim that they are abandoning neoliberal economic policies while simultaneously stabilising and embedding the conditions for the continuation of the same policies.

Readers may not agree with Kelsey’s analysis — or her recipe of alternatives. But these essays will feed contemporary debate and become an important landmark in commentary on the New Zealand political landscape. — VH

At the Crossroads
— three essays

by Jane Kelsey
(pub 2002 by Bridget Williams Books)
ISBN 1-877242-91-8

from the book ...

  • According to the UN, New Zealand is the most transnationalised in the OECD (UNCTAD, 2000). The structural adjustment programme begun in 1984 was as doctrinaire as any imposed by the Bretton Woods institutions on indebted countries in the South. Unrestricted foreign direct investment transferred control over most of our productive, financial, energy, retail, transport and communications infrastructure to transnationals. Regulation of our share and financial markets was so light-handed that they became veritable casinos.

    Tariffs were removed from everything except imports on textiles, clothing and footwear in the misguided expectation that vibrant new enterprises would emerge from the ashes of those which collapsed. Speculative finance moved in and out of the country in response to the Reserve Bank’s manipulation of interest and exchange rates, playing havoc with the productive economy and employment.

    These changes were systematically locked in through a plethora of free trade and investment agreements. New Zealand made the most extensive commitments of almost any country at the WTO, especially on trade in services.

    The Closer Economic Relations agreement on free trade in goods and services with Australia is as sweeping as NAFTA, except that it formally excludes investment. Investment agreements signed with Chile, Argentina, Hong Kong and China between 1989 and 1999 contain NAFTA-style guarantees against expropriation, although their enforcement mechanisms are technically weaker.

    These agreements apply for a minimum of ten to fifteen years, with protection for existing investors extending for a further fifteen years after a government withdraws; yet few people even know they exist.

    The Labour / Alliance Government elected in late 1999 continued the globalisation agenda, although its rhetoric and strategy became more sophisticated. Globalisation would have a social face, including protections for labour and the environment, and would only be undertaken on a reciprocal basis. There would also be greater consultation with business, unions and ‘civil society’.

  • The cumulative economic cost to New Zealand of embracing the global free market has paralleled that of many poorer countries. New Zealand’s OECD ranking fell from ninth in 1970 to nineteenth in 1999. The economic growth rate was among the lowest in the OECD, well below Australia’s.

    Our export growth was dismal. We ranked twentieth out of twenty-five OECD countries on export growth performance indicators. A 1998 survey of forty-five countries showed that New Zealand was one of five to have lost market share over the past six years. The rising level of import dependency led to persistent trade deficits, although the effects of a substantial depreciation provided some relief in 2001.

    New Zealand’s net foreign debt, at around NZ$87.1 billion, was well beyond the levels of the East Asian economies at the time of their financial collapse. There was a chronic deficit in the external current account of the balance of payments, mainly due to a sustained net deficit on foreign investment income. That had to be bridged by asset sales, more overseas borrowing, or using up government reserves. The share of the country’s income from domestic production that remained available to fuel the New Zealand economy, after net profits, income and dividends remitted abroad were accounted for, reached a fifty-year low.

    New Zealand had done everything globalisation required of it. The result was a pathologically dependent, vulnerable and under-performing economy.

  • The social costs were just as dramatic. By 1996 around one in five New Zealanders, and one-third of the country’s children, was living in relative poverty. This was more than double the number in 1988.

    Maori, Pacific Islands and other immigrant families were much more likely to live in poverty than Europeans. Inequality had also grown. The richest 5 per cent of New Zealanders had increased their share of national income since 1984 by 25 per cent, while that of the bottom four-fifths fell. The poorest had proportionately lost most.

    The social infrastructure of public health, education and housing had deteriorated and its commercialisation had put such basics beyond the budget of many families.

    Privatised telecommunications, electricity, banking and transport were operated for the short-term benefit of their foreign owners, with no obligations to provide affordable access or quality. The regions were increasingly hollowed out from trade liberalisation, privatisation and rural recessions, while the cities were more visibly divided on socio-economic lines.

  • The Third Way is a political project whose objective is short-term political management, not transformation. The fifth Labour Government has been able to claim simultaneously that it is abandoning neoliberalism and to stabilise the conditions for its continuation. The result is a more deeply embedded form of neoliberalism that perpetuates the tensions which the Government was elected to relieve.

    The fact that similar approaches have been pursued by other ‘centre-left’ governments in countries that experienced radical free-market restructuring in recent years illustrates the effectiveness of structural adjustment politics and the inadequacy of the traditional left, nationally and internationally, to derail that agenda. Third Way political management may successfully defuse the tensions created by globalisation in the short run. But its unwillingness to confront the cause of those tensions will prove politically unsustainable in the longer term.

  • The Third Way enables centre-left governments to rationalise their role in consolidating neoliberalism. It is less a political theory than a programme of political management. Among its most prominent academic exponents is Anthony (Lord) Giddens — a sociologist appointed to the prestigious position of director of the London School of Economics in 1997, adviser to British Prime Minister Tony Blair, and the primary source for New Zealand Labour’s attempts to intellectualise its new approach. [...]

    Giddens believes that technology has so transformed the nature of capitalism and work that historical notions of class have become irrelevant. Indeed, his thesis lacks any theory of politics or power. The government’s principal role is to facilitate the successful globalisation of capital and assist individuals to cope with the consequences through education, training and employment subsidies. Within this environment, citizens are expected to balance their rights and responsibilities, but the owners of capital face no corresponding obligations. The pursuit of consensus, partnership and social inclusion at the local, national and international levels means the Third Way does not disturb any existing interests and has no enemies. Uncomfortable constructs such as class, colonisation, racism and patriarchy can be banished from the political lexicon.

  • Many within the coalition Government and their parties genuinely believe they are offering a new way forward. They would be horrified at the suggestion that they are recycling old neoliberal wine in ‘new social democracy’ bottles or that there are parallels with the fourth Labour Government of 1984. But that is what the Third Way agenda of ‘globalisation with a social face’ requires.

  • It was the response of many social agencies that showed how deep the market culture had seeped. Many community organisations and churches had responded to growing social demands, dwindling resources and waning political influence by developing commercial service delivery arms that were quarantined from moral philosophy.

    A number of these agencies opposed the accident compensation reform because it would increase the cost of insuring their workers. One branch of the YMCA appeared among the sponsors of an employers’ advertisement that opposed the Employment Relations Bill. As a result, the credibility with which these agencies could mount traditional arguments about social justice, community obligations and employer responsibilities was seriously undermined.

  • Within ten months of the 1999 election, business supervision of government — a hallmark of the free market era —had been restored with the acquiescence of both parties in the coalition Government. Those in the vanguard of the neoliberal revolution may have been sidelined. But the ongoing dialogue with business, including the promotion of ‘social responsibility’ and reporting on the ‘triple bottom line’ (financial, social and environment performance) remained firmly embedded in the market- led paradigm.

    As a result, the ‘fundamentals’ of tight monetary policy, fiscal restraint, trade liberalisation and light-handed regulation were more secure than before. These were also the parameters within which any Third Way initiatives for regional economic development, an inclusive economy and a knowledge-driven society would be framed.

  • In one sense, social partnerships pose more of a political problem for the Government than those with business. Partnership is essentially a political technique that aims to pacify, more than to deliver. Yet partnerships create expectations and demands that may lead to backlash if people are engaged with no visible returns. Some might simply withdraw from the process, disillusioned; others become openly critical. These are, however, people and groups whose influence has been blunted and who often have few other political options.

    There is a strong sentiment in Third Way politics that these traditional constituencies no longer matter. The formulation of policy and political responses now depends more directly on the regular focus groups, market research and spin doctoring undertaken by governments whose primary concern is to attract the uncommitted voter and get re-elected.

  • Theories of social capital effectively detach capital and capitalism from these relationships of power, conflict and class. Structured inequality gets reconstituted as a contingent risk, which people should be given the opportunity to avoid or mitigate. The result is a policy agenda which sees the rich and powerful speculating on how to improve the lot of the poor through promoting their self-help and organisation without questioning the sources of their economic disadvantage.

    This helps to explain how the officials can talk about inclusion, social cohesion and sustainability purely at the level of individuals. It also allows them to treat the ‘fundamentals’ of deregulation, privatisation, trade liberalisation and Reserve Bank-induced recessions as purely economic, when these are social to their core.

    Likewise, they can acknowledge that economic policies such as cuts to benefits and real wages, market-driven education, health and housing, user-charges for essential services or the redistribution of the tax burden have social consequences, but still maintain those policies while offering individualised palliatives. And it enables them to ignore absolutely the contribution of colonisation and exploitive immigration policies to structural poverty and deprivation in Maori and Pacific Islands communities.


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