NZ: Crisis, Free Trade and Socialism

How will US credit crunch hit NZ?

The US credit crunch will impact in the short term on NZ in the relative devaluing of the Kiwi $dollar. For NZ workers this means our labour is revalued as not as worthwhile in the world capitalist market. A chunk of US$ speculative money capital will be eliminated and the US$ we move to revalue on the basis of the actual strength of its productive capacity. NZ is linked to growing Australia and Asian economies and is benefitting from strong commodity export prices. This is despite an overvalued Kiwi $ that results from high demand due to high interest rates.

The Austral/Asian bloc will benefit from the devaluation of the US$ as the Euro and Yuan play a larger role as ' world money'. The US$ has played the role of world money since 1971 when it went off the gold standard. Today most countries hold US$ reserves because they expect to be a store of value which can be exchanged at value for commodities. This means that competition for the US$ as world money holds up its value even when the US is running a huge trade deficit. By printing dollars with a value well in excess of what they can be exchanged for in US commodity production, the US can consume much more than it produces in value and maintains an artificial 'dollar hegemony' over the world economy.

This 'dollar hegemony' is waning as today the US$ had declined from 80% to 40% of world money. The end of US dollar hegemony will force the US domestic economy into line with globalised market values to which NZ has adjusted over the last 20 years. This means that there will be less need to hold US$ reserves and the EU and China can diversify its investments from USA$ bonds. This will bring a major realignment of the world economy from US$ hegemony in which it was able to transfer value from other countries to itself, towards an economy in which the US will have to create value by more productive investment domestically and internationally.

FTAs are really about buying up assets

The only reason that NZ is chasing Free Trade Agreements with nations in the Asia Pacific such as China and the P4, is that it hopes that this will allow more access to NZ exports. NZ has reduced tariff protection to almost nothing so that it has everything to gain from China and the US doing the same. Free trade will benefit NZ because it has already restructured to develop comparative advantage. The prices of US and China goods imported into NZ are likely to fall faster than the price of NZ exports. China is already moving from being a low wage country by increasing investment in high technology. The current crisis in the US will switch productive investments in high technology bringing it into line with its external investments in Asia, Latin America etc.

Of course, from a capitalist standpoint, the objective of free trade and investment in all three countries, as well as other FTA’s (see box on FTA’s and the P4), is to increase the rate of exploitation and cheapen the labour content of the commodities produced, so as to gain greater world market shares and more profits.

However, the US and increasingly China is investing more and more of its surplus capital as Direct Foreign Investment so that it can exploit the productive resources of developing countries and emerging markets. What they are looking for in NZ is a free hand to buy up the remaining private and state assets. From a working class standpoint, the benefits from growth for the capitalist investors, in all three countries, are at the expense of the workers. Therefore, workers in these three countries have very different class interests from the capitalist owners.

Workers answer to FTAs are STAs

In response to FTAs the interests of workers is not to appeal to their own capitalist class to protect their jobs. This leads to the ‘race to the bottom’ as workers sell out their wages, conditions and other workers jobs in the hope that they can keep their own. In every country were workers have tried this protectionist strategy they have been defeated and lost their jobs anyway.

The only way for workers to keep their jobs is to take control of production. This means socializing the means of production i.e. labour and materials. This is the only way to make sure that production is planned for the benefits of workers and is ecologically sustainable.

In order to build up the power to socialize production, workers have to fight now for more control of production. This does not mean joint ventures in which the nation state concedes ownership to multinationals. Capitalists are happy to operated ‘shared production’ as in Iraq or Bolivia, because they extract their super-profits anyway. The local state is the bosses’ state and does not represent workers at all. So ‘joint ventures’ or PPPs (Public-private partnerships) between local states, like the NZ state, are really deals between the national capitalists that manage the state, and imperialist capital that dominates the global market.

Socialism means occupying and expropriating capitalist property, turning that property into workers property, and planning production for need (not profit). Workers in every country need to unite and coordinate internationally to plan Socialist Trade Agreements. This would take the alternative agreements such as ALBA, between Venezuela, Cuba and other Latin American states, and turn them into agreements administered and controlled by workers organizations independent of the local bourgeois states and imperialists.