In the October 17 general election in New Zealand, the Labour Party government of Jacinda Ardern was re-elected for a second three-year term with a greatly increased majority. For the first time since the Mixed-Member Proportional (MMP) electoral system was adopted in 1996, a single party won enough seats in the New Zealand Parliament to form a government on its own, without having to enter a coalition with any of the minor parties. Labour won 64 of 120 seats. The opposition National Party led by Judith Collins saw the number of its seats drop from 55 to 35.
There was much speculation about whether Ardern would form a government alone or form a ‘consensus politics’ coalition with the Green Party, which won 10 seats. Part of the speculation was due to the strong hostility to the Green Party among National-supporting farmers, some of whom claimed to have made a ‘tactical vote’ for Labour in order that it would be able to govern without the Greens.
Whether or not Labour formed a formal coalition with the Greens was immaterial, however. It would have made no difference to its political course in government, since it didn’t depend on the Greens for its majority in Parliament. Ardern will have weighed up the benefits of such a display of ‘consensus politics’ against the possibility of ‘consensus’ with bigger capitalist fish, and appears to have rejected coalition with the Greens.
The Labour Party’s election slogan of “Let’s keep moving” was widely criticized as being vacuous – but this is an not a valid criticism, in the opinion of this writer. In the present context, it had a very precise meaning: Let’s keep the capitalist economy ticking over. That has been the course of the Ardern government in the past three years; that is the limit of its vision. Ardern gave a pointed ‘thank you’ on election night to “those amongst you who may not have supported Labour before.” She promised that she “will not take your support for granted” and gave the customary pledge to govern, not on behalf of labour, that is, the working class, but “for every New Zealander.” Ardern had long ago ruled out any proposals likely to encounter serious opposition among wealthy capitalists and speculators – such as a tax on capital gains which Labour had promoted in three previous election campaigns, and a Green Party ‘wealth tax.’ So abundantly clear was this, throughout the election campaign, that the National Party’s last-ditch attempt to drum up fears of new taxes backfired against it.
The Labour Party’s emphatic election victory, and Ardern’s immense personal popularity, reflect a real political consensus among broad layers of the capitalist and professional middle classes in support of the course that the Ardern government has pursued through the early months of the Covid-triggered economic collapse. Ardern’s strategy of ‘elimination’ of the virus through lockdowns and strict border controls and the ending of almost all international travel arrivals other than returning citizens, combined with ‘wage subsidies’ to businesses to stave off the resulting economic collapse, has proved largely successful in containing the virus to date, and widely popular. Even significant layers of the working class, shielded from the worst effects of the slump by the generous subsidies handed out to businesses to keep them afloat and workers employed, support this course for now.
The price of these measures has been high, and that price will only increase as time goes on. Entire industries have been shut down for the foreseeable future, including international tourism, a major earner of foreign exchange. The hospitality industry, a major employer, has been hit especially hard by the lockdowns, with many small businesses already gone to the wall, others teetering on the edge of bankruptcy and living in fear of another lockdown. Some industries like horticulture, heavily dependent on the cheap labour of migrant workers on special work visas, face critical labour shortages in the coming months, and the prospect of harvests rotting on the vines. As the subsidies come to an end, as more big capitalist outfits that took the money lay off workers anyway, and especially if the defences against the virus are breached, the political consensus behind Ardern is bound to break down.
Excluded from the consensus already, for the most part, have been the majority of workers. As well as demonstrating the unanimity of support for the government’s path, the massive majority for Labour was also a measure of the degree to which the working class has been shut out of the political discourse in this country. Not one voice, neither in the Labour and National parties nor any of the minor parliamentary parties, even claimed to speak in the interests of the working class. Aside from minor tactical disagreements, every one of these parties supported the consensus. (It is notable, for example, that when National Party deputy leader Gerry Brownlee dropped hints of conspiracy in respect to the government’s handling of the Covid crisis, it cost the National Party dearly, and Brownlee was forced to backtrack.) The parliamentary parties’ monopoly of the political conversation was watertight. (The only exception in this election campaign, as far as I am aware, was the Communist League, which stood two candidates on a working class programme in Auckland, and which chooses not to register as a party.)
There was one significant chink in this watertight containment which working people should take careful note of not because it is worthy of support, but on the contrary, because it represents a serious threat to working class interests. The party which came together under the banner of Advance New Zealand, led by former National Party MP for Botany, Jami-Lee Ross, won 21,000 votes, about 1% of all party votes cast, almost equal to the number of votes cast for the Maori Party.
Ross resigned from the National Party in 2018 after accusing the leader of the party at the time, Simon Bridges, of corruption in relation to donations from Chinese businessmen, and after being accused himself of harassment and bullying behaviour towards colleagues and staff. He remained in Parliament as an Independent until the recent election. He has positioned himself firmly in the anti-China camp. “Our politics needs to be free of money from the Chinese Communist Party-linked individuals,” Ross says. Deepening conflicts between China and the United States are bringing the ‘China question’ increasingly to the centre of foreign policy and politics in New Zealand, as well as Australia and the Pacific region.
Shortly before the election Ross teamed up with Billy Te Kahika Jr, a businessman and musician who had won a considerable following on social media by promoting conspiracy theories in relation to the Covid “plandemic.” Te Kahika organized a series of public protest demonstrations against lockdowns which drew thousands in Auckland – in defiance of the Level 3 lockdown conditions. His election rallies – 500 in Christchurch, a similar number in Tauranga, thousands at the campaign launch, were of comparable size to those of the major parties. By some measures, his reach on social media was also comparable – at least, it was until, two days before the election, Facebook removed Advance NZ’s page from its platform for “spreading Covid-19 misinformation.”
Te Kahika accuses Jacinda Ardern and Director-General of Health Ashley Bloomfield of being “communists” and also promotes conspiracist ideas in relation to the United Nations, the 5G communications network, and the anti-Semitic fantasies of UK conspiracist David Icke. (Icke himself visited New Zealand in 2011 and 2016, drawing large crowds.) One Advance New Zealand candidate claimed that a recent devastating wildfire near Lake Ohau was caused by a direct energy weapon. Disappointed with his vote on election night, Te Kahika claimed that tens of thousands of votes were unfairly disallowed, and the election result was rigged against his party. “People are waking up very, very quickly to the idea that this Government and this whole system is corrupt – it’s not real.”
Te Kahika channels fellow conspiracists, including Vinny Eastwood, who claims that Oranga Tamariki, the child welfare agency, is “running an industrial-scale child trafficking ring.” This comes at a time when there is deep and growing opposition among Maori to the Oranga Tamariki practice of ‘uplifting’ new-born babies from Maori parents deemed to be unfit parents. Both Ross and Te Kahika are Maori.
The capitalist press celebrated a ‘brutal takedown’ of Ross by interviewer Tova O’Brien, and expressed relief that the vote for Advance NZ was not higher. “The public also rejected some political hopefuls’ rallying cries to populism, conspiracy theories and scepticism about Covid-19”, crowed the Guardian.
This is wishful thinking on their part. The key fact is that for the first time in eight decades there is an organisation in New Zealand which promotes anti-Semitism and conspiracism, and is willing and able to mobilise thousands in the streets. At this point, anyone who seeks to break out of the consensus straitjacket of the parliamentary parties, anyone who looks outside the electoral system for political change, will find Advance NZ as the most prominent alternative on offer.
And there will be many more who seek to break the parliamentary stranglehold on politics as the slump deepens, and who will seek solutions outside the electoral arena.
There was an extraordinary moment in the election campaign, in the middle of a televised “Leaders’ debate” between Jacinda Ardern and Judith Collins, when the moderator asked, “Do you want house prices to fall?” It is highly unusual in bourgeois election debates for real issues to be posed so directly. This question went to the heart of problem – and left both of the candidate prime ministers squirming uncomfortably, saying evasively that they didn’t want prices to go on rising.
The housing crisis was already acute well before the Covid-triggered slump. The failure of market-driven construction to keep pace with population growth is only a minor factor in this: far more important is the skyrocketing price of houses – and consequently, of rents – mostly driven by speculation in real estate. The Labour government elected three years ago made fixing this problem one of its flagship policies – and in its first term it failed spectacularly to mitigate the problem in the slightest degree.
Many economists then forecast that the Covid slump signalled the beginning of a ‘price adjustment’ in the housing market. But that is not what has happened in the last six months. As soon as the halt in house sales due to the first lockdown was over, the housing market took off again, with prices reaching new heights in recent months. In August 2020, average asking prices for houses were 21% higher than a year earlier, and 9.1% higher than a month earlier.
The very conditions that led to the problem in the first place have been exacerbated by the measures taken to stave off economic collapse in the wake of Covid.
The cause, ultimately, is the ordinary law of capitalist development described by Marx 150 years ago: the tendency of the rate of industrial profit to fall. (I described the operation of this law briefly, and how it plays out in the Covid-triggered slump, in this post.)
With the profitability of capital invested in production declining long-term, capitalist investors seek to reap higher profits in non-productive, speculative forms of investment, such as share-market trading, currency speculation, trading in debt packages, bonds, and crypto-currencies, and the all-time favourite form of capitalist gambling in New Zealand – real estate speculation.
Every step taken by this government since the Covid-triggered recession of March 2020 has accelerated these trends. The funds borrowed and handed out at low interest rates are supposedly to keep production going. But the problem of the decline in the rate of industrial profit has not been solved. There is more profit to be made elsewhere than in expanding the productive capacity of factories and farms. Therefore, the effect of the interest rates reaching historic lows is to shift capital even further into non-productive forms of investment.
Banks, meanwhile, make their profits from the interest they receive on loans. The more they lend, the more profit they can make – provided they can be sure of the loan being repaid. They lend to house-buyers up to the limit of what the borrower’s income permits them to squeeze out in repayments, based on current interest rates. The lower the interest rates, therefore, the more you can borrow on a given income, and the more you can spend on a house. Low interest rates have thus become the engine of skyrocketing real estate prices. Speculators are enjoying windfall profits as many New Zealand citizens who have been living abroad – disproportionately middle-class professionals – return to New Zealand during the Covid crisis.
Thus, the falling rate of industrial profit is at the root of the housing crisis, including the so-called ‘ghost houses,’ the forty thousand empty houses in Auckland alone. At current average valuation of a million dollars each, about $40 billion in capital is tied up unproductively in these ghost houses – in just one city – and that’s just the empty ones! As long as the speculative frenzy continues, there is so much profit to be made by speculating on the ever-inflating prices of houses that many capitalist-speculators don’t even need to bother with the hassles of tenanting them. This is not an inevitable result of immigration, nor is it a policy decision by the government. It is simply the natural path of capitalist investment in the epoch of capitalist stagnation and decay.
And for that reason, it is a powerful imperative of capital, which sweeps aside all attempts to regulate it. That is the reason why the Labour government dropped the capital gains tax. That is the underlying cause of the fiasco of their Kiwi-build housing construction project, and of the ludicrous timidity of their Residential Tenancies Amendment Bill, with its attempt to “improve tenants’ security and stability while protecting landlords’ interests” and “ensure the law appropriately balances the rights and responsibilities of tenants and landlords” in. That is the reason why Auckland Mayor Phil Goff’s pious offer to the owners of the ‘ghost houses’ to fill their houses with tenants, which he described as a “win-win situation,” was laughed off the stage. And it is the reason why neither Judith Collins nor Jacinda Ardern could even say that they wanted the massively inflated house prices to fall.
The fact so unexpectedly glimpsed in Ardern’s embarrassed squirming in the TV debate is that there is no reconciling the interests of capitalists and workers on this issue. The idea that it is possible to “improve tenants’ security and stability while protecting landlords’ interests” is a foolish illusion. There is no “win-win situation,” no “balancing the rights and responsibilities of tenants and landlords” – only clashing class interests and a relentless, more or less open, class struggle.
The speculator-capitalist-landlords themselves are fully conscious of this class struggle. It is only the working class that is paralysed by such sentimental illusions and false hopes. And it is the Labour Party government of Jacinda Ardern, with its fussing and fakery on the housing question, which is the chief promoter of such illusions in the ranks of the working class.
Bernard Hickey has written an interesting article in Newsroom on how housing prices are tied to other aspects of the New Zealand economy, including rapid population growth “fuelled by international students and temporary work visa holders coming here for cheap education and the vaguely and not-so-vaguely dangled prospect of permanent residency.”
The Covid-triggered crisis is continuing to lift the lid on the extent of some of these practices – through the complaints of the horticulture, dairy, construction, hospitality, and fishing bosses heavily dependent on these workers, whose profits are jeopardised by the cutting of international travel. As I write these lines, another outbreak of Covid in Christchurch has been detected among a group of 440 fishing boat workers flown in from Russia and Ukraine by special arrangement in order to keep the fishing industry from collapsing.
Hickey writes: “Just before the lockdown began on March 25, New Zealand had over 340,000 non-residents here as students and travellers with work rights and workers with ‘high skilled’ temporary work visas. Most were working as kitchen hands, shelf stackers, dairy farm labourers, liquor store attendants, service station attendants, help-desk operators and in construction… Many of these workers were exploited by employers owning their visas and with the power to write (or withhold) the all-important letter to Immigration NZ attesting to their very high skills as retail and hospitality managers. It was a perfect situation for landlords, homeowners, universities, polytechs, employers and the IRD [tax department – JR]. The students and temporary workers paid income tax and GST, they provided a ready and cheap supply of very willing and often talented workers. They also created a new supply of tenants to keep rents high and to put constant downward pressure on both wages and interest rates.”
If Hickey’s figures for the numbers of workers on non-resident visas are accurate, and allowing for about 30,000 of the 340,000 being non-working students, that leaves about 15% of the full-time pre-Covid workforce in New Zealand who would not even have had the right to vote in its elections.
Hickey continues: “Now this influx of tourists, students, temporary workers and money-laundering visitors has stopped dead… So why didn’t the housing market crash? Put simply, it’s too big to fail and everyone knows it, and can bet on this market being the first to get bailed out by the Government specifically, and voters more generally… This market is too big to fail and the Government just demonstrated yet again that betting on the bailout pays off.”
There is as much truth as there is cynicism in Hickey’s argument.
But the bailout measures Hickey cites, such as the mortgage repayment deferral, can defer the crunch, not prevent it. Speculative investments like property speculation create no new value – for every winner, there is a loser, albeit sometimes separated by an interval of time. And the price of deferral is to make it worse when it comes. Regardless of the short-term ups and downs, there is no sign that the Covid-triggered pandemic is going to do anything but deepen over the coming years. And it will bring the institutions of capitalist rule, including its electoral system, to breaking point.
One thing that did not change one bit in the recent election was the fawning support given by the primary defensive organisations of working people, the unions, to one or other of the capitalist parties. That stance is both cause and effect of the terribly weakened state the organised workers movement finds itself in today. As the anti-working class course of the re-elected “Labour” government accelerates over the next three years, workers will need to re-build their unions, or organise them from scratch in many cases. An essential part of that process will be ending political support to the misnamed Labour Party, and working to build a true party of the working class, one which recognises the class struggle, which rests primarily on the power of the workers mobilised in the streets, and which fights for the political rule of that class.