Auckland: Antipodal Portal of Empire
[Note: this essay is 10 years old and I will add an update shortly]
Introduction: the boomtown rap (1)
What is the relationship between Auckland as the major city in Aotearoa/New Zealand and the global world economy? Auckland has always been the main portal to ‘Overseasia’, the local terminus (or circuit-breaker) of private and public capital flows. Auckland suffered a reputation in the 1880’s as a frontier city ridden by cliques of speculators living off the productive land-based economy.(2) This notoriety was revived by the 1987 financial meltdown almost exactly 100 years after the first Auckland bubble burst. Is this infamy deserved? Is Auckland a gigantic rent rip-off, or is it the nerve centre that allows the economy to flex it muscle? Is Auckland producer or parasite?
My premise is that Auckland is the New Zealand end of the antipodean apron string, or better, the southern end of the pipeline along which food, fibre and information flows outwards, and migrants, machines, consumables and information flows inwards. I argue here that Auckland is more than neon lights and mirror glass site of the rip-off merchants of Overseasia. Its function has been to manage capital flows from colonisation to globalisation. Without Auckland there would be no New Zealand as we know it. If Auckland lives off the back of the land it is because it is the backbone of the land, the nervous system that allows Auckland to inject capital into producing land-based rent – the lifeblood of the economy. The Auckland that New Zealand loves to hate is the Auckland it deserves.
But Auckland’s colonial evolution is more complex than that. The city has gone through successive stages – first as the site of the settler implantation of a prefabricated capitalism –‘reinventing capitalism’; then as a state managed hothouse of protected import substitution – ‘state-welfare capitalism’; to become today the bridgehead for overseas invasions and ‘re-colonial’ occupation as a colony of the US ‘Empire’. (3) Auckland’s transformation therefore provides the genetic code of the three watershed events in the development of the New Zealand economy and society. These dramatic booms and busts that punctuate New Zealand’s colony-to-nation-and-back career can be labelled the Colonial Crisis, the Dominion Crisis, and the Welfare Capitalism Crisis; and they mark out Auckland’s progress from Frontier Town, to Welfare City, to Global City, and foreshadow a future Capital City. Auckland’s coming crisis will be one it shares with the global economy –the crisis of Empire.
Frontier Town: Merchant-Adventurers’ capitalist utopia
Karl Marx, writing of the unfortunate Mr Thomas Peel who migrated to the Swan River in West Australia in the 1840’s, could equally have been talking of any number of ‘Mr Peels’ who settled in Tamakimakaurau (Marx, 1976:932). These settlers were part of the first “New Zealand Experiment” –to transplant capitalism. (4) They brought money and machines and ‘acquired’ land from the natives. Mr Peel’s desire turned sour when capital and land alone could not make him rich. His labourers ‘shot through’ to the bush to become their own masters. Mr Peel’s machines rusted, his money depreciated and his prospects evaporated. (5) The moral of this tale is that there were thousands of Mr Peels settling on the banks of the Waitemata and Manukau in the mid 19th century only to find that capitalist social relations did not fall from heaven or rise from the soil. They had to be created by taking new land and acquiring a free labour force i.e. workers who had the freedom to chose between working for a capitalist master or starving. This capitalist implantation failed to take root when workers abandoned their employers to get land and work it as their own masters.(6)
If frontier Auckland was the antithesis of the Wakefield experiment it was also its salvation. The attempt to establish a system of capitalist production of commodities had to wait on certain prerequisites. Auckland ‘businessmen’ had first to create the conditions for their businesses to exist. Their money and machines, like Mr Peel’s, needed new land and free labour to multiply. The merchant adventurers (with some missionary softening-up) devoted themselves to ‘primitive accumulation’.(7) They invaded Maori land, clear felled native timber, stripped gold, and turned Auckland into a speculative ferment of traders, land grabbers, bankers, and, out of necessity (to provide for the growing working class) small manufacturers. This implantation took several decades, yet Wilkes’ rudimentary analysis of the class structure of frontier Auckland in 1843 shows that even then 11% were ‘owners’, 11% ‘self-employed’ while 78% were landless ‘workers’ (1993:figure 4.4).(8)
One section of the Auckland elite was devoted to acquiring huge tracts of land for speculation. They ganged up to form a ‘War Ministry’ and in the 1860s violently dispossessed Maori of many millions of acres. A number became rural barons with estates of many thousands of acres in the Waikato (Stone, 1973:9, 19). While these landlords were not yet established capitalist farmers, they served the purpose of converting Maori land into private property (i.e. creating modern landed property). Their monopoly of the land deterred workers from escaping wage-bondage in Auckland onto their own section in the bush. By such brutal means the Auckland merchant-adventurers succeeded in implanting capitalism in Auckland where the Wakefield schemes had largely failed.
In 1865 Auckland suffered a minor slump as Wellington replaced it as the Capital city. But it was saved in 1867 by the Coromandel gold bonanza. Loose money was now invested as capital in mining, land development and timber. Capitalist enterprise was up and running. A clique of crony capitalists who got rich quick formed around the Bank of New Zealand (BNZ), New Zealand Insurance (NZI), and New Zealand Loan and Mercantile Agency (NZL&MA) (Stone, 1973:21-25). The ‘pork barrel’ politics of the 1870’s won Auckland the lion’s share of Vogel’s original ‘think big’ borrowing boom to build roads, rail and ports as the arteries of the regional economy. Auckland businessmen became the most dynamic entrepreneurs in the Colony enticing overseas finance and banking capital to invest in mining, agriculture and forestry. Land could be converted to capitalist property to produce rent. Money could now be transformed into Capital. Local Capitalism has been reinvented, stamped and branded ‘Auckland, New Zealand’ but it was franchised to the City of London (Stone, 1973:21-25; Hanham, 1963).
Belich speaks of these years as ‘progressive colonisation’ before the onset of ‘re-colonisation’ (2001:17). (9) Yet New Zealand was then a colony directly ruled by Britain. There was only room for decolonisation. The settler oligarchy demanded ‘Responsible Government’ so that they could take responsibility for land development. Despite the emergence of an Auckland radical clique around George Grey, in the 1870s ‘politics ran on railway track’ (Sinclair, 1963:106). But even this significant degree of decolonisation had an imperialist payoff. The onset of capitalist production on the land put an end to chronic speculation and securely grounded Britain’s investment in the colony in a tax on land values. The standard of progress in the colony was measured by the value of commodities. Such progress saw to it that NZ remained a British neo-colony firmly tied by circuits of capital to Britain.
Auckland more than any other centre demonstrates this as its role was to ensure a profitable return on British investment. The local banks, insurance companies and loan companies had British shareholders as well as boards of directors. The City of London was effectively the Colony’s Board of Directors. The main shareholders were the British middle-class ‘rentiers’ or ‘coupon clippers’ who made 15% in the boom years between 1875 and 1885 out of the ‘primitive accumulation’ of Kauri, gold and Maori land (Stone, 1973:23). The local clique of merchant-adventurers got richer as agents of British capital, but few were to survive the colonial crisis of the 1880s to become the founding fathers of the New Zealand bourgeoisie.
Dominion City: ‘Progressives’ with delusions of grandeur?
In the year 2002 Jim Anderton’s ‘Progressive Coalition’ was the inheritor of the faded founding dream that New Zealand could become an independent nation with a state-managed national economy. Yet this myth had its origins in the reality of the sudden onset of state capitalism in New Zealand with the collapse of the boom in the 1880s. Creating the conditions for the capitalist market in the period of progressive colonisation was not enough to generate any economic takeoff. The frontier faltered and Auckland would have faced a 30 year slump were it not for an ‘artificial boom’ (Sinclair, 1963:107) later condemned as the ‘Vogelian burst of mad wastefulness’ (Stone, 1973:62).
The state stepped in with a rescue mission but this was insufficient to stave off depression. In 1881 the Inspector of the Bank of New Zealand warned the government against ‘meddling’ in industry and commerce (Stone, 1973:21). The credit boom saw bank advances leap by 75% between 1880 and 1884. But this generated little productive return (Stone, 1973:61). Logan Campbell warned of Auckland ‘riding high on a fictitious wave of prosperity’ (Stone, 1973: 61). By 1887 the BNZ had failed (Stone, 1973:66). It was the state that took on the debt, backing the bank with a guarantee in 1894 (Stone, 1973:194).
An excess of money that could not be employed as capital caused the crash.
Why? Productive investment requires production of profits. The extraction of timber and gold produced high returns but they were soon exhausted. The land taken from the Maori was not yet turned to the production of agricultural rent. Plans to subdivide and settle 600,000 acres of former Maori land south of Auckland didn’t go far. The NZL&MA sold up the ‘merchant prince’ J.C. Firth of Matamata (Stone, 1973:68, 139-152). So the limits of a raw extractive capitalism also capped the prospects for capital investment. The bust saw most of the merchant-adventurers go broke. Logan Campbell was proven right: all that credit generated so little production from the soil. He even had to sack his own gardener (Stone,1987a: 214).
Colonial capitalism experienced a crisis. Debt mounted as profits fell. The robber barons locked up productive land. Landless labourers clamoured for a single tax and land nationalisation (Brooking, 1996). Unemployed workers demanded unions, jobs and the vote. Progressive politicians like George Grey from Auckland and Robert Stout from Otago campaigned for the liberal paternalist state to intervene to rescue and revive the economy. The Auckland-based BNZ was virtually nationalised by Wellington. Tariff protection was introduced in 1888. The Liberal Government voted in by workers and landless labourers legislated land and labour reforms, breaking up the estates, subsidising small farmers, managing labour relations, public works and administration from 1890 to 1912 (Reeves, 1950:308-323; Sinclair, 1959:169-185). Despite the market diehards, ‘take-off’ in the colony was very much state assisted (Bedggood, 1980:28-44).
Auckland’s role in this transition from Colony to Dominion was to help resolve the colonial crisis within the new state-administered development. It transformed the speculator’s failed utopia into the Dominion City of the North – turning raupatu (confiscated land) into rent – overseeing capital flows and managing the rent returns to the ‘private sector’.
First, Auckland was fenced into Britain’s Farm. Land settlement policies along with new markets for refrigerated pastoral products saw the land around Auckland converted to capitalist farming. It was no accident that much of the land turned into small farms was recently alienated Maori land – the ‘busting-up the greatest estate of all’ (Brooking, 1992). Auckland became a regional centre for capitalist agriculture with value-adding dairy factories and freezing works straddling the regional rail, roads and ports.(10) The Official Handbook of the Auckland Industrial and Mining Exhibition of 1898 revealed a raw antipodian city bursting with capitalist enterprise. (11)
Second, Auckland became a sweatshop for local industry. Tariff protection encouraged small scale backyard manufacturing which had arisen willy-nilly to meet the needs of city dwellers. (12) Husbands (1994) study revealed widespread poverty in the working-class suburb of Freeman’s Bay in this period. The development of local manufacturing (textiles, clothing, brewing, pottery etc) and the associated transport, building and service trades, brought with it outbreaks of class conflict.(13) Auckland as the terminus of the main circuits of capital became the strategic location for the emerging national bourgeoisie that looked to the state to settle the labour and land questions.(14) However, some businessmen were not averse to backing labour if it was profitable.(15)
Over 100,000 migrants arrived in Auckland in the first decade of the new century, the majority single, unskilled men, contributing to Auckland’s reputation for ‘Larrikinism’ (Olssen, 1988: 108). It was the main arena of working-class support for Trade Union parliamentary candidates, socialism and the ‘wobblies’ (Olssen, 1988:107).
While arbitration had failed to contain the militants, scab labour backed by state forces and ‘Massey’s Cossacks” did the job.(16) By the outbreak of war the upsurge of industrial militancy on the wharfs, railways, mines and factories was settled. The majority of workers were safely incorporated into a state-managed progressive nationalism, isolating the breakaway (Red Fed) militants.(17)
Auckland after 1890 was proof of Dominion ‘de-colonisation’ not ‘re-colonisation’.(18) Auckland as Dominion City was central to these developments since it was the home of three rival classes, each tapping into the imperial pipeline. First in line, the rising national bourgeoisie deducted its patents, profits and property rights as its slice of the god-given rent. Second, an increasingly concentrated, organised and politicised working was prepared to use militant strike action to improve its claim on the rent of its own labour.
Third, a rural cohort of small farmers, the gumbooted vanguard of the self-employed ‘middle class’, were determined not to ‘share their rent’. (19)
Responding to the emergence of these class conflicts over the division of the rent, the New Zealand state won important new sovereign powers over the domestic economy that allowed a larger proportion of the rent to be retained. It intervened in the market with tariffs to protect domestic industry, and heavily subsidised pastoral production. Neither of these actions met with imperial approval.(20) In a fit of adolescent rebellion it had made the transition from Colonial capitalism to Dominion capitalism and kept back a bit of the differential rent. (21)
Of course ‘decolonisation’ did not mark a break with New Zealand’s political or economic dependence on Britain. It just reconfigured it as Dominion capitalism (Ehrensaft and Armstrong, 1978). Britain was prepared to concede Dominion status to its debtor colony in its own interests. New Zealand’s political independence was contingent on appeasing the City of London. The neo-colonial state, via its principle gateway, Auckland, was now the guarantor of the national debt, ‘contracted out’ by Britain to create, manage and tax capitalist production to meet loan repayments to British rentiers. The Dominion was now a neo-colony.(22) The City of London end of the pipeline was flush with repatriated interest, profits and ‘back wages’ (23) as its guaranteed share of the rent (Sutch, 1966: 206-235).
Thus the development and integration of the nation around a neo-colonial state-centred strategy did not fundamentally shift the dependent relationship with Britain one way or the other. Nor was it able to insulate the economy and offset the crisis of Dominion capitalism. This crisis sparked a new level of restructuring and intervention to rewire the circuit of ‘paralysing dependency’ on export prices. Auckland played a key role in bringing about these changes as the main circuit-breaker of the Dominion Capitalist crisis.
Welfare City: Labourism nationalises the dream?
Writing in the Great Depression, A.R.D. Fairburn excoriated the social extremity of the times in his poem ‘Dominion’, in which the ‘usurers’ and the state ‘enslaved’ the workers on the ‘treadmill’; the unemployed lived in ‘backblock camps for outcasts, the superfluous’ sacrificed to ‘the maintenance of profit as distinct from the gross increment of wealth’, and the land is ‘mortgaged in bitterness, measured in sweated butterfat’.(24) The Dominion capitalist crisis in the 1920’s and early 30’s saw the outward flow of value in the pipeline fall dramatically. The market for pastoral products in Britain went into steep decline. Prices of exports slumped by nearly half despite rising volumes (Hawke, 1985:127). Import prices fell by only about 10% but volumes slumped by 40% (Hawke, 1985:134). This caused a severe retrenchment of the domestic economy including wage cuts and job losses (Hawke, 1985:140-2) and allegations of ‘rampant sweating’ (Martin, 1994:138).
Like the Long Depression of the 1880’s, the Great Depression of the 1930’s was a failure of the world market to ensure economic growth. The Dominion Capitalist settlement of the 1890’s was exhausted by the neo-colony’s dependence on primary product export markets and fluctuating export prices – the so-called ‘balance of payments constraint’. This crisis called upon the state to step up to a new level of economic intervention. Better management of export markets and ‘guaranteed prices’ was one way of stabilising export prices. But New Zealand was essentially a ‘price taker’ (Hawke, 1985:160). Conserving foreign exchange by import substitution was the one sure way of conserving foreign exchange and restoring domestic growth. The solution was for the state to intervene, apply demand-side economics (later known as Keynesian economics) to regulate supply and demand, along with welfare state measures to regulate incomes. It brought into being the next settlement – Welfare Capitalism.
New Zealand’s neo-colonial dependence was tested by the double-banger Dominion crises of depression and war. The Labour party had to come up with the political fix. Labour’s grandiose visions of a socialist economy were by the 1930s compromised to meet the interests of manufacturers and small farmers. The prospect of office saw Labour scale down its dream of state socialism to state managed capitalism (Cutler, 1990). The recovery of the economy after 1935 averted any need for radical change. As Sutch makes clear, this shift to more heavy state intervention was less to do with welfare ideology than with overcoming depression and fighting a war (1969:230-259). It was the 1938 Exchange Crisis that forced Labour to adopt more drastic policies of economic insulation such as import licensing and exchange controls (Hawke, 1985:165).(25) War time stabilisation policy extended these controls (Hawke, 1985:173). Rather than ‘nationalising’ or ‘de-commodifying’ the economy, the state would subsidise and manage capitalism for the benefit of all.(26) The resulting welfare capitalist settlement allowed Labour to come out of the war with much less debt and primed for a post-war boom that created massive growth centred on domestic manufacturing Sutch, (1966:297). It had made the transition from Dominion ‘quasi-colony’ to Welfarist neo-colony.
There are many misconceptions about what caused the post-war boom. But none of them argue that is was caused by New Zealand’s ‘recolonisation’! The standard left wing ‘Long Pink Cloud’ tradition is well known (Olssen, 1992:61). On the right wing, reborn free marketers like Auckland historian and Rogergnome Michael Bassett claim that the boom was held back by Keynesian state interference. The world economy took off but welfarism held back New Zealand’s participation in that boom (Bassett, 1996: 22).
Against this view Marxist Brian Roper showed that the ‘golden weather’ followed the ‘dark storms’ of depression and war. These storms destroyed out-dated backyard industry, restructured production, and disciplined the labour force, preparing the way for the post-war Welfare state settlement (Roper, 1993, 1997). Neither of these ‘left’ or ‘right’ views gives any credit to the insulating state for creating a boom. By contrast, the prevailing social democratic orthodoxy gives the state’s role as active agent of national development pride of place (Sutch, 1966, 1969, 1971; Rosenberg, 1968, 1978). The ‘Long Pink Cloud’ tradition, originating with Pember Reeves, is well established (Olssen, 1992:61). Not Marx but Keynes was the saviour. Only the interventionist state could insulate the economy and break the circuit of dependency.
Economic ‘insulation’ allowed the whole country to go ‘on the welfare’, sharing out the national wealth among different classes. As usual some did better than others. The Government formed strong links with some business cronies to launch the dream of a national development strategy. Welfare depended on growth, and growth on welfare. The relatively closed economy was a recipe for oligopoly (Macrae, 1977:45). The former merchant princes, financial cliques, land barons, unemployed workers and the destitute had gone, and in their place appeared state subsidised crony clubs of farmers, manufacturers, bureaucrats and workers (Jesson, 1987:33-65).
The state subsidised agriculture through producer and marketing boards and negotiated trade deals with Britain to guarantee stable prices to producers. It also stepped up public works to create the infrastructure for manufacturing. Auckland was becoming the prime site for developing the new economy. The rapid growth of Fletcher Construction typifies this. Labour put James Fletcher in charge of state-house building soon after it was elected in 1935. He became commissioner in charge of defence construction during the war, and then head of the Ministry of Works.
By the end of the war Fletchers had gone public and expanded into a range of building supplies including timber, steel and cement and into manufacturing roofing, asbestos, and plywood (Jesson, 1987: 41). Its home base was now located in Auckland and post-war moves into forestry, paper, steel and energy production made Fletchers the largest conglomerate in the country.
New industry created employment. A flood of workers, many of them Maori, came to Auckland to take up jobs in manufacturing, building and construction, transport and communications (Foster, 1973).
Workers got their own welfare safety net. Labour’s state housing program created whole new ‘satellite suburbs’ of dormitories for the workforce (McGee, 1969:169; Thorns, 1977:63). Social spending as a share of GDP remained static for much of this period (Macrae, 1977:50). But welfare capitalism had to be worked and managed, so state employees and public servants multiplied. While Wellington was head office, most government departments were also located in Auckland and so a burgeoning army of public employees joined in the suburban sprawl.
But the main class antagonists always contested the terms of the post-war welfare settlement. The welfare settlement could not be founded on a comprehensive economic protection. It remained vulnerable to export prices and scarce foreign exchange. Without effective insulation Labour had to enforce austerity on its supporters. Labour took the first steps to reign in militant unions with cold-war redbaiting. In 1949 it sided with F.P. Walsh, leader of the moderate Federation of Labour, to smear unions such as the Auckland wharfies and carpenters as misled by communist infiltrators (Sinclair, 1976:276-7). It shot itself in the foot by enacting peacetime conscription (Sinclair, 1976 274) and lost the election that same year.
In 1951 the employers conspired with the Holland National government to stage a waterfront lockout to remind workers who was the boss. Centred on Auckland this defeat was to consolidate the post-war settlement on the bosses’ terms for a whole generation.(27) As in 1890 and 1913, moderate workers sided with the employers against the militant minority of the labour movement. The nerve centre of militant unionism in Auckland was crushed and National returned to office with a larger majority (Bramble, 1998). The 1950s windfall boom in export prices was blown on consumption rather than ‘broadening the export base’ (Sutch, 1966:431) and merely delayed the outbreak of the next balance of payments crisis, in 1957.
Labour got another chance in 1957-60 to push the boundaries of the protectionist state further to try to resolve New Zealand’s neo-colonial dependency. Bill Sutch as Secretary of Trade and Industry did his best to promote import substitution manufacturing or ‘development in depth’, including a glassworks, an oil refinery, an aluminium industry and even a cotton mill (Sinclair, 1976:343). Compared with Muldoon’s later ‘think big’ programme, this was ‘think huge’ (Sutch, 1966:426-435).
Auckland fitted into Sutch’s five-year plan too. At Waiuku on the Southern flank of industrial Auckland, a steel mill was founded on iron sands.(28) The dream of an economy insulated from the storms of the global economy was about to be realised. But this dream became a nightmare when the National government took New Zealand into the International Monetary Fund in 1961. New Zealand was now set on the path of liberalisation and free trade (Sutch, 1972: 55). The economy was now opened to foreign ownership and control and ripe for take-over as a ‘book entry in the supernationals’ (Sutch, 1972:102). And most of those multinationals would locate their Head Office in Auckland (Britton, et. al., 1992:59).
Social-class divisions spread from the old inner-city neighbourhoods to the outer suburbs as they filled up with immigrants. The south and west were workers’ dormitories for factories located in the south-west-east periphery. Mass inflows of Maori and Pacific Islanders pushed by rural poverty and pulled by new jobs congregated in the cheap state and private housing developments across the south-west zone. The north and east expanded as middle class embourgeoisified ridges and slopes with views of the Waitemata harbour (Thorns, 1977:73). Status snobbery abounded here, in the social attitudes towards new immigrants, especially the ‘eth-class’ of Polynesians (Macpherson, 1977:107). High socio-economic status (SES) was reproduced over generations (Vellekoop-Baldock, 1977), as a US sociologist discovered when surveying one Eastern suburbs girls school on the issue of sexuality. The University of Auckland Vice-Chancellor stepped in to stop the research. The University of Auckland stopped the research when the parents complained.
The economy could no longer be insulated from the ravages of international capitalism. Nor could society be insulated from divisions of class, race and gender. Social indicators all expressed the full Socio-Economic Status (SES) spectrum of locations and dislocations in housing, schools and social amenities. The ‘pink cloud’ ideologues who promulgated the dream of a classless society where social difference was part of the price of progress now had to explain away intractable racial, gender and class divisions (Bedggood, 1980:7-9). Auckland failed to match the promise of the Labourist dream. It turned into the wasteland of urban sprawl, widening gaps, gangs, racial time bombs, suburban neuroses etc. The scene was set for the social destruction of the neo-liberal revolution.
Global City: Banksism and the Banks
The ‘end of the golden weather’ as viewed from Takapuna beach was Bruce Mason’s play about the end of a New Zealand adolescence (Mason, 1962) that serves as a metaphor for the end of New Zealand’s adolescence (Roper, 1993). What the Labourites had celebrated as a permanent Keynesian-welfare compromise began to collapse in the mid-1960s. Export prices fell, markets closed and the Balance of Payments went into deep deficit. In 1967 Finance Minister Muldoon wrote a ‘letter of intent’ to the IMF surrendering New Zealand into ‘debt bondage’ (Rosenberg, 1968).
Re-enter centre stage Sir Robert Muldoon, the larger than life Auckland politician, in some ways a late twentieth-century social liberal in the mould of Sir George Grey. He fraternised with Maori gangs and acted as narrator in the ‘Rocky Horror Show’ as easily as he called out the cops to bash Springbok Tour protestors. The unquestioned financial driving force of the National governments of 1975-84, Muldoon tried to shore up an economic fortress model for New Zealand. His wage and price freezes and heavy borrowing (‘think big’) to create self-reliance in energy, was like Dr Vogel meets Dr Sutch. The result was Muldoon’s own ‘Rocky Horror Show’ as the ghosts of New Zealand’s neo-colonial dependence -market forces- came back to haunt the country. The attempt to overcome the Dominion crisis by insulation had created its own crisis thirty years later. Welfare capitalism based on import substitution had finally outgrown the domestic market. It had to break out of the hothouse into the cold world outside, or die.
Muldoon’s heavy handed economic nationalism failed to patch over the broken panes in New Zealand’s glasshouse. Even he could not hold back a crisis that was endemic to capitalism. Keynesian economics proved incapable of preventing the tendency for profits to fall. The long cycle in the world economy that went into a downturn in the late 1960’s was one of falling profits and excess capital (Roper, 1993). But to make it worse New Zealand suffered its own semi-colonial crisis of welfarism. Once New Zealand companies had saturated the domestic market protection became a death sentence (Bedggood, 1977).
New Zealand’s severe economic crisis resulted from a head-on collision of both global and local cycles. Insulation of the economy suppressed internal competition and the operation of the law of value, but the tendency of the rate of profit to fall was apparent.(29) The solution to the crisis was the return of market forces (i.e. the law of value) and restructuring (i.e. depression).
Accounts of this differ somewhat. Those who represented big business pushed for the deregulation of the economy to allow manufacturing to become internationally competitive. For the New Right the deregulation of the market was a move to overcome barriers to economic freedom. From the start Auckland business interests were behind the political pressure for reform.
This quickly spread into the Labour Party establishment. The leading Rogergnomes originated in the Auckland regional Labour Party.(30) Auckland as the historic hotbed of crony capitalism rapidly became the campaign headquarters of deregulation and the new frontier of globalising flows of finance and cosmopolitan consumer lifestyles.
Beginning around 1984, the New Zealand Business Round Table (NZBRT), based in Auckland, produced a series of papers and submissions to governments on reforms required to implement this neo-liberal agenda.(31) The Fourth Labour government (1984-1989) and National governments from 1990 to 1996 followed many of the NZBRT prescriptions from which prominent Roundtable members benefited (Kelsey, 1995). Deregulation of capital flows, of the labour market, the lifting of subsidies and tariffs, and the privatisation of state assets were the key elements. Corporate raiders like Brierley, Gibbs and Hawkins bought up and restructured under-performing companies. They also prepared the ground for Auckland merchant bankers like Fay and Richwhite to make windfall profits from the privatisation of state assets (Britton et.al., 1992: 165-169; Kelsey, 1995:127-137).
Two Auckland examples stand out – Telecom and New Zealand Steel. Both were state-owned monopolies that were privatised at huge loss to New Zealand workers. These public assets were sold off cheaply, creating huge profits for their rich multinational buyers and their local agents (Barton, 2001). Thousands of Telecom workers were laid off, though some were re-employed as contract workers with no union cover and for worse pay and conditions. Telecom could then profit by extracting monopoly rents from its customers and rivals (Gaynor, 2001). Telecom’s quasi-monopoly of Telcos now forms part of a larger media monopoly with Murdoch’s Independent Newspapers Ltd, and Sky TV (Braddell and Shearer, 2000).
Muldoon expanded the state-owned Glenbrook steel mill on the southern fringe of Auckland in 1981. The day before the 1987 crash, Equiticorp bought 89 per cent of NZ Steel from the government for $200 million under its market value. Equiticorp collapsed soon after, leaving the state and its shareholders carrying the loss. CEO Hawkins went straight to jail for six years, while NZ Steel was snapped up by its historic competitor the Australian giant BHP (Hunt, 2000:229).
Those manufacturers who depended on tariff protection, along with the inheritors of the social democratic dream, including Brian Easton (1997) and Paul Dalziel (1992), opposed the neo-liberal agenda. They defended the welfare-capitalist settlement. In their eyes uncontrolled deregulation was re-colonisation. National sovereignty over the economy had to be retained if the economy was to be regulated against external domination. For radicals like Bruce Jesson and Jane Kelsey, who had heeded the early warnings of Sutch and Rosenberg, the crisis was not one of capital but of capitulators. Financiers and speculators had taken over the world economy without a fight. Their agents in New Zealand, most of them based in Auckland, had succeeded in capturing the state and worse still, the New Zealand Labour Party. The invasion of global finance capital would ruin the New Zealand economy.
Jesson fought back against the neo-liberal takeover at the Auckland Regional Services Trust (ARST) as a member of the Alliance. From 1993 to 1995 he chaired the ARST whose task it was to manage Auckland’s corporatized state assets such as the ports and buses and prepare them for privatisation. The price of this efficiency drive was the cutting of costs, including jobs and wage cuts. The ARST delayed the privatisation of the buses until 1998 and prevented the sale of the Ports of Auckland. Jesson argues that the record of the ARST over this period demonstrates that the public sector can be efficient and profitable. Yet ‘Jessonism’ proved to be an anomaly soon corrected by the abolition of the ARST.(32) Once again, Auckland was asserting its role as the portal of global finance capital responsible for re-colonising New Zealand in the interests of international capital. By the year 2002 Muldoon’s Rocky Horror Show had re-opened in Auckland City. This time the figures of John Banks and his evil henchman Bill Birch appeared in Auckland City politics. Auckland was rebranded with Banksism.(33)
Is this “glass mirror parasitism”? Did Jesson see right through the Mirror Glass? Had Auckland become a parasite on the body of New Zealand producers? I don’t think so. Jesson romanticises productive capital by demonising finance capital (Jesson, 1999:24). Yet the history of Auckland shows they are blood brothers. Auckland’s boomtime rap in the 1980s was not a re-run of the 1880s. The role of finance capital appears similar – speculating in assets that do not produce value. On the one hand the crisis of the 1880s was due to the incomplete implantation of capitalism. Surplus capital in Britain could not be productively invested in Auckland until it had first been through its ‘primitive accumulation’ and created landed property and free labour.
A century later, the crisis of the 1980s was necessary to restructure capitalist production to restore profitability. Corporate raiders such as Brierley and Equiticorp, and merchant bankers such as Fay and Richwhite, are capitalist restructurers (re-valuers) of assets. They are the jackals of market ecology. Finance capital functions as part of productive capital so long as the market rules, tearing apart old inefficient industry and spawning new ventures in the process Schumpeter called ‘creative destruction’. In the 1980s Auckland became the uncontested business capital of New Zealand as its share of manufacturing, trade and services increased. It displaced Wellington as the preferred city for most of the new foreign companies locating in New Zealand (Britton et. al. 1992:59; Le Heron, Pawson, 1996:74).
The jackal-like ‘restructuring’ of industry bit into the Maori and Pacific Island workforce as the welfare-capitalist industries – freezing works, clothing and footwear factories, and car assembly plants – closed down or relocated overseas (Britton et.al 1992:130 ff). Yet the size and militancy of Auckland unions at New Zealand Steel (Glenbrook) and Ford (Wiri) and the organised resistance to the Employment Contracts Act in 1991, proved that Auckland was no glass mirror menagerie (Britton et.al, 1992:81). Like each of the earlier crises, Auckland led the charge to restructure the national economy and showed the scars of these brutal battles in its own social transformation.
So the latest battleground is not merely a rerun of the 1880s and 1930s. Each crisis forced a leap ahead in the development of local capitalism, from conception, to infancy, adolescence, and maturity. The Colonial crisis meant that the state had to take charge to create the market and be guarantor to capitalist production. The Dominion Crisis revealed that New Zealand’s vulnerability to external shocks demanded a higher level of national protection. Once this solution had run out by the 1970s and falling profits threatened the survival of capitalism in New Zealand, the welfare crisis made yet another restructuring of production necessary.
In this view, 1987 and not 1887, is the critical turning point when New Zealand lapses into ‘recolonisation’. The national economy that was founded out of the crisis of the 1880s becomes de-nationalised and forced into the global economy. National sovereignty is ‘hollowed out’ and replaced by multilateral agreements that impose the hegemonic sovereign brand of the USA. Auckland is displaced geographically and becomes indistinguishable from metropolitan America as part of the Empire. Auckland becomes the ‘mirror glass’ information portal of global finance and casino capital. This reality is captured in the flickering image of John Banks riding up Queen Street on his Harley-Davidson.
New Zealand has undergone a genuine re-colonisation by the United States ‘Empire’ since 1984 (not 1884). But this is not the radical coup conspiracy theory of the radicals. Cronin’s (2001a) analysis of rise of the multinational and finance fractions of capital in NZ can be applied usefully here to show that the finance sector serves to restructure and concentrate productive capital.(34) As the limits to the welfare capitalist solution became apparent, multinational and banking capital re-asserted its property rights and forced the NZ economy to open up. Of course this was said to be necessary for freedom rather than profits. But the cause was not the political ill-will or greed of foreigners. It was a necessary restructuring of production to free up the flow of capital within the global economy. Global solutions are total and leave no spaces for the local except as niche nostalgia markets. Auckland as Global City is Capital go-with-the-flow City.
Conclusions on Space and Time
Back to the original question: is Auckland the parasitic agent of Overseasia? What if there is no Overseasia, and never has been? Perhaps it is an imagined other that masks the global circuits of capital flow? Perhaps Auckland has never been about space but rather time. Once capital conquered the globe, space was reduced to time. Auckland’s identity was stamped by its role in facilitating the international circuit of capital.
Time is money, and under capitalism money must become capital or cease to increase in value.(35) So Auckland’s evolution can be understood as the elimination of space by time in the interests of capital accumulation; its implantation of capitalist social relations converted local land and labour into rent as capital flows. Its circuit breaker role has been to restructure and modernise those social relations by means of a national stock exchange and then as global agent of capital flows.
What if Auckland plays pimp in the Americanisation of the economy? The whole world is being pulled into America’s orbit. At the same time America’s Empire becomes the world empire. If we all become American’s what do we lose? While New Zealand won the America’s Cup, the United States won New Zealand as its prize. What is left of the sovereign British settler colony is now pulled North East as a US ‘semi-colony’. So what is new? New Zealand lost some of its British heritage to Aussie rugby, racing and beer barons, but then Maori and Aboriginal peoples lost a lot more.(36) If New Zealanders want to try their luck in the global economy they have to buckle up and take a chance on ‘casino capitalism’.
Capital is Flow time. Auckland is the transmission belt of the inward flow of venture capital and culture, and of the value-added outward flow of knowledge commodities (including knowledge workers). Aucklander Helen Clark’s favourite entrepreneurs are Auckland’s winners of Michael Porter’s competitive advantage stakes. Auckland has captured a rich niche knowledge market down under. But the world-beating biotech industry needs the life line of US venture capital.
That’s why Banksism banks on the banks. For the first time in its history Auckland’s future is totally wired to the global economy. The capital circuits and flows are wide open. Auckland is no longer a circuit breaker to the outside world but is located in the outside itself somewhere near the International Date Line – pure Capital City.
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1 Published in Ian Carter, David Craig and Steve Matthewman (eds) (2004) Almighty Auckland, pp 25-47 Palmerston North: Dunmore Press.
2 Eldred-Grigg (1996:55) reports that outsiders described Auckland as ‘rotten’, inhabited by ‘sharpers and thieves’, ‘reckless, profligate, dishonest’, noted for its ‘rabid speculation’ and ‘commercial immorality’. Tom Brooking (1996) argues that the settlers wanted to escape the industrial cities of Britain for a rural arcadia of small landholders, free of urban speculators, landlords, bankers and other parasites on the back of the land. Of course this idyllic split between town and country could not survive the introduction of capitalism to New Zealand where the land was converted into capitalist landed property for the production of commodities so that class divisions in the towns and countryside would produce both urban and rural slums (Bedggood, 1980:49-52).
3 Rent is the technical name for the wealth produced by labour on the land. It is the main source of wealth generated in the NZ economy so the struggle for a share of the rent is what motivates NZ’s history like nothing else. See Macrae and Bedggood (1979:120), Bedggood, (1980:35) and Steven, (1985).
4 I use the term ‘Empire’ here to signify United States ‘imperialism’ i.e. the US domination of most of the world via its multinational corporations, the IMF and World Bank, the UN Security Council, and its military. By ‘re-colonisation’ I mean a reversion to the status of a colony where national sovereignty is reduced to passing laws to reproduce international capital (c.f. Pocock (1992:53; Kelsey,1999:43-52).
5 For E.G. Wakefield’s role in this ‘experiment’ see Olssen (1997).
6 West Australia’s labour shortage was solved by convict labour until 1868. Mr Peel never succeeded in employing workers and became a land speculator instead (Marx, 1976:934; Hughes, 1988:577).
7 This was why Marx could claim that Wakefield discovered something new about capitalist relations. ‘So long, therefore, as the worker can accumulate for himself – and this he can do so long as he remains in possession of his means of production –capitalist accumulation and the capitalist mode of production are impossible’ (1976: 933) ‘How then can the anticapitalist cancer of the colonies be healed?’ Wakefield’s scheme was designed to price land so high that workers would have to work for a period before they could save their wages and buy land, while the proceeds of land sales would go to the government to fund immigration (1976:938).
8 This term does not refer to accumulating the land of ‘primitives’. It means accumulation which is not capitalist accumulation. ‘So-called primitive accumulation is nothing else than the historical process of divorcing the producer from the means of production’ (Marx, 1976:874).
9 For labour conditions in Auckland before 1890 see Martin (1995).
Belich (2001) claims, against the conventional wisdom of ‘left’ and ‘right’, that New Zealand was ‘re-colonised’ from the 1880s to the 1930’s. He suggests that self-government and an emerging culture of timid nationalism celebrated by the ‘long pink cloud’ school of historians masked New Zealand’s growing economic dependence on ‘protein exports’(2001:28-31).
10 Auckland had twin ports on the Waitamata and Manukau and two ‘portages’ in between, Otahuhu and New Lynn.
11 None more exemplary than the Auckland Freezing Co whose ‘stately and commodious premises between the railway line and Railway Wharf’ houses a ‘new Hercules seventy-ton ammonia machine’ capable of manufacturing 8 tons of ice and freezing 1600 sheep in 24 hours, and accommodating 36,000 sheep (Official Handbook, 1898:138)
12 Some industries serving the expanding New Zealand market and were quite large employers. Clothing and textiles were represented by Archibald Clark and Sons on Shortland St, soft goods importers and merchants, who started manufacturing ‘Chief’ and ‘Zealandia’ brands of clothing from about 1888 employing ‘several hundred workers’ in two factories built behind the warehouse (Official Handbook, 55). Of a similar size (employing 100 Singer sewing machines) was the Cambridge Shirt and Clothing Factory in Victoria St West (ibid:85). The Onehunga Woollen mills employing 90 hands in spinning all sorts of tweeds and serges, was set up in 1886. Similarly, brewing (Campbell and Ehrenfield on Queen St., the Great Northern Brewery on Kyber Pass Rd, the Captain Cook brewer of Hancocks XXXX brand), flour milling (Northern Roller Mills on Fort and Quay Sts). The man who some thought ‘ran the whole civic show’ was J. J. Craig who employed over 400 men in transport, shipping, pottery (Avondale Brick and Pottery Works) coal and lime (ibid:146).
13 Olssen (1987) argues that union membership took off among the unskilled workers (Tramway strikes 1906, 1908; Labourers, 1911 and attempted general strike of 1913) over this period. Membership went from 1500 in 1901 to over 13,000 in 1915 (ibid:84). Support for the ‘Red Fed’ and revolutionary socialist ideas was strong (ibid:88; .Wilkes, 1993 Chapter 5:14)
14 (Olssen,1988:108) The prominent families associated with these businesses such as the Campbell, Myers, Davis, Hellaby, Nathan etc formed the backbone of the Auckland bourgeoisie of the 20th century. See Wilkes (1993:Fig 5.1) for statistics on the colonial class structure in 1891, 1901 and 1911.
15 Workers voted for brewer, Arthur Myers, who stood against prohibition, while Ernest Davis another brewer ‘was the principal financial backer of Auckland’s Red Feds’ (Olssen,1988:109)
16 ‘Massey’s Cossacks’ (special police named after the Reform Prime Minister from Mangere on the southern fringe of Auckland) were drawn mainly from the small farmers who had become a petty-bourgeois class pitted against organised labour. In 1913 the New Zealand Farmers’ Federation recruited thousands of farmers enraged that their produce was rotting on the wharves, as ‘specials’ to act as strike breakers and work the wharves (Olssen, 1988:192).
17 Olssen’s (1988:107-123) research on the ‘Red Feds’ in the Auckland area is the classic account of the period ending in the 1913 general strike.
17 Belich, like Sutch (1966:xii) uses the term ‘colony’ to mean ‘economic colony’ in the sense that I use the term ‘neo-colony’ to signify an economic dependence on foreign capital. Belich is correct to challenge the historians who declare national independence with literary phrases. But he overlooks the fact that the benefits of domestic growth did not all flow to Overseasia. Auckland developed from the 1880’s onward as a regional site of the ‘nationalised’ economy acting as agent for British capital but capable of living well off the ‘rent returns’.
18 With the breakup of the Liberal party by ‘class war’ (Olssen, 1988:219) in 1912, farmers sought their own political representation in Massey’s Reform Party and later in the National Party (Sinclair, 1959:186-207).
19 Sinclair (1976:180) recounts how much later, Walter Nash successfully overcame strong British objections to Labour’s economic nationalism by offering to allow British ‘branch plants’ to set up in New Zealand.
20 Steven’s (1985) view is that Pakeha of all classes benefitted from the rent of stolen Maori land. I take the view that the bulk of the rent went as profits to the bourgeoisie, and that Pakeha workers did not have their wages ‘topped up’ from rent (Bedggood, 1980:39).
21 A neo-colony is a former colony that remains economically dependent on the former colonial power. Sinclair’s term was ‘quasi-colony’. New Zealand as a Dominion was formally independent yet still ‘paralysingly dependent’ (1976:135)
22 ‘Backwages’ is A.R.D. Fairburn’s term in his poem ‘Dominion’ for surplus extracted from workers in Britain and invested as capital in the colonies to employ migrant workers (1966:23).
23 Ibid 15-16.
24 See Sinclair (1976:175-186) on the tough borrowing terms imposed by Britain on the ‘quasi-colony’ Britain even wanted New Zealand to abandon import controls and industrialisation.
25 Socialism had become social security and according to Prime Minister Savage this was ‘applied Christianity’ (Sinclair: 1996: 167).
26 Scott’s (1977 ) account is sympathetic to Barnes but not his tactic of destroying the union movement. Bassett (1972) criticises Barnes personally for isolating the militants from the moderates. Barne’s book (1998) makes a case for confrontation despite overwhelming odds.
27 Rosenberg (1968: 194ff) shows that by 1962 the plan to set up NZ Steel would rely on Government funds but give the private sector control of the asset and the lion’s share of the profits.
28 Cronin calculates that the rise in organic composition of capital is much less than supposed by Pearce (1986) and Roper (1993) but the rise and fall of value composition is still associated with falling profits between 1972-1983, and an increase in profits from 1984-1989 (Cronin, 2001a).
29 Most of them from the Princes Street (University) Branch – Roger Douglas, Richard Prebble and Michael Bassett, along with their ‘fellow-travellers’ David Lange, Helen Clark, Phil Goff and Jonathan Hunt.
30 The NZBRT represented and was chaired by the CEOs of the biggest beneficiaries of welfare-capitalism such as Myers of Lion Breweries and Trotter of Fletcher-Challenge, and the historic dominance of the finance sector such as Norris of the Auckland Savings Bank. Other prominent members were corporate raiders like Alan Gibbs and Michael Fay and David Richwhite (Hunt, 2000). Their role as the ideological leaders of neo-liberal reforms with likes to international new right organisations has been well documented (Harris and Twiname, 1998).
31 What we can call ‘Jessonism’ is the idea that finance capital can be controlled or moderated by the state. Yet New Zealand’s history shows that the state acts to oversee the interests of finance capital and facilitate its profitability, so that former instances of ‘Jessonism’ i.e. ‘Vogelism’, ‘Sutchism’ or ‘Muldoonism’ were also anomalous tendencies that could not resist the dominant globalisation of the world economy. Of course it is a different matter when workers and others exercise direct democracy and take over the running of the services themselves.
32 ‘Banksism’ is the rule of the market in Auckland local body politics (opposite of ‘Jessonism’). It means getting out of social spending (e.g. pensioner housing) and moving towards user-pays (road tolls) for amenities and services. Bill Birch’s Report (Birch, 2001) was developed to implement this approach to Auckland City.
33 Cronin’s unpublished work reinforces the widely held perception that foreign investment, particularly that of key productive sectors, has risen dramatically since 1972, especially since 1984 (2001:157-197).
34 The speed of circulation of capital is important in determining the rate of capital accumulation (Marx, 1974:128). Money which is not invested as capital to create surplus-value ceases to accumulate or expand value (Marx, 1976:251).
On this issue see Pocock’s seminal (1992) essay.