The Development of Capitalism in New Zealand: Towards a Marxist Analysis (1978)
By John Macrae and David Bedggood
First published in Red Papers, 3, Summer 1978/79
In this paper we present the outline of a Marxist analysis of the development of capitalism in New Zealand. Given the circumstances under which we are working, it is obvious that much that will be covered requires further research and further thought. Nevertheless, it reflects a point in the evolution of our thinking. It also represents therefore as much a project of research as a definite statement of progress.
We shall show that N.Z.’s “national development” has been determined by its role as a semi-colony (white-settler colony or “colony proper” as distinct from colony) within the world-wide division of labour under capitalism. In taking this approach, we are engaged in theoretical class struggle against bourgeois conceptions of the causes of “development” which focus on there appearances and ‘isolated instances’ which are taken to represent the total social reality.
The method employed is that of Marx and Lenin, together with some reformulations and extensions of their work, which seeks to understand the working of the Capitalist Mode of Production (CMP) in terms of certain “laws of Motion” which operate not in any vulgar deterministic sense, but as a complex “structural causality” determined under specific historical conditions of class struggle. Adopting this method, we intend to demonstrate its power in explaining the development of capitalism in N. Z. as a complex inter-relation of economic, political and ideological causes which are determined in the “last instance” by the historic expansion of the CMP into the lands of white-settlement in the nineteenth century.
1.1 Modes of Production and the Social Formation
In this section we set out the basic concepts used in our analysis, essential for the understanding of both the structure and evolution of N.Z. capitalism. The core element of structure which we adopt is Marx’s concept of a Mode of production. A Mode of Production consists of an economic base or infrastructure, made up of two elements, forces of production – signifying the level of development of the technology of production, the extent of the division-of-labour in the production process, and the embodiment of scientific knowledge – and the relations of production – referring to the social circumstances of individuals who cane together in the process of producing and appropriating use-values. Relations refer to relations of production in three senses: legal ownership (e.g. shareholding), real ownership (executive control etc), and possession (e.g. physical operation of the process of production). Of the two elements comprising the economic base, it is the relations of production which are dominant in the form of “class struggle” as the ”motor of history”. Overlying the economic base in any mode of production is a superstructure comprising political, legal and ideological relations. Both base and superstructure make up the total structure of a mode of production (Marx, Preface, Marx and Engels, German Ideology, 41-62; Althusser, Essays, 201-8).
A mode of production is an abstraction. It is not directly observed; it is not an appearance. Rather it is the product of the Marxist abstraction of the’ relevant’ structure underlying the main features of the world is seeks to explain. The real world of human relations is not immediately given nor understood by simply observing everyday behaviour in the marketplace or the boardroom – were any ‘social scientists’ interested. It can only be reconstructed as knowledge of the laws which govern these relations. A Mode of Production therefore does not describe any actual society existing in recorded history. As a concept its purpose is to abstract those basic characteristics common to all actual societies, and to show how any given society can only be understood by means of such a concept.
In applying the concept of a Mode of Production to actual societies, Marx put forward another concept, that of a social formation In contrast to the superficial and unscientific bourgeois concepts of ‘nations’, countries’ or ‘societies’, a social formation is defined as a site of the concrete existence of one or more modes of production, under the dominance of the most’ advanced’ mode. In almost all cases, social formations will be made up of a complex articulation of modes representing a complex pattern of inter-relations expressed at the level of appearances as a ‘unique’ pattern.
Thus the contemporary N. Z. social formation as we define it can only be understood in terms of the articulation of various modes of production: the CMP in N.Z., together with the residual elements of the pre-capitalist Maori social formation (an example of a lineage mode of production), and the evolved form of the peasant-family sub-mode, but under the dominant influence of the world CMP mediated through its agents in N.Z., the national bourgeoisie. We insist that the concept of the N.Z. social formation has to be constructed as the end-product of the application of the Marxist method, and is not drawn out of the air as are the bourgeois figments of ‘nation’, ‘N.Z. Society’ or N.Z. population. We reject, in short, the method of political economy which starts from the outward form (e.g. the size of the population) and is forced to fumble into more and more meaningless generalities (the population’s skills, its social composition, the concept of a family etc.). On the contrary, we begin from the abstract and use this to explain the meaning of the concrete level of appearances (Marx, Grundrisse, 100) .
[Note : The concept ‘mode of production’ is a highly contentious one. We use it as an abstraction capable of differentiating distinct ‘social forms’ of production according to “different forms of the appropriation of resources, or means of production, and of the product itself”. Thus the concept is neither a schema emptied of historical content, nor an actual historical social formation. It is an analytic tool enabling us to look beneath the surface forms in any society and determine the ‘organising principle’ – that of the reproduction of the material means of existence (production) – of that society.]
Against the apologetic vision of the (political) economists, namely the harmony of interests, materialist analysis is dialectic; it insists on the primacy of contradiction built into the concept of structure. Now, the very existence of a structure presupposes the reproduction of that structure within a social formation. A mode of production (or any articulation in a given social formation) is not a stable equilibrium, but a system in which contradictory forces are constantly in opposition. The principal contradiction in any mode of production is between the forces and relations of production crudely between the forces of material progress and the ‘class’ appropriation of the materials produced – which generates ‘class struggle’. The reproduction of a mode of production therefore is the reproduction of its conditions of existence, namely conditions which contain the class struggle, but which also constantly reproduce class struggle. It is in this sense that Marx describes the CMP as a “unity with contradictions” (Grundrisse, Introduction). It also signifies that class struggle necessarily takes place within the superstructure as well as at the level of productive relations.
In contrast to the fragmented and superficial approaches of the bourgeois writers, the concept of the underlying “laws of motion” we advance is that of a complex structural causation which signifies that the reproduction of any social formation will involve the complex interplay of historical and contemporary circumstances, and also the interplay between the base and political and ideological levels of the superstructure. Despite the complexity of these relations as they operate in the case of the N. Z. social formation, we propose to trace this process of complex structural causation in order to demonstrate the primacy of the economic base in determining in the “last instance” the relations at the level of the superstructure. It is important to recognise that the dominance of social relations as expressed in the concept of determination in the’ last instance’ is in the final analysis, that of class struggle. In this, we follow the position of Althusser:
The capitalist social formation, indeed, cannot be reduced to the capitalist productive relations alone, therefore to its infrastructure (economic base). Class exploitation cannot continue, that is, reproduce the conditions of existence, without the aid of the superstructure, without legal-political and ideological relations, which in the last instance are determined by productive relations.. .and since the production relation is a relation of class struggle, it is the class struggle which in the last instance determines the super-structural relations, their contradiction, and the over-determination with which they mark the infrastructure (Essays, 203-4).
In other words, while the superstructure has a ‘relative autonomy’ from the base, this is determined within the limits set by the need to reproduce the conditions of existence of the dominant mode of production. Once these conditions begin to weaken or breakdown, we enter the whole new question of the transition from one mode of production to another (Bettleheim, Class Struggles)
What we shall be attempting to illustrate is new this pattern of structural causality, including the relative autonomy of the superstructure within limits determined in the ‘last instance’ by the base, operated in the case of the N. Z. social formation. This means first, determining the specific economic form in which exploitation occurs, and how this relates to the corresponding form taken by the state etc. Marx has stated the logic of this approach very clearly (cf. Althusser, Essays. 175-187).
The specific economic form in which unpaid surplus-labour is pumped out of direct producers, determines the relationship of rulers and ruled, as it grows directly out of production itself, and in turn, reacts upon it as a determining element. Upon this however, is founded the entire formation of the economic community which grows up out of the production relations themselves, thereby simultaneously its specific political form. It is always the direct relationship of the owners of the conditions of production to the direct producers – a relation always naturally corresponding to a definite stage in the development of the methods of labour and thereby its social productivity – which reveals the innermost secret, the hidden basis of the entire social formation, and with it the political form of the relation of sovereignty and dependence, in short, the corresponding specific form of the state. This does not prevent the same economic basis – the same from the standpoint of its main conditions – due to innumerable different empirical circumstances, natural environment, racial relations, external historical influences, etc., from showing infinite variations and gradations in appearance, which can be ascertained only by analysis of the empirically given circumstances (Vol 111, 791-792).
By taking the “facts of development of capitalism in (one) country” (Lenin, Russia, 67), we shall show how in the case of N.Z., any analysis of the “innermost secret” of the “hidden base of the entire social structure” has to take into account what has been said above i.e. natural environment – climate and fertility of new lands in the colony; racial relations – the destruction of Maori society; external historical influences – British Imperialism. Consequently, underneath what is usually taken to be a “unique” pattern of appearances, “the special case” (Blyth, 1973), there is the determination in the last instance of N.Z.’s semi-colonial role within the CMP.
1.2 Our Method of Procedure
Since the understanding of the history of the N. Z. social formation requires first an understanding of the CMP, we must begin with Capital. In Section 2 we assume that the reader is familiar with Vol. I on the production of surplus value, and the outline of the circulation process in Vol. Il. We use as our basic operational abstraction, the analysis introduced in Vol. Il, which we refer to as the ‘circuit model’. This describes the reproduction of capital by means of an increasingly complex system of interlocking circuits of capital in its various forms, constituting the total social capital (Vol. II, 357). We then add to this analysis of the economic base, the analysis of the ‘superstructure’ of the state and its ‘ideological apparatuses’ to demonstrate their role in the reproduction of the conditions of existence of the social formation. We conclude this section by showing how the circuit model can be used to analyse the process of expanded reproduction of the total social capital on an international scale. Here we extend the analysis of the “internationalisation of capital” pioneered by the French school of Marxists including Michalet and Palloix. We then show how the internationalisation of the circuits of central capital, into the peripheral or semi-peripheral social formations, such as N.Z., provides a significant extension of the basic model for our purposes. In the Note on Imperialism we argue that the use of the circuit model helps in explaining the particular historic roles of core capitalist states in furthering the internationalisation process by the use of force in establishing the CMP in ‘new’ lands and in setting up dependent client states in peripheral and semi-peripheral social formations.
The circuit model is not the orthodox theoretical model used in Marxist economics and its adoption implies that we approach many of the standard issues of Marxist debate (e. g. the transformation problem, productive vs. unproductive labour etc) from a different perspective (see the earlier formulation of this model in Macrae, The Neglect, Evolution). It is a ‘dynamic value analysis’ as opposed to a static one found in most standard approaches (Mandel, Desai, Balinky etc). We refer briefly to the implications of this approach for some of these debates in Section 2.
In Section 3 the abstract circuit model which provides the basis for our analysis of the internationalisation of capital and of imperialism, is used as a materialist framework for a brief history of the New Zealand social formation. Here we attempt to follow the complex causality at all levels — economic, political and ideological, tracing the patterns of change from the British social formation, through annexation, the destruction of Maori society, the implantation of the CMP, and the subsequent semi-colonial form of extraction of surplus-value, all determined in the ‘last instance’ by the economic base, i.e. the interlocking circuits of capital established in N.Z. In doing so, we subject bourgeois “histories” which put causal primacy on super-structural aspects of the social formation, to the critique of a Marxist science of history.
In the concluding Section 4, we attempt to put forward some general observations and guidelines for the analysis of the current crisis, drawing together the main lessons of the foregoing analysis, and setting out areas requiring further detailed analysis.
2.0 The Materialist Framework
2.1 The Circuit of Industrial Capital.
We begin by outlining the basic mechanisms of the circulation process. The economic base, or real foundation, comprises the twin elements of relations and forces of production. The former represents the social circumstances which relate individuals to each other with regard to the production and appropriation of surplus-value ; the latter represents the rode of economic or material life and organisation, the level of technology, nature, human qualities, etc., with which the relations of production must operate. Any advanced capitalist society is one whose economic base, by definition, has experienced considerable accumulation and division-of-labour.
To analyse such accumulation, we use the circuit model which brings out the important distinctions between forces and relations, between production and distribution/exchange, and between the production process and circulation process. This is one of Marx’s most brilliant simplifications – the basic idea of the circuit is one of reproduction, not production. It is used to analyse a situation where start becomes finish to start again on an expanded scale (Le. as it is across the entire Monetary base of the (Mp). Hence, the capitalist advances fixed and circulating (“working”) capital to purchase means of” production and the labour-power of the working class to start the circuit. He receives at the end an expanded mass of money capital, now including his net profit which he (or his bank) could temporarily hoard or immediately reintroduce into the next turnover cycle. Capital in changing its form over the cycle cannot be given any unambiguous (algebraic) definition; capital in Marx’s sense must always be related to the reproduction of the underlying capitalist relations of production, wage-labour and capital, as they relate to the turnover circuit. “Capital is not a simple relation, but a process, in whose various moments it is always capital” (Grundrisse, 258, also 221-370 for Marx’s definition of capital).
Within the CMP, the circuit of reproduction assumes the form: M – C – M’. Fully expanded this becomes :
where M is money capital, C is commodity, i.e. marketed production, Lp is labour-power (also a commodity), Mp is means of production, and P is productive capital. The primed values represent in general greater magnitudes than the unprimed ones and also later historical stages of a circuit or part of a later circuit. M’ – M = m’ or gross profit (see Macrae, The Neglect).
As expressed, this circuit represents the essentials of the underlying relations of production: labour-power as a commodity exchanged for M and organised with means of production by an industrial capitalist. It may also be used to assess the level of development of the productive forces since these will be reflected in the speed (time) of the turnover of capital i.e. the time elapsing between M and M’. We see, also the roles played in this process by a) the speeding up of the production process – continuous shift work, electronic technology with instant calculations, better product flow and b) the speeding-up of the circulation process – use of marketing, advertising, hire purchase agreements etc. to telescope the time of circulation. All these agents contribute therefore to the more efficient reproduction of capital (see discussion of productive and unproductive labour in 3.6 below).
2.2 Extensions and Generalisations
The above circuit (1) may be extended to assist in understanding certain key parameters of the system, for example the rate of profit – “The motive power of capitalist production” (Marx, Capital, Vol. III, 259). We shall also generalise it to account for interlocking circuits, both within social formations, and between them (internationalisation, Sect. 2.5) something of fundamental importance for our subsequent analysis of the N.Z. social formation.
According to Marx, it is during the production process (or during the production phase of the circuit indicated by the series of dots in (1) above) the surplus-value is created, although it does not take on a monetary form until it has been realised as part of gross sales revenue or M’. It is in the form of monetary profit that surplus-value therefore makes its appearance in the CMP. Accepting the formal identity between the mass of surplus-value and the mass of profit as Marx defines it, the annual rate of profit is defined as r (A).
(Note: this important distinction must be made more strongly in this current era of costing of “profits” for reasons of tax evasion, thus reducing the significance of ‘declared profits’ as a measure of r (A))
The rate is a relation between a flow magnitude and a stock magnitude. It represents the gross return over total capital advanced by the capitalist, over a particular period of time, that period thereby giving the rate its time dimension. From (2) it follows that r (A) is directly related to the mass of the surplus-value created, and this in turn, is a function of several variables, the most important being:
(a) The rate of surplus-value – itself a function of the level of development of the productive forces
(b) The number and quality of productive workers employed
(c) The number of effective ‘turnovers’ of production that can be completed in a year which in its turn is dependent on a range of factors e.g. levels of demand, sales, administrative efficiency, state intervention, together with the development of the credit system, all of which speed-up the circulation process; and factors such as mechanisation, rationalisation etc. which speed-up the production process itself.
Our analysis has pointed to the functions of sales agents, credit terns, managerial education and so on in speeding-up turnover. These items may be added to Marx’s general list of counter-tendencies operating to overcome the falling rate of profit (Capital, Vol. Ill, 232-240). They all act ultimately on the rate of turnover and hence, the rate of profit, either by helping to economize the amount of capital to be advanced, or by spreading fixed expenses over more production runs. Distinguishing fixed from circulating capital is also important for questions of pricing, employment and distribution (Macrae, The Neglect).
(Note: It is important to know how our analysis of reproduction is distinct from most existing Marxist analyses which stress a static approach to the economic base. Such approaches are dominated by questions such as “who gets more or less surplus-value”, or “what groups represent ‘drains’ on surplus-value” often leading to a discussion at the level of distribution rather than one based on a dynamic value analysis.)
Using the circuit model is it possible to get from an expression of an annual rate of profit (2), to a general rate of profit for any given social formation? Such a vexed question involves a consideration of the total social capital as composed of individual capitals with individual rates of profit, each circuit interlocking with others to reproduce the total social capital. Now a circuit of capital can interlock with another in a number of different ways, depending on the particular form which it takes on. One of the most important interlocks is that between the circuit of finance capital, put at the disposal of industrialists; this is the classical context of the discussion of imperialism (See 2.6 below).
According to Marx’s analysis in Capital Vol. III, the general rate of profit is formed by re-allocating total surplus-value across departments so as to equalise the rate of profit (as defined in (2) above) in each. But, if we view surplus-value as a flow deriving from the continuous movement of production, as in the circuit model, we cannot undertake any transformation as per Vol. III unless we assure a particular historical structure and phasing of interlocking circuits. If surplus-value is an irregular flow, it is not a stock that can be parcelled out into its ‘aliquot’ parts. Consequently it is doubtful whether any meaningful general rate of profit can be measured for a given social formation.
2.3 Money and Credit
Use of the interlocking circuit model clearly presupposes an advanced use of money in various forms. Money is the universal medium of exchange by which the circuits can be renewed. In this context money plays the role of a means of commodity circulation, although the Marxist theory of money encompasses other vital functions as well – in particular a measure of value and as an object of specific demand itself, even when it takes the form of inconvertible paper (De Brunhoff, p. xv). Indeed, the acceptance of money as a medium of circulation presupposes its establishment as the measure of value. It would seem, however, that with the development of the credit system, the function of money as a means of circulation declines relative to that as a unit of account, or measure of value, or obligation of debtor to creditor; here lies a major reason for recurring monetary crises, namely the ‘liquidity crises’ that occur when debts falling due cannot be met. While in normal times, the credit mechanism works to cover such gaps and enables the entire interlocking system to continue, at times of crisis this breaks down, loans are recalled, disruptions of production occur, and so on.
We can see then that there are fundamental interconnections between the credit system and the various interlocking production circuits. In some cases, the only interlock between branches of production may be, not by the exchange of commodities, but through the credit system itself, recycling ‘fallow’ capital from one otherwise independent branch to another. In this respect we see that the main functions of bank credit may be summarised as follows:
(a) Economising the absolute amount of capital to be advanced by the industrial capitalist, at the expense of course of interest payments drawn from the mass of surplus-value the industrial capitalist receives – i.e. a deduction from his gross profit.
(b) Speeding-up turnover by substituting for an inability to pay (commercial bills etc) and boosting low levels of purchasing power (hire purchase etc).
(c) Transferring balances of firms and individuals of one branch to make than work in other branches of production affecting (a) and (b) above, and raising the share of interest in surplus-value. These transfers of M raise the velocity of the circulation of money and thereby the possibility of an increase in the rate of accumulation. This is because the increased velocity of the circulation of money facilitated by the credit system is of itself insufficient to increase the rate of accumulation. It presupposes conditions such as the willingness of capitalists to invest, stocks of commodities, balance of payments etc. It may stimulate rapid inflation and contradict the basic aim of increasing capital accumulation, a point we take up below.
The importance of these credit functions in relation to the rate of profit has been shown by recent research. In their study of the declining profitability of advanced industrial capitalism, 1955-1975, Loiseau et. al. are struck by the very rapid growth in indebtedness of industrial firms to the banks over this period. The authors regard this important trend as both a countertendency to falling rates of profit, as well as a warning of the impossibility of repeated recourse to borrowing of this nature (from the credit system) to overcome the long- term tendency of continued decline in profitability .
Money itself has no price, rather a rate of exchange which ties money to socially necessary labour time, thereby expressing the function of money as a measure of value (De Brunhoff, 27). Inflation results in the depreciation of this rate of exchange between money and value. This is immediately reflected at the level of distribution as the depreciation of the holdings of money creditors, who are now repaid the equivalent of less value than they had originally advanced (depending of course on the exact terms of interest and repayment) and favours debtors who must pay a lesser equivalent in terms of value. Whilst much capital that exists today is fictitious capital (i.e. capital which does not enter directly into the productive circuit and therefore plays no direct part in the augmenting of capital, but which nonetheless exists in the form of a monetary claim on total surplus-value, e. g. interest on the national debt (Marx, Capital, Vol. Ill, 465), this mass of fictitious capital is clearly increasing with inflation and its growing claim on total surplus-value is not fictitious. There comes a stage therefore, when monetary phenomena (inflation, balance of payments, interest and exchange rates etc.) will hinder the reproduction process. Whenever monetary phenomena, in the guise of the credit system, interpenetrate the reproduction circuit, as they do to such an overwhelming extent in contemporary capitalism, the potential for crisis is so much more greatly increased. And as the state is drawn into the management of reproduction, any measures affecting money, such as credit policy, expenditures or other policies adopted by governments, because they affect the “universal medium”, must therefore percolate throughout the entire system.
2.4 The State and Reproduction
The capitalist state functions to reproduce the CMP at three levels – the political/legal, the ideological and the economic.
(a) Political/Legal. By this we mean the establishment by force of capitalist social relations – the separation of the direct producers from the means of subsistence and production, both in Europe, and the lands subsequently penetrated by the CMP. This function therefore is historically prior to the establishment of the CMP and its internationalisation (See Marx on “Primitive Accumulation” Capital, V. I 667-724), but remains a necessary condition of reproduction of total social capital on a world scale today as imperialism (2.6 below). The legal aspect of the states function is to legitimate the possession of private property, i.e. the conversion of means of production into alienable commodities including that of labour-power (e. g. the laws governing maximum wages and restricting strike action etc). This function of the state corresponds most directly to the bourgeois view of the state as an institution which has a monopoly of the use of force. Althusser refers to this area of state activity which contains the “Government, the Administration, the Army, the Police, the Courts, the Prisons etc” as the Repressive State Apparatus (Lenin, 136).
(b) Ideological. This function of the state is concerned with the reproduction of capitalist ideology. It extends the commodity fetishism of the marketplace into the realm of politics and culture by means of the Ideological State Apparatuses -educational, family, legal, political (including parties), trade-unions, communications, the arts etc. (Lenin, 137). The reproduction of ideology is basic to the reproduction of capitalist social relations since it constitutes bourgeois’ subjects’- i.e. character structure of bourgeois individuals. Political, Legal and Ideological functions combine to give us the ‘form’ or ‘appearance’ of the capitalist state including Social Democracy and fascism. The particular combination of any given form reflects the ‘relative autonomy’ of the state in performing its basic economic function (Bedggood, The Limits, cf. Poulantzas, Classes, 17-35).
(c) Economic. This function presupposes some combination of (a) and (b), i. e. some balance of force and ideology, in establishing the conditions of production. At this level the state intervenes in the circuit of capital to operate countertendencies to the falling rate of profit and to reproduce both national and international capital (see 2.5) These interventions can be understood in terms of the points at which they affect the circuit of industrial capital as expressed in (1) above.
M – Mp – The state advances capital in the form of an infrastructure (public works, railways, ports etc), or in the form of loo interest loans or outright grants. Thus the absolute amount of capital advanced by capitalists is reduced and the organic composition of capital held down, both counteracting the falling rate of profit.
M – Lp – This is a state subsidy which cheapens the reproduction costs of labour-power to the capitalist. It takes the form of a subsidy on wage-goods (food, mortgages, state rentals, public transport etc) or wage-transfers (the provision of health, education and social services). The ‘cheapening’ of these elements in the value of labour-power is paid for by means of tax revenue drawn ultimately from surplus-value but immediately from wage and salary earners, transferring this cost from the capitalist via the state to the working-class.
P . . . C’ – As well as subsidies to productive capital, the state intervenes in the production process itself. Intervention in the private circuit consists largely in the applications of research and development to increasing productivity and in speeding up the production process itself. Since competition generates a drive to improve productivity, state involvement in subsidising the advancement of technology becomes increasingly important. Direct intervention in production takes the form of the nationalisation of particular branches which require exceptionally large capital outlays (energy, transport etc) or which are too risky or unprofitable. In this way the state subsidises the losses involved in high-risk or low profit areas, allowing the goods and services produced to enter into the circuit of capital at less than ‘economic’ prices. In so doing it makes possible the concentration and centralisation of capital at rising levels of organic composition, developing the forces of production and intensifying the contradiction between private ownership of the means of production and the increasing socialisation of the forces of production.
An important area of state intervention in the circuit is between M’ at the end of one turnover and the re-investment of M’ as C’ at the beginning of another. This concerns the state’s policies in facilitating the mass of productive capital and the speed with which it circulates, since productive capital alone (combined with Lp and Mp) makes the production of surplus-value possible. Of course the purpose of all forms of state intervention is to counteract the falling rate of profit and by doing so, to make the re-investment of M’ more attractive to the capitalist than consumption, hoarding or speculation. Nonetheless, to the extent it can influence the decisions of capitalists or their agents concerning the use of M’, the state plays an important role in the reproduction of capital. The main instruments it uses to control the direction and speed of ‘capital formation’ are those which help to reduce the cost of credit. However, since the operations of the government itself affect this cost by influencing the amount of credit available and the amount demanded, then the analysis of state intervention at this point in the circuit is tied up with the circumstances of overall fiscal policy as reflected in the state budget.
By means of various institutional arrangements, the state establishes a mechanism of continual credit creation and credit rotation which can be altered to suit the particular needs of capital. Since the state bank has the power to create credit, it can theoretically create unlimited credit to cheapen its cost and encourage the efficient re-investment of M’. In practice however, it cannot do so beyond certain limits without causing hyperinflation and with it that consequence it seeks to avert, namely an investors’ strike. It has therefore to rely upon a policy of combining some credit creation together with the rotation and control of credit within the private sector, referred to commonly as the ‘stop-go’ counter-cyclical policy.
The credit policy of the state’s bank has therefore two major goals:
i) to manage the state’s own credit needs, and ii), to provide for the credit needs of the business sector in general. For instance, directives to the trading banks to hold more government stock would be made if the state’s budget was in heavy deficit, whilst the private sector has a surplus of M’. Selling government securities would have the same impact in principle, raising the cost of credit (the rate of interest) by reducing the supply available to the business sector. The reverse would be the case following a policy of deliberate expansion of the supply of credit. In general, the state’s credit policies work to flatten the business cycle by means of its counter-cyclical ‘stop-go’ controls. It will also attempt to prevent the non-productive use of M’ in hoarding or speculation as prices and interest rates rise by means of selective incentives. The logical development of such policy is of course for the state to assert increasingly tight control over capital formation to ensure its recirculation as productive capital. In doing so however, it cannot escape the limits of the credit system as a means of overcoming the rise of inflation, the depreciation of commodity prices, and finally, crisis (Bullock and Yaffe, Inflation, 26).
In concluding this section it should be stressed that while the state’s economic interventions are designed to arrest the falling rate of profit in the short term, this merely transfers the tendency from the market onto the state itself in the form of ‘fiscal crisis’. That is to say, the increased costs of subsidising capital become steadily less productive of total surplus-value. The state runs up mounting expenditures wyich tend to outrun its ability to increase its sources of revenue. And as this deficit cannot be met simply by ‘printing money’ beyond a certain point without fuelling inflation, or by increasing taxation of surplus-value going to the capitalist in the form of profit, rent or interest, it must be raised by increasing the rate of taxation of both the productive and unproductive working class. This puts the state in the position of having to expose its functions on behalf of the capitalist class as it becomes difficult to reconcile its attack on workers living standards with a ‘neutral’ non-class ideological status (Bedggood, State Capitalism). The result is that class struggle within the state apparatuses becomes generalised across economic, political and ideological levels, placing limits upon the states ability to resolve the basic contradictions short of the social expropriation of the means of production.
So far we have considered the process of reproduction in abstract terms without reference to particular social formations. In this section we propose to relate reproduction specifically to the internationalisation of capital. As we have pointed out, the development of capitalism in New Zealand is, by definition, related to the development of the CMP on a world scale and can only be properly conceived at that level. What we shall do here is to apply the interlocking circuit approach to the problem of internationalisation as it affects the development of capitalism in New Zealand. In the light of this discussion we shall then examine the applicability of the traditional theories of imperialism to this problem.
We start with the circuit of an industrial capital (M1) which can be schematised (after (1) above) as follows:
In this example, industrial capital in branch 1 takes on at least three different forms at various phases (Marx, Capital, Vol 11 (chaps 1-3l Palloix, Self Expansion, 19) namely
1. a commodity capital circuit C1- M’1 – C’1
2. a productive capital circuit P1 – M’1 – P’1
3. a money capital circuit M’ – C’1 – M’1
Each of these has to be reproduced in order for self-expansion to occur. In addition various other framents of capital are required at particular stages. These are:
· merchant capital to realise linkages marked –
· bank capital to achieve adequate levels of M
· realisation capital to facilitate the entire circuit by promotional advertising etc of commodities for sale.
Note that we have surrounded the whole process by a bracket to indicate that the entire interlocking process bakes place within a given social formation designated by [A]. Now we proceed to extend this to an international context by distinguishing different ‘brackets’ i.e. distinguishing the different (geographical) locations or sites of various components of the whole self-expansion process.
As Palloix puts it:
The process of internationalisation in relation to the self-expansion of capital does not refer simply to the extension of the process of self-expansion beyond national boundaries . . .The internationalisation process is not a reality external to capital, a reflection, a result, (a spatial overflowing, an intersecting of foreign capitals) . . .(it) is a result of the world-wide universality of the CMP . . .internationalisation manifests itself both as an expression of: the national division (into social formations); the universality of the CMP (the generalisation of wage-labour); and the law of uneven development. It takes this form in order to assure the continual increase of the rate of surplus-value on the basis of the fusion of M-Lp and M- Mp within the process of production. The internationalisation of capital and the working of the national economy are not antagonistic, not two alternative realities, but are two phenomena which constantly mirror each other, amplifying each other in their historic development because they are both shaped and moulded by capital (ibid: 23)
We define internationalisation here as the process of ‘unification’ of different social formations by means of capital in its various forms and fragments for the purpose of its own self-expansion. Given the various forms and fragments of capital mentioned above, the patterns of internationalisation as it affects different social formations will be extremely variable. The best know cases would be:
In addition to industrial capital, merchant and bank capital will be involved in the process. The ‘hegemonic’ industrial capital circuit M-C-M will absorb these fractions in its movement. Thus local capital will normally be used to provide commodities auxiliary to the main production process, financial services, or wage-goods to workers employed by foreign capital. Rarely does the dominated social formation provide large amounts of capital in the form of instrument of labour embodying advanced technology (machinery, electronics etc), this being reserved for sale by other branches of capital at the centre. A typical interlock with the local social formation is the absorption of national money capital for advance to the industrial circuit, and it is in this that local finance capital plays a key role. These are some of the mechanisms by which’ hegemonic’ capital self-expands through the uneven development of the social formations drawn into the internationalisation process.
Having stated the problem in its most abstract and generalised way, we now proceed to its application to the New Zealand formation. In the first place, since the CMP came up against a pre-capitalist and nonmonetised mode the form of Maori society, the existing formation had to ‘adapt’ to the needs of capital. This had to involve the introduction of money forms by means of the attraction of native labour into construction work, and the dispossession of the land – in short the undermining of the system of production for use-value in Maori society with production for exchange with the CMP. The most significant form of commodity exchange implanted in N.Z. was that of the white-settler production of commodities indirectly related to the circuit of industrial capitalism. By this we mean the production of wage-goods for reproducing labour-power in Britain, which in its turn was then directly involved in the production of surplus-value in Britain. There would not be, for some time, a locally established branch of production into which British industrial capital could interlock. The other side of the semi-colonial commodity production was therefore the requirement for money, for capital, mainly freed-up rentier capital from the U.K. which could be used to establish the conditions enabling the new colony to play a role in the international division-of-labour. Schematically we may describe these interlocks as follows. In this diagram [A] is the U.K. and [B] is New Zealand.
We have distinguished here between capital advanced by the enterprise (M11 or M21) in each social formation, and that advanced by agents, namely the rentier in the U.K. (M12) and indirectly, via the state, In New Zealand (M22). We ignore the private rentier capital invested in New Zealand and the export of industrial commodities from the U.K. to N.Z. which in our view were relatively minor interlocks in the initial period (see 3.5). Key interlocks are expressed by the arrows. The rentier interest on M12 in the U.K. is m12 = M’12 – M12. The interest on M22 (the N.Z. public debt) is m’22 = -M’22 – M22. The basic function of the new colony therefore was to expand U.K. industrial capitalism by cheapening the reproduction costs of labour-power, and providing a secure outlet for the investment of rentier capital. Both operated as counters to the falling rate of profit.
Once these interlocks had been established their impact on the two social formations was quite dramatic. During the first third of the 19th century England imported only 2.5% of its foodstuffs. In 1912 it imported mainly from Australia and New Zealand about 50% of its meat, 70% of its butter and 50% of its cheese (Harms, 1912: 176). The consequences for New Zealand’s economy are summarised below:
Once established this pattern of internationalisation of the circuit of commodity capital has never ceased to be of prime importance to the New Zealand social formation. However, the modern period (Post W. W. II) exhibits a far more diversified and evolved pattern of inter-locking than that illustrated above. The contemporary pattern of circuit interdependence is outlined in greater detail below (see Section 3.). We shall limit ourselves to an analysis of the main forms of dependence in abstract terms. The major new development in the modern period has been the establishment of a range of production processes in New Zealand organised along industrial capitalist lines, under the domination of foreign capital. Foreign capital dominates directly – by direct or partial ownership in conjunction with a fragment of national capital of these branches. Or else it dominates, indirectly, by provision of the range of modern instruments, materials, patents, licenses, agencies, managerial expertise etc. essential to the reproduction of capital in New Zealand. – all of which are supplied by ‘hegemonic’ capital. In other words, MA (foreign capital), in various forms, constantly traverses the reproduction of local capital (MB) which in turn functions to reproduce the former (Palloix, Appendix, 21). The following are a few examples of this new pattern of dependence. In all cases, A refers to “abroad”, B to the local N.Z. social formation. We also break down Mp into instruments and materials of labour (e.g. machinery and oil), symbolised by IL and ML respectively.
Case A – a joint venture producing previously imported articles of consumption or instrument of labour
In the extreme case of A (colour TV’s for instance) no MA is advanced in [B], but m’A is drawn off in the form of royalties etc. arising out of the assembly and sale of TV’s in NZ from ‘kitset’ packs supplied by the licensing company. Local capitalists are happy at the monopoly profits provided (m’B) under the protection of rigorous state enforced import controls on foreign competitors.
Case B – The provision of materials of labour for a MNC (eg Comalco)
In this case, Cornalco gets cheap auxiliary materials of labour (electricity C’B ) to smelt imported bauxite ore, which is subsequently re-exported (C’A). Although the production process is located in New Zealand (PB), this signifies few linkages apart from some local employment, (LpB) and, because of transfer pricing, little chance to claw back any declared profit (m’A’). In effect the huge state investment involved in MB (supplying the electricity) and the low price of its sale means that the New Zealand working-class subsidises the profits of the huge MNC, Cornalco.
Case C – Foreign control of processing of smallholder production (eg meat)
Here the foreign company sells the processed meat (C’) to its overseas subsidiaries at inflated overseas (EEC) prices. Smallholders provide the livestock (ML) at low costs and are vulnerable to developments all down the line of processing, transporting, marketing etc.
Case D – Provision of an advanced transport facility (eg Air New Zealand)
In this case, heavy overseas costs for importing IL and ML from [A] (fuel, aircraft) are met by state guaranteed overseas borrowing (MA). Revenues to return these advances, together with interest, are earned by charging New Zealand and foreign users high monopoly tariffs for travel (the commodity sold) on protected South Pacific routes [C’A/B].’
These cases illustrate the degree of penetration of foreign capital in its commodity, money and productive forms into the contemporary social formation. The examples underestimate the degree of dependence on foreign capital since they ignore for instance, the indirect links to foreign capital through locally provided materials of labour e.g. imported oil to provide electricity (MLB) in the case of Comalco and other firms. Nor does the degree to which the local state makes concessions such as export incentives, state regulation of wages etc. to foreign investment to make the conditions for production as attractive as possible, show up in these examples. Moreover, the links with overseas banks, finance, merchant and insurance companies, all of which can be related to the above circuits, have not been isolated.
All these links act to manage the flows of commodity production and thereby also to transfer as much of the surplus-value as possible from the direct producers to the various fractions of the capitalist class both in New Zealand and overseas.
2.6 A Note on Imperialism
So far we have limited our discussion of the main interlocks affecting the N.Z. social formation to the analysis of the internationalisation process. We have made no reference to the political and ideological context in which this interlocking of circuits occurs. We now want to trace the connection between the internationalisation of capital and the rise of imperialism in order to determine the role of the semi-colonial state in this process.
According to Palloix, imperialism differs from internationalisation, being the manifestation at the political level of the role of the core capitalist states in linking-up the CMP in various social formations on a world scale. If we conceive of internationalisation as the ‘unification’ of social formations by the CMP, then imperialism is the political form taken by this unification. The core states’ dominance over peripheral and semi-peripheral states ranges from direct rule to formal independence, demonstrating the imperial states’ ‘relative autonomy’ within the limits set by the particular historic circumstances of internationalisation. Usually the initial interlocks with pre-capitalist social formations will he established by force, but the development of these interlocks may be managed by ‘self-governing’ or ‘independent’ client states. Imperialism, so defined therefore, spans the whole epoch of internationalisation from the 16th century to the present day. While we should be careful to distinguish between successive phases of imperialism, an adequate theory of imperialism must be able to account for the co-existence of internationalisation and imperialism over the whole epoch (Murray, Value, part 2).
According to our definition imperialism refers to the role of the core state in serving the needs of capital accumulation by territorial expansion. While Marx noted the importance of the state as “a powerful lever of capital accumulation” in the mercantilist phase (Capital, V. I, 706) he appeared to limit its role to one analogous to ‘primitive accumulation’ in the period of free trade (i.e. the bombardment of new markets into submission in India and China, and in opening-up the lands of white-settlement). In the chapter on the ‘Modern Theory of Colonisation’ (Capital, V. I Chap. 33), Marx quotes approvingly the Wakefield analysis of systematic colonisation. A working-class could be created according to this plan even when land was abundant, as in the colonies proper such as Australia (he does not mention N.Z.) by means of a ‘sufficient price’ policy operated by the state. The resulting fund would be used to manage immigration and keep the labour market full for the capitalist. But later on in this chapter Marx reflects on the limited usefulness of this particular analysis in the light of events in North America where other factors such as the civil war, the rise of the national debt, in brief “the most rapid centralisation of capital” (Capital, Vol 1 724) were more important in creating the conditions for capitalist development than any Wakefield type of scheme.
Despite these observations, and the brilliance of Marx’s vision of the future development of the Pacific Basin (On Revolutions, 392), he and Engels avoided any serious consideration of the long-term consequences of the introduction of the CMP into the Australasian colonies. They preferred to believe that the abundance of ‘free’ land would remain a permanent barrier to capitalist production on any large scale, and that as markets for British goods they would be rapidly ‘glutted’ and incapable of preventing the coming crisis in Britain (Mayer, Marx, 97). In other words the element of wishful thinking prevented Marx and Engels from developing their theory of ‘foreign trade’ to allow for the new financial interlocks between the self-governing colonies and the Imperial state. They failed to appreciate therefore the important role of the semi-colonial state as a ‘powerful lever of capital accumulation’ not only in the colonies but in Britain.
Of course it can always be argued in their defense that the great increase in British capital exports to the self-governing territories did not take place until after 1880, too late for Marx and Engels to be aware of their significance (Barratt-Brown, Economics, 189). Today, with the benefit of hindsight, we can see that the interlocks established between Britain and the colonies proper in the first half of the nineteenth century were characterised by a form of imperialism in which the initial use of imperial state force to implant the CMP was followed by a rapid transition to self-government by the settlers. This form of imperial core/periphery connection was entirely consistent with the nature of the interlocks established (see (7) above).
If Marx and Engels had some excuse for underestimating the rise of capitalism in the semi-colonies, Lenin and Bukharin did not. Though they showed that the uneven development of the colonies and semi-colonies was the consequence of the centralisation of capital as finance capital in the core states, there is little discussion of the white settler colonies in their work. Bukharin stressed the fetter of landed property on the pace of development of agriculture in the established capitalist formations, but did not link this dis-proportionality to the plight of the suffering classes, or the development of capitalism in white-settler colonies such as New Zealand. For though he mentions directly N.Z.’s role in supplying foodstuffs to the British market, he ignores the significance of cheap wage goods supplied by the semi-colonies in overcoming the land barrier and in countering the falling rate of profit of industrial capital (Imperialism, 19-21).
The most influential theorist of imperialism, Lenin, conceived of imperialism as a distinct (the “highest”) stage of capitalism characterised by the concentration of capital in monopolies and cartels in the European states, the export of surplus-capital in search of super-profits, and the increasing rivalry between European states for colonial territories (Imperialism, 700). He also drew a direct connection between imperialism and the reformism of the European working-class which was ‘bribed’ by colonial super-profits and drafted in defence of national capitals (712). Lenin fully understood the degree to which the contradictions of the CMP were expressed in imperialism; on the one hand, the export of capital “greatly accelerates the development of capitalism in those countries to which it is exported. . . .expanding and deepening the further development of capitalism throughout the world” (691) while on the other hand, the concentration of capital in monopolies established monopoly prices as a barrier to competition, to increasing the rate of relative surplus-value and hence the further development of the productive forces at the centre. The stagnation at the centre therefore intensified the scramble for colonial super-profits based on the extraction of absolute surplus-value at low organic composition (and low wages) (Mandel, MET, 455-458), leading to growing national rivalry and eventually war.
Like Marx and Engels, the weakness in Lenin’s theory of imperialism is the element of wishful thinking. Because he believed (rightly as it happened) that the fate of the Russian Revolution would hinge on the revolution in Europe, he exaggerated the ripeness of capitalism’s decay and the revolutionary potential of the working-class. Just as important for our discussion, however, was his failure to appreciate the extent and depth of capitalist development in the white-settler colonies. As Barratt-Brown points out Lenin did not distinguish between ‘colonies’ in general and the ‘self-governing colonies of the British Empire’ in his analysis of capital export (Economics, 186). Had he done so he would have seen that the vast export of British capital to the self-governing colonies and Latin America after 1870 was not in search of super-profits but a secure return from the national debts of a number of white-settler colonies established in the period before 1870.
The bulk of British investment was not associated with capitalism’s ‘highest stage’ as conceived by Lenin, but with an earlier one, when various class fractions thrown out by the process of accumulation at the centre were relocated in the periphery under changed conditions. There they did lead, it is true, to the consolidation of the CMP and its development to a higher stage, but only after certain pre-conditions had been satisfied. In sum, the establishment of the CMP in the white-settler states before 1850 and their subsequent development by British finance capital, contributed not only to the success of British free trade policy, but also to her continued supremacy after 1870 in the age of imperial rivalry.
If we allow for the elements of wishful thinking, Marx, Engels and Lenin have left us a theory of imperialism that can be used, together with the interlocking circuit model of the internationalisation process, to analyse the development of capitalism in New Zealand. The changing patterns of world imperialism over this whole period have produced several shifts in the New Zealand state’ s relations with imperial powers, in particular from that of self-governing colony within the British Empire to that of ‘junior partner’ in U.S. imperialism today. But whatever the nature and form of this changing relationship, it has been determined historically by the particular interlocks established with N.Z. by the internationalisation of capital. It is to the actual problem of explaining the historical evolution of the N.Z. social formation in the light of these combined processes that we turn in the next section (3). Before doing so however, for the sake of clarity in this analysis we must set-out the basic characteristics of the pre-capitalist modes of production which articulate with the CMP in the N.Z. social formation.
2.7 General Characteristics of the Subordinate modes
We stated in the Introduction (1.1.) that the contemporary N.Z. social formation could only be understood in terms of an articulation of various modes of production. These are the CMP in New Zealand (the development of which is the object of this analysis), together with the residual elements of the pre-capitalist Maori Lineage Mode of Production, and a highly evolved and differentiated Peasant Family Mode of Production. Since the development of capitalism in N.Z. is viewed as the process of articulation of the CMP with these two subordinate modes, we need to define the main characteristics of each of these modes before proceeding further.
(a) The Peasant Family Mode (PFM). The mode we refer to here, is a particular form of pre-capitalist simple commodity production established by the “mass of fanning colonists” in the colonies proper (Marx TSV, V2, 301). Traditionally, the characteristics of this mode are: a patriarchal household and plot of land; production of means of subsistence for use, but with some exchange); and its non-capitalist calculation of ‘profit’ – “. . .so long as the price of the product covers (his) wages, (the peasant) will cultivate his land, and often at wages down to the physical minimum” (Capital, V Ill, 805-806). Whilst these features did, to a degree characterise early N.Z. settlement, the contemporary PFM is quite different in almost every respect, retaining only the family form of labour as a traditional social relation. Unencumbered by any feudal rode and benefitting from cheap and abundant land alienated from the MLM, the PFM in New Zealand has undergone remarkable evolution (see 3.4). (Note: the PFM does not apply to sheep farming).
The evolution and subsequent differentiation of the PFM followed its rapid subordination to the CMP. Thus in N.Z. it came under the firm dominance of the agents of the CMP (e.g. the stock and station agents) who ultimately controlled the family farmer as a sort of wage-slave, despite the position of the farmer appearing to be one of ‘independence’. His independence becomes a ‘formal’ independence; against the fact that he possesses and legally ‘owns’ his land he does not control it (Banaji, Modes, 33-36). The ‘price’ the farmer gets for his product is in fact a ‘concealed wage’ and the interest and commissions paid to the merchant-banker is ‘rent and profit’ (34).
Having determined the underlying nature of the relations of production dominating the PFM as capitalist, we must also point to the manner in which its articulation with the CMP has evolved. In particular, we describe in Section 3.4 how the peasant farmer class used the state as an ally against the merchant-banker class to boost their price and rate of profit. We point to the crucial role of agricultural exports in the 1970’s in the efficient reproduction of the CMP in N.Z. (Section 3.5). This historical process has resulted in a considerable differentiation of the PFM, particularly when viewed from the level of distribution (income, profits etc). First, there is the section of quasi-subsistence farmers (e.g. on marginal land); second, there is the middle-peasantry, who in good years might realise an average rate of profit, but because of high levels of debt and fluctuations in their terms of trade, seldom in fact do so; third, there is the peasant bourgeoisie (capitalist farmers), who for some reason or other, could accumulate on the basis of earning an average or above average rate of profit, employing wage-labour, managers, accountants etc. We find, therefore, despite Marx’s reference to this form of production as “capitalist. . . without its advantages” (TSV, Ill, 487), (that is, unable to expand reproduction on the basis of the production of relative surplus-value) in N.Z., the interaction of the state, the merchant-bankers, and the natural environment, combined to permit the PFM to evolve out of colonial simple commodity production to provide the basis for expanded capitalist production in the semi-colony (See Lenin, Russia, 175-190).
(b) The Maori Lineage Mode (MLM). The mode of production which corresponds to the ‘structure’ of the Maori social formation is that of ‘primitive communism’, or the ‘lineage mode’ (Terray, MPS; Hindess and Hirst, PCMP). Notwithstanding the debates surrounding this concept, for the moment we adopt the view that the basic characteristics of the Lineage Mode apply to Maori society – they are; a low level of development of the forces of production, community ownership and possession of the means of production, cooperative labour and collective distribution of the product at the economic base; the absence of a state and the dominance of ideology in the form of kinship relations at the level of the superstructure – hence the term ‘lineage’ signifying the key role of ideology in reproducing the conditions of existence of this mode.
The MLM can therefore be characterised in these terms as having an economic base comprising collective ownership and control of the means of production, and where the distribution of the product is not determined by class relations at the base, but is dominated by the ideological agents (elders, chiefs) who (a) do not form a ruling class, (b) do not therefore require a state, but (c) are responsible to the collectivity for the reproduction of the mode. In short, the MLM is a good example of Marx’s concept of primitive communism (Grundrisse, 471-474).
The historical process by means of which the MLM became subordinated to the CMP has been described by us elsewhere (Bedggood and De Decker, Destruction; Macrae, The Maori). It follows approximately the same stages suggested by Dupre and Rey (Reflections) beginning with:
(a) Trade: The period from European contact to about 1860 during which the main links with the MLM were via traders and missionaries. The MLM quickly adapted to the commodity market and withstood early attempts at domination by agents of the CMP to a high degree.
(b) The Colonising Period: from 1860-1880 approx. during which state force was used to break the resistance of the MLM to the penetration of the CMP resulting in widespread alienation of the land, the pre-condition for the transformation of collective labour into capitalist wage-labour, and the establishment of the PFM.
(c) The Period of CMP dominance: From approx. 1880-1945. The MLM was reduced to a semi-subsistence peripheral mode providing labour at low wages in seasonal or casual work in the CMP, now consolidating its hold over the PFM and laying the basis for domestic manufacturing on the post-war 11 scale.
(d) Industrial Proletariat Stage: From 1945 to the present, during which the bulk of the rural population of the MLM migrated to the cities to join the industrial proletariat. Today, approx. 1.3 million hectares of Maori land remain in areas of strategic importance for forestry, iron sands, urban development etc. This fact, together with the rising level of proletarian consciousness among Maori workers, shows that while the MUM has been almost totally subordinated to the CMP, the residual elements of its base (the land and cooperative social relations) and of the superstructure (ideology and ‘culture’’) play a significant role in the current conjuncture (see 3.7).
3.0 The Evolution of the NZ Social Formation
We proceed from the level of the material base, using the model of interlocking circuits outlined above, to show how that approach can explain the evolution of the N.Z. social formation. The most important interlock came historically from N.Z.’s (or specifically the PFM’s) role as a supplier of cheap foodstuffs to the U.K. in return for the investment of U.K. money capital as well as providing a limited market for British manufactures (see (7) above). This connection between N.Z. capitalism, based mainly on the PFM, and U.K. industrial capitalism, was to completely determine the historical development of the N.Z. social formation. At the same time it operated as a counter-tendency to the falling rate of profit in the U.K. by cheapening wage-goods and returning interest on the national debt.
Since this interlock is so important in setting the limits to historical development in N.Z. we must give an explanation of its origins. This involves tracing the causal interplay between the economic base, represented by the interlocking turnover circuits, and the agents who perform class functions within these circuits, and the superstructure of politics (the imperial connection) and ideology (nationalism). Our explanation of the timing of N.Z. settlement and of the subsequent development of the CMP must therefore begin with the question of the causes of colonisation, and in particular with an examination of the ‘land barrier’ in mid-nineteenth century Britain.
3.1 The Land Barrier
Our analysis of the historical circumstances which caused white-settler colonisation is based on the barrier of landed property to further capital accumulation. Marx establishes the connection between agriculture and industry as follows:
In the period of the stormy growth of capitalist production, productivity in industry develops rapidly as compared with agriculture, although its development presupposes that a significant change as between constant and variable capital has already taken place in agriculture, that is, a large number of people have been driven off the land. Later, productivity advances in both, although at an uneven pace. But when industry reaches a certain level the disproportion must diminish, in other words, productivity in agriculture must increase relatively more rapidly than in industry (TSV, II, 110).
From about 1800, increased productivity in agriculture was retarded by the remaining feudal barrier to accumulation on the land – landed property in Britain and the protected colonies. A landlord class extracted an absolute rent from tenant fanners and consumed rather than invested this surplus-value as capital (Marx, Capital Vol. Ill, 748-813). This barrier to agricultural investment prevented a cheapening of the elements of constant capital (raw materials) and wage goods (food etc) in industry acting as a brake on the expansion of industrial capital.
The consequence was a prolonged period of relative economic stagnation, of small booms punctuated by commercial crises, and accompanied by agricultural labourer’s riots, Chartist demonstrations, overpopulation, pauperism and crime (Hobsbawm, Industry, 56-108).
Thus the encumbrance of landed property to the further development of industrial productivity (relative surplus-value) was expressed politically and ideologically as a class struggle between the landlords and the industrial bourgeoisie. Parliament was still the preserve of landed property, propped-up by the mercantilist system, the extraction of absolute rent in Britain and the colonies (Marx, Capital Vol. Ill, 791; Mandel, MET, 282-292). The breaking of the land-barrier came only after a lengthy struggle in which the industrial bourgeoisie asserted its parliamentary supremacy, abolished the feudal rump of mercantilism and put ‘free trade’ in its place. There followed between 1850 and 1870 an unprecedented boom based on new sources of cheap food and raw materials which established Britain as the ‘workshop of the world’.
Equally important for our purposes was the land barrier as the prime cause of white-settler emigration. While the process of the expropriation of agricultural labourers was continuing apace, together with the depopulation of Ireland, a stagnant industry could not provide employment for this surplus population. In order to escape wage-labour and pauperism large numbers emigrated to the colonies. Between 1815 and 1859 a total of 4,917,598 persons emigrated from the U.K. to all parts of the world. Over the same period approx. 684, 000 emigrated to Australia and New Zealand (Merivale, Colonisation, 166). The outflow of white-settlers to the ‘new lands’ added an important dimension to the development of the CMP in Britain. It established not only new sources of surplus-value, but new ‘little Englands’ i.e. social formations where ‘fragments’ of the British social formation comprising economic, political and ideological levels, were grafted onto pre-capitalist formations, producing a hybrid type of colony.
3.2 The Penetration of the Capitalist Mode
It follows that the penetration of the CMP into the Maori social formation occurred at all three levels – economic, political and ideological. The task is to determine the relative impact of each level upon the colonisation process. It is clear at the outset, that the bourgeois approach to colonisation, in examining in minute detail the motives of those concerned (missionaries, the Colonial Office, settlers), begs the question of economic determination in the last instance (Sinclair, A History, 65; Ward, Justice, 24-40). This is the method of the ‘isolated instance’ as opposed to that of ‘structural causality’. In terms of our explanation, these actors were all agents of the CMP, but they operated at different levels. The settlers most directly represented the class struggle arising from the land barrier in Britain. Consisting of those who were escaping high rents in the hope of getting the benefit of ‘founders’ rent’, or of the unemployed hoping merely to produce their means of subsistence in the land, they were either aspiring capitalist farmers or independent producers (Marx, Grundrisse, 279; TSV, 11, 239).
Of the settlers, it was the systematic colonisers who were the most influential in causing the imperial state to annex N.Z. They persuaded the British state agents that colonisation would provide a solution to the social and political problems of the time by serving as an outlet for surplus labour and capital. Merivale, for example, went to great lengths (in his capacity as Oxford don) to demonstrate that controlled emigration would not deplete the reserve army of labour below the numbers necessary to hold down wages at home (ibid, 164-165). The clinching argument was that the expenses incurred would be paid for by a tax on the wages of the emigrating workers in the new colonies (ibid, 158).
The imperial state’s annexation of N.Z. can therefore be seen as a necessary expense incurred in the maintenance of law and order as a condition of the reproduction of the CMP in Britain (see 2.4). Whether these expenses were involved in putting down rebellion at home, transporting convicts, or pacifying unruly ‘natives’ – Afghan, Chinese, or Maori – the purpose was the same. The apparent contradiction, in bourgeois terms, between the expense of annexation and the absence of any direct economic benefit (raw materials, labour, market) in a period of free trade, which can only be ‘explained away’ by introducing the myth of ‘moral suasion’ (Wards, Shadow), is in the final analysis, no contradiction. Native protection was simply a slogan providing ideological cover to the geographic extension of the imperial state’s political-legal function in reproducing the CMP (see 2.6).
Once we have established that the class interests of the settlers were not in contradiction with the imperialist state, the highly over-rated role of the missionaries and humanitarians becomes clear.
They are revealed as bourgeois agents in the reproduction of ideas at the ideological level. Though these ideas (anti-slavery, native protection, civilising mission etc) are determined in the last instance by the interests of the industrial bourgeoisie, the ideological agents do have great ‘relative autonomy’ in practice. Since the function of bourgeois ideology is to represent the values of capital as ‘natural’ and ‘universal’, we must expect well-intentioned missionaries to perform this task literally in the geographical sense, often penetrating pre-capitalist social formations in advance of the market. According to Merivale, religion is the basic means by which ‘civilisation’ is introduced to ‘savage tribes’; “For in what mode are we to excite the mind of the savage to desire civilisation?” (ibid, 524).
The immediate impact of the ideological ‘civilising mission’ in N.Z. was to challenge the dominance of the Maori chiefs (elders) in the reproduction of the MLM. In this they failed for the introduction of commodity trade allowed a rapid adaptation of the MLM to commodity production (flax, wheat etc) but still under the dominance of the elders (cf. Firth, Economics, 482). Thus the combined efforts of the ‘advance guard’ of the CMP, the missionaries and traders, were insufficient to subordinate the MLM, convert its means of production and labour-power into commodities, or to set-up the settlers’ PFM. The explanation is to be found in the key role of the elders in the MLM (see Section 2.7). Since the elders were not a ruling class;
they could not be used in alienating the land without destroying their ideological dominance in the MLM. By 1860 the growing pressure from the settlers for land put this role to the test. A number of chiefs responded by reasserting their ideological command over the MLM in the from of the King Movement to prevent the loss of their remaining land. This resistance was interpreted by the imperialist state as a political rebellion (implying a Maori King and a Maori state) justifying the use of state force to break the elders’ control of the MLM, and in to seize the land in compensation. With the elders’ control broken, the imperial state, as midwife of history, introduced the CMP into N.Z., establishing the PFM and articulating the remnants of the MLM, both under the dominance of capital.
Following the intervention of the imperial state to establish by force the conditions for the CMP, the way was clear for the settlers to assume responsibility for self-government. The striking difference between the ‘new lands’ and the ‘old world’ was the absence of landed property. Marx, in his discussion of the ‘new system of colonisation’ (Capital Vol. I, Chap. 33) shows how free land is a hindrance to capital accumulation of a different sort to landed property, since it prevents the formation of a wage-labour class without its means of subsistence. That this was the case in N.Z. together with the refusal of the British Crown to allow many of the N.Z. Company’s dubious claims, accounts for the failure of the Wakefield system to dominate agriculture. Had the Company been able to establish ownership of the vast tracts of land it claimed, then it would have been able to reproduce in the colony a system of landed property, whereby a few landlords could have extracted absolute rent from agricultural labourers and tenant farmers. While it is true that in the period up to 1890, a landed squattocracy controlling large landholdings did exist, this was in the nature of extensive capitalist farming of wool and wheat, and did not constitute a barrier to capital investment in increasing agricultural productivity. What was established in New Zealand in this period was therefore neither landed property, nor large-scale capitalist farming, but rather the grafting of the old stock of the PFM onto the new roots of ‘free land’ through the agency of the settlers’ state.
It is important to stress the key role of the state as it figures prominently in bourgeois explanations of N.Z.’s ‘national development’. The settlers used the local state “to hasten, as in a hothouse, the process of transformation.. . to the CMP” (Marx, Capital Vol. I, 915). With the destruction of the MLM, the state legislated ‘peaceful’ means of appropriating any remaining Maori land of value (Ward, Justice. 185). It encouraged the immigration of the land-hungry and assisted smallholder settlement with crown leaseholds, loans and other forms of subsidies. Most importantly, it borrowed large amounts of British finance capital to lay down a productive infrastructure, social overhead facilities and the necessary links to international trading networks. It was a very good example of the use of the national debt described by Marx as one of the “most powerful levers of primitive accumulation” (Capital Vol. I, 706-707). While the benefits of the developments made possible by such borrowing went mainly to direct producers, “financiers and middlemen”, much of the burden of interest on the national debt fell on the working-class.
Bourgeois conceptions of the role of the state in the articulation process are of two sorts. The neo-classical view reduces the state and ideology to epiphenomena of the international market (Blyth, Industrialisation). N.Z.’s comparative advantage is in its agricultural specialisation – fertile land, plus capital equals ‘take-off’. Following the classical political economy, this view does not recognise exploitative class relations or the capitalist nature of the state. Its perspective is thus entirely limited to the appearances of the market. The more common view of the role of the state is that which draws on the radical tradition of the ‘progressives’ (Reeves, Experiments, 59-102; Sutch, Poverty, Colony, etc). It gives causal primacy to radical ideas which are then translated into progressive legislation to control the ‘excesses’ of the market, and to regulate capital and labour in the ‘common interest’. It acknowledges but does not understand the key role of the state. Following Reeves and Stout, the state is seen as ‘neutral’ and above classes, not merely ‘relatively autonomous’ , but capable of abolishing classes and capitalism itself (Bedggood, State Capitalism).
It is clear that the bourgeois historiography in the ‘long Pink Cloud’ tradition (Sinclair, N.Z.), in making radical ideas the prime cause in N.Z.’s history, has not looked beneath the level of the superstructure to discover the final cause of bourgeois radicalism. A classic example is the role of radical ideas and policies in land settlement (Marx, TSV, II, 44). Once the objective of the ‘nationalisers’ or ‘single-taxers’ had been realised, namely land-ownership, radicalism was transformed into a conservatism of private property. Therefore, to take the isolated instance of radical ideas as the independent and ultimate cause of national development, is to replace an economic determinism with a cultural determinism in the ‘last instance’ i.e. idealism. While the semi-colonial state was an important instrument in the development of capitalism in the N.Z. social formation, it was not sufficient. It was the new land combined with immigrant labour, producing a high rent plus a secure return on the national debt, which in the last instance, determined the politics and ideology of ‘national development’.
3.3 The Reproduction of Capitalist Social Relations
In summary then, the articulation of modes which evolved in the N.Z. social formation, reflected in the last instance, the ability of the peasant smallholder to achieve state subsidised settlement and to benefit from ‘founders’ rent’ on relatively fertile land (Murray, Value, II). This s provided the material circumstances for the establishment of the CMP in N.Z. and the capitalist domination of a new source or surplus-value that entered into the imperial circuit, furthering accumulation both in Britain and the semi-colony. But the whole basis of the extension of capitalist accumulation in N.Z. rested upon the reproduction of capitalist social relations. The crucial role in this process was played by the comprador bourgeoisie, who as linking agents, managed the transmission of capitalist social relations into the ‘backwoods’ of the PFM in the new colony. Though now possessing land, the settler lacked capital, a crucial fetter to his expansion beyond producing his means of subsistence; and the comprador provided it if the state did not also. The merchant provided commodities for use, and credit for their sale and purchase. The finance capitalist provided capital for the land, and the banker backed them both and directed customers to them. The role played by the comprador class has been nowhere adequately stressed in the bourgeois literature, and not even by so-called radicals, who in their concern with ‘foreign control’ ignore the bourgeois class that has acted as the local agents of most forms of ‘foreign control’ (e.g. Sutch, Takeover).
The class relation which became the basis of the pattern of interlocking circuit dependence that had emerged by the 1930’s was one in which the peasant smallholder had become a form of wage-slave, contributing surplus-value to the comprador class. This form of exploitation follows from the key role of the comprador in extracting surplus-value, in controlling the marketing of the primary products, and requiring the farmer to meet his fixed charges out of normal profits and even wages (see next section). This extraction was expressed in a disguised form in accounts as interest on mortgage, rent paid, commission to stock and station agents, freight charges, insurance on chattels,(re-possession on default of mortgage repayments)etc. in total accounting to about 45% of all farm income in normal times, and 100% during the Great Depression (Weston, Farm). The comprador had in effect, replaced the landlord as an agent in extracting surplus-value. Though Condliffe, one of the more perceptive of bourgeois economic historians, recognised that the N.Z. ‘freeholder’ had by the early 20th century, “exchanged the landlord for the mortgagee”, he refused to admit to any more than the possibility of his ‘exploitation’ by the comprador class (NZ, 277).
On the basis of this analysis we conclude that the grip of the finance bourgeoisie, both British rentier and local comprador, on the labour process of the peasant producer, did not cease to tighten and consolidate the now traditional pattern of semi-colonial specialisation in the international division-of-labour. Though they replaced the landlord class in extracting surplus-value from agriculture, their role was not to hold back the investment of capital in agriculture. They accumulated rather than consumed the surplus-value off the land, facilitating the circuit of capital into agricultural production in the form of productive capital, providing money capital for investment in the nascent branches of industrial capital in N.Z., and of course re-circulating money capital into British and other international circuits.
While Marx and others have written on the articulation of CMP and Peasant Modes, there is no fully developed theory of what we have call called the PFM in the white-settler states. It seems to us that the potential of this form of articulation has been underestimated in circumstances where it is introduced into a semi-colonial setting characterised by (a) an absence of feudal landed property, (b) the dominance of a capitalist comprador class, and (c) in association with a highly interventionist, modernising local state. It is clear that when these conditions prevailed, as in N.Z., the PFM has, in the form which we have described above (2.7), undergone remarkable transformation.
3.4 Unequal Exchange
Our analysis of the production and extraction of surplus value in the N.Z. social formation so far leads us to the position of accepting that some form of ‘unequal exchange’ of value operates to maintain
N.Z.’s subordination to international capital shows up in many forms but is most obviously related to the international flow of export commodities and the value relationships underlying these flows. Consequently we reject any analysis of ‘unequal exchange’ in the tradition of Emmanuel’s work, which begins from the level of wages, prices or terms of trade, and tries to deduce explanations of ‘exploitation’ and under-development. Very briefly, Emmanuel argues that inequality of wages as such, all other things being equal, is alone the cause of inequality of exchange (Unequal, 613). But of course all other things can never be equal and it has become clear that arguments which begin at this level cannot further our understanding of the problem. For example, in Clark’s discussion of Australia, he records that Australian wages have been generally higher than British wages. He can only avoid the absurd conclusion that Australian workers have exploited British workers by calling for more pseudo-statistics! (Clark, Unequal).
Yet for all the polemic against Emmanuel, little empirical or theoretical work has been done to counter the appeal of his thesis. Bettleheim and Palloix have pointed to the logic of reproduction as the starting point, and Barratt-Brown has marshalled some data to demonstrate that the level of wages is a mirror image, not a determining factor of unequal exchange (Economics, 235). By contrast, we have argued that the position of various classes in relation to the overall reproduction of capital is what is fundamental, and that this must not merely be asserted but actually demonstrated. This we propose to do, beginning first with an attempt to explain the phenomenon of ‘unequal exchange’ as a particular case of absolute rent in the N.Z. historical context. We start therefore by explaining the basic idea of absolute rent and then adapting it to the problem of unequal exchange. Then we show how responses to this original form of unequal exchange help explain the current pattern of relationships prevailing in N.Z.’s international trade in agricultural commodities.
a. Marx’s Theory of Absolute Rent
Marx defines absolute rent as that component of surplus-value which does not enter into the process of equalisation of the rate of profit across departments (Capital Vol.III,760-761). It reflects the monopoly of ownership of a particular resource employed in the production of commodities under the CMP. In Marx’s example, the resource referred to was land and it was the landlord class which acted as an obstacle to the free flow of capital and the equalisation of the rate of profit in agriculture with that in other departments. In demonstrating the case of absolute rent, Marx defines three levels of analysis
(1) the Value of commodity i, understood here as an agricultural commodity, and comprising the elements W1= Ci + Vi + Si
(2) Prices of Production (Yi) comprising costs (Ci + Vi if we ignore the transformation problem) plus average profits and
(3) a monopoly-price or modified price (Xi) which equals costs plus profits, at an average rate if the farmer is a ‘’true’ capitalist, plus absolute rent or excess profits.
These 3 levels are defined in the diagram below.
(NB: In what follows we ignore the so-called transformation problem which is a red herring for the purposes of the present discussion anyway).
In this example, Xi >Yi, i.e. the modified price exceeds the price of production by the full amount of the absolute rent, since we assume all items of costs and profits to stay the same in both cases. Absolute rent is added as a monopoly profit to give a modified price which is consequently higher than the price of production (Yi). Now whether absolute rent is added on to the price of production (Yi) or is deducted wholly or in part from Yi depends on market conditions (supply and demand) (Capital Vol.III p762) . It also depends on the relations of production in agriculture. Normally under capitalist production relations in agriculture absolute rent is by definition marked up on top of average profit from farming since no capitalist farmer would invest his capital at below average profit and no landlord will let him use the land without paying rent.
Now at first glance, there would seem to be little relevance in all this to the N.Z. case. Not only was there no landlord class, but no effective obstacles to settlement on the land existed. How then do we establish a case for unequal exchange along these lines?
b. Adapting the Basic Theory
We recall the point made by Marx and Lenin that colonial super profits were the most important counter-tendency to the falling rate of profit. Such super-profits in turn imply the existence of monopoly control of finance capital at the centre which could act to eliminate competition and prevent the general process of equalisation of the rate of profit everywhere. But this still does not indicate what the source of unequal exchange was in the periphery. To explain this we refer back to our discussion of the causes of settlement in N.Z. (3.3). Our general thesis was that whilst monopoly over landed property (‘modern landed property’) was never established in N.Z., this was replaced by another form of monopoly, that of finance capital, owned by the comprador class. While the process of settlement was such that some acquired large holdings, the majority were peasant smallholders, buying and selling on the local market. After establishment of the main trading links with the U.K., these smallholders became increasingly indebted to merchant bankers for the credit needed to purchase and develop their holdings, consolidating the relationship with the comprador class which extracted the surplus-value from the direct producer in the form of an absolute or monopoly rent, this time understood as a monopoly of large money capital.
Now the question arises as to where this rent came from. Was it paid out of a modified price Xi in excess of Yi by the full amount of the rent, as in the original analysis outlined in Section (a) above? Or was it absorbed into Yi and taken out of some combination of wages (i.e. the value of labour-power of the snallholder, Vi) and a rate of profit that was average or less than average? The latter could only occur if the occupying smallholder was not a true capitalist, i.e. did not demand an average rate of profit on his capital.
Moreover, its impact on different smallholders’ individual rates of profit would depend on the differential rent from their new land in the colony, i.e. the disparity between their individual costs of production and the average price as determined for them by the market. We are referring here to DR1 which Marx defines as the varying yields from land of equal area with equal applications of constant capital, arising out of differences in fertility and location with respect to the market (Capital Vol. III 647-673). The effect of greater yields would be to reduce the unit cost of production for the favoured smallholder, and raise his rate of profit above the average. However, we cannot assume that in N.Z. all the land settled was better than older lands under cultivation in the countries of older civilisation (Capital Vol. III p.769). So, in what follows we assume at first land of average fertility and then in Section (c) consider the impact of differential rent on our initial conclusions about the distribution of surplus value produced.
In trying to determine the distribution of surplus value we have to consider only 2 alternatives – do we assume the average smallholder realised an average rate of profit or a less than average one, in the conditions of settlement of N.Z.? We suggest that probably the latter was what occurred at least in the early period. The two main reasons for this were (1) that under pioneer conditions, settlers were more concerned with producing their means of subsistence and reproducing their capital at a minimum rather than an average rate. That is, they valued actual possession of the land highly. (2) Market conditions also operated in the same direction. The comprador class had an interest in increasing its share of the surplus value produced at the expense of the direct producer, so keeping the modified price Xi low and the price of the new colony’s commodities down. This was after all the basic function of the new colony – to cheapen costs at the centre. The comprador would therefore attempt to take his excess out of average profit of enterprise, rather than mark-up the price of production and lower the colony’s international competitiveness. In all cases, however, the share of the comprador in the form of a monopoly rent constitutes unequal exchange.
As a simplified abstraction of the likely pattern of unequal exchange we offer the following example. We stress that we are dealing at this stage only with land of average fertility.
Here Ci is constant capital in branch i; Vi is variable capital, Si is surplus value, R is the average rate of profit calculated in the usual way – i.e. assuming the identity between aggregate surplus-value and total money profits. R’ is the rate of merchant profit on merchant comprador capital advanced (Mi), and R’ is the analogous rate on enterprise capital advanced (Ki). We divide the N.Z. social formation into the agricultural sector (or circuit) (A) the industrial sector (or circuit) (M). The table below shows the general relations of exchange which finally prevail after the modifying influence of the comprador class is taken into account.
In the table, R = 20% before modification by merchant finance capital, i.e. before deduction of monopoly rent. After modification, the merchant rate of profit in (A) exceeds that in (M) and merchant capital in the latter receives a rate of return approximating the overall modified rate or enterprise profit in (M). The rates of profit finally received are:
(The figures in brackets are actual modified profits received in money terms) .
Under this solution ∑Wi = ∑Yi = ∑Xi, but individually values and prices (either Yi or Xi) diverge. The family smallholder ends up with a less than average rate of enterprise profit and turns a monopoly rent over to the merchant comprador in the same way as the English tenants turned over rent to their landlord as the condition of their being permitted to invest capital in his land (Capital Vol. III, 626).
In our example, the comprador class, therefore, inserts itself in an intermediary position between the dominant capitalist mode and the dependent PFM forcing prices received by the PFM down low enough so that, even after modification by monopoly margins, the market price was still low enough to be competitive.
Unequal exchange, as it operates here, is a form of monopoly rent extracted by a comprador class from the surplus value produced in agriculture as a consequence of that class’s control over the movement of capital into that branch of production. But it clearly cannot rest there. This monopoly will be subjected immediately to countering forces. For instance, how long will it be before manufacturing capitalists attempt to become merchant compradors? We must now turn to a discussion of the counteracting forces.
c. Countering Obstacles to Extended Reproduction
It follows from our example as it stands, that the direct producers of the PFM would have had difficulty reproducing their conditions of existence, or even making improvements to compensate for declining natural fertility of the land. As such our illustration underestimates the potential for expanded reproduction within the PFM, a potential which history shows to have been clearly realised. In the first place, we have ignored Differential Rent 1, i.e. differences in fertility and location which would imply that, although on average, the rate of enterprise profit in (A) was kept low, there were wide variations around this average. Farms with above average DR1 could therefore earn rates of profit equal, or even in excess of the average for the formation as a whole (20% in the example). For these producers, then, there would be fewer obstacles to accumulating capital and extended reproduction. Such disparities in DR1 therefore, (e.g. above average fertility or exceptional location) underlie our explanation of the differentiation of the peasantry, as outlined in Section (2.7) above, into 3 classes or fractions after about 1890. The bourgeois fraction was favoured in its ability to invest their own capital in the general modernisation of their holdings, and so reduced their dependence on the comprador class.
However natural fertility of the soil has to be replaced, and the pace of mechanisation, or raising of the organic composition had to be maintained and in this process the State played a crucial role. The State’s activities may be summarised as intervention in the PFM to sustain extended reproduction by limiting the monopoly control of the comprador class over the movement of capital. This was achieved by methods which influenced both DR1 and DR2 although a clear distinction between the two is difficult to maintain. The most important measures were State subsidies in the development of improved methods of cultivation, higher yielding stock, improved methods of fertilisation, improved public works etc. Secondly, the State limited the monopoly of the comprador over the supply of credit by offering cheap State loans for both settlement and development. Finally, particularly after the onset of the depression of the 1930’s, the State itself became a monopoly in the acquisition of smallholder dairy production in an attempt to bolster squeezed profitability and to undertake more ‘rational’ marketing of dairy products. (Such, Security, 183-6)
As a consequence of these measures and others too numerous to mention, the State ‘nationalises’ the major costs of agricultural production and re-circulates excess profits at least partially back to the direct producer, holding down the share of the comprador class of the surplus value produced. The direct producer’s rate of realised profit would converge upwards to the overall average and thereby allow for extended reproduction to go ahead more rapidly.
But while State intervention breaks the monopoly control of the comprador class over the PFM in subsidising the costs of agricultural production, this only modifies the basic pattern of unequal exchange, it does not reverse it. The fact that such commodities still sell at modified market prices below their values represents unequal exchange out of the PFM in the conventional sense, i.e. a divergence of value from price. The State operates to redirect some of this transfer of surplus value back into the PFM by means of subsidies paid out of general tax revenues.
In addition to this conventional form of unequal exchange, we have added another relating to the monopoly ownership of capital by the comprador class. We have pointed out the limits placed on this monopoly by the State. In terms of the interlocking circuit model, the semi-colonial State, therefore, encourages the reproduction of international capital by transferring value in the form of State subsidies into agriculture, hence countering the tendency for agricultural production to stagnate.
To conclude our analysis of unequal exchange in agriculture it follows that the transfer of value out of agriculture, made possible by the combination of 1) a modern progressive form of land tenure in the semi-colony, 2) high differential rent and, 3) State intervention, provided a source of capital which could be used to ‘develop’ domestic manufacturing.
3.5 Contemporary Patterns of Circuit Interdependence
The previous sections have been concerned with the application of the interlocking circuit model to the analysis of the development of capitalist dominated agriculture in the N.Z. social formation. To some extent we have presupposed the existence of the Industrial Capital Circuit in our discussion of the flow of surplus-value via the state into the agricultural branch. In this section then, we extend the analysis to include the development of the industrial circuit into N.Z. and to demonstrate its impact on contemporary ‘economic’ relationships affecting the social formation, and on the pattern of social relations, or ‘class structure’. Though we cannot give more than an outline of the growth of the circuit in this paper, we emphasise its importance in the full development of the CMP in N.Z. It represents the further development of the CMP in N.Z. from the initial limited interlock of British capital with the PFM, through the establishment of branches of domestic manufacturing, to the present complete penetration of industrial capital into all branches of production accounting for 3 to 4 times as much as agriculture in the statistics on national production (Year Book, 1977).
What is quite distinctive about this development is that while it followed a sequence of ‘stages’ from the introduction of the PFM, to simple manufacturing, to later advanced production by international capital, it did so at a much more rapid rate than the original capitalist transition because it occurred in the context of the already established CMP and as the result of a highly interventionist local state. This meant that the pre-conditions for capitalist manufacture, namely 1)- capitalist dominated agriculture, 2)- wage-labour, 3)- industrial capital and 4)- a market, were rapidly realised by means of their displacement from the British social formation and their re-location in the semi-colony by the agency of the local state. We have emphasised in our previous discussion the influence of the state in establishing capitalist social relations in agriculture by means of the National Debt, using U.K. finance capital to develop the infrastructure of ports, communications , etc. for the full development of capitalist farming. This provided the first condition for manufacture, i.e. wage-goods for a working-class.
The state created the second condition, the working-class itself, by means of the assisted immigration of would-be settlers who finding themselves landless had no choice but to work for wages. The creation of wage-labour in the colony was not therefore the result of the original Wakefield scheme, but that of state schemes that applied the same principles of using the revenue from land sales to pay for a supply of immigrant wage-labour.
The third condition, industrial capital, arose out of the process we have discussed above. We saw that the accumulation of capital from the PFM, whether by the comprador class or the peasant bourgeoisie, was sufficient to increase agricultural production. It also provided the necessary money capital for investment as productive capital in the industrial circuit as soon as the combination of conditions required for domestic manufacturing occurred. This conjunction came about during the Long Depression when the pool of unemployed drove down the value of labour-power to the point where the local cost of production (at low organic composition and high absolute rates of exploitation of men, women and children) together with tariff protection (in 1888) made domestic import substitution of some commodities profitable for the local capitalist class (Sutch, Poverty, 106).
Apart from the development of primary processing industries, either cooperatively owned, or owned by capitalists (see (11) above), and their more recent extension into areas such as paper pulp etc., the three main branches of domestic manufacturing established after 1880 were:
(1) – Production of Wage-Goods: articles of consumption for the working-class, beginning with clothing, shoes etc., and incorporating a widening range of commodities entering into the value of labour-power E.g. TV’s, domestic appliances, motor cars (see (9) above).
(2) – Production of Capital Goods for Agriculture: the local production of previously imported machinery, farm implements, topdressing aircraft etc.
(3) – Production of Capital Goods for the Wage-Goods branch: a more recent tendency since as we pointed out in 2.5, the production of capital goods is usually the speciality of the Industrial Circuit in the core capitalist states, e.g. steel for construction, plastics for consumer durables etc.
Though these domestic branches of production were established and sustained by means of state protection (tariffs and import controls etc) they nonetheless represented a new source of surplus-value production open to international capital. As a result, from the 1880’s to the present day, we find that all branches have been penetrated by ‘foreign’ capital which has moved to take advantage of the development of the CMP in the N.Z. social formation, drawing the formation further into the international circuits of capital and reinforcing the semi-colony’s extraverted dependence.
We can describe the contemporary N.Z. social formation therefore as an immensely complicated system of interlocking circuits of capital spreading throughout its articulated economic base, and now augmented by an increasingly important branch of manufacturing production. The basic logic of the whole unity is one of circuitous interdependence, each circuit feeding or linking at some crucial stage with a foreign counterpart. The most crucial interlocks, in the context of our current discussion, are as follows:
(a) The Level of Production
(i) imported materials of labour feed into agricultural production for re-export or for industrial manufactures (oil, chemicals, raw fertilisers etc). We may call this an ‘import-output’ linkage.
(ii) Imported machinery is required for use in producing commodities feeding into non-agricultural production processes (wood, metal lathes etc). We can call this the ‘import-input’ linkage.
(iii) Agricultural raw material production feeds into locally-sited production processes, undertaking further processing before exporting takes place (e. g. timber, meat and wool processing). We call this an ‘output-export’ linkage.
(b) The Level of Exchange
Tthe foreign exchange earned from a( iii) is required to finance linkages a(i) and (ii). The foreign exchange earned from exported manufactures is needed to reproduce production of itself, as seen by linkage a(i).
(c) The level of Finance Capital
Seasonal shifts in the demand for credit by the farming sector results in credit being withdrawn at certain periods from this sector and fed into urban manufacturing. The seasonal pattern of production and realisation of export revenues, implies a requirement for foreign exchange credits for purchasing continuously needed materials for manufacturing. The credit system operates to effect these linkages and enables reproduction to proceed efficiently.
In sum, the basic model is one of the “production of commodities by means of commodities” (Sraffa), but with the crucial extension of all circuits into a foreign counterpart. The high degree of dependence on foreign trade is only partially revealed by aggregate figures relating exports to GNP, where, as can be seen from the table below, N.Z.’s percentage is not particularly high, and corresponds to that of many advanced capitalist social formations.
However, these figures conceal the dependence on particular primary commodities which is a general characteristic of colonies and semi-colonies. Moreover, as the previous discussion demonstrates, a lower aggregate ratio of exports to GDP may merely reflect the extent of indirect linkages in an increasingly diversified economic base. But these local circuits all at some stage spill out into an external one, so such aggregate data as presented in the table can say little if anything about the real degree of dependence or ‘extraversion’ which prevails in the N.Z. semi-colony. For, as is well known, the vital significance of the foreign exchange linkage, in permitting the reproduction of the entire economic base, and obvious from our above illustrations, explains why there has developed such heavy state control of foreign exchange transactions in N.Z.
Although less so than in the past, the evolution of N.Z. capitalism is still strongly dependent on the speed of development of the agricultural branch. Hence minimising the turnover, i.e. the time of production, plus the time of circulation of agricultural capital is critical to the ongoing pattern of accumulation. However, unlike manufacturing, there are natural limits to the capacity of new technology to speed up turnover of capital in agriculture and related branches of production, e.g. forestry. Agricultural produce simply needs a certain time to grow. Limits to the speed of circulation e.g. on account of the physical distance from its markets, are also important and very costly to overcome. This leads to a key point. Any reduction of these limits becomes increasingly costly in its capital requirements, even with heavy state subsidy. The result must be a tendency for the relative profitability of agriculture to lag behind that in other branches and for capital to be redirected accordingly.
These structural limitations (to which others such as the parcellisation of land could be added) to the development of the productive forces in the branches of primary production will act as real constraints on N.Z.’s overall capacity for accumulation. They also occur in conjunction with a world of heavily protected production of similar commodities in overseas formations whose states place strong limits on the market access for N.Z.’s traditional dairy products, leading to chronic overproduction in those markets that do remain open to N.Z. produce. It follows that the costs of maintaining minimum prices and returns to the smallholder in N.Z. by means of various state subsidies, represent deductions from the total social capital. The fact that these revenues might have been used in more productive branches (in line with the current ideology) reflects the price to be paid for preserving the foreign exchange earnings of the semi-colony. In international ‘comparative’ terms then, N.Z. carries a structural weakness much more significant than in social formations such as W. Germany, Japan etc. , which are not dependent on exports of primary produce, and which are currently said to be forging ahead of N.Z. in the international league tables.
Whilst these figures are clearly subject to severe limitations, taken at face value they can be used to support our structural argument.
The contradictions inherent in the semi-colony’ s new, or rather evolved, pattern of circuit interdependence are fairly obvious, but are clarified by means of our analysis of linkages made earlier in this section. For instance, more exports as called for by the orthodox ‘task force’ ideologists (N.Z. at the Turning Point)requires more export production (output-export), in turn requiring more inputs, and more imports (import-output) and so more exports to pay for them etc. Discrete changes in the cost of any one component (e.g. oil costs) are transmitted and probably magnified in their impact (through mark-up pricing practices) on all other components. So, from the above analysis, it follows that increasing export costs lead to reduced export competitiveness (and so on, in a downward spiral).
In addition, the usefulness of across-the-board measures, e.g. devaluation to cheapen exports, have their effects dissipated by the contradictory impact which devaluation has on import costs. This criss-crossing of effects at the level of market forces – prices, terms of trade, incomes etc. – is in truth the realm of the economist number-juggler, whose weighty pronouncements about such complicated interrelationships reflects their function as mystifiers of the underlying relations of production. The consequence of their ideological pronouncements is ultimately to assist in the offensive to drive down the value of labour power in the interests of the “export drive” (Steven, Terms).
3.6 Contemporary Class Structure
In this section we derive the contemporary pattern of social relations (i.e. the class structure) from our analysis of the development of the CMP and the subordinate modes in N.Z. Our approach is simply to locate classes in terms of their qualitative relations as wage labour or capital. We define this relation as one of ‘real ownership’ or ‘real non-ownership’ of capital which determines the form of control of the means of production, the labour process, and the distribution of the surplus-value produced. In our view, ‘legal’ ownership of the means of production is not capital unless accompanied by ‘real’ ownership. Contrary to some views it is meaningless to distinguish between owning either MP, or LP, since the CMP presupposes C (LP+MP) = P. We do not, therefore, propose to attempt to quantify the extent to which an individual may be exposed to ‘contradictory’ positions with respect to capital or wage-labour (Wright, Class, Steven, Class). Nor are we concerned at this stage with the reproduction of social relations, or with any imputation of class ‘interests’. We wish to establish first the links between the interlocking circuit model of accumulation, and the formation of a class structure.
From our analysis it follows that two classes produce surplus-value (s) in N. Z. They are:
(1) The working’ peasant smallholder (together with-other residual petty capitalist elements of little importance) which we shall discuss below.
(2) The Productive Working-Class (PWC) , in all branches of production and both private and public sectors. Productive labour is defined by Marx as the production of surplus-value (s) in commodity form, “The worker who performs productive work is productive and the work he (sic) performs is productive if it directly creates surplus-value” (Capital, Vol. I, 1039). This is an important point because it is the exploitation of this PWC that sets the limits to the production and distribution of surplus-value (cf. Wright, Class). All other classes, and fractions of classes, do not by definition produce s , but they are nonetheless engaged in its realisation, its circulation, its accumulation and its consumption. Arising out of the total circuit of capital therefore, it is possible to determine the form in which the social relation, wage-labour and capital, expresses itself in the contemporary N.Z. class structure. (See diagram below).
1. The Working Class
(a) Productive workers: Beginning at the point of production of s in commodity form in all branches of production we have the PWC. Though Marx speaks of ‘direct’ creation of surplus-value it is clear from the context that he includes both mental and manual labour, the “manager, engineer, technologist, the overseer, the manual labourer and the drudge etc” (Capital Vol. I, 1040). The PWC in N.Z. therefore includes not only all those defined as production workers in all industry divisions, but scientists, technicians, graphic artists etc who design and build commodities for the production of other commodities or the consumption of the working-class. See graphic (22) below for an estimate of the total numbers and size of the PWC. Since it is the PWC alone which produces s in the form of commodity capital, C’, it is the rate of exploitation of this class of ‘living labour’ which absolutely determines the limits to total s production (excluding the PFM). But while the PWC produces C’ it is only one part of the total proletariat (defined as being dispossessed of capital) which functions to circulate capital through its various moments of the circuit, all of whom can be defined as reproductive workers. They include (following the movement of surplus-value through the circuit):
(b) Realisation Workers: all those wage and salary earners engaged in sales (wholesale and retail), advertising, promotion etc, who function to convert C’ into M’. This function is performed by employees of capital, public servants on behalf of private capital (e.g. Department of ‘Trade and Industry), and public employees on behalf of state enterprises that produce commodities (Gas, Coal etc). They comprise all sales workers (with the exception of those selling financial, business and community etc services) (See Graphic 22. )
(c) Circulation Workers: all those wage and salary earners who are concerned with the circulation of M’ as money capital and its conversion into productive capital (exchange for MP and LP) in new productive circuits. They include all forms of commercial workers, banking, finance and administration, both in the private and public sectors. Private sector circulation workers are usually engaged in some aspect of the credit system, advancing M’ to finance production or consumption. State circulation workers are those involved in all forms of administration of the public revenue, that is the transfer of s (taxes) from gross wages and salaries, and profits, into all types of productive consumption as capital: first, in the state’s own productive enterprises, and second, all kinds of subsidies to the private sector’s productive branches. The estimated composition of the circulation working-class consists of the total employed in the major Industry Division, ‘Finance/Business’ (less production, sales and service workers) together with clerical and related workers, and professional, technical, managerial etc workers involved in circulation in all of the ‘production’ and ‘realisation’ (sales) industry divisions. ( See Graphic 22)
(d) Service Workers: Those wage and salary earners who exchange services for wages and salaries of the working-class, or who as state employees staff and operate the social services (health, education etc) thereby contributing to the value of labour-power. This group includes all the major division ‘Community-Services’ etc, together with service workers in the production and realisation divisions.( See Graphic 22)
(e) Domestic Workers: This Category of worker is usually ignored by bourgeois economists and placed outside the work1ng-class by Marxists on the grounds that the labour performed is not exchanged for variable capital and is therefore not productive, nor is it exchanged for wages or revenue. It is regarded as a form of “privatised, unpaid, toil” (Adamson, et. al. Women’s).Yet while domestic work is no more productive of s than is realisation, circulation or service work, it nevertheless contributes to the value of labour-power by performing unpaid surplus-labour and reproducing labour-power below its real value. In many cases domestic labour is done by single men and women, and married women, who also perform wage-labour (in N.Z. 50% of women working for wages are married). It follows that there is no strictly separate category of ‘domestic workers’, though it is usually identified as consisting of married women not otherwise working. In our view domestic labour is clearly a case of reproductive labour since it performs the very important function of reproducing the productive and reproductive working-class without which capitalist production would be impossible. The residual category of ‘domestic workers’ should therefore be added to the other categories of reproductive workers in determining the size and composition of the total working-class. ( See Graphic 22.)
(f) The Industrial Reserve Army: Since there are always some individuals(dispossessed of capital) who are unemployed, and the function of the reserve army is to facilitate the production of s through the increased rate of exploitation of all other wage-workers, the unemployed are also reproductive workers (albeit not currently employed). The reserve army, together with the actively employed categories of wage-labour and domestic labour comprise the total working-class.
In the following table we present some estimates of the total working-class relative to capital, and of the relative size of the various sections of productive and reproductive workers comprising the working-class. Because of the limitations of the data, they are no more than rough approximations of the numbers involved in 1971.
Our method of making these estimates was to cross-classify workers according to the major occupational group i.e. type of work – production, service, sales etc. and the major industry division. We classified the industry divisions into production (Agriculture etc; Mining etc; Manufacturing etc; Electricity etc; Construction and Transport etc) and into reproduction (Wholesale etc; Finance etc; and Community etc).
The logic of capital accumulation with increasing concentration and productivity, is to expel ‘living labour’ from production into either the reproductive working-class or unemployment. For example the relative decline in productive workers to reproductive workers is evident in the following:
Similarly, the petty bourgeoisie (those who possess some means of production but do not employ wage-labour) are being progressively squeezed out of existence into the proletariat, even in agriculture where the PFM still accounts for some 65,000 working farmers. For example, in the dairy industry:
It would appear therefore that the familiar polarisation of the two main classes in the CMP is taking place in the N.Z. social formation with the working-class now comprising about 90% of the active working population, and the capitalist class about 10%.
(Note: It should be emphasised that the identification of the working-class at the level of production relations deliberately excludes the fashionable concept of the ‘function of capital’ which is adopted by Wright and others to introduce a conflict of interest between certain categories of wage-labour who whilst performing wage-labour are ‘possessing’ or ‘controlling’ labour on behalf of capital. Whilst it is true that these categories of labour are often higher paid and may not perform surplus-labour this in our view introduces a conflict at the level of distribution of incomes and not production. This, of course, is not to deny the importance of these distributional conflicts along with other ideological and political differences that separate the immediate interests of various categories of wage-labour. The basic point however, is that the difference between these categories is not one given in the relations of production, those who have some function in supervising labour, are not owners of capital in the sense of controlling both means of production and labour process, so whatever differences exist between the immediate interests of the various categories of wage-labour – productive/unproductive, private sector/state, supervisory/non-supervisory etc. – are not conflicts between wage-labour and capital, but conflicts within wage-labour introduced by capital.)
2. The Ruling Class
From what has been said before, the ruling class, which defines the contemporary pattern of control of N.Z. capitalism, will be found to comprise certain definite elements. First, due to the absence of either any established industrial bourgeoisie, or an important landed aristocracy, their place taken be elements reflecting the actual historical process of accumulation in N.Z. Given the ‘facts’ as outlined above, it is not surprising therefore to find the following four major groups represented in the N.Z. ruling class.
a.The old merchant families.
b. The modern finance capitalist (the modem successor to the early comprador).
c. The ‘new professionals’ – lawyers, accountants etc, together with 4.
d. The splattering of ‘ self-made men’ of various descriptions. In terms of numbers of individuals, the group is small (about 100) but they can be defined as the ruling class because they control (actually own) the MP and LP that is brought together in capitalist production in the N.Z. social formation. (N.Z. Herald, Top 100) ‘!he function of these groups is to integrate, co-ordinate and control, through the various directorships they hold, all the most important industrial and finance companies in N.Z. (NZH, Top 100, Jesson, Family). The technocrats (group 3) are increasingly important in mediating in relations between capital and the state (taxation, inflation accounting, ‘planning’ etc). The ‘pure’ directors on the other hand represent the interests of both foreign and local capital (foreign shareholding amounted to approx. 20% of the total in N.Z. in the ’60s but the true degree of foreign control cannot be properly assessed in these terms (see Deane, Economic).
In terms of ‘legal’ ownership of course the ruling class is a minority. This is a consequence of the extensive amount of ‘socialised’ legal ownership of capital in N.Z. both in the form of state shareholding and the ‘pygmy-property’ of thousands of private individuals. But shareholding is as a legal concept, not part of the relations of production. It is the latter which the ruling class controls through their control of management which determines all key decisions affecting the allocation of capital. The separation of the work of management from the ownership of capital as different functions, which is illustrated in the following example, was fully analysed by Marx 100 years before its ‘discovery’ by Galbraith under the now renowned phrase ‘the separation of ownership from control’ (Capital Vol. Ill, 388). (cf. Burnham, The Managerial Revolution)
The way in which the ruling class operates at the level of the economic base and in particular how they dominate the relations of production by determining the distribution of the realised surplus-value, may be illustrated by a concrete example. In the period following the 1975 downturn in market conditions, more and more apparent has been the allocation to management of surplus-value in the form of higher salaries, Mercedes-Benz cars, petrol, housing and other allowances. These deductions are made, not at the expense of the workers, as workers, but at the expense of the pygmy-shareholders (who may of course be workers) whose rates of dividend on their shares consequently fell in 1976 and 1977. Many dividends were declared at low levels, in accordance with a policy of dividend control to discourage the ‘excessive wage claims’ of workers. But in fact, what was occurring as the result of falling profits, was a redistribution of the surplus-value in favour of the managerial group within the ruling class, who received an average or above average rate of profit on their capital, since their dividends were augmented by payments disguised in other forms. The absurdity of taking a legalistic view of production relations is fully illustrated by this example. Legal relations are part of the superstructure. Relations of production determine the allocation of the surplus-value to those legally entitled.
In sum, therefore, the function of the ruling class is two-fold. First, they determine the distribution of surplus-value between the various capitalist and other class fractions within the limits imposed on the reproduction of capitalist social relations due to the contradictions within the CMP (see next section). Second, a point not stressed above, they manage the articulation of N.Z. peripheral capitalism into the international capitalist system. This function brings with it various conflicts which cannot be properly treated here, but which require serious study. Finally, the social composition of the ruling class reflects the historical process of accumulation in N. Z.
3.7 The ‘Welfare State’ and Reproduction
In the preceding sections we have shown how the state played a decisive role in establishing the CMP in the N.Z. social formation by means of its political-legal and economic functions. As a result, capitalist social relations were established in agriculture, and in domestic manufacturing, developing into class struggles between peasants and compradors (see 3.4) and between wage-labour and industrial capitalist classes. In this section we show how the semi-colonial state has functioned to reproduce these social relations at the level of political and ideological relations allowing the full development of the CMP within the N.Z. social formation.
Up until the establishment of the industrial circuit in N.Z. the semi-colonial state functioned largely as a sub-imperial outpost of the imperial state. It drew heavily on the imperial state’s political-legal and ideological apparatuses (the imperial army, the Westminster system, statute law etc) which it adapted to the transplanted social institutions in education, trades unions, religion and family relations. However, as we have noted, the local state assumed a much more dominant role in establishing the CMP in N. Z. than had the capitalist states in the historical transition to the CMP in Europe, and it also responded to the growing threat of class struggle arising out of the Long Depression by rapidly transforming its apparatuses, that is introducing ‘state experiments’ to regulate work hours and conditions and provide basic social security measures. The local state therefore assumed a central dominant role in reproducing the CMP in the semi-colonial setting, fusing its accumulation, political-legal and ideological functions in the form of the ‘welfare state’ (Poulantzas, Classes, Intro) .
It is clear that the serious challenge to the reproduction of capitalist social relations posed by the rise of union militancy, forced the ruling class to rely much more heavily on the state’s reproductive functions in maintaining social unity and cohesion. But while the state’s role was to moderate class struggle and to shift the basis of accumulation from absolute surplus-value to relative surplus-value (i.e. actively reproducing skilled labour-power by means of the state provision of health, education and welfare) it was presented at the level of popular ideology as ‘state socialism’ . The state was conceived to be a ‘neutral’ institution standing above class interests and capable of reconciling these interests in the general interest expressed in terms of the dominant ideology of nationalism. By using the state to reconcile class interests at the level of ideology the ruling class was able to reproduce the conditions for extended accumulation. In so doing, it was in turn able to finance the rising living standards and social services of the working-class and continue state subsidies to capitalist production by means of the rising productivity of labour-power. And rapid accumulation, in its turn, worked to legitimate the state’s appearance as the ‘peoples’ state’. Thus, if the working-class benefitted from higher wages, better conditions, social security etc. it was not because it had won a victory against the capitalist class, but because it had provided these ‘benefits’ out of its own surplus-labour (Bedggood, Class).
The post World War II development of the welfare state has extended its functions in reproducing the CMP and maintaining the unity of the social formation. The use of Keynesian economic policies such as full employment, income maintenance and social security, together with the reproduction of skilled labour-power, sustained the post-war accumulation boom. This had the effect at the level of ideology of legitimating the state’s capitalist role under the slogans of economic growth and per capita prosperity. But clearly the state can only manage to appear as the benign ‘people’ state’ so long as its functions do not require any drastic reduction in the living standards of the working-class. So long as it can perform its accumulation functions of reproducing skilled labour-power through the provision of equal opportunity in education, health, housing etc. without raising taxes or cutting wages, these functions will appear to be in the ‘interests’ of the working-class. Indeed, they will serve to reproduce capitalist social relations at the level of individual achievement motivation.
(Note: Most writers (e.g. Yaffe) assume that state intervention in the economy is a drain on the surplus-value going to the capitalist class thereby lowering the average rate of profit. The position taken in this paper is that this conclusion follows from a static analysis which does not take into account (a) the surplus-generating functions of the state which must offset to some extent the so-called ‘drain’ by creating new surplus-value, and (b) the fact that the state extracts surplus-value from the working class (which would not otherwise have gone to the capitalist) in the form of taxation. Thus over the post-war period increased productivity has created more value, but the state has actively intervened in the class struggle for shares of the newly created value by extracting a portion that would have entered into the historical component of the value of labour-power, and cunningly redistributed it to capital. Thus the ideology of the welfare state is the reverse of the reality. (Bedggood, State, cf. Wright, Class, Crisis and the State)
More recently, however, the costs of maintaining the levels of social welfare spending to sustain the illusion of equal opportunity in education, health and so on, has put a strain on the state’s fiscal resources, leading to the general situation of cuts in state spending, increased taxation, and the redistribution of state revenue from less productive to more productive branches such as export manufacturing. The basic contradiction between the relations and forces of production which has been suppressed during much of the semi-colony’s history by the intervention of the state now threatens to dissolve the unity of the state’s reproductive functions. Now that the rate of accumulation has slowed down, the state’s efforts in sustaining accumulation require it to redistribute surplus-value from the working-class to the capitalist class. As it takes the offensive against the working-class it sheds its appearance as the ‘welfare’ state and for the first time faces a serious challenge to its ability to suppress class struggle and maintain social cohesion in the N.Z. social formation.
4.0 The analysis of Crisis and the NZ Social Formation
Our previous analysis has stressed two basic points of relevance to an analysis of crisis. First, is the need to consider the N.Z. formation as an articulation of various sub-modes under a dominant mode of production. Second, is that the operation of its economic base may best be thought of as complicated system of interlocking circuits operating to reproduce capital in its various forms. Crisis may be defined as a period of dislocation, or discrete reversal in the speed and pattern of the circulation of capital throughout this base. Since the various moments of the circuit are moments at which capital, in some form, is active, e.g. industrial capital at time of advance, productive capital during the process of production, bank and merchant capital at time of sale etc. then no one moment or particular fraction or social class represented by that moment, has a fortune fundamentally different from any other. All are affected by the dislocation of the flow of exchange value through the various interlocked circuits. Less profit in one area leads to less in another and hence to cumulative processes of contraction, or expansion, as conditioned by various structural and other phenomena involved. These may be, for example, the time periods of production, the nature of operation of monetary institutions, the patterns of income distribution and so on.
Since a crisis ultimately affects all moments of the circuit, production, circulation, distribution, reinvestment, it is unreasonable to classify crises as uniquely crises of overproduction, or of foreign exchange or whatever. Categorising along these lines reflects an attempt to identify the apparent source or most obvious manifestation of the dislocation which has lead to the crisis. For instance, a crisis of overproduction as evidenced by unsold stocks of commodity capital has its immediate source in inadequate demand for these commodities which in turn implies a disruption in the flow of purchasing power to those doing the demanding. But, the actual cause of the disruption is not explained. Many crises in New Zealand are, in these terms, crises of production; i.e. they dislocate the production process initially – labour disputes for instance – and thereafter affect distribution and exchange. But these crises are of a relatively superficial nature. They don’t greatly affect the reproduction process and can be dealt with outside the production process itself.
At some stage however (the mid 1970’s) there occurred a “structural crisis of reproduction” reflected in a discrete fall in the rate of profit in a significant number of the main branches of production. The decline in the rate of profit reflects the inadequacy of available measures to counter the tendency of the rate of profit to fall. A structural crisis of reproduction therefore brings on the need of the ruling class to review the structure of the total social capital and to adopt a range of specific measures for regenerating the accumulation process. It involves, in principle via the mediation of the state at all levels and instances, alteration of the pattern of accumulation, liquidation of inefficient businesses and reorientation in directions that will restore and surpass previous levels of profitability. The crisis acts to “purge” the impurities as it were, and thereby to ensure that expanded reproduction and circulation will be renewed. Such is the nature of the crisis now affecting world capitalism and New Zealand in particular.
The main features of the current crisis are by now very familiar –slow growth in production, heavy unemployment, low rates of profit, high indebtedness of many manufacturing businesses, declining real wages etc. At the base of this crisis is the inadequacy of the mass of surplus-value being produced to satisfy the demands for consumption, accumulation and other reproductive functions placed upon it. The role of the crisis is to effect a redistribution of the surplus value away from areas of lesser efficiency, out of the hard won gains of working class struggles, and out of generally unproductive hands, into areas of higher accumulation potential. The methods used require an attack by the ruling class and the state at the economic, political and ideological instances, in order to bring about the required restructuring. The general direction of the desired restructuring is that of manufacturing production for export, assisted by a widened range of specific state subsidies and tax concessions. Incomes and income taxes have been shifted in favour of the higher income groups and the managerial fraction in particular (see 3.6), with only minor’ concessions’ allowed for lower wage earners, domestic workers, welfare beneficiaries etc.
Given the generalisation of monetary circulation throughout the entire economic base, the impact of the crisis cannot be escaped by any class or class fraction as part of the dominant CMP or any of the sub-modes with whicl1 it articulates. Rather, the impact is passed through the various circuits to the weakest points, at which ‘moments’ the impact is offloaded. These points are those at which the sub-modes articulate with the dominant mode and show up as increased exploitation of weaker classes. On this basis the PFM, domestic labour, youth, racial minorities etc. are the groups to bear the major impact of the crisis, a conclusion that can be easily verified by empirical investigation e.g. on properly defined PFM terms of trade , relative wage of Maori labour, whatever.
In order to legitimate its economic restructuring policies, the state engages in an ideological and political offensive. On the one hand it must gather support for its policies by appealing to an overriding patriotic sentiment and present the restructuring as in the’ national interest’. At the same time as exhorting all New Zealanders to ‘pull together’ (Task Force Report) the ideological apparatus of the state operates to divide the basis of solidarity within the working-class by setting striker against non-striker, skilled against unskilled, white against non-white, married against unmarried and so on. Any attempt to ‘rock the boat’ or ‘stir’ is immediately interpreted as greedy, short-sighted, communist-inspired etc., and against the nation’s’ interests’. The bourgeois notion of harmony only resides, in the mind, at the level of joint participation (“working together”) in the nation’s development, at which level conflict dematerialises.
It should be emphasised however, that each ‘solution’ to a crisis of reproduction in the’ national interest’, while it may restore the rate of profit for a time, can only do so by accelerating the maturation of the CMP and the pre-conditions for socialist revolution (Marx, German Ideology ,54). That is, the basic contradiction between the forces of production and capitalist social relations becomes condensed in a more acute form on a higher plane. The forces of production are concentrated in the monopoly sector to a greater degree by restructuring (supplanting the PFM in agriculture, and small manufacturers etc) while the proletarianisation of the people generates the material basis for overcoming the ideological divisions within the working-class along the lines of skill, income, race and sex. And as we have seen earlier, the ability of the state to contain class struggle arising from the growing contradiction is limited by its own contradictory role as capitalist state masquerading as ‘peoples’ state’. It becomes increasingly difficult for the state to attack the working-class and pretend to be doing otherwise (e.g. when capital can no longer operate within the’ rule of law’). The immediate consequence of restructuring therefore is to intensify class struggles within the political and ideological instances, to foster the growth of the ‘new’ society within the ‘old’, and ultimately to hasten the transition to socialism.
These general observations regarding the nature of the current crisis in NZ are expressed here to underline an important point of analysis. This is that the forces underlying crisis cannot be understood simply at the level of distribution; i.e. class struggle over the shares of the surplus going to wages and profits. The crisis is one of fundamental restructuring involving discrete shifts in the pattern of accumulation, the welfare of various social groups and the nature of state intervention. These crises do not occur as a result of certain uncontrollable forces such as workers’ drives for higher wages al though these may be an easily observable phenomenon associated with the crisis. Rather, their basic function, which is their real significance, is first to bring about a redistribution of surplus value so as to enable a new pattern of capital accumulation to be established and the reproduction of capitalist social relations to be maintained.
What are the most important points to emerge from our analysis? Into which areas do we suggest the greatest attention should be directed?
First, we would suggest that our analysis has re-affirmed the importance of the science of history. No attempt at explanation of the path of development of any social formation can merit serious consideration if it fails to pay sufficient attention to the historical process. The contribution of Marx was that he discovered the continent, or, the science of history (Althusser, Lenin, 42). His method is scientific because it represents a full reconstruction in the mind of the entire process of the operation of a given reality, in our example the development of capitalism in the New Zealand social formation. It is not a partial view, stressing isolated instances and fragmentary appearances; it is a total conceptualisation based on a materialist analysis.
Secondly, applying the science of history, our approach has stressed the dynamic of reproduction, as distinct from production. No social order can persist unless it succeeds in reproducing itself together with the contradictions contained within it. This means that the reproduction of the forces and relations have to be analysed using an appropriate method. The interlocking circuit model of reproduction has provided us with the required conceptual apparatus.
Finally, implicit in both the Marxist science of history and its application to a particular social formation is the clear opposition to bourgeois ideology. We wish to underline our position in the theoretical class struggle in which we are engaged. What we have attempted to show is that the bourgeois approach is unscientific since it never takes into account more than the level of appearances and more than a narrow or partial view of history. On the contrary, the Marxist position is that nothing must be left unexplained and no instance can remain un-attached if one is aiming for a full explanation of the evolution of any social formation. Our treatment of the case of New Zealand serves, we believe, as an illustration of the validity of a Marxist approach.
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