Why buy New Zealand made?

18 October 2008

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“Economic nationalism” is the idea that the citizens of a nation, either individually or collectively, should own and manage its economic assets.   It is normally an adjunct of political nationalism, which assumes that all who dwell within a defined geographic area share a common interest, and are subject to political institutions which are unique to, and make exclusive claims over, the particular territory.  By this definition, political nationalism in New Zealand is compromised by the fact that its pre-eminent political institution, the Crown, represented in the person of Queen Elizabeth II, is not unique to New Zealand.   Essentially New Zealand retains the political, cultural, and economic forms of a British colony and successive waves of immigration have ensured that the beliefs and attitudes which bind New Zealanders together are in many cases weaker than those which bind them to their “home” countries such as Britain, Holland, China and India.   It is the relative absence of any properly developed cultural or political nationalism in New Zealand which makes any form of economic nationalism problematic as well.

As I have remarked in previous posts, economic nationalism enjoyed some influence among the political classes in New Zealand through the middle part of the twentieth century.  But from the time of the fourth Labour government it fell out of favour.   The National, ACT, and Labour political parties adopted the ideology of the “global free market” and supported the wars of  global capital (aka the international community”) against the people of Iraq and Afghanistan .   The New Zealand First Party continued the traditions of mid-twentieth century New Zealand capitalism by supporting the global  military operations of international capital, while still promoting quasi-nationalist economic policies.   The more left-leaning Green Party, which had to some extent dissociated itself from the wars in Iraq and Afghanistan, also advocated economic policies which were mildly nationalist, arguing in favour of  an official “Buy New Zealand Made” campaign, and against the sale of New Zealand assets to foreign entities.

The “minority” position adopted by New Zealand First and the Green Party is symptomatic of a widespread and deep-rooted sentiment within New Zealand society which is at odds with the colonial structure of its political institutions and the "diverse"  imperial culture fostered by those institutions.    While continual immigration since the 1840s has tended to dilute nationalist feeling,  the  majority of New Zealanders have some kind of nationalist sympathies, such that neither of the dominant political parties - Labour and National - are willing to run the political risks of attacking economic nationalism head on.   (That task was largely left to the ideological purists of the ACT party, and the pundits of the mass media, who continue to shamelessly argue the case for global capitalism and Anglo-American military hegemony).

But as global capitalism is gripped by an economic crisis unprecedented in the past half-century, the new “National” Party leader John Key, is reverting to economic nationalism in an attempt to save New Zealand capital, and the regime, from the consequences of the failure of the global capitalism which he had so strongly endorsed, and from which he has personally profited.

Key, like erstwhile supporters of global capital the world over, has determined that the resources of the nation-state should be used to subsidise and rescue the institutions of capital.    New Zealand capitalists - from the landlord with one or two rental properties to corporate manufacturers like Fisher and Paykel and  Fletcher Building -  will not, and cannot, be saved by global capital.   On the contrary, in the coming year expect to see the New Zealand market being held to ransom by the international financial community.   As global capitalism descends into chaos,  New Zealand capitalists will stop preaching the merits of  globalization.   Instead they will start  asking the state and the people to invest more in New Zealand institutions, and to buy more New Zealand products.

In some jurisdictions, such economic nationalist polices might provide some temporary relief.   But for the policy to work there has to be some reciprocity of the kind which has been largely absent in  New Zealand.   For example the dairy company Fonterra, the largest producer in New Zealand, shows no loyalty to local consumers, who are made to pay international prices, or higher, for New Zealand dairy products.    And the appliance manufacturer Fisher and Paykel has shifted much of its production off-shore to factories in Thailand and Mexico.  While they may appeal to national sentiment for short-term gain, neither the state nor the institutions of capital in New Zealand respect the underlying nationalist principle of the common national interest.   In this respect New Zealand differ significantly from countries which have a long history of political independence and national unity.    The values, the institutions, and the legislative framework of New Zealand have developed to serve the needs of an economy founded on exploitation and speculation.  The character of the state and society in New Zealand would have to be dramatically transformed before economically nationalist policies could have predictably beneficial outcomes.

When guided by the  “protestant ethic” of thrift, diligence, honesty, sobriety, industry and charity capitalism works as well as, if not better than, any other social system.   But when society allows capital to be extravagant, hedonistic, self-indulgent, greedy, lazy and mean-spirited, the outcomes are catastropic.    That has been the case in New Zealand.   And that is why “buying New Zealand made” or “investing in New Zealand business” as a rule can not work to the good in the current social climate.

The problem with these “economic nationalist” strategies is that they necessarily involve an abdication of control by the consumer and the investor in favour of the entrepreneur.   If you invest in a New Zealand business (other than one of your own that you control personally, or one in which you have a significant share holding and therefore a significant influence) then you trust the party that does exercise control (the major shareholder, or the managing director, or even the chief executive) to do the “right” and wise thing.   If you purchase New Zealand-made goods at a premium that reflects your support for New Zealand industry, then you are in effect making a cash donation to the producer of those goods, again in the hope or expectation that he or she will do the “right” and wise thing.   But you have no control over actual outcomes.  Your effective transfer of economic power to another can have unintended and unanticipated consequences that are quite at odds with your prior hopes and expectations.

By helping create a class of affluent New Zealand capitalists, you assist those who may be  wanting to buy their second, third or fourth home or farm to compete in the market with those who are trying to buy their first.   “Buy New Zealand made”  and the unintended consequence may be that you price yourself or your children out of a home, a farm, or a business.

And if you think that buying New Zealand made will keep New Zealand businesses in New Zealand hands, then think again.   Successful New Zealand businesses are even more likely than failing ones to move into foreign ownership.   The almost universal tendency among successful New Zealand entrepreneurs is to cash up, and decamp to Sydney, London, New York or Geneva, in a pattern that dates back to the beginnings of the colonial era.

Another reason to think twice is that  New Zealand capitalists do not have a good record of probity or prudence.   The Bank of New Zealand, Air New Zealand, New Zealand Rail, New Zealand Forest Products and New Zealand Telecom, were all badly managed by New Zealand directors and executives, with the first three needing financial bail-outs from the state.   At the next level down, scores of finance and investment companies, and some major manufacturers such as Feltex, have collapsed due to financial imprudence or criminal misappropriation of funds by their managers and directors.

The act of charity should not depend on unfounded expectations as to how the recipient will respond.   Because the “Buy New Zealand Made” and “Invest in New Zealand” campaigns do not meet this  criterion, they are misguided charity as well as bad economics.  In the short term it may be better to buy products from China or Vietnam than to effectively subsidise a local producer who will either depart with the booty or else stay and use his wealth to deprive you of the opportunity to own your own house, farm or business.   In the medium term, it may be better to use what wealth you have to build your own economic assets.   But in the long term the better course is to build new political institutions which reflect solid moral values, our common interest as a people and our true identity as a nation.   Only when these pre-conditions are met, will economic nationalism become a viable strategy.