The article below first appeared in issue #7 of revolution magazine (August/Sept 1998), one of the precursors of this blog.  Its original title was “Have you got protection?”  The core arguments remain highly relevant as economic nationalism still dominates most of the NZ left and the vast bulk of the trade union movement.

downloadby John Edmundson

May Day in New Zealand is not traditionally the focus of large demonstrations by workers.  This year, however, was different.  Textile workers in many centres were given time off work and provided with free bus transport to march alongside their employers in support of a campaign to freeze the tariff reduction programme.  Both employers and workers in the industry are seriously concerned about the long-term viability of clothing manufacture in New Zealand in the face of competition from low-wage Asian economies.

The textile industry in New Zealand employs approximately 25,000 workers and is traditionally one of the lowest-paid sectors of the economy.  The Trade Union Federation (TUF), a federation of left-leaning unions, supports the anti-tariff removal campaign in the interests of defending its members’ jobs.

So what is behind this unlikely alliance between sections of New Zealand capital and left labour – united in opposition to the freeing up of this section of the economy?

Deregulation

The election in 1984 of a Labour government dominated by Roger Douglas’ programme of deregulation and economic liberalism has changed the complexion of the New Zealand political and economic scene.  Whereas in the past regulation was an accepted feature of economic management by both Labour and National in government, the post-1984 era has been marked by a strong aversion to any form of tariff or protectionism.  In fact, the major parties spend much of their time vying to be seen as the most deregulatory and consequently most modern party.

Even New Zealand First’s revision of its earlier tariff reduction policy merely changes its stance from one of leading the world to one of keeping pace with this country’s tradtional partners.  The climate has changed sufficiently in New Zealand that any opposition to tariff reduction is seen as the preserve of the inefficient or the far left.  Given the propensity of left-nationalist groups to argue for precisely such a position, this is hardly surprising.

The focus of the tariff reform movement has been the General Agreement on Tariffs and Trade (GATT), and its associated treaties such as the Trade-Related Investment Measures (TRIM) agreement.  The GATT agreement was signed in 1947 and was comparatively uncontroversial until the Uruguay Round of GATT negotiations got underway.  The GATT’s Uruguay round stalled for a long time as competing interests vied to retain protective barriers for their own strategic industries while moralising about the need for free trade in other areas.

The USA and Europe retained protection for their agricultural sectors while Japan and the Asian Tigers continued to protect their crucial motor vehicle and electronics industries.  New Zealand took an ideologically  pure stand and commenced a massive programme of unilateral, across-the-board tariff reform.  Resolution of the Uruguay round provided the environment to push a second layer of international market reforms.

Borderless

The most controversial of these has been in the area of deregulating capital flow across national boundaries.  Anticipating tough opposition from the Third World on this issue within the GATT forum itself, the rich nations which comprise the Organisation for Economic Co-operation and Development (OECD) sought to present a united front to the world by producing their own agreement, the Multilateral Agreement on Investment (MAI).  The secretive means by which participating governments attempted to pass the MAI outraged activist groups throughout the West.  (The draft agreement only became available after a leak.)  The MAI in its initial form failed to achieve the desired consensus and has been temporarily shelved.

The NZ government’s position was to sign immediately.  Oppositon MP Mike Moore opposed only the secrecy aspect, believing that the agreement was good and would have been acceptable if open debate on it had been allowed.  What the MAI essentially attempted to do was require national governments to prevent discrimination in favour of local investment, although there was no reciprocal restriction preventing discrimination against local capital.

Who’s free?

Free market policies certainly threaten many jobs in the NZ economy.  The TUF, the most radical wing of the NZ trade union movement, predicts that most of the 25,000 footwear and clothing workers’ jobs and at least 5,000 vehicle assembly jobs will be lost if the tariff reduction proposals are carried through.  TUF argues that “a tariff is a good tax”, protecting jobs, protecting local (capitalist) industry, and providing income for state spending on health and education.

In the “What Can I Do?” section of a leaflet they produced in response to the latest announcement of tariff reduction in the clothing and vehicle assembly industries they advocate that concerned citizens write to minister of commerce John Luxton, “urging that tariffs are not reduced beyond their year 2000 level”, ring talkback radio, talk to family and friends and organise demonstrations and “Jobs with Justice” groups to promote tariff retention.  No attempt is made to explain, in even the most basic form, the capitalist imperatives driving the campaign for free trade.

Origins of free trade

The early campaigners for free market theories, such as Adam Smith, believed that in a completely deregulated world, trade would multiply to the massive benefit of all.  Each country or community would find its niche producing those products which suited its specific conditions, climate, geography, labour force etc.  Contemporary advocates of the same system, such as the Business Roundtable, as if oblivious to the massive inequalities which exist both within and between countries, continue to argue along the same lines.*  But it is capitalism, first and foremost, which has created these inequalities.

Capitalism, as Lenin predicted in his work on imperialism, has proven singularly incapable of bringing about equality, either within or between nations.  Capitalism, having created a world where SouthEast Asian workers labour in sweatshops to produce cheap consumer goods for the world, is now asked by the Trade Union Federation to intervene to protect New Zealand workers from those goods.

The trade union movement, in adoptng this position and allying itself with protectionist and nationalist political parties, is merely acting in the short-term interests of its members’ jobs.  It promotoes an alliance with national capital at the expense of international labour.  It has long since abandoned a stance which sees beyond the paradigm of capitalist production.  Moreover, as Engels points out in a footnote in Capital, vol 3:

“. . . these protective tariffs are nothing but preparations for the ultimate general industrial war, which shall decide who has supremacy on the world-market.  Thus every factor, which works against a repetition of the old crises, carries within itself the germ of a far more powerful future crisis.”

Job losses

Marx clearly identified the dilemma for workers faced by the job losses which result from free trade measures:

“But the protectionists will say: ‘So when all is said and done we at least protect the present state of society.  Good or bad, we guarantee the labourer work for his hands, and we prevent his being thrown onto the street by foreign competition.’  I shall not dispute this statement, I accept it.  The preservation, the conservation of the present state of affairs is accordingly the best result the protectionists can achieve in the most favourable circumstances.  Good, but the problem for the working class is not to preserve the existing state of affairs, but to transform it into its opposite” (Marx and Engels, Collected Works, vol 6, p280).

It is an indictment on the New Zealand trade union movement that its most radical wing can do no better than parrot the arguments of protectionist capitalism.  Campaigning in support of tariffs and other forms of protection does not represent opposition to capitalism.  Tariffs are simply tools the capitalist state uses at specific times to protect certain industries in difficult periods or against more efficient competition.  Marx described protectionism as “an artificial means of manufacturing manufacturers, of expropriating independent laborers, of capitalising the national means of production and subsistence. . . (Marx and Engekls, CW, vol 26, p521).

Governments and industrial lobbies fluctuate between protectionist and free market/free trade policies as domestic and international circumstances dictate.  All New Zealand’s governments have used a range of protectionist measures at different times to support certain sectoral interests within the economy.  The first Labour government in the 1930s handed enormous subsidies to Fletchers in order to undertake the state housing programme.  Supplementary Minimum Prices, whereby the farming sector received a ‘top up’ when prices fell below a predetermined level, were an important part of National Party policy, as was the provision of cheap power to the Comalco aluminium smelter.  Free milk in schools and the subsidy on milk prices to the general public were instituted in order to support a strugglimg dairy industry, not primarily for the improvement of public health.

Support for tariff reform is not a measure of any given party’s capitalist credentials but rather an indication of which particular capitalists or industries that party currently considers most significant to the economy or, more cynically, its electoral prospects.  As Engels observed:

“The question of Free Trade or Protection moves entirely within the bounds of the present system of capitalist production, and has, therefore, no direct interest for us Socialists who want to do away with that system.  Indirectly, however, it interests us inasmuch as we must desire the present system of production to develop and expand as freely and as quickly as possible; because along with it will develop also those economic phenomena which are its necessary consequences” (Marx and Engels, CW, vol 26, p535).

Here, of course, Engels is referring to the two main negative tendencies of capitalist production.  The first is the tendency towards concentration of capital, where monopolies tend to form, so that caital – and consequently wealth – tends to become concentrated in the hands of a smaller and smaller bourgeoisie while the wokring class becomes comparatively larger and yet also more exploited and relatively more impoverished, ie has a smaller share of the total wealth of society.  The second is the tendency for the rate of profit to fall, whereby increasingly capital-intensive production shrinks the profit rate across the capitalist economy as a whole.  These two factors are important and inherent contradictions within capitalism itself which contribute to its vulnerability.

No protection for workers

Support for continued tariff protection at very least ignores, and at most attempts to alleviate, the harm caused to capitalism by these forces.  Ultimately of course, as with all tendencies governed by the capitalist system, this occurs at the expense of the working class.  Protected capitalism is no more or less robust in the long-term than free trade/free market capitalism.

Protected industry accelerates the enlargement of the working class and therefore contributes to capitalism’s weakness.  But it is, in some respects, better that the cloak of national protection is stripped away in order that capitalism be revealed more openly for what it is, an exploitative economic system increasingly unable to deliver the needs, let alone the wants, of society.  As Marx wrote:

“Let us assume that there are no more Corn Laws** or national and municipal import duties; that in a word all the accidental circumstances which to-day the workingman may look upon as the cause of his miserable condition have vanished, and we shall have removed so many curtains that hide from his eyes his true enemy.

“He will see that capital released from all trammels will make him no less a slave than capital trammelled by import duties” (Marx and Engels, CW, vol 6, p643).

When New Zealand’s manufacturing base was becoming established as a result of the government’s import substitution policies, tariff protection – ‘manufacturiong manufacturers’ – was the ‘rational’ capitalist approach.  For an economic policy increasingly based on a low-wage work force and ‘export-led growth’ a low tariff or, better still, a tariff-free global environment is the one most preferred by capital.

Furthermore, cheap consumer goods for consumption by the working class reduces the cost of labour in the medium to long term and thus enable capitalism to maintain higher profits.  It is this situation which faces New Zealand capital today.  Marx again:

“But generally speaking, the Protective system in these days is conservative, while the Free Trade system works destructively.  It breaks up old nationalities and carries antagonism of proletariat and bourgeoisie to the uttermost point.  In a word, the Free Trade system hastens the Social Revolution.  In this revolutionary sense alone, gentlemen, I am in favor of Free Trade” (Marx and Engels, CW, vol 6, p465).

Marxists must analyse capitalism in all its forms to identify the driving force behind any ‘policy change’ within bourgeois thinking.  It is not sufficient to simply assume that ‘new right’ market liberalism must be worse than the Keynesian orthodoxy of the postwar boom years and that, conversely, the old capitalism is therefore somehow more appealing than the new.

Capitalism is administered by capitalists and it operates in its own interests at all times.  When crises such as the job losses in the clothing and automotive assembly industries occur, it is important that they be understood in the context of the capitalist system rather than merely combated within it.  Of course the mass destruction of entire industries and consequent job losses of this sort must be opposed but they must be exposed for the failure of capitalism that they really are, not simply as the result of tariff cuts.

Most of the far left, while claiming to oppose Kiwi nationalism, has leapt onto the anti-MAI campaign bandwagon.  Once again, the left has accepted the idea that NZ-owned capital represents ‘the lesser of two evils’.  But the job of Marxists is to draw class lines on these questions.

Tariffs make workers in other countries pay for the problems of capitalism while uniting workers and their class enemies, capitalist employers within New Zealand.  As long as workers identify with New Zealand capital, they will never challenge the actual source of their exploitation, the capitalist system itself.

Notes
* Many modern-day supposed followers of Smith also misrepresent Smith. He didn’t favour free trade at all times in all places; he thought protectionism was a necessary stage until national economies were in a position to compete with some degree of fairness.
** The Corn Laws were agricultural tariffs which maintained artificially high corn prices in England well into the nineteenth century in order to maintain the wealth of the big landed interests. These were successfully campaigned against by an alliance of free-trade manufacturers and workers.  After the repeal of the Corn Laws, the divergent interests of the capitalists and workers came to the fore in British society.

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