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Mahurangi Magazine reprints the New Lynn speech

by 29 Apr 2012Climate action economics, Election turnout0 comments

Speech to the New Lynn Women’s Branch of the Labour Party
David Cunliffe

Gagged in God’s Own: Following the New Lynn speech, ‘Shearer and his minions … ripped into Cunliffe at [the 8 May] caucus meeting, and then refused him permission to appear on [The Nation] (even with a written undertaking from [its political editor] that there would be no questions on Labour’s internal politics).’ image Tumeke


You know that at the last election, the one that we lost so badly, nearly one million people didn’t vote; more thansorry, sorry, but the Mahurangi Magazine just cannot bring itself allow ‘over’ in place of ‘more than’, in the first sentence 800‍ ‍000 people—a fifth of the population—didn’t vote.

Now you know, there are lots of reasons that people didn’t vote, and there were even more reasons why people didn’t vote for Labour. Let me give you just a few.

The major reason that voters didn’t vote for Labour, and sometimes didn’t vote at all, is simply that Labour failed to inspire voters that it was a credible alternative to National.

This is the first of a series of speeches on economic development. I am going to start with the basics—why the invisible hand of the market failed us and why we need a clear and distinct Labour view on economics; why you can’t cut and sell your way out of an economic hole; and what a Labour economic development plan should contain. We need to be clear about the context before we can go on the policy journey.

I want to be clear from the outset that this speech represents my own views and does not pretend to represent overall Labour policy. All policies are being reviewed in the post-election period.

The invisible hand

The Labour Party was traditionally a left-wing party. Before we debate the future of the Labour Party, we should define what the terms left and right-wing mean.

Left wing generally means community ownership and or control and/or responsibility. Right wing means individual ownership and/or control and/or responsibility. By modern standards, even the National Party would have been a left-wing party until the 1990s. That’s because most New Zealanders accepted the idea that the government has not just a right, but also a duty to be there for them.

David Cunliffe

God’s Own Gets Off Lightly: Aotearoa’s brush with neoliberalism, initiated by the Labour Party, was destructive enough, but in Shock Doctrine Naomi Klein documents the full extent of the vicious toll that Chicago School of Economics ‘corrections’ have exacted globally. image The Guardian

New Zealanders wisely accepted that finance companies needed regulation. New Zealanders wisely accepted that it was the government’s job to ensure that the electricity didn’t go off. They wisely accepted that it was the government’s job to ensure the children didn’t grow up in poverty, that medical care was available for people who needed it, that decent housing was available for the poor and the elderly.

However, by the 1980s, the New Zealand economic system had grown clumsy and slow. Most people agreed that it was in need of reform. That’s what most people wanted, economic reform. That is, they wanted the existing system, but they wanted it to function more smoothly, more efficiently and more fairly. They did not want it replaced with a system that simply handed over most of the wealth and power to rich people.

Yet, that’s what happened, and to our eternal shame, the Labour Party was the party that introduced many of the so-called economic reforms that have proved so disastrous. The National government that followed it took the experiment further; with the ‘mother of all budgets’ that savaged social services, more privatization and deregulation, and the odious Employment Contracts Act that set us on the path of becoming a low wage economy.

You hear the National government talking about the need to sell assets because we have so little money in this country. Do you know why we have so little money in this country? It’s because a large percentage of our economic assets are overseas-owned. For example, when the Australian-owned banks make billions in profits here (and it’s up a quarter to a third this year alone). That money isn’t returned to New Zealanders. The money goes straight back overseas.

And, as if that were not bad enough, the National government now wants to sell our other major state assets, which is simply going to mean higher prices for ordinary New Zealanders and it’s going to mean still more profits disappearing overseas. It’s madness, and you know it’s madness and most ordinary Kiwis know it’s madness.

But let’s go back a bit. I know that most of the people in this room think of the 1970s as a period of longhaired hippies and revolution. However, beneath the events that were happening on the surface, there was a much more sinister revolution going on in the background.

Stephen Keen Capital Account interview

Debunking Downunder: Not only does neoclassical economics not work, not only did it inflict, and continues to inflict, misery on millions, but Australian Steve Keen has exposed as unsound the mathematical models on which the whole nasty edifice is predicated. Keen was one of only a dozen economists worldwide to predict the global recession, and the underlying reason for it. image Capital Account

While the hippies were out protesting in the streets, a professor at the University of Chicago called Milton Friedman, was selling his students the idea that taxation was evil and that businesses worked best when they were deregulated.

Does this sound familiar? It should be. The Republican Party in the US, the Conservative Party in England and the Labour Party in New Zealand enthusiastically took up Friedman’s philosophy, which is now called neoliberalism. Neoliberalism has become such a dominant economic philosophy that it is now the only economic philosophy taught in many universities. Friedman revived a belief in the ‘invisible hand’ of the market. It was a fairy tale that Adam Smith had said a century earlier would automatically deliver the best of all possible economic worlds.

Of course many of the rogues who benefited from it have never believed that—they remember how they got rich. However, neoliberalism was a convenient way of selling the idea of inequality to the masses.

Hands off our assets!

Let me repeat, none of this happened by accident. The people who were the most enthusiastic supporters of neoliberalism were the people who stood to make the most money from it. Let me give you just one example:

In the 1980s and 1990s, merchant bankers Michael Fay and David Richwhite were advisors to government. Michael Fay and David Richwhite recommended that the government sell the state-owned New Zealand Rail. The government agreed and put the company up for sale. Fay and Richwhite and some partners, then purchased New Zealand Rail at a bargain price.

That’s right: Michael Fay and David Richwhite, the consultants that government hired to advise them on state asset sales, advised the government to sell New Zealand Rail, then Michael Fay and David Richwhite bought a large chunk of New Zealand Rail.

The story gets worse: Fay and Richwhite and their partners then sold many of New Zealand Rail’s most valuable assets, such as land, without improving the company as a true rail operator would. Then, in 1995, Fay and Richwhite sold their shares in New Zealand Rail, having made hundreds of millions in profits. Because Fay and Richwhite had sold many of New Zealand Rail’s most valuable assets without investing in trains or tracks, New Zealand Rail was virtually bankrupt. The government was then forced to spend hundreds of millions of dollars of taxpayer money to keep the rail service operating. Does this sound crazy? It is.

This sort of madness has been repeated all over the world, and it’s always the ordinary taxpayers like you, who end up paying the bills.

Roll the clock forward to the current National government and nothing has changed except the packaging. They can try to soft-soap it by calling it the ‘mixed ownership model’. But you and I and the 10‍ ‍000 other New Zealanders who marched up Queen Street yesterday to fight it, know it is still privatization.

Arcelor Mittal steel works

Ayres Rock: Unlike conventional economists, Robert U Ayres, who is also a physicist, understands where wealth comes from, and that economic growth, broadly, is the result of increasing energy service. ArcelorMittal’s Lake Michigan steel works, where recycled energy produces 90 megawatts of emission-free energy, is an example quoted by the Ayres brothers in their critically important work, Crossing the Energy Divide.

We know why privatizing our power companies is nonsense. Generations of Kiwis worked to build up those assets and we don’t need to be told we have to buy them all over again. That’s assuming we could afford them of course. The fact is that when sold, they will not be state-owned enterprises covered by the [State-Owned Enterprises Act] at all—they will simply be companies like any other—in which the taxpayer has a much reduced shareholding. We know they make a healthy return for the taxpayer now. In fact, over the last three years the total return was around 16%—far higher than the cost of Crown capital at around 6%. They pay good dividends—over $300‍ ‍million a year for the last four years. But the government deliberately failed to show that in the budget documents when it banked the supposed sale proceeds well before the last election.

To complete the hypocrisy, the government is now saying the loss of dividends is so low that no sane buyer would pay the money they want without driving your power prices through the roof.

National tried to buy iwi support by saying treaty rights would be protected. I doubt this, but even if true it would mean the taxpayer bears 100% of that risk including on behalf of the new private investors. Yet the biggest porky of them all—that the government would retain majority ownership and control. Yeah right. Not when [state-owned enterprises] like KiwiRail are already busy flogging off major components like Hillside Workshops. Not when [state-owned enterprise] bosses told Parliament they are free to sell off 100% of subsidiaries. In other words, the [state-owned enterprises] are like a horse. The government intends selling the horse off bit by bit, leaving the taxpayer owning nothing more than the saddle. The fact is, this is old fashioned privatization with new spin and the same old result. The people lose. The ticket-clippers win (it costs up to $300‍ ‍million in banker fees to sell the shares!). And the voter is told to ‘eat that’.

So how do these rogues get away with it? The answer is twofold: on one hand, the news media has been a solid supporter of neoliberalism. Did you know, for example, that British Labour prime minister Tony Blair, regularly lunched with Rupert Murdoch, the far-right media boss? Tony, apparently, used to test which policies would be acceptable to Murdoch. Thus we have a far-right media boss influencing the policies of what was supposed to be the party of the people. It’s shameful.

Road to Nowhere cartoon

National’s Blighted Future: The National Party’s blind faith in endless, directionless growth contrasts to the Green Party’s newfound enthusiasm for growth, but growth on a green mission. However, neither the Green Party nor David Cunliffe seems keen to acknowledge the all-critical mission of avoiding runaway anthropogenic global warming, for fear of frightening the horses. cartoon Majorlook Productions

The second reason these rogues get away with it is because, as the Tony Blair example shows so clearly, the opposition parties, which are supposed to be the solution, too often become part of the problem.

When the right-wing party says that it’s going to cut your leg off, voters want the left-wing party to say that it’s not going to cut your leg off. Voters don’t want to be told that the left-wing party is also going to cut your leg off, but cut it off a bit lower down and give you some anesthetic. I think that’s a major reason that nearly one million voters deserted us at the last election. It wasn’t because we failed to communicate our policies. Quite the opposite. Those voters saw that our policies—with the exception of asset sales—were mostly the same as National’s. So we can’t really be surprised at the result.

Towards a new economy

So where to from here? Let’s be absolutely clear—New Zealand cannot cut and sell its way to National’s so-called ‘brighter future’.

New Zealand cannot simply milk more cows and hope that commodity prices stay up. Nor can we pretend that mining national parks won’t destroy our precious global brand. National has no new ideas and no credible plan. It has laundry lists of actions, many of which take us in the wrong direction. The reason is that they still fundamentally believe that some combination of the ‘invisible hand’ of free markets, and the ‘sleight of hand’ of dirty deals with casinos, dotcoms, film and media magnates, and telcos, will do the job.

The good news, if you can call it good news, is that the economic myths that drove the world into this current mess are starting to unravel. Let me quote economics writer Bernard Hickey, who regularly contributes to the New Zealand Herald:

It’s time for me to recant and to say what I’ve been thinking for months: The economic god of completely free markets and capital flows is not worth believing in anymore and we must look for other things to believe in and do.

I think New Zealand needs to have a debate about capital controls, about foreign ownership of assets, about measures to control our currency and about being openly nationalistic rather than internationalistic about our economic policy.

I think the Global Financial Crisis and the preceding decade of debt-driven instability in global capital markets and trade flows have demonstrated the failure of the economic model most New Zealand policymakers have adhered to for nearly 3 decades.

I think we need to rethink the way we run monetary policy, the way we allow foreign ownership of assets, the way we encourage savings, the way our financial institutions are regulated and change the things we are aiming for.

Bernard Hickey, 20120516

Not Working: Neoclassical economics has definitely not worked for young New Zealanders, of which 83‍ ‍000 aged 15 to 24 are not working or in education. The youth unemployment rates for Māori and Pacific Islanders are 30.4% and 29.8% respectively. image

All around the world, this realization is sinking in: The unregulated marketplace has been a disaster, and the costs have always been borne by ordinary people.

Europe’s current economic crisis was caused by bankers who loaned money on riskier and riskier ventures until the whole structure collapsed. Were those bankers jailed and their assets seized? Of course not. Instead of the bankers paying the bills for their reckless speculation, the ordinary taxpayers are being screwed, left, right and centre. And you know what? Despite all the promises that the European economic austerity measures would turn this tragic situation around, the opposite is occurring.

Austerity economics does not work. It did not work in the Great Depression of the 1930s and it will not work in the Great Recession of the current decade. When you start closing down your government services and firing your workers, those people have no money to spend. Because they have no money to spend, the local businesses suffer. So they start firing staff. And so the economy goes into deep recession, with no easy way out.

Am I the only one who thinks this is complete lunacy?

You know, these problems that we face today stem from a lack of appropriate regulation or a lack of enforcement of existing regulations. The global financial crisis was caused by unregulated banking. Leaky building syndrome was caused by deregulating the building industry. The Pike River mining disaster has raised numerous questions about deregulation of the mining industry. Does anyone still seriously believe that big business can be safely left to regulate itself? Yet, regulation has become a dirty word. Do I favour regulating the lives of ordinary New Zealanders? Certainly not: I have great faith in ordinary New Zealanders. Do I favour supporting positive businesses? You’re damned right I do. Businesses help create jobs and economic growth. I want to see a future Labour government get stuck in and do more to help the economy grow. Do I support all businesses? No way. Businesses that let workers die unnecessarily, or abuse and exploit their workers, or steal from old people: All these business need a strong, legal response from the state.

Japan Tsunami 2011

Naīve and Foolish: Some of David Cunliffe’s caucus colleagues described his speech as ‘naīve and foolish’. While only time will tell whether New Zealanders agree, the Mahurangi Magazine must take issue with David Cunliffe’s Fukushima reference. The magnitude 9.0 Tohoku earthquake and resultant tsunami killed 19‍ ‍000, and injured nearly 27‍ ‍000. The Fukushima nuclear disaster resulted in 39 physical injuries, and two workers were hospitalised with radiation burns. photographer Mainichi Shimbun Reuters

All this requires regulation, and it’s there to protect ordinary people from becoming victims of greed. Labour is strong on encouraging positive business and positive economic growth. And Labour is also about legislating to control negative businesses and their effects on our people and our environment.

Caught between a naīve belief in free markets and direct pressure from vested interests, National is unwilling to confront the downsides of unregulated markets. Fortunately we’re not. And an increasing number of journalists and politicians are saying what ordinary people already know: That the economic policies of the last 30 years have mostly been an unmitigated disaster. But you’d never know this if you listened to John Key. Like a quack doctor whose cure has failed, his response is to double the dose until the patient is dead.

Sorry, John, but let me quote Sir Winston Churchill:

The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.

No matter how many politicians and economists still defend the economic policies that led us into this mess, the truth is steadily showing itself.

You know, there’s not much difference between a Wellington schoolteacher struggling to find an affordable home and a Northland freezing worker who’s just lost his job. Whether we earn our living by our hands or by our words, we’re all working people, whose lives have grown harder and whose world has grown steadily darker. We’re all in this together.

We all resent those who squander our tax dollars by helping out large corporations, while we struggle to pay our mortgages. We all resent those who seek to sell the very state assets that help keep us afloat. We all resent those who claim to represent us in Parliament, but who really represent the rich and the powerful, at our expense

Instead of National’s failed economic model, we need a simple, credible economic development plan that serves the interests of all New Zealanders. One that keeps more of what we earn here in the country we love.

Norman Kirk, Levin, 1972

Ban the Big Bomb: As prime minister, Norman Kirk vigorously opposed French nuclear weapons testing, famously by sending frigates to bear peaceful witness to the crimes against nature and humanity perpetrated at Moruroa. Kirk’s big beef was with nuclear weapons not power—as was David Lange’s, until the Labour Party’s anti-nuclear-anything faction forced his hand. With those most knowledgeable on de-carbonising energy finding that third and fourth generation nuclear is indispensable, if the burgeoning use of coal for electricity generation is to be sufficiently curtailed to avert runaway global warming, ‘God’s-Own’ owes it to the planet to reconsider its precious anti-nuclear-everything position. image Horowhenua Historical Society


I believe the Labour Party is now uniquely positioned to take up the reins when this current government’s policies collapse under their own weight.

Labour has a new leader with strong values, who’s focused on reconnecting with the voters and has the courage to stand up to bullies. It’s up to us, as a party, to share with our leader, our hopes, our fears and our dreams, to reconstruct the party from within, to reclaim our natural constituency of decent, ordinary New Zealanders who believe in fairness and hard work.

Now it’s up to us to turn this around: A hard task, but not an impossible one.

When Labour proposed a nuclear-free policy, it was seen as an impossible dream. Yet nearly thirty years’ later, this dream is a solid reality, and it’s helped protect us from the sort of nuclear disaster that Japan has just endured. The New Zealand Labour Party faced enormous pressure, from inside and outside New Zealand, to back down and change its anti-nuclear policy. But we didn’t. And we don’t have to back away from creating policies that can turn us away from the economic insanity of the last three decades. New Zealanders are decent, fair-minded, hard-working people. We want a government that reflects our own uniquely Kiwi values.

It’s going to be hard, but we’re not afraid of hard work. With your help, and the help of the people of New Zealand, we can win the next election. We can move forward to a future that rewards hard work and stops rewarding dishonesty. That gives the poorest of our citizens the chance to a decent life. That gives us all a chance to live in a nation that was once called ‘God’s own country.’

We can become God’s own country again.

David Cunliffe
Member of Parliament for New Lynn
Labour Party economic development spokesperson