Sunday, 26 August 2001 - ‘Alternative Economics. New Policy Directions for the New Millennium’ - Dr Jane Kelsey on globalization and the effect on Aotearoa

It’s very nice to be here. It took a bit of organizing as I’ve been away for the last couple of months which, in a sense, gives what I want to say a sense of immediacy. I’ve been up in Eastern Europe, in Hungry and Poland and the Czech Republic and then dropped into Geneva and the World Trade Organisation. But then, more recently, I’ve been in Argentina and Ecuador.

Those of you who have been following the news will know that the Argentinean economy is in a state of total collapse. And it’s been intriguing, sad, challenging, to talk with people up there about what’s happening. But I suppose the most distressing thing was, I’d been asked to give several lectures on New Zealand’s economic experiment and after I gave them, in two instances, including one with the economists, they said, well you’ve told us about Argentina, when are you going to tell us about New Zealand. Given what’s happening there, that was a little chilling.

I think what’s fascinating, for those of us who have been working on globalization since before it became trendy, is how in fact, the debates and the discourse changed. In the late 1980s and 1990s during the Uruguay Round negotiations of the GATT, and particularly after the fall of the Berlin Wall and the collapse of the Soviet Empire, it was the sense that globalization was somehow invincible, that there was no competing ideology or superpower anymore and that there was a linear progression from national economies to a global free market which was inevitable and irresistible.

And even many of those who did not like it, believed that this in fact was so. Those who were its cheerleaders felt no need to justify their rhetoric. All we had were triumphalist clichés and the critics couldn’t secure a look-in. A decade later, that had changed dramatically. The future of global capitalism had become much less certain and even the cheerleaders worried.

What I want to present to you today is part of an essay that I’ve been writing for a small book that will come out in November. The essay is entitled, “The Wobbly Bicycle – Globalization At The Precipice”. The reason for calling it the wobbly bicycle is that this is the term that the globalizers themselves are using. I first came across it at a seminar held on the side at the Asian Development Bank meeting in Geneva in 1998. A panel discussion there was headed by the then Director General of the World Trade Organization, and included the gurus of globalization – the Deputy Editor of the Financial Times, the head of the think tank, The Institute of International Economics in Washington and the Deputy Prime Minister of Thailand who is to be Mike Moore’s successor at the WTO.

It started off in its normal gung-ho fashion about globalization. And then over time, the discussion kept building on this metaphor of the wobbly bicycle. And they reflected that in just the past year – this was mid 1998 – a number of things that had happened had destabilised their free trade bicycle. The East Asian tiger economies had collapsed and they had expected to be the engine of growth in the early 21^st Century. The international financial markets had been thrown into disarray and there was talk, and from Malaysia some action, about re-regulating financial flows. The IMF and the Work Bank, which had been under attack since 1994 in the 50 years is enough campaign, were being blamed for making the situation worse. At the OECD, the negotiations on the Multilateral Agreement on Investments had collapsed. In the US, President Clinton had been denied the right to negotiate a fast track agreement which the Congress had to accept in whole, or reject in whole.

In many countries, they acknowledged, the impact of globalization on jobs, on local industries, was starting to produce a backlash that was promoting more protectionism. And, citizens across the world were starting to challenge the impact of globalization on the nation state, national sovereignty and self-determination, an outcome which they considered to be an inevitable and acceptable consequence of globalization.

So, in a sense, the balloon started to deflate as they talked. But what was fascinating also was their solution to this - you had to pedal the bicycle faster to keep it upright. So they suggested that the institutions – the IMF, the World Bank, the WTO and all of the baby banks and the regional agreements - had to continue dismantling the barriers to the expansion of global markets. But they could maybe make the documents and decisions more transparent. They might even acknowledge the existence of social concerns whilst stressing that those were still the responsibility of domestic government, even if at the same time their structural adjustment programmes made it impossible for domestic governments to deliver.

Even, possibly, they might invite the better behaved members of civil society, to come and have a dialogue on their fringes. But what was fascinating to me in this discussion was that there was no hint of any recognition that the economic model they were promoting might have failed, that it might have needed to be rethought, or that the contest against it might have to be contained. In other words, in my mind, they ignored the fact that you cannot have unrestrained accumulation of global capital without addressing the contradictions that that sets in place – social coherence and stability and political legitimacy. And I think that they still suffer from that problem.

So that’s the backdrop against which I want to talk about what I think is in fact happening in the globalization era. When we look at the developments of the last three or four years, most of us will have these images of Seattle, Washington, of Genoa and so on. And without doubt, those protests have been very important. And I think that the cheerleaders of globalization seriously underestimated the speed and intensity with which that public opposition was gaining momentum and the extent to which it was organized.

They have, since then, had constant reminders. Physically, they have had to meet behind those barriers. That is not a pleasant experience. Whilst the demonstrations are not new, they certainly are more potent. Whilst they might have been able to be dismissed in the past, they cannot now be dealt with so easily. I think it’s a wonderful paradox that one of the reasons they are so potent is that the networks of global media have in fact been transmitting the challenge to those operations into our lounge rooms.

It’s not only though the key players in those institutions who are recognising that something significant is happening. Even The Economist, a wonderful bastion of global capitalism, has taken the message. In September of last year it made a very interesting statement. It said, “the protesters are right, that the most pressing moral, political and economic issue of our time is third world poverty. And they are right that the tide of globalization, powerful as the engines that drive it might be, it can be turned back. The fact that both these things are true is what makes the protesters, and crucially, the strand of popular opinion that sympathizes with them so terribly dangerous”.

So, those protests have been significant. But at the same time, media-driven focus around these protests, I think, is highly problematic for our ability to analyse what is really happening with globalization. Because what it presents is a caricature. It oversimplifies and reduces what is happening to sound bites and clichés. We have, on the one hand, responsible NGOs and unions and on the other hand, the irresponsible militants and the anarchists. We have the media focus on property damage and violence, not on the issues. And when we have the issues, they are usually expressed by those well-behaved, well-resourced northern NGOs and unions.

And because the protests are centred mainly around the institutions, the focus has been on the reform of those institutions rather than the nature of global capitalism and the instabilities they create. The positions and perspectives of poorer people in poorer countries are almost invisible on CNN or Sky. Yet it is the impact on them which are fuelling the instabilities in the global arena.

Now, I’m also nervous about this focus because I’m not at all convinced that the current wave of anti-globalization protests can be sustained. And if people think that’s all there is to the challenge of globalization, then we have a problem. It will be quite easy for those media empires to pull the plug on the coverage. It would not be too difficult for the institutions to alter the form and location of their meetings as we have seen happening already. Divisions between the more conciliatory and more militant anti-globalisation activists may well be effectively fostered by a divide and rule strategy which is also well under way. And indeed, just the simple fact that people are now dying, may stop people from going out on the streets.

So, the decline in popular activism, and in particular, these mass protests would, I think, deflate the hype around globalisation and would also lower the profile of the dissent. What won’t happen, though – and this is why I’m concerned about the focus on the protests – it will not make the threats to globalization, which the Economist acknowledged, to go away. Because the protests are simply the public manifestation of a multi-faceted complex dynamic which has been destabilising globalization over a number of years. And that dynamic, I think, involves at least four different elements.

One is the self-destructive capacity of the unregulated free market and in particular of global capital and the potentially devastating economic earthquake that those create. A second feature is the unstable alliances and rivalries between both the superpowers and the transnational corporations as they compete for dominance in world economic activity. A third factor is the intensification of inequality between and within countries of the north and the south that are a consequence of the increased concentration of global capital. And the fourth is the upsurge in popular resistance to the subordination of self-determination, national identity, democracy, to the interests of international capital.

Now those diverse elements do not form a single unitary anti-globalization movement. They involve alliances, variously of poor governments, international NGOs and unions, indigenous nations, municipal councils, farmers, workers and ordinary citizens. At times on an agenda that is loosely shared, at times that is co-ordinated but which is also often contested and contradictory. They are not always on the same side saying the same thing. And if we are going to understand what is happening with globalization, we actually need to understand the complexity of these forces. And those who are trying to defend it have a great difficulty grasping, let alone responding to that deeper set of challenges that now confront them.

It is possible, I think increasingly possible, to revert to the old north-south discourse in relation to globalization – the north being the richer, industrialized countries, in particular, the OECD and the south being the poorer countries. And the globalizers like to say, well of course, it’s not that simple, the poorer countries are not all on the one side. To some extent that’s true.

We are starting to see an increasing consolidation of countries that consider themselves to be part of the south, and this is one of the reasons why the instability is so difficult to rein back in. In the 1980s and 1990s, there was quite a successful strategy of divide and rule. Now we are increasingly seeing poorer countries coming together and asserting fundamental concerns about poverty, the disempowerment of them as governments and their people by foreign investors, transnational companies and superpowers. And we are starting to see a reassertion of the need to address the un-level playing field that the global market pretends is not there.

Now that doesn’t mean that there aren’t different positions being taken by those countries. We see that the different history, the different economics, the different culture, the different politics plays through in different ways. And we have within those countries – and it was very visible for me in both Argentina and Ecuador - competing interests of the elites in those countries which are locked into the global market and the interests of the poor in those countries who are the victims of the structural adjustment policies and international financial speculation.

And the governments in those countries are often corrupt – something that is tolerated when it suits international investors and the major powers, and used to blame those countries for their situation when it does not. The governments in those countries have to work out how they mediate those tensions between their elites and the international financial community and the mass of people who are now increasingly mobilizing on their streets.

When I was in Argentina, there were protests each week I was there, of over 30,000 people in the main city. Those followed blockades of the main arterial routes of the highways and the railways by the so-called pikiteres, who had for three days solidly, brought those highways to a standstill. We see the signs of political contagion now in Brazil. We see concerns that it might even spread to more stable Chile, and a fear that those governments might put those domestic priorities and pressures ahead of the interests of the elite.

When we come to the north, the challenges to globalization in those countries have tended to come more from unions, from small businesses, from local government, from NGOs, some of which claim, with questionable justification, to have an international mandate. The pattern that we see in those countries in the north is not so much a focus on poverty and inequality, as the defence of particular sectors from which those unions or NGOs or local authorities or small businesses come – an attempt to defend those particular sectors against the pressures that now confront them.

So we don’t have opposition to globalization per se, we actually have a desire to carve out from globalization the areas of particular concern. And hence we see focuses on public service, on foreign investment, on environment, on labour clauses, as well as the issues of democracy. And unlike what is increasingly happening in the south, there is very little coincidence between the positions of the governments of the north and the anti-globalization voices.

Significantly though, even that is starting to change. In the US and Europe, the domestic political consequences, especially for social democratic governments, have seen the likes of Clinton turn around and embrace the labour clause and environment clause as the price for continuing to expand the rest of the globalization agenda. The fact that Bush has decided not to continue down that path raises an interesting question about how those tensions will play through in the next few years.

And cross-cutting the north and the south, we see this interesting alliance that is building again of indigenous nations who in both sectors of the world, view what is happening as another form of the colonization that has left them alienated and dispossessed, which commodifies nature, which treats human and natural worlds as legitimate spheres for exploitation. As a consequence, indigenous peoples rebel. There are, even though CNN doesn’t show this, significant rebellions occurring by indigenous peoples in many countries that are intensifying these conflicts.

For example, in the last 18 months in Ecuador, there have been two mass mobilizations there led by indigenous peoples, one of which brought the government down, and the second of which is currently stopping the implementation of an IMF-driven strategy. So, whilst we cannot say that there is a single anti-globalization movement, there is undoubtedly something that is happening where people are not accepting the globalization-is-inevitable discourse and are in quite diverse ways fighting back.

I want to talk a little bit about some of the details of the focuses of resistance so that we understand quite what the particular objections to what is happening are. And then I want to reflect on how that anti-globalization sentiment is or is not being reflected in this country of ours. When we look at the challenges of globalization from the south, as I said, the focus is predominantly on questions of poverty and it’s interesting that the documentation now, even from within the institutions, is acknowledging that under the period of globalization, poverty has increased.

The World Development report out from the World Bank in 1999 conceded that poverty and inequality during the 1990s had increased in Eastern Europe, in Latin America, in the Caribbean, sub-Saharan Africa and south Asia, all of which had been subject to the kind of structural adjustment programs that we know in this country so well. And almost all of those were conditions of IMF and World Bank debt financing often, to refund or refinance unconscionable and unpayable loans.

Now, that’s not terribly new information. The challenge to the failure of the World Bank and the IMF structural adjustment programs have been around for a long time and people have simply tended to ignore the information. What’s really interesting is that the same information is now coming out in quite conclusive terms about the World Trade Organisation. It is often claimed, and Mike Moore says this constantly, that the recipe for poverty alleviation in poor countries is free trade. But the UNDP has now produced estimates that in the first decade of the WTO’s existence, from1995 to 2005, the 48 poorest countries in the world will be 600 million dollars a year worse off, that sub-Saharan Africa will be worse off by 1.2 billion dollars a year.

Another report that interestingly came out just before Seattle, said quite explicitedly that the predicted gains to developing countries from the Uruguay Rounds had been exaggerated and they called for a new economic agenda that sought to provide for genuine economic development. So we are starting to see that the concerns expressed by poorer countries are being backed now by statistics produced from within the institutions themselves.

In Seattle, those arguments backed the position of poorer countries who insisted that those agreements needed to be renegotiated rather than the WTO agenda expanded. I want to give just two particular examples of how these impacts on peoples’ lives are fuelling the resistance that is coming from below. One is the area of agriculture that is about the only part of the WTO that New Zealanders tend to know about. And we are of course told that free trade and agriculture is essential to the survival of the New Zealand economy and therefore any other concessions that might be made are justifiable as a consequence.

But what’s interesting, if you look at what’s happened in agriculture at the WTO, is that rather than freeing up protected agricultural markets of the US and the EU, those markets have in fact become more protected. In practice, their defences have remained intact, but they have demanded that others remove theirs to intensify the agribusiness of their major transnationals. Indeed, if you look at what has happened between 95 and 98, the first three years of the operation of the agriculture agreement, agricultural subsidies in the rich OECD countries more than doubled. Whilst some of those go to smaller farmers who are seeking to survive, the vast bulk of those subsidies find their way to corporate farmers and agribusiness in the EU and the US.

Now the consequence of this is that we have a glut in production. So what happens with a glut in production – it has to find a market. And those markets are the markets of poorer countries and poorer countries who are seeking to export their agriculture simply cannot compete because they don’t have the supports in place and they don’t have the infrastructure of the transnational agribusiness. And their farmers become trapped in a vicious cycle because the structural adjustment programs from the IMF and the World Bank insist that they move from subsistence to export crop production. And as they move to that, they have to plant high yield crops that have to be maintained by insecticides and fertilisers which reinforce the dependency of those farmers on the patent holders like Cargill and Monsanto who in return then start to insist that you plant genetically modified crops and that you can’t keep your seeds to regenerate your seeds for next year because that’s a violation of the patent rights.

At the same time, the structural adjustments programs demand the cooperatives and producer boards are deregulated so that there is a competitive market so farmers become locked into supply contracts to the global agribusiness like Tesco’s. And we start to see then that it’s only the larger scale producers that can survive. Indigenous peoples are forced off their lands, smaller farmers who often have higher interest rates on debt as they have converted to this export focus simply cannot sustain their existence. They still have to pay the debt. Traditional rural communities start to collapse as does the infrastructure around those communities and the secondary economies on which they depend.

The food security of those countries gets undermined because they are no longer producing for their own consumption. And as food shortages emerge, the costs of imports exceeds the return from exports. And as the trade imbalance comes through and the debt increases, the IMF and World Bank say you need to cut your subsidies for food. And hunger, combined with corruption and with IMF-enforced cuts to subsidies, create social and political instabilities as well as threatening peoples physical survival.

Now, common sense tells us, and I think that even evidence tells us, although evidence doesn’t have much play in here, that small-scale farming can be more productive, more efficient, more healthy, more environmentally sustainable in the long term than this agenda. It also meets peoples’ needs for food, security and employment. But is has absolutely no place in the world of globalized agriculture. When you spend time in local communities, you see these arguments articulated in very clear ways by those who are daily trying to survive that syndrome.

The second example is a quite different element of the WTO, but which also highlights the social and human impacts of supposed ‘free trade’. You might wonder why intellectual property rights are part of a world trade agreement. What do they have to do with trade? Well, there are theoretical justifications given by the patent holders, but the political answer is that the US couldn’t get the agreement it wanted to in other forums and it imposed this effectively on poorer countries as a condition of securing what they wanted in the Uruguay Round - which I’m not going to talk about here but which in fact hasn’t largely been delivered.

What’s interesting about the intellectual property rights agreement in the WTO, called TRIPS, is that it requires all member countries of the WTO to guarantee a minimum protection for general patents for a period of 20 years. And it prohibits governments from using measures that they often use to deal with technology transfer and to provide affordable access to patented products. Poorer countries complain that this is problematic because it means that their industrial development is totally dependent on access to the technology controlled by the larger companies and that massive outflows of royalties are leaving very little money in the country to be able to fuel that development.

In agriculture, I’ve given the examples of the problems with the control by the agribusinesses over the shape and direction of the agricultural sector. But the area in which TRIPS has become particularly controversial is the access to life-saving drugs. In particular, it has come into focus on the question of HIV AIDS. The agreement basically gives the mega-pharmaceutical firms a guarantee that no country will produce or reproduce in a generic form the drugs over which they have patents. That gives them the ability to charge whatever level of royalties they want for the use of those drugs.

This has come to the fore in two countries in recent months. In South Africa, there is a law that allows the government to reproduce generically such drugs. And it decided last year that it was going to do so as part of a campaign against HIV AIDS. The major pharmaceutical companies lodged litigation in the South African courts to challenge the breach of patents. That became a matter of high international controversy. It even was raised at the G7/G8.

As a consequence of the pressure on the pharmaceutical companies, they withdrew their court action, we are told, because they decided that they had social responsibilities. I understand from the lawyers that in fact a major reason was they were concerned that the evidence was going to require them to disclose the costs and the profits they made from these drugs. So, in theory, South Africa can proceed. But information that has just come through in the last few days confirmed that South Africa, under pressure, has decided not to use these laws, citing the high production costs and the lack of an internal infrastructure to distribute them.

But there is a happier story from Brazil. Brazil has what is viewed internationally as the most progressive anti-HIV AIDS strategy in the world, where it provides a cocktail of 13 drugs free to all those suffering the disease. The US and the European Union lodged a complaint at the World Trade Organisation against the proposal from Brazil that it would grant compulsory licenses to its local producers to make generic drugs so it could circulate them as part of this strategy. Again, after considerable pressure and the embarrassment that caused they withdrew the complaint to the WTO in June this year. My understanding at the time was that Brazil had given an assurance that it in fact it would not proceed with these proposals without first consulting the US.

But just two days ago, I received a notification that Brazil has in fact announced that it will proceed with the compulsory licensing with one particular HIV drug. If they paid the price which the Swiss pharmaceutical giant Roche was demanding for this one drug, it would have sapped up 75% of their AIDS budget. So they have announced they will license it to be produced generically.

Interestingly, Brazil has a clause in its constitution that allows it to break patents in cases of national emergency or where companies use abusive pricing policies. Despite this, if the US wants to proceed at the WTO, Brazil’s action may be held to breach the TRIPS agreement. The political pressure is making it extremely unlikely that the US will do so. But the pharmaceutical companies will be mobilizing like crazy because once the door is open to this happening in one country on one drug, then the whole of the TRIPS safeguards that they have put into place are in danger of collapse. (Subsequently a deal has been reached where Roche provides the drug at 30% the price it charges in the US, thus averting this much bigger risk to its profitability).

I hope those couple of examples will give you a sense of how what is claimed to be simply a set of economic policies are setting in train social and political consequences that make that economic agenda unsustainable, unless it is pursued through outright repression and repression, which we know is a highly economically and politically unstable response.

There are a number of other areas which are fuelling this sense of resistance that are largely coming from the north and they also form part of the arguments in this country, so I will just mention them briefly. One of them involves the trade in services. You might say how can you trade services. Services are now the big business part of international economic activity, with something like 1.4 trillion dollars annually in international transactions, and they involve lucrative sectors like finance, telecommunications, electricity, environmental services, health, education, information technology, consultancies and so on.

Now the interesting thing about trade in services is that it doesn’t involve the issues of tariffs and licensing, of taking something across the border from one country to another. The ability of foreign investors to operate internationally in services markets means that the domestic rules that countries apply to their services have to be deregulated and discrimination against foreign suppliers removed. And so the services agreements have the potential to require governments to treat foreign provided education, health, media, telecommunications, electricity, banking, etc on exactly the same basis as they treat their own and not restrict the markets to which they can have access.

That was highly controversial during the Uruguay Round, so at present the services agreement only covers the services which countries have opted to include. But the negotiations currently under way at the WTO are seeking to extend that into new areas. There is a huge battle, in particular, to defend so-called public services against these rules. The problem is that public services in the eyes of the WTO have to be non-commercial and not supply competition with any other provider.

The second area that has become extremely controversial is the area of investment. The failure of the negotiations on the Multilateral Agreement on Investment have not made the issue go away. Indeed, the services agreement already provides some rights for foreign services providers to establish a presence within the markets of WTO members. But we are seeing real pressure emerging again for the introduction of tighter investment rules. Those investment rules will be modelled on the MAI type agreement which in turn was modelled on the North American Free Trade Agreement.

That NAFTA agreement has now become incredibly controversial because companies are starting to launch challenges to government measures taken for environmental, or health or public services reasons, claiming they are eroding the value and the profitability of their investments. And the clause in the NAFTA agreement on expropriation basically allows them to demand full compensation for government measures that have the effect of reducing the value of their investment or their profitability. Not surprisingly, there has been a backlash.

Let me just give a few reflections on how this bigger picture relates to this country. Since 1984, and indeed before that, there has been a dogmatic commitment on the part of New Zealand economic policy makers to free trade and open investment. Over time, that has become locked in through rules that make it extremely difficult to backtrack. Indeed, that is the objective, not only of the World Trade Organisation and other international agreements but it is why you privatize, why you have extensive foreign investment, why you become totally dependent on the voices of the international markets, because as soon as there is any attempt to close those doors and to tighten the rules, there will be a crisis of international investment confidence and governments are told they can’t do it.

So, we have had those policies and we have had a deliberate strategy to lock them in. Sad to say, and I can say this because I am not a member of any political party, the present government has continued down precisely that same road. Despite the policies of both members of the coalition, one of which was elected on a platform that opposed this approach outright, and the other which said it would take a more moderate approach, we have had a continuation of a pure free trade and investment line.

We have seen it through a whole variety of mechanisms. And those mechanisms have not been adopted simply because they would have a clear domestic benefit. They have explicitly been adopted because of concern that the global bicycle is getting wobbly. They are explicitly being pursued because there is concern that the WTO and APEC are paralysed and the New Zealand government wants to play a leading role in revitalizing them. It is called the Trojan horse strategy which is the term coined by the architect of the Singapore Free Trade and Investment Agreement.

If we look at what this has meant in the last two years, we see very clearly that we not only have the Singapore Agreement that extended New Zealand’s commitments on trade in goods, trade in services, government procurement and investment, and similar negotiations in relation to Hong Kong. We also have a variety of moves to negotiate similar agreements with Chile, to negotiate the so-called P5 Agreement involving the US, Singapore, Australia, New Zealand and Chile. We’ve seen attempts to negotiate with Australia to open up the CER agreement even further. We will have shortly a report from the Foreign Affairs Trade Committee which is likely to suggest CER be taken further.

We have seen the unilateral removal of tariffs in relation to least developed countries which is not going to make a blind bit of difference to them but which is going to accelerate the demise of our textile, clothing and footwear industries if it is accompanied by the removal of those tariffs in relation to Hong Kong.

We have seen the government refuse to lower the threshold for vetting of foreign direct investment which National raised just before the 1990 election to a level of $50 million - that means foreign investors seeking to invest less that $50 million do not now need to seek overseas investment commission approval. That threshold was locked into the Singapore Agreement and we are likely to see it locked into the Hong Kong Agreement, meaning we can’t raise that threshold for those countries for another 15 years. It doesn’t just apply to existing investors from those countries. Any companies that decide to operate through those countries can secure those protections.

So why is this happening? I’m going to leave you with a controversial suggestion. When people in this country thought they had elected a centre-left government, they paid attention only to the social, the foreign policy, the environment policy, the defence policy and they paid very little attention to the economic policy factors - in particular, those who voted for Labour. Because if you look at the economic agenda, you will see that it is business as usual.

Indeed, Helen Clark has said precisely that. Helen Clark told the Government Business Forum, “While acknowledging the need to move on and embrace change, the government doesn’t plan to throw the baby out with the bathwater. Yes, we have made moderate corrections, in areas like industrial relations, but what is the greater significance are those economic fundamentals which have not changed. For example, the Reserve Bank Act has not changed, the Fiscal Responsibility Act has not changed, the government has budgeted for good surpluses and will continue to do so. Government spending is decreasing as a proportion of GDP and the government is committed to promoting open world trade.”

So the economic paradigm, introduced since 1984, has not changed and indeed the reviews we have seen of electricity pricing, of competition law, of tax, the Reserve Bank and so on have only made minor adjustments that have stabilized rather than made significant changes to that agenda. And whilst the centre left have remained focused on social policy, on defence policy, on environment policy, we have not been challenging the globalization agenda which has been a fundamental policy since 1984.

That poses some interesting questions for us politically – why is the international rebellion and resistance not taking place here? Why are those who have been the victims of structural adjustment policies in other countries rebelling and those who have been victims here are not? Why are we starting to buy back in to precisely the same pacification strategies that occurred under the fourth Labour government? Why are we not learning the lessons of the last 16 years? And why are we not, in fact, challenging publicly the failure of the government that we elected to do something different, so we thought, to deliver on that promise. I can say that because I am not part of those parties, I don’t have to deal with the leadership. I just don’t get invited or get dis-invited as happened recently with one regional branch of Labour Party.

I think this raises some really significant questions for how, not only within parties but outside parties, and not only domestically but internationally, we raise the profile of these issues and we start to see the wobbly bicycle has its parallels in the domestic policy agendas pursued by our government.

Question Period

Question: I would like to know why, in the trade union movement, the media collaborates with capital to separate us. What would be your response to that and do you think that is a valid statement?

Kelsey: Well, the obvious answer is that the international owners of media have a vested interest, yet CNN carries the stuff so that is not an acceptable answer. The New Zealand media has been so self-censoring over a long period of time that it has lost both the will and the capacity to tell those stories. But again, that is still not enough of an answer. There is, I think, within this country a very significant concern, by key players and beneficiaries – I’m going to sound like a conspiracy theorist here but I’m going to justify it - to silence the potential for an anti-globalization movement as it has occurred in other places.

Let me give you two justifications for that. You might remember in 1999, at the APEC meeting there was a CEO summit and it cost megabucks to go and they made megabucks. That money has been sitting there and they have now decided to spend it so they have created something called the Free Trade Forum. That partly funded the recent visit of Brian Mulroney to talk about New Zealand joining NAFTA, it partly funded Herald journalist Fran O’Sullivan’s trip to Quebec to report on the Free Trade Agreement for the Americas negotiations there. The Herald has been an active player and collaborator in that process.

A second example again involves the Herald. I have tended to write op-ed pieces for the Herald and they used to carry them. Before I went to South America, I rang and said, “Look, the government has confirmed that negotiations are just about to begin on Hong Kong, I’d like to write a piece” and the editor of the Dialogue page said, “Sorry, we are not going to carry any more of that, people are sick of it and if you haven’t actually got any traction on it yet, then that’s too bad”.

We had a very interesting discussion, a very volatile discussion, about the responsibility of the media as the fourth estate and when I said to him the only place you are carrying stuff on this is in the business pages and that is only presenting a business viewpoint, he said it is well-known Herald policy that the business page is to be pro-business. I said well, where then is the other view going to appear?

What became clear was that the Herald was okay about carrying alternative pieces on globalization that are sourced offshore, but they are not prepared to give any traction to those arguments when they are produced at home, because there is a potential for them to connect and have more impact. I think we need to be really concerned about what is happening with the newspaper that supplies one-third of the people of this country.

Question: I wonder if we could explore a bit further why New Zealand is not demonstrating against globalization. I would put forward size, because we seem to be more easily controlled because of the interlocking power structures.

Kelsey: I would disagree about size. Size can work both ways. [from questioner: true, but right now it’s only working one way]. We have a history in this country of political complacency, we have a history of anti-intellectualism, we have a sense that the parliamentary forums are the arena in which you do politics and I think we have seen in the last 20 years those agencies that were very active in areas of social justice becoming introspective and concerned about their own bottom line, such as the churches. If we look at the one area where we do have continued mobilization, it’s amongst Maori and in that arena as well, we see the divisions between the entrepreneurs, wanting to embrace the global environment and those who want genuine alternatives.

So we have a history in this country which needs to be overcome. It doesn’t mean that there haven’t been pockets when things were different. Bill Sutch’s book A Quest for Security is really fascinating when he talks about how in the early 1930s the likes of the WEA and the forums that it ran, and the fact that leading politicians in the Labour Party went to those forums and participated in those debates. And Uncle Scrim did his thing. And people got out on the streets and said what they believed. We had real, thinking politics. But those occasions are rare in this country and I think that there is an institutional and a cultural dimension to this.

Question: Jane, I actually challenged Fran O’Sullivan some weeks ago about this Herald policy on op-ed. She claims that there isn’t actually a ban on such sentiments being written for her paper. I suggest that you ring her up personally and have her on about it because she claims to me that there wasn’t one.

Secondly, I would characterise that the Singapore Free Trade Agreement, Hong Kong Free Trade Agreement is a creature of an MFAT-Labour-National alignment. The Alliance is a very unwilling partner in this and has been tarred unjustifiably with that brush. I want to ask you, what is the potential you see of an increasing upsurge of dissatisfaction of people in this country about the Royal Commission on genetic modification. In fact there are going to be some several thousand people down the road here next Saturday and the fact that the GE thing actually has a very big multinational, corporate-driven agenda and somehow these two particular issues have some sort of cross-connection.

Kelsey: On the first point, I have sent two letters to Gavin Ellis of the Herald asking for a clarification of their policy, both of which have been ignored. So, I am just working on what I was told by the editor of the Dialogue page. I’ve asked, does this apply to globalization overall or just the Hong Kong agreement or does it apply just to me or to others. We need to actually know just what that policy is and so far there is no answer.

Second, yes, obviously Labour and MFAT and National have worked on these issues consistently together since 1984 and they continue to do so. I have a less generous view of the line taken by the leadership of The Alliance. I believe that it has made pragmatic decisions not to pursue these matters. I don’t think it’s fair on the The Alliance party to use that brush, but I think there’s a very significant problem with the position the leadership has taken.

In terms of GE , yes, I think we have to make those connections The reason I went through the multi-faceted nature of the destabilization of globalization is to understand those connections. The fact that I’m not deeply activist about GE doesn’t mean that I don’t actively support it when a critical point has been reached – the same as the water pressure campaign or whatever else. It might mean that there are activists who work on specific sets of issues, but when you reach a particular focal point, then it’s the time for everyone to recognise the connection and act on them.

Question: Is it possible for the general population of New Zealand to subvert the process and what are the consequences of destabilising the bicycle?

Kelsey: Well, I’m not a great believer in us going out and trying to create Armageddon. I think that the instability is happening and certainly what I saw in Argentina, the price is very, very high. But that price is happening at present and it is a price that will intensify if they continue the IMF agenda. So I think that fighting back is critical, but the fightback has to be backed by good intellectual analysis and planning of what alternatives might be.

I was very encouraged, and it comes back to the question of the tertiary institutions, when I was in Argentina, talking to the economists there, there was a team of senior professors and retired professors who had come together now to create what they call the Phoenix Plan which is a coherent alternative economic strategy for Argentina. And at a time of crisis, there is actually more chance of getting that sort of strategy to have some greater traction than at a time of effective pacification. They said that ‘it is our responsibility. If we don’t do it, who will and that is what universities are there for’. I did suggest to them that we could use some academic economists who thought like that here!

Question: As of this morning news, we’ve had our electricity rates doubled between 1990 and 1994. I think that the public of New Zealand should demand an answer because they were not public assets, they were consumer assets, they belonged to us, individually.

Kelsey: Yes, I agree completely. This is where those of you who are part of government have an important role to play. I think we are seeing now that a whole lot of those privatization chickens are coming home to roost. Not only the electricity issue, but if you look at the railways, and the fact that Tranz Rail paid one dollar a year for the rail track for some 90-odd years. The government is going to have to do something. We saw that with the kiwi bank, they had to move as well. Now the counter pressure has come to bear to make sure that the kiwi bank is just a clone of all of the other banks and even then, there is an attempt to subvert it. But I think we are now starting to see in a whole range of the privatizations, those sorts of pressures coming through. The privatizations are proving unworkable. That’s where it becomes possible to force a debate about what we can do. We have to be assertive and say that what the international investment community says is possible is not the only option.

Question: To avoid the dictates and influences of international finance, won’t New Zealand need to put into use a flow of internal finance that does not increase levels of debt so as to increase our levels of economic activity and investment?

Kelsey: Yes, there are several ways that this could be done. Of course one of them was the proposal for pension funds. I think it’s absolutely appalling that there is no requirement written into the legislation that any of that fund be invested in New Zealand. Beyond that, there are well-tried routes – green dollars and so on – that have been used in various other countries and to some extent, here, but without enormous success.

I actually think we have to start looking seriously at those. I say so not simply because it’s a nice, warm fuzzy idea, but again, if I can go back to Argentina, because it becomes a necessity. They have what is called a hard peg that equates the Argentinean peso and the US dollar. That is explicitly designed to constrain their fiscal policy. Because half of their money is spent in debt payment, they have not got enough money to pay wages. The provinces have been in that situation for quite some time. So they started printing their own currency. I have to confess, I have some problem with social credit policy, so I’m just telling you what’s happening in Argentina. In the provinces, some years ago, because they didn’t have enough money, particularly to pay their workers, they started to create this local currency called “bonos”, which are actually bonds that in theory are redeemable within a certain period of time. Now those bonos have become the defacto currency in those regions, but they can’t be used outside the region.

Converting them into pesos and dollars is difficult. But even that was not enough. So some employers, including the provincial governments, started paying their workers in tickets that are only redeemable at certain shops and businesses that recognise them. So you have another informal currency. And a teacher I spoke to in one of the regions said that she is now being paid in a combination of tickets, bonos and a salary deferred for six months. There is a problem when you are trying to pay your electricity and your water and so on if the currency you earn is not legally recognised. But the internal crisis in Argentina has reached such a point that the province of Buenos Aires has started issuing it’s own currency, called the “Patacom”.

And, McDonalds is obviously concerned that the local people, if they are not being paid in pesos, aren’t going to be able to continue buying McDonalds. I have this wonderful story in my bag out of the Miami Herald that McDonald’s is now creating a “Patacombo”, which you can only buy with a Patacom and you can’t receive change in pesos, because they don’t want to lose their customers. The electricity, the telecommunications and the provincial government have all said they will now accept Patacoms in part-payment for bills. The central government of Argentina has now said they are going to create a uniform currency so that you don’t have all these regional currencies. They have, in fact, created their own currency internally. It’s going to fuel inflation, it’s going to have huge internal consequences, but they’ve reached the point of crisis that they actually had to do what in theory they were unable to.

Question: Jane, my question takes us back to why we don’t have protests here. It was very good to hear about the issue of the profound silence of those who were elected and their dreams – the centre-left government. As well as being nice and anti-intellectual, we also do have a history of vigorous protest. Do you think that the long hours work culture is playing a stabilising part?

Kelsey: I wouldn’t say so much the long hours work culture, I’d say peoples’ sense of insecurity, peoples’ focus on survival, the highly individualist ethos that we have, in fact, all absorbed over this period of time and coupled with the very effective machine that has hit those that do speak out. And I mean hit in the sense of those who spoke out politically or academically but also, if you look at say the ADB protests in 1986, there were only a handful of people there and they got beaten. When we had APEC, we decided we weren’t going to try to run protests, because people were, still, 10 years later, scared. Now we did have a nice meeting down in the Methodist Church after which people got up and did have a protest outside the hotel, but if we had tried to organize it, we would have had one tenth that number. We have just got to get brave enough again and recognise that, in fact, numbers are what makes us safe and that the insecurity that we feel is only going to be overcome in that way.

Question: Do you think that the repression of protest will be deeply effected by numbers?

Kelsey: I think we see internationally, in Genoa, the backlash against overkill. I think it’s deeply ironic that people are talking about the WTO meeting in Qatar as a repressive environment, but forget about how the OECD countries have dealt with them. Again, it was interesting in Argentina that the protest of 30,000 people brought together all sectors, and I saw probably about 15 police. It was a very well-behaved and very politically effective protest.