The Somnambulists

In September 1952, Bill Pearson wrote an influential article for the literary rag Landfall called 'Fretful Sleepers: A Sketch of New Zealand Behaviour and its Implications for the Artist'. In this article, Pearson argued that Kiwis have such a deferring attitude to politics that it would be easy for a dictator to take power without us even bating an eyelid. Pearson's article struck such a cultural chord that it became the inspiration for C. K. Stead's novel Smith's Dream and then adapted for the wide screen in Roger Donaldson's 1978 film Sleeping Dogs. In the Stead and Donaldson versions, Kiwi apathy towards politics sees the nation electing the authoritarian Volkner, based loosely on Rob Muldoon. As New Zealand spirals into industrial disputes, Volkner becomes increasingly fascist, bringing in American special forces to help control the communist Kiwi outposts that remain fighting in the bush.

While guerillas running around in the bush makes for great cinematic tension, as London School of Economics Professor Robert Wade reminded New Zealanders last night, danger exists in slightly more banal forms that are far more innocuous than a bunch of fascists running round with batons. In practice democracy can be just as dangerous. For Wade, the causes of the global recession are intimately bound up with the process of 'financialization', a process that has seen the development of an oligarchy that furthers its interests through the control of the financial sector in the much of the Western world.

Similar to the conditions that preceded the Great Depression, the last few decades have seen the concentration of wealth in the hands of a few together with an increasing crevasse between rich and poor. Just as economist John Kenneth Galbraith noted in the 1950s, such movements lay the preconditions for fundamental flaws in the functioning of the free market. With the top 1% of income earners in the US controlling more than 23.5% of the economy in 2007, and benefiting from a 62% growth in income from 2002 to 2007 (compared to the 4% growth of the bottom 80% of wage earners), the financial elite have literally built a house of cards that is bound to fail. The problem with such concentrations of wealth in the top 1% is that this income does not lead to a trickle-down effect, rather the wealthy tend to invest in the accumulation of assets, which stops money circulating through the rest of the economy.

For Wade, this concentration of wealth means that the top 1% of the world's population exhibit a dangerous level of control over the policy and governance of financial institutions, as these institutions work to preserve the interests of the elite. In practical terms in the US, this has meant the takeover of the Fed, the Treasury and the Congress by the financial oligarchy, who then propagate the notion that the best policies for the nation are those that support Wall Street's interests. This control can be seen in the growth of the corporate finance sector's profits in the US from under 16% in the period from 1973 - 1983 to over 43% in the year 2000 (Wade). There are now five lobbyists for each Congressman in the United States (Wade). As the IMF and other institutions export a Chicago-school model of economics to developing nations that is founded on the belief of a free, deregulated and self-correcting market, these policies begin to constitute a global matrix that glosses over the role that such policies have in furthering the interests of the elite.

The situation is just as bad in New Zealand, where we have seen the National Party grab power under the misguided assumption that Labour caused the financial crisis for Kiwis (putting it this way sounds better than the election being lost over lightbulbs, which in some sad sense is probably much more the reality of the situation). With 35% of the hours considering Bills in Parliament since their election done so under urgency so that other parties do not get the opportunity to debate their effects (hence circumventing the basic premises of both MMP and democracy), we have in New Zealand an example of a financial oligarchy that is out of step with the interests of the general population. While it is certainly true that New Zealand faces a dire economic situation (as do many other nations) with the Government haemmoraging $250 million per week, the sorts of policies we have seen introduced are not those that bolster the interests of the majority of wage earners. Rather, we see an example of a National Government, with its blind faith in the free market despite the obvious deficiencies of such a philosophy, introducing policies that benefit the top percentile of wage earners at the expense of the bottom. Similar to the US, in 2004 in New Zealand the top 10% of income earners controlled 50% of the total wealth.

We are now beginning to see the broad strokes of the real economic damage a National-led Government will do to those 90% of New Zealanders that fall outside of the top earning percentile, with broad changes to ACC, the privatisation of the prison system (which provides a return for vested interests on crime), the abolition of the Pay Equity Commission for women, changes to employment conditions, a referendum for MMP, unprecedented changes to surveillance laws that violate the rights of individual citizens and the privatization of the water systems, we are about to see a radically different New Zealand. Of course, for National, the real changes will occur if they win a second term in 2011 so we cannot really see the shape of how things will look yet.

Perhaps this is what we deserve for sleepwalking in New Zealand - for investing in the financial myths that drove this economic collapse at precisely the time that the rats began to swim away from the sinking ship. This is the point, New Zealand, where we need to wake up. The change we got is not the change many expected, and it is only over the next few generations that we will really begin to pay the financial and social cost of such ridiculous legislation.

Professor Robert Wade gave a lecture in Auckland last night for the Bruce Jesson Foundation at the University of Auckland.