Category: Economy

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A Return to a US Gilded Age?

I have been trying to figure out the logic of Trump’s tariff policies and apparent desire for a global trade war. Although he does not appear to comprehend that tariffs are a tax on consumers in the country doing the tariffing, I can (sort of) understand that he may think that this is a good way to protect US manufacturing and employment. But because the evidence that tariffs wind up hurting domestic consumers and do not necessarily bring back manufacturing, farming or employment in those or other sectors, I found myself somewhat mystified as to why Trump is determined to push them through.

I realise that he is using them as a form of leverage to obtain concessions in non-trade areas like illicit drug interdiction and immigration. But he seems to want to go further than forcing neighbouring countries to tighten their border controls in exchange of a lifting of tariffs or reduction in the amount of them (both in terms of reducing tariff costs–say from 25 percent to 10 percent–as well as the range of goods subject to tariffs). He truly does appear think that tariffs are good for the US, all evidence to the contrary.

Because of his intellectual limitations (remember my empty vessel argument of a couple of weeks ago), I then thought about his economic advisors and how they may see the issue. Here is where I think I have found the answer to Trump’s obsession with tariffs. It has to do with the so-called Gilded Age.

Readers may recall Trump speaking of president William McKinley and the “Gilded Age” when the US was prosperous, expanding and turning into the global superpower that it eventually became. He even restored the name “Mount McKinley” to the mountain in Alaska known as Denali by indigenous people and has otherwise extolled the virtues of the 25th US president even though McKinley was assassinated while in office in 1901 (Vice President Teddy Roosevelt succeeded him). As it turns out at least one person (an anarchist) was not happy with his policies. Yet it seems that Trump seeks to return to a new US Gilded Age in light of what he and his advisors see as the failure of capitalist globalisation.

Needless to say, there have been global trade systems since ancient times. Notions of Riccardian and competitive advantage were eventually developed around them to explain and justify the commonweal benefits of global trade. This accelerated with the technology-driven globalisation of production, consumption and exchange that emerged as of the 1990s and grew exponentially in the following two and a half decades. While all economic boats would be lifted by this rising tide, the argument went, the expansion in trade was expected to benefit the US the most because it was the core of the global capitalist system, including finance, advanced manufacturing, information and high-tech services, logistics and even value-added primary good extraction.

For its adherents, the post-Bretton Woods moment was the US’s oyster and free trade under standardised monetary exchange conditions was considered to be so universally positive that theories (known as “neo-modernization” theories after the original 1950s variants) were advanced that posited that joining global systems of trade would lead to rising middle classes and eventually democracies in poorer authoritarian countries that adopted the export-import logic and other development models such as the so-called “Washington Consensus.” The Consensus (by industrialised nation’s finance ministers of the time) married neoliberal domestic economic theories based on the primacy of finance capital in determining a country’s investment opportunities in a macroeconomic environment characterised by the reduction of the State’s role as both manager and direct producer of national goods and services, on the one hand, with an abject faith in the invisible hand dynamics at play when national markets were opened up to unfettered foreign competition.

As it turns out, things did not go as planned. Rather than benefit the most as the core of the globalised system of trade, the US saw significant declines in domestic manufacturing, mining and other extractive enterprises as well as a number of value-added business sectors (textiles, shoes, ship-building) when US firms migrated abroad in pursuit of cheaper labour and supply chain inputs. Even service sectors saw business move abroad–think of off-shore call and computer service centres–something that in the aggregate saw the economic decline of the so-called Industrial Age-originated “Rust Belt,” growth of increasingly precarious labor markets and the rise of a host of social pathologies associated with that decline (the book Hillbilly Elegy by JD Vance sums them up pretty well even if it is a fictionalised account of his own life story pre-politics).

Put bluntly, instead of being at the top of the globalized pile, when it came to many US domestic businesses, profits were prioritised over patriotism, they moved their businesses abroad and the benefits of globalisation went to them (in terms of re-patriated profits), not their former employees and the communities that depended on their livelihoods. When it comes to free trade and open markets, businesses acted as capitalists first, and that made them globalists rather than nationalists.

The bottom line is that while the US remains the core of the global economy, the location of where globalisation impacted negatively the most within the US and the perception of its general decline as a result is a strong component of the economic nationalist discourse that propels the modern US Right. From Pat Buchanan to Rand Paul to Steve Bannon, US economic nationalists see US decline as rooted in two main things: 1) the migration of industries away from the Heartland to foreign countries which do not adhere to the overly restrictive environmental, labor, welfare and taxation standards of the US; and 2) the “woke” cultural transitions associated with granting equal rights to everyone regardless of merit while opening admission to immigrants from foreign cultures that are inherently anti-Western in orientation and yet upon which the US was increasingly dependent for both skilled and unskilled labor.

This is where economic nationalists on Trump’s staff like Peter Navarro come in. It is he and his colleagues that put the thought of the McKinley Gilded Age into Trump’s otherwise adderal-addled head. For them, a global trade war suits the US because as the biggest economic bully on the block, others will fold their cards before it has to. The belief is that although there will be short-term pain in the US domestic economy, eventually foreign countries and businesses will, for their own political as well as economic reasons, bend a knee and comply with US demands on trade and non-trade issues. Some manufacturing and other businesses may return to the US but even if they just adjust their bilateral export pricing and other trade measures in line with US demands, the view is that the US will eventually win and ultimately prosper because the advantages it has when it comes to complex economies of scale.

We need to underscore that many trade globalisation supporters did not see the US as necessarily benefitting more than others under the modern trade framework. Instead, they saw all nations receiving some benefit in excess of what they would accrue if they did not join the network, and within that “limited gains” perspective the US would still do well even if it lost uncompetitive businesses to foreign markets that held comparative and competitive advantages like lower wages and costs and proximity of raw materials, rising educational standards etc. They believed that the US would simply specialise in higher-end production and services that used advanced technologies and value-added capital goods while continuing to domestically supply most consumer non-durables like food staples and the like.

This is different than what the economic nationalists envisioned, and whereas the globalist economic vision is an integral part of the liberal internationalist perspective and institutional order codified in the likes of the IMF, WTO and World Bank, economic nationalists see the entire combine as inimical to US economic supremacy and hence an existential macroeconomic threat that increased US economic dependency on the whims of others such as the PRC and EU. Where globalists see trade interdependence and mutual benefit, economic nationalists see trade dependency and economic vulnerability The latter is the dominant rationale in the White House at the moment.

With Navarro and other economic nationalists back in the West Wing and the liberal international order in disarray for more than just economic reasons, the in-house consensus is that the time is ripe to push for another Gilded Age on the back of a tariff-based national economic restructuring. Coupled with a new version of gunboat diplomacy and carrying a foreign policy Big Stick, Trump is offered as the champion of and vehicle for that metamorphosis.

The trouble is that US capitalism today is not the capitalism of a century ago, nor is the nature of its connections to a globalized capitalist world with multiple centres of economic gravity. Think of the Middle East, the Arab oil oligarchies and their sovereign hedge funds. Think of the reach of the PRC’s Belt and Road initiative. Think of the rise of the Global South and emergence of the BRICS as an economic bloc. All of this suggests that while Trump may see himself as McKinley bringing in a new US Gilded Age, he is just a real-time protagonist in his economic advisor’s pipe dreams. What may have worked at the turn of the 20th century in terms of tariffs benefiting the US is unlikely to work in the early 21st century, at least not in the measure envisioned. So even if some countries cave to US demands on a host of issues, the chances of the US “winning” a truly global trade war seem long at best, and even if the US “wins” the economic contest, the political costs of subjecting the US electorate to consumer price hikes and supply chain disruption through the 2026 Congressional midterm elections and 2028 presidential vote may spell serious trouble for Trump, MAGA and the GOP regardless of who may or may not succeed him. The political fallout of the tariff moves, in other words, may yield negative dividends even if it is “successful” because the short-term economic pain that Musk and Trump talk about as necessary may not be tolerable for many voters, including those in Red States.

If that is the case, all the tariff-led economic gilding project may just turn into political rust.

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Scholarly Link: The Comparative Notebook.

I am pleased that the under-recognized scholar (and previous co-author of mine) Kate Nicholl has decided to join Substack and publish her thoughts on comparative politics. By using Substack she wants to bridge the gap between scholarly articles and opinion editorials (op eds). Her gift as a writer is to make the complicated seem simple.

Her stack is free so please check it out. Knowing her work as well as I do, I can confidently say that she deserves to be read by wider audiences. In her first Substack essay she briefly explains why comparisons between NZ and Ireland or Singapore are largely spurious from both a methodological as well as a policy standpoint.

Check her out here

Also, coincidentally, she has a piece in The Conversation on a related yet different topic.

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Political societies and economic preferences.

Much discussion has been held over the Regulatory Standards Bill (RSB), the latest in a series of rightwing attempts to enshrine into law pro-market precepts such as the primacy of private property ownership. Underneath the good governance and economic efficiency gobbledegook language of the Bill is a desire to strip back regulations in order to give capitalists of various stripes more latitude of action.

The RSB is interesting for two reasons. One, it is the type of omnibus bill that is designed to supersede other legislation in the policy enforcement chain. It is a “mother of all laws” or foundational stone type of legislation that its proponents hope will serve as a basis for future legislative reforms and policy-making and to which all existing laws must be retro-fitted. Although it varies in its NZ specifics, it emulates the “Ley Omnibus” (later named “Ley Bases” (Base Law) pushed through by Argentine president Javier Milei last year, which basically allows for the dismantling of the Argentine State bureaucracy, reform of labor and environmental laws, slashes the public budget, and opens the economy to foreign investment.

As a result, although the inflation rate has been drastically reduced and some foreign investors have taken interest in the Argentine economy, the poverty rate now reaches nearly 60 percent, health indicators (and facilities) have cratered, pension and social welfare plans have been decimated, unemployment and crime have risen, and basic public services are on life support (including power and water provision in some areas). Despite these deleterious effects, Milei’s “chainsaw” approach has been celebrated by the ACT Party, sponsor of the RSB and its predecessors, so here again we see an example of NZ politicians borrowing concepts from similarly-minded foreign governments.

They are not alone: the incoming Trump administration’s Project 2025 and Project 47 copy aspects of Hungarian president Viktor Orban’s authoritarian-minded constitutional reforms (since it centralises power in the Executive Branch and restricts civil liberties and opposition rights). More ominously, because it is an omnibus bill that redraws the NZ constitutional map in a preferred image, it echoes the Nazi “Empowerment Law” that Hitler pushed through in the German parliament after the was named Chancellor in 1933, albeit without the repressive powers later confirmed upon him. As in the case with Milei and his Base Law (and Hitler at the beginning of his legislative campaign), the RSB depends on securing a slim parliamentary majority in order to to pass into law.

What is important to note is that such omnibus legislation is most often used in democracies by authoritarian-minded politicians who are afraid that they cannot get their policy reforms passed and accepted otherwise. It is a soft form of constitutional coup whereby the “rules of the game” are stacked via legislative reform in favour of a specific set of interests, not the public good. It is a “soft” type of coup because it uses lawful/constitutional means to achieve its ends. In a perverse way it is a sign of weakness that its proponents do so, as if they know that their preferred policy prescriptions will be rejected by the electorate in the absence of an overarching law forcing the public to follow them.

To be clear, here the focus is on omnibus or foundational laws, not more specifically drawn laws that follow from them. For example, commercial and environmental law cover aspects of social and economic life but are not “foundational” in the sense that they do not provide cornerstone underpinnings to civil and criminal law, which in turn address detailed and specific rights and obligations regarding various aspects of social life, including enforcement of those rights and obligations by an independent judiciary. “Penalties under the law” refer to this level secondary of judicial oversight, which in turn is governed by foundational principles enshrined in omnibus legislation (which is the province of constitutional law).

There is a second, more fundamental problem with this approach. It involves the distinction between political society and economic society and why they should not be intertwined.

Political societies are aggregations of people within given physical boundaries who agree upon or are forced to accept certain universally-binding rules regarding representation, leadership and collective decision-making. Because NZ is the subject of this post, we shall leave aside for the moment various authoritarian political communities. As a liberal democracy, NZ has a form of rule based on majority contingent consent to the system as given, formally expressed through elections but more granularly in the everyday actions of voters who accept their positions in the social order. People go to work, play, attend school, have relationships and generally comport themselves as members of society in accordance with commonly accepted notions of acceptable behaviour (e.g., “live and let live,” “due onto others as one would do onto oneself,” respect difference and the rules of the road, etc.). But that majority consent to any given democratic rule is contingent on public expectations being met, both materially as well as politically. Political and economic societies are formed to address (and shape) those expectations.

Economic societies are aggregations of people operating within a given productive structure, making things and generating surpluses from their labor and labor-saving inventions while exchanging goods and services. “Homo economicus” is non-political. S/he maximises economic opportunities in order to pursue material interests. The ways of doing so are many and can involve collective as well as individual effort, which is often determined by the type and modalities of production (industrial, agricultural, mixed, etc.) and the material goods being pursued.

Vulgar structuralist thought holds that the type of economic society determines what type of civil and political society emerge from it. To this day, proponents of things like (neo)modernisation theory adhere to this belief. But such views offer a simplistic read on the interplay between economic and non-economic factors, so claims such as “free markets lead to democracy,” and ” political parties are the political equivalent of economic agents in the productive process” are overdrawn at best. A more nuanced take is that civil and political life may have a grounding in economic life but are not reducible to or epiphenomena of it. In some instances, say in the cultural sphere, human behaviour is not a surface reflection of an underlying economic reality or framework.

Political society is about collective governance and civil engagement. In democracies it involves a “legal” agreement, compact, or contract about the way in which the political order should be governed, which involves ostensibly neutral institutions and processes, As such, it can co-exist with a number of economic arrangements and is not inherently linked to any one. For example, over the years democracy has coexisted comfortably with varieties of capitalism and socialism. Authoritarianism has also co-existed with capitalism and socialism. The particular combination of economic framework and governance structure defines specific variants of regime type: NZ is a “liberal” democracy because it is based on a capitalist economic foundation (first settler colonialist, now primary good export, real estate ownership and services dependent production). North Korea is a Stalinist country because it combines one-party authoritarian rule with State control of the mixed industrial/agrarian economy.

What this means is that laws in a democracy are basically a means of adjudicating disputes, avoiding collective conflicts and regulating individual and collective behaviour regardless of economic status (think of the “justice is blind” adage). Ideally, they should be agnostic or neutral with regard to economic preferences because it is possible that future generations of voters will elect to support different types of economic arrangements that they believe suit their collective and individual material interests better than current schemes.

But that is not what has happened. In NZ and elsewhere in liberal democracies, things like private property rights have been enshrined in law and thereby protected by the State. The evolution of this marriage of political and economic societies is complex but the bottom line is that NZ is a capitalist society governed by a democratic capitalist State that enforces the primacy of capital above all other things. To be sure, much lip service is given to civil liberties, human rights, equality before the law, even adherence to the principles of Te Tiriti o Waitangi. But the foundation of the modern NZ State is not based on a contract between interested parties such as the agents who signed the Treaty, or on respect for the rule of law per se, but on the structural dependence of NZ society on capitalism. The role of the NZ State is to help resolve the contradictions that inevitably emergence in a political system where a minority of voters control major parts of the productive apparatus but rely on the labour of others (wage labour) in order to generate the material surpluses (profits) that allow them to exercise (indirect) political as well as (direct) economic control in NZ society.

The RSB seeks to further deepen that structural dependence of NZ society on capital by giving certain capitalist fractions more leeway in the conduct of their self-interested affairs. When fully implemented it will atomise wage-labor both in and out of production while consolidating specific types of capitalist structural control. In that light the RSB codifies the State’s role (or non-role) in facilitating capitalists’ (aka businesses) self-interested pursuit of profit. From then on self-interested maximisers of opportunities, individual and corporate, will seek comparative advantages in the deregulated marketplace.

The problem, again, is that enshrining a specific set of economic preferences or biases in a political charter interferes with voter’s freedom of choice when it comes to their own economic interests and desires. Depending on their circumstances and structural location in the productive apparatus, not everyone may be a fan of capitalism or accept the primacy of private property rights. Some may even prefer socialism, however that is defined. Prioritizing and facilitating the pursuit of specific economic preferences contravenes the commonweal (public interest) basis of democratic political charters such as that governing Aotearoa. Instead, it rigs the societal “game” in fair of a select few.

Other, more astute minds have already voiced their opposition to the RSB on a variety of grounds. Here the point is to remind readers of why omnibus bills are inherently anti-democratic even if they are legally constitutional, and why democratic political society is distinct from and should remain “above” economic society however construed. The former deals with universal values and interests; the latter involves specific sectorial interests and their material objectives in a system structurally based on the pursuit of profit. Although they may be overlapped in fact because of NZ’s history of structural dependence on capital, the public good is best served when the political/legal framework is agnostic or neutral when it comes to sectorial interests. That is what democratic collective bargaining systems are for and why political lobbying needs to be tightly regulated. Instead, the RSB seeks to tilt the game board in the direction of a specific set of interests, not the public interest at large.

Alas, although it is not meant to be, the rightwing NZ economic and political twain have met, and the outcome is the RSB. For the reasons outlined above, that is why it should be opposed.

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Article Link. “South America’s Strategic Paradox” in MINGA.

The Latin American multidisciplinary journal MINGA just published my article on “South America’s Strategic Paradox.” I was surprised that they wanted to do so because they have a very clear left-leaning orientation and my article was pretty much a straight-forward geopolitical analysis. This was the article that an editor of the New Zealand International Review felt was too broad in scope to publish. Go figure. Judge for yourself (the article is in English, with translation pending).

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Benign Strategic Nostalgia.

It has been interesting to observe reactions to the release of a cluster of national security-related documents by the NZ government last week. They include threat assessments and forecasts, defense capabilities and priorities, and areas requiring upgrades and reform, and much more. Among the issues being considered is one that I have discussed here before, the question of whether NZ, if it is invited to participate, should join “Pillar 2” of the AUKUS agreement between the US, UK and Australia on submarine and related high technology transfers. NZ is not part of the submarine (Pillar 1) component, where the US and UK will begin to rotate nuclear attack submarines through HMAS Sterling outside of Perth in a few years, then help Australia acquire and eventually build nuclear-propelled attack submarines based on US and UK models now in service. Given its non-nuclear status, NZ is not party to that aspect of the agreement although it will eventually benefit from AUKUS submarine patrols off of its Eastern seaboard and EEZ as well as from the improved signals intelligence collection streams these platforms provide to the 5 Eyes intelligence network that NZ is part of through the GCSB electronic intelligence agency.

Pillar 2 is about establishing local high technology defense industry hubs in Australian locations and perhaps NZ. These would focus on developing indigenous and shared quantum computing, cyber security, artificial intelligence and an assortment of signals and technical intelligence capabilities relevant but not limited to submarine warfare and intelligence collection and which could have trickle-down benefits for commercial and other non-military enterprises. These technologies may not be available from other countries, as they a are part of high security collaboration between close military allies. The Australian federal government has already apportioned billions of dollars to several states so that they can engage in Pillar 2-related industrial development, promising to create thousands of jobs and spin-off business opportunities by doing so. Although I do not see why Australian business interests and local governments would want to share the employment and the short-term as well as trickle-down profit benefits of the Pillar 2 pie with non-nuclear NZ, NZ authorities and businesses have expressed an interest in being included in the non-nuclear aspects of the deal.

That is where the reaction in NZ has gotten interesting. Although the specific details of any participation in Pillar 2 have yet to be announced (in fact, everything so far has consisted of vague declarations of interest on the part of the NZ Defense, Intelligence and Security Minister, Andrew Little), there has been a strong pushback from certain sectors of the foreign policy community, including Foreign Minister Nanaia Mahuta, former Prime Minister Helen Clark, and prominent academics such as Robert Patman. They all think that it is a bad idea, and while they offer a variety of reasons, their arguments against NZ participation in AUKUS Phase 2 appear to boil down to three beliefs: 1) trade dependence makes it dangerous to annoy the PRC because of the risk of economic retaliation (since AUKUS is clearly designed to counter Chinese military expansion and influence in the Southern Pacific and beyond); 2) there is moral equivalence between the PRC and US or the PRC is seen as a benign actor when compared to Western imperialists; 3) NZ must remain neutral when it comes to Great Power competition in order to remain “independent” in foreign affairs. All of these assumptions should be tested in any debate about NZ’s potential role in AUKUS Phase 2 (should it eventuate).

Until the specifics of any invitation for NZ to participate in Pillar 2 are outlined in detail, I remain agnostic on the proposition. I can see the benefits but also remain concerned that the nuclear propulsion component of Pillar 1 of the agreement is a violation of the 1997 Treat of Rarotonga that declares the South Pacific to be a nuclear free zone. Contrary to what some may think, the Treaty prohibits not only nuclear weapons but the presence of nuclear power and storage facilities on land as well. That means that AUKUS nuclear maintenance facilities, should they be constructed at HMAS Sterling, will likely be in violation of the Treaty. It appears that by basing the AUKUS subs on an island outside of Perth in Indian Ocean waters, the AUKUS signatories believe that they have circumvented that prohibition, but if one looks at the original maps that are attached to the Treaty declaration one will see that the coastal waters of Western Australia are in it. That means that practically speaking, AUKUS provides a precedent for the forward basing of other nuclear-powered naval vessels in the region, including from the PLAN (e.g. the PRC Navy, but others as well). That augers poorly for the Pacific remaining nuclear-free even if we acknowledge that nuclear submarines, including those that carry nuclear weapons, in all likelihood already transit Southern Pacific waters on a regular basis.

Although arguments by knowledgeable and reasonable people such as Patman are couched in neutral, objective language, there is also an internal political aspect to the discussion. Helen Clark was the PM when NZ signed the first Western bilateral Free Trade Agreement (FTA) with the PRC, which many NZ trade advocates consider to be the “gold standard” of NZ FTA’s. Clark has a personal stake in that agreement, which was expanded by her successor John Key, so she certainly does not want to see her government’s crowning foreign policy achievement undermined by subsequent Labour governments with different perceptions on international security affairs and the role of the PRC within it. Remember that Clark was very much on the Left of the Labour Party before pragmatic centralism pushed her rightwards once she became PM. Remember also that she eliminated the air combat wing entirely when her government renegaded on the purchase of second-hand F-16s from Pakistan that would have replaced the obsolescent A-4 Skyhawk squadron. At first her government starved the NZDF of resources and delayed replacement of ageing equipment (although it accepted delivery of the completely oversized purchase of 105 LAV wheeled armoured vehicles signed by the previous National government, which then were largely kept in storage, deployed in small numbers and/or damaged in accidents and in operations until recent on-sales to Chile. There are still a few dozen left, most surplus to requirements). In fact, in the early days of her stint as PM, she downplayed the need for robust military forces because, in her infamous words, NZ existed in a “benign strategic environment.” That was before 9/11.

Then things changed. After 9/11 the Clark government saw the opportunity to ingratiate itself to the US (after the freeze in security relations occasioned by the 1984 non-nuclear declaration that ended ANZUS) by offering support for the so-called “War on Terror.” Along with disgraced former SIS Director Richard Wood (now still feeding at the public trough as Chair of the NZ Environmental Management Risk Management Authority (ERMA). He is also Chair of the NZ/France Friendship Fund, a nice sinecure for a former ambassador to Paris and Algiers), Clark was front and centre in orchestrating the malicious framing and railroading of Algerian asylum seeker Ahmed Zaoui as an al-Qaeda linked terrorist. Although Zaoui was less dangerous to NZ that any number of Christchurch skinheads, he was imprisoned in a maximum security prison for several years until a team of dedicated advocacy lawyers proved his innocence, including that the SIS under Woods’s direction and at the Clark government’s behalf had lied and produced false evidence of his alleged crimes (the Vietnam “scouting” trip video being the most ludicrous of them). She also ordered the NZ intelligence community to focus its resources on the anti-jihadist crusade in Aotearoa and elsewhere (which may well have included NZSIS complicity in the US extraordinary rendition and black site operations against suspected al-Qaeda terrorists and supporters, the details of which remain suppressed), and to top things off attempted to use the newly-minted powers of the Terrorism Suppression Act (TSA) to arrest and jail the so-called Urewera 18 band of leftists and Maori sovereignty activists (charges were dropped against all but four defendants, and the remaining were convicted of minor weapons charges after years of costly litigation, as had been the case with Zaoui).

Terrorism became the foil for Clark’s turn to security toughness even if the jihadist threat, both before and after 9/11, has been more talk than walk (no Muslim has been involved in an ideologically-motivated violent attack in NZ before or after 9/11. The 2021 supermarket stabber was, as I have written before, a lonely and homesick mentally ill person with a blade fetish and no effective counselling support, not an ideologically committed extremist). Sensing the tenor of the times, Clark dropped her progressivism on both domestic and foreign policy issues and turned rightwards out of political expediency (remember her opposition to cannabis legalisation while in office? She now supports it), thereby setting the stage for a change in NZ’s security perspective and assessment of threats.

At the same time she was polishing her anti-jihadist bonafides on the back of an innocent man and settling scores with pesky activists, she authorised NZDF deployments to Afghanistan and Iraq (even while not formally supporting the US-led invasion of Iraq in 2003). Not all of those deployed, shall we say, were NZDF engineers, and those deployments turned into a longer-term engagement in both countries that did not end until the end of the 2010s/early 2020s. In the end both countries reverted to form once the NZDF vacated the premises, leaving as a result 10 dead soldiers, several more wounded, credible accusations of war crimes and a cost of millions of dollars.

The turn towards revitalising ties with Western security partners began with her government. Under her watch NZ negotiated the core of the bilateral Wellington and Washington Agreements on US-NZ defense cooperation (later signed into force by her successors). NZ also deepened its ties within the 5 Eyes signals-technical intelligence network involving Anglophone partners. That makes it pretty rich of her to now claim that NZ has become too ensnared in the 5 Eyes “vice” and has adopted too much of a Western-centric security perspective. In fact, it appears that beyond her obvious hypocrisy, Clark has returned in retirement to her lefty roots in order to burnish her tarnished progressive credentials with certain domestic and foreign audiences. But that does not make her right when it comes to NZ’s national security and contradicts her actions on the security front while in office.

Beyond her personal foibles, the Clark interjections in current NZ security debates is evidence that she clearly is out of the loop when it comes to current NZ intelligence and defence threat assessments, but more importantly, is more proof of a significant fracture within Labour Party circles (the domestic aspects concerning tax policy and other issues having already become public). For example, Foreign Minister Mahuta has been demoted within Cabinet and appears increasingly confined to ceremonial roles rather than substantive engagement with foreign policy formulation. Minister Little has clearly assumed a dominant role in foreign policy decision-making as well as in security affairs, having repeatedly stated that NZ “no longer operates in a benign strategic environment” in a pointed message for Clark to pull her head in (and to be sure, the rightward drift in Labour after Jacinda Ardern’s tenure as PM is palpable this election year).

He, of course, is objectively correct on that score. NZ has to adapt its strategic posture to the times, and these times are not those extant during Clark’s tenure as PM. She and like-minded others need to stop living in the past, clinging to outdated notions of foreign policy “independence,” and treating the PRC as a benign global actor. As I have written before, NZ operates with bounded autonomy in our foreign affairs, something that gives it flexibility but which does not allow it complete freedom of choice or action when it comes to things like Great Power competition. But for NZ to be flexible in light of existing constraints, it must clear-eyed about what is and what is not in its medium to long-term interests. That is because in these fluid transitional times re-shaping the increasingly multipolar global order, trade opportunism is just a short-term solution, especially when it runs counter to longer-term international security trends.

If I were to be charitable, I would simply say that Clark and her fellow travellers need to understand that the PRC of 2008, when the FTA was negotiated, no longer exists. Gone is the relative openness and transparency of the CCP regime led by Hu Jintao and in its wake has risen the repressive and expansionist regime led by Xi Jinping. Clark and others may wax nostalgic for a past where the PRC would adopt liberal internationalist principles when it comes to foreign affairs and join the community of nations as a democratising Great Power, but that sadly has not happened. Instead, Xi has consolidated his grip on power, increased authoritarian powers against civil society, moved to culturally extinguish restive minorities like the Uyghurs, and de facto annexed Hong Kong while sabre-rattling against Taiwan and usurping the maritime territory of its littoral neighbours around the South China Sea. All while expanding its military capabilities (including its nuclear arsenal) and conducting global political influence (United Front) and espionage campaigns that include large-scale as well as focused cyber intrusions, intimidation of diaspora populations and industrial-size patent and copyright theft. That in turn has reconfigured the threat environment in which NZ is situated. The recently released package of NZ security documents pointedly make reference to these facts, among other things.

Even if we agree that rising Great Powers like the PRC have to do what they have to do when it comes to expanding their power, and recognising that Western countries have done similar things and worse well up to the recent past, it is nevertheless clear that the PRC is not operating as good international partner on all fronts, and that its behaviour is very much inimical to the rules-based order that NZ professes to uphold in the international system. In fact, the PRC under President Xi explicitly rejects the premise of liberal internationalism citing, perhaps at least partially correctly, that the international institutional status quo was built by and for Western imperial and neo-imperial powers and their allies, not for the Global South.

In that light AUKUS may not be the solution to the changes in the South Pacific strategic landscape and in fact it might make things worse if it serves as a precedent for the erosion of its non-nuclear status and catalyst for further militarisation of the region. But resorting to knee-jerk objections based on a rosy vision of some ethereal past does not help advance the debate about where should NZ situate itself in the equation and what moral, ethical, and practical utility AUKUS rests upon, especially since as far as the AUKUS partners are concerned, it is a fait accompli whether NZ is involved or not.

In that light, assessments and arguments based on nostalgia for a benign strategic past where issue-linkage could be abandoned and trade and security could be decoupled now seems naive at best and foolhardy at worst. But then again, I do not have skin in the game when it comes to past foreign policy decisions that have, in a path-dependent way, led us to where we are today.

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A word on post-neoliberalism.

I recently read a critique of the market-oriented economic theory known as “neoliberalism” and decided to add some of my thoughts about it in a series of short messages on a social media platform dedicated to providing an outlet for short messaging. I have decided to expand upon those messages and provide a slightly more fleshed out appraisal here.

“Neoliberalism” has gone from being a monetarist theory first mentioned in academic circles about the primacy of finance capital in the pyramid of global capitalism to a school of economic thought based on that theory, to a type of economic policy (via the Washington consensus) promoted by international financial institutions to national governments, to a broad public policy framework grounded in privatisation, low taxation and reduction of public services, to a social philosophy based on reified individualism and decontextualised notions of freedom of choice. Instilled in two generations over the last 35-40 years, it has redefined notions of citizenship, collective and individual rights and responsibilities (and the relationship between them) in liberal democracies, either long-standing or those that emerged from authoritarian rule in the period 1980-2000.

That was Milton Friedman’s ultimate goal: to replace societies of rent-seekers under public sector macro-managing welfare states with a society of self-interested maximizers of opportunities in an environment marked by a greatly reduced state presence and unfettered competition in all social (economic, cultural, political) markets. It may not have been full Ayn Rand in ideological genesis but the social philosophy behind neoliberalism owes a considerable debt to it.

What emerged instead was societies increasingly marked by survivalist alienation rooted in feral capitalism tied to authoritarian-minded (or simply authoritarian) neo-populist politics that pay lip service to but do not provide for the common good–and which do not adhere to the original neoliberal concept in theory or in practice. Survivalist alienation is (however inadvertently) encouraged and compounded by a number of pre- and post-modern identifications and beliefs, including racism, xenophobia, homophobia and social media enabled conspiracy theories regarding the nature of governance and the proper (“traditional” versus non-traditional) social order. This produces what might be called social atomisation, a pathology whereby individuals retreat from horizontal solidarity networks and organisations (like unions and volunteer service and community agencies) in order to improve their material, political and/or cultural lot at the expense of the collective interest. As two sides of neoliberal society, survivalist alienation and social atomisation go hand-in-hand because one is the product of the other.

That is the reality that right-wingers refuse to acknowledge and which the Left must address if it wants to serve the public good. The social malaise that infects NZ and many other formally cohesive democratic societies is more ideological than anything else. It therefore must be treated as such (as the root cause) rather than as a product of the symptoms that it displays (such as gun violence and other anti-social behaviours tied to pathologies of income inequality such as child poverty and homelessness).

As is now clear to most, neoliberalism is dead in any of the permutations mentioned above. And yet NZ is one of the few remaining democratic countries where it is still given any credence. Whether it be out of wilful blindness or cynical opportunism, business elites and their political marionettes continue to blather about the efficiencies of the market even after the Covid pandemic has cruelly exposed the deficiencies and inequalities of global capitalism constructed on such things as “just in time production” and “debt leveraged financing” (when it comes to business practices) and “race to the bottom” when it comes wages (from a labour market perspective).

I shall end this brief by starting at the beginning by way of an anecdote. As I was trying to explain “trickle down” economic theory to an undergraduate class in political economy, a student shouted from the back seats of the lecture hall “from where I sit, it sure sounds more like the “piss on us” theory.

I could not argue with that view then and I can’t argue with it now. Except today things are much worse because the purine taint is not limited to an economic theory that has run its course, but is pervasive in the fabric of post-neoliberal societies. Time for a deep clean.

PS: For those with the inclination, here is something I wrote two decades ago on roughly the same theme but with a different angle. Unfortunately it is paywalled but the first page is open and will allow readers a sense of where I was going with it.

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Media Link: “A View from Afar” on NZ security strategy and the end of neoliberalism in South America.

I have not had much time to blog in recent weeks but continue the weekly series of podcasts with Selwyn Manning. This week we discussed efforts to develop a comprehensive national security strategy for New Zealand that goes beyond Defense White Papers and annual reports from various security agencies, then turned to recent elections in South America as an indicator that neoliberalism is well and truly dead as an economic policy approach and, perhaps more importantly, as a social theory. You can find the episode here.

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Between appeasement and confrontation.

The worm has turned when it comes to the relationship between the People’s Republic of China (PRC) and the West. Something has happened to sour the relationship beyond repair, and the strains are not limited to US-PRC, Australian-PRC or UK-PRC bilateral relations. Other countries, notably in the EU and Southeast Asia and including traditional rival India, have replaced two decades of offering warmth and goodwill with increasingly frosty and suspicious attitudes towards the PRC. That seems to be due to a combination of PRC militarism and belligerence in places like the South China Sea, Hong Kong, Taiwan and the Line of Control in the Himalayas separating it from India, but also as a result of Chinese sharp power influence operations in liberal democracies, its coercive trade diplomacy, ongoing Chinese cyber espionage, cyber theft and cyber warfare campaigns launched against a swathe of countries (including New Zealand), its dollar and debt diplomacy in Africa and South America where debt for equity swaps are accompanied by the colonisation by Chinese labor of critical infrastructure sites in countries lacking the resources to undertake large scale projects like port modernisation or power generation, and the adoption of “wolf warrior” diplomacy where insults and bullying have become mainstays of PRC diplomatic discourse, particularly but not limited to the issue of human rights and adherence to international norms.

With regards to the latter, in some cases Chinese behaviour is so egregious, such as stationing hundreds of fishing boats outside the marine reserve surrounding the Galapagos Islands or off the southeastern and southwestern coasts of South America and Southern Africa, often using the cover of night to poach in the Exclusive Economic Zones (when not territorial waters) of various countries, that countries otherwise prone to welcome the PRC as an antidote to traditional US or colonial power dominance have started to review their positions with regards to it.

The faith once placed in incorporating the PRC as a good global citizen into the community of advanced nations by admitting it into international organisations such as the World Trade Organisation and giving it leadership roles in others like the World Health Organisation and various UN agencies has not yielded the results that were hoped for. Instead, the errors of so-called modernisation theorists of the 1950s were repeated: rather than encouraging Chinese democracy by exposing it to “Western” values and helping expand its middle class on the back of increased international trade opportunities and the corresponding rise in material opportunities associated with it–something that was thought would lead to a better appreciation by and reproduction of democratic values by those emerging middle classes who would grow to see democracy as the political equivalent of the “free” economic market–under Xi Jinping the PRC has become more authoritarian, more state capitalist, more territorially expansionist, more normatively untrustworthy and more militarily bellicose. Instead of a global good citizen, it is now increasingly seen in the West as a very large bully on the world stage.

This does not absolve the US and various colonial powers of their histories. But it points to the fact that the thirty year period of relative inter-state peace after the end of the Cold War is coming to its conclusion. What lies ahead is unknown but it is likely to be marked by conflict of one sort or another or a combination thereof. The strategic postures of the US, UK, France and Australia all now explicitly identify the PRC as the primary military “peer competitor” (i.e. the enemy) that they must prepare to fight. Even NZ’s defense posture has shifted from unconventional warfare scenarios against irregular non-state actors to involvement in interstate conflicts (although the focus on peacekeeping operations remains). Reflected in defense procurement programs over the next ten years, the shift in war planning is answered by Chinese redoubling of its efforts to expand its fleet and improve the sophistication and size of its land and air-based forces. It also has renewed its bilateral military ties with Russia and courted the alliance of a variety of strategically important authoritarians regimes such as Iran and Turkey. It seems that it is only a matter of time before either by miscalculation, misperception or misadventure it will be involved in an armed engagement with a Western or Western-backed adversary, at which point the escalatory and expansionist potential of such conflict is limited only by the threat of nuclear war.

This puts small states like NZ between a rock and hard place. The diplomatic pressure is being felt in Wellington and Nanaia Mahuta’s speech to the China and New Zealand Business Council reflected the attempts to massage the stresses now apparent in its relationship with the PRC. The question is whether NZ can continue to employ its “softly-softly” approach in the face of the Western turn against the PRC and the latter’s increasingly acerbic responses to criticism of its actions at home and abroad. There can be little doubt that at this juncture if push comes to shove NZ will side with the West as a matter of values and principle. It has signalled as much and, with its commitment to diversifying its trade relations outside of the bilateral ties with the PRC, is setting the pragmatic grounds for doing so even if the short term costs of any deterioration in the relationship with the PRC proves onerous and wide-spread throughout the economy. But so long as the quarrel between Great Powers is limited to podiums and pens, then NZ can hope to finesse the contradictions in its strategic posture.

The answer on how to do so may lay in thinking of NZ’s position in the face of the US/West-PRC rivalry as a strategic balancing act in which the fixed points are appeasement versus confrontation and the slackline between the two is cooperation. The key is to find an equilibrium point along that line given specific issues and changing circumstances. There is plenty of common ground for NZ to serve as a honest broker and fair interlocutor when it comes to PRC-West relations even as it reaffirms its commitment to Western liberal values. Pragmatism and principle will undoubtably factor into the centre of gravity upon which to balance NZ foreign policy in that regard. The goal is to be nimble when demonstrating a desire to cooperate on selected issues given the competing demands by trade and security partners to appease or confront each other. Sometimes the equilibrium point may be closer to the PRC position, sometimes it will tilt in favour of the Western stance. They key to success lies in refraining from entering into broadly binding agreements or commitments and to adopt an issue-by-issue, case by case approach that serves to insulate any particular bilateral decision from the larger geopolitical struggles surrounding it.

That may turn out to not be feasible if the contending Great states do not accept NZ’s “siloed” approach and will not be a permanent foreign policy solution given the apparent inevitability of a Great Power stand-off in the medium term future. But it provides a means of finding the optimal equilibrium point on the diplomatic slackline that is NZs transitional position vis a vis China and the West until the new multipolar world system is firmly established.

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Facing facts.

The critical reaction of some conservative commentators and politicians about Nanaia Mahuta’s “Taniwha and Dragons” speech is focused on the double premise that NZ is “sucking up” to the PRC while it abandons its obligations to its 5 Eyes intelligence partners. Some have suggested that NZ is going to be kicked out of 5 Eyes because of its transgressions, and that the CCP is pulling the strings of the Labour government.

These views are unwarranted and seemingly born of partisan cynicism mixed with Sinophobia, racism and misogyny (because Mahuta is Maori and both Mahuta and PM Ardern are female and therefore singled out for specific types of derision and insult). Beyond the misinterpretations about what was contained in the speech, objections to Mahuta’s invocation of deities and mythological beasts misses the point. Metaphors are intrinsic to Pasifika identity (of which Maori are part) and serve to illustrate basic truths about the human condition, including those involved in international relations. As a wise friend said to me, imagine if a US Secretary of State was an indigenous person (such as Apache, Cherokee, Hopi, Mohican, Navaho, Sioux or Tohono O’odham). It is very possible that s/he would invoke ancestral myths in order to make a point on delicate foreign policy issues.

In any event, this post will clarify a few facts. First, on military and security issues covering the last two decades.

New Zealand has twin bilateral strategic and military agreements with the US, the first signed in 2010 (Wellington Declaration) and the second in 20012 (Washington Declaration). These committed the two countries to partnership in areas of mutual interest, particularly but not exclusively in the South Pacific. New Zealand sent troops to Afghanistan as part of the US-led and UN-mandated occupation after 9/11, a commitment that included NZSAS combat units as well as a Provincial Reconstruction Team (PRT) in Bamiyan Province that mixed humanitarian projects with infantry patrols. More than 3500 NZDF troops were deployed in Afghanistan, at a cost of ten lives and $300 million.

Similarly, NZ sent troops to Iraq after the US invasion, serving in Basra as combat engineers in the early phase of the occupation, then later as infantry trainers for Iraqi security forces at Camp Taji. More than 1000 NZDF personnel were involved in these deployments, to which can be aded the SAS operators who deployed to fight Saddam Hussein’s forces and then ISIS in Iraq and Syria after its emergence. There are a small number of NZDF personnel serving in various liaison roles in the region as well, to which can be added 26 NZDF serving as peacekeepers in on the Sinai Penninsula (there are slightly more than 200 NZDF personnel serving overseas at the moment). In all of these deployments the NZDF worked with and now serves closely with US, UK and Australian military units. The costs of these deployments are estimated to be well over $150 million.

The NZDF exercises regularly with US, Australian and other allied partners, including the US-led RimPac naval exercises and Australian-led bi- and multilateral air/land/sea exercises such as Talisman Saber. It regularly hosts contingents of allied troops for training in NZ and sends NZDF personnel for field as well as command and general staff training in the US, Australia and UK. RNZN frigates are being upgraded in Canada and have contributed to US-led freedom of navigation exercises in the South China Sea (against PRC maritime territory extension projects) and anti-piracy and international sanctions enforcement missions in the Persian Gulf. Among the equipment purchases undertaken during the last two decades, the NZDF has bought Light Armoured Vehicles, the infamous “LAVs” (or Strykers, as they are known in the US), Bushmaster armoured personnel carriers, C-130J “Hercules” transport aircraft, P-8 “Poseidon” anti-submarine warfare and maritime surveillance aircraft, Javelin anti-tank portable missiles and a range of other weapons from 5 Eyes defence contractors. In fact, the majority of the platforms and equipment used by the NZDF are 5 Eyes country in origin, and in return NZ suppliers (controversially) sell MFAT-approved weapons components to Australia, the US, UK , NATO members, regional partners and some unsavoury Western-leaning regimes in the Middle East.

After the estrangement caused by the dissolution of the ANZUS defence alliance as a result of NZ’s non-nuclear decision in the mid-1980s, a rapprochement with the US began in the aftermath of the 9/11 attacks. The 5th Labour government sought to capitalise on the moment and sent troops into Afghanistan and later Iraq using the cover of UN resolutions to deflect political attacks. That led to improved military-to-military relations between the US and NZ, something that has been deepened over the years by successive NZ governments. The intelligence relationship embodied in the Echelon/5 Eyes agreement was slightly curtailed but never ended even when ANZUS died, and gradually was restored as the main security partnership to which NZ was affiliated. Now the NZDF is considered a small but valued military and intelligence partner of the US and other 5 Eyes states, with the main complaints being (mostly from the Australians) that NZ does not spend enough on “defence’ (currently around 1.5 percent of GDP, up from 1.1 percent under the last National government, as opposed to 2.1 percent in Australia, up from 1.9 percent in 2019) or provide enough of its own strategic lift capability. The purchase of the C-130J’s will help on that score, and current plans are to replace the RNZAF 757 multirole aircraft in or around 2028.

The dispute over US warships visiting NZ because of the “neither confirm or deny” US policy regarding nuclear weapons on board in the face on NZ’s non-nuclear stance was put to rest when the Arleigh Burke-class destroyer USS Sampson (DDG-102) participated in the RNZN 75th anniversary celebrations in November 2016 after an agreement between the then National government and US Department of Defense on assurances that it was not carrying or using nukes as weapons or for propulsion. As if to prove the point of bilateral reconciliation, on the way to the celebrations in Auckland DDG-102 diverted to provide humanitarian support to Kaikura earthquake relief efforts after the tremor of November 14th (the week-long anniversary fleet review involving foreign naval vessels began on on November 17th). A Chinese PLAN warship also participated in the anniversary Fleet Review, so the message conveyed by the first official NZ port visit by a US warship in 30 years was made explicitly clear to the PRC.

The fact is this: the relations between NZ and its 5 Eyes partners in the broader field of military security is excellent, stable and ongoing. That will not change anytime soon.

As for intelligence gathering, NZ is a core part of the 5 Eyes signals intelligence collection and analysis network. Over the years it has moved into the field of military signals intelligence gathering as well as technical and electronic intelligence-gathering more broadly defined. More recently, in light of the emergence of non-state terrorism and cyber warfare/espionage threats, the role of 5 Eyes has been upgraded and expanded to counter them. To that end, in the last decade NZ has received multiple visits from high-ranking intelligence officials from its partners that have dovetailed with technological upgrades across the spectrum of technical and electronic signals intelligence gathering. This includes addressing issues that have commercial and diplomatic sensitivities attached to them, such as the NZ decision to not proceed with Huawei involvement in its 5G broadband rollout after high level consultations with its 5 Eyes partners. More recently, NZ has been integrated into latest generation space-based intelligence collection efforts while the focus of the network returns to more traditional inter-state espionage with great power rivals like China and Russia (we shall leave aside for the moment the benefits that the GCSB and NZDF receive from Rocket Lab launches of US military payloads but we can assume that they are significant).

As routine practice, NZSIS and GCSB officers rotate through the headquarters of 5 Eyes sister agencies for training and to serve as liaison agents. Officers from those agencies do the same in NZ, and signals engineers and technicians from 5 Eyes partners are stationed at the collection stations at Waihopa and Tangimoana. GCSB and SIS personnel also serve overseas alongside 5 Eyes employees in conflict zones like Afghanistan and Iraq. While less standardised then the regular rotations between headquarters, these type of deployments are ongoing.

5 Eyes also maintains a concentric ring of intelligence partners that include France, Germany, Japan, Israel, and Singapore. These first-tier partners in turn use their respective capabilities to direct tactical and strategic intelligence towards 5 Eyes, thereby serving as the intelligence version of a “force multiplier” in areas of common interest. One such area is the PRC, which is now a primary focus of Western intelligence agencies in and outside of the Anglophone world. This common threat perception and futures forecasting orientation is shared by the NZ intelligence community and is not going to change anytime soon unless the PRC changes its behaviour in significant ways.

For its part, the PRC has no such complex and sophisticated intelligence networks with which to avail itself. It has intelligence partners in North Korea, Russia, Iran and other small states, but nothing on the order of 5 Eyes. As a result, it is much more reliant on human intelligence collection than its rivals in the 5 Eyes, something that has become a source of concern for the 5 Eyes community and NZ in particular (as the supposed weak link in the network and because of its economic reliance on China, of which more below). While the PRC (and Russia, Israel and Iran, to name some others) are developing their cyber warfare and espionage capabilities, the fact is that the PRC continues to rely most heavily on old-fashioned covert espionage and influence operations as well as relatively low tech signals intercepts for most of its foreign intelligence gathering. If I read intelligence reports correctly, NZ’s counter-espionage and intelligence efforts are focused on this threat.

In a word: NZ is committed to the 5 Eyes and has a largely Western-centric world view when it comes to intelligence matters even when it professes foreign policy independence on a range of issues. That is accepted by its intelligence partners, so transmission (of intelligence) will continue uninterrupted. It is in this light that Mahuta’s comments about NZ’s reluctance to expand 5 Eyes original remit (as an intelligence network) into a diplomatic coalition must be understood. There are other avenues, multilateral and bilateral, public and private, through which diplomatic signaling and posturing can occur.

That brings up the issue of trade. Rather than “sucking up” to China, the foreign minister was doing the reverse–she was calling for increased economic distance from it. That is because New Zealand is now essentially trade dependent on the PRC. Approximately 30 percent of NZ’s trade is with China, with the value and percentage of trade between the two countries more than tripling since the signing of the bilateral Free Trade Agreement in 2008. In some export industries like logging and crayfish fisheries, more than 75 percent of all exports go to the PRC, while in others (dairy) the figure hovers around 40 percent. The top four types of export from NZ to the PRC are dairy, wood and meat products (primary goods), followed by travel services. To that can be added the international education industry (considered part of the export sector), where Chinese students represent 47 percent of total enrollees (and who are a suspected source of human intelligence gathering along with some PRC business visa holders).

In return, the PRC exports industrial machinery, electronics (cellphones and computers), textiles and plastics to NZ. China accounts for one in five dollars spent on NZ exports and the total amount of NZ exports to China more than doubles that of the next largest recipient (Australia) and is more than the total amount in value exported to the next five countries (Australia, US, Japan, UK and Indonesia) combined. Even with the emergence of the Covid pandemic, the trend of increased Chinese share of NZ’s export markets has continued to date and is expected to do so in the foreseeable future.

Although NZ has attempted to diversify its exports to China and elsewhere, it remains dependent on primary good production for the bulk of export revenues. This commodity concentration, especially when some of the demand for export commodities are for all intents and purposes monopolised by the Chinese market, makes the NZ economy particularly vulnerable to a loss of demand, blockages or supply chain bottlenecks involving these products. Although NZ generates surpluses from the balance of trade with the PRC, its reliance on highly elastic primary export commodities that are dependent on foreign income-led demand (say, for proteins and housing for a growing Chinese middle class) makes it a subordinate player in a global commodity chain dominated by value-added production. That exposes it to political-diplomatic as well as economic shocks not always tied to market competition. Given the reliance of the entire economy on primary good exports (which are destined mainly for Asia and within that region, the PRC), the negative flow-on effects of any disruption to the primary good export sector will have seriously damaging consequences for the entire NZ economy.

That is why the Foreign Minister spoke of diversifying NZ’s exports away from any single market. The only difference from previous governments is that the lip service paid to the “eggs in several baskets” trade mantra has now taken on urgency in light of the realities exposed by the pandemic within the larger geopolitical context.

Nothing that the Labour government has done since it assumed office has either increased subservience to China or distanced NZ from its “traditional” partners. In fact, the first Ardern government had an overtly pro-Western (and US) slant when coalition partners Winston Peters and Ron Mark of NZ First were Foreign Affairs and Defence ministers, respectively. Now that Labour governs alone and NZ First are out of parliament, it has reemphasised its Pacific small state multilateralist approach to international affairs, but without altering its specific approach to Great Power (US-PRC) competition.

The situation addressed by Mahuta’s speech is therefore as follows. NZ has not abandoned its security allies just because it refuses to accept the Trumpian premise that the 5 Eyes be used as a diplomatic blunt instrument rather than a discreet intelligence network (especially on the issue of human rights); and it is heavily dependent on China for its economic well-being, so needs to move away from that position of vulnerability by increasingly diversifying its trade partners as well as the nature of exports originating in Aotearoa. The issue is how to maintain present and future foreign policy independence given these factors.

With those facts in mind, the Taniwha and Dragon speech was neither an abandonment of allies or a genuflection to the Chinese. It was a diplomatic re-equilibration phrased in metaphorical and practical terms.