In the past couple few weeks the Reserve Bank governor Alan Bollard, prime minister John Key, and other commentators have been talking about the recession, or at least the worst of it, being over.
Bollard is a fairly level-headed and reasonably sophisticated bourgeois economist and Key is a fairly level-headed, reasonably sophisticated capitalist political manoeuvrer. So their view of the current state of the recession is worth some consideration and can’t just be dismissed as capitalist propaganda.
The evidence, such as it is, that has been presented to suggest NZ is coming out of recession is pretty flimsy, however. A news item that featured what they were saying on the subject showed a case of one house that had been sold in five days, whereas last year the same house hadn’t sold in months. That is hardly evidence for much at all.
Harcourts’ real estate blue book in early July contained an ‘informational’ sheet in which Harcourts declared the recession, or at least the recession in house prices, over. Their evidence was improved house sales for the past two months. This verdict on their part seemed rather unconvincing - especially since it came in a blue book that was at least 1/3 smaller than the size of the blue books last year. If the housing market was really jumping back up, then the Realtor and the Harcourts blue book wouldn’t be the slimmed down volumes that they are at present.
More importantly, a real recovery couldn’t be judged from house prices. No new value is created in the sale of houses - all that is involved is prices going up and down. If they go up, above the actual value of houses, these boosted prices simply draw money from elsewhere in the economy - and, usually, also involve the extension of more credit.
So a real recovery has to involve an increase in output and productivity in the real economy - in the production of goods (and services) for the market. In relation to housing, this would mean more house-building, rather than simply more house-selling, ie more selling of existing housing stock.
But it would also mean, crucially, more industrial production. There seems little evidence of that.
That’s not to say that NZ isn’t starting to pull out of recession - just that no convincing evidence has yet been presented.
What is useful about Bollard and Key’s claims, however, is a reminder that much of the left ‘talked up’ the depth of crisis. It was the biggest economic catastrophe since the Great Depression; for some, it even held the possibility of being the final meltdown of capitalism globally.
Some of these people making such claims were actually around in the mid-1970s when the long postwar boom came to an end, so they should’ve known better than to claim that the current woes are the biggest thing to go wrong since the 1930s. Even more of the left were around in 1987, when stock markets around the world crashed, and NZ capitalism took a major hit which it has never really recovered from (actually, NZ capitalism has never really recovered from the end of the postwar boom).
In contrast, we in the Workers Party looked clinically at what was happening and made a calm, rational analysis to the limited extent that we could (ie not having full-timers, researchers etc etc). Our analysis has been vindicated. We said it was a significant recession, but it wasn’t anything like on the scale of the 1930s and it wasn’t on the scale of the malaise that followed the end of the postwar boom either. We also delayed judgement on how serious it might (or might not) get, preferring an evidence-based analysis rather than wishful thinking and hyperbole. And we pointed out that, in the absence of substantial movement by the working class, the system could renew itself without a major meltdown.
Moreover, it’s important to keep in mind that recessions have a two-fold character. They are not only a symptom of the disease - they are also a cure. Capitalism not only creates regular recessions, because it is an unplanned system which generates contradiction and crisis; it also creates recessions as a self-protection mechanism. Through recession, capitalism is revitalised. A lot of the left are very easily excited by a recession, or even the spectre of one, and in their excited state they overlook or forget that recession has this second function within the operations of the capitalist system.
At this point in time, no serious Marxist can know what is going to happen next - whether the worst is over or whether there will be a deepening of the recession. That’s why it also never pays to be a one-trick pony, but to have two sets of arguments to deal with two possible scenarios.
Even if the worst is over, and it may not be, any recovery is going to be rather weak. The ‘best’ that NZ capitalism can deliver these days is what it delivered from the mid-1990s (final years of Nat government) to about 2008 (the global financial-sector meltdown or semi-meltdown). There’s certainly no sign of a major reinvigoration of the productive economy - that would require massive new investment in plant, machinery, technology, research and development and there has been no indication since the end of the postwar boom that the NZ bourgeoisie has much inclination for such new investment. In fact the last major round of such investment had to be carried out by government - indeed, a National government; namely, Muldoon’s ‘Think Big’ projects.
Our analysis may lack the glamour and hyperbole of the pronouncements of many others on the more easily excited left, but it has served us well.