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Eco-Economy: Business Sector vs Financial Sector

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Eco-Economy: Business Sector vs Financial Sector


By Dr Finlay Thompson

The financial sector is hiding behind the word "business". The much discussed political "line in the sand" is not between the left and the right, employees and employers, truckies and farmers.

The real political line has moved and now stands between the local productive and the foreign financial sectors. At present both the Labour and National parties are standing on the same side of that line, on the side of the New Zealand productive sector.

In fact, now, only the Act party stands on financial sector’s side.

It is now clear that business confidence is falling, and falling fast. The government is carefully trying to talk positively and keep everyone from a pointless self-inflicted panic. Meanwhile the Act party is taking the opportunity to make digs at Michael Cullen's poor management of the economy.

The strange thing is that our new Labour government has hardly done anything.

The few election mandated proposals that are still alive can hardly be described as "extremely left wing", as Richard Prebble would have us believe.

In fact it could be argued that the government has been elected because New Zealand has decided that the rampant free market and "extreme right wing" economic management of the last nine years have had their turn.

As Michael Culen has pointed out recent speeches, the word "business" is rather broad, including quite a range of different interests. It is easy to identify at least two groups:

1) Small to medium businesses. Agricultural (farmers), retail, industrial and service businesses form a group well represented in terms of voters. This is productive New Zealand, the group that has apparently been surveyed. It is interesting that all politicians try to speak to this group, from Jim Anderton to Richard Prebble. For the sake of clarity I will call this group the "productive business" community.

2) Large financial and multi-national industrial/trading corporations. A small group in New Zealand in terms of voters, but big in influence. The essential character of this part of the "business" world is that nothing real is produced, it is the financial superstructure that manages our economy. This group will be referred to hereafter as the "financial business" community.

So who is upset?

The latest figures make it clear that the productive business community has been scared.

The "standard theory", implicitly and explicitly stated in the media, is that our Labour led government has made productive business people nervous over a return to unionism and industrial action. That employees are rising up and demanding a bigger slice of their action.

There is a major problem with the standard theory however.

Government has not actually done anything yet! Moreover, the reforms that have been mooted are hardly extreme, just look over the Tasman at their labour laws!

However while nothing has been done by the new Government the economic indicators have moved markedly since the election, and are now looking bad.

The New Zealand dollar is sliding, inflation is rising, retail and housing markets are flat, and according to some the Reserve Bank is still set to push mortgage interest rates over ten percent by the end of the year. I am nervous and I'm not even a businessman!

The conclusion is obvious. We should break the concept of "business" into its "productive" and "financial" components.

The interests of small and middle sized New Zealand based business are NOT the same as the interests of large foreign and multinational financial corporations.

Could it be that the financial sector is punishing us for voting in a Labour government?

Could it be that the government does not have the real economic power?

Could it be that our productive business community is feeling the effects of a financial sector decision to send us into a downturn?

The Labour government has demonstrated quite clearly in its first budget that it cannot actually DO anything with the New Zealand economy.

The Reserve Bank has only one lever, the OCR, and even that is ineffectual. It seems that economic power is not in their hands.

New Zealand and its efficient and productive business community should be demanding answers from the financial sector. If neither the present government nor the Reserve Bank is willing to stand up to the foreign controlled financial sector, who will?

Dr Finlay Thompson

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