Economic restructuring in New Zealand: A classical account

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Abstract

New Zealand's recent experiment with radical neoliberalism is well rehearsed in international policy circles. Yet, given the economic restructuring premise for the reforms, there has been little assessment of their structural impact.

In this paper I take up this challenge, utilising [Shaikh, A., Tonak, E. Measuring the wealth of nations: the political economy of national accounts. Cambridge: Cambridge University Press; 1994] methodology for deriving classical value categories from official national accounts data but extending this to the industry level. This approach allows changes to the production and appropriation of surplus value in different industries during the period to be identified, underpinning a Marxian interpretation of restructuring.

Beyond the methodology, the research makes four contributions. First, conventional analysis is found limited by its concentration on changes to the distribution of value rather than its creation. Second, land rents are significant. Third, the role of financial capital is found more complex than traditionally argued. Finally, the approach provides a firm grounding for the unfashionable concept of class fraction.

Introduction

The premise of the neoliberal reform period in New Zealand from the mid 1980s was the need for economic restructuring. Yet economic assessment of the period has largely overlooked structural change for a concentration instead on microeconomic efficiency, growth and employment performance, and income distribution. Discussion of structural change has been limited to observation of the growth of services and changes to the export commodity structure, a result of the export-led growth assumptions of many commentators.

In this paper, I argue that the limited attention paid to structural change in New Zealand arises from limitations in the System of National Accounts conventionally used to categorise economic activity. This is quite understandable because the focus of neoclassical economics underpinning this categorisation is on marginal advantage rather than on the conditions of production and exchange per se. The latter tends to be dismissed as a quaint preoccupation of classical economics.

To adjust the prevailing focus, following a brief review of conventional accounts of the period of neoliberal reform, I present a method for categorising economic activity in classical economic terms at the industry level. This is an extension of Shaikh and Tonak's (1994) derivation of classical value categories from conventional national accounts data at an aggregate level. I demonstrate how this extension allows analysis of changes to the production and appropriation of value in different industries to be identified and contrast this with conventional accounts. The analysis of value flows then underpins a Gramscian interpretation of political changes during the period.

Section snippets

The New Zealand experiment

In November 1984 the New Zealand Labour Party won a majority in a parliamentary election that had been hastily called by a disintegrating government unable to cope with a growing economic crisis. The new government rapidly embarked on a wide-ranging neoliberal programme of regulatory change and austere economic management. The programme was aimed to force a restructuring of government, business, and social activity to forge an internationally competitive economy (see Douglas and Callen, 1987

Conventional accounts of the restructuring

Consideration of New Zealand's economic performance following the neoliberal experiment from 1984 gives little attention to structural change at a macroeconomic level, in favour of broad accounts of macroeconomic performance (Dalziel, 2002, Easton, 2002, Hazledine and Quiggin, 2006). The few studies that do provide an account of restructuring, tend to dwell narrowly on changes to the export commodity structure, a result of the export-led growth assumptions of many commentators. The New Zealand

A classical approach to national accounting

In recent years various techniques have been developed to derive quantitative measures of classical economic categories from contemporary national accounts data (see Shaikh and Tonak, 1994 for an extensive review). In contrast to orthodox systems of national accounting, the use of classical economic categories has shed light on some persistent questions concerning unproductive economic activity, profit rate trends, and productivity.

The derivation of quantitative measures classical economic

Classical economic estimates at an industry level

The recent derivations of classical national accounts have been restricted to the aggregate national level. But the process of mapping from conventional to classical categories involves the aggregation of industry level-data. In the case of the NZSNA, national accounts are presented in 25 distinct industry groupings, mostly at the two-digit level. Input–output data is also published variously at two- and three-digit levels. So the process of deriving aggregate national level data itself

A classical account of New Zealand restructuring 1972–1995

The derivation of estimates of classical economic categories at the industry level provides the means for more detailed examination of intra and inter-industry trends from a classical perspective. Using such data, the restructuring of the New Zealand economy during the 1972–1995 period will be considered in these terms.

As discussed earlier, at an aggregate level, three phases are identifiable during the 1972–1995 period. The New Zealand economy experienced falling general profitability through

Conclusion

The extension of methodology to derive classical economic categories at an industry level provides powerful tools to examine the dynamics of economic restructuring. The distinction between the creation and appropriation of surplus value and between the rate of surplus value and the value composition of capital provide a perspective on inter-industry relationships not considered from the neo-classical viewpoint.

The rise in GDP shares of finance and resources highlighted by the few conventional

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