New Zealand Rents and the Permanent War Economy

I don’t often write about New Zealand. My attention has a way of focusing on what’s most cosmically urgent and that’s usually the declining hegemon addicted to war, not a rich country of five million people with peaceful proclivities and excellent coffee. Plus, in many respects, New Zealand is better than advertised:

But in the years since I arrived, life here has gotten measurably harder for the average Kiwi.

Wealth inequality is off the charts. Youth unemployment is growing. Rents cost more than mortgages. Students are struggling to find work after graduation. Community healthcare infrastructure is under strain and underfunded. And the price of food and fuel is worse than when I was in Hawai’i—the most expensive place I’ve ever lived.

That’s why people here are stunned—and increasingly irate—that the current government keeps making decisions that drive the “national economy” into the ground. If you’re a functioning democracy, it’s irrational to impose austerity on your people, raise interest rates on homeowners, cut government jobs, defund public research, sell off public assets, and invite foreign companies to poach your natural resources while asking for little of the financial upside from extraction.

Of course, if you’re an aspiring oligarchy, all those policies make perfect sense.

But the “national economy” is an illusion if what we mean is something that all Kiwis share in. New Zealand has a rentier economy. Most of the country’s wealth is trapped in home values and services around real estate—an asset already too expensive for anyone under 40 years old to afford.

The landlord class is not just a reality of life here; it’s the class on whose behalf both major parties seem to govern (National Party far more shamelessly so than Labour).¹ The country’s wealth holders maintain their position not through investment in production but by 1) extracting rents from the assets they hold, 2) asset inflation, and 3) state support won via well-funded lobbying groups. Their class position is immune to youth unemployment, declines in productivity, or changes in GDP—all traditional measures of the health of a “national economy.”

And so New Zealand, like most rich countries, really has at least two economies. Which one you exist within defines how you experience life. And the easiest predictor of which one you’re in is whether you own property.

The New Zealand story is part of the global story. I’ve written (and spoken) about this several times now, but the way surpluses accumulate in today’s version of capitalism (through rents, speculation, asset inflation, and consumer debt) promises certain nightmares worsening in the coming years. Social cohesion will collapse. The ranks of the “permanent underclass” will swell to include people you know (and maybe you and me). The center-right will become more fascistic in defense of the imperatives of capital accumulation. And far-right parties will gain strength as centre-left ones refuse radical solutions to radical problems.

These are the politics associated with a k-shaped economy.

“K” is the shape of oligarchy

In the US, oligarchy—which takes a K-shape—needs the permanent war economy. It’s also becoming true for China as inequality grows. But in smaller countries, a rentier economy has historically been more essential than military spending.²

That’s the linkage I want to make: Analysts almost never account for the fact that rentier economies in the global North (which includes New Zealand) are corollaries to America’s permanent war economy. Both are perversities that heighten inequalities domestically and globally. But they also co-constitute one another as part of the worldmaking of transnational oligarchy. The surpluses derived from rents and asset inflation also finance America’s war machine (with foreign debt purchases); they comprise a capitalist world-system.

It’s important to see these connections because they illuminate how struggles for a better world can run into a brick wall. In 1967, Martin Luther King, Jr. spoke of poverty, racism, and militarism as the “Three Evils of Society.” We’re still battling those same demons today, but in mutated form.

Our three great challenges at a global level are America’s permanent war economy, imperialist methods in foreign policy, and oligarchic concentrations of wealth. To fight one of those is to fight all three. The lie is believing that you can win a fight for progress on only one of these fronts to the exclusion of the others.

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1. My theory is that Labour loses more than it should because it caters to the same constituency as National, and National panders more directly and shamelessly to the economic interests of that class. Nobody views Labour as a party of ambition or ideas, to say nothing of the working majority.

2. National security spending is becoming a more important feature in small-nation oligarchies for reasons I’ll have to write about later, but this has not been true for most of the “unipolar moment.”

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