Anti-Globalization Wave Reaches New Zealand

Tiger Huang

On October 26, Jacinda Ardern, the leader of the center-left Labour Party, was sworn in as New Zealand’s 40th Prime Minister, ending 9 years of the center-right National Party’s rule. While Labour fell short of the popular vote by over 7.5%, the party successfully formed a majority coalition with the populist New Zealand First Party and leftist Green Party after more than a month of negotiations. The 2017 elections saw the highest voter turnout in the country in 12 years, as tensions regarding income inequality, housing unaffordability and immigration have risen to new levels.

The outcome of the New Zealand elections reflects a continuation of the anti-globalist sentiment around the world that began with Brexit and the US presidential elections last year. In October 2017, populist and anti-globalization parties also achieved victories in the elections of the Czech Republic and Austria. [1] Iceland’s elections on October 28, while still currently under negotiations, may also see the Left-Green Movement form a majority coalition with minor parties. [2] Earlier this year, populist movements have also gained unprecedented support in the elections of the Netherlands, France, and Germany.

Since the economic reforms and deregulation of 1984, New Zealand has embraced free-market economics and maintained one of the highest consistent growth rates in the developed world. New Zealand was among the least affected in the OECD during the Great Recession, and maintained the sixth highest GDP growth rate in the group after the downturn. [3] Recently, the high growth rates were primarily driven by strong exports and domestic consumption, as well high immigration and a burgeoning housing market led by domestic and foreign investment.

Despite these achievements, New Zealand has also seen a steady increase in income inequality and housing unaffordability. Since 1985, New Zealand’s Gini coefficient has risen by almost 0.7 points, the third highest inequality growth rate in the OECD [4]. As the median house price has more than doubled over the last ten years in Auckland, where more than a third of the country is populated, an increasingly large portion of the population has become locked out of the housing market. [5] In recent years, New Zealand’s child poverty and homelessness have become some of the worst in the developed world, dominating national headlines and politics. [6]

In the same period, New Zealand’s demographics and foreign trade have also gradually gravitated towards the Asia-Pacific. Since the Immigration Act of 1986, the Asian population in New Zealand has increased almost nine-fold to nearly 12% of the population in 2013. [7] Auckland, the country’s most populous city, has a foreign-born population of nearly 40%, one of the highest in the world. [8]

Internationally, New Zealand was the first developed country to sign a Free Trade Agreement with China in 2008 and the Hong Kong SAR in 2010, and signed an additional FTA with Korea in 2015. In the same year, New Zealand was also the only western country to become a founding member of the China-led Asia Infrastructure Investment Bank. [9]

In recent years, the record-level of Asian immigration and investment, particularly foreign Chinese investment, has been blamed for exacerbating the country’s overcrowded housing market and infrastructure. Others have also raised concerns about the economic competition brought about by the FTAs. Populist movements, spearheaded by the New Zealand First Party, have taken advantage of this situation to rally support and become the kingmaker party in the election.    

The significance of inequality, immigration and trade issues is already reflected in the new coalition government’s policies. Shortly upon taking office, the coalition government has banned foreign ownership of New Zealand property and increased the minimum wage for implementation next year. It has also pledged to cap immigration levels and to renegotiate the Free Trade Agreement with Korea.

At first glance, the outcome and factors leading to New Zealand’s election results reflect the social tensions occurring in the United States, the United Kingdom and elsewhere in the developed world. However, for an island nation of 4.5 million people, the possibility of isolationism has much more far-reaching consequences.

Immediately after the elections, the New Zealand Dollar dropped to a 5-month low, as uncertainty in the country’s markets loom. Auckland’s housing market has also seen its first downturn since 2011. [10] In the long-term, the curbs to immigration and renegotiations of trade agreements may also taint New Zealand’s reputation of openness, and could antagonize the country’s relationship with key trading partners. The country’s higher education industry and foreign direct investment flows may also be adversely affected.

Given New Zealand’s current social problems and divisions, the new government should focus on solving the country’s problems related to housing, infrastructure and income disparity. However, the move towards isolationism could very well damage the lifeline of the country’s economic foundation in the international markets. Ultimately, the very measures taken to address New Zealand’s current domestic problems may instead lead to further economic decline.

While the long-term consequences of the New Zealand elections still remain unclear, the elections are undoubtedly a manifestation of the various social tensions and divisions brought about by globalization. It follows the long list of growing populist movements around the world, and marks the continual uncertainty and instability in the international politics of the post-Brexit era. It should serve as a lesson to other neoliberal governments around the world to ensure that growth under globalization is both sustainable and evenly distributed.

Tiger Huang is a junior at the University of Pennsylvania, where he studies International Relations and Finance with a minor in Chinese. He is the Blogger for Oceania Affairs and the Deputy Editor of the SIR Online Journal.

 

Sources

[1] Rick Lyman, “In Czech Election, a New Threat to European Unity,” The New York Times, October 17, 2017

[2] Elias Thornsson, “Iceland's President Asks Leftist Opposition Leader to Form New Government,” Reuters, November 2, 2017

[3] “New Zealand Economic and Financial Outlook, 2014,” The Treasury, April 2, 2014

[4] “Focus on Inequality and Growth, 2014,” Organisation for Economic Co-operation and Development, December, 2014

[5] Patrick Collinson, “New Zealand Tops World House Price Increase” The Guardian, September 6, 2016

[6] Dan Satherly, “NZ's Child Poverty Highlighted in Amnesty Report,” Stuff, February 23, 2016

[7] Elsie Ho, “The Changing Face of Asian Peoples in New Zealand,” New Zealand Population Review, 2015

[8] “New Zealand Census, 2013”
[9] New Zealand Ministry of Foreign Affairs and Trade

[10] Jonathan Underhill, “NZ dollar Drops to 5-month Low as Market Awaits Policy Details of New Government,” The New Zealand Herald, October 20, 2017