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September 2002



Part 6. China

203) China, as the world's most populous nation, is a big player on the world and Asian stage. It is a rival in Asia to the US, to Japan, to some extent Russia, as well as an emerging India. It is also the economic magnet for most of the capitalist world's foreign direct investment, at least into the neo-colonial world. Some commentators point to it as the only future economic superpower which will be able to rival US imperialism on a world stage.

204) The class characterisation of China - whether the remnant of a workers' state remains or an already fully-formed capitalist state has developed - has been the subject of some controversy within the ranks of the CWI. The process of bourgeois restoration is unmistakeable and is considerably advanced in certain parts of China. However, the sheer diversity between different parts of China, the peculiar and complex process through which this colossus has gone, is without precedent and does not lend itself to a simple categorisation. Indeed, to merely put a label - workers' state or capitalist state - onto what are very contradictory and unfinished processes will not help to clarify the stage which China is at or perspectives for the future.

205) Capitalist restoration has gone a long way, especially in the coastal strip of the south and the east. There is no 'planned economy' as existed, for instance, during the heyday of Chinese Stalinism. Moreover, there is no possibility of returning to this kind of economy and society. Its disintegration and with it the fracturing of Chinese society along regional and local lines has been under way for two decades. It was widely expected that entry into the World Trade Organisation (WTO) would ensure that "economic reforms [i.e. the 'market' would become dominant] would speed up... the rule of law would spread and the new creed of economic Darwinism would ensure the extinction of obsolete companies and the prosperity of the profitable". [James Kynge, in the Financial Times, 15 March, 2002]

Effects of WTO entry

206) World capitalism, particularly the US, looked hungrily to an expected untrammelled market that would open up. Clinton's trade representative Charlene Barshefsky, who negotiated the key US-China deal, described the WTO accord as something that "will open the world's largest nation to our goods, farm products and services in a way we have not seen in the modern era". This issue, in the words of James Kynge in the Financial Times before the WTO agreement, "tended to be seen in black and white tones". The reality, however, is somewhat different as the 'reformers' and the advocates of WTO implementation have realised. China is for instance a huge potential market for the mobile phone telecommunications industry, which faces saturated markets in Western Europe. The sale of mobile phones is increasing at a rate of about five million a month and naturally the capitalist telecommunication giants of Europe, Japan and the US expected that under the WTO agreement, they would be allowed to take up to 49 per cent in domestic operators. However, since access to the WTO foreign firms have met with an impenetrable wall of increased restrictions involving longer delays in processing applications and, more importantly, stipulations that the Chinese partner would have to put up 75 per cent of one billion renminbis in capital before permission was granted to establish such firms.

207) Since China opened the country to foreign investment the government has channelled this via joint ventures (JVs) for each different line of business. This was done in order that they could be controlled at local level and also to avoid them being too successful in competition with domestic industries. This is extremely irksome to the multinationals covering more than one industry. They are prevented from moving capital freely between one sector and another. Even wholly owned foreign enterprises came under strict regulations from the Chinese authorities. Now, however, a number of multinationals have struck out on their own - most notably Unilever, Alcatel and Michelin - through the establishment of joint-stock companies. These are a minority, although undoubtedly point towards the future development of foreign capitalism in China, unless events compel an about-turn by the government.

The economy

208) Foreign direct investments have continued to rise by a huge 34 per cent in the year up to January 2002, to a total of $2,966 billion, while contracted foreign investment, an indicator of future trends, soared 48 per cent to $7,187 billion. At the same time, exports, around half of which are generated by foreign invested companies in coastal areas, are up. One of the reasons for this is that cheap Chinese products continue to invade the markets of Japan, the EU and the US. Indeed China, especially along the east and south coast areas, is in the process of becoming the most efficient manufacturing hub in the world. Costs are falling as an abundant supply of labour migrates from rural areas and as the Financial Times comments: "Costs are falling as an abundant supply of labour migrates form rural areas, the supply base is maturing and fierce competition in the domestic market keeps the component prices either steady or falling".

209) The competition provided by China even to the low cost producers, is highlighted by what is happening in textiles and the clothing trade in general. This has been a key lifeline traditionally for many countries in the underdeveloped world. Now they will be slaughtered as quotas on imports are projected to be eliminated under the WTO arrangements by 2004. In 1997 China had about 15 per cent of global exports in apparel but is expected to grab nearly half of the global exports in this field by the middle of this decade. It will not be home based Chinese capital which will benefit most but economies like those of South Korea and Hong Kong, as well as the overseas Chinese capitalists, who scour the world for countries with unused quotas in which they can base their factories. They are preparing to shift resources to the Chinese mainland to take advantage of the new rules.

210) However, away from the booming coastal areas the situation in China is not so rosy. Farmers' incomes in many parts of the country are falling and most manufacturing industries face overproduction, with mounting debts for the government and endemic and rising corruption in the bureaucracy. At the turn of the year, the ministry of labour sent a chilly message to the tens of millions of migrant peasants who had gone home for the holidays: "Don't hurry back to the towns because there are going to be fewer vacancies". An employment agency in Guangzhou, capital of the southern province where China's post-economic reforms began, has placed an advertisement saying: "Thanks, but no migrant workers please".

211) The tasks facing the regime are daunting. An economic growth rate of 7.3 per cent in 2001, down from 8 per cent in 2000 but higher than 1999, is impressive when set against the performance of the Japanese and US economies, not to say the neighbouring Asian countries. However, these growth rates are the minimum in order to ward off even greater upheavals by the swelling numbers of unemployed. There are at least 150 million people seasonally unemployed in the countryside and the government needs to create between six and eight million jobs a year just to meet the demand of new entrants. And yet, according to John Gittings in The Guardian: "Last year only 30 per cent of laid-off workers were re-employed". Entry into the WTO could mean that the first year alone could see the loss of 20 million jobs in the countryside in a situation where the rural boom of the 1980s to mid-1990s has evaporated. Farmers' average incomes rose by just 2 per cent in 2000, while urban incomes rose by 7 per cent in the same year. State owned industries, on the other hand, have been severely hit by foreign competition as well as being "asset stripped by venal cadres".

212) The slowdown of the Japanese and US economies has also affected Chinese exports. So desperate is the fear of any slowdown in China itself, of a period of deflation as in 1997, that the government will once more resort to pump priming, ploughing in state funds in order to maintain the economy's momentum. It could also be forced into a devaluation of the renminbi in answer to the recent depreciation of the yen. This in turn could trigger, as in 1997, competitive devaluations throughout Asia with serious world and financial repercussions.

213) At the same time corruption has reached mountainous proportions. The economist Hu Angfang has estimated that between 1999 and 2001 the cost of corruption amounted to 14.5 per cent of the annual GDP. And according to official figures published in January 2001, the Communist Party punished 175,000 of its own members in the previous year for corruption, an increase of 30 per cent over the year before.

Has capitalism been restored?

214) Despite the process of bourgeois restoration and the entry into the WTO, a China watcher, John Gittings, could still write in The Guardian: "Older Chinese remember enough Marxism to know that economic change must lead to change in the political 'superstructure', but can the new leaders deliver it?" This poses the question, has a fully bourgeois state been constructed, even along the lines of post-Yeltsin Russia? The Financial Times, which as the 'internal bulletin' of finance capital is compelled to pose things in a sharp fashion, can still write about "Reform, but in a communist state", by which they mean a Stalinist state apparatus.

215) We know that the term 'communist' and 'socialist' can be deployed by states and parties who have definitively passed over to the bourgeois and bourgeois society. Moreover, an interesting recent study by researchers from the Chinese Academy of Social Sciences has shown the class shift which has taken place. It states that the "proletariat has been unceremoniously deposed", although Marxists understand that it never was directly the ruling class in Stalinist China. But the prominent sociologist who headed the study also said: "Our country slowly built up a social structure based on workers, peasants and intellectuals but after the economic reforms (of 21 years ago) the class struggle in our country underwent a profound shift."

216) What emerges is a picture of the growth in China of all the same classes which are present in "modern societies throughout the world". Of the ten categories identified "private entrepreneurs ranked third and shop owners sixth. Those who do not own the means of production, including the unemployed, the workers and the agricultural workers, bring up the rear". But as the Financial Times pointedly explains: "What is not mentioned in Mr Lu's research, however, is that it contradicts prevailing ideology. Only in August the People's Daily, the Communist Party's mouthpiece, Jiang Zemin, the president believes all comrades must unswervingly uphold four cardinal principles - one of which is upholding the dictatorship of the proletariat"... but analysts said such contradictions are not only commonplace but intentional. China hopes that by obfuscating its communist ideology, it can shed it without having to renounce it. Such a process may seem unnecessarily complicated, but obfuscation can be useful in neutralising opposition". In the present context - given the relationship of forces worldwide - a return back to a Stalinist form of 'planned economy' is not possible.

217) Can it therefore be concluded that China is now, despite the 'socialist' and 'communist' rhetoric, set on a seamless path towards a successful, dynamic capitalism? Given the complex reality of this vast country and the contradictory processes at work at each level of Chinese society, in the economy and in the state, to simply do so would not accurately describe the reality. There are big and growing elements of capitalism, as explained above, but there are still contradictory phenomena. Of more than 1000 companies listed on domestic bourses, only a handful are non-state owned at the present time. The four major state banks are not only probably insolvent with huge bad loans but still account for 70 per cent of the finance sector. Fifty-five per cent of the urban workforce is officially classified as still working in the 'state sector'.

218) A qualification has to be added here because in 'state enterprises' and in 'co-operatives' a large element of the market already exists. But, as the bourgeois internationally never cease to complain, there are big barriers still existing to the untrammelled development of capitalism, not least in the role of the Chinese state, and its different sections. Undoubtedly, foreign capital and particularly the overseas Chinese billionaires have successfully penetrated part of the state and bent them to their will, above all on a regional level. But, particularly at national level, the old 'Stalinist' bureaucracy remains in control. They are battening down the hatches, fearful that the slightest state benediction for political reforms would open the floodgates which could overwhelm China and unseat them from power. Apocalyptic books such as The Coming Collapse of China map out such a scenario, irrespective of what the Chinese state does.

219) However the regime, despite the urgings of international capital for the establishment of 'the rule of law' and of a clear pro-capitalist political system, is less prepared to sanction political reforms than even in the pre-Tiananmen period. The bourgeois are looking to a new generation, which will soon take power, led by Hu Jintao who is likely to become party General Secretary in place of the present incumbent and Chinese president Jiang Zemin. His record does not indicate that he is a modern 'democrat'. He used "ruthless efficiency" to put down separatist demonstrations in Tibet. On the other hand, arguments are circulating within the ruling elite in favour of "inner party democracy", with direct elections of party leaders.


220) An upsurge in protests by workers, including strikes and demonstrations has taken place. Unlike in the past, rather than meeting with repression, some of their demands have been acceded to. The Chinese regime seems to be guided by a policy of gradual introduction of capitalism, economically but above all politically, in order to avoid the upheavals and disintegration experienced by the USSR at the beginning of the 1990s. However, it could still unravel; growing unemployment could trigger new Tiananmens, which despite the confused consciousness and even strong elements of pro-capitalism which will be demonstrated in such a movement, could pose a threat to the Chinese elite and both domestic and foreign capital. It is not excluded that the process- a further collapse of the state sector, privatisations, a massive influx of capital - could be halted. China could still have a significant 'state capitalist' sector and, in fact, in a serious crisis, this could grow.

221) At the same time, while China is not beset, in terms of scale at least, with the national problems which confronted the USSR and contributed to its rapid disintegration, it nevertheless faces a serious challenge. There is a growing and unresolved problem of Tibet which, compared with the rest of China, is as backward and isolated as it ever was. A thin Tibetan middle class has been seduced by the fruits of modernisation. Living in new, semi-private housing estates on the edges of Lhasa, the capital, they have been drawn closer to China, including sending their children to Chinese colleges. However, 2.6 million Tibetans still live in semi-feudal starvation, with less than four out of ten Tibetan children reaching secondary school and with average incomes in the region only half of those in China itself. Despite the efforts of Beijing to tie Tibet to itself, partly through economic stimuli and also through Chinese immigration into Tibet, the population appears to still intransigently resist assimilation by the giant to the east.

222) In China itself a serious national problem has flared up in the vast Xinjiang region in the north-west. A terrorist campaign with 200 incidents and the deaths of 162 people is the result of a 'holy war' launched by Moslem fundamentalists in an attempt to establish a "religious state" in the region. The Chinese centralist state indignantly denies any claims to a separate nation in this region, claiming that it has been part of China since 60 BC. Beijing claims that the crackdown in the region, called 'East Turkistan', is being directed not against any particular ethnic group or religion but at "criminal activities" of the terrorists. However, it has long concentrated military forces in the border regions inhabited by officially recognised minorities such as the Uighurs in Xinjiang. In the course of allegedly fighting separatism, arbitrary arrests, executions, torture and routine restrictions on freedom of expression have been implemented.

China and the 'War against Terrorism'

223) The problems which the Chinese regime confronted in this region was one of the factors in prompting them to support US imperialism's intervention in Afghanistan. However, the war itself resulted in important shifts in relations between the powers in the region and with US imperialism. The war itself served to highlight how tenuous Chinese power remained when compared to that of the US. The Financial Times commented: "Not only have Chinese experts watched with awe at displays of US firepower, there is also a sense that - diplomatically - Beijing has slipped down the regional pecking order".

224) While initially supporting US military intervention it has now struck China that the outcome has weakened its position with the balance of power shifting in favour of the US. Pakistan prior to the conflict was in Beijing's sphere of influence. However, the Musharraf regime, while still professing 'unbreakable' friendship with China, has swung behind Washington. The Chinese elite is alarmed at what it sees as a further encircling of China by the US and its allies. The latter appears to be permanently ensconced in the region - for a long time in Pakistan and Afghanistan, as well as Central Asia. The US now has an enduring presence on China's western border.

225) The reaction of the Chinese is to seek counterpoints of support elsewhere. Traditionally there has been an enmity - including wars in the past - between China and India. Delhi saw China as the supplier of technology to Pakistan's nuclear weapons. Moreover India is aggrieved that part of the chunk of what was Indian-held Kashmir which was taken in the war 40 years ago is still in the hands of China. Seeking a rapprochement with India during the latter's conflict with Pakistan, China distanced itself from the claim of Islamabad that China would support it in "any eventuality".

226) South Korea also, as commented earlier, is in conflict with US imperialism over how to handle North Korea. It in turn has swung towards Beijing, deepening its economic and diplomatic ties. It is trade above all which is dragging Seoul towards Beijing, with the South Korean bourgeois believing it is particularly favourably situated to exploit the opening of Chinese markets following the latter's entry into the WTO. There has even been a "China fever" in South Korea, with Chinatowns springing up in cities, language schools reporting surging demand for Chinese lessons and tourist destinations targeting the growing Chinese tourist market. The growing anti-US imperialist mood is reflecting itself in a greater pro-China attitude of South Korea's population.

227) These developments have not been 'welcomed', to use diplomatic language, in Washington. All of this adds up, after the first initial common front against al-Qa'ida and the Taliban, to greater tension and competition, particularly in North-East Asia where the interests of China, Russia, Japan and the US intersects. China itself, in response to the challenge which it now faces from its rivals, is seeking to bolster its military prowess by increasing the military budget, boosting the dwindling morale in the 2.5 million People's Liberation Army and seeking to transform it into a more modern fighting force.

A superpower or crisis?

228) At the same time, the notion peddled by some bourgeois economists that China can speedily emerge as a superpower rival and even supplant US imperialism economically is a pipedream. The Chinese economy is still heavily dependent upon the US market, with which it has a huge surplus in trade. It is on the other hand seeking to boost its trade with India, which accounts at the moment for less than one per cent of China's global trade, in order to diversify and build up its position.

229) A period of economic turbulence combined with massive social and political upheavals in China is the perspective facing the regime. Even a period of economic stagnation, which is the likely scenario for the immediate period ahead, would mean huge problems for the Chinese regime. After decades where it has been kept in the dark, first by Chinese Stalinism and now by the present abortion of a regime, the Chinese working class could emerge as a new and powerful force which would enter the world stage. The huge economic development in the coastal strip and elsewhere, while at the same time vitiating the elements of the planned economy which remained, has at least boosted in terms of numbers, if not yet in its cohesion, the Chinese proletariat.

230) The heroic events of Tiananmen have left an impression, despite the mixed consciousness, with elements of pro-capitalism demonstrated there. A repeat on a higher plane is entirely possible. The forces of genuine Trotskyism must be poised, particularly the comrades in the region, to intervene as we did splendidly in the Tiananmen events.


231) Australia is an important country/continent, both in relation to its effect on Asia and the effect of Asia on it. It is also important for the CWI given the role of our organisation in the country. The Australian economy, in tandem with the rest of the more developed capitalist world, has experienced growth between 1997 and today. However, this is based on an intensified exploitation of the working class and not increased investment. There has been a greater exploitation of the working class with a relative fall in living standards in comparison to other countries. In terms of income, the country has fallen from third internationally in 1950 to eighth in 1970 and 26th today.

232) Moreover, Australia is locked out of every real trade alliance and, because of the right-wing Howard government's Anglocentric approach, its position is set to worsen. There has been talk of a US-Australian free trade agreement, but the US-imposed tariffs, particularly on steel and agriculture, seem to have put paid to this. At the same time, the government has to be wary of angering its major trading partners in Asia. Sections of the Australian ruling class look towards Asia as a key region to extend their influence.

233) Notwithstanding the growth rates, manufacturing industry continues to decline. The upturn which has taken place, in common with the US and Britain, is mainly consumer-driven, fuelled by massive personal borrowing taking advantage of the low interest rates. This has led to a housing boom which is beginning to implode. Growth has also been helped by a low Australian dollar boosting exports and encouraging foreign speculation in property.

234) As with the rest of the more developed capitalist world, the boom has been sustained by a huge increase in borrowing and a piling up of debt. The working class, unlike in previous booms, has not gained substantially and this has fuelled the discontent which looked as though it was going to unseat the Howard government in the election in 2001. However, at the last moment Howard played the 'race card'. He used the 'threat' of a boat load of mainly Afghan and Iraqi refugees seeking to enter the country to conjure up the spectre of Australia being engulfed by immigrants. The irony is that this is a country built on waves of immigrants - and in the process the massacre of 90% of the indigenous aboriginal people. Yet many Aboriginal representatives supported the right of the refugees to enter the country.

235) The British arrived on the shores of the continent not as settlers, but as conquerors. The Booker Prize winner, Peter Carey - who wrote the widely acclaimed True History of the Kelly Gang - correctly commented: "A real Australian... is, by definition, anyway an immigrant". Unlike their American cousins a century earlier, the Australian ruling class, fearing their powerful working class, declined to challenge the British colonial power. Instead they were content with being an outpost of British imperialism and, in tandem with the tops of the labour movement, they developed a class collaborationist White Australia policy that kept non-whites out and gave a few extra crumbs to the white working class. This racist policy lasted until the early 1970s, when fleeing South Vietnamese became the first non-European boat people.

236) Historically, Australia has shown two faces to immigrants. On the one hand, it offered a new beginning for those who could not make it in the Old World. On the other hand, some of the longer-established settlers invariably complained about being 'swamped' by the next batch of new arrivals, e.g. the Irish in the 19th century, and Southern Europeans after the Second World War.

237) However, each wave of immigrants, after the initial hostility, contributed enormously to the building of this country. This includes Afghans - who helped to establish the country as its first explorers relied heavily on Afghan dromedaries (camels) and their herders. Howard, talking at length about patriotism, declared a little while before: "When I think of Australia... I think of mateship, I think of the fair go, I think of the resilience and I also think of pulling together". None of this, however, applied to the recent Afghan refugees, who were mainly Hazaris from central Afghanistan fleeing Taliban persecution but who, for political expediency, were scapegoated as possible 'terrorists' by the Howard government and also by other parties, including the cowardly leaders of the Labor Party.

238) The truth is that rather than being swamped by Afghans and other immigrants, the numbers seeking entry are tiny. At present, Australia has around 2,000 detainees and in 1999 the country accepted one refugee for every 1,583 citizens. The UK took one for every 530 Britons and Tanzania one for every 76 Tanzanians. The Howard government, in effect, borrowed the clothes of the now discredited Pauline Hanson, the leader of the One Nation party. At its peak in 1998, this party received the backing of one million Australians. It is now in the process of disintegration due to the simple fact that large parts of Hanson's programme were adopted by Howard prior to the November 2001 federal elections.

239) Once having used the refugee issue, Howard then believed that it would simply go away. Many of the Afghan refugees were dumped in isolated, privately-owned detention centres in places like Woomera, a remote area of South Australia. However, in part due to the tremendous campaign which our Australian organisation participated in, this issue has not gone away. The refugees have conducted a very bitter battle against their detention, with the support of protesters from our organisation and others. Such is their desperation that they stitched their lips together, and those of their children as well, as part of a hunger strike, and downed cocktails of shampoo and sleeping pills, with some attempting to hang themselves from bed sheets.

240) The protest action at these inhuman conditions is just a portent of what is likely to happen on the broader social and economic issues. There is a growing anger in the workplace over workers' entitlements, long hours, low pay and worsening conditions. Strikes are still at a low level but, as with other countries, there is a rise in part-time and casual work, etc. At the same time, the trade unions are still popular in all opinion polls.

241) A new mood, however, is developing within the trade unions, with opposition to the class collaborationist policies pursued by the union leaders in the 'Accord' years. At the same time, a new younger, more militant leadership, outside of the control of the different factions of the Australian Labor Party (ALP), has come forward.

242) We are well poised to intervene within the unions on the general issue of a fighting programme but, in particular, on the question of moves by some unions to disaffiliate from the ALP. In seeking to emulate the Blair leadership in Britain, the right-wing Australian trade union leaders are attempting to present themselves as the most reliable party for the bourgeoisie by systematically cutting down what union influence still exists within the party. In the reaction to this there have been threats by unions in Queensland to disaffiliate from Labor. The process has gone much further in Victoria. As we have reported, a number of unions have inched in the direction of talking about the need for a new party. This has not yet cohered into a definite formation but, under the hammer blows of events, this could develop and we are well poised to intervene. If anything, the idea of a mass workers' party assumes more importance in Australia at the present time because of these developments within the trade unions than elsewhere in most of the advanced industrial countries.

243) Howard's federal government is the most right wing on social issues for decades. This, in turn, is radicalising significant sections of the population, particularly young people. Our election success, the growth of the Greens and the mood for a new mass party within some of the unions, all indicate the changes which are coming, which our Australian organisation can grow from.

New Zealand

244) New Zealand, still suffering the consequences of the mad monetarist/Thatcherite policies of governments in the past, will also face convulsions given its parlous economic situation. New Zealand is supposed to be a 'textbook' example of the effectiveness of Thatcherite policies. It is exactly the opposite. The consequence of these policies has been that what was once one of the world's most comprehensive welfare states has been dismantled with catastrophic consequences for the working class and society as a whole. The standard of living has fallen from 1.25 times the average standard of living in the high-income countries in 1965 to 0.6% last year. As the Financial Times commented: "New Zealand is the Argentina of the second-half of the 20th century".

245) In surveys of 'economic freedom' (read Thatcherite policies) New Zealand ranks with Hong Kong and Singapore, and even ahead of Britain and the US. And yet the economic data show that since the Thatcherite 'experiment' began, growth has been much slower than in the rest of the developed world. Productivity and living standards have barely risen, while almost all other rich countries have enjoyed sustained expansion.

246) New Zealand did suffer in the past as a result of the break in its trade in commodities - particularly lamb, wool and milk -to the British market. The rise of agricultural protection and the UK's accession to the European Union damaged it enormously. This, in turn, led to the manic switch towards monetarist Thatcherite policies. The consequence of this was shown in 1998 when the privatised electricity industry blacked out much of central Auckland for five weeks.

247) The same thing happened later in California, with the privatised electricity industry unable to prevent blackouts. Little wonder that one Financial Times commentator could later write: "...New Zealand - an isolated, easy going country with impressive social coherence - was the wrong place to try out economic libertarianism. Economists must be grateful for such experiments but it is better not to live in the country where they take place."

248) One of the consequences of the application of neo-liberal policies in New Zealand, which was supported by right-wing Labour, was the formation of the Alliance Party. This held out the promise of a new left-wing alternative to Labour developing in New Zealand, which in turn could provide an example for the working classes of other countries to follow. But if new parties or formations fail to adopt a distinct left programme and perspective they inevitably stall and can eventually disintegrate. Why should the working class place any greater hopes in 'new' parties which then move to the 'centre' and become a copy of the ex-social democratic parties which sometimes they have just left? The Alliance, which did not develop a rounded out alternative programme, fell into this trap. It could have become a reference point for all those disillusioned with the rightward moving New Zealand Labour Party, but that opportunity appears to have been lost.

249) In fact, the Alliance is now in complete disarray, with a split between a majority of its parliamentary wing and the rest of the party. There has been a de facto expulsion of the majority of the Alliance's MPs, although a papering over of the cracks has taken place. The reason for this is that this is the only way that the Alliance would continue to be recognised as a parliamentary party. In the vacuum which has been created the Greens have gained support, as they have done in Australia.

250) The Labour party, led by Helen Clark, seems set to continue in office after the next election, possibly with the Greens as a junior coalition partner. This is largely due to the slight swing to the 'left' of the Clark government - she has rejected the more outlandish aspects of the neo-liberal policies pursued by right-wing Labour in the past - and the slight economic upturn of the New Zealand economy, partly due to the low price of the New Zealand dollar, which has helped export growth. However, in the event of a serious economic crisis the Clark government, or even a coalition with the Greens, will be blown apart. Once the Greens are tested in office, as has been the experience in Europe, they could rapidly decline. Moreover, there is still an opposition mood within the unions, which can lead at a certain stage to the re-emergence of a new Alliance-type movement, but this time on firmer ground, ideologically and organisationally.

251) At the same time, the outline of a far-right movement in New Zealand is foreshadowed by the anti-immigrant stance of Winston Peters, paradoxically a Maori, who seems to have some support from sections of the older white population. There are parallels here with the Netherlands. Both Peters and the late Pim Fortuyn are leaders who come from a section of the population not normally associated with far-right parties. The polarisation of left and right, which is in its early stages in New Zealand, is bound to develop on the basis of the economic and social scenario which looms. We have to intervene, probably through our Australian section, to build an important base for the CWI in New Zealand.