Post by Lux on Aug 11, 2008 15:11:30 GMT 12
World Socialist Web Site www.wsws.org
WSWS : News & Analysis : Australia & South Pacific : New Zealand
The 2008 New Zealand “Rich List”: the super-wealthy profit from recession
By Tom Peters and Rick Wilson
5 August 2008
The National Business Review's (NBR) 2008 Rich List, released July 25, reveals
that New Zealand's super-rich have been thoroughly insulated from the effects
of the current recession.
While the vast majority of people suffer from cripplingly high petrol and food
prices and thousands lose their life savings in finance company collapses, a
handful continue to amass vast wealth. The 178 individuals and families on
the Rich List control an estimated $NZ44.4 billion ($US32.6 billion)—a New
Zealand $5.8 billion or 15 percent increase compared with last year, and
$9.3 billion or 26.6 percent more than in 2006. This staggering increase
comes despite the fact that, since 2006, the Rich List has shrunk by 44
entrants.
As the super-rich have expanded their fortunes the NBR has continually raised
the bar for inclusion on its list. The first Rich List, published in 1986,
had an entry level of $5 million. This was revised to $16 million the
following year, $20 million in 1988 and $25 million in 2004. Last year the
prerequisite doubled to $50 million, where it continues to stand.
This year’s list includes a record eight billionaires, headed by New
Zealand’s wealthiest man Graeme Hart, whose fortune has more than doubled
to $6 billion from $2.75 billion last year. The NBR boasts that Hart now
"lies just one spot below the world's top 200 Forbes list of the world's
billionaires. This is higher than such household names as Donald Trump, Sir
Richard Branson and Steven Spielberg."
Hart’s "big break" dates back to 1990, when the free market reforms and
privatisation of state assets implemented by Prime Minister David Lange's
Labour government enabled him to buy the Government Printing Office at the
bargain price of $23 million (it had been valued at $70 million). Since
then Hart's Rank Group has proceeded to buy up numerous companies—including,
recently, timber producer Carter Holt Harvey and food manufacturer Burns
Philp—cutting costs and staff, and then selling them off at a profit.
Following its acquisition of Swiss packaging group SIG last year, the NBR
reports that Rank is now the world’s second largest drink carton packaging
operation, behind Sweden’s Tetra Laval.
Another high ranking entrant on the NBR’s list is the $2.6 billion Todd family,
owners of Todd Energy, which has increased its wealth by hundreds of millions
of dollars thanks to escalating demand and record high prices for oil.
Also on the list are Sir Michael Fay and David Richwhite, each worth about
$700 million, owners of the Geneva-based investment bank Fay Richwhite.
Under Lange's Labour government of 1984 to 1990, Fay and Richwhite acted as
advisers for the privatisation of New Zealand Rail. Like Hart, Fay and
Richwhite benefited immensely from the market reforms of Lange and Treasurer
Roger Douglas, buying a third of the privatised company, which had been renamed
Tranz Rail. When Tranz Rail ran into financial difficulty in 2002, the pair
sold off $63 million worth of shares, prompting allegations of insider trading.
Last year Fay and Richwhite's Midavia Rail Investments paid $20 million to
the Securities Commission in an out-of-court settlement over the scandal.
Another pair on the list whose names are fast becoming synonymous with murky
dealings are Eric Watson and Mark Hotchin, owners of New Zealand's third-
largest finance company, Hanover Group. Together, they control an estimated
$650 million. On July 23, just two days before the NBR released its Rich List,
Hanover froze over half a billion dollars of its 16,500 investors' funds and
called for a moratorium on trading. It is now the 26th New Zealand finance
company to face collapse since the onset of the recession. Hotchin told Radio
New Zealand that "at the very least half [of Hanover's borrowers]" were
affected by the collapse of the property market and were therefore likely to
have difficulty repaying their loans. On July 28, economist Brian Gaynor
told Newstalk ZB that Hotchin and Watson had lent themselves "about $81
million" from Hanover for their own property developments, in addition to
having collected tens of millions of dollars in dividends from their shares.
Gaynor said that there was no way to know whether Hotchin and Watson had met
the June 30 due date for repaying their loan.
On July 24 the Commerce Commission announced that it would investigate
whether Hanover had given investors misleading information. Last year the
Advertising Standards Authority upheld a complaint about Hanover's television
advertisements, which claimed that the company had "the size and strength
to withstand any conditions." Investors, many of whom are saving for their
retirement, are angry about Hanover's multi-millionaire owners’ apparent
indifference to their situation. One elderly investor told Newstalk ZB that
on Monday July 21, just two days before it announced that it would freeze
investors' funds, Hanover had convinced her to reinvest all her savings.
Another investor told the New Zealand Herald: "I am shocked at the news of
repayments being frozen, especially given that senior managers of Hanover
have recently been advising me that the company was coping well with the
difficult trading conditions."
Perhaps the most prominent new addition to the NBR Rich List, however, is the
main opposition National Party leader John Key, valued at $50 million. Key
began his career as a currency trader for Elders Finance in 1985, shortly
after the Lange-Douglas government floated the New Zealand dollar. In 1995,
Key became managing director of Global Foreign Exchange Trading in London
for the multinational merchant bank Merrill Lynch. The Herald writes: "During
his time at Merrill Lynch, his base salary would have been more than
$US250,000 ($NZ336,138), topped up by a bonus of cash, shares and options
on shares."
Key is part of a layer that has enriched itself by thoroughly parasitic,
non-productive means. The Herald notes that Merrill Lynch share prices sky-
rocketed from $52 at the end of 2001 to $93 in 2006, "when Key would still
have owned a considerable portion.” This was due, in large part, to the
US sub-prime mortgage boom, in which Merrill heavily invested. In October
2007, when the bubble burst, the bank reported a third-quarter loss of
$US2.4 billion and wrote off $8.4 billion in bad debts linked to the
sub-prime mortgage market.
With recent polls putting the National Party at least 20 percentage points
ahead of the ruling Labour party, Key looks likely to become New Zealand's
next prime minister. However, this does not indicate any confidence among
ordinary people in the National party's program, widely recognized as being
substantially the same as that of the current Labour government. The polls
simply show a widespread disgust and disillusionment with Prime Minister
Helen Clark and her government.
Deepening social inequality
Regardless of the outcome of the election, due later this year, the current
recession has revealed that the Labour government has done absolutely
nothing during its nine years in power to stem, let alone reverse, the
decline in ordinary people's living standards. Instead, it has established
the foundations for a relentless deepening of social inequality.
Over the past decade, the average net worth of New Zealand households nearly
doubled from $189,765 to $369,249. This increase was due to a boom in the
housing market. Housing comprises eighty percent of the combined assets of
households and the median house sale price rose from $165,000 to $340,000
over the same period. Sixty percent of the new jobs created in the last five
years, especially in real estate, construction and retail, rested on these
rising house prices. The period of the Labour government also coincided with
significant increases in household debt. Between 1999 and 2007, average
household indebtedness rose from 100 percent of disposable income to 160
percent.
The housing bubble has now burst. In April, analysts predicted that the
weakening of the property market could lead to a loss of 38,000 jobs. The
internet business TradeMe recently reported a 50 percent increase in
applications for each job advertised in the last year and a decline in pay
rates for unskilled workers. Auckland-based Charman Consulting agency
claimed a quadrupling in the number of job-seekers contacting it during
the first three weeks of July.
A renewed round of job cuts has been announced in the last two weeks. Meat
co-operative Silver Fern Farms (SFF) announced the closure of its meat
processing plant at Belfast in the South Island—the third major closure
in the industry this year. SFF has now cut 500 jobs in the South Island and
another 500 in the North Island. Last week, the country's dominant
telecommunications provider, Telecom, revealed that following a recent
period of trials, it was now preparing to shift all its call centre work
to Manila in the Philippines, with a loss of up to 1,500 jobs.
These developments come on the top of a long-term deterioration in the
social and economic position of ordinary people. The average net worth of
a New Zealand household declined by $2500 in the December 2007 quarter
and $5900 in the March 2008 quarter. In the same six months, average debt
increased by 2.2 percent. More than one in five New Zealanders with a home
loan, spend over 30-45 percent of their income on mortgage payments, while
over one in eight spend this amount just on mortgage interest. The value
of the houses these mortgages rest upon is falling—the median sale price
dropped by $5000 from May to June this year. Despite the fact that the
Rich Listers increased their fortunes by $2.9 billion in the six months to
March, New Zealand households’ combined loss in the half-year was over
$13 billion.
The same day the NBR released its Rich List, a report by the Families
Commission and the Labour Department gave another glimpse into the
deteriorating conditions of working people. According to an analysis of
2006 census data, 150 years after immigrant carpenter Samuel Parnell
insisted on working an 8-hour day, nearly one in three full-time workers
are putting in more than 50 hours a week. Two years since these figures
were compiled, it is clear that the vast majority are workers on low incomes
struggling to fight off mounting economic insecurity.
Whichever party or combination of parties assumes office later this year,
a narrow, parasitic elite will continue to amass unprecedented private
wealth, while working people will continue to face unemployment, home
foreclosures, economic insecurity, declining wages and escalating prices
for food, petrol and other basic necessities.
This raises the need for working people, students and youth throughout
New Zealand to break with the established parties and begin to participate
in the building of a mass political movement of the working class that
is completely independent of the old, thoroughly rotten organizations—
the unions and Labour—and that is based on a genuine socialist and
internationalist alternative to the profit system. This is the task to
which the WSWS is committed—in New Zealand and around the world.
wsws.org/articles/2008/aug2008/newz-a05_prn.shtml
WSWS : News & Analysis : Australia & South Pacific : New Zealand
The 2008 New Zealand “Rich List”: the super-wealthy profit from recession
By Tom Peters and Rick Wilson
5 August 2008
The National Business Review's (NBR) 2008 Rich List, released July 25, reveals
that New Zealand's super-rich have been thoroughly insulated from the effects
of the current recession.
While the vast majority of people suffer from cripplingly high petrol and food
prices and thousands lose their life savings in finance company collapses, a
handful continue to amass vast wealth. The 178 individuals and families on
the Rich List control an estimated $NZ44.4 billion ($US32.6 billion)—a New
Zealand $5.8 billion or 15 percent increase compared with last year, and
$9.3 billion or 26.6 percent more than in 2006. This staggering increase
comes despite the fact that, since 2006, the Rich List has shrunk by 44
entrants.
As the super-rich have expanded their fortunes the NBR has continually raised
the bar for inclusion on its list. The first Rich List, published in 1986,
had an entry level of $5 million. This was revised to $16 million the
following year, $20 million in 1988 and $25 million in 2004. Last year the
prerequisite doubled to $50 million, where it continues to stand.
This year’s list includes a record eight billionaires, headed by New
Zealand’s wealthiest man Graeme Hart, whose fortune has more than doubled
to $6 billion from $2.75 billion last year. The NBR boasts that Hart now
"lies just one spot below the world's top 200 Forbes list of the world's
billionaires. This is higher than such household names as Donald Trump, Sir
Richard Branson and Steven Spielberg."
Hart’s "big break" dates back to 1990, when the free market reforms and
privatisation of state assets implemented by Prime Minister David Lange's
Labour government enabled him to buy the Government Printing Office at the
bargain price of $23 million (it had been valued at $70 million). Since
then Hart's Rank Group has proceeded to buy up numerous companies—including,
recently, timber producer Carter Holt Harvey and food manufacturer Burns
Philp—cutting costs and staff, and then selling them off at a profit.
Following its acquisition of Swiss packaging group SIG last year, the NBR
reports that Rank is now the world’s second largest drink carton packaging
operation, behind Sweden’s Tetra Laval.
Another high ranking entrant on the NBR’s list is the $2.6 billion Todd family,
owners of Todd Energy, which has increased its wealth by hundreds of millions
of dollars thanks to escalating demand and record high prices for oil.
Also on the list are Sir Michael Fay and David Richwhite, each worth about
$700 million, owners of the Geneva-based investment bank Fay Richwhite.
Under Lange's Labour government of 1984 to 1990, Fay and Richwhite acted as
advisers for the privatisation of New Zealand Rail. Like Hart, Fay and
Richwhite benefited immensely from the market reforms of Lange and Treasurer
Roger Douglas, buying a third of the privatised company, which had been renamed
Tranz Rail. When Tranz Rail ran into financial difficulty in 2002, the pair
sold off $63 million worth of shares, prompting allegations of insider trading.
Last year Fay and Richwhite's Midavia Rail Investments paid $20 million to
the Securities Commission in an out-of-court settlement over the scandal.
Another pair on the list whose names are fast becoming synonymous with murky
dealings are Eric Watson and Mark Hotchin, owners of New Zealand's third-
largest finance company, Hanover Group. Together, they control an estimated
$650 million. On July 23, just two days before the NBR released its Rich List,
Hanover froze over half a billion dollars of its 16,500 investors' funds and
called for a moratorium on trading. It is now the 26th New Zealand finance
company to face collapse since the onset of the recession. Hotchin told Radio
New Zealand that "at the very least half [of Hanover's borrowers]" were
affected by the collapse of the property market and were therefore likely to
have difficulty repaying their loans. On July 28, economist Brian Gaynor
told Newstalk ZB that Hotchin and Watson had lent themselves "about $81
million" from Hanover for their own property developments, in addition to
having collected tens of millions of dollars in dividends from their shares.
Gaynor said that there was no way to know whether Hotchin and Watson had met
the June 30 due date for repaying their loan.
On July 24 the Commerce Commission announced that it would investigate
whether Hanover had given investors misleading information. Last year the
Advertising Standards Authority upheld a complaint about Hanover's television
advertisements, which claimed that the company had "the size and strength
to withstand any conditions." Investors, many of whom are saving for their
retirement, are angry about Hanover's multi-millionaire owners’ apparent
indifference to their situation. One elderly investor told Newstalk ZB that
on Monday July 21, just two days before it announced that it would freeze
investors' funds, Hanover had convinced her to reinvest all her savings.
Another investor told the New Zealand Herald: "I am shocked at the news of
repayments being frozen, especially given that senior managers of Hanover
have recently been advising me that the company was coping well with the
difficult trading conditions."
Perhaps the most prominent new addition to the NBR Rich List, however, is the
main opposition National Party leader John Key, valued at $50 million. Key
began his career as a currency trader for Elders Finance in 1985, shortly
after the Lange-Douglas government floated the New Zealand dollar. In 1995,
Key became managing director of Global Foreign Exchange Trading in London
for the multinational merchant bank Merrill Lynch. The Herald writes: "During
his time at Merrill Lynch, his base salary would have been more than
$US250,000 ($NZ336,138), topped up by a bonus of cash, shares and options
on shares."
Key is part of a layer that has enriched itself by thoroughly parasitic,
non-productive means. The Herald notes that Merrill Lynch share prices sky-
rocketed from $52 at the end of 2001 to $93 in 2006, "when Key would still
have owned a considerable portion.” This was due, in large part, to the
US sub-prime mortgage boom, in which Merrill heavily invested. In October
2007, when the bubble burst, the bank reported a third-quarter loss of
$US2.4 billion and wrote off $8.4 billion in bad debts linked to the
sub-prime mortgage market.
With recent polls putting the National Party at least 20 percentage points
ahead of the ruling Labour party, Key looks likely to become New Zealand's
next prime minister. However, this does not indicate any confidence among
ordinary people in the National party's program, widely recognized as being
substantially the same as that of the current Labour government. The polls
simply show a widespread disgust and disillusionment with Prime Minister
Helen Clark and her government.
Deepening social inequality
Regardless of the outcome of the election, due later this year, the current
recession has revealed that the Labour government has done absolutely
nothing during its nine years in power to stem, let alone reverse, the
decline in ordinary people's living standards. Instead, it has established
the foundations for a relentless deepening of social inequality.
Over the past decade, the average net worth of New Zealand households nearly
doubled from $189,765 to $369,249. This increase was due to a boom in the
housing market. Housing comprises eighty percent of the combined assets of
households and the median house sale price rose from $165,000 to $340,000
over the same period. Sixty percent of the new jobs created in the last five
years, especially in real estate, construction and retail, rested on these
rising house prices. The period of the Labour government also coincided with
significant increases in household debt. Between 1999 and 2007, average
household indebtedness rose from 100 percent of disposable income to 160
percent.
The housing bubble has now burst. In April, analysts predicted that the
weakening of the property market could lead to a loss of 38,000 jobs. The
internet business TradeMe recently reported a 50 percent increase in
applications for each job advertised in the last year and a decline in pay
rates for unskilled workers. Auckland-based Charman Consulting agency
claimed a quadrupling in the number of job-seekers contacting it during
the first three weeks of July.
A renewed round of job cuts has been announced in the last two weeks. Meat
co-operative Silver Fern Farms (SFF) announced the closure of its meat
processing plant at Belfast in the South Island—the third major closure
in the industry this year. SFF has now cut 500 jobs in the South Island and
another 500 in the North Island. Last week, the country's dominant
telecommunications provider, Telecom, revealed that following a recent
period of trials, it was now preparing to shift all its call centre work
to Manila in the Philippines, with a loss of up to 1,500 jobs.
These developments come on the top of a long-term deterioration in the
social and economic position of ordinary people. The average net worth of
a New Zealand household declined by $2500 in the December 2007 quarter
and $5900 in the March 2008 quarter. In the same six months, average debt
increased by 2.2 percent. More than one in five New Zealanders with a home
loan, spend over 30-45 percent of their income on mortgage payments, while
over one in eight spend this amount just on mortgage interest. The value
of the houses these mortgages rest upon is falling—the median sale price
dropped by $5000 from May to June this year. Despite the fact that the
Rich Listers increased their fortunes by $2.9 billion in the six months to
March, New Zealand households’ combined loss in the half-year was over
$13 billion.
The same day the NBR released its Rich List, a report by the Families
Commission and the Labour Department gave another glimpse into the
deteriorating conditions of working people. According to an analysis of
2006 census data, 150 years after immigrant carpenter Samuel Parnell
insisted on working an 8-hour day, nearly one in three full-time workers
are putting in more than 50 hours a week. Two years since these figures
were compiled, it is clear that the vast majority are workers on low incomes
struggling to fight off mounting economic insecurity.
Whichever party or combination of parties assumes office later this year,
a narrow, parasitic elite will continue to amass unprecedented private
wealth, while working people will continue to face unemployment, home
foreclosures, economic insecurity, declining wages and escalating prices
for food, petrol and other basic necessities.
This raises the need for working people, students and youth throughout
New Zealand to break with the established parties and begin to participate
in the building of a mass political movement of the working class that
is completely independent of the old, thoroughly rotten organizations—
the unions and Labour—and that is based on a genuine socialist and
internationalist alternative to the profit system. This is the task to
which the WSWS is committed—in New Zealand and around the world.
wsws.org/articles/2008/aug2008/newz-a05_prn.shtml
then I'd be the happiest person for 2 mins