Copyright is owned by the Author of the thesis.  Permission is given for 
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New Zealand's Energy Policy 

from the World-System Perspective 

A thesis presented in partial fulfilment of the requirements 

for the degree of Master of Philosophy 

in Development Studies 

at Massey University 

Held at NZP Stack 

Jutha Debahasatin 

January 1994 



Abstract 

The World-System Theory of Immanuel Wallerstein is a grand-scale 

theory that is useful as a framework to understand how New Zealand's path of 

~pment has been ~fected by the country's energy policy. The theory is 

appropriate in application to energy issues because its macro-level of analysis puts 

emphasis on both exogenous and endogenous factors. Its special emphasis on historical 

background and context also adds to an understanding of the New Zealand position. 

The World-System perspective offers three major concepts directly applicable to the 

case of New Zealand energy policy, namely, the interplay between politics and 

economics with a particular interest in the role of multinational corporations (MNCs) 

and the state, the notion of semiperiphery, and the cyclical nature of the world 

economy. 

During the period of the 1970s economic downturn marked by two oil 

crises, New Zealand as well as most other countries-and the MNCs suffered a severe 

setback. However, while most core states, as well as some successful non-core states 

and the oil majors, could react appropriately to the crises and retain their potential for 

growth, the semiperipheral New Zealand could not. The country possessed few options 

because of her intermediate level of industrialisation and less competent state apparatus 

compared to the MNCs involved. Lacking the intention to promote local industrial 

capitalists, the New Zealand state chose wrong strategies, first Think Big and then 

disinve tin0at, which together have undermined the bargaining position of local 

entrepreneurs, over-committed the national hydrocarbon resource and disproportionately 

promoted the interest of the foreign oil corporations. The overall outcome of the 

energy policy is therefore detrimental to the country's development. 



11 

Preface 

This thesis evaluates the context and the outcome of New Zealand's 

energy policy during 1970s - 1990s. Immanuel Wallerstein's World-System theory is 

used as the theoretical framework for analysis. The thesis content is therefore divided 

into two major sections: theoretical framework and New Zealand's energy policy. 

Chapter one is the introductory part. Chapter two and three deal with 

theoretical matters. Chapter two elaborates the overview of the theory and chapter 

three discusses relevant theoretical aspects. Chapter four will tum the attention of the 

readers to economic and political settings, both at the global and internal level, during 

the policy shifts. Chapter six will examine the policy decisions and chapter five will 

evaluate them. Finally, chapter seven, the conclusion, will synthesize both theoretical 

and New Zealand's policy sections. 



lll 

Acknowledgement 

The completion of this thesis has been made possible by the wise 

guidance of my supervisor, Dr.P.L. Read. I feel indebted to his thoughtful advice and 

deeply appreciate his efforts in regard to his supervisory task, especially during the 

vacation period that should have been his free time. I also have appreciated advice 

and moral support from Dr.Croz Walsh accorded to me since the very first day that I 

became a student in the development studies deparunent, until recently when he left for 

a new position in Fiji. I would like also to thank Brian Ponter for his kind counsel that 

helped me formulate the skeleton of the thesis and for his recommendation over 

procedural aspects regarding the completion of my thesis. 

My special thanks go also to Ms. Molly Melhuish in Wellington. She 

kindly spared her precious time to enlighten me with her extensive knowledge in the 

field of energy. Also in Wellington, I appreciated the helpful assistance of Ms. 

Christine Jamieson, Deputy Librarian, Ministry of Commerce, and the library staff. 

I am indebted to the Ministry of Foreign Affairs of Thailand which was 

kind enough to let me pursue my study for more than two years. I feel much obliged 

to colleagues who had to work harder to enable my absence. I would also like to 

express my appreciation to the Ministry of Foreign Affairs and Trade of New Zealand 

who sponsored my study at Massey University. 

Finally, I would like to express my sincere thanks to friends in the Thai 

Student Association whose confidence and support in the time that they were most 

needed, helped alleviate the pressures that would have been otherwise unbearable. 

Special appreciation to Ms. Pomtip Ngamkasem, without whom this thesis would not 

have been completed in time. 



page 

Abstract 

Preface 

Acknowledgements 

List of Tables and Figures 

TABLE OF CONTENT 

Chapter I. Introduction 

1 

ii 

iii 

V 

1 

Chapter II. World-System Theory of Immanuel Wallerstein 12 

Chapter ill. Semiperipheral States and Multinational Corporations 

in Cyclical Economic Trends 32 

Chapter IV. International Political Economic Climate and Its 

Impacts on New Zealand 65 

Chapter V. Energy Policy, or Lack of It 99 

Chapter VI. New Zealand Economic Performance as an Outcome 

of the Country's Energy Policy 

Chapter VII. Conclusion 

Bibliography 

126 

159 

168 

IV 



LIST OF TABLES AND FIGURES 

Tables page 

Table 3.1 Crude Classification of the International System Circa 1970 50 

Table 3.2 Net Migration Gains and Losses in New Zealand of Polynesian-Born 

People, by Migrant Category, 1971-1986 54 

Table 3.3 Crude Classification of the International System Circa 1990 56 

Table 4.1 Leading Oil Companies (The Chase Manhattan Group Average 

Return on Invested Capital 

Table 4.2 Annual Average FOB Export Price of 34 API Arabian 

Light Crude Oil 

Table 4.3 World Energy Consumption 

Table 4.4 NZ' s Major Import Commodities 

Table 4.5 Trends in Consumption of Primary Energy 

Table 4.6 External Government Account Balances 

Table 6.1 Estimated Balance of Payments Flows Associated 

with Large Projects 

Figures 

Figures 4.1 Trends in Consumer Energy Use 

Figures 6.1 Total Production of Energy Supply/GDP Ratios 

of OECD Countires 

Figures 6.2 Price of Import Oil 

Figures 6.3 Crude Oil Consumption 

Figures 6.4 Retail Prices of Fuel Oils 

75 

78 

80 

84 

87 

93 

137 

88 

128 

144 

145 

145 

V 



1 

I. Introduction 

While problems of inequality and injustice still prevail, applying 

grand scale theory to understand the root causes and to guide the way towards the 

tackling of the problems is less appealing in the eyes of contemporary development 

scholars. Recently, the development studies sphere has witnessed the withering away 

of generic functionalism which gave way to inductive research on a limited scope. 

Also less emphasised as a prime strategy for improvement is focusing problems at the 

state level. 

Yet denying grand scale theory has some shortcomings. Firstly, small 

empirical research work may, if not usually, confirms or relates to a theory and 

'adds plausibility to a metatheory that the researcher has never thought about' . 1 

Fumbling through random phenomena without conscious use of systematic deduction 

guided by theoretical framework thus may only be a tortuous route leading to a 

conclusion not very much different from what has already been suggested by a 

theorist. 

Secondly, states do share some common characteristics and sometimes 

repeat others' mistakes; therefore, conceptualisation of changes and continuity on the 

international scale and generalisation of social issues contributes more towards 

comparative studies than examining the uniqueness of a society. Here, grand scale 

1 See Leslie Sklair, "Transcending the Impasse: Metatheory, Theory and Empirical 
research in the Sociology of Development and Underdevelopment" in World 
Development 16, 6(1988) p.698. 



2 

theory can act as a storehouse of past wisdom, restored m the form of logical 

networks, some of which may prove valuable for many other societies. 

And, thirdly, human global society is so complex that one has to either 

comprehend the entire social mechanism in some forms of reductionism or compre-

hend only a tiny part of it and neglect all the rest. Denial of grand scale theory falls 

in the latter category which, while escapes the trap of overreduction and superficiality, 

may face problems when the case-study involves powerful extragenous causal factors. 

For these reasons, developmental problems that grand scale theories like Parsonian 

modernisation or dependency have failed to eliminate still outpoint the issue-tackling 

developmentalists. 

Seeing the virtue of grand scale theory in apprehending complexities of 

human society, I still disbelieve the end of its era. As Daniel Garst comments, 

The reception of novel ideas in social and political theory has 
usually been marked by two phrases: at first there is an initial burst of 
enthusiasm in which the idea in question is seen as providing answer to 
long-standing anomalies and opening up the way for new interesting path 
of research; this acclaim, however, that is then normally followed by a 
period of disillusionment in which the idea in question comes to be seen 
as a theoretical dead-end with the re-search being taken within its 
framework viewed as counterproductive1 

it is just that such kind of theory is trapped in the cycle of hope and disillusionment. 

In social sciences it is not the case that a theory, or an operational research without a 

guidance of a theory, is totally relevant or irrelevant to a contemporary issue, but the 

1 Daniel Garst, "Wallerstein and His Critics", Theory and Society 14, 4 (July, 
1985) p. 469. 



3 

point is to employ a right tool to a right job. In addressing complicate problems that 

require interdisciplinary apparatus, it is still possible that grand scale theory may render 

a very useful perspective. National development, for example, involves historical 

limitations, economic impediments and political constraints, domestically and 

internationally. With the help of a grand scale theory, the path of national development 

can be logically comprehended and the contribution of the government policy towards 

the progress can be likewise assessed, both within an international context. 

Apart from getting benefit from theory, the theory itself can also be 

benefitted. Applying a grand scale theory framework to contemporary issues also 

means another empirical test for the idea. Since every theoretical proposition has 

room for improvements, trial over time will contribute to its refinement. It will be a 

pity for a theory if it attracts no more critics or has to be kept in a sacred place, for 

such situations signal immobilism. 

For the above-mentioned reasons, I decide to employ a grand scale 

theory, namely the World-System proposed by Immanuel Wallerstein, to analyze a case 

in national development, that is New Z.ealand's energy policy, with primary emphases 

on oil and gas sectors. The theory and the case constitute an interesting combination. 

The World-System Theory underlines the importance of a global perspective in 

understanding the relative level of development of countries. It emphasises the linkage 

between the economic and political factors. External influences and states' reactions 

are issues of prime significance according to the perspective. Energy issue can be best 

investigated under this perspective because of its transnational characteristics and the 

involvements of the state and the multinationals. Moreover, the theory's unique 



4 

positioning of New 2.ealand in an intermediate level of development (semiperiphery) 

fits in the country's pattern of energy investment and of import-export as well as the 

comparative GNP data. 1 

The World-System Theory nowadays may not be at the heart of the 

debate. Since Wallerstein "discovered" the World-System in 1974,2 his basic 

propositions, appeared in the book and his following publications, have been endorsed, 

criticized and scrutinized incessantly. Those with empirical doubts question either his 

accuracy or his interpretation of given facts. The comments are usually well-based and 

Wallerstein undeniably continues to produce the lapse but, due to the limit scope of 

each remark, the critics never proved to be serious detrimental to Wallerstein's thesis. 

Wallerstein regards them as constructive critics because they force him to make a more 

precise analysis.3 

As for the theoretical critics, W allerstein either shows his indifference 

or sometime contempt. According to him, 

[a]ddressing them deductively would be pointless however 
as it would not lead to a rational debate, but merely to a clash of opposing 

1 This point is to be discussed in Chapter Three. 

2 Ragin and Chirot discuss "the discovery" of a World System which they regard 
as a process first towards methodological conclusion and then finally towards the 
completion of Wallerstein' notion that 'modern social change could be studied only in 
the context of a historically conceived world system,'. The publication of the first 
volume of The Modem World-System in 1974 marked the completion of the process. 
See Charles Ragin and Daniel Chirot, "The World System of Immanuel W allerstein: 
Sociology and Politics as History", in Theda Skocpol ed., Vision and Method in 
Historical Sociology. (New York: Cambridge University Press, 1984) pp. 279-284. 

3 Wallerstein, ibid. p.469. 



5 

faiths. We shall, therefore, address them heuristically, arguing that our 
deductive classification is more useful than alternative ones, because it 
comprehends more easily and elegantly what we collectively know at 
present about historical reality, and because it affords us an interpretation 
of this reality which enables us to act more efficaciously on the present. 1 

Such critiques, almost by their nature, tend to fall by 
rebound into the sin opposite to the one they are attacking. 2 

As I understand it, this category includes those who argue against single 

macro-unit of analysis and may propose class or three-world analysis instead, or who 

criticise the Modem World-System as too economic oriented or relying too much on 

historical approach. 

The "clash of opposing faiths" is not yet settled but the point seem to 

be left open. In this paper the 'clash' is born in mind but will not be revived. Only 

when the part of the theory in use has some challenges either empirically or 

theoretically, remarks will be given. After all, controversial as it was, the World­

System Theory offers several useful insights as will be discussed in forthcoming 

chapters. 

Turning to the energy issue in New Zealand, this paper will devote its 

attention to the oil and gas sectors, though electricity industry may sometimes be 

mentioned. The country's adaptation during the 1970s and 1980s to the changing 

international environment is of particular interest. Then the global economy witnessed 

a big recession and a revival. The external shocks in 1970s, caused mainly by the 1973 

1 Ibid. p. 20. 

2 Ibid. p. 8. 



6 

and 1979 oil crises, affected the country severely and the reaction to the shocks, as 

manifested in the energy policy, also left a profound impact on the New Zealand's 

economy. In this regard, the government's decisions on the alleviation of the 

country's burden of importing oil and on the natural gas reserves played a key role in 

the economic performance of the country. 

What is interesting in the case of New Zealand when compared to most 

other OECD countries is that the New Zealand state had a structural constraint that 

resulted in poor performances in the energy sector. The key failure that is attributed 

to the past energy policies is the country's low productivity relative to the energy 

consumed. To be more precise, New Zealand's energy intensity, as measured by the 

TPER/GDP ratio1 increased by 31 % between 1973 and 1987 and was on the rising 

trend in the following years. Only two other members of the OECD International 

Energy Agency (IBA) experienced increases in energy intensity over that period: 

Portugal 19% and Greece 11 %. In contrast, the energy intensity of the IBA countries 

was falling and the IBA average fell by 23% between 1973 and 1987.2 

While increasing energy consumption as well as energy intensity are 

points of national concerns, Energy Minister John Luxton asserts a positive aspect -the 

1 OECD criterion: total production of energy required in comparison with gross 
domestic products. 

2 International Energy Agency (IEA), Energy Policies and Progress of IEA 
Countries, 1989 Review. (OECD, Paris, 1980) p. 183. See also Ministry of Commerce, 
Energy Data File. (Wellington, 1991) pp.50-51 and Geoff Bertram, "New Zealand's 
Rising Energy Intensity", Victoria Economic Commentaries. (Victoria University of 
Wellington, March 1991), and also, Bertram, The Rising Energy Intensity of the New 
Zealand Economy. (Victoria University of Wellington, 1991) pp. 4 - 8. 



7 

country's liquid fuels self-sufficiency is now around 50%1
• He also attributes the 

energy intensity to low population and housing density, thus high transport and heating 

costs per capita, and to the country's "comparative advantage with cheap energy" 2 

which enables energy intensive industries.2 Like that of the World-System Theory, 

controversy over the success/failure of New Zealand's energy policy, based on 

interpretation of available data, is still far from settled. 

From a broader point of view, however, studying energy policy has so 

far contributed to a circular arguments along the line of the disagreement between two 

economic perspectives: Keynesianism and monetarism. The arguments on deregulation 

and price efficiency or security of supply appear to be rather repetitive though 

informative in substance. Here there appears another 'clash' in which the involvement 

of the government is viewed as either desirable or detrimental regardless of the coun­

try's level of development. When incorporated into a wider aspect of national 

development and reconsidered through an interdisciplinary perspective, energy policy 

may carry with it another meaning. 

Although both the World-System Theory and the case of New Zealand's 

energy policy have passed their era of colourful debates and insightful investigations, 

applying the World-System perspective to New Zealand's energy policy is promising 

as well as challenging. The mixed optimism is attributed to following reasons: 

1 John Luxton, "Opening Address", Energy Sector Reform. Addresses of Speaker 
at the Seminar Organised and Presented by the New Zealand National Committee 
World Energy Council, 18 March 1992, P. 6. 

2 Ibid. p. 14. 



8 

1. The World-System Theory was originated from an attempt to 

understand root cause of problems facing national development. It was formulated to 

discuss the mechanism of the system that enables or impedes progress "by the analogy 

with astronomy which purports to explain the law governing the universe"1 and hence 

making the births and the paths of stars comprehensible. Emphasising exogenous 

factors and the interplay of politics and economics within a historical context, the 

world-system is a suitable framework to analyze the role of state in national 

development meaningfully. 

2. Breakthroughs in economic theory formulation may derive from 

incorporating perspectives from other branches of sciences. 2 Energy policy is an 

economic issue that has a potential to be cross-bred with interdisciplinary perspectives. 

In this regard I see the World-System Theory as one 'macro-sociology' theory that can 

shed a new light on the study of the energy issue. 

3. The world-system perspective has been applied to explain ethnic 

tensions3 a European peripheral society,4 Japan and China developments,5 modem 

1 Wallerstein, The Modem World-System. (New York: Academic Press, 1974) p. 
7. 

2 Georgescu-Roegen's theory of irreversibility of material inputs which earned him 
the Nobel Prize is an example of incorporating the second law of thermodynamics into 
resource economics. 

3 Michael Hechter, International Colonialism: The Celtic Fringe in British National 
Development, 1536-1966. (London: Routhledge & Kegan Paul, 1975). 

4 Daniel Chirot, Social Change in a Peripheral Society: The Creation of a Balkan 
Colony. (New York: Academic Press, 1986). 



9 

banking and financial system1 and etc., but, to my knowledge, none directly concerns 

energy policy. Since energy policy constitutes a crucial part of state strategy in 

enhancing its position in the world dynamic hierarchy, it will be another worthwhile 

test that can broaden the sphere of the study of the world system. 

4. Development is a process of relative enhancement and not a static 

condition which can be reached once and for all. Countries in the intermediate status 

in the world system are therefore subject to struggling both against recession and 

towards a better position at the same time. This group of countries, however, has not 

been the major focus of most studies in the development field. In this light, New 

Zealand, an OECD country which experienced a unique trend of energy resource 

development compared to other OECD members,2 can be a good case study that tes­

tifies the dynamic and extensive nature of development process. 

A study of one country's policy is not an end in itself, but it should help 

to formulate theoretical guidelines for further understanding of social phenomena. 

Assessing New Zealand's energy policy along the line of the world-system perspective 

can contribute to development studies in this regard. New Zealand represents countries 

affected by global economic cycle especially the contraction of the early 1970s, while 

s Frances Moulder, Japan, China and the Modem World Economy: Toward a 
Reinterpretation of East Asian Developments ea. 1600 to ea. 1918. (Cambridge, UK 
& NY: Cambridge University Press, 1977). 

Fred Bloch, The Origins of International Economic Disorder. (Berkeley: 
University of California Press, 1977). 

2 New Zealand's position as a semi-peripheral country will be discussed in 
forthcoming chapters. 



10 

the energy issue reflects adaptations of economic strategic of the actors involved, states 

and private sectors alike. According to Wallerstein, countries' relative position in the 

world system usually shifts during the contraction period of economic cycles resulted 

from the overall situations in relation to the strategies they take. Lessons can 

accordingly be drawn from assessing the international setting and the consequences of 

New 2.ealand's policy shift concerning energy prices and productions. 

Since the matter under consideration concerns two major aspects, the 

World-System Theory as theoretical framework and New 2.ealand's energy policy, 

this paper is likewise divided into two main sections. Chapter two and three deal with 

theoretical matters. Chapter two aims to make the reader familiar with systematic 

propositions of the World-System Theory; therefore, it will elaborate the overview of 

the theory. It will also review the intellectual context in which the approach was 

developed and will analyze Wallerstein's epistemology and methodology. Then chapter 

three will discuss relevant theoretical aspects including capitalist system and its cycles, 

the notion of semi-periphery states, and transnational owner-producer ( or multinational 

corporations). 

From the theoretical aspect of world capitalist system, chapter four will 

tum to a more concrete level of economic and political settings during the policy shifts. 

It will raise the issues of international oil market and New 2.ealand' s perception of the 

international context Domestic aspects will be addressed in the fifth chapter which 

will examine each policy decision which was made in particular situations. The 

examination will be based primarily on the interplay between political and economic 



11 

factors. In the sixth chapter, impacts of the energy policy will be assessed. The 

chapter will also discuss some constructive comments and recommendations. Finally, 

the last chapter will synthesize both theoretical and New Zealand's policy sections. 

This conclusion part will offer an evaluation of to what extent a country's policy, New 

Zealand's in this case, can be explained by a tri-modal World System Theory. 



12 

II. World-System Theory of Immanuel Wallerstein 

The World-System perspective became a distinctive theory with the 

publication of Immanuel Wallerstein's The Modern World-System1 in 1974. It 

shares common viewpoints and explanations with various theories but retains a 

uniqueness in the power of its synthesis of approaches and emphasis on linkages of 

factors under one global system. In the field of development theories, the perspective 

inherits several arguments from its predecessors in the "leftist" tradition - that is, 

Imperialism and Dependency Theories. As for its historical approach, the perspective 

is much influenced by the French Annales school. 2 It is also interesting to note that 

Wallerstein's writings borrow some arguments from "Smithian" economics, Chicago 

School of Economics and Keynesianism. Therefore, W allerstein' s ability to integrate 

the three branches of knowledge to form a new interdisciplinary perspective places his 

World-System Theory a high privilege in the field of social study. 

Since the 1970s, the theory has gained its acceptance as a mild-Marxian 

alternative that academically outshone the modernisation theory and offered an 

explanation that included both foreign and domestic aspects based on concrete historical 

knowledge. 

1 Later, this book and the others in the series may be called MWS. 

2 Charles Ragin and Daniel Chirot, "The World System of Immanuei 
W allerstein ... " p. 288. 



13 

World-System Theory: Overview and Background 

In the 1970s, the dependency school emerged as a major challenge to the 

dominance of the modernisation school of development theory. The latter views 

backwardness as a result of cultural hindrance and inadequacy of social infrastructure. 

It offers guidelines to overcome underdevelopment which many countries have 

followed. But this school is known for its fatal flaw as ahistorical, a characteristic 

which signals its weak explanatory power. Moreover, the growing gap between the 

developed and the 'developing' countries, observable since late 1960s, revealed the 

predictive failures of the approach. That made way for the emergence of radical 

dependency whose core/periphery dichotomy is based firmly in historical development 

of the colonial era and economic interpretation of underdevelopment Dependency 

school represented by Andre Gunder Frank and Samir Amin offers a sound explanation 

of underdevelopment that the modernisation school lacks. However, dependency itself 

cannot be a viable option for policy makers because it falls short of rendering practical 

strategies. The clash between the two theoretical poles without a clear winner left the 

1970s an ideological vacuum to be filled by contending theories. 

At that time, W allerstein inclined more towards the dependency than th~ 

conventional sociological approaches by which his early writings were influenced. 

Wallerstein followed the dependency theorists' standpoint that the backwardness of the 

periphery was caused by exploitation by the core powers. 1 He agrees with Frank 

1 Tony Spyby, Social Change, Development & Dependency. (Cambridge, MA: Polity 
Press, 1992) p.28; and Immanuel Wallerstein, Historical Capitalism. (London: Verso, 
1983) pp.30-55. 



14 

that economic development and underdevelopment are the two sides of the same 

coin.1 In fact he identifies the World-System perspective with the 'Marxist' trend of 

the 'Latin American structuralists'2 as oppose to the 'liberal' or the modernisation 

school. But while the dependentistas occupy themselves with the analysis of the 

underdevelopment of the periphery, Wallerstein goes a bit further to understand the law 

of the system that governs the pattern of exploitation. The relationship between the 

two approaches is therefore, as Robert Brenner put it, that "[i]t has been left for 

Immanuel W allerstein to carry to its logical conclusion the system outlined by Frank". 3 

Though, dependency influence may not be found in any of his work 

before the remarkable Modem World Systems (MWSs). Sociologist by training, 

Wallerstein still used conventional literature in sociology in his early academical 

writings.4 In the 1960s his focus was on African politics. Later, Wallerstein was 

frustrated by the fact that political development in Africa was impossible under the 

existing interstate structure, a problem that conventional sociological theories failed to 

1 Wallerstein, The Modem World-System (MWS). p. 99. 

2 Wallerstein, "The Present State of the Debate on World Inequality" in The Capitalist 
World-E.conomy: Essays by Immanuel Wallerstein. (Cambridge: Cambridge University 
Press, 1979) p.53. 

3 Robert Brenner, "The Origins of Capitalist Development: A Critique of Neo-Smithian 
Marxism", in Hamza Alavi and Teodor Shanin (eds), Introduction to the Sociology of 
"Developing Societies". (London: Macmillan, 1982) p. 56. Saying this he means Frank 
underestimates the progressive force of capitalist development in the core by placing 
too much emphasis on the surplus appropriation from the periphery as determining 
capitalist development. The logic of capitalist evolution demonstrated by Frank is thus 
incomplete. It is Wallerstein who conceptualises the logic of the whole system where 
relationship between the core and the periphery is integrated. 

4 Ragin and Chirot p. 280. 



15 

address, let alone to answer. Then he redirected his focus to the heart of the problem 

and developed a first step of what may be called Wallerstein' s world view: 

The field of action of the movement toward African 
Unity was not Africa but the world, for its objective was not 
simply to transform Africa, but to transform Africa by transfonn­
ing the world. Its enemies were internal to be sure; but the 
internal enemies were seen as agents of foreign powers - the 
essence of the concept of "neocolonialism". We must according­
ly analyze the emergence of the movement for African Unity in 
terms of the world system, for it was the changing state of this 
system that made it impossible for the movement to gain and 
then lose its freedom to manoeuvre. 1 

Wallerstein's determination to pursue his examination of the world­

system that originates the Third World sufferings leads him away from the positivistic 

sociology towards the opposite paradigm. He borrows concepts and explanatory 

mechanism from Lenin and other scholars on imperialism.2 Generally, this current of 

thought rejects the notion that states are independent actors but views the peripheral 

areas as subject to the demand for raw materials from the centre. In W allerstein' s 

Modern World-System trilogy (1974, 1980, 1989) and Historical Capitalism (1983) 

much effort has been made to describe how development and underdevelopment evolve 

around the 'networks of material exchanges'. At the heart of capitalism lies the logic 

of 'capital accumulation' where wealth is accumulated through profits from commodity 

exchanges.3 The global inequality is characterised by the 'centripetal' in form of 

1 Ragin and Chirot p. 282 (italics mine). Later he expands the idea and comes to 
a conclusion that "[t]he states do not develop and cannot be understood except within 
the context of development of the world-system". (Wallerstein, MWS, p. 67). 

2 See Ragin and Chirot p. 289, and Chritopher Chase-Dunn, Global Formation: 
Structures of the World-Economy. (Oxford: Basil Blackwell, 1989) p. 3. 

3 Wallerstein, Historical Capitalism pp. 13-17. 



16 

commodity exchange. "That is to say, [commodity chains] have tended to move from 

peripheries of the capitalist world-economy to the centers or cores".1 Thus far, 

Wallerstein's point resembles that of the Imperialism and Dependency theorists. In 

addition, W allerstein' s underlying of the conflict of interests and crisis in capitalism 

caused by rivalries in the core is completely in agreement with Marxism.2 

Unlike Lenin and the dependentistas, Wallerstein does not appear 

antagonistic to the powerful core because his focus is on the system mechanism. 

Exploitation is a natural phenomena of the capitalist world-system in which those who 

do not appropriate surplus to reinvest will be punished by the system. It is the system 

that creates inequality. "Hence some areas 'progress' and other 'regress' .... The key 

factor to note is that within a capitalist world-economy, all states cannot 'develop' 

simultaneously by definition. Since the system functions by virtue of unequal core and 

peripheral regions".3 With this argument, he proposes the world-system as the unit of 

analysis4 and the transformation of the world-economy as the only answer to global 

inequalities. 

Wallerstein stands firm against the advocacy of "stages" of capitalism. 

For him, it is the single past-present (and future) time span of the life of the global 

1 W allerstein, ibid, p. 30. 

2 Ragin and Chirot, p. 295. 

3 W allerstein, "The present state of the debate ... " p. 61. 

4 Ibid. 



17 

system. 1 Wallerstein's periodization of the modem world-system into the origins of 

the European world-economy (MWS), mercantilism and the consolidation of the 

European world-economy (MWS II) and the second era of great expansion of the 

capitalist world-economy (MWS III) is merely a confirmation of a similar patterns of 

the rises and falls of core countries in various cycles in history. Some variables may 

change, for example, textiles might represent an advanced industry in the sixteenth 

century but may no longer be so, yet the logic behind the state struggling for better 

positions in the world hierarchy still holds true. In other words, history is not unilinear, 

rather, it is a circle of capitalism that governs every movement in the world-economy. 

Addressing problems at the level of 'totality' so that all possible 

influences can be identified is one of Wallerstein's strength2
; however, it poses him, 

and social scientists after him, big challenges. It eliminates any possibility for 

conducting a research by comparing the world-system to another. It further encumbers 

the researcher with the multiplicity of data that go beyond one's ability to master. 

W allerstein transcends the first obstacle by turning to history and avoids the second by 

relying on secondary sources mostly from one school of history that shares a broad 

world view. He traces the history of capitalism in the framework of Marxist 

historiography and acts as 'a user rather than a creator of historical work' 3 in the 

sense that he bases his argument on other people's finished research products. As 

earlier mentioned, the historical work of the like-minded school that he relies on is 

1 W allerstein, MWS, p. 7. 

2 Ragin and Chirot, "The World System of Immanuel Wallerstein ... " p. 307. 

3 Ragin and Chirot, p. 288. 



18 

French Anna.Les school of Fernand Braudel.1 The use of concrete historical knowledge 

to explain social structures pioneered in the United States by Wallerstein made his work 

very appealing to young American social scientists who no longer revered functionalist 

positivism.2 It should be noted, however, that Wallerstein's interpretation of historical 

facts is occasionally criticised as inaccurate or one-sided. 3 

"W allerstein' s approach emphasizes the interaction between the 

historicity of socio-economic systems and their deep structural or essential elements".4 

As a social scientist, he uses deductive method to turn diversified historical facts into 

a comprehensible model. This is where Wallerstein's work differs from that of 

historians. In his MWS trilogy, Wallerstein discusses the historical development of 

the world capitalism centred in Europe since the 16th century showing his inclination 

towards generalisation and apprehension of 'regular macrosociological laws'. 

"W allerstein diverges profoundly from the Annales school in his choice of explanatory 

concepts. His central problem, to explain the origin and persistence of global 

inequality, dictates the use of explanatory concepts that are comparably global in 

scope".5 Femand Braudel himself regards Wallerstein as "a little too systematic".6 

1 Ragin and Chirot p. 288; and Chase-Dunn, Global Formation, p. 2. 

2 Ragin and Chirot, p. 278. 

3 See, for example, Book Reviews by Ted N. Margadant and by Joel Mokyr under 
the same heading, "Wallerstein, The Modem World System m, 1989" Theory and 
Society, 20: 6, (The Netherlands: Kluwer Academic Publishers, 1991) pp. 891-895 and 
895-899 respectively; and Ragin and Chirot, p. 292. 

4 Chase-Dunn p. 300. 

5 Ragin and Chirot p. 288. 

6 See Chase-Dunn, Global Formation, p. 14. 



19 

Although the Marxist influence and Annales historical school are usually 

mentioned in most studies of Wallerstein's World-System perspective, his non-Marxian 

economic concept is not as profoundly analyzed. 

Among the few who do, Robert Brenner labels Wallerstein as "neo­

Smithian", an accusation that might be shared by anyone who stands further left. For 

critics, Wallerstein's "view of economic development is quantitative, revolving around 

: (1) the growth in size of the system itself through expansion; (2) the rearrangement 

of the factors of production through regional specialization to achieve greater 

efficiency; (3) the transfer of surplus" .1 Unlike Marxism, Wallerstein's concept of 

capitalist economic development places "production for profit in the market " in the 

central assertion. Brenner also correctly argues that Wallerstein shares the same belief 

with Adam Smith who views the level of wealth as generated by the degree of 

development of trade2 and that " ... Wallerstein, implicitly or explicitly equates 

capitalism with a trade-based division of labor".3 

Not mentioned by Brenner, however, is that when compared to economic 

writings of Milton Friedman of the Chicago School of Economics, W allerstein' s work 

appears to borrow some interpretations from monetarism. He explains the wage drops 

1 Robert Brenner, "The Origins of Capitalist Development .. " p. 58. 

2 Brenner, p. 60. 

3 Not all aspects of Brenner's criticism are still hold undisputedly true (See Chase­
Dunn, pp. 17-18 and Daniel Garst, p. 469), but I agree with Brenner in this point. 



20 

in England in the 16th century1 in a familiar monetarist argument, if not term. It 

sounds like 'the oversupply of money caused inflation that reduced real wages which 

were fixed (by custom, contract, or statute)'. At the same time, in the declining 

northern Italy, wages were still set relatively high even while the rate of surplus 

accumulation was decreasing2, in other words there was a time lag for economic reality 

to reach the stage of recognition, the taking of action and the lag in effect of policy. 

This 'time lag' is also the argument of Friedman on the inappropriateness of 

government interventionist policy. From time to time, readers might come across 

Wallerstein's mentioning of mobility of capital, wages reduced by inflation3 and the 

danger of huge government budget directed towards non-profitable activities.4 Though 

his main point is to attack inequalities created by the world-capitalism, many of his 

concluding statements are derived from his contemporary 'liberal' ways of interpreting 

economic relations. 

But Wallerstein cannot be too monetarist. He believes inflation has a 

positive function in capitalism development. "It was nonetheless a method of taxing 

the politically weakest sectors to provide a capital accumulation fund which could then 

be invested by someone . ... [l]nflation encouraged [savings and] investment".5 Like 

1 MWS, p. 81. 

2 Ibid. 

3 Wallerstein. "America and the World: Today, Yesterday, and Tomorrow" Theory 
and Society. 21: 1, February 1992, p. 12. 

" MWS, p. 196. 

5 MWS: 83. 



21 

Keynes, he attributes growths mainly to investments, and also like Keynes, he proposes 

governmental active roles in fighting recession and in economic expansion. 

W allerstein' s inclination towards the making use of history and economic 

concepts almost makes people forget the fact that he is actually a sociologist. Waller­

stein has shown his departure from the mainstream sociologists before him since 1974 

and strongly attacks the modem social scientists whose aim is to II achieve quantification 

of research findings 11 
•
1 Still, he toes the line of modem social sciences that there are 

regular laws that apply over all time and across societies and not that each situation is 

explainable only by its unique history.2 What distinguishes Wallerstein as a prominent 

modem sociologist is the strengthening of his generalisation with historical interpreta­

tions As seen by Chase-Dunn, another World-System theorist, 11Wallerstein's work is 

consciously located ... at a midpoint which is more historical ... , and yet which is more 

generalizing than that of most historians. 3 

By synthesizing polarised ideas from various disciplines, Wallerstein 

discovers the structure of the whole system. The whole that does not mean just the 

assembled parts.4 

1 MWS, p. 8. 

2 Ragin and Chirot, p. 284. 

3 Chase-Dunn, pp. 13-14. 

4 MWS, p. 8. 



22 

Key Assertions 

The main point of his assertions is that societies are linked to one 

another in the context of a larger network of material exchanges and that the network 

of interdependent subunits is constituted in a systemic way. World capitalist economy 

developed as the global commodity trade centred in Europe prospered since 16
th 

century, and repetitive patterns of significant historical phenomena have been extracted 

to formulate the general law of the unique era. Wallerstein observes the aggravated 

inequality where the world subsystems divided into the prosper and the loser caused 

by the general law of capital accumulation through trade and through profits generated 

from investments. Toe absence of supranational authority to harness the market forces 

serves to "reinforce the existing system of stratification".1 Here, weak states are so 

vulnerable to external forces, but the governments that are clever enough to act in 

accordance with the capitalist mechanism can improve their positions and increase their 

room to manoeuvre at the others' expenses.2 

Capitalism is not the only world-system he mentions but the only one 

he profoundly associates himself with.3 It is the system that replaces the world empire 

- a system in which strong centres dominate unitary political entities and materials were 

less commodified. In the capitalist world-economy, there is no single encompassing 

1 W allerstein, "Dependence in an Interdependent World- The Limited Possibilities 
of Transformation within the Capitalist World-Economy" in The Capitalist World­
Economy: Essays by Immanuel Wallerstein. (Cambridge: Cambridge University Press, 
1979) p. 66; and MWS, pp. 127, 134. 

2 MWS II, p. 179. 

3 Ragin and Chirot, p. 285. 



, 

23 

state apparatus but there are multiple societies, multiple states and a single economic 

division of labour.1 The reproduction of the division of labor depends on the 'unequal 

exchange' between the core, producing high-waged products, and the periphery, 

producing low-waged products. The unequal exchange within the division of labour is 

necessary for profit accumulation in the core.2 "[C]apitalism is the only mode of 

production in which maximiza.ti,on of surplus is rewarded per se. 3 Because profit can 

become capital, it is used "to accumulate more of the same"4. 

"Capitalism involves in addition structures and institutions 
which reward primarily that subsequent of the owners and controllers 
who use the surplus value ... for further investment. The structure of the 
market ensures that those who do not accumulate capital (but merely 
consume surplus value) lose out economically over time to those who 
do accumulate capital".5 

The more he discovers the logic of capitalism, the more he dislikes the 

system. That is because "far from being a 'natural' system, historical capitalism is a 

potently absurd one. One accumulates capital in order to accumulate more capital. 

Capitalists are like white mice on a treadmill, running ever faster in order to run still 

faster. "6 But undesirable as it may seem, capitalist world-economy now really exists; 

and, as long as it continues to exist, national development is still a zero-sum game 

1 Chase-Dunn. p. 2. 

2 W allerstein, "Dependence in an Interdependent World ... ", p. 71. 

3 Wallerstein, "Class Conflict in the Capitalist World-Economy" in The Capitalist 
World-Economy, p.285. 

4 Wallerstein, Historical Capitalism, p. 14. 

s W allerstein, ibid. 

6 Wallerstein, Historical Capitalism, p. 40. 



24 

understandably only through the examination of the interaction between the state 

policies and systemic trends. 

Since 1974, Wallerstein devotes his academic life for the construction 

of a theory about the capitalist world-economy, which, he says, has come into being 

since the 16th century and now dominated the relationships between states as well as 

non-state actors. As earlier mentioned; Wallerstein's MWS trilogy depicts the 

characteristics of the development of the capitalism in three major periods in history. 

That does not mean he omits to address the capitalistic nature of the contemporary 

world. W allerstein chooses to implement his grand scheme through various essays and 

speeches. 2 It appears that he tries to build the foundation for his theory by proving 

it "heuristically" with his research on historical world-system, and then to emphasize 

the versatility of the theory by applying to various political and economic issues in the 

postwar era Together, his MWS trilogy and collections of essays confirm three salient 

feathers that are inherent to a world-system and the capitalist world-economy, namely, 

the interplay between politics and economics, perpetual structural hierarchy, and 

economic cycles. 

For W allerstein, the only raison d'etat is the interstate system. As the 

nature of the world capitalism requires a single division of labour, states in the system 

1 Pages 15 - 17. 

2 For examples, those collected in The Capitalist World-Economy. 1979, and The 
Politics of the World-Economy. 1984. 



25 

are accordingly an "organization" that is created to facilitate this division of labour. 1 

"The fundamental role of the state as an institution in the capitalist world-economy is 

to ... reduce the 'freedom' of the market".2 State system "encrusts, enforces and 

exaggerates" the pattern of specialisation which may be initiated by market conditions.3 

Within its boundary, a state regulates the market pattern and transform wealth from one 

group to another through tax and subsidy measures; beyond its jurisdiction, a state 

always try to impose its will on other states.4 

Not only the state can affect economic accumulation, the level of 

economic success of a state can determine the strength of the state machinery. The 

tax revenue enables the state to have a larger and a more efficient civil bureaucracy and 

army which in tum leads to greater tax revenue - a process that continues in spiral 

form. "5 In a country where capital is concentrated, there are "both the fiscal base and 

the political motivation to create relatively strong state- machineries", among whose 

many capacities is that of ensuring that the state machineries of other countries remain 

relatively weaker and unable to reject the trade and production patterns imposed upon 

by strong states.6 "illtimately, of course, political and economic measures are linked 

See W allerstein, "Household Structures and Labour-Force Formation in the 
Capitalist World-Economy" in Etienne Balibar and Immanuel Wallerstein, Race. Nation. 
Class: Ambiguous Identities. (London: Verso, 1991) p. 122. 

2 Ibid. 

3 Ibid. 

4 Ibid. 

5 MWS, p. 356. 

6 W allerstein, Historical Capitalism, p. 32. 



26 

reciprocally because productive efficiency makes possible the strengthening of the state 

and the strengthening of the state further reinforces efficiency through extramarket 

means.1 

Accordingly the global community always comprises strong and weak 

states. A strong state with an efficient bureaucracy usually can intervene the domestic 

market to maximize the production efficiency and create a favourable international 

climate for its external trade to increase profit, and thus capital accumulation, for its 

own entrepreneurs. On the contrary, a weak state may be destined to produce primary 

or less sophisticated products to serve the demand of domineering states, and at the 

same time forced to open its market for finished products from those countries. It is 

therefore impossible for every state machinery to be equally strong because that would 

undermine the power of transnational economic entities and the world division of 

labour would be impeded. Neither can all state be equally weak "[t]or in such a case 

the capitalist strata would have no mechanisms to protect their interests, guaranteeing 

their property tights, assuring monopolies, spreading losses among the larger 

population, etc."2 The system can only reproduce itself in this inequality. 

The realisation of the disparity of state power leads to another crucial 

aspect of the World-System Theory, that is the perpetual hierarchy in the interstate 

system. Roughly, the countries where capital accumulation is relatively high and 

whose state machineries are strong enough to exert their influence beyond their 

1 MWS II, p. 113. 

2 MWS, p. 355. 

..:.. 



27 

jurisdictions constitute the "core" zone, and the countries with the opposite characteris­

tics the "periphery". The two categories are only slightly different from the classic 

dependency dichotomization. What is Wallerstein's initiation is the concept of 

semiperiphery. 1 He emphasizes the indispensability of the semiperiphery due to its 

political function of stabilising the otherwise extreme bi-polar world-system. "The 

existence of the third category means precisely that the upper stratum is not faced with 

the unified opposition of all the others because the middle stratum is both exploited 

and exploiter. "2 The capitalist world-system has always comprised and will always 

comprise the three strata. Shifts in rank order are normal but the hierarchical system 

remains unchanged. 

This hierarchy and the shifts within the hierarchy is understandable 

within the context of economic cycles. A cycle includes a period of expansion and 

then a period of downturn. "Periods of expansion of the world-economy are relatively 

easy to summariz.e. Production is expanding overall and in most places. Employment 

is extensive. Population is growing. Prosperity is the sign of the time." 3 It is a period 

when virtually most states can enjoy a positive rate of economic development On the 

contrary, the period of contraction is much more complicated and meaningful.4 To say 

1 The semiperiphery is a unique and interesting concept which 1s worth 
elaborating. The notion will be reviewed in depth in chapter 3. 

2 Wallerstein, "The Rise and Future Demise of the World Capitalist System: 
Concepts for Comparative Analysis", in The Capitalist World-Economy. p. 23. 

3 MWS II, p. 129. 

4 The concept of world economic contraction deserves further investigation in the 
next chapter because of its complexity as well as its direct relevancy to the case study. 



28 

simply, "a downturn is a slowdown of activities, not a stoppage. It represents, ... , a set 

of obstacles in the search for profit.. .. "1 Usually at this moment occur major shifts 

in interstate hierarchy. Because, in tough time, those who are less competitive can be 

easily "weeded out", and at the same time, "[t]he strong not only survive; they 

frequently thrive".2 In this contraction period, a few states that pursue 'intelligent state 

policies" can outperform the rest and improve their positions in the world-system, and 

the states that pursue unwise policies may shrink.3 

The period from 1600 to 1750 was an example of a 'relative 

stagnation'.4 The diminishing effective demand was unfavourable to the high-waged 

core and thus the core producers were forced by the circumstance to exploit their 

subordinates more directly and severely. In such a condition, the majority of peripheral 

.areas such as Poland were the ones who most suffered while only Sweden and Prussia 

could step up from peripheral areas to join the semiperipheral states. Also at that time 

the semiperipheral England and France could challenge the Dutch hegemony and 

became core countries themselves. These reshuffles were all attributed to each state's 

strategies conducted within a specific setting of global economic downturn. 

These changes emphasize the key role of states in the world hierarchy 

and the single division of labour. Wallerstein contends that "the state was an essential 

l Ibid. 

2 Ibid. 

3 See MWS II, p. 179. 

4 MWS II, p. 241. 



29 

instrument used by the Dutch bourgeoisie to consolidate an economic hegemony that 

they had won originally in the sphere of production and had then extended to the 

commerce and finance. The state of competing core and semiperipheral powers would 

be equally essential instruments in the process of destroying this hegemony". 1 

At a lower level, Sweden in the 17th century represented another success 

of strong state machinery and its policies. The country was in hapless conditions which 

included small population thus small financial base for its state machinery and the lack 

of vast resources 'to sustain its position in the long run'. 2 However, Sweden could 

maximize its limited resources for national development, first by continuously 

strengthening the state machinery3 and then by choosing to build up industries based 

on its natural resources.4 Swedish state consciously developed the country's 

specialisation in production and export of 3 main resources: copper, iron and tar, when 

there were demands from the core and other semiperipheries in Europe without strong 

competitors. At first, the businesses seemed to be under 'foreign domination' but the 

government also succeeded in "nationalizing" the industries "by ennobling the 

entrepreneurs".5 The state used its three quasimonopolies to create a strong bargaining 

position, without which the political-military expansion would have been unattainable. 

1 MWS II, p. 65. 

2 MWS II, p. 217. 

3 Strong state machinery in this sense means strong vis-a-vis any social group 
within the state enough to pursue its determined policies as well as the state's military 
or political power vis-a-vis other states. See MWS, p. 355. 

4 MWS II, p. 217. 

5 MWS II, p. 210. 



30 

The political-military expansion in tum made it possible to develop the transformation 

industries". 1 In short, what Sweden at the time did proves that an intelligent weak 

state with an efficient state machinery can make the most use of foreign investors, 

grasp the opportunity of the market open to it by the rich core and then increase its 

wealth by exploiting weaker neighbours. 2 

Conclusion 

Wallerstein can raise endless examples to show that his theoretical 

premises are sound and the world-system framework renders a useful systematic 

interpretation of current affairs.3 "Once these are accepted, a series of assertions about 

the contemporary world can be made. A large number of situations, from Stalin's 

excesses to the Cambodian tragedy and the rise of Solidarity in Poland, can be 

explained by the exploitative nature of the capitalist world system and its contradicti­

ons". 4 Many of his analogies are beyond the scope of this study, for example, the 

socialist movements, the road to hegemony, the class-formations, and etc. Still, the 

logic of argument and the three main points: the interplay between politics and 

economics, the perpetual structural hierarchy, and economic cycles, can be directly 

analyzed within the context of New Zealand's energy policy. 

1 MWS II, p. 211. 

2 Prussia was another interesting case of a country that could upgrade itself in the 
world hierarchy but the scenario was difficult and may be less relevant to the topic to 
be discussed later in this thesis. The details of Prussian rise are mentioned in MWS 
II, pp. 225-36. 

3 See Ragin and Chirot, p. 305. 

4 Ragin and Chirot, p. 305. 



31 

Whether W allerstein' s conclusion about the undesirability of capitalism 

and the need to transform it is acceptable or not, his vision of social sciences certainly 

earns him the reputation. The World-System perspective suggests that one should not 

let disciplinary boundaries hinder one's investigation and that any problems should be 

addressed in 'totality' and in historical context.1 In the broader context of the world­

economy, states, firms and political groups are dynamically playing their roles. In the 

light of such perspective, the discussion in the following chapter will elaborate the 

interplay between politics and economics by highlighting the roles of states and 

multinational corporations, the concept of semiperiphery and its relevance to the status 

of New Zealand, and the features of economic downturn that affects the world in 

general and New Zealand in particular. The broad overview of the World-System 

perspective already mentioned in this chapter and three core concep~ to be discussed 

in the next chapter will serve as the conceptual framework for the analysis of New 

Zealand's energy policy in the latter part of this study. 

1 Ragin and Chirot, p. 307. 



32 

ID. Semiperipheral States and Multinational Corporations in Cyclical Economic Trends 

The three core concepts from the world-system perspective mentioned 

in the previous chapter constitute the basic explanation of the direction of New 

Zealand's energy resource development during the 1970s and 80s as well as the 

structural constraints in implementing economic policy. The first concept, the interplay 

between politics and economics is the most crucial foundation for further arguments. 

Within the system of single division of labour, market forces and the logic of capital 

accumulation govern any decision in economic activities. At the same time, those 

economic activities must be carried out within the jurisdiction of one state or another 

whose policies can shape the pattern of surplus-value extraction of any capitalist 

enterprise. This mutual effect between the state and non-state actors is most dramatic 

in the realm of the semiperiphery where the state plays the central role in the national 

development. The other two concepts, the semiperiphery and economic downturns, 

emphasize the interrelated role of the state and economic actors. Together they 

compose a picture of New Zealand as a semiperipheral country moving on waves of 

economic cycles. That is the first step of analyzing the country's rationale for policy 

making. 

The purpose of this chapter is to elaborate the significance of the role 

of the state and the multinationals in shaping the path of a country's development In 

doing so, it is necessary to prove that New Zealand is and has always been in the 

semiperiphery, where experience of national capital accumulation can be explained by 

global economic cycles. 



33 

States and MNCs: the Interplay between Politics and Economics 

That the capitalist economy occupies the entire globe and penetrates all national 

boundaries does not imply that it expands unassisted nor unhampered by political 

forces within the existing multistate system. In the capitalist world-system, the 

producers cannot rely solely on their ability to produce efficiently to extract a huge 

amount of surplus-value. Success in the system "is based on a combination of effective 

state power and competitive advantage in production" .1 In the first place, firms depend 

on the interstate system to provide a relatively stable world order conducive to profit­

making activities.2 Then firms also require state guarantee of internal order and 

property rights. Moreover, owner-producers usually wish the state to perform two key 

functions. One is that they want the state to intervene to expand or to limit the 

"freedom" of the market, whichever one will most increase profits. The other is that 

they wish the state to act, actively or passively, "to help them extract a larger 

percentage of the surplus than they would do otherwise, ... "3 The state is therefore, in 

the world-system perspective, a political institution that is indispensable for capital 

accumulation within the world-economy. 

States usually perform the function that the system requires and that the 

finns expect them to. 1bere can be two explanations as to why states act in accordance 

with the need of local or transnational enterprises motivated by profit-seeking. Either 

they pursue their courses of conduct deliberately or they are forced to do so. A state 

1 Chase-Dunn, Global Formation, p. 140. 

2 Ibid, p. 75. 

3 MWS II, p. 113. 



34 

may eagerly become an "aggressive capitalist state" by not merely waiting "for the 

entrepreneurs to succeed so that it can tax them" but also "create opportunity to 

entrepreneurs and sometimes it takes on the entrepreneurial role itself'. 1 These kinds 

of policies should result from a realisation of the necessity to compete in the dynamic 

interstate system. A state that wishes to enhance its position within the world hierarchy 

should deliberately assist the local firms to maximize their profits in the world market 

And if the state depends on overseas capital, it has to make the most use of that capital 

and prevent massive outflows of money in terms of profit repatriation. "Neither local 

entrepreneurs nor the state begrudge the multinationals the right to earn profits. High 

profits are fine as long as they are reinvested in local accumulation".2 Recently 

Japanese and Brazilian governments represent this type of capitalist states. 3 In the 

past, British interventionism in the world market and the British government's indirect 

role in the so-called Industrial Revolution reflected another successful story of a state 

pursuit of profit maximization. 4 

It should be noted, however, that the willingness of state to promote 

local accumulation does not guarantee its success. A state with less competent 

apparatus or with limited resources may try to create beneficial atmosphere for its 

entrepreneurs but may lose against powerful MNCs. 

1 Chase-Dunn, p. 120. 

2 Peter Evans, Dependent Development: The Alliance of Multinational, State, and 
Local Capital in Brazil. (New Jersey: Princeton University Press, 1979) p. 195. 

3 See Evans, ibid, p. 79, and Chase-Dunn, Global Formation. p. 120. 

4 MWSID. 



35 

There have been some states that choose to neglect the logic of capital 

accumulation and profit maximization at the global level, but because the world 

capitalist economy prevails, most states cannot resist the trend. Some states, such as 

China and the Soviet Union in the past, have tried to "cut themselves off from the 

larger world-system and to create a closed internal economy' 1 and some, such as 

Chile, Mexico, and the Philippines, during the 1970s, may have tried to mobilise 

overwhelming resources to serve short-term political purposes irrespective of the 

requirements of the economy. For most of those countries, after certain years of 

perseverance they are brought into the world capitalist line either by domestic upheaval 

or the World Bank/IMF conditions or both. Because resisting the capitalistic current 

did not produce prosperity ( though joining the tide might not either) many socialist, 

nationalist and fascist states have made a sharp tum towards the fashionable capitalism, 

however unwillingly. 

It is also possible that a state's political system is just too obsolete. The 

state political formation then may be forced to transform by global economic 

necessities to catch up with the latter. In this category too, examples can be found 

throughout history of capitalist development. As cited by W allerstein, the transition 

of French state from feudalism to capitalism marked by the French Revolution was one 

of the examples of forces unleashed to generate the political institution that observes 

the rules of the game.2 Japan can be regarded as another example that indicates the 

1 Chase-Dunn, Global Formation, p. 119. Many of these states are credited as 
'antisystemic' by Wallerstein. 

2 MWSID. 



36 

transformation of a feudalist imperialist to a capitalist empire. The Japan reform 

process is usually labelled the "Meiji Restoration", the political process which covered 

most of the latter half of the 19th century. Within the process, the first decades 

witnessed the dismantling of the power of the feudal lords and the 1880s was the 

decade of judicial reform. The restoration paved the way for more efficient 

accumulation for the Japanese state by giving judicial endorsement for landowners to 

appropriate high levels of surplus from farmers. The landowners were, through the 

reform, liberated from the repression of the feudal oligarchs and therefore could keep 

most of the profits for further reinvestment. 1 Here, too, the adjustment of political 

system into a more progressive form serves the need of global capitalism. 

Since states are to be a political machinery to facilitate surplus-value 

extraction, the point is whether they can perform the task well enough to preserve or 

enhance their position in the world-system or so unsuccessfully that they fall victim of 

external exploitation. The answer lies in the state's "strength". A strong state can 

protect its capitalists from the risks or uncertainties in the world market.2 In the non~ 

core areas, where the local bourgeoisie are too weak to manipulate the economic 

situation, a strong state with a highly centralized and extensive state apparatus is 

needed.3 

1 For details see Jon Halliday, A Political History of Japanese Capitalism. (New 
York: Pantheon Books, 1975) pp. 3-61. 

2 Chase-Dunn, p. 239. 

3 See Daniel Garst, "Wallerstein and His Critics", p. 481; Wallerstein, (1979) 
"Dependence in an Interdependent World ... ", p.72; and Chase-Dunn, pp. 140-41. 



37 

"Strong" state does not mean an authoritarian one. According to 

W allerstein, the strength of state is determined by 5 factors. First is its ability to help 

its owner-producers compete in the world market. Second is its influence over other 

states. Third is the ability to perform the above-mentioned first and second tasks, 

namely to compete with and influence over others, at least cost Fourth is an effective 

bureaucracy. And the last element which is the key to the others is its ability to 

articulate a balance of interests among owner-producers so that its dominant class 

"forms the stable underpinning of such a state". 1 

According to these guidelines, states with different status must be 

assessed differently. In core economies where the owner-producers are competent, a 

compact but effective bureaucracy that imposes lower tax burden together with a 

government that can exert influence to create a favourable atmosphere for their owner­

producers represent a strong state. But while a core state can save the country's 

resources for use in private sectors and help its producers gain an advantage, quite the 

opposite is true for a non-core state.2 In the semiperiphery, the owner-producers are 

not in a position to compete with transnational actors without "extra-market" assistance 

from the state. However, for both cases, it can be said that "[a] state is stronger than 

another state to the extent that it can maximize the condition for profit making by its 

entrepreneurs ... within the world economy."3 

1 MWS II, p.113. 

2 Garst, p. 481. 

3 Wallerstein, "World Networks and the Politics of the World-Economy" in 
Wallerstein, The Politics of the World-Economy: The States. the Movements and the 
Civilizations. (Cambridge: Cambridge University Press, 1984), p. 5. 



38 

If Sweden and Germany in the 17th century reflected the success of 

peripheral areas that acquired those five elements and then became semiperipheral,1 

a showcase for the 20th century can be Brazil, whose ascending to the intermediate level 

of development is analyzed by Peter Evans. 2 Evans extracts six components 

constituting the bargaining power for a semiperipheral state against MNCs: 

- valuable natural resources 

- extensive local market 

- exploitable labor force 

- capacity of state apparatus 

- technical expertise and 

- control over relevant information. 3 

Brazil undoubtedly possesses all six components and has a potential to 

manipulate foreign investments for her own development. In the same manner as 

Sweden in the 17th century, Brazil state utilises her potential for national accumulation. 

The country promotes an 'export-oriented growth' policy and attracts multinational 

capital for its industrialisation. Dependent on foreign capital as she is, Brazil maximizes 

her economic development by creating the 'triple alliance' of MNC, the government 

1 See page 28-29 in the previous chapter. 

2 See footnote 2 page 34. 

3 Evans, p. 44. 



39 

and local bourgeoisie as the fundamental force for local accumulation of capital. 1 The 

government's active role in harnessing foreign forces and transferring control and 

know-how to national capitalists is very significant in this regard. This work of Peter 

Evans confirms Wallerstein's assertion of the key role of the state in enhancing the 

status of non-core areas. 

The relation of semiperipheral state and MNC is twofold. On the one 

hand they help each other to realize a mutual benefit; on the other hand they have 

conflicting interests. Multinational corporations need the location in which they can 

make a profit. As long as the host state "does not undertake any efficacious measures 

to reduce its world-wide profit", the MNC can act in harmony with the country's 

development strategy.2 For instance, when Saudi Arabia raised its oil price in 1973 

hurting many importers, Exxon did not feel threatened and could get along with the 

country's new stance. 3 But sometimes corporation profit contradicts local interests. 

Some projects that are not profitable in themselves but create a base for subsequent 

projects or sustainable resource management may be good from a national point of 

view but absurd from the multinational perspective.4 Because various states compete 

for overseas capital, normally (especially in the period of economic expansion) MNCs 

1 Ibid, p. 32. 

2 Wallerstein, "Semiperipheral Countries and the Contemporary World Crisis", p. 
103. 

3 Ibid. 

4 Evans, p. 195. 



40 

"make great profits from their ability to play off states against one another. States 

compete to offer the best deals to attract the capital investments of the transnational". 1 

States with less competence may have to sacrifice some long-term benefits for the sake 

of immediate capital. 

Both the state and MNCs played the central roles in New Zealand's 

energy development in recent decades. This particularly held true in I970s-80s when 

the involvement of MNCs in the country's large development projects posed serious 

challenges. The argument so far, which is extracted from W allerstein and other world­

system theorists, may help to understand the interaction between the two actors and 

the forthcoming discussion will assess the interaction through the analysis of the 

political status of the two actors and their historical backgrounds. 

At the crossroads, the strength of the New 2.ealand state according to her 

international position should be considered. In W allerstein' s classification, New 

Zealand belongs to the category of "Old white Commonwealth" with Canada, Australia 

and South Africa, which forms a part of the semiperiphery.2 New Zealand's 

development as a 'semi-colonial country' is discussed specifically by David Bedggood 

and Warwick Armstrong. Both underline the dependence of New Zealand on 

imperialist countries as the main impediment for real development.3 The same basic 

1 Chase-Dunn, p.75. 

2 Wallerstein, "Semiperipheral ... " , p.100. 

3 David Bedggood, "New Zealand's Semi-Colonial Development: A Marxist 
View", pp. 285-89; and Warwick Armstrong, "New Zealand: Imperialism, Class and 
Uneven Development", pp. 297-303. Both are articles in The Australia & New Zealand 



41 

idea is shared by non-Marxist Bruce Jesson who regards New Zealand as a "satellite 

society - an appendage of Britain and still dependent on the major industrial powers". 1 

There is virtually a consensus that New Zealand's colonial background determines the 

structural imbalance of the country in the late 20th century. 

Founded as a colony to serve economic needs of Britain, New Zealand's 

early development was made possible by the state and "borrowed money". In this 

regard, the New Zealand state can be said to be 'created' in order to facilitate 

international accumulation. In most of the 19th century, New Zealand economy 

depended upon wool growing and scavenger industry (gold, timber, whaling, sealing).2 

Land acquisition was funded by foreign loans. 3 Both economic facets of the 

settlement enable accumulation in the home country by reducing wage within the 

British Isles and by accumulating interests from loans.4 These reproductions of capital 

required a colonial 'state' to maintain law and order and to "guarantee a secure return" 

of investments from abroad. 5 

In New Zealand's early history, funds for economic development were 

channelled through the state because "from the point of view of the British investors 

Journal of Sociology. 14:3 (part two) October 1978 ( Place of publication not stated). 

1 Bruce Jesson, Behind the Mirror Glass. (Auckland: Penguin, 1985) p. 30. 

2 Jesson, Behind the Mirror Glass, p. 19. 

3 Armstrong" New Zealand :Imperialism, ... ", p. 299. 

• Bedggood, "New Zealand's Semi-Colonial Development ... ", pp. 287-88. 

s See Bedggood, ibid, p. 289. 



42 

the state was a better risk than local businessmen".1 The growth of New Zealand 

economy amidst the international division of labour came "largely through the benign 

intervention of the state which often played the role of financier in nineteenth-century 

New Z.ealand. The state bought and sold land, constructed railways, settled farmers and 

financed immigration. "2 Therefore, in the absence of the industrial capitalist class, "it 

could be said that the state pioneered New Zealand capitalism". 3 

Both the extensive role of the state as well as the lack of its industrial 

capitalist class in the colonial economy are addressed by most authors; it is , however, 

the interpretation that differs among various authors. lesson simply attributes the lack 

to the unavailability of time for evolution and to the tradition of the private sectors of 

leaning on the pioneering role of the government 4 But Annstrong believes the New 

Zealand capitalist class had evolved but could not get a chance to develop. He 

confirms the existence of an industrial base for New Zealand in the 19th century as 

"[t]here was emerging an industrial sector, capable of producing and exporting a wide 

range of goods - from textiles to fann machinery and dredges - of supplying New 

Zealand rail network with locally-made locomotives and of shipping its goods in locally 

based ships."5 But the emergence was later blocked by the country's incorporation 

1 Jesson, p.30. 

2 lesson, p. 101. 

3 Ibid. 

4 See Jesson, ibid. 

5 Armstrong, 1988, p. 299. 



43 

into the British-dominated international economy. New Z.ealand then became a colony 

specialised in temperate foodstuffs for the European market.1 As a result instead of 

having "an independent, autocentric industrial capitalist" and an industrial capitalist 

class as its impetus, New Zealand pursued the path of "dependent, uneven developm­

ent"2 which was intensified by the consolidation of the 'comprador class' .3 

Therefore, for Armstrong, the symptoms are closely linked to the country's status in 

the semiperiphery, and the consequence is the reproduction of "monocultural 

extroverted specialisation in the production of primary raw material for the "mother 

country" 4 which would affect the country severely later on.5 

To support his assertion, Armstrong maintains that neither 

industrialisation nor independent development of the country occurred even when local 

capital was available during the prosperous years of 1896-1914. 

The combination of British imperial dominance and a 
collaborative mercantile- financial-landed ruling group in New Zealand, 
many of whom were local managers for British banks and finance 
houses, guaranteed the colony's full insertion into the world-system of the 19th 

-

and 20th 
- centuries as a specialist staple producer and exporter in return for the 

import of British capital, labour and manufactures. In such a scheme there was 

l Ibid. 

2 Ibid, p. 302. 

3 Ibid, p. 300. 

4 Ibid. 

5 Ibid, p. 302. 



44 

little place for an emergent industrial capitalism, nor for an autocentric pattern 
of development Instead the colony and later the neo-colony readily assumed 
its role in the international division of labour as an imperial fann." 1 

The pattern remained for almost a century. Even though the Depression 

of the 30s and the hardship experienced during the Second World War pressured New 

Zealand to develop and protect its own manufacturing industry,2 the country's 

dependence on a few agricultural exports was not altered. That was because "[t]he new 

industries produced for the local market and consumed overseas funds without earning 

any. This magnified the country's dependence on farming exports .... "3 And that has 

left New Zealand to become a fragile economy. Even nowadays New Zealand national 

income and the country's living standards still depend heavily on export earnings which 

make up around 30% of GDP,4 and the country is still largely dependent on exports 

of commodities. 5 

Armstrong clearly asserts that the "transmitted prosperity" experienced 

by New Zealand in some periods through the dependence on monocultural export to 

the imperial centres is far from the real meaning of development For one thing, New 

1 Armstrong, p. 301. 

2 Jesson, p. 38 and pp. 104-5. 

3 Jesson, p. 39. 

4 Pat Colgate and Joselyn Stroombergen, A Promise to Pay: New Zealand's 
Overseas Debt and Country Risk. Research Monograph 58 (Wellington: NZ Institute 
for Economic Research, 1993) p. 9. 

5 Ibid, p. 63. 



45 

Zealand is, "like the international capitalist peripheries, much more comprehensively 

affected by [global cyclical] downswings by the very nature of their wholehearted 

commitment to, and dependence on, external influence". 1 He implies industrialisation 

as the key to become a developed capitalist nation.2 The idea is in complete 

agreement with that of Wallerstein who portrays the world division of labour as being 

sustained by the "unequal exchange" between the core which sells high-wage products 

and the periphery which depends on low-wage product. 3 

Apart from acting as a facilitator of the integration of New Z.ealand into 

the British-led international division of labour, the New Zealand state was prone to 

domestic pressure for it did not possess enough strength vis-a-vis the local dominant 

class. This relative internal weakness reaffirmed New Z.ealand's destiny as a dependent 

economy. According to the class structure of New Zealand, the dominant class was 

that of the comprador who played a "mediating role between the local producers of 

'staple' for metropolitan markets, and foreign industrial capitalists and investors"4 This 

class depended on merchant capital or circulatory capital. It was a vital interest for the 

class to make rapid turnovers and not long-term investments.5 This dominant class 

still prevails after the Second World War. From then on, "New Zealand has been ruled 

1 Armstrong, p. 302. 

2 See Armstrong, pp. 209-300. 

3 W allerstein, "Dependence ... ", p. 71. 

• 
4 See Armstrong, p. 300. Armstrong borrows the concept of "the comprador class" 

from Paul Baran. 

s Ibid. 



46 

by the comprador mercantile-financial and farming groups which have exercised 

continuing influence over state power and policies".1 This is the reason why the 

diversification and the strengthening of the private industrial sectors always fall short 

of the apparent potential. Had the state decided to pursue policies which differed from 

those demanded by the imperial market. it could not have done so because the powerful 

domestic bloc would not permit. Therefore, "as long as the society remains under the 

direction of the groups whose class interests are best rewarded by acting as intermedi­

aries for the trading and financing of staples-exports in exchange for imported 

manufactured goods and investment capital, there will be no real move toward the 

achievement of greater independence". 2 

Showing a relative weakness against both the external influences and 

domestic bloc, the New Zealand state has resolutely led the country into the 

international division of labour, but passively. This causes mixed results over different 

periods of time. And the country's performance during these periods should be 

assessed within the framework of the "semiperipheral" concept. 

Semiperiphery 

The concept of semi periphery introduced by W allerstein is now widely 

accepted in the field of sociology of development but the real meaning of the term is 

1 Armstrong, p.301. 

2 Ibid, p. 302. 



47 

still problematic.1 W allerstein is quite clear on the necessity of the world system to 

be tri-modal and quite decisive in specifying some states as being semiperipheries. 

However, he proposes no precise rules of classification and that poses a problem for 

quantitative sociologists who demand empirical tests. To have a clearer idea about 

the definition and classification of semiperipheral countries, one has to take several 

related arguments into account. 

The concept of semiperiphery is initiated by Wallerstein to explain why 

self-contradicting world capitalism is not tom apart. This group of states depolarizes 

the system and makes a capitalist world-system run smoothly.2 This middle sector also 

exploits the periphery and thus diverts the peripheral antagonism from being directed 

solely towards the core. 3 At the same time it plays a role of peripheral zone in serving 

the interests of the MNCs from the core. By providing a location for the core 

capitalists to shift some investments outside the national boundaries to seek 

comparative advantage,4 it facilitate the reproduction of capitalism at the global scale. 

In this light, W allersteinian semi periphery is by nature a functional concept. 

1 See Chase-Dunn, p. 210. 

2 Chase-Dunn, pp. 211, 243; and Wallerstein, "Semiperipheral", p. 21. 

3 MWS, p.350. 

4 See Wallerstein, "Semiperipheral ... ", p. 97. 



48 

The lack of accurate classification of the concept has been criticised by 

Chirot. 1 And attempts have been made to clarify the notion. Snyder and Kick2 apply 

blockmodel analysis - "an empirically grounded theory of social structure" to the world 

stratification pattern. They analyze empirical data on four types of international 

networks: tradeflow, military interventions, diplomatic relations and conjoint treaty 

memberships of 118 nations from 1955-1970 and find that the regression analyses of 

the effects of network model "provides strong evidence for a core-semiperiphery­

periphery structure". 3 Steiber4 also tries to test the existence of semi periphery 

empirically by using import-export data of four commodity classes of 15 groups of 

nations, and the result follows the same line as that of Snyder and Kick. 

The two studies offer a good guideline for further analysis. However, 

when applied specifically to the case of New Zealand they both cause a certain problem 

- in what category stands New 2'.ealand? Interestingly, Snyder & Kick locate New 

Zealand within the "periphery" which is probably because the pattern of trade of New 

2'.ealand resembles that of the peripheral countries which "are integrated into the world 

1 Daniel Chirot, Social Changes in the Twentieth Century. (New York: Harcourt 
Bruce Janovich, 1977) quoted in David Snyder and Edward L. Kick, "Structural 
Position in the World System and Economic Growth, 1955-1970: A Multiple-Network 
Analysis of Transnational Interactions" in American Journal of Sociology. 84: 5 (1979) 
p. 1101. 

2 Ibid, see footnote 4 of this page, pp.1907-1126. 

3 Ibid, p. 1096. 

4 Steven R. Steiber, "The World System and World Trade: An Empirical 
Exploration of Conceptual Conflicts" in The Sociological Quarterly 20: 1, Winter 1979. 



49 

economy only through their trade with the core block .... "1 On the contrary Steiber 

applies a Frankian criterion that regards the socialist bloc as the semiperiphery and the 

OECD countries including New Zealand as the core. However, examining Seiber's 

work may contribute to an argument against placing New Zealand into such stratum. 

Grouping Australia and New Zealand together, Steiber finds that the two countries 

together represent an exceptional case of the core states, but he does not go further to 

investigate the reasons behind the exception. According to the normal pattern, core 

countries are supposed to export secondary goods to and import primary goods from 

non-core countries. Instead, the group of Australia and New Zealand, in 1973, exported 

primary goods to and imported secondary goods from the semiperiphery. It is also 

possible that if the author examined only the data of New Zealand alone, without 

grouping with Australia, the figure would more strongly confirm New Zealand's 

position in the semi periphery, judging from the pattern of trade. 

A clearer and simpler way has been suggested by Peter Evans (1979). 

He realizes the imprecision of the theoretical concept of the semiperiphery2 and 

proposes to circumvent the problem by having a crude classification of the international 

strata based on GNP figures as appears in table 3.1. 3 

1 Snyder & Kick, p. 1114. They admit the arbitrarily determination of block 
classification and deny the location of countries in blocks as definitive nor precise. 

2 Evans, p. 291. 

3 Ibid, p. 292. 



Table 3.1 Crude Classification of the International System Circa 1970 

GNP greater than 
US $ 100 billion 

GNP between $30 billion 
and$ 100 billion 

GNP between $ 5 billion 
and $ 30 billion 

GNP less than $ 5 billion 

Based on IBRD. 1973. 

(1) 
U.S. 
U.S.S.R. 
Japan 
Germany (Fed.Rep.) 
France 
United Kingdom 

(3) 
Italy 
Canada 
Germany (Dern.Rep.) 
Poland 
Spain 
Sweden 
Czechoslovakia 
Australia 

(5) 
Belgium 
Switzerland 
Denmark 
Romania 
Finland 
Norway 
Netherlands 
Hungary 
Greece 
Austria 
New Zealand 
Venezuela 
Argentina 
Israel 
etc. 

(7) 
Ireland 
Iceland 
Luxembourg 
Hongkong 
Kuwait 
etc. 

(2) 
China 

(4) 

India 
Brazil 
Mexico 

(6) 
South Africa 
Yugoslavia 
Pakistan 
Iran 
Turkey 
Indonesia 
Korea 
Philippines 
Chile 
Colombia 
Egypt 
Nigeria 
Peru 
Bulgaria 
Thailand 
Taiwan 

(8) 
Roughly 120 Third 

World countries. 

50 



51 

He classifies boxes 1 and 2 as core zones, box 8 as periphery and boxes 

3-6 as semiperiphery.1 From the criterion, New Zealand is clearly situated in the 

semi periphery. 

Wallerstein himself specifies New Zealand as a semiperiphery, not 

because of any statistical data but because of the country's structural relation to the 

core and peripheral countries. As already mentioned, New Zealand's dependence on 

core states is apparent. But does the unbalanced pattern of trade push New Zealand 

into the periphery category? Here the country's relation with peripheral areas, many 

of which are Pacific islands, points to another direction. 

Quite consistent to the role of intermediary suggested by W allerstein, 

New Zealand acted as an agent for distribution of manufactured products into the 

Pacific island region. "New Zealand's reexport trade increased after the [First World 

W]ar and reached the large total of£ 1.2 million in 1921.2 Moreover, the country 

started importing raw material from peripheral zones to serve its own industrial 

activities since the late 19th century. "In 1884 an important new industry - sugar 

refining - was begun in Auckland. Sugar made from cane grown in Fiji replaced 

imports [of refined sugar] from Mauritius.3 

1 Ibid, pp. 292-96. 

2 M.F. Lloyd Prichard, An Economic History of New 2'.ealand to 1939. (Auckland: 
Collins Bros.&. Co., 1970), p. 295. 

3 Ibid, p. 149. 



52 

Up to now, the trade between New Zealand and Pacific island countries 

has been small in amount yet reflects an unbalanced pattern. The Pacific island 

countries export only a few commodities to New Zealand market, to which most of 

the exports are primary products. Processed goods comprise only 7% of all 

Commonwealth Pacific Islands exports to New Zealand. 1 New Zealand became the 

major source of export earnings for the Cook Islands, Niue and Tokelaus, and in 1960s 

New Zealand took over 40% of Samoan export.2 The relationship between New 

Zealand and these Pacific Island countries has been characterised by the latter's 

dependence on the former. 

Apart from trade, New Zealand import of migrant labour from the 

Pacific to support the country's postwar production was obviously another example of 

exploitation. 

Normally, in an economy where increasing production induces demands 

for more labour, migrant workers can be a source of cheap labour which will "obviate 

the need for employers to increase wages to [ other workers already available in the 

labour market but become relatively more scarce]" .3 Migrant labourers work for 

wages as long as the economy demands and become unemployed when there is a shift 

in the form of industrial production or a cyclical downturn. But employed or not, they 

1 Michael Bellam, A Question of Balance: New Zealand Trade in the South 
Pacific. (Wellington: New Zealand Coalition for Trade and Development, 1980), p. 7. 

2 Ibid, p. 14. 

3 Robert Miles, Capitalism and Unfree Labour: Anomaly or Necessity?. (New 
York: Tavistock Publications, 1987), p. 146. 



53 

are usually deprived of legal status as a citizen, they are excluded from political 

relations and then become alienated in the society where they come to sell their labour 

and where the social structure is more complicated than they were brought up in. 1 In 

such cases, the inferior status of migrant workers shows that they are exploited to serve 

the benefit of the host economy. 

The case of New Zealand's import of Polynesian labour force reaffirms 

this typical trend in the capitalist mode of production. The story can be traced back 

as far as late 18th century and remains until recently. Polynesian labourers were 

attracted to the production of salted pork in New Zealand (and Tahiti), one of the 

earliest industries in the Pacific, to supply settlements in Australia in 1788. 2 In the 

postwar period, another wave of labour migration to New Zealand began. The 

Polynesian ethnic groups were attracted to the assembly lines and fill semi and 

unskilled jobs because of the needs of the Fordist mass production system. 3 From 

1950s on Pacific Islanders, at first Cook Islanders and Fijians and some years later 

many other countries, have been integrated into the New Zealand working class 

according to the periodic demands in industry. They work in the industrial areas or in 

some service sectors, i.e., hospital kitchens and laundries, and live in working class 

1 Miles, ibid, pp. 146-47. 

2 Jacqueline Lecki, "An Overview of the Pacific Labour Reserve" in Clive Moor, 
Jacqueline Lecki and Doug Munro (eds.)Labour in the South Pacific. (Townsville: 
James Cook University of Northern Queensland, 1990), p. xxx. 

3 Paul Spoonley, "Economic Transformation and the Racialisation of Labour". 
1992, unpublished paper, pp. 16-18. 



54 

residential area. 1 The number of migrants from Polynesian countries during 1971-86 

is given in table 3.2 which reveals a net inflow of migrants from these countries to 

New Zealand. 

Table 3.2 Net Migration Gains and Losses to New '.Zealand of Polynesian-Born People, by Migrant 
Category, 1971-1986. 

Total Polynesian Permanent Long-term Short-term Total 
in period of NZ non NZ non 

residents residents residents residents 

1971 - 76 4,973 -343 1,525 -1,200 18,667 23,662 

1976 - 81 2,118 - 1,873 1,070 -1,133 6,766 6,948 

1981 - 86 5,343 -340 261 45 9,517 14,856 

1971 - 86 12,434 -2,526 2,856 -2,278 34,950 45,426 

Source: Paul Spoonley, "Polynesian Immigrant Workers in New '.Zealand", in Moor, p. 156. 

Imports of labour from Pacific Islands enabled postwar industrialisation 

in New Zealand and the decisions and process concerning migration was left to private 

hands. "The state did little to oversee the migration and it was left to voluntary 

agencies and church organisations to look after the welfare of the migrants", 2 welfare 

which would have been the responsibility of the state to provide to the labour if they 

were recruited within New Zealand. And when the recession came, these workers were 

targeted to be a scapegoat. Since 1974, the government has become very strict about 

the "overstayer" as well as restricting immigration from Pacific Islands. Some workers 

1 Paul Spoonley, "Polynesian Immigrant workers in New Zealand" in Moor, Lecld 
and Munro, Labour in the South Pacific. p. 157. 

2 Ibid. 



55 

were repatriated and the remainders have suffered either lay-offs or racial discrimina­

tion or both. 1 

Put together, trade and migration patterns articulate the disparity in 

relationship between New Z.ealand and South Pacific countries. Although New Zealand 

has not played a political imperialist role in the region, the available data indicate that 

the appropriation of surplus-value from the Pacific countries contributes to a certain 

level of capitalist development in New Zealand. This relationship is clearly that of the 

semiperiphery and the periphery. 

The arguments thus far have proved the position of New Zealand as a 

semiperipheral state and not a core country as many may regard. This proof is crucial 

for this thesis because it is a key factor in analyzing the New Zealand state role in 

relation with the MNCs. 

New Zealand has hitherto never shifted her position within the world 

hierarchy, which only a few states have. However, incremental changes occur over 

time in each stratum. To have a rough idea about what has become of New Zealand 

over the last two decades, I try to construct a table similar to that of Evans to point out 

the direction of the development. According to table 3.3, Australia and Korea show 

impressive progress compared with the countries' ranks in 1970. After 20 years, New 

Zealand remains in the same range - GNP between US$ 5 billion and $30 billion with 

Details of marginalisation of specific ethnic groups' labour force through 
economic transformation in New Zealand , see Spoonley, 1992. 



56 

per capita GNP greater than $1,000. But because many countries in this semiperi­

pheral area have shown a marked improvement statistically, it can be said that New 

Zealand's relative position vis-a-vis other semiperipheral states has declined. 

Table 3.3 Crude Classification of the International System circa 1990 

Per Capita GNP Per Capita GNP 
Greater than $1,000 Lesser than $1,000 

(1) (2) 
GNP greater than U.S. 
US $ 400 billion Japan 

F.R.Germany 
France 
Australia 

(3) (4) 
GNP between $100 billion Italy China 
and $ 400 billion United Kingdom India 

Canada 
Spain 
Switurland 
Netherlands 
Korea 
Sweden 
Belgium 
Mexico 

(5) (6) 
GNP between S 30 billion Austria Brazil 
and S 100 billion Finland Indonesia 

Denmark Turkey 
South Africa Thailand 
Greece Poland 

(7) (8) 
GNP between S 5 billion Israel Egypt 
and S 30 billion New Zealand Pakistan 

Hungary Philippines 
Colombia 
Romania 
Czechoslovakia 
Chile 
Argentina 
Peru 

Based on IMF, International Financial Statistics Yearbook, 1992. 



57 

New Zealand's descending status in the international economy is 

confirmed by the rating from the Standard and Poor' s Corporation. Once the country 

got the top rate of AAA but since May 1983 New Zealand has been rated AA minus .. 

"When New Zealand was last downgraded in March 1991, Standard and Poor's 

rationale was the continued vulnerability to adverse international developments, the 

level and maturity of external debt, and the uncertain timing and extent of the benefits 

from current refonn programmes".1 This decline in relative status after the 1970s 

implies structural problems overshadowing New Zealand economic strategy. 

Since New Zealand enjoyed a high living standard in the past, and that 

resulted from exporting commodities to Britain, dependence on the British market 

actually induced growth in New Zealand's economy. Likewise, 17th century 

Switzerland's dependence on the French market helped develop her export industry and 

brought the country up to the semiperipheral status.2 But what decides the sustainabi­

lity of economic development of both New Zealand and Switzerland is not only the 

profit margin that the production for export generated but also whether and how the 

profit is reinvested in the economy. And here, New Zealand's experience explains her 

relative downfall. Merely windfall profits cannot sustain continuous development. 

New Zealand's cl~ structure and relatively weak state vis-a-vis external 

and internal pressures account for the inability of the country to pursue an autocentric 

development As earlier mentioned, the period of downturn of 1930s-40s boosted New 

1 Colgate and Stroombergen, A Promise to Pay .... p. 5. 

2 MWS II, p. 200. 

·' 



58 

z.ealand manufacturing industries, but because of the need for overseas funds, that only 

magnified the co