Salient. Victoria University Student Newspaper. Volume 38, Number 25. 2nd October 1975
The financial sector of the New Zealand economy is heavily controlled by foreign interests. The financial sector controls credit and investment to a large degree in all sectors of the economy. Development of the economy, and society, in the interests of New Zealanders depends very largely on the use of money controlled by the finance sector of the economy. With foreign interests being predominant, and with the foreign corporations being large enough to dictate to New Zealand industries and even the New Zealand government, then New Zealanders can only expect the best if our interests coincide with those of foreign bankers, In many cases they do not.
There are four main types of business in the finance sector. They are Trading Banks (including their subsidiary Savings Banks), Merchant Banks, Finance Companies and Insurance Companies.
There are five Trading Banks, four of which are foreign. The foreign banks do 60% of the banking business in New Zealand.
New Zealand has six merchant banks all of which have substantial linls with overseas firms. Merchant Bankers raise large loans for development purposes, arrange short term loans particularly for importers or exporters, and provide working capital in the form of loans from one company to another. Merchant Banks are playing an increasingly crucial role in determining the type of economic development that occurs in New Zealand, and hence the type of society we have.
The top 13 finance companies in New Zealand do 90% of the business in this field. Of the top 1310 have substantial foreign links. These companies loan money for hire purchase, particularly on commodities like cars, invest in property (i.e. speculate) and industry, provide loans for the purchase of property and industrial equipment, and for property development (both high rise buildings and housing).
The insurance companies invest in industry, lend mortgage money to prospective home owners, and are also compelled by law to invest a certain amount in Government and Local Body Securities, as are all the other types mentioned. There are 76 insurance companies in New Zealand, 46 of them are foreign controlled. But of the largest 10 in terms of their assets, 9 are foreign controlled.
On the surface, it appears that there are a large number of sources from which to get finance for development. But a small number of men have control over the finance sector, and hence can determine what type of developments may take place by controlling the flow of investment and credit. How do they make their decisions? According to one executive of a transnational corporation, such a person must "set aside any nationalistic attitudes and appreciate that in the last resort his loyalty must be to the shareholders of the parent company, and he must protect their interests even if it might appear that it is not perhaps in the national interest of the country in which he is operating". Dr. W.B. Sutch commented on this: "From the viewpoint of the individual state the supranational frustrate economic planning. Governments have less and sometimes no control over the structure of their economy — what industries are to develop and at what level of performance. As others have observed, governments are expected to improve living standards, including the environment and social services at the optimum development of the individual; they are expected to promote full employment, keep prices more or less under control, and foreign payments balanced. Supranational firms are not very interested in these objectives."
What at first seems a bewildering array of financial institutions very quickly sorts itself out into subsidiaries of a few important banking interests.