GUEST BLOG: Ian Powell – Crony capitalism

On 21 November 2021 Winston Peters posted on X (Twitter) that New Zealand has a government that “…has an unhealthy penchant for crony capitalism and protecting their mates”. This followed a media release from him 10 days earlier as Leader of New Zealand First.

The context was the findings of the Auditor General’s look into saliva testing procurement during the height of the Covid-19 pandemic.

He claimed that the Auditor-General (John Ryan) had confirmed his quoted words above in respect of the Labour government under Prime Minister Jacinda Ardern.

Overcooked claim

A closer examination, however, reveals that Peters has overcooked the Auditor-General’s investigation. One simply needs to read the latter’s concluding letter to the Ministry of Health (10 November).

Winston Peters overcooked cronyism accusation

In the independent statutory officer’s own words:

As you are aware, concerns were raised with us regarding the Ministry of Health’s procurement of Covid-19 saliva testing services. Those concerns were broad and included:

• the Ministry’s decision not to appoint an external probity auditor to support the procurement;
• the Ministry’s management of probity during the procurement;
• the Ministry’s choice of members for its procurement panel and management of conflicts of interest;
• the communication provided to tenderers throughout the procurement process, particularly regarding delays;
• the possibility of a pre-determined procurement outcome;
• the provider the Ministry selected to deliver saliva testing, and the delays in announcing this;
• the slow pace at which saliva testing was procured as part of the public health response; and
• the slow pace at which saliva testing is being implemented despite the urgency surrounding the procurement.

As a result of these concerns, we met with Ministry staff and sought information about aspects of the procurement so we could understand how it was managed and how final decisions were made. We also looked at the internal assurance review of the procurement process carried out by the Ministry. The review outlined opportunities, and an intention for improvement in the Ministry’s procurement practice. The Ministry told us it is taking steps to improve how it manages future procurements.

Having reviewed information from the Ministry, we consider further inquiry is not warranted at this time. However, I have identified serious concerns about aspects of how this procurement was managed…

Auditor-General John Ryan found no further investigation required and no ‘crony capitalism’

What can be taken from the Auditor-General is that:

• the salvia procurement process was undertaken by the Ministry of Health on behalf of but not by the former government;
• the Auditor-General had some serious concerns about the process much of which had been addressed by an internal Ministry review;
• the Auditor-General saw no need to investigate further; and
• there was nothing in his report to suggest cronyism or any link with capitalists or capitalism (whatever was meant by Peters’ choice of language).

It should also be noted that that the procurement process was undertaken in the midst of an unprecedented pandemic. The obvious challenges this created for a perfect process appears to have passed Petters by.

So, what is crony capitalism

Nevertheless, Winston Peters’ overcooking still raises the question of what ‘crony capitalism’ is. The expression certainly has a captive ring to it.

Cronyism is a pejorative term used to describe a situation in which businesses profit from a close relationship with those in government.

This can include government grants, tax breaks, and undue influence over the deployment of public goods (such as contracts for public works). Private wealth accumulation is the outcome.

Ferdinand Marcos senior gave the term ‘crony capitalism’ greater currency

This relationship between business and governments gets called ‘crony capitalism’. It first became extensively used in the 1980s to describe the Philippine economy under its corrupt dictator Ferdinand Marcos (father of the current elected president).

‘Crony capitalism’ also had a significant public impact as an explanation for the Asian financial crisis of the late 1990s.

Pot calling the kettle black…many times

Pot in overdrive calling the kettle black

Winston Peters overcooked claims of crony capitalism by the former Labour government should be compared with the relationship between business profit interests and the current coalition government of which his party is a member and of which he was until recently deputy prime minister (now number three in cabinet rankings).

The track record confirms that the pot has been caught out calling the kettle black numerous times. That is, what the accused is criticised for is being practiced by the accuser. Hypocrisy packaged as an ancient proverb.

‘Big Tobacco’ closely connected with NZ First

This became quickly obvious soon after the 2023 general election when NZ First deputy health minister Casey Costello led the move to repeal New Zealand’s previous world tobacco legislation and to subsequently introduce tax breaks and other financial benefits for the industry.

The links between NZ First and the tobacco industry were soon exposed by first class mainstream media investigative journalism, such as Stuff’s Andrea Vance, and the academically rigorous Public Health Communication Centre (its director is experienced epidemiologist Professor Michael Baker).

In a nutshell, key current ‘Big Tobacco’ senior staff were previously, before the last election, holding senior NZ First staff positions and Costello’s advocacy for and defence of her actions closely resembled industry talking points.

It should also be noted that senior National Party MP Chris Bishop is a former tobacco industry lobbyist prior to becoming an MP while Prime Minister Christopher Luxon has a family connection with the same industry.

David Seymour: bad taste jokes over ‘benefits’ of smoking

ACT as the third party in the governing coalition also can’t be discounted from this cosiness as evidenced by its leader David Seymour’s bad taste jokes at a conference in London about the fiscal benefits of tobacco as reported by Sam Sachdeva in Newsroom (21 June): Seymour’s ‘light up’ message alarms tobacco researchers.

 ‘Crony capitalism’ in carbon emissions

Reducing tobacco control and giving the industry perks is not the only business recipient of beneficial government support.

Director of the newly established and invaluable Integrity Institute Dr Bryce Edwards has been active in exposing this in other areas through the Institute’s online publication Integrity Briefing.

Bryce Edwards actively exposing ‘crony capitalism’ under current government

Drawing upon excellent investigative journalism by Newsroom’s Marc Daadler, his Integrity Briefing (8 April) exposed a conflict of interest between NZ First Cabinet Minister Mark Patterson over carbon emissions: NZ First carbon emissions conflict of interest.

In Edwards’ words:

Mark Patterson, a New Zealand First MP-turned-Cabinet Minister, whose private business interests have collided with his public duties. Patterson sat in on crucial Cabinet discussions about climate policy – despite personally standing to gain from those decisions. The conflict involves Ngapara Farms Ltd, a company Patterson co-owns that is registered in the Emissions Trading Scheme (ETS) and earns revenue from carbon forestry. In other words, Patterson has a pecuniary interest in the price of carbon credits, yet he participated in setting those very policies.

Say no more!

ACT making hay while sun shines on agribusiness

Edwards does not just focus on NZ First MPs. ACT is also making hay while its political sun shines bright, particularly through former Federated Farmers President Andrew Hoggard’s strategic placement in food safety and agriculture.

ACT MP Andrew Hoggard strategically placed in agribusiness cabinet portfolios

On 3 April, drawing on reporting by Radio New Zealand’s Anusha Bradley, in an Integrity Briefing Edwards discusses how diary lobbyists got their way with government over a baby milk formula controversy, with particular reference to Hoggard as Minister of Food: Diary lobbyists get their way over baby milk formula.

A day later, again drawing on excellent investigative journalism by Anusha Bradley, Edwards published another Integrity Briefing on Hoggard and conflict of interest:   Andrew Hoggard, conflict of interest and complacency.

In Edwards’ words:

Hoggard’s case is a wake-up call: it’s time to shift from box-ticking to true accountability ensuring that our ministers serve the public interest first and foremost – and are seen to do so at all times.

Dr Bruce Curtis does deep dive into agribusiness and corporate welfare

On 3 June, this time written by Dr Bruce Curtis, formerly a Professor in Sociology and Social Policy at Waikato University, an Integrity Briefing did a deep dive into agribusiness and corporate welfare under the current coalition government:    Corporate welfare for agribusiness.

It is worth quoting from parts of it beginning with:

The new National-led Government elected in late 2023 has essentially given the industry a free pass on agricultural emissions.  

Then:

It’s hard to imagine a more textbook case of vested interests at work. The Associate Agriculture Minister is now Andrew Hoggard, a former president of Federated Farmers (the industry’s summit lobby group) – a revolving door if ever there was one. The Government’s own press release openly states “agriculture is the backbone of our economy” and that profitability comes first.       

And:

We can already see the real-world effects: the new Government is reviewing or repealing freshwater regulations that farmers claimed were unworkable, delaying tougher winter grazing rules, and promising no new taxes or costs on farmers. They even halted the push to include agriculture in the ETS. This is regulatory capture in action – when an industry essentially dictates the terms of its own oversight. 

His conclusions on the role of KPMG in promoting the interests of agribusiness with an obliging government:

And who is facilitating all this? KPMG itself is neck-deep in these arrangements. This is how they describe themselves: “Whether you’re a farmer cooperative, food manufacturer, technology innovator, financier, or policymaker, KPMG can help you move from insight to action. Together, we can reimagine and help build a food system that delivers for people, planet, and profit — resiliently and equitably.” In short, KPMG has a vested interest in the agribusiness status quo: the more complex and drawn-out these transitions (to lower emissions, better water quality, etc.) are, the more consulting work arises.

The Agenda does not disclose KPMG’s client interests, but it’s well known that Big Four firms, including KPMG, make millions from Government contracts and industry consulting. In the agribusiness sector, you can bet KPMG is advising both the Government and the companies on either side of many deals – a potential conflict of interest that remains unspoken.

Further context

Bryce Edwards also reports the appearance of new terminology (‘chumocracy’ and ‘cosyism’) to provide further context to amplify the business interests-political governance relationship in an Integrity Briefing published on 21 May: ‘Chumocracy’, ‘Cosyism’ and suppression.

Professor Robert MacCulloch is an economist who was pressured to shut down his personal website because he had critiqued  the cosy relationship between cabinet ministers,  the banking sector and the New Zealand Initiative (a pro-corporate rightwing business organisation originating out of the Business Roundtable which was influential in the expansion of neo-liberalism in the 1980s and 1990s).

To complete the context Edwards discussed the significance of the 2025 National Business Review ‘rich list’ in terms of who runs the country in an Integrity Briefingpublished on 9 June: Who runs the country.

A Trumpian quality

Lighter version of Trumpian crony capitalism?

There is a certain Trumpian quality about all of this, at least a lighter version of it. What Winston Peters might call crony capitalism when not in government, is flourishing under the government he now partly leads.

Similar to the United States ‘Crony-in-Charge’, it is characterised by being  ‘in-your-face’ (blatantly so).

The crony capitalism Peters accused the previous government of committing involved flaws in a procurement process undertaken in the difficult circumstances of being in the midst of a pandemic. It did not involve lack of integrity such as businesses  profiteering from a close association with government.

On the other hand, issues over lack of integrity and profiteering from close associations with government are increasingly obvious under Peters’ current government ‘watch’. This is obvious in the case of the tobacco industry, carbon emissions and agribusiness.

The mind boggles over what might be happening in pharmaceuticals with former ‘Big Pharma’ senior employee Todd Stephenson.

Now, as an ACT MP, he is a health undersecretary for pharmaceuticals, including the regulator MedSafe and the drug purchasing agency Pharmac.

Perhaps time for another deep dive Bryce Edwards?  Just saying.

 

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Political Bytes