Brooking T. The History of New Zealand

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114

The

History

of New Zealand

tries.

The rate of unemployment rose to high of around 100,000 or about

15 percent of the workforce. Even the most liberal calculations cannot lift

the figure above around 20 percent. This represents a very serious figure

by New Zealand standards, but it is a relatively modest one compared

with Sydney's 25 percent, let alone the 33 percent plus experienced in the

industrial northeast of the United States, the manufacturing regions of

Britain, or the Ruhr in Germany. In short, the New Zealand figure was

similar to other primary producing countries such as Denmark and Ar-

gentina, or the farming and mining state of Western Australia among its

nearest neighbors.

This relatively modest level of suffering is important because it meant

that the Depression unfolded in New Zealand as a very uneven experi-

ence.

Big sheep farmers, for example, fared well because they took ad-

vantage of low prices and labor costs to increase their flocks and improve

their properties. Some also splashed out on luxury cars and took cruises

to Asia. Manufacturers such as the Fisher and Paykel who produced do-

mestic appliances also benefited from low wages and reduced costs. Well-

established farmers with low debt levels got by. So too did city dwellers

who held onto their jobs. Some, like my own family, made modest sacri-

fices such as putting the car up on blocks, cutting off the phone, and

dismissing the servant. Yet sales of electric stoves and water heaters rose

through the worst years of the Depression. Students must remember that

this depression was all about deflation. Consequently, costs went down

along with wages. The new prime minister George Forbes, who replaced

Ward, and Coates formed a coalition government in September

1931.

They

reduced the salaries of public servants by 10 percent. This caused incon-

venience, but falling prices compensated the affected groups.

Things were different, however, for professionals and white-collar work-

ers who had a long way to fall. Lawyers and dentists, for example, found

that their work was nonessential to many, and they too had to join the

work schemes building roads, digging tunnels, planting forest, and mak-

ing gardens. The unskilled as always had a hard time of it and resented

being broken up from their families by the notorious Number Five Scheme,

which sent them off to camps in remote areas. Women experienced the

brunt of declining wage packets and were the first to lose their jobs. They

had to improvise and make do much like their pioneer grandmothers.

Abortions increased as families could not feed extra children, and the

marriage rate dropped alarmingly. The birthrate consequently hit an all-

time low of little over two children per family. Most humiliating of all,

many white-collar employees of banks, insurance companies, and gov-

ernment departments lost their supposedly safe jobs and had to forfeit

The Most Loyal Dominion Loses Its Way,

1914-1935 115

their mortgages, sell their suburban houses, and move back into rental

accommodations in the central city. Similarly, small dairy farmers were

hard hit, and many simply walked off their land, never making it into the

official bankruptcy statistics. Maori continued at the bottom level of so-

ciety and suffered from the decline in casual work.

All this proved very traumatic in a land that Richard Seddon had de-

scribed as "God's own country." The New Zealand dream was in tatters,

and the whole point of emigrating so far from Britain seemed lost. In such

an atmosphere, the great majority of people began to believe that everyone

was suffering. Many accepted the Labor Party's argument that the system

and not individuals should be held responsible for the widespread misery

and that the country, therefore, required immediate remedial action to

restore its fortunes.

Protest took several forms. Brief riots flared in Dunedin, Auckland, and

Wellington early in the winter of 1932, but direct action never held much

appeal to phlegmatic New Zealanders. Most rejected extreme solutions

such as communism or fascism. Writers and artists joined in the criticism

of the old order, but in a compassionate, humanitarian way rather than

by developing a Marxist critique of the capitalist system like their Aus-

tralian equivalents. The Labor politician John A. Lee wrote stirring realist

novels about his poor childhood and First World War experiences. The

poet A. R. D. Fairburn criticized financial orthodoxy in a long poem en-

titled "Dominion," but his alternative was Douglas Credit, not socialism.

(Douglas Credit originated in Alberta and advocated an increase in the

money supply as a way of solving the problem of underconsumption.)

Novelist and poet Robin Hyde (real name Iris Wilkinson) wrote both re-

alist and ironical accounts of family life and told the story of an ordinary

First World War soldier in Passport to Hell and Nor the

Years

Condemn. She

lived an unconventional life by raising a child outside marriage but dis-

appeared from the scene to visit China and Britain before committing

suicide. The predominately male writers of the time tended to marginalize

her, but recently she has won stronger critical endorsement than any of

the other writers of the 1930s. Other poets, such as Dennis Glover and

Eileen Duggan, the novelist John Mulgan, and short-story specialist Frank

Sargeson continued to critique the inhumane aspects of orthodox finance

and the inadequacy of the puritanical moral code throughout the decade.

New painting also seemed to come of age in this era. Once again, artists

actually had the time to paint in the midst of so much unemployment.

Under the influence of the English trained teachers Robert Field and

Christopher Perkins, women painters such as Rita Angas and Evelyn Page

began to portray a distinctive New Zealand landscape rather than a

116

The History of New Zealand

watered-down version of English and European landscapes. Toss Wollas-

ton and Colin McCahon pushed these experiments in a more abstract

direction, while Lois White made explicit critiques of both capitalism and

militarism in her symbolist paintings.

The Labor Party seized its chance after the riots by adopting a similar

humanitarian stance. Rather than revolution, Labor politicians promised

pragmatic reform. First, though, they had to wrest control of the unem-

ployed from the communists before advocating a radical program of re-

form. They took a very different line from the Marxism of 1916, however.

The nationalization plank, especially of land, had been dropped as early

as 1927, and Labor became much more of a centrist party thereafter. They

were above all humanitarians who simply wanted to bring relief to de-

spairing, ordinary New Zealanders. Once the Christian Socialist Michael

Joseph Savage took over Labor Party leadership on the death of the more

militant Harry Holland in 1933, the party softened its appeal further. Ba-

sically Labor advocated policies not unlike those of FDR and the New

Deal. Labor politicians may not have read Lord Keynes, but intuitively

they realized that the economy had to be reflated through a sustained

policy of public works. New Zealand desperately needed an overhaul of

its aging housing stock, and this rebuilding program would provide many

jobs.

They also wanted to establish a maximalist model of the welfare state

to provide free health care and education and adequate pensions. Their

financial spokesman, Walter Nash, costed everything to the last penny

and countered coalition government complaints that Labor was finan-

cially irresponsible. By 1934 the churches also fell in behind Labor, and

Ratana made an alliance with the party to improve the lowly position of

Maori.

The coalition government, which had won the 1931 election comforta-

bly enough by 51 seats to Labor's 25, became increasingly unpopular. It

did not introduce a dole until as late as 1934 and employed an army of

busybodies to report on any visits to the pub or racetrack made by men

on relief work. Coates did take some initiatives. In 1933 he removed the

New Zealand pound from parity with Sterling to make exports more com-

petitive, and he provided mortgage relief for farmers, hoping that a re-

vitalized farming industry would trickle benefit through to the rest of

society. He also established a Reserve Bank in

1933

to control fiscal policy

in a more efficient manner and actually assisted some economic recovery.

The public, however, cared little for such technical achievements and

turned increasingly to Labor, which at least seemed to have a plan. Sav-

age's vague pronouncements on making interest-free loans available and

ending unemployment through a concerted public works program gave

The Most Loyal Dominion Loses Its Way,

1914-1935 117

hope to many, and his party won comfortably in 1935 as the political right

argued among

itself.

A rather stern Democrat Party split the conservative

vote,

allowing Labor to win 55 seats and 47 percent of the vote against

the coalition's

seats and 6 independents. The election of this new radical

government did not signal either revolution, as its supporters hoped, or

disaster, as its opponents feared, but rather an energetic burst of reform

within the strict confines of mainstream capitalism.

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The Struggle for Greater

Independence, 1935-1973

BUILDING THE WELFARE STATE

Labor had a clear mandate to undertake a program of rapid reform, but

even so the new government surprised its opponents with the energy and

efficiency with which it implemented a raft of new policies. Critics laughed

at the fact that the new cabinet was easily the most working class in New

Zealand's history. Prime Minister Savage was a barrel washer from a

brewery; deputy leader Peter Fraser had been a wharf laborer; finance

minister Walter Nash had worked as a small storekeeper and traveling

salesman; and the rest of the group was made up of four miners, a French

polisher, a boot clicker, and a railway caterer. Only one lawyer and one

farmer, the groups that traditionally dominated parliamentary politics,

served in Savage's cabinet. The ridicule only seemed to inspire this un-

likely but remarkably well-read group to get on with the big job of putting

the country to rights.

Labor's main aim was to make the economy less vulnerable to the va-

garies of international markets through the encouragement of import sub-

stitution industries, such as domestic appliance manufacturing, and via

greater control and planning of production and marketing. This insulated

economy, condemned by its critics as fortress New Zealand, would

defend

120

The History of New Zealand

every citizen from misfortune by building a full-scale welfare state. Savage

and Fraser promised cradle-to-grave security, and the ebullient John A.

Lee went one further by promising protection against poverty from erec-

tion to resurrection. His exuberance offended the straitlaced Savage and

Fraser but caught the mood of the electorate very accurately.

First, though, Labor had to get the economy moving again if the nation

ever hoped to defy orthodox economics by achieving full employment.

Coates's healthy surplus of £38 million of overseas reserves helped ex-

pand public works and enabled government to undertake a major pro-

gram of building state houses. Men on relief work building roads, digging

tunnels, and planting forests were immediately paid a full award wage

in an endeavor to restore consumptive power. The old Red Fed Bob

Sem-

ple

guided all the public works with enthusiasm and flair, but the more

energetic Lee soon outshone even the colorful Australian soapbox orator.

Even though Lee worked as an undersecretary outside the cabinet, he

oversaw the construction of

5,000

new houses by 1939. He worked closely

with the building magnate James Fletcher and personally ensured that

every house was well built out of permanent materials. In a deliberate

endeavor to counter criticism that socialism encouraged colorless con-

formity, Lee insisted that every house should be a little different from the

others in its architectural design. Lee built one block of high-rise flats in

Wellington. It so horrified him that he ordered all other state house to be

built as stand-alone structures on their own sections of land, complete

with lawns and gardens. He also ensured that these houses were scattered

around older suburbs, rather than being concentrated in ghettos of new

housing. In this manner he adhered to the New Zealand dream of owning

one's own piece of land but, in the process, pushed the rentals out of the

reach of the really poor. New Zealand, thereby, failed to develop anything

equivalent to the council housing estates of Britain.

Finance Minister Nash tried to complement all this industry by devel-

oping a so-called mixed economy in which the state and private enterprise

worked closely together. In

1936

he nationalized the Reserve Bank to gain

firmer control of fiscal policy and passed the Primary Products Marketing

Act to tighten central control of the various marketing boards. As prom-

ised at the 1935 election, he also introduced a system of guaranteed prices

for butter and cheese to cushion struggling dairy farmers against adverse

terms of trade. His idea of maintaining a steady average price (set at the

extraordinary figure of 12 and

9/16

of a penny per pound of butter fat and

6 and 9/16 of a penny per pound of

cheese—approximately

15 cents in

American dollars) enabled farmers to plan for the future and recommence

programs of farm and herd improvement. This idea of putting away sur-

The Struggle for Greater Independence, 1935-1973

121

plus monies for a rainy day came as much from the Old Testament story

of Joseph and the seven fat and seven lean years as it did from any socialist

text. Initially the scheme proved popular with dairy farmers, some of

whom threw over traditional prejudice against the left and voted Labor

in 1935. Once prices rose sharply in response to the demands of war,

however, farmers rejected the idea.

Passing legislation with a hefty majority is relatively easy, but insulating

and diversifying a colonial-style economy is a much more difficult task.

Nash soon found that English investors did not like the idea that New

Zealand might develop import substitution industries and so deprive En-

glish manufacturers of a captured market. They showed their displeasure

by withdrawing funds. By 1938 overseas reserves collapsed to a little over

£8 million. Nash had to visit London to disabuse investors of the idea that

New Zealand had engaged in an extreme Soviet-type experiment. He had

some success, and things improved a little, but not before the crisis forced

him to introduce exchange and import controls in December 1938 as a

kind of surrogate

tariff.

The emergency measure enabled the minister of

finance to limit the outflow of funds from New Zealand and introduce

some restriction on imports, especially if they threatened to exceed export

returns. This makeshift solution worked surprisingly well and provided

New Zealand industry with much shelter until the radical reforms of the

1980s.

Labor, meantime, had carefully costed the implementation of a full wel-

fare state before the exchange crisis broke. In a masterly display of political

acumen, Savage announced on April

2,1938,

that his government would

introduce new and improved pensions, free education, and free medical

services. The electorate responded enthusiastically. The famous New Zea-

land novelist Janet Frame recorded a very common reaction: on hearing

the broadcast, her father threw the family's many medical bills onto the

fire.

This promise earned Labor a huge popular mandate of 56 percent at

the

1938

election, and the party won seven new seats even though it lost

nine seats it had held in 1935. The so-called dairy seats reverted to their

traditional patterns, voting for the new, mass-based National Party formed

in 1936. National's complaint that the welfare state constituted applied

lunacy, rather than the applied Christianity claimed by Savage, failed to

gain traction with the clear majority of New Zealanders, and the welfare

state was erected rapidly in 1939. Income tax literally doubled overnight

to around 15 cents in the dollar equivalent, but the majority accepted this

tax quite happily in return for greater economic security.

Nash's financial orthodoxy, though, meant that the government did not

introduce a full, non-means-tested retirement pension at age 60, as Savage

122 The History of New Zealand

wanted. Staunch opposition from the doctors via their pressure group, the

British Medical Association, also forced a compromise over delivery of

health services. Labor did introduce free hospital treatment, but the pa-

tient still had to pay half of the fee for a visit to the doctor. This system

worked well and discouraged abuse while guaranteeing doctors a com-

fortable living. Dentists too fared well, in that Labor never introduced free

dental services. Instead, government greatly expanded the School Dental

Nurse Service introduced in 1920 and made free treatment available to

adolescents. Many dentists got their start under this heavily subsidized

scheme.

Labor did rather better with education, making virtually

free

secondary

education compulsory for everyone under 15 in 1944. University educa-

tion became much cheaper and more widely available, and the dynamic

new director-general of education, Dr. Clarence

Beeby,

overhauled the

curriculum. Peter Fraser always had a deep interest in education and

called a conference of international experts to overhaul the system in

1937.

He followed their recommendations in an effort to make the system less

narrowly academic and both more relevant and more enjoyable for all

citizens. New subjects such as social studies were introduced in 1945 to

replace the old rote-learned history and geography, and math and science

teaching received a major overhaul. As a result, most New Zealanders

received a solid education thereafter for over a generation.

Labor's sympathy for education constituted just one area of reform in

the attempt to create a youth state. A family allowance of 10 shillings ($1)

per child was introduced in 1946 to encourage the building of larger fam-

ilies.

This supplement equaled another half a wage coming into the house-

hold if parents raised four children. Young couples were also entitled to

generous tax breaks and cheap housing loans at a modest 3 percent inter-

est from 1946. This

pro-natalist

policy worked, and New Zealand, like

most of the Western world, experienced a spectacular baby boom after the

war. Welfare historian David Thomson argues that in combination these

benefits seriously advantaged the young adults and children of the late

1940s over subsequent generations. Feminist historians also complain that

the high family wages paid to men since 1936, in addition to the family

allowance, discouraged married women from entering the paid workforce.

The first Labor government achieved a notable record in two other key

areas:

pursuit of a more independent foreign policy, and patronage of

cultural life and the arts. Savage, who was an Australian of Irish Catholic

descent, did not hold nearly as fierce an allegiance to the British Empire

as did the likes of William Massey. Similarly, many of his colleagues

shared a rather internationalist outlook. As a result, during the heady

The Struggle for Greater Independence, 1935-1973

123

years of

1936

and 1937 New Zealand pursued a line on foreign policy that

deviated sharply from the policy followed by Britain and other Dominions

within the empire. Under Savage's and

Fraser's

leadership, New Zealand

advocated the cause of collective security and strongly supported the

League of Nations. In 1936 New Zealand fell out with Britain by con-

demning Mussolini's invasion of Abyssinia (Ethiopia) and supporting a

League of Nations intervention in the Spanish Civil War.

The Labor government loathed fascism and condemned General Franco

outright, much to the embarrassment of British diplomats. At the Imperial

Conference in May 1937, meek, loyal New Zealand amazed the Austra-

lians by criticizing both the League and the British government for not

doing more to end the Spanish Civil War. In September New Zealand's

refusal to recognize Mussolini's government of Abyssinia and stern criti-

cism of appeasing Hitler further irritated the British. This independent

attitude would emerge again under Labor governments in the 1970s and

1980s in opposition to French nuclear testing in the Pacific and to nuclear

ship visits.

After the Munich agreement of 1938, however, New Zealand fell back

into line as war became ever more likely. The threat of Japanese attack

made it clear that New Zealand had to turn once more to protection from

the Royal Navy while building up its own Navy and Air Force. As World

War II drew to an end in 1944, however, Fraser played a prominent role

in setting up the United Nations. In particular, he ensured that small na-

tions had some say in the operation of the new international peacekeeper,

and he made a large contribution to the drafting of the Declaration of

Human Rights. Try as they might, revisionist historians have failed to

deny the first Labor government's pursuit of a more independent foreign

policy.

Labor's leaders also believed that citizens in a democracy needed more

than full employment and better housing if the former colony hoped to

flourish as a nation. Consequently, they tried to promote the development

of a more vigorous cultural life and provided modest support for the fine

arts.

The by now popular medium of radio provided a ready means of

encouraging such developments, so in 1936 they set up the New Zealand

Broadcasting Service. This network offered commercial programs on the

ZB network, run by their long-time ally, the Methodist minister and pop-

ular broadcaster Colin Scrimgeour (known to the public as Uncle Scrim),

and also offered a more serious public radio modeled on the British Broad-

casting Commission (BBC). James Shelley, the dynamic professor of edu-

cation at Canterbury University College, won the job of directing this

more high-minded broadcasting service. He set high standards and laid