A few weekends ago I was fossicking in a charity book sale when I stumbled on The National Government 1949-1954: FIve Years of Progress and Prosperity, published by the National Party. It was, it appears, published as part of National’s 1954 election campaign: 150 pages of (often quite detailed) text and tables, complete with a detailed chronology of measures, and an index.
I’ve always been interested in that first National government. Apart from anything else, the Prime Minister (and Minister of Finance) was my grandfather’s cousin – they’d been close, and in our family Sid Holland was always “Uncle Sid”. It was a government with a fairly mixed record. Through my career at the Reserve Bank I was always quietly proud that a relative had legislated to establish the primacy of price stability in what we expected from monetary policy and to put monetary policymaking at a further remove from direct ministerial control (even if, in practice, it didn’t make much difference).
There was some genuine liberalisation – including of those banes of New Zealand economic management for too many decades, import licensing and exchange control. And there was the ANZUS Treaty – which I hadn’t previously known came into effect on ANZAC Day, a nice touch – and the interesting episode of New Zealand’s approach to the Suez crisis. It was the time of the wildly popular first ever visit by a reigning sovereign. And the sort of short-term austerity that led to the Auckland Harbour Bridge being built too narrow from the start, or central planning that meant that for years the Reserve Bank wasn’t allowed to start building its own building.
In the territory of serious black marks, it is hard to defend the way the 1951 waterfront strike was handled – not so much the confrontation with the watersiders itself, but the brutal undermining of civil liberties and the freedom of the press during that period – often using powers introduced by the previous Labour government.
Perhaps only in New Zealand – where good histories and biographies are few – could a government that was in power for eight years, with a leader who spent 17 years in the role, not have either a decent scholarly treatment of that government or a biography of its leader.
But what of the book?
It has a foreword by the Prime Minister which, I imagine, captures quite well the way National saw things in those years
It is a proud thing to belong to a Government which is able to say that the people have never been better off, that there is a new spirit of vigour and enterprise abroad in the land, that there was never a time when so much progress was being made in the development of the resources of the country.
Once again, New Zealanders feel that the future belongs to them…….
Freedom, which is at the heart of the National Government’s philosophy, is perhaps an intangible thing – until you have lost it. But it yields tangible results. The Government’s recrod, which this book outlines, is the answer to those who stand to the creed of Socialism.
But having lauded freedom, the Prime Minister goes on to laud the apparently growing role of the state.
A vast programme of development works is in progress – imaginative and progressive schemes like the new pulp and paper and timber industry in the Rotorua-Bay of Plenty area, the utilisation of geothermal steam, the huge hydro-electric project at Roxburgh. More hospitals, more schools, more houses – there is no neglect of everyday necessities because of the scale of the development programme. The Government has liberalised and extended social services, more is provided for other social services, trade is booming, the needy are cared for, the workers are prosperous, savings are greater. On all fronts New Zealand has gone ahead, as a young country should…..
I lived in Kawerau as a child, but it is only over the last decade as I’ve come to read a lot more New Zealand history that I’ve come to realise how big a deal – in some way, the decade’s Think Big, complete with outside capital and protected markets – the Kawera/Murupara development really was in the 1950s. The state was at the leading edge of promoting economic development, as it saw it (in this book, the Kawerua scheme is described – perhaps with a little exaggeration, depending on how one classifies Vogel’s interventions – as “the greatest single enterprise ever attempted in New Zealand”.
On the one hand, in the early 1950s, New Zealand still had some of the very highest material living standards in the world. On the other, only a few years later people started writing serious reports (eg the new Monetary and Economic Council and the new NZIER) observing that New Zealand’s productivity growth was lagging behind. Sadly, it was to be the story every decade from then to now.
But this post isn’t really intended to be an abbreviated political or economic history of the decade. It was more that I was fascinated by things the National Party chose to highlight, and the accounts of interventions I’d just never been aware of.
Take rest homes for example. When I was young, almost all of them were run and provided by church groups. I had never given much thought to why – caring for the vulnerable was one of those things the church had done since Roman times. But this little book tells how the government skewed the playing field:
Soon after taking office the Government introduced a policy of helping charitable or religious organisation to establish homes for aged people. Generous subsidies, up to 50 per cent, are offered, together with loans finance on favourable terms in respect of housing schemes.
The next sub-section recounts the introduction of a similar subsidy for such groups to establish youth hostels.
There are reminder of times past: anti-tuberculosis campaigns get two-thirds of a page to themselves.
There were 506000 radio licences in New Zealand in 1954, and not a single television.
And in a country of two million people, there were still only 334580 telephone subscribers (and a little subsection on “Mobile telephone services” – some 2000 people had telephones in vehicles, up from only 192 when the government had taken office five years earlier).
The forerunner to Air New Zealand – Tasman Empire Airways Ltd – flew 30888 people trans-Tasman in the entire year to March 1954: fewer than 100 a day. Domestic air services, so the party (fairly) boasted, has increased substantially during its term in government, but total passenger numbers were still less than 1000 per day.
And if economists are (largely rightly) inclined to be censorious about the excess demand policies of the period (inflation nonethless kept in check) there is still something to hanker after in these numbers:
In spite of the large increases in the labour force, ample work is still available. At 15/1053 the number of vacancies for men was 13500 and for women 6500. Unemployment in 1953 averaged only 85 persons throughout the year.
(These were people registered as unemployed. Five-yearly census numbers were higher, but still very low by modern standards.)
These were the days when, in New Zealand almost uniquely, cars held their value, the numbers imported being rationed. There was an exception for people with overseas funds themselves (the “no-remittance” scheme) – which made an English OE additionally attractive. My grandfather was not infrequently heard to jest that my father proposed to his daughter only because she had a car, (having done her OE).
What of monetary policy?
The declared policy of the Government is to divorce currency and credit from political control, to avoid the issue of credit unbalanced by goods and services, and to stabilise internal prices by establishing a proper balance between money and goods.
From an economist’s perspective, two out of three isn’t bad, but that middle phrase is disconcertingly reminiscent of the real bills doctrine. In fairness, the same government liberalised what were then known as “capital issues controls” restricting the ability of firms to raise funds on market.
And if there were elements of liberalisation, (eg the “state monopoly of coal seams” was abolished on 10 October 1950) there was also this
The Potato Board was established in 1950 to control the production and marketing of main crop potatoes.
Why, one has to wonder?
In the some things don’t seem to change category, there was the boast that
Maori land claims. Removal of grievances over land claims is being vigorously pursued, Claims settled include: [and a list follows]
Perhaps in the same category, pages and pages are devoted to housing and housing finance, including this curious observation under the heading “Encouraging local authorities to buy land and develop it for housing”
A retarding influence in many cases has been the desire on the part of local bodies to avoid placing a further burden on ratepayers by raising loans for housing activities, but the loan procedure has been simplified to open the way for local authorities to engage in housing activities without recourse to long-term finance. They can now finance these projects on bank overdraft.
I’m clearly missing something in understanding the greater appeal of a bank overdraft.
Meanwhile large scale immigration has restarted (I wrote about it here), including subsidised (“assisted”) migration. Being a skilled building trade worker was enough to get assisted passage for married people (at the time, policy explicitly favoured single people because of the housing shortages). But there is no hint of the politicians realising – what economists knew even then – that new arrivals added more to housing demand, and overall resource pressure, than any feasible increase in supply (even in the building sector specifically).
For an economic history junkie, it is a fascinating read. There is the line from L P Hartley’s novel The Go-Between that “the past is another country, they do things differently there”, and it comes to mind strongly reading this book And, it won’t surprise regular readers to know that the other thought that comes to mind is one along the lines of “if only” we’d done things differently then and since, and could still today boast of being one of the richest countries in the world. How much more we could offer our people – on market, and off. Of course, in material terms, people are better off today than they were in 1954. That is an important benchmark, too easily lost sight of – only a few years prior to 1954 my mother had done her masters’ thesis on the incidence of basic home appliances in Dunedin (far from universal) – and yet, and yet, the failures and lost opportunities since then, which mean we now languish so far down the international league tables, matter too. Both National and Labour must take responsibility for that failure. Not that one would know it from either party’s campaigns last year.
16 thoughts on “Electioneering 1954 style”
Chapter 9 Townsfolk Call the Tune
Urban communities grew to serve rural industry.but more and more people were drawn to the bright lights, building a base for manufacturing and commercial enterprise. cities gained power and a life of their own – and all the headaches of handling big populations.
“Not until the turn of the century did Auckland come into it’s own again. Since then it has been one of spectacular and almost continuously accelerating growth, at least until the 1970’s. It was the belated development of the provinces hinterland, and the emergence of dairying based on phosphate stimulated pastures and a new processing technology, that stirred the city’s expansion”
One very important legacy of the Holland government was the massive growth in power station development that they promoted. Not only the Waikato dams, but Wairakei and Meremere. At the time. NZ was changing from a rural to urban society and growth was constrained by the lack of electricity. They also pushed for dams to be built by large mechanical equipment, not the labour absorbing pick and shovel of the Semple years. The Minister of Works, Stan Goosman, also wanted the DC link to use the South Island hydro in the North Island. The Nash/ Nordmeyer government stopped that and stopped a lot of the dam construction, but it started again in the early 60s when Goosman became Minister again.
Following your frequent enlightenments that NZ was once one of the wealthiest countries in the world, back when the population was at or under 2 million. Now the population has increased to 4½ million and we have descended down to around 35th in the world.
Applying the theory of William of Okham, simple logic dictates that the reduction in wealth of NZ is inverse to the population increase
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Yes, but specific to NZ. It isn’t true, to the same extent anyway, of other countries, including Australia. The difference? A whole lot more natural resources than they realised existed previously.
Or, in some other places, the rapid growth of other new – typically knowledge-based location-friendly – industries. The population of Luxembourg has increased a lot (the workforce even more).
you are being a bit harsh. A growing public sector is part and parcel of economic development. I don’t think he was talking about the public sector owing industries alah Atlee.
It looks to me he is advocating infrastructiure spending, , more money on essential industries and a social welfare net although he hasn’t stated it being means tested.
The state had a very large equity stake in the Kawerau project.
Originally, it was an oil and gas drilling company that was drilling the geothermal wells at Kawerau, but they had a major incident (on KA3 from memory) and pulled out. The Ministry of Works drilling at Wairakei took over, but it set back the supply of steam to the mill significantly.
The trees that they were harvesting were old and not easy to extract as the only near railway line stopped at Rotorua. The first trees were planted by prisoners near Waiotapu about the turn of the century and a lot more were planted during the depression. Most hadn’t been pruned or thinned. Lots of trees, no market, no mills that wanted them – NZ needed Kinleith and Kawerau.
Thanks. I’m not disputing that something needed to be done (or rather there were resources to utilise), but in a market economy it wouldn’t have been the govt driving, or owning, the resulting projects (and quite probably it might not have been a paper mill either).
Kinleith was built by private enterprise and according to Wikipedia, it was the same for Kawerau. As the forests were run by the Forest Service, maybe the supply of logs to the mill entrance was where government finance was needed – extending the railway line to Murupara as part of it.
The govt was a substantial shareholder in Tasman – sold down later – and owned most of the logging company, and of course all the rail infrastructure.
According to here:
the government share was only 15%
The logging company they sold out of in 1962 http://fletcherarchives.co.nz/companies-history.php?id=203
As well as the rail infrastructure, the government also built the towns of Murupara and Kaingaroa and probably a lot of the houses in Kawerau. They also had to put the grid through to the mill as well. And the source above notes that the mill was the second largest in the world at commissioning and built in only two years, so it was a big project and major achievement.
The government did have a big involvement, it needed to. The Eastern Bay of Plenty was a depressed area with a lot of rural maori. Separating out general economic development and infrastructure expansion that needed to occur anyway from that development would be hard. And if the government hadn’t been a partner, it would not have happened.
A history lesson appreciated – How quickly we forget
As a native born older grey-hair this is appreciated more than the many journeys comparing NZ to Northern Hemispherical places. There was one media place, where Bernard Hickey used to hang out, where 80% of the commenters were foreign born, spouting opinions that were based more on where they came from, rather than a genuine understanding of where they have come to. Periodically one needed to chide these interlopers with a history lesson.
On the matter of lessons and responsibilities of maybe, what if, what might have happened
A trawl through the list of Prime Ministers since 1940, and adding up the years in power, the balance in the hands of one party is evident. Perhaps there should be some responsibility sheeted home for where we are today
The history of Kawerau and Kinleith led me to a journey of Tasman Pulp and Paper.
Where was NZ Forest Products
NZFP was, at least, a private sector development (apparently somewhat miffed at the heavy state involvement, and protections, in the Kawerau/Murupara development).
NZFP and Government intervention
New Zealand Forest Products (NZFP) was New Zealand’s largest industrial company from its creation. The company and its tenacious Managing Director were consumed by a long, drawn-out battle to create a vertically integrated forestry and pulp and paper industry based in the North Island. Throughout the 1940s and 50s, he clashed frequently with government agencies designed to limit the licensing of specific industries
It certainly is an interesting period, there were a lot of new suburbs being built, and all of south Auckland was in the pipeline. Historians have not examined the era at all really. Although political biographies need substantive archives and papers to be available. I’m not trying to defend historians but economists tend use modern or fashionable concepts, and apply them back to periods before they came into use. I haven’t across the specific term ‘price stability’ in contemporary archives. And the economists who did the histories of the Reserve Bank chose to ignore the extensive/intensive debate on the use of Reserve Bank credit in the late 40s/early 50s. It actually underpinned the public works programme, given the State was not borrowing overseas (until Tasman was finalised).
“Price stability” was explicitly added to the Reserve Bank Act in 1950 as the primary goal of monetary policy.
RB credit certainly played an important role in the late 30s but not (I’m pretty sure) in the 1950s. In fact, checking the RB submission to the Royal Commission, a table included there shows public debt falling from 117% of GNP in 1950 to 85% in 1954 (altho of course the nominal level of debt still increased during those years.)