80 years today since we entered World War Two

It is eighty years today since New Zealand declared war on Germany, joining the United Kingdom in responding to the unprovoked aggression of the German invasion of Poland.  Until just now, glancing at one of the government historical websites, this statistic hadn’t occurred to me

New Zealand was involved for all but three of the 2179 days of the war — a commitment on a par only with Britain and Australia.

It is estimated that 11928 New Zealanders died in the course of that conflict, a death rate (per million population) higher than in any other Commonwealth country.  Dreadful as the war was, it still strikes me as something closer to a just war (for our side) than most other conflicts in modern history –  although, of course, the counterfactual is unknowable.

Back in the very early days of this blog, I wrote a short post on some aspects of the New Zealand economy in and around World War Two (while lamenting the absence of a modern analytical book-length treatment).  Here is the gist of a few of the paragraphs from that post

Two things from the period did stand out.

The first is that, while New Zealand devoted almost as much of its GDP to the war effort as any of the major combatants (at peak similar to that in the UK, although the UK held the peak for longer), material living standards for the civilian population seemed to remain relatively high –  notably the quality of the diet, access to petrol etc.  Perhaps that partly reflects just what a rich country New Zealand then was.  Using Angus Maddison’s data:

1939 GDP pc

New Zealand’s GDP per capita in 1939 was second highest of those countries shown (a year earlier –  the US in recession –  we’d been top of the table).  It may have been easier to devote a larger share of GDP to the war in a rich country like New Zealand than in a relatively poor one like the USSR, where a larger share of resources would have to have been devoted to subsistence.

And the second point is the dramatic transition: New Zealand went from being on the brink of default in 1939 to being, in effect, defaulted on just after the war.  In 1939, in the wake of the imposition of exchange controls, Walter Nash emerged from a humiliating mission to London, with a very onerous schedule of overseas debt repayments.  If the war had not been looming –  which made the British government keen on maintaining good relations with the Dominions –  it is quite possible that New Zealand would have been unable to rollover maturing debt at all, probably ending in a default to external creditors.  By just after the war, New Zealand  –  having markedly reduced its external debt ratios during the war – made a substantial gift to the UK (as did Australia): in reality, Britain was quite unable to meet all its obligations and needed some of them written down.

In a paper a couple of years ago, some IMF economists looked at examples of countries that had markedly reduced their overseas debt.  The New Zealand experience during WWII was as stark as any of those reversals, but is too little studied.  It seems to have mainly resulted from a determination to pay for as much of the war as possible from taxation, together with the controls and rationing that limited private sector consumption and investment.  But it was not because of any strength in New Zealand’s terms of trade:

WW2 TOT.png

New Zealand’s terms of trade fell during the war years –  our import costs rose as global inflation increased, but there was little adjustment in the prices of the agricultural/pastoral products New Zealand sold to Britain.

Notwithstanding the lives lost (and the constraints on consumption, free speech etc) New Zealand’s experience of World War Two was pretty mild.  No combat occurred on our shores –  nor was it ever credibly likely to –  and we didn’t even have anything akin to the bombing of Darwin or of Pearl Harbor.

Of all the countries involved, perhaps Poland’s experience was worst.  I wrote a post here late last year, at the time of the 100th anniversary of the end of World War One (in turn leading to the re-establishment of an independent Poland), in which I noted that

My own reflection on Poland is that it is hard to think of a place in the western world (say, present day EU, other bits of western Europe, and western European offshoots – eg New Zealand, Australia, Canada, US, Argentina, Chile, Uruguay) that wouldn’t have been preferable to live in over the last 100 years or so, at least as judged by material criteria.   Perhaps if you were German, you have to live with the guilt of World War Two, but most of Germany was free again pretty quickly.   Romanians and Bulgarians might have been poorer on average, but they largely escaped the worst horrors of the German occupation.  To its credit, Bulgaria managed to largely save its Jewish population, while the Polish record was patchy at best.  With borders pushed hither and yon, and not a few abuses of other peoples (notably ethnic German) post-war, sanctioned by the state, the place then settled into 40 years of Communist rule.   There is a lot to admire about Poland, but I wouldn’t have wanted to live there any time in the 20th century.

And never more so than during and just after World War Two.

But against that backdrop it leaves the story of the Poland in the last 30 years or so all the more impressive.    Some will be critical of various aspects of Polish governance etc, but they are now bringing up 30 years of democratic government –  and changes of government –  something that would have been hard to imagine when I was young, or –  in the late 30s –  when my parents were young.

And then there is the economic performance.  In 1938, it is estimated that Poland’s average real GDP per capita was just a third of New Zealand’s.    The most recent IMF estimates suggest that this year, Poland’s GDP per capita will be 82 per cent of New Zealand.  New Zealand has, of course, been a poor performer, but relative to Germany over the period Poland’s GDP per capita has improved from 40 per cent to 60 per cent.

And then, of course, there is productivity: real GDP per hour worked.   We don’t have very long runs of data for this variable, but here is the ratio of Poland to New Zealand for the 25 years for which there are data for both countries.

poland real GDP phw

Them doing better doesn’t make us worse off (of course).  Their success is great for them and their people.

But, as we ponder the deeper issues of loss, sacrifice, freedom, the threat of tyranny etc –  all exemplified in the story of World War Two –  it might still be worth reflecting on how extraordinary New Zealand’s relative economic decline  (relative to every single country on that first chart above) would have seemed to our leaders in 1939 if someone could have told them then how poorly New Zealand itself would do over the next 80 years.

 

17 thoughts on “80 years today since we entered World War Two

  1. A mainly agricultural country with a large diaspora and a more populous wealthy neighbour: Poland and New Zealand. Would I be right in suspecting their population is not growing as fast as NZ’s and the move to the cities is slower? On the other hand having been such a poor country so recently they must have a serious infrastructure deficit: roads, bridges, sewers and hospitals are all expensive so that will be a drag on their economy..
    It is easy to grow an economy when it has been throttled by state planning but has an educated population. Your graph for GDP per hour worked seems to accelerating; my eye-ball test extrapolates the Poles have just overtaken us.

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    • Poland’s population is flat or falling slightly. You are probably right about the infrastructure altho I think Poland gets quite a lot of EU funding. Re drift to/from cities, i’m not sure of the numbers but unlike in nz gdp per capita in Warsaw is far above that in the rest of the country (true in most other countries inEurope).

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    • And Kiwis will fly back home too. Maybe both will be returning with useful new skills.

      If Poland, despite the way its borders have moved, has more social cohesion than NZ it will be too their advantage. When issues such as age of qualification for Superannuation, regional development funds, etc are discussed a strong national identity helps achieve at the best option for the entire country rather than the loudest sub-group.

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  2. Kenneth Cumberland covers the wars. The bitter refers to WW1 soldier settlers beaten back in the North Island hill country; the sweet refers to balloting for WW2 returned servicemen plus advances in agricultural technology (including aerial top dressing)

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  3. Comparing NZ to Poland doesn’t give a meaningful picture in my view. Taking the World Bank GDP per capita PPP data, if you plot Poland, Germany, Italy and Spain, it shows a quickly divergence in performance starting from about 2007/8, with Germany powering ahead, dragging Poland with it (being very integrated into the Germany economy) with the southern European economies stagnating or worse. There was a quick upturn for all Euro group members after its introduction, but for the southern economies that was mostly a credit boom due to being able to borrow on the prudent northern European’s good name. It is beyond doubt that the Euro project has heavily rewarded some countries at the expense of others:

    https://www.dw.com/en/cep-study-germany-gains-most-from-euro-introduction/a-47675856

    (although this went fairly unreported). I appreciate Poland has its own currency still, but by virtue of its position next to Germany and skilled industrial workforce, it was in the right place at the right time…

    Obviously Poland’s history is fascinating and the people can be admired for their bravery and toughness, but I have the feeling their recent economic gain is counter balanced by southern Europe’s loss. And looking at the historical angle of this – for all the suffering they are almost back to where they were in 1914 – a prosperous and stable part of Germany’s orbit, but maybe not entirely free (certainly it remains to be seen how their traditional Catholic morality and nationalism expressed at a political level will stand up to EU pressure….

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  4. I don’t really disagree. Much of my repeated refs to the various central and eastern European countries is about propitious location, quite unlike NZ. And yet the NZ authorities keep on with the mad-cap “big NZ” vision, bringing in lots more migrants each year.

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    • We have recessionary periods where net migration was negative and it was really not that much fun either. Anyway it looks like the tourism boom has peaked which means that the hospitality industry will not need increasing numbers of workers which will offset the increasing worker numbers needed of the age care industries.

      Not too sure why you keep blaming poor NZ authorities when it is very clear it is the health, hospitality and education industries that are driving the human factor requirement. I worry very much that this is a NZ economist problem whereby they would keep getting the key variables wrong.

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      • NZ governments set immigration policy rules. SImple as that really. With a more conventional immigration policy, of course there would still be demand for workers in health and hospitality etc but (a) there would be much less demand for workers in population growth driven sectors (eg construction) and (b) where there was still residual scarcity wages would rise.

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      • You know very well those targets have not changed very much for the last 3 or even 4 decades. Government does not even use those targets as a measure of whatever performance. Immigration has a stringent process from application to approval. There is no cutoff once targets are reached or any panic that targets are not reached. They would continue to accept applications when it arrives. There is no timeframe that immigration works towards the final approval, it happens when they are finished and comfortable that the i’s are dotted and the t’s are crossed. It could take 3 months, a year or even 2 or 3 years before final approval dependent on key restrictions like qualification, whether there are kiwis to fill the positions and minimum wages offered for the skilled category or the invested amounts.

        Therefore you are creating a variable to a problem where none exists.

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      • The residence framework has been in place, at around current levels, for two decades, but there have also been big changes in work visas etc rules. My argument isn’t about cycles, but about long-term econ trends and outcomes.

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      • Long term economic trends for NZ would continue to have an upward pressure on immigration due to the age care and health care industry needs. If tourism has peaked then the trend here for workers would be flat and falling which may help offset the increasing needs of the age and health care industries. Our education institutes produce more high technical skilled labour than our RBNZ engineered decimated industries needs which would continue to push New Zealanders with higher level skills to depart NZ which create a vacuum that will continue to require lower skilled immigrants. Higher levels of welfare payments keep unskilled Kiwis from taking up lower skilled jobs.

        6 new bus drivers for Wellington has been hired to drive buses in Wellington. That gave me a huge hahaha moment.

        https://i.stuff.co.nz/dominion-post/news/115444546/drivers-recruited-from-phillipines-to-help-man-wellingtons-buses

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  5. Hi Michael,

    What do you think have been the chief causes of New Zealand’s relative economic decline in the last eighty years?

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