The Vogel Era

In spite of this growth, no one was content with things as they were around 1870. The gold boom had passed from the South Island leaving a surplus of unemployed; the wars left the North Island jittery, and anxious for a policy which would at the same time neutralise the Maori threat and secure rapid economic expansion. Julius Vogel, an ex-Otago politician who had experienced the gold boom, supplied what most politicians concluded was the answer: a policy of expansion based upon overseas loans. This was hardly a revolutionary proposal, except in scale; the central government had borrowed before for war purposes, and the provincial governments for development. Only Otago and Canterbury had done so with success; the rest had become embarrassed and had so lowered the financial reputation of the colony in London that by an Act of 1868 the central government assumed all provincial debts and prohibited future provincial borrowing.

Vogel was proposing, by calling in 1870 for loans of £10 million over 10 years, to make the central government the chief agency of development. Initially the money was to be devoted to railway construction in the South Island (here, already, decent roads existed), to roads in the North Island (these, as well as opening country to settlement, would bring civilising influences to bear upon the Maoris), and to assisted immigration. Though Vogel made plans for the loans to be secured against land – plans which were frustrated by jealous South Island provincialists – his optimism convinced him that the best security was the economic strength which would be brought about by good communications and an increased population stimulating agriculture and pastoral farming and exploiting newly discovered resources, notably through mining and manufacturing. Unluckily for the colony, world prices for New Zealand exports generally fell over the next 20 years, the gold industry continued to dwindle, and no new enterprises of significance were discovered. In the same period, 1870–90, nearly £30 million was borrowed, frequently at high interest rates; by the end of the century fresh borrowing did no more than meet charges on existing debt.

Vogel carried the day, and dominated politics from 1870 to 1876, as Colonial Treasurer for the greater part of the time, and twice as Premier (1873–75 and 1876) as well.

Apart from the development policy, Vogel also created the Public Trust Offices and State Insurance. He attempted to bring in forest conservation to preserve assets for future use, but was blocked by provincial politicians, unwilling to accept limits upon their control of land. This encouraged Vogel to consider the abolition of the provinces; he had been prepared to work with them, but he would not permit them to obstruct what he was sure was the destiny of the colony. So, in 1875, he moved for the abolition of the North Island provinces, and soon expanded the Bill to include complete abolition. There was a good deal of noisy argument, especially during the 1875 election which preceded the Bill's implementation, and notably in self-confident Otago where some petitioned the Crown for separate colonial status. But in fact abolition, seemingly a major affair, was put into effect painlessly.

This was so because men were swayed by the interest of their localities and for the most part concluded that local interest would be best served by a strong central government. The central government, in fact, had been in charge of further development since 1870, while the provincial responsibilities diminished. Politicians, not ceasing to look for local advantage, concluded that it could be best secured centrally. Thus most provinces favoured their own abolition, and few people grieved for the loss of separate institutions.

Depression Problems

Politics in the 1870s revolved around development policies – men differed chiefly on the extent of such policies, whether they should be prudent in scope, or adventurous. Within Parliament Ministries earned support by distributing favours in the form of public works, for Parliament itself allocated funds to specific projects. Vogel himself temporarily quitted the colonial scene in 1876, to become Agent-General in London; his successor, H. A. Atkinson, scaled down the level of borrowing and spending during his 12-months' ministry. This made him vulnerable to any opposition which promised a return to booming mid-seventies, especially as prosperity began to waver. Sir George Grey, who had withdrawn into private life at the end of his governorship, embarked upon a political career in 1876 to defend the provinces, placing himself at the head of a disaffected coalition – expansionists, radicals, provincialists. Grey was premier from 1877 to 1879; his radical reforms fell flat, but under the guidance of two Otago expansionists, James Macandrew and William Larnach, the borrowing and spending spree was spiritedly revived. Grey was not a notable premier – his oratory remained unrivalled, but his grip upon affairs was slight. He fell out with his two ablest new men – Robert Stout and John Ballance – partly because he suspected their political integrity; and he ended his term in financial chaos.

In 1879, after an election and a shift of votes within the House (for in the election Grey had actually gained), Grey was replaced by Sir John Hall. Under Hall from 1879 to 1882, and Whitaker from 1882–83, and then Atkinson from 1883–84, a group of politicians who could best be designated “prudent” endeavoured to grapple with what had become the problems of acute depression. For from 1879 on, without any intermissions till 1895, the country knew hard times: declining prices for its exports of wool, a diminishing output of gold, a high level of indebtedness, both private and public, low and falling wages, unemployment, and destitution in the towns. No resolute answer was given; ministers hesitated between retrenchment and taxation on the one hand, and renewed if reduced borrowing upon the other. For once borrowing had become established, it was hard to control; half-completed works prevented an absolute cut, and borrowing could still appeal as a miraculous panacea. So much was this so that the old magician, Vogel, could return to power in 1884, in alliance with Stout as premier, upon a promise to borrow and spend on the grand scale once again. Within three years it became clear that the magic had faded; 1887 brought Atkinson and “caution” back, and saw an end to overseas borrowing for the best part of a decade. An era in New Zealand life was over.

The development policy, besides bequeathing a load of debt, had greatly altered the country. In the course of the 1870s the population doubled to 500,000, transport and communications were immensely improved, and if no new resources had been found, at least industry had grown under the stimulus of low wages, and resources like timber, gum, and flax had been more intensively exploited than before. In the South Island, Christchurch, Dunedin, and Invercargill were linked by a trunk railway, and there were a number of feeder lines, some of which were never to justify their existence economically. North Island railways remained fragmentary with lines centred upon Wellington, Palmerston North, Napier, New Plymouth, and Auckland; Maori possession and engineering difficulties, together with hard times, reserved the construction of the North Island trunk system for the twentieth century. Overseas shipping and cable connections were also improved. A large share of the new settlers had congregated in the towns (93,000 in all had been assisted, some came “free”) but some, including many Scandinavians, had been located in special rural settlements in the North Island.

Compared with economic depression, the recurrent problem of the 1880s, other political concerns are less significant. A few, hesitant steps were taken by William Rolleston's legislation in 1882 and 1885 for small leasehold farms to settle men on small farms where they could at least raise food for their families. Rolleston, too, made the first move towards moderating the brutal speed with which the Maori and his land were being separated. In 1880 Hall, taking over an Electoral Bill which Grey had shelved, brought in a franchise which, together with a degree of plural voting based upon property, amounted to universal male suffrage. One of Grey's few completed measures had given, in 1878, a legal basis to trade unions, which, together with secondary industry, grew significantly in the larger towns during the 1880s. Taxation policy was also widely discussed, the advocates of a tax upon land (a proposal linked with an animus against the large owner) contending with more conservative advocates of a tax upon all forms of property. In all these ways, the 1880s prefigure the Liberal era and the reforms of the 1890s.

By the end of the 1880s, hard times seemed to have come to stay: in 1887–90 more people left the country than arrived. Large-scale farming did not supply enough jobs to defeat unemployment – though it had seemed, up to 1883, that intensive cereal (chiefly wheat) farming in Canterbury and Otago might provide part of the answer. But in the later 1880s, as virgin soil was exhausted, output and exports dropped sharply. Nor did the boost given to the pastoral industry by the successful export of frozen carcasses to England in the years after 1884 hold out much hope for the small man. Sheep farming did not absorb labour. Town industry, and such rural occupations as gum digging, timber milling, flax processing, together with coal mining, certainly grew, but not sufficiently to counter unemployment; nor, for that matter, were wages and conditions in secondary industry of a decent standard.

Atkinson's 1887–90 ministry turned an important corner. On the one hand he made an end to borrowing; on the other he attempted, rather half-heartedly, to bolster up local industry by tariffs, while small-scale land settlement continued. At the same time stringent governmental economy was applied. In brief, Atkinson was attempting to keep a depressed New Zealand going by using what she had – her land and her small factories – and not by relying upon what she might borrow. John Ballance's Liberal ministry, which came to power in 1891, was to apply such remedies with much greater vigour and thoroughness.

1890–1919 The Liberal Era

The period that begins with the 1890 election and ends with the Great War in 1914 is the most formative in New Zealand's history. At this time her characteristic economic activities developed, the tone and system of her political life was shaped, major pressure groups, such as trade unions and farmers' bodies, grew to maturity, and national feeling achieved a certain definition. This “Liberal era” was, of course, shaped by the past, but it imposed upon its inheritance a pattern which is that of twentieth century New Zealand. In Maori affairs and external affairs the same vital reshaping is, though less emphatically, discernible. To a degree the robust figure of Richard John Seddon, premier from 1893 to his death in 1906, may be taken as symbolical; certainly his qualities impressed themselves upon all these developments. But Seddon was a symbol rather than a creator; other individuals, and movements of interest and opinion-swaying multitudes, in fact give shape to the period.

The 1880s had been dominated by depression and by arguments about appropriate governmental action. 1887 saw the end of an ancient remedy, borrowing and spending, and the first signs of another, industrial protection, land settlement, and governmental economy. These are the themes of the victors of 1890 – the Liberals proposed to make depression tolerable by helping the town worker, by “bursting up” the great estates and settling small farmers, by governing cheaply. They continued in this spirit till the mid-1890s, when better prices for exports brought prosperity. Refrigeration, as early as 1884, had heralded better times by opening the English market to the New Zealand food producer, but its effects were delayed first by the low level of prices, and secondly by the fact that it first facilitated mainly meat exports, the product of the sheep farmer, normally a large owner. Only in the later 1890s were butter and cheese exports, the products of the small dairy farmer, becoming significant. After these changes, the Liberals turned to the more agreeable duty of administering prosperity – it is this later period in particular that Seddon symbolises so eloquently.

The Liberal majority of 1890, the foundation of Ballance's administration of 1891, was a coalition of anti-Atkinson groups, and initially not an entirely happy one. Their main electoral support came from the depressed of town and country – from farm labourers who wanted to become farmers, from small holders who farmed for food rather than profits, from townsmen who saw in a farm an avenue to future security, from industrial workers oppressed by low wages and smarting under a recent crushing industrial defeat.

Two events, just before the election, assisted the cause of the Liberals among the poorer townsmen. The “sweating” scandals in urban industry evoked humanitarian indignation with which the Liberals associated themselves by promising effective action. Secondly, the maritime strike, beginning with the seamen and spreading to most transport workers (organised by J. A. Millar into the Maritime Council), had ended with the defeat of the strikers, the cautious advocacy of their cause by Liberals (prompted by the government's involvement through the railways), and direct union participation in the election on the Liberal side. Many Liberal members received union endorsement, and six Labour M.P.s were elected to support Ballance.

The first Liberal term produced more proposals than accomplishments. In the dying days of his ministry (between the election and his resignation) Atkinson had secured the appointment of himself and a number of his sympathisers to the Legislative Council, thereby increasing its existing conservative majority. It proceeded to block many Liberal reforms, notably in land and labour policy. This was fair ground for a constitutional struggle. Ballance demanded additional Liberal appointees to redress, in a modest way, the balance; his demands were rejected by the Governor. The ensuing campaign against entrenched vested interests (Legislative Councillors enjoyed life appointments) and alleged autocracy ended with a Liberal victory when the Colonial Office instructed the Governor to yield. In 1891 the emasculation of the Council was effected by a seven-year term for new appointees, a sure guarantee of docility. During the struggle the Liberals seem to have grown more unified; temporary frustration acted as a party cement. Once this struggle was past, the 1893 election (held just after Ballance's death) gave an emphatic mandate to the semi-frustrated Liberals, so that 1894 became the annus mirabilis of Liberal reform.

Land measures were introduced chiefly by John McKenzie, Minister of Lands and Agriculture from 1891 to 1900. In 1891 a land tax, mildly graduated to strike at large estates, replaced the property tax; an Act of 1894 enabled the state power to repurchase lands for closer settlement, compulsorily, if need be. The graduated tax had little effect, apart from the case of the great Cheviot estate of 84,000 acres in North Canterbury. Repurchase proceeded to the extent of £250,000 annually. In 1894, too, the Bank of New Zealand, under unsound management, and the largest landowner in the country thanks to foreclosures during the depression, was faced with collapse and rescued by swift government action. One consequence was effective government control in the future; another was the disposal of its property, and that of associated companies, by a partly governmental board. So, especially in the North Island, a great quantity of land became available for closer settlement. Many large landowners, in fact, would have happily subdivided their estates, if they could get a good price. This became the case once prosperity set in, so that private and state subdivision proceeded together. Finally, closer settlement was accelerated by renewed government purchases of Maori land (over 2 ½ million acres in the 1890s), and its distribution to farmers.

Farmers went on the land either as outright purchasers, or as occupiers with a right of purchase after 10 years, or as “lease in perpetuity” tenants. This final tenure, in fact a 999-year lease, had many advantages: the tenant had absolute security; his rent could not be increased by revaluation; and he could devote all his own money to improvements. This was the poor man's way to the land; one which he ceased to value when he ceased to be poor.

The crucial land measure came from Joseph Ward, the Treasurer, in 1894. On the one hand he reverted to a previous model by borrowing modestly in London; on the other he broke new ground by using the money not (initially) for public works, but to help settlers buy land. State advances, at a lower interest rate than advances from private lenders, became a permanent feature of New Zealand life.

The Entry of the State

This legislation marks the direct entry of the State as director of economic affairs: it was no longer just a land seller and a road builder – it split up large estates, it revised tenures, it controlled (though inactively) the largest bank, it lent money to individuals. It also, through the Department of Agriculture, taught the farmer how to farm well, and the time was not far distant when it would help him market his products overseas. The same extension of public authority will be seen in Liberal labour legislation.

All this would have guaranteed no more than subsistence to the farmer had the economic climate not improved. But refrigeration, recovering export prices, the (limited) spread of dairying and fat-lamb production on small farms, had together gone sufficiently far by the end of the century to bring substantial prosperity to the majority of New Zealanders, and would go further in the near future. The dairy factory and the freezing works became the outward signs of a technological revolution in New Zealand farming, as were renewed activity in road and rail construction, a brisk commercial life in the towns, and an increased number of jobs. The Liberals began by legislating for adversity, but their work came to fruition in a wider prosperity than the country had known before.

The spread of prosperity from farm to town was assisted by William Pember Reeves, the major intellectual in the Liberal ranks, a Christchurch political journalist connected with the trade union movement there. In the Ballance ministry he was Minister of Labour, and as such was responsible for an improved factory law (1891) and an Act to settle industrial disputes (1894), as well as legislation abolishing “truck” and regulating working conditions in shops. The Industrial Conciliation and Arbitration Act of 1894 was his most important measure. Reeves was here concerned to reconcile class differences by establishing tribunals where employer and employee might meet and settle their disputes. As the 1890 strike had shown, the dice were loaded against the worker. This Act set up, on the local level, conciliation boards under an impartial chairman to attempt a settlement, and on a national level, an arbitration court under a Supreme Court Judge, to reach a decision if local conciliation failed. The decision of the Court could be made mandatory on the parties concerned.

This measure, blocked at first by the Legislative Council, ushered in an era of trade union expansion and industrial peace. Thus, on the one hand, the trade unions were built up into a permanent pressure group, wedded (initially and in the long run) to the social status quo, for the Act gave them far greater chance of success than strikes could hold out. And on the other, the Act greatly favoured the continuance of Liberal rule, first by giving satisfaction to the town worker, and second by presenting propertied interests with the benefits of industrial peace.

There is little to be said about legislative achievement after the mid-1890s, except to note that old age pensions, a foundation stone of the welfare state, were introduced in 1898, and that votes for women completed the structure of political democracy in 1893 – the three-year parliamentary term had been introduced in 1879, and plural voting had gone in 1889. The decade of Seddon's dominance, ending with his death in 1906, is notable in other respects, not least for the prosperity which kept the country happy. It was characterised by stability rather than change. Economic policy became expansionist again; borrowed money was spent on public works, with two important differences: an increased amount was raised within the country, and the public works were of immediate usefulness to the expanding economy, especially of the North Island. The completion of the Main Trunk railway in 1908 symbolises this aspect of Liberal administration.

Seddon's talents – those of party manager and father figure – were admirably attuned to stability. He succeeded Ballance in 1893 by sleight of hand; Stout, the successor Ballance had designated, was not an M.P. and, before he could return to the House, Seddon seized power and held it grimly against all detractors – who were numerous enough, for Seddon, quite apart from an ingrained crudity, possessed nothing like Stout's prestige. The elections of 1893 and 1896 confirmed the coup d'etat; rivals near the top dropped off one by one. Reeves gladly took refuge in London as Agent-General in 1896; in the same year Ward's resignation followed revelations about his personal financial situation; in 1900 McKenzie resigned, old and exhausted. Their replacements were not of comparable calibre. Seddon assumed many major portfolios and became a one-man cabinet surrounded by sycophants, except for Ward who returned to office in 1899. He dominated the Liberals in the House and the party machine in the country, itself his own creation. He won successive elections (1899, 1902, 1905) which had hardly a solid issue to distinguish them: it was enough to point to the prevailing good times and promise to perpetuate them. The parliamentary opposition – old men unused to the new temper of politics – dwindled and grew dispirited. But under the surface of these constant successes the spirit of the times was changing – substantial men in town and country were turning from the Liberals, but not until after 1908 in electorally significant numbers. Seddon and Ward ruled with the name of “Liberal” but in fact they were conservatives, for good times do not demand change. The left wing elements in the Liberal party – single-tax followers of Henry George, land nationalisers following John Stuart Mill, socialists from the trade unions – continued to exist, but without success. Good prices, roads, bridges, and railways kept the farmers happy; stability and industrial peace continued to commend the Liberal administration to propertied men everywhere.

Ward continued, as Prime Minister, with the politics of stability after 1906, explicitly fighting the 1908 election on a promise to stand still, and winning a substantial victory. It was, however, the Liberals' last victory, for in the next three years the movement of opinion reached the point where it showed electorally; in 1911 the Liberals could not retain enough votes in town and country to avoid a tied result. This led to the first Reform administration, under William Ferguson Massey. The change has an appearance of suddenness, but it was a culmination of a lengthy movement.

The Liberal Decline

The Reform Party, though its antecedents may be traced at least to the beginning of the century, emerged as a separate party in 1909, closely allied to the Farmers' Union and to business organisations. Town and country property had not always been averse to Liberals; it had become so by 1911, largely because the condition of the country had become disturbed, and it became plausible to link the Liberals with the cause of this discontent. After 1906 a number of larger unions – of freezing workers and miners especially, whose unions could hit the exporting farmer and the businessman hard – broke away from the arbitration system, partly prompted by a desire for higher wages, and partly under the stimulus of socialist ideas. Another reflection of the same process was the emergence of separate political Labour groups, strong enough to return four M.P.s in 1911. The Liberals were traditionally of the left, even if not in actual policy, and indeed there were radicals in the Liberal ranks – some were cabinet ministers under Ward. Ward himself was not the vehement strike repressor that Massey later proved himself to be. It was possible to identify the Liberals with the currents of opinion which threatened prosperity. The link was tenuous, but it was polemically plausible and electorally profitable. Further, the Liberals, 20 years in power, had grown slack, and a faint breath of scandal hung over the administration.

A further issue had relevance in country districts particularly – how much it is not possible to say. This is the matter of the leasehold tenure. Over 10,000 farmers had taken land on 999-year leases by 1907, most of them in the North Island. Once they had become established, the advantages of leasehold tenure receded. Once they had capital, thanks to their easy start and subsequent prosperity, they (or at least some of them) wanted to use it to buy the freehold at the so-called “prairie value” – i.e. at a price very near the value of the land at the point of initial occupancy. It was a period of rising land values and a major motive was a desire to realise upon these rising values and sell at the greatest advantage. No doubt many 999-year leaseholders saw with envy their freehold neighbours doing just that. “Every man his own landlord” became Massey's most prominent slogan, and it seems to have swayed all and sundry in the Reform ranks, businessmen and freeholders as well as the allegedly deprived leaseholders. Ownership had an emotional as well as a financial appeal. The issue was an efficient stick to beat the Government's back with, the more so because doctrinaire elements in the Liberal party, chafing at last at the conservatism that Seddon had consolidated, began to agitate after his death for an extension of the leasehold principle and an increase of the leaseholder's rentals. The Reform Party could and did represent this pressure (to which Ward had no intention of yielding) as the beginning of a process which could end in land nationalisation and socialism.

The leasehold issue carried a fair emotional charge, as an item in a general indictment of Liberal socialism and corruption. The upshot was a close result in 1911 (36 Reform to 30 Liberals and four Labour), with Ward's resignation and brief replacement by Thomas MacKenzie, and his defeat in 1912 when a small group of freehold Liberals crossed to the other side. Massey, thus slenderly supported, began a premiership which lasted till his death in 1925; the Reform Government lasted three more years under J. G. Coates, one of the Liberal freeholders who had crossed over in 1911. Massey's pre-war years were marked, first, by an Act giving the 999-year leaseholders the right to buy the freehold at prairie value (less than 30 per cent took the chance) and secondly by a fierce social conflict arising from an industrial dispute. A 1912 strike of gold-miners at Waihi had been the prelude; the 1913 conflict saw the same methods employed by Government, employers, and farmers on a much more significant scale against watersiders, railwaymen, and freezing workers. The arbitration system was used to outlaw the strikers through the organisation and recognition of “tame” splinter unions in the place of the actual unions which had cut themselves off from the system. This legal device was enforced by the use of troops and special constables, typically farmers, to back up the police. The infant Labour movement was shattered in its first, unequal, trial of strength.

Nevertheless, the Labour movement had grown up in the generation before the war. Since the 1890 election the unions, typically small, and locally organised into trades and labour councils, had been a moderate pressure group within the Liberal alliance. In 1906 the Arbitration Court began to stabilise wages where before it had increased them; around the same time socialist and syndicalist propaganda began to sway small but vigorous groups. From this disillusionment and this ferment arose the “Red” Federation of Labour with its political ally the Social Democrat Party, bent upon social revolution. The moderate Labour elements were still important, and the two branches of the movement were by no means unified when the disaster of 1912–13 came. Adversity was a stern master, and succeeding years saw the emergence of a unified and moderate Labour movement, both political and unionist.

That the Labour movements were able to alarm the well-to-do so thoroughly was a reflection of the economic structure of the country. As dairy and fat-lamb production expanded, more and more people, the farmers themselves and urban businessmen, came to depend wholly upon the export trade. The unions who could paralyse the flow of exports were the most disputatious: hence the acrimony surrounding the 1913 strike and the repressive energy of a Government based upon rural and urban property.

This same expansion of farming increased the weight of the North Island; the 1901 census showed that once again the majority of Europeans lived there. The intensification of farming entailed the growth of a multitude of small and a few large towns, again notably in the North Island: a basic factor in the subsequent growth of the Labour Party. Both demographic trends have continued through the twentieth century.

Denser North Island settlement renewed the pressure upon the Maori population – hence the massive land transfers of the period. But politicians began to realise that the expropriation of the Maori had gone far enough, though little was done in the early twentieth century. Among the Maoris themselves significant changes began. Their population ceased its downward movement – the 1901 census shows a small increase from the low point of 42,000 shown in 1896. This increase was most striking among those tribes which had kept much of their land and had been remotest from European penetration. All through the later nineteenth century the assimilation of the Maori, through farming, through road and railway construction, through wage labour generally, had been going on. At the end of the century some effort was made by Maoris to guide the process. A “Young Maori Party” (not a political party but a social movement of a youthful elite) began to campaign for a selective acceptance of European ways, especially in health and sanitation, and a determined retention of “Maoritanga” – the distinguishing qualities of tribal Maori life. Leaders like Apirana Ngata, Te Rangi Hiroa (Peter Buck), and Maui Pomare rose from this movement to become leaders of national eminence.

The strife of 1913 was followed by a greater struggle – the Great War of 1914–18. New Zealand automatically ranged herself alongside the United Kingdom, but this did not mean that there had not been significant developments in external affairs in the previous 20 years. Vogel and Stout in the 1870s and 1880s had combined a strong British patriotism with a vocal New Zealand nationalism – and this combination was continued with Seddon and Ward. On the one hand these leaders looked north to a potential island empire in the Pacific, and were outraged when Great Britain permitted German and French annexation of islands; on the other, they journeyed with increasing frequency to London for conferences which drew the self-governing parts of the British Empire together. The two trends were not disconnected; these men were world-wide as well as local British patriots, and they saw in closer imperial ties a chance for greater influence upon British policy. Emotion and calculation joined hands – in, for instance, their advocacy (partly tongue-in-cheek) of Imperial Federation, their firm belief in Imperial preference, and their participation in the Boer War. The First World War played much the same role: on the one hand local nationalism was reinforced by the exploits of New Zealand's forces, especially at Gallipoli; on the other, the solidarity of the self-governing empire was increased.

The war profoundly affected the course of domestic politics. In the 1914 election Massey was returned with a very narrow majority over Liberal and Labour combined – too unstable a situation, many thought, for a wartime Government. Neither Reform nor Liberal was anxious to coalesce, but newspaper pressure and public opinion forced the two antipathetic leaders, Massey and Ward, into a National Government in 1915. The Governor played an important part in bringing them together; and Labour remained obstinately aloof. Massey was still Premier, but Ward, in charge of finance, was a good deal more than second in command, and was responsible for the crucial matter of war finance. At the end of the war the two leaders were glad to part company and resume party conflict.

1919–35 An Uneasy Period

The problems of New Zealand in this period are those of a rural economy constantly unsettled by the conditions of the world market for farm products. A few products, wool, butter, cheese, and meat, earned the major part of overseas income; the whole country, and not just the farmers who actually produced, depended upon the conditions affecting the sale of these products overseas. The urban population, indeed, was large and growing, but in the absence of large-scale industry, townsmen were, ultimately, as dependent upon grass and grazing animals as the farmers. Governments based their policies upon these facts; most important measures of the period are designed to strengthen the primary producer, and thus to benefit the whole country. Further, to a major degree, the fate of Governments depended upon the votes of the countryman and small townsman, and in the uncertain climate of the period these votes were apt to be unpredictably cast. Politically, this period is one of three-party flux and realignment, in striking contrast to the simplicity of preceding and following eras.

Farming had prospered during the war, and, thanks to Ward's loan finance, taxation did not bear heavily upon profits. Farming, more than ever, seemed the high road to fortune. Land values, which had been on the increase since the 1890s, appreciated steeply with men's zeal to get on the land. Between 1915 and 1925 over 40 per cent of the occupied land in the country exchanged hands as farmers bought and sold upon a rising market. It has always been a little difficult in New Zealand's history to tell the land speculator from the farmer, but never more so than at this time. The Government, in its well-meant efforts to help the returned serviceman, accelerated the course of the disease by making some £235 million available for land purchase.

Two unhappy results soon became apparent. First, and all over the country, farmers bought land at high prices, borrowing heavily at high rates of interest. They were inevitably embarrassed when prices for farm products fell, as they did from time to time in the twenties and disastrously between 1928 and 1934. Commitments on mortgages, chiefly interest payments owed to Government lending Departments, banks, private credit agencies, and previous owners remained high and ate up an increasing share of the farmer's income. Farmers on good land who had taken over farms as going concerns, were typically able to weather the prolonged storm by cutting down expenses and stepping up production. The “new chum” farmer – and this is the second consequence – was less fortunately placed. Often he was but recently a townsman, normally he had gone on to poor-quality land needing considerable development – clearing, fencing, buildings – before it could bring him a good return. Many returned servicemen were in this category, and a number of them left their farms derelict. Inexperience, poor land, and lack of money augured ill for their future, especially in a period in which farm incomes fluctuated and, over the period as a whole, fell. Such farmers as these, and also better established farmers, were faced above all with a shortage of money, so that the typical appeal from the farming districts at this time is for more abundant and cheaper credit.

Further, farmers' organisations turned to Government to help them market their goods more effectively, in the belief that the farmer was being cheated of his due by avaricious middlemen in London. Finally, when farmers saw, as was readily apparent by the end of the twenties, that their sharply increased output brought a declining income, many were ready to believe themselves victims of an international conspiracy of foreign financiers.

Economic Uncertainty

Over the same period, economic uncertainty and disaster hit the towns with even greater severity. Most farmers, when bad came to worse, could at least feed their families; in the depression of the early thirties many townsmen could not do this without recourse to charity. Urban unemployment grew steadily during the 1920s. In some areas at least, unemployment in the towns sent job hunters into the country, depressing rural wages to the point of subsistence. No significant Government action was taken to meet unemployment until the end of the 1920s, and even then it was hardly effective. The town worker, like the more struggling farmer, became a voter with a grievance. During and just after the war there had been a labour shortage; unions became strong and sought to prevail through direct action. The Alliance of Labour thought poorly of political action and scorned equally the Labour Party and the arbitration system. By the end of the decade a labour surplus reversed this pattern; arbitration and the Labour Party became the only defences – and for the time being ineffective ones – of the wage earner.

This economic background is essential to the politics of this troubled period. These are the problems to which Governments directed their attention; this is the climate in which they rose and fell. Three parties contested for votes between 1919 and 1931: Reform, Liberal (or United), and Labour. On the surface party fortunes are simple: Reform, led till 1925 by Massey and thereafter by Coates, ruled till 1928, when a modified Liberal Party with the name “United” (q.v.) was elected under Ward; Reform and United joined forces in a coalition in time for the 1931 election, had no difficulty in winning under the leadership of George Forbes (Ward's successor) and Coates, and governed until Labour's triumph in 1935. But the realities beneath the surface are much more complex.

Reform won three victories at the polls, 1919, 1922, and 1925 (the last overwhelming in terms of seats, though not of popular votes). Those of 1919 and 1925 coincided with peaks of prosperity in an up-and-down decade. Through these three elections Liberal support was eroded in the countryside by Reform, and, more emphatically, in working-class town electorates, by Labour. Labour won a quarter of the votes and 17 seats in 1922, a showing it was not to improve on significantly till 1931. In 1925 and 1928 it vainly attempted to find a remedy for rural uncertainty through, first, a new form of land tenure, the “usehold”, and secondly, a promise of credit facilities. Neither appealed greatly to the rural voter: the usehold looked too much like the leasehold, and in 1928 Ward, heading the refurbished Liberals, outbid Labour as a credit dispenser. Labour's sole achievement in the twenties was to displace Liberal as the party of urban workers. Before it could become a secure Government the two older parties had to be driven together, and then defeated by adding farmer and “respectable” urban votes to its column of wage earners. In 1931 it became the Opposition in a renewed two-party system; in 1935, thanks to the depression and to its policy, Labour won more than sufficient additional votes and seats to become the Government.

This process was accompanied by significant modifications of policy and attitude. Tacitly, a party whose origins lay deep in ideas of social revolution (whether achieved by violence, or, more typically, by Persuasion) made its peace with the economic status quo. Its zeal for the underprivileged was undiminished, but the zeal was directed to securing a fair deal for all within a capitalist society by a far-reaching extension of the role of the State in welfare activities, credit and currency control, and industrial development. The circumstances of the early thirties made such zeal and such intentions irresistible.

The concrete accomplishments of the Reform party came in the early twenties. It borrowed steadily and heavily overseas for road and rail construction and hydro-electric generation; it met, though only in part, the farmer cry for credit through long-term loans and a cooperative system of intermediate credit facilities; it essayed the reorganisation of marketing of exports through a series of boards in which producer and Government cooperated to reduce freight rates and middleman profits, and generally to rationalise procedure. With dairy produce these latter attempts met with some marginal success. The more ambitious attempts to control meat marketing (which involved an attempt to sidestep the English distributor entirely) failed. Other products, honey, fruit, kauri gum, came under similar boards later in the twenties.

These experiments were more significant than successful. The farmer, rank individualist though he sometimes appears, had done well under rigidly controlled wartime conditions; the reapplication of control, many of his organisations held, might bring back good times. But, it was soon apparent, the war years had been good, not because they had been controlled, but because the prices had been good; the 1920s were mostly to be lean because prices were frequently low and tending to fall. No marketing organisation could have more than a marginal effect upon world commodity prices. These experiments of the twenties are significant, however; they are the prelude to a much more thorough system of controlled and planned marketing brought in by the Labour Government, chiefly in the context of another war, which became an established feature of the New Zealand economy.

It was Reform's bad luck to go to the polls in a good year, 1925, and to win handsomely. For 1926 was a bad year and 1928 was the threshold of prolonged depression. Coates had won resoundingly in 1925 as a symbol of energy, resolution, and hard work, the accepted virtues of the pioneer farmer making the wilderness flower. But in these lean years farmers worked hard to increase output: top-dressing and herd and flock management caused a spectacular increase in productivity. But prices fell so swiftly and so far that an increased output actually earned less. “Coats off with Coates”, the energetic slogan of 1925, had a hollow sound in 1928. The poorly established farmer, the man least fitted to weather the storm, looked for more than pioneer virtues in 1928 – he wanted a lifeline, as did the increasingly depressed town and country wage earner. It was the chance for the success of an aberration. That aberration was the United Party led by Sir Joseph Ward.

Coates, as the depression was to show more clearly, had a pragmatic turn of mind and was flexible in his choice of measures and methods. To some in the mid-twenties (and to many in the mid-thirties), his choice often seemed dangerously socialistic, for Coates was ready to use the power of the State to secure his ends. Such laissez faire dissidents, urban businessmen chiefly, rallied before the 1928 election, and their extra-parliamentary movement merged with the Liberal remnant in Parliament. The aged and ailing Ward came out of retirement to lead the new-old party, United. In 1928 he appeared to offer a credit-hungry country the benefits which would accrue from the immediate spending of 70 borrowed millions. Ward in fact offered something much less – something not unlike the sort of loan expenditures which Reform had quietly practised since the war. Still the lifeline appeared to have been thrown. Both Labour and Reform lost support. The result was a sufficiently numerous United contingent to displace Reform and rule the country with the Labour support.

The £70 million was neither borrowed nor spent; Ward, after 18 ineffectual months, died; the depression fell with unremitting severity. The United M.P.s, many of them parliamentary novices, yielded to the demands which had been heard since the war that the “respectable” parties, Liberal and Reform, should unite against the social revolution manifested (so it could still be held) by the Labour Party. The example of Great Britain, where Ramsay Macdonald's National Government was formed in 1931, was infectious. In the same year the two New Zealand parties joined in what they expected to be no more than a temporary coalition necessitated by economic emergency. All efforts were to be directed, as they had been in wartime, against the enemy, less palpable than the Germans but as deadly; the rescue operation completed, the two parties could resume their separate existence. So it did not happen; neither Reform nor Liberal-United was to survive the merger; from its ashes emerged a hesitant phoenix, the National Party of 1936.

This decade of the 1920s was not an inspiring one. There were few able leaders, and even the ablest were unlucky: for example, Coates, who campaigned himself into an untenable position in 1925, or Henry Holland, the gifted, humane, though bitter leader of parliamentary Labour, plunged into gloom as one adverse election followed another. Ward, a great man from the past, would stand higher if his last years had not been marred by the fiasco which followed on the election of 1928. Nor did the coalition of 1931 bring men of the first flight into control at a time of peril. The Prime Minister from 1931 to 1935, George Forbes, was honest and painstaking, but little more can be said; the competent Minister of Finance (up to 1933), W. Downie Stewart, was hamstrung by an obdurate fidelity to the doctrines of laissez faire; the most able leader, Coates, dominant in economic policy after Stewart's resignation, came too late to full authority, and in the event proved insufficiently flexible. On the Labour side, Holland declined steadily until his death in 1933, but others were at last reacting with the vigour and determination demanded by the times; such leaders as Walter Nash and Peter Fraser were to transfer this vigour from protest to reconstruction after 1935. The troubles of the twenties and the slump of the early thirties caught New Zealanders unprepared; leaders and country alike had matured in prosperity; adversity had to hit hard and long before men gave up waiting for a miracle.

The Depression

The depression was in origin a matter of markets and prices; prices for all major exports suffered a sharp and prolonged fall. The cut in the farmers' income blighted the whole of society and government; merchants and shopkeepers who sold to the farmer, banks and credit agencies who had lent him money, workers who handled and processed his products. The whole economy slowed down, and the symptoms of the illness appeared everywhere: farmers unable to meet interest payments and threatened with foreclosure, tradesmen and shopkeepers faced with bankruptcy, large employers reducing staff and cutting wages, wage earners either unemployed or underpaid facing destitution and eviction. Generally speaking, society was divided into two groups: those who could hold on in straitened circumstances and await the upturn, such as established farmers, business and professional men, and white collar workers with secure tenure; and, secondly, those with little or nothing to fall back upon, small farmers on poor land, wage earners subject to dismissal, casual workers, the aged, the widows, and the infirm without private means. For these latter, there was no recourse beyond niggardly public relief and haphazard private charity.

Government policy was marked by an insistence on long-term objectives and by grave inflexibility. Rightly enough, the Coalition ministers reasoned that a society based on rural production would best be rehabilitated by stimulating the primary producer. Less adequately, such stimulation was attempted within a narrow framework of ideas as to the limits of acceptable economic policy. Coates's pragmatism showed itself towards the end of the depression, but it was tardy and inadequate. Downie Stewart's orthodoxy – balancing the budget, living within one's means, letting the forces governing the market have free play – dominated Coalition thinking. It was a policy of belt-tightening, of yielding to the inevitable, of waiting for the corner to be turned. However, with the farmer, some attempts were made to bring the corner closer.

In the first place, steps were taken to reduce the farmer's costs and increase his income. Wage cuts served this purpose, for wages, either directly or indirectly, were an item in the farmer's cost of production; to hasten wage reduction compulsory arbitration of disputes was revoked, the culmination of a lengthy campaign by farmers' leaders. Cuts in public servants' wages were an economy measure, too, for a government with a dwindling revenue and comparatively rigid commitments, for instance on overseas debt. The alteration of the exchange rate from parity to £NZ125 = sterling 100 (the move that prompted Stewart's resignation) was designed to appreciate returns from farm exports. Fertiliser was subsidised by the State, to keep up rural productivity. A series of measures in 1931 and 1935 protected the impoverished farmer against foreclosure and enabled interest rates upon farm mortgages to be reduced, a policy extended by the Labour government. A mortgage corporation, to operate independently of the government and upon orthodox lines, was set up to provide rural credit. These extensions of State activity, together with the creation of a semi-independent Reserve Bank as a national banking authority, were Coates' chief contributions – contributions which gave some offence to the conservatives and no comfort at all to the increasing, if variegated, company of radicals. By 1934–35, owing in part to these measures but more to a recovery of world prices for wool and meat, the situation had distinctly improved. The budget had been balanced, thanks to new taxation (e.g., the sales tax) and rigid economies (e.g., wage and pension cuts, the cessation of public works, the reduction of the school population); London reserves were in a healthy condition; and public revenue was buoyant. But there was still an army of unemployed, and the dairy farmer, a notable element in the North Island population, had not yet sighted the corner.

Urban distress met with no comparable attention from government. The farmer was protected against foreclosure, but not the rent-paying worker against eviction. Soup kitchens, relief work, boredom, apathy, strikes, and sometimes riots, dominated the life of the unemployed town worker. A poll tax and an income tax, with irregular subsidies from general revenue, financed the unemployment fund, from which was drawn relief wages for men employed either on trivial tasks around the towns or on major construction projects in remote areas. Wages were low and work was rationed; such work was demoralising. Resentments multiplied, in the idle towns, the unemployment camps, and among the depressed farmers. It was a ready soil for grievances and for panaceas. “Something ought to be done” would well express the mood of the times – of the unemployed worker, the bankrupt farmer, the appalled minister of religion and charity worker, the merely indignant observer. A cause had to be found, and it was likely to be identified as an international conspiracy of bankers, using the Coalition government as its (perhaps) unwitting tool. By 1934 few of those who had suffered from their vulnerability or had been affected by the suffering of others, were ready to let nature, as revealed in economic laws, take its course. A mounting current of public opinion, headed by an energetic Labour Party, a rapidly growing Douglas Social Credit movement, and a numerous body of enraged humanitarians, demanded that the Government do something, no matter how unorthodox, especially about currency and credit, and above all to relieve poverty. The little that the Coalition did came nowhere near to satisfying the demand.

The normal three-year term of Parliament had been extended to four, and the extension justified by the existence of the coalition and the imperatives of the emergency. But 1935 proved no better for the government than 1934 would have been. The recovery was not yet electorally significant. The towns, even “respectable” areas spurred more by indignation than actual suffering, proved substantially Labour; so too did a number of largely rural seats, dominated by the still-depressed small townsman and a number of unrelieved dairy farmers. The chances of the Coalition were further dimmed by the emergence of a right wing Democrat Party of conservatives alienated by Coates's “socialism”. It had no effect other than splitting the anti-Labour vote and so swelling the number of Labour members returned. Without the Democrats, Labour would probably have squeezed in; with their help its share of the votes (less than 50 per cent) was converted into a massive majority of M.P.s. In the campaign, as in the later years of the depression, the Labour Party led by the genial M. J. Savage and allying itself with the currents of “credit reform” opinion set flowing throughout the country, held the initiative. Other parties could but copy its proposals, and the times demanded a more substantial change than such a last-minute conversion. A thorough change could only be a change to Labour.

1935–49 The Labour Regime

The Labour Party came in on a crest of a wave – a wave that did not finally recede for 14 years. It began with four years of peace and rose to its peak of electoral success in 1938; then followed six war-time years, with a postponed election in 1943 which showed the wave beginning to recede; finally, four difficult post-war years saw the tide turn, and a vigorous National Party take over in 1949. In these 14 years an indelible mark was made upon the country.

Labour expanded State activity until it covered the whole economy and a good deal of social life too. In peacetime to secure its welfare objectives, in wartime to mobilise the country as well, Labour constantly added to the functions of the State. The process was hardly at all doctrinaire; there was simply a conviction that circumstances demanded public action. Certainly Labour ministers suspected the credentials of untrammelled private enterprise and were more than ready to limit its freedom; equally certainly, they had no intention of abolishing private enterprise when it could be supervised so easily. The test of measures was their practicability, not their doctrinal purity. This can be said of the recovery measures and guaranteed price system of 1936, the welfare programme of 1938, the pre-war public works, housing, and education programmes; the import and exchange control mechanisms, prefigured in 1939 and articulated during the war; the wage and price fixing machinery set up during the war together with controlled export marketing; the post-war attempts (ill-starred) to peg land and property values; the long and losing battle against inflation from the war years into the peace. Though the Labour Party made an indelible mark, it did not meet with uniform success. The measure of its achievement is the paradox that it was defeated by a party which had adopted its leading accomplishments. All sections adopted its victories – full employment, public provision of welfare, a controlled economy; by 1949 a majority condemned its failures – inflation, industrial unrest, and the weariness and arrogance that arise from a long tenure of office.

During its first term Labour guided and hastened the return of prosperity. From 1934 overseas prices were recovering and the country could not help but be better off. The Government benefited, too, from a balanced budget, a buoyant public revenue, and a healthy reserve in London, inherited from its predecessor. It made good use of these propitious circumstances. Its initial step was simply a Christmas bonus for the unemployed – a symbolic if small pledge of humanitarian readiness to cut corners. It went on, in the busy session of 1936, to restore wage and pension cuts, to bring in a basic wage, a 40-hour week, and a major programme of public works; it built up the unions by bringing back compulsory arbitration and adding to it compulsory membership of unions; it embarked upon a great housing construction programme; it brought in a price scheme for dairy products which guaranteed the farmer a reasonable income; it tried, without notable success, to encourage secondary industry so that there would be more jobs for wage earners. The Government's opponents never tired of inquiring, “Where will the money come from?”; the Government's answers were never explicit, but in fact a good deal of the money came from State credit created by the Reserve Bank. This institution, by an Act of 1936, had become a fully governmental body; where these expensive programmes could not be financed out of current revenue or overseas funds, the Government simply borrowed from its own bank. Neither the housing programme nor the guaranteed price could have been financed without such credit. Labour had collected most of the Social Crediter's votes in 1935, and this, which was far from their desires, was their reward, a policy a good deal more Keynesian than Douglasite, however.

The cornerstone was set in the arch in 1938. Already the government had shown its concern with public health and welfare; in 1938 the two were integrated into a “social security” system by which the State guaranteed medical advice, medicines, hospital services to all whatever their means, and a wide range of pensions to all likely to suffer hardship. In part the scheme was financed by special taxation, in part from general revenue. It was, among other things, a ready vote winner in 1938; its attractiveness, together with the Government's energetic record and the National opposition's general nervelessness, proved irresistible.

Hard on the heels of the victory came tribulation. Thanks in part to public works construction (which had begun to revolutionise road, rail, and air transport) draining overseas reserves, in part to a flight of private capital from the country, scared by a government that still seemed “socialistic”, in part to a sag in prices for exports jeopardising the guaranteed price system, and in part to the unsympathetic attitude shown by London financiers to some £16 million of debt shortly falling due, things looked ominous in 1939. The debt was converted on rather stringent terms; exchange and import controls were applied. But the real saviour was the war that broke out in September. Once again farm exports were at a priority and the mobilisation of resources for the war effort permitted the introduction of more thorough controls than would have been tolerable in peacetime. The recovery programme had had a narrow squeak, and its ability to withstand adverse economic conditions was not seriously tested. “Insulation” from overseas fluctuations had been talked about; it was New Zealand's good fortune that it did not have to be tried.

Though the war brought New Zealand, by her free decision, to the side of Great Britain, this action did not mean that external policy had not altered considerably since 1914. The Reform Party and Coalition leaders, to be sure, had made rather a fetish of the British race and loyalty, but under the surface Massey, Francis Dillon Bell, the leading Reform Party spokesman on external affairs, and Coates could oppose British policy when they felt New Zealand interests were endangered. Labour spokesmen cared less about the proprieties, and were more internationally minded than their predecessors in office. An idealistic approach came readily from the spokesmen of a small country which lacked the responsibilities of international power. Their idealism took the form of an attachment to the League of Nations and to the cause of the small nations; the League they saw as the defender of small nations against the great aggressors, notably Germany and Italy. The readiness of Great Britain to ignore the League and yield to the aggressors they saw both as wrong in principle and as dangerous in consequences. William Jordan, New Zealand's representative at Geneva, was outspoken in defence of this not impractical idealism. Savage, especially at Commonwealth Prime Ministers' Conferences, made it perfectly clear that he thought the path to international amity lay through economic reform and higher living standards. In these years New Zealand's voice was heard on the international stage in an individual way, in particular as a defender of collective security through the League, at a time when that body was collapsing under the defiance of Italy, Germany, and Japan.

The Second World War

But idealism did not preclude realism. In 1939 preparation of a War Book was undertaken – a plan of defence measures to be taken if war broke out. In particular New Zealand looked warily to Japan, and sought guarantees from Great Britain against Japanese attack. In 1939 (though not in 1942) the enemy proved to be European, and New Zealand once more set about fighting her battles half a world away. Again, a volunteer expeditionary force was raised; again, it was sent (the first detachments in 1940) to the Middle East for training. Recruitment into the Air Force and the Navy was also considerable. While the New Zealand Division, placed under the command of General Bernard Freyberg was in the Middle East, the “phoney” war ended, France collapsed, Italy joined Germany, and Great Britain faced the enemy alone apart from her Commonwealth allies. The Italian drive for Suez meant that the Division was in the heart of a war theatre. Thus the Mediterranean region was the scene of New Zealand's major fighting effort – the tragic campaigns in Greece and Crete in 1941, the successful battle against Rommel's army for North Africa in 1942, and the bitter campaign north up the Italian peninsula in the closing period of the European war. The end of the war saw a weary Division established at Trieste facing the Yugoslavs when the United Kingdom and France were reverting to the methods of traditional diplomacy, and when the United States continued to show its indifference in an early round in the cold war.

During this time, of course, the Pacific had acquired its own war. The Japanese attack in 1942 had turned New Zealand's worst dreams into stark reality. Singapore had fallen, the United States Pacific fleet had been knocked out at Pearl Harbour, British naval reinforcements had been quickly sunk; New Zealand and Australia, for a time, were defenceless. Rather than pull her forces out of Europe (as Australia did), New Zealand was persuaded to leave her division in Italy. Already with her resources under great strain and totally mobilised (conscription had been introduced in 1940), the country set about maintaining a further division in Fiji. An attempt was made, with naval and air forces as well as the army, to play a full part in the Pacific war under the overall control of the Americans, and to set up an effective home defence force. At the same time an intense domestic effort was made to step up food and raw material production (and also to produce munitions and other manufactured goods) for Great Britain and for the American forces. The effort proved too much; in 1943 the Pacific Division was reduced to reinforce the Division in Europe. Nevertheless, the point had been made, if less emphatically than New Zealand and Australian policy makers desired: if, as was necessary in the nature of the case, the Americans had taken a major part in defeating Japan and so dominated peace making in the Pacific, Australia, and New Zealand had earned a place at the conference table. The protracted peace negotiations, and the setting up of the United Nations Organisation, saw New Zealand playing as full a part as her size could merit.

All this was not accomplished without intense internal strain. The war effort made great demands upon leadership, and generally it proved sufficient for the task. Labour Ministers, Fraser (who had succeeded Savage on the latter's death in 1940) and Nash in particular, kept the affairs of the country under detailed control, and on a remarkably even keel. The war was financed without recourse to the overseas loans which proved such a crippling liability after the First World War. Instead, the cost of the war effort was met out of current revenue and from domestic war loans; both these devices had the added merit of mopping up surplus spending power at a time when high incomes and scarcities made inflation unavoidable. After the war began, the Government, elected to dispel depression, found, paradoxically enough, that its main task was to discipline a dangerously inflationary boom. Farm exports were taken over by the Government for bulk sale to the United Kingdom at prices lower than the prevailing world level, but still high. A share of the farmers' earnings was held back in reserve accounts as an anti-inflationary measure. War conditions, further, stimulated secondary industry by limiting imports; this, combined with a labour shortage, tended to send wages up, and of course retail prices, rents, charges for services, all tended to rise sharply in a situation of scarcity. The Government's remedy was a system labelled “stabilisation”: in 1942 steps were taken to stabilise prices, wages, and rents at the level of that year. Subsidies were paid to local producers who would have suffered without help. The system was not foolproof, but its success can be measured by the fact that the overall rise in the cost of living in New Zealand in wartime was considerably less than with most Allied powers. The chief political architect of this system, as of the whole structure of wartime finance, was Walter Nash; it was probably the greatest single accomplishment of his long career.

Sending armed men to battle was not the most important part of the war effort; farm production, helping to feed and clothe the United Kingdom and also allied forces, was less heroic and more profitable, but also more significant. In spite of manpower shortages and others such as farm equipment and machinery, production rose to impressive heights. The totality of the war effort was reflected in a system of manpower direction which gave priority to essential occupations, especially farming, processing farm products, munitions, and other secondary industries. Industrial growth was very considerable upon New Zealand standards, a development begun in wartime which is still continuing.

Among its many social effects may be singled out that acceleration of the process by which the urban section of Maori population began to increase – a process which has continued, and which, combined with the high Maori birthrate, has introduced the germ of a radical problem into the life of New Zealand towns. Labour policy towards the Maori people had since 1935 been both energetic and enlightened, but mainly directed to raising the standard of living of the Maoris in more or less isolated rural communities. Housing, farming, health, and education improvements were the aim of policies summed up in the 1945 Maori Development Act. The spirit of the policies was that of Sir Apirana Ngata who, as a leader of the “Young Maori Party” had begun a reformer's career among his own people early in the century, and, as a Minister of the Crown, had continued it nationally after 1928. The goals were his, but the energy was that of the Labour Party rather than of the Reform Party to which Ngata belonged. More recent developments of policy have come closer, but probably not close enough as yet, to the newer problem of the urban Maori.

Among the most important wartime developments was in external affairs – and developments here were equally the fruit of the complexity of the problems facing the country and the determination of Fraser that New Zealand's interests should not lack vehement advocacy. Decisions over the use of New Zealand troops, and in particular the distinctive identity claimed for the Middle East Division, involved New Zealand and Fraser in problems of high command and overall strategy. These were intensified by the dominant role of the United States, especially in Pacific fighting – an area in which New Zealand, with Australia, believed she had special interests and so a special claim to be heard. Fraser was a realist above all else; he did not expect to force Churchill and Roosevelt to do his bidding. But he, aided by Nash as Minister at Washington from 1942 to 1944, did expect an opportunity to make known the New Zealand standpoint. This he continued to do after the war, and in the process achieved greater international celebrity than has fallen to the lot of any other New Zealand leader.