Labour Party in Decline

Domestic politics stagnated early in the war, but from 1942 on are enlivened by the spectacle of a reviving opposition. The National Party which had been formed in 1936 had nothing new to say in the election of 1938 and was easily and thoroughly defeated. Its leader, Adam Hamilton, a Coalition Minister of Reform Party extraction, did not inspire. He was displaced from leadership of the party by Sidney Holland, a young and vigorous politician, who with Hamilton and Coates had become a member of the War Cabinet. This body, far from being a full coalition, had responsibility only for decisions affecting the war, and not even final responsibility for these. In 1942, after a dispute with Labour Ministers, Holland led the National members (all except Coates who thus effectually severed himself from his party) out of the War Cabinet and into a new phase of New Zealand politics. The postponed election was held in 1943; Labour won without much difficulty, but with reduced support. The initiative had passed to the Opposition, even if it took two more elections (1946 and 1949) to bring it to the Treasury benches.

Fraser's Government presided over the readjustments of peace as it had over the stresses of war – in a spirit of paternalism (becoming increasingly rigid and touchy), and with a readiness to intervene in economic life in the interests of stability and welfare. Its members were getting old and the problems were insuperable in any case. The ancient enemy, inflation, still threatened, and counter-measures, unpopular but tolerable in wartime, in peace were merely unpopular. On the one hand farmers clamoured for and secured a greater share of the sharply increasing earnings of their products; on the other the unions grumbled at wage restraint, and the more tough-minded of them, notably the watersiders, secured major increases by strikes or threats of strikes. Less advantageously placed wage earners contented themselves with modest increases through Arbitration Court wage orders, again allowed after 1945. Internal prices climbed high, higher than increasing incomes; housing was short, and there were still scarcities. In brief, stabilisation was crumbling before a popular demand for relaxation of controls and increase of rewards. The Labour Party, traditionally allied to the unions, was weakened by the intransigence of the industrial left wing; the National Party saw power at the end of a road paved with promises to dismantle control, defeat inflation, and reduce taxation. Had not the Labour Party abolished the country quota (a device that had artificially weighted the rural vote) and had not Maori voters stayed faithful, Labour would have been defeated in 1946.

The years immediately before this election saw the successful implementation of a generous rehabilitation policy for returned servicemen. Low interest loans and grants were provided by the State for farm and house purchase, for education, and for setting up businesses. The State bought a good deal of farm land, developed it even to the extent of fencing and building, and passed it on to ballot-selected servicemen. An elaborate, and not wholly successful attempt was made to control property values, both as a measure against inflation and as an aid to rehabilitation. The contrast with the post-1918 programme was striking.

Labour's last three years, 1946–49, were among its most inglorious. Industrial relations, notably on the waterfront, evolved towards the crisis which was to come in 1951. The continued intimacy between political and industrial Labour enabled the Opposition to attack the Government for its softness towards “the wreckers”. The situation was not unlike that of 1911, with Holland and Fraser occupying the positions of Massey and Ward. Fraser, in these years, convinced himself that the international situation required a reversal of Labour's traditional policy towards conscription, and, after arousing dangerous enemies in the Labour movement, had his way through a referendum in 1949.

With his hostility to international communism grew his antipathy to critical left wing elements in his party and in the country at large – and the two were assumed to be not far from identical. Labour was indeed fighting for its life; its majority was so narrow that any dissidence on its left wing would play straight into the hands of the Opposition. In fact the National Party hardly needed such assistance. Popular anger at inflation and impatience with controls (a paradoxical union of antipathies, for the dismantling of controls would only liberate inflationary forces, as the National Party discovered when it exchanged the exuberance of opposition for the sobriety of administration in 1949) were sufficient to carry the day. In 1949 the new men took over. It is probably not too much to say that an era, comparable in its formative character to the Liberal period, had come to an end.

1949–61

In the future the fifties may be regarded as a watershed decade between two New Zealands: a period of pause and consolidation as far as outward events are concerned, but a decade marked by the beginning of major readjustments under the surface of prosperity. Certainly, there has been continuity and prosperity through the rise and fall of governments, even if, at the outset, it seemed that something new had happened with the election of 1949. Under the surface, however, the fifties have experienced a renewed uncertainty, comparable in temper if not in social effects, to the fluidity of the 1920s. In 1957–58 it became abundantly clear that the roots of prosperity were shallowly set, that a country depending upon a few customers buying a few commodities and paying scarcity prices was uncomfortably vulnerable. Industrialisation, the redirection of rural industry, a major shift in marketing policy – these are among the remedies which have been suggested for this age-old but newly rediscovered insecurity. In the future it may be possible to detect their initial application in this decade.

Policy of the National Party

The National Party took over the Treasury benches in the spirit of crusaders, determined to rescue the country from socialism, bureaucracy, inflation, and high taxation. It went a little way towards these goals. Import and price controls were relaxed, some nationalised enterprises were put under corporation control, property deals were freed from a control that had been far from effective, food subsidies were reduced. But inflation continued as prices and wages maintained their steady climb; the slogan of 1949, “make the pound go further”, was proving ambiguous. In 1951 price controls and food subsidies were re-introduced, and welfare benefits increased. The mood of the National Government, shrewdly led by Sidney Holland, was pragmatic, and pragmatism demanded State action to prevent distress and fend off unpopularity. Had economic issues maintained their pre-eminence, the election due to be held in 1952 would surely have seen the National majority sharply reduced.

But industrial strife caused that election to be anticipated in 1951, and economic issues to be temporarily obliterated by matters of more emotional urgency. The nerve centre of industrial disaffection was the waterfront, where a strong union, to the grave embarrassment of the Labour Government, had for years used its power with some irresponsibility to elevate its members into the status of a working class élite. Other unions, also strategically placed in the economic life of the country, had followed this example, while the great powerless majority had collected the crumbs that fell from the table of arbitration. Holland, with a strong man as Minister of Labour, (Sir) William Sullivan, made it his business to meet this ambitious militancy head on. Behind the vocabulary of conflict – charges of communist conspiracy and industrial wrecking – one can detect an elemental determination on Holland's part not to tolerate a rival authority within the country, an authority personalised in the watersiders' tough leader, J. Barnes. In 1951 the waterside workers ceased work, technically locked out by their employers.

The conflict, now finally joined, had had its prelude in 1950 within the trade union movement, when the militants, led by watersiders, had failed to conquer the conservative Federation of Labour, led by F. P. Walsh, and had formed a rival national body, the Trade Union Congress. The dispute of 1951 lasted for three months, and ended in a total victory for the Government, the port employers, and conservative opinion, notably of businessmen and farmers, throughout the country. Within the Labour movement the militants were isolated: the Federation was hostile, the political Labour Party, led since Fraser's death in 1950 by Nash, was indecisive. By and large, the public were either hostile or apathetic to the watersiders and their allies, the freezing workers and transport workers.

The struggle was not without its ideological elements, even though it was in the main a naked contest for power. The TUC had socialistic overtones, and talked the old radical language of nationalisation, worker control of industry, and the abolition of compulsory arbitration. For their part the Government linked the whole affair to the cold war, and made its appeal to patriotism, loyalty, freedom, and the Western alliance. Defending such values, no hold could be barred; the emergency regulations with which the Government armed itself were stringent to an unprecedented degree. When, after the election of 1951, the National Government attempted to convert these regulations into a permanent Police Offences Act, it met with marginal reverses as a public opinion committed to the liberty of the subject manifested itself and secured the withdrawal of the most illiberal provisions of the Bill.

Holland displayed his astuteness in holding this emergency election; it was the first time in this century that a parliament had not gone its full three-year term. He explicitly sought public endorsement of his Government's handling of the dispute, and this he received. The Labour Opposition, dogged by Nash's injudicious declaration that he was neither for nor against the watersiders, appeared, and was, indecisive; the National Government was returned with an increased majority. A majority of voters, it was manifest, were glad to see the watersiders and the militants put down.

But no economic difficulties had been solved by this flexing of conservative muscles, and in the next three years the old perplexities reasserted their dominance. Taxation was still high, inflation still confronted high incomes with yet higher prices, bureaucratic controls were still applied. It had become clear that in mid-twentieth-century New Zealand no retreat to the golden age of laissez faire could be made. In 1954 the National majority was greatly reduced, and the 11 per cent of the votes collected by a third party, the Social Credit Political League, proved that a minority in the country was disillusioned with both major parties, neither of which seemed in possession of the magic word needed to open the door to unqualified felicity. Though Social Credit, thanks to the dispersion of its vote, gained no seats, the League made it clear that one-tenth of the voters were ready to opt for a new magician with a new formula.

Recent Trends

The next three years saw a continued decline in the reputation of the Government. The Labour Party took a new lease of life in 1957, Nash showed notable energy as a leader, and its programme promised a carefully selected list of benefits to wavering voters: taxation relief, an income tax rebate, and increased benefits. Narrowly, Labour won, and the Social Credit vote sagged to 7 per cent.

This victory might be compared with that of Coates in 1925, though not in magnitude, for it simply presented the victors with problems with which they were not able to cope. Consequently 1960 saw the National Party handsomely returned under the leadership of K. J. Holyoake (he had in fact succeeded Holland as Prime Minister when the latter retired three months before the 1957 election). The Nationalists made full use of the opportunities presented to them by Labour's stringent handling of the crisis of 1957–58.

This crisis, whose advent had been detected by economists before the 1957 election was fought, had a head start thanks to the National Government's understandable preoccupation with electioneering in the latter months of 1957. The Labour victors took office to find themselves embarrassed by a combination of expensive electoral promises and a financial crisis. The crisis arose from a sharp fall in overseas prices for exports accompanied by a grave shrinkage of London reserve funds. Here one might note a certain poetic justice: in 1935 Labour inherited an economic upswing and did well upon it; in 1957 it inherited a crisis which proved abruptly fatal.

The Government's answer to the crisis came with the austerity budget of 1958, presented by the Minister of Finance, A. H. Nordmeyer. Already imports had been severely restricted to safeguard what was left of overseas funds; the chief note of the budget was high taxation, especially upon such articles as beer, tobacco, and petrol. Short-term loans were also raised overseas to tide over the crisis. It has been doubted if even these measures, acutely unpopular as they were, would have proved sufficient had not overseas prices, especially for dairy produce, considerably recovered after 1958. As it was, this recovery of prices, though not permanent, gained sufficient breathing space; but the emergency measures brought sufficient unpopularity to the Labour Party to secure its defeat in the 1960 election.

Subsequently the crisis had resolved itself into a continuing condition – a condition to which the country is readjusting itself with some reluctance. It has become clear that overseas prices, especially for dairy produce, cannot be relied upon to stay high: they go up and down, and their movement affects the general condition of the country. In 1961 the guaranteed price to dairy farmers, the basis of their standard of living, had to be subsidised by the Government to prevent a 5 per cent cut.

But a more serious threat was that the market itself may close up, or at the very least shrink acutely. This arises from the considerable likelihood that Great Britain will join the European Common Market, upon terms which will allow New Zealand only a brief exemption from the restrictions upon non-member countries imposed by the highly protectionist Common Market agricultural policy. Together with increasing European production of dairy products, and with the certainty that European farmers will look upon the United Kingdom as the natural market for their surpluses, this development is full of menace to a country which has for a half century based its economy upon the unrestricted entry of dairy produce, meat (most notably lamb), and wool to the British market.

Whatever the political complexions of governments over the next few decades, this grave problem will, or should, dominate their activities. For it seems that within the next generation New Zealand might be faced with the need for an economic reconstruction quite as great as that change of production, fathered by refrigeration and mothered by the small intensive farm, which gave pre-eminence to butter, cheese, and meat in the generation between the 1880s and the war of 1914. This time the problems will be greater. Then it was a problem of putting people on the land and encouraging them to produce; this time it is one of persuading those already there, and enjoying a high standard of living, to change their ways while there is yet the opportunity.

by William Hosking Oliver, M.A.(N.Z.), D.PHIL.(OXON.), Professor of History, Massey University of Manawatu.

International Relations, Political Parties, etc.

• General Histories: New Zealand – a short history, Beaglehole, J. C. (1936)
• New Zealand, Miller, H. (1951)
• A History of New Zealand Life, Morrell, W. P., and Hall, D. (1957)
• The Long White Cloud, Reeves, W. P. (1950)
• A History of New Zealand, Sinclair, K. (1957)
• The Story of New Zealand, Oliver, W. H. (1960).

• Economic Histories: New Zealand, Belshaw, H., (ed.) (1947)
• New Zealand in the Making, Condliffe, J. B. (1959)
• The Welfare State in New Zealand, Condliffe, J. B. (1959)
• The Instability of a Dependent Economy, Simkin, C. G. F. (1951).

• Special Studies: A History of Canterbury, Vol. I, Hight, J., and Straubel, C. R. (jt. eds.) (1957)
• History of Otago, McLintock, A. H. (1949)
• Crown Colony Government in New Zealand, McLintock, A. H. (1958)
• Early Victorian New Zealand, Miller, J. O. (1958)
• Provincial Government in New Zealand, Morrell, W. P. (1932)
• The Maori People Today, Sutherland, I. L. G. (ed.) (1940)
• New Zealand in the World, Wood, F. L. W. (1940)
• The People at War, Wood, F. L. W. (1958).

• Biographies: King Dick, Burdan, R. M. (1955)
• The Maori King, Gorst, J. E. (1959)
• Sir George Grey, Rutherford, J. (1961).