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Graphic: An Encyclopaedia of New Zealand 1966.


This information was published in 1966 in An Encyclopaedia of New Zealand, edited by A. H. McLintock. It has not been corrected and will not be updated.

Up-to-date information can be found elsewhere in Te Ara.



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.

Next Part: The Depression