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.