Kōrero: Economic thought

Whārangi 1. Wakefield and the economics of colonies

Ngā whakaahua

Systematic colonisation

New Zealand’s organised European settlement from 1840 owed much to Edward Gibbon Wakefield, a major figure in the New Zealand Company. His plan of ‘systematic colonisation’ marked the most significant early impact of economic thinking on New Zealand.

When London intellectuals discussed New Zealand colonisation in the 1820s, they recalled the successful revolt of the American colonies in the 1770s. At that time it was an open question as to whether or not colonies were desirable. They could be expensive, and they could be politically embarrassing. But they offered employment prospects, especially for young European men.

Advantages of trade

Colonies generated trade. In the early 19th century political and intellectual leaders were grasping the theory of comparative advantage and the benefits of free trade. Widespread trade was seen as more beneficial than the exclusive trade between colonies and colonisers. People theorised that if a country was better at producing a product like wine, while another country was better at producing cloth, both countries benefited if one specialised in wine and the other in cloth, and they traded. Britain began moving towards free trade.

Economic thinkers like David Ricardo also showed that while trade was mutually beneficial, it did not guarantee social harmony. As an economy grew, owners of limited resources (especially land) would gain more than others, for example those who just had their labour to sell. This redistribution of wealth did not reward enterprising behaviour – it was just a function of who owned what, and depended too much on luck and game playing.

Adding to the land supply

Wakefield recognised the relevance of colonies to economic debates. By adding to an economy’s supply of land, colonies diminished conflict over the division of economic wealth between landowners, entrepreneurs and labourers.

Wakefield felt colonies could also provide work for the unemployed, especially for men who were no longer required for military purposes after the defeat of Napoleon, and might cause social disorder.

Wakefield had some original ideas about the economic circumstances in the colonies. Ignoring the rights of indigenous peoples, he argued that in a newly-settled colony land would be plentiful and therefore cheap, and rents would be low. He thought this would make it difficult for farms and urban employers in the new colony to retain labourers. He proposed a ‘sufficient price’ to stop labourers from buying land until they had built up funds by working for others – government could retain land rather than sell it straight away, and so ensure an optimal balance of land, labour and other factors of production.

Wakefield’s thinking was based on the economics of wheat-growing southern England, rather than the large sheep runs which became the main source of New Zealand’s early economic growth. Yet he influenced the colonial authorities – an early example of reliance on overseas ‘expert’ advice rather than local experience.

Me pēnei te tohu i te whārangi:

Gary Hawke, 'Economic thought - Wakefield and the economics of colonies', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/mi/economic-thought/page-1 (accessed 22 August 2019)

Story by Gary Hawke, published 11 Mar 2010