Rogernomics: New Zealand’s Economic Revolution
By: Sam Mills
Tags: Society, New Zealand, History, Economics, Politics

The First Labour Government, in power from 1935 to 1949, dominated New Zealand politics while the effects of the Great Depression inspired widespread economic and social reform. In 1931, the United and Reform parties formed a coalition government; Labour, meanwhile, had to settle for being the opposition bloc. But the 1935 general election saw a frustrated public back Labour with 53 of the 80 parliamentary seats (United and Reform merged the following year to become the National Party, which remains Labour’s traditional rival) and roughly 46 percent of the vote. Amidst ongoing economic devastation, New Zealanders were happy to support the party and its promise to strengthen the government’s response to poverty. Labour’s leader, Michael Joseph Savage, had a history of association with trade unionist and socialist causes. However, his image was less radical than those of his predecessors, aiding Labour’s successes at the polls.

Michael Joseph Savage, New Zealand’s first Labour Prime Minister, pictured in 1935 (Credit: Wikipedia)

Nonetheless, Savage and Labour pursued some openly socialist policies in the years leading up to the Second World War. As public spending soared, the government nationalized the Bank of New Zealand and industries such as coal mining and domestic aviation. Public works projects not unlike those of Franklin Delano Roosevelt’s New Deal programs were launched, while broadcasting and transportation services were placed under ministerial control. Savage’s history of involvement with unionism also influenced public policy, as trade unionism was made compulsory alongside a five-day, forty-hour working week. Other policies of the First Labour Government included the introduction of import, exchange, and price controls, the reversal of wage cuts, central planning initiatives, new tariffs and other protectionist measures, and significantly higher taxes on income and land. Keynesian economic thinking arrived in full force; the relationship between the New Zealand Government and the economy it managed had become inseparable.

New Zealanders were also guaranteed incredibly generous welfare benefits. The Social Security Act 1938 established the world’s first social security program, introduced universal government-funded healthcare, and expanded benefits for the ill and unemployed. Pensions were increased and extended to a much larger section of the population, and welfare payments increased for poor and working-class Kiwis. Savage and Finance Minister Walter Nash also launched New Zealand’s state housing program, ordering the construction of 5,000 publicly owned rental homes in 1936. That same year, an accompanying Fair Rents Act was passed, introducing a rigid set of rent controls that required magisterial approval to amend. Education also received significant support from the government. Free secondary education was made compulsory for those under fifteen, school meals and books became publicly funded, support for facilities and faculty increased, and universities were made increasingly cheap and affordable.

Construction of state houses in 1944. The development shown above is the suburb of Naenae, located just outside the city of Lower Hutt (Credit: Te Ara)

New Zealand’s large agricultural industry was also managed by the state. The Agricultural Workers Act 1936 set minimum wages for farmers and provided low-cost loans, housing assistance, and guaranteed prices for produce. Regarding race relations, Māori citizens were also given greater access to education traditionally available to their Pākehā counterparts; their pay on public works, welfare, and pensions was also gradually increased to equal that of whites. Māori living standards improved noticeably, as slums disappeared, unemployment fell, life expectancy rose, and educational enrollment grew.

Though Savage passed away from cancer in March 1940, Labour remained in power for another nine years under new Prime Minister Peter Fraser. Eventually, frustration over issues such as the state housing scheme and Fraser’s commitment to peacetime conscription powered the National Party to victory in the 1949 general election. Nonetheless, Savage remains among New Zealand’s most beloved prime ministers. Adored by much of the public, 50,000 mourners paid their respects at his Auckland funeral. For decades following his death, his portrait hung in the homes of Labour voters across Aotearoa.

New Zealand sheep. Even today, agriculture remains a prominent form of economic activity in New Zealand, with fruits, dairy products, lamb, and mutton ranking among the country’s largest exports (Credit: Stuff)

Though Labour’s grip on power came and went over the next few decades, the legacy of Savage and the First Labour Government remained largely intact. Throughout the 1950s and 1960s, agriculture continued to dominate the economy as it had since the late 19th century, with the production and exportation of meat and dairy products key to New Zealand’s economic livelihood. Despite fully asserting its independence with the Statute of Westminster Adoption Act 1947, New Zealand remained heavily dependent on Britain. In 1961, more than half of New Zealand exports went to the United Kingdom, with another fifteen percent going to other European nations. Nonetheless, the 1950s and 1960s were a time of prosperity and growth for most New Zealanders, many of whom still saw themselves as inextricably tied to Britain and its culture.

Protests against the Springbok tour in 1981. A wave of unrest gripped cities across New Zealand, representing broader national frustrations that initially surfaced during the economic crisis of the early 1970s. Divisive events like these ultimately came to define Robert Muldoon’s tenure as Prime Minister (Credit: Stuff)

However, the early 1970s saw turmoil on a level unseen by New Zealanders since the Great Depression and the Second World War. 1973 was a particularly disastrous year, as protests against French nuclear testing in the South Pacific worsened, oil prices surged in the wake of the global energy crisis, and the United Kingdom joined the European Economic Community (EEC). British membership in the EEC spelled disaster for New Zealand, as Britons could now purchase cheaper European products thanks to the EEC’s introduction of lower tariffs. New Zealand’s protectionist economy could not compete; stagflation plagued the country for much of the decade. National Prime Minister Robert Muldoon, who served from 1975 to 1984, fought tooth and nail to maintain the welfare state and the prosperous New Zealand of the previous two decades. However, his conservative and polarizing style of governance emboldened an already strong protest movement, most infamously embodied by a vitriolic reaction to the 1981 Springbok tour. Muldoon’s policies also failed to improve a struggling economy, worsening his reputation among many voters. In 1984, New Zealanders rejected a fourth term for Muldoon and National, instead opting for David Lange’s Labour — and a new agenda that would change their country forever.