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Salient: Victoria University Students' Paper. Vol. 28, No. 5. 1965.

I Wrote a Little Book..

page 12

I Wrote a Little Book...

The following article was written by W. Rosenberg, Reader in Economics at the University of Canterbury.

Through the medium of the Christchurch Press I have learned that an article appeared in Salient appraising, and apparently incidentally attacking, the policies of import control and industrialisation which have been bi-partisan policies for 25 years in this country and which owe so much to Dr. W. B. Sutch.

The policies of import control and industrialisation which were introduced in 1938 and carried on ever after by Labour and National Governments have proved exceedingly successful—as far as their proclaimed objectives went: the maintenance of unbroken full employment and the reduction of New Zealand's dependence on imports by the creation of her own Industries.

There is no other country in the private enterprise world which has not had even one per cent unemployment for an unbroken period of 25 years. Switzerland, which has low unemployment percentages, regulates its unemployment by admitting or expelling foreign labour. Sweden has had quite substantial fluctuations in employment in 1958 and 1959 (2½ per cent and 2 per cent respectively) and Australia, since abandoning import controls, has had up to 130,000 unemployed at any one time. Of course, there is a growing number of persons who feel that "a little bit of unemployment might not be a bad thing"—however, in terms of New Zealand's welfare achievements the absence of unemployment must be counted as a major achievement. Young people in particular should appreciate this, since in USA, for instance, school leavers find it very difficult in many instances to obtain a job.

As far as a reduction of New Zealand's import-dependence goes, the following are the figures:

Relation of Imports to Gross

Domestic Product in New Zealand

1951-52 to 1963-64

Three-year Sliding Aver. % of GDP
1951-53 30.8
1952-53 30.9
1953-54 28 0
1954-55 27.1
1955-56 27.8
1956-57 28.0
1957-58 26.3
1958-59 24 0
1959-60 22.8
1960-61 22.7
1961-62 22.6
1962-63 21.8
1963-64 21.5

Except for 1963-64.

Sources: Reports on the Balance of Payments 1954, 1959, 1963 and Official Estimates of National Income 1963. "Imports" is sum of Merchandises imports, transport and travel.

A drop of about 10 points in import dependence is an achievement to be proud of. And if personalities are to be introduced, the most radical change occurred between 1957-58 and 1963-64, Dr. Sutch's tenure of office in the Industries and Commerce Department.

Few people are aware of the deep structural changes which have occurred in our economy and the average person, in his ignorance, will tell you that "the import substitution thesis" has turned out to be a fallacy. It is a success.

Will you allow me to correct a few other statements in your article?

You are quoted as saying: "It is one of the ironies of New Zealand political history that it was a Labour Government which brought in policies which shifted part of the national income away from the workers." There is some truth in your statement. However, during the period of Dr. Sutch's administration (and presumably that is what your article is dealing with—without having seen the original) the following has been the share of private income before taxation received by Wage and Salary Earners:

Share of Private Income Before Taxation Received by Wage and Salary Earners

Year % of Priv. Inc.
1938-39 59.0
1953-54 54.1
1954-55 55.6
1955-56 57.2
1956-57 57.3
1957-58 58.5
1958-59 59.2
1959-60 58.1
1960-61 58.1
1961-62 60.0
1962-63 59.2
1963-64 58.3

Source: National Income Estimates, 1963-64, p. 20

Finally, you are taking up the old warhorse that "before Dr. Sutch became secretary of commerce New Zealand had the third highest standard of living in the world. By the end of the Sutch era New Zealand had slipped to sixth or seventh place."

The following table gives per capita incomes in 1953 and 1962, expressed in United States dollars:

Six Richest Countries.

Per Capita Incomes in 1953 and 1962

(expressed in United States dollars) 1953

(1) USA 2080
(2) Canada 1521
(3) Switzerland 1097
(4) New Zealand 1050
(5) Australia 993
(6) Sweden 981


(1) USA 2691
(2) Canada 1807
(3) Sweden 1740
(4) Switzerland 1703
(5) New Zealand 1505
(6) Australia 1416

Source: UN Yearbook of National Account Statistics, 1963.

The above table takes into account wages and salaries as well as monetary benefits accruing to wage and salary earners. But if the pure wage and salary figures are taken, the picture is the same. It was only during the lost three years (excepting 1958-59) that the wage and salary earners' share has returned to the 1938-39 level. There are many explanations for this; but your statement blaming import controls and industrialisation for a reduced share of income going to wage and salary earners cannot stand uncontradicted, as far as it goes. This docs not mean to deny that a number of severe injustices have appeared during the last few years and that there is a tendency for these injustices to become worse; but to blame Dr. Sutch and his policies for these is surely unreasonable.

In interpreting national income statistics there are many slips between the cup and the lip, but prima facie in 1953 New Zealand had a per capital income of about 50 per cent of the highest per capita income (USA), in 1962 her per capita income had risen to be almost 56 per cent of that of USA. That there has been a slight re-arrangement in the league ladder is not a matter of concern in this context. On the other hand, for a primary-producing country hit by severe adversity in her terms of trade. New Zealand has done exceedingly well.

It is sad to see so much economic ignorance dressed up as expertise in this country, used to belittle our achievements. May I just mention that, in order to deal with this question, I have written a little book entitled: What Every New Zealander Should Know About The Effects Of Imports Controls and Industrialization Of New Zealand which will appear early in May. (Published by the NZ Monthly Review Society, Christchurch.) There I have dealt with the various fallacies and justified complaints in the argument surrounding import controls more fully. But I felt that your article should not go unanswered, even at the present stage.

Aftermath of a student party? A Temperance Unionnist's nightmare? No. The opening of Victoria's library.—Don Laing photo.

Aftermath of a student party? A Temperance Unionnist's nightmare? No. The opening of Victoria's library.—Don Laing photo.