Title: War Economy

Author: Baker, J. V. T.

Publication details: Historical Publications Branch, 1965, Wellington

Part of: The Official History of New Zealand in the Second World War 1939–1945

This text is the subject of: ‘Something of Them Is Here Recorded’: Official History in New Zealand

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page 27

The Need to Prepare

THE outbreak of war, in September 1939, can hardly be said to have come as a surprise, nor was there very much doubt about the effects of a global war on the economy; but, when war was declared, New Zealand's economic preparations were very patchy indeed.

By 1935 Hitler had ceased to make any pretence of accepting the limits on rearmament imposed by the Treaty of Versailles. From then until 1939 the dictators of Europe needed to make only minor diplomatic gestures to other European powers in order to be able to do pretty much what they liked. The Rhineland was gobbled up in 1936, Austria in 1938, parts of Czechoslovakia in 1938 and 1939, Albania in 1939.

The allied nations, weakened by disarmament and by strong antimilitary feelings among their citizens, could protest, but without offering any effective resistance. Even at Munich, in September 1938, defiance, which was after all the only alternative to appeasement, could not have been backed by arms.

The appeasement at Munich stiffened the backs of the Allies and gave time to prepare for the final gesture of defiance to the aggressors when it was provoked by the invasion of Poland on 1 September 1939.

The writing was on the wall in 1935. It was there in great red letters in 1938. The Allies must ultimately stand firm or be trampled underfoot. Yet, in New Zealand, economic preparation still hung back.

For New Zealand, the threat of war came much closer than in 1914. Japan might support Germany and Italy. In that event New Zealand did not share Britain's confidence that there would still be no immediate danger of attack on Australia and New Zealand. page 28 Moreover there was a strongly held view in New Zealand that war against Germany and Japan would entail a six months' break in overseas communications.¹

How should New Zealand prepare her economy for war? She would continue to be the foremost supplier of food to the United Kingdom; in fact New Zealand supplies would become much more important to the United Kingdom if other sources were denied to her. If New Zealand were to join in the fighting, the needs of the armed services would make considerable demands on manpower and would probably leave industry with insufficient labour at a time when many branches of industry were required to expand production to sustain her allies. Allocation of labour to industry and the maintenance of a proper balance between production and military needs would require very careful planning.

Shipping and international trade seemed almost certain to be disrupted. This might be drastic and immediate in its effects on New Zealand if Japan entered the war, as she was expected to do. Nearly all New Zealand industries were dependent to varying degrees on supplies of materials and equipment from overseas, and a wide range of essential consumer goods had to be imported. Road transport and much industrial and farm equipment were powered by petrol or oil, which was available only from overseas sources. Reserve stocks should be accumulated.

Interference with shipping would also make it difficult for New Zealand to maintain the outward flow of her export commodities and a large portion of these commodities was perishable. Preparation for war should therefore make special arrangements for storage of these perishable commodities.

By 1938 it became apparent also that, even if communications were not cut, New Zealand could not depend upon United Kingdom suppliers for military equipment. New industries would have to be developed to fill the gap.

Everything pointed to the fact that economic planning for modern warfare would have to be far-reaching and comprehensive. In a prolonged war the overall strain on manpower resources and finance would be unbearably heavy. Planning would have to visualise establishing new industries to fill supply gaps, diverting construction endeavours to military works and stepping up food production. To man these industries and to protect other essential industries, precautions would have to be taken against excessive depletion of manpower for military purposes. It might even be necessary to restrict the movement of the labour which remained.

page 29

The adequacy of reserves of raw materials and equipment might easily determine the length of time many industries could continue to operate, while perishable exports might go to waste if storage facilities were not considerably extended.

The magnitude and urgency of the economic tasks called for immediate-and decisive action.