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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However strong the patriotism of the people, it would obviously have been impossible to meet the extensive wartime demands on the New Zealand economy without some degree of overall economic planning, leading to various forms of direct control. Wartime controls followed closely on the heels of the very definite pre-war statements of the Labour Government stressing its intention to conscript wealth before men. It is interesting to see whether this had any effect on the form they took.

Considering the Government's attitude to conscription, it was only to be expected that the early regulations would not contemplate direction of men or women. When the time for such action came, the Emergency Regulations Act of September 1939, though very sweeping in its powers, was not found powerful enough to enable the Government to conscript men. It was not until May 1940 that it was strengthened by the Emergency Regulations Amendment Act, which gave complete powers to control the individual as well as his property as ‘necessary or expedient’ for the war effort.

The Labour Party's opposition to conscription was deep-rooted and, even when this amending act was under discussion in Parliament, some members still hoped it would not be necessary to conscript men. But ultimately men were conscripted and wealth was not, except to the extent that much of the cost of war was met by taxation, and owners of productive resources could be required to undertake defence work.

Full control of manpower would involve the completion of a national register. The national register itself was seen as a possible threat to the freedom of the individual. The Government had refused to authorise it before the war and was still most reluctant to do so. Even when it became essential to have some form of register for specified age groups as they became eligible for conscription, the job was done piecemeal. Registration was, for the most part, restricted to those age groups which were immediately required.¹

This rather halting approach to the problem was no doubt made workable by the fact that registration had been required for Social Security purposes since September 1938. The Social Security registration could be used as a check on those responding to wartime registration orders.²

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The powers necessary to impose conscription for the armed services were taken under the National Service Emergency Regulations in June 1940 and the first ballot was held in October 1940.

The same regulations made it possible for the Minister of National Service to direct any person over 16 years of age to perform any non-military service necessary for the war effort. However, this latter power was still not used, and it needed the outbreak of war with Japan, in December 1941, to enforce action on industrial mobilisation. Manpower direction into industry commenced in January 1942.¹

There is no doubt whatever that the Labour Government had been very firm in its intention to conscript wealth before men, but in the circumstances as they emerged, such a policy would probably have been quite impossible to administer. Conscription of men was doggedly resisted, but ultimately was forced on the Government, partly because of the obvious unfairness of allowing men in New Zealand to please themselves whether they contributed to the war effort while large numbers of their fellow New Zealanders were engaged in actual fighting overseas, and partly because it became quite impossible, without conscription, to find sufficient men for the forces and for essential industries.

Failure to conscript wealth before conscripting men was probably a bitter disappointment to many Labour supporters. Some drew comfort from the measures the Government did take; for example, Mr James Roberts, President of the Labour Party, said at the Labour Party Conference in June 1940:² ‘The only objection they³ ever had to conscription was when they were called upon to defend their country and the economic agency and the property of the country were not being utilized in the interests of the nation. In New Zealand the Government had now taken control of all property and it must be used in the interests of the country. The Government had given a pledge that no profits must be made out of the extra efforts of the people of New Zealand.’ The Government by no means took control of all property. Legally it did take intensive powers to direct the use of most productive resources. Some impression of the extent to which these powers were used, and of the possibilities of making high rates of profit from war contracts and other work, are discussed in following chapters, particularly in Chapter 13. The reader may prefer to suspend judgment as to whether wealth was conscripted until he has read Chapter 13.

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There is no doubt that the Government considered the full implications of conscription of wealth before abandoning it. Conscription of wealth would, if carried as far as some of its advocates wanted, mean Government ownership, or at least control, of all the means of production. Wartime experience was to show that, in some industries, higher outputs could be obtained without Government ownership. Achievement of wartime production targets often involved using new methods and working under high pressure. Many state employees were capable, given the opportunity, of rising to such heights, but usually the detailed and rigid controls associated with state employment restricted them so much that they were unable to do so.¹ The fact of the matter was that, where achievement of difficult targets was absolutely vital to the war effort, cost-plus arrangements and other systems of stimulating private enterprise, inequitable as they were, probably offered the only hope of success.²

Even presupposing that there was a strong body of opinion within the Labour Government in favour of ownership of the means of production, this was politically an extremely controversial issue and one which it was not desirable to fight out during the course of a major war. Later experience has shown the New Zealand Labour Party to be moderate in its intentions to nationalise the economy and quite willing to concede that, for a wide range of industrial undertakings, private enterprise can often get better results, given a reasonable measure of competition.

Keith Sinclair sums up very well when he says:

‘Slumps and wars alike have led to further centralization of power. The Second World War, as in many other countries, encouraged what was already the chief tendency of the Labour Government, and speeded the progress towards a “planned economy” via “price control” and “stabilization”. Broadcasting, internal airways, the linen flax industry, were added to the long list of state monopolies; but, in general, the Government contented itself with control over credit and marketing and made no attempt to nationalize production.’³

Though some changes to state ownership were made, private ownership and the profit motive remained predominant throughout the war, and in fact were given extra emphasis, in many cases, as the only means to get difficult and urgent assignments completed in time.

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