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Salient: Victoria University Students' Paper. Vol. 28, No. 3. 1965.

Dr. Sutch: His Economic Consequences

page 12

Dr. Sutch: His Economic Consequences

Dr. Sutch has fallen, and with him an era ends. Last year's nine day wonder in New Zealand was his compulsory retirement from the position of Secretary of Industries and Commerce. This was seen by some as a preliminary step in the Government's plan to remove import controls and develop a more market-orientated economy. There is no doubt that the pro and anti Sutch schools will continue to debate.

More accurately, the debate about import controls and their role in promoting industrial development and protecting the balance of payments will continue, However, what has escaped notice in the debate has been the effect import controls have had in shifting a large slice of the National Income away from the wage and salary earner.


Consider for instance, the following figures on wages and salaries, and company profits in New Zealand over the last twelve years.

wages and Salaries Company profits
£ m
1951-52 328 80
1952-53 348 78
1953-54 384 90
1954-55 431 97
1955-56 468 94
1956-57 495 98
1957-58 534 106
1958-59 558 110
1960-61 639 145
1961-62 682 143
1962-63 723 159
1963-64 776 179

Dr. Sutch, New Zealand's most prominent public servant was generally regarded as an inflexible opponent of any relaxation of import controls, and an advocate of "development in depth." During his reign as Secretary of the Department of Industries and Commerce he managed to persuade Governments of both parties to use import controls as a major weapon to promote industrial development in New Zealand. He was a vigorous and eloquent spokesman for the "mature economy" he wished New Zealand to become. However, most academic economist opposed his policies.

Income trends since import control reimposed, Index 1957-8

Behind the scenes, debate on the Sutch policy of import controls was bitter. His supporters regarded him as the man who began to push New Zealand into a modern era of industrial development. His opponents charged him with striving to achieve industrialisation at all costs, and doing more damage to the New Zealand economy than Khrushchev's virgin lands policy did to Russia. The anti-Sutch school pointed to the fact that be fore Dr. Sutch became Secretary of Industries and 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.


In the six years between 1951-52 and 1957-58 when import controls were being gradually dismantled, company profits rose only 32.5 per cent while salaries and wages soared by 62.8 per cent. In the six years after 1957-58 when import controls gave a lush protected market to the New Zealand manufacturer, company profits soared 68.9 per cent while wages and salaries grew only 45.3 per cent. All these figures of course only partially represent real gains because of inflation, but the relative comparability remains. The re-imposition of comprehensive import controls in 1958 was followed by a continued shift in the national income towards the profits sector.


A further cause for apprehension in this shift was the extent to which these extra profits went to foreign investors. Even during the period of dismantling of import controls prior to 1958 foreign investors were increasing their share of company profits. After 1958 this movement accelerated. The protected New Zealand market became a paradise for foreign companies setting up branch plants, and for foreign investors to make take-over bids. The inflow of foreign capital into New Zealand speeded up, and profits soared. In the six years after 1957-58 income from direct investment in New Zealand more than doubled to reach a total of £23.2 million in 1963-64. Thus one consequence of the Sutch attempt to make New Zealand less reliant on overseas trade was to hand over a larger share of our National Income to foreign investors.

Income from direct overseas investment in New Zealand:

1951-52 6.7
1952-53 7.7
1953-54 10.8
1954-55 11.7
1955-56 11.3
1956-57 12.0
1957-58 11.4
1958-59 13.6
1959-60 11.1
1960-61 20.1
1961-62 16.7
1962-63 23.0
1963-64 23.2

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. It is a further irony that Dr. Sutch. long known for his left wing and humanitarian views was the chief architect of these policies.—D. A. P.

Income trends before import control, Index 1951-2