Other formats

    TEI XML file   ePub eBook file  


    mail icontwitter iconBlogspot iconrss icon

Political and External Affairs

CHAPTER 17 — Pyrrhic Victory

page 228

Pyrrhic Victory

THE sharp fear of Japanese attack; the prolonged strain of a two-front war whose demands could not possibly be met; the need for adjustment to policies of two great overseas allies instead of one; and the impact on the community of a hundred thousand American visitors: these things necessarily had profound effects on New Zealand life.

Their reaction on party politics was indeed somewhat unexpectedly delayed. In December and January the Opposition fought by-election campaigns with full vigour as the Japanese pushed their way through Malaya and the Philippines. On 19 January S. G. Holland, Leader of the Opposition, said that in his tour he had found growing discontent and frustration among the people, and that he was preparing a comprehensive memorandum setting out what was wrong. It was a document which appeared to have considerable relevance to party warfare, and Holland agreed to postpone publication for a few days while those immediately concerned studied it. It was discussed by the House of Representatives in secret session, and in the end War Cabinet seems to have persuaded the Leader of the Opposition that publication would not be in the public interest. When the House resumed open session there was as usual plain speech, but no suggestion that constructive work had been done to bring the parties closer together. Indeed, the most significant indication of political trends was a strong statement by the Prime Minister, emphasising his disagreement with some of his followers in the Labour movement in dealing with an urgent current issue.

The problem was that of industrial trouble in wartime. In Mr Holland's by-election campaigning in January, the core of his criticism of the Government was its alleged weakness in dealing with strikes, and on two occasions later in the year the same issue became of crucial importance. The reasons for this were plain. It is true that so far during the war years New Zealand's record did not compare badly with that of other Commonwealth countries— the number of days lost in strikes per thousand persons engaged in mining, industry and transport was much less than in Australia, less than in Canada, and only slightly more than in Great Britain.

page 229

Yet a real economic problem lay in the fact that losses were concentrated in certain key portions of the industrial system—in mining, waterside work and meat-freezing. For instance in 1942, which was to be an exceptionally bad year, nearly one week's work per miner was to be lost through strikes.1

The importance of industrial trouble, however, cannot be estimated in purely economic terms. Every strike seemed to present a glaring contrast between the actions of strikers who, to a greater or less extent, were inflicting loss on the community in pursuit of sectional advantage, and those of the servicemen who had volunteered or been conscripted into risking their lives for the common interest. Naturally enough this produced a bitterness which was strongest in those groups who did not themselves have a tradition of strike action or any need for it. In many cases their members drove a hard bargain with the community for their own services; yet there was in the strike an obvious element of coercion which gave it an especial quality as an irritant. Consequently, the National Party and the press found somewhat the same use for the strikers in 1939–45 as the Labour Party had for the war-profiteer in 1914–18. In each case the Government's critics could accuse it of tolerating the activities of a figure whose anti-social character and party affiliations were hardly debateable.

At the end of 1941 and the beginning of 1942, with a Japanese invasion actually to be feared, strikes of more or less importance continued. The problem of maintaining industrial discipline, accordingly, became worse than embarrassing for the Government, and when Parliament reassembled in March it drew from the Prime Minister a startling and important personal statement. A strike was in progress at the Westfield freezing works over the status of two rival local unions. The strikers had disregarded instructions from the Government—as workers in an essential industry—to resume work, their union had been deregistered, the Prime Minister had appealed for volunteer labour,2 and prosecutions had been brought against the strikers. There were signs that the Westfield men had a considerable measure of support from other unions in Auckland, and it seemed as if a crisis might be at hand in the relations between the Government and the industrial unions. While Fraser was replying to Opposition appeals for a fuller mobilisation of national resources for the war, he said that he had just been informed that some of the Westfield strikers had been sent to prison. While he did not want, he said, to see men punished, he ‘would sooner punish any number of men than betray the country at the present

1 Hare, Industrial Relations in New Zealand, p. 258.

2 NZPD, Vol. 261, p. 60.

page 230 moment…. If the Government cannot take strong enough action by the ordinary process of the Civil law, then other methods may have to be contemplated….’ More than that, if he could not get better support from the workers, his duty would be clear-‘to step down altogether.’ He would not ‘step out and endeavour to form a Government behind the backs or opposed to the wishes of those with whom I have been associated. I have helped to build up the Labour party of this country, and I will stand by the Labour party of this country, but I will not lead any party if it is going to mean a betrayal of the country…. If I am to remain, whatever steps have to be taken will be taken with the support and the consent of the party to which I belong, or else my resignation will go in to the Governor-General1.’

Underlying the Prime Minister's outburst was both his exasperation at the irresponsibility of some trade unionists and also his personal conviction, dating at least from 1940, that ‘national unity’ required the further association of non-Labour groups with the administration. It was greeted by Holland as ‘the best and strongest thing that has been said for a very long time2’; on the other hand. it left Fraser's followers still unconvinced of the desirability of cooperation with the Opposition, even if they saw the need to give effective (though critical) support to the Government. The immediate occasion—the Westfield strike—passed within a week. Work was resumed, the cases of the 213 sentenced strikers were re-heard, and the men were ordered to come up for sentence if called within a year.3 But the strike and Fraser's reaction to it overshadowed the annual conferences of both the Federation of Labour and the Labour Party.

At the first of these conferences the Government was very generally criticised for not taking a sufficiently strong line with the employers. Webb in reply told the delegates that ‘If you go along the way your freezing workers are going up there, you are full steam ahead for a wreck not only of yourselves, but of the Government too…4.’ At the Labour Party conference the possibility of a two-party government was directly considered and there appeared an open disagreement between the Prime Minister and the rest of the party. The conference unanimously declared its opposition to the proposal and recommended that the party remain prepared for a general election. Fraser said that ‘he realised that his personal views were out of line with the opinion of the Parliamentary Party and with those of his colleagues in Cabinet’,

1 NZPD, Vol. 261, p. 178.

2 Ibid.

3 New Zealand Herald, 28 Mar 1942.

4 Standard, 9 Apr 1942.

page 231 and went on to explain what he would do if he felt he could no longer carry on as prime minister of a purely Labour government because ‘sections of the people were not co-operating in the national war effort’. He would first consult cabinet, caucus and the national executive of the party; if no solution could be found he would go to the Governor-General, tender his resignation as prime minister ‘and recommend to him that he call upon the leader of the majority party to take my place. The fact that the election had been postponed would, no doubt, play a part in subsequent events1.’

This was an astute move. Fraser confronted his colleagues with an awkward alternative; to accept a broadening of the administration, should he consider it necessary, or to face an election under unfavourable circumstances. The pressure on them would clearly be great. Fraser could, indeed, hardly hope to induce them to consent to a division of domestic cabinet portfolios in a coalition government formed with the National Party. However, if the Nationalists could be induced to agree to some proposal falling short of this, then Fraser was in a strong position to persuade his own party to go halfway to meet them. At the beginning of April 1942 the state of public controversy showed little likelihood that the new and uncompromising leadership of the National Party would be prepared to consent to any such half-measures. Nevertheless, negotiations were actually in progress which in the end enabled Fraser to exert much the same sort of pressure on the Nationalists as he had already brought to bear on his own party.

These negotiations seem to have begun with a meeting between Fraser and the Hon. W. Perry, President of the New Zealand Returned Services Association, with other members of the executive of that body. Perry later explained that the NZRSA had been anxious since May 1941 to do something which would help in establishing a greater measure of national unity, and that on this occasion Fraser urged it to formulate some concrete proposals. On 23 March 1942 the NZRSA executive produced a manifesto in fairly general terms but urging ‘The reorganisation and strengthening of the present War Cabinet on a truly national basis with the inclusion of men from outside Parliament, thus creating a National War Cabinet, with full executive powers to prosecute a total war effort in New Zealand.’ It also proposed ‘The elimination of party recriminations for the duration of the war both inside and outside Parliament.’ This manifesto was submitted to NZRSA branches and approved by a ‘great majority’ of them. Perry explained when the plan was made public that what was intended by the War Cabinet

1 Standard, 16 Apr 1942.

page 232 proposal was that the existing War Cabinet should resign and the Prime Minister should appoint a new one ‘unfettered by party political considerations and on a truly national basis.’ The reference to the elimination of party recrimination meant that as long as a really national War Cabinet faithfully performed the task for which it was set up an election would be unnecessary. As transmitted to Holland, the plan apparently provided for the inclusion in the National Government of representatives of manufacturers, dairy farmers, workers and other interests.1

Private negotiations followed, in which, as might have been expected, the new proposals were accepted by the Labour Party and rejected by the Nationalists. Holland pointed out that they continued the division between the domestic and war cabinets and involved the National Party approving in advance the Prime Minister's appointments to the latter. He felt also that the appointment to ministerial office of men from outside Parliament was constitutionally a dangerous departure—‘We have already had far too much domination of Parliament by outside interests2.’

A censorship request to the press to withhold comment was withdrawn on Holland's request,3 and on 15 May the proposals and the attitude towards them of the political parties were made public. A lively if unfruitful discussion on the matter ensued. However, on 29 May direct talks between the party leaders began, and on 24 June the caucuses of both parties agreed on yet another addition to the structure of New Zealand's wartime government. The war effort was to be the responsibility of a War Administration of seven Government members (Fraser, Jones, Sullivan, Semple, Paikea, McLagan, Nordmeyer) and six Opposition (Holland, Coates, Hamilton, Polson, Bodkin, Broadfoot). Each of these held some portfolio relative to the direction of the war,4 but with the exception of Semple, who relinquished National Service to Broad-foot, the existing members of the domestic cabinet retained their portfolios. There were accordingly some rather ingenious creations, and apparent overlapping in function. Jones, for instance, remained Minister of Defence while Coates became Minister of Armed Forces and War Co-ordination and was given charge of New Zealand's military effort at home and in the South Pacific. The War Cabinet (which Holland joined and of which he became deputy chairman) was to act as the ‘executive’ of the War Administration in matters not dealt with by the full body.

1 ‘Perry in Evening Post, 16 May 1942; Holland in Dominion, 7 Jul 1942; Round Table, September 1942, p. 526.

2 Evening Post, 18 May 1942.

3 Director of Publicity to editors, 11 May 1942.

4 Full details were given in Evening Post, 1 Jul 1942.

page 233

It was also announced that a Bill was to be introduced extending the life of Parliament ‘for the period of the war and for a period after the war not exceeding twelve months1.’ There were signs of considerable public uneasiness at this proposal, mainly among conservatives, though the Auckland Trades Council also expressed its misgivings.2 In deference to such criticisms and to feeling within Parliament itself, a provision was inserted in the Prolongation of Parliament Act for a vote of the House to be taken on the question each year.

The new arrangement meant, in essence, that the Opposition representatives got portfolios while the members of the Government kept theirs: in spite of his earlier objections, Holland agreed to the continuance of the existing domestic cabinet. Justifying his action to a critical National Party conference a month later, he said that the arrangement was ‘not ideal, but he thought, in common British fairness, that it was entitled to a fair trail.3’ He had, he said, attempted a rapid survey of opinion in New Zealand and found no feeling in favour of a general election in 1942. Moreover, though it was not at the time publicly known, New Zealand troops were being moved from Syria to help check Rommel's advance in Egypt. In such a situation, and when the National Party had already rejected a plan sponsored by the NZRSA, there was a strong inducement to its leaders to avoid the odium of precipitating a renewal of party warfare.

The new arrangement looked, on the face of it, unbearably clumsy, and as a constitutional device even more anomalous than its predecessor. Yet it was defended with vigorous cogency by men so normally divergent as the Prime Minister and the Leader of the Opposition. It was futile to complain, said Fraser, that it was not a national government. Everyone knew that a national government was impossible. The only possible course was to make the best arrangement possible, and then make sure that it worked. ‘Anything will work—even an inefficient organisation—if the people concerned put their hearts and their souls into the job.4Holland used terms not so very different in answer to critics within his own party, and appealed successfully for support in operating ‘the best arrangement that was possible in the circumstances.5’ Moreover, he gave to the Prime Minister an assurance of co-operation on the very point which in the early phase of the war had most bedevilled relations between the parties. ‘One of the first things which the

1 Evening Post, 24 Jun 1942.

2 Ibid.,8 Jul 1942

3 ChristchurchPress, 24 Jul 1942.

4 NZPD, Vol. 261, p. 373; Evening Post, 1 Jul 1942.

5 Press, 24 Jul 1942.

page 234 Leader of the Opposition said when he approached me on this matter,’ Fraser told Parliament, ‘was that there was no desire of the party to which he belonged to interfere with the social legislation or its administration by the Government, adding that that had been the decision of the country in the past, and it should continue.1’ As a conservative observer remarked: ‘one wonders what effect such an assurance, given earlier, might have had upon the course of events since the outbreak of the war.2’ As it was, the arrangement amounted, as Holland said, to ‘a political revolution3’; and it was launched with good hopes, if not with great expectations.
The War Administration lasted three months, during which time it had a fair claim to have represented successfully a united national will to fight. So far as the work of government and administration was concerned, this seems to have proceeded effectively, in spite of the apparent clumsiness of the institution; at a time when recriminations were hot, Polson and Bodkin went out of their way to emphasise the smoothness of the co-operation between members of the two parties.4 In the inner circle of the War Cabinet, however, there seems to have been friction from the first between Holland and its older members. After he had been Minister of War Expenditure for a fortnight Holland decided that something further should be done to control expenditure from the War Expenses Account, which, for security reasons, was exempt from parliamentary supervision. Accordingly, he proposed to Fraser before the latter left for the United States on 13 August that a committee should be set up of two MPs and two persons from outside Parliament to examine this expenditure. Fraser was apparently agreeable to this proposal, but did not give final approval to Holland's statement setting out the reasons for it and implying, in Fraser's view, criticism of the Commissioner of Defence Construction5. He said that the matter would have to be considered by Sullivan as acting Prime Minister. Sullivan does not seem to have objected to the draft when Holland discussed it with him and Holland handed it to the press. On 4 September, however, publication was held up and the matter referred to War Cabinet on the authority of the Director of Publicity, who maintained that the terms used went beyond what was necessary and might damage public morale by implied criticism of the War Cabinet's past handling of financial matters. This view was supported by Sullivan and other members of War Cabinet. No

1 NZPD, Vol. 261, p. 568.

2 Round Table, September 1942, p. 527.

3 Ibid.

4 NZPD, Vol. 261, pp. 695 and 704.

5 Ibid., p. 639. Sir James Fletcher had been appointed Commissioner of Defence Construction in March 1942.

page 235 agreement could be reached and Holland agreed to the matter being held over until Fraser's return from the United States.1

By that time, however, this tiresome matter was overshadowed by graver causes of disagreement arising from a crisis in the vexed field of industrial relations; for a stoppage ostensibly originating in a very minor dispute at the Huntly mines threatened to paralyse the industrial activity of the whole of the North Island. Both the industrial conflict and its associated political crisis were complex, and in some important incidents the facts were hotly disputed. Yet the general course of events at this turning point in New Zealand's wartime politics was clear. Faced with industrial chaos, Labour ministers launched at the strikers threats of legal action and bitter reproaches. They had, said Semple, ‘declared civil war on the civilian community2.’ They had been ‘led by a few wreckers,’ said Webb, ‘and have declared war on the state. Their challenge will be accepted3.’ Sullivan, then acting Prime Minister, spoke of strong steps to be taken, and said that ‘the people will prefer to endure and suffer if need be, rather than surrender to either the internal or external aggressor, each of whom equally threatens the security of the nation4.’ War Cabinet authorised legal proceedings, and Holland, its deputy chairman as well as Leader of the Opposition, stated that ‘this is a time for the strongest action.’ ‘There can be no thought of any arrangement that interferes with the processes of the law by which those who break it are punished,’ he said, and added that ‘the question of who is to rule this country must be settled once and for all5.’

Mr W. A. Bodkin, one of Holland's senior colleagues, later disclosed that Holland had consulted him on this statement and that at first he had urged him not to make it. ‘I said that the Government was mishandling the whole business and getting into an impossible position which it could not sustain.’ Holland had replied that ‘he had asked each member of the War Cabinet whether he really meant that the law must take its course. Each one said that he stood for enforcement of the law, and that the matter had gone too far to do otherwise….’ Could the Opposition refrain from coming out in support of the Government? In these circumstances Bodkin had ‘with grave misgivings’ agreed that Holland's only course was to make the statement ‘as the acting-Prime Minister had virtually asked for it6.’

1 NZPD, Vol. 261, pp. 635ff.

2 Evening Post, 15 Sep 1942.

3 AucklandStar, 9 Sep 1942.

4 Evening Post, 15 Sep 1942.

5 Dominion, 16 Sep 1942.

6 NZPD, Vol. 261, p. 704.

page 236

A few days later a group of recalcitrant strikers were sentenced to a month's imprisonment, and deadlock seemed to be complete. At this moment Fraser returned from the United States, and a further attempt at negotiation began. Over the weekend, and before the sentences had been enforced, the strikers got wind of a proposal, which had originated before Fraser's return, that the mines should be taken over by the State for the duration of the war, and on this understanding agreed to go back to work. On 21 September Fraser proposed to a joint meeting of the War Administration and domestic cabinet that the mines should be taken over and the sentences on the miners suspended on condition that they dug coal diligently and took part in no more strikes. Holland alone was opposed and the plan was adopted. The mines were taken under state control; the miners' sentences were conditionally suspended and they returned promptly to work; and the original dispute went to the National Disputes Committee, which incidentally pronounced the men to have been wrong. Government policy, said the Prime Minister, had been successful in preventing ‘an industrial catastrophe of great magnitude which would have directly and disastrously affected our war effort…. The position now is,’ he claimed, ‘that the law is upheld and coal production, so vital to the war effort, has been fully resumed1.’

Holland strongly dissociated himself from the policy adopted, and of the remaining five National members of the War Administration, three in the end stood with him, including two who had voted with the majority on 21 September. The resulting situation was discussed at a National Party caucus on 29 September, and it was decided to withdraw the party's representatives from the War Cabinet and the War Administration. Announcing this decision Holland said that ‘When a state neglects to enforce its own laws it sows the seeds of anarchy. When it gives law-breakers more than they broke the law to get, it means an end to constitutional government…. the taking over of the mines by the State at the dictates of strikers, creates a precedent which may easily involve the country in complete economic chaos.’ The National members, said Holland, must make ‘the most emphatic protest within our power’; and if the Prime Minister thought they had done wrong, ‘an election as soon as the war situation permits would appear to be the best solution.’ The Prime Minister replied sharply. He had no difficulty in showing that previous New Zealand governments had remitted sentences on strikers who had resumed work, and not merely suspended them conditionally as in the present case2. ‘Apparently,’

1 Dominion, 30 Sep 1942; Round Table, December 1942.

2 Dominion, 1 and 2 Oct 1942.

page 237 he said, ‘Mr Holland and his colleagues are of the opinion that the Government should have aimed not at having the mines restarted and our war effort and industry generally kept going, but at placing the 180 miners who were sentenced, and the 900 or 1000 others who were on strike as well, in jail where they would be actually prevented from producing the necessary coal1.’

At the beginning of October the six National Party members duly resigned from the War Administration, but Coates and Hamilton, who had been members of the War Cabinet since its inception, immediately accepted Fraser's invitation to rejoin it as individuals. Hamilton served there till the end of the war, and Coates till his death in 1943; he was succeeded by William Perry, who as President of the NZRSA had initiated the negotiations leading to the War Administration. On rejoining the War Cabinet Coates and Hamilton issued a statement trenchantly criticising the policy followed by the majority of their party. The strikers' behaviour, however reprehensible, did not in their view justify the extreme step adopted: the right answer to an industrial strike was not a political strike. Holland's demand for a general election, if agreed to, would transform a caucus issue into an election issue, and disrupt political unity when the enemy was at the gates. ‘Manoeuvring for party advantage by any section in these critical hours’ must hamper the war effort. For themselves, they had decided ‘that our duty to the country is more important than our duty to party. Our plain duty … is to accept the Prime Minister's request, remain at our posts, and continue to render what service we can during our country's peril2.’ Few others spoke so firmly against the party's leadership, yet there was clearly a substantial minority in the members which felt uneasy as to what had been done. A number of opposition newspapers approved of the stand taken by Coates and Hamilton; and when Parliament met on 14 October two other Opposition members voted with them after a confidence motion had been furiously debated3.

Thus broke down the last serious effort to create something like a coalition government; for three months, indeed, a coalition had been virtually achieved, for an administration ostensibly confined to the war effort was in fact dealing with most important issues.4 With its collapse, said Fraser dramatically, ‘The basis of unity in the country has been destroyed—irretrievably destroyed—because there can be no trust between the two parties now5.’ The War Administration had been very largely his own creation, the result

1 Dominion, 1 Oct 1942.

2 Ibid., 6 Oct 1942.

3 NZPD, Vol. 261, pp. 717-18.

4 Round Table, December 1942, p. 99.

5 NZPD, Vol. 261, p. 645.

page 238 of amazingly complicated and astute manoeuvring directed towards a purpose which had about it, as far as one can judge, no element of party politics. The disinterestedness of Fraser's conviction that it was necessary to give further political expression to ‘national unity’ seems as unquestionable as the skill with which as party manager he sought to bring that end about. Yet it is a fair question whether there was not in his approach to the problem a weakness on which the Hon. W. Downie Stewart laid his finger when he said, at the time of the RSA plan, that if the Prime Minister proposed to give War Cabinet representation to sectional interests ‘he will certainly imperil or destroy such national unity as we possess, which is probably greater than he realises1.’ The force of Stewart's comment is not confined to the dangers of giving special representation to economic interests, though Fraser's partiality to such plans suggests a certain insensitiveness to the spirit of the constitution. Pressure groups, it might be argued, already received quite enough consideration, and it was no more desirable in war than it was in peace for ministers to be freed from the responsibility of answering for their actions to an elected assembly.

It can be argued further that the very tenacity with which Fraser drove his reluctant colleagues and opponents towards formal cooperation was in the nature of things liable to produce results the opposite of those he intended. In fact it appeared to do just that. The recriminations of October 1942, the sharpening antipathies, and the resumption of party politics were a disappointing sequel to the ‘sincere effort to achieve national political unity’, which, said Fraser, had been ‘succeeding admirably2.’ Yet it may be that the whole incident had not so altered the situation as clarified it.

The issue on which the War Administration broke down was the attitude to be taken by cabinet towards a major strike in wartime. Holland associated himself emphatically with the firm, even violent, words used by Labour ministers during Fraser's absence. When it came to the point, however, these ministers returned to the line of thought subsequently expressed by the Minister of Mines. ‘The use of the big stick,’ he said, ‘can only aggravate a delicate situation. The miners will not be bludgeoned. Most of them can see reason, and reason ultimately prevailed.’ Possibly cabinet had seen itself as following the lead given by Fraser at the time of the freezing workers' strike in March.3 Fraser himself, however, was sharply aware of the practical differences between a strike of freezing workers in March and a strike of miners in September. He

1 Evening Post, 20 May 1942.

2 Thorn, Fraser, p. 216.

3 See p. 230.

page 239 thought it better that the Government should eat the words of its lesser members than that it should, at that time and place, face industrial chaos. This was the change of front that Holland could not follow. His view of 21 September, he explained later, was that the ring-leaders should have been imprisoned, and the rest given forty-eight hours to get back to work under penalty of being drafted into the army.1This action, he was convinced, would have broken the strike. It remains a matter for speculation whether use of the relatively accessible open-cast pits and the threat of prison or the army-even if widely approved in the community—could have produced coal within the few days that existing stocks would have kept industry going; and there was no indication of what Holland would have done next to ‘enforce the law’.

Even if it be conceded, however, that Fraser took the only really practicable course in his treatment of the strikers, it does not necessarily follow that Holland and his colleagues were wrong in making a startling protest; the remarkable drop in the following year in the number of days lost through strikes suggests that the militant unions had been put on their mettle and had taken to heart the implications of the impending general election.2 From the standpoint of securing industrial peace there was something to be said for a situation in which a sympathetic, even indulgent, Government was under fire from an Opposition behind whom loomed the remembered shades of ‘Massey's Cossacks’.

After the dissolution of the War Administration the conflict between the parties, apparently sharpened by the difference in personality and approach between the two leaders, was so manifest that no further attempt was made to bridge it. It may be doubted, however, whether these disagreements cut deeply at the essentials of New Zealand's unity in wartime purpose, and whether the resumption of party politics absorbed to a serious extent abilities which might have been more effectively expended in a national war effort. On the one hand, during most of 1942, while the crisis remained really acute, there was, after all, widespread agreement on the most important things which had to be done. On the other hand, in 1943, as military tensions eased, the issues were such as could be actively debated, and in September it was possible, by general agreement, to pass through the political system the cleansing winds of a general election.

In 1942, for example, there was agreement not only on the need to mobilise every possible man into the armed forces for national self-defence, but on the essence of the economic policy to deal with

1 NZPD, Vol. 261, p. 634.

2 See p. 263.

page 240 the situation caused by the withdrawal of so many men and women from productive work. Direction of civilian man- and woman-power was an obvious measure, but however ingenious such direction, and however hard individuals worked, economic dislocation was inevitable, and in particular a drastic shrinkage in available goods and services at a time when money was circulating freely. In New Zealand's past experience—and in some contemporary experiences overseas—such conditions had produced big price-increases and transfers of wealth, which amounted for most of the population to a severe but haphazard fall in standards of living. No one wished this to happen again in New Zealand, least of all the Labour ministers who had so fiercely denounced this aspect of New Zealand's war-making in 1914–18. To allow it would have been to deny the firmly held tenets of the Labour Party, to have flown in the face of prejudices shared by an overwhelming majority of New Zealanders, and to have weakened the determination and willingness to accept physical sacrifice which were essential to effective war-making. Accordingly, from the first the Government made clear its resolution to protect, so far as possible, the social welfare with which its regime was associated: in the Prime Minister's later phrase, to keep standards ‘intact or recoverable’, in spite of war. Social services should therefore be maintained, even improved. As in peacetime, price increases should as far as possible be prevented, but more particularly the prices of basic necessities should be held down. In principle, those whose budgets did not in any case extend beyond necessities would thus be protected. At the other end of the scale, it was laid down firmly that no one should profit from the war situation. There was no question that standards of living in the community as a whole must fall: yet the loss could perhaps be kept to small proportions, and be suffered primarily by those who could best afford it. War taxation, the increased cost of imports and shortages of goods would bring inevitable adjustments. Yet so far as the civilian population was concerned it did not appear to be inconceivable that matters could be so arranged that no one would either gain or lose very greatly from the war situation. Some such objective, with the proviso that those closest to the bread-line should lose least, would be in tune with public sentiment, and a natural policy for a self-professed welfare state at war.

The whole matter came to the front in August 1940, when the Arbitration Court granted a 5 per cent wage increase to those working under awards: an action which illustrated the problem rather than created it. In September the Government convened a widely representative economic conference ‘to consider the possibility of stabilising costs, prices and wages, and to discuss expanding production so that the strain of war expenditure may be page 241 successfully borne and the standard of living be maintained as far as possible.’ This conference, and a committee drawn equally from employers and trade-unionists, was composed of men deeply involved in New Zealand's politico-economic problems; but they produced a unanimous report. This was the basis of the policy of Economic Stabilisation, which was followed with some consistency and considerable success throughout the war. At first its operations depended on general government policy and on the decisions of the Price Tribunal, though the retail prices of thirty-eight essential commodities were stabilised. In December 1942, however, the threads of economic policy were drawn together in an elaborate stabilisation scheme. In principle, prices, costs and incomes were to remain fixed at the level they had reached on 15 December. It was clear, however, that wages could not be held if prices rose substantially. Accordingly, the prices of 110 important items were stabilised—if necessary by subsidies-and a new and elaborate cost of living index was worked out and published quarterly; if this varied widely, wage adjustments would follow. According to this index there was practically no change in the cost of living for the rest of the war period1.

This whole phase of New Zealand's wartime life demands patient probing by economists. From the political point of view, however, the situation was sufficiently remarkable. ‘Stabilisation’ intimately affected every citizen. A new and lively government department— the Economic Stabilisation Commission—dealt with almost every economic issue that arose; and its advice was rarely neglected.2 There were, of course, infinitely numerous opportunities for complaint that the system was maladministered, or pressed on some people unfairly, and indeed complaints were frequent. Yet this fundamental item of economic policy retained throughout the war a quality possible only when there was national agreement. This was, perhaps, most noteworthy in respect of the Labour movement, for the very notion of ‘stability’ cut at the root of traditional Labour attitudes. The Labour parties of the New World had been built on the assumption of indefinite progress and on the belief that the world's economic resources, if developed for the public good, were infinite. Belief ran deep, therefore, that there was no limit to social betterment, that he who was not moving forward was losing ground, and that the difficulties of employers and even of governments were the opportunities of trade unionists. The plea that such opportunities must be forgone in the public interest was hard to argue with men who remembered the course of things

1 Round Table, December 1940, p. 189; March 1941, p. 388; March 1943, p. 193. New Zealand Official Year-Book, 1946, p. 594.

2 L. C. Webb in ed. Belshaw, New Zealand, p. 288.

page 242 during the First World War and during the slump. Nor was wartime New Zealand free of labour troubles, of tensions which remained hidden and explosive, or of men of all classes who drove shrewd bargains. Nevertheless, Peter Fraser's government held the Labour movement, and with it New Zealanders as a whole, on an unaccustomed course. To the end, there was an area of national life exempt from the more wasteful forms of party controversy: and that area included the major elements of wartime policy—the principle of whole-hearted military co-operation; the principle of selling New Zealand's major exports to Britain at stable and relatively low prices; and the principle of domestic economic stabilisation.