Who Ya Gonna Call? Labour and the New Zealand Economy.

Truth In Advertising: Labour, it would seem, is the party that knows nothing about running the economy right up until the moment that it does. 

HOW DID LABOUR acquire its reputation for being a poor economic manager? As with most things political and historical, it’s a long story.

In the beginning, the very idea that Labour might become New Zealand’s government was considered so preposterous that its economic policies weren’t considered seriously. To be fair, in its early days Labour’s economic ideas were more ideological than practical. The party espoused “the socialisation of the means of production, distribution and exchange”. Once the people were firmly in control of the economy, Labour seemed perfectly content to leave the details of its management to them.

Unfortunately, the revolution in Russia and the seizure of power by the Bolsheviks provided the rest of the world with a lurid picture of what “socialisation” could look like. Most New Zealanders recoiled in horror. If this was class war, then roughly 8 out of every 10 voters wanted no part of it. Clearly, hair-raising and formulaic responses to economic questions were not the way to win votes for Labour outside its working-class bastions in the big cities – and the West Coast’s coal mines.

Thus began the long and difficult journey from the Red Dawn of Labour’s adolescence to the Pink Sunrise of its adult years. Along the way the party steadily shed the most radical of its manifesto promises. That Labour was finally ready to occupy the Treasury Benches was signalled when the party voted to abandon its longstanding commitment to nationalise all privately-owned land in New Zealand.

The event which drove this crucial shift from revolutionary rhetoric to reformist realism was, of course, the Great Depression. Labour had to present the electorate with something it could vote for because it was fast becoming clear to a majority of New Zealanders that the conservative coalition government of the day was utterly bereft of ideas about how to get the economy moving again. Labour owed the people a workable alternative – and in the 1935 general election it delivered one.

For the next 14 years, through depression and world war, Labour kept on delivering. For tens-of- thousands of New Zealanders, the party not only stood for the nation’s, but also their own families’, economic salvation. The policies of Mickey Savage, Peter Fraser, Bob Semple, Jack Lee and Walter Nash were widely credited with transforming New Zealand. The country entered the post-war period with one of the world’s most prosperous economies. The opposition National Party only secured the reins of government in 1949 by promising to leave Labour’s “cradle to grave” welfare state intact.

The event that cost Labour its reputation as a wise and just economic manager was the so-called “Black Budget” of 1958. Confronted with a ballooning balance-of-payments deficit, Labour’s Finance Minister, Arnold Nordmeyer, increased excise taxes and sharply curbed the importation of foreign goods. For old and ignoble political and personal reasons, the trade union leader, Fintain Patrick Walsh, joined with the National Opposition in castigating Nordmeyer’s “Black Budget” as a puritanical Presbyterian’s attack on the booze-and-baccy pleasures of the working man.

That Nordmeyer’s tough-but-fair measures actually righted the economy and restored its forward momentum was forgotten. For the best part of two decades all any National Party politician had to say was: “Remember Nordy’s Black Budget!” and voters winced.

By the mid-1980s, however, the gross incompetence of a conservative government had, once again, compelled Labour to set aside its social-democratic dreams. New Zealand urgently required an economic programme capable of extricating its economy from the cul-de-sac into which the dirigiste policies of National’s Rob Muldoon had driven it. “You can’t run a country like a Polish shipyard!”, boomed Labour’s leader, David Lange. Roger Douglas wasn’t about to disagree.

Labour, it would seem, is the party that knows nothing about running the economy right up until the moment that it does. It is nothing short of astounding that in spite of everything that has happened since the party’s formation in 1916 – up to and including Labour’s two decisive re-organisations of the New Zealand economy of 1935-49 and 1984-1990 – New Zealand’s conservative establishment still finds it expedient to cast the Labour Party as a bunch of blood-thirsty Bolsheviks hell-bent on nationalising everything and shooting the buggers who complain.

This woeful lack of gratitude on the part of New Zealand’s capitalists makes me wish (almost) that their false description of Labour was true.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 31 July 2020.