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We feature each week Nicholas Reid's reviews and comments on new and recent books.

“THE BROKEN DECADE – Prosperity, Depression and Recovery in New Zealand 1928-39” by Malcolm McKinnon (Otago University Press, $49:95)

            As I’ve argued elsewhere on this blog, revisionism is the life-blood of the academic study of History and so it should be. As we move in time further away from historical events, we rightly see them in a different perspective and are more aware of their long-term consequences. New history books have to be written. As relevant new documents and other evidence come to light, received opinions on a given era must be challenged. New history books have to be written. When memoirs and works of fiction have created a “legend” or popular image about a certain period, it is right for historians to lay before us the best available factual evidence. New history books have to be written. Of course some history books are unnecessary (especially many “popularisations”, which tend merely to re-hash more scholarly works). But the task of “rewriting history” is exactly what good historians should be undertaking.

Malcolm McKinnon (formerly of Victoria University of Wellington) is a good, thorough and conscientious historian. The 512 closely-printed pages of his The Broken Decade consist of 420 pages of densely-reasoned and documented text followed by 92 pages of substantiating notes. I must also add that as a physical object, this is one of the heaviest books I have ever encountered, being all printed on thick glossy pages, perhaps the better to accommodate the illustrations and graphs. This is not a light read in any sense of the term.

Nowhere does McKinnon pronounce himself to be a revisionist, but it is clear from his introduction that he is less than satisfied with those books that have so far been written about New Zealand’s experience of economic depression in the 1930s.

He name-checks various popular books on the subject, but makes special mention of Tony Simpson’s “oral history” The Sugarbag Years, basically a collection of recorded interviews with people who had lived through the 1930s. McKinnon says of The Sugarbag Years that it is “the study that more than any other… cited by contemporary New Zealanders when ‘the Depression of the 1930s’ is mentioned.” He continues by remarking that The Broken Decade “does not replace [The Sugarbag Years]; it is more in the nature of a conversation with it.” (p.8) Nevertheless, McKinnon is uncomfortable with the legend, which “treats the Depression as a conflict between rich and poor, the powerful and the powerless, in which the ‘little guy’ finally wins, or appears to. The win draws a line not just under the Depression but under the era of conservative or ‘not very liberal’ governments since 1906, when Seddon died.” (p.19) According to this legend, the election of the Labour government in 1935 spelled the end of old-fashioned laissez-faire liberalism and the acceptance of collectivist government intervention.

In fact, argues McKinnon, in his 1928-30 government, the old Liberal Sir Joseph Ward’s  “combination of state-directed expansion and wage-earner and other kinds of sectional welfare was a potent mix that Labour replicated – even if it did not acknowledge this – when it gained power in 1935.” (p.22) Labour may have restored and then expanded some of the benefits that were established in the 1920s, culminating in the Social Security Act of 1938, “although in practice it was the full employment of the workforce… that was central to its strategy and that relied on public works and house-building as in the 1920s.” (p.26)

            Therefore McKinnon’s basic argument is that the agony of the Depression in New Zealand was not a case of hidebound conservative politicians (in the United-Reform Coalition) refusing to find a way out of the Slump. Much of Labour policy had been pioneered before, especially by Ward. Labour did not represent progress so much as attempt to regain former prosperity and re-work familiar remedies.

            McKinnon returns to the clear articulation of this general thesis in his final chapter (Chapter 11), where he considers the “legacy” of New Zealand’s Depression, and once again untangles (pp.396-401) the standard received views before considering (pp.401 ff.) more recent scholarship, which has modified the legend of years of universal misery. As he notes:

“The ‘sugarbagging’ of the Depression gave a particular contour to the memory of it. It was not inaccurate but it was partial, in the sense that it shaded out the experiences of hundreds of thousands of people who were affected by the Depression but were not as damaged by it as those who lost jobs, houses or livelihood.” (p.401)

None of this is to claim was there was not huge hardship in unemployment, evictions, widespread poverty, niggardly sustenance and relief work. But there are persistent myths, which McKinnon proceeds to disprove, such as the one that New Zealand relief workers were harnessed like horses to drag harrows or that there were “slave” camps. Farmers did walk off the land with mortgages they were unable to pay, but as McKinnon shows, the peak of this happened in the 1920s before the Depression struck. Child labour was common on farms, but then it was common from 1919 to 1939, both before and after the Depression.

Thus much for the “bookends” of this very substantial book – its clear revisionism and the idea of continuity that McKinnon wishes to stress. McKinnon is further insistent in his introduction that the experience of the Depression was not all of a piece – it went in phases.

And it is with these that the bulk of the book deals – ten chapters which chart the changes in emphases, mood and political choices in the years 1928-39. As a warning to his readers, McKinnon makes it clear that The Broken Decade deliberately focuses, not on the experiences of individuals, but on politics and finance. This is not an anecdotal account of hardships.

It plays thus:

First there was (Chapter 1) the “Indian summer” of the 15 months (1928-30) of Sir Joseph Ward’s premiership and his efficient dealing with benefits and also with growth-geared economy. Even by the middle of 1930 (when the Slump was already felt in the rest of world), effects in New Zealand still seemed relatively minor. It was simply like a replay of the minor downturn in the mid-1920s, and George Forbes’ first budget dealt with it in those terms. Then (Chapter 2) came the real bite of full economic depression in 1930-32. When Ward was prime minister, his United Party government was kept in power with the support of Labour votes. 

Now that Forbes was prime minister and pursuing austerity policies, Labour moved away as Reform and United got closer. Even so, Labour still supported deflation and the need to balance the budget. Gordon Coates (Reform) and Forbes (United) moved to a “fusion”, without their respective parties actually uniting. This meant that before the 1931 election, Labour became the official opposition. But the election of 1931 cemented the Reform-United Coalition’s position and consensus was now moving towards the view that raising loans was not the best way to run an economy in times when the loans would be impossible to repay.

By 1932 (Chapter 3), New Zealanders were puzzled that the austerity policies of the Coalition took so long to rein in rents and interest rates as well as wages and salaries… but now the Coalition moved into cutting pensions, education votes and existing benefits. When it came to taking the teeth out of the Industrial Conciliation and Arbitration Act, Labour was most vociferous in opposing. Says McKinnon:

“All three political parties endorsed austerity, although Labour was completely at odds with the others over how to deal with it; the battleground was that of obligations and entitlements rather than expansion or austerity. Different segments of opinion within Reform and United were also often at odds with each other, for instance over the extent to which contractual obligations, such as pensions, could be diluted.” (p.107)

            But while austerity and balancing the books were orthodoxy for all parties, there was (Chapter 3) a parallel crisis going on with unemployment in 1930-32. The long attempt to avoid outright and general payment of a dole meant various schemes for paid relief work. The new system of funding relief work, by special taxation levy, had been endorsed by Labour in late 1920s, before the slump hit. Unemployment figures were rising in 1931, and McKinnon comments “In retrospect it seems remarkable that the difficult circumstances through 1931 did not lead to outbursts on the scale of those that took place in 1932. There was certainly no lack of evidence of hard times or troubled lives.” (p.123)

Why was the public reaction so muted? McKinnon speaks of the “cushion” provided by people’s savings, which were used up by 1932, and also what he cites Margaret Tennant as calling “the informal side of the welfare economy” (p.129) – that is, there were quite a number of caring bosses who provided for workers at their own expense; there was much practical welfare provided by churches; and local councils and hospital boards decided to keep the social peace as much as possible by making as generous provision for the unemployed as they could. Hence demonstrations of the unemployed in 1931 would attract a few hundred people rather than the thousands that they attracted in 1932. But employment continued to rise. And most government schemes to alleviate it involved rural work, though the great majority of the unemployed were in the main cities. The Labour party and the trade unions focused on ensuring that wages and conditions were maintained for the employed, knowing that many employers could use the threat of unemployment to lower wages.

It is in this context that McKinnon cites many instances of personal distress, with stories and personal testimony as wrenching as anything found in The Sugarbag Years.

Gordon Coates’ immediate plan was to defuse tensions in the cities by moving unemployed men (especially unmarried men) to public works camps in the country. But there was much dissent about this, the heat was raised, and now there really were serious riots and disturbances in Dunedin, Christchurch, Wellington, and Auckland, with the largest being the major (and much mythologised) riot in Auckland in April 1932. However (Chapter 4) despite common legend, the riots and disturbances in Auckland and elsewhere did not lead to a period of prolonged alarm. After a few weeks of panic the “special” constables were stood down, although local ordinances still banned outdoors meetings. Few unemployed men were willing to take up the option of going to public work camps. Then there was the matter of women not being properly represented in the statistics of unemployment; and of evictions especially from State Advances houses, even though in April 1932, the government had reduced rents by 20%. The peak of unemployment was April 1933. Thereafter there was a slow decline as the economy picked up. In all this there was the special problem of youth unemployment, partly because of the “extreme reluctance of unions, in the weakened labour market, to encourage youth competition with adult workers.” (p.189)

As McKinnon is always ready to remind us, all New Zealand’s hardships took place within the context of the government attempting to find financial solutions to the effects of the slump; trying to find better prices for New Zealand exports; trying to stimulate the economy to create real employment and trying to find the hard cash that could pay for needed welfare. In 1932-33 (Chapter 5, entitled “How to Raise Prices”), after the Ottawa conference, there was the prospect of “reflating” (i.e. slightly inflating) currency in the hope of profiting more from exports to Britain. The National Expenditure Commission released a report in September 1931 advocated huge cuts to education and all social services and a drastic reduction in the number of hospital boards. Labour raged against in in parliament, with Labour leader Harry Holland calling it “An utterly valueless document to the country… the commissioners attacked the human being from the cradle to the grave.” (p.202). But McKinnon points out that all parliamentary political parties repudiated the report. However, spending on public works was drastically reduced. It had been 4.8 million pounds in 1931-32 but was only 1.7 million pound in 1932-33. Public works in effect became a relief agency and its workers were paid relief rates. By this stage in the depression there were many plans for monetary reform, only some of which were Douglas Social Credit. Keynesianism was now beginning to have an influence on some New Zealand economic thinking. McKinnon notes that once again Labour was often in agreement with the (otherwise conservative) Farmers’ Union on these matters.

The main discussion within the governing parties was about what to do with the exchange rate. After a major tussle in the cabinet between Downie Stewart and Gordon Coates, the government raised the exchange rate in its first inflationary move.

(Chapter 6) This move was popular at first with rural New Zealand, but was fiercely criticised by both business and labour, with their separate fears of rising prices or rising wages. The ephemeral New Zealand Legion, with its vague ideas, was strongly anti-Keynesian.

In 1933 there was further agitation against married men being drafted into rural public works camps. McKinnon refutes the claim made the Keith Sinclair (cited p.239) that “few people outside the Labour Party lent an ear to Keynes’ plea for increased government expenditure”. Many other groups were now adopting Keynesian ideas. However, Labour was now (for the first time) articulating its own fiscal policy in it electioneering document “Labour Has A Plan” (1933). McKinnon sums up the Reform-United coalitions conservative, but prudent, fiscal policy thus:

“It remained wedded to financing unemployment relief through the tax system, avoiding either borrowing or ‘inflationary’ credit expansion. The exchange rate aside, lower interest rates remained its favoured means of stimulating economic activity and employment by the private sector. Its objections to the measures proposed by its critics were not unfounded.” (p.253)

By late 1933 (Chapter 7) there seemed to be a rise in commodity prices, but this tended to be confined to the agricultural sector; and there was still a failure to adjust credit rating appropriately. When it came to credit matters and radical ideas of currency reform, Major Douglas’s visit to New Zealand in 1934 was a flop and the Social Credit movement peaked and went into decline as an influence on major political parties. By this stage, Labour found common cause with smaller businesses and consumers and was now clearly in favour of only a limited degree of government control of private businesses. The Reserve Bank at last opened August 1934

By this stage (1933-34, Chapter 8) it was clear that the consensus of all parliamentary political parties was moving towards acceptance of what would come to be known as the “welfare state”, with expanded benefits and national health insurance, especially as these measures had already been carried in some Australian states, in Britain and in the New Deal in the USA. As unemployment lessened, there were still polemical struggles concerning the unemployed, especially in the matter of sustenance (rather than relief work). These pitted the Unemployed Workers’ Movement (UWM), controlled by the tiny and electorally insignificant Communist Party, against the more practical Labour-oriented Unemployed Workers Association (UWA). But parallel with agitation concerning the unemployed, there was unrest among the employed, calling for the restoration of cut wages and the restoration of compulsory arbitration in industrial disputes. In itself this was evidence that the worst of the depression was over. Gordon Coates’ budgets of 1934-35 began to restore cuts as economic situation improved.

Making a general statement about the hardships of New Zealanders in the Depression, Malcolm McKinnon remarks:

“The plight of the poor and deprived was all the more pronounced because the Depression had not had a marked impact on the health and wellbeing of the population as a whole. Significant indicators of deprivation – infant mortality, maternal mortality, the incidence of tuberculosis, child malnutrition – did not rise in the early 1930s.” (p.315)

Nor did the annual number of suicides rise; but there was an increased mortality rate of women from septic abortions, and the higher rate of Maori infant mortality continued to cause concern, as it had done in the 1920s.

By mid-1935, with the election looming, the Coalition government scrambled to outbid Labour and most pre-Depression pensions and benefits were restored to their full rates.

And so at last to the 1935 election (Chapter 9). McKinnon plunges us into the thick of it by reminding us in minute detail of how the election campaigns were actually fought, rather than simply cutting to the Labour victory. As he notes in detail, it is often forgotten that in 1935, both the Coalition and Labour feared the possible “spoiler” effect of the newly-formed Democrat Party. Labour and the Coalition were afraid that the Democrats would do what the United Party had done in 1928, and damage two established parties enough to gain the treasury benches. In the effect, the Democrats fizzled into nothingness in the election itself, but both Labour and the Coalition campaigned against them.

McKinnon is also insistent that the main issues of the election were about economics, not about social welfare:

“While the first Labour government is remembered, more than anything, for legislating for social security in 1938, social welfare was the least contested field of the 1935 election campaign. This reflected both the extent of absorption in and debate and argument over money and finance on the one hand, and a consensus among political parties on health and social insurance on the other – with persistent debate about how it should be financed.” (pp.330-331)

Labour’s policies in the 1935 campaign were unclear and its fiscal stance not too far from orthodoxy. Like the Coalition, Labour was gearing for a recovery economy.

In considering how Labour performed in office 1935-39 (Chapter 10), McKinnon argues that in practice Labour’s programme was one of restoration as were its fiscal policies. Much depended on a reversion to more borrowing from London (as under the Ward government), signalled by the finance minister Walter Nash’s visits there. However, the Labour government did enhance nearly all benefits or pensions.

Labour won the 1938 election with a real absolute majority (they had won 46.1% of the popular vote in 1935; they won 55.8% in 1938). The 1938 Social Security Act was essentially a consolidation of all that had gone before. There was some pressure for “insulation”, meaning in effect, attempts to argue that New Zealand should become self-sufficient by boosting local industry as much as possible. By 1939 the GDP was one third higher than it had been in 1931, and the Depression was in the past. But the economy began to falter again, and the national debt grew. Nash was forced to go to London yet again in 1939 to ask for more credit.

The hard economic reality implied here is that the Labour government could well have faced the same fate at the Ward and Forbes governments, had the downturn continued. What saved the Labour government and its reputation was the outbreak of the Second World War, which called for its own austerities and made New Zealand gear up in quite a different way.

What does this detailed history (which I have deliberately dealt with in detailed fashion) add up to?

It forces us to question the received image of the Depression by showing that the governments of 1928-35 were not bumblers who did not come to grips with the crisis, but were politicians who did the best they could in the circumstances. It was Labour’s good fortune to attain power, with a huge popular mandate, at a time when economic circumstances were already on the mend. Hence Labour was able to carry through very popular welfare and other policies that had already been pioneered by the governments that preceded them. When the Labour government also faced (in its second term) an economic downturn, its attempted remedy was exactly that which the Ward government had attempted in 1928. This is why McKinnon so often uses the term “restoration”. Labour was not introducing something new. It was “restoring” the New Zealand that had existed before the Depression.

Just a few additional comments. McKinnon is to be applauded for placing the extremists of the age in their appropriate perspective. The tiny Communist Party is mentioned a number of times, especially in association with the UWM, and its vivid rhetoric is noted, but its influence on events is shown to be virtually nil. Likewise the New Zealand Legion, its importance inflated by at least one historian as “New Zealand’s fascist moment”, is shown to be an ephemeral movement with vague and waffling ideas, which quickly sank from view.

I would not be an honest reviewer if I did not note that The Broken Decade is not an easy book to read. It is data-heavy, its sentences are long and often tortured in style, and in the week I slogged through it I sometimes choked on the level of minute financial and political detail offered. In short, it is a very academic book. For this reason, its view of New Zealand’s Depression is not likely to displace soon the more familiar legends.

Even so, it does the historian’s essential job of challenging superficial views of the past.