Abstract: The First Labour Government's New Start for Manufacturing, Employment, and Social Security in New Zealand, 1935-1949

Astrid Baker

Abstract

New Zealand's first Labour government swept to power in 1935 with ambitious plans for recovery after years of depression. Its promises were similar to those of other national governments in the United States, Britain, and Europe, which also accepted responsibility for economic wellbeing. Labour used state powers to boost local industry, thereby creating employment and conserving precious foreign exchange. But its real challenge was smoothing out sharp changes in external commodity prices to achieve internal price stability, and somehow sharing out through paid employment the "national" income earned by a small sector and a few exports. Labour took the lead in economic regulation, curbing competition and concentrating industry to avoid costly duplication of plant, equipment, or expertise and to ensure "stabilisation." But expansionist policies and prosperity brought strong demand from industry and public works. Large volumes of imports and sharply fluctuating prices for meat and dairy products on the London market caused a foreign exchange crisis in 1938. Threats of balance of payments crises recurred throughout the postwar years, undermining long-term aims for local industry. Labour's legacy lived on after 1949 as new governments also tried to maintain a commitment to a full-employment welfare state.

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