1938: New Zealand

The decisive victory of Premier Michael Savage's Labor government in national elections held on Oct. 15 provides a new lease on life for the only Left Wing dominion-wide régime under the British flag. The new government is pledged to continue and extend a long list of social policies, including state control of the banking and credit system, the maintenance of employment, improvement of social security measures, readjustment of mortgage obligations, and planning of production. The policy of aiding New Zealand's secondary industries, in order to make the Dominion less dependent upon fluctuating or glutted overseas markets, will be actively pursued. 'Insulation' — or the maintenance of a high standard of living in New Zealand, whatever the economic trends in the rest of the world — has become the watchword of Premier Savage and his cohorts.

Steps in this direction, begun in earlier years, were vigorously pressed in 1938. The system of controlled domestic and foreign marketing of New Zealand's primary products was extended to cover new industries. Trade agreements with the Netherlands and the British Dominions provided for larger quotas on basic New Zealand exports. To carry out the protective policy for local enterprises, higher tariffs were announced on Feb. 28; and on March 12, Parliament authorized the Government to establish a small iron and steel works as a state monopoly. In September, a new social security act providing for old-age pensions and free medical and health services was passed.

The gradual change-over from a free to a controlled economy is attended with grave difficulties. As export prices for New Zealand's specialties — particularly dairy products and meat — have begun to fall, the burden of maintaining a guaranteed return to the producers has become greater. At the same time, the protective tariff policy has raised prices within the Dominion, much to the distaste of the rural population. These factors and the Labor party victory have shattered confidence among capitalists and led to a serious flight of capital from New Zealand. The Savage government countered this movement in December by borrowing weapons from the armory of the totalitarian states and imposing virtual official control over the foreign exchange market. While conservatives were doubtful of the country's ability to remain prosperous under such circumstances, the Government intimated that the few measures might be permanent expedients for implementing the 'insulation' policy.