1942: New Zealand

New Zealand, previously at war with the European Axis, declared war on Japan Dec. 9, 1941, two days after the Japanese attack on Pearl Harbor, and the day following the attack on Hong Kong.

Lying 1,200 mi. east of Australia, and approximately in size the combined areas of Pennsylvania, Virginia, Maryland, Delaware, and Rhode Island, its population numbers only 1,640,000, of whom 90,000 are Maoris, natives similar to Hawaiians. Total New Zealand population is thus no larger than that of Detroit, Mich.

By mid-1942 one out of every two New Zealand men aged 16 to 60 was serving in the armed forces. One-sixth of the total population was under arms. In addition there was a part-time Home Guard of 100,000. On a population basis this would be equivalent in the United States to armed forces numbering 13,000,000 with an additional part-time army of 8,000,000.

In financing this relatively large military manpower problem the New Zealand government has enjoyed the advantage of owning the country's Reserve Bank, giving it complete control of the monetary system.

War Expenses Account for 1942-43.

War expenditure in New Zealand for 1942-43 will amount to £133,000,000; £126,000,000 of which is the estimated expenditure on the Army, Navy, and Air Force, and £7,000,000 the civil expenditure associated with the war.

New taxation includes an increase in national security tax by 6d. to 1/6d. in the £ on all incomes, including company profits. Super tax levied on income tax payable is raised from 15 per cent to 33 per cent.

New direct taxes are as follows: An additional 10 per cent sales tax on certain non-essential goods; an increase of 1/— a gallon in beer duty and a corresponding increase in wines and spirits; an extra 2d. on a packet of 10 cigarettes, together with an additional 5d. an ounce on tobacco.

The result of these proposed adjustments will be that direct taxes will reach 18/— in the £ at £2,500 in the case of unearned income, and £3,700 in the case of earned income. Companies at the maximum rate will pay 14/—d. in the £ as compared with 12/—d. at present.

The final returns for the £15,000,000 Liberty Loan for war purposes showed the loan oversubscribed by £2,501,170. This is the largest single sum ever raised as a loan in the Dominion.

War Administration Formed.

A War Administration of thirteen Ministers, seven Government Ministers and six from the Opposition was announced in July. The members of the previously existing War Cabinet continued to hold office in the War Administration. The domestic Cabinet outside the War Cabinet continued to function. The War Administration has supreme command of all war activities, and every member holds full Ministerial authority.

The War Administration, which consists of thirteen Ministers, carries out the full administration of New Zealand's War effort, but six members constitute the War Cabinet. This body consists of: the Prime Minister, Mr. Fraser; the Minister of Supply, Mr. Sullivan; the Minister of Defence, Mr. Jones; Mr. Coates; Mr. Hamilton, and the Leader of the Opposition, Mr. Holland.

The personnel of the War Administration of 13 Ministers, 7 Government Ministers, and 6 Opposition Ministers, includes:

Rt. Hon. P. Fraser, Prime Minister, Chairman of War Cabinet

Hon. S. G. Holland, Minister in Charge of War Expenditure, Deputy-Chairman of War Cabinet

Hon. F. Jones, Minister of Defence

Rt. Hon. J. G. Coates, Minister of Armed Forces and War Co-ordination

Hon. D. G. Sullivan, Deputy Prime Minister, Minister of Supply and Munitions

Hon. A. Hamilton, Associate Minister of Supply and Munitions

Hon. R. Semple, Minister of Transport

Hon. W. J. Polson, Minister of Primary Production for War Purposes

Hon. P. K. Paikea, Minister in charge of Maori War Effort

Hon. W. J. Broadfoot, Minister of National Service

Hon. A. McLagan, Minister of Industrial Manpower

Hon. W. A. Bodkin, Minister of Civil Defence

Hon. A. H. Nordmeyer, Minister of Health.

The War Administration is responsible for all matters connected with the war or with New Zealand's war effort. The War Cabinet acts as the executive body of the War Administration and is responsible for making all decisions in relation to war matters except those that are dealt with by the War Administration as a whole.

Although New Zealand is an agricultural country with very limited industrial resources, a munitions industry has undergone rapid development during the year. Trade in agricultural products to Great Britain during the years 1940-41 amounted to 547,000,000 lb. of butter, 493,000,000 lb. of cheese, 1,533,000,000 lb. of meat, and 600,000,000 lb. of wool.

Agricultural objectives and war requirements of the Dominion for the fiscal year 1942-43 included 300,000 acres of wheat as against 258,000 for the previous season.

Early in September 1942, Labor Prime Minister Peter Fraser visited Washington, D. C., to discuss war problems with President Roosevelt.

1941: New Zealand

Despite its isolated position in the South Pacific, developments in New Zealand during 1941 were dominated by the converging conflicts in Europe and the Far East. To an ever-increasing extent, New Zealand's governmental activity, industry, agriculture, and every-day life were deeply affected by the war effort. Added impetus was given to the dominion's mobilization when its government declared war on Japan on Dec. 9, as a result of the treacherous Japanese attack on British and American possessions two days before.

New Zealand's principal contribution to the Allied cause continued to be strong and well-trained manpower. By the end of the year, one-fifth of the population of 1,640,000 had been enlisted in the defense services. Over 80,000 were enrolled in the regular army, of which half were serving overseas. The home guard had a strength of 138,000 and the civilian defense organization 98,000. More than 13,000 airmen, trained in New Zealand or Canada, were stationed at home or abroad. The Royal New Zealand Navy, a unit separated from the British Navy during the year, included over 4,000 seamen. In addition, 15,000 women volunteers were placed in positions ranging from signalers to truck drivers, with the Women's War Service Auxiliary. New Zealand troops saw active service in the two dramatic Allied offensives in Libya during 1941, and a full division was sent with the Allied forces to the Balkans. In the Greek and Cretan campaigns, the New Zealanders distinguished themselves and left behind over 5,000, killed, captured by the Nazis, or hiding in the mountains of Crete. Even before Japan struck in the Pacific, the dominion sent army and air units to Singapore and to outposts in the Fiji islands and the East Indies. When the Pacific conflict blazed up, New Zealand forces went into action in Malaya, while at home the defenses of the two main islands and the outlying territories were strengthened. Complete mobilization was ordered as the year ended.

The dominion's limited industrial resources underwent almost complete conversion for war production, and its factories produced Bren gun carriers, mortars, bombs, shells, steel helmets, and small arms during the year. The opening of a new ammunition plant in March doubled the country's output. A factory to manufacture training planes was also completed, while other firms made aircraft parts. Great Britain and the United States sent fighter and bomber planes, heavy coast defense guns, and tanks for the protection of the dominion. Altogether New Zealand planned to spend £71,000,000 in 1941-42 on the war effort, of which Britain agreed to provide £31,000,000 by loan. The economic position of the dominion deteriorated as the year progressed, for Britain, desiring to save shipping by buying in nearer markets, reduced its purchases of New Zealand's chief export products, meat and dairy products. The Wellington government thereupon sent a trade mission to the United States in May and developed plans for preserving perishable foods and diversifying agricultural output.

There were few important political developments in 1941. Prime Minister Peter Fraser continued to head a regular Labor cabinet, dealing with domestic matters, and a war cabinet, composed of three government and two minority members, with authority over war production and military policy. Proposals for a single cabinet of coalition, with all parties participating, were advanced by the Nationalist Party, especially after it had absorbed several small political groups on Feb. 20 and thereby consolidated the opposition. Labor's fears of dilution of its social program through coalition brought the proposals to naught. In October the government asked and obtained permission to postpone the parliamentary election, scheduled for 1941, on the ground that it would be an upsetting factor in a critical period. Meanwhile, the Labor government continued to advance its social reforms. A system of free medical care was inaugurated on Nov. 1, after overcoming the opposition of the organized medical practitioners. A bill to abolish capital punishment and flogging and another to establish standard specifications in industry were passed by Parliament, in which Labor continued to enjoy a two-to-one majority. That Labor was not, however, oblivious to the international crisis was indicated when the Prime Minister, addressing the party in April, stated that 'war needs must be placed ahead of social development.'

As the year closed, New Zealand faced, for the first time in its history, the prospect of invasion by an enemy power. Its people forgot their past differences and labored to fortify their island home against either raiding Japanese ships or a full-scale attempt to secure domination over them. They realized, however, that safety lay, not so much in their own efforts, as in cooperation with the other Allies. Fortunately, contacts with London and Washington had been developed during 1941, especially by Mr. Fraser's mid-year trip to those capitals, and in addition, New Zealand and the United States had determined, in February, to exchange diplomatic representatives. New Zealand prepared to face the enemy with resolution and courage, as one of the free United Nations.

1940: New Zealand

The war in Europe gave New Zealand, which celebrated the one hundredth anniversary of white settlement in January and February 1940, still another opportunity to live up to its appellation of 'the most loyal Dominion.' Acclimated to the most far-reaching socialism in existence in any democracy, the New Zealand government was able to institute war controls with relatively little difficulty. Some 80,000 men out of an adult male population of only 350,000 had volunteered for overseas service by July 1940, when a compulsory service scheme was established. Men above and below the conscription age limit were mobilized in a home guard which is eventually to be expanded to a force of 200,000. As it conscripted men, the government also established drastic controls over property. Legislation passed in the spring gave the Cabinet virtually dictatorial powers.

The Labor party, in whose hands the destiny of the country has rested since 1935, is successfully directing the war effort despite internal difficulties. Its leader, Premier Michael J. Savage, died on March 26, 1940 after a long illness, but his office was assumed by Peter Fraser despite intra-party friction over the composition of his Cabinet. At the same time an extremist Left wing group under John Lee was read out of the party, now a smoothly functioning political machine. Strong measures were taken against Communists and other anti-war groups. National unity was preserved, not only by several shifts in the Cabinet during the year but also by the formation of a War Cabinet of five, including two opposition members, which assumed direction of the war effort while the Labor party government continued to administer all other matters.

In the field of social and economic affairs, the stream of new measures continued, although they were now applied primarily to the country's war needs. Tax burdens were heavily increased, particularly in the upper income brackets. Forced loans were floated, in some instances without interest until after the conclusion of hostilities, with subscriptions calculated on the basis of income tax payments. Social legislation, however, was not disregarded. On April 1 a 'universal pension plan' went into effect, guaranteeing many types of social security payments. In August the national Arbitration Court granted a general 5 per cent wage increase to all industrial workers under collective agreements in order to offset the rise in the cost of living. The government tapered off its public works program and threw its energies instead into production of munitions. It did not hesitate to discipline labor organizations which refused to cooperate in expanding output. As the year closed, it was making plans to acquire small farms on which to settle returning war veterans, and was contemplating introduction of a nationwide health insurance plan which had been successfully blocked for many months by the united opposition of New Zealand physicians.

The financial difficulties brought on before the war by the government's social legislation have been eased for the duration of the conflict. Assistance has been forthcoming from the British, and a guaranteed market at good prices is assured in the United Kingdom for New Zealand's major exports: wool, meat, butter and cheese. Since cheese is especially in demand, much of the Dominion's famous butter processing industry is being converted to cheese manufacture under government auspices. The stringent import controls instituted before the war began have been greatly intensified. Thus New Zealand has made the shift from peace socialism to war socialism and seems determined to continue on the progressive path.

1939: New Zealand

In November 1939 New Zealand celebrated the completion of its first century as an inhabited British territory, but the great Centennial Exhibition marking the event was overshadowed by the pressing problems of peace and war. The early portion of the year saw Premier Michal J. Savage contending with a difficult economic situation despite the unprecedented prosperity of 1938. On the one hand the world prices of dairy products, wool and other New Zealand exports had sharply declined; on the other, the Labor Government was pushing forward its program of social welfare measures which raised the cost of production. Meanwhile, important loans amounting to about 18,500,000 New Zealand pounds fell due in Britain, and further expenses were incurred abroad for defense equipment.

To meet the situation, the Government imposed a sharply restrictive control of imports and managed to secure renewed loans and credits in London. Attacked by a Left Wing faction within the Labor party for its conservatism, and by farm and propertied interests for its socialism, the Cabinet has vigorously continued to foster infant industries and generally to support labor in frequent wage and working disputes. The outstanding progressive development of the year occurred on April 1, when the augmented social security plan adopted in September 1938 formally went into effect. The scheme provides for a well-rounded group of services; contributory old-age pensions, widows' and disability benefits, and an elaborate plan for socialized medicine and free health facilities. On the latter project the Government at once met with insuperable difficulties, since the New Zealand Medical Association refused its cooperation on the ground that the bureaucratic control involved would destroy the customary doctor-patient relationship. In consequence the medical portion of the Government system has not been applied and seems destined to remain a dead letter at least until after the war.

True to its strong British ties, the Dominion has responded wholeheartedly to the war emergency. It has organized a fully equipped volunteer division, containing perhaps 20,000 men, for service overseas and has expanded its air training program to provide the Empire with 10,000 pilots, gunners and other personnel who will receive a part of their instruction in Canada. The financial charges are being met by renewed borrowing in the British market and inflationary advances from the Central Reserve Bank, now fully controlled by the Government. Difficulties over exports have been removed for the time being by an agreement under which the British are to absorb surpluses of meat, wool, butter and cheese. For the duration of the emergency the Government has assumed sweeping powers of censorship; control over industry, prices, marketing and transport; and command of labor itself. Strikes and lockouts are forbidden. On the Left these steps have been viewed as fascist measures, but the country as a whole hailed them as a prerequisite to national political unity — which seemed to be near as the year ended.

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.