"Still belief persisted in the magic of credit to achieve all economic objectives. ... This pathetic and muddled belief in the power of credit to cure all economic ills is perennial in New Zealand ...
"It was a factor in the Labour Party's seeping victory in 1935 ... It was potent throughout the Labour Party's tenure of office and never more potent than in the post-war years when it was least applicable."
~ JB Condliffe writing after the WWII) of the New Zealander's enthusiasm for cheap money, in his 1959 book The Welfare State in New Zealand
Friday, 28 November 2025
"This pathetic and muddled belief in the power of credit to cure all economic ills is perennial in New Zealand"
Tuesday, 16 September 2025
First Labour's State-Housing Story is a Con
THE SATURDAY AFTERNOON OF 18 September 1937 was warm and clear as a furniture truck pulled up outside a new house in Miramar. Greeted there by a crowd of cabinet ministers, a Prime Minister, 300 onlookers and a small gaggle of press photographers, doors were opened, cameras were loaded, sleeves were rolled up, and the crowd was treated to the spectacle of four cabinet ministers and one parliamentary undersecretary bump their way inside the house with a handful of furniture for the new house’s selected tenants.
“Everybody is happy” oozed the state broadcaster
Prime Minister Savage himself earned warm praise for his treatment of a chair, carrying it in “without a hitch” – which “in front of some hundreds, calls for more poise and purpose than the average person can muster.” Ministers of Finance and Defence also earned praise for showing the crowd how to handle a chair, while “the coatless Minister of Public Works,” Bob Semple, also helped Prime Minister Savage “to carry in a solid-looking table.”[2] “Labour Ministers, Indeed” sang the headline in the Auckland Star – appearing, however, only on page six’s ‘News of the Day’ below several headlines the editor clearly considered more important, including one about “Red Tape” in laying out school playgrounds in Te Aroha, and another trumpeting the birth of a two-headed calf in Hikutaia, the second in the neighbourhood in as many months![3]
The house was conveniently located inside the Minister of Public Works’s electorate, one of eight state houses in the electorate and 500 others around the country already completed, with another 1485 under way on the way to his target of 5,000. “The only thing standing between the Government and the achievement of its purpose,” said the Prime Minister in his speech, “were labour and materials.” Those, along with “at least £16,500,000 to £17,000,000,” and he and his team of removalists would be “more confident than ever that we could do the job.”
The nation was lucky enough to hear all the speeches over the newly-nationalised ZB radio network, which was compelled to drop its regular programming to carry the speeches,[5] while the Prime Minister and his team were lucky enough to have the newly-nationalised Reserve Bank on their side to help lend cheaply for the political promises. In April 1936 Finance Minister Walter Nash had assured a public wary of the nationalisation that he did not intend “to sit down and merely turn the handle of the printing press.”[6] But like every politician before or since, he lied. Between 1936 and March 1939 the Reserve Bank borrowed into existence £12.2 million for the Labour Government’s programmes – £5.6 million of this was low-interest loans for Lee & Semple’s housing programme.[7]
With improved employment, and those who had delayed marriage now affording to do so,[8] demand for rental houses had been steadily building. But supply had been discouraged by, among other things, a new rent control law which required a magistrate’s agreement before rents could be raised[9] -- just one of fifty-nine public Acts of parliament passed in Labour’s first year.[10]
By November 1935, when Labour were elected and announced a Christmas bonus to all voters, it looked to an electorate eager for good news like salvation was at hand.
In reality however, the Depression years here, in Australia and the UK were already over, although unemployment would remain high until the decade's end. Here and in our major trading partners, the "classical medicine" had been applied, where “balancing the budget … was seen to have made the all-important difference.”[11] Explaining it later to the House of Commons, British Chancellor of the Exchequer Neville Chamberlain took a gentle swing at America’s free-spending president:
“At any rate we are free from that fear which besets so many less fortunately placed, the fear that things are going to get worse. We owe our freedom from that fear largely to the fact that we have balanced our budget.”[12]
So in fact, Labour were gathering in a harvest grown by others—and the crop was used to enlarge spending, to subsidise monopolies, and to inflate prices.
And by 1938, their unsustainable boom had created their own self-made financial crisis —only rescued by war exports to a desperate Great Britain, and the unemployment crisis (which saw numbers rocket back to those of the bad years) was only remedied by a former pacificist sending men to war.
But let’s look at the myth of public housing. A story that Hans Christian Anderson would have rejected as a fairy tale for being so fantastic.
STATE HISTORIANS TELL US THAT “in 1936 it [the new Labour Government] drew up plans to use private enterprise to build 5,000 state rental houses across New Zealand.”[13]“In the 1930s under the first Labour government of Michael Joseph Savage, gushes political commentator Bryce Edwards,’ state house building was turbo-charged.”[14] Others simply called it a miracle of mass housing, crediting it all to the magic wand of St Michael.
Depression historian Malcolm McKinnon at least provides figures, so they can be checked. “3000 new houses had been completed in 1934-35; over 4000 in 1935-36 and 1936-37; … just over 6000 in 1937-38 and just over 8000 in both 1938-39 and 1939-40.”[15]
What McKinnon and others don’t tell you, or don’t know (or don’t care to know?) is that those figures he cites are not the figures for state houses. They represent the numbers of all houses consented across the country–private and public. And there was no year in which did state house building ever approached the numbers of privately-built houses.
Not one. Not in any year from 1937 (when state building started) right up until 1949 (when it was ended).
There was not even a year in which state-house building built more than private builders did in peak years of the previous decade.
And this was despite the country’s then largest mass house builder, Fletcher’s, working for the government and making its directors and shareholders very rich indeed in the process—James Fletcher’s “special relationship” with government quite literally paying dividends.[16] The numbers can be seen below, from Ministry of Works figures.[17] They make fascinating reading.
What they reveal in essence is that the story of state-housing here is a con.
Savage himself knew it was a con. Presenting the Budget to Parliament on Walter Nash’s behalf in 1939 (Nash was away beseeching more credit from unwilling London bankers) he admitted, “The operations of the department have been superimposed [sic]on the normal works carried out by private enterprise.”[18] The accurate phrase here is “crowding out.”
Nonetheless, he could boast that “In the last year the housing construction department commenced building 3445 houses, while the total number of dwellings arranged [sic] was 8093.”[19] The accurate phrase here is “built by private builders”—which you can yourself in the table above.
That Savage knew he had to fudge was the measure of how much he knew the programme was a con.
THIS IS A GOOD REMINDER OF the state of play in New Zealand house-building ever since we've been building houses: that the health of affordable housing is due to the profitability of private speculative builders. And that it is not until speculative builders here can get back on their feet in volume that housing today might begin to become affordable once again.
In short: Make life safe for spec builders again.
NB: The other myth exploded by perusing these tables, especially the more complete table below, is the myth that National killed the state-house programme. Despite Sid Holland’s rhetoric against it, his promises to end it were as empty as every National Party leader since.
* * * *
THE FOLLOWING TABLE [20] shows the number of building permits issued for dwellings in New Zealand since 1925. The figures for 1925 to 1938 do not include houses built in rural areas. The figures for 1937 and later years include State Rental Houses erected.
Number of New Dwellings Consented
Year ended Mar 31 Private Govt Total Total Value (£m)
1925 5,805 5,805
1926 6,850 6,850
1927 7,179 7,179
1928 5,690 5,690
1929 5,212 5,212
1930 5,747 5,747
1931 3,463 3,463
1932 1,555 1,555
1933 1,496 1,496
1934 2,649 2,649
1935 2,892 2,892
1936 4,140 4,140
1937 4,533 22 4,555 11.6
1938 5,149 1,895 7,044
1939 6,266 3,445 9,711
1940 5,816 3,870 9,686
1941 5,307 3,570 8,877
1942 4,567 2,605 7,172
1943 1,266 368 1,634 3.5
1944 3,020 1,916 4,936
1945 5,446 3,255 8,701
1946 7,481 2,875 10,356 20.7
1947 10,107 2,769 12,876 26.9
1948 10,983 3,065 14,048 29.3
1949 12,025 4,111 16,136 36.0
1950 12,262 5,395 17,657 42.5
1951 14,551 3,298 17,489 48.8
1952 14,297 2,814 17,111 59.2
1953 12,607 3,610 16,217 61.1
1954 14,025 3,432 17,457 69.5
1955 17,420 3,443 20,863 93.4
1956 16,234 3,270 19,504 90.2
[1] Ngā Taonga Sound & Vision Reference: F4372
[2] ‘Tenants Take Over,’ Evening Post, 20 September 1937, p. 10
[3] ‘News of the Day,’ Auckland Star, 20 September 1937, p. 6
[4]‘Tenants Take Over,’ Evening Post, 20 September 1937, p. 10
[5] ‘That First House Broadcast Queried: Director’s Powers – Interrupted Programmes,’ Evening Post, 24 September 1937.
[6]
[7]
[8]
[9] Fairer Rents Act, 1936
[10]
[11 Kates (2010) p. 114
[12]Neville Chamberlain, Budget speech in the House of Commons (25 April 1933)
[13] Ben Schrader, 'Housing and government – State loans and state houses,' Te Ara – the Encyclopedia of New Zealand, https://teara.govt.nz/en/housing-and-government/page-2 (accessed 15 September 2025).
Story by Ben Schrader, published 13 October 2011.
[14] Bryce Edwards, ‘New Zealand once led the world on social housing – it should again’, Guardian, 27 Nov 2020
[15] Malcolm McKinnon, The Broken Decade, OUP (Dunedin,2016) p. 363
[16] Frontier of Dreams, ed. Bronwyn Galley & Gavin McLean, Hodder Moa (Auckland, New Zealand) 283. Students of government subsidies should note however that Fletchers underbid on the housing build just as they underbid on today’s Convention Centre build, and were bailed out by government then as they have been now. Dividends twice over.
[17] Cedric Firth, State Housing in New Zealand, Ministry of Works (Wellington, New Zealand, 1949) p. 67. Amusingly, in his book-length eulogy to state power, Chris Trotter's otherwise enjoyable No Left Turn refers to Cedric Firth as Colin Firth—perhaps after one too many viewings of Bridget Jones's Diary?
[18] NZ Parliamentary Debates 254: 884 (1 Aug. 1939)
[19] ibid
[20] Combined tabulation from Cedric Firth, State Housing in New Zealand, Ministry of Works (Wellington, New Zealand, 1949) p. 67 and (Condliffe, The Welfare State in New Zealand, 1959) p. 201. Firth’s figures run from 1925 to 1949, Condliffe’s (which are not referenced) from 1938 and then intermittently to 1956. Condliffe and Firth have the same precise totals for each similar year, but marginally different numbers for government housing. As Firth is closer to the source, and his 1939 figure tallies with Savage’s account to Parliament, I have preferred his, and calculated private numbers therefrom (correcting Condliffe’s numbers accordingly).
Monday, 15 September 2025
"The only way forward is to go back to the concept of 'deserving' and 'undeserving' " [updated]
"It has been clear for decades that NZ's approach to welfare has gone awry. The late Roger Kerr, of the NZ Business Roundtable, once said to me, 'The only way forward is to go back to the concept of 'deserving' and 'undeserving'.' ...
"Between the passage of the Social Security Act in 1938 and the early 1970s the percentage of working-age people on a benefit never exceeded two. Today it stands at almost twelve, with the time people stay dependent growing every year.
"As a society we have created this level of reliance by believing and acting on a bad idea. That we must not judge others. We must not mention their faults and shortcomings. We must bend over backwards to not blame the person responsible for their own troubles. That's the kindness and compassion we are taught to aspire to. ...
"I would vouch that the majority of New Zealanders want to help people who, through no fault of their own, need a benefit and public housing. But that willingness does not extend to people who chronically cause their own misfortune."~ Lindsay Mitchell, from her post 'Is real change on the cards?'
"After nearly ninety years of social security it would be reasonable to conclude that the state cannot solve 'poverty'. Indeed, the more the state does, the more the state is expected to do."
~ Lindsay Mitchell from her post 'The other side of the story'
Monday, 1 September 2025
WELFARE: "National will persist with the tinkering..."
"Right now, benefit statistics are worse than at the time of last year's election. There are 380,169 main beneficiaries — a rise of 5 percent. The number on a Jobseeker benefit is up 7.5 percent. ...
"[I]t is long-term single parent dependence which drives inter-generational malaise - the most serious social problem the country faces. Inter-generational dependence drives under-achievement, domestic dysfunction, ill-health and crime.
"So what is National doing?
"The same thing it does every time it returns to power. It gets a bit tougher about oversight of beneficiaries ... They set some soft targets ... but make no mention of sole parents (who are also not required to 'check-in').
"The last big National [Party] welfare reforms (2013) comprised ... changing benefit names.
"The percentage of working-age people dependent on welfare is higher now than then. [Much higher]
"There is an inertia about the numbers which is going to take some radical actions to disrupt them. But National lacks the necessary reforming zeal.
"National will persist with the tinkering that deflects attention and mollifies their voters while the country's historic heavy and unhealthy over-reliance on the welfare system continues."~ Lindsay Mitchell, from her post 'Welfare - no good news'
Monday, 18 August 2025
The State is not a good parent
"Reading the abuse in care reports, two questions requiring clear and compelling answers remain unanswered: Why? and How? Why were so many children and young people abused in such awful ways? How was it possible for so much and such appalling abuse to continue unchecked for so long? Without satisfactory responses to these two critical questions, the chances of history repeating itself must remain unacceptably high.
"For some reason, however, the Why and How of Abuse in Care were not made the prime focus of the Royal Commission’s investigations. Its reports tell us the Who, When, Where and What of this horror story, but, those two key questions, Why? and How?, are not adequately addressed."~ Chris Trotter from his post 'Report on the abuse of young people – two key questions have gone unanswered'
Monday, 4 August 2025
Did you know you can see shit political economy from space?
Did you know you can see shit political economy from space? Here below is the Black Hole of North Korea at night, too poor to have enough lights to switch on.
And you can see shit political economy in Auckland too, in aerial photographs. To be accurate: you can see shit political economy in the form of the effect of tariffs. ...
Let me explain.
The first houses built here en masse were workers' cottages and then villas. When you fly over the city, you can see a ring of these villas around the inner parts of the city — especially so in Ponsonby and Grey Lynn — built right up until the First World War.
But after that war, something changed. It seemed to some that the United States had rescued Europe from its Great War, and had a lifestyle to which an increasingly prosperous population could aspire. It was the Jazz Age — the age of radio, electrification, automobiles, and the mass production (Fordism!) that made them affordable. In love with Americanism, in housing here it became the decade of the California Bungalow.
A villa is not a bungalow. Like the California lifestyle it aped (and which the world would fully fall in love with after another war), the California Bungalow was freer than the more uptight Victorian villa, and reached out for sun and air. Their broad spreading gables form a second ring around the city in what we now call the "tram suburbs," a ring from Pt Chev through Mt Albert, Sandringham, Mt Eden, Greenlane, Ellerslie, and right around to the border of Meadowbank/Remuera.
Their popularity was immense.
Their takeover seemed unstoppable.
Until something happened.
That something involved a tariff. Brought in by US Senators Smoot and Hawley, their Smoot Hawley Tariff Act raised tariffs on imports by an average of twenty percent. Their intention (we're told) was to quarantine American manufacturers from the effects of the 1929 stock market crash. What it did do instead was to spread the misery and contagion around the globe, kicking off the Great Depression and all but shutting down international trade for nearly two decades.
![]() |
| John Bell Condliffe's "wagon wheel" showing the dramatic death spiral of world trade following the disastrous implementation of the 1930 Smoot-Hawley Tariff Act |
New Zealand economist J.B. Condliffe has a world-famous diagram describing the accelerating downward spiral of trade as every country and trading bloc in the world put up their own tariff walls in response. It was one of the most successful acts of intentional self-destruction in all modern history.*
Almost at a stroke, we fell out of love with the US. In Britain, still the head of something called an Empire, an Imperial Preferences Act was swiftly passed making trade within the Empire roughly tariff-free — allowing many Commonwealth countries to escape the Depression first. (Not so the US of A, which had to wait until the death of a President and the end of a war to boom again.)
And trade amongst the Empire, rather than outside it, meant many more British goods replacing the previous love affair with American. Not least in housing. If the twenties was the decade of the California Bungalow, then the thirties was the decade of the English Cottage/English Revival. We can see these crabby, restrained offerings around the outer parts of the tram suburbs. (And you can see all these styles described in the Auckland Council's 'Style Guide,' pp 14-24)
In insulating itself from the world, America had not only shot itself in the foot economically, it also lost its influence with the rest of the world.
Turned out it was a not-so-great way to Make America Go Away Again.
* * * *
* Until April 2, 2025, that is, with what Johan Norberg calls "the longest suicide note in economic history."
"Thomas Rustici identified the role of the Smoot-Hawley Tariff Act in exacerbating the Great Depression, particularly through its effects on trade, banking failures, and economic contraction. His seminal work, *Smoot-Hawley and the Great Depression: A General Equilibrium Analysis* (2005), presents a compelling argument that Smoot-Hawley initiated a trade war, triggered mass bankruptcies, destabilized the banking system, and led to deflation and depression. ...
"Conclusion Rustici’s work provides one of the most comprehensive and rigorous explanations of how the Smoot-Hawley Tariff Act triggered a trade war, bankrupted farmers and businesses, destabilized the banking system, and created deflationary collapse. His analysis is central to understanding how protectionist policies can create economic catastrophe by disrupting credit, trade, and monetary liquidity. His insights remain critical in debates over trade policy and economic crises."
Monday, 13 February 2023
"In reality, the long history of unionisation ... is replete with homegrown racism..." [updated]
"In reality, the long history of unionisation in the United States is replete with homegrown racism, as organised labor has sought to increase white workers’ wages by driving African Americans out of the competitive workforce. Many early-20th-century union initiatives, including working-hour restrictions, minimum wages, and collectively codified seniority privileges for existing workers allowed organisers to cartelise white labor against wage competition from African Americans and immigrants. The mostly white union sector benefited from artificially higher pay under these measures, whereas blacks found themselves excluded from employment entirely."~ Phil Magness, from his article 'The 1619 Project's Confusion on Capitalism'
“It’s impossible to understand early twentieth-century progressives without eugenics. Even worker-friendly reforms like the minimum wage were part of a racial hygiene agenda… The minimum wage, in addition to providing some workers with a better standard of living, would guard white men from competition.”~ Malcolm Harris from his article 'The Dark History of Liberal Reform', reviewing the book Illiberal Reformers: Race, Eugenics & American Economics in the Progressive Era
"Racist views were widespread in New Zealand [too] during the nineteenth century but it was in the Labour movement that these views received their fullest expression. The emotive appeal of nationalism, the social Darwinist vision of the battle of the races and feared economic competition fused in the Labour movement to produce a series of anti- Chinese campaigns. Racism in the Labour movement peaked in the early twentieth century when the White New Zealand policy was established. Regulations which discriminated against groups on a racial basis were a feature of trade unionism in New Zealand from its early beginnings and these policies were defended in this period with great vigour by Labour racists."~ G.R. Warburton, from his 1982 Masters thesis 'The Attitudes and Policies of the New Zealand Labour Movement toward Non-Union Immigration to New Zealand, 1878 - 1928' (p. 179)"The Auckland Labour MPs were spurred by the Grocers' Assistants and the Furniture Trade Union into sending a telegram to [then] Prime Minister [Massey] protesting that all this cheap [foreign] labour would lower living standards and probably lead to deterioration of the physical vigour of the race. M. J. Savage was particularly alarmist. The teeming millions of the East were less than a stone's throw away and New Zealand was faced by a rushing horde of Asiatics which it must try to stem both by laws of its own and by negotia- tions with Asian governments themselves. The Auckland Water-siders also recorded their fears for the living standards of the workers and their abhorrence of the 'piebald New Zealand' which now threatened..."~. P.S. O'Connor, citing Auckland Star reports from 1920, from his 1968 article 'Keeping New Zealand White, 1908-1920'
UPDATE:
The original verse ended:I asked a cove for shearin' once along the Marthaguy"We shear non-union here," says he. "I call it scab," says I
I looked along the shearin' floor before I turned to go
There were eight or ten non-union men a-shearin' in a row
There were eight or ten dashed Chinamen a-shearin' in a row"Pretty clear from the original, says Duncan, "what the union was about, at least in part."
* First published under the title 'The Bushman's Song in the Bulletin in 1892. This poem of Banjo Paterson's has grown a number of tunes in its time in the bush. Meredith collected three tunes in NSW, and two tunes are given in the Queensland Centenary Pocket Songbook while in his Big Book of Australian Folk Song Ron Edwards gives another two. This tune is the one most commonly sung today, and was collected separately by Geoff Wills and John Manifold. Manifold got it from Mr Hines of Donald, Victoria, it is in his Penguin Australian Song Book.
See also 'The Bushman's Song' in the Evening News 1870.
Thursday, 7 May 2020
Fortress New Zealand: Losers Picking Losers
Remember the Trekka?
Winston Peters does. David Parker does. Grant Robertson does. Or at least you'd think so, given their talk over recent weeks about how they're going to be "picking winners" to get New Zealand back off the economic canvas -- Peters to bring back the local manufacturing he likes; Parker to make his preferred picks get easier resource consents; Robertson to pick on whom he starts spraying helicopter cash.
Or perhaps they're still trying to forget the Trekka. And who wouldn't want to?
It was New Zealand's only production vehicle (if either word can be used in its full sense) -- a New Zealand body built over Soviet-era Skoda motor and running gear; a two-wheel-drive dog of a vehicle that only saw the light of day because of a loophole in the arcane maze of New Zealand's tariffs, subsidies, import-licensing and "picking winners" regime that throttled life down here the later-middle decades of the last century.
The thing was a dog. Intended for use on farms, its communist two-wheel drive system could barely perform on the road. So it looked best simply sitting on the lawn rusting into the weeds. Which was easy, because to save time money, the body was never painted on the inside, which meant they rusted from the inside out. And don't try cornering. Not at any speed. Perhaps the only good thing that can be said about it is that, even in wartime Vietnam (where five were sent) black-market thieves didn't even think it was worth stealing. So there's that.
This is the sort of local manufacturing that "flourished" here from the fifties to the seventies -- as we gradually made ourselves poorer. Selling here only because everything else we could buy was made so goddamn expensive, just to punish us for the temerity of buying offshore, that NZers would buy any damned thing because that's all that was available to buy. To "protect jobs." To "keep it local." To keep lack-lustre local manufacturing going back then, New Zealanders at the time were paying around 50% more for a car than they needed to because of tariffs (which is a tax on consumers) --- and that's if you had and were granted permission to use your precious "overseas funds." Meanwhile, those taxes were paying a subsidy to locals here to assemble junk like this of around 100%. (See figures below.)
Just so New Zealanders were able to put their ingenuity into producing shitty stuff reassembled from godawful overseas stuff that was so bad it wouldn't even be stolen in a war zone.
Lunacy.
Bring back local manufacturing, eh!
To paraphrase Don Boudreaux,
free traders oppose government using tariffs and subsidies to pick winners and losers for at least two reasons, neither of which Peters/Parker/Robertson grasps. First, economics offers solid theory – and history offers solid evidence – to show not that government cannot pick winners and losers (of course it can), but, instead, that government too often picks as winners losers, and as losers winners.
Second, Peters/Parker/Robertson seems unaware that when government prevents trade from destroying the jobs of some New Zealanders it thereby destroys the jobs of other New Zealanders For example, tariffs that protect New Zealanders steel workers destroy jobs for New Zealanders working in industries that export, that use steel as an input, and that are buoyed by foreign investments. (It’s a wonder that people such as Peters et al apparently never pause to ask ‘What do foreigners do with the dollars they earn by selling their exports to New Zealanders?’)
Unlike Peters/Parker/Robertson who apparently see only the jobs that protectionism saves, free traders see also the jobs – and the economic growth – that protectionism destroys.
PS: Here's some of those figures for you of just how much we were made to suffer back then from politicians who put together the tariffs and subsidy regime on the basis that they were "picking winners." (They come from a report to the incoming 1984 government put together by the late great Conrad Blyth et al.)
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