Saturday, 31 January 2015

2015 Greek Syriza struggle with criminal bankers same as 1936 New Zealand Labour Party.

Excerpts From Walter Nash by Keith Sinclair 1976
Index Of Most Relevant Credit Reform Reference-
Pg 125 - Were Nashs' conservative views influenced by central banker threats of economic sanction?
Pg 135/6/7 - Keeping the colony of New Zealand in its place.
Pg 157 - Public Credit used for state housing project.
Pg 169 - Hamilton makes reference to Newfoundland in 1933 becoming the first nation to be invaded by economic sanction.
Pg 170/1 We decide to not become the next Newfoundland!
Pg 172 - World War II saved us from the same fate as Newfoundland.
Pg 174 - The test of time has proven the Keith Sinclairs opinions of John A Lee to be very misguided.
Pg 180/1 - The blackmail begins, Nash protested against point 1 (4) that it was astonishing: 'You are taking charge of our country. Surely we have rights.'
..............This must have been one of the strongest threats used by a British minister against New Zealand.
Pg 186 - British media describes terms of loans as "Blackmailing." Attempt to use your own money backed by your own resources, you face the Central Bankers sanctions.
Pg 189 - How World War II saved New Zealand economy.
Pg 209 - Money can always be found for war, but not for peace.
Pg 226 - The economic cost of war.
Pg 235 - The physical cost of war.
Pg 241 - War over, victors meet at Bretton Woods to plan future of world. New Zealand appointed financial advisor from Bank Of England.
Pg 243 - New Zealand had deep suspicion of IMF. Time has proven them right as the benefits stated have turned out to be quite the opposite.
Pg 248 - New Zealand signs for its supposed independence in 1947
Pg 252 - Nash objects to policies suggested by America " it has the appearance of serving the expansionist aims of economic imperialisms."
Pg 272/3 - British financiers blackmailed New Zealand prior to the war, yet after the war we sell them discounted product and give up our trade advantage to assist the "Mother Country" out of its debt crisis.
Pg 288 - New Zealand economy saved by war again(Korean war wool boom) anyone in the world protesting the current international financial system labelled communist and National Party ram through draconian laws.
Pg 294 - 1954 Labour Party policy state to control banking and credit, to introduce Pay As You Earn tax system.
Pg 305 - Balance of Payment Crisis in every election year between 1946 - 57.
Pg 342 - Fight for Economic Nationalism and be labelled a Communist by the banking empire, nothing has changed today!
Pg 351 - 58,000 New Zealanders signed a petition against joining the IMF, were they wrong or were they right?

Pg 75
Although the local LRC had told him that in his electorate there was little interest in land policy could not resist expatiating on his favourite themes, land tenure and land transfers.
He explained the iniquities of insurance companies and the power wielded by banks. He covered in detail the history of the Bank of New Zealand, which Seddon had saved from liquidation in the 1890s. In 1925 Nash wrote a pamphlet on this subject, Financial Power in New Zealand. The Case for a State Bank, thought that a State Bank, with an agricultural credits department, was a first priority, so that the Associated Banks should not continue to exercise their politically irresponsible control of credit for the benefit of shareholders.

Pg 95 -The policy was explained in Holland's Address-in-Reply speech in September 1932, was published by the Clarté Book Shop as a pamphlet, The Way out of the Labyrinth. He said that currency reform alone could not end unemployment, but must play a part in a scheme of social and industrial reconstruction. He quoted Keynes and other economists to argue that increased purchasing power, not deflation, was what was needed. Though he thought the issue of bank notes, based on the volume of goods and services, could be increased, he was not advocating inflation, but state control of credit........ The main change in Labour policy was the emphasis on credit and banking. This was not altogether new. The party had since 1916 advocated setting up a state bank to reduce the cost of credit and--still an aim in 1931--to control the issue of bank notes. The historian of the Reserve Bank has pointed out the irrelevance of the latter aim in New Zealand, where bank notes were only a small part of credit. Nash had, however, come closer to the idea of a central bank in his pamphlet, Financial Power in New Zealand, in 1925, when he argued that it should control the level of credit in the community ...........Labour's new policy went much further in stressing public control of credit. Credit reform had now moved alongside a humanitarian welfare programme to form the twin centres of Labour policy. The socialists of 1913 had become an anti-bank party. Instead of attacking capitalism they were attacking, and intended to reform, its financial structure. And the aim was to cheapen and extend credit within the capitalist system.

Pg 97/8 -
Some of the phrases in the party's 1931 election manifest echo the note of Nash's --or Savage's--sentimental optimism, sounded even in 'the worst conditions: 'We have wonderful natural resources'. But the emphatic stress on credit, again, obviously derived from the credit reformers, such as the president of the party, H. G. R. Mason. asserted, 'The flow of credit ...has been blocked'; the Labour Party 'proposes to use the nation's credit for reconstruction purposes'; 'Credit is the first essential'. A central bank would be established to control credit resources. However, there was a credit antidote in the same bottle. The manifesto twice asserted that the necessary extra credit could be raised under existing banking laws. This enabled Labour speakers not enamoured of daring finance to proclaim, as Fraser did, that there would be no departure from sound finance, 'no rash inflation, no repudiation', equally, it permitted candidates to stress credit to their liking. In Wellington, on 4 November, Holland made an attempt to rival Ward's successful £70 million loan proposal of 1928 was not announcing party policy, and it seems that his political grip was weakening. The state would intervene to provide funds for development. Pending the setting up of a Reserve Bank, and under existing banking laws, Labour would raise £25 million in three years, partly by relaxing the laws regulating bank note issue, partly by 'employing methods somewhat similar to those adopted during the war'. He did not make it clear whether there was to be an internal loan or whether the government would borrow direct from the banks, but in either case credit would be increased.

PG 101 -
In 1930 B. C. Ashwin, of Treasury, had observed that New Zealand sterling funds, earned by exports, were being used for Australia's benefit-and 'unfairly to the people of this Dominion'. Most of the banks were 'foreign', both owned and directed, and there was much hostility to them. A Bank of England official, Sir Otto Niemeyer, who was invited to New Zealand to discuss its exchange problems, suggested that a central bank should be set up to regulate the monetary system. The need for such a bank had been discussed in the nineteen-twenties and its creation had been advocated by the Labour Party. The Coalition government did not, however, implement this recommendation until Coates became Minister of Finance in 1933. He then set up the Reserve Bank, extending its objective to a more general one, 'that the economic welfare of the Dominion may be promoted and maintained', response to these measures was mixed. It thought that the Reserve Bank should be state-owned and directed, not partly owned by private shareholders.

PG 103/4 -
'The popes are in retreat', Lee wrote to his wife; it was 'a complete victory for the free money advocates'; there would be 'some sore sad hearts for a few days', far as Savage was concerned, the soreness lasted to his death.
In a debate next day, though caucus had agreed that members could mention the loan proposal, Nash did not speak 'cut of consideration for the views of the other members'. Holland moved that bank credit should be used for industrial development, while Savage spoke of the need for peace credits, like those in war, formulation sufficiently vague to support the caucus majority, while sticking to his guns.
There was a widespread acceptance, except among the politically and economically most conservative, that what was needed to alleviate the depression were some inflationary measures to stimulate the economy. But in what form should the stimulus be administered? Coates had tried devaluation. Within the Labour Party there was a widening difference of opinion. Fraser and Nash agreed that there was need for expansion. The latter spoke of a shortage of 'spending power', they believed that inflationary measures should be carefully controlled. They could not swallow the Social Credit doctrine that there was a permanent shortage because of a congenital defect in the monetary system.
Nash was strongly opposed to extensive 'credit creation', fresh currency issues, and unrestrained inflation. He thought bank advances could be much extended--the banks' lending policies were very conservative. He inclined to think that much of the necessary credit could be obtained from local institutions such as the Post Office Savings Bank, State Advances, and the state insurance office. Basically he believed that economic development should be paid for mainly from taxation and loans, which should be raised locally and not overseas. He believed in balancing the budget, with which Holland agreed (although they favoured inflationary measures in other areas, such as guaranteed prices). On such points his views could be, and were, called conservative by the currency reformers, or by anyone who thought Social Credit was left wing. But he sometimes spoke in terms very like theirs. In 1934, for instance, he advocated the nationalization of all banks and said that credit must be controlled in the interests of the community as a whole.
Nash had a much clearer and more realistic conception of how the economy in practice worked than did his critics. 'Our income is conditioned by the return we get for the produce we send overseas', he said flatly to the 1934 Monetary Committee, was not the only factor, as he realized. Nevertheless, New Zealand was exceptionally dependent on exports of meat, dairy produce, and wool, almost all to the British market.............. In 1932 the Social Credit Movement held its first national meeting and set up a national organization to spread the gospel, rebuff and ridicule, its persistence ever since is significant in the context of New Zealand politics. It has offered plenty for nothing. It has been the country's Aladdin's Lamp, golden-egged goose, state lottery, and 'cargo cult'.
The Labour leaders were of course perfectly conscious of Social Credit's growing appeal. Mason wrote to the assistant secretary, Dave Wilson, in 1933 that the movement was going through Auckland like a plague. They would have to convince its adherents that Labour would give Shylock short shrift, too, stressed the need to placate or attract them, Labour Party member said that 'Douglasism' was an 'avalanche'. He thought Labour should add the word 'Social' to its credit policy statement. Creditors, with no political party of their own, pressed the Labour party from within and without. One of the Labour credit reformers, W. E. Barnard, wrote to James Thom in 1932 that five of the branches near Napier wanted Labour to adopt a Social Credit policy. When Douglas visited New Zealand in 1934 Barnard thought the party should welcome him, but the Executive rejected the idea, the leaders were as conciliatory as possible. Nash wrote to one devotee that Douglas had made 'a splendid contribution towards the reconstruction of our Monetary system', but he could not quite accept his proposed method of 'putting the matter in order'. 1933 a Social Creditor was allowed to address the Labour conference. 1932 Nash, Savage, and Jordan held a meeting with the members of the ( Social Credit) Auckland branch of the Farmers' Union. The chairman was Colonel S. J. E. Closey, leader of the Social Credit Movement. They passed resolutions on the need for public control of the financial system, and increased payments to farmers and workers and unemployed. loose, unofficial alliance was formed, which lasted until about 1936. This gave Labour an extra organization, with touring lecturers spreading a gospel rather like Labour's.

Pg 111
The 1935 election, which was one of the most exciting in the country's history, rivalled by those of 1890 and 1949, and one of the most momentous in its results, was held on 27 November. Excitement is difficult to recapture. The feeling arose from the depression: the depression was the issue. Such an election is the civil war of a democracy, no less decisive in its results for leaving the losers their heads.........Nash wrote two of the principal pieces of Labour propaganda. The main one was the election 'manifesto'. He sent the first draft to Joe Savage on 3 November: 'It's been a devil of a job writing it and you should watch out with Fraser and the others [on the Publicity Committee] that every word will help.' (The party had no paid ad-men, PR men, or other synthetic image-builders in those days: it had to roll its own publicity.) Although

Pg 112
Nash was the author, he thought it too long for a leaflet,
certainly the four large pages of dense prose were not easy reading, while contrasting favourably in this respect with more modern specimens of Labour electoral prose. Interested voters presumably contented themselves with the summaries in newspaper headings and in speeches.
The main points were guaranteed prices, a statutory minimum wage, a national health and superannuation scheme, and greater educational opportunities. State control of credit was stressed 'to control the flow of credit, the general price level, and the regulation of foreign exchange operations'. The Reserve Bank would be nationalized. Reciprocal trade agreements were to form the basis of guaranteed prices. Foreign policy would aim at promoting international cooperation and the League.
In Nash's mind the main points in the 'manifesto' were joined together in a coherent policy arising from the Christian and humanitarian doctrines he had believed in since he was a young man. The 'first charge'--still his favourite phrase--on the community was to be the care of the worker, the old, the young, the sick. A statutory minimum wage, increased child allowances, pensions for the needy, and a national health scheme would redistribute wealth so that everyone would be cared for. People who served would receive an equitable share of what was produced. He agreed with the credit reformers that the ills of society lay in maldistribution, not in production.

PG 123 XI Minister of Finance 1936
Nash's position, as Minister of Finance, was not easy--trapped between the election rhetoric of Savage, Lee, or Langstone and the judgement of moderate men, like himself, that the British, the voters, and the economy would only stand so much printing. Government by printing press was a relatively novel idea and such examples as came to mind were not encouraging. Savage had no firm grasp of economics beyond the need for higher wages and pensions. In any case, he was always willing to let his rhetorical heart rule his economic head to the benefit of his political position. More than once Nash had to make his actions conform, as comfortably as might be, to his leader's ill-considered pronouncements. ..............
Just after the election Savage announced that the government would restore wage cuts, expand pensions, guarantee farmers' prices, and revalue the currency. The English Economist commented that deflationary exchange..................

Nash reported on his plan to nationalize the Reserve Bank, which was closer to Members' hearts than the subtleties of exchange rates.............. The government's first legislation was the Reserve Bank Amendment Act. In moving the second reading of the bill on 3 April, Nash spoke of the

Pg 125controversy about whether a central bank should be free of political control. An Associated Banks' bulletin had spoken of the political bias unavoidable in nationalized banking. Nash argued that this impugned the integrity of every MP, and asked why 'so delicate a set of machinery' as the credit and currency machine could be run by private bankers, but not by the elected men who ran, for instance, the health and education systems of the community.
The state bought out the private shareholding of the bank. The sanctity of contracts, which Nash acknowledged, ensured that they received a good price. His aim was 'absolute control of our monetary system'. The Governor of the bank, Leslie Lefeaux, a stiff Englishman, who had been a senior officer of the Bank of England, and had been appointed on the recommendation of its Governor, Montagu Norman, believed that he had some degree of independence from government control. Nash now sought to define the bank's relationship to government: its function was 'to give effect as far as may be to the monetary policy of the Government as communicated to it from time to time by the Minister of Finance', this purpose, and to promote 'the economic and social welfare of New Zealand', the bank was to 'control credit and currency' and also all the overseas funds earned by exports. Nash did not, however, intend to introduce exchange controls at once: 'we have in general such confidence in the men who are worth while in the Dominion that we do not think they will take any money away....' He had been warned by a banker that 'Capital is a very "shy bird" and takes fright and flight very quickly', and had looked into the possibility of blocking transfers of funds through the purchase of Australian shares, but for the moment he was optimistic about business confidence in the government, government would use credit to enliven the economy, but neither too much nor too little.
Coates asked who was to decide on the dosage, cabinet, or the minister, or whether the views of the bank would be considered. Nash defended the principle of a coordination of state and private interests. But he was not heated. Lee thought that Nash's speech was too moderate, that he had a 'slight desire to play to the orthodox whom he can't win rather than to the revolutionary who would cheer', of course Nash was trying not to alarm business and banks more than necessary.
The government wanted to keep interest rates low. In September Nash told Lefeaux that he wanted to convert an internal loan and raise money for State Advances at 3¼ per cent. Lefeaux informed the Board that in his view the amounts needed could not be raised at that rate. Nash had appointed an old friend, a Dunedin cabinetmaker and city councillor, Mark Silverstone, to the Board. He wrote to Nash that, far from accepting the minister's direction, the Board was hostile and obstructionist and passed resolutions endorsing Lefeaux's views. Nash was about to go to London and Lefeaux argued that a failure to raise the money would weaken his negotia-

Pg 126
ting position there. Nash gave in to some extent. The State Advances Loan was made at 3¼ per cent but the conversion at 3½ per cent.
This caused strife in caucus, which did not like dictation by bankers. In the event Lefeaux's judgement proved sound. Treasury reported to Nash that the 3¼ per cent loan was a fiasco. But the episode was one which led Nash to determine to strengthen the government's control over the bank. Lefeaux believed that while government decided policy, the bank should decide how to implement it. As early as August, however, in instructing the bank to create credit of £5 million, Nash also specified how this was to be done.

PG 130
The third leg of Nash's financial policy was the State Advances Corporation Bill. State advances to settlers--in other words cheap loans to farmers --had been introduced by the Liberals in 1894. Savage had announced that he was taking over where Seddon left off in 1906. In this case Labour returned to somewhere near that position. The Coalition had replaced the old State Advances Office with a Mortgage Corporation with private shareholders. The state now bought these out. The directors were to administer the Corporation under the minister's direction. One of Nash's aims was to keep interest rates down. And he hoped that the Corporation would stimulate the building of houses, up to 5,000 a year. He hoped to stop the land-agents and land-grabbers from reaping the profits--and managed to get in a reference to 'usehold' as a desirable tenure for householders. The Corporation would also administer government loans to promote industries.

PG 134It is evident that Nash had given a great deal of thought to this whole subject. His vision of New Zealand, British Commonwealth, and world trade was, however, one very distasteful to the British government which was committed, though more notably in theory than in practice, to a return to freer trade, regulated by market forces. The United States government, .............

Pg 135
in the person of Cordell Hull, was at that time seeking to revive world trade by negotiating tariff reductions. In American or British leaders' eyes, Nash's dream of cooperation appeared liked a Nazi or Communist nightmare. ….............
When the depression began most governments heard the cry, sauve qui peut, and adopted various restrictive measures intended to protect their domestic economy, whatever happened to any other country. High tariffs, quotas, competitive devaluations, exchange controls, became the order of the day. There was a great drop in the volume of world trade. New Zealand, which had one of the lowest tariffs in the world, the highest volume of trade per person, and a minute local market, was singularly vulnerable and paralysingly dependent on Britain, which took almost all of its exports --almost all of which were products of the cow and the sheep.
Britain's response was to hope that the Empire trade might prove its salvation. In 1931 it introduced a protective tariff and, at the Ottawa conference, accepted the idea of imperial preference which the Dominions had been advocating for forty-five years and practising for thirty or so. At Ottawa--by a series of bilateral agreements--the Dominions gained exemption from the new British 10 per cent duty, while Britain retained and extended her preferential position in Dominion markets. Tariff protection against British manufactures was to be given only to Dominion industries 'reasonably assured of sound opportunities for success'. Even then, British producers were to be given 'full opportunities of reasonable competition'. This agreement, which was the basis of New Zealand's privileged access to the British market, was generally ignored by New Zealand advocates of currency reform and rapid industrialization. In regarding the Commonwealth as an economic unit, the agreement assumed some specialization in production in the different countries.
The next four years were stormy, for the Empire unit functioned imperfectly. The Dominions could not absorb all Britain's exports, so the British had to consider foreign points of view, such as those of Argentina, a chief rival of the Dominions. Moreover, the British government moved in various and sometimes mysterious ways to protect British farmers. First there was a threat that the British would impose quotas on Dominion and foreign supplies of meat. Then, in 1935, the British proposed to impose a levy on meat imports to subsidize home industry. As the chief supplier of sheep meat New Zealand would have had to pay the largest share of the subsidy. In 1935 the British government dropped this proposal temporarily--the levy would not be introduced for at least three years. The Dominions had to continue to regulate supplies to the British market instead. At the same time, the British government introduced subsidies on local milk and cheese.

Pg 136W. K. Hancock commented, in 1940, that since, counting invisible items, Britain had a favourable balance of payments with most Empire countries, it was naive to suppose that she would accept Nash's principle of balancing agreements, which would have slashed her export trade...... 9
Though they made speeches about the liberalization of trade, the British leaders had been as affected as anyone by what Hancock called 'the economics of siege'. ….....
Generations of British politicians and civil servants have left minutes and

Pg 137memoranda, now stored in the Public Record Office in London, about the visits of colonial politicians. Their frame of mind was usually that of weary, impatient schoolmasters; their tone tart and superior. It did not alter much if they were dealing with a rough ignoramus or someone much better read and articulate than most of themselves, a man like Alfred Deakin of Australia, for instance. Nash suffered from a treble disability: he represented a Dominion, a small one, and he was easily 'placed' in a hierarchical society --as a Midland shopkeeper. If he suffered from moving in higher and sniffler circles he did not show it; on the other hand, without being a sycophant, he enjoyed meeting and was impressed by the great. The fact that he had come at all was irritating to start with. The British government had informed the New Zealand, before he left, that it was not its policy to enter into balancing agreements, except in 'special circumstances' (that is, ones from which the practical gain to Britain outweighed the loss in principles), nor to give New Zealand different treatment from the rest of the Empire. The New Zealand reply had ignored British views. The Board of Trade thought the first task would be to persuade Mr Nash 'that we cannot re-cast our general trade policy to suit New Zealand's convenience'.
The British 'establishment's' attitude to the New Zealand government was hostile. It was also, in some very unsympathetic ways well, or at least directly, informed. Lefeaux apparently regarded himself as an agent of the imperial government and the Bank of England. Lord Balfour of Burleigh, a banker, visited the Dominion and after a conversation with Savage wrote that he was an 'honest idealist', willing to try anything to achieve his aims: 'His attitude suggests to me that of a small boy in a power station happily pulling one switch after another to see what happens. One day he may pull a switch which will fuse the whole of the works'. Only Fraser and Nash, of the ministers, at all impressed British visitors and officials.

Pg 156
The day after the election Fletcher wrote offering to assist the government with housing. He was invited to Wellington to talk with the three leading ministers and he drew up some plans for building houses in numbers and quickly. The government--particularly Nash--wanted to buy Fletcher's organization, as the basis for a government department of housing construction, and to appoint Fletcher as its director. (In the same way, the government did purchase the plant, premises, and stock-in-trade of Picot Brothers, the largest wholesale dealers in primary produce for the local market, as a beginning for an internal marketing organization for dairy produce, bacon, eggs, and honey.)
At first Fletcher would not agree, and various other suggestions were considered, including his own proposal to build all the houses at a fixed net profit per house. 12But in 1937 and up until the end of 1938 Fletcher gave serious consideration to the proposal. He informed Nash that he had valued the total assets and stocks of his firm (at £130,000) and put forward proposals that he should become Director in Charge of a State Building Construction Department. The negotiations again came to nothing. Fletcher did, however, build a very high proportion of the state houses, though not without difficulties, for at the same time he was advising the government and public servants on the whole programme, which led to suspicion among the latter that his advice was in his interests as contractor.
Fletcher discovered that, with rising wages and import prices, costs were increasing rapidly. He found he was going to lose money on every house, for no escalation clause had been included in his first contract. In order to keep the project moving the government guaranteed at the Bank of New Zealand a £200,000 overdraft for one of his firms. Fletcher was widely criticized for making a fortune out of state housing, but he said then and later that it was his least profitable undertaking.
It was recognized by the government that, without Fletcher's experienced advice, and the new skills of his organization, state housing would have taken much longer to organize. Nash and the Under-Secretary in charge of housing, John A. Lee, both acknowledged this debt. Fletcher became a very big businessman by New Zealand standards, but his restless energies were not all self-seeking. He had large ideas, and a genuine interest in state housing. During World War II he became Commissioner of Defence Construction.
Fletcher's cooperation was very important to the government. The ministers knew little about building and less about organizing and administering a large scale enterprise like state housing. Indeed, none of their large projects, guaranteed prices, welfare, or housing, had been planned in detail or costed. In opposition they had no research staff. This makes their achievements the more remarkable: the distance between dream and action was so great.
The other two people most responsible for state housing were Lee and

Pg 157
Arthur Tyndall, an engineer, who was Under-Secretary for Mines, whose appointment was recommended by Fletcher, tackled his task with energy equal to Fletcher's. By February 1936 he had written a very long report on overseas public housing and New Zealand's housing problems. He also wrote a report on defence. Sir Alister McIntosh, who assisted him, has remarked how few New Zealand ministers have been capable of writing their own reports........
One important influence Lee had was to insist that Reserve Bank credit--£5 million was initially approved--should finance the scheme. Nash sent him details of Manchester housing. Fletcher, in England in 1937, looked into brick-making plant. Everyone worked with enthusiasm. By September 1937 Savage and Semple and Lee and Nash helped a tram conductor, Mr David McGregor, and his wife to move into the first state house, in Miramar, in Wellington.

Lee was by no means the sole source of the friction which intensified in caucus from 1936 to 1940 but he was, in personality, its focus; he pressed his opinions and rivalry furthest. In him the conflict was given dramatic form and literary expression in a series of pamphlets and books written over the years from 1938 to 1975.
Essentially the struggle was one by the credit reformers in the party to force their policies on the leaders. Two of them were in cabinet, Langstone and Mason. Outside were able men, like Lee and D. G. McMillan, a general practitioner just elected to parliament. There were a number of other credit reformers among the new MPs. In 1937 they came to form a fairly stable group of dissidents in caucus. Since one of their leaders was Lee, and their principal interest was credit, the government's financial policy and the Minister of Finance himself were usually in or near the centre of the battle.
In 1937 one new MP, Jack Lyon, twice moved that the Bank of New Zealand should be nationalized. This was a step dear to the heart of the credit reformers, who were repeatedly to return to the attack, but this time Lyon was fobbed off by Savage. Lee gave notice of motion that funds for local body loans and conversions, State Advances loans to settlers and workers 'wherever the security warrants', for new industries and for all capital (public) works should be provided by the Reserve Bank. This was at a time when, as Under-Secretary in charge of housing, he was complaining of rising costs and a shortage of skilled workers. He called cheap loans to local authorities 'Socialist funds for Socialist Local Bodies'. He also wished to lower or hold existing interest rates. Instead of borrowing money locally, as Nash was doing, he wished, in short, to find it at the Reserve Bank. This was in line with his view, expressed in a pamphlet in 1934, that 'Each penny of bank created credit is stolen from the community.' In his eyes Labour policy was to be based on credit creation. But in the eyes of Nash and Fraser, Reserve Bank loans were to be used as little as possible. Moreover, it was difficult to hold down interest rates while borrowing on the local market. This question had been fought in 1936, and a State Advances issue at 3¼ per cent had been a fiasco. B. C. Ashwin of the Treasury estimated, in April 1937, that some £20 million would have to be raised in loans--'In fact low interest rates and heavy borrowing are a contradiction in policy.'
Lee, too, was pushed off by Savage. The only point in his financial proposal to be voted on by caucus was the nationalization of the Bank of New Zealand. The voting was 14 to 14 and the motion was lost on the Prime Minister's casting vote.

Pg 169
In denouncing the increase of state controls, which was very marked under the Labour government, National had not struck a note which the public heard loudly. It has, indeed, rarely shown signs of fearing the state. Nor, in a period of rising prosperity, was there much response to Opposition denunciations of rising taxes. During the budget debate, Hamilton had pressed this line of attack, but, in fact, Nash had not increased income taxes in 1937 or 1938.
Hamilton had come nearer to finding the government's Achilles heel when, in the same debate, he referred to the declining overseas funds, and referred darkly to the fate of Newfoundland, which had borrowed and spent too freely, and finished up in 1933 in the hands of a receiver, in the form of a British Commission, losing its independence.

Pg 170
XIV The Exchange Crisis 1938-9
During the depression New Zealand built up in London a large reserve of sterling funds, not spent on imports because of a lack of effective demand among the poor and the hungry. These overseas assets totalled sterling £38 million in December 1935. They drained away, especially in 1936. Then, between 30 April and 30 November 1938, they declined from £28.6 million to less than £8 million. 1these funds, which paid for imports, had been regarded as a key indicator of the state of the economy, and had long been its unacknowledged regulator, was a dangerous situation.
For most of 1938 the government turned a blind eye towards the London balances. Savage and Nash denied that there was a flight of capital or that the sale of foreign exchange was restricted, and attributed contrary assertions to a lack of patriotism and a desire to damage the country's credit. But that was being damaged by figures, not words.
Even before the election there was great public unease about money. The country was swept by rumours that the deposits in the Post Office Savings Bank were not safe. An officer of a trading bank wrote to Nash in November that they were trying to reassure their clients and telling them to leave their money in the Savings Bank. There were heavy withdrawals. Similar fears encouraged a flight of capital abroad.
The transfer of these funds abroad, for instance by purchasing Australian shares, had attracted Nash's attention in 1936. Probably this movement was a result of people having left funds in New Zealand to benefit from Savage's promised revaluation, and transferring them when it did not eventuate.
An economist of the time estimated that the 'panic' export of private funds accounted for more than half the loss of reserves in 1938. Whether he was correct it is not possible to say, there certainly was a large-scale transfer of funds. Bankers and others wrote to Nash about the requests for capital transfers and the unpatriotic actions of some of the meat companies, for instance, who were selling their funds to the highest bidders.
The 'flight of frightened capital' did not alone explain the economic crisis. There had been considerable over-importing--import costs exceeded export receipts by over £3 million in 1938. But, as Nash explained, New

Pg 171Zealand needed about a £12 million surplus to service public debts and make other payments. The increase in imports had been largely generated by the government's expansionist policies: for instance the public works programme created a demand for machinery. It was not possible (as the credit reformers supposed) to divorce internal from external expenditure.
To conservatives, like Lefeaux of the Reserve Bank, the situation was quite clear: the country was not living within its income, a situation which could not continue indefinitely. The government must refrain from inflationary measures, reduce expenditure to match income. traditional response to a drop in reserves was for banks to call up overdrafts, the government to introduce 'cuts', reducing demand and producing unemployment. This, Nash explained to an importers' conference in January 1939, the government had declined to do or to, accept. Instead, it decided to 'meet our commitments; maintain our living standards' and reduce imports by introducing exchange controls and import selection.
There can be no doubt that this measure, not taken until December 1938, was belated. 1937 Nash had been collecting information on the Danish system of controls. He had told caucus in November 1937 that exchange controls would be introduced, had told the British in 1936-7 that this would be done. He was well aware that funds were being transferred abroad through 1938. He claimed that the situation did not become serious until November, but one reason for the crisis was the lack of earlier restraints.
Why had the government not acted? There were several reasons, of which one was probably decisive. Nash had seen exchange controls primarily as a consequence of a bilateral trade agreement with Britain. He lost interest when his mission to London failed. The British strongly opposed the introduction of such controls. They would probably result in a breach of the Ottawa agreement, which had promised British exporters the opportunity for reasonable competition with domestic producers on the New Zealand market. Regulation or selection might involve an effective prohibition of certain British exports. Lefeaux was extremely hostile to exchange controls, and argued against them on many grounds, faithfully acting as the mouthpiece of British authority. Cannot be said that Nash yielded to imperial views but he could not ignore them; he had to give them due weight. For one thing, a large London loan conversion had to be arranged in 1939.
Probably the main reason why nothing was done for so long was that it was election year. To admit that there was a crisis, to introduce exchange or import restrictions, would have been an admission of failure and a powerful stimulus to the Opposition. Mark Silverstone, Nash's agent on the Reserve Bank directorate, had written to him on 1 June, 'I can see serious trouble coming', but he did not think Nash should act before the election. That he postponed action for this reason cannot be proven, but

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is very convincing. Certainly that was what John A. Lee thought. 
The introduction of Social Security had been postponed to win votes; exchange controls so as not to lose them.
Nash was frank in explaining the controls as due to the need to conserve funds. Savage pretended that they were introduced to 'insulate' the Dominion from unfair overseas competition and to encourage industrial development. This explanation was pressed by W. B. Sutch. Allan Fisher wrote to Nash, 'Sutch tells me that it is a mistake to suppose that pressure on London funds is the complete explanation and that control is intended to be a weapon of genuine socialist reconstruction with "selective importing" as the key-note. (A ribald enquirer might ask, selective by whom? by Sutch? which would no doubt be unfair).'
Some Labour MPs, like D. G. McMillan and Lee, as well as Sutch, had for some time seen import controls as the key to industrial growth. However, they were not introduced as part of a large economic strategy, but in an atmosphere of emergency. Ashwin of Treasury and Wood of Customs advised that it was impossible to reduce imports to the extent required to balance receipts and payments--some £10 million to £12 million--without cutting industrial raw materials and other essential items, endangering employment and living standards. Other measures such as taxation, local borrowing, and a reduction of public works would be needed; a large rise in local costs and prices must somehow be avoided.
The months from November 1938 to late 1939 were politically among the most anxious and tense in Nash's political life. He had met the fate of all but the luckiest of New Zealand Ministers of Finance. In a small democracy with a dependent economy, in which the voters expect glittering promises, the Treasury was the most vulnerable position where able men and wizards of finance, like Julius Vogel, Harry Atkinson, J. G. Ward, and Gordon Coates, trying to make the ends of promises and economics meet, had fallen. To some extent Nash was lucky. He was saved, not by the whistle, but the war.
While he was trying to cope with the internal crisis, and soon with its consequences in London, he was also at the centre of the biggest storm the Labour Party has ever experienced. His financial policies were under fire from almost every direction at once, but undoubtedly the party criticism was the most wearing.
The first caucus after the election, on 3 and 4 November, was the occasion of a very unpleasant dispute. Nash outlined the financial problem. McMillan and Anderton moved that a caucus committee, including four credit reformers and three of the leading ministers, be set up to investigate the financial crisis and report back. It was scarcely the time for committees. McMillan withdrew his motion, apparently after a heated debate, when Fraser and Nash moved that cabinet should consider exchange controls, embargoes, or tariffs, in that order of preference. If the former were feasible,

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cabinet would impose them without reference to caucus; if not, there would be another meeting.
The government had not adopted the dissidents' policies. They were now trying to seize the power to implement them. Already two credit reformers were in cabinet. They wanted a stronger representation. In May 1936 Dr McMillan, a new MP, had moved that in future all cabinet ministers should be elected. Savage had ruled the motion out of order on the grounds that it was the present system, which was quite untrue. The issue had smouldered for two and a half years; now they were trying again. Lee now moved, at the meeting in November 1938, that cabinet should be elected by a preferential vote of all caucus members. According to him, Savage threatened to resign. There was an emotional debate, and the motion was carried by 26 to 22. Savage said that he would not feel bound by the resolution, and would refer the issue to the annual conference, was not unreasonable, since the method by which cabinet was chosen was as much a matter for the party as for caucus. In the event, however, six members of the central executive attended the next caucus, in early February, to submit the executive's own proposals for selecting cabinet. A joint caucus-executive committee then drew up rules which were accepted. The leader was to be elected by caucus in the year of each general election, and could nominate his own cabinet, but its members had to be approved by a caucus vote. If any names were not approved, members could recommend others to the leader. He would then select those he wanted from among the nominations. These names, too, had to be approved by caucus. It was an unwieldy attempt to combine leadership with democracy.

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In December Lee, Nash's Under-Secretary, launched a powerful attack on Nash himself. He wrote a long letter to members of the Labour caucus. Apparently W. J. Lyon, an Auckland MP and one of the leading Labour credit reformers, intentionally or not, began to circulate it. It was soon published, possibly by National supporters, as a pamphlet, A Letter which every New Zealander should read. 
The 'Lee Letter' denounced Nash as a conservative blocking the introduction of radical Labour reforms. It publicized caucus disputes over pensions and said that Nash's was 'the greatest opposition to the present Social Security Scheme'. But principally it attacked his financial policy. Nash had adopted a 'god-like attitude' and was persisting with financial orthodoxy against party policy. He was denounced for not introducing exchange controls earlier, and for not being more daring in his recourse to Reserve Bank credit. Lee wrote, 'We took over the Reserve Bank to free Labour development from capitalist debt', and asserted that they should have used its credit to wipe out most of the public debt. How London investors could be induced to accept a New Zealand credit issue was not perhaps clear. Lee suggested that loans should have been refunded at a much lower interest rate. He always objected to paying interest to private investors to provide for national development. He ridiculed 'the inflation bogey'. He advocated further credit expansion--at a time when New Zealand was suffering acutely from over-importing because of internal inflation. Thus the cure for New Zealand's post-election hangover was to be more of the stimulus that caused it. Someone wrote to Nash that Lee had seen a man walk steadily after three whiskies and refused to believe that a whole bottle might have a different effect. The 1939 conference condemned Lee's action in issuing the letter as a breach of party loyalty and discipline and passed a vote of confidence in Nash and in his financial policy. But Lee continued as Under-Secretary--sharpening up his pen.
Caucus pressure was one factor which led the government to introduce exchange and import controls, but not the principal factor. Given the delay in acting before the election, even if the government had been willing to adopt deflationary measures, some kind of exchange controls or quotas had become essential.
One of the government's main difficulties was that, to deal with its extensive policies, it had very limited resources of administrative skills and other expertise, whether among the ministers or in the public service. It had promised much, and could not deal with everything at once, as caucus seemed to ask. For instance industrial development had long been a plank in policy, one now especially desirable, to get men off public works into more productive enterprises.

Pg 179….....Apart from rare loans to Dominions, lending abroad had almost ceased--80 per cent of a new Australian issue was left to the underwriters. He told Nash it was impossible for the British government to lend money for New Zealand's defence. Neither a government loan nor a public issue was possible for the £10 million loan Nash wanted. He should concentrate on dealing with the £17 million conversion. But he seemed to Phillips to have no programme but wait and see. Phillips, Inskip, and Norman, Nash got the impression that some funds might be offered for defence, but nothing more until the New Zealand government provided for the redemption of the maturing loan. Norman, suggested that a proportion of New Zealand's export receipts should be set aside for this purpose.
Nash began to receive conflicting or contrary advice from different authorities, which was confusing, but at least showed that the 'establishment' was not single-minded, which must have been encouraging. Kershaw of the Bank told him that it might be possible to get a loan for defence, but the conversion loan could not be considered until late that year. Inskip told him he should deal with the conversion first.
It must have been a disconcerting experience to find himself regarded in England much as he regarded John A. Lee in New Zealand. Kershaw lectured him on the iniquities of Reserve Bank credit and excessive public works. While giving him little comfort, more responsible people realized that something would have to be done. New Zealand was discussed in cabinet on 21 June, said that New Zealanders were beginning to contrast Britain's willingness to give loans and credits to the Romanians, and recently to the Poles, Turks, and Greeks, with her attitude to the Dominion, a contrast which was not escaping notice in the Press said that Nash should not leave without some help. Another point was that Nash was in touch with the Labour Opposition. Lord Halifax, the Foreign Secretary, said that they were 'living in what was virtually a state of concealed war' so that financial aid to the Romanians or Turks was really military, not commercial. There was an Export Credits Guarantee Department, which assisted British exports by underwriting private commercial credits to foreign importers, and could guarantee New Zealand's payments. Oliver Stanley said, in this connection, that he doubted whether New Zealand would welcome a grant of an export credit 'under a scheme which implied that she was not credit-worthy'. The Prime Minister, Chamberlain, said that this point would be met if Stanley consulted with Inskip, Simon, and Halifax in deciding on the exact amount of the increased figure for non-commercial guarantees which parliament should be invited to sanction. Stanley had presented a memorandum suggesting non-commercial guarantees of up to £10 million should be raised. The Prime Minister had now directed that New Zealand should be helped. Cabinet agreed.
After a chilly beginning, in which most of the British with whom Nash

Pg 180talked offered (in the words of the Treasury brief for ministers), 'little or nothing', negotiations now entered a second phase in which the British set the most arduous terms for assistance.The Board of Trade was under strong pressure from businessmen. The New Zealand High Commissioner's office had been suggesting that manufacturers should take advantage of the import regulations by setting up branch factories in New Zealand. This idea, that British industry should export itself instead of its products, was Nash's main idea about how New Zealand could industrialize. He was at the time negotiating with tobacco and tyre firms. It was a way of getting the capital and know-how at once. The Federation of British Industries protested strongly about this and even more at an offer that New Zealand would lift embargoes on imports from firms willing to leave the payment in New Zealand. The Federation said this was 'vicious' and called on the government to revise Ottawa. New Zealand was not merely to pay a stiff price, but to be taught a lesson.On 22 June Montagu Norman suggested to Nash that he accept a short-term loan of £16 million repayable at £4 million per year, and made a specific charge on New Zealand's export receipts, strongly objected to accepting what was called 'a bond with a charge', for it would be a public indication of distrust of New Zealand's credit. He said he could not recommend his government to accept unless some arrangement could be made to pay for imports and defence. Next day Inskip committed the British government to cover New Zealand's defence needs through the Export Credits Guarantee Department. Zealand had almost always converted its London loans when they fell due. Norman's demand was unprecedented and onerous. It was doubtful if New Zealand could pay £4 million annually. Nash protested vigorously against the 'specific charge' at a meeting with the British ministers on 29 June, but Simon said the terms were necessary in Norman's opinion, if the loan were to attract investors. The ministers were also adamant that they would not lend direct to the New Zealand government for import payments and that the Export Credits Guarantee Department must endorse bills covering individual contracts and provide the money only when a payment fell due: 'This was the procedure applied in the case of Russia, Romania and other countries'. In the afternoon R. S. Hudson, the Parliamentary Under-Secretary of State for Overseas Trade, was even tougher. He presented Nash with a set of demands:1.The New Zealand Government to declare
1. that present import control scheme is temporary and will be abandoned as soon as financially possible;
2. that uneconomic industries will not be set up, nor will existing industries be extended to manufacture goods which cannot be made economically in New Zealand;
3. that protection, whether by quota or duty, will not be afforded to New Zealand industry in conflict with Ottawa commitments;
4. that some undertaking should be given with regard to the granting of monopoly of manufacture to individual concerns or to existing manufacturers to the detriment of other interests in export, import and manufacturing.

Pg 1812. The New Zealand Government to agree to take into consultation representatives of the appropriate United Kingdom trade association whenever a proposal is under consideration for establishment or extension of New Zealand manufacturing.
Nash protested against point 1 (4) that it was astonishing: 'You are taking charge of our country. Surely we have rights.' Hudson replied, 'yes, and we have too.' Hudson said 'You have broken your promise given at Ottawa'. Nash also protested at the idea of consulting British businessmen on New Zealand industrialization. He said it was futile--no manufacturer would advise the exclusion of his own trade.
Hudson threatened to apply a 'Clearing and Payments Agreement', a procedure whereby a proportion of New Zealand's export receipts defined by the British Government would be paid into a special account and earmarked for the payment of British exports to New Zealand specified by the British government. Despite its dislike of bilateralism, Hudson said, Britain had been forced to negotiate such agreements with Germany and Italy, specifying what goods they would take. Nash said Britain already set a limit to New Zealand's exports to her markets. He did not see what right she had to control New Zealand's imports.
This must have been one of the strongest threats used by a British minister against New Zealand. Nash cabled to Savage that they might agree to give assurances about 'non-economic' industries (and he and the British had discussed what they might be) and to consultation with the British on new industries, but that they should not agree to the annual 'specific charge' surely a new form of the 'first charge' to him.
Nash's and New Zealand's cup of humiliation was not yet full. On 5 July Norman laid down his terms. The only consolation he offered was that in two years it might be possible to borrow long term to replace the commitments he now suggested. There would be a five-year £16 million loan. Every month £266,666 13s. 4d. from New Zealand's export receipts (£3.2 million per year) was to be placed in a special account. The Bank of England would publicly announce monthly the receipt of these payments --the 'specific charge'! The Reserve Bank was to give 'irrevocable instructions' to the Bank of England authorizing it to draw any deficit in monthly instalments from the Reserve Bank's account in London, then departed to Basle for a week to a meeting of gnomes and bankers.
Savage replied that Hudson's suggestion of a Clearing House procedure was 'intolerable'. Norman's demand that the Bank of England would announce monthly that New Zealand had paid up was 'unnecessary and humiliating'.

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Savage underlined the harshness of the terms by reporting that if anything like £4 million had to be repaid in 1940, after repaying the £2.5 million lent by the trading banks, interest on government and local body loans and other remittances, only £35.8 million would be left for imports, assuming that export receipts were about £55 million, as in 1939. This would mean a huge reduction of £19 million in imports, in comparison with the cut of about £8 million to £10 million which the government intended. It would disorganize the economy and cause much unemployment.........

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The ten days had been very wearing by most people's standards. The British took the view that the three loans were linked, as well as being dependent on certain assurances. Consequently negotiations were very involved. The £5 million for defence orders placed in Great Britain was now secure, but the British ministers would not fix a total for commercial credits for New Zealand importers, wishing to leave this to the Export Credits Advisory Council. Nash asked for £10 million and on 7 July the Chairman of the Council agreed to £2 million. Nash said that this was 'no use to him at all'. He then cancelled his passage home. There were more meetings at which he demanded £8 million (Savage cabled that at least £5 million was needed). A meeting on 11 July Inskip said that £2 million 'was the limit tonight; it will be the same tomorrow morning or tomorrow afternoon or next week.' Indicated that he would compromise at £5 million. Next day the Chairman of the Council, Inskip, Simon, and Stanley decided to offer £4 million, which Nash promptly accepted.
At the same time Nash was engaged in long discussions, involving many cables and telephone calls to Wellington, on the assurances which New Zealand might give to the British government and manufacturers about import controls and New Zealand industries. There was much discussion about what an 'uneconomic' industry was. The British ministers defended their manufacturers vigorously. Oliver Stanley opposed 'monopolies' in New Zealand, protected by import prohibitions, but he added 'that if the license is to be confined to one "we want our people to have the chance to be that one".' In reference to pressure from manufacturers, he said to Nash, 'we're both politicians and have our difficulties'.
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..........referring to a 'monopoly'. Eventually London agreed to Wellington's suggestion that the paragraph should refer to industries which 'required some measure of restriction of import in order to operate efficiently'. In the eyes of the British negotiators, this gave a 'wider assurance' than they had asked for. On 12 July, Oliver Stanley and Nash signed a memorandum. Though much watered-down, it was still a humiliating document, which was presently published. In part it read:
2. United Kingdom Ministers recognise that in the circumstances that existed in New Zealand last December, and still exist, some effective measure for reducing total imports into New Zealand below their recent abnormally high levels was, and is, inevitable, and they do not raise objection in principle to the method which the New Zealand Government have adopted though they are conscious of the difficulties it has caused in individual cases. Mr. Nash has undertaken that the New Zealand Government will examine and do their best to meet the representations by United Kingdom industries with regard to such cases. United Kingdom Ministers welcome this assurance. They appreciate also the fact, which was confirmed by Mr. Nash, that the New Zealand Government's intention is to administer the policy as favourably as possible in relation to United Kingdom interests. They informed Mr. Nash, however, that they were apprehensive as to the permanent effects on the United Kingdom export trade of a policy designed to meet a temporary difficulty in New Zealand.
Nash acknowledged that the scale of import restrictions was abnormal. New Zealand would aim at a relaxation to encourage expanding trade with Britain,
4. Mr. Nash assured United Kingdom Ministers that it was not the intention of the New Zealand Government to employ the import licensing policy in order to give protection to New Zealand industry against imports of United Kingdom goods on a scale which prevented full opportunity of reasonable competition. He explained that difficulties arose in cases where the New Zealand Government had already incurred obligations by taking action to encourage the establishment of industries which, in the opinion of his Government, required some measure of restriction of import in order to operate efficiently. He undertook to investigate the matter fully on his return to New Zealand, and gave an assurance that, pending this investigation of the position, such protection would not be extended to other industries.
5. He also agreed on behalf of the New Zealand Government that their policy of licensing imports would not be used to foster uneconomic industries, and that, in order to assist them in determining what goods could be economically produced in New Zealand, they would invite the views of the United Kingdom industries concerned and would take such views into account in reaching a decision.
6. In cases where it is proposed to grant a limited number of licences to manufacture particular kinds of goods, the New Zealand Government would give United Kingdom interests the opportunity to put forward, should they so desire, proposals for undertaking such manufacture.
Nash's troubles were not yet over. On 11 July Norman returned from
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Basle and met Nash, who had now booked a passage on the Queen Mary on the 13th. Norman spoke to him as though to an erring schoolboy. Nash's transcript of the opening of this conversation went as follows:
MR. NORMAN at the outset said that two things were perfectly clear: (1) We cannot finish this if Mr. Nash is leaving tomorrow (2) Unless you have agreement with your friends in Whitehall--the Board of Trade and Sir Thomas Inskip--there will be no arrangement. 'We must all stand together'. He enquired whether Mr. Nash was going away?
MR. NASH: Those are my present plans.
MR. NORMAN: From the beginning I have felt you did not want to improve your credit position.
MR. NASH queried this.
MR. NORMAN: 'You have been up and down talking figures that damage your credit. If you had set out to destroy your position you could not have done it better.' He referred further to the difficulties of making arrangements. 'Nobody can know what they can do a week hence: you have only to look at the map of Europe'.
MR. NASH said they were agreed that the money to repay the 16 millions should be met half-yearly; that arrangements should be made for the Bank of England to draw from Reserve Bank of New Zealand's funds if necessary. There should be no special charge on exports.
MR. NORMAN: What if the money were not there or if the Reserve Bank account were withdrawn from the Bank of England
MR. NASH: We would give an undertaking that the funds would be there. He was prepared to recommend legislation to set up an Overseas Debt Redemption Fund.
MR. NASH repeated that the proposed announcements that moneys were being paid on due date by New Zealand were objectionable. 'It is like the declaration of a bankrupt's dividend'.
MR. NORMAN: I won't say you're bankrupt but you have no credit. Further discussion whether the giving of priority on a new redemption loan would infringe the security of existing loans.
MR. NORMAN: We still want some charge on the 'funds arising from the sale of primary products outside the Dominion'.
MR. NASH: We are prepared to pay from our own Government funds.
MR. NORMAN could not say this evening whether a phrase on those lines would meet requirements. He mentioned that Mr. Nash was seeing the Dominions Secretary at 9 p.m. (9.30 p.m. was the hour), and repeated 'We all stand together'. 'You settle with all before you settle with any.'
Instead of a 'first charge' on New Zealand exports, Nash offered to give an undertaking to repay from government funds. Norman replied that 'an irrevocable undertaking to supply from a fund that may or may not exist cannot be very reassuring.' He insisted that a New Zealand government promise to repay must be backed by an order-in-council or an act of parliament. An order-in-council was objectionable enough, and the New Zealand Solicitor-General advised that it would amount to no more than a solemn declaration. Nash protested that the prospectus of a loan was in itself a binding contract. But the government had to comply. On these terms
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............the bank dropped its demand for monthly repayments and for a 'specific charge'. Even so, the loan of £16 million had to be repaid in five annual instalments. Some British newspapers thought the terms impossibly onerous; indeed blackmailing.
There followed what Nash called an 'annoying delay' by the bank. So far the 'establishment' had twisted Nash's arm, meaning to impel him towards wiser, in other words more orthodox courses, more in Britain's interests. Now Norman intervened decisively to help him, just as, almost certainly unknown to Nash, Chamberlain had done. It would not do to go too far in publicly punishing an erring Dominion, or quasi-colony. It was difficult to induce brokers and financial houses to assist with the loan. Machtig wrote to Batterbee, 'It is a testimony to the depth to which New Zealand's credit had fallen in the City that it took the Governor of the Bank nearly a week before he could secure the necessary support for floating the proposed loan, and even then, we are told, he had to "ram it down the bankers' throats".' What Norman did was to force the six banks operating in New Zealand to take up some £6 million. The Bank of England underwrote the rest. His biographer, Sir Henry Clay, wrote: One territory incensed the issuing bankers, which had always met its needs, by talking about re-funding sinking funds and by pursuing a policy of domestic inflation which made it very unlikely that it would be able to meet its external debt service. When its Finance Minister arrived in London with very large maturities to re-fund, he found his former friends all disinclined to lend him anything. Norman sympathised with the issuing bankers; but he could not let an Empire Government face default. For a week he kept bankers and Ministers in conference, putting the case of each to the other and extracting concessions from both, until agreement to float the re-funding issue was--with a large undisclosed subscription from the Bank--agreed. The Adviser who had assisted him remarked as they left the last meeting, 'I do not know how even you stand a strain like this last week's'. 'I could not have done, ten years ago', the Governor replied.
Norman also assisted by arranging that the underwriting commission and other expenses would be below normal. The loan was floated at the very low rate of 3½ per cent and only some £3.5 million was applied for in cash or conversions. £12.5 million was left with the banks. The Times was 'helpful' in encouraging a good atmosphere for the loan.
Nash at last got away on the Queen Mary's next crossing on 2 August. In exceedingly difficult circumstances he had done fairly well. He had got most of the money he wanted. Beneath his courtesy he was exceedingly stubborn. Not as aggressive as Fraser, he was very hard to throw off balance; he kept cool. He was a good negotiator. Although there was a press campaign against New Zealand's finances, personally he had a good Press. He was very attentive in listening to the complaints of manufacturers. His praise of his government's achievements impressed Labour listeners.
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......... If Norman called during the crisis, it must have been on the 12th or 13th of July, at the time of the interview just quoted. Nash was then booked on the Queen Mary and uncertain whether to leave, as he told Mrs Nash and Savage, while Norman was urging him to stay on. It was after this that Norman pressed the banks to assist New Zealand Though these events were, not surprisingly, a little scrambled in his memory when Nash was an old man, there is no reason to doubt that something of the sort happened. Norman did help Nash very considerably--had he gone home without a loan his political prestige would have suffered severely. What impressed Nash most, however, was that Norman had called on him, a borrower. Just after he left England, Mr H. V. Hodson, the editor of Round Table, a journal which tried to be objective about British Commonwealth affairs, wrote to him:
I find it difficult to comment on the arrangements that you succeeded in making here. I imagine they will be regarded by many people in New Zealand as more onerous than might have been expected, and that ill-will towards a Labour Government on the part of the City of London may be blamed a good deal, as it has been in the past. There must inevitably be suspicion on. the part of investors of money towards a reformist régime but it is my view that this motive has been, in the last resort, much less important in placing obstacles in the path of your obtaining the finance you want than the sheer lack of investing power of Great Britain today. We have neither the necessary margin on our balance of payments nor the necessary margin between savings and investment at home. Indeed, I think we may be in for a substantial measure of inflation on the latter score within a short space of time--a development likely to be not unfavourable to the economy of New Zealand. When there is really little or no money to lend, the political excuses for not lending it always seem to be decisive.
While crossing the Pacific in the Mariposa, after crossing the USA, Nash replied:
The London negotiations were conducted in very mixed atmospheres. Some splendid friends whom it is good to remember, others whom it is well to forget.
Once fears in the financial and investing world have been created it is difficult
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to remove them. Stressing of advisability or necessity only extends the fear of the Trustee or ordinary investor--and the more publicity that was given to the question--the more difficult to obtain rational thought and reasoned procedure.
Whilst recognizing the extent of the accommodation provided and without commenting on terms or other conditions I regret personally that the opportunity was not seized to be completely generous in every way--with party politics--and class prejudices completely set aside.
Such an opportunity to tie up the goodwill of New Zealand whatever its form of Government may not occur again.
We can manage but with many difficulties that could have been avoided and replaced by memories of generous thought and treatment that would never have been forgotten.
However the United Kingdom has its difficulties and whatever New Zealand can do in its small way to help the Old Country will be done--even though the cost may be heavy.
One of Nash's reactions to the events in England was that his dislike of overseas borrowing was greatly reinforced. In a cable to Savage from London he referred to 'the menace of overseas debt and redemptions'. This had been an attitude very common in the Labour Party during the depression, as among the earlier Liberals during the depression of the eighteen-eighties. When export receipts fell, or import expenditure rose too high, the interest on and redemption of overseas loans was a heavy burden which left the government exposed to the kind of pressures Nash had experienced..... Undoubtedly the events of mid- 1939--and much more, those of 1941-5 --pushed the New Zealand government towards independence, towards a lesser reliance on 'the Old Country'. The British ministers had not proposed to tax the Dominion, but they had certainly wanted to control its economic development--in their own interests: an attitude not much different from those of eighteenth-century mercantilists. Some people must have thought that Nash was getting his deserts, for profligate radical government, when he was being pushed around in London, in the hard, real world. But was this fair? In the light of later events one might see Chamberlain and Montagu Norman--the 'appeasers'--as living in an unreal world, trying to hold fast to economic and political views which most governments repudiated. (During World War II, the Americans suspected Norman of still being in touch with Schacht. One of Norman's biographers called him a 'sleep-walker', for he persisted in trusting the German authorities even into 1939.)
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On his way back to New Zealand Nash paid another official call of much greater long-term and symbolic significance than his time in London. He visited Washington, where he discussed trade with Sumner Welles..................
Nash enjoyed a little revenge on the British, which must have given him some quiet, ironical satisfaction. On 4 September the New Zealand government declared itself at war with Germany. On 5 September Nash came ashore from the Mariposa. On the same day the British government cabled that (according to arrangements finalized early in 1939) it was prepared to buy New Zealand's entire exportable surplus of meat. Next day they requested the entire exports of dairy produce. His 1936-7 search for a bulk sales agreement had been rewarded. And over the next few months sterling reserves built up with gratifying speed.
Pg 192
..............The proposed nationalization of the Reserve Bank aroused strong party political feeling. Fraser and Nash--and Savage--did not want to divide public opinion any further in war-time by pressing an issue as emotionally charged as the nationalization of trading banks. It could be thought that, in seeing an overriding need for national unity, they were as patriotic as the professed or super patriots like Lee and Barnard, who wrote pamphlets such as I Fight for New Zealand and The Speech of a New Zealander.
When the question of nationalizing all the banks first came up in caucus, at the September meeting, Fraser and Nash raised it. The credit reformers, except on one occasion, pressed to nationalize the Bank of New Zealand alone. This would not have been difficult, for it was a New Zealand bank. Indeed, the government already controlled its policies in a broad sense, both through the Reserve Bank and because it appointed a majority of its directors. To nationalize the other banks would be more difficult. Several had their main business in Australia. All were directed from Australia or Britain. Most of their shareholders did not live in New Zealand. A caucus committee reported that it would be difficult to legislate banks out of existence, but recommended that the Bank of New Zealand, once nationalized, 'might' be given power to purchase the New Zealand assets of its rivals.
Lee and the dissidents regarded themselves as a left wing fighting orthodox, conservative ministers, but it is difficult to see the dispute in this light. A socialist would have regarded bank nationalization as part of a programme of state ownership of the means of production and distribution --as well as of exchange. But neither the government nor its critics had such a programme. The dissidents' aim was not socialism but cheap credit. Lee believed that a trading bank should be taken over to make credit available for industry. In the eighteen-eighties the State Bank League had similarly wished to get cheap credit for farmers. But why Lee thought that to nationalize the Bank of New Zealand was the best way of providing cheaper credit was and is not obvious. The nationalization of one bank, though the largest, would not have threatened capitalism, but to the credit reformers it was an emotional symbol--one moreover, with which exsocialists could identify. Nash himself had written his pamphlet attacking the bank in 1925.
In October McMillan returned to the attack. He and W. T. Anderton moved in caucus that the shareholders of the trading banks should be compelled to sell their shares or New Zealand assets to the Reserve Bank.
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British fleet would arrive. Although the British authorities already realized that a fleet might not arrive, the British Chiefs of Staff had sent a quite misleading paper asserting that if Japan attacked a fleet would be sent whatever the situation in Europe. When Air Marshal Sir Arthur Longmore returned to Britain he told the Chiefs of Staff that it had been embarrassing --the British delegation did not want to encourage doubts about the fleet, yet did not want to discourage New Zealand defence preparations by suggesting that all was well. In the event they were less than frank.
The British now said it might take up to ninety days for a fleet to arrive and twenty more for supply convoys. Bernard Ashwin of Treasury expressed doubts whether Singapore could hold out that long. He noted that the Japanese had experience of coastal landings in China. There might be a 'gap' between the time Singapore could hold out and the fleet arrive. Longmore complained that Berendsen and Nash were firing broadsides at the British. Nash was very pressing and sceptical about how long the fleet would take if Germany and Italy were at war too. Major-General P. J. Mackesy said it might be three months--but fortresses could hold out much longer than expected. Nash asked, 'What do we do then to defend Australia and New Zealand when Singapore is gone and the fleet that comes after is smashed up?' Longmore said, 'I think the answer to that is to take to the Waitomo Caves.' Nash retorted, 'The only place that we can see anything that is glowing.' 17
One could not call Nash or Fraser or Savage New Zealand nationalists, as Lee was. New Zealand stood between colony and nation; they were leaders entirely appropriate at this stage. They thought much, justifiably, and on the whole wisely, about imperial relations, whether trade or defence or political. But events were pushing the southern Dominion towards national independence. Neither an Australian-born Prime Minister nor his Scottish deputy were likely to kow-tow to the English. If Nash had nostalgic yearnings, his experience in 1939 pushed him strongly towards antipodean and 'Kiwi' rather than Anglo-Saxon attitudes.
When declaring war, Savage said of Britain his famous words, 'Where she goes we go, where she stands we stand'. He did not know for certain that the British had gone, even if it seemed unlikely that they were coming. The overwhelming majority of New Zealanders accepted his sentiment, whether for the love of the motherland or hatred of murderous dictators. By September the government had reversed its attitudes and offered an expeditionary force. Plans were discussed by Fraser with other Commonwealth ministers in London late in the year. He was more abrupt than Nash--and often had to curb his sarcastic or satirical tongue..................
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.................... Nash had become less prominent as number two than as number three. He had been closer to Savage than Fraser was. Perhaps in wartime all but the number one have to submerge their personalities for the common good. But there was another relevant factor. The government's problems had changed. The great legislation was past; the problems of 1940 and 1941 were not those of the legislator but of the politician, such as relations with pressure groups, and with the Opposition party and with other governments. These problems were, in a concentrated form, the sort of problems at which Fraser excelled. As a creative legislator Nash was his equal; in matters of political tactics no one in New Zealand was his equal. He had the kind of flair, instant reflex, instinct almost, which marks the born politician.
In the absence of his chief, the loyal lieutenant did very well. He did not make any terrible mistakes. He was already, in lesser degree, used to coping with the innumerable diverse problems which crowd in on a prime minister's attention. Fraser and he discussed, by cable, the appointment of a new Chief of the General Staff. Both of them had, as Nash cabled, 'bias towards New Zealander for post'. Edward Puttick was appointed. The Governor-General, Sir Cyril Newall, was reluctant to sign a government recommendation remitting a sentence of flogging on four prisoners in Mt Eden gaol. He wanted the government to announce legislation abolishing flogging. Nash was reluctant to acquiesce in his not accepting advice, but was half inclined to agree to his terms if the government did oppose flogging. Fraser cabled back that cabinet should on no account accept the Governor-General's refusal to act on ministerial advice. However, he too, hesitated. Perhaps they should not press the point. With an election pending, their decision might be misunderstood. On this occasion--probably the last on which a New Zealand Governor-General did not act on ministerial advice--the cabinet gave in. Rex Mason, the Attorney General, announced that flogging would be abolished; the Governor-General then signed.
One problem Nash could not solve was the refusal of the medical profession to accept the proposed medical service. In 1941 Nordmeyer replaced H. T. Armstrong as Minister of Health and began to harry the doctors. They were offered a 15s. capitation fee per patient, plus a mileage allowance, but this was acceptable to few. In desperation Nash and Nordmeyer took up the idea, several times suggested by the profession, of a fee for each treatment a doctor gave to a patient. They met BMA representatives in late August and Nash said 'we will pretty well have to agree to anything to achieve cooperation'. The doctors, however, refused the fee-for-service. The government went ahead and introduced legislation introducing a 5s. fee for each service. The doctors organized protest meetings and published advertisements saying that the people's health was in danger.
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.........Nash's main job in 1939-41 was to tune up the war economy. This meant that, as in peacetime, as Minister of Finance he had a say in most important decisions. New Zealand had not been prepared for war. There had been a small measure of rearmament; the territorial army had been enlarged; but the shortage of overseas funds had kept imports for defence purposes to a minimum. There had been negligible planning about the use of manpower before the war. Ironically, the over-importing which produced the exchange crisis proved a godsend. In particular, heavy earth-moving equipment brought in for Bob Semple's public works proved invaluable for defence works. Similarly the introduction of exchange controls and import licensing, not notably skilful in 1938-9, proved useful practice for wartime controls and planning.
It had long been observed, especially by credit reformers, that there was always plenty of money for wars. Once again, the question for Nash was, where is the money coming from? In his budget speeches in 1940 and 1941, in a speech published as a pamphlet in 1940, Nash replies to the Critics, in his speech to the Stabilization Conference in 1940, Nash had turned his face sternly against inflationary credit issues. The government's policy for financing the national effort 'on the war front and the "home front",' he said in his 1940 financial statement, 'may be concisely stated as tax to the economic limit for war purposes and borrow for essential productive works and for any balance of war requirements'. In addressing the Stabilization Conference he refurbished his sturdy old favourite phrase and told them that the 'first call' on their resources and energies was now the war.
Tax to the limit: he meant it. It was at this time that he began to earn a reputation as a rapacious taxer. In 1940 he introduced new gift and death duties and a war tax, the national security tax, of 1s. in the £1. The aggregate income, social security, and national security taxes rose to a level that had not been known before. In 1915 a single taxpayer earning £500
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......New Zealand's importance as a food-producing country--and especially of the desirability 'that a large proportion of the foodstuffs shipped to Europe and elsewhere for relief purposes should be milk products, because these are the most nutritive, and can be most easily assimilated by peoples whose stomachs have been weakened by long periods of deprivation'. He said that much trade after the war might be commodity exchange--but he had thought of the idea that the rich states might buy food from New Zealand to give to the poor nations.
One of Nash's constant themes in 1942-3 was the need for the creation of a United Nations Council, a peace council to parallel the great War Councils. He wanted an immediate meeting of the United Nations (that is, at that time, of the Allies against Germany, Italy, and Japan). Roosevelt had spoken in 1941 of the 'four freedoms'. He and Churchill had issued the Atlantic Charter later that year. What was now needed was a meeting of the 'forty-three free nations' to define their aims more precisely and fully, and to translate those aims into terms of specific domestic and international policies. Moreover, initial decisions about the future organization of the world must be made in public and not in secret conclave. He repeatedly urged in speeches that a World Reconstruction and Developmental Council should be set up at once.
Many people were very moved by his talk. In November 1942 Bill Parry, a simple soul, wrote from Wellington, 'Your advocacy Walter, of the international Council to give an interpretation to the Atlantic Charter is an inspiration....' He added that Tim Armstrong, who had just died, had been 'enthused' too. 'Tim said Walter is not going to have our cause fooled this time, he is going to insist upon the world being given to understand what it really means'. 63
But what did the Atlantic Charter mean? The right to national selfdetermination, the right of all people to improved labour standards, economic advancement, and social security, for instance, looked differently to British or Americans. Nash pressed his views on this question on Roosevelt, both at private meetings and at the Pacific War Council.
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...............Nash was home for the party conference and for the budget. In 1942 it had been presented by Fraser and enormously increased taxes. Though Nash was able to present this year's budget, economic matters were no longer in his control. Fraser had announced a comprehensive stabilization policy, to control prices, wages, and costs, in December 1942. Stabilization and war finance were the dominant economic themes of the time, and Nash summarized these in his financial statement. So far the war had cost £229 millions--which made his £17 million conversion of 1939 seem a tiny problem.
The budget provided extensive increases in pensions for disabled ex servicemen, for war and other widows, and in child allowances. Payments to hospitals were also increased. The cost of social security increased to £17 million. 4
Nash stayed on in New Zealand for the 1943 general election. He spoke to nineteen meetings in three weeks. The credit reformers tried to make a comeback. John A. Lee's breakaway party, Democratic Soldier Labour, advocated a 'new credit system', especially for industrial development. He and Barnard ridiculed Fraser and Nash as financial conservatives.
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Nash's main job in London was to discuss the Dominion's manpower problems. New Zealand had over-extended itself. It was trying to maintain an army division in the Middle East, and then Italy, and another in the Pacific, plus large numbers of men in the navy and air force. By September 1942 there were 153,600 men and 3,400 women in the armed forces. The man were nearly a third of the male labour force.
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Although New Zealand had an obvious interest in the regulated expansion of world trade, international monetary stability, and above all in cooperative measures to cope with balance of payments deficits, the Bretton Woods meeting also held a potential threat. Fraser wrote to Nash in January 1944 that 'there exists a grave danger for New Zealand' in the preliminary talks between London and Washington on post-war policy. He feared that Great Britain might accept the idea of export subsidies, which the USA might want to keep to help its farmers, while being 'inclined to surrender on questions of quantitative restriction of imports, bulk purchase, state trading and imperial preference'. He thought 'it would be a poor reward for our country's immense war effort to be threatened in any way with industrial disaster at the hands of our friends.'
The threat was real, for import licensing and exchange controls, such as New Zealand's, were two of the measures restrictive of trade which the Americans, led by Cordell Hull, and the British wished to eliminate.
The Americans and British had to make concessions to the Russians during the preliminary discussions in London. Nash cabled Fraser from there in March that the trend of thought favoured either private trading or state trading with government monopolies. It was not clear whether there would be room for New Zealand's mixed trading system.
Before the conference began the Australian and New Zealand governments conferred about their policies during discussions on international economic collaboration. They agreed that the main over-all aim was full employment. This objective was a legacy of the depression which was, at least in New Zealand, to dominate Labour thought for many years. The two countries wanted to induce others to pursue domestic policies aimed at the same target. They wanted international economic cooperation after the war. But--Fraser cabled to Nash--they wanted the right to retain government control of imports and exports where necessary in the national interests.
The Bretton Woods conference of forty-four states met to discuss the draft Agreement drawn up during the preliminary discussions. Nash led the New Zealand delegates. He was accompanied by B. C. Ashwin, Secretary to the Treasury, E. C. Fussell of the Reserve Bank, Bruce Turner, and A. G. B. Fisher. The latter had been brought over from Chatham House in London as an 'expert', to the FAO conference. Cox and Campbell had him attached to the New Zealand delegation to the UNRRA conference. When Nash was in London he found that Fisher and Campbell did an excellent job during the preliminary IMF discussions. He now had Fisher appointed a temporary Counsellor to the New Zealand legation. Fisher's understanding of international finance was outstanding. Turner was to become the senior UN financial official. With their economists' knowledge of trade and finance and Nash's politician's knowledge and experience, it was a good team.
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Apart from the main Commissions, the one on the IMF chaired by Harry Dexter White, Assistant to the Secretary of the Treasury, and the one on the International Bank chaired by Lord Keynes, there were three committees. Nash was elected Chairman of the Committee on Nominations (to the various commissions and committees). During the conference he was also elected a member of a committee which fixed 'quota' allocations.
Each member of the Fund was allotted a 'quota', which determined its subscription and drawing rights. Both in Committee and in full Commission Nash pressed for a higher quota for New Zealand. He did not get his way, but thought nevertheless, since the establishment of the Fund was of such broad international importance, that New Zealand should join. The Russian request for a much higher quota was approved, and Nash was impressed with what he took to be the USSR's whole-hearted support for the Fund. Nash spoke on various other matters. For instance, he strongly but unsuccessfully protested against the requirement that members of the Fund pay a small service charge on borrowings. He thought this would discourage the use of the Fund. But his main concern was that the Agreement provided that members would not impose restrictions on the making of payments and transfers for current international transactions except during a transition period after joining, or temporarily against currencies which the IMF had declared 'scarce'.
He cabled the Acting Prime Minister and Minister of External Affairs ( Dan Sullivan, while Fraser was abroad too, from April to July).
While the intention of this provision is not to interfere with a member's system of exchange control so long as the member is not blocking payments which it owes (i.e. for current imports) I felt that it was unsatisfactory in its present form because it is liable to lead to misunderstanding on the part of the public. I endeavoured to have embodied in the clause a specific statement that reference to restrictions was in no way directed at the control of exchange in its entirety to enable commitments for approved imports and other approved transactions to be met promptly and fully. But the most I could get was an assurance from the Chairmen of the Commission (concurred in by members of the Commission) that there was nothing in the clause as it stands which in any way conflicts with exchange control. Under the present draft we can maintain our import licensing and exchange control procedure subject only to our ensuring that all exchange required for current transactions is made available.
According to the notes he made at this time, he had asked the chairman, Harry D. White, whether exchange controls were permissible, provided that exchange was used to pay for all current transactions. White replied that this was his understanding, and he asked the meeting if there was any dissent. There was none.
Within New Zealand there was much suspicion and hostility to the IMF. Nash was warned not in any way to intimate publicly that if he signed the final Act he was committed to recommending it to his government; nor was
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New Zealand committed to adopting it. Sullivan and Fraser both stated that there would be no commitments until the government and parliament had considered the matter.
Nash felt strongly that New Zealand should join the Fund. Before he left he wrote to Harry D. White, 'it can easily be the greatest step in World History with possibilities of removing one of the major causes of war--if not the major cause.' He was not blind to the possible menace to his beloved import and exchange controls. There would be some restrictions on New Zealand. For instance, a member of the IMF could not permit exchange rates to fluctuate greatly without permission. But any international system of payments would involve submitting to rules. As usual, Nash placed international benefits to the fore. But, like A. G. B. Fisher, he was also quite aware of the great help the Fund might offer in coping with balance of payments problems like that in 1939.
Nash had by now been succeeded as Minister to Washington by Carl Berendsen. His colleagues wanted him back in time for the 1944 budget. This gave him a very tight schedule. However, Admiral Ernest J. King arranged for a plane to fly Mrs Nash and himself back home. They left New York by plane on 20 July and San Francisco on 22 July. They landed at Honolulu, Canton Island and Fiji, where Nash received 'budget material' flown up from New Zealand. The flight across the Pacific to Auckland took 33 hours 3 minutes. By 26 July he was in Wellington for the opening of parliament.
While Fraser and Nash were away the credit-men had been playing up in caucus. On Langstone's motion a caucus committee had considered nationalizing the Bank of New Zealand. It resolved unanimously that this should be done though so frightened was caucus of Fraser that it approved the committee's views only as a recommendation to the Prime Minister.
Although Nash had opposed this step in war-time and had said that the banks were doing a good job, this time both he and the Prime Minister had to submit to the majority. They remained entirely--and justifiably-sceptical. Since the government already appointed a majority of the bank's directors and controlled its actions in various ways through the Reserve Bank, and since the other banks were to be left in private ownership, it was not clear what benefits would flow to the public from nationalization.
However, Fraser and Nash could console themselves with the thought that it might be possible to unite the party over an issue which had long divided it. At the 1943 party conference Nash had strongly resisted the demand for nationalization and had been supported by the majority. Now, at the 1944 conference, he seconded H. E. Combs's motion to create a state trading bank. His arguments were luke-warm but he said that, although it would not bring all the advantages people hoped for, it was in the best interests of the country that the proposal should receive unanimous support
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.............. Nevertheless, the New Zealand government, led by an Englishman and a Scot, was markedly more Commonwealth-minded than the other Commonwealth governments. There was certainly no invariable and necessary connection between British birth and British imperial patriotism. And in Nash's case it might have been expected that his unhappy experiences in 1939 would have outweighed love of country. But his reaction was different. He always tried to look charitably upon the actions of those who opposed him. The behaviour of the upper class rulers of 1939 did not altogether dismay him; he bore no resentment; the sins of Oliver Stanley were not visited on Churchill or Attlee. It should be added that New Zealand was moving in the same direction as the others, but more slowly. In 1947 New Zealand adopted the Statute of Westminster which made it in all legal respects a fully independent state. In 1946 the government began discreetly to drop using the expression 'Dominion of New Zealand', the word Dominion being scarcely appropriate to the new post-war Commonwealth.
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............. The New Zealand amendment provided that states which maintained 'an effective system of complete control' of foreign trade by methods other than a complete state monopoly, should receive the recognition accorded to eastern Europe. Such states were to use all their overseas receipts for debt repayments and imports...........
Only eighteen states were represented at Geneva. On this and other related amendments Nash received support from the Chileans and Czechs --Jan Masaryk being not yet defenestrated in Prague. Australia, New Zealand, Cuba, and Chile pressed hard for more protection for the underdeveloped countries. A Cuban delegate later said that his country was 'one of the other bad boys' who dared to raise their voice against their elder brothers...........
Leicester Webb, a journalist and political scientist who had become Director of Stabilization, replaced Nash on the delegation. The Americans now opened up with some heavy traditional artillery. They moved an amendment directly attacking the New Zealand amendment. One American delegate said that the New Zealand amendment would destroy the structure of the Charter and--horror of free trade horrors--make it possible to protect all domestic industries.
Clair Wilcox said that the New Zealand amendment was 'a sanctification of autarchy, an incitement to economic warfare.' Leicester Webb said in conference that Wilcox had 'descended upon us in wrath rather like an angel of the Lord'. 72
Webb spoke more briefly and boldly than Nash, but without the conciliatory gestures desirable in view of other New Zealand objectives, not immediately at stake. Nash, however, was clear enough when speaking to Webb or Johnsen. One American amendment implied more or less free entry for investors. Nash cabled from Wellington to the delegation:
There can be no question of admitting equality of investment opportunity and certainly no question of concessions to foreign capital which will be permitted to exploit New Zealand resources only in circumstances and under conditions conforming faithfully to our economic and social policies.
The whole of the proposed American amendment is a threat to the economic and political sovereignty of countries which might be penetrated by the capital of creditor nations. Moreover read in the light of Charter's insistence on M.F.N. [Most Favoured Nation: that is, that any tariff advantage given to one state must be given to all members] ... and proscription of quantitative regulation it has the appearance of serving the expansionist aims of economic imperialisms. New Zealand could not in any circumstances subscribe to an article of such substance.
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................It was fashionable in leftist and credit reform circles after the war to talk of the government as extreme right wing. But it had made some moves, not all willingly, to refurbish its image in radical or credit reform eyes. The 1946 election manifesto promised the nationalization of the coal mines-which some owners in any case wanted. In 1945 the child allowance had been increased to 10s. a week. At that time this was a significant addition to the income of families. Another such measure was the nationalization of the Bank of New Zealand which pleased socialists and credit reformers...............
Nash's own publicity, such as a leaflet, The Hutt Electorate, placed the main emphasis on these fears. The voters were told that the choice was between 'the jungle economics of unrestricted competition advocated by the Nationalists with its inevitable accompaniment of booms, slumps, insecurity and poverty' and prosperity with Labour. 'Only under Labour's economic and social philosophy is there any security against future unemployment.'
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............... New Zealand's principal trade policy was a form of aid to Britain. For many years New Zealand sold its dairy produce to Britain at well below ruling world prices. This was the case even though Britain was paying New Zealand 'lump sums' to compensate for the fact that the terms of trade had moved against New Zealand, because she had successfully held local inflation firmly in check. 24
While he was in London in 1946 Nash renegotiated the bulk sales agreement with Great Britain. New Zealand continued voluntarily to sell her produce at below world rates. In 1947, for instance, the British were paying 242s. per cwt. f.o.b. for Danish butter and only 175s. for New Zealand (before the war the advantage of Danish butter had been only 15s. or 16s.). It could reasonably be argued that the world afforded no comparable market for New Zealand dairy produce--but New Zealand did not try to develop other markets. The agreement with Britain allowed for 2½ per cent of New Zealand production to go to other markets, but this provision was not used. Australian butter, by contrast, was being sent to Asian markets.
During and after the war, as a result of import shortages, New Zealand built up massive reserves of sterling. The banks' overseas assets increased from £7 million in early 1939 to £114 million in February 1947. This was the highest level in New Zealand history. Nash had learnt one thing very clearly in 1939--he never wished to find himself at the mercy of the British moneylenders again. Much of the 'lump sum payments', and other overseas assets were, as has been noted, used to redeem London debts. The overseas debt was reduced during the war by £45 million. Nash could reasonably feel that New Zealand's economic strength had never been greater--and this at the end of a major war. When in 1948 Nash revalued the New Zealand £ (which had been devalued in 1933 to NZ £125 = sterling £100) to parity with sterling, he explained this to the public in terms of help for Britain. Labour had never liked the devaluation, intended to help farmers with higher export receipts. It seems likely that Nash and his colleagues had an emotional commitment to parity--a deep feeling, as B. C. Ashwin said, that a 'pound is a pound is a pound'.
Nash's principal advisers opposed revaluation. Ashwin wrote that New Zealand would lose £20 million annually in export earnings and also lose the protection afforded to New Zealand industry by the existing exchange rate. The Department of Industries and Commerce and E. C. Fussell of the Reserve Bank were also opposed.
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After the war Britain suffered from a severe US dollar shortage. Even when Britain achieved an overall balance of payments. there was a dollar shortage. The sterling countries pooled their dollars, but still there were not enough. In 1947 Attlee asked Fraser if New Zealand could help in various ways. These included not importing more than current export earnings-thus keeping up the sterling balances; reducing petrol consumption; not ordering supplies from dollar sources even if they were available earlier than those from the sterling area; and, as before, restricting dollar expenditure in general. New Zealand agreed.
Another government policy was to continue food rationing in New Zealand so as to maximize exports to Britain. All these policies meant the continuation of controls and shortages. The public was growing weary of them--and of stabilization. These had been accepted in wartime; but voluntary peacetime restrictions were another matter. E. C. Fussell wrote to Nash in 1948 that importers believed that import limitation was 'more to suit the New Zealand Government's wishes than to help 'Britain'. Such attitudes were very common. Nash was winning support abroad but not at home. In July 1949, after he had attended a meeting of Commonwealth Finance Ministers, at which Britain's dollar crisis (which soon led to the devaluation of sterling) was discussed, Stafford Cripps wrote thanking Nash for 'all your helpfulness during our meetings and for that ready friendship which you always radiate'.
Resentment against restrictions and controls and shortages was grist for the National Party's propaganda mill. It was easy to say that this was state control, socialism. Nash's and the government's liking for central control made the accusation credible. The resentment was a major determinant of the 1949 election.
Another respect in which the outside world dominated the situation in
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the election. The Press, as right-wing and capitalist as any in a Communist's dream, equated Labour with Communist. When Ben Roberts, the former Labour Minister of Agriculture, wrote to Nash about the election results. Nash began to write a reply. 'The Communist bogey proved terrifying to thousands, yet it was (in the light of circumstances in New Zealand [where only a tiny minority voted Communist]) so childish that I could not persuade myself that it would terrify grown up men & women'--he stopped at that point, and did not complete the letter, but wrote another four months later.
Possibly Labour's defeat was not entirely due to National aggression. Some of the Labour pamphlets stressed the danger of a depression--which was not very real to most people during the great Korean war wool boom. Labour voters stayed home in droves. There was a very low turn-out. National won another four seats, tightening its grip. Nash was indomitable: alone among Labour MPs he gained an increased majority. He was one of the few remaining Labour leaders who was still a national figure, not to be brushed aside by abuse, however repetitive.
In May 1951 a British newspaper had reported that New Zealand was in the grip of a Communist-inspired reign of terror. Its season of hysteria was not yet over. After the election the government introduced two repressive pieces of legislation. One, to deal with spying, was the Official Secrets Act, which passed without debate except that Nash asked for an assurance that anyone accused could have a jury trial. The other legislation was the Police Offences Amendment Bill, which dealt with sedition and subversion. This time the government had gone too far. There was very widespread protest in the Press, from churchmen and others. The sight of a government which spoke so much about the rule of law and of extending individual freedom--as Holland did during the 1951 election--curtailing individual liberties was hard to stomach. Some of the most illiberal features of the Bill were dropped, but as passed it was bad enough. Like the emergency regulations, the new legislation placed a heavy burden of proof on the accused. In addition summary trial without a jury was introduced.
The government alleged that the strike had been secretly fomented by Communists. The aim, it appeared, was to limit New Zealand's war effort, an assertion for which the evidence appeared to be some anonymous waterside workers' strike pamphlets. The election, the ministers said, had given them a mandate to deal with the Communists. In introducing the Bill the Attorney-General, T. C. Webb, stressed the need to guard the right of the individual to 'legitimate' freedom of speech. Nash attacked strongly. He recalled his conviction in 1921, and described it in detail. This involved him running a gauntlet of National interjections. Holland asked if it were wise to bring the subject up. Nash said the same thing could happen under this legislation. It involved a censorship of literature, of opinion. He quoted the journal Round Table that democracy must fight anti-democratic
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Labour came out in the 1954 election with a fist-full of promises. The child allowance would be raised to 15s. a week. The government would make available 3 per cent loans for housing. Effective steps were promised to make the state the sole authority for the issue of credit and currency. This was an attempt to keep creditites in the Labour fold, for the Social Credit Political League was now putting up its own candidates. In July Nash had forced the pace by announcing that if elected, Labour would introduce PAYE income taxation. The government then said that PAYE was bound to come. Labour announced during the election that the first £100 of taxation due in 1956 on income earned in the previous year would be cancelled (so that no one would be paying two years' tax at once).
Labour tried to make it a 'cost-of-living' election. Nash always stressed that whereas National had promised in 1949 to 'make the £ go further', it now cost 28s. to buy what a £ would buy in 1949. But, at least to start with, the contest between the main parties aroused little interest. Both Nash and Holland commented on this. By contrast, Social Credit meetings had a revivalist atmosphere.
The lack of fervour reflected the fact that Labour and National had politically drawn closer together so that a failure to tell one from the other was excusable. There were differences between them over policy and in the kinds of voters who supported them. But there was nothing comparable to the ideological gap between the parties in the nineteen-twenties or even the nineteen-thirties. This was obvious to almost everyone except, it seemed, the politicians. They continued to assert that Labour would oppress private enterprise or that National would oppress the unions.
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.............They did not look likely to set anything on fire. Though Nash and Nordmeyer had once been thought very left wing, none of them had that reputation now. They had lost the wild money-men of 1935, so that the ex-credit reformers and ex-socialists in their ranks looked pallid in comparison with their predecessors. They did not intend to set anything alight--they had no great schemes like those of 1935. Labour had become an alternative administration, differing from National in support and in emphasis. In the cabinet photographs they looked a respectable lot. The historian J. C. Beaglehole remarked that Nash, 'at the age of 76, looked the only young man among them. The impression of eternal youth--or rather eternal splendid maturity--was illusory....'
The responsibilities, as opposed to the joys of power, descended upon Nash with unwelcome speed. Reality asserted itself over euphoria in the nightmare guise that Nash knew so well: another balance of payments crisis.
There had been balance of payments problems in each election year since 1946. That meant that the government had permitted an importing spree in election years--or, in other words, that the public demanded more goodies than exports would pay for while politicians were unwilling to act the stem guardian of the public purse just before elections. 1957 was no exception. A day or two after the election, the economist J. B. Condliffe, an old friend, who was acting as economic consultant to the Reserve Bank, came to Nash with a sorry tale. The Bank had been recommending credit restrictions since August. While the Governor of the Bank, E. C. Fussell, was ill and his deputy, Gilbert Wilson, not very active, Condliffe and the economic staff discovered in early October that the worst balance of payments crisis since 1938 was threatening. Condliffe was forbidden to tell Nash. The Minister of Finance, Jack Watts, was told of the situation, by Wilson, it seems, in October. Fussell wrote to him on 6 November, that urgent action was needed. The government declined to act so near to and during an election campaign.
Only now, after the election but before Labour took office on 12 December, did Condliffe publicly refer to the crisis in a talk to Rotary. The threatening situation had not, however, gone quite unnoticed. In mid-
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November F. P. Walsh, President of the Federation of Labour, accused the Prime Minister of studiously avoiding any reference to the country's economic crisis, the over-spending of overseas funds. Holyoake replied that ruin was not just round the comer but that the national finances would require careful handling. The Press commented on the very low overseas reserves, when figures were published later in the month. But at least one newspaper, and also a cabinet minister, Tom Shand, used the signs of a crisis as a stick to beat Labour with. Shand said that there was a clear warning against expensive election promises. The Evening Post warned that 'Labour's reckless bid for office' should not be accepted at the expense of 'financial stability'. Labour said very little because an admission of crisis would make its promises look hollow.
The episode was eloquent testimony to the ostrich-like propensities of a prosperous democracy in an election year. The government could more or less conceal, the Opposition and public ignore, approaching unpleasant economic sand-storms. Meanwhile the situation deteriorated.
On the day Labour took office, E. L. Greensmith sent a Treasury report to Arnold Nordmeyer. Export prices had fallen sharply while import payments were running at some £4 million a month above the 1956 level. To ministers who had been so very promising his advice was bitterly unpalatable. To restore equilibrium, private imports must be reduced by £30 million. (The estimated total for 1957, before reduction, was £260 million.) This was a task painful, and difficult, though not impossible, without unemployment resulting from shortages of imported raw materials for industries. As a consequence, it would be essential to reduce purchasing power to the same extent: extra taxation and a reduction in government expenditure were essential.
How could the government fulfil its promises while decreasing expenditure and increasing taxes? At a meeting of the Cabinet Committee on Economic Policy on 20 December, chaired by Nordmeyer and attended by Skinner, Holloway, and Boord, as well as Greensmith, Fussell, Sutch, and others, the question was asked in Nash's absence. Nordmeyer said that New Zealand must live within its income so that overseas borrowing should not be thought of at present. The Committee agreed that comprehensive import controls would be the most effective way of dealing with the problem. ( Nash must have been present in spirit, with the shades of 1938-9, at this point):
Subsidiary matters were discussed as follows:
(a) it was obvious that import control of itself would not restrain excessive internal demand and that a simultaneous and strongly disinflationary policy was required to reduce the level of demands for imports from the prospected £260 million level to the suggested level of up to £220 million [but hopefully only £200 million].
Many relevant problems were discussed: what to do about imports 'on the
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.............was both persistent and fearless. Although he was deeply interested in foreign policy, and much of our talk was occupied by a survey of the world situation, the main items for serious discussion were naturally economic....
On 23 January I attended a meeting of the New Zealand Cabinet which lasted nearly two hours. Apart from the immediate economic difficulties, on which I assured them that British exporters would understand the need for temporary import controls, Ministers seemed chiefly interested in the questions of defence. In particular, they expressed anxiety about developments in Indonesia and the future of Malaya. Fortunately for me the Prime Minister conducted the whole affair off his own bat and filled up the greater part of the time with his own exposition. In the evening I had another private conversation with him which lasted until the early hours of the morning. All this was both useful and informative, if somewhat repetitive. Nash was fond of talking, and when he found another Prime Minister ready to listen to the arguments which he thought it right to expound, he enjoyed to the full 'the rare felicity of uniting, in the same pursuit, his duty and his inclination'.
Gladstone and Marx were alike wide of the mark. Macmillan would have done better had he thought of two friends of his grandfather, Charles Kingsley and F. D. Maurice.
Nash told Mallaby that he found it easier to deal with a Conservative than with a Labour government in Britain, he was forgetting Oliver Stanley.
Among other subjects Nash brought up the question of revising Ottawa. They agreed to seek some agreement as soon as possible, and before a Commonwealth economic conference which was to meet in Montreal in September. Nash also raised one of New Zealand's recurrent problems, dairy marketing. Prices had fallen drastically, largely because a number of countries were 'dumping' subsidized butter. Macmillan was sympathetic and himself suggested that New Zealand should invoke the new British antidumping laws.
A strong team of officials, led by J. P. D. Johnson, now of the New Zealand Board of Trade, who had been at Geneva and Havana with Nash, set off for London in April to discuss revising Ottawa. Jerry Skinner, the deputy Prime Minister, went to London to discuss the butter problem. Both he and the officials ran into customary difficult negotiations. The British declined to impose countervailing or anti-dumping duties, but threatened to do so if offending countries did not voluntarily limit supplies.
The delegation of officials found that the British were agreeable to reduced tariff preferences, but demanded a tough concession in return, that the New Zealand government should state, in the revised trade agreement, that it would not apply quantitative restrictions to protect local industry against British trade. New Zealand already had made such an undertaking, in general, under GATT which however, permitted quantitative restrictions for balance of payments purposes, and these could be manipulated so as to give some protection to local industry. The British also wanted New Zealand to agree that import restrictions..........
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..............In February 1959 Nash visited one more Asian country, Japan, where he met the emperor and held trade and political talks with ministers and businessmen. It was thought by many people that Nash's journeys were not strictly necessary, and amounted to not much more than receptions and tourism. But there was much more to it. Nash was a very strong and effective spokesman for his government's--which were substantially his own--policies. Indeed it may be doubted whether New Zealand has had a more outspoken representative in international affairs.
In 1959 there was a crisis in Laos which could possibly have led to a major war, like the later war in Vietnam, or even to a great power confrontation. In late 1958 and early 1959 there were accusations from the Royal Laotian Government of North Vietnamese intrusions, and counter claims of American military bases in Laos, contrary to the Geneva agreements. There was frontier fighting between government forces and the insurgent Pathet Lao. In September 1959 the government asked the UN for military aid to stop North Vietnamese aggression.
Laos had been designated, under the protection of SEATO, as a 'protocol' state, so there was immediate talk of intervention, which Nash strongly deprecated. In statements in early September he tried to cool such talk in New Zealand by saying that the situation in Laos was unclear. In particular, it was not at all certain that there was outside aggression rather than Laotian rebellion. It was, however, appropriate for its government to seek UN assistance. The situation was a dangerous one which might involve New Zealand.
In October Nash attended a meeting of the ANZUS Council in Washington, where he was extremely outspoken against American views. He asked how long the Laotian government would have lasted without American aid, and questioned whether it was right to interfere in local politics. One of the Americans, J. Graham Parsons, an assistant Secretary of State, said that Laos naturally looked to the USA for aid, since the USA paid much of its budget. Nash asked if this were a breach of the Geneva agreement, and the American said the USA was not a signatory.
There was a warmer exchange with the Secretary of State, Christian Herter. Nash said that the USA was trying to maintain the type of government the USA wanted, not what the Laotians wanted.
Mr Herter: 'No! We have not selected those who run for office, who form the government.'
Mr [Robert] Murphy [an Under Secretary of State]: 'Mr Prime Minister, you are suggesting that we are trying to impose a government on the Laotians.'
Mr Nash: 'No, trying to maintain an existing government.'
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...........In early May Nash returned from Europe, where he had visited Italy and been received by the Pope, to London for his third Commonwealth conference--the others having been in 1937 and 1946. This time there was Macmillan, Nehru, Diefenbaker, Menzies, Tunku Abdul Rahman, Nkrumah, Sir Roy Welensky, Eric Louw representing South Africa, Mohammad Ayub Khan from Pakistan. There was much dining and royalizing as well as pontificating. Nash's diary (in his own handwriting) records on 3 May a luncheon at 10 Downing Street, dinner at Windsor Castle (evening dress and decorations); on 4 May a dinner at No. 10 and a reception at Buckingham Palace; on 5 May an audience with the Queen.
At the conference, while feeling not at all inferior, he was overshadowed by Nehru and Macmillan, who did much of the talking on world affairs and peace. Nehru had recently met Chou En-lai as well as Russian leaders. Still, Nash told them of his talks with Khrushchev. He was convinced from his talk with the Russian leader that he did not want war, but he would be willing to take risks, for instance over West Berlin. 30 While they were discussing the summit conference, to meet in Paris in mid-May, an American U-2 spy plane was shot down over Russia and its pilot taken. The summit looked less hopeful now.
Other dark shadows were on the horizon. Nash spoke of New Zealand's great anxieties if Great Britain drew closer to the EEC. Subsidized EEC agricultural exports flooding the British market posed a great threat. (On this trip he visited the six capitals of the EEC countries and discussed their emerging common agricultural policy.)
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When he(Sutch) was a member of the New Zealand delegation to the UN in the late nineteen-forties there were FBI reports that he had contacts with Communists. After he became Prime Minister, Nash was informed by the Security Service that the National government had blocked Sutch's promotion to the head of the Department of Industries and Commerce because the Americans said that they would regard New Zealand's security as suspect. 11 (The United States communicated secret information to its ANZUS and SEATO ally.) Nash, however, appointed Sutch to be permanent head of the department. He did not discuss with the minister, Holloway, the objections of the Security Service, nor raise the matter at cabinet. Nash knew Sutch very well, and had long experience of his ability, intelligence, and deviousness. It was a courageous decision. Whether it was wise may never be known.
In the anti-Communist atmosphere of Chamberlain's Great Britain or the United States during the 'cold war' any pink radical might seem a red threat. Many people--in New Zealand too--were secretly condemned often without their knowledge, on slender or suspect evidence, perhaps mere tittle-tattle collected by anonymous agents. On the other hand, in Sutch's case, cool and uninvolved enquirers may wonder whether there was not some fire below so much smoke. Nash was quite aware of both these points of view and decided to trust his old adviser. Leading National Party MPs did not conceal that they regarded Sutch as a Communist.
One other example of Nash overruling the security service may be given. A European who had in his youth been associated with Marxists wished to become a naturalized New Zealander. He had lived in New Zealand for many years and had a New Zealand wife and children. The security police would not give him a clearance because, they said, he had not accepted New Zealand ideals. Nash minuted in 1960 that he should be allowed to naturalize. The file lay on his desk without action, however, until the election. A backbench Labour MP, Mr R. J. Tizard, took the file to the Minister of Internal Affairs, W. T. Anderton, who was the only Minister in Wellington during much of the election period, because he was not standing, and he signed the necessary approval.
Dr Sutch played a major part in New Zealand politics during the Nash government. His role was not that of a socialist but of a New Zealand nationalist--one of the most conspicuous, indeed, up to that time. His field was that of economic nationalism.
In the Labour government's policy from 1958 onwards, import licensing, the search for new markets, and industrialization went hand in hand. New industries were to provide import-substitutes. But much more important in the long run, they were to help New Zealand to outgrow its colonial economy.
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...........Nash introduced the Government Service Equal Pay Bill at the end of the 1960 session. He recalled how fifty years ago (in Modem Tailors) he had found women doing for £2 what men received £4 10s. a week for. (At that time, the union had been demanding equal pay.) He affirmed his belief that men were not superior--indeed, he thought the expression 'the better half' was more correct. Equal pay was to be introduced in the public service, in three stages, by 1964.
In the final term of the 1960 session Nordmeyer introduced a short Reserve Bank of New Zealand Amendment Bill affirming that it was the sovereign right of the Crown to control currency and credit. This measure was less of a genuine reform than a ritualistic propitiatory gesture to Labour's credit reform past and credit reform supporters.
.............A political scientist has commented that to the Labour leaders the 1958 budget was 'a matter of morality'. To reverse the policies of that year before the imbalances of the economy had been corrected would be to cast doubt on the government's original assessment of the problem. But the terms of trade had begun to improve almost from the time of that budget. It seems, in the light of after-knowledge, that the government had over-reacted in 1958--had guessed wrong. But the economic improvement did not seem to Mr Nordmeyer to justify much generosity in his 1959 budget. He did, however, reduce income tax, by two stages, to about the 1957 level. By early 1960 retail turnover was at a record level; the country was enjoying near boom conditions. The Minister of Customs, Ray Boord, eased up on import controls. In the 1960 budget Nordmeyer gave some hand-outs to the voters, but he was not open-handed. Pensions and benefits were raised; so were state employees' salaries; duties on petrol and cigarettes and sales tax on motor vehicles were somewhat reduced. Taxes on beer, petrol, and cigarettes
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XXVII The Grand Old Man 1960-8
Walter Nash was an MP to the end of his life, but power had gone. The long reign of Sir Keith Holyoake had begun and Nash did not live to see it end. The National government rapidly altered or reversed some of Labour's policies. In 1961 there was mounting public criticism of the Nelson cotton mill. Within the National Party caucus some backbenchers, including Mr R. D. Muldoon, an assertive and loquacious new MP, attacked the decision of cabinet to honour Labour's agreement.
Eventually, when the factory buildings were nearly complete, the government cancelled the contract and paid £1.4 million compensation. In this rough game Labour's opposition was weak, ineffectual, indeed almost irrelevant. Nash found himself in a position, very different from those he had adopted a generation earlier, of defending overseas borrowing for development: 'we cannot develop this country as it should be developed in this decade or generation out of our own savings or out of our own capital in general. Overseas investment is imperative....' The attack on the cotton mill would, he claimed, deter overseas investors.
During the major parliamentary battle of 1961 Nash was in a position much less comfortable, though assumed with apparent ease. The government decided that New Zealand should become a member of the International Monetary Fund and the World Bank. This stirred up all sorts of slumbering prejudices.
Nash's personal feelings were still favourable to the IMF. In 1958 his old friend A. G. B. Fisher, now a high IMF official, had written saying that now only the Soviet Bloc, Portugal, Switzerland, Liberia, and New Zealand remained non-members. He thought New Zealand's opposition arose from fear of sinister American financial powers. Nash wrote back agreeing that the opposition was emotional. He thought the time would come when the advantages would be seen to outweigh the disadvantages. But the Labour caucus voted against joining and Nash found himself leading the serried ranks of anti-American leftists, anti-American funny-money men, Social Creditites and economic troglodytes in general. He received large numbers of letters opposing the IMF and supporting his opposition. Fifty-eight thousand people signed petitions to parliament, organized by the Labour Party, opposing joining.