Dr Michael Bassett

Dr Michael Bassett

The National Years 1949-1999

Published in the Dominion, December 1999

By Michael Bassett

Fifty years ago, on 13 December 1949, the first National Government headed by Sidney Holland was sworn into office. It won 51% of the votes to defeat Peter Fraser's first Labour Government. This week the fourth National Government left office, having polled 31% in the recent election. Since 1949 the National Party has won thirteen general elections, and the Labour Party five. National governed for 38 years out of the last 50. It has been the principal party of government in the second half of the century, though its support gradually ebbed away.

While the National Party dominated after 1949, the Labour Party set the political agenda for most of the century. During the First World War Labour's faith in big government began influencing the way other parties behaved. Central government was initiating, building, regulating, subsidising and gradually taking on welfare responsibilities. Under M.J. Savage the pace quickened after 1935. Labour ministers preached "socialism" as they extended the range of government activities. They introduced guaranteed prices, built houses, brought in social security and made unionism compulsory. Taxes rocketed. By 1949 New Zealand possessed one of the most highly regulated economies in the world. Its social security system was envied by many. The State now spent 28% of the Gross Domestic Product. All roads led to Parliament Buildings where the key decisions were made.

When National took office the big question was whether it would make any difference. On 13 December 1949 Holland held a press conference. "There is going to be no more socialism in New Zealand", he said. "The peg went in this afternoon". Was he about to unravel half a century of interventionism? Many feared he would. They need not have worried. It was soon clear that National intended to keep import controls, tariffs and price controls. Food subsidies were lifted, then re-introduced. Taxes stayed high. National backed off abolishing compulsory unionism. The governments of Holland and Holyoake undertook major industrial projects such as Tasman Pulp and Paper and New Zealand Steel. Rigid social controls persisted. The ban on weekend shopping that led Lord Beveridge to observe in 1948 that New Zealand was a puritan country with two Sundays each week, remained until the 1980s. The welfare state persisted. Indeed, National added to it. ACC, the DPB and the hugely expensive system of National Superannuation, all introduced in the 1970s, originated with National governments, not Labour. Gradualism was National's secret.

Welfare costs increased while the economic tide was going out. The country was soon beached. National had a different set of interest groups from Labour, but overall, for more than thirty years it tried to keep life easy for as many as possible. Ultimately it was National's Robert Muldoon who pushed state spending to more than 40% of GDP with Think Big, which encouraged inflation and killed off growth. But in the meantime, with only two short breaks before 1984 (1957-60 and 1972-75), National convinced enough voters that it could be trusted with the inheritance from Labour. They were administrators, only occasionally initiators.

The big rift in our political history occurred not in 1935, nor in 1949. It happened in 1984 as a result of a serious run on the dollar, and the wind-back of the State that David Lange's fourth Labour Government undertook. Fifteen years on, it is clear that those changes revolutionised central and local government. They had a profound effect on the private economy and the state sector. Taxes went down. While critics of reform were quick to say it didn't pave the roads with gold, it is a fair bet that they would be even angrier had New Zealand slipped instead into permanent third world status.

Once more the National Party locked into place the big changes Labour made. When Jim Bolger's fourth National Government came to office in 1990 with 48% of the votes, it promised a "decent society", kindlier and more gentle. However, it repealed little. Indeed, for a short time National pushed into areas that Labour had not risked. The fiery Ruth Richardson slashed welfare expenditure, and work place conditions changed with the Employment Contracts Act. Bolger slowed the pace, but not quickly enough to prevent many National supporters fleeing. It began to look as though National, for a change, would last only one term. It survived by the narrowest of margins in November 1993, its share of the vote dropping to an unprecedentedly low 35%. Richardson was jettisoned, and National inched forward. MMP challenged both major parties in 1996, initially hurting National less than Labour. Bolger was saved by Winston Peters in a fluke decision that will often occur with MMP. Sending out conflicting signals for the next eighteen months of coalition, Bolger, then Jenny Shipley increased spending. Flying solo in 1998-99, there were further structural reforms. But National lost its administrative edge largely because it failed to monitor departmental performance. In the end Shipley's government succumbed to a withering onslaught the like of which Muldoon performed on Bill Rowling in 1975. However, the result for National in 1999 was not as humiliating, leaving it greater residual strength.

After half a century, has National surrendered its dominant position? Can Helen Clark's fifth Labour Government do what Walter Nash, Norman Kirk and Bill Rowling were unable to do: win a second term, and become the dominant party of government? It's not impossible, although Labour parties in the past have been more venturesome, and quickly lost the middle ground. Caution lay at the heart of National's long hold on office. New Zealand, it must be remembered, is a very conservative country which only occasionally tolerates radical change, and then only in short bursts. Labour's challenge is to adapt, or to prove this wrong.

Michael Bassett, an historian, was a minister in the fourth Labour Government. His biography of Peter Fraser will be published next August.