Introduction to Not in Narrow Seas: The Economic History of Aotearoa New Zealand

Published in The VUP Home Reader 2020 p.131-143

Not in Narrow Seas borrows its title from Allen Curnow’s pioneering 1939 work, a collection of great poems evoking New Zealand’s isolation and fragility. ‘In your atlas two islands not in narrow seas / Like a child’s kite anchored in the indifferent blue,’ says the opening poem, ‘Statement’. New Zealand is seen as ‘cringing’ beneath a cold wind from Antarctica, ‘Two islands pointing from the Pole, upward / From the Ross Sea and the tall havenless ice’. Curnow famously suggested that the inhabitants of these remote islands were still not sure who they were: it was ‘a land of settlers / With never a soul at home.’ And his next collection (Sailing or Drowning, 1943) concludes with the endlessly recycled lines ‘Not I, some child, born in a marvellous year, / Will learn the trick of standing upright here.’

            Curnow’s poetry is a gift for an economist. It captures certain brutal truths about our country. If the land mass later known as New Zealand had sunk beneath the waves 23 million-odd years ago, the history of the world would have been little different. If the tyranny of distance and global insignificance gave life here a particular edge, its economic effects were profound and permanent. Curnow’s ‘anti-myth’ about the anxiety and uncertainty of the nation’s people perhaps bred the familiar counter-myth described by historian Keith Sinclair as the LBW syndrome: New Zealand ‘leading-the-bloody-world’ or sometimes ‘lagging the bloody world.’ In fact New Zealand usually ranks in the middle of the bunch of the 30 or so rich countries. Global interconnectedness is more complex and subtle than LBW supposes.

            As for New Zealanders’ recurrent obsession with their identity, this too has deep economic roots. Once the European settlers exposed New Zealand to the world, it had colonial (or neocolonial) status. As Britain’s imperial reach shrank, its ties to Britain loosened and New Zealand began to engage with more of the world’s economy. Because it is small, it remains a ‘neocolony of the world’; in a globalised age most economies do. Hence New Zealand’s constant preoccupation with nationalism and national identity. Even the common nineteenth century idea that New Zealand was a ‘better Britain’ articulated some sense of national uniqueness, however subservient it might now seem.

            New Zealand’s story is about immigrants and how the newcomers coped. Each wave of settlers arrived with a great weight of cultural baggage, accumulated over generations. We can’t understand our history unless we understand something of the migrants’ back-story. So it is necessary to consider where the proto-Maori came from, to delve back into the seventeenth century to understand nineteenth-century British immigrants, and to describe the last two centuries of the Pacific islands whence came New Zealand’s Pasifika people. In each case the immigrants had to adapt their inherited ways to life here.

            The islands they came to were not passive; they interacted with the humans, each shaping the other. The earliest settlers, having made a heroic 3000-kilometre ocean journey from east Polynesia, found that some staples of their diet (kumara) would grow here but others (taro) would not. These migrants were truly on their own in the new land as climate change made the journeying back too difficult. It was perhaps inevitable that their economy was based first on mining the country’s resources, starting especially with the most easily available: the staggering riches of the sea, the lumbering meat larder of moa, seals, and some of the native birds.

            This is the economy of the quarry, and it would be replicated by the European settlers. In each case the result was the same: depletion and even disappearance of resources that could not be readily replaced (cleared forests and dying species; the moa and the whale are totems). At a certain point the problem of resource sustainability had to be faced, and it was then that the now-celebrated Green Maori appeared with a hard-won strategy of the rahui, a ban on the taking of depleting resources. The European settlers’ quarry economy, of course, caused a much greater devastation and the effects are all around us. Fishing quotas, native forest protection regimes and even the measures to combat global warming are modern versions of rahui.

            Many historians have told the New Zealand story before; but an economist uses a particular lens and, I would argue, helps us to see our nation’s history in a new way. Too often we take the hard economic core of our history for granted, or we give it merely fleeting attention. Sex is notably absent from the Victorian novel; the economy is almost as rare among recent novels and histories. To give an account of a society without paying attention to its economic underpinnings is about as sensible as telling a love story without sex. It can be done, of course, but certain vital facts of life are left out.

            The biographies of some of our most famous politicians, for instance, rarely consider the economic environment in which they lived. The Liberal Premier Richard John Seddon and Labour Prime Minister Michael Joseph Savage governed in periods of prosperity, and it is partly for that reason that they are remembered. Contrast them with two equally important but far less well-known politicians who led their country, Harry Atkinson from the nineteenth century and Gordon Coates from the early-middle twentieth. Both were important precursors to the two great reforming leaders Seddon and Savage, with Atkinson an early advocate of the welfare state and Coates of a more active form of economic management. But they were long undervalued and remain inadequately remembered, partly because they both held power during economic depression and stagnation. Politicians who live in hard times tend to get a bad press, if any.

            Or consider the much-celebrated political break-up of the great settler farming estates by the Liberal Government at the end of the nineteenth century. This was a major political and economic reform. The great sheep stations represented a hierarchical, class-bound society; the much smaller family farms created by their dismemberment symbolised a more egalitarian, family-based and less formal one. But the changes were driven by economic factors and would probably have taken place anyway and that the political reform was much less important than the economic drivers that helped make it possible. Refrigeration and the rise of the meat industry made the break-up more profitable for the estate owners. They had good economic reasons to dismember their vast holdings.

            Or take the role of the gold rushes in the quarry economy and the rise of the cities. Histories of my own home town of Christchurch, for example, tend to take its early prosperity as a given. That contrasts with most other settlements which, after an initial boom, lapsed into depression. The difference with Christchurch seems to have been that about the time it should have gone through the same down cycle, the Melbourne goldfields opened up (in 1851). Christchurch prospered, as did other regions, by supplying the miners with food. So economic facts neglected by historians throw a new light on the city’s story.

            Similarly, Britain’s entry into the European Economic Community in 1973, is often seen as a major break in New Zealand’s history. This, so the story goes, shocked New Zealand into diversifying its export market and its economy more generally. It would have to sell to the world and not just the Mother Country. The reality is rather different. In 1973 the diversification was already underway. The Britain export market was already in rapid decline. It was certainly still a major buyer of farm products such as butter, cheese and lamb; but by then these made up only 30 per cent of New Zealand’s total exports of goods. So the diversification was driven by the market rather than British politicians. A far more important change to the economy was the almost permanent collapse of the wool price at the end of 1966, effectively ending the political economy which had reigned since 1882.

            An even more important economic event in New Zealand’s history was the introduction of refrigerated shipping in 1882 – and other related technologies – which substantially reduced the tyranny of distance. It enabled the country to sell meat and dairy products to markets – Britain above all – on the other side of the world. But it also made possible a more sustainable economy in a land whose quarry economy was being exhausted and increasingly looked as though it could not pay its way in the world. It transformed the political economy to one where the family farm was at its centre.

            Modern New Zealand is a market economy which sells its products to the world; the fact is so familiar that we tend to forget how important the non-market economy has always been. The economy of the Maori was based on Polynesian gift-exchange, where the transaction was more about mana than profit. Similarly, European settlers sprang from pre-market or even feudal Britain. Nor did they entirely leave that pre-market when they came to New Zealand. Much of their small farming was self-sufficient or near-subsistence. While family farms had become commercial operations by the end of the nineteenth century, subsistence farming (supplemented by some off-farm sources of cash income) continued in Maoridom until well into the twentieth century.

            Economic activities in the home occur largely in the non-market economy. Changes there, driven by new technologies and changes in family size and composition, led to big changes in the story of New Zealand as well as of the economy. The entry of women into the workforce, partly freed from the household by labour-saving devices, changed everything. The largely invisible half of the workforce – traditionally not even included when workers or the unemployed were counted – could no longer be ignored.

            Modern New Zealand is politically centralised. The line between direction by the market and by the state has shifted over the years, but compared with other economies with similar standards of living, the state has played a very central role in the economy. Part of the reason is that government preceded European mass settlement. In other former colonies such as the United States, settlement began 150 years before a federal government was formed. This meant that American society produced deeply rooted social institutions with which the state had to negotiate or contend. New Zealand, by contrast, was a ‘hollow’ society, without independent entities to mediate between the government and individuals.

            The implications for our development are many, not all of them positive. The state developed a commanding presence and could powerfully affect economic development. But the state could also create institutions which were mere creatures of statute and without statutory support might weaken and even die. The history of trade unionism is a case in point. Long sponsored by the state, when unionism lost that support with the introduction of the anti-union Employment Contracts Act of 1991, the unions withered.

            Some powerful economic myths have played a major role in the history of New Zealand; one is the claim that it is an egalitarian country, where Jack is as good as his master and wealth and incomes are evenly spread. It is hard to judge how much truth there is in the myth. There is some evidence for it in colonial times, when British farm workers had the opportunity in the colony to become small farmers. And in the 30 years after the Second World War there is strong evidence of a reduction in inequality of incomes. However, inequality grew markedly during the top-down economic revolution (1985-1993) known as Rogernomics.

            The argument about inequality also raises the spectre of New Zealand as ‘the land of the long pink cloud’. Much of our history has indeed been written from a leftish perspective. However, the pink cloud obscures the real story of New Zealand’s development. The history of the labour movement, for instance, tends to focus more on its militant wing – perhaps inevitably, since that was the one whose activities were so controversial – than on the quieter working majority.

            The left perspective sets out a tension between the pink progressive governments and the blue conservative ones in which the former win in the long run despite being out of power for two-thirds of the time. However, many of the blues were also progressives – National governments have a tradition of accepting the reforms of their Labour forerunners – but with a different agenda. New Zealand may be the land of the long white cloud. But it is a green land nestled in blue sea and sky.

            This takes us back to the ‘colonial cringe’. The mistake of the pink cloud thesis arose from taking well-established foreign theories but failing to adapt them to local conditions. Rather than thinking through the local problem, those suffering from the cringe grab whatever is going off a foreign shelf. This is a long-standing habit in New Zealand. At the heart of Rogernomics, for instance, was the application of an extremist form of free-market theory to New Zealand as though the country was an idealised United States. The result was a deep and self-inflicted wound to the economy arguably unique in our history. The period of stagnation between 1986 and 1993 was the result of the influence of ideology, unlike previous recessions and depressions, which were generally caused by contractions in our overseas markets.

            This history falls into six parts.

            The first covers the physical development of the islands and the economy of the first Polynesian settlers up till the arrival of the European settlers. The proto-Maori and Maori economy was a subsistence one, but subsistence did not mean starvation. Their gardens and fishing grounds provided adequate food, and economic surpluses went into artistic creation and community-building activity. The people generally lived the good life. Tsunamis and earthquakes could cause sudden devastation, but the effects were usually local and limited. When the Europeans arrived Maori life expectancy was probably not much different from their visitors’.

            Economic exchange in pre-European times was typically of the ‘gift exchange’ variety, where the focus was on the transactors rather than the transaction. ‘Gifts’ brought an obligation of reciprocity sooner or later, an obligation not captured in the English word. The relative values of the goods or services exchanged, moreover, were well understood. Some of the exchanges amounted to bartering. This meant Maori were experienced traders, and they quickly became expert at trading with the European settlers.

            Maori attitudes to land, however, were utterly unlike those of the Europeans. The idea of permanent alienation of land through sale – the dominant European idea – had no place in traditional Maoridom. If land was transferred, it was to cement marriage and diplomatic ties, or as a result of conquest in war. There was a gulf in values and in understanding between the two cultures, and it helped lead to war. The European musket had already devastated the Maori world; it turned limited hand-to-hand traditional conflict between tribes into mass slaughter (perhaps 20,000 Maori died). Its economic effects were also large; Te Rauparaha was said at one point to have had 2000 slaves preparing flax to trade for guns.

            As Part II explains, the Europeans brought the market economy to Aotearoa, and its inevitable pattern of boom and bust. The first boom, partly the result of a sudden inundation of settlers, was quickly followed by the first bust. Within a year of the arrival of the Tory, the flagship of the colonising New Zealand Company, the new colony sank into depression. There was not enough land for the colonists, and with a continuing wave of ships arriving there were too many workers and wages slumped.

            And already there were signs that the new European-based quarry economy could not last. By 1845 the whale catch had fallen till it could no longer carry the colony. But what would? In the short run there was the stimulus of war. Wellington became an armed camp by the late 1840s; feeding the soldiers fed the economy too. The New Zealand Wars of 1861-72 helped create an economic infrastructure (roads, bridges, and ports were built for invading soldiers); and the vast confiscation afterwards of Maori lands provided the fertile farmlands the settlers craved. Gold rushes in the 1850s and 1860s provided another source of income, although inevitably a temporary one.

            Wool turned out to be a staple commodity of a more long-lasting economy. But by 1870 many of the fruits of the quarry were disappearing while the wool economy had not yet fully launched. Help arrived in the shape of Julius Vogel, the most significant early example of the Borrow-and Hope, Think-Big politician – a type which would recur. Vogel’s overseas-funded development programme kick-started the economy and built valuable infrastructure. But there was no export staple to pay for it, and his Think Big programme could have led to disaster.

            This very nearly happened, because the long depression of the 1880s and 1890s in the Northern Hemisphere soon spread to New Zealand. Hardrock goldmining boom and its trade with the Australian market helped see Auckland through. But the fundamental risks and dangers of the colonial economy were now clear. How could New Zealand make its way in the world?

            The answer was through refrigeration, as Part III explains. The first frozen lamb was shipped in 1882, leading to a boom in sheepfarming; a dairy boom, also based on refrigerated exports, came a little later. Family farms provided the meat and the wool and stimulated jobs in service industries and towns. Society changed as towns grew into cities with a recognisable working class; politics reflected the change, with the rise of the Liberals, the early welfare state, and then the Labour Party. Women became a more prominent part of public life. But boom times under the Liberals turned to a long period of stagnation as overseas prices fell; depression struck in the early 1930s. Recovery from depression, the result of rising overseas prices and Keynesianism at home, flagged in the late 1930s; but world war brought another boom.

            Postwar New Zealand, as Part Four explains, brought a long-lasting boom and unprecedented social transformation. Class structures were changing and so was politics. Labour Cabinet Minister Bob Semple said ‘the bastards walked to the poll booths [in 1935] to vote us in, and drove to them [in 1949] to vote us out’. Increasing affluence brought increasing conservatism; National proved to be the more enduring party of government. Society was changing fast: Maori flooded into the cities and Pasifika people into New Zealand, mothers flowed into the labour market. National embraced the welfare state after condemning its launch by Labour; it continued to administer an economy heavily controlled by the state, with import licensing at the border and a centralised system of wage-fixing.

            The whole system started to unravel in 1966 when wool prices collapsed. After a brief recovery in the early 1970s, wool prices never returned to their real postwar levels. A major prop of the pastoral economy was undermined. Economic growth slowed; farmers could no longer generate the overseas income the country needed. In a protected and centralised economy the losses were passed on like an economic version of ‘pass the parcel in a Belfast pub’, where the bomb of a real income cut was passed on via price and wage hikes to the next person. Unemployment rose and inflation soared. Robert Muldoon, despite being the most aggressive politician in New Zealand history, could not make the changes desperately needed.

            The revolution in economic policy known as Rogernomics is the focus of Part Five. The aim was to modernise the economy and find an alternative to a framework which had clearly broken down under Muldoon. Undoubtedly a more-market approach to the economy was needed. Import licensing, launched by Labour in 1938, had by the 1980s become a barrier to economic development, locking the manufacturing structure into the past and entrenching manufacturing interests opposed to its dismantling. Unions, similarly, were locked into an inflexible system: compulsory unionism delivered members to often small unions enmeshed in a complex steel web of relativities. The external economy had rapidly diversified; the sclerotic internal system held it back.

            Rogernomics recognised the failures of the system, but its remedies were extreme and often ineffective. The consequence was a rise in social inequality and a rolling back of the welfare state which was only possible because the ‘hollow society’ could not resist it. Labour’s revolution – continued during National’s first term – sparked a populist revolt which upended the Front Runner (Winner-Takes-All) electoral system. While Rogernomics was broadly a failure, however, the political debate about it continued.

            In Allen Curnow’s ‘Out of Sleep’, the newly awoken poet tries to make sense of his surroundings: ‘[A] gust in the damp cedar hissing / Will have the mist right off in half a minute. / You will not grasp the meaning, you will be in it.’ An historian contemplating very recent history faces a similar difficulty. But the attempt must be made; Part Six tries. There has been a renaissance in Maoridom, with the new MMP system giving Maori much more political power. Treaty settlements have also given Maori much more economic clout, though the extent of that new wealth is often exaggerated.

            The increased power of business represents a fundamental change in the political economy. At some time in the late 1990s, however, the business community began concluding that neoliberalism (Rogernomics) no longer served its interests. There was a return to the traditional partnership with government, a revived form of NZ Inc. But what this meant in policy terms remains unclear. We are still trying to decide what to do with the legacy of Rogernomics, and in particular the hefty rise in inequality – and poverty – which it has left.

            The Clark-Cullen Labour Government wanted to reverse the extremism of Rogernomics, but had trouble thinking through alternatives to the neoliberal structure. The Key-English National Government’s pro-business approach included elements of crony capitalism mixed with policy inertia: the politics of manana or, to use the Kiwi version, of ‘she’ll be right’, an approach all too familiar in New Zealand’s history. Jacinda Ardern’s Labour Party did not expect to be elected in 2017, and was hardly prepared in policy terms for government. The resulting coalition government continues to grapple with the implications of promises without policy and a formidable backlog of unmet social and economic needs.

            Under the Ardern-Peters Government, as under those before it, New Zealand is constantly renegotiating its role in the global economy. No man is an island, John Donne said, and no economy is either, even an economy of remote islands set in the vast blue sea.