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Interpretations of New Zealand's Post-War Economic History

New Zealand’s economic fortunes were drastically altered with the onset of the global recession in the mid-1970s, and two stages are clearly discernible. Prior to 1973 the ‘long boom’ was characterised by strong growth, a balance of payments equilibrium (owing to historically auspicious terms of trade), low inflation, rising real wages, and full employment. From 1974 to 2005 New Zealand had problems with ‘stagflation’ (stagnated growth and high inflation), declining profitability, declining real wages, and massively increased levels of unemployment and impoverishment. This chapter will outline the differences in Marxist, Keynesian and monetarist interpretations of the two epochs in New Zealand (NZ) economic history, and will explain why understanding the interpretations is relevant and necessary to appreciating politics and policy-generation in NZ since the mid-1970s.

NZ was not isolated in its economic downturn. Globally, economies were cooling and unemployment was mounting, with the G7 group of countries, between 1950 and 1973, experiencing a drastic drop in growth (5.5 percent to 2.1 percent) and unemployed numbers up to 6.2 percent from 2.1 percent^[1]. However, NZ had peculiarities that exacerbated the global trend. Very few countries experienced both the effects of the oil shocks and a persistently deteriorating market for major traditional exports^[2]. NZ’s reliance on a narrow range of exports whilst simultaneously being dependent on imports of oil, capital and intermediate inputs left it vulnerable to the whim of international fortunes^[3]. Major demand- and supply-side constraints to agricultural growth also left it susceptible to a decline in terms of trade^[4]. Nonetheless, comparative evidence strongly suggests that regardless of the terms of trade decline, growth rates would still have declined, since NZ shares similar predispositions of development as other advanced capitalist economies since 1945^[5].

Whilst monetarists and Keynesians both broadly agree on the heavy impact and effect of the externals shocks of the 1970s and 80s on the NZ economy^[6], they, and their Marxist counterparts, interpret NZ’s economic history through fundamentally distinctive and conflicting approaches. Areas of contention include the role of state in economic management; the basis of the boom and ensuing collapse; the stability and meaning behind the economic recovery of the last decade; and how the shifting economic environment has affected policy, policy-making, and the state^[7].

Notes

1. ^ Brian S. Roper, Prosperity for All?: Economic. Social and Political Change in New Zealand Since 1935 (Victoria: Thomson, 2005), 5.
2. ^ J. Gould, The Muldoon Years (Auckland: Hodder and Stoughton, 1985), 43.
3. ^ G. Hawke, The Making of NZ: An Economic History (Cambridge: Cambridge University Press, 1985), 204-30.
4. ^ Hawke, 58, 209; D. Skilling, The Importance of Being Enormous (Wellington: Treasury Working Paper, 2001), 6; Paul Dalziel, and R. Lattimore, The NZ Macroeconomy, 4th ed. (Oxford: Oxford University Press, 2001), 1, 16-18.
5. ^ Roper, Prosperity for All?, 8.
6. ^ Ibid., 6.
7. ^ Ibid., 3.