Academic journal article
By Wright, Matthew
The Reserve Bank of New Zealand Bulletin , Vol. 72, No. 3
1 Background to the Great Depression
"In 1931 everyone was still talking about the depression [in New Zealand] as if it was a rainstorm that would blow over...After that people spoke about the depression as something more than a rainstorm, as a national calamity that had begun to affect their lives."
--John Mulgan, Report on Experience. (2)
The Great Depression of the early 1930s was the deepest global economic crisis of the twentieth century. It affected the whole western world, notably the British Empire, Europe and the US. Its economic legacy was significant. (3) The socio-political legacy was felt worldwide, including in New Zealand, for decades afterwards--the historical debate is not whether, but how. (4)
Available annual data (figures 1 and 2) shows that New Zealand, which had been through several downturns in the 1920s, experienced the economic effects of the Great Depression most severely during 1931-33. It has been estimated that at its peak in 1933, up to 30 percent of the potential workforce were unemployed. (6) But in an economic sense the Depression was relatively brief. There was a sharp recovery in 1934-36. Although there were mild downturns in 1937-38, and New Zealand experienced a foreign reserves crisis in 1939--in part a consequence of fiscal policies introduced in response to the Depression (7)--these were not integral with the earlier events. These post-Depression issues arguably were not resolved until the Second World War. The rapidity of economic recovery in 1934-36 was explicit, and as early as April 1936 a study based on 1935 data was able to report 'satisfactory evidence of recovery'. (8)
[FIGURE 1 OMITTED] (5)
From a world perspective--and despite the perceived severity by New Zealand standards--the Depression did not plumb the depths experienced elsewhere, either in terms of lost GDP or other measures. By contrast with some other nations there was no banking crisis, no balance of payments crisis, and New Zealand did not default on sovereign debt.
[FIGURE 2 OMITTED]
Given this circumstance, it is necessary to find an explanation for popular perceptions of the Great Depression in New Zealand as a 'bogey man'. Some analyses to date have struggled with this point because the empirical economic data does not correlate well with the observed scale and timing of the social effects, and no purely economic or social hypothesis, alone, offers a compelling explanation for the combined pattern. But we must not, however, suppose that the economic data reduces the received social memory to a populist trope; the more useful approach is to identify a consistent explanation that accounts for both aspects.
The relationship between the empirical and perceived effects of the Great Depression in New Zealand also helps illuminate questions that arose as the recession of 2007-09 unfolded, when there were suggestions that the world was heading for a second Great Depression. Some figures supported this impression; one analysis suggested that the scale of economic shock worldwide from 2007 until mid-2009, measured by world trade, industrial production and stock prices, was 'every bit as big' as that of 1929-30. (9) In New Zealand the 2007-09 period was, nevertheless, economically different from that of 1929-30 for a number of reasons. (10) More to the point, however, was the fact that a 1930s-style social response was noticeably absent.
This article focuses on the New Zealand experience during the Great Depression of the early 1930s, and begins by briefly summarising the economic debate over the causes worldwide. The article goes on to summarise and deconstruct the economic, social and political effects on New Zealand, identifying the causalities between these factors.
Although not in the league of overseas experience, the social effects in New Zealand, it will be argued, followed a series of social shocks. These included the enduring pressure that the economic downturns of the 1920s placed on the ability of ordinary New Zealanders to realise the ideals and values that had shaped local aspirations since colonial times, most notably home ownership and security of employment. …