Washington’s Missing China Strategy
To Counter Beijing, the Biden Administration Needs to Decide What It Wants
DEPRESSION in New Zealand has been, in a manner of speaking, only relative as compared to conditions in most of the rest of the world. That is to say, until 1930 the British Empire's oldest Dominion had known a prosperity which had maintained the standard of living at a high and rarely-varying level. During the past four years this standard has been lowered very materially, but not to the point of destitution or any widespread distress.
New Zealand is, politically and socially, somewhat apart from the world and well content to remain so. But its economic well-being depends almost entirely upon the disposition of its primary products abroad, particularly to the home country. Those products are wool, frozen or chilled meat, and butter and cheese. As these bring high or low prices, so does New Zealand prosper or want. There is hardly any other country in the world so dependent upon its primary products -- the products, broadly speaking, of the soil.
When times are bad, people wear less wool and more cotton or other substitutes, they eat less butter and more margarine, use less of the milk from the cow and more of that from the tin can. Four years or more of these tendencies have hit New Zealand very hard indeed. A year ago you could have bought out half the sheep ranchers of the Dominion had you offered them a dollar each for their animals, and you could buy in the meat-markets the highest grade of lamb and mutton chops for ten cents a pound or even less. You could live on the best of all kinds of meat cheaper than upon bread and cheese in most other lands. Even now there are a score of restaurants in both Wellington and Auckland where the regular charge for a table d'hôte meal is a single shilling, and that includes soup, an ample portion of either beef, mutton or spring lamb, fresh vegetables and dessert.
But that is no good to the primary producers. It is even more distasteful to the retailers, scores and scores of whom have been driven into bankruptcy. If the necessity exists in a country like America to raise retail prices, it exists infinitely more in a country like New Zealand, which is agricultural and stock-raising, and industrial only in negligible degree. How to do that has been engaging the attention of political and economic leaders for several years and many of them, especially those who have recently been in the United States, are clamoring for the adoption in New Zealand of a modification of the recovery measures in vogue there.
Indeed, in the "relief schemes," so-called, New Zealand is, and has been since 1931, working along broadly similar lines. When the jobless of the Dominion began to increase by the hundreds and thousands, the Government, which is a "national" coalition of the former Reform and United Parties, decided to subsidize public works in the various towns and boroughs and also to subsidize farm labor. Thus the unemployed were put to work on the roads, in laying out parks and playgrounds, in railway extension and dock building, on housing projects, in afforestation work, and on farms where government aid enabled the farmers to employ additional labor. This has cost the Government to date several millions of pounds, which is a good deal for a population of scarcely 1,500,000 people; and it has had to be raised by a ten percent sales tax and by an "unemployment tax" which deducts a shilling in the pound from all salaries and wages, however small. Government economies, moreover, have included a reduction in the old-age pension -- which New Zealand was one of the first countries to adopt -- as well as in all other pensions, and a ten percent cut in federal pay.
Yet the "relief schemes" are open to objection on many grounds. In the first place they are generally non-productive. More than half of the men employed on them have been and still are shoveling dirt and blasting rocks on the highways. Worse than that, they provide a wage barely enough to exist upon and in that connection are often referred to unpleasantly as worse than the hardships of the Russian Five Year Plan. Single men often receive as little as fifteen shillings a week and rarely more than twice that, while married men are paid ten shillings extra for each member of the family. This does not mean, of course, day-by-day work week after week. No one on "relief work" is regularly employed, for with more than 75,000 at present jobless it is quite impossible to provide more than an average of three days' employment out of six. On the farms, compensation for long hours of hard work is little more than actual subsistence, and New Zealand farmers, rugged Scotch stock for the most part, are notoriously hard taskmasters.
There is, then, much grumbling among the "relief workers." Often, too, there are "strikes of the unemployed." These occur when a group of men refuses to entrain for the camps, sometimes located in remote districts where the workers are maintained under very primitive conditions. There have been -- as recently in England -- marches of the workless upon Wellington, the capital. And three or four times the more resentful element has broken loose entirely, smashed windows and helped itself to food, clothing and jewelry.
And yet, as we have already seen, New Zealand has thus far avoided a degree of depression bringing actual distress, and at the moment there are evidences that the "corner has been turned," especially as the current wool sales have been marked by an increase over last year of more than 6,000,000 pounds. The relief pay, while small, has at least provided the bare subsistence which has been lacking in so much of the world. Private charity has done much; the old-age pension, now fifteen shillings a week, has assisted; and anything in the form of a "dole," even indirect, has been averted.
Yet it seems anomalous that there should be anything at all resembling a depression in what is proportionately beyond doubt the richest producing country in the world. Why is it that with meat so plentiful, with a profusion of vegetables and fruit produced by a rich and quickly-responsive soil, and with an unvaryingly-rich yield of wool, anyone in a country like New Zealand should want for the essentials of existence? Moreover, there is little or none of what is called "profiteering" in the Dominion, little or no exploitation of producer or consumer by middlemen, and no "rings" or combines of any importance to restrain fair competition. And yet, though no one is starving, there is so great a deprivation of comforts as to cause a good deal of unrest even among a people so proverbially patient and forbearing as New Zealanders. It is no easier to answer this question offhand than to answer approximately similar ones in other countries of rich primary production where so much more has been grown and raised than can be sold. Yet it is reasonably clear that a man who is trying to live on five dollars a week cannot buy much meat even at ten cents a pound nor much clothing even if he can secure, as in New Zealand, a good suit of woolen cloth for twenty-five dollars.
The reason he is compelled to try and exist on five dollars a week is that the overseas markets for the primary products on which his country depends have slumped almost to the disappearing point, directly and indirectly depriving thousands of people of their jobs. Were you to investigate the unemployment position in New Zealand you would be surprised to discover how large a proportion of professional men are on "relief work," not only clerks and "white collar" men generally, but lawyers, dentists and even doctors. Such people have always been accustomed to a good standard of living, and so have their ancestors back to the time of the pioneers in this exceedingly youthful land. They have never, or very rarely, experienced even the "bad times" which have been more or less periodic elsewhere, to say nothing of trials such as those of the present. That is why a degree of depression which would little disturb a European country is so upsetting in New Zealand.
But it is not only the failure of overseas markets which has brought woe to the Dominion's primary producers and through them to almost every class in the community. It is the economic nationalism that has been developing to a surprising degree even inside the Empire family. If the Ottawa Conference was expected to check this ever-growing spirit neither New Zealand nor Australia has been able to read anything but failure into it -- though in the case of Australia it is more or less a case of being hoist with her own petard, for she is notorious for her economic jealousy. But about all New Zealand got out of Ottawa was a small concession as to meat, which is little good in the present state of the overseas markets, and a reduction of the Canadian duty on butter. That duty, more than doubled a few years ago, was cut down fifty percent. But in view of the marked decrease in demand even that concession left the position pretty nearly where it was before, which means a loss in New Zealand's export revenue of at least two million pounds a year. It was a hard blow and the moral damage is only less than the economic.
On the other hand, the Dominion's tariff barriers are themselves unconscionably high and the idea of imperial free trade has gained few adherents here. The Government is pointing with pride to a 1933 favorable trade balance of nearly £20,000,000, but a marked falling off in imports accounts for much of that rather than an increase in exports. There is nothing particularly healthful or comforting in favorable trade balances achieved in such fashion and a good deal of food for anti-tariff argument, especially when it is found that New Zealand's imports last year were the lowest since 1912. Moreover, it indicates but too clearly a significant lowering in purchasing capacity.
Yet the Dominion's bank surplus of deposits over advances during 1933 amounted to more than £14,000,000. Such a surplus, combined with a drop below the average annual exports of £6,000,000, discovers a lack of confidence and a temerity in spending among the community's well-to-do classes. This lack of confidence is based very largely on a growing restiveness in regard to the Coalition Government. Reduction of imports would seem to disclose an opportunity and a need for secondary industries, and the immediate result of the establishment and success of these would be a reduction in unemployment and a restoration of former standards of living. Yet no such encouragement is given either by the banks or by the Government. The banks refuse to lend and thus to assist the situation by putting the huge sums on deposit into circulation, and the chief reason for such a seemingly obstructive policy is the encouragement to hoard found in the Government's exchange policy. The Government some eighteen months ago fixed the exchange on London at a 25 percent premium and refuses to heed all the demands to abolish the premium. Another result is the holding of Dominion funds in London.
Thus the country generally is becoming very much dissatisfied with the Coalition Government which, like that in England, was set up as an emergency measure. It combined the former Reform and United Parties (more or less the equivalent of the Liberal and Conservative Parties of Britain), under their respective heads, the present Prime Minister Forbes and Finance Minister Coates. The only opposition is the Labor Party, articulate but too small to be effective and without the confidence of other than the labor element.
New Zealand has, like Australia, borrowed a great deal of money abroad and, also like Australia, spent it recklessly when times were good. It has borrowed so much that it has a per capita debt of more than $900 and its external loans demand no inconsiderable part of the country's entire revenue in interest payments. A large portion of the English debt has recently been "converted" to a lower rate of interest, a proceeding which, called by whatever name or entered into by bondholders with whatever seeming willingness, is nothing more nor less than a form of repudiation. Some of the proceeds of these loans have been applied to relief measures and more to interest payments on other loans.
Probably nowhere in the world is the American experiment being watched more anxiously and with closer interest than in New Zealand. In its essentials it is practically the thing advocated for the Dominion by the large element which holds official policy largely responsible for the slow progress of recovery here. The New Zealand press, with but one or two exceptions ultra-conservative, generally avoiding a definite position on any moot question, timid in the face of the Government and the large interests, banking or otherwise, regards the American procedure askance and is generally pessimistic in its fear of "radical" measures. It is far from favoring innovations so "socialistic" as government control of hours and rates of work. In short, in common with the usual British tendency, nowhere more manifest than in this Dominion, it looks with apprehension upon any departures from time-honored methods.
Nevertheless, a more progressive tendency is becoming increasingly articulate in New Zealand. The younger generation is clamoring for an abandonment of Victorianism -- political, economic and social. It has been said of New Zealand that it is the most Victorian of all British Dominions, and a good portion of its people still take that as a compliment. But the younger business men and most of the intellectuals are becoming impatient of ultra-conservatism and they are hoping with scarce-concealed eagerness for the success of the American experiment in order that they may insist upon its adoption here.
The Dominion's public debt of more than £280,000,000 is a heavy burden for a country whose entire population, including 71,000 of mixed Polynesian blood, scarce exceeds 1,500,000. This brings the per capita debt to about £182, normally more than $900. Interest charges on so huge a sum eat up too much of the nation's revenue for its peace of mind or for its economic equilibrium. Yet, quite as in the case of Australia's astounding national debt of a billion and a quarter pounds shouldered by scarce 6,000,000 people, there seems no immediate prospect of reduction.
And yet despite all this New Zealand has succeeded in keeping the income tax down to seven pence in the pound -- on incomes below three hundred pounds -- as against five shillings in the pound in England. Moreover, the New Zealand exemption is as high as two hundred and ten pounds, with liberal qualifications. The rate rises slowly, generally at about one one-hundredth of a penny in the pound until, at incomes of £1500 or more, the tax becomes about one shilling, sixpence to the pound. And as there are very few millionaires in New Zealand -- very little, indeed, of wealth as understood in America -- the state gets no large revenue from taxes and super-taxes on huge incomes.
New Zealand is perhaps the most thoroughly Anglo-Saxon country of any today. The immigration that supplemented the descendants of the pioneers of only a hundred years ago has largely fallen off during the depression, and the "assisted passage" policy, that brought out more than two thousand in 1926, has practically been abandoned.
This termination of what would seem to be an admirable colonizing policy is due to many factors -- the depression, the fear of increasing the number of the unemployed, the lack of inducement to the individual, and so on. Yet a wise and carefully-planned scheme of colonization appears to be New Zealand's main hope for the future. No one doubts that the Dominion -- the total area of which is about that of Japan proper -- could support under normal conditions at least ten millions. Millions of acres of land at present unproductive yet potentially of value both for grazing and for growing are said to be purchasable at an average of five shillings an acre. This land, according to experts, could at an average expenditure of £5 an acre be made worth four to five times that amount in an equal number of years. Three acres of land so improved is computed to be able to graze two cows in full milk without other feeding. Such are the land possibilities in this richest of producing countries. And it seems that eventually it will be up to Britain to help put her "pet" Dominion on a more stable economic basis by inaugurating, with New Zealand's coöperation, a colonization scheme on a large scale as soon as there is definite improvement in general economic conditions.