NEW ZEALAND'S Labor Government faces its third and severest test in the December elections. Labor was chosen in 1935, for the first time in the Dominion's history, largely as a result of the inability of the conservative Coalition Government to solve the problem of the depression. It has since been returned twice, though each time by a decreased majority. It continues to enjoy the almost unanimous support of New Zealand labor, but this year it is opposed by a strong combination calling itself the Nationalist Party -- a coalition of all conservative elements, including most of the primary producers and backed by practically the entire press.

The contest is sure to be close, with very small odds favoring the present régime. Labor has alienated many supporters by continuing the rigid import restrictions that for nearly ten years have kept Dominion markets short of many things New Zealanders once had in plenty, by an admitted inability to reduce taxes since the end of the war, by a refusal to terminate rationing of food and apparel, and by a recent realignment of electoral districts somewhat in the fashion known in America as gerrymandering. The opposition has made the most of all this, though the Government does not lack facts and figures in defense.

Conservative interests likewise bitterly opposed the recent taking over of the Bank of New Zealand, an institution almost as old as the country, whose shares the Government bought up at its own price. The Government denied that this was merely a Socialist gesture and a preliminary move toward the nationalization of large industry, and insisted that control of the principal banks was the basis of its highly successful housing scheme through which more than 20,000 new homes for low-income groups have been built in a decade, 14,000 of them during the war years, despite the dearth of materials and labor.

This is a point of general interest, since there is a possibility that the British Labor Government may proceed along similar lines. The New Zealand plan embraced the borrowing from the Reserve Bank -- established by the Coalition Government in 1934 and taken over by the incumbent régime several years ago -- of the money with which to build the houses, at 1 percent interest. The cost was upward of $100,000,000, a large sum for a population of less than 1,700,000. The rental for the houses is hardly more than nominal, yet it meets the low interest charge on the borrowed money. The houses are built in accord with the highest modern standards of construction and lack nothing except central heating, which the New Zealanders do not like and which they say is unnecessary in a climate that has no extremes. They are available to all classes of the community with no discrimination, income bar or means test.

Despite this construction, the housing problem is acute, as elsewhere, and the Labor Government promises to accelerate its building program. It can take the money necessary to do it from the two government-controlled banks. Commenting on the housing scheme, Finance Minister and Deputy-Prime Minister Walter Nash says, "Probably no single activity in which the New Zealand Government has engaged during its ten years in office has brought more joy and brightness into the lives of thousands of its citizens. We look forward to a tremendous extension of this activity, not only in our country but in every country that has pledged its effort and resources to the task of making the postwar world a better place in which to live for ordinary men and women."

Next to the housing achievement, the Government takes pride in the Social Security Act, which was passed by Parliament in 1938. Although this was a marked advance on previous legislation, it was not an innovation by the Labor Government. New Zealand, in 1898, was the first country in the world to introduce old-age pensions. A conservative government established widows' pensions in 1911 and family allowances in 1926. In the two-score years before the present government took office, health and hospital facilities, infant and maternity welfare services, free school dental care, and certain other public services were giving the vigorous little Dominion -- the "Brighter Britain of the South," as its people like to call it -- a reputation for advanced social legislation.

The 1938 Social Security Act consolidated all measures listed above and added other benefits to safeguard the people of New Zealand against disability arising from old age, invalidism, widowhood, orphanhood, unemployment, sickness and occupational disease. Medical, hospital and maternity benefits were expanded. And, out of the abundant supply usually at hand in this country, free and unlimited fresh milk was made available to all children of the low-income classes.

There is no "means test" for health benefits of any kind. Every person upon reaching 65 qualifies automatically for the old-age pension, without income or property restrictions. A postwar increase has brought this payment to the sum of two pounds a week. This is about $6.50 in U. S. currency, and while it is admittedly inadequate, it is nonetheless the equivalent of about $12 a week in the United States, taking into account the great difference in living costs, especially in the cost of food. A recipient may have an additional pound from any source, or an interest in a mortgage, annuity or life-insurance policy; and, in addition, he may possess up to £500 in cash or in any form of security without affecting the benefit.

The social security scheme is expensive, and a tax of a shilling in the pound of every salary or wage, however low, is required to maintain it, in addition to all other taxation. This is undoubtedly a burden in some cases. Taxation generally is high. On an income of £400, the income tax is £58½; on £1,000 it is £263½; and the recipient of an income of £10,000 pays the government the sum of £7,587 and 18 shillings. Few New Zealand incomes reach this figure, for New Zealand is a country without either extreme poverty or much large wealth.

There has been much protest at these taxes, especially since the war, when the Government has failed to commit itself to tax reduction. Labor's opponents argue that New Zealand, which depends mainly on primary production and is consequently endangered economically if foreign markets fall off, as in the early thirties, cannot afford such expensive housing schemes, nor such far-reaching social benefits. It is charged, for example, that the free-medicine plan which permits anybody to go to a doctor and have his fee paid by the state tends to make doctors richer -- especially those with lower-paid practices -- and the state poorer, inasmuch as it tempts people to seek medical advice for trifles. It is also charged that much of the social legislation is in reality class legislation, in that it eases the burden of the poor by taking from the wealthy. Indeed, there is no doubt that it does just that, and is intended to, for the Government takes the categorical position that "the first charge on a nation's wealth should be the care of the old because they have worked in their earlier and fruitful years for us to enjoy the standards we enjoy today; of the young because unless we care for them the future will not be provided for; of the ailing because they cannot care for themselves." And Mr. Nash adds, "New Zealand has become an enterprising democracy which, though young, is advanced in social legislation, in labor laws and economic policies designed to give the fullest possible freedom under a collective and coöperative organization for production and distribution."

Defending drastic import restrictions, the Labor Government points to a sterling reserve against emergencies of £85,000,000 in London. In the same period deposits in New Zealand trading banks rose from £66,000,000 to £118,000,000, and Post Office Savings Bank deposits increased to £40,000,000 in five years. The ratio of bank advances to deposits fell a third in this period, and net retail sales taxes expanded from £3,480,000 in 1937 to more than £4,500,000 -- the total at present -- despite shortages in many consumer lines.

American consumers will be interested to hear that butter in New Zealand -- rationed, but not severely, and always obtainable -- costs 22 cents a pound, leg of mutton 14 cents, roast of beef 15 to 25, cheese 15, a two-pound loaf of bread 8, milk 8 cents a quart, oatmeal 26 cents for five pounds, and flour 68 cents for 25 pounds. Meat is rationed but is always obtainable in all grades.

The average New Zealand wage runs about to the equivalent of $20 to $25 a week. Waterside workers, known in New Zealand as "wharfies," are the best paid of manual laborers and with overtime often make twice the foregoing sum, for considerable periods. Yet they are the most troublesome of all workers, striking on trivial pretexts, causing delays in the loading of perishable goods, and sometimes tying up essential food shipments to the mother country. The Government is accused of failing to adopt firm measures with them, or with the coal miners who are likewise troublesome, out of a fear of losing political support needed in the forthcoming election. Beyond doubt there is some ground for these charges, and it is permissible to suggest that the situation holds danger of the development of a disastrous class-consciousness. But if the election returns the present Government to office, there is every likelihood of legislation looking to a firmer handling of industrial disputes.

What is the effect of this advanced social and economic legislation upon the national economy as a whole? The workers suffered in New Zealand during the depression of the thirties, and it was obvious to any objective observer that the Government of that period was lacking in social consciousness. The workers certainly had a case. They submitted their case to the final court of appeal -- the people of a country that was, and is, as truly democratic as any in the world -- and it was approved. But the point is that all the people who did the approving were by no means workers, and they are as much entitled to consideration as is any other class.

That is the crux of the present position. And because it is, because a government of the workers must finally be judged, not alone by what it does to benefit the working class but by what it does to benefit the whole country, liberals everywhere have been watching New Zealand's Labor Government closely. The question is whether, by turning to distinct class legislation and thereby engendering an aggressive class-consciousness that can in the end ruin any country, it will bring labor into general disrepute as a political force. The opposition in New Zealand, of course, charges that the Dominion's Labor Government has already fostered such class-consciousness. So far the charge is not well-grounded; but the danger that such predictions may prove valid is nonetheless apparent.

The coming elections have evoked a world-wide interest, for they constitute one of the most significant tests of the Socialist cause that it has yet faced. The New Zealand Government makes little use of the term "Socialism" and has never really issued a specific challenge to free-enterprise capitalism. Nevertheless, it is in fact and in effect Socialistic, and the result of the voting in December will be either a definite encouragement to Socialism throughout the world or a clear setback.

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