This year marks 34 years since the passing of the Employment Contracts Act, which was the biggest defeat of the working class in New Zealand in the 20th century. One of the most powerful union movements in the world, on paper, was destroyed almost overnight, a crushing blow from which it has not recovered.
This article traces the rise and fall of the union movement, which is intertwined with the rise and fall of the welfare state, from a communist perspective that emphasises the struggle of the working class. This article also highlights the reactionary role played by reformism. Under capitalism, the interests of capital and labour are in complete contradiction—a contradiction that is normally hidden, but explodes to the forefront in a time of crisis. Then there is no room for negotiation – every reform can only be defended by struggle; every attack can only be repelled by struggle. The working class needs a leadership that understands this basic lesson.A very important part of this history has not be mentioned here: the connection of the working class struggle to the indigenous struggle of Maori. The role played by union militants, communists, and Maori workers in bringing both struggles together deserves its own in-depth study.
Early history
The strength of the unions was built over the decades of struggle of the labour movement in the first half of the 20th century. The first major class confrontation was the 1890 maritime strike, which led to the introduction of a system of arbitration between unions and employers. The 1913 general strike led by the Red Federation of Labour (the ‘Red Feds’) almost brought down the government. Although the strike was ultimately defeated, it united the working class and facilitated a rapid growth in class consciousness. In 1916 the Labour party was formed; 10 years later it had become one of the three main political parties in the country with overwhelming support amongst workers. World events like the First World War and Russian Revolution also left their mark. In 1921 the Communist Party (CPNZ) was formed by revolutionaries inspired by the Russian Revolution.
Following the 1928 election, the United Party (liberals) formed a government with Labour support, with the Reform Party (conservatives) in opposition. Then the great depression hit and the United government moved to implement austerity. In 1931 Labour withdrew their support and the government collapsed. After the 1931 election, United and Reform formed a coalition goverment with Labour in opposition.
The United-Reform coalition implemented austerity and became rapidly discredited. Unemployment skyrocketed. Communists set up the national unemployed workers movement which organised protests and hunger marchers. There were food riots in the main cities. In the 1935 election, Labour swept into power with an absolute majority—53 seats to the coalition’s 19.
The Welfare State
The first Labour government was immediately under the pressure of the workers. Unlike today, the background of Labour leaders in the 1930s was thoroughly working class, steeped in trade unionism. Leading members such as Peter Fraser and Bob Semple had spent time in jail for opposing conscription during the First Worlc War. Compulsory trade unionism was introduced in 1936 together with a whole series of laws on working hours in various industries, overtime, the minimum wage, health and safety, etc. for the benefit of workers. The Finance Act reversed all wage cuts carried out under the previous government.
The Labour government oversaw the creation of the welfare state through the great depression and WW2. Unionism was built into its foundations from the beginning.Important industries were nationalised, and there was massive investment in infrastructure. More than 60% of the NZ economy ended up in the hands of the state. But still the economy remained capitalist. There was no workers’ control over industry. Despite its massive size, the state sector did not call the shots – Labour ministers, in consultation with business organisations, subordinated the economy to the interests of the capitalist class.
The socialist wing of the Labour party represented by John A. Lee heavily criticised the Labour leadership for not going far enough, i.e., for not simply sweeping the capitalists out of the way and moving towards Socialism. A number of them split off to form the short-lived Democratic Labour party after Lee was expelled from Labour in 1940.
At the end of WW2 there was an economic upswing driven by postwar reconstruction and the expansion of world trade. This gave a new lease of life to the system and solidified the welfare state. The gains won by the working class during the Depression years were locked in for a whole historical period.
The economic opportunities after the war meant that the capitalists had no real interest in attacking the welfare state. On the contrary, state industries provided essential infrastructure, and in some cases, a guaranteed market—for example, Fletcher Building made its fortune building state houses.
For their part, the Labour leaders had no interest in taking on capitalism. The welfare state played a political role as the capitalists’ answer to communist propaganda and its popularity in Europe and Asia. The Communist Party of NZ still had a small but significant influence for historical reasons, but there was no question of making further gains; in the eyes of the working class, Labour had delivered the goods. Allegiance to the Labour party among the mass of workers was watertight. New Zealand placed itself firmly in the imperialist camp under the domination of the US; any movement against capitalism would be blamed on communist subversives. Some of the reformist Labour leaders later evolved into the most ardent anticommunists. In 1949, the National party finally won an election, promising to keep the welfare state while doing a better job at managing the economy.
Militant unionism vs class collaboration
The great Waterfront Lockout happened two years into the new National government, in 1951. A dispute over pay and working conditions by waterfront workers led to a lockout by shipowners, and became the biggest single industrial dispute in New Zealand’s history, involving 20,000 workers. The government came down hard on the side of the shipowners and eventually defeated the workers. The Waterside Workers’ Union was deregistered and its leaders blacklisted.
The main reason for the defeat was that the waterside workers’ union was isolated from the rest of the labour movement. The Federation of Labour, the main trade union body, sided with the government and left the workers out to dry. They argued that the action of the watersiders was jeopardising the arbitration system and turning the public against the labour movement. If this continued, all of the benefits recently won by the unions would be in danger.
The defeat of the waterside workers’ union was a defeat for militant unionism in general. The waterfront workers were one of the most militant sections of NZ workers, with a proud history from the 1890 waterfront strike to the 1913 general strike. After their defeat, the union movement was dominated by class collaboration and reformism.
This battle also made its mark on the government and the bosses, who despite the betrayal of the reformist union leaders, still took 5 months to grind out a victory. They would have to think twice before confronting workers head on.
Economic crisis
In the 1970s the temporary period of capitalist upswing came to an end and the world economy went into recession. In New Zealand this was compounded by the loss of its biggest export market. Britain entered the EEC (European Economic Community—forerunner to the EU) and orientated itself away from its ex colonies. At the beginning of the 1970s over half of NZ’s lamb exports went to Britain; by the end, the proportion had dropped to under 20%. Economic growth slowed from over 5% to less than 1%.
A period of struggle opened up as the ruling class tried to offload the burden of the economic crisis onto the working class, and the workers fought back. The general mood of struggle brought other struggles to the fore: the campaign against Nuclear testing in the Pacific; the Maori Land march; and the campaign to boycott the apartheid regime in South Africa.
A reformist Labour government led by Norman Kirk was elected in 1972. The 1973 oil crisis soon followed. The government had no answer to the economic problems, other than borrowing money to cover spending and trying to pressure the union leaders into selling wage freezes to their members.
A National Government under Robert Muldoon was elected in 1975. The crisis continued. Muldoon attempted to force the country out of the crisis by increasing state intervention. He launched “Think Big”, a series of massive infrastructure and energy projects to increase self-sufficiency, following the oil crisis. To keep a lid on inflation, he instituted wage and price freezes.He combined the economic policies with increased repression against the social struggles of the period. He also whipped up racism and culture wars among conservative layers of society, to oppose these struggles. Unemployment was blamed on illegal immigrants. Pacific Islanders were targeted in the Dawn Raids.Muldoon’s economic policies failed, and so did his repression against the working class. Of particular note was the struggle of workers against a wage freeze at the Kinleith Paper Mill in 1980. It ended in a massive victory for the workers.
A section of the capitalists—those linked to property and finance capital—turned against state intervention and Keynesianism, towards privatisation and deregulation. They built links with key figures in the Labour Party to carry out these policies.
The Betrayal of the 4th Labour government
In 1984, Labour was elected in a landslide. Under Finance Minister Roger Douglas, the ‘new right’ economic policies were implemented, also nicknamed ‘Rogernomics’. In the 1990s the term ‘neoliberalism’ was popularised to describe such policies worldwide. New Zealand was a laboratory for neoliberalism that would be rolled out across the West, as well as the Eastern bloc after the collapse of Stalinism. The currency was devalued. Nationalised industries were sold off, many at bargain prices. Tariffs and subsidies for farmers were abolished. Many manufacturing businesses closed. Approximately a third of manufacturing jobs were lost. Unemployment skyrocketed. The working class was stunned. The party whose government founded the NZ welfare state was actively destroying it. The political authority inherited from the past enabled them to go much further along this path than any National government would have managed to do without provoking the workers. For example, consider Norm Douglas: a lifelong unionist, former Labour party president, who in the 1930s and 40s was associated with the socialist wing under John. A. Lee. His son, Roger Douglas, was the chief architect of capitalist counter-reform.
The Labour Party also covered itself by granting reforms in a whole series of secondary areas: a nuclear-free policy; decriminalisation of homosexuality; abolition of the death penalty; and various policies in favour of Maori, women, and the environment. This led to an increased majority in the 1987 election.To a certain extent, the Labour government could get away with their economic policies with the argument that there was no alternative. This argument was also pushed by left reformists like David Lange (the PM), as well as the union leaders, who gave a left cover to the antiworker policies. And on a purely capitalist basis, the argument was correct – there was no alternative. NZ could only negotiate new export markets by free trade agreements that forced our local capitalists to open up to competition on the world market. To stay competitive and keep profits up, they needed to cut costs. The Labour government obliged by slashing taxation rates. Uncompetitive industries were shut down, as capitalists moved their money elsewhere. Factories were turned into warehouses for imported goods. Nationalised industries were restructured to be run as corporations, then privatised. In the process, a small number of capitalists made a fortune, like the merchant bankers Michael Fay and Peter Richwhite.
For example, the NZ Railways Department ran the railways, which were owned by the state. This became a state-owned enterprise (the NZ Railways Corporation) in 1986, run like a for-profit private company. In 1990 the profitable parts were transferred to a new company, NZ Rail Limited, and all its debts written off. NZ Rail Limited was then sold off to a Fay Richwhite led consortium in 1993, and renamed Tranz Rail. Under Tranz Rail, the rail infrastructure was run into the ground, until it was renationalised by the government in 2008, becoming KiwiRail.
The ‘Rogernomes’ were organised around their basic programme – carry out the dictates of capitalism to solve the crisis of the welfare state, at the expense of the working class. It took some time for a coherent opposition on the Labour left to develop, which it eventually did around the figure of Jim Anderton.
The only way to safeguard the gains of the welfare state was to move against capitalism itself. In the New Zealand context, introducing a regime of democratic workers’ control and management in the nationalised industries (which made up over 60% of the economy) would have set the workers up for a direct confrontation with the capitalists who were trying to drag the country in the opposite direction. Such a contradiction would have led rapidly to a pre-revolutionary situation.
Under a revolutionary leadership, the economic power of nationalised industry would be combined with the organisational power of the unions to take decisive control of the economy under workers control, snuffing out the rule of capital. Was that an impossible task? One only has to look at the single-minded effort put in by the class enemy on the other side. A tiny minority of big capitalists managed to tear up the existing order and impose their will on society, in the teeth of mass opposition. Imagine the effect of the left putting in just 10% of such an effort to mobilise the working class in a socialist direction. The workers had already been awakened by the struggles of the 1970s.
Of course, the nature of the Labour party and trade union bureaucracy ruled such a policy out from the start. In the context of the Cold War, reformists had no such perspective; they had no faith in the working class and were easily cowed by red-baiting tactics. The capitalists had swung over to Labour precisely because they knew that under such leadership, their system was in no danger at all. They recruited a group of leading Labour MPs to implement Rogernomics behind the backs of the working class. In hindsight, what unfolded was inevitable.
While the historical authority of the Labour Party gave it the freedom to carry out economic counter-reforms, the Labour government could not directly attack the workers’ organisations. A direct attack on the unions would very quickly undermine the union leaders and push them into opposition. In fact, the union leaders were needed to lull the working class to sleep while the knives came out for the welfare state.
The National Government under Muldoon had introduced voluntary unionism in 1983. Some unions were severely weakened as a result – those where the union was virtually indistiguishable from a human resources department. Those that were not affected were unions that had built up their authority among the workers through class struggle. Many of the working class struggles of the 1970s and 80s were led by union militants on the ground – in particular, communists.
Communist influence in the union movement persisted, despite the general anti-communist atmosphere of the cold war, and the fact that communists were a tiny minority. A number of union officials were members of the USSR-supporting Socialist Unity Party (SUP), which had broken away from the Communist Party of New Zealand (CPNZ) when the latter aligned with Mao in the Sino-Soviet split. This included Ken Douglas who became the head of NZ’s union movement in 1988. In practice, the SUP was a reformist group that did not seriously oppose the Labour goverment. The CPNZ had a working class composition and its militants were involved in many of the struggles going on; a number of them played leading roles in strikes, the anti-apartheid struggle, and the occupation of Bastion Point. But they did not have the mass forces to lead the working class in a fightback against Rogernomics. The same was true of smaller Trotskyist groups.
The right wing union leaders, instead of fighting back, acted as a left cover for Labour’s anti-worker policies. They preached that the only realistic course was for workers to make sacrifices in the national interest. After Labour’s reelection in 1987, the Council of Trade Unions (CTU) leaders began promoting a “compact” with the Labour government. In practice, it amounted to meaningless consultation with Labour cabinet ministers who had earlier put the boot into the working class.
But workers patience had run out. There were protests against Rogernomics, and mass opposition to the “compact”. The pressure from below was reflected in the split between Lange and Douglas at the top of the Labour government, and the split off of Jim Anderton and many Labour party activists to form the NewLabour party.
The class struggle expressed itself as a struggle inside the Labour party, paralysing the government. The National party remained on the sidelines. Lange resigned as Prime Minister and was replaced in quick succession by Geoffrey Palmer, then Mike Moore. In the November 1990 election, Labour won only 29 seats, losing to National in a landslide on a low turnout – the worst result for Labour since 1931.
For all their sacrifices, workers were rewarded with 2 recessions – one in 1987 following the stock market crash, and another one in 1990 following the first Gulf war. Labour had argued that these sacrifices were necessary to combat rising inflation and unemployment. Yet in 1990 inflation was 7% and unemployment was 10%, rising to 25% for Maori workers.
Adding insult to injury, a number of individuals had become super rich out of the privatisation process, and were flaunting it all over the place, like (yet to be knighted) Michael Fay with his failed America’s cup campaign. The backlash against these nauseating displays of wealth was dubbed “Tall Poppy Syndrome” in the media.
For their historic betrayal, Labour lost 3/4 of its membership. It took until the 1999 election to recover its electoral support. But its pre-1984 political authority has never fully recovered.
The Employment Contracts Act
The National Government inherited the 1990 recession and a crisis in the Bank of New Zealand, which it bailed out to the tune of hundreds of millions of dollars to avoid collapse. Then it turned its attention to the union movement.
Labour had deregulated the economy and privatised whole swathes of nationalised industry, but the labour market remained highly regulated. There was a system of national awards in which union and employer representatives would negotiate conditions across an entire industry. This set baseline working conditions for every type of job. For the capitalists, this was unacceptable.
The union leaders had played an important role in pacifying the working class under Labour. Now that the dirty work was done, they were no longer required. The unions were now an obstacle. The 1991 Employment Contracts Act was a direct attack that smashed the power of the unions. National awards were torn up, to be replaced by individual contracts and collective agreements negotiated with a single employer. All strikes were outlawed except when a collective agreement expired.
The working class was not going to accept this lying down. Defeated on the electoral plane by Labour’s betrayal, they were ready to move into action to kill the Employment Relations Bill, before it passed into law. Instinctively, they moved towards a general strike.
But the CTU leaders, steeped in the most utopian and cowardly reformism, still imagined that they could negotiate a way out, i.e., prove to the bosses that they were indispensable for bringing workers and bosses together. In vain did they try to convince the bosses of anything, who simply treated them with contempt. In vain did they try to paper over the growing split in society along class lines. They spent all their energy trying to convince the workers not to fight. Apparently the bill could only be “opposed”, not defeated. Workers would have to find ways to work within the Act.
Despite the lack of leadership from the CTU, between February and April 1991 mass meetings and demonstrations were held up and down the country. Wildcat strikes broke out in many workplaces and there were increasing calls for a general strike. It is estimated that around 300,000 workers were involved in actions against the employment contracts bill. It was the biggest mass movement of the NZ working class in history. But without a centralised leadership, the energy of the movement dissipated.
The union leaders had decided against a general strike. But such was the polarisation in society that the growing movement had a real chance of escaping the control of the union bureaucracy, who were increasingly being exposed as the cowards they were. NewLabour under Jim Anderton criticised the union leaders for not doing enough. The pressure of the working class from below is illustrated by the following anecdote. The Communist Party had come out strongly for the general strike. At a mass meeting of thousands of union delegates in Auckland, Communist Party militants were physically barred from addressing the meeting. The call for a general strike at that meeting would have met with an enthusiastic response and quite possibly have set in motion a different chain of events, led from below. For the reformist union leaders, this was a nightmare to be avoided at all costs; they were not going to give it a chance.
Workers instinctively knew that a 24-hour general strike was not enough to stop things. The ‘People’s Voice’ (the Communist Party newspaper) quotes workers saying that the general strike had to last however long it took—until the government was forced to withdraw the bill. However, an indefinite general strike poses the question of power in a fundamental way: who controls society? Taken to its natural conclusion, such a general strike would not only have killed the bill, it would have brought down the government. (This is precisely what happened in France a few years later in 1995, when a general strike against a pension reform bill brought down the government of Jacques Chirac.)
Aftermath
After the Act passed on 15 May, there was demoralisation in the workers movement, and the bosses quickly went onto the offensive. Following the defeat of the unions, National passed the “Mother of all Budgets” in July – another massive attack on the working class and poor. Together with the ongoing recession, this compounded the defeat.
Over the next few years, union membership nosedived. Many unions disappeared or amalgamated. Non-union and casualised jobs with worse conditions proliferated. Strikes hit an all time low.
The workers movement only started to recover in the mid 90s, some time after the economy started growing again.
The National party stayed in power until 1999 when a Labour government under Helen Clark was elected. Since then, Labour has been in government for 15 of the last 25 years, but there have been no significant changes to our labour laws. Labour governments have invoked the welfare state in speeches, but talk is cheap—even the National goverment under John Key could pay lip service to the welfare state. Apart from some reforms here and there, they have made it clear that there is no going back. And in fact, there is no going back. The unique conditions of the postwar period that allowed NZ to develop a generous welfare state do not exist.
As the welfare state becomes a distant memory, a whole generation has grown up. The world of Generation Z consists of one crisis after another: climate change, terrorism and war, the global financial crisis and the Covid-19 pandemic.
We are currently in a recession with a National-led Government at the helm, which will be forced into attacking workers. Compared to the past, the political and ideological authority of reformism among the working class has never been weaker. Explosions of working class struggle can rapidly escape the control of the unions and labour. Major struggles may completely bypass them. These days, whole layers of the working class, especially in the private sector, and especially among migrants, are outside the union movement. This includes some of the most exploited workers in construction, hospitality, and tourism.
Our aim is to build a Communist movement that can intervene in upcoming struggles over the coming years and decades, and provide a leadership worthy of the working class. The historical task of the working class is to overthrow Capitalism, which is at a complete dead end on a world scale.
The crisis of the system will give rise to explosions all across the world. We can confidently say that the biggest mass movement of the NZ working class lies in the future. Under a revolutionary Communist leadership, such a movement will be unstoppable.
Not a return to the welfare state, but forward to Communism!