In Defence of Living Standards: The Federation of Labour and the politics of economic crisis, 1975-1987

This thesis examines the history of New Zealand’s peak private sector union body, the Federation of Labour (FOL), and the politics of economic crisis between 1975 and 1987. It traces how the FOL wielded, attempted to defend, and then lost much of its power in political and economic life over those years. That period marked an important historical juncture, one overwhelmingly shaped by economic crisis, austerity, and then neoliberal reform. The twin oil shocks of the 1970s brought the postwar boom to a definitive end. The simultaneous emergence of high inflation and stagnation eroded real wages, fueled a more contested ritual of wage bargaining, and undermined longstanding economic orthodoxies. The Robert Muldoon led National Government (1975-1984) pursued austerity, to dampen domestic demand and encourage an export-led recovery, a tentative programme of restructuring and liberalisation, and various forms of wage controls, culminating in the rigid 1982 wage and price freeze. The Fourth Labour Government (1984-1990) then embarked on a rapid programme of deregulation, market liberalisation, and severe monetary tightening. For all their stark differences, both National and Labour administrations believed that real wages had to fall in line with the decline in national income, and that workers had to accept a decline in their living standards in the interests of tackling inflation and restoring economic growth. These attempts to engineer a fall in real wages ran up sharply against the FOL’s key objectives of defending living standards and of ensuring that workers did not bear the brunt of the economic crisis. It would also be a hard sell to many workers facing a rising cost of living.

As the political and economic landscape shifted, the FOL was forced to confront a series of vexing questions about its strategy and its role. How, for example, would it fight for and make the case for the maintenance of living standards in the face of an economic crisis and high inflation? What was its economic alternative? How would it respond to the rapid free-market economic reforms after 1984? And how would it reconcile its traditional goals with a new political economy forged by the reforms? This thesis examines how the FOL grappled with these questions. Following an overview of the FOL’s history between its 1937 formation and the crucial 1975 election, this study begins by examining its industrial campaigns against Muldoon’s Government. It concludes with the end of the FOL following its merger in 1987 with the public sector peak body the Combined State Unions (CSU) to form a new peak body, the Council of Trade Unions (CTU) in the aftermath of rapid neoliberal economic reforms. By 1987, the new peak union body would oversee the abandonment of the traditional goal of raising and defending living standards in favour of a new focus on increasing productivity, growth, and a programme of job creation in partnership with government. This shift, characterised variously as capitulation or pragmatism, is often commented on, but rarely examined within the longer story of the FOL’s grappling with the economic crisis from the mid-1970s. Whatever its merits, this shift also took place in a moment of undeniable defeat for the labour movement. It marked the end of the peak body’s status as a central player in political and economic life and the beginning of a precipitate decline in organised labour’s size, bargaining power, and political influence. While providing a largely chronological account of these developments, the study also focuses on three interconnected themes. As the title implies, these are, first, the FOL’s interactions with governments, the state, and party politics; second, the economic and inflationary crisis and policy responses, and third, the question of ‘living standards’ or the ‘standard of living’.

Existing accounts of the FOL have been highly critical, suggesting that it played a largely reactive and self-defeating role, that it failed to adapt to changing economic orthodoxies, or that it failed to mount an effective opposition to economic restructuring and to state and employer attacks. This thesis moves beyond the traditional questions of what the FOL ought to have done. Rather, it seeks to analyse the FOL within the context of its successes, its limitations, and its failures, and emphasises the immense difficulties posed by the pressures of economic crisis and political hostility. It argues that the FOL played a more active and critical role in political and economic life than previously recognised, even if it was not always successful. By examining the FOL’s response to the events as they unfolded, the more prosaic union rituals and debates—from union conferences, negotiations over wages, and debates about economic and industrial policy—come alive as places where opposing visions of the future of the union movement, politics, and the economy were contested and debated, rather than as markers on the road to inevitable defeat. Moreover, a study of the FOL provides a new vantage point from which to view these crucial decades, a way to yield a more rounded understanding of organised labour at a key moment in its history, and a way to illuminate and integrate the important connections between labour, political, and economic history. While wages, inflation, and employment have long been recognised as among the central political, economic, and social questions of the era, scholars have been strangely inattentive to the labour history of these years. Finally, this study suggests that the struggles between the FOL, employers and the Government over those questions between 1975 and 1987 were crucial in the making of the modern New Zealand political economy and political culture.