The Lee Affair

The Lee Affair was an event that transpired in the late 1930s in New Zealand revolving around Labour Party MP John A. Lee's repeated vocal, public critiquing of his party's leadership. The affair culminated with Lee's expulsion from the Labour Party who then formed his own Democratic Labour Party causing a sizeable rift in party membership.

In-between the 1931 and 1935 elections a division of opinion began to manifest in the Labour Party caucus as to whether loans or credit should be the primary method of funding economic recovery and end the effects of the Great Depression. As a result, financial affairs were beginning to dominate party policy and general Labour concerns. This led to the development inside caucus of a monetary reform group, mainly from the more militant socialist wing of the party under the leadership of John A. Lee.

Throughout the 1930s many Labour MPs had communicated clumsily on the concept of credit leading to confusion as to the party's exact position. This left Labour in a difficult position when eventually elected.

Lee became something of a Young Turk in the Labour ranks. He seemed impatient with the party leadership which he believed to belong to an older generation. During the selection of his Cabinet, in both 1935 and in 1938, Prime Minister Michael Joseph Savage had ignored Lee's personal appeals for insertion, thinking him too wild and unconventional. Eventually Savage compromised making Lee an Under-Secretary.

After finally winning the Treasury benches, the initial sense of camaraderie and intra-party democracy which had given such vivacity to Labour, steadily declined as a result of the burdens of office. The senior leadership seemed somewhat inclined to simply disregard caucus decisions that they disliked leaving some MPs feeling begrudged. Credit theory was one such topic where this was prevalent. It was not always the case and in some instances Cabinet accepted public credit measures for projects, but only after being pushed into it by a large caucus majority. Lee and his socialistic allies, were also greatly influenced by social credit theory. They believed that the government needed to immediately take control of New Zealand's financial system. The fiscally conservative Finance Minister, Walter Nash opposed this, and blocked Lee's proposals to nationalise the Bank of New Zealand.

...
Wikipedia