The Great Crash: The Short Life and Sudden Death of the Whitlam Government - 9 November 2005
The Great Crash: The Short Life and Sudden Death of the Whitlam Government
9 November 2005
He turns the clock back one year from the election night in 1975 to a meeting at the Lodge where a draft executive council minute was being put together to authorise the US$4million loan borrowing for temporary purposes by the government for what it said was national purposes; the so-called loans affair. And in many ways the loans affair was the bellwether of the government, 1972 to 1975.
Elected after 23 years in opposition, it came to office at the end of the second long economic wave of the twentieth century. The post war one which ran from 1947 to 1974. It was very bad luck to arrive just as the party was ending. But by 1972,
The post war basis of economic wealth had begun to seriously peter out as the Whitlam government came to power. The government was made up of people who had spent their whole lives focusing on the distribution of wealth, needing no mind as to its creation; but given the economic times, then reminiscent of the late 1930s, economic expertise was again being called for.
The distorting effect of the DLP, through Labor’s long period in opposition, even though Labor was getting well over 50% of the national vote occasionally and did so on a couple of important occasions, kept Labor out of power. But an inability to form a government owing to the preponderance of the conservative vote in
There was a very great confusion between ‘means’ and ‘ends’. Some of the ends, of course, were long overdue.
- The end of the White Australia policy
- The embrace of an independent foreign policy
- A belated celebration of Australian culture
- The withdrawal from Vietnam
- The end of colonialism in Papua New Guinea
- The establishment of a principle of comprehensive national health insurance and health provisioning
- A more adequate and fairer social security system
But as well as that, there was a wish list by ministers who had been waiting many years to finally get an opportunity to do things. Some famous ones come to mind.
The old Australian Defence Model which, of course, Australia had for over a century, was in decline. You have got to remember that in 1900
It started to break down just about the time
The wages system became even more rigid, with national wage cases based around wage inflation indexation. So, what little bit of flexibility there was within the award system and within sectors, evaporated with the onset of inflation and with the public sector as the wage pacesetter. The unions, the ACTU, went in hard for wage indexation, which essentially applied the CPI to wage adjustments. So within the wages community, it didn’t matter whether you were good, bad or indifferent, you were locked in to a much more rigid system, with little possibility of increased productivity arising from it.
The fact was that the so-called Australian Settlement was in need of dismantling. And that task would have to wait for another Labor government a decade later.
The mixed economy and the hankering for national planning was still part and parcel of Labor thinking in the 1970s. The Labor Party then, with its ideological confusion and the lack of economic understanding, was still considering centralised economic planning. There would never be a Labor Party economic document that didn’t have the magic phrase ‘economic planning’ in it. And then you had the Left running around talking about the success of east European states in economic planning. And I forget the name of the Left journal;
But the problem was that the people on the right of the party had developed no economic framework of their own such that they were bumped around by these debates. At national conferences they would not really say, not only have we a mixed economy, but what we want is a smaller and better public sector, not a larger one, and a larger and stronger private sector with more employment. These phrases were utterly unutterable at these kinds of events.
So we had this debate going on, and of course, in those days, the barrenness of the Soviet structure had not yet been fully revealed and because the Soviets were pumping money into parts of eastern Europe, places like
The one truly internationally competitive set of industries we had – the mining and agricultural sectors – carried the dead weight of the tariff and put upward pressure on the exchange rate. In later days, I was the Shadow Minister for Minerals and Energy, and much of my economic framework developed during this period, when the one thing we truly had which we could rely upon, were those industries.
The Labor Cabinet 1972 to 1975 had no overarching philosophy. Certainly no economic one. And the meetings, of course, were mayhem. Twenty seven ministers all having their say. Much of it entirely undisciplined. As one of the few people who sat through the Cabinets of those years and of the later years in the 1980s and 1990s, the difference could not have been starker. It was like comparing a well-meaning but ambitious group on a municipal finance committee with the people running the re-purchasing operations of the Bank of England. And you may think that is hyperbole but it is, in fact, not. In fact, in the Labor government of the 1983 to 1996 years, that government was more disciplined than the Bank of England. We had outlays growth lower than any OECD country in the post war years. The fiscal consolidation in
And the Liberals, of course, out of office after 23 continuous years were already trying to refuse supply after eighteen months of
If the commentary is, whenever the Liberals think they have power, or whenever the government, a Labor government in the House of Representatives becomes unpopular, it is within their right to get the government to an election and have it defeated. They thought it was their right to try and chop it the moment it became unpopular.
Gough appointed Kerr. The thing about these kinds of appointments is that one should always look long and hard at who these people are. What does the man standing before you stand for? What is his claim to fame? What does he say and what does he do? I think any wise Prime Minister undertaking these kinds of appointments, whether it is for the governor generalship or for the High Court, should look behind the screen to try to see, to try to discern what you are dealing with.
I don’t believe that Gough ever thought or would have reasonably thought, that the so-called reserve powers would have been used by any governor general against a government enjoying a majority in the House of Representatives. And against a government which had the confidence of the House of Representatives. But Kerr’s treatment of Whitlam was completely devious.
And a little known fact. I attended with Gough the last meeting of the executive council with
I waited with Smith outside in the hall while Gough had his meeting with Kerr then they called me in and we signed the documents. It was all bonhomie. All jolly. As we left the Governor General’s office and walked down the long corridor towards the entrance with Kerr, Gough said to me ‘look at that leonine mane’; this was Kerr’s shock of white hair. Hardly the kind or remark you would make about someone who was about to dismiss or execute you.
So I got into the car. Gough sat in the front and turned on some music and I was in the back and I said ‘well, Kerr seems alright Gough’. And he said ‘oh he’ll be alright, he’s entirely proper’. That was on Thursday afternoon about and of course, on the Tuesday the government was dismissed.
Of course, the great flaw in Kerr’s tactic was that
You know, that the House of Representatives immediately carried a vote of no confidence in
Now, the fact is, we had seen all of this before with
This was not the case here.
Here, we had the position where a pumped up bunyip potentate thought he might dismiss the elected government. To use the powers a king had declined to use.
On the day, I was a minister, though a junior one. Gough never quite liked the NSW Right, even though we anointed him and crowned him. And as I was one of the guys in the dark suits from Sussex Street I was also kept at arm’s length. I told
As it turned out Kerr more or less got away with it. Not in moral terms but in constitutional terms. And lest you think that my view was on some way anti-constitutional, as to that kind of advice, when it was my turn to recommend a structure for the republic in the House of Representatives as Prime Minister in 1995, I recommended a model that maintained the reserve powers.
There has got to be some figure in the system able to resolve deadlocks between the Senate and the House of Representatives. Because with a proportional voting system in the Senate these days, as the population grows, so too will the House of Representatives. And with the nexus in the constitution, the Senate must be near enough to half the size of the House of Representatives, so the Senate will grow in numbers.
As the Senate grows in number, the quota needed to elect each senator will be lower. So all sorts of flotsam and jetsam will roll into the Senate and you will have periods of instability. There has to be someone on the top of the system who can resolve such impasses.
Kerr did not create the problem. It was created by
But he too inherited the post war slump which began in 1974. He arrived in 1975 while the next wave in the twentieth century did not begin until 1982. So he had a very poor period through this, aided and abetted by an ordinary government and need I say, a very ordinary treasurer, who had no hope of dealing with wage inflation and stagnation. Stagflation.
In fact, his Treasurer,
These days he trots out wages growth figures about his years, of course, created by us, the new wages system of productivity based enterprise bargaining and talks about the decline in wages in the Hawke years, which was in fact, the Hawke government doing the nation a favour repairing the mistakes of
So it was an ill gotten government and
So, there has to be a lesson in all that. I think one of the lessons in it is this.
The model I introduced for the republic I recommended that we have a president appointed by the houses of parliament. Because
Now people say the answer is to codify the powers. But to try and write down all the contingencies that may arise between the House of Representatives and the Senate or in a national emergency, so as limit the powers of the presidency is nigh on impossible. Once popularly elected, that task is unfathomable.
In the end these powers are best left other than codified. To codify them is to make them justiciable. These matters should not turn on the attitude of a judge. Someone has to be able to resolve a deadlock but let us not let that person hear voices in the way that
So, it was a momentous period. Politics is, of course, about making the turns. It is not about simply running the country. The country more or less runs itself. Politics is about change and only about change.
Whitlam made the turn. He made the turn in our sense of ourselves, in our foreign policy, in our culture, but his party was not up to it. The cabinet was not up to it. The people he had running the economic portfolios were not up to it. And as a consequence he led himself into danger at the hands of an opportunistic opposition and an unscrupulous Governor General.
That’s what happened. And one may say well, maybe Gough should have had a better economic set of ministers. I don’t think that in the end it would have mattered much because they’d all grown up in the immediate post war years. Most of these people were elected to parliament in 1948 and 1955, or something like that, through the growth years. They assumed, growth was always going to be around and their lives were about focusing on distributional matters. And Gough’s was too.
By the time the Hawke government came to office it was clear to us that the secular decline in the terms of trade was virtually a permanent feature of the landscape. That inflation remained at double digits, that the wage share was out of line, that the financial market was sclerotic, that the exchange rate was poorly set, that the tariff was a structural problem and as a consequence, a group of ministers decided to change the basis of Australian wealth. This would never have happened in the Whitlam government no matter who was the treasurer.
So, we give marks for the turn. And the turn was, in 1972, to give
Let’s render to Caesar the things that were Caesar’s and not others. That is, let us give credit where credit was due but not otherwise. This book on this thirtieth anniversary is an important milestone in that.
I am here out of respect for
I congratulate the publisher