Seeds of
disaster
Gough Whitlam
in power
By TOM O’LINCOLN
This first
appeared as part of a longer piece entitled “The Rise and Fall of Gough Whitlam”,
in Socialist Review, no 5,
******
WHITLAM’S
famous “It’s Time” slogan was more than clever marketing. While many ALP
supporters, like Magpie fans at the 1990 Australian Rules grand final, didn’t
dare believe in victory until the very end, still there seemed to be something
virtually inevitable about the 1972 Labor win.
When the old bastard retired in 1966, industrial disputation was at low levels. The unions seemed largely cowed by Penal Powers that could be used to virtually ban strikes. Yet only three years later, the curve of industrial struggle had begun rising sharply. Long years of prosperity had finally begun to give workers confidence in their ability to fight, and an awareness that employers could afford to meet their demands. The more militant unions had begun to believe the Penal Powers could be broken, and Communist Party secretary Laurie Aarons was displaying no astonishing predictive powers when he remarked that “the time has come for a determined, militant confrontation with the employer-arbitration-Government class structure.” (2)
When Victorian Tramways Union leader Clarrie O’Shea was jailed in 1969, a near general strike secured his release and the Penal Powers became a dead letter. This opened the way for a sustained union offensive for better wages and conditions.
A symptom of
the times was the rise of Bob Hawke, colourful and aggressive, as head of the
ACTU. Hawke was never an industrial militant and was actually a good friend of
employer advocate George Polites, but his larrikin style suited the mood of the
union membership, which was clearly moving left. Another sign of change in the
working class movement was the walk-out from
As continued economic growth drew more and more women into the workforce, they gained confidence in their ability to fight for equality. Angered by a 1969 equal pay decision that offered mostly token reform, Communist Party member Zelda D’Aprano and two friends chained themselves to the doors of the Arbitration Commission, an action that marked the beginning of the women’s liberation movement. The new movement fought for free abortion on demand and 24-hour child care as well as equal pay, and braved initial ridicule to educate society on the ways in which sexist language and the portrayal of women’s bodies were used to oppress half the population. The movement also supported struggles by working women.
The
radicalisation in sexual politics was infectious. Not only did some men begin
to change their attitudes, but a Lesbian and Gay movement arose following
similar developments in the
So were
Aborigines. As early as 1965,
A growing
ferment gripped the campuses. At
The 1966 election campaign was a turning point for the emerging radical movements. By this time Australia had troops in Vietnam, and groups such as the Youth Campaign Against Conscription and Save Our Sons were organising protest actions. Labor leader Arthur Calwell’s campaign was sharply anti-war and the activists worked hard for an election victory. When the ALP was trounced, some of the radicalising youth turned in the direction of revolutionary politics.
A number of trends drew together from the mid-sixties. With millions of workers engaging in strike action, class struggle demonstrated that the power of capital and the state could be challenged on a mass scale. Meanwhile frustration with the conventional political process, which became acute with the 1966 election result, found an outlet in an increasingly radical anti-war movement. These two arenas of mass struggle provided the context within which smaller movements – students, draft resisters, Aborigines, women and gays – could develop confidence and move leftward.
The anti-war
movement grew by leaps and bounds. Despite a scare campaign by the Liberals,
who called the marchers “political bikies pack-raping democracy” (3) the 1970 Moratorium marches mobilised some
120,000 Australia-wide, and made it clear that public opinion was moving
against the war. While the movement was not organised along class lines, it
offered opportunities for workers to act in their own right. Seamen on two
ships, Jeparit and Boonaroo, refused to handle cargo bound for
Labor’s
social base was moving left, but the ALP did not follow suit. Arthur Calwell
resigned as leader after the 1966 defeat and was replaced by Gough Whitlam.
Whitlam began to distance himself from Labor’s previous commitment to withdraw
from
Whitlam was
taking other steps to give the party a more “moderate” image and above all to
legitimise it amongst the business community. To this end one key task was to
muzzle the “socialist tiger” within the Victorian ALP. Though it was largely a
paper tiger, the Labor left’s pronouncements were enough to perturb the
bourgeoisie; more importantly, powerful unions stood behind it with their
increasingly militant membership. Following a stormy Broken Hill Federal
Executive meeting in 1970, Clyde Cameron spearheaded a rightwing campaign for
federal intervention in
As well as weakening the Labor left, Whitlam needed to directly cultivate capitalist supporters, holding frequent meetings with newspaper barons and other industrialists designed to show them that he spoke their language. The Australian’s Max Hollingsworth reported on one occasion:
Gough
Whitlam strode into the grand ballroom of one
of
If the
bourgeoisie were slowly getting used to the idea of Labor as a viable
alternative, they were also becoming disillusioned with the conservative
coalition. Liberal PM John Gorton’s
nationalistic rhetoric made him seem too much like Labor, leading to talk of “Gortlamism”.
Economic policy was incoherent. By the time the Liberals replaced him with
Billy McMahon, having gone through several Prime Ministers and an equal number
of policy u-turns, they seemed an utter shambles. They were locked into a
losing war in
They also hoped Labor might heal social wounds. The Vietnam war was a disaster and the ALP could end it; the youth were dissatisfied, and Whitlam could offer them new (but politically safe) visions; women wanted a new deal and Labor could accommodate them. Above all workers, male and female, were showing an awareness of their social and economic power, and the ALP argued that its special relationship with the unions could be used to channel and contain the rising tide. In all these areas concessions must be made to militant groupings, and that too was part of the Whitlam program. At the same time Labor offered a new style of nationalism: its call for “resources diplomacy” and controls on foreign capital were popular with sections of the bourgeoisie, and a foreign policy tilt away from Cold War stances could appeal to a more left of centre constituency without jeopardising the US alliance (Nixon himself was moving to an accommodation with China). Thus when Whitlam claimed victory on 2 December 1972, much of the country had high expectations – on both sides of the right-left or worker-employer divides. Only a few Marxists and other malcontents suggested that the contradictions within this seeming consensus could bring the new government undone.
The first Whitlam government
Gough Whitlam never intended to challenge the prevailing social order. He had spelt out his philosophy as early as his 1961 Curtin lecture:
Socialists
should not be content with nationalising where necessary; they should be intent
on competing where possible and initiating where desirable… The sins of
capitalism in
Whitlam’s aim was not to threaten but to perfect Australian capitalism by rationalising the economy, developing the welfare state, and bolstering national capital against foreign rivals. The public sector appeared the ideal vehicle. The public sector’s ability to expand depended on the health of the private sector, but that didn’t seem to be a problem. After all, strong economic growth had persisted through most of the post-war years, despite some very second rate policies on the part of the conservative parties. Whitlam was very clear that his whole program depended on a high level of economic growth, and his 1972 policy speech said it could be ensured by planning:
A Labor
government will establish the machinery for continuing consultation and
economic planning to restore and maintain strong growth. This is the real
answer to the parrot-cry, ‘Where’s the money coming from?’ (6)
On this foundation rested a vast program of social reform embracing housing, transport, Aboriginal affairs, migrants, women, health and the arts. Labor sought to approach these, as well as more traditional welfare concerns, in an integrated fashion. Welfare was not to be a safety net, reserved for a stigmatised minority; it was to be a normal part of everyone’s social existence. Whitlam’s central argument was that
increasingly,
a citizen’s real standard of living, the health of himself and his family, his
children’s opportunity for education and self-improvement, his access to
employment opportunities, his ability to enjoy the nation’s resources for
recreation and cultural activity [and] his scope to participate in the
decisions and actions of the community are determined not so much by his income
but by the availability of services which the community alone can provide and
ensure. (7)
This line of argument could be used to oppose wage rises and was effectively counter-posed to redistribution of wealth. But at the same time it embodied a strand of enlightened thinking, promoting social needs as against individual self-interest and the public sector against the private, that is sobering to contemplate in today’s era of “lean and mean” capitalist thinking.
The early
months of Labor rule were frantic. Whitlam and his Deputy Lance Barnard,
governing by decree, ordered the remaining Australian troops out of
Firstly he sought to rationalise industry. Long years of tariff protection had preserved fragmented, backward, inward-looking industries such as textiles, clothing and footwear. As a result of local-content requirements, the car industry had built up excessive capacity. Labor tackled these problems head on, announcing a 25 percent tariff cut in July 1973 and two revaluations of the dollar. Imports became much more competitive. The idea was to force inefficient firms and industry sectors to close, with capital flowing into more efficient areas. Manufacturing would be made to build on its strengths.
Secondly, he sought to restructure the labour force. While mass immigration had provided a large supply of “factory fodder”, this cheap work force had meant there was less reason for employers to deploy labour-saving machinery. Consequently productivity growth was sluggish. Immigration was therefore to be cut, and labour supply increasingly drawn from the large numbers of married women entering the workforce, as well as from workers displaced from declining industries. Equal pay and child care programs would assist the women, while retraining through the National Employment and Training Scheme (NEAT) would ease workers’ transition from old industries to new. A third reform attacked long-standing government subsidies to industry, while bringing in stronger Trade Practices legislation and a Prices Justification Tribunal (PJT). The first two of these measures moved Whitlam to remark that his was “the first genuine free enterprise government in twenty-three years.” (8) Similarly the PJT was intended to ensure pricing was “rational” in capitalist terms, not to protect workers from price rises. The Tribunal’s chair declared bluntly in 1974 that it was “not designed as an answer to inflation”. (9) Workers soon recognised this and began to joke that the PJT existed to “justify prices”.
Lastly, the government believed it could carve out a more favourable niche for Australian capital in the world economy by controlling foreign investment, and by taking the lead in “resources diplomacy”. Whitlam intended to ensure that “capital inflow is associated with productive investment…and that capital is employed in real partnership with Australian-owned capital. (10) Resources diplomacy was an idea much in vogue in 1973, as a world-wide boom created a sellers’ market for energy and raw materials. Labor’s leading economic nationalist Rex Connor, who thought the country’s potential greatness had been sold out by the “mugs and hillbillies” of the mining sector, set about encouraging exploration and creating a united front of exporters. It seemed an impressive program. But Labor’s hopes for strong growth (they envisaged six or seven percent a year) assumed that Australian capitalism was and would remain fundamentally healthy, and that the capitalist class would remain neutral if not favourable to the government. The crisis of 1974 and 1975 removed these preconditions at a stroke.
Whitlam had
not come to power expecting a dream run with the economy. The new government
foresaw a substantial task mopping up the unemployment inherited from McMahon.
But in fact the jobless total began ebbing rapidly. Inflation gradually emerged
as Labor’s first major economic test. Inflation had been a problem throughout
the long post-war boom, but it escalated world-wide from the end of the sixties,
as a consequence of US war spending in
the
budget is not simply an economic document. It is also an important instrument
whereby we give effect to our goals and aspirations. (11)
How long could Labor maintain this defiant stance? One reason the government was so relaxed about inflation in 1973 was that unemployment, after falling rapidly in early 1973, had levelled off at around 1.5 percent, a level then considered to be on the high side. This suggested demand would remain sluggish, which would inhibit price increases. However the 1.5 percent figure masked severe labour shortages in some sectors. These sectors became particularly overheated as the economy as a whole entered a feverish boom. The consequent prosperity carried Whitlam through the 1974 election, but Liberal leader Billy Snedden’s ability to score points on the inflation issue alarmed the government. A credit squeeze was already in place on Treasury advice, but the Treasury experts began calling for an additional “short sharp shock” to rein in inflation. Whitlam made determined-sounding statements, but his government seemed incapable of biting the bullet. In July 1974, Crean delivered a mini-budget with only a token deflationary content (even so, it was nearly voted down by Caucus). In September he was obliged to deliver a budget largely shaped by Jim Cairns, who had emerged at the head of Treasury’s opponents. The budget speech contained one passage guaranteed to alarm business circles:
Crucial
as the fight against inflation is, it cannot be made the objective of
government policy…The government’s over-riding objective is to get on with our
various objectives in the fields of education, health, social welfare and urban
improvements. The relatively subdued conditions in prospect in the private
sector provide the first real opportunity we have had to transfer resources to
the public sector. (12)
The original perspective had based public reform programs on private sector growth. But as early as September 1974 the government was already reduced to trying to push its reforms through regardless of the state of the economy. Short of mass mobilisation and class struggle of a kind Labor did not even begin to contemplate, this could not succeed, particularly as unemployment was set to rise dramatically and profits were already falling, setting the stage for a major recession.
Opposition
to the Treasury line sprang from a growing concern that the economy was heading
for a downturn. The budget strategy for fending it off contained some hints of
a “social contract” approach: mild economic stimulus to maintain employment
levels combined with appeals to the unions for voluntary wage restraint. Clyde
Cameron was already negotiating with the ACTU about wage indexation. In the
September quarter inflation hit an annual rate of 22 percent. Profits were
declining. The world commodity boom was winding down, and a glut of office
space signalled the end of what had been a spectacular boom in commercial
building. The downturn was exacerbated by the credit squeeze, which was now
really beginning to bite. An increasingly worried government began battling to
rescue the private sector from what it now realised might be a very savage
recession. The credit squeeze was scrapped and further economic stimulus
applied. When Leyland Motor Corporation began reporting huge losses, Whitlam
agreed to a $25 million rescue package, even though 2,600 retrenchments went
ahead. Soon after this the major car companies won government assistance after
threatening up to 10,000 sackings. As investment dried up, Labor swallowed its
nationalist pride and eased controls on foreign capital inflow. The ALP’s
Terrigal conference in early February, 1975 adopted a platform promising “reasonable
returns on investment”, and shortly afterwards
We live
in a society where the determinants, the things that happen in society as a
whole are taking place in the private sector. Now if we’re going to get
activity going, if we’re to get production up, if we’re to keep people in work
or get them back to work, we have to work on the private sector. (13)
The Prices
Justification Tribunal was advised to remember that “a restoration of
profitability is one of the necessary conditions for the solution of the
current economic problems.” (14) But
while Labor’s policies were shifting rapidly, they were still lagging behind
events.
We
might do precisely that. There are still about 250,000 persons unemployed in
Here was a capitalist policy of hand-outs to
the bosses, wrapped up in socially aware rhetoric, which satisfied no one and
convinced the increasingly monetarist establishment that
The loans affair centred on Minerals and
Energy Minister Rex Connor, who saw in the oil crisis of the time an
opportunity to “buy back the farm”. Large amounts of petro-dollars were available
with few strings attached, while a number of foreign mining companies were in
financial trouble. Backed by his departmental head, Sir Lennox Hewitt, Connor
gained authorisation to borrow sizeable sums and go shopping. His inept
dealings with oddball financier Tirath Khemlani, compounded by continued
contact with Khemlani after his authority to borrow was revoked, contributed
greatly to Connor’s eventual fall from power. But his wider policies had also
lost the confidence of the ruling class. The end of the world commodity boom
had made “resources diplomacy” unviable, while his attempts to use the state to
mobilise capital began to be seen as “socialisation” by business interests who
were turning against the government. The government might have survived the
loans affair had its economic credibility remained intact. By July 1975,
however, the Whitlam economic strategy was in tatters, with unemployment
approaching 5 percent and profits plunging. Once again the government was
engaged in an agonizing reappraisal and this was the immediate occasion for
1. We
must never fail to re-employ people who can be re-employed productively merely
because it would add to the deficit. 2. We must not consent to surrender any
significant part of our program…as the result of pressure from the media and
other anti-Labor forces. It is better to be defeated while attempting to
implement Labor policies than to be defeated after surrendering them. (17)
Hayden and McClelland were now installed to
organise a retreat on every front, to placate the bourgeoisie, and in doing so
to forestall the ever-present threat by the Opposition – now led by Malcolm
Fraser – to block supply and force an election. This approach might seem to
have a certain logic. Yet by surrendering to the demands of the political
right, it invited further attacks and thus opened the way for further defeats.
Whitlam later appeared to half grasp this when he wrote: “McClelland’s
accession to the Labour portfolio and Hayden’s to the Treasury convinced our
opponents that our Government had the
best men in the crucial roles and had to be brought down quickly if at all”. (19)
The “new post-Keynesian economic orthodoxy” (20) arrived with a vengeance. In July the
government placed a strict ceiling on public service growth. The start of
August saw telecommunications charges rise. On 19 August Hayden brought down
his budget in a climate of gloom, and announced cuts in almost every area.
Meanwhile McClelland fought to hold down wage increases. The Hayden policies
were strikingly close to Fraser’s. If 1969 had been the year of “Gortlamism”,
commented the Financial Review, 1975
had inaugurated the “era of Haserism”. (21)
Labor’s
social policies
How much was being lost? In terms of social
policy, the early Whitlam Government represented a real, though highly
ambiguous step forward. The subsequent retreat was therefore a misfortune,
though not a tragedy. Traditional welfare philosophy in
Medibank,
child endowment, the abolition of the means test, aged persons’ housing, the
provision of health centres, child care – all thee are of benefit to all
Australians and not just those below the poverty line. (23)
This clearly had its progressive side, but at
the same time it effectively precluded
a redistribution of wealth from the affluent to the poor. In fact, all too
often the government’s reforms favoured the “haves” more than the “have nots”.
The scrapping of tertiary education fees, because it was not a radical enough
measure to really open up universities to large numbers of working class youth,
ended up mainly as a gift to the middle
and upper classes. Increased funding for the arts was a valuable reform, yet we
can hardly ignore the fact that these programs, which primarily affected
sections of the middle classes, survived the Hayden budget far better than
welfare programs. Similarly, the virtues of Medibank couldn’t entirely obscure
the fact that patients choosing private wards were subsidised and had their
medical fees paid.
The Whitlam Government had some pretensions
to empowering welfare clients through the Australian Assistance Program. But in
reality “the Regional Councils for Social Development were often dominated by
members of local voluntary agencies”, who were more likely to be professionals
than welfare recipients; and a critic rightly wrote of the AAP that “community
involvement indecision-making tends to be
middle class and is, therefore, likely to produce benefits for the middle class.” (24) A
short survey will illustrate the ambiguities which dwelt in every aspect of the
Whitlam program.
Medibank was highly progressive. Before 1972, ten to
fifteen percent of the population were not covered by health insurance. The gap
between benefits and actual costs could be considerable as fees for the same
procedure varied greatly, and the private funds set limits on the number of
days of hospitalisation, which placed a special burden on the chronically ill.
Labor’s new scheme went a long way toward remedying these failings. Yet as
Peter Wilenski later pointed out, “power in the health sector remained largely
in the hands of the medical profession”, with doctors’ position as private
entrepreneurs left virtually unchallenged. (25) Indeed, their income from fees rose
considerably. Rather then being a national health scheme, it was a universal
health insurance scheme. The state
replaced the private funds as insurer but the doctor remained a private
operator. Health expenditure increased dramatically, but many of the funds were
spent on higher doctors’ fees. In addition, the government sought to transfer a
portion of the cost back to workers via a 1.35 percent levy, effectively a
flat-rate and hence regressive special tax. This was blocked by the Opposition
in the Senate for opportunistic reasons.
Aborigines got a much better deal from Labor. It should
be stressed that this was not just the beneficence of the government: militant
struggles by black communities had placed a new deal firmly on the agenda, and
the political climate had also been changed by liberation struggles in Africa
and the
Women’s
rights is an area where
Whitlam has received a lot of praise. His government supported equal pay,
introduced maternity leave for public servants, brought in a supporting mothers’
benefit, abolished the luxury tax on contraceptives and at times seemed
committed to major child care programs. Unfortunately, all of this impressive
list is subject to qualifications. As with Aborigines, women had won many of these demands in struggle.
At the same time, many of the reforms suited the needs of business, which was
keen to draw women into the work force. For example a 1971 joint study by the
government and the Clothing Manufacturers’ Council had supported subsidised
child care and other inducements for women to work. Equal pay, we should note,
was granted only formally. Many employers simply reclassified females to avoid
paying them more. Struggles around the issue continued under Labor, even
embracing previously quiescent sectors such as insurance staff. With regard to
reproductive rights, Labor’s enlightened attitude to the pill must be weighed
against its retention of the “conscience vote” allowing MPs to oppose abortion
rights. And while the supporting mothers’ benefit was an advance, it also
reinforced traditional attitudes that women should depend on male breadwinners,
since a single mother had to seek maintenance from her child’s father, and men
were not eligible for benefits. Meanwhile child care was a battleground, with
Whitlam making promises then postponing expenditure, or channelling it to
pre-schools (which generally entailed half-day care; often for only one or two
days a week). Despite much grand rhetoric, a lot of Labor’s record could be
summed up by the Financial Review’s
1973 comment that while the government was “often attacked for its frenetic
activity…somehow women seem to have been lost in the frenzy.’ (27)
A critical analysis of other social policies
would take so much space that a few hints must suffice. The government scrapped
the last relics of White Australia (following trends set by the Liberals, and
for reasons reflecting the needs of business). However Whitlam also cut the
migrant intake, and shifted the emphasis to family reunion. Family reunion was
all right in itself, but the combined effect ensured that few non-whites were
admitted. The National Employment and Training Scheme provided training, but
made few courses available to the unskilled which would help them climb the
occupational ladder; mainly it provided stenographic courses for women which
reinforced their traditional status. Finally, urban and regional development
programs aimed to lessen regional inequality, and in practice did benefit
working class communities. However they were based on a philosophy which
explicitly moved Labor away from attacking class
inequality: Whitlam’s 1972 policy speech declared that “in modern
As well as being contradictory in content, the social programs played an
important role in co-opting, and hence demobilising, social movements.
Aboriginal, migrant or health worker activists found themselves inside
bureaucracies, where they administered programs that somehow never delivered
what they promised. Women were drawn into establishing half-way houses, then
forced to devote all their energies to staving off funding cuts. And when
social movements got their events funded it strengthened the middle class
currents within them, as at the 1975 Women
in Politics Conference where non-whites were grossly under-represented.
The National Times commented:
Elizabeth
Reid was sorry about it, a special effort should have been made to inform both
the Aborigines and the migrant women, but it wasn’t. A pity because they missed
out on the handsome across the board paid to a largely white, middle class
participation. (29)
The
Whitlam Government and the working class
The Prime Minister wanted to help workers
primarily as part of a wider, classless quest to “liberate the talents and
uplift the horizons of the Australian people.” (30) Yet there were
other ministers with pretensions to representing the working class in a more
immediate sense. Most prominent was Clyde Cameron, former shearer and
Australian Workers’ Union infighter, who served in the Labour portfolio for
most of Whitlam’s reign, and launched all its key initiatives in that area.
With Cameron, and Lefts like
In reality they were simply labour market
adjustments to meet the longer term needs of Australian capital and its state.
Parental leave, along with equal pay and child care, was intended to help women
participate more fully in the workforce. As for the extra holidays and some
other public service reforms, Whitlam later explained that the furore about “pace-setting”
was over-blown. “The reality…contradicted the publicity. Federal public
servants were merely acquiring those conditions to which most of their state
counterparts had long been entitled.” (31) In any case, these concessions were being
made to a working class that had shown its ability to win major gains in the
field. The Whitlam regime had been allowed to take power partly to make just
such unavoidable concessions, and employers’ later complaints on this score
were essentially dishonest.
Much is also made of the support Cameron and
other ministers occasionally showed for strikes. “In his first months”, wrote
Alan Reid, Cameron was “pugnaciously pro-union, pro-union claims, pro-strikers
and anti-boss.” (32) Later he expressed sympathy for rebellious
car workers at Ford Broadmeadows. But Cameron was no class warrior. As early as
1970 he had sought to establish as ALP policy a plan for binding agreements
between unions and employers enforceable by financial damages. The plan was
torpedoed by the more militant unions but in 1973 he tried again, this time as
Minister, calling an “industrial peace conference” to propose binding
industrial agreements. Again nothing came of it.
In 1973 the government also went to a
referendum seeking the power to control wages and prices. Despite Liberal and
Country Party opposition the measure might have succeeded with backing from the
ACTU, but the unions were not prepared to surrender their right to win wage
rises. The ACTU stand was for “yes” on price control and “no” on wage control,
and as voting figures showed this was the sentiment of large numbers of blue
collar workers. The “yes-no” position polled quite well in core working
class electorates such as Cunningham on
the NSW South Coast and Gellibrand in
Melbourne’s west. (33)
In 1974, with an economic crisis at hand,
Cameron pursued the idea of class collaboration more vigorously, telling a
meeting of Sydney AWU members that industry’s profitability must rise, and if
this was not to mean cuts in workers’ living standards, then productivity must
be boosted. “But let me be blunt, it will depend on trade union cooperation.” (34) At
the same time,
1974 was an industrial relations nightmare
for the government as unions, chasing after spiralling inflation, launched a
major wage offensive. The total number of strike days topped six million, the
largest figure since 1919. As union success in achieving large wage settlements
protected workers from attempts to make them pay for inflation, and just as
importantly, high levels of militancy were damaging “business confidence”, the
ruling class began demanding government intervention. Workers who had expected
“their” government to favour their interests now saw it turn increasingly
hostile to wage rises. Cameron proposed wage indexation. His greatest concern
was to restore industrial peace, but by holding real wage movements below price
movements, indexation did slow inflation – at workers’ expense – and provided
some modest support to sagging profits.
Despite some resolution-mongering at the 1975
ACTU Congress, the union officials were largely pleased with wage indexation.
They had no enthusiasm for struggle because their bargaining position vis-à-vis the employers had been eroded
by the recession. On the other hand, by shifting the focus of wage fixation to
the Arbitration Commission and away from struggle, indexation was strengthening
their position relative to the rank and file. They seized on the pretence that
indexation would maintain real wages. In reality it effectively cut them
because of time lags between price hikes and pay increases, and a statistical
fiddle when Medibank came in. (38) Before the year ended metal employers were
gloating that indexation had “helped to
dampen a dangerous pattern of wage growth”.
(39)
But the impact of government policies on the
class struggle had more ominous implications. Workers had already seen the
much-vaunted social programs fall in a heap. Now the government in which they
had placed their hopes was turning against them on the industrial front.
Indexation had a sugar-coating to be sure, but quite a few militants were at
least very uneasy about the shift of wage-fixing from the shop floor to the
bureaucratic processes of the Arbitration Commission. The less class-conscious
sections of the working class began telling opinion pollsters they would vote
Liberal. The core of Labor’s supporters wouldn’t do that, but they felt
bewildered at best and at worst, cruelly betrayed.
Economic
crisis: who’s fault
The recession of the mid-seventies, preceded
by a dramatic surge in inflation and accompanied by continuing prices rises
(“stagflation”), shocked society. Employers, politicians and the media sought
scapegoats, finding prime targets in the government and the unions. They accused
the government of spending beyond its means and thus creating inflation. This
image has become so entrenched that few realise the 1973 budget planned for a
reduction in the domestic deficit, and because inflation brought in extra
revenue, the government actually achieved a $211 million surplus. The following year did see a sizeable deficit. But this
can hardly explain the inflationary surge, which had already begun in the
1973-74 financial year with the CPI rising above 14 percent.
If inflation wasn’t Whitlam’s fault, what of
the recession? The 25 percent tariff cut, a move quite well received in the
press at the time of its introduction, was later portrayed as a catastrophic
blunder which devastated manufacturing. But in reality it caused only a limited
proportion of the unemployment. In 1975 only 23,060 people were receiving special
assistance under a scheme designed for persons retrenched as a result of the
cut, and an estimated maximum of 33,000 lost their jobs because of it. (40) At most you could blame the government for
the impact of the 1973-74 credit squeeze. But this was a measure urged on
Whitlam by Treasury experts, in which he initially placed immense trust.
Whitlam’s naiveté and Treasury incompetence can be faulted, but that hardly
reflects on the government’s wider program.
Rightwing ideologues had another, equally
predictable target: they charged that the unions, egged on by Clyde Cameron and
led by communists out to wreck the economy, had made unreasonable wage claims.
We have seen that Cameron played no such role. More importantly, the unions
were (unfortunately) innocent of the charge. Placing their faith in Labor, the
unions initially held back. Under the Liberals the union movement had
demonstrated it had the muscle to keep wages ahead of inflation. (41)
But in 1973, for the first time in years, earnings rose marginally less than the CPI. The 13 percent
inflation was due to sharp increases in food prices. (42)
In 1974 unions did take the offensive,
responding to the price spiral, but even here the demonology which blamed left
union leaders for the wage push was fundamentally mistaken. After a major
industrial campaign, metal trades unions, led by the leftist Metal Workers,
settled for an unimpressive $15 rise in April. Traditionally the metal trades
award was a benchmark for the rest of industry, and conventional wisdom
suggested that such a pay rise would allow employers to regain control of the
situation. But at this point General Motors Holden, suffering labour shortages,
offered the Vehicle Builders Union $22. In the following months other
politically “moderate” unions including the Transport Workers won sizeable
rises and the metal unions had to apply for a catch-up. Thus although workers
did often display great militancy in 1974, the rate of increase in wages was
largely determined, in the end, by market forces.
While the government’s 1974 deficit
undoubtedly had some inflationary effect, and while the high price of labour
was undoubtedly a factor in employers’ later decisions to shed labour, these
factors cannot explain the recession. Far more important were international
trends and the inherent contradictions of capitalism itself. Inflation had been
a world-wide problem throughout the post-war years, resulting from arms spending
associated with the Cold War. It accelerated in the final stages of the long
boom, spurred by war spending in
This last point is crucially important: in
the course of 1974 both industry leaders and the government became aware of a
downward trend in profit rates. The trend had been there for some years, but
the experts failed to recognise it, apparently fooled by inflation-fed paper profits. Yet the decline in
profitability, which was to persist through Fraser’s austerity programs, the
resources boom, and into the following wage freeze surely indicates that the
crisis years of 1974-82 were caused by contradictions deep within capitalism.
This becomes even clearer when you consider that falling rates of profit were a
world-wide phenomenon. (43)
World capitalism as a whole was facing
immense problems, which the 1973 oil crisis helped translate into an
international recession. Thus international trends, reflecting basic flaws in
the capitalist system, largely explain the onset of recession in
********
For the story of the Constitutional Crisis see my book Years of Rage , chapter 3.
References
I am grateful to Dave Nadel, George Petersen, Rick
Kuhn, Janey Stone, Mick Armstrong and Sandra Bloodworth for critical comments
on the original version of this article.
1. Graham
Maddox, The Hawke Government and Labor
Tradition, Penguin,
2. The Bulletin,
22 March 1969.
3. Quoted in Frank Crowley, Tough Times:
4. The
Australian, 23 August 1969.
5. Quoted in E. G. Whitlam, The Whitlam Government 1972-75, Viking,
6. Quoted in Bob Catley, “Socialism and Reform in
Contemporary Australia”, in E.L. Wheelwright and Ken Buckley, eds, Essays in the Political Economy of
Australian Capitalism, ANZ, Sydney 1978, p. 24
7. Whitlam, p. 3.
8. Quoted in Catley, p. 24.
9. The Age,
9 October 1974.
10. Quoted in Catley p. 29-30.
11. Quoted in Barry Hughes, Exit Full Employment, Angust and Roberston,
12. Quoted in Hughes, p. 91.
13. The
Australian, 25 February, 1975.
14. Australian Financial
Review, 23 May, 1975.
15. Australian
Financial Review, 10 April 1975.
16. Australian
Financial Review, 9 May 1975.
17. The Age,
6 June 1975.
18. Whitlam, p. 278.
19. Whitlam, p. 289.
20. Australian
Financial Review, 6 June 1975.
21. Australian
Financial Review, 24 September 1975.
22. Patricia Tulloch, Poor Policies: Australian Income Security 1972-77, Croon Helm,
23. Quote in Tulloch, p. 45.
24. M.A. Jones, The
Australian Welfare State, Allen & Unwin, Sydney, 1980, p. 202; Adam Jamrozik, p. 80.
25. Peter Wilenski, “Reform and its Implementation:
The Whitlam Years in Retrospect”, in Gareth Evans and John Reeves, eds, Labor
Essays 1980, ALP, Melbourne, 1980, p. 43.
26. Quoted in Lorna Lippman, “The Aborigines”, in
Allan Patience and Brian Head, eds, From
Whitlam to Fraser: Reform and Reaction in Australian Politics, Oxford
University Press,
27. Australian
Financial Review, 18 October 1973.
28 Quoted in Leonie Sandercock, “Urban Policy”, in
Patience and Head, p. 28.
29. National Times, 8-13 September 1975.
30. The
Australian, 14 November 1972.
31. Whitlam, p.
287.
32. Alan Reid, The
Whitlam Venture, Hill of Content,
33. Sydney
Morning Herald and The Australian,
7 December 1973; see also the editorials on the same day in the Melbourne
Herald.
34. Australian
Government Digest, 2:4, 1974, p. 1197.
35. Quoted in Paul Ormonde, A Foolish Passionate Man, Penguin, Melbourne, 1981, p. 176.
36. Australian
Government Digest, 2:3, 1974, 723.
37.
38. Medibank was treated as a price reduction, whereas
in reality much of the cost of medical care was simply transferred – after all,
workers were paying for Medibank through their taxes.
39. Sydney
Morning Herald, 20 October, 1975.
40. Fred Gruen, “The 25 Percent Tariff Cut”, Australian Quarterly, June 1975, p.
16-18.
41. Whereas the CPI rose by 4.9 percent in 1970s, and
7.2 in 1971, average earnings increased by 9.2 and 11.8 percent. In McMahon’s
last year inflation slowed to 4.5 percent under the impact of a mild recession;
earnings increased by 8.8 percent.
42. Meat prices rose by 34 percent because of an
international shortage, while the price of potatoes doubled due to bad weather.
See Hughes, p. 60.
43. The Marxist explanation is roughly as follows.
Capitalist growth leads to the substitution of capital for labour. Since labour
is the source of all value-creation, and profit derives from the creation of
surplus value, growth eventually places downward pressure on the rate or
profit. Thus a long boom as experienced in the post-war decades will ultimately
give way to crisis, when profit rates fall. How this works out in practice may
depend on various “countervailing factors”. See Rick Kuhn and Tom O’Lincoln,
“Profitability and Economic Crises”, Journal
of Australian Political Economy, No 25, October 1989.
44. Whitlam, p. 282.