The record of the Australian Labor Party: high hopes and big disappointments

[This talk was presented at the A Century of Struggle — Laborism and the radical alternative: Lessons for today conference, held in Melbourne, Australia, on May 30, 2009. It was organised by Socialist Alliance and sponsored by Green Left Weekly, Australia’s leading socialist newspaper. To read other talks presented at the conference, click HERE.]

By Jeremy Smith

Why have we scheduled this talk? First, I want to mark part of the historical memory of the working class in a modest way. Second, it helps pull apart the myths of the Australian Labor Party (ALP) and Laborism. Third, it addresses a century-long debate which goes back to the Victorian Socialist Party (VSP) and the Wobblies (Industrial Workers of the World, IWW); a debate which remains unresolved. The high hopes held for Labor when it has been elected and the bitterest of disappointments felt after its failure to deliver leave for us lessons too easily forgotten. We need to remind ourselves of those lessons.

I will focus on expectations held of Labor coming into office (and the high hopes dashed). The record of the ALP’s capture of government federally suggests it is hapless to say the least, often taking power in periods of impending crisis and not in the upswings of the capitalist cycle. This talk breaks into two parts:

• From Labor prime ministers Andrew Fisher through to Jim Scullin where hopes of protection from poverty were confounded

• The line of continuity from Gough Whitlam through to Kevin Rudd which involved a process of “modernisation’’

Labor after Federation through to the Great Depression

Labor’s success in Australia had no parallel in the world to that time. John Watson became the world’s first Labor Party prime minister when he briefly took office in 1904. Andrew Fisher came next in 1910, when Labor enjoyed a clean sweep of both houses of parliament in the election that year. This was the first stable Labor government in the world and the first stable federal government in Australia. It came in during times of good fortune and a buoyant economy. With the benefit of hindsight, we can say that these were the best conditions any Labor government has met. A number of new measures marked this government: a progressive land tax, the extension of pensions and increased welfare expenditure. The Commonwealth Bank and Commonwealth Shipping Line were founded. Make no mistake, this was about nation-building, not socialism. It was white nation-building also with a distinct emphasis on the gendered division of labour. The full system of arbitration gave the government a state institution to deflect union demands onto. At this early time, we can see firm pressure for the Federal Parliamentary Labor Party to adopt interpretation of party platform. Along with Billy Hughes, Fisher pushed for this. Even during the period in which Labor enjoyed the best prospects the tension between party policy and Labor’s leaders in government was there.

Labor lost power for a short time but was elected to federal government again in 1914. Entry into World War I tested the bid of internationalists for strong opposition to war (which was echoed in the VSP and Victorian Trades Hall Council) and the pro-Empire nationalists. Fisher said during the 1914 election campaign that Australia would “stand behind Britain…to our last man and last shilling’’. This seems unsurprising, this was the party of the White Australia policy. It was the party of stout national defence which was understood to mean defence of the wider British Empire.

For a time, the pro-Empire nationalists, led by Hughes, prevailed. Disappointment with the Labor government’s unwillingness to protect workers in times of heavy profit-taking (and in fact, it attacked workers who struck for better wages) ensued. The indisputable conclusion of the war years must be that opposition to conscription spoiled Hughes and the Labor leadership’s commitment of all-out sacrifice for the war. It precipitated an undeclared split when Hughes and 21 others walked out of the Labor parliamentary caucus. More than that, the fatigue from poverty and inequality exacerbated by war effort left federal Labor with little support.

The 1917 NSW general strike showed the loss of faith in federal Labor. Hughes helped to form the new conservative party (the Nationalist Party) after he walked out. Split and deeply demoralised, Labor lost in 1917. It slid from national preeminence to the purgatory of opposition until 1928-29. The 1920s is remembered mythically for “prosperous times’’. However, the return to pre-war living standards was uneven and took time. In fact, it was a period of cyclical recessions and booms, a bit like the 1990s. There was a slump coming into the 1929 election which prompted the conservative Stanley Bruce government to try and undo the arbitration system as a prelude to an all-out assault on the trade union movement.

Scullin and the Depression

Labor ran in the 1929 election on a straightforward platform: “Before: Bruce-Page government: Slump. After: Labor government: Prosperity.’’ Labor’s prospects seemed good at the point of their 1929 victory. Labor held all Australian governments in 1929. The federal swing to labor had been fairly uniform (outside of Queensland). Thus Jim Scullin came to power in mid-1929 with rising unemployment (running at 12%) and strikes in mining industry and on the wharves. But he assumed office unsuspectingly ahead of the Depression. Labor had promised to maintain the federal arbitration system, increase tariffs and deal with unemployment. On that basis it had smashed Bruce’s conservative government at the polls. However, the Senate [Australia’s federal upper house] was still in the grip of a conservative majority (Labor had only seven senators). Many opportunities for a double-dissolution election presented in the first 12 months of government were not taken. Some in the Labor caucus urged a double dissolution, but the leadership lacked the resolve to tackle the Senate and initiate more radical measures.

Labor soon faced problems that it had no experience in and had not even guessed at while in opposition. Severe budget deficits, a critical imbalance of payments and declining commodity prices on world markets were difficulties that Labor’s leaders had not anticipated. They were naïve economically—indeed clueless—and lacked the will to pursue socialist solutions. They thus drifted inexorably towards the prevailing orthodoxy of monetarism. Remember that, strictly speaking, this was the pre-Keynesian era. Whilst John Keynes was a working economist of some note at this time, his major works setting out the Keynesian system of public financing were yet to be penned. There were those who believed in an expansionary approach to government spending (in the Labor Party’s left wing for example), but the dominant economic theory of the day held that balanced budgets were necessary under nearly all circumstances.

The Depression crashed down on the Labor government a mere two days after its cabinet was sworn in. Without doubt this was rotten luck. Early in the government’s term, Sir Otto Niemeyer (an establishment figure from the Bank of England) toured Australia. He prescribed a program of drastic cuts in public spending through all tiers of government. Scullin and the state governments agreed – there was to be no resistance from Labor governments. In this the Scullin government failed dismally to meet its commitments made in the 1929 election, with the one exception of tariff increases.

Note that all governments retreated into protectionism during the Great Depression. Australia’s trade fell by almost 60% so the impact of increased tariffs was far less than that anticipated before the 1929 election. Agreeing to Niemeyer’s plan did not allow Scullin to make inroads into unemployment (which worsened). Lowered government spending cut off the avenue of public sector jobs. A 20% reduction in pensions was intended to pursue the holy grail of a balanced budget. Arbitration would be maintained by legislation introduced by Labor into the House of Representatives. But it was re-written by the Senate in 1930 and then further stripped of pro-union conciliation provisions by the High Court. The Australian Council of Trade Unions (ACTU) launched only muted criticisms of Scullin at this point. Those became slightly louder when the Arbitration Court lowered wages by 10% in January 1931. The ACTU ignored its own policies; it shared the naive belief of the government that the economy was about the turn the corner at any time.

Resistance and ‘rats’

Of course, there was significant resistance from within the Labor Party and amongst the union movement at large. At the government level different plans were developed to deal with the crisis. Joe Lyons hatched a plan of Labor’s right wing. “Red Ted’’ Theodore drafted a more expansionary version of Scullin’s approach. It was evident that Labor was unable and unwilling to fulfill its election promises.

From Labor’s left came the Lang plan (after New South Wales Labor Premier Jack Lang). It contained three elements: default on interest payments to British bondholders, abandon the gold standard and reduce interest on government borrowing to 3%. There was nothing radical about this. The gold standard was defunct. Lang had rejected “repudiation’’ of the debt at his first election (even when the NSW peak trade union body, the NSW Labor Council had endorsed it), so the default on interest payments did not signal a comprehensive moratorium on debt repayments.

The Lang Plan went nowhere. However, it marked a distinction between Lang Labor and the federal party. Labor was devastated at the 1931 federal election. Lyons split to the right when the Labor cabinet refused to implement his plan. Like Hughes before him, he ratted to the conservative other side of parliamentary politics and played a crucial part in consolidating the United Australia Party – Australia’s new conservative alliance.

Jack Lang

The Lang Plan set up a lasting conflict between federal Labor and Lang Labor, which became two separate parties. The struggle was fought out in the federal party and in faction fighting in NSW. Was Lang a viable pole of attraction for left opponents? Politically, he was a redemptive figure and a demagogue; the “Big Fella’’ as his supporters called him. But he too implemented deflationary measures, whilst railing with fiery rhetoric against the “money power’’ of British finance. He also begrudgingly went along with the 1931 Premiers Plan, which included a 20% cut in government expenditure (including the notorious 10% cut in wages). Things came to a head in 1932 in Lang’s confrontation with the conservative Lyons government and the crypto-fascist New Guard and Old Guard organising in NSW. Lang’s fate was to be sacked by the NSW governor. Lang went quietly to fight an election (much like Gough Whitlam would 43 years later). There were mass election rallies, but no sustained mobilisation and nothing outside of the context of parliamentary elections. Labor was lost in the wilderness until the Second World War.

Some brief comment on the John Curtin and Ben Chifley administrations are worth making. These were wartime governments with wartime emergency measures. They instituted a high level of regulation of business and finance. The private banks resisted after the hostilities of war ceased. If there was an aim it was the “light on the hill’’: full employment, but not socialism. The resistance of private banks to regulation (which was intended to contribute to the goal of full employment) led Chifley to the botched bank nationalisation campaign of 1949. This was not a socialist program, but the extension of regulatory powers necessary for reconstruction. They didn’t sell it really as they were too fearful of an anticommunist backlash to mount a serious campaign. In fact, the idea unified conservative forces politically. The right was able to use bank workers even as their cadre (note that bank workers were quite privileged in those days). At the same time, Labor launched an attack on the coalminers’ union. Labor’s perceived inability to “control communist-led unions’’ strengthened Robert Menzies new Liberal Party. Labor lost ignominiously in 1949.

From Whitlam on: modernising neoliberalism

The early achievements of Gough Whitlam’s 1972 Labor government can be credited to the efforts of the social movements. An early milestone was the end of participation in the US war in Vietnam. But this was very clearly the culmination of years of anti-war movement mobilisations. The equal pay case was reopened, but this was driven by a campaign of women workers. The contraceptive pill was listed in the Pharmaceutical Benefits Scheme; a landmark of some years of mass consciousness raising and movement activity associated with the second wave of feminism.

Subsequent to these early achievements, Whitlam funded a significant expansion of tertiary education and did so on the back of the abolition of fees and the establishment of a living student allowance. All levels of public education were expanded. Note that this designed to modernise Australia’s workforce during the course of the 1970s. It expanded and deepened the skills base and cultural capital of Australian capitalism. The settings were then geared for a fast-growing services sector. Certainly the investment in education was a social benefit. But it was also oriented to an anticipated high-tech economy of late capitalism.

The universal health insurance scheme Medibank was a memorable reform. It matched insurance schemes of other OECD countries. It was savaged by conservative government led by Malcolm Fraser, which defeated Whitlam in 1975. Multiculturalism was a term coined during Whitlam’s government which included the first minister for multiculturalism in Al Grassby. In fact, the end of the notorious White Australia policy had come earlier in response to lively student protests in the mid-1960s. Those protests focused the perception that Australia could be diplomatically isolated like South Africa was becoming in the 1960s (and therefore disadvantaged economically). Multiculturalism was inaugurated with Whitlam but the bulk of public policy changes occurred during the Fraser years. Aboriginal land rights were famously promised and a number of symbolic (though undeniably important) measures were taken. Legislation to institute land rights was drafted but did not pass before the dramatic November 11, 1975, sacking of the Whitlam Labor government by the governor-general John Kerr.

The talk of modernisation and nation-building foreshadowed Bob Hawke-Paul Keating governments of the 1980s and ‘90s. It was laced with a rhetoric of “new nationalism’’ to distinguish it from the anachronistic Britain-loyal Liberals of the Menzies era. They called for a new flag and anthem, which didn’t amount to much but was important symbolically. Its policies were offset by fierce anti-US statements borne of backbencher frustration. At the cabinet level, however, an independent role in international affairs was championed. Australia was to be a “medium-sized power’’ in the region, according to Whitlam. While foreign policy drew Australia out of the Vietnam War and damned white-minority-ruled Rhodesia, it also turned to support the US-Backed dictator of Indonesia Suharto and was complicit in the invasion of East Timor. Openness to China was foresighted – in that Whitlam sensed a future lucrative economic relationship. His visit to Beijing was followed within days by an announcement that US President Richard Nixon would also visit.

In matters of the state and the economy, Hawke-Keating sympathiser Paul Kelly (in The End of Certainty) sums matters up well: deregulation, once started, develops a momentum of its own. If Kelly is right, then Whitlam was the starting point.

Whitlam started the long process of dismantling Australia’s protectionism. Industry tariffs were cut by 25% in 1974. Handouts to industry. They provided fuel for profits, with few guarantees against job losses. Whitlam’s enthusiasm for market forces was undeniable. He curbed restrictive trade practices, abolished the federal wealth tax and set in place anti-inflationary policy. The overarching aim was increased competition and marketisation of the economy. Certainly he did not go nearly as far as Hawke and Keating. But these initiatives were the necessary precursor to the 1980s. The test came when times got tough. The last Whitlam Labor budget handed down by the treasurer Bill Hayden in 1975 brought the first cuts to welfare and education spending for many years.

The Hawke-Keating years and the Accord

The key innovation of the Hawke-Keating governments was the Prices and Incomes Accord. It was the centerpiece of Laborism in the 1980s. Wage “restraint’’ was supposed to be the trade-off for a promised comprehensive improvement in the “social wage’’ i.e. welfare, increase health and education spending etc.. Once inflation was brought under control, then the real purchasing power would be restored. Tax reform would be brought in for low income earners. This was a big promise, but it was not long before it was disowned.

Medicare [the original Medibank was savaged by the Fraser government]—the main lasting welfare reform of the era—came with the first tranche of “restraint’’. There was no indexed pay rises to compensate for the inflationary effects of the Medicare levy introduced with the public health insurance system.

Taken as a whole, there were few positive results in terms of the social wage early on. Over the course of Accord Mark II (1985-7) there were in fact cuts to public spending. Over the era of the different versions of the Accord, calculations of workers’ lost real purchasing power vary depending on which source you consult or what period you are measuring (and then whether you measure average weekly earnings or take award pat rates as a guide). One reliable estimate is as follows: between the years 1982 and 1993, 17-28% was lost across award rates. Women workers suffered disproportionately. Look at this as a ratio of wages: profits (this is an indicator of the terms of struggle of labour and capital). Wages as a percentage of GDP fell from 74% when Hawke took power to 63.3% by 1990. Tax relief was promised. But the largest tax cuts went to the top wage and salary earners – so much for the claims that Accord would reduce the gap between low- and high-income earners. Taxation increased overall under Hawke, despite the fact that the government embraced economic rationalism.

It is widely recognised in the trade union movement today that the Accord failed to meet its promises. The few of us who forecast that outcome in the early 1980s were treated as pariahs. Perhaps the greatest problem was the strategic and political loss, and not just material losses in purchasing power. A clue to this was that the Accords Mark III and IV introduced the principle of demonstrable productivity gains into the strategy of union negotiators. Clever negotiation became the real art of union business rather than workplace organisation and activity. This hints at the larger effect of Accord politics. The Accord process bonded union leaders to the government in an unprecedented fashion. The business of trade union organising became trying to wield influence at the level of government policy making and implementation, not shopfloor and workplace organisation and campaigning. Grassroots workplace structures declined through neglect in many places. Above all the government’s relationship with unions was used to temper union militancy and independence: the smashing and marginalisation of the Builders’ Labourers Federation, the pilots and meatworkers as the rest of a union movement was unwilling to break politically with the ALP and its Accord corporatism. Even the state-based struggle of Victorian nurses in 1986 felt the straitjacket of the Accord. This was the political cost of the long Labor period of 1983-1996 and we’re still paying it. It left most trade unions in no condition to take advantage what benefits could be salvaged from enterprise bargaining. The low paid lost the benefits of centralised wage fixation.

Welfare and Indigenous rights

A promise to tackle Indigenous issues emerged. It was symbolised in the pledge to extend Aboriginal land rights. Hawke didn’t have the stomach to stand up to far-right scare campaign in the mid-1980s about the supposed seizure of resources which would be locked away under land rights. The campaign was well backed by the Western Mining Corporation and its key “New Right’’ leader Hugh Morgan. A treaty was pledged in its place but nothing materialised. During the 1988 bicentennial of British colonisation, Hawke resisted strong calls for a treaty. Hawke settled for a 10-year “reconciliation’’ plan which may have had some merit in itself, but in this context postponed talking on all issues. Howard would later withdraw support in his well-known stand-off with nearly all sections of the Aboriginal movement. Of course there was no movement on Indigenous social issues.

Statistically, decreased inequality between households can be measured during the long Labor decade. However, the quality of welfare, education and health enjoyed as public goods declined. To put this another way, the ability to enjoy something closer to universal access to these as community resources declined under the growing economic rationalisation of welfare and the public sector. User-pays principles sacrificed the ideal of universal access and social rights. This was sold as the modernisation of Australia.

More than anything else done by the Labor governments, this underlying shift laid the ground for John Howard’s right-wing government’s exercise of “mutual obligation’’ regulation of welfare and “voluntary fees’’ for education and the expansion of private health insurance.

Labor achieved what no Liberal government dared to try: the deregulation of the finance sector. Foreign banks were admitted and the Australian dollar “floated’’. Major assets were sold: the Commonwealth Bank and Qantas were the largest. Competition was introduced for Telecom. Thepublic sector was infused with the principles of economic rationalism while the ranks of the senior public service were re-staffed with the students of the neoliberal schools of public administration.

Kevin Rudd – continuity with modern Laborism

This is a living history so I will only offer a few comments. Two major sets of undertakings were in the spirit of Labor’s 2007 campaign, if not spoken in fine detail of policy statements:

The environmental crisis and global warming. In the rhetoric before the election, it was all about the Howard government’s failures: it was out of step and it denied the reality of climate change when only a shrinking minority did so. Labor was short on detail, but what else could the electorate think but that a major change of direction was blowing in the wind? The Kyoto Protocol was signed, which looked like a good start. Then came the Garnaut Report, by economist Ross Garnaut reporting on scientific matters. The result was inadequate greenhouse-gas emissions targets and little real action to reduce emissions; a disappointment to everyone alarmed about global warming, and even to Garnaut himself. At the time of writing, Rudd’s proposed a carbon trading scheme is in crisis and held up by the Senate. Its design guarantees billions in free pollution permits to the worst carbon polluters. More than 18 months since the Rudd government’s first election, there is next to no progress in this area in which no delay is affordable.

Workchoices. A program of staged abolition of Howard anti-worker industrial laws has been effected in favour of “Workchoices lite’’. Detailed analysis is available elsewhere and I will make one general comment only. While marginally less draconian features can be found in the Labor government’s legislation (in terms of a wider award safety net for instance), the core Workchoices provisions that have sharply curtailed union rights to organise are reproduced in full.

Rudd exemplifies the character of the ALP in government. There are no vestiges of the language of gentle social-democratic reform (much less the socialisation objective). He is louder than any other leader about nation-building. In the past, nation-building in Australia was state-led (but this has been the norm for mixed capitalist economies) and occurred through public sector. Today, government investment occurs in and through (in “partnership’’ with) private capital.

Conclusion

The test of politics is what is done when there is a crisis. At the height of the ALP’s rhetoric, the ideal of socialism was sold to working class with little conviction or substance. Labor’s true colours can be observed in its history: Labor is a national capitalist party, the nationalist party par excellence that the traditional conservatives cannot be. It is the political vehicle best placed to meet the national interests of Australian capital, especially in times of crisis.