Redeeming McMahon

Any person who attains the office of Prime Minister of Australia has inherently left their mark on history. Historians have generally recognised this, producing a myriad of biographies cataloguing the lives of those who have had the chance to lead us. Men like John Christian Watson, who never held a majority in the House of Representatives, and Earle Page, who held the post for just nineteen days, have been subject to the illumination of the biographer’s torch. There is one leader, however, who despite holding the reins for almost two years, has been abandoned by history and by his party. That leader is Sir William “Billy” McMahon, who bears the sad indignity of never having received a stand-alone biography.

The reasons why McMahon has been overlooked are all fairly clear. To those on the Left he is a stock character, an old conservative who offers contrast to the innovative idealist who succeeded him. In that capacity he is useful to left-wing historians, but he never held the power required to build up the ire necessary for the writing of a negative biography. Negative biographies are quite rare in Australian political historiography, for it takes quite a masochist to dedicate years of research and thought to someone they despise.

For those on the Right, McMahon is the man who finally led the Liberal Party to defeat after twenty-three years in government. In doing so he shattered the mystique of the “natural party of government” and unleashed the economic turmoil of the Whitlam years. Debate continues over whether McMahon should have received the office earlier and in more favourable circumstances. After Harold Holt’s disappearance the arch-protectionist Country Party leader John McEwen vetoed the ascent of the Liberals’ free-trade-sympathising deputy leader, threatening a break-up of the Coalition if the senior party went against his wishes. There is much conjecture over whether McMahon would have won the leadership ballot even without the veto, but what is clear is that by the time John Gorton’s overwhelming centralising tendencies forfeited his grip on office his successor was left with a poisoned chalice.

For this reason many Liberals can forgive McMahon’s electoral performance. Inundated with economic woes beyond his control and facing a fierce and telegenic opponent, it may have truly been “time” for McMahon and the Coalition government to go. He actually did surprisingly well in the 1972 election, losing just eight seats in what was anything but a landslide. The real damage had been done under Gorton, who lost sixteen seats in 1969 and failed to arrest a sharp slide in popularity even after that reality check.

If the electoral performance of McMahon is somewhat forgivable, then there must be some other reason for the animosity directed at the man once described as “the Prime Minister the Liberal Party is most ashamed of”. Much of this comes down to personality. A hard-working loner, McMahon was viewed as untrustworthy and overly ambitious. There were frequent rumours of him leaking from cabinet, and while these were undoubtedly exaggerated by his pro-Gorton opponents there seems to have been an element of truth in them. Even John Howard, who worked for McMahon, seems at best to hold an ambivalent attitude to the man seen by many as a “devious and relentless self-promoter”.

This piece hopes to redeem McMahon from such scorn. It does not dispute that he was ambitious—all politicians are. What it argues is that he was not hungry for power for power’s sake. The evidence shows that he was in fact a deeply philosophical classical liberal. He once described himself as “a genuine liberal in the sense of feeling that the less interference there was with people … the better kind of society developed”. As Prime Minister he was never able to put these small-government beliefs into practice, but as Treasurer he fought against excessive intervention and particularly protection in a resolute and pragmatic way.

McMahon’s deeply held liberal beliefs were expounded most clearly in a piece he wrote for the 1954 symposium The Australian Political Party System. This book brought together papers from a forum of the Australian Institute of Political Science. Entitled simply “The Liberal Party”, McMahon’s piece explores the human and economic basis of liberal politics in remarkable detail.

He begins by offering four assumptions on the nature of humanity. First, that the individual is the “central feature of society” and that therefore no state has any inherent value greater the individuals that constitute it. Second, that man has the capacity to think and act purposefully and that this is his distinguishing feature. McMahon posits that though the causes of change are highly complex, individual thought and action are the “primary driving force” behind history. He therefore rejects the materialistic thesis that places forms and conditions of production as the fundamental determinants of social structures and change. Third, that man is born with the tendency to sin and that no man, however exceptional, is immune to this. Therefore the concentration of power will lead to tyranny. Fourth, that humanity possesses free will, and that choice is the source of all good and evil.

Human nature thus described is inclined towards liberty, and the role of parliamentary democracy is to act as the “source and custodian of our essential liberties”. These essential freedoms are speech, worship, assembly, association, and choice of occupation, along with the ability to manage one’s income and to own and accumulate property. These are the values of a liberal political system, protected by the rule of law. The “liberal way” or agenda is to protect and extend these freedoms in a pragmatic rather than dogmatic way. Circumstances and objectives change, so liberals should not bind themselves to a perpetual program but should deal with new issues with reference to the eternal liberal principles.

Liberalism’s flexibility thus distinguishes itself from the rigidity of the socialist objective. In McMahon’s perception of human nature, socialism and communism are not only undesirable but in fact unachievable goals. Socialism is unachievable, as a “psychological and irrational mankind cannot be mechanised in an individual society”. Socialism is undesirable not only for the maintenance of liberty but also because the division of economic and political power is an “essential protection against arbitrariness and tyranny”. Since mankind is prone to sin, power must be diffuse, and the separation of government and capital is one method of achieving that goal.

Capitalism is desirable beyond this simple diffusion. As someone who studied economics McMahon believed in the power of private enterprise, and though his views were coloured by the Keynesian orthodoxy of his day he still saw the “need of differential rewards and incentives for effort” to release the productive capabilities of humanity. He quotes Marx and Schumpeter in defence of the productive success of capitalism, though inevitably he views it in a less exploitative light. McMahon argues that by their very nature the fruits of mass production reach the masses as consumers, raising the living standards of those who in a standard Marxist formulation would be seen as victims. Because of this he suggests that “it would be completely senseless to produce theoretical equality and social justice at a cost of economic progress and lower living standards for all”. He does argue that liberals should pursue social justice and that perhaps a heightened sense of social responsibility is needed, but only in a manner which protects the capitalist wellspring of wealth which acts as “the very mechanism on which the realisation of higher standards of living and social justice ultimately depend”.

Finally McMahon discusses the nature of the Liberal Party and how it reflects liberal values. He does this in a fairly traditional sense, highlighting the respect Liberals have for the right to free speech and individual opinions and contrasting this with Labor’s caucus solidarity. He also defends the Liberal Party’s claim to represent no single section of society, though he argues that this creates its own problems. So many interests make up the Liberal Party that common sense and prudence are required to keep “the many spirited horses in the single harness”. He concludes that beyond the protection of liberty the goal of liberalism in Australia is to produce national development in a flexible and sustainable manner.

The Australian Political Party System clearly presents McMahon as more than just a careerist and ambitious politician. He was a political philosopher of an extent rare in Australian politics. He held clear beliefs on the nature of humanity and the role of liberalism, though he also had a profound conviction on the necessity of pragmatism. At the beginning of his piece he describes how “in the short run, political activity undoubtedly bows to expediency”. This attitude restricted the extent to which his political career would reflect his liberal beliefs, as he had to work within a Liberal Party with “liberals” of a less classical bent.

McMahon entered Parliament in the watershed election of 1949 that swept the Liberals into power. He based his campaign on the issues of anti-socialism and anti-communism that neatly combined his liberal beliefs with the concerns of the day. His campaign for the seat of Lowe in Sydney’s inner west received national attention because of one of the gimmicks he used to push his case. He had Adrian Walker, the articulate nine-year-old son of his campaign manager, deliver speeches through an amplifier on several occasions throughout his electorate. The thrust of the speeches was an anti-socialist warning that “in twelve years’ time I should have a vote and I want you to help me so that I can be sure of having that vote”.

McMahon’s maiden speech in Parliament stressed that the Liberals’ embrace of private enterprise was the only way of securing full employment and that government ownership would eventually lead to ruin through the pursuit of unproductive goals. He clearly impressed through his first term, for in 1951 he was promoted to Minister for Navy and Minister for the Air. It was rumoured that his promotion was a sop to New South Wales in what was then a party dominated by Victorians. Some have suggested that there is a New South Wales strand of Australian liberalism that has generally been more inclined towards small-government beliefs than its Victorian counterpart. While such a view does not allow for the ideological fragmentation present in both states, it is worth noting that McMahon’s classical liberal beliefs echoed those of George Reid and Joseph Cook, two early prime ministers from New South Wales.

McMahon’s new post offered him little chance of pursuing his liberal goals beyond preparing for future fights against communism, but by all accounts he served his office with dedication and efficiency. There followed a steady rise up the political ladder. In 1954 he was promoted to Minister for Social Services, then Minister for Primary Industries in 1956 and Minister for Labour and National Service in 1958. In the latter capacity took up the fight against communists in the Waterside Workers Federation. He set up an inquiry into the militant union which ultimately led to it being stripped of authority over recruitment and threatened with deregistration. The union had begun making trouble under Harold Holt, McMahon’s predecessor in the ministry, who had to deal with extensive strikes after the government gave stevedoring employers the right to recruit non-union labour.

When Menzies retired from the prime ministership Holt succeeded him in a relatively seamless transition. While Holt’s ascent was inevitable there was more conjecture over who would succeed him as deputy leader. Some presumed that Paul Hasluck would take the post, but McMahon put his hand up and began campaigning vigorously. This episode earned him his reputation for ambition. Hasluck thought self-promotion was unseemly and refused to canvass for himself. When McMahon beat him using tactics that were arguably innate to politics he earned Hasluck’s eternal enmity. Hasluck later described him as “disloyal, devious, dishonest, untrustworthy, petty, cowardly”.

With McMahon’s new elevated prestige as deputy leader combined with his economics background he became Treasurer in the Holt ministry. He held the post for nearly three years and produced four budgets. The period was one of prosperity that, while undoubtedly the luck of the economic seasons, McMahon tried to foster and protect. His budgets were occasionally coloured by expediency, whether for electoral needs or Keynesian spending, but he was able to reduce the deficit from $644 million in 1967-68 to $30 million in 1969-70. A large part of his success was due to his close relationship with the public service.

It was as treasurer that McMahon came into conflict with John McEwen. McEwen was an innovative Country Party leader who saw that in order to stay electorally viable his party needed to look beyond its rural roots. His solution to attract more votes was to use a hard line on protective tariffs to foster a relationship with manufacturers and manufacturing workers. In doing so he was picking up the slack of a Liberal Party that, in a legacy of the fusion between the Anti-Socialist (formerly Free Trade) Party and the Protectionist Party, continued to support protection but had essentially abandoned making its vigorous prosecution a central article of faith.

There was a central contradiction in what McEwen was trying to do. High tariffs raised the price of goods and equipment for farmers, while fostering friendly trade relationships was essential for agricultural exports. By pushing protectionism McEwen was sacrificing his constituents, and as much as he liked to talk about an alliance between farmers and manufacturing this made him vulnerable.

Sydney had never relied on manufacturing as Melbourne had, and there remained in New South Wales a lingering free-trade sympathy that stretched back to colonial politics. McMahon was very much the Sydneysider and absorbed some of this free-trade sympathy that fitted naturally with his support for free enterprise. He supported some basic protection for fledgling industries but beyond this he thought protection, particularly its extension from already high levels, detrimental.

McEwen held the position of Minister for Trade and Industry, which he used to push protection in a manner that disturbed McMahon. During Holt’s tenure the two men clashed over the devaluation of the dollar and McEwen’s attempt to create the Australian Industry Development Corporation. At the time the Australian dollar was pegged to the UK pound. When Britain devalued in an attempt to fix its economic woes, McEwen wanted Australia to follow in order to make exports cheaper, but McMahon only partially followed for fear of inflation and flow-on economic effects. The AIDC was a highly interventionist body designed to promote locally owned development and investment that McMahon was able to block under Holt in favour of the more liberal Australian Resources Development Bank. Beyond these policy disputes McEwen was obsessed with McMahon’s alleged attachment to the pro-free-trade journalist Maxwell Newton and the Basic Industries Group, a free-trade agricultural lobby that threatened the legitimacy of the Country Party’s new ideology.

In standing up for his own position on protection and the other issues McMahon may have sacrificed his political future in defence of his philosophic and economic beliefs. As leader of the Country Party, McEwen was virtually untouchable by Liberals, and in an age when the coalition was less ironclad than it is today McEwen was able to wield considerable influence against McMahon. McEwen successfully used his veto to prevent McMahon from attaining the prime ministership after Holt’s death. Peter Sekuless has gone so far as to suggest that McMahon became a “martyr to the cause of free trade and free market economics” and while his beliefs were more flexible than this idealised statement implies it is clear that if he was as opportunistic and devious as some have suggested he would not have taken such an unprofitable stance.

Despite speculation as to whether McMahon would have won the leadership election had he been allowed to run, McEwen’s veto undoubtedly made Gorton’s victory easier. McMahon was able to hold on to the deputy leadership, but this was cold comfort to a man whose continuous promotion had now ground to a halt. Because of McEwen’s helpful intervention and a shared belief in “economic nationalism” Gorton gave his junior coalition partner free rein to pursue his protectionist and interventionist goals. The AIDC was approved, and the government even ventured to become directly involved in the shipping trade. McEwen was not behind everything however, and Gorton himself led a populist campaign against foreign ownership that discouraged international investment.

All of this was much to the chagrin of McMahon, who despite his healthy reputation for economic management repeatedly had his budgets interfered with. After Gorton led the Liberals to an electoral battering at the 1969 election McMahon decided that in the interests of himself and his party Gorton had to go. There was much speculation about a leadership challenge and McEwen, who by now was having his own conflicts with Gorton, made it known that if McMahon approached him he would be willing to lift his veto. This is what happened, and after David Fairbairn initiated a leadership contest McMahon threw his hat into the ring. With the advantage of incumbency Gorton was able to win the contest, though his exact margin of victory is unknown. Alan Reid, who admittedly had a pro-McMahon bias, has suggested that it may have been as close as thirty-four votes to thirty-one. McMahon once again held on to his deputy leadership but accepted that his chance to reach the top had essentially passed. Adding insult to injury, Gorton removed him from the Treasury and gave him the lesser post of Minister for External Affairs.

Though he had only narrowly won the leadership, Gorton refused to heed the concerns of those he had alienated: that he frequently disregarded cabinet and that his tendency to deal with Commonwealth–state relations in an overtly centralising manner went against a key Liberal belief in federalism. This was a belief that McMahon respected, though his parsimony as Treasurer had still managed to anger many state premiers. For McMahon federalism represented a diffusion of power essential to democracy and the prevention of tyranny, a direct translation of classical liberal beliefs into a policy position.

Though Gorton continued to jeopardise his own position, a dejected McMahon no longer pursued the prime ministership. In the end it fell into his lap. When some poor decisions by Gorton led to Malcolm Fraser’s resignation from the ministry, the reverberations resulted in a confidence vote in the party. The vote resulted in a tie, and Gorton, accepting that his position was untenable, broke the deadlock by voting against himself. McMahon then won the vacated post, only to be bizarrely hamstrung when Gorton contested and won the deputy leadership.

McMahon’s ascent was initially met with a jump in the polls, particularly in Sydney. But his prime ministership was dogged by a nightmarish concoction of difficult circumstances. Chief amongst these were economic woes beyond his control, but there was also the withdrawal of troops from Vietnam without having secured victory and the undercutting of Washington over the recognition of China. Even if these distractions had not existed, McMahon’s precarious position atop a divided party did not offer the security necessary to make radical policy moves in favour of liberty. His liberal achievements would be limited to restoring relations with the states and reducing income tax, and even this reduction was done without the necessary spending cuts.

McMahon’s story is one of a liberal tragedy. Few politicians, let alone one who reaches the top office, have the grasp of liberty and liberal philosophy that he displayed. Yet circumstances never allowed him to put theory into practice.

Despite a steady rise up the political ladder he jeopardised his future in internal fights against big government that ultimately proved futile. He came agonisingly close to the top job only to be denied it long enough for the policy opportunities of prosperity to evaporate. That is not to say that in different circumstances he would have been a libertarian zealot. He was a committed pragmatist who on certain issues conformed to the expectations of the day. Nevertheless it is reasonable to posit that in fairer weather his liberalism would have shone through clearer.

Like Reid before him, McMahon reached the prime ministership only to find it an untenable position, with McEwen and Gorton playing the Deakin role in the continued undermining of classical liberalism in Australian politics.