Menzies, Myth and Modern Australia

menzies mug IIIn his comment in the Australian newspaper (24 Sept.) on John Howard’s ABC TV documentary (broadcast 18, 25 Sept.), Troy Bramston claimed that Howard had failed “to support its central thesis that Menzies played ‘the fundamental role’ in ‘the building of modern Australia’ “; instead, “it was not an era of policy innovation or modernisation…There is a huge gulf between the economic, social and foreign policies of the Menzies government then and the Liberal and Labor parties today.”

What Bramston failed to notice was the huge gulf between the economic policies of the Menzies government and those of his Labor opposition.  Although there is much to criticize in Menzies’ strategy for Australian economic development, especially with the benefit of hindsight, it seems indisputable that Labor’s alternative would not only have been disastrous at the time, but also would have long sent the economy in directions quite opposite to modernization. Labor’s post-war vision was of an economy planned and centrally controlled. The success of a wartime regime of ‘command and control’ reinforced Labor’s long-held beliefs. In 1948, Chifley attempted to make permanent the wartime power over rents and prices. Menzies saw the proposal as part of Labor’s plan of complete socialisation—and certainly Labor’s ambitions for economic centralization and control went much further.

The ‘socialisation’ plank of Labor’s platform was then far from the shibboleth it became: Labor strongly believed in extensive ‘nationalisation’, starting with, but by no means limited to, the banks, steel industry and aviation. Menzies successfully frustrated Labor’s efforts to seize the banks.  He preferred private enterprise to nationalisation, even if, as with aviation, the industry was heavily regulated.

Labor, which remained committed to bank nationalisation (although not ‘in the first term in office’), strenuously opposed the creation of the Reserve Bank, a fundamental turning point in the history of central banking in Australia.

Bramston claims that Menzies ‘inherited innovation’ from the Labor governments of Curtin and Chifley: specifically, post-war immigration, the Snowy scheme, and support for local car manufacturing.  And some Menzies government innovations, like the 1957 Japan trade treaty, Bramston dismisses as not being unique: hey, Canada—which had not been threatened with invasion, let alone bombed by Japan—also signed a trade treaty with Japan.

Once again, contrast Labor’s policy with Menzies’. Under Evatt, Labor opposed the trade treaty with a Japan that was exporting, not steel and ships, but textiles, of which there were many Australian manufacturers, including in regional cities and towns. It is true that Labor arranged for GM to set up GMH in Australia, but during the Menzies era, Labor was strongly critical of the foreign private capital inflows that not only helped finance the development of manufacturing, engineering and chemical industries, but also carried along with it the latest technical and management knowhow. Said Calwell in his 1961 election speech: ‘It’s time for a change … to the open-door policy for foreign capital with no government plan for the protection against take-over bids of Australian-owned enterprises, and of our great national assets.’

In a period of relatively low international terms of trade (apart from the short rise and fall due to the Korean War), Australia absorbed over 1.5 million immigrants, many unskilled, doubling the share of foreign born to almost a quarter, while living standards rose at 2 per cent a year, and unemployment and inflation were low.

While Menzies had supported Chifley and Calwell’s intake of Displaced Persons, and their plans for recruitment from Southern Europe, Labor continually opposed Menzies’ immigration policies. Calwell again: ‘Full employment and adequate housing are the pre-requisites to any successful humane scheme of immigration.’ Labor emphasised the use of migrants in public works and government undertakings, rather than for speeding up the development of the private sector.

Labor was strongly committed to public housing (as in NZ)—it did not want a nation of  ‘little capitalists’—so Labor’s 1945 State housing agreement, in force until 1956, was entirely about public housing. Nonetheless, according to the census, 53 per cent of households in 1947 were owner-occupiers; this rose to 71 per cent in 1966, where it plateaued for decades.

Bramston claims that ‘the Menzies government did not believe in balanced budgets; its last was in 1953.’ However, out of what otherwise would have been surplus tax revenues, the Commonwealth subscribed to State loan-raisings, averaging over one per cent of GDP. This helped the decline in public debt from 120% of GDP in 1950 to 52% in 1964 (and 8% in 1974, before Whitlam ignited an explosion).

Strong growth in per capita GDP, the fact of full employment—which gave families the security to buy homes—and low inflation, allowed the first moves to modern capital markets: the official short-term money market (1959), deeper and wider securities markets generally, consumer credit via hire purchase, more merchant banking, including foreign.

Sure, as Bramston wrote, ‘Menzies would not recognise modern Australia’. How many of his contemporaries would?  But they would have recognized, as ‘modernisation’, the structural shift from agriculture—which halved as share of GDP to 11%—and towards services, including construction, which rose from 50% to 61% of GDP. Despite the tariff and import quotas, at the end of the Menzies era, manufacturing accounted for no more of GDP than in 1949 (26%).  Subsequently, Labor under Hawke and Keating, with the support of the then Opposition, took the courageous decision to dismantle most industry assistance to manufacturing (although we still have remnants in motor vehicles).

Contrary to what Bramston claims, Menzies played the fundamental role in building a modern Australia, upon which the current is Australia is based.

Jonathan Pincus is Visiting Professor at Adelaide University. With Henry Ergas, he wrote the chapter on the economy in JR Nethercote, ed. ‘Menzies. The Shaping of Modern Australia

  • Don A. Veitch

    If Labor had ‘run’ industry from the Department of Post War Reconstruction and Development we would all still be living in Beaufort houses, and would not have achieved the highest standard of housing in the world! Whitlam would have added the social psychologist and social worker to the mix (Sir John Kerr saved us from that!)
    Menzies had a giant of a partner, (Sir)John McEwen, a rural socialist, acknowledged by both sides as ‘the father’ of secondary industry in Australia”. Keating’s speech on McEwen, at the time of his death, is glowing.
    Menzies had the Boltes, the Playfords – not an ‘Austrian’ amongst them. This is the team that developed Australia.
    a lazy Menzies had heroes such as Bill Anderson (a follower of Hayek actually), and May Couchman who were the real builders of the Liberal Party.

  • ian.macdougall

    The older I get, the more prepared I become to recognise the good that came out of the Menzies years: full employment after the 1930s depression and WW2 years particularly. To what extent that was Menzies own doing and to what extent the result of the general post-WW2 economic boom is debatable. Let’s face it, Menzies was no free-marketeer. He cultivated a timid cultural dependence on Britain and had a slavish fondness for his betters, particularly Elizabeth Windsor and her reflexively condescending husband Philip Mountbatten, aka Phil the Greek.
    He was also hamstrung to some extent by his need for crucial support from the Catholic right wing of the Labour movement led by BA Santamaria, who was himself in favour of steering a quite different course from that of Menzies.
    Santamaria wanted an Australia that was more like Italy, or to be more precise, Mediaeval Italy, or to be even more precise, an idealised Mediaeval Italy, with the Catholic Church having a central and dominant role in life, both notionally and formally. He wanted Australia to become as Catholic as possible through migration from Southern Europe.
    His original National Catholic Rural Movement also wanted things as decentralised as possible, with the basis of the whole project being a sturdy God-fearing rural population (“six acres and a cow” was the jibe of his irreligious and Protestant opponents). And of course post-WW2, he was the local cheerleader for Franco’s reactionary fascist regime in Spain, though the fact that Australia had just been through a war to save Western Civilisation from the Rome-Berlin-Tokyo Axis did create some difficulties for him.
    That was all well documented in Tom Truman’s classic Catholic Action and Politics (Melb. 1960). But Santamaria and his Democratic Labour Party (DLP) did manage to keep Menzies in office, and the ALP out of it, until 1972.
    Where in the UK Churchill became the man who led his country in its darkest days, the Menzies government lost its majority in the Federal Parliament on the eve of WW2, and John Curtin became Australia’s wartime Prime Minister, succeeded on Curtin’s death in 1949 by Ben Chifley.
    Both Menzies and Chifley were protectionists: the orthodoxy of the day and of their time. The story of Australia’s car industry sums the issues and the situation up quite graphically.
    Australia had a car industry of its own long before the first Holdens rolled off the line. A very good car, the Australian Six was manufactured here between 1919 and 1925. But it could not continue without government financial support, and that neither side of politics was prepared to provide. And so Australia rolled on towards the war with Japan without much of a manufacturing base of its own. Eventually and post-WW2, General Motors of the US agreed to set up manufacturing the original Holdens on condition that Australia pay them (not lend them) a consideration of 8 million pounds up front. Quite a bit of money at the time.
    Contrast our situation with that of Sweden, which today produces cars and trucks (think Volvo, Saab) aircraft (Saab again) telephones and telephony equipment (Ericsson) motorcycles, sewing machines and chainsaws (Husqvarna, Electrolux) in the midst of Europe and its competing industries, but also exports them to Australia. (No similar Australian goods go the other way.) It also has a very healthy trade balance.
    Menzies back in office as PM did a lot of fawning over Elizabeth Windsor, and committed Australia to support of the Americans in their all-round ruthless bloodbath of a colonial war in Vietnam. With consequences.
    As a young law student, he had enlisted in the militia, his unit being the Melbourne University Rifles. But he resigned the commission that looked so good on his CV in 1914: “A very promising military career unfortunately cut short by the advent of war” was the succinct way it was summed up by Menzies’ former fellow soldier Sir Wilfrid Kent Hughes. But like “the Little Digger” (who never dug) Billy Hughes, Menzies made up for it by cheering the soldiers on their way.
    So was he a magnificent statesman or a bloated mountebank and a bombastic fraud?
    The jury is still out on that.

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