How Labour Governs. Vere Gordon Childe 1923

Introduction. The Background

THE main theme of the present study will be the development of Labour organisation and policy during the current century; for it is in this period that the most characteristic phases of Australian Labour have manifested themselves. Moreover, the course of Australian economic and industrial growth down to the date of the Federation of the Colonies has been admirably and exhaustively described by Sir Timothy Coghlan and other writers. Nevertheless, in order to enable the reader to follow more readily the drama to be unfolded, it may be helpful to sketch very briefly the historical background.

In the first place it must be remembered that Australia is a continent of 2,974,581 square miles in area – slightly larger, therefore, than the U.S.A., and rather smaller than the Dominion of Canada. We often hear that this continent is empty. In fact, the total white population, as revealed by the 1921 census, is just under five and a half millions. But emptiness is not to be reckoned by the population per square mile, but by the number which the country is actually capable of supporting and, when this is taken into consideration, the disproportion between the immense acreage of Australian soil and her meagre population becomes less striking. In point of fact vast areas of Australian territory are quite unadapted for close settlement. Over huge tracts of the interior the rainfall is so exiguous and so uncertain that agriculture is out of the question. The only industry that such land could maintain is pasturage, and that only thinly at the rate of, say, one sheep to a hundred acres. No amount of settlers could increase materially the carrying capacity of these plains, since man cannot control the rainfall, and the natural configuration of the land precludes the possibility of irrigation. On the other hand, this appearance of emptiness is enhanced by the uneven distribution of the population and the immense concentration in a few bloated cities. The 900,000 inhabitants of Greater Sydney represent almost half the total population of a State covering 309,432 square miles. Outside the capital there are only five towns in the whole of N.S.W. with more than 10,000 inhabitants. South Australia is even larger, yet more than half of her 494,867 citizens are returned as residents of Adelaide. Similarly half the Victorians live in Melbourne. In these three States the capital cities dominate the whole political and economic life of the community; they are the termini of the principal railways, and practically the only ports for overseas shipping. Thus they have sucked in an undue proportion of the increase of the State’s population, and continue to grow ever more unwieldy and bloated. Queensland is far more happily situated. She has achieved some degree of decentralisation, and possesses at least three independent ports, each connected with their own hinterlands by separate railway systems. While in N.S.W. all lines run to Sydney, Brisbane occupies no such exceptional position in the traffic of the northern State.

In geographical structure and in climate Australia is a remarkable unity. A narrow but fertile and well-watered strip along the Pacific Coast is separated from the more characteristic plains and slopes of the west by a steep dividing range. Running spine-like the whole length of the continent from north to south. West of the range the land slopes away very gradually to the great plains of the Murray-Darling basin, and as one proceeds westward the rainfall becomes ever smaller and less reliable, till beyond the Darling one reaches a comparative desert which extends nearly to the West Australian coast. In the far north the physiographical conformation of the land is somewhat different, and the rainfall also is more regular and bounteous. But for such details the reader is referred to the lucid descriptions published in the Commonwealth Year Book.

But if Australia is a unity geographically, it is very far from being a unity politically. The early colonisation of the continent took place at a number of different spots on her immense coast line, and these settlements were granted independent status and self-governing constitutions by the Imperial Government at different times and under varying conditions. It has thus come about that Australia is divided up into six States, very largely independent one of the other, whose boundaries, save in the case of Tasmania, do not correspond to any essential physiographic or economic divisions, but are largely arbitrary or even fortuitous. Each of these States has a Governor and Bicameral Legislature of its own. Till 1901 they were as independent of one another as of Canada or Cape Colony. At the beginning of the century these six colonies federated, and a seventh legislature and vice-regal court were superimposed on those already existing. The Commonwealth was given strictly limited powers to deal with so-called national questions–defence, foreign affairs, inter-state and overseas commerce, currency, postage and the like–closely defined in a written constitution which could only be altered by a referendum of the whole people carried by a majority of the voters and in a majority of the States. The State Parliaments still retain complete autonomy in respect of education, railways and industrial matters. The last point is important. It has meant that each State has its own peculiar set of industrial laws and its own system of settling industrial disputes or fixing prices, and consequently that the unions and Labour Parties in each have had to retain a large degree of local autonomy to enable them to utilise and comply with the different codes ruling from State to State.

Coming now closer to our subject it must be insisted that Australia is still, economically speaking, a land of primary producers exporting their surplus of raw materials in return for the manufactured products of the older countries. The importance of this point must not be overlooked. Prior to 1901 Australia was dependent upon imports for the majority of the articles necessary to the life of her inhabitants and to the development of her natural resources. Iron, for instance, could not be produced, and steel has only been turned out since the opening of the Newcastle Works in 1915. That has been changed since Federation, largely under the influence of a protective tariff; while the war, by restricting the possibility of importing goods, greatly accelerated the expansion of Australian manufacture. Nevertheless, though no longer totally at the mercy of foreign manufacturers for the essentials of civilised life, and thus more nearly able to take her place as an equal in the markets of the world, Australia’s economy is still essentially that of a country exporting raw materials, and no change in this position is to be expected in the near future at all events. Wool is her staple source of wealth, and though the time may come when Australia may be able to supply her own local market with woollen textiles – at present the local mills could barely supply a third of the home demand – it is not likely that she will be able to compete with other countries as an exporter of woollen goods. Accordingly it is safe to point to primary production as the main source of her national income.

In the primary industries the pastoral is immensely the most important. Of her total export trade worth in 1919 just on £150,000,000, over £50,000,000 was represented by wool, while other pastoral products, skins, meat, and tallow accounted for another £25,000,000. Sheep flourish almost anywhere in the continent, and the huge sheep stations are still the characteristic feature of Australian industry. Cattle raising is also an important industry, especially in Queensland and the Northern Territory.

Agriculture takes second place after the pastoral industry. Wheat can be grown profitably over the eastern parts of N.S.W. across the dividing range and all over the west of Victoria, as well as over a large area of South Australia and the West. This crop now accounts for £30,000,000 Of Australia’s exports, but historically the grain industry has only recently assumed these proportions. In 1901 the value of the wheat and flour exported was barely one-tenth of the figure reached in 1919, though the actual quantities produced bore only a two to one relation. Another characteristic crop is sugar cane, which is largely planted all along the Queensland coast and in the extreme north-eastern corner of N.S.W. This industry is likewise of relatively recent growth, the yield having doubled between 1891 and 1901, and again by 1915. Nevertheless, the amount of sugar exported is now negligible, the greater part of the crop finding a local market, and indeed being insufficient in bad years to satisfy home requirements. Large tracts along the coast and in many other well-watered districts are now devoted to dairying, being divided up into relatively small farms. In this industry co-operation has made especially marked progress, the majority of the butter factories being owned by the dairymen’s co-operative societies. Finally, mention must be made of the vineyards situated in the coastal region of N.S.W, in Victoria, and in South Australia. Similar in some respects is the fruit industry which has become especially important along the Murray with the extension of irrigation.

Thirdly, the mineral wealth of Australia is very considerable. It was the discovery of gold that first brought to Australia any large influx of free immigrants, and gold digging is still popularly regarded as a characteristic employment of the Australians. This impression is, however, erroneous. In the eastern States gold production declined steadily from close on £13,000,000 in 1853, to a little under £2,000,000 in 1918. At least, since 1891 the preponderating proportion of Australian gold has been won by wage-earning miners from deep mines; the independent prospector is now relatively unimportant. But, despite the falling off in the production of the precious metal, the value of Australia’s mineral output has consistently increased, advancing from £12,000,000 in 1891 to £26,000,000 in 1918. This has been due to the opening up of the ores of silver, base metals and coal on a large scale, and often from deep mines. The silver-lead mines of Broken Hill have been responsible for the creation of the third largest town in N.S.W, situated in an almost waterless wilderness, remote from any seaport and with no other source of trade than the mines. And one of these had by 1913 paid over £9,000,000 in dividends! In N.S.W., Queensland and South Australia there are important copper mines, around which small, or in some cases quite large, townships have sprung up, often only to decay away again like Cobar when the main ore-body has been worked out. About five-sixths of the coal produced in the continent comes from N.S.W. In fact, the other States are all more or less dependent on the mother State for their fuel supplies. Yet there are small coal mines in all the States except South Australia, each serving as the centre for a small township. In N.S.W. the principal coalfields lie within 100 miles of the capital, which is itself situated immediately over the centre of the main basin which outcrops to the south in the Illawarra, to the west round Lithgow, and to the north at Newcastle, and again at Maitland and Cessnock. None of these districts are exclusively devoted to mining, but the miners form the predominant element in the population of the towns in the areas named. At Newcastle and Lithgow secondary industries dependent upon coal are rapidly springing up. On the whole, it looks at the moment as if the relative importance of mining in Australian economy is declining. The comparative figures for the value of mineral products compared with the agricultural and pastoral industries respectively were very approximately in the ratios 5: 8: 10 in 1911; to-day the corresponding figures would be about 1 : 2 : 4.

As has been said, these primary industries are the main source of Australia’s wealth. Manufacture plays a very secondary role in this respect. The total wealth production of the Commonwealth in 1913 was estimated at £206,000,000, of which only £61,000,000 were assignable to manufacturing industry. And of the 206 millions, 114 millions were exported. In fact it is only since the beginning of the century that manufacture proper has been undertaken locally on any large scale. Prior to that date secondary industry might be grouped under two main heads: the refining of raw products without, however, converting them into consumables – smelting, wool-scouring, tanning, and milling, operations which are on the border-line between production and manufacture proper – and small industry – baking, brick-making, furniture-making, brewing, and so on. It is true that engineering works had made considerable progress, that there were boot factories, sugar refineries and a few other more advanced industries; but in the main secondary production was on a small scale and progress was slow. The number of factories in N.S.W increased from 2,961 in 1881, to 3,367 at the beginning of the century, and the number of employees from 31,197 to 66,135. After the foundation of the Commonwealth, as has been remarked, manufacture advanced much more rapidly, and was carried out on a larger scale. New industries were established, including the working up of raw materials imported from abroad into goods for final consumption – tobacco into cigarettes, cotton into shirts and underclothing, etc.; and the working up of Australia’s own products into finished commodities was advanced a further stage by the establishment of the shipbuilding industry, and the manufacture of locomotives, steel rails and other engineering products in Australia. The expansion of manufacture and also the change in its nature is well indicated in the following figures:

The manufacturing industry, where it was independent of special conditions – such as those that attach smelters either to the scene of the mining operations or to a locality where coal is cheap, butter-factories to a dairying district, or sawmills to a well-timbered region – was generally started in the already-formed centres of population. Now the main towns of Australia owe their origin and rapid growth to commerce and transportation – they are deep sea ports and railway termini; for, apart from the primary industries of pasturage, agriculture and mining, it was commerce and shipping that first developed in Australia, and gave rise to large aggregations of workers. The rising manufacturing industries took advantage of the existing groupings of potential labourers, and were in the majority of cases established in close proximity to the large cities, which, as we have indicated above, were in most cases the capital cities of the several States. In 1919, 196 of the 250 factories in N.S.W. employing over 100 hands, were in the metropolitan district, and the same proportion held in respect of the 273 establishments employing over 50 but less than 100 persons. A very large proportion of the remainder would be situated in or around Newcastle, the second largest town in the State, which owed its growth to overseas shipping and the coal trade. There are, therefore, practically no purely manufacturing towns.

In sketching the economic history of the continent whose industrial constitution has just been outlined, it may be pointed out in the first place that a country in whose economy rural industry plays so important a part is naturally exposed to marked fluctuation in prosperity in accordance with variations in the seasons. Especially is this the case in Australia, where the rainfall is exceptionally capricious. Severe and widespread droughts recur periodically and inflict terrible losses on the pastoralists, to say nothing of the farmers. Nearly as common are disastrous floods which may ruin the crops and also drown many of the flocks, while hailstorms and cyclones from time to time cause disaster to the crops of fruit and sugar cane. A failure of any of the staple crops is immediately reflected in the life of the great cities, which depend so largely upon trade and the transportation industry. In particular a long and general drought, like those of 1900-1 and 1918-20, is always responsible for a severe depression of trade all over the continent and its corollary of general unemployment. During the period before 1891 these fluctuations in the general level of prosperity were most violent and rapid, as a few chapters of Coghlan’s history will show. With the growth of manufactures and the expansion of public works, the changes have been less sudden, and it is only the worst of bad seasons that have given occasion for a severe general depression affecting the whole economic life of the States concerned.

Apart from these seasonal fluctuations the decade from 1881 to 1891 was a period of expanding industry and booming trade. That boom was followed by a decline culminating in the bank smashes of 1894 and the general collapse of trade that ensued. It is no coincidence that the great spread of unionism and its first triumphs occurred during the former decade, and that it was in the period of depression that the Australian Labour Movement took on its characteristic political and arbitrationist form. From the beginning of the century, however, trade began to revive, and with the breaking of the drought of 1901 a new boom set in. The bank deposits rose from £90,965,530 in 1901 to £147,103,081 in 1911. Similarly the savings bank deposits were nearly doubled in the period. The exports rose from £49,685,509 to £79,482,258, and the total trade per head increased from £23 6s.1d. to £32 12s.4d. Pages of figures pointing the same way could be adduced were it desirable to labour the point, but the statistics just cited, combined with those quoted on previous pages, should suffice to establish the fact. Apart from agriculture the expansion of real assets was not so marked in primary as in manufacturing industry. For instance, the flocks of sheep only increased from 87 to 93 millions, and did not reach the pre-drought total of 106 millions in 1891. On the other hand, the breed and the handling of the fleece were improved, as, despite the reduction in the flock, the 1911 clip yielded 721 million lbs. as against 631 in 1891. But the value represented by the buildings and plant of factories practically doubled itself in the first ten years of the century. At the same time there was a marked increase in Governmental expenditure on reproductive public works, such as roads and railways, though perhaps this expansion hardly kept pace with the growing prosperity of the colonies.

But one distinctive feature of the decade must be noted – that is, the rapid growth of combination among capitalists. The tendency in this direction had been apparent since 1890 when the employers had begun to act together against the combined forces of the workers. The depression of the ’nineties which caused the failure of many small concerns accelerated the process, and it was further favoured by the Arbitration Laws passed early in the new century, which had among their avowed objects the encouragement of associations among employers as well as among employees. No doubt the associations of employers contemplated in these enactments were not such as might tend to raise prices by the elimination of competition, but rather such as would facilitate the conclusion of collective agreements covering a whole industry with the employees’ unions in that industry; but in practice associations of the latter type naturally became or gave rise to organs of joint action in fixing the prices of the products of the industry they served. The most celebrated of such combinations was the so-called “coal vend” among the colliery proprietors of N.S.W, which was in a position effectually to determine the selling price of coal for almost the whole of Australia. Similar associations grew up in most other industries. Attempts were made to check this process by the Federal Legislature, but these were utterly ineffectual. The vend, indeed, formally dissolved, but its constituent members continued to act in common just as if a formal and legally valid agreement bound them. Side by side with such associations of nominally distinct concerns, went amalgamations on a large scale which became actual monopolies. The Sydney Ferries, Limited, absorbed several smaller lines plying on that harbour. So all the Australian jam manufacturers were gradually amalgamated into one huge concern. The most notorious of these monopolies was, however, the Colonial Sugar Refining Company, which not only possessed the only refinery in the Commonwealth, but also acquired all the mills which extracted raw sugar from the cane-save the co-operative mills established under the auspices of the Queensland Government to combat the trust.

One result of the combinations which were taking place during this period was a general increase in prices. It took £1 in 1911 to purchase the amount of food, groceries, and housing which could in 1901 have been purchased for 17s. 7d. Using index numbers with 1911 as the standard, this represents a rise from 880 to 1,000. The change was most marked in Brisbane, where the price number rose from 769 to 915, and least in Perth, where the respective figures are 1,027 and 1,136. Nevertheless, it seems that the prosperity of the period was fairly generally diffused. That is suggested by the savings bank balances already quoted, and by the fact that real wages, despite frequent sharp fluctuations, rose on the whole in every State except Queensland.

But by the end of the decade signs were not wanting that the trade boom was on the wane. The pastoral industry first manifested signs of decline. The volume of primary production per head went back from 1,028 in 1910 to 990 in 1912. Similarly the excess of imports over exports decreased from £8.7 to £1 millions. For the whole Commonwealth, despite a rising overseas market for Australian produce, the percentage of exports on imports steadily fell from a maximum Of 155.9 in 1906 to 98.5 in 1913. Hence Australia began to show an unfavourable trade balance for the first time since 1892. Of course, external trade is not necessarily a measure of the prosperity of a country. In the case of a self-contained and self-supporting community it would afford no measure at all. But, despite the expansion of manufactures that had already taken place, Australia was not self-sufficing, and hence the decline was of sinister significance. Similarly the mass volume of production per head declined slowly and irregularly from a figure of 43.1 in 1910 to 39.8 in 1912. It would be a mistake to attach undue importance to such statistical computations, but the evidence seems to point to a gradual lowering of the productive activity of the community which under the present system of production for profit generally presages a crisis. At the same time the upward movement of the price curve became accelerated to an alarming degree. The index number for the Commonwealth – food, groceries, and rent –jumped in one year from 1,000 to 1,104. The change was particularly marked in the capital cities of the eastern States – in Sydney from 1,031 to 1,148, and in Melbourne from 950 to 1,055. And this time wages did not keep pace with the rise in the cost of commodities. The index number for real wages dropped from 1,000 in 1911 to 956 in 1912. In N.S.W. the fall was particularly rapid from 972 to 921. Yet money wages were constantly being raised, and the increased cost “passed on” in prices. Nevertheless, Governmental expenditure rapidly increased both by the States and the Commonwealth. The disbursement of large sums on public works by the State Governments and on naval and military preparation by the Commonwealth served to provide more or less plentiful employment and to disguise the effects of the threatening decline in other industries.

Such was the situation when the war broke out. The substantial effect of that cataclysm, after the shock of the first panic had worn off, was to maintain and even enhance the partly fictitious prosperity of the last pre-war epoch and postpone any crisis. At first there was a general disturbance to industry, paralysis of overseas trade, a stoppage of loan-moneys and consequently of public works, and widespread and severe unemployment. But within nine months the wheels of industry were revolving at a faster rate than hitherto. The European situation gave an enormously inflated value to all Australia’s staple products – wool, meat, wheat, and metals. Although little shipping was available to transport these crops to the theatre of war, the Imperial Government purchased the whole output of Australia at hitherto unheard-of prices. The value of pastoral production in 1916 was just on £90,000,000 as against £50,250,000 in 1911, and yet the wool clip scaled about 550 million lbs. as compared with 761 millions in the earlier year, and the quantities of butter, bacon, and hams were also smaller. The energy devoted to the preparation of raw materials, and the shortage of shipping to bring goods to Australia or to carry away Australian products, gave a splendid stimulus to local manufacturing industry both to make up for the lack of imported articles by manufacturing them locally and to reduce to the smallest compass Australian exports by refining in Australia what had hitherto been shipped in the crude state. The unfavourable position of the Australian trade balance at the beginning of the war was reversed by 1916-17, when the percentage of exports to imports reached 128.5. Nevertheless Australia experienced a series of bad seasons, culminating in a tremendous drought in 1919-20, which have reduced the sheep flocks of Australia from 93 millions in 1911 to 75 millions in 1919. In N.S.W. the drop was from 46 to 29 millions in June, 1920. A slight increase in the number of cattle can hardly counterbalance this tremendous loss. Moreover, taxation increased enormously. In 1914 the combined Federal and State taxes worked out at £4 14s. per head, by 1919 the figure was £8 18s. 3d. Moreover, to say nothing of the States, the Public Debt of the Commonwealth has increased from £19,000,000 sterling at the beginning of the war to well over £325,000,000 in 1919, while the burden of interest is to-day twenty times what it was in 1914. And this huge sum is not represented by any substantial and reproductive assets as are the debts of the States expended on railways, and the like, but has largely been blown away in the sheer wastage of war.

Nevertheless, the war period was one of actual prosperity, however unstable its foundations may have been. Prices rose enormously, but wages more than kept pace with them, so that the real wage curve ascends rapidly though it does not reach the peak level of 1911. The savings bank balance rose correspondingly, the total deposits being nearly doubled between 1911 and 1918. These figures represent rather an extension of the area of prosperity than an increase in the prosperity of those previously banking, for while the deposits per inhabitant rose from £13 8s. 5d. to £23 7s. 2d., the balance per depositor only increased from £37 2s. 4d. to £42 1s. 1ld. The appearance of prosperity endured for the first year of peace; the soldiers returning from the war had large amounts of deferred pay to spend, and both Commonwealth and State Governments poured out money lavishly for repatriation purposes. At the same time those who had made huge profits during the war were still able to spend freely. This expenditure encouraged importing on a large scale and an enormous increase in prices, especially of imported articles.

But the bubble of this prosperity has been burst. The market for primary products has collapsed and the fabulous prices ruling during the war are no longer obtainable. Thus the huge paper values of Australian produce are automatically contracting. The roseate veil of money has been torn, and it is necessary to face real values again. The prospect is not bright, and a marked depression has infected industry which even the heavy expenditure of Government loans on public works cannot hide. With the collapse of the metal market practically all the mines have suspended operations and consequently the treatment works, and all the wide industry indirectly dependent upon them is paralysed. The Commonwealth armament construction programme has slackened down greatly, and a general slump in trade seems to have arrived.

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