When I began my working life at the late and lamented Department of Trade and Resources I was still fresh from poring over The Crisis in Australian Capitalism by the economics journalist Peter Robinson, scourge of the “tariff bludgers.” This persuasive polemic made me a committed free-trader — a historically perverse position for a Victorian, especially one who stayed for a while in Melbourne’s then heavily industrialised outer southeast. Overseas students studying at Monash University, mostly Malaysian Chinese in those days, regularly found work in local factories during term breaks.
What’s more, the agency I had landed in still harboured fond memories of having been the fiefdom of the former Country Party leader John “Black Jack” McEwen. As trade minister, this much-feared figure was postwar Australia’s high priest of protectionism as bulwark of the nation’s manufacturing base. “Under McEwen you either shared the minister’s opinion or had none at all,” a departmental veteran told me.
The department was dedicated to opening up markets for Australian exports, but my decrying of Australia’s own trade barriers was considered a mere youthful indiscretion. In the early 1980s, after the nation had been governed for most of the past thirty years by a Coalition headed by a Liberal Party supposedly committed to economic liberalism, these barriers seemed as unassailable as ever. How did the Liberals and the Country Party keep the proverbial lid on what could have been as great a cause of mutual strain as net zero today?
In the late nineteenth century the trade issue defined the discordant political cultures of the two main Australian colonies, Victoria being the home of arch protectionists David Syme and his acolyte Alfred Deakin while footloose New South Wales was committed to free trade. It constituted the greatest policy choice facing a still formative Australia as the twentieth century approached. As an obstacle to Federation, it had potential to be a nation breaker.
Even after Federation was finally achieved in 1901 there remained a fundamental question of whether the new nation would try to compete boldly on international markets or withdraw into cosseting domestically oriented infant industries. Unsurprisingly, the young Commonwealth trended towards the easy option of protection against imports, only partly made up for by the abolition of trade barriers between the states. Their borders are still dotted by now quaint colonial-era customs houses. Any lingering doubt as to where Australia was headed was ended by the Massy–Greene tariff of 1921, which embedded tariff policy by — among other things — creating the Tariff Board to assess industry requests for protection.
But surely the formation of an earlier coalition in 1923 between the urban based Nationalist Party of Stanley Bruce and Earle Page’s Country Party would have changed things? One of the Country Party’s foundational gripes — long before Black Jack took the leadership — was that tariffs and other trade barriers imposed unfair costs on primary producers, and Page and his rural confreres now had nearly half the spots in cabinet, with Page himself as treasurer.
Well, no, the Bruce–Page government didn’t make much difference. One fundamental reason is that the costs of protection are spread so thinly as to be less than obvious, while its benefits are highly concentrated on the fortunate few. Continuing to rip off great numbers of consumers has always been far easier than exposing inefficient manufacturers to international competition.
Also, the Country Party in government discovered the joys of what became known as protection all round: if you can’t get rid of tariffs then you compensate for the costs they impose by building up a smorgasbord of schemes to subsidise primary producers. This nice little earner of a strategy became a staple of Country Party policy. Page and co also found that remaining in government was necessary to keep directing funds to (mostly much-needed) rural services and infrastructure.
Hence the Bruce–Page government resisted the not infrequent tariff tantrums of rural radicals from the Country Party’s outer fringes. Bruce persuaded himself that tariffs actually built up the home market for primary goods but, as one of our few prime ministers with a commercial background, harboured a disconcerting soft spot for business efficiency. Just before losing office in 1929 his government moved to inquire more closely into its own tariff regime. Its hapless Labor successor, headed by James Scullin, raised tariffs to unprecedented levels in a vain effort to cope with the Great Depression.
Postwar, the Liberals’ lack of economic nous let McEwen dominate trade and industry policy. So much so that he became one of the very few Australian political leaders to give his name to an economic strategy. “McEwenism” was more than just a cynical exercise in expanding the Country Party’s rural support base by encompassing manufacturers. McEwen held that a prosperous Australia needed to build its ability to defend itself by expanding its population, and that only a manufacturing sector protected by tariffs, quotas and suchlike could provide the mass employment required to sustain this. Subsidies, meanwhile, would keep primary producers happy.
The end result was that “the whole of the Australian economy is protected,” McEwen proudly proclaimed. His conviction that Australian manufacturing would grow overlooked the limitations of internationally uncompetitive industries limited to a small domestic market while encased in a business culture cosily attuned to government assistance.
McEwen’s considerable personal standing didn’t help. Menzies considered him to be the Coalition’s most capable minister, and even the acerbic Paul Hasluck respected his commitment to the national interest — even if he otherwise treated politics as “a contest for advantage, not a matter of doctrines or principles.” There were occasional suggestions — and not just from within the Country Party — that McEwen would make an excellent prime minister. It took until the early 1960s for his economic doctrine to finally attract serious criticism from within his party’s coalition partner.
Many early public attacks on the excesses of McEwenism emanated from a self-styled “modest member” from South Australia, one Bert Kelly. This Liberal backbencher correctly argued that the tariff wall constricted the national economy by propping up industries for which we had no natural advantage, just as “you can, with the expenditure of immense effort, grow bananas at the South Pole.” Yet the Country Party remained under McEwen’s domination, while both the Liberals and Labor bathed in a “pleasant pool of apathy.” Kelly did, at least, give his fellow Liberals due credit for tolerating his seemingly quixotic fixation.
More serious for McEwen was criticism starting to emanate from the Tariff Board under its chair Leslie Melville and his successor Alf Rattigan. By the mid-1960s a graziers’ organisation called the Basic Industries Group and a particularly rambunctious economics journalist, Max Newton, were campaigning with a vigour that Black Jack found decidedly irksome. They were almost as annoying as one of his fellow ministers — an ambitious little guy from Sydney with big ears and a sing-song voice.
Billy McMahon is not normally cast as a political hero. Whatever personality flaws he bore, he was a serious student of economic policy. Zachary Gorman, historian of Australian liberalism, called him a “deeply philosophical classical liberal” for his efforts to uphold individualism and oppose the concentration of power. This, and his emergence under prime minister Harold Holt as a capable treasurer, helps explain the seeming mystery of why he eventually became Liberal leader.
McMahon was McEwen’s most serious Liberal challenger. They clashed not just over industry protection but also over creation of an Industry Development Corporation to lend to and invest in industry, and McMahon’s refusal to devalue the dollar to match Britain’s own devaluation in 1967. McEwen accused him of encouraging the Basic Industries Group, and of leaking information to Newton.
So it was not a total surprise that when McMahon moved to contest the party leadership in the wake of Holt’s untimely death, Black Jack decreed that a McMahon prime ministership would end the Coalition. In doing so he produced one of the best-known Australian political remarks: “Bill, I will not serve under you because I don’t trust you.” Whether McMahon would have otherwise won the party-room ballot remains doubtful: there was no groundswell of support for him before or after McEwen’s veto. Nor was there any need to attribute McEwen’s hard line to the quite false rumour that McMahon was gay, to use the parlance of a later era. I lost count of the number of times I had been assured of the contrary.
The remarkable thing here is that the McEwen–McMahon clash was the only time in the twenty-three years from 1949 to 1972 that protectionism became a major public issue between the Country Party and a senior Liberal. McEwen eventually lifted his veto shortly after John Gorton nearly lost the 1969 election.
Whitlam’s sudden twenty-five per cent across the board tariff cut of 1973 was soon written off as a political blunder. It took until the early 1980s for things to really begin to change. Bafflement over the stagflation that followed the two oil shocks and a growing fear that the Australian economy was facing irreversible decline encouraged the emergence of the Dries in the Liberal party room, not to mention such robustly economically rational Labor figures as Bill Hayden and Peter Walsh.
In the end it was those great (no sarcasm intended) economic reformers Bob Hawke and Paul Keating who belatedly led the way towards modernising and internationalising a moribund Australian economy, crucially supported by opposition leaders Hewson, Downer, and Howard.
Now, I am no climate change expert: nor am I confident that net zero is a great goal for Australia to aspire to. But I will make a few admittedly broad-brush observations on how the Liberals might relate to their Coalition partner on such a tough issue, drawing on the sorry saga of their predecessors’ acquiescence with McEwenism.
Lesson one is to develop a strong internal capacity for developing robust policy. If you don’t have a well thought out position in which you have intellectual faith, how can you even begin to stand up to the McEwens of this world? Nurture ideas, tolerate debate, read worthwhile books, and conduct research. Too many Liberal MPs of the 1950s simply didn’t do enough in this department.
Second, value the Coalition as a ready-made basis for hammering out a balanced policy package. It’s far better to negotiate as joined at the hip partners than to resort to public spatting that leaves both sides fearful of being seen as having backed down. The Coalition has been more or less functional for most of the past century, so it must have something to offer. It worked for Bruce and Page, so why can’t it for their political descendants? And remember also how the Nationals largely went along with economic reform under Howard.
It’s up to the Liberals here as the senior Coalition partner (well, those of them who favour net zero) to balance National demands with a wider view of what is good for Australia. Don’t condemn the Nats for protecting their regional constituency — it’s what they do, and might even generate a few good ideas for a balanced policy package that addresses net zero’s manifest costs.
Third, be patient about policy change. Plant an idea and encourage it to grow as changing circumstances make its merits more obvious. Good ideas are the ultimate vehicles of power, they just take time to achieve majority favour. Bert Kelly was seen as an obsessive, and McMahon as a boat rocker, but ultimately their ideas won out.
Fourth, one slightly “out there” thought. Don’t always dismiss the seeming crank: stay alert to the near inevitability that in today’s ever-growing oceans of dottiness there swim a few Kellys who have done their policy homework and are truly brave, not merely obsessive. Stanley Bruce said wisely of his rather manic deputy that “if you had the patience to listen to Page, he’d come up with a helluva good idea now and then.”
Finally, remember that no major issue is ever permanently resolved, so never rest on your laurels. Those trade department sages were oh-so wrong to assure me that protectionism would last forever. And now even such a manifestly bad idea as protectionism is coming back. Who would have thought that a prominent Liberal would be calling for the revival of the Australian car industry? History doesn’t go in circles, but nor does it ever cease.
Incidentally, I didn’t last long in the trade department. I’ve no idea why. •
