Austerity Or Stimulus?
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When Labor stood for full employment Victor Quirk1 CofFEE Abstract: The establishment of post-war full employment (2 per cent unemployment) in Australia was a deliberate policy by the Curtin and Chifley ALP governments of 1941-1949, anticipated in speeches in opposition and at the 1942 Constitutional Convention. Even during 23 years in opposition, throughout the 1950s and 1960s, the ALP kept the Coalition government true to its 1949 pledge of maintaining full employment. From the mid 1970s, despite claiming to uphold the values of Curtin and Chifley, the ALP has preserved labour underutilisation to cower working people and drive productivity. This is precisely what Labor’s 1940s leadership most categorically opposed. 1. Introduction Every day, Australians demand that we answer the most important question they can ask of any government: What do you stand for? They are right to ask. It is their Government, not ours. And we should welcome the question, because our answer is clear. Opportunity for all, not as a theoretical concept but as a call to arms, to be expressed every day in making sure men and women have jobs... (Gillard, 2011). The polling organisations, advertising agencies and media space that politicians use to engineer their electoral support are substantially paid for by wealthy individual and corporate donors. The donors know what they want in return for this expenditure, just as the political parties who take their money know what they must do to keep the funds rolling in. Herein lies the fundamental source of tension in the modern Australian Labor Party: it must somehow preserve the electoral support of people who live by earning wages, while raising ever- increasing campaign funds from people who want a cheap and compliant labour force. It is this tension that leaves the dwindling ALP rank and file wondering why they bother supporting it, and party luminaries constantly attempting to convince wage earners that Labor is still their best alternative. Abstract symbolism is useful in these situations, which explains the ubiquitous references by modern Labor figures to Chifley’s declaration (at a June 1949 ALP conference) of the labour movement’s ‘great objective – the light on the hill – which we aim to reach by working for the betterment of mankind’(Chifley, 1949a:65). The current Labor Prime Minister referred to ‘the light on the hill’, for example, in her recent speech (16 September 2011) at the Chifley Research Centre (quoted above), although in relation to the provision of jobs her intentions could not be further from those of Ben Chifley. Chifley himself referred to ‘the light on the hill’ several times in 1949, notably in his November national election broadcast in which he stated ‘the Labor government has shaped all its financial and economic measures towards maintaining full employment and it will continue to shape them so’, having by 1949 kept unemployment below 2 per cent for six years. This was despite, he added, loud and vociferous opposition: You cannot have discipline and efficiency – so critics say – unless you have a degree of unemployment. Not too much unemployment of course – that would be bad for business. Just a nice six or eight per cent of unemployment, just a quarter million or so out of work to keep the fear of the sack in the hearts of all the rest. 175 Quirk The Labor government rejects this barbarous and intolerant view and dismisses as absurd the arguments used to support it. It is utter nonsense to say that unemployment would cure shortages – produce more goods, that is, by having fewer people at work (Chifley, 1949b:75) When Chifley made this speech to a nation of 8 million people, barely 2000 of them were in receipt of unemployment benefit. By contrast, when Ms Gillard made hers (above), 560,000 Australians were officially unemployed, another 950,000 were without work, wanting to work, but not counted as ‘unemployed’, and 1.2 million of the ‘employed’ (because they have at least one hour of work per week) needed more hours of work (ABS, 2010, 2011). Australia’s ‘flexible’ labour market, in which workers endure deepening economic insecurity, is often claimed to be great modernising Labor reform. This use of labour under-utilisation as a productivity-driver was precisely what Chifley condemned in his speech, and what earlier Labor governments had sought to end since the days of E.G. Theodore’s 1919 Unemployed Workers Bill in Queensland (Quirk, 2009). Beginning with the Curtin government in which Chifley served as Treasurer, between 1944 and 1974, Labor and Liberal governments directed the Commonwealth bureaucracy to keep the rate of unemployment below two percent by managing aggregate demand with high levels of public sector employment. The bargaining power that plentiful work gave to working people decasualised the labour market, making permanent, full time work the norm. Housing ownership grew and wealth disparities reduced (Berry, 1999). A conscious policy of obliging the public sector to train more apprentices and employ more graduate professionals than it required ensured that the expanding manufacturing, housing and engineering sectors were plentifully supplied with skilled workers (Cook, et al, 2008). People could have families in the expectation of being able to provide for them. To the generation that survived the grief of the First World War, the 1930’s depression and the Second World War, it was a holiday in the sun. To the leading strategists of the business class it was the realisation of their worst fears: without the threat of unemployment, workers were demanding a larger share of what their labour and the employer’s capital produced. What was worse, even with a Liberal government in power they could do nothing about it. By the time Menzies took office in December 1949, full employment had been the norm for six years, and the public were completely habituated to it. Menzies was forced to explicitly promise to maintain it during the 1949 election, and for the rest of his career even slight deviations of unemployment above 2 per cent provoked an electoral backlash, particularly with Labor and the unions opportunistically accusing him of abandoning full employment whenever public expenditure was even slightly trimmed. Its final abandonment, coinciding with the destruction of the Whitlam government, was consolidated with deft agenda management by the Fraser Government, a surge of anti ‘dole- bludger’ stories in the tabloid media, and a large scale US-designed ‘ economic education campaign’ throughout the late 1970s / early 1980s, critical of public sector employment (necessary to restore full employment) and government intervention in the economy (Carey, 1995; Windschuttle, 1980). The effective elimination of unemployment was a consciously political act, as was its restoration in the 1970s, as is the maintenance of labour-underutilisation as a productivity driver today. While studies abound on the roles of various economists who developed the legislation and technical strategy for post-war full employment, less consideration seems to be given to the role played by the politicians that ordered them to do it. This paper reviews 176 Quirk the strategy Curtin and Chifley pursued to establish full employment, in the face of conservative opposition, having taken their lead from Scullin’s Treasurer, the man Chifley considered ‘...the best financial brain this Parliament has ever known’, Edward Theodore (Chifley, 1950:361). 2. John Curtin’s leadership Both Curtin and Chifley were members of the Scullin Labor Government that took office in October 1929, at a time when monetary policy was controlled by the private interests represented on the board of the Commonwealth bank. Labor’s capacity to legislate was blocked by an obstructive Senate, and their strategies undermined by having an opposition informant (Joseph Lyons) in their midst. They saw first-hand how Treasurer E.G. Theodore’s efforts to wrest control of the money supply from the banks, and use public sector job creation to reflate the economy were all blocked. The same London financial houses that had placed a four year financial blockade on Queensland during his Premiership of the early 1920s, largely to prevent his implementation of his 1919 full employment legislation, were driving Australia into depression. In 1930-31 they demanded Australia cut its living standards to lower production costs of its raw materials to British manufacturers, to offset the undermining of Britain’s trade competitiveness caused by the banker’s desire to preserve an over-valued, gold-standard pound (Quirk, 2009;2010). At the height of the depression, Labor capitulated to the banks, introduced the cuts, and waited in vain for them to reciprocate with a promised credit expansion. Having thus disillusioned their constituency, the government fell prey to the opportunism of their enemies who forced an election, sweeping Lyons and the conservatives to victory in December 1931 (Quirk, 2010). Despite having publicly denounced Theodore’s capitulation to the bankers in 1931, in the immediate aftermath of their both losing their seats, John Curtin wrote to him, declaring his commitment to Theodore’s economic policy goals, urging him to re-enter parliament at the earliest opportunity and seek the leadership of the party. Theodore declined, jaded with the treachery and short-sightedness of politics, enunciating a policy of aggregate demand management to establish full employment in his reply letter to Curtin. ...it should be the first duty of our rulers (our rulers include those in charge of the monetary system as well as the government) to keep the population at work. If production of consumable goods increases beyond the market needs the redundant workers should not be sacked but should be employed upon capital works and improvements. When the time comes that there is not sufficient work for the employment of all the workers an all round reduction of working hours should take place (Theodore, 1932).