A.o.S 3: The Great Depression

1. A.o.S 3: The Great Depression • The Government Response

2. Theodore’s Plan • Edward Theodore was the Treasurer to the Scullin Labor government (1929-1931). He agreed with the idea of ‘equality of sacrifice.’ • His idea was to increase inflation by printing a special banknote. This would be instead of cutting salaries and government spending. • He believed that by putting the economy into debt by spending more money would create more jobs and stimulate the economy (Keynesian approach). • Theodore’s plan had the support of the Labor caucus but not the leading members of the ALP. • Furthermore the Commonwealth Bank refused to support the plan

3. Sir Otto Niemeyer • Sir Otto Niemeyer was a representative from the Bank of England. He came to Australia to assess their financial issues in 1930. • He suggested Australia was living beyond their means. Australia needed to cut costs and start paying back their debts to England. • Cuts should be made to salaries and government expenditure.

4. Sir Otto Niemeyer • He further recommended that Federal and State governments suspend the majority of their investments in public works projects (Classical approach). • He also clearly stated that Australia must not default on loans to British banks as this would affect future credit. • Thomas Bavin, Premier of N.S.W (Nationalist Party 1927-1930) immediately cut salaries etc. in line with Niemeyer’s suggestions. • The federal government was also deeply influenced by his visit and heeded his warnings on defaulting on their loans.

5. Lang’s Plan • Jack Lang (The Big Fella) was the Labor Premier of New South Wales in 1930 following Bavin. • Lang blamed the economic difficulties of Australia on the financiers of Great Britain. He said they made themselves wealthy at Australia’s expense. • He also blamed debts from WWI and anti-Labor governments who reduced wages and social services (Mirams et al). • Lang won much support from the insecure working-classes and the unemployed yet antagonised many conservative elements of Australian society who considered his politics to be in-line with communism.

6. Lang Government • Lang introduced a number of popular pieces of social welfare legislation like: • The widow’s pension • Worker’s compensation • Child endowment payments to mothers • This was at a time when much of Australia’s federal social welfare legislation had not drastically changed since early federation (Macintyre).

7. This cartoon features Jack Lang fighting the banks. He is about to deliver a finishing blow while Theodore and Scullin are already knocked out. In the background Lang is about to be stabbed in the back.

8. His plan for beating the depression rested on three major points: • Interest payments to overseas investors be suspended until Britain agreed to lower interest rates and spread payments over a longer period and wipe Australia’s war debt. • Interest rates on loans raised within Australia to be reduced to 3% forcing the incomes of Australian investors down so they were in line with general decreases in Australia • Australia should settle overseas debts in its own currency, based on goods produced rather than the gold standard.

9. OPPONENTS • Some saw Lang as a ‘ruthless demagogue’ hellbent on leading N.S.W and Australia to destruction • They said Lang was sacrificing Australia’s honour by failing to pay their debts. They called it a policy of repudiation. • Far-right were concerned Lang was attempting to overthrow N.S.W with a Communist Govt. • SUPPORTERS • He was seen by some as the hero of the poor and the battlers. • 500,000 rallied to hear him speak at Moore Park in Sydney June 1932 • The slogan ‘Lang is Right’ was adopted by his supporters

10. The federal government introduced the Financial Enforcement Act in 1932 which redirected federal funding to NSW to pay NSW’s interest payments. • However Lang intervened by simply depositing the funds into the NSW’s treasury. Now that Lang had broken the law the federal governments of both Scullin and Lyons pressured the Governor of NSW, Sir Phillip Game to dismiss him (Stradher) • In May 1932, State Governor, Sir Philip Game, dismissed the Lang government on charges of breaking state and federal laws. • The dismissal occurred a few months after the opening of the Sydney Harbour Bridge.

11. Federal and N.S.W Labor Split • In 1931, the Lang N.S.W government refused to pay interest on overseas loans • Scullin’s federal government paid the difference. The Labor party split into two: “State Labor” (supporting Lang) and “Federal Labor” (supporting Scullin). Lang and his supporters were expelled from the Labor party including federal members directly affecting Scullin’s majority in parliament. • The government was also divided along conservative lines where Joseph Lyons as acting-Treasurer was pushing a fiscally-conservative economic recovery.

12. Joseph Lyons • Joseph Lyons was a leading cabinet minister in the Scullin government and became acting Treasurer whilst Scullin was in England for the Imperial Conference. • Lyons pushed for a conservative fiscal policy of cutting spending, controlling the budget and reducing wages. • He further advised lower interest rates and greater credit for industry. • Even though Scullin supported these policies it brought out divisions between the left and right factions of the Labor party caucus.

13. The United Australia Party. • However Lyons had much support from the business community and they urged him to split from the Labor party and form a conservative coalition opposition to the Scullin government. • This coalition of conservative politicians became the United Australia Party. • Upon being denied the job of Treasurer Lyons followed this advice forcing an election and with Labor already divided between State and Federal factions Scullins’ Labor lost to the newly formed Lyons-led United Australia Party. • Lyons governed Australia for the remainder of the Great Depression following a policy of a balanced budget, wage cuts, cuts to government spending and pensions and paying back Australia’s loans.

14. The Premiers’ Plan • Named as the Premiers of each Australian State agreed to endorse its proposals. • Founded on traditional economic principals of adopting deflation as a policy meaning Australia had to cut costs and balance the budget. • Lower costs would enable a growth in profits, employers would be able to take on extra employees and economic revival would gradually occur.

15. The Main Proposals were: • 20% reduction in total government spending • 20% reduction in salaries, wages and pensions • Cuts to interest rates • Higher taxation

16. The Premiers’ Plan lowered the demand for goods and services, this prevented the industry from recovering thus prolonging The Great Depression. • Measures were not in the best interests of the workers. Although the plan meant that Australia could meet their overseas debt, the workers were directly suffering by losing pay and work. • Lang was the only premier to oppose the Premier’s Plan, although he was finally persuaded to accept it, so long as interest rates were lowered and bank loan repayments were extended. Both the Scullin and Lyons’ government supported the Premiers’ Plan. Subsequently it was implemented for the remainder of the Great Depression

17. Recovery • By the mid-1930s Australia was on the way to economic recovery. • Investors and banks began to have more confidence in the national economy and therefore were more willing to invest in business expansion. • The farming sector recovered and returned to exporting wheat and wool again to their traditional markets. • AGL Shaw has argued that Australia’s real recovery came from the emergence of a manufacturing sector that provided employment, goods and bolstered the wider local economy.

18. Shaw on the Recovery • Shaw: “…the volume of manufacturing production, which increased by nearly 30 percent between 1920-1929 again went up more than 40 percent between 1929 and 1937. • “In 1928-29, 450,000 persons were employed in manufacturing; in 1931-32 there were 337,000 employed but in 1937-38 this had increased to 558,000 that were employed.”

19. Recovery • Manufacturing recovery came in metals, chemicals and the textiles industries. Manufacturing did recovery greatly however it relied on many rural products. • R.M. Crawford: “The Depression brought greater health into the Australian economy. Inefficient industries went under and others learnt an increased efficiency. The fall in overseas credits made it necessary to buy less from outside and make more at home and the long-term effect was to stimulate renewed industrial expansion, aided by lower costs.” • M. Johnston points out that wages increased from 1935-40.

20. Creation of New Groups • COMMUNISTS • The Communist Party of Australia was formed in 1920. • Membership increased as the economic situation worsened. 300 members in 1930 increased to 3000 members in 1934 • They blamed the capitalist system for their suffering and believed Labor had been betrayed. • Many Australians were very fearful of the Communists.

21. THE UNEMPLOYED WORKERS’ MOVEMENT • A communist group that formed in April 1930. • Encouraged agitation and used widespread propaganda. • By 1932 there was 31000 members and in 1934 this had grown to 68000. • Many people joined the group as it offered practical and psychological support when there was little assistance from the Government and other organisations.

22. THE FASCISTS • Various groups began devoted to anti-communist and patriotic ideals • Conservative Australians were mainly attracted, including many returned soldiers. • They were intent on upholding a Loyalty to ‘King and Country’ and ruin communist, socialist and trade union meetings. Specifically, strike action. • They saw the Australian Labor Party as sympathetic to, and controlled by Communists

23. THE NEW GUARD • A Sydney based group, led by AIFF officer, Colonel Eric Campbell, this group attracted middle class Australians who feared the lower class Australians would lead a Communist Revolution. • They were very opposed to Jack Lang and felt he was threatening National Security and Australia’s ties with Great Britain. • They regarded violence and street fighting as legitimate political tactics. • They disbanded after Lang was dismissed.

24. Major Responses of The Great Depression • Destruction of the federal Labor Government due to in-house fighting • Rise of the new conservative political party, the United Australia Party, led by Joe Lyons formally of the Labor Government • Division in N.S.W during the Lang Government ending in his dismissal in 1932 • Non-party responses to Lang (The New Guard)

25. Growing voice and influence of the Communist Party in Australia, directly and indirectly through other groups such as the Unemployed Workers’ Movement • Growing number of unemployed (1/3 of the workforce in 1932) added to the atmosphere of instability and political turmoil. • Fear that there would be a revolution led by the unemployed workers