Once Was Woolier

Historian Keith Hancock’s classic work from 1930, “Australia”, provides solid grounds from which to assess our nation’s past and present economic and social problems, writes Richard Allsop.

In 1930, young historian W.K. Hancock published a book simply titled Australia. During the 90 subsequent years many other Australian historians have sought to explain the country in a single volume. Indeed, a distinctive feature of the national historiography is that so many of our prominent historians—Scott, Crawford, Ward, Clark, Blainey and Macintyre, to name a few—have written short histories of Australia. Many of those works have merit, yet there is still something unique about Keith Hancock’s book which makes it highly relevant to understanding contemporary Australia.

Hancock’s Australia continues to be widely acknowledged as a significant work but—as Henry Ergas noted in a 2016 essay, this recognition is something of “a faint shadow, with an impact confined largely to academia and, even there, more often cited than read”. Ergas compared Australia to Alexis de Tocqueville’s Democracy in America and found a stark difference in the two books’ ongoing impact. He ascribed part of this gap to de Tocqueville’s ‘grand sweep’ compared to Hancock’s ‘narrower’ focus, but still considered Hancock seriously undervalued in our study of the nation’s history.

Although only in his early thirties when he wrote Australia, Hancock was already a Fellow of All Souls College, Oxford, and Professor of Modern History at the University of Adelaide. In writing the book he exhibited an unequalled ability to identify the essence of the forces shaping the development of the country and the creation of those features which dominated Australia from Federation at least to the 1980s, features which have come to be known as the Australian Settlement. Of those features, Hancock argued the White Australia Policy was “the indispensable condition of every other Australian policy”.

When Hancock was writing, the population of Australia was approaching 6.5 million. Now it is almost four times that size, and immigration policy has been the main factor in this. There have been many variations in immigration policy since 1930, and—following Hancock’s argument—immigration has in turn affected every other area of Australian public policy.

Immigration policy has two aspects: the total number of migrants allowed and the make-up of that number. Hancock noted that “in their eagerness to stake their claim to a continent the Australians have made strenuous and sometimes very crude efforts to increase the quantity of their population”, but he also noted they were “more concerned with its quality”. The driving force behind the search for ‘quality’ migrants was the radical labour movement, who saw racial purity as a fundamental building block of the democratic utopia they wanted to construct in the Antipodes. It was the first priority in the Federal Parliament in 1901.

In the 1920s, the Labor Opposition branded the Bruce-Page Nationalist Government’s expansionist immigration policy as a capitalist device to reduce working class living standards by flooding the labour market with cheap imported labour. As Hancock was completing his book, the recently elected Scullin Labor Government was hastily suspending assisted immigration. Despite differences about numbers, both sides of politics broadly accepted in the 1920s that Australia should remain at least 98 per cent British in its ethnic composition. Hancock described a moral panic in 1927, when 7,784 Italians arrived in Australia in a single year.

Harold Holt’s Liberal Government ended the White Australia Policy.

After World War II we got over our aversion to southern Europeans, allowing them to join the immigrant ranks. However, broadening the range of countries from which migrants could come did not appeal to 1950s Labor leader ‘Doc’ Evatt, who campaigned for the proportion of British migrants to be raised from 50 to 60 per cent, claiming Mediterranean migrants lacked the requisite skills to contribute to the Australian community. To their credit, some individual members of the Labor Party began pushing for immigration reform, but it was under Harold Holt’s Liberal Government that the White Australia Policy was effectively ended. It was also the Liberal Governments of the late 1960s that boosted immigration numbers to new record highs, peaking at 185,099 permanent settler arrivals in 1969-70.

There were still in the early 1970s some prominent supporters of the White Australia Policy, most notably Labor’s post-war Immigration Minister Arthur Calwell, who had set up the massive post-war migration scheme but who to his dying day supported the principles of the White Australia Policy. Calwell was a product of the Old Left of the Labor Party and often his remarks opposing coloured migration drew support from the right wing of the Liberal and Country Parties. Perhaps the end of the White Australia Policy can best be described as a victory for the radical centre of the political spectrum.

Even though it buried the last vestiges of the White Australia Policy, the Whitlam Government was not pro-immigration in general. One of its first acts was to cut immigration numbers and, when unemployment rose later in its term, the annual intake was cut to a measly 50,000. Whitlam was also a virulent opponent of letting Vietnamese refugees into Australia, only allowing in 1000 in 1975 (the year of the fall of Saigon) and continuing to criticise their arrival when he was back in Opposition.

The treatment of refugees has tended to dominate the immigration debate in the first two decades of the 21st century. The Tampa and related incidents seemed to obscure the fact that the Howard Government was a high immigration government, particularly in its latter stages with permanent arrivals reaching 140,000 in its final full year. Under Howard, for the first time since Federation, the overseas-born proportion of the population exceeded 24 per cent and the non-European component of the overseas born went above 50 per cent. As journalist George Megalogenis sagely commented, because of his tough stand on refugees “the former Hansonite belt” thought Howard was “keeping out all the foreigners”, when he was allowing them to arrive in the highest numbers since the 1970s. Howard’s critics on the left often also seemed to be unaware just how pro-migration he was.

The Rudd-Gillard-Rudd Government maintained this high immigration policy, with migrants reaching 190,000 in 2012-13. A major landmark occurred in 2010-11 when for the first time the United Kingdom lost its mantle as the number one source of new permanent migrants to Australia, with China passing it in that year and India also subsequently doing so. Presiding over high and ethnically diverse migration development highlights a profound shift in the nature of the Australian Labor Party which would have been unimaginable when Hancock was writing.

Hancock noted that the capacity of Australia to absorb an increasing population depended upon the prosperity of Australia. While most would agree with that proposition, the path to Australian prosperity has been keenly contested. To many, it seems obvious that Australian prosperity is intrinsically tied up with it being an open exporting nation. Yet, first in Victoria from the 1860s onwards, then in some other colonies and ultimately in the new Federation, belief in Protection as the path to prosperity became the conventional wisdom.

Just as the White Australia Policy was cast in stone for too much of Australia’s history, so was its evil twin, Protection. As Hancock argued, Protection was “more than a policy: it has been a faith and a dogma”. And, as for its critics, by 1930 they had become a “despised and detested sect”. The critics of Protection largely disappeared for several decades until the likes of Bert Kelly rekindled the fight in the 1960s.

Small farmers, in particular, were the victims of Protection.

Hancock made the point that Protection had appeal for lots of different groups. For one it appealed to the Commonwealth Treasury which, despite the growth in collections from direct taxation, still at the time Hancock was writing, received half its revenue from collection of customs. Australian tariffs had increased by 145 per cent from 1913 to 1925, “an increase with which no other country could compete”. When the first explicitly Protectionist, as opposed to revenue-raising, tariff had been imposed in 1908, eight items attracted a tariff of 40 per cent or above; by 1928, this number had increased to 259 items. As well as increasing the cost of imports, Australia also began subsidising exports so that overseas consumers were often paying less for products such as Australian sugar and dry fruits than Australians were themselves.

If things were bad when Hancock was writing, they got worse as the Depression hit harder over the next few years. Further massive tariff increases contributed to the failure of the Scullin Government’s response to the economic crisis. Hancock highlighted that small farmers, in particular, were the victims of Protection, “carrying on their backs the burden of other people’s comfort and security, and sometimes the burden is too heavy to be borne”, creating rural slums out of what would otherwise be profitable farms. Despite Protection being so obviously damaging to the nations’ agricultural sector, under John McEwen’s influence the Country Party decided that farmers’ interests would be best served by drawing them in under the Protectionist umbrella.

Ending the Protection racket took a long time. Australia was the only OECD country where the average tariff on imports increased between 1965 and 1985. The Hawke and Keating Governments finally ripped up the model that had been an inherent part of the Australian Settlement since Federation. Having already cut Protection in the 1980s, further ambitious future reductions were announced in 1991—a particularly brave action in the middle of a recession.

If Labor was the driving force behind establishing the White Australia Policy, its support for Protection had evolved more slowly. Labor MPs gradually moved towards the Protectionist Party, in part, as they sensed that the Free Trade Party was less committed to a White Australia. The clincher was Protectionist Party Leader Alfred Deakin’s New Protection, which made protected industries legally obliged to pay high wages.

It became accepted that if a business could not afford to pay these high wages it had only two options: seek a higher level of tariff protection or go out of business. While a complex system of margins for skill became a feature of the Australian industrial relations system there was a strong aversion to “the insidious and humanity-wrecking system of payment by results”. Justice H.B. Higgins famously worked out the basic wage on the needs of a male breadwinner with a wife and three children. This had the effect of making the single bloke particularly well-off for—as a 1920 Commission pointed out—Australian industry was paying for 450,000 non-existent wives and 2,100,000 non-existent children. In their desire to achieve wage ‘fairness’ the proponents of Australia’ unique industrial relations system created many greater inequities. As Hancock commented, “against the equalities created by wage regulation must be set the inequalities created by the combination of wage regulation and the tariff”.

Although Australia’s industrial relations system is far from perfect in 2020, many of the rigidities have been removed. Unions now only cover a small percentage of the private sector. The crippling strikes which were a regular feature of industries such as power-generation and transport for much of the 20th century are now a fading memory. The egalitarian mindset which dictated that all workplace promotion should be on the basis of seniority has given way to one where the attitude is more generally that promotion should be based on talent. We are less likely, in Hancock’s words, to “make merit take a place in the queue”.

Another item on the Biggest Mistakes list was Canberra.

While one can argue that Australia’s immigration, trade and industrial relations policies have improved since the time Hancock was writing, there are other areas which he highlighted where public policy has deteriorated further.

By the 1920s, the imbalance in taxation power between the Commonwealth and the states was already evident. Hancock described how, at a time when the states were struggling to meet their basic obligations and being forced into deficits, the Commonwealth “passed merrily though the post-war decade, spending heavily on war debts, pensions and miscellaneous luxuries of national life, yet piling up fat surpluses”.

The 1920s was the decade when the Commonwealth began funding roads, a move which Hancock argued the states “had good reason to fear”. Indeed, three states initially rejected roads funding “but in the end they dared not refuse the gift”. Hancock speculated that if the Federal Government funded roads, it could do the same for railways and today almost all major infrastructure projects are joint Federal-State exercises.

Parliamentary Budget Office, 2020-21 Medium –Term Fiscal Projections (ht Accenture).
NB: Gross debt (securities on issue, excluding borrowing on behalf of the states)

In 1930, there was still hope of a workable federation, but the coming of uniform taxation in 1942 dealt what was probably the fatal blow to a responsible Federation. The blurring of responsibilities, which has been produced by vertical fiscal imbalance, has contributed to a huge growth in unnecessary duplication in Commonwealth and State expenditure. The highest profile instance of this was the provision of Commonwealth state aid to private schools. The provision of state aid was listed as one of the “13 Biggest Mistakes” in Australian history, when the IPA drew up a list in 2006.

Another item on the “Biggest Mistakes” list was Canberra, the entry beginning by quoting Hancock’s words that “Canberra is a document of Australian immaturity”. In one of the most eloquently written parts of Australia, Hancock described the battle between the original Walter Burley Griffin concept for the new national capital and the views of the “Government men who counted costs and knew about sewers”, a conflict which ended up in an “anti-climax (of) adequate comfort and reasonable convenience”. Canberra was but one example of what Hancock argued was a tendency for Australians to be content with a “middling standard” in many aspects of their national life.

“Canberra is a document
of Australian immaturity”
— W C Hancock, Australia

An honourable exception was “the production of staple commodities, which has been Australia’s proper business”. Understanding the importance of the agricultural and mining sectors is integral to any attempt to make sense of Australian history, but one wonders how many history courses in Australian universities now teach about wool, wheat and minerals—let alone doing so in a positive manner. It would be rare to find in modern historical writing such a clear enunciation of the impact of wool on the nation as when Hancock wrote: “Wool made Australia a solvent nation, and in the end a free one” and hence “the authentic founder of Australian independence is John Macarthur”. Then there was the man whose “services rendered …are second only to those rendered by Macarthur”, being the “solitary enthusiast” William Farrer for his revolutionary improvements to the production of wheat.

Deregulation of our daily lives has been a major improvement.

Hancock suggested that one way in which judgement would be passed on Australia would be by its use of its north. He was writing in an era when it was still being debated whether “whites” could operate in tropical climates, and understandably failed to predict the modern tourist’s liking for warmer climates. In the case of northern Western Australia, Hancock noted three potential sources of some economic development. One was iron ore. For much of the first three decades after Hancock wrote, Australia had an iron ore export ban in place. Its removal in November 1960 must rank as one of the most significant positive changes in the last 90 years.

Another major area of improvement in recent decades has been in the deregulation of much of our daily lives. Australians today enjoy much more flexible shopping hours, drinking hours, and the ability to gamble than their forebears. Ridiculous rules about how far a baker could cart bread or how much margarine could be produced have been swept away. The decline of Sabbatarianism allows people to seek their own pleasures seven days a week rather than six. In many ways Australia is a more tolerant nation than in 1930, but threats are constant if we are to remain a country combining support for the right to have a beer and a bet at the pub, with the right to conduct the latest zany inner-urban arts project.

Hancock included chapters titled The Labour Party and The Parties of Resistance. His thesis was that the “parties of resistance” in 1908 (with Fusion of the Free Trade and Protectionist parties) and in 1917 (when joining with Billy Hughes’ pro-conscription Laborites) were admitting defeat, and accepting large swathes of what they had previously rejected. The Labor split in World War I made the Labor Party more Catholic, more socialist, and more internationalist, and consequently a little less in tune with the distinctive early Labor nationalism which had so influenced the Australian Settlement. It created a new paradigm for the 1920s of a status quo which had been heavily influenced by pre-war Labor, but which was now nominally controlled by the Right.

This was most notable in Victoria, a state where Labor had only made cameo appearances on the Treasury benches, but about which F.W. Eggleston wrote a book entitled State Socialism in Victoria. While Eggleston’s book was not published until 1933, Hancock quotes Eggleston in Australia and had clearly been influenced by his ideas, as he had by Edward Shann whose An Economic History of Australia also appeared in 1930. In one of the most famous lines in Australia, Hancock wrote that “Australian democracy has come to look upon the State as a vast public utility”. One effect of this attitude was that it led to each economic difficulty being “generalised as a political issue, with the double result that it becomes more difficult to solve, and more exasperating when it remains unresolved”.

In a statement which could just as easily be applied to the response to the pandemic in 2020, Hancock wrote of WWI that “The war compelled politicians of all parties (as a Labour leader exulted) to burn their books on political economy. Governments regulated everything”. How to deal with debt induced by excessive government expenditure became a crucial element of Australian politics in the years after Australia was published, as governments grappled with how to repay loans during the Depression. Debt was also a major, if less controversial, issue after WWII. In a recent article in The Australian, Henry Ergas described the success the Menzies Government had in reducing the size of government debt. When Menzies took office in December 1949, that debt stood at 120 per cent of GDP, but after presiding over 16 years of high growth and low inflation, by the time of Menzies’ retirement in January 1966 the debt had been reduced to less than 50 per cent of GDP.

Governments have no panacea for society’s economic ills.

That experience at least provides some hope that major problems can be rectified. While much of the poor policy which Hancock identified has been improved, other aspects of policy have got worse. However, perhaps the most important observation Hancock made is that we should avoid the belief there is a simple government-led panacea to all society’s economic ills. As he wrote, “a generation ago, to Australia’s idealistic democracy, economic and social problems seemed easy to solve. Australia is beginning to learn they are difficult”.

Hancock argued that a generation earlier it had been quite reasonable to believe a new enlarged government might lead to utopia. By 1930, this had been clearly shown not to be the case. Remarkably, 90 years later, we still have many who in one breath lament the perpetual poor quality of politicians and bureaucrats, but in their next breath still espouse ever-more-powerful government as the cure for the societal problem du jour.

Anyone seeking to understand Australia’s past and present economic and social problems can still learn much from reading Australia, the jewel in the crown of Australian historical writing.

This article from the Autumn 2021 edition of the IPA Review is written by IPA Senior Fellow, Richard Allsop.

Hancock’s Australia can be read in full at https://archive.org/details/in.ernet.dli.2015.172679

In 1968 Sir Keith Hancock, then recently retired as inaugural head of the Research School of Social Sciences at the Australian National University, wrote—exclusively for the IPA Review—‘Then and Now’, a wry reflection on Australia, the “cocky young man” who wrote it, and what he thought has changed in the 40 years since its publication. This has been digitally reproduced at https://ipa.org.au/ipa-review-articles/then-and-now