Jack Lang and the Great Depression

‘Lang was right’ – so wrote former Labor MP for Newcastle and German prisoner of war Arthur Wade on the walls of his prison. Lang undoubtedly captured collective memory and the collective imagination. He shares with Gough Whitlam the distinction of still being spoken of with gratitude by ordinary people long after having been dismissed by a vice regal appointee. By abolishing university fees Whitlam enabled ‘mature age adults’, including many women, to attend university. Jack Lang introduced the widows’ pension, thus helping to protect thousands of single mothers from the ravages of the Great Depression. In the early 1990s, I was at a funeral of an ALP branch member conducted by his friend Father Fingleton, brother of the cricketer, Jack Fingleton. I was startled to hear Father Fingleton say that because of Jack Lang’s widow’s pension Syd’s family and the Fingleton family were not broken up when their fathers had died in the 1920s.

Jack Lang and the Great Depression is a history of English financial control of Australia, State and Federal Government finance and Commonwealth-State relations up until 1939. The text is concise with figures and tables included making it easy to follow the author’s argument. Cain uses the official records dealing with matters of critical importance and this material casts a very different light on the political events of the time to that revealed in the popular press. The decisions of banks, brokers and treasury bureaucrats are often portrayed as the inevitable outcome of a higher order, not as the decisions of groups and individuals with political agendas equally as significant as those of their so-called political masters.

Federation led to a series of financial arrangements which deprived the States of revenue, with the Commonwealth taking more and more of the customs and excise collected. The establishment of the Loan Council made it difficult for the States to raise money directly and Cain deals with the Loan Council at length and with a bias in favour of the position of the States.

By 1929 the London money market and the Bank of England had undermined Australia’s ability to raise money on the London market – and Cain identifies the brokers and bankers involved. It was only when England was again threatened with war in 1939, and Australian military assistance was again wanted, that the British stopped placing obstacles in the way of Australia raising loan moneys.

For those of us who thought that privatisation of the Commonwealth Bank was somehow against Labor’s interests, Cain’s book comes as something of a shock since he reveals how the bank worked against the interests of the labour movement and Labor governments. The bank’s Chairman, Sir Robert Gibson, arranged the visit by Sir Otto Niemeyer, and out of dislike of Lang refused to assist the NSW based Government Savings Bank.

Australia’s World War I dead are engraved on our national psyche but, as Cain clearly establishes, our relationship with and subservience to Britain was sealed not only with blood but also with money. In 1921 Australia agreed to repay this debt at £5.5 million per year for 36 years, at five per cent interest – a very high rate for the time. When Australia wanted to renegotiate the war loan London refused. England’s view was that ‘Australia was to subsist on income from primary production and turn to Britain to import consumer goods’. This did not prevent England buying dumped Soviet butter or Argentinean beef. Australia wanted to erect tariffs on imported goods to help raise money to service loans. Sir Otto Niemeyer was sent to Australia at the height of the financial crisis and his mission was to bring Australia to heel, including preventing the emergence of a viable Australian manufacturing sector. Shortly after leaving Australia, Niemeyer remarked: ‘Australia is a poor country with high unemployment, overpopulated and unsuitable for further settlement.’

In the lead up to Lang’s dismissal, there was much talk that Lang was acting illegally: reneging on legally binding agreements; not paying loans; depositing money with the NSW Treasury instead of the Commonwealth and bringing NSW to the brink of financial collapse. One would have expected the new Premier, Tubby Stevens, to take immediate steps to reverse this perilous state of affairs – but nothing much really changed. Cain shows that immediately after Lang’s dismissal the demand for the £3 million owing in loans was no longer important to Canberra or the British Empire, and the Treasury Bank moneys were not sent to Canberra, as expected. Although the anti-Labor Commonwealth government had rejected the NSW government financial statements, prepared by Lang, showing the savage impact of the depression, it accepted them when presented by Premier Stevens and immediately began to assist NSW with finance.

Although Cain deals with the Scullin / Lang conflict, and with the role of Scullin’s Treasurer, ‘Red Ted’ Theodore, the Labor Party upheaval of 1931-32 is mentioned only in passing. That is not necessarily a problem, though, since the Labor Party angle has been much written about. This book is written in a measured style and so I was surprised that a tale about government finances made me feel enraged on behalf of ordinary Australians.

This book should be compared, not with the existing Lang biographies, but with Boris Schedvin’s Australia and the Great Depression. Whereas Schedvin argues that market forces were dominant in Australia’s reaction to the crisis and that the political response from the Left and Right was emotional and inappropriate, Cain’s hones in on the men who made the decisions of the banks, the dominion office and the money markets so as ‘the market’ appears as the product of human agency rather than as the workings of some super-human ‘invisible hand’.

Lang claimed NSW was a Crown Colony ruled from London. After he was dismissed the Premiers’ Plan adopted the measures that Lang had argued for interest rates to be reduced and loan periods lengthened. Perhaps we should say on both counts ‘Lang was Right’.

Sydney SUE TRACEY