The 20th Century economic debate
For much of our history NSW (then, after 1901, Australia) has been extraordinarily vulnerable to climate and agricultural trade cycles.
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‘The chart shows Australia’s economic progress over 140 years... ‘The volatility was enormous both before and during the Industrial Age (1865-1964) largely due to weather. Agriculture remained over 15% of our GDP for most of that period… ‘a 25% fall or more in output would slice 4% off the economy by itself - with a domino effect through the food & fibre input-output chain - causing a recession. We had 27 such years or one every 3-4 years...’ Phil Ruthven IBIS |
During the 20th century Australian governments experimented with the full spectrum of government interventions to develop manufacturing; both to reduce our dependency on agriculture and to increase Australia’s military resilience. To grow and protect manufacturing Australia applied, then abandoned: selective tariffs; publicly owned businesses; and enforced government purchasing preferences.
Until the start of the 20th century the political differences in pre-federation Australia were polarised around the issue of ‘free trade’ verses protection (NSW versus Victoria).
The electoral success of the Australian Labor Party (in 1910), following the Marxist social analysis in the mid 19th century and English Fabianism, led to a new polarisation around worker’s rights and the socialist alternative to capitalism; retaining a strong protectionist sentiment. With the split in the Labor party, at the start of the ‘Great Depression’, a new ‘United Australia Party’ (in government from1932 -1941) formed around Lyons and Labor splinter groups, together with elements of the older establishment parties; both free traders and protectionists.
Thus by the middle of the century, both major parties had elements combining the older protectionist movements, as well as elements supporting socialism and public ownership. Protection and government owned enterprise became an accepted reality on both sides of politics; reinforced by two world wars.
By the mid 1960’s, under the protection of import tariffs and direct government involvement in economic production, manufacturing in Australia had grown to become the largest and most productive sector in the economy, long supplanting agriculture, services and mining.
But at the end of the Menzies/ McEwen era, in the late 1960’s, it was apparent that much of this manufacturing and government enterprise was inefficient and unable to compete internationally. With the new Universities, post-war academic sentiment was swinging towards Neo-Keynesian (eg Samuelson) or Monetarist (eg Friedman) economics and the intellectual climate changed.
Free trade and free market arguments prevailed, in both major political parties, and the progressive withdrawal of protection followed, along with the disposal of government owned businesses and local buying requirements.
In 1967 the first minerals boom and a large increase in foreign investment lead to the dollar’s decoupling (un-pegging) from the pound sterling. Its strong upward revaluation followed. Together with the Federal Government’s determination to dismantle protection, this contributed to rapid economic restructuring.