1932Author: Gerald Stone
Imprint: Macmillan Australia
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The Great Depression was born of a great delusion — the Midas myth of a bubble of boundless prosperity that could never burst. Australians, imbued with the hopes of a vibrant young society, would be swept up in the fantasy more than most. By the fateful year of 1929 their recently formed Federation owed more to the financial houses of London than all the governments of Europe, Africa, the Far East, Middle East and South America combined. It ranked as the most credit-addicted, debt-ridden country on earth, next only to Germany; and its small population was destined to be singled out for special punishment come economic judgement day.
A decade earlier prospects could not have appeared brighter, with the end of World War I promising an exciting new era in international trade. After four years of ruinous conflict, Europe clamoured for wheat to feed its ravaged populations and wool to clothe them. Australia had every reason to think of itself as an ascendant force in primary industry just as the United States would emerge as the leading power in manufacturing and investment. So long as primary exports continued to do well it seemed easy enough to service mounting interest bills, but the first months of 1929 showed disaster looming as surely as an iceberg sighted too late to avoid. Wool and wheat receipts nosedived almost simultaneously, partly due to cutthroat foreign competition but also because of the rise of rampant protectionism — the punitive tariffs and other import restrictions that would soon prove so disruptive to the world economy.
British lenders previously could have been counted on to offer temporary assistance until prices came good again. However, events were taking place on the other side of the Atlantic that would plunge Australia into crisis well in advance of most other nations. New York 's Wall Street had begun its infamous feeding frenzy, disrupting normal patterns of international investment as all available funds were diverted to high-profit speculation in shares. The market for government securities, especially those of a clearly overstretched borrower like Australia, vanished virtually overnight. The loan-hungry Federation would be left bleating at the bottom of the world like a calf sucking on a dry teat.
What was all that borrowed money being used for? Much of it had been poured into urban development, with a burgeoning new class of city dweller demanding paved suburban streets on which to drive their cars and electricity to run their radios and household appliances. The giant bridge taking shape above Sydney Harbour was the outstanding testament to such unrestrained expenditure — every inch of it another IOU. Other ambitious works programs were under way throughout the nation, perhaps most notably in the newborn city of Canberra. Such projects employed tens of thousands of workers whose incomes were wholly dependent on regular injections of loan money. Their pay packets, in turn, created jobs for many thousands more. When the financial axe fell in London, those necks would be first on the line.
Australia, of course, was hardly the only nation to be brought unstuck by unrealistic expectations. All across the industrialised world, national economies had been steadily undermined by self-indulgent excesses — overproduction, overspending, over-borrowing. Instead of scraping away the accumulated rot of inefficient work practices, lazy and incompetent governments merely imposed new protective barriers against outside com petition. One unstable economy attempted to prop itself up at the cost of another. The Wall Street crash of October, 1929 was all that was needed to set off an avalanche. Traditional export markets for both primary and manufactured goods would end up buried deepest in the rubble.
The loss of trade income was bound to cause widespread unemployment in Australia under any circumstances but it would be the loans burden above all else that tipped the scales from tough times to a true national calamity. The subsequent cuts to public expenditure would send job losses soaring to the second highest rate recorded in the Great Depression, exceeded — once again — only by Germany. Meanwhile, the crushing debt burden left the federal and six state governments with severely limited options on how to respond to the emergency. As their revenues from taxes, import duties and other sources dipped precariously, the one factor to remain constant was the steady drain from the huge overseas interest bill. That blew out into a critical haemorrhage with the rapidly diminishing value of the Australian pound.
No one political party or government could be blamed for the miscalculations that precipitated the emergency. They were due more to a national mind-set which, like a cracked mirror, distorted the way Australians saw themselves. Many still preferred to think of the island continent not as an independent country but a valuable economic unit within the British Empire, very much like the Middle West corn belt was to the United States. So long as they kept their raw produce flowing north ward, they were more than just a tiny population at the bottom of the planet: they formed an indispensable part of a powerful whole.
The illusion of being forever under the protective wing of Britain may well have encouraged the prodigal excess of borrowing. More significantly, though, it blinded the fledgling nation to its own limitations once the endless supply of credit inevitably ran out. A host of other small countries, from Austria to Uruguay, had been quick to appeal for some form of moratorium to suspend debt repayment while they tried to repair their shattered economies. Australia — at least in the eyes of its conservative establishment — was synonymous with British might and majesty and thus far too proud to cry poor.
At the beginning of 1931, however, an imposing figure strode onto the national political stage to turn the loans debacle into the most explosive issue of the Great Depression. Jack Lang, the pugnacious Labor Premier of New South Wales, declared it nothing short of madness to keep paying massive amounts of interest to overseas moneylenders while the families of unemployed Australians were starving.
Lang was popularly known as ‘the Big Fella', not so much a comment on his muscular 6 foot 4 inch (193 centimetres) frame as the way he tended to throw his weight around in political forums, purposely setting out to shock and intimidate all who dared oppose him. His rallying cry, people before money, would polarise the nation — sparking a wave of passionate confrontations not only between the haves and have-nots, but between those who put their British heritage before all else and those who saw themselves as Australians, first and last. As much as Lang was loved, he was hated even more fiercely denounced by his enemies as a mob-provoking demagogue. The political storm stirred up by the Big Fella would reach its peak in the middle of 1932, bringing Australia as close as it ever got to civil war. But to understand the traumatic events of 1932, it is best to begin with 1931, the second most tumultuous year in the life of the nation.