Extract from 1990 Boyer Lectures by Tom Fitzgerald

Fitzgerald, Tom, 1990, Between life and economics, Crows Nest, N.S.W, Australian Broadcasting Corporation

It seems to me that the human awareness of these men is an aspect of the same intelligence that made them outstanding representatives of a Labor tradition of hard, independent thinking on economic subjects and most particularly of distinguishing the interests and demands of the financial sector from considerations of the welfare of the whole economy. They were always alive to the potentiality for conflict between the two. From about the age of thirty, John Curtin pursued his own line of study in economics, independently of Anstey. He attended university courses in the subject and kept abreast of some advanced professional writing. But he never wavered from the older man’s first precept that money must be made the servant, instead of the master, of the people and industrial life. Anstey had known the consequences of the bank crashes of 1893; both men saw bankers overrule the elected Labor government in the 1930 Depression in a manner that was to be condemned by a subsequent Royal Commission.

On his appointment in 1917 as editor of a Labor newspaper in Perth, John Curtin accepted a responsibility to be aware of current economic thinking. He read, or at least examined, each of the books that Keynes wrote in 1919, 1921, 1923 and 1930, as well as numerous articles. He read some writings of another Cambridge economist, AC Pigou, among others. He made comments on or references to all of these. He had discussions with several Australian professors of economics: Edward Shann, Douglas Copland and Lyndhurst Giblin. He engaged Giblin in debate in print. At the beginning of a pamphlet he wrote in the Depression of 1930, when Australia had a large public-sector debt, Curtin indicated an understanding of the inherent difficulties in economic analysis. A passage such as the following has a topical air, and one might wish that the intelligence it expresses was available now:

The cross currents in the reactions emerging from what has happened make it almost impossible to present the case in the proper sequence of cause and effect. Far back in the hills there is little difference observable between what ultimately becomes a great river and what merely serves as a minor tributary to it. But for the number of lesser streams feeding it, however, the river itself might not have become of any great historic or national importance. So it is with the study of Australia’s economic problem. What appear to be minor elements are so mixed with those that are admittedly major in significance, that the only safe thing to do is to consider them whenever and wherever they present themselves.

We are a debtor country….

When Curtin came to office, therefore, he had wrestled with the economic complexities to arrive at his own position, founded on principles that would not be quickly engulfed or swept away by advisers in Treasury or anywhere else. Professor Giblin later acknowledged that this was the case, from his experience as a senior economic adviser to the Curtin government. He recalled a remark that the Prime Minister made to him one day: ‘I have attended the funeral of so many economic theories…’ Giblin had the grace to add the comment: ‘It must be admitted that the advice of economists has always been apt to neglect John Locke’s warning against believing anything more strongly than the evidence warrants.’

Curtin, along with Anstey and EG Theodore, had, since the time of Word War I, called for the establishment of a real central bank with control over the money supply. The absence of such a body left the economy exposed to a mixture of forces and decisions which they summed up, with differing connotations, as the ‘money power’. On Curtin’s first meeting and conversation with the governor of the Commonwealth Bank in 1941, while he was Leader of the Opposition, he formed a judgement that the governor’s attitude to national economic issues was, even in wartime, dominated by the interests of the banks, and he spoke out sharply to that effect. His government’s banking bills of 1945 were intended as a lasting protection against the dangers. Control over the money supply was entrusted to a central bank that would be subject to the elected government.

If anyone today chooses to dismiss a suggestion that a considerable part of our economic sovereignty has passed to a new, farcical version of the money power, let such a person explain how the government would be able tomorrow morning to reduce the exchange rate and interest rates for the purpose of correcting the fundamental imbalance between the tradeable and non-tradeable sectors of the economy. It is a nice question as to how much the Treasury’s disinclination to address that imbalance in public, and its retreat into aggregate savings and investment figures, is due to a perception that a necessary correction cannot be executed, and how much to an inability, based on unwillingness, to recognise the existence of the imbalance….

In the necessary dialectic over issues of policy in changing economic circumstances, it had been the Labor Party’s traditional function to maintain a vigilant eye in the interests of preserving the nation’s financial independence. By suddenly lunging in the direction of the opposite camp, and capping this with the elimination of dissent even within the public service, this government has abolished the normal avenues for a dialectic in a period when a long succession of its predictions have been unfulfilled….

This is the kind of situation in which, on some past occasions, the Labor Party played the indispensable role of challenging the pretensions of financiers to possess arcane knowledge that transcended ordinary public perceptions. We have been compelled to recognise something that earlier labor leaders might have regarded as inconceivable: given the quirks of personality, it is possible for a Labor Party in office to be far less effective in preserving commonsense economic principles than it would have been if it had remained as a challenging Opposition.