Free Trade vs Protectionists

The "bearded men" are fortunate they happened to shroud the history of Federation in a cloak of triumphalism. It has managed to hide their ineptitude for a century now. Their lost opportunities include a Bill of Rights, a High Court and a wet noodle of an informal Constitution amongst others. There was another battle lost, though this in the Commonwealth halls of Melbourne. It was an epic battle; New South Wales vs Victoria, George Reid vs Alfred Deakin - it was the battle between Free-trade and Protectionism.

The Schism Between The Colonies

Before Geoffrey Edelston poached the South Melbourne footy club to Sydney, and well before a Melbourne Rugby League team won the Grand Final, there was a deep divide between the colonies of New South Wales (NSW) and Victoria. Rail gauges were of different sizes, the colonies leveraged tariffs on each other, public holidays were on different days and there were even quarantine restrictions between them.

During the American Civil War, New South Wales had supported the north, while Victoria had supported the south. The inter-state rivalry between New South Wales and Victoria has a long history. It could even get petty. Phillip Knightly writes;

In 1878, New South Wales announced that it was considering changing its name to Australia. It claimed the right to do so because not only was it the first Australian colony .... but more native Australians had been born there than in all the other colonies put together. Victorians could scarcely contain their anger. If New South Wales did this, said on MP, then would the Victorian Premier rename his state Australasia? 'No,' said the Premier 'because then New South Wales might well call itself The Southern Hemisphere'.

When the first referendum for Federation was held, New South Wales did not achieve sufficient majority. One of the reasons was because the colony was free-market and all the others were protectionist. The NSW Premier, George Reid, was for Federation, but not really. he got nick-named "Yes-No" for his speech where he proclaimed there was not an advantage for New South Wales in Federation, but that he would be voting yes anyway.

George Reid

Reid was born in Scotland in 1845. He was age seven when his family emigrated to Melbourne as part of the gold rush. Reid worked his way through the public service in NSW, becoming a barrister and finally heading the Attorney-General's department in 1878. In 1880 he resigned from the public service and won election in Eastern Sydney for the NSW Assembly.

Reid was a tubby figure, an easy caricature for the Bulletin in the 1880s. Alfred Deakin wrote of Reid;

Even caricature has been unable to travesty his extraordinary appearance, his immense unwielding jelly-like stomach always threatening to break his waist-band, his little legs apparently bowed under it weight to the verge of their endurance, his thick neck rising behind his ears rounding to his many-folded chin. His protuberant blue eyes were expressionless until roused or half-hidden in cunning, and a blond complexion and infantile breadth of baldness gave him an air of juvenality.

Deakin wrote that during the Federal Conventions. Deakin was good friends with Edmund Barton. After the failure of the first referendum in NSW, partly because of Reid's lack of enthusiasm for it, Barton ran against Reid in the NSW Assembly electorate for Eastern Sydney. Reid won, but the margin was small enough that Reid got some amendments to the Federal proposals which led to NSW having a large enough majority in the next referendum for Federation to go through.

Anti-Labor

These three political figures would find their early Commonwealth political careers entwined, along with a new and influential political entity, the Labor Party. The Shearers Strike in rural Queensland would change the dynamic of Australian politics. When the Shearers were starved out of their camps, penniless and broken at the hands of the Queensland government, constables and militia; they decided to band together as a political group. It was the beginning of what we now know as the Australian Labor Party.

The fledgling Commonwealth Parliament hadn't devolved yet into the two party duopoly of Liberal and Labor. The anti-Labor factions included the Protectionists and the Free Traders. The protectionists were represented by Edmund Barton and Alfred Deakin, while the Free Traders were typified by George Reid. Initially this led to unstable minority governments, reliant on the constant demands of Labor for slim majorities.

As an example of the volatility;

Reid had serious reservations about the damage protectionist policies at the federal level would do to NSW's economy. Brian Carrol writes;

[Reid] likened free trade NSW joining the other five colonies, all Protectionist to varying degrees, to a teetotaller setting up house with five drunkards and leaving the question of beverages to be decided later by majority vote.

In the first elections of March 1901, candidates announced themselves as either Protectionist or Free Trade. The first Parliament ended up composed of thirty-one Protectionists, twenty-eight Free-traders and sixteen Labor members.

Reid did not get his majority and would not join a coalition with Barton and Deakin. The Protectionists established a minority government with Labor giving their support in return for concessions.

Minority Governments and Coalitions

The gap in members between the Protectionists and Free Traders continued to get smaller, in 1903 there were twenty-six Protectionists, twenty-five Free-traders and twenty-three Labor members. In April 1904, Labor was able to vote against Deakin, de-stabilising his minority government and leading to the establishment of the Chris Watson Labor government.

Up until this point the Protectionists and Free-traders had been opposition parties. But the Watson government had shown that there was a re-alignment in the Australian political system to Labor and anti-Labor. The Deakin protectionists stepped aside and formed a coalition with the Free Traders. George Reid became Prime Minister.

Reid survived the six month recess, but when Parliament returned: Deakin and Watson combined to remove Reid. The Free Trade Party was unable to enact any free-market legislation. From that point on the Protectionists became the dominant anti-Labor party. Deakin entrenching the Protectionists through a minority government with Labor support. Deakin joked that his most important phrase was, "Yes, Mr Watson".

Reid and Deakin did not get along, and there was no unified anti-Labor party until Reid retired from federal politics. Joseph Cook took over as head of the Free Traders and the Deakin Protectionists and Cook Free-traders combined into the Fusion Party - with Deakin leading it. This would later be the foundation for the first Liberal Party.

Protectionism

The inability of George Reid and the Free Trade Party to gain a majority government meant that Australia would pursue protectionist policies - policies which lasted until the 1980s. In 1901 the only federal revenues were from tariffs, the federal government getting their finger in the income tax pie did not come until 1942 and the John Curtin government.

The political thirst for protectionism was to continue through Hughes, to Lyons, to Curtin, to Menzies to Fraser. The first government to return to the economic liberal policies of the New South Wales colony was the Hawke government.

Did this protectionism hurt? In World War I, the United States and Canada industrialised, sufficiently to challenge Europe as the centre of the worlds economy. Australia's protected commodity markets meant that the industrialisation of World War I passed us by. In the 1930s we were left with government subsidised factories in an attempt to industrialise. World War II found us with our pants down as home production could not match our needs.

Conclusion

I have often remarked that the failure of Australian Federation is the failure of NSW. There was the chance there to create something as innovative and potentially as wondrous as the US Constitution was in 1787. NSW was the most powerful colony in Australia, politically and economically. It was the hotbed of Republicanism and free-markets in Australia.

But NSW was not able to influence the conventions toward a republic. Nor was it able to gain a majority in early parliament to make free-traders the dominant anti-Labor party. Sadly it was the Deakin style of monarchical federation, protectionist economics and minority politics that won.

cam
cam: Deakinism: Is Alfred Deakin Australia\'s most influential politician ? Is what we call Federation really a Victorian federation (not a NSW federation?). The US Republic is a Madisonian Republic, should we be calling Australian Federation a Deakinist Federation?

I reckon there might be a case there.

cam
siento: Protectionism - Why Australia has some industry.: Other than the UK, which industrialised before other countries, every other country that has industrialised and created high tech industry has been protectionist.

Once industries have been established free trade can be allowed, but even then governments need to be very careful to keep incentives for industry around.

The dramatic econmic rise of East Asian countries has been largely protectionist. It is interesting to talk to people about trying to sell things in Japan.

Arguably the American Civil War could be seen as a battle between the protectionist North, who wanted to bolster their industry, against the free trade South who wanted cheap industrial goods from England.

Sweat shop factories can be created by others with expertise in countries that have built it up, but free trade doesn\'t create much else. Capital is inherently more mobile than people.

Government subsidies and the careful creation of conditions that allow businesses that do more than hang out people\'s washing to flourish are critical.

When discussing the Australian Military we frequently refer to how Australia needs to create it\'s own. This is a form of subsidy or protection.

The major black mark against the Howard government  is that they rolled back the export enhancement programs and sunset claused research (CRCs) that the Hawke Keating government had set up and that led to double digit growth in Australia\'s exports. Now the balance of trade is coming to haunt the Coalition.

They have adopted with respect to economic development the same economically orthodox system that has led to New Zealand\'s decline.

Today both free trade and protectionism are outdated. Government incentive\'s with research funding and tax incentives coupled with export enhancement programs are better. But in the past, protectionism led to the creation of industry.

Thankfully Australia had protectionist economics.
Scrymarch: Paul Kelly: ... of the Australian, made a similar argument.  He called Deakin\'s combination of protectionism, immigration controls and the monarchy the Australian Settlement.

Damn I knew I should have bought that $3 discounted Centenary of Federation reprinted biography at Bookworld.
cam: I dont think Reid was absolutist about it: None of them really are. IIRC Japan made the step to modernization and industrialisation while having open markets. They wanted to become protectionist but got locked into some pretty nast trade deals. With the US IIRC. I will have to go and look it up.

The Japanese industrialisation came off the backs of those that couldnt say no. Daughters of peasant farms supplied the sweatshop labor. In England during the industrial revolution it was women and children too.

One of the reasons why the world wars led to massive industrialisation was because of constant government investment and government basically indenturing labor (national emergency and all that).

I will have to read more on George Reid, and find out how free-market the Free Trade Party was, or whether the free traders and protectionists were like our current Liberal/Labor and represent the same side of the same coin.

cam
cam: Huzzah for Amazon:

And also huzzah for the US having \"everything\". Three books are now rubbering their way across the great paved expanse of the American mid-west to my door;

Got the Hayden book as Botsman seems to be pretty impressed with Hayden\'s view of the GG. Will read and make up my own mind on it.

I really must do some Deniehy, Vosper, L. Lawson guest posts.

cam

The Initial Schism Between Liberal and Labor

The early elections at the federal level were three cornered contests between the NSW free traders, the Victorian protectionists and the first organized political party in Australia: Labor. The NSW and Victorian contingent were not the tightly disciplined parties that we see today, they were more amorphous in the loyalties, but were of similar class, social standing and ideology. The Victorians, led by Alfred Deakin, and Labor, led by Chris Watson, agreed on many common political principles; protectionism, restricted immigration, unemployment benefits and minimum wages. After numerous minority Victorian Protectionist governments, propped up by the support of Labor, finally the Deakinists split with Labor for good. Judith Brett argues that the reason for the schism wasn't policy, but instead principles of party organisation.

Protectionists to Liberals

The early years of the American Republic were dominated by the Virginian Presidents of Washington, Jefferson, Madison and Munroe. They set the tone for what was a Virginian Republic. Australia carries a similar legacy, the Victorians under Deakin dominated Federation and the early years of parliament, achieving a Constitutional Monarchy of limited but not complete independence. NSW was republican and free trade, yet the monarchist and protectionist Victorians set the tone of what Australian government would be. Immigration took seventy years to remove, the protectionist economy eighty years - and we are still working toward making Australia a constitutional republic.

Deakin manoeuvred the NSW Free Traders out of holding government by forming a minority government with Chris Watson's Labor government . Minority government is relatively volatile in a parliamentary system, as shown below. George Reid was Prime Minister, but held government only for a recess period, as soon as parliament convened he was unable maintain his majority.

Joseph Cook is an interesting Prime Minister, and represents the organisational split between Labor and Liberal well.

Joseph Cook Cook was born in Staffordshire in England to a coalminer. Cook left school to work in the pits at age nine, and by age twelve his father died in an industrial accident. Cook supported his family, later becoming a preacher, a railway worker and then a unionist. He married a school teacher who's family had already emigrated to Australia. The Cooks followed soon after, settling in Lithgow. Once settled, he soon became involved in Unionism again, and in 1891 Cook won election in the NSW Legislative Assembly as the Labor member for Lithgow. Two years later he was the leader of the NSW Labor Party.

Labor had grown in electoral popularity as an outgrowth of the Shearer's Strikes in rural Queensland. There workers and unions decided political power lay through the hands of parliament. In Queensland Labor regularly collected more than a quarter of the vote, and was able to claim to having the world's first Labor government in 1899.

In NSW, Labor success was almost instant, with the Labor Party in 1891 winning thirty-five seat and the balance of power in the NSW Assembly. But the inexperienced Labor members were quickly wedged over a fiscal issue which split the free trade and protectionist Labor representatives. The caucus was decimated, and the thirty-five members for Labor was quickly reduced to seventeen.

This led Labor to establish a far more disciplined caucus. Labor believed the only way it could wield power in parliament was by a united front to any opposition through absolute party power. For the Labor representatives there was a conundrum for them, did they represent their electorate, or the labor movement. The caucus took that decision out of their hands at the 1894 Labor Conference which required all Labor candidates and representatives to sign a pledge, "to vote in the house, as a majority of the party, sitting in Caucus, has determined."

Joseph Cook refused to sign the pledge, stating;

.. the pledge destroyed the representative character of a member and abrogated the electoral privilege of a constituency.

Those who signed the pledge returned as Labor members, while the twelve who would not sign, including Cook, returned to the Assembly as Independent Labor representatives. From this point on the Labor Executive only chose candidates who signed the pledge. Cook was not hard done by and became the Postmaster-General in George Reid's Free Trade government.

Joseph Cook in 1909 managed to reconcile the NSW Free Traders with Deakin's Protectionists when they banded together to oppose Labor. Cook led the first Liberal Party Government, and was the Prime Minister at the outbreak of World War I. Cook's other claim to fame was getting the Governor-General to agree to the first double-dissolution election.

Liberal and Labor Sitting in a Tree ... K.I.S.S. Oh Gee

The early governments in Federation were minority ones, led by Alfred Deakin with Labor support. But in 1910 Labor achieved the first majority government, polling nearly 50% of the vote. This left the Protectionists and Free Traders in a bind. Labor was politically disciplined, electorally popular and leaned toward the socialist side of politics. Since the Protectionists and Labor shared many policies, such as economic protectionism, unemployment benefits,minimum wages and restricted immigration, Deakin had hoped that Labor would get absorbed into the Protectionists.

The leader of the Free Traders (and Anti-Socialists), George Reid did not get along with Deakin, and there could be no union between those parties while Reid and Deakin led them. In 1908 Reid retired from federal politics and his able deputy, Joseph Cook took over. At this point the parties combined to form the short-lived Fusion Party, which was then replaced by the Liberal Party.

Traditionally the formation of the Labor, anti-Labor duopoly at this point is looked at in class terms. However Judith Brett argues, that is was not class that caused the Protectionists and Free Traders to set aside their policy differences, but instead party organization. Brett writes;

The insurmountable barrier between the Deakinite Liberals and the Labor Party was not Labor's policies not its attitude toward the state, but the nature of the party's organization: the demands which it made on its members to subordinate their own views and judgements to the collective will of the party and the implications this had for parliamentary government.

The problems Labor's organisation posed for the Liberals was particularly apparent in Labor's hostility to alliances. Labor simply refused to play the parliamentary game as it had hitherto been played, and parliamentary leaders found themselves stalled at every turn as they tried to put together workable majorities in the usual way.

Essentially Labor changed the way politics was done at the State and Federal level. With the establishment of the Liberal Party (as opposed to the Fusion Party), the Liberals, led by Deakin wrote down their party planks. To differentiate themselves from Labor they included a plank which originally said that the Liberals opposed the caucus methods of the Labor Party, but this was changed to one that asserted;

... all representatives of the people should be directly and solely responsible to the people for their votes and actions.

With this statement, it is easy to see why the ascension of Joseph Cook to lead the Free Traders made it easy for them to join in union with the Protectionists. Cook had years earlier left the Labor Party on the same issue. Judith Brett argues that the line the Deakinist Liberals were not prepared to cross, was the one where individuals subordinated their freedom of judgement and integrity of conscience to the iron discipline of the party organisation.

cam
Scrymarch: Alfie and Tommo: Jefferson and Deakin are parallel figures in a few different ways.  Both were literary men, and poets, with wide interests, but published little in their lifetime.  Both were introverts of a sort who played the part of reluctant politicians and reluctant party leaders, but at the same time spent most of their lives in politics and were continually sought out for office by their colleagues.

Both were radicals with respect to ends but the dramatic difference between Alfie and Tommo was in means; reformist and revolutionary.  Oh, and facial hair.

Good thing Deakin didn\'t own slaves, eh?
cam: Deakin didnt mind there being no bill of rights: it gave the federal government \"latitude\" when it came to the Chinaman. Australia sorely lacked a Madison. When Washington and Adams were President (and Hamilton Secretary of the Treasury), Madison led Congress. During Jefferson\'s terms he was Secretary of State, and the he was the next President. The US Republic is more a Madisonian Republic than a Jeffersonian one. But Jefferson was more eloquent with the pen, and nastier campaigner.

Probably the closest thing Australia had to a Madison was Andrew Inglis Clark or Henry Higgins. Clark did too many disappearing acts and Higgens wasnt powerful enough to push forward alternate systems like the Swiss Canton.

A lost oppurtunity that still hasnt been fully unravelled. I think the Australian public is going to have to recognize that the bearded men, not so much got it wrong, but didnt get it right.

cam
Felix the Cassowary: Alternatives?: Regarding that Swiss Canton comment... Were their serious proposals for alternatives to the original Federal structure? Could you elaborate on them?
cam: Charles Kingston: Kingston I believe submmitted a draft constitution that included Swiss style referenda in it. Clark\'s initial draft of the constitution also included a Bill of Rights, but Grifffiths took it out. Two years ago when I was in AU, I went to National Library trying to find Clark\'s draft constitution, but they didnt know what I was talking about, and couldnt find it. IIRC UWS Campbelltown has a copy of it. I will probably be back in Au later this year, so will try chaasing it up again.

Higgins also wrote a book in 1899? criticising the constitution. I will chase up the name of it for you.

cam

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