Lee, David
Description
In this thesis I attempt to trace the most important differences between the Chifley and
Menzies governments Without disagreeing with the view that the two governments
agreed on many things, such as the need for a large immigration programme,
Keynesian economic ideas, and the welfare state, I argue that there was a fundamental
difference between the two governments: their attitudes and policies to the threats of
depression and war. A Labor government afraid of depression but relatively...[Show more] confident
that another war would not break out, gave way to a Liberal-Country party
government which feared the outbreak of war but not a depression.
The Labor government hoped to protect Australia from depression by
participating in the new economic world order being built by the United States after
the second world war. However it tried to mould the American multilateral system into
one which would guarantee full employment throughout the world. America’s idea of
free trade defeated Australia's idea of full employment in the making of the new
economic world order. But multilateralism foundered because of the dollar shortage in
the world outside the United States. The United States wanted to dismantle the sterling
area and to incorporate it immediately into the multilateral world order. However the
United Kingdom found that she could not adopt multilateralism without massive
foreign aid from the United States. Instead of embracing multilateralism, the United
Kingdom resolved to shore up the sterling area, until some means of overcoming the
dollar shortage could be found. The Australian Labor government resolved to
cooperate with the United Kingdom in consolidating the sterling area as a
discriminatory economic bloc. Chifley made a deliberate decision to stick with the
United Kingdom rather than to seek a stronger economic relationship with the United
States.
The opposition Liberal and Country parties chafed at the restrictions and rationing caused by the Labor government’s pro-sterling area economic policies. They defeated the Labor government in 1949 by campaigning against its policy on the
sterling-dollar problem, its domestic economic policy, its handling of the coal strike,
and bank nationalisation. The issue of socialism was largely rhetorical.The
fundamental difference between the two governments was not about the degree of
government ownership of industry and banking. The Menzies’ government’s major
new initiative was to make serious defence preparations against the danger of war. It
abandoned Labor's internationalist foreign policy and regional defence policy and
substituted for them a policy of making Australia a partner in the western anticommunist
alliance being formed against the Soviet Union and the emergent
communist China.
Menzies expanded defence spending along with public and private investment in
a policy of ‘national development’. This was in stark contrast to Chifley’s fiscally
cautious anti-depression economic policy. It involved running a huge import surplus at
a time when the sterling-dollar problem was still serious and when Australia was
vulnerable to an economic downturn. Fortunately for Menzies, American
rearmament, the Korean war wool boom, and a dollar loan .from the United States
temporarily solved the dollar problem for Australia and the sterling area. Menzies
succeeded in being able to have both increased defence expenditure and increased
civilian investment. Moreover the Menzies government decided that Australia could
not be developed at the rate it wanted simply with British and Australian capital. Its
policy was that Australia had to forge a new political and economic relationship with
the United States. The Liberal-Country party government hoped that this policy would
free up the economy, enable Australia to borrow from America, increase the flow of
American capital into Australia, and allow the government to abolish the controls and
restrictions associated with Labor’s policy of protecting the sterling area.
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