Joan Beaumont - Australias Great Depression: How a nation shattered by the Great War survived the worst economic crisis it has ever faced

First published in 2022

Copyright Joan Beaumont 2022

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to the Copyright Agency (Australia) under the Act.

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ISBN 978 1 76029 398 7

eISBN 978 1 76106 374 9

Index by Garry Cousins

Maps and figures produced by CartoGIS, Scholarly Information Services, The Australian National University

Set by Midland Typesetters, Australia

Cover design: Lisa White

Front cover photographs: (top) Men outside a Sydney soup kitchen in 1932, (bottom) a family in their makeshift tin hut, c. 1932 (The Sydney Morning Herald)

For my grandchildren,

the coming generation of Australians,

so full of promise

Some generations are born unlucky. Australians born in 1895 might have served in World War I. If they survived, they might then have fought once more in a second global conflict in 193945. Even worse, they might have sent their children to that war. In the intervening years, they endured the worst economic crisis that Australia and the world have ever confronted, the Great Depression. In 1932, perhaps a third, or even more, of the Australian workforce was unemployed, dependent for their survival on charity, community support, limited government aid and their own resources. Many thousands lost their businesses, farms, savings and homes. Government budgets were slashed and the nation itself faced insolvency.

Remarkably, however, most Australians survived. Although the year 1930 saw the highest rate of male suicide in the twentieth century, most men and women somehow found the will and resources to cope. Moreover, Australias political and social institutions survived the ordeal. The Great Depression, like World War I, generated bitter and often violent disputes about the inequality of sacrifice across different social and economic sectors. But despite a high level of political and civil unrest, the legitimacy of the democratic political system was never seriously threatened. There was no revolution such as World War I triggered in Russia and central Europe, and no fascist authoritarianism such as that which sprang out of the Great Depression in Germany. Instead, like many individuals, the Australian political and social fabric proved resilient enough to adapt and accommodate the economic crisis.

Why was this so? What were the sources of resilience, individually and collectively, that sustained Australians through yet another shock to afflict this one generation? These are the questions that inspired this book. It a story of survival. To be sure, there was great hardship, anger, anxiety and despair, but there was also extraordinary endurance, self-reliance, mutual support, adaptation and resilience.

Most Australians can tell you something about the Great Depression. They recall their parents or grandparents being risk-averse, hoarding their savings in the bank rather than spending them on luxuries, and being timid about financial exposure. They remember, too, tales of shanty towns on Australias riverbanks or town outskirts, long queues of desperate men waiting for work or the dole, and single men hawking pathetically small bags of low-value items from door to door. This was the human face of economic disaster. Understandably it has featured prominently in past histories, especially those that have tapped the rich, if subjective, oral histories of people who lived through the Depression.

There was, however, more to this national crisis than the masses of unemployed, central though they were. The Depression was self-evidently a crisis of the Australian economy. Heavily dependent on exports of primary commodities, such as wool and wheat, Australia was acutely vulnerable to the collapse of global prices in the late 1920s. In the previous fifteen years, its governments had accumulated huge debts, from fighting World War I and then funding repatriation and visionary projects of national development. Many of these debts could not be serviced when investors in London took flight in 1929. The threat of national insolvency and the nightmare of default on external borrowings has none of the drama and human interest of stories of human suffering. Loan conversions, interest rates, Treasury bills, sterling reserves, exchange rates and that pillar of the 1920s banking world, the gold standard, do not make easy reading. But the servicing of Australias external borrowings was the issue that dominated the Depression years, affecting in some way or another the lives of almost everyone in the country.

Debt servicing was an issue that became profoundly politicised. Economics is never value-neutral, and the problem of managing Australias overseas debts polarised the political debate. Rarely have Australians been so politically engaged and the Australian political system under such strain. The Australian Labor Party (ALP) government of James (Jim) Scullin (192932) had the profound misfortune to come to power just in time to preside over the worst years of the Depression. Just as the ALP had split when it inherited the responsibility for leading Australia in wartime in 1914, so it now foundered on the intractable issue of how to keep the nation solvent while mitigating the acute social distress of many Australians. The Commonwealth (federal) government had few of the policy settings with which to manage a crisis of this unprecedented scale. Responsibility for aiding the poor had traditionally resided at the local level, with charities, churches, voluntary organisations and municipal authorities. The state governments soon accepted, in many cases for the first time, that they had to do more to intervene by offering the dole (or sustenance) and part-time relief works. But with default on Australias loans ruled out as a policy option, and the Bank of England demanding deflationary policies as the price of continuing national solvency, these programs always fell short of the mounting need.

As unemployment soared in 193132, the debate about policy responses descended into a bitterly contested battle of the plans. Ultimately the Scullin government lacked the power, the institutional apparatus and perhaps the courage to introduce radical policy options, be they the expansion of the monetary supply to stimulate the economy or the adjustment of, or even default on, Australias external debts. A formidable array of forcesa Nationalist (conservative) Opposition majority in the Senate, the bankers in London, the Commonwealth Bank at home and even some of the emerging cohort of professional economistsall tended to favour financial orthodoxy and sound finance. A form of deflation ultimately prevailed. Federal and state governments committed themselves to balancing budgets while wages, pensions and interest rates were all cut in an effort to ensure equality of sacrifice across the population. The ALP split for the second time in a generation, and the non-Labor forces reorganised in a way that enabled them to win and hold power at the federal level for the rest of the decade.