Lessons of the Whitlam Labor government and its overthrow

Tomorrow, November 11, 2000, marks the 25th anniversary of the dramatic dismissal of the Whitlam Labor government in Australia. For the generation entering the ranks of the Labour movement today, 25 years on, the experience of the Whitlam Labor government holds many valuable lessons besides the clear demonstration of how the ruling establishment is prepared to act in defence of its interests against a properly elected Labor government.


The dramatic dismissal of the Whitlam Labor government by the Governor General 25 years ago on November 11th 1975 has tended to overshadow the memory of the first Labor government to come to power in Australia after the years of Liberal-Country party rule that marked that era.

However, for the generation entering the ranks of the Labour movement today, 25 years on, the experience of the Whitlam Labor government holds many valuable lessons besides the clear demonstration of how the ruling establishment is prepared to act in defence of its interests against a properly elected Labor government.

For in sharp contrast to the Hawke and Keating Labor governments, who far from delivering improvements in the quality of standard of life for working class people in Australia have instead rolled back many of the gains won by a century of struggle, the Whitlam government formed one of the purest expressions anywhere of an attempt to put the ideas of reformism into practice and bring about a just and fair society within both the framework of parliamentary democracy and the capitalist economic system.

For this reason, when compared to the pitiful personality of Bob Hawke and the shifty character of Paul Keating, both of whose record in power has been disastrous from the point of view of the working class, the figure of Gough Whitlam tends to tower like a giant over other Labor Prime Ministers before and since.

Nevertheless, it can never be forgotten that the Whitlam experiment was a failure, and a spectacular one at that. The Labor government that was overthrown by an unconstitutional conspiracy between John Kerr and Malcom Fraser had already been dead in the water for over a year, decisively alienated from the only force that could have saved it from the intrigues of reaction - the organised Labour Movement.

The reason for this failure lay in the fundamentally flawed nature of Whitlam's program itself, in particular its failure to understand the diseased character of capitalism in the final quarter of the 20th century, and therefore in its mistaken belief that the steady economic growth of the post war period would continue indefinitely and so generate the revenue to pay for the policies designed to bring about some form of equality in society. In reality however, life under Labor involved rising unemployment and falling living standards from the middle of 1974 when a severe recession struck the Australian economy.

Ironically, it was Whitlam's attempt to find a 'constitutional' alternative to a socialist program adopted by the ALP during the 1920's that had involved nationalisation of the commanding heights of the economy which turned out to be completely utopian, and furthermore led directly to hare-brained schemes behind the disastrous 'loans affair' that dogged the government throughout it's final year.

A serious look then at the life of the Whitlam Labor government reveals above all the shortcomings of reformism, and highlights the obstacles that stand in the way of any Labor government seeking to advance the interests of working class people. But the failure of the Whitlam government also points toward a correct strategy by which a Labor government can successfully overcome the resistance of the 'establishment' and carry out a socialist transformation of society, the only real solution to the problems of mass unemployment, chronic underemployment, declining living standards and the run down of the public sector taking place today.

For this reason, on the 25th anniversary of Whitlam's overthrow we are publishing a review of the course of the Whitlam government between 1972 and 1975, the events surrounding its dismissal, and how we propose a future socialist Labor government should act to avoid the same fate overtaking it. This is a slightly modified version of the text published in a previous edition of the Australian 'Socialist Appeal' and, please, e-mail all comments and suggestions to this site as a discussion on this topic is important for today's Labour movement to ensure the lessons of Labor's defeat are absorbed to ensure victory in the next round of the class struggle.

Lessons of the Whitlam Labor government and its overthrow - 25th anniversary

On December 3rd 1972, after 23 years of unbroken rule by the Liberal-Country Party, Labor came to power with a slogan that symbolised the desire for a break from the stifling values and suffocation of the Menzies' era and for a fresh start - "It's Time."

Labor's victory was due to a profound change in the mood of society that had first made itself felt not in 1972 but three years earlier. It was the resurgence of the ALP in the 1969 federal election, a direct reversal of the crushing defeat Labor had suffered in 1966, that signaled the end of Coalition rule and generated the air of inevitability about the result of the 1972 poll reflected in Labor's election slogan.

The 7% swing to Labor in 1969 was a product of the post-war boom that had brought with it more than two decades of uninterrupted economic growth, creating an unprecedented mood of optimism among ordinary working people and raising high expectations as to what the future might hold in store.

As Graham Freudenberg, Whitlam's press secretary and speechwriter, commented, "The odd thing about 1969 was that Whitlam was actually helped by the buoyant economy. This is what marks 1969 as the point of departure from all before. It was precisely because the younger middle class electors felt content and confident that Whitlam's appeal attracted them. Whitlam raised expectations and those electors could see no reason why their expectations could not be met." (A Certain Grandeur pl64)

Among these lay the desire for working class children to have access to a university education and for an affordable system of health care to be available to everyone.

At the same time, the massive expansion of the outer suburbs during the 1950's and 1960's in all the main cities created new problems which called for a large increase in spending on infrastructure to improve the quality of life for those living in the newly built areas.

Although the Coalition parties had presided over 20 years of unprecedented growth, as the 60's progressed the feeling grew that the government was becoming more and more out of step with the needs of the society that had taken shape as a result of the boom.

And more than anyone else, it was Gough Whitlam, since 1967 the leader of the ALP in the federal parliament, who caught the mood of the time and articulated it in his political platform.

Unlike most politicians at that point in time, Whitlam himself was a product of the suburbs. This allowed him to speak on the issue of urban development with a unique authority. Addressing the 1968 Federal Labor Women's Conference, Whitlam said, "I speak with some experience on this matter. I am the first Labor Leader who has ever represented the urban sprawl, who has ever represented the outer suburbs. I have lived in those areas for 21 years. I have raised for children in those areas. We have built two houses in them. We have never been connected to the sewer. In this respect we are in common with 3/4 of a million men, women and children in Sydney."

And writing later in his account of the life of 1972-5 Labor administration, Whitlam stated "During the period of rapid growth in the 1950's and 1960's most of the amenities which the residents of Canberra took for granted were inexcusably lacking in the outer suburbs of Sydney. My great objective as a parliamentarian was to dramatise the deficiencies and devise practical government programs to deal with them. It was for me a cause that went to the heart of our way of life." (The Whitlam Government 1972-5 p372)

Underlying Whitlam's approach was the idea that the traditional concerns of the Labour Movement, jobs and wages, were no longer relevant in an era when capitalism appeared to have left the troubled times of the 1930's behind and could now guarantee steady growth and full employment for the foreseeable future. Under these conditions the ideas of socialism had to take on a new meaning. Addressing his first Federal Conference as Labor leader, Whitlam argued, "Wages and conditions are no longer the chief determinants of real living standards. The health and housing of ourselves and our families, our children's education, represent the most important social capital this nation has to offer. These are then things which determine the quality of life. They are the matters of particular concern to us as democratic socialists, because the things which governments provide are those that determine most whether the community enjoys a measure of true equality. The quality of life and equality in life is what socialism is all about."

This interpretation of the concept of equality went to the very heart of Whitlam's outlook. In his policy speech for the 1969 election campaign he expressed it in these words, "We of the Labor Party have an enduring commitment to view about society. It is this; in modern countries opportunities for all citizens - the opportunity for a complete education, opportunity for dignity in retirement, the opportunity for a complete education, opportunity for dignity in retirement, opportunity for proper medical treatment, opportunity to share in the nation's wealth and resources, opportunity for decent housing, the opportunity for civilised conditions in our cities and towns, opportunity to preserve and promote the natural beauty of the land - can be provided only if governments, the community itself acting through its elected representatives, will provide them. And increasingly in Australia the national government must initiate those opportunities."

In line with this vision Whitlam put forward a plan to provide universal health insurance paid for by a 1.25% surcharge on income tax, which also covered free dental care. For an average income family this meant a halving of their health costs.

Whitlam also proposed setting up a Schools Commission to hand out federal grants to schools and colleges, both public and non-government, whereas the Coalition government only gave financial assistance to the private sector, heavily weighted to schools for society's elite.

Whitlam had met with stiff opposition on this issue from inside the ALP where previous party policy had stood opposed to any state aid to church run schools, but Whitlam had laid his leadership on the line at the 1966 Federal Conference in order to 'crash through' his position.

Whitlam linked the question of a Schools Commission to the chronic underfunding of education under Coalition rule, even by the standards of other industrialised nations. In the late 1960's Australia only spent 2.9% of its national output on education, compared with 3.7% in the UK and 4.5% in the USA. In addition, Whitlam promised to abolish all university fees and to make pre-school education available to every child.

With these policies Whitlam successfully tapped into the feelings and aspirations of the generation shaped by the years of the post-war boom. But this was only one part of the cause behind Labor's revival in the 1969 election. As Graham Freudenberg put it,

"The 1969 elections were the first since 1946 in which the Coalition was unsuccessful in calling the issues. It was the first since 1949 in which communism was not effective as an issue. It was the first since 1954 in which international and defence issues did not dominate to Labor's overwhelming disadvantage." (A Certain Grandeur pl64)

The reason for this can be summed up in one word - Vietnam.

The Vietnam War

"Vietnam had not played a prominent part in the official campaigns of either side in 1969. Yet it remained an issue of critical importanceÉ Electorally, Vietnam had provided the solvent to detach a significant number of the younger middle class from the Liberal Party. For the first time since 1946, Labor increased its support in the crucial 21-35 age group. A significant, if imponderable, factor was the impact of university students on their middle class, Liberal voting parents." (A Certain Grandeur pl66)

The Vietnam War became the single issue that completely transformed the political situation in Australia during the closing years of the 1960's. For it was the Vietnam War that finally destroyed the grip of Cold War anti-communism by exposing the true nature of US military support for its puppet regimes across the former colonial world in the name of halting Soviet and Chinese 'expansionism'; and the cost of this support in terms of the lives of ordinary American and Australian youth lost in a futile effort to prop up a corrupt regime of capitalism and landlordism in Vietnam.

In his memoirs Tom Uren, a federal Labor MP and together with Jim Cairns, a leading anti-Vietnam war campaigner, describes the experience of previous election campaigns before the war had begun to change the mood within society,

"The anticommunist hysteria of the 1966 campaign was almost beyond belief. The Liberal Party published a pamphlet displaying a map on which a large red arrow was thrusting from China, through Vietnam towards Australia. The DLP propaganda was just as bad."

"In those days, during election campaigns, we would put snipes on telegraph poles which said 'Australian Labor Party; Vote 1 Uren'. The supporters of my Liberal opponent would place stickers over my snipes depicting a big red star with a hammer and sickle on its rump. They would do this thing all over the electorate... There was a real sickness in our society, with hate spewing out against our party. I often got hate mail and threatening phone calls."

"The propaganda tactics of the conservatives were not only limited to the 1966 campaign. As far back as the 1961 election, and then again at the 1963 election after the Cuban missile crisis, the Liberals produced newspaper advertisements with a big hand on one page and Khruschev's photograph on the other. They printed Jim Cairn's name on one finger, Tom Uren's name on another, and Jimmy Cavanagh's name on a third. We were considered to be the monsters who were doing the communists work." (Straight Left pl86/7)

Racism & Anti-Communism Undermined

The strength of anti-communism during the Cold War period did not only stem from the post war boom and the renewed confidence this generated in capitalism as opposed to the Stalinist regimes in the Soviet Union, Eastern Europe and China. It also flowed from the deep hold racism had exerted over the broad mass of the population in Australia since white settlement. As Whitlam himself pointed out in relation to the Coalition government's foreign policy and its sending of Australian troops to Vietnam,

"The foundation of these policies and these attitudes was fear of foreigners; its focus was fear of communism; and, because these fears in turn focused so sharply on China and the Chinese version of communism, they were rooted in racism. Racism was the common denominator of a whole range of foreign policies of the Menzies era, from Southern Africa to Indo-China." (The Whitlam Government 1972-5 p26)

Because of this, the decision to send 800 troops to Vietnam was widely supported at first. It took a combination of the trauma from the rising body count, the escalation of Australian involvement to 8 000 troops by 1968, the reintroduction of conscription and the growth of the anti-war movement inside the United States itself for this support to be undermined.

The decisive turning point came with the Tet offensive in January 1968. After this it became clear that a military defeat of the Viet Cong would require a massive increase in the number of US and Australian troops committed to Vietnam and even this would not guarantee victory.

The Liberal Prime Minister Gorton had to give ground to the growing anti-war feeling in the country and refuse a request from the Pentagon for more Australian troops to be sent. But with the prospect of victory fading, even the existing commitment of Australian soldiers made less and less sense to ever-wider sections of the population.

From this point on, the continued Australian involvement in the Vietnam War became a significant factor in undermining traditional racist attitudes towards Australia's Northern neighbours and a questioning of the 'alliance' with US imperialism against the 'threat of communism'.

Despite the role played by ALP politicians such as Jim Cairns and Tom Uren, the party did little to assist this process. In 1966 the ALP had campaigned against the sending of Australian troops to Vietnam on the basis of its opposition to conscription. But on the crucial question of whether a Labor government would withdraw the troops once they were there the party leadership made no comment.

It was only with the rise of the anti-war movement that the 1967 Federal Labor Conference adopted a clear commitment to withdraw Australian troops within six months of a Labor victory at the polls. Ironically the decisive factor in this change of policy on the part of the ALP was not the opposition to the war inside Australia, but the appearance of splits within the US Congress on the question of Vietnam. As Freudenberg commented, "Whitlam was also the first Australian parliamentarian to perceive the significance of congressional opinion about Vietnam... Visiting Washington in 1966, Whitlam learnt that at least half the Senators were uneasy about Vietnam and perhaps one third were opposed outright." (A Certain Grandeur p58/9)

Labor's Dilemma over Vietnam

This allowed Whitlam and other Labor leaders to oppose the war without challenging the role of the United States as 'world policeman' on behalf of capitalism and landlordism in the ex-colonial world, a problem which Whitlam described with these words, "All of us were entangled in Labor's central dilemma; how to oppose American intervention without opposing America; how to denounce the war without denouncing the US." (The Whitlam Government 1972-5 p36)

Throughout the war then, Whitlam was determined to put over opposition to the war as motivated out of concern for the best interests of US capitalism, which had blundered with its intervention in Vietnam, and to ensure the 'alliance' between Australia and the US was not threatened by the anti-imperialist sentiment that had arisen out of the war.

"In times to come that great people (of the United States) will feel no gratitude towards governments and nations which have willed their prolonged embroilment in this physically, politically, socially and morally debilitating and divisive war. There will however, be gratitude for those friends who have recognised America's agony and have tried to use such influence as they have to help her end it." (Letter to the WA ALP 1969)

Throughout the Vietnam war, the position of the Labor leaders lagged behind not only the forces mobilised by the anti-war movement, but even those wide sections of the working class who did not take an active part in the marches and demonstrations but who were beginning to see the real face of US imperialism and the true meaning of anti-communism.

Far from assisting the anti-war movement however, the contradictory position of the ALP leadership only gave the Coalition ammunition in its justification for the war, and was brutally exploited by Menzies, as this extract from Freudenberg's memoirs demonstrates, "Menzies, with fierce finesse, homed in on Labor's central political difficulty - the question of Australia's relations with the United States. 'Does the Leader of the opposition really believe that the United States of America, of whose actions he has approved and re-approved, ought to be allowed to continue to carry this burden and that we, as one of the SEATO powers, with South Vietnam requesting our help, should say; 'Sorry, there is nothing we can do about it?'... We will help you with debate in the United Nations. We will offer some fine words and some good sentiments. But, as for practical action, 'No. That is for you' American soldiers from, the Middle West can go and fight and die in South Vietnam, but that is not for us'." (A Certain Grandeur p54)

As a result of this inconsistency in its position, Labor was unable to make any impression during the 1966 election campaign despite its opposition to Australian involvement in Vietnam. In fact Labor was crucified in this election.

It was only after the mood within society had decisively shifted and the back of anti-communism broken in the wake of the Tet offensive that Labor was able to turn the question of the war to its advantage.

Whitlam however, remained determined to keep his distance from the anti-war movement and maintain his ability to smooth things out with the US government in the event of Labor coming to power, and categorically refused to appear on any anti-war platforms.

"As Leader, I have not thought it proper or prudent to sign statements or to appear with persons expressing a less complete view than our Caucus or Conference or presenting a different emphasis. The traps into which one can fall were highlighted last Monday (a reference to a rally in Melbourne which had called for a military victory by North Vietnam - Freudenberg's note)... Members of the Party should not give the false and damaging impression that under a Labor government foreign policy would be determined at mass meetings or by public petitions." (Letter to WA ALP 1969)

Nevertheless, despite the weakness of Whitlam and the ALP's official position, Labor was still the main party to benefit from the aftermath of the Vietnam war, which was the single most important factor behind a huge swing to the Left that took place within society at the end of the 1960's.

Among wide sections of the population the desire built up for a decisive break with the domestic and foreign policies of the Coalition government and for a fresh start to mark the new decade. As was the case with his program of reforms, it was Whitlam who articulated the new mood inside the country.

This included a decisive turn away from the racism that had guided Australian governments since federation in relation to foreign affairs and their treatment of Aborigines.

A New Image For Australia

"All Australians must now realise how damaging and dangerous a reputation Australia's present policies produce. We are a European nation on the fringe of the most populous and deprived coloured nations in the world. What the world sees about Australia is that we have an Aboriginal population with the highest infant mortality rate on earth; that we have eagerly supported the most unpopular war in modern times on the ground that Asia should be a battle ground of our freedom; that we fail to oppose the sale of arms to South Africa; that the whole world believes that our immigration policy is based on colour; and that we run one of the world's last colonies...the combination of such policies leans heavily indeed on the world's goodwill and on Australia's credibility." (The Whitlam Government 1972-5 p23)

But Whitlam's prime motivation lay in his understanding that in the wake of the Vietnam war, the interests of Australian capitalism now lay in establishing good relations with Indonesia, China and the other major powers of the Asian region.

This however required a clear break from the racist policies of previous governments. Whitlam therefore promised to grant independence to New Guinea, recognition of mainland China over Taiwan, and a program of measures to improve the position of Aboriginal Australia, alongside the commitment to withdraw Australian troops from Vietnam.

By the time of the 1972 election, the inevitability of a US defeat in Vietnam and the massive changes in Australian society as a result of the post war boom had combined to create a mood within the electorate powerful enough to bring to a close almost two and a half decades of unbroken Coalition rule and return Labor to power for the first time since 1949.

Labor Implements Its Program of Reforms

As if to emphasis the break with the past, the newly elected Labor government set to work at breakneck speed. Before all the votes had even been counted Whitlam and his deputy Barnard were sworn in and began to implement their program. Among some of the first measures taken by the new government,

"December 5th - Mr. Barnard announces immediate end to national service call up. PM announces equal pay to be reopened before Arbitration Commission.

December 6th - Talks open at Chinese embassy on Australian recognition of China. Australian ambassador to Taiwan recalled. All seven draft resisters set free.

December 7th - Initiated moves to scrap the honours list. Ordered NSW government to close down the Rhodesian Information Centre in Sydney. Announced the removal of sales tax on the contraceptive pill and acted to have the pill put on the National Health Scheme list. Stopped the granting of further leases on Aboriginal reserves in the Northern Territory.

December 11th - Announced the withdrawal of the remaining troops in Vietnam within the next three weeks.

December 12th - Set up the Interim Committee of the Australian Schools Commission. Decided to ratify international conventions on nuclear arms, racial discrimination and labour.

December 15th - Took the first moves to grant Aboriginal land rights.

December 16th - Announced a new purchasing policy for the federal government giving Australian firms preference over foreign owned companies." (Sydney Morning Herald December 1975)

This pace of reform was to continue throughout the first year of the Labor government. During 1973 a total of 254 Bills were introduced into parliament, well above the previous record of 169 set in 1968. These covered the main areas Whitlam had outlined in his 120-point election manifesto - education, health, urban development and the environment.

It was in the area of education that the Labor government had the biggest impact. As Whitlam put it, "The most enduring single achievement of my government was the transformation of education in Australia. It established the Australian Schools Commission and Technical and Further Education Commission. It distributed funds to schools on the basis of need. It assumed full financial responsibility for tertiary education and abolished fees for tertiary and technical education. It continued to expand the involvement of the Australian government in education funding." (The Whitlam Government 1972-5 p315)

The government injected a huge amount of money into expanding the education sector. From $442 million in 1972, spending on education had risen by 196% in real terms to $1.9 billion by 1976. This included a 260% increase on funding for schools and pre-schools, 311% on CAE's and teacher's colleges, 263% on TAFE's and 116% on universities. The number of full time university students rose to 127 300 and college students to 109 700.

A similar increase, 156%, was also achieved in spending on health care. This included a 343% rise in the amount spent on hospital services and benefits and a 240% increase for Aboriginal health. This was accompanied by the introduction of Medibank, the universal health insurance scheme Whitlam had promised.

The government also established a new Department of Urban and Regional Development to tackle the problems of the cities. From a budget of $45 million in its first year, this grew to $395 million by 1975, most of which was spent on building sewerage systems in the main urban centres. The number of public housing units built with federal money rose from 8 000 to 13 500 in 1974.

Spending on Aboriginal programs was more than doubled, with housing receiving a 104% increase, education 97%, legal aid 254%, and employment 350%. The government outlawed discrimination on the basis of race or sex, introduced equal pay and paid maternity leave into the federal public service, and extended the adult minimum wage to cover women workers for the first time. Pensions and social security benefits were extended single parents and generally increased by significant amounts.

"Where's The Money Coming From?"

The success of the Whitlam government in implementing these reforms stands in sharp contrast with the record of the Hawke and Keating Labor governments, under who many of these reforms, such as the abolition of university fees, have been undermined.

The withholding of a wage increase under the Accord offset even the most important achievement of the Hawke Labor government, the reintroduction of Medicare. The granting of paid maternity leave in the 1995 Budget likewise only took place at the expense of a counter-reform - the sale of Qantas and the Commonwealth Bank.

The Whitlam government was able to deliver reforms whereas Hawke and Keating have failed for two reasons. First of all, after the years of Coalition rule, there were many areas of the federal budget that consisted of grants and assistance to business, and in particular to the rural sector. In 1973 the report of the Coombs Task Force was able to recommend $365 million of cuts to such programs which was then made available to put into effect the government's election promises.

But far more important was the relatively healthy state of the Australian economy, still able to participate in the long upswing of the post war era. The expectation of steady economic growth continuing into the indefinite future was the foundation of all the ambitions of the Whitlam government to deliver lasting reforms.

As Whitlam himself stated in his 1972 election speech, "Our program, particularly in education, welfare, hospitals and cities, can only work successfully within a framework of strong uninterrupted growthÉ This is the real answer to the parrot cry, "Where is the money coming from?" Even at the present low rate of growth, Commonwealth income has nearly doubled in the past six years. At existing rates of taxation it would increase by $5 000 million in the next three years. It is because of the automatic and inevitable massive growth in Commonwealth revenues that a whole range of Labor proposals announced and derided by the Liberals for years and years have suddenly become possible and desirable on this election eve."

On the strength of this growth, the government was able to set its reform program underway in the 1973 Budget and still maintain an overall surplus of $211 million without raising taxes.

"Strong, Uninterrupted Growth" - An Illusion

But the apparent ease with which the Labor government had carried out the first phase of its program was an illusion. Whitlam's failure to understand the inability of capitalism to sustain the growth of the post war period indefinitely and to foresee the impending crisis in the economy was his greatest blunder, and ultimately, the cause of his demise.

"Whitlam's real Achilles heel was the economy. Gough Whitlam, a lawyer and parliamentarian, was never at home with economic and financial issues... In summary, Labor's first and most successful year, 1973, was the very year in which its false sense of security betrayed it by refusing to face up to the realities of the economic climate it had inherited." (Paul Kelly, The Unmaking of Gough p348/9)

Paul Kelly, now the editor of 'The Australian', like most commentators from the mainstream press, uses the onset of the economic crisis in 1974 to argue Whitlam was mistaken to implement his program of reforms during 1973.

"Whitlam enthusiastically supported and proudly endorsed the policies of new and huge government spending initiated by Labor. In particular he pointed to the government's record in supporting better wages for women, better conditions for the public service, and as a result, higher wages for public sector employees. Yet these very moves were sowing the seeds of future economic disaster... If MacMahon had been reselected, he would have applied an economic squeeze very early to correct inflationary pressures." (The Unmaking of Gough p348)

But with this argument Kelly betrays his loyalty to the interests of the media magnates and capitalism in general for who the main lesson of the Whitlam years is the irresponsibility of Labor governments who attempt to carry out policies in the interests of ordinary working people. But Labor is not another version of the Liberal Party, and in 1972 it was elected in order to carry out a far-reaching range of reforms that would benefit the vast majority of the population.

The mistake of the Labor government lay not in implementing its election program, or as Kelly argues, in not balancing it with tax increases that would have cancelled out its impact, but rather in its view that such a program of reform could be maintained on the basis of capitalism.

As Graham Freudenberg explained, Whitlam's approach to the economy, which was shared by most sections of the Labor leadership, was shaped during the years of the post war boom.

"There is one important reason why Whitlam's thinking turned on programs of social reform rather than economic theory. From 1953, the end of the war in Korea, to 1970, when the real economic cost of the war in Vietnam began to bite deep, the Western economy shared a long period of sustained growth. It was easy to accept that the problem of full employment had been solved. The post-war recovery of Western Europe, the 'miracle' of Japan, and above all the economic and technological might of the United States created unlimited optimism."

"In the 50's and 60's it was quite possible for politicians to believe that the days of the primacy of economics were past. These days were the heyday of the idea of 'fine-tuning', the belief that the only choice to be made was between a little more inflation or a little less employment...growth was the new touchstone, solving the dilemma between the need for profits and the demands of public welfare within the 'mixed economy'." (A Certain Grandeur p77)

The first year of the Labor government appeared to bear out Whitlam's outlook. On the basis of a worldwide recovery in the growth rates of the industrialised nations unemployment fell between February and August 1973 183 000 to 103 000 causing Whitlam to report on the anniversary of his election victory, "The government is proud of its record. We have abolished unemployment and restored a healthy rate of growth."

But Whitlam's optimism was misplaced. In fact the growth of 1973 did not reflect a healthy condition on the part of the capitalist world. The artificial character of this growth could be seen in the outbreak of inflation that came with it, a warning sign of the coming crisis.

Post-War Boom Draws To A Close

The long upswing that began in 1947 was founded on the dominant position of US capitalism over its rivals in the wake of World War II. This allowed the United States to dismantle the tariff barriers that had strangled international trade during the inter-war years. On the basis of a sixfold increase in world trade the next 25 years saw an unprecedented expansion in the world economy that reinforced the notion that capitalism had overcome its inherent contradictions and put the misery of the 1930's behind it forever.

However by the early 1970's, the position of the United States was being undermined by the rise of Germany and Japan, reflected in the growing size of its current account deficit. Furthermore, in its role as the guardian of the entire capitalist world against the 'Soviet threat' and the unfolding revolution in the former colonial world, in particular Vietnam, the US had to devote vast amounts of money to its military budget.

The decline in the dominant position of the United States undermined the strength of the US$. In 1971 Nixon took the US$ off the gold standard. As the value of the US$ fell and the US' current account deficit continued to widen, the effect was to fuel inflation among all the nations of the industrialised world, a symptom of the fact that capitalism had overreached itself and stood before a period of contraction, or in other words, a recession.

By the time the Whitlam Labor government took office, the condition of the world economy meant that the longer a growth rate sufficient to keep unemployment down was maintained the deeper would be the slowdown once it arrived. In this sense Paul Kelly's argument that Whitlam's reforms were 'sowing the seeds of future economic disaster' has a grain of truth.

In a dilemma familiar to the Keating government in 1995, the Whitlam Labor government was faced with a choice between reducing unemployment but at the cost of rising interest rates, or else reining in inflation but at the expense of jobs.

Unlike Keating however, Whitlam decided that unemployment was the greater evil and refused to heed the calls of big business to rein in government spending and abandon his program of reforms.

Price Controls & A Wages Freeze

Instead Whitlam revalued the A$ to lower the prices of imported goods and reduced tariffs by 25% across the board. Both measures benefited wide sections of Australian capitalism by cutting their production costs, with the exception of those industries relying on tariff protection, but had little effect on prices as employers merely pocketed the higher profit margins and inflation continued to rise.

In response Whitlam established a Prices Justification Tribunal requiring all firms with a turnover above $20 million to submit price increases for approval. This however was a voluntary commitment and the Tribunal had no power to prevent price rises. Nevertheless, big business, anxious to see a similar restriction on wage increases, agreed to co-operate with the Tribunal. In practice the Tribunal agreed the vast majority of increases, BHP for example being granted four prices rises totalling 24% over 18 months.

The only exceptions were made of companies passing on 'excessive' wage rises. In these cases the Tribunal took a harder line in an effort to dissuade firms from giving in to trade union wage demands.

Such measures could have no serious impact on the inflation rate. Australian capital was only prepared to tolerate one solution to the problem of rising prices, a freeze on wages. As 1973 progressed the call for such a freeze grew from the mainstream media.

Unfortunately the Whitlam Labor government, determined to work within the constraints of capitalism, was quite open to the idea of a wage freeze. In response to the campaign by big business, Whitlam announced a referendum for December 1973 to grant the federal government power over wages and prices.

Labor and The Problem of Inflation

The problem of inflation is one that affects the working class and employers in quite different ways. For workers, so long as wage increases can keep pace with price rises, either through industrial action or indexation, inflation is not a life or death concern, at least so long as it does not escalate into hyperinflation.

For the owners of capital on the other hand, the question is entirely different. Without some stability in prices it becomes impossible to make the forecasts necessary for investment decisions. More than this however, the capitalists' worst fear is that inflation will wipe out the value of their assets which are marked in A$.

In response to this fear the banks and financial institutions demand such a high rate of interest as security that productive investment in new plant and machinery becomes unviable. In the search for high enough returns to cover the rate of interest speculation soars while the economy seizes up.

Within a capitalist economy the room for a Labor government to manoeuvre and go against the wishes of big business is severely limited. Ultimately it is capital that decides the key question of whether it will make the necessary investment to push the economy forward. This is what private ownership means.

In rejecting the calls to renege on his election promises and allow unemployment to rise as part of an effort to bring down inflation, Whitlam was only delaying the crisis, not solving it.

The continued rise in inflation to 13% by December 1973, the high level of interest rates, and the government's credit squeeze all led to a slump in investment that would inevitably lead to a rise in unemployment at some point in time.

The question of the referendum on prices and incomes became the first issue whereby the honeymoon relationship between the Labor government and the working class came to an end and the limitations of Whitlam's reformist approach began to show through.

The Government and The Unions Clash

The ACTU Congress in September 1973 clearly opposed the government on the question of controlling incomes. During the referendum the trade union movement campaigned for a No vote and as a result the government was defeated by a 66% vote against it. Whitlam tried to put the blame on the trade unions for the consequences of this defeat, "In such a fashion, the industrial wing of the labour movement worked against its own long term interests ant those of the parliamentary wing. It inadvertedly hastened the electoral demise of my governmentÉ" (The Whitlam Government 1972-5 p203)

But in reality the result of the referendum gave an insight into the true position of the Labor government. Without the active support of the organised labour movement, its ability to push through its agenda was almost nil. But such support could hardly be won in the pursuit of such anti-working class policies as a wage freeze.

On the other hand the failure of the government to implement such policies in the face of resistance from the trade union movement meant that the government could serve no useful purpose for capital either. Instead it confirmed the view that a more reliable government was needed that could deliver what big business required. The referendum therefore only made the government enemies on both sides of the class divide.

The only way forward for the Labor government in this situation was to carry out policies in the interests of working class people resting on the support mobilised by the labour movement. Outside of this role the government could be of no use to anyone, as subsequent events were to demonstrate.

But such a course would inevitably require the government to break free from the constraints of capitalism and put into effect a socialist program. Otherwise capital would use its power to disinvest and destroy the economy, in turn generating a backlash from the electorate against the government unless it acted decisively to solve the crisis on a socialist basis.

The question of inflation therefore, and the issue of the referendum on prices and incomes, became a crucial test for the Labor government. The logic of Whitlam's reformism, with its acceptance of the capitalist system and its rejection of socialism as a viable alternative, inevitably drove the government down a path that undermined its own base of support and ultimately left it defenceless against the forces opposed to its reforms.

The Myth That Wage Rises Fuel Inflation

With the government's strategy against inflation in tatters, the trade union movement moved to protect its members from the effects of rising prices. In April 1974, with the average wage around $119 a week at the time, Metal Workers won a $15 a week wage increase. Over the next three months hotel workers in Victoria got an $18 a week rise, wharfies $22.50, building workers $25 and NSW nurses 35%. Oil workers won $25 with a further $5 to come in October, workers got $25, and vehicle builders up to $30 a week.

Such increases were not won without a struggle. In 1974 the number of strike days lost came to 6.2 million, up from 2.6 million the previous year. But with unemployment still low and Labor in power, workers saw the opportunity to win a significant improvement in living standards. In real terms wages rose by 7% during 1974.

In the face of this wages push the employers and the mainstream media began to turn on the government for its inability to hold the labour movement in check, arguing falsely that rising wages were fuelling inflation.

In fact the impact of wage rises was felt only on profits, for it has never been the case that employers can simply pass on a rise in their production costs to the consumer in the form of a price increase. It was this, rather than the question of inflation that lay behind the press campaign.

It was here that Whitlam betrayed his lack of understanding of economics, accepting the argument of the employers as valid. Once again this led the government into a position where it was at odds with the labour movement, but completely incapable of satisfying the demands of big business.

Whitlam's confusion on this question is revealed in his own account of the life of the Labor government, in which he complained bitterly,

"Some commentators have argued that the Labor government was too close to the unions. In reality we were not close enough to the unions to achieve our objectives. Everything my government did had the intention of improving the life of the ordinary working person. Our expenditure programs...were calculated to represent an average gain of approximately $16 in the real social wage of each family each week. Yet unions behaved as if Labor's advances in these fields did not exist." (The Whitlam Years 1972-5 p201)

As if they should! More than anything else Whitlam's exasperation with the unions over this issue reflected the collision between the utopian character of Whitlam's program and the real world.

"The chief economic failure of my government resulted from the wage explosion of 1974. In part, our failure was a failure of communication, our failure to persuade the trade union movement of the central concept of the Labor's program." (The Whitlam Years 1972-5 pl98)

This concept related to Whitlam's 1961 declaration that wages and incomes were no longer key factors in the quality of life of working people. But what relevance did this idea have to the realities of life in 1974, with inflation running at 16%?

The trade union movement had a responsibility to use its industrial strength to defend the standard of living of its members, and if the industrial climate allowed for an improvement in this standard, then so well and good. It was after all Whitlam's Labor government that was determined to work within the framework of capitalism, convinced this was the best way to advance the cause of Labor. How then could it echo the complaints of capital when workers achieved a favourable outcome under such conditions?

In reality the problem lay not in the consistent defence of living standards pursued by the trade union movement, but rather in the fundamental contradictions within Whitlam's 'concept' itself.

Economic Crisis Reduces Labor's Support

The government's opposition to the labour movement and its endorsement of the arguments of employers over inflation meant that it earned no credit for the success of the trade unions industrial campaign to increase wages throughout 1974.

However Whitlam's commitment to working within the constraints of capitalism did mean that the government had to take responsibility for the crisis in the economy and the impact of this crisis on working people.

Above all this meant massive increases in interest rates, which had reached 20% by August 1974, and led to a number of large company crashes, particularly in the hard hit construction industry. This in turn fuelled the growth of unemployment, which had bottomed out in April.

As a result the government began to lose support among the electorate, despite its successful re-election in May 1974. By the end of the year the government was in deep trouble, reflected in the disastrous result of the Queensland state election, which Whitlam turned into a referendum on the record of the federal government. The Labor vote fell by 10% to 36%, leaving the party with just 11 seats in the state parliament.

The single most important factor in the change of fortune for the Whitlam's government between May and December 1974 was its handling of the economy.

By the middle of the year it was clear that the fundamental contradictions of capitalism were reasserting themselves. Rejecting the path of a socialist transformation of society, the Whitlam government was torn between the devil and the deep blue sea.

Either it could act to reduce inflation by maintaining high interest rates and cutting back public spending, measures that would bring on a recession and therefore rising unemployment, or else it could make jobs the top priority and allow inflation to continue, which would inevitably cause a slump in investment and a steeper rise in unemployment at a later stage.

Unlike a Liberal government however, which could have acted purely in the interests of capitalism, the Labor government did not have the same room to manoeuvre, coming under pressure from its working class base and the organised labour movement.

Between The Devil &The Deep Blue Sea

The actual course of the government's economic policies during 1974 therefore turned into a series of disastrous zigzags as it reacted to the contradictory pressures of capital and labour.

At first Whitlam announced at the June Premiers conference, "Inflation must be curbed. The government is determined to curb it" and allowed interest rates to soar. But by July the effects of this policy on unemployment was already showing through. Cabinet and Caucus revolted and forced the government to change tack. A mini-budget acted to raise pensions by $6 a week and the budget itself in August increased public spending by 32% and introduced income tax cuts worth $430 million. The Budget forecast a deficit of $570 million, although in the event this turned out to be $2.6 billion. Signalling the change of heart, Treasurer Frank Crean's Budget speech stated, "Crucial as the fight against inflation is, it cannot be made the sole objective of government policy. The government is committed to the program of social reform to improve the position of the less privileged groups in our society and to maintain employment opportunities."

The Budget, which was followed by a 12% devaluation in the A$ to boost exports, came too late to prevent the collapse of two major building companies and the Leyland Motor Corporation. Unemployment continued to rise, reaching 267,000 by the end of the year. Meanwhile inflation still remained at 16.3%.

The combination of high interest rates and rising prices, which largely cancelled out the wage increases won by the trade union movement, and the increase in unemployment completely undermined the government's support among ordinary working people.

At the same time however, the government's policies won it no friends within the circles of big business. Capital was also suffering under the impact of high interest rates and the growing recession in the economy. The only solution acceptable to employers lay in the restoration of profit levels through wage cuts.

The government responded to the pressure of big business with a renewed drive to win the trade unions to wage restraint, this time through indexation. It also deferred $500 million of company tax due in December and abolished capital gains tax in a further attempt to boost profitability.

Attitude of The Ruling Class To Labor Changes

But the damage had been done. Despite these generous gifts to capital, the government's economic U-turn and its expansionary budget had lost it the confidence of the ruling establishment which now began to look for means to return the Coalition to power.

December 1974 saw a decisive change in the attitude of the Australian capitalist class toward the Whitlam Labor government. For despite the absence of any intention on the part of Whitlam to fundamentally challenge the institutions of capitalist rule in Australia, over the course of its first two years in power the Labor government succeeded in alienating wide sections of the establishment, who by 1975 had embarked on a determined drive to bring the government down.

Initially the ruling class was not hostile to the Labor government elected in December 1972. The final years of Liberal-Country Party rule had seen paralysing splits develop within the Coalition over the first signs of crisis in the economy and in response to the mood for a fresh approach building up within Australian society.

The first few months after the federal election saw the mainstream media generally treat the Whitlam government in a friendly manner. This however came to an end with the 'raid' on ASIO headquarters by the Attorney General and a squad of Commonwealth police in March 1973.

The Raid on ASIO Headquarters

The 'raid' took place against the background of a visit to Australia by the President Bijedic of Yugoslavia, and the possible threat of an assassination attempt by the Croatian Ustasha, a pro-Nazi organisation that had previously carried out a number of bombings and acts of terror against representatives of the Yugoslav state under the protection of ASIO. As Whitlam pointed out, "If communist rather than anticommunist organisations had been thought responsible for the incidents I have described, all the Liberal Attorneys-General would have been active in pursuing and prosecuting the perpetrators... The Ustasha enjoyed complete immunity under Menzies, Holt, Gorton and McMahon." (The Whitlam Government 1972-5 pl71)

In relation to the visit of Bijedic, Whitlam's Attorney-General Murphy, "Éfound that not only had ASIO failed to keep track of Croatian activities but some elements in ASIO and related departments were attempting to conceal the facts from him. He thought it necessary to take Federal police from Canberra to ASIO headquarters in Melbourne and seal the relevant files." (The Whitlam Government 1972-5 pl66)

Despite its relatively harmless purpose, the 'raid' on ASIO sent shock waves through the ruling establishment, raising their worst fears that a Labor government might seriously interfere with the functioning of the 'security' services, one of the key institutions for the defence of the existing order in the event of a serious threat to transform society along socialist lines.

Graham Freudenberg described the effect of this episode in the following terms, "The ASIO raid was to have consequences out of all proportion to its intrinsic importance. It marked the end of the honeymoon period normally enjoyed between a new government and the press...For a public service accustomed to quiet enjoyment of their prerogatives, Murphy's use of one arm of the service to discipline another was deeply disturbing." (A Certain Grandeur p263)

The implications of a Labor government prepared to use the machinery of state in pursuit of its policy goals was indeed 'disturbing' to a ruling class that was prepared to allow the Labor Party 'office' but by no means control over the real sources of power - the armed forces, security services, or even the upper layers of the public service.

"The ASIO visit smacked of the authoritarian tendency which had been the most unattractive characteristic of the Chifley Labor government...When, in May, both State and Commonwealth police staged a dawn raid on a number of residences, purportedly in search of weapons, this impression deepened. The ASIO visit was the first serious blow to the self-confidence of the Labor government and the first serious check to the unqualified enthusiasm of its supporters." (A Certain Grandeur p263)

By 'supporters' Freudenberg was referring to those within the ruling establishment who up to this point had adopted a friendly attitude to the Labor government. To these sections, any challenge to their unfettered rule over society was 'authoritarian' and could not be tolerated.

Lacking any understanding of the real nature of the capitalist state, Whitlam had no idea of the cardinal sin his government had committed in the eyes of the ruling class with the ASIO 'raid'.

The Labor Government's Enemies Grow

Nevertheless this tiny section of the population did not have the power to bring down an elected government at will. For this to take place Labor had first to alienate much wider layers of society, not only the upper and middle classes, but its own base within the working class as well. Unfortunately the government proceeded to do just this.

The first enemies the Whitlam Labor government was to make were the farmers, who during the years of Coalition rule had received huge amounts in grants and subsidies from the federal government. In order to pay for the social reforms of Labor's program many of these were cut back in the 1973 Budget following the report of the Coombs Task Force.

As Graham Freudenberg commented, "A large number of items in the Coombs report involved rural industries, reflecting the proliferation of special arrangements for farmers during the years of Country Party ascendancy. The very existence of the Coombs report felt as an affront to agricultural interests. It became a symbol of Labor's hostility to agriculture...Thus when the government decided in February 1974 to abolish the super-phosphate subsidy, the actual political impact of the decision was magnified ten-fold by six months of resentment and uncertainty."

Labor's reform program also generated opposition from other sections with vested interests in the status quo. Medibank, for example, came under predictable attack from the private health insurance industry, and from the AMA who raised a $2 million 'fighting fund' to campaign against it. The General Practitioners' Society distributed letters to patients on the following theme, "The control of our country has fallen into the hands of socialists...socialism was the brain-child of Karl Marx, a bitter man and a strange mixture of semi-scientist and half-baked philosopher. Lenin accepted the teachings of Marx, fomented a revolution in Russia, exterminated millions of ordinary people and enslaved the rest... The fight that the GPS in Australia is spearheading is basically a fight for freedom - not just freedom for doctors - but freedom for you, for your children and for all people in the country."

The decision to reduce tariffs by 25% in June 1973 likewise provoked a predictable reaction from employers, and to some extent workers, in those industries enjoying protection from imports. This tended to reinforce the hostility to the Labor government in rural areas where much of the textile and clothing industry was situated.

Furthermore, the government's proposals to reform the insurance industry, reduce foreign ownership in the mining industry, regulate the financial markets, and Whitlam's verbal attack on the Stock Exchange all increased the unease with which the Australian capitalist class viewed the Labor government.

Role of the Treasury Department

Alongside this came the deterioration in relations between the Treasury and the government in the wake of its twists and turns on the economy during 1974. The Treasury acted as a secret faction within the government with the aim of forcing through orthodox capitalist policies at Cabinet level. As Whitlam described its activities,

"More than any other department, Treasury would present and advocate only one line of advice. If that line were rejected, it would present it again... If Treasury's advice was still rejected, it would use its contacts with senior officials in other government departments to attempt to get its policy accepted by the government." (The Whitlam Years 1972-5 p205/6)

The conflict between the government and the Treasury came to a head over the 1974 Budget. This included the Treasury falsifying projections and statistics, bordering on outright sabotage.

"Treasury's calculations implied a domestic budgetary surplus of $330 million. When it was discovered...that Treasury was in fact planning a surplus of $1 330 million, ministers were not surprisingly incensed. Emotion ran even higher when it was revealed that Treasury's unemployment prediction for 1975 had already been reached."

"Treasury fought on to the bitter end. Crean (the Treasurer) circulated a Treasury document under his own name, after Cabinet had approved the Budget, which continued to argue Treasury's policies and continued its vehement criticism of the strategy agreed upon. Treasury then provided an insultingly perfunctory Budget speech... Treasury also refused to take part in the traditional exercise of explaining the Budget to the pressÉit declined to produce the usual Economic Survey... If Treasury was not actually on strike, it certainly went into a sulk." (The Whitlam Years 1972-5 p208)

Despite these tensions between the Labor government and the various sections of the ruling class, big business understood that Whitlam had no intention of fundamentally threatening the rule of capital over society. So long as the Labor government retained the support of its working class base, the establishment was therefore prepared to confine its dissatisfaction to hostile editorials in the press.

But once the government's determination to remain within the constraints of capitalism had led to a significant erosion of that base by the end of 1974 as a result of the crisis in the economy, the ruling class saw the opportunity for a successful outcome to the Coalition's campaign of obstruction in the Senate where it held a majority. The establishment threw its weight behind this campaign with one sole purpose - to bring down the Labor government. All that was required was an issue by which to achieve this goal.

As 1975 opened, the stage was set for the great drama that was to expose all the contradictions and failings of Whitlam's reformist political approach in full view - the loans affair.

The Loans Affair

The loans affair was no accident. It flowed from the very nature of Whitlam's entire political outlook, which developed out of the attempt to find a 'constitutional' alternative to a socialist program involving the nationalisation of the commanding heights of the economy.

Whitlam's conviction that the constitution excluded the possibility of nationalisation flowed from the decision of the High Court in 1947 to interpret Section 92 as a barrier to the proposals of the Chifley Labor government to nationalise the banks and the airlines.

"The way of the reformer is hard in Australia. Our parliaments work within a constitutional framework which enshrines Liberal policy and bans Labor policy." (Chifley Lecture 1957)

Whitlam drew from this that Labor had to look to other means than nationalisation in order to meet its goals. But in this, Whitlam completely misunderstood the significance of the High Court's action. The problem did not lie in the 'unconstitutional' nature of nationalisation, in fact Section 92 deals with the question of tariff barriers between the states, but rather in the blatant misuse of this clause by the High Court to defend the interests of the Australian capitalist class.

This was an absolutely fundamental error on Whitlam's part. The constitution had no relevance whatsoever to the issue of privatisation, being a document drawn up to define relations between the federal government and the states at the time of Federation.

The real barrier to socialist Labor government lay in the determination of the ruling class to use any means to defend the existing capitalist order, in this case by a completely fraudulent interpretation of the constitution.

In the final analysis, it was Whitlam's failure to understand the true nature of the obstacles confronting a socialist Labor government that proved to be fatal for his own government.

But Whitlam's error went much further, for he believed he had found a formula by which the question of nationalisation and the problem of the constitution could be sidestepped. Instead of posing the need to confront and defeat the resistance of the High Court and the other institutions of capitalist rule in Australia, Whitlam proposed a seemingly far easier route for a Labor government.

"In our obsession with Section 92 which is held up to be the bulwark of private enterprise, we forget Section 96, which is the charter of public enterprise."

"The Australian Labor Party's attitude to more equitable and efficient regulation of the economy is often thought or alleged to centre chiefly or solely on nationalisation. The party's objective is the 'democratic socialisation of industry, production, distribution and exchange to the extent necessary to eliminate exploitation and other anti-social aspects in those fields'. This is a limited, negative and apologetic definition, which makes little allowance for the creative scope of socialist measures. Socialists should not be content with nationalisation where necessary; they should be intent on competing where possible and initiating where desirable."

"A more fruitful and complete use can be made of Australia's human and material resources through the initiation of public enterprise than the regulation of private enterprise. The Australian government is as constitutionally free as any other national government to initiate public enterprise internally or internationally." (1961 Curtin Lecture)

"For decades, successive Liberal-Country Party governments had shackled the effectiveness of the Commonwealth Bank, Australian National Line and TAA by refusing them competitive rein in the open market. My government removed all the restrictions on these public enterprises which prevented them from competing with private firms on an equal footing in all aspects of their trade."

Whitlam recognised that these measures would meet with opposition, "Conservative politicians oppose the development of public enterprise because they perceive it as a threat to the hegemony of private enterprise."

But Whitlam himself believed this was not the case, "The great obstacles to public enterprise in Australia are political not economic." (The Whitlam Years 1972-5 p215)

Whitlam saw in this approach a viable alternative to the transformation of the economy along socialist lines. In fact Whitlam believed that by building up the public sector a Labor government could make up for any shortcomings in the workings of market forces and improve the running of the capitalist system as a whole.

"The sins of capitalism in Australia today are ones of omission rather than commission and of not being sufficiently enterprising and independent. Even if governments took over very significant company, there would still be huge gaps in our development and trade." (1961 Curtin Lecture)

It was precisely this line of thought that was to lead directly to the loans affair and seal the fate of the Whitlam government in 1975.

The Issue of Foreign ownership

Whitlam believed that the fundamental cause behind these 'sins of omission' lay in the increasing level of foreign ownership over the Australian economy, and particularly over the mining industry. On this question Whitlam held a clearly reactionary position.

Whitlam failed to understand that the basis for the post war boom had lain in the expansion of world trade and the increased economies of scale and higher productivity that came with the growth of multinational corporations serving the global market. Whitlam himself recognised the role foreign capital had played in the development of the Australian capitalist economy.

"Historically, economic development has been highly susceptible to foreign penetration. British pastoral investment dominated the economy before World War 1. The growth in the manufacturing sector after the World War II era was dominated by a high flow of investment from the US. In recent years, much of the ownership of the Australian mining sector has been absorbed by transnational capital." (The Whitlam Government 1972-5 p219)

From the standpoint of the working class this was not in itself a negative process. Under the conditions that emerged after the Second World War, not only did it allow for an unprecedented rise in living standards during the 1950's and 1960's, but the growing integration of the planet's major economic powers has laid the foundation for a worldwide socialist order once capitalism is overthrown.

For workers it is a matter of indifference whether they work for a domestic or a foreign employer. Capital is capital, and derives its profits from the unpaid labour of the working class. The real choice lies not between Australian or foreign ownership over the means of production, but public or private ownership.

The correct response for the labour movement to rising levels of foreign ownership over the economy is not to attempt to turn back the clock and promote purely Australian capitalism, but rather to fight for a socialist transformation of society on the basis of a nationalised, planned economy and link up with the working class of other nations in the struggle for a worldwide socialist order.

Instead of this however, Whitlam lamented the extent of foreign ownership over the mining industry from a purely nationalist standpoint. Speaking in 1966 he stated, "The government is condoning and encouraging the sale of our richest mineral resources to overseas interests. Some of the most amazing mineral discoveries in our history are now in foreign hands. Foreigners do Australians the honour of employing them to dig up their own wealth, to be exported overseas."

In what way this differed from workers being employed by Australian firms to "dig up their own wealth" was not clear. In any case since when did a certificate of Australian citizenship include shares in BHP, CRA or any other company with the ownership rights to exploit Australia's mineral resources?

Nevertheless Whitlam was determined to right this 'dishonour',"Government participation is required, as well as government planning, to counter the drift to overseas ownership."

But while Whitlam's crusade on this issue was a matter of indifference to Australian workers, for capital it was an entirely different question. Whitlam failed to understand that the rise in foreign ownership had not occurred against the will of the Australian capitalist class, nor did it threaten their interests. The Coalition's support for foreign investment had not been an accident. Instead the whole process merely reflected the movement towards economic integration taking place across the entire capitalist world.

For this reason Whitlam failed to foresee that intervention by the Labor government into the mining industry with the aim of boosting 'national development' and Australian ownership would meet with stiff resistance, not only from the multinationals, but from Australian capital too.

Whitlam proposed, "A responsibility rests on government to discover and process minerals, either through joint Commonwealth and State enterprise or in consortia with private companies. Participation with companies is often the best or only way to secure know-how, access to supplies and market outlets."

A 'Constitutional' Alternative to Nationalisation?

But the mining corporations had no interest in participating with the governments plans. As Paul Kelly commented, "The implementation of this policy led to a massive falling off in exploration programs and development projects both on land and offshore." (The Unmaking of Gough pl58)

The only practical solution to this obstruction by the mining companies was to take away their control over the level of investment in the industry. This could only be done through nationalisation. But Whitlam had categorically excluded this course of action, believing he had found an alternative, 'constitutional' means of achieving the government's goals.

"The main means by which the government planned to increase Australian equity in mining, however, was the Petroleum and Minerals Authority... Should an Australian corporation have discovered a lode that appeared to have great potential yet lacked the finance to further explore or develop it, such a corporation would have been able to gain assistance from the PMA rather than from overseas capitalÉ"

"Like the multinationals it would have been able to search for and find minerals, extract them, process them and market them, so that it would be one of the few Australian concerns to participate in the highly profitable activities of processing and marketing. Unlike the multinationals however, it would distribute its benefits to the people of Australia, and that meant all of the people, not just a few thousand shareholders." (The Whitlam Government 1972-5 p250)

The PMA therefore, represented Whitlam's vision of the role for public enterprise put into practical terms. However this 'constitutional' alternative to nationalisation never got off the ground, it was voted down by the Senate and never made it through parliament.

The same fate awaited the Australian Industry Development Corporation Bill, designed to add to the AIDC, "a second objective...that of securing the greatest practical Australian participation in the ownership and control of companies engaged in those industries" (The Whitlam Government 1972-5 p219), and also the National Investment Fund Bill to finance the AIDC, an overseas Trading Bill, and a proposal to set up a publicly owned insurance company. In fact, with just a single exception, the opposition of big business and the Senate sank each and every one of the measures put forward in line with Whitlam's vision for the public sector.

The exception was the National Pipeline Authority, which was passed by parliament in June 1973. Given the role this body was to play in Whitlam's downfall, its successful passage through the Senate was perhaps a mixed blessing for the government.

The construction of a national pipeline was the jewel in the crown of a series of resource development projects planned by the government, and the personal brainchild of Rex Connor, the Minister for Minerals and Energy, and Whitlam himself. With the refusal of Australian private capital to finance the project, the government had to turn elsewhere for funds or else drop the idea. This was the origin of the loans affair.

"Connor realised the central dilemma of his policies. This was where the overseas loan raising fitted neatly into the equation... If these projects could be funded through a massive overseas borrowing then Connor would satisfy his twin objectives of development and Australian control. The search for overseas loan funds was not an aberration. It was the natural product of Connor's policies and objectives and of the limits within which he had to operate." (Paul Kelly, The Unmaking of Gough pl58)

Bypassing the Cabinet, Whitlam and Connor obtained through the Executive Council authorisation to seek US$4 billion of loans on the world money markets. This amount (A$3bn), would cover the cost of a pipeline from the Cooper Basin through Dampier to Perth ($970m), a submarine pipeline from Dampier to North Rankin ($225), a petro-chemical plant at Dampier ($750m), three uranium mining and milling plants ($225m), and $700m of other similar projects.

Bypassing the Treasury

The viability of these projects was never to be put to the test. In any case, the furious reactions on the part of the ruling class to this decision by the government was not based on the wisdom or otherwise of what the loans were intended for.

Even if it had turned out that the money had been badly spent, this would not have caused any great trauma for Australian capitalism. Neither would the role of the publicly owned Pipeline Authority in the resources sector, although an irritant, have fundamentally threatened the domination of private capital in the industry.

Instead the reaction of the establishment to Whitlam and Connor's actions stemmed from something else, the way the government went about seeking the loans.

The problem for the Labor government lay in the hostility of the Treasury to its policies, which had strained relations to breaking point a few months earlier. Whitlam knew that the Treasury would oppose the loan, and if overruled by the elected government would actively sabotage it with leaks to the press and the Coalition. This fear on the part of Whitlam turned out to be completely justified.

Whitlam therefore made a fateful decision, he decided to bypass the Treasury in secret, and access the US$4 billion without their or the Loan Council's knowledge.

The Treasury had an established procedure for raising overseas loans for which it employed the leading Wall Street finance house Morgan Stanley. The use of this firm reflected the close relations between Australian and US capitalism during the post war period. But in the wake of Vietnam and the 1973 Arab-Israeli war, the position of US imperialism had been seriously weakened. As Whitlam put it, "In 1973 and 1974 eruptions of unprecedented magnitude shook the financial world. Balance of payments surpluses from the sale of oil began to accumulate in enormous quantities in the organisation of Petroleum Exporting Countries world, principally the Middle East. Surpluses amounting to no less than US$55 billion and US$60 billion are believed to have accumulated in this way in 1974 alone." (The Truth of the Matter p45)

In these 'petro-dollars' Whitlam saw his chance to get around the opposition of the Treasury and raise a large loan at a low rate of interest. Through an Adelaide businessman Jerry Karidis, Connor was introduced to a Pakistani financier Tirath Khemlani who had contacts inside several regimes in the Middle East. Khemlani was authorised to investigate the possibility of a loan to the Australian government from one of these sources.

The loan never came through and the idea was abandoned in May 1975, but that no longer mattered. For as with the case of the ASIO raid the previous year, in the eyes of the ruling class, Whitlam had committed a heinous crime by acting independently of the Treasury and seeking other channels for an overseas loan in the pursuit of the government's goals.

The True Nature of the Capitalist State

The trouble with Whitlam was that he had no idea of the true nature of the capitalist state. He believed that merely by winning office in a federal election he would be able to carry out his program so long as he remained within the limits of the Constitution. This was a fundamental and ultimately fatal error.

In his desire to avoid the fate of the Chifley government, whose policies were blocked by the High Court in the name of the Constitution, Whitlam was undoubtedly successful. Not a single one of 507 pieces of legislation passed by parliament during the life of the Labor government was successfully challenged in the High Court, with the exception of the PMA Bill which was lost on a technicality.

But parliament is not the state. The system of parliamentary democracy introduced from Britain consists of a whole series of institutions whose function is to defend the capitalist order from any threat to its survival. This includes the threat posed by an elected Labor government seriously committed to advancing the interests of the working class.

Whitlam was correct to identify the Constitution as one of these institutions. But he failed to see that it is not alone. The armed forces, the security services, the High Court, the Treasury and other top layers of Public Service, the Senate, and the Governor General, all these too exist for the sole purpose of maintaining the dictatorship of capital over society.

So long as the Labor government worked within the constraints laid down by these institutions then the ruling class was prepared to tolerate its mildly reformist program and restrain its opposition to Labor to the normal parliamentary channels, patiently waiting out the time to the next election.

But Whitlam's government did not do this. It showed that it was prepared to step outside these constraints and interfere with the running of the security services. It ignored the 'orthodox' economic advice of the Treasury. Through the loans affair it demonstrated conclusively in the eyes of the ruling class that it could not be trusted.

It did not matter that Whitlam remained committed to the capitalist system and that his policies represented no serious threat to the existing order, the problem lay in that the government was unreliable, it could not be relied on to respect the safeguards the ruling class had established to render parliamentary democracy safe for capitalism. And for that reason it had to go, as soon as possible.

Speaking on the 10th anniversary of his overthrow, Whitlam showed a glimpse of understanding of this issue, "One thing is plain. Electoral success does not of itself establish Labor's legitimacy. Our opponents no more accepted the people's verdict of 1974 than they did that of 1972. (Coalition Senator) Withers dismissed both as 'aberrations resulting from the votes of the outer suburbs of Sydney and Melbourne', with the implication that a majority so composed is less valid than other majorities'.

Correctly pointing out that Governor General John Kerr's actions sacking the government could not be seen in isolation from this attitude on the part of the ruling class, Whitlam stated, "I do not propose here to canvass again Kerr's motives. Nevertheless to understand them fully, it is necessary to recall the atmosphere which had built up in the weeks and months before the dismissal. Central to everything that happened in October-Novemeber 1975 was the unceasing effort by the conservative parties and interests in Australia to deny the legitimacy of my government. That effort began at the beginning, virtually from December 1972. It was more than resistance to change. It was more than opposition to specific reforms. It was a profound, instinctive, almost tribal rejection by the Australian Establishment of our right to govern and the right of the people who twice elected us to have the government of their choiceÉ"

"Given his proclivities, and his growing obsession with acceptance by the Australian Establishment, it is not perhaps surprising that Kerr succumbed to be the instrument of the ultimate act of the denial of our legitimacy on 11 November 1975." (The Whitlam Government 1972-5 p735)

Vicious Press Campaign Unleashed

As the details of the loan affair came out in the press, deliberately supplied by Treasury officials to Coalition politicians, the media launched into a vicious and unprecedented campaign to drown the government in a flood of 'scandals' and allegations of corruption and misconduct.

Most of these, such as the case of the 'secret cables' or the Morosi affair, were either complete fabrications or simply attempts at character assassination directed at individual ministers such as Jim Cairns. But as the media was well aware, the government was completely innocent of such charges, and in fact not single one of the avalanche of accusations that poured down on the government during 1975 even warranted a proper investigation.

Whatever the political sense of the loans affair or any other decision of the Labor government, there was never any question that the members of Whitlam's Cabinet had acted out of anything other than the best of motives.

For bringing on the wrath of the ruling establishment the Labor government can never be criticised from the standpoint of the working class. It was to the government's credit that it sought ways to overcome the resistance of the capitalist state to its program and came into sharp conflict with this state.

The problem however lay in the political issues that the Whitlam government chose for its confrontation with the capitalist class.

In his assessment of the reasons behind the campaign that forced Jim Cairns' resignation in mid-1975 for his role in the loans affair, Tom Uren correctly stated that Cairns had, "Étried to bypass the established and powerful channels that determine the placement and use of international finance, and he is paying dearly for it. We must try to understand the reasons for many of the attacks of this nature that we have weathered since we have been in government. This steady, timely flow of letters, this disappearance of papers from files, all this sensation has been carefully orchestrated, it seems to me, by the real powers-that-be in the country and the international arena." (Straight Left p239)

What Stake Did the Working Class have In the Loans Affair?

But the only force within society that could have successfully countered the vicious attacks on the government by the establishment was the organised working class, the labour movement.

But how could the labour movement mobilise its strength in defence of a Labor government under siege in the wake of the loans affair? Call a general strike in support of Khemlani's efforts to secure a loan from Saudi Arabia? Just to pose the question is to answer it.

At the end of the day the working class had no fundamental stake in the construction of a pipeline across the WA desert. It had no real stake either in the question of whether Australian or foreign capitalists owned the mining industry. There was never any possibility of mounting a serious effort to bring the strength of the working class movement to bear over these questions.

The class struggle is not a simple plus or minus affair. Just because the policies of the Whitlam government conflicted with the best interests of Australian capitalism did not mean that they therefore represented the true interests of the working class. The world is more complicated than that.

Neither could the government effectively appeal for support on the basis of its record in power. For despite the valuable reforms achieved during its first period, working class people rightly judged the Labor government by its handling of the economy as the recession struck during 1974, which for all Whitlam's ideas about the irrelevance of wages and incomes still remained the basic factor determining their standard of living.

But because of its determination to work within a diseased and crisis ridden capitalist system, the government had decisively alienated itself from its working class base by the end of 1974, precisely the time when the loans affair and the press campaign was gathering momentum.

This was the critical weakness in Whitlam's reformist strategy. The program of the Labor government inevitably brought it into conflict with the existing order. But it did so in such a way that at the critical moment it was left without any social base with which to counter the onslaught of reaction. Throughout 1975 the Whitlam government was dead in the water, a sitting duck under a hail of fire from an enraged capitalist class.

Ironically it was the crisis over supply and the drama of the showdown with the Senate during October and November that retied the knot with the working class and revived the fortunes of the government for one last, brief moment. In this contest Whitlam was unquestionably at his best, fighting a battle on his home ground, the Constitution, and inspiring the ranks of the labour movement with his intransigence over a question of principle.

From a low of 37% in the opinion polls during August 1974, support for the government rose to 46% during the crisis. Over 70% of the population stood in favour of the Budget being passed. Without question the tide of public opinion would have caused the Senate to crack, possibly within a day or two, had the Governor General not intervened on November 11th.

But in spite of Whitlam's surprise, Kerr's action was no accident. Had the ruling class shown the same respect to the Constitution that Whitlam had throughout his political life, Whitlam would have emerged from the showdown with the Senate the victor. But Whitlam had made a fatal blunder, he had failed to understand that what was involved was not a game, with set rules, but a struggle between living social forces with vital material interests at stake, far too important to be sacrificed for the sake of 'fair play'.

Whitlam's tragedy did not lie in that he was denied victory by his opponents' cheating. Whitlam's tragedy lay in that he was playing one game, while the ruling classes were playing an entirely different one.

A Balance Sheet of the Whitlam Government

In drawing up a balance sheet of the 1972-5 Labor government, it has to be born in mind that Whitlam, and his political outlook, were very much a product of their time. Whitlam's fate flowed from the unfortunate circumstance that this time was already past when his government came to power. Whitlam himself understood this, "The 1969 election, it can now be seen, was the last in the post war series which provided the government returned at it with the opportunity to carry out a social program relatively free from overwhelming problems of economic management...Yet we had lost those three crucial years." (The Whitlam Years 1972-5 p9/l0)

It is tempting to speculate on what would have happened had Labor come to power in 1969 instead of 1972. But at the end of the day this would be a useless exercise because the era of the post war boom is gone for ever. The success of failure of Whitlam's reformist strategy must be judged by the real conditions of economic crisis that developed during his time in power because these are the conditions Labor governments must confront today and in the future, only on a far greater scale as capitalism continues its decline at the start of the 21st century.

And for this reason Whitlam's approach must be considered a utopian one, not because it lacked inspiration or vision, but rather because it did not correspond to the realities of life when it came to putting it into practice.

Twenty years on, the verdict of today's generation on the Whitlam government must be a harsh one. This is so despite the many reforms the Labor government was able to implement, particularly in its first year, and in spite of the towering stature of Whitlam himself, when compared with the Labor Prime Ministers that have followed him.

But the verdict must be harsh because our generation cannot afford to repeat the mistakes of the Whitlam government. A quarter of a century after the ending of the post war boom, the stakes in the class struggle for working class people, especially the youth, are infinitely higher than in Whitlam's time.

At its peak, unemployment reached 4.6% during the recession of 1974/5. Today, at the peak of the 'boom' in capitalism, unemployment has dropped only as far as 6.3%, which doesn't even take into account the casualisation of the workforce and employment in menial jobs with poor prospects and security in the future. Spending on health care and education, the prize of the Whitlam years, has been and continues to be constantly slashed by federal and state governments. The climate of industrial relations has hardened to an extent unthinkable during the early 1970's.

Speaking in 1985, Whitlam himself recognised the difficulties for would-be reformists today, "In the present economic conditions it would be difficult to embark on such expensive reforms as were introduced by my government in the 1973 and 1974 budgets."

But surely the need for such reforms is far greater now in the context of the more advanced state of decay capitalism finds itself in the year 2 000? If reformism can not deliver these, then the labour movement has no choice but to turn to the ideas of socialism for a way forward.

Whitlam's Two Fundamental Errors

Whitlam made two errors. His misfortune stemmed from the fact that these two errors could not have been more fundamental. In his assessment of the treatment of the Chifley government at the hands of the High Court, Whitlam completely failed to grasp the true character of the capitalist state and its determination to defend the interests of the ruling class by whatever means necessary; and in his view that the steady economic growth of the post war period would continue indefinitely, along the way generating the revenue to finance a program of social reform that would render wages and incomes irrelevant to the real quality of life enjoyed by working people.

Because of these fundamental flaws in Whitlam's approach, the Labor government of 1972-5 suffered a crushing defeat at the hands of the ruling class.

But both errors point the way toward the correct strategy for the labour movement. A Labor government that genuinely wishes to advance the interests of working class people must commit itself to break out of the constraints of capitalism and carry out a socialist program, acting decisively to counter the resistance of reaction by mobilising the organised strength of the working class.

So long as these lessons are absorbed by the generation entering into the ranks of the labour movement today, then the Whitlam government can be remembered in a positive light, as a pure and honest attempt to put into practice the utopian ideas of reformism, and whose failure clarified the correct way for a Labor government to successfully bring about the socialist transformation of society.


DISMISSED:Whitlam's overthrow
at the hands of the Governor General

Kerr's dismissal of the Labor government on November 11th 1975 was described by Whitlam as a 'constitutional coup d'etat' But was it legal ? And how should the Labor government have responded? For the Labor movement today, the events that led up to the sacking of an elected Labor government offer many lessons, among them a clear insight into the nature of the state and the role of the Constitution in a conflict between Labor and the ruling class.

On November 11th 1975, at 1pm, the Governor General John Kerr handed Gough Whitlam a letter of dismissal as the Prime Minister of Australia. A minute later Malcolm Fraser was appointed in his place.

Kerr's action was unprecedented. Whitlam himself was completely taken by surprise, convinced that the Governor General would only act on the advice of his Ministers, as had been the normal practice since Federation.

Kerr justified his sacking of an elected Labor government with a clear majority in the House of Representatives in his autobiography with this reasoning, "When an Upper House possesses the power to reject a money bill, including an appropriation bill, and exercises the power by denying supply, the principle that a government which has been denied supply by the Parliament should resign or go to an election must still apply." (A Matter of Judgement p360)

Kerr then argued that Whitlam's refusal to take this course left him with no choice but to sack him.

The dismissal took place against the background of a refusal by the Senate on October 15th to discuss the supply bills passed in the Lower House. Under the Westminster system that had evolved centuries earlier out of the power struggles between parliament and the monarchy in England, without both Houses' consent the Treasury was not authorised to release the money raised from taxes for the running of 'Her Majesty's' government.

The Senate was controlled by the Coalition with a narrow majority of two, and the Coalition at that time was determined to force a general election as it had in May 1974 by blocking supply from the Labor government which had a majority in the House of Representatives.

The Senate's actions were also completely unprecedented. As Whitlam pointed out, "On 139 occasions since 1913 Appropriations Bills had been passed by a Senate with an opposition majority." (The Truth of the Matter p73)

The reason for this lay in the origin of the Senate itself. Under the Constitution adopted with Federation in 1901, the powers between the two Houses of Parliament were drawn up with the aim of defining the division of powers between the new Commonwealth and the States. The question of party politics had not entered the equation, and up until the Whitlam Labor government the Senate had only rejected bills on the basis of 'states' rights'.

Senate Tactics 'Dubious'

Under Section 53 of the Constitution the Senate had the power to reject money bills. The Senate however, did not do this on October 15th. Instead they voted to 'defer' discussion on the bill until an election for the Lower House had been called.

This was a crucial tactical decision on the part of the Coalition and was made for two reasons. Firstly, because it was unlikely that the opposition could win a majority for rejection given the weight of tradition on this question, and secondly because in the event of an election being called for the House of Representatives the Senate held the power to grant supply and so resolve the crisis.

This tactic was also without precedent, and in relation to the Constitution it could at best be described as 'dubious'.

In contradiction with Kerr's statement, by November 11th the government had not been refused supply by the Senate. The Upper House had merely put off a debate on it. Furthermore the supply bills passed the previous six months had not yet run out and would last until November 30th. And even beyond this date, it would still be possible for the business of government to continue for some time into the future by arranging credit with the banks.

The deadlock need not have been broken therefore for several weeks. It was extremely unlikely however, that the opposition could have held the line for that length of time. The Labor government had won the 'war of public opinion' with over 70% calling on the Senate to pass supply in an opinion poll on October 30th.

A key factor in this was the role played by the organised Labour Movement outside parliament despite the efforts of the ACTU leadership to dampen down the movement, as Paul Kelly describes, "As the crisis moved into its second week, Labor appeared to be well on top. Right from the start Bob Hawke had used all his efforts to prevent the threat of nationwide strikes. The industrial movement had fallen behind the political wing of the party in a massive display of support. Telegrams, letters and donations poured into the party, lifting the morale of the Prime Minister and his colleagues." (The Unmaking of Gough p280)

Under the pressure of mass rallies and the growing support for the government expressed in opinion polls, the opposition Senators were on the edge of backing down by the second week of November. Whitlam was supremely confident of victory.

It was at this moment that Kerr chose to intervene. There was only one justification for his intervention on the November 11th - this was the last day on which a federal election could have been called before the Christmas break.

But an election was only the aim of the Coalition, not the government on whose advice the Governor General was meant to act. Kerr's action was a clear attempt to resolve the crisis to the advantage of the opposition.

If Kerr had been determined to intervene, then he could equally have applied pressure on the Coalition Senators to pass supply. In any case Whitlam had come to the meeting with Kerr with the intention of calling a Senate half election, which would have been another way of bringing the crisis to an end. Not a single one of Kerr's arguments justifying his action stands up to legal inspection.

Kerr's intervention highlighted the contradiction between the conventions surrounding the role of the Governor General and the power of his office as defined by the Constitution. This contradiction was summarised by Paul Kelly, "By convention and tradition, the Governor General always acted on the advice of his ministers and not without that advice. But once again the Australian Constitution, under the strict letter of the law, the Governor General appointed his ministers who "hold office during the pleasure of the Governor General." In short the Governor General had the power to decommission ministers and dissolve the House of Representatives and this function was vested in his office, not the Queen's." (The Unmaking of Gough p273)

Whitlam's fatal error was to assume that the Governor General would act in accord with convention. Instead Kerr demonstrated a higher loyalty to the interests of the ruling class who by this time were determined to bring the Labor government down.

Not only did Kerr sack his 'own' government whose advice he was meant to follow, he did this with the secret collaboration of the opposition leader Malcolm Fraser, obtaining legal advice on his possible options against the express wishes of the Prime Minister, and deliberately deceiving the government by giving them no idea of his intentions.

Kerr's conduct was described by Donald Home, author of 'The Lucky Country', in these words, "What happened?"

"This: The Governor General secretly made a decision, the effect of which was to support the political plans of the Liberal and National Country Parties."

"Against all contemporary practice he did not discuss that decision with the government that was then in power. But having contemplated the decision secretly he secretly got for it the support of the Chief Justice, a person of no more constitutional significance than you or me, but one whose respected office could seem to give extra authority to what the Governor General had decided. The Governor General then mounted a time tabled operation, for which the phrase 'constitutional coup d'etat' seems a useful description. It was an operation which had the general effect of having the Prime Minister with a false sense of security, then, without discussing any alternatives, kicking him out of office, installing a minority leader as Prime Minister, then dissolving Parliament."

Whitlam's own description ran as follows, "The key to the entire operation by which my government was dismissed was secrecy. Surprise was all. Secrecy was not incidental to the enterprise; it was essential. Through secrecy and surprise, Sir John Kerr struck aside at one blow the whole range of options available to an elected government successfully fighting for its survival." (The Truth of the Matter p.xii)

"Sir John Kerr's deception was two fold. At all stages, he failed to 'counsel and warn'; he never disclosed to his constitutional advisers his concerns or the course he had in mind. It follows by necessary inference that he deliberately misled us; at the very time he had determined to dismiss us, he consciously and deliberately left us to believe that he understood and supported what we were doing. His was a double deceit." (The Truth of the Matter p89)

But in going outside of convention Kerr was not alone. The Senate itself had broken with tradition by refusing to grant supply. Not only that, but the make up of the Senate had also been distorted by the breaches of convention of the Coalition Premiers of NSW and Queensland, reducing Labor's Senators from 29 to 27 out of the 60 in total.

Conventions Worthless at A Time of Crisis

From these actions Whitlam should have realised that to rely on convention was a serious blunder. In fact this is one of the key lessons of the whole episode, conventions are not worth the paper they're (not) written on.

For conventions are only designed to operate during 'normal' times, when there is no challenge to the capitalist order. In a period of crisis, when the class struggle reaches a decisive point, the modern capitalist state retains a range of reserve weapons, among which the powers of the Governor General are only one example, with which to deal with any threat that may arise.

Because Whitlam failed to understand the nature of the capitalist state, Kerr's intervention took him completely by surprise. Nevertheless, all was by no means lost. The afternoon of November 11th contained a number of opportunities for Labor to save the situation by decisive action. Unfortunately these were not taken.

In reality the Governor General stood on very shaky ground. Labor still held what was potentially the trump card, a majority in the House of Representatives that had been won in a general election. This gave the government both massive political authority in the eyes of working class people throughout the country, but also some room to manoeuvre within the parliamentary process itself.

Whitlam Still Held the Trump Card

The first involved the question of supply. on becoming Prime Minister Fraser organised for the Senate to approve the bill. The Labor Senators could have obstructed this and won valuable time through points of order, etc. If the Lower House could have passed a motion of confidence in Whitlam and presented this to Kerr before Fraser had obtained supply then the whole basis of his appointment as Prime Minister would have collapsed.

Still reeling from shock Labor missed this chance. However all was still by no means lost. The House of Representatives passed a motion of no confidence in Fraser and re-endorsed Whitlam. It made an appointment for the Speaker Scholes to see Kerr and inform him of this.

Before meeting Kerr however, Scholes sent the writs for the supply bill to the Governor General as was the normal practice. There was no need for him to do this. If he had held onto them until after informing Kerr of the vote of no confidence then the Governor General would have been placed under a powerful obligation to reinstate Whitlam as Prime Minister.

Whitlam himself acknowledged this, "With the wisdom of hindsight we can all see that it would have been wiser if Mr. Scholes had taken the Appropriation bills together with the resolution from the House to his appointment with the Governor General...this would have been a legitimate and, even against Sir John Kerr, an effective tactic." (The Truth of the Matter p117)

Despite this mistake, Labor was still in a powerful position. After all Kerr's letter of dismissal was only a piece of paper. The Governor General's action would have had even less authority in the eyes of working people than the Senate's blocking of supply had. With the traditions of democratic rights fought for and won by the Australian Labour Movement over a century and a half, an elected Labor government had no need to fear defying this obscure individual acting in league with the Coalition.

Kerr's next move was predictable. He dissolved parliament announcing the election date of December 13th. But there was absolutely no need for Labor to accept this. Supply had been passed, there was no longer any crisis, Labor had the confidence of the House of Representatives - a stand by the Labor government would have been almost certain of success.

All that was necessary was to stay inside the House, and call on the massed ranks of the Labour Movement to assemble outside demanding the reinstatement of the government.

At this point in time, such an appeal would have brought the nation to a standstill and hundreds of thousands of workers to the steps of Parliament House. The Governor General and the Coalition would have been dealt a humiliating blow.

But at the decisive moment, Whitlam rejected this course. "Mr. Scholes and I discussed maintaining or resuming the sittings of the House. It was in this context that I said to him in those circumstances Sir John would call out the troops. Many people still think it incredible that Sir John could have done that. If, however, a man can interpret the Constitution, where it is silent, in a way which entitled him to perpetuate his actions of that day, how much more certain is it that he would have thought himself entitled to act when, as the Constitution expressly states, 'The command in chief of the naval and military forces of the Commonwealth is vested in the Governor General as the Queen's representative'." (The Truth of the Matter p117/8)

For Kerr to 'call in the troops' and eject Labor MP's from Parliament House by force of arms when these had a majority in the House of Representatives would have been a monumental blunder and would have led only to his own destruction.

In any case, anyone with a knowledge of Kerr's character, as Whitlam had, would have known that the Governor General would never have had the guts to take such a step.

But here, under the pressure of the moment, the absolutely criminal side of Whitlam's obsession with constitutionalism comes to the fore.

Whitlam had no idea of the real nature of the struggle he was engaged in. Whether Kerr was entitled to use Section 64 in the way he did was neither here nor there. It was irrelevant to the outcome of the struggle. The decisive factor was the support that a democratically elected Labor government could command from the working class in the face of this 'constitutional coup d'etat'.

But this support could only become a factor if the Labor government itself did not lend Kerr's actions any authority. This was why the reading out of the writ dissolving parliament was the decisive moment.

Whitlam's Inactivity Legitimised Kerr's Action

Whitlam did not understand that in allowing this to go ahead unchallenged he was legitimising Kerr's sacking of the Labor government. From this point on, the question of the dismissal was no longer an issue as far as the great majority of the population was concerned.

Only one force remained that could have turned the situation around. In spite of Whitlam's capitulation on the afternoon of November 11th, the trade union movement could still have saved the day with an immediate call for a general strike demanding the reinstatement of the government.

In fact spontaneous strikes were already breaking out all over the country as news of the sacking spread, particularly on the waterfront. But Bob Hawke demonstrated the same terror of a real struggle against the dismissal as Whitlam had when he said, "What has happened today could unleash forces in this country the like of which we have never seen. We are on the edge of something quite terrible and therefore it is important that the Australian people should respond to leadership."

It is hard not to find the Labor and ACTU leaderships guilty of cowardice for their failure to act at the decisive moment.

But the problem ran deeper than a lack of personal courage. Throughout their parliamentary careers the Labor leaders had never conducted a real struggle against the class enemy, but instead had spent their lives in the pale and distorted reflection of the class struggle that goes under the name of parliamentary debate, with its own rituals.

But the parliamentary chamber is not the place where the real decisions that determine the fate of society are made. And in the corridors of real power under a capitalist system, the constitutional niceties play only the most minor role.

Fraser and Kerr, acting on behalf of the Australian ruling class, knew precisely the what was at stake in the struggle, and were prepared to do what was necessary to ensure their side came out on top. The Labor leaders on the other hand, and above all Whitlam himself, had absolutely no idea of the character of the struggle they were engaged in.

Kerr's action on November 11th raised this struggle onto a new plane. From that afternoon on, the rules and procedures of the parliament, the established conventions of 'Westminster style' democracy, no longer counted for anything. What was involved from then on was a struggle between living social forces, whose outcome would be determined by the side that understood the nature of the conflict best and which was prepared to act in the most resolute manner.

Why Labor Lost the Election

Whitlam believed his position would be vindicated in the election held on December 13th. But this too was a fatal misjudgment. once Labor had accepted the dissolution of parliament, Kerr's action was no longer an issue that could determine the outcome of the election. Attention returned to the record of the Whitlam Labor government in power. As Graham Freudenberg recalls, "As long as the constitutional crisis lasted, the Labor government had improved its rating massively. As soon as the Governor General delivered his 'verdict', the polls reverted to their pre-crisis levels." (A Certain Grandeur p404)

At the height of the crisis, in a speech made on October 29th, Whitlam explained his view of the stakes in the struggle with the Senate, "It is now clear that behind the present constitutional struggle there is a wider political question the answer to which is central to the way in which Australia's whole political life will develop for the rest of this century and beyond. The question is not just whether this particular government, the Whitlam government, will be allowed to govern for the term it was elected. The question is whether any duly elected reformist government will be allowed to govern in the future. What is at stake is whether the people who seek change and reform are ever again to have any confidence that it can be achieved through the normal parliamentary processes."

But in the light of the events that were to follow, the answer to this question must be - no.

Just as the fate of Whitlam's government was not decided in the parliamentary chamber, and nor are any of the fundamental decisions determining the direction of society taken within that forum, still less will the success or failure of a Labor government committed to carrying out a socialist transformation of Australia be determined 'through the normal parliamentary processes'.

The winning of a majority in a general election can be a powerful weapon in the struggle to transform society along socialist lines, and it is perfectly correct for the ALP to strive for this goal; but only so long as it is understood that the election of a Labor government within the parliamentary system will not be enough to secure the implementation of a socialist program.

Instead it will require a mobilisation of the strength of the organised Labour Movement in order to effectively counter the resistance, which will take place outside the walls of parliament, from the ruling class against any threat to its interests.

The parliamentary sphere, or more accurately the electoral process, forms one part of the terrain on which the class struggle is carried out in society. But it is not the struggle itself. This is the chief lesson to be drawn from the overthrow of the Whitlam Labor government on November 11th 1975.


How a Left Labor government
could carry out a Socialist
Transformation of Society

Over the next decade or so, the inability of a diseased and crisis-ridden capitalist system to solve the problems of society will generate massive support among working class people for a transformation of society along socialist lines as the only way forward.

This in turn will create the possibility of electing a Labor government to power genuinely committed to implementing a socialist program.

From the outset however, it will be necessary for the Labour Movement to draw on the lessons of the experience of the Whitlam Labor government and anticipate the measures, outside the parliamentary arena, that the defenders of the existing capitalist order will resort to in order to prevent such a development taking place.

First of all, it will be necessary to protect the democratic process from any attempt to obstruct an election from going ahead. The Labour Movement will have to give advance notice that it will not tolerate any excuse to postpone or cancel the holding of the election. Should any such any threat emerge, the movement will have to organise to defend every polling booth, and if necessary supervise the printing and distribution of ballot papers itself.

In such a situation, the trade unions and the ALP will have to set up 'Committees for the Defence of Democracy' inside every workplace and working class suburb. These will not only have the task of defending the electoral process from disruption or fraud, but also the prevention of any attempt by conservative forces to create a climate of tension and fear in order to justify cancelling the election by a declaration of emergency or some other anti-democratic measure.

To prevent this, the unions will have to organise inside every workplace to ensure management dismantling plant and machinery, or any other acts of sabotage does not disrupt production. The means of transport and communications, and above all the waterfront, will have to be given special attention by the forces committed to safeguarding the democratic process.

It will also be necessary to organise within every suburb to prevent acts of provocation or terror by sections of the state or the extreme right. The 'Committees for the Defence of Democracy' will have to monitor the movements of the police and the military, and in particular the special units that deal with 'civil disorder', and respond quickly to any riots, looting or acts of arson by dubious elements that may be connected to a conspiracy to stop the election proceeding.

The Labour Movement will also need to break down the barriers separating members of the armed forces from society in general, encouraging political discussion and debate on base over the impasse of society under capitalism and the case for a socialist transformation.

The right of soldiers and sailors to form their own trade unions must be fought for, as well as the right to disobey any order to intervene in an industrial dispute on the side of an employer or suppress the right to demonstrate. Units of the armed forces loyal to the principles of democracy must be identified and prepared to take steps to isolate other units that may be used in an attempt to prevent the election or cancel out its result.

If the Labour Movement acts in a sufficiently decisive and determined manner, then it should be able to ensure the election goes ahead unhindered and a socialist Labor government duly elected.

The same resolution and determination will also have to be shown by the government once it has been elected. Having received the endorsement of the electorate, the Labor government must not allow any other force to override the result of the election, which has clearly given the government a mandate to transform society along socialist lines.

As soon as the votes have been counted and a Labor victory confirmed, the Governor General has an obligation to swear in the new government. It would not be necessary to wait for parliament to convene for the government to begin implementing its program.

Here Whitlam has set the precedent, ruling alone with his deputy Barnard between the 5th and 18th of December 1972 before the Labor Caucus met to elect the new Cabinet. Parliament itself did not convene until February 27th the following year.

The decisions taken by Whitlam and Barnard during their period of two-man rule included the withdrawal of Australian troops from Vietnam and the release of 7 draft resisters from jail, and were made using the executive powers of the Governor General-in-Council covered by Sections 61 to 70 in the Constitution. Under these sections government is carried out by the Executive Council, which consists of Ministers and the Governor General himself.

Once the government has been sworn in, its first act should be to fax the Queen to obtain the immediate appointment of a new, acting Governor General from Labor's ranks. This is necessary because under the Constitution the Governor General has control over the armed forces.

The Governor General of course may refuse to co-operate with the new government and resist his own early retirement. This raises an important point, one of the most vital to come out of the experience of the Whitlam Labor government.

Should any one of the institutions of the state, including the Governor General, breach convention and obstruct in any way the implementation of Labor's program, the government must go ahead regardless, taking whatever means are necessary to remove this obstruction without delay.

The first 24 hours of the new Labor government will be decisive. The 'Committees for the Defence of Democracy' will play a crucial role during this period, identifying and countering any moves by conservative forces to nullify the result of the election. once elected, the new government will be able to work in close co-operation with the Committees and legally sanction their activities.

Under Section 67 of the Constitution the government has the power to appoint and remove 'all other officers of the Executive Government.' Using this clause the Labor government will be able to grant official status to members of the Committees moving to prevent sabotage by employers or suspicious activities by units of the armed forces or bands of fascists.

The government will also be able to disband ASIO, ASIS, the JIO and other departments of the secret services, who on paper are accountable to the Prime Minister, and sanction the actions of the Committees in disarming the police and any disloyal units of the armed forces.

The acting Governor General will be able to order all members of the armed forces to comply with the wishes of the Committees. The staff of the military High Command can also be ordered to present themselves to the Governor General in person to determine their attitude to the new government and their willingness to respect the decision of the electorate.

Under Section 69 the Governor General also has power to transfer to the new government control over "posts, telegraphs and telephones; naval and military defence; lighthouses, lightships, beacons and decoys; and quarantine." Acting together with the 'Committees for the Defence of Democracy', the government can use this to resist any efforts to overthrow it by undemocratic means.

But of equal importance to these steps, whose purpose is to defend the democratic process, will be the immediate implementation of the socialist program of the Labor government.

Program Must Be Implemented Immediately

The 'Committees for the Defence of Democracy' operating inside the workplaces will be authorised to oversee the immediate introduction of a 32 hour working week, a minimum wage of $500 a week for full time workers and $14 an hour minimum for part time, and take full control over production and the management of the enterprise. Within the suburbs, the Committees will have the responsibility of ensuring supplies of essential goods and the maintenance of essential services is not disrupted.

Beyond a local level, the government will have to take control over the Reserve Bank and suspend the A$ from the currency markets. All international financial transactions will have to be frozen for the time being. The Committees can of course supervise the movement of real goods and services on the waterfront and at the airports.

The introduction of these measures will be absolutely decisive in the success of failure of the Labor government. For it will only be through the resolution, on a socialist basis, of the fundamental problems of society that led to the Labor Party's success at the polls, that the government will consolidate its support among ordinary working people.

This is the key lesson from the experience of the Whitlam Labor government. Like Whitlam, a socialist Labor government will meet with the determined resistance of the ruling class, who will resort to any means to bring down the government and defend their material interests. But unlike Whitlam, a socialist Labor government will carry out policies that will overcome the problems of mass unemployment, declining living standards and the run down of public services caused by the inability of capitalism to take society forward.

In this way a socialist Labor government will preserve its political base among the working class and even the middle layers within society and be able to effectively counter the undemocratic manoeuvres of the small minority of the population with a stake in the existing capitalist order.

The election of a Labor government on a socialist program will therefore mark the opening of a new phase in the development of society. Within weeks of taking power, it will be necessary to convene a far more democratic forum to discuss the future direction of society than permitted by the House of Representatives, possibly along the lines of the tax summit organised by the Hawke Labor government in 1975, but on a larger scale.

A crucial role in this forum will be played by the 'Committees for the Defence of Democracy' that have ensured the survival of the Labor government up to this point and who by now have a critical role in the process of production and the distribution of goods and services.

Such a forum will have the responsibility for setting up the precise mechanisms by which the economy will be placed under the democratic control of society. This will involve at a minimum the nationalisation of the top 100 corporations, the banks and financial institutions. Beyond this however, the position of small and medium sized enterprises will have to be debated out.

Abolition of The Senate &The Governor General

Such a forum will also have to determine the constitutional set up of the new socialist order. In a democratic manner, it will have to decide whether its own existence has negated the need for the House of Representatives to meet. It may decide that the Lower House with its Labor majority, which is only required under Sections 5 and 6 of the present Constitution to meet once a year, can act as a rubber stamp for the new, more democratic institutions now established.

For the Senate however, the Governor General and all other such undemocratic bodies, there will be no place. The relationship between the Commonwealth and the States will have to be looked at afresh in the light of the new situation.

In all probability the Constitution itself will have to be replaced. The present Constitution was drawn up to determine the relative powers between the Commonwealth and the States at the time of Federation. This was the reason for an Upper House. It enshrined the role of the Governor General at a time when Australia remained a part of the British Empire as a means to prevent any conflict emerging between the new Federation and Britain.

But all this lost its relevance long ago. The ruling class however, has preserved the Senate and the Governor General as a 'reserve weapon' against an elected Labor government, as Whitlam found to his cost.

A socialist Labor government, elected by a majority of votes in a federal election can not give any credence to these institutions, nor in the final analysis to those sections of the Constitution that serve to preserve the dominant position of the ruling class against the democratically expressed will of the population.

Even under the 'Westminster system' however, precedents exist to justify such a course of action. In 1688 King James II was overthrown by the ruling class in a military coup that installed William of Orange and put into effect a number of important limits on the power of the monarchy. These constitutional changes were later ratified by the 'Convention Parliament' of 1689.

A socialist transformation of society can not take place without the active support and participation of the majority of working class people. It is perfectly in order for the working class to use the democratic rights won through the struggle of the Labour Movement in order to bring to power a Labor government committed to carrying out a socialist program.

But democratic rights and the institutions of the capitalist state under a 'Westminster style democracy' is not the same thing. It was Whitlam's great error to confuse the two. As Whitlam himself was later to comment, after the overthrow of his government,

"Central to everything that happened in October-November 1975 was the unceasing effort by the conservative parties and interests in Australia to deny the legitimacy of my government. That effort began at the beginning, virtually from December 1972." (The Whitlam Government 1972-5 p734/5)

Process Can Work Both Ways

But this process can work both ways. The refusal of the ruling class to recognise the legitimacy of an elected Labor government and its use of undemocratic methods, including a vicious media campaign by the millionaire press, the unprecedented blocking of supply by the Senate, and the (un)'constitutional coup d'etat' of November 11th 1975, can also be matched by the refusal of the working class to recognise the legitimacy of these institutions and instead move decisively to defend democracy, including the right of an elected Labor government to carry out a socialist transformation of society. This is one of the critical lessons of the Whitlam government.

A future socialist Labor government can never allow the same fate to overtake it as overtook the Whitlam Labor government.

It must act in a determined and decisive manner to prevent any attempt by the ruling class to use the institutions of the capitalist state against it from meeting with success. And on coming to power, it must immediately break with capitalism, implement a socialist program to resolve the fundamental problems of society, and in this way maintain its political base within the working class as a sure defence against any manoeuvres on the part of reaction.

Provided a Labor government acts in this way, then a peaceful and relatively painless transformation of society along socialist lines lies well within its reach. This then must be the goal of the Labour Movement.

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