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Curtin & Labor’s full employment promise

Paper presented at From Curtin to Coombs: war and peace in Australia seminar, Curtin University of Technology, 25 March 2003 by Dr Tim Rowse.

Copyright: John Curtin Prime Ministerial Library 2003. JCPML00793/1/2

In this paper, I want to show you how John Curtin intervened in the writing of the White Paper ‘Full Employment in Australia’ that was tabled in the House of Representatives on May 30 1945, a few weeks before the Prime Minister’s death. Curtin had directed that the White Paper be written, after returning on June 26 1944 from the USA and from Britain where the Churchill Government had published the White Paper ‘Employment policy’ during the previous month. Postwar employment policy was a preoccupation of the Allies, reflected in the Murray-Wagner-Thomas Bill introduced to US Congress in January 1945 and in the Canadian paper ‘Employment and income’ in April 1945.

Preference in employment: a defining issue for Labor?

One of the reasons Curtin wanted a White Paper on employment policy was to placate critics of his Re-establishment and employment bill. Parliamentary debate on that bill took up many days in the autumn of 1945, as did the bills reforming the Commonwealth Bank and the banking system. In the months before the Japanese surrender, Labor was laying the legislative foundations of postwar reconstruction. While students of political history are likely to be told something of the banking bills controversy – the prelude to Labor’s unsuccessful attempt to nationalise the private banks in 1947-9 – the Re-establishment and employment bill is less likely to be remembered nowadays. This obscurity is unmerited, for in that bill a basic principle of citizen entitlement was under discussion.

The Labor Government sought to oblige employers to give preference to employing a person who was either an ex-serviceman or woman, or a civilian who had been exposed to enemy fire for seven years after the Act’s proclamation. Opposition members thought that Labor did not go far enough; they argued for the ‘ex-service’ preference to last indefinitely. However, trade unions were disappointed that a Labor Government was not legislating that preference in employment be given to members of trade unions.

The Australian Council of Trade Unions (ACTU) had pushed the Curtin Government since its inception to introduce employment preference for trade unionists. When setting out a framework of cooperation and consultation between the government and the trade union movement in December 1941, the ACTU included ‘universal application of absolute preference for unionists.’ 1 The government, as employer and purchaser, took this up. ‘Beasley’s Ministry of Supply and Development insisted upon 100 per cent membership amongst clothing workers, and Makin’s Ministry of Munitions advised workers that union benefits would accrue only to union members. The Civil Construction Corps recruits were instructed to bring along their “union tickets” when reporting for jobs.’ 2

Because of the huge increase in the Australian labour force (200,000 extra since the beginning of the war) union preference had become ‘crucial’, in the words of the ACTU’s historian, to its ‘obligations to the labour movement and the Labor Government.’ 3 The ACTU’s determination to unionise the vastly expanded workforce was rewarded; the proportion of the workforce who were trade union members increased from 49.3 to 54.2 per cent from 1941 to 1945.

These war-time measures were heartening to the ACTU, but would the Labor Government’s postwar planning continue to promote union preference? Hagan points to the limits of the ACTU’s influence over postwar planning. Chifley, Treasurer and Minister for Postwar Reconstruction, created a forum in which such issues could be discussed. At his request, the ACTU set up a Standing Committee of the Executive Committee and Vice-Presidents to consult with the Department of Postwar Reconstruction. However, these discussions were advisory only, and they dealt with those areas already determined by Chifley and his specialist advisers.’ 4

The preference issue first arose in parliament in 1943, in debate over the Australian Soldiers’ Repatriation Act. The Senate amended the government’s bill so that servicemen who had served outside Australia or in combat zones would be preferred as the employees of the Commonwealth. In the House of Representatives, Labor reluctantly accepted this new provision. Two years later, when it introduced the Re-establishment and employment bill, the Curtin Government was committed to generalising ex-service preference to all employers, albeit with a seven year sunset clause. According to Hagan ‘throughout the whole of the war period, the ACTU urged the Government to use its powers to introduce absolute preference for unionists and to reject any preference for ex-service personnel.’ 5 The provisions of the Re-establishment and employment bill demonstrated the limits of the ACTU’s influence over the Curtin Cabinet.

I can think of three reasons why the Labor Government became committed to ex-service preference, braving the discontent of the trade unions:

First, the government incurred a debt to service men and women when Curtin persuaded the Labor Party, in January 1943, that conscripts could be placed in overseas combat duty. This overturned the deeply-held anti-conscription convictions of a whole generation of the Labour Movement.

Second, any government (Labor or Liberal) had reason to fear the social disruption that a badly managed demobilisation could bring. Such disruption, immediately after the First World War, was in the memory of every Member of Parliament. 6 The scale of the 1940s demobilisation made it one of the largest projects ever undertaken by an Australian Government. If we include not only service personnel, but all those in war industries, then about 600,000 persons (one fifth of the labour supply) were due to be re-absorbed into other than war-time occupations.

Third, Labor thought that they could address trade union unhappiness by promising that in a full employment economy the intended preference clause would not disadvantage anyone.

This brings me to one of the main arguments of this paper: the immediate political utility of the White Paper ‘Full Employment in Australia’ was that it neutralised the Labor Government’s differences with the ACTU on the preference issue.

We can see the ameliorative potential of the White Paper in the words of the Labor member for Lilley, Mr. Hadley, when he spoke in favour of the Re-establishment and employment bill in the House of Representatives on 18 May 1945:

I take second place to no man in recognising my responsibility to do my best to ensure that our obligations to the members of the forces shall be met to the fullest degree possible. We also have responsibilities to the civilian population. The best way in which to meet our obligations to both sections of the community is by ensuring that there shall be jobs for everyone capable of and willing to work, for then the question of preference will not arise. It is the policy of this Government and of every member of the Labor party to do all possible to ensure work in plenty. 7

A few minutes later, he gave an instance where ‘preference’ could be divisive:

There may be three sons to a family; the youngest is too young to go to the war, the second son is engaged in essential industry, and the oldest son goes to the war. When the war is over and he comes back, he may have to compete for employment with his younger brother – or the civilian brothers of some of his mates who fought on the battle-front. In that way, brother will be set against brother.

He was then challenged by Archie Cameron: ‘The honourable member is advocating preference to those who did not fight.’ Hadley replied: ‘No. My contention is that to live up to its obligations, a Government must ensure that every member of the community shall have the right to work.’ 8

Curtin in the drafting process

The White Paper went through eight drafts over about a year, starting in the Department of Postwar Reconstruction, of which Dr.H C Coombs was Director-General. From a discussion lasting from May to November 1944, wholly within this Department, emerged a draft by economists Jim Nimmo and Gerald Firth (Draft A) on December 14 1944. Coombs’ revisions of A gave rise to Draft B, which circulated within the Department in January 1945. 9 In that month, further revisions by Firth and Nimmo produced Draft C. Draft C was the first version to be discussed outside the small group of officials working under Coombs; it appears to have gone out to senior officials in other Departments in late February 1945.

Coombs and his colleagues responded rapidly to comment on Draft C, splitting it into a technical paper and a political manifesto. The former, with its tables of statistical projections about the immediate post-war years, would be published separately; the political manifesto, now known as draft D, expounded the principles, machinery and benefits of full employment in the long term. Draft D was completed on March 15 1945, and went before Cabinet on March 20. 10 According to L F Crisp, one of Coombs’ officers, the political need for a White Paper was now urgent. On March 23, the second reading of the Re-establishment and Re-employment bill would begin. ‘[T]he Government wanted its faith in full employment policies formally and officially proclaimed to sweeten the atmosphere for the Reestablishment and Employment Bill (with its sticky preference clauses) and for its banking Bills.’ 11

One particular copy of Draft D, available in the National Archives of Australia, is of great interest. 12 Its title page is inscribed: ‘Copy used by D-G [Coombs] at Expert Committee (meeting 4 April 1945) carrying PM’s comments and amendments to “D”‘. Selwyn Cornish has quoted Coombs writing on 17 March, anticipating a Cabinet meeting on 20 March, that he was particularly keen to have Curtin’s comments on the passages to do with machinery of government. 13 Coombs had worked with Chifley (his Minister for Postwar Reconstruction from January 1943 to January 1945) much more than with Curtin, so it is worth pausing to hear what Coombs recalled in 1994 about the relationship between the two men’s views. ‘[T]here was no significant difference between Curtin and Chifley. They worked together all the way through and I think if there had been any differences, Chifley would have given way…Curtin relied very much on Chifley’s economic and financial knowledge and was guided by him, but there was no uncertainty as to where the final yes or no lay and that was with Curtin.’ 14 Curtin probably wrote his comments on Draft D in the few days between 15 and 20 March.

Curtin’s annotations on Draft D can be divided into the stylistic and the substantive. I will not say much about the stylistic other than to recall that Curtin had been a professional journalist and so could be expected to take an interest in details of expression. I have itemised these stylistic suggestions in an Appendix. Curtin’s substantive changes and deletions can be analysed under the following headings:

1. Machinery of government
2. Avoiding specific targets
3. Avoiding unequivocal rankings of principles or objectives
4. Avoiding clear exclusion of certain macro-economic policy options
5. Avoiding things smacking of ‘unsound finance’
6. Reforming wage-setting 15

1. Machinery of government

It is a clear prime ministerial comment on the ambitions that Coombs held for his own Department as a future agency of economic policy coordination that Curtin wanted paragraphs 194 and 195 deleted:

The Commonwealth Government intends to develop a Central Planning Office. This body will supplement, and in no way cut across, the functions of existing Departments, with which it will work in close collaboration. Its functions grow naturally out of the work of the Department of War Organisation of Industry and that now being carried out by the Ministry of Post-War Reconstruction. (D, par 194)

The essence of the employment policy outlined in this paper is the maintenance of sufficient investment expenditure of the right kind and in the right places. It is accordingly proposed that a National Investment Board should be linked with the Central Planning Office, with the function of reviewing material prepared by that Office and recommending appropriate level and balance of investment from time to time. This Board will include representatives of the Departments and agencies most closely concerned with the planning and finance of public and private investment. In the first instance, it will be presided over by the Minister for Post-War Reconstruction. (D, par 195)

The published draft merely asserted (all quotations from the published White Paper will be in italics) that it has become an urgent matter of government organisation to make better provision, both for general inter-departmental collaboration in the development of policy affecting more than one Department, and for the examination of major questions of policy from the standpoint of Cabinet as a whole. (par 26)

Curtin was also sensitive to the White Paper’s representations of federal relations. He directed that the drafters delete the following sentence. The Commonwealth Government is convinced that within the framework of the Australian Federal system ways and means for the effective discharge of this responsibility [maintaining full employment] can be found, and that the people of Australia will not tolerate any constitutional or other obstacles which might stand in the way of a successful policy of full employment. (D par 3) Curtin was here reacting against his officials’ tendency to set aside, as a minor and temporary setback, the voters’ ‘No’ vote in the 1944 Powers referendum (in which the Commonwealth had sought to gain powers hitherto exercised by the States, under 14 headings, for five years after the declaration of the peace.) In the opening paragraph of the White Paper, we find the sentence: Because the Referendum was not carried, the co-operation of State Governments and local authorities will be particularly necessary. (par 1)

As well, Curtin asked for ‘elaboration’ of a paragraph that stated the need to plan Commonwealth and State public investment through a National Works Council. The published White Paper refers to the National Works Council as an existing forum for consultation between Commonwealth and States over public capital expenditure (pars 45, 99, 114) and it makes respectful reference to the role of the States and to the need for Commonwealth/State consultation in pars 1, 24, 99, 100, 116, 117, 129, 130. It is in this spirit of assuring the public that he had heard the message of the 1944 referendum that Curtin asked for a sentence to be added to paragraph 130 on the gradual withdrawal of subsidies that were instruments of price control: Policy in this vital matter may devolve upon the States at some period before the transition has been completed.

2. Avoiding specific targets

Curtin did not want the White Paper to define ‘full employment’ as a maximum rate of unemployment. He directed that the drafters delete the following words:

As compared with 10% immediately before the war and an average of 14% for the twenty years between the wars, a recorded rate of unemployment of 4% might be expected once the economy has settled down after the transition. Such a measure of unemployment would be consistent with a state of affairs in which everyone genuinely seeking work would be able to find a job within a comparatively short time. (D, par 6)

The White Paper did not define ‘full employment’ as a percentage of the workforce ‘unemployed’. However, in paragraph 26, it anticipated that there will be a tendency towards a shortage of men instead of a shortage of jobs. One senior public service economist, Deputy Director General of the Department of War Organisation of Industry Ronald Walker was then forecasting that unemployment was unlikely ever to fall as low as 4 per cent. 16

3. Avoiding unequivocal rankings of principles or objectives

It seems that Curtin was wary of some of his officials’ ringing declarations of policy principle. For example, paragraph 45 of Draft D pointed to the strategic importance of public investment, asserting: …chief reliance against any threat to full employment (and particularly a sudden threat) must be placed on an increase in public investment at least sufficient to maintain total spending at the full employment level, and so provide a breathing space during which action can be taken, if necessary, to step up other types of spending. Curtin directed that the drafters delete the sentence that followed: This is the over riding principle of the government’s public spending policy.

Under the heading ‘Other problems of the transition (1) the balance of payments’ in paragraph 117, the drafters again caught Curtin’s cautious eye. He directed them to delete: It is therefore clear that deliberate control of spending on imports will be inevitable in the transition. No domestic economic policy, other than one which involved widespread unemployment and loss of income, could avoid the necessity for this control in the early post-war years. The Government does not consider a policy of deliberate deflation to be worthy of serious consideration. Curtin seems to have wanted to avoid a clear ranking of government objectives – such that ‘deliberate deflation’ was ruled out and an open-ended tolerance for import controls was ruled in. However, the White Paper did say that the deflationary method [of dealing with a deficit in the balance of payments] is inconsistent with a full employment policy, and serves the interests neither of the people of Australia nor of the people of the countries with which Australia trades. The Government will not countenance this method in future. (par 90) And the paragraph that followed entertained the possibility of ‘quantitative restriction of imports’ (par 91). It would seem that Curtin’s caution on this point did not survive the next month of drafting.

4. Avoiding exclusion of certain macro-economic policy options

Curtin wanted the drafters to delete paragraph 121. It said that Monetary policy will conform to the requirements of the investment programme selected for the transition period. Interest rates will be kept to a minimum, though radical changes from present comparatively low levels will be neither necessary nor desirable. I interpret his deletion as signalling Curtin’s dislike, not of low interest rates, but of seeming to rule out certain options (such as increases in interest rates) within macro-economic policy. In the event, the White Paper committed the Labor Government to continuing its current policy of low interest rates (par 39).

Curtin was sensitive about the draft’s discussion of exchange rate policy. He struck out the following .

Alteration of the exchange rate is one conceivable method of restoring the balance [of payments]. Although at one time widely canvassed, the exchange rate regarded as an instrument of short-term policy suffers from disadvantages similar to those of ‘flexible’ taxation. A change in the rate should only be contemplated in response to long-term factors, such as a permanent change in the terms on which we exchange our exports for the imports we need. Membership of the International Monetary Fund would also impose strict conditions for any change in the rate. (D, par 179)

The White Paper made almost no mention of the International Monetary Fund – a policy issue that called for the utmost tact on the part of Curtin’s successor Chifley in 1946 and 1947. On the one hand, there was a strong current of hostility within Labor to any compromise of Australia’s sovereignty in economic policy. On the other hand, postwar international agreements on currency, trade and employment – in whose development Australia was taking an active interest – were probably going to bind Australia in some ways. It was to Australia’s diplomatic advantage to appear to be willing to abide by international regulation of exchange rate alterations. While not mentioning the IMF, the White Paper entertained the possibility of altering the exchange rate if the deficit in the balance of payments is primarily due to a permanent decline in oversea demand for Australian products, and if it is not possible to restore export income by shifts of productive resources to meet changes in world demands…(D, par 91)

5. Avoiding ‘unsound’ public sector finance

At one point, Curtin wrote ‘reduce emphasis’ in the margin. The point requiring less emphasis was the Commonwealth Bank’s influence over private investment:

Banking and financial policy may play an important part, and in particular [Curtin directed that drafters delete ‘in particular’] it is hoped that the special department which the Government is now setting up within the Commonwealth Bank to provide finance for small and growing industries will make a vital [Curtin directed that drafters substitute ‘modest’ for ‘vital’] contribution to the stability of investment and to its encouragement in directions which will add significantly to our industrial development. The Government also proposes to co-operate with private enterprise in the exchange of information and in the provision of advice and research, so as to ensure the firmest and most satisfactory basis for the plans both of the Government and of private enterprise. (D, par 40)

The White Paper does not seem to me to give this point any less emphasis than the draft to which Curtin objected. 17

Sometimes the drafters must have seemed to Curtin to be begging for political trouble, in the looseness of their drafting. He directed that paragraph 46 be deleted in full:

Public investment will be met from internal borrowings, in the course of which the Commonwealth Bank will be relied on to the greatest practical extent. Precisely to what extent the Commonwealth Bank can safely be used cannot be forecast in advance, but will depend on the economic and financial circumstances of the time at home and abroad. (D, par 46)

As Schedvin explains, the previous Labor Government of James Scullin (1929-32) had angered the custodians of Australian finance with what they saw as a lax approach to government deficits. In 1931, the Commonwealth Bank

“on behalf of the [banking] system as a whole, placed a limit on the amount of deficit finance, insisting that governments adopt a collective plan to achieve budget balance within a defined period. Within the Labor government this was seen as an attack on democratic principles, and in particular on the right of an elected government to determine its own budgetary policy. The Bank won this contest: the mildly expansionary programme proposed by the government could not be financed, and governments adopted a moderately deflationary package leading to balanced budgets over a three-year period. The bitterness caused by this episode was deep and abiding. The mistrust of the banks within the labour movement was intensified, and banking reform moved to the top of the Labor Party’s agenda. The more radical members of the party believed passionately that the banks had been largely responsible for the depression….for many years after World War II central banking was conducted in the long shadow of 1931.” 18

The White Paper’s words for this sensitive issue were that Financing by the Commonwealth Bank can be used to advantage up to the limit of available men and resources, but if carried beyond this point it would gravely threaten the real incomes of workers and low income groups and would result in conditions so unstable that full employment could not be maintained. (par 84) Labor’s prudential respect for established canons of ‘sound finance’ could be expressed as a concern to defend workers’ and others’ incomes from the ravages of inflation.

Curtin was happy with paragraph 48 on the need for taxes to cover government expenditure without adding ‘interest-bearing debt’. The Draft said: Loan moneys will normally be expended on capital goods, developmental works, and other projects (such as training and research) which add to Australia’s capacity for the production of goods and services. Curtin let that stand, but he wanted the following sentence deleted: However, should the maintenance of full employment for any reason require it, the Government will not hesitate to depart from this principle in favour of the over-riding principle that public investment must be at least sufficient to maintain total spending at the full employment level. Curtin possibly thought that this statement courted reaction from those who thought that the ‘overriding principle’ of public finance was the need to be able to cover repayment from current revenue. The White Paper promised that there will be no place in this full employment policy for schemes designed to make work for work’s sake (par 6). It declared taxation to be the main source of revenue, urging the government to publicise the purposes of public expenditure and to extract tax equitably. The yield from taxation, under conditions of full employment, would cover at least all public expenditure on current items, including the maintenance of existing assets. It should also make some contribution towards public capital expenditure (par 83). In short, the White Paper left open the possibility that governments would borrow from the public or from the central bank (see par 81) to cover expenditures not covered by tax revenue.

6. Reform of wage-setting

Among economists planning full employment policy – and this is true even of Keynes himself – there remained one large unanswered question: how would organised labour behave when there was a shortage of men rather than of jobs? Curtin’s greatest differences of opinion with the officials who created Draft D were about how to project the future discipline of labour.

L F Giblin, chair of the Financial and Economic Committee, had raised this issue as early as 1942, telling Treasurer Chifley that ‘It would no doubt be possible to keep everyone employed after the war, but only (a) by adoption of a fully planned peace economy, which would take time to build up just as the war economy has taken time; (b) by controls fully up to war standards and particularly by a control and direction of labour, which, in the absence of war conditions, would have to be much more severe than at present. It does not seem to me that these implications of maintaining everyone in employment are generally recognized.’ Chifley had replied: ‘I am glad to have your views because this problem of “Full Employment” is, I know, full of snags.’ 19

One way to turn the White Paper into an appeal to workers to maintain their war-time self-discipline was to dwell on the risk of inflation. Against paragraph 147, Curtin wrote in the margin: ‘Expand section on price changes’. That paragraph said:

“In the transition period, workers will seek higher wages and generally will be in a stronger position to bargain for them. If they are to get fair treatment, and yet at the same time an upward spiral of wages and prices is to be avoided, careful thought must be given to wages policy”.(D, par 147)

The White Paper declared that price control will be essential in the transition period (par 101). Under the heading ‘Controls in the transition’, the White Paper also discussed plans to ensure the mobility of labour. However, the White Paper said nothing about transitional controls over the levels of wages.

Generally, Curtin seems to have judged that the less said about long term wages policy the better. This is consistent with my argument that one of the political purposes of the White Paper was to ameliorate trade union discontent about the preference issue. Why stir them up by canvassing new ideas about wages policy?

Curtin’s deletions go to the heart of Labor’s approach to reforming capitalism. The officials had drafted paragraph 148 about the purposes for which ‘increased wage rates may reasonably be sought in conditions of maximum production’. Curtin deleted (c) to increase the proportionate share of the national output which is received by wage earners, in accordance with the community’s ideas of social justice. The White Paper has nothing to say about the principles that might underpin Labor’s approach to workers’ share in the nation’s wealth. Rather it links wages rises to productivity.

” A sense of responsibility of the trade union movement to the community is more likely to be fully developed if unions generally are satisfied that the system of wage fixation is such as to pass on to workers a fair share of increased output flowing from the growing productivity of labour as technical processes improve, and our resources are further developed. It should be possible to have a periodical review of the standard of consumption which the basic wage is to represent – a review designed expressly to ensure that the normal upward trend of real output available per head is duly reflected in the level of real wages. The main factor affecting this trend will be progressive technical improvements increasing the productivity of labour” (par 77).

Against paragraph 151 – concerned with workers sharing in fruits of increased productivity – he wrote in the margin cost of living adjustments to continue. He also wrote two marginal points next to this paragraph. One said: publication of National Incomes figures in popular forms. Curtin seems to have shared in the view expressed by Coombs, among others, that if workers were given a factual statistical account of ‘the economy’ they would be more likely to listen in sympathy to what economists were telling them about the limits on wage rises. The other marginal note said: necessity for willingness to change jobs – unions to interest members in volume of employment in their trades. Again, the worker is assumed to be a rational actor open to influence through statistical accounts of the labour market.

There were three paragraphs in Draft D on which Curtin wished to hear the views of his colleagues. He wrote ‘Cabinet to decide’ next to paragraphs 152-4. I will first deal with paragraphs 153 and 154.

” The third reason advanced for increased wages is to give workers a proportionately larger share of the national output. It is not certain that a redistribution of income can be achieved by promoting a general rise in wages in excess of the expansion of output per head, because increases in money wages are usually passed on to consumers in higher prices so that wage-earners may on balance be no better off. (D, par 153)

The Government believes, therefore, that more effective progress towards an equitable distribution of goods and services is likely to come from a steady development of social services financed by progressive taxation. Included in social services are not only money payments but also the development of a range of community services provided by Commonwealth, State, local and other public authorities including education, medical and health services, and community facilities such as kindergartens, centres for cultural and leisure activities.” (D, par 154)

As I have shown above, Curtin had already deleted a paragraph on the possible redistribution of the national product, through wage rises, to workers. Paragraph 153 was setting out why rises in money wages might not be an effective way to improve the material living standards of the working class. Paragraph 154 proposed a solution: the social wage. This is the way forward that the White Paper eventually proposed (par 79).

Increased wages are not the only means by which workers receive a larger share of the national output. In Australia, a significant contribution to living standards has been made in the past, and will continue to be made, by a high level of social services. Some of these are in the form of direct money payments, such as invalid and old-age pensions, child endowment and widows’ pensions. Others are services provided directly by governments and public authorities, including education, health and medical services, kindergartens and libraries.

When we look at what happened to paragraph 152 – comparing Draft D with the published paper – we might conclude: not much.

” The Government proposes to set up a special committee to report upon possible changes in the principles and machinery for making general wage adjustments. The Committee will include a judge of the Commonwealth Arbitration Court, senior officials with appropriate experience, and representatives of the Trade Unions and Employer’s Associations. It will report directly to the Prime Minister.” (D, par 152)

The White Paper said (par 78): The Government is considering the setting up of a special committee on which employers and employees will be represented to report on possible changes in the principles and machinery for making general adjustments in wages and industrial conditions.

However, this short reference to a possible committee was all that was left of a much more difficult problem that the Postwar Reconstruction officials had wanted the White Paper to raise. 20 When their Draft B had turned to the question of labour’s efficiency under full employment conditions, Coombs’ and his colleagues had consciously challenged Labour Movement thinking by canvassing ‘methods of payment based upon individual output.’

The Labour Movement in the past has generally been opposed to the development of such ‘piece-work’ systems of payment. The Government shares the fears of employees that such systems are capable of being used to undermine established standards and to develop an intensity of work which can impair the long-term health and efficiency of the individual. At the same time the Government is conscious that recent developments overseas suggest the possibility that where a strong trade union movement exists to protect the interests of the worker and modern methods of wage fixing are employed that it is possible to raise the general level of production and the wages and standards of living of the employees themselves. Before accepting such developments, however, the closest investigation is necessary to ensure that the long-term interests of the employed are not impaired. (Draft B, pars 198,199)” 21

Draft D had canvassed similar possibilities in paragraph 171. Curtin intervened in two ways. He wanted the phrase ‘by employers’ to be deleted from: It is frequently contended by employers that, at least in the short period, individual efficiency can be increased by wage payments based upon individual output. He also placed question marks beside the following sentences:

” The Labour Movement has been generally opposed to the development of piece-work systems. The Government shares the opposition of employees to systems which are capable of being used to undermine established standards and to develop an intensity of work which can impair the long-term health and efficiency of the individual. At the same time there have been developments in recent years in other countries, such as, for instance, systems of payment based on the output of a team of workers, which may be worthy of closer investigation.” (D, par 171)

The following paragraph Curtin wanted entirely deleted:

” The Government believes the whole field of labour relations and working conditions is of profound importance to both the future efficiency of labour and the welfare of workers, and that every effort must be made to keep Australian ideas and practices abreast of the most progressive thought in these fields. It proposes, therefore, to send overseas a special delegation which will include an Arbitration Court Judge, experts in industrial welfare and representatives of Trade Unions and of Employers to report upon working conditions, labour participation in management, employer-employee relations generally, development of new incentives to efficiency and any other industrial matters affecting the standard of living, health and long-term efficiency of the employee.” (D, par 172)

Instead of canvassing piece work or other new ways to determine wages, the White Paper’s considerations on labour’s efficiency should, in Curtin’s view, focus on what the government would do to make the labour market more fluid, to pre-empt shortages of labour in certain occupations, industries and regions. Thus he wrote Department of Labour and National Service to be continued after the war in the margin next to the following paragraph:

” The Government recognises that it will take time to build up in the minds of employers and employees a mutual understanding of their rights and responsibilities. Both must recognise that their individual and group interests must be subordinated to the welfare of the community as a whole; both will need to realise, particularly during the transition period, that there are likely to be many more sources of friction in the war’s aftermath of fatigue and irritation; both will need to exercise patience and tolerance if the difficult problems of industrial relations are to be solved.” (D, par 173)

In the White Paper, under the heading ‘Mobility of Resources’, paragraphs 55-62 outlined public policy (the Commonwealth Employment Service in the Department of Labour and National Service) designed to ensure the occupational and residential mobility of labour.

Labor without an incomes policy

Curtin was sensitive to the problem of making specific commitments. He rejected a quantitative definition of unemployment, and nor would he commit his government to embracing import controls and rejecting deflation, as ways to deal with balance of payments problems. It did not suit him to appear to promise low interest rates and low taxes. Curtin did not welcome the D draft’s recommended changes in the machinery of Commonwealth economic policy coordination. He wrote ‘no’ beside the paragraph foreshadowing the Central Planning Office and the National Investment Board. He crossed out a sentence implying Labor’s intolerance of constitutional or other obstacles which might stand in the way of a successful policy of full employment and he suggested that price control be devolved to the States. When the draft acknowledged that Australia’s economic policy options would one day be constrained by membership of the International Monetary Fund, Curtin again wrote ‘no’.

Curtin was careful about the draft’s thoughts on public finance. He did not want his government to say that maintaining full employment was the over-riding principle of the government’s public spending policy. Nor did he agree that the pursuit of full employment would sometimes justify government borrowing for expenditure on other than capital projects. He did not like the paragraph that acknowledged uncertainty about the extent to which the Commonwealth Bank would fund public works.

When it came to his government’s relationships with the Labour Movement, Curtin preferred to let Cabinet decide two of the issues raised in the draft – whether wealth should be redistributed through enhanced social security and services to the public or through a more aggressively pro-Union approach to wage fixing, and whether there needed to be a special study to decide the future criteria of wage fixing. However, he wrote ‘no’ beside the draft’s proposal to study overseas experiments in work discipline.

A formative moment in Australian social democracy?

According to Butlin and Schedvin, when the White Paper was tabled at the end of May 1945, ‘Few were satisfied with the result…the economists regarded it as a pallid representation of their views.’ 22 I suggest that one reason for their dissatisfaction was that they thought that the government of labour under full employment required an incomes policy; the White Paper -aimed at placating the union movement over the employment preference issue – did not include one. Ronald Walker (Deputy Director General of the Department of War Organisation of Industry) forecast that ‘There was every prospect of the most urgent of all post-war problems being that of industrial unrest…It was to be expected that organized labour would seek post-war “concessions” in the form of higher wages and reduced working hours…the supreme problem of post-war reconstruction would lie in the field of industrial relations, with the opposing parties each attempting to use the Government to their own ends. Of all post-war problems this was perhaps the least susceptible to war-time investigation and planning.’ 23

Walker qualified that forecast with another – that unemployment was unlikely to fall as low as 4 per cent and that ‘fear of unemployment will not completely disappear if the average rate falls to 8 or even 6 per cent. Moreover, although the loss of one’s job may be less of a catastrophe in a period of relatively high employment than when there are many unemployed, there remains the risk of having to accept a less attractive position.’ 24

The White Paper might have ducked the hard issues of labour discipline and labour reward under full employment, but the Chifley Government, from 1945 until its defeat in December 1949, made a series of attempts to rise to the political challenge of full employment. A 1943 paper by Michal Kalecki spelt out the political shift that a full employment society implied. The new framework for governing capitalism ‘will reflect the increased power of the working class.’ 25 That is, once the capitalist class lost unemployment as a discipline over labour, the representatives of labour could suggest the quid pro quo of labour self-discipline. A new, sustainable social contract would have to respect the interests of organised labour.

We can interpret some of the initiatives of the Chifley Government as efforts to build this new framework, that is, as the beginnings of an ‘incomes policy’ that would offer some security to the working class. At the September 1946 election, Chifley asked voters to grant the Commonwealth powers over the terms and conditions of employment. The referendum lost. Also lost was a constitutional amendment that would have given the Commonwealth powers to smooth fluctuations in the incomes of primary producers. On the third constitutional issue of 1947, Chifley won the Commonwealth powers with respect to ‘the provision of maternity allowances, widows’ pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services…, benefits to students and family allowances.’ 26 In May 1948, the Commonwealth asked the electors to grant it power over rents and prices – enabling Commonwealth government influence over the purchasing power of wages. This referendum failed.

The Commonwealth acquired some lesser powers to influence workers’ standard of living: the Commonwealth-State Housing Agreement of 1946, the Pharmaceutical Benefits Act of June 1947, and the National Health Services Act of 1948 – as well as the power won in 1946 to legislate social welfare payments. However, without the constitutional power to legislate terms and conditions of employment as part of a coordinated economic policy, the Commonwealth had no choice but to continue to accept the Arbitration Commissioners’ judgment as to what wage levels would ensure industrial peace. In amending the Conciliation and Arbitration Act in 1947, the Chifley Government provided for an economists’ bureau to be set up to advise the Commission’s wage-setting judgments. However, this bureau was never established.

Without constitutional power over rents, prices and primary producer income flows, the Commonwealth could not bring the incomes of property owners and capitalists within an overall incomes policy. Labor was stuck with the Arbitration Court as its imperfect instrument of a wages policy. Some of the officials who prepared the White Paper in 1944-5 hoped that the working class would embrace new ways to determine wage levels. On the one hand, they wanted Labor to enunciate a wages policy that included the possibility of redistributing wealth from capital to labour. Curtin and his colleagues preferred a wages policy that restricted wage rises to productivity and cost of living adjustments. On the other hand, the officials wanted Labor to explore piece rates. On this point Labor heard them – after the war.

In 1947 Chifley convened a tripartite ‘Better Industrial Relations’ conference. The ACTU representatives agreed, without enthusiasm, to investigate incentive payment systems. However at the 1947 ACTU Congress the Sheetmetal Workers Union won support for their motion ’emphatically’ rejecting incentive payments ‘because the bitter experience of the trade union movement has proved such methods result in an intensification of labor and the weakening and disruption of the trade union movement.’ The Federal Parliamentary Labor Party and the party’s Federal Executive requested nonetheless that the ACTU’s Full Executive survey incentives in affiliated unions. So the issue was debated again at the 1949 ACTU Congress, and again incentive payments were dismissed. 27

If we see ‘full employment’ as the threshold of a very significant change in the class relations of liberal capitalist society, then the persistence of constitutional and political obstructions to a national incomes policy was a more important defeat for the Chifley Government than Labor’s failure to nationalise the banks 1947-9. Without bedding down an incomes policy in the transition to peace (and with 23 years of Coalition rule in the Long Boom) Australian trade unions continued to do what they knew best: pursuing money wages by applying their bargaining power where they had any. I believe that this thwarted the development of a corporatist style of social democracy, in which wages and other components of the material well-being of the working class could be negotiated within an all-embracing political framework. Only at the very end of the Whitlam Government did a Labor Government and the ACTU start to negotiate such a framework: their substantial agreement over what to ask of the April 1975 National Wages case.

In a December 1975 retrospective on the Whitlam Government, John Edwards made a remark that takes us back to the drafting of the White Paper in 1945 and in particular to John Curtin’s cautious refusal to raise and to decide a basic issue of social democratic strategy. Edwards wrote that in 1972 Labor

” arrived in office with an unresolved, almost unrecognised, conflict over the means by which it would promote equality. From the earliest days of his parliamentary career, Whitlam was a proponent of the ‘services’ approach to promoting equality. He wished to see a huge expansion of the services Governments provided their citizens, and to make those services available to all who needed them. Other Ministers, particularly those (like Clyde Cameron) with trade-union backgrounds, did not express any opposition to the services approach but were more interested in changing income shares within the community.” 28

In Edwards’ view this issue remained undebated and therefore unresolved when the Whitlam Government fell. In this respect, we can say that the Whitlam Government carried the legacy of the Curtin Government’s limited objectives for its 1945 White Paper.

Appendix: John Curtin’s Stylistic Amendments to Draft D of ‘Full Employment in Australia’:

* from par 1 delete ‘wanted to’ [work], and substitute ‘desired’ [work]

* par 21 substitute ‘public’ for ‘communal’ [consumption]

* par 22 delete ‘strategic’ from the phrase ‘the principal strategic factors’

* from par 21 deleted the words ’employment and therefore’ from the sentence ‘If employment and therefore incomes are stable, a high degree of stability in personal consumption can be expected.’

* recast par 23 which read: ‘If full employment is to be maintained, public policy must ensure that the total of investment (public and private) will be large enough to make up the deficiency in spending below the maximum production which remains after allowing for a given total of consumption (personal and communal) and net spending from overseas. If this “gap” is not bridged by investment, there will not be enough total spending to provide a market for all the goods and services which will be produced in conditions of full employment, and therefore employment and production will fall.’

* into par 24 insert ‘the value of’ to phrase ‘while the total fall in [the value of] production’…

* in par 31 substitute ‘long run’ for ‘deep-seated’ [tendency] for private spending persistently [delete ‘persistently’] to fall short of the amount necessary to ensure maximum production, so giving rise to a chronic state of [delete chronic state of] under-employment…’

* par 35 substitute ‘promote’ for ‘ensure’ [gradually rising standards of consumption]

* par 39 delete ‘The Government’s view is that’ [the best hope of a reasonable degree of stability…]

* par 53 The basic feature of full employment policy will be the planning and implementation of [delete last 5 words] a general Australian programme of rising living standards, etc…

* delete from par 57 a superfluous ‘some’ [additional resources]

* from par 119 delete a superfluous sentence about the need to reduce taxation as soon as possible, after transition period. The amended par would still make this point.

* par 155 instead of ‘output per man-hour’ he preferred ‘daily output’

* Threats to full employment’ (pars 26-32)

Curtin wanted these paragraphs’ references to the ‘transition’ to be deleted. He was not against making any distinction between problems of transition and longer term problems as he made no corrections to later passages where they were clearly differentiated. However, in this part of the paper, the PM did not want the paper to distinguish problems (matching the profile of labour demand and labour supply) arising in the transition period, ‘the immediate post-war years’, from the future in general. With the deletion of references to the transition, the theme of these pars would be the long term threat of reduced demand for labour.

* In par 42, Curtin called for more emphasis. That is, he wanted a ‘special paragraph’ to be devoted to the draft words:

‘to examine measures to stabilise [substitute ‘for greater stability of’] the incomes, and hence the expenditure, of Australian export producers, so as to offset the effect of short-term fluctuations in the demand for Australian exports.’

wanted reduction length of pars 158-62 on research finance for innovative industrial projects, encouragement (within limits) of structural change – caution in offering support to declining industries.


1. J.Hagan The history of the ACTU Melbourne: Longman Cheshire 1981, p.180

2. Hagan ibid.p.182

3. Hagan ibid p.182

4. Hagan ibid p.187

5. Hagan ibid p.187

6. S.Macintyre The succeeding age: 1901-1942 Melbourne: Oxford University Press 1986, pp.185-7

7. CPD 18 May 1945 pp.1891

8. CPD 18 May 1945 pp.1893-4

9. For my account of discussions of Draft B among officers of the Department of Postwar Reconstruction see T.Rowse ‘Full employment and the discipline of labour’ The Drawing Board 1(1) July 2000, 1-13

10. S. Cornish Full employment in Australia : the genesis of a white paper Canberra: Dept. of Economic History, Faculty of Economics, Australian National University, 1981, p.105

11. L.F.Crisp ‘Policy coordination – the case of the 1945 White Paper’ unpublished typescript in Box V of Papers of L.F.Crisp, National Library of Australia MS5243

12. This copy of Draft D can be found in the file CRS A9816/5 item 45/639 National Archives of Australia (ACT).

13. Cornish op.cit p.112

14. From Samantha Wells’ transcript of conversation between H.C.Coombs, D.B.Rose, D. Lea and D. Lawrence at the North Australia Research Unit 29 April 1994, author’s files

15. On some small points, Curtin had no impact at all. His wish for par 163 was to delete the sentence: ‘The responsibility of management for taking the lead in improving employer-employee relations is particularly important.’ This sentence survived intact in the published White Paper (par 70).

16. E.R.Walker The Australian economy in war and reconstruction New York: Oxford University Press 1947 p.384 Walker appears to have finished his manuscript before the war’s end, as his references to post-war conditions are in the future tense.

17. The White Paper: ‘In particular it will be the responsibility of the Commonwealth Bank to ensure that the banking system does not initiate a general contraction of credit or contribute in any way to the growth of unemployment through a decline of expenditure. The Commonwealth Bank will be in a position to adopt a policy of maintaining and expanding direct advances as may be required by the level of total spending in the community. It is intended that the Industrial Finance Department, which the Government is now setting up within the Commonwealth Bank, will also provide capital finance for small and growing businesses, many of which, although credit-worthy cannot provide the required securities for bank advances. This will make a significant contribution to our industrial development.’ (par 39)

18. C.B.Schedvin In Reserve: Central banking in Australia,1945-75 St.Leonards: Allen and Unwin 1992 p.53

19. Giblin to Chifley 25 November 1942; Chifley to Giblin 28 November 1942 CRS CP43/1 item 1943/809

20. For more on this, see T.Rowse ‘Full employment and the discipline of labour’ The Drawing Board 1(1) July 2000, 1-13

21. Draft ‘B’ can be found on CRS A9816/1/ item 45/631.

22. S.J.Butlin and C.B.Schedvin War economy 1942-1945 Canberra: Australian War Memorial 1977, p.674

23. Walker op.cit pp.344-5

24. Walker ibid p.386

25. M Kalecki ‘Political aspects of full employment’ (1943) in Collected Works of Michal Kalecki New York: Oxford University Press, 1990, 347-56, p.356

26. T.H.Kewley Social Security in Australia Sydney: Sydney University Press 1965, p.183

27. R.Paterson, R (1963) ‘A note on the ACTU attitude toward incentive payments’ Journal of Industrial Relations 5,1963,pp. 70-74, p.71; Hagan op.cit, pp.247-8

28. J.Edwards ‘Labor’s record, 1972-75’ in H.Mayer and H.Nelson (eds) Australian politics: a fourth reader Melbourne: Cheshire, 1976, pp.530-8, p.531, emphasis added