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Rethinking the Australian Dilemma

Economics and Foreign Policy, 1942-1957

by Bill Apter (Author)
Monographs XX, 292 Pages

Table Of Content


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List of Illustrations

No Middle Course, Norman Mitchell, The News (Adelaide), 3 June 1954

In Darkest America, Norman Lindsay, The Bulletin, 17 January 1940

No Offence, Mum, John Frith, The Bulletin, 31 December 1941

What -No Chaperon? Sid Scales, Otago Daily Times, 27 September 1952

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List of Graphs and Tables

Graph 1Australian Trade Partners – 1892–1928

Graph 2Australian Trade Partners – 1892–1939

Graph 3% Share of Australian Exports

Graph 4% Share of Total Australian Trade

Table 1Australian Trade 1892–1939

Table 2Index of Australian Export Concentration 1913–1938

Table 3Australian Trade 1892–1959

Table 4Growth of Australian Government 1939-mid 1950s

Table 5Comparative Defence Expenditure 1953–1957

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Preface

This book explains how and why, between 1942 and 1957, Australian governments shifted from their historical relationship with Britain to the beginning of a primary reliance on the United States. It shows that, while the Curtin and Chifley Australian Labor Party (ALP) governments sought to maintain and strengthen Australia’s links with Britain, the Menzies administration took the decisive steps towards this realignment.

The dominant feature of the Australian governments’ foreign policy was a search for security. First, Japan, and then the Cold War in Asia had made the region more dangerous, at the same time as Australia’s traditional protector, Britain, proved less willing and able to meet these threats. However, while military strengths and cultural links were significant, domestic economic reconstruction was at the core of Australia’s search for security. The Menzies government saw development as not just as an economic goal but critical for Australia’s long-term security. This policy served to push Australia towards the dominant United States and its ally, Japan, and away from the weaker Britain.

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There is broad acceptance that the end of British Australia only occurred in the 1960s and that the initiative for change came from Britain rather than Australia. This book rejects this consensus, which fundamentally rests on the idea of Australia remaining part of a British World until the UK attempts to join the European Community in the 1960s. Instead, it demonstrates that critical steps ending British Australia occurred in the 1950s and were initiated by Australia. These Australian actions were especially pronounced in the economic sphere, which has been largely overlooked in the current consensus. Australia’s understanding of its national self-interest outweighed its sense of Britishness.

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Acknowledgements

In The Government and the People, 1942–1945, Paul Hasluck compares his delay in delivering the second volume of his Official History of the war to the kangaroo, which he explains:

Prolongs the period of gestation when the season is unpropitious, and the offspring due to be born this season may not come until the next season, not by deliberate choice of the parents but by the dispensation of Nature. A similar phenomenon may be noted in the case of this volume.1

Hasluck uses this occurrence to justify his eighteen-year delay. How then should I explain an over thirty-year deferral between my initial plans to carry out historical research and the eventual outcome represented by this book? Perhaps it would be easiest to say that life in general rather than any specific gestation period was responsible! It also means that some of the people whom I consider to be initiators of this work have probably long forgotten their acts of inspiration. Fortunately, others have continued to be involved or became involved more recently and so will be more aware of their contribution. I want to take this opportunity to acknowledge their assistance.

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Several people are responsible for initially generating my interest in carrying out the research and writing involved. I want to thank them. As my undergraduate tutor at Leeds University, the late Phil Taylor was the first to make me consider what working as a historian would be like. Marne Hughes-Warrington convinced me that I should do it. Having started my doctoral research, I was delighted to find that existing experts were happy to take the time to discuss their work and even to read my drafts; in particular, Roger Bell, David Lee, and Frank Bongiorno provided coffee and advice. I greatly appreciated both.

This book began its life as my PhD thesis. My supervisors, Andrea Benvenuti and Lisa Ford, were towers of strength and consistent sources of advice. I’m not sure whether they understand that this would not have been finished without them, but I do.

I want to thank Jatinder Mann for suggesting that I consider preparing it as a book in his series, Studies in Transnationalism, and also for helping me navigate that process with good humour and regular insightfulness. It became a book due to Peter Lang Publishing and I have appreciated Meagan Simpson and Sarath Kumar’s calm advice and rapid responses to my numerous queries.

I have always enjoyed libraries and appreciated their role in civil society. This is fortunate, as I have spent what seems to be an overwhelming proportion of my recent life in libraries and archives across the globe. These include the National Archives of Australia, the National Library of Australia, the Reserve Bank of Australia Library, UNSW, Macquarie University, Ascham School, Woollahra and the City of Sydney Libraries, the U.S. Library of Congress and National Archive, and the UK National Archive. I thank the staff working at these institutions and those who ensure that they are appropriately funded.

However, despite all this assistance, ultimately this book would not have been possible without Sian and Liam’s ongoing support, intellectual stimulation and love. They have been there for the entire journey and have calmly accepted its every stage. I am sure they are pleased that it is finally over!

Needless to say, none of the above bears any responsibility for the opinions and particularly any errors or omissions expressed here, which are mine alone.

Note

1Paul Hasluck, The Government and the People, 1942–1945 (Canberra: Australian War Memorial, 1970), ix.

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List of Abbreviations and Acronyms Used

ADB Australian Dictionary of Biography.

AIF Australian Imperial Force.

ALPAustralian Labor Party.

ANZAM Agreement between Australia, New Zealand and Britain for the defence of British-ruled Malaya.

ANZSANA Australia New Zealand Studies Association of North America.

ANZUS The Australia, New Zealand and U.S. (ANZUS) Treaty is a multilateral military alliance signed in 1951. It binds members to cooperate on Asia-Pacific security.

CRO Commonwealth Relations Office (UK).

DAFPDocuments on Australian Foreign Policy.

DFAT Department of Foreign Affairs and Trade (Australia).

DPWR Department of Post War Reconstruction (Australia).

DWOI Department of War Organisation of Industry (Australia).

EECEuropean Economic Community, formed through the 1957 Treaty of Rome by France, Germany, Italy and the Benelux countries.

EFTA European Free Trade Area. Founded in 1960 by Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom.

FRUSForeign Relations of the United States (U.S. State Dept. publication).

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GATT General Agreement on Tariffs and Trade.

GDPGross Domestic Product.

GM-HGeneral Motors-Holden.

IBRD International Bank for Reconstruction and Development.

IMF International Monetary Fund.

ITOInternational Trade Organization.

LoC U.S. Library of Congress.

MFNMost Favoured Nation. Agreements that require the recipient country to receive equal trade advantages as the “most favoured nation” by the country granting such treatment. For Australia, MFN ranked behind Imperial Preference, i.e. so called most favoured was actually second best.

MHR Member of the House of Representatives (Australian government).

NAA National Archives of Australia.

NATONorth Atlantic Treaty Organisation, established in 1949.

NLA National Library of Australia.

NSC U.S. National Security Council.

PWC Pacific War Council. Based in Washington.

RAAF Royal Australian Air Force.

RANRoyal Australian Navy.

RBA Reserve Bank of Australia.

SEATOThe South East Asia Treaty Organisation. An agreement for mutual defence between Australia, France, New Zealand, Pakistan, the Philippines, Thailand, Britain and America signed on 8 September 1954.

SWPA South West Pacific Area.

UKUnited Kingdom. I have used Britain and the United Kingdom interchangeably in this book as shorthand for the United Kingdom of Great Britain and Northern Ireland.

UKNA United Kingdom National Archive (previously known as PRO (Public Records Office)).

UNUnited Nations.

U.S.United States. I have used America and the United States interchangeably as shorthand for the United States of America.

USNUnited States Navy.

USNA U.S. National Archive.

WTO World Trade Organisation.

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Part I

Kinship

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Introduction – The Anzac Dilemma

“Some inadequately observed consequences of the decline of British power, with special reference to the Pacific area.”1

The Dilemma

In the early 1950s, the historian Frederick Wood explained the choices forced upon Australia and New Zealand by British decline. Previously, he said, “we took for granted the naval and economic strength of Great Britain, and on that twofold foundation we built free and prosperous countries.” But this British preeminence no longer existed; America was the dominant military and economic power. Britain’s decline led to what he called the “Anzac dilemma.” Australia could be forced to choose between the British Commonwealth and the United States. The dilemma was masked when Britain and America stood together but, if they seriously diverged, “the results for the Pacific Dominions would be calamitous.”2

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While Wood’s primary focus was on New Zealand, this book explores how Australia attempted to resolve the dilemma from 1942 to 1957. It finds that, contrary to the current historical consensus and public political statements at the time, which emphasise ongoing attachment to Britain, in the 1950s, Australia demonstrated an increasing tendency to follow America. This choice was clear to many contemporaries. The Adelaide News, soon after Rupert Murdoch assumed control, summarised the “dilemma” in 1954. A front-page editorial asked “the 64-dollar question … Is Canberra more concerned with keeping in step with Washington than with her traditional ties with Britain?” An accompanying cartoon illustrated the dilemma. Should Richard Casey, Australia’s Minister for External Affairs, take Uncle Sam’s dollars and the path entitled “follow America,” or respect the advice of the British Foreign Secretary, Anthony Eden, and “stick with Britain”? As its title claims, there was “No Middle Course.”3

No Middle Course. Source: The News (Adelaide), 3 June 1954

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Australia’s pro-American tendency grew during Robert Menzies’s administration, elected in December 1949. It was revealed in a series of meetings and actions in 1957 illustrating how, despite the ongoing familial ties of empire, the Menzies government’s Britishness had been overwhelmed by economic and geo-strategic realities. The Japanese advances in early 1942 had first made the Anglo-Australian rift apparent, but both sides papered over these fissures when the threat receded. However, the Menzies government came to believe that Australian national interest could, ultimately, only be secured by America rather than Britain. This concern reached an apogee in 1957.

Australia’s choice was demonstrated at the Canberra SEATO Council meeting in March 1957.4 John Foster Dulles, the American Secretary of State and the British Lords Home and Carrington, Secretary for Commonwealth Relations and High Commissioner respectively, attended.5 Casey, with deliberate understatement, described their time with the British as “not very pleasant.”6

Home and Carrington sought to justify significant British defence cuts in the Far East. William Worth, who later in 1957 became Deputy-Secretary to SEATO but was then an Assistant Secretary in the Prime Minister’s Department, set out the questions to pose to Britain. Illustrating Australian concerns, he suggested the preamble to the defence questions be just “who do they think they are kidding?” He compared the British government’s position to its strategy less than two decades earlier, which, from the Australian perspective, had eventually doomed Singapore: “1940 all over again with its catastrophic complacency.”7 In contrast, although America had been reluctant to accept open-ended commitments, on this occasion, Dulles emphasised U.S. commitment to the region and its security pacts:

Let there be no doubt in any quarter … that the American nation is united in its determination to respond to our obligations under these pacts. Also that determination is backed by power in being and in useful places.8

Later that year, Australia announced its defence alignment with America, a commercial agreement with Japan that led to it replacing the United Kingdom as Australia’s principal export destination, and a rejection of British proposals for greater coordination of Commonwealth forces in South-East Asia. As Casey explained to Duncan Sandys, British Secretary of State for Defence, in declining these overtures, Australia explicitly prioritised its reliance upon American economic and military strength above British race patriotism:

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For survival Australia had to rely on the United States. They were the only nation in command of great forces in the area and we could rely on no one else for massive aid. Australia is just as warmly attached as ever to the United Kingdom, but these are facts of life.9

Menzies repeated this rejection. He explained to Harold Macmillan, the British Prime Minister, that “the main stream of our policy” was dependence on America for security.10 However, accounts of Australian policy in the 1950s generally omit this turn to America. Indeed, a recent article, summarising the papers given at a conference on British Australia, concluded that:

There is a large degree of consensus among the historians about the timing of the end of British Australia, and only mild disagreement about how that end came about … all agree on the 1960s [when Britain tried to join the EEC] as decisive, and all locate the initiative more in Britain than Australia. Australians did not so much seek independence as have it thrust upon them by the reorientation of Britain’s place in the world.11

I reject this consensus. This book demonstrates that critical steps ending British Australia occurred in the 1950s and were initiated by Australia. These Australian actions were especially pronounced in the economic sphere, which the consensus has mostly overlooked. I explain how and why, by 1957, Australian governments had shifted from their historical relationship with Britain to the beginning of a primary reliance upon America. While the ALP governments of Curtin and Chifley sought to maintain and strengthen links with Britain, it was the Menzies administration that took the most decisive steps away towards this realignment. Economics was at the heart of this change.

There is broad acceptance that the dominant feature of Australian foreign policy in the decade after 1942 was a search for security.12 First the Japanese and then the apparent Communist threat had made the Far East and the Pacific a more dangerous region, at the same time as Australia’s traditional protector, Britain, proved less willing or able to help. But, while military strength and cultural links were significant, the core of Australia’s search for security was domestic economic development. Menzies explicitly explained Australian development in national security terms in his 1950 Anzac Day broadcast, “the best way in which Australians can guarantee a peaceful existence and guard against attack is by working hard for the development of Australia.”13 Australia’s post-war reconstruction was a critical factor pushing it towards the dominant United States and other Pacific Rim countries, notably Japan, and away from weaker Britain.

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This book shows how the changes caused by this focus on economic development impacted Australia’s international relationships. As Joan Beaumont argued, “foreign policy is something of a Cinderella in Australian historical writing.”14 Beaumont observes the domination “in recent decades by studies of race, gender, class and post-colonialism, all within a general preference for social history.” Therefore, perhaps it is not surprising that consideration of economics, Australia’s fundamental domestic transformations, and their consequences have been broadly absent in studies of its foreign policy. Economic history, post-2008, has started to regain importance globally, and even within Australia.15 Indeed, Kenneth Lipartito suggested that recently there “has been something of a cross-disciplinary convergence in economic history.”16 However, this has not occurred in studies of Australian foreign policy. Thomas Piketty described his study of tax returns as “a sort of academic no-man’s land, too historical for economists and too economistic for historians.”17 The no-man’s land between Australian economic and diplomatic history seems equally broad.

The Menzies government saw development as not just an economic goal, but critical for Australia’s long-term security. Development required foreign investment. In the nineteenth century, British capital and trade had financed the expansion of not only its Empire but also America.18 Britain’s relative economic decline meant this was no longer the case. As Allen Brown, Permanent Secretary to the Prime Minister’s Department, explained to Menzies in 1952, since “the sterling area cannot finance its own development,” Australia needed American capital and “any action that is regarded as discrimination by them, will adversely affect our chances of getting money. These fellows are very tiresome but, of course, they have the cash.”19

The importance of domestic economics has long been discussed within American and European foreign policy; the debate often framed as between the “traditionalists,” who favour geo-strategic explanations, and the “revisionists,” who argue the need to meet domestic political-economic goals drives foreign policy.20 This debate is absent in Australia; this book is intended to help to fill that gap.

Major Themes

Australia and the British World

In explaining the Australian dilemma and its resolution, this book has two major themes: Australia and the British World, and the importance of economics. Although considered separately, they are linked, as historians’ emphasis on the influence of Australia’s British race patriotism has been at the expense of due consideration of the significance of economics.

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I show that the current historiographical emphasis upon Britishness is overstated. The consensus view fails to reflect the breakdown in economic and strategic Anglo-Australian complementarity and Australian agency in further widening this breach. Furthermore, too much attention has been paid to politicians’ statements, as opposed to their actions and the contexts for these statements.

The concept of Australia’s British race patriotism entails “the idea that British countries of the world, despite occasional divergences of opinion and periodic conflict over particular interests, were organically bound under a common racial destiny.”21 Historians have argued that this unifying sense of Britishness was the dominant theme in Australia’s policy until it was shattered by the decision by the Macmillan government in 1961 to reject the imperial ideal in favour of applying to join the European Economic Community (EEC).22 While accepting that disagreements occurred on occasions, historians have considered that these were resolved. In Neville Meaney’s phrase, “the web of culture has closed over each episode and in retrospect each episode has been seen as an aberration. Australians have allowed sentiment to dictate the lessons drawn from experience.”23

This sense of Britishness does emerge from the public rhetoric used by Australian Prime Ministers in the 1940s and 1950s. John Curtin emphasised that “Australia is a British land, and the 7,000,000 Australians are 7,000,000 Britishers.”24 Ben Chifley described Australia, like New Zealand and Britain itself as “purely British units,” while Robert Menzies regularly spoke of Australia’s British kinship.25 However, when one considers the actual policies, and in particular, those economic and trade policies resulting from Australia’s post-war reconstruction, a different picture emerges; sentiment plays a much smaller role. Indeed, on occasions, Australian politicians used sentiment to justify decisions furthering their national interest at the expense of Britain or a unified Commonwealth position. Chapters 4 and 5 show that, despite their public statements, Curtin and Chifley chose to align with Britain after 1943 due to their perception of Australia’s national interest rather than “sentiment.” Equally, as explained in Chapter 8, Menzies rejected British requests for import restrictions to support the Sterling Area. In 1952, he wrote to the British Chancellor of the Exchequer, “my old friend Butler,” full of words of friendship and apparent Commonwealth solidarity, but actually reinforcing Australia’s different interests. He emphasised Australia’s Britishness (“we are British”) but, in firmly dismissing Butler’s proposals, pointed to the diverse needs of Commonwealth members.26

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Stuart Ward accepts that the Menzies government’s “preoccupation with Australia’s own national development” and its pursuit of American security, even in the light of British objections and exclusion from ANZUS, caused serious difficulties in Anglo-Australian relations. However, he argues that “this fails to ring true to the popular image of these years, and it is hard to believe that the early 1950s were experienced, on any level, as a time of irresistible strain on the traditional ties to the Mother Country.”27 He points to these links and how they continued to be demonstrated in 1950s Australia: the enthusiasm for the 1953 Coronation and the 1954 Royal Tour, the population exchanges as seen from the ongoing British immigration and Australian travellers going “home” to Britain and the repeated expressions of kinship by the media and politicians.28

All these features of Australian life are undoubtedly real, but to what extent did they determine Australian policy in this period? One could equally look to the growing American influence on Australian society. As early as 1908, the U.S. Great White Fleet had generated crowds, in a then smaller Sydney, almost comparable to the 1954 Royal Tour. The ABC claims over a million saw the Queen in Sydney.29 Nearly fifty years earlier, Sydney was half the size but “well over half a million Sydneysiders turned out to watch the arrival of the American Navy’s ‘Great White Fleet.’ ”30 Equally, “nearly a million people lined the Sydney streets” when President Lyndon Johnson visited Australia in 1966.31 Are these large crowds genuinely suggestive of strong political leanings? In 1965, when the Queen visited West Berlin, over a million people turned out to see her.32 Nobody claims that these Germans felt they were British. These massive crowd numbers were perhaps a function of the rareness of visits and paucity of alternative international visitors in the early and mid-twentieth century.33

Indeed, both contemporaries and historians have noted, in the post-war period, American popular culture, expressed through film, music and television as well as the rise of supermarkets and American cars, permeated Australian society.34 Nevertheless, as Roger Bell argues, accepting that “US culture has been deeply and variously implicated in Australia’s modern history” does not mean that this American cultural power was responsible for reorientating Australia from the British to the American security sphere:

Realpolitik, not cultural or social similarity, shaped Australia’s quest for American strategic assurances. In peace, as in war, national interests not shared values or pastimes, determined fundamental shifts in Australia’s diplomacy and foreign policy.35

The same would appear to be true of British cultural influences. Although, Australian politicians, buttressed by the existing infrastructure of relationships and regular correspondence and meetings, by reflex looked to London, ultimately, self-interest, not Britishness, determined Australian policy.

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Historically, Australia’s position in the British World had been one of dependency. Australian engagement with America required the simultaneous U.S. acceptance of a Pacific role and an Australian desire to prioritise the relationship. For much of the half-century after Federation, neither or only one factor was present. Until both of these elements worked together, Australia was not able to make a choice. Before the 1950s, it was bound to the British world by a lack of alternatives. As illustrated in Chapter 1, before the Second World War, America rejected Australian advances, which, in turn, were inconsistent and often conflicting. Chapters 3 and 4 show that, while the Japanese threat brought Australia and America together in 1942 in a mutually convenient alliance, they drifted apart with the prospect of peace. American indifference and the Chifley government’s instinctive anti-Americanism meant U.S.-Australian engagement remained limited until the extension of the Cold War to Asia and the election of the Liberal-Country government in 1949.

Casey’s comments to Sandys, outlined above, demonstrate how Realpolitik and national interest, rather than Britishness, guided Australian policy. American diplomats observed this too. John Ausland, a U.S. diplomat in Australia in the late 1950s, noted the folly of looking for the determinants of Australian foreign policy in its culture:

Americans should be under no illusions as to the grounds for growing Australian cooperation with the United States. It is true, as it is often stressed in public, that the similarity of our culture provides fertile soil for friendship. This cultural similarity existed, however, long before Australia started drawing under the wing of the American eagle.36

What had changed, he argued, was that Australia feared Asia and that British weakness meant that America was “their only guarantee of survival.”37 America’s increased involvement in Asia meant that Australia could follow the United States and hope that, in return, America would support it from the threat of Asian Communism. Consideration of Australian decisions and the decision-makers shows the appreciation of these realities rather than the impact of culture.

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Cultural history has emphasised the importance of Australia’s ongoing Britishness. Quite reasonably, studies trying to understand general feelings and beliefs look to a range of sources incorporating a broad collection of people. In contrast, this book is heavily based upon the statements, letters, notes and actions of a small group of government officials, primarily in Australia, but also America, Britain, New Zealand and Canada. It is deliberately focused upon this elite, rather than a more extensive range of public opinion because, in this period at least, this limited circle of politicians and their advisers made foreign policy. In explaining Australia’s “growing … cooperation with the United States,” Ausland had stressed that Americans should be under no illusions for the grounds of this support:

Even when Australia supports the United States, it should not be assumed that the position of the Government fully reflects Australian opinion. Australian foreign policy is determined within an apex made up of the Prime Minister, his Cabinet, and a few government departments. While the Government cannot ignore the opinion of Parliament, press, and public, they have little direct influence on foreign policy.38

Contemporary commentary supports Ausland’s view. Gordon Greenwood, writing of diplomacy in 1956, observed that “in Australia, the shaping of policy is in determined by a relatively few powerful individuals.”39 The actions and views of these men made Australian foreign policy. As Ausland appreciated, these actors had to work within the constraints of public opinion and parliament but, subject to these, they were able to operate in accordance with national interest as they determined it. Public opinion and popular culture did matter to politicians. They both reacted to it and helped shape it through their public pronouncements. However, it was not the determining factor and thus Menzies, a Prime Minister who reflected and amplified Australia’s Britishness, can be seen setting a path of increasing alignment with America, even to the detriment of British ties and interests, as shown in Part IV. Indeed, arguably, Menzies’s nostalgic rhetoric helped sugar the pill of change.40

In an apparent paradox that has been labelled by economists and political scientists as “Only Nixon could go to China,” it is sometimes easier for politicians to take a position that is the opposite of what would be expected from their ideological beliefs.41 Parts III and IV contrast Menzies’s ability to “go to China” in seeking American, rather than British, alignment with the constraints on the ALP. Australia’s dilemma and the different resolution pursued by the various parties were apparent to contemporaries, but historians have chosen instead to focus upon Australia’s cultural Britishness and apply this to the policymakers’ decisions.

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Journalism claims to be “the first rough draft of history”; history is written building upon media narratives, using subsequent discoveries and analyses.42 But, while political journalists wrote of the dilemmas as the ALP became pro-British and the Liberal-Country parties increasingly pro-American in the late 1940s and 1950s, their insights are generally absent in the current historical debate.

After Rupert Murdoch, as outlined above, Alan Reid is perhaps the most notable example. Laurie Oakes, Reid’s successor as Canberra’s leading reporter, claimed of him that, “no other Australian political journalist has exercised such influence.”43 Initially a member of the ALP, and close to Curtin and Chifley, by the mid-1950s, Reid had become more associated with the Coalition. He joined the anti-Labor Daily Telegraph and, in 1957, had his ALP membership terminated.44 With links to both sides, Reid was well placed to understand the shifting party perspectives. In May 1953, he wrote of their changing allegiances:

Australia’s non-Labor forces are figuratively either wrapping themselves in the Stars and Stripes and chorusing The Star Spangled Banner, or discretely remaining silent. Labor is waiving the Union Jack high and declaiming about Australia’s blood kinship with the United Kingdom.45

He appreciated that, initially, ideology had been significant: the ALP was sympathetic to Britain’s Labour government while the Liberal-Country parties supported American capitalism. However, by 1953, Churchill’s British Conservative government had been in power for nearly two years, so ultimately a Realist view of Australian security prevailed: “America has the power to look after Australia in the Pacific. Britain has not.”46 Reid disclosed this battle just two days before Elizabeth II’s coronation; a period when cultural historians have claimed that participation in the British World dictated Australian policy.

Reid regularly reiterated his observation.47 Nor were Murdoch and Reid alone; Harold Cox in The Herald, the Catholic News Weekly and Frederick Wood all raised similar concerns about the dilemma of Australia’s Anglo-American choice.48 These perspectives are missing from the historical consensus with its emphasis upon Australia’s ongoing Britishness. These contemporary explanations of the Menzies government’s stance put realism before any concept of kinship. Reid’s views on Labor’s pro-British leanings, while including sentiment, centred upon economic ties. Britain, in Chifley’s words, Australia’s best customer, was “in fact her only customer of proven worth and endurance.” Given Australia’s dependence on trade for her standard of living, it “could easily follow Britain down the drain economically if Britain slipped.”49 However, like the contemporary journalists, economics is mostly absent in the current debate.

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The Importance of Economics

I am seeking to return economics to its position as the central policy factor for both the ALP and Coalition governments. Australian foreign policy in the 1940s and 1950s has traditionally been explained in the context of Australia’s ongoing sense of Britishness and as a response to geo-strategic threats, from Japan initially and then from Asian Communism. These threats caused Australian politicians to look for protection from American, the British Commonwealth and, in the case of the Chifley administration, through the United Nations. When the Menzies government rejected reliance upon the United Nations, it entered into the ANZUS alliance with America. Despite this, at least in its early stages, ANZUS did not amount to much. Australia still saw its primary role within the Commonwealth and, influenced by ties of race and blood, continued to look to Britain for leadership and protection.

The problem with this analysis is that it treats foreign policy in isolation, and so ignores the priority afforded to economic development by the post-war governments. As Stuart Harris, Secretary of the Department of Foreign Affairs when it was reorganised to reflect the linkage of diplomacy and trade as the Department of Foreign Affairs and Trade (DFAT) in 1987, recognised:

International economic and political systems are linked to domestic systems -we pursue foreign policy to meet domestic objectives. These links are fundamental but we commonly talk about international developments as though they existed on their own … for Australia -priority in the post-war years was to the domestic economy.50

Traditionally histories of the period have considered “high” foreign policy separately from “low” economic and trade policies. This division not only results in an artificial separation but also, because of the importance that both ALP and Liberal-Country governments placed upon Australia’s economic security, devalues its consequence. David Lee noted this problem and sought to resolve it in his Search for Security. Indeed, writing in 1992, he claimed, “with few exceptions, the whole economic domain has been excluded from the study of Australian foreign policy.” He confidently stated that this would be corrected, “it would be unthinkable now to think of offering an account of Australian foreign policy which did not address both its geo-economic and geo-strategic dimensions.”51 But Lee was over-optimistic; the economics still tends to be missing.

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Whether described as Post-War Reconstruction by the Curtin-Chifley governments or National Development by the Menzies administration, development was the pivotal bipartisan policy. Both believed that the combination of a larger population and economy was the solution to the twin problems of unemployment and external threats; as well as delivering long-term full employment, a bigger, industrialised Australia would provide greater security against possible foreign invaders. Development of the Australian economy required foreign investment and markets. Britain had provided these but, as Australian economic advisers regularly told their ministers, not only was Britain not as able to invest or buy as it had been, Australian industrial development was potentially contrary to British economic interests.52

Economic historians have noted that Australia’s post-war development policy inherently diverged with the British view of the role of Commonwealth members: to provide primary products and act as a market for British manufactured goods.53 They have called this Anglo-Australian conflict a “decline in economic complementarity.” John Singleton and Paul Robertson argued that “the Commonwealth economic network started to unravel in the mid-1950s” as differences arose over Britain’s desire to subsidise its own farmers, Australia’s industrialisation, and Britain’s inability to provide the capital Australia required.54

A similar picture appears in John Crawford’s Australian Trade Policy 1942–1966. Crawford was Secretary of the Department of Commerce and Agriculture until 1956 and, thereafter, of the Department of Trade. He felt that the commitment to multilateral trade in Article VII of the 1942 Mutual Aid Agreement with America, “launched Australia on a course of policy governing her trade relations with other countries … Initial uncertainty and some fear of impairment of Australia’s basic relations, especially with the United Kingdom, are apparent.”55

While economic histories demonstrate the changing nature of Australian trade, although accepting links between economic and diplomatic relations, they tend to focus on the former without real consideration of the latter. This treatment parallels the omission of economics in political and diplomatic histories. For example, David Lowe’s Menzies and the “Great World Struggle” concentrates upon the search for political, diplomatic and military security, but not economic.56 It analyses the Menzies government’s geo-strategic response to the early Cold War, but Lowe’s minimal consideration of economic policies leads him to downplay the extent of realignment from Britain to America in 1950–1952. He argues instead that “an organic conceptualisation of the Empire/Commonwealth lay at the heart of Menzies’ thinking on international affairs.”57 As a result, he concluded this period “revived and sustained Australia’s ties with the British Empire or Commonwealth.”58

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Similarly, monographs focusing on the making of the ANZUS treaty consider the diplomatic and military debates and decision-making, failing to integrate them with the trade and economic debate of the era.59 Even government reports have this historical amnesia. DFAT only includes documents by one of its predecessor departments, the Department of External Affairs, in its ANZUS volume. It contains no Department of Trade documents. DFAT’s own structure recognises the symbiotic nature of trade and foreign affairs, but its published historical documents do not reflect this inter-relationship.60

The current consensus story of an ongoing British Australia is one result of this overlooking of the implications of the trade and economic policies of the Curtin, Chifley and Menzies governments. It helps explain Stuart Ward’s claims that “Australia was pulled along reluctantly in the wake of changing British policies and priorities” until the British attempt to join the EEC in 1961 “fatally undermined the persisting assumptions about organic Anglo-Australian unity,” thus provoking long-overdue debate about Australia’s political and economic future as well as its ties to Britain.61 This claim may be true of public opinion, where expressions of Britishness continued to abound but, within Australian policy circles, the debate had commenced over a decade earlier and was already causing changes. These alterations reflected both Australia’s post-war economic development, in which the relationship with Britain was becoming less relevant compared to America and Japan, and its geo-strategic position where only America could provide security in a more threatening region. The British decision to choose Europe was, in part, a reaction to Australian politicians taking the initiative in pursuing Australia’s separate national interests.

Periodisation and Turning Points

Failure to appreciate the long roots of the developing U.S.-Australian relationship is also a product of historians’ periodisation. This book demonstrates the importance of both the 1930s and the Second World War on Australian policy after 1945. The Great Depression and the trade wars of the 1930s brought an artificial Commonwealth closeness while, in the war, Australia started to develop American economic and military links that re-emerged in the 1950s. These factors are regularly lost in historians’ structural choices: most accounts of the depression end in 1939, the war is treated as a subject in its own right, and accounts of the post-war era commence in 1945. A more extended focus is necessary.

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The choice of period to study matters. As Jacques Le Goff observed in his last book, Must We Divide History into Periods? “There is nothing neutral, or innocent, about cutting time into smaller parts … [as] unavoidably, it is shaped by personal bias and shaped by an interest at arriving at a result that will be widely accepted.”62 Since this suggests that all periodisation choices are subjective, it is essential to clarify the periodisation that I adopt and to compare it to others. I deliberately take a longer-term view. Although concentrating on the fifteen years from 1942 to 1957, this book considers the periods before and after to understand how economic continuities explain the endurance of trends and hence events. This deliberate periodisation choice creates a different perspective than that usually adopted by other historians as outlined below, even those who have considered the economic factors.

While David Lee’s focus upon economics enabled him to see the pro-American trend in Australian politics, his choice of periodisation limits his study. As explained in its sub-title, his book is a review of Australia’s post-war political economy and thus paid little attention to either the wartime economy or the extent of continuity between the “searches for security” of the Curtin and Chifley governments.63 This periodisation is not unusual. Because 1945 marks the end of the Second World War, historians frequently use this date as their start or endpoint.64 The other approach tends to be to view the 1941–49 Labor administration as a whole and not look beyond it to the Menzies government and to compare its diplomatic and economic policies with Curtin, Chifley and Evatt’s.65 Equally overlooked is the continuity between eras of multilateral trade. As shown in Chapter 1, until the end of the 1920s, the Australian economy was diversifying away from Britain, towards America, Europe and Japan. The moves to bilateral trade and Imperial Preference, ushered in by responses to the Great Depression, reversed this movement. A return to multilateral trade in the 1950s resulted in, once again, the expansion of Australian non-British trade and investment links. Taking a longer view helps to understand the parallels between these eras and the more fragile nature of Australia’s British connections.

Roger Bell appreciated the importance of economic factors in his articles as well as his monograph, Unequal Allies. He combined the Australian-American economic competition with their disagreements over planning for the post-war Pacific, and especially the Japanese peace settlement, in explaining Australia’s distancing itself from America after 1943.66 Nevertheless, by focusing only on the Pacific war era (his book and articles cover the period to 1946), his analysis, albeit very useful on the relations during this period, does not consider the policies of the later Chifley and Menzies administrations.

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Even longer-term periodisation without consideration of economics can be limiting. Coral Bell’s scope in Dependent Ally was Australian foreign policy from 1941 through to the Hawke and Keating administrations, so it is better placed to explain the immediate post-war period.67 By following Chifley and Evatt’s policies compared to that of the subsequent Menzies government, she was also able to see not just the wartime changes, but also the impact of 1949 and Australia’s “strategic dependence on the USA.”

However, she expressly declined to consider the economic aspects of Australia’s relationships, claiming that since she was writing about foreign policy rather than economic history, “I have ventured no farther into that territory than has been necessary to illuminate the diplomatic and strategic decisions.” By downplaying the economics, Bell failed to appreciate the importance of the search for economic security to both the Chifley and Menzies governments and the latter’s fundamental shift away from Britain and the Sterling area, towards America to try to find the finance Australia needed for its industrial development. Overlooking economics in this way, Bell dates the commencement of the next “period of very high dependency” in American-Australian relations to as late as 1962.68

Another benefit of a longer periodisation is an ability to see continuities. The historiography of the period from 1942 to 1957 is dotted with so-called turning points. Of the fifteen years, at least eight are claimed as such: 1942 (the Japanese assault, the cable war with Britain and Article VII of the Mutual Aid Agreement),69 1945 (the Anglo-American loan),70 1947 (the collapse of sterling convertibility),71 1949 (the election of the Menzies government),72 1950 (the decision to send troops to Korea in support of America),73 1952 (Commonwealth Economic Conference),74 1956 (the renegotiation of Ottawa),75 and 1957 (the economic breakdown of the Commonwealth)76 all have the term attributed to them. This multitude of turning points suggests a veritable seesaw, even before the 1960s, which, as Bongiorno reminds us, represents the current consensus decade of change.77

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Andrea Benvenuti emphasised the critical points later, pointing to the cumulative effect upon the Anglo-Australian relationship of a series of four crises provoked by British actions during the period from 1961 to 1972.78 This observation progresses the discussion as it suggests that perhaps the whole concept of a single turning point, implying a radical change from previous policies, is unhelpful. A “turning point” is an abrupt change or a discontinuity.79 The term is an inappropriate metaphor for the Australian changes: the reality seems to be a series of events and related decisions that had consequences and provoked the need for subsequent choices. In his analysis of turning points in world history, Randall Collins found that the overwhelming proportion of events identified as such were political or military; very few were economic.80 This feature is true of histories of Australia in the 1940s and 1950s.

In focusing on the period from 1961 onwards, Benvenuti painted a picture of British decisions and Australian reaction. However, although he emphasised the importance of economic factors, by his choice of periodisation, he gave a lower profile to the Australian decisions of the 1950s to which the British turn to Europe was, at least in part, a reaction. Australian policies helped to create the situation that ultimately led to the British decisions of 1961 to 1972. There was no single “turning point” but a series of economic and strategic decisions by both countries that contributed to ongoing Anglo-Australian estrangement. Indeed, as David McLean argued, in dismissing claims of “the 1940s as a turning point in Australian foreign policy,” there are significant continuities in Australia seeking a stronger relationship with America stretching back to Federation.81 The focus on so-called turning points and current emphasis on the 1960s, and the sidelining of the impact of Australian economic decisions, acts to suppress the importance of longer-term economic and geo-strategic factors as well as Australian agency in Britain’s subsequent decisions. A longer periodisation illuminates these linkages.

Structure

This book is divided into four parts, covering Australia’s relations with America and Britain in the period from 1942 until 1957. The four parts have titles reflecting the changing relationship during this period: Kinship, Estrangement, Reconciliation and Separation. The allusion to a changing family relationship is intentional; this has been a consistent metaphor for Anglo-Australian relations, at least since Henry Parkes’s “crimson thread of kinship” preceding Federation.82

Part I, Kinship, comprises this introduction and Chapter 1: a background to Australia’s relations with Britain and America in the period to 1941. It provides a contextual overview. This introduction explains my structure. It has examined periodisation and the need to see the effects of Australia’s economic circumstances on its external relations over a broader period than usually adopted. Chapter 1 considers its ties to Britain at the beginning of the period. It shows that, although real and numerous, when tested, many connections were to prove more ephemeral than firm. The relationship was built as much upon Australian dependency as its innate sense of Britishness.

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Part II, Estrangement, looks at the Anglo-Australian rifts in the early stages of the Curtin administration. It also consists of two chapters. Chapter 2 explains the effects of Australia’s wartime economic changes on its relationships with Britain and America. Chapter 3 outlines how, in the crisis provoked by the Japanese attack, mutual expediency propelled the U.S.-Australian relationship. This motivation changed as the invasion scares of 1942–3 passed. However, as the American Minister to Australia, Nelson Johnson noted, “all wars, especially the one in we are engaged in now, involve revolutionary processes which tend to hasten movements within the social framework more or less unperceived during times of peace.”83 Although Australia sought a return to a British world after 1943, the long-term changes wrought by the war eventually proved as profound as Johnson had prophesied.

Part III, Reconciliation, describes the restoration of Australia’s relationship with Britain and the Commonwealth. This re-establishment began under Curtin and continued until the end of the Chifley administration in 1949. Chapter 4 shows how the waning of the Japanese threat and prospect of eventual Allied victory led to Australian consideration of its post-war objectives. Chapter 5 addresses the Chifley government’s motivations and the benefit to Australian interests from its Sterling Area and the Commonwealth memberships. The principal legacy of the Chifley government was post-war reconstruction.84 Chapter 6 considers the implications of this policy on the government’s economic and diplomatic choices. It explains that its policies were not driven by simple Britishness, but a belief that a primary alignment with Britain and the Commonwealth led to the best outcomes for the Chifley government.

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Part IV, Separation, investigates the Menzies administration. It explains why, under an Anglophile Prime Minister, Australia began to re-align itself such that his government “took Australia-United States relations to a pitch of closeness and excellence not previously or subsequently matched, except perhaps in the time of his successor, Harold Holt.”85 There were perhaps three critical periods, and this section is divided chronologically, to consider them in successive chapters. Chapter 7 includes the changes and continuities from the Chifley to the Menzies government. It covers the role of Percy Spender as Minister for External Affairs and his interconnection of economics and foreign policy in developing Australia’s relationship with America, resulting in the ANZUS Treaty. Chapter 8 is more focused on economics. It investigates the changes in direction over import controls and the Sterling Area in 1952 as the Menzies government pursued economic development at the expense of relations with Britain. It also considers the cultural claims of Britishness, even as strategically and economically Australia was moving into the American orbit. Chapter 9 studies the period to 1957. It includes the renegotiation of Ottawa Trade Agreement with Britain and the Japanese Commercial Agreement as well as the stronger defence relations with America (SEATO and the decision to seek equipment compatibility with America in 1957), illustrating the increasing tendency for the Menzies administration to look to America rather than Britain.

Part IV shows that claims that, in its application for EEC membership in the 1960s, Britain effectively abandoned Australia, fail to appreciate the steps Australia had already taken over the previous decade to undermine the Commonwealth economic network. This network had reached its peak at the end of the 1940s but was declining in the 1950s. Australian agency contributed to this and the weakening of the Anglo-Australian relationship. Britain’s turn to Europe was, in part, a reaction to these changes. Australia’s reorientation to America and Japan reflected Canberra’s own economic and geographical search for security. Despite their common cultural Britishness, a mutual pursuit of national interest pulled Australia and Britain apart. As Chapter 1 shows, a belief in their common racial affinity had long existed but, even before 1941, the Anglo-Australian relationship was contingent on Australia’s dependence. This bond had been in decline after Federation but was re-amplified by American isolationism after the First World War and the economic protectionism of the 1930s. Changes to these underlying factors altered the relationships.

In his summary of the conference on British Australia, Frank Bongiorno suggested the possibility of a broader perspective than the current consensus, with its emphasis on the 1960s and the importance of the cultural impact of the ongoing British World. He argued that, despite the consensus he had outlined, in some accounts the 1950s “seems more fluid, multifaceted and transitional from the point of view of Australian diplomacy than it can appear in accounts that stress mainly the continuity of British race patriotism.”86 This book seeks this different view by looking carefully at policymakers and key commentators on Australian foreign policy and recognising the primacy of domestic economic policies. As a result, it shows the dilemma that lay at the heart of Australia’s search for security: whether, when forced to choose, Australia should concentrate upon Britain and the Commonwealth or America. I show the different resolutions of this problem attempted by the Curtin and Chifley Labor governments compared to the Menzies Liberal-Country Party administration. In rethinking this dilemma, I find that, while the ALP administrations sought to retain Australia’s traditional links, the Menzies government eventually chose to align with America, even at the expense of its British ties.

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Notes

1Frederick Wood’s suggested sub-title for his article, “The Anzac Dilemma,” International Affairs 29, no. 2 (1953): 184.

2Wood, 184. It was initially given as a Chatham House address in December 1952 and published the following year.

3“An Open Letter to Mr Menzies,” The News, 3 June 1954, 1. Cartoon by The News’ Political Cartoonist, Norm Mitchell; copyright, Patricia Mitchell.

4SEATO was the South East Asian Treaty Organisation, signed in Manila in 1954. A mutual security pact, its signatories included Australia, Britain and America.

5Home became Foreign Secretary and then, in 1963–64 as Alec Douglas-Home, Prime Minister. Carrington was Foreign Secretary from 1979 to 1982. Dulles’s was the first visit by a U.S. Secretary of State. At this time no American President or British Prime Minister had ever visited Australia.

6Casey diary, 15 March 1957, MS 6150, Box 28, file 21, NLA.

7“Proposed Australian Questions in respect of United Kingdom Defence Proposals in South-East Asia,” Note from Worth to Brown, 15 March 1957, A1209 1957/1152: 151–157, NAA.

8Dulles, Statement, Opening Session, SEATO Council Meeting, 11 March 1957, John Foster Dulles papers, Box 353: 2, http://findingaids.princeton.edu/collections/MC016/c10489. Previously America had ensured that its Asia Pacific commitments were less than in NATO. The limited natures of ANZUS and SEATO compared to NATO are discussed in Chapters 7 and 9 respectively.

9“Defence Preparations Committee of Cabinet: Minutes of a meeting with Duncan Sandys,” Canberra, 26 August 1957, A5462/1, 12/1/3, NAA.

10Defence Committee “United Kingdom Proposals on Future of ANZAM” January 1958, A4940, C1962, part 1, NAA.

11Frank Bongiorno, “Comment: Australia, Nationalism and Transnationalism,” History Australia 10, no. 3 (2013): 79.

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12Gordon Greenwood and Norman Harper writing in the 1950s, Neville Meaney in the 1960s, W. J. Hudson, H. J. W. Stokes, Robert O’Neill and Meaney and Harper again in the 1980s, David Lee in the 1990s and Richard Herr in 2006 all use the phrase, “search for security” in describing the main theme of Australia’s policy in this period or more generally in the first half of the twentieth century. Greenwood and Harper, eds., Australia in World Affairs, 1950–1955 (Melbourne: F.W. Cheshire, 1957), v; Meaney, “Australia’s Foreign Policy: History and Myth,” Australian Outlook 23, no. 2 (1969): 173; Hudson & Stokes, eds., Documents on Australian Foreign Policy, 1937–49, vol. v (Canberra: Commonwealth of Australia, 1982), ix; O’Neill, Australia and the Korean War (Canberra, Australian War Memorial and Australian Government Publishing Service, 1981), 404; Meaney, Australia and the World: A Documentary History from the 1870s to the 1970s (Melbourne: Longman Cheshire, 1985), 37–42; Harper, A Great and Powerful Friend (Brisbane: University of Queensland Press, 1987), 149; Lee, Search for Security: The Political Economy of Australia’s Postwar Foreign and Defence Policy (St Leonards; Allen & Unwin, 1995); and Herr, “Australia, Security and the Pacific Islands,” The Round Table 95, no. 387 (2006): 705–716.

13Menzies, reported in the Sydney Morning Herald, 25 April 1950, 1.

14Joan Beaumont, “Making Australian Foreign Policy, 1941–69” in Beaumont, Christopher Waters, David Lowe, with Garry Woodard, eds., Ministers, Mandarins and Diplomats: Australian Foreign Policy Making, 1941–1969 (Melbourne: Melbourne University Press, 2003), 1. A decade later, Beaumont argued that it was “Not the Cinderella it Once Seemed” in Beaumont and Matthew Jordan, eds., Australia and the World: A Festschrift for Neville Meaney (Sydney: Sydney University Press, 2013), 3–14. However, since she makes her claim based on the 2011 online relaunch of the Historians of Australian Foreign Policy, 13–14 and its website is now not operational, it would seem that “Cinderella” is unfortunately still a good description. For the non-operational link, see http://www.australiaforeignrelations.org.au/.

15Peter Temin describes the decline of academic economic history in “The Rise and Fall of Economic History at MIT,” Massachusetts Institute of Technology Department of Economics Working Paper Series, Working Paper 13–11 (2013), http://ssrn.com/abstract=2274908. In contrast, Kenneth Lipartito describes economic history’s post-2008 revival in, “Reassembling the Economic: New Departures in Historical Materialism,” American Historical Review, 121, no. 1 (2016): 101–139 and Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (Princeton: Princeton University Press, 2016). Within Australia, recent examples include, Ian W. McLean, Why Australia Prospered: The Shifting Sources of Economic Growth (Princeton: Princeton University Press, 2013) and Simon P. Ville and Glenn Withers, eds., The Cambridge Economic History of Australia (Cambridge: Cambridge University Press, 2015).

16Lipartito, “Reassembling the Economic,” 105.

17Thomas Piketty, Capital in the Twenty-First Century (Cambridge: Belknap Press of Harvard, 2014), 17.

18James Belich, Replenishing the Earth: The Settler Revolution and the Rise of the Anglo-World, 1783–1939 (Oxford: Oxford University Press, 2009), 479–481.

19Cannot finance,” Brown to Menzies, 29 July 1952, A1209, 1957/5919, part 1 [Emphasis in the original]; “These fellows are tiresome” Brown to Menzies, 9 April 1952, A1209/23, 1957/5055, 2, both NAA.

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20For the Orthodox U.S. view see, for example, John Lewis Gaddis, The Cold War (New York: Penguin, 2005). For the Revisionist approach see, for example, William Appleman Williams, The Tragedy of American Foreign Policy (New York: Delta, 1971) and Joyce and Gabriel Kolko, The Limits of Power (New York: Harper & Row, 1972). An overview of the historiography is set out in Steven Hurst, Cold War US Foreign Policy: Key Perspectives (Edinburgh: Edinburgh University Press, 2005). Andrew Moravcsik outlined the same debate in Europe in, for example, “Charles de Gaulle and Europe: The New Revisionism,” Journal of Cold War Studies 14, no. 1 (2012): 53–77.

21Stuart Ward, Australia and the British Embrace: The Demise of the Imperial Ideal (Melbourne: Melbourne University Press, 2001), 260.

22See, for example, Ward, Australia and the British Embrace; James Curran, The Power of Speech: Australian Prime Ministers Defining the National Image (Melbourne: Melbourne University Press, 2004); David Goldsworthy, Losing the Blanket: Australia and the End of Britain’s Empire (Melbourne: Melbourne University Press, 2002); Neville Meaney, “Britishness and Australian Identity,” Australian Historical Studies 32, no. 116 (2001), 76–90 and “Britishness and Australia: Some Reflections,” The Journal of Imperial and Commonwealth History 31, no. 2 (2003): 121–135.

23Meaney, ed., Australia and the World, 29.

24Curtin, London City Corporation, 10 May 1944, quoted in Curran, The Power of Speech, 28.

25Chifley, Report to the Nation, 7 November 1948, quoted in Curran, 40.

26Menzies’s message to Rab Butler, British Chancellor of the Exchequer, 21 January 1952, A571, 1951/1723, part 2, NAA.

27Ward, Australia and the British Embrace, 22–24.

28Ward, 24–31.

29Queen Elizabeth II in Sydney, http://www.abc.net.au/archives/80days/stories/2012/01/19/3411411.htm.

30The Great White Fleet http://www.navy.gov.au/history/feature-histories/great-white-fleet’s-1908-visit-australia.

31Sydney Morning Herald, 12 November 2011, http://www.smh.com.au/national/lbj-came-all-the-way--but-few-followed-20111111-1nbrg.html.

32Thomas Harding, The House by the Lake (London: William Heinemann, 2015), 250.

33As Geoffrey Blainey observed, before 1954, “no British monarch and no leader of any major nation … had ever visited Australia. Likewise during the war, not one of the military and political leaders of the major allies … visited Australia.” Blainey, The Story of Australia’s People: The Rise and Rise of a New Australia (Melbourne: Penguin Random House, 2016), 323.

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34For example, contemporary commentators such as Geoffrey Serle, “Godzone: Austerica Unlimited?” Meanjin 26 no. 3 (1967): 237–250 and Richard White, “ ‘Combating Cultural Aggression’: Australian Opposition to Americanisation,” Meanjin 39 no. 3 (1980): 275–289 and Joseph Camilleri, Australian-American Relations: The Web of Dependence (Melbourne: Macmillan, 1980) and historians such as David McLean, “From British Colony to American Satellite?: Australia and the USA during the Cold War,” Australian Journal of Politics and History 52, no. 1 (2006): 73 and Roger Bell, “The American Influence” in Neville Meaney, ed., Under New Heavens: Cultural Transmissions and the Making of Australia (Sydney: Heinemann, 1989), 368.

35Roger Bell, Australia and the United States in the Twentieth Century: Essays in International History (Australia Research Institute, Curtin University of Technology, 2006), 234.

36John C. Ausland, “Thoughts on Australian-American Relations,” 11 August 1958, RG84, UD2034-C, Box 30, USNA.

37Ausland.

38Ausland.

39Greenwood, “Australian Foreign Policy in Action” in Greenwood and Harper, eds., Australia in World Affairs, 1956–1960 (Melbourne: F.W. Cheshire, 1963), 4.

40As suggested, for example, by Peter Edwards in “Foreign Policy, Defence and National Security” in J. R. Nethercote, ed., Menzies: The Shaping of Modern Australia (Redland Bay: Connor Court, 2016), 120; John Rickard, Australia: A Cultural History (Melbourne: Monash University Press, 2017), 195–197; and Bell, “The American Influence,” 362.

41See, for example, Tyler Cowen and Daniel Sutter, “Why Only Nixon Could Go to China,” Public Choice 97, no. 4 (1998): 605–615.

42Commonly attributed to Phil Graham, co-owner of the Washington Post, for example, http://www.slate.com/articles/news_and_politics/press_box/2010/08/who_said_it_first.html.

43Laurie Oakes, Foreword to Ross Fitzgerald and Stephen Holt, Alan “The Red Fox” Reid: Pressman Par Excellence (Sydney: New South, 2010), vii.

44Stephen Holt, Reid’s biography in the ABD, http://adb.anu.edu.au/biography/reid-alan-douglas-14435.

45“All Quiet on Churchill’s Peace Front,” The Sun, 31 May 1953, 34.

46“All Quiet on Churchill’s Peace Front.”

47For example, “Empire Loyalty,” The Sun, 1 November 1949, 14; “Australia’s Foreign Policy” The Sun, 4 July 1950, 13; and “Australia is Drifting Away,” The Argus, 31 January 1955, 2.

48Harold Cox, “Australia backs US on Indo-China. Risks clash with Britain,” The Herald, 28 April 1954, 1 (Also noted in Casey Diaries, 23 May 1954, Box 27, File 16, NLA). News Weekly, 18 August 1954, Casey papers, Box 51. Wood, “The Anzac Dilemma.”

49“All Quiet on Churchill’s Peace Front,” The Sun.

50Stuart Harris, “The Linking of Politics and Economics in Foreign Policy,” Australian Outlook 40, no. 1 (1986): 5–10.

51Lee, Search for Security, 167 and 1.

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52For example, L. G. Melville, “Report on London Discussions on Article VII, February-March, 1944,” Crawford papers, MS4514, Box 1; H. C. Coombs, “Commercial Policy: Issues for Australia,” 15 October 1945, A9816/1945/525, part 1; and Coombs to Chifley, 11 February 1947, “The Declining Position of the United Kingdom,” A1068/ER47/70/7 and M448, all NAA.

53Gianni Zappalà, “The Decline of Economic Complementarity: Australia and the Sterling Area,” Australian Economic History Review 34, no. 1 (1994): 5–21; Paul Robertson, “The Decline of Economic Complementarity? Australia and Britain, 1945–1952,” Australian Economic History Review 37, no. 2 (1997): 91–117; and Tim Rooth, “Imperial Insufficiency Rediscovered: Britain and Australia 1945–51,” Australian Economic History Review, 39, no. 1 (1999): 29–51.

54John Singleton and Paul Robertson, Economic Relations between Britain and Australasia 1945–1970 (Basingstoke: Palgrave, 2002), 2.

55J. G. Crawford, Australian Trade Policy 1942–1966: A Documentary History (Canberra: ANU Press, 1968), 8.

56David Lowe, Menzies and the “Great World Struggle”: Australia’s Cold War, 1948–1954 (Sydney: UNSW Press, 1999).

57Lowe, 20–21.

58Lowe, 183.

59These include, W. David McIntyre, Background to the Anzus Pact (Basingstoke: MacMillan Press, 1995); David McLean, “ANZUS Origins: A Reassessment,” Australian Historical Studies 24, no. 94 (1990): 64–82; DAFP, The ANZUS Treaty, 1951 (Canberra: Commonwealth of Australia, 2001); and Philip Dorling, The Origins of the Anzus Treaty: A Reconsideration (Adelaide: Flinders Politics Monographs, 1989).

60DAFP, The ANZUS Treaty, 1951.

61Ward, Australia and the British Embrace, 10–12.

62Jacques Le Goff (translated by Malcolm DeBevoise), Must We Divide History into Periods? (New York: Columbia University Press, 2015), 2–4.

63This period is covered briefly on pages 8–13 of Lee, Search for Security.

64There are many examples of this in addition to Lee, including David Day, The Politics of War: Australia at War 1939–1945 (Sydney: Harper Collins, 2003) and David Horner, High Command: Australia and Allied Strategy 1939–1945 (Sydney: Allen & Unwin, 1982) and other studies of Australia during the war including, for perfectly reasonable reasons, the Official War histories. Examples of starting after the war include the economic historians referred to above, Zappalà, Robertson, Rooth and Singleton and Robertson; and Douglas Copland and R. H. Barback, eds., The Conflict of Expansion and Stability: Documents relating to Australian Economic Policy 1945–52 (Melbourne: F. W. Cheshire, 1957) as well as diplomatic/political histories such as David Lowe, ed., Australia and the End of Empires: The Impact of Decolonisation in Australia’s Near North, 1945–1965 (Geelong: Deakin University Press, 1996) and David McLean, “Australia in the Cold War: a Historiographical Review,” The International History Review 23, no. 2 (2001): 299–321.

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65For example, David Day, ed., Brave New World: Dr H V Evatt and Australian Foreign Policy 1941–1949 (St Brisbane: University of Queensland Press, 1996); Christopher Waters, The Empire Fractures: Anglo-Australian Conflict in the 1940s (Melbourne: Australian Scholarly Publishing, 1995); and Stuart Macintyre, Australia’s Boldest Experiment: War and Reconstruction in the 1940s (Sydney: NewSouth Publishing, 2015).

66Roger Bell, Unequal Allies: Australian-American Relations and the Pacific War (Melbourne: Melbourne University Press, 1977), also his articles including “Australian-American Discord: Negotiations for Post-war Bases and Security Arrangements in the Pacific, 1944–1946,” Australian Outlook 27, no. 1 (1973): 12–33; “Australian-American Disagreement over the Peace Settlement with Japan, 1944–1946,” Australian Outlook 30, no. 2 (1976): 238–262 and “Australian-American Relations and Reciprocal Wartime Economic Assistance, 1941–6: An Ambivalent Association,” Australian Economic History Review, vol. 16 (1976): 23–49.

67Coral Bell, Dependent Ally: A Study of Australian Foreign Policy (St Leonards: Allen & Unwin, 1993).

68Bell, 2–3.

69Melanie Beresford and P. Kerr, “A Turning Point for Australian Capitalism, 1942–1952” in E. L. Wheelwright and Ken Buckley, eds., Essays in the Political Economy of Australian Capitalism, Volume 4 (Sydney: Australia & New Zealand Book Company, 1980), 148–171 and David Day, The Politics of War. More recently, this argument has largely been rejected, as per the consensus referred to at the start of this chapter and, for example, John McCarthy, “The “Great Betrayal” Reconsidered: An Australian Perspective,” Australian Journal of International Affairs 48, no. 1 (1994): 53–60; Deborah Gare, “Britishness in Recent Australian Historiography,” The Historical Journal 43, no. 4 (2001): 1145–1155; and Philip Bell & Roger Bell, “Cultural Shifts, Changing Relationships: Australia and the United States,” Australian Cultural History 28, no. 2–3 (2010): 283–297.

70Francine McKenzie, “Renegotiating a Special Relationship: The Commonwealth and Anglo-American Economic Discussions, September-December 1945,” The Journal of Imperial and Commonwealth History 26, no. 3 (1998): 71.

71Allister E. Hinds, “Sterling and Imperial Policy, 1945–1951,” The Journal of Imperial and Commonwealth History 15, no. 2 (1987): 165.

72Lee, Search for Security, 135–136.

73Claimed by both Percy Spender and Harry Truman to be a turning point. Spender in Roger Bell, “Shifting Alliances,” Australia and the United States in the Twentieth Century and Truman in O’Neill, Australia in the Korean War, 1950–53, 308.

74Robertson “The Decline of Economic Complementarity?” 110.

75Paul Robertson and John Singleton, “The Commonwealth as an Economic Network,” Australian Economic History Review 41, no. 3 (2001): 261–2 and Sandra Tweedie, Trading Partners: Australia and Asia, 1790–1993 (Sydney: University of New South Wales Press, 1994), 97–105.

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76“Turning Points in the Commonwealth?” The Observer, 29 December 1957: 4.

77Bongiorno, “Comment: Australia, Nationalism and Transnationalism.”

78Andrea Benvenuti, Anglo-Australian Relations and the “Turn to Europe,” 1961–1972 (Woodbridge: Boydell Press, 2008), 7–14.

79Peter Burke, “Introduction: Concepts of Continuity and Change in History” in The New Cambridge Modern History, Vol. XIII: Companion Volume (Cambridge: Cambridge University Press, 1979), 9–10.

80Randall Collins, “Turning Points, Bottlenecks, and the Fallacies of Counterfactual History,” Sociological Forum 22, no. 3 (2007): 247–269.

81McLean “From British Colony to American Satellite?” 68.

82For example, Parkes’s words at the 1890 Federation Conference, describing the ties, were echoed in calls of common kinship with Britain in 1914. https://maas.museum/inside-the-collection/2014/03/19/henry-parkes-and-the-crimson-thread-of-kinship/.

83Nelson Johnson to Roy Howard, 3 March 1943, Nelson T. Johnson papers, MSS27912, Box 42, LoC.

84Explained by, for example, Macintyre, Australia’s Boldest Experiment.

85Sir John Bunting, R G Menzies, A Portrait (Sydney: Allen & Unwin, 1988), 202.

86Bongiorno, “Comment: Australia, Nationalism and Transnationalism,” 82. More recently, Nick Richardson also emphasised the transitional nature of Australia’s 1950s in his book, 1956: The Year Australia Welcomed the World (Melbourne: Scribe, 2019).

Bibliography

Primary Sources

Australian Archives

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  Volume V: July 1941–June 1942.

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Beaumont, Joan, and Jordan, Matthew, eds. Australia and the World: A Festschrift for Neville Meaney. Sydney: Sydney University Press, 2013.

Beaumont, Joan, Waters, Christopher, Lowe, David with Woodard, Garry, eds. Ministers, Mandarins and Diplomats: Australian Foreign Policy Making, 1941–1969. Melbourne: Melbourne University Press, 2003.

Belich, James. Replenishing the Earth: The Settler Revolution and the Rise of the Anglo-World, 1783–1939. Oxford: Oxford University Press, 2009.

Bell, Coral. Dependent Ally: A Study of Australian Foreign Policy. St Leonards: Allen & Unwin, 1993.

Bell, Philip, and Bell, Roger. “Cultural Shifts, Changing Relationships: Australia and the United States.” Australian Cultural History 28, no. 2–3 (2010): 283–297.

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Bell, Roger. “Australian-American Discord: Negotiations for Post-war Bases and Security Arrangements in the Pacific, 1944–1946.” Australian Outlook 27, no. 1 (1973): 12–33.

Bell, Roger. “Australian-American Disagreement over the Peace Settlement with Japan, 1944–1946.” Australian Outlook 30, no. 2 (1976): 238–262.

Bell, Roger. “Australian-American Relations and Reciprocal Wartime Economic Assistance, 1941–6: An Ambivalent Association.” Australian Economic History Review 16 (1976): 23–49.

Bell, Roger. Unequal Allies: Australian-American Relations and the Pacific War. Melbourne: Melbourne University Press, 1977.

Bell, Roger. Australia and the United States in the Twentieth Century: Essays in International History. Australia Research Institute at Curtin University of Technology, 2006.

Benvenuti, Andrea. Anglo-Australian Relations and the “Turn to Europe”, 1961–1972. Woodbridge: Boydell Press, 2008.

Beresford, Melanie, and Kerr, Prue. “A Turning Point for Australian Capitalism, 1942–1952.” In Essays in the Political Economy of Australian Capitalism, Volume 4, edited by E. L. Wheelwright and Ken Buckley. Sydney: Australia & New Zealand Book Company, 1980: 148–171.

Blainey, Geoffrey. The Story of Australia’s People: The Rise and Rise of a New Australia. Melbourne: Penguin Random House, 2016.

Bongiorno, Frank. “Comment: Australia, Nationalism and Transnationalism.” History Australia 10, no. 3 (2013): 77–84.

Bunting, Sir John. R G Menzies, A Portrait. Sydney: Allen & Unwin, 1988.

Burke, Peter. “Introduction: Concepts of Continuity and Change in History.” In The New Cambridge Modern History, Vol. XIII: Companion Volume. Cambridge: Cambridge University Press, 1979.

Camilleri, Joseph. Australian-American Relations: The Web of Dependence. Melbourne: Macmillan, 1980.

Collins, Randall. “Turning Points, Bottlenecks, and the Fallacies of Counterfactual History.” Sociological Forum 22, no. 3 (2007): 247–269.

Copland, Douglas, and Barback, Ronald, eds. The Conflict of Expansion and Stability: Documents Relating to Australian Economic Policy 1945–52. Melbourne: F. W. Cheshire, 1957.

Cowen, Tyler, and Sutter, Daniel. “Why Only Nixon Could Go to China.” Public Choice 97, no. 4 (1998): 605–615.

Crawford, John Grenfell. Australian Trade Policy 1942–1966: A Documentary History. Canberra: ANU Press, 1968.

Curran, James. The Power of Speech: Australian Prime Ministers Defining the National Image. Melbourne: Melbourne University Press, 2004.

Day, David, ed. Brave New World: Dr H V Evatt and Australian Foreign Policy 1941–1949. Brisbane: University of Queensland Press, 1996.

Day, David. The Politics of War: Australia at War 1939–1945. Sydney: Harper Collins, 2003.

Dorling, Philip. The Origins of the Anzus Treaty: A Reconsideration. Adelaide: Flinders Politics Monographs, 1989.

Fitzgerald, Ross, and Holt, Stephen. Alan, “The Red Fox” Reid: Pressman Par Excellence. Sydney: New South, 2010.

Gaddis, John Lewis. The Cold War. New York: Penguin, 2005.

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Gare, Deborah. “Britishness in Recent Australian Historiography.” The Historical Journal 43, no. 4 (2001): 1145–1155.

Goldsworthy, David. Losing the Blanket: Australia and the End of Britain’s Empire. Melbourne: Melbourne University Press, 2002.

Gordon, Robert James. The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Princeton: Princeton University Press, 2016.

Greenwood, Gordon, and Harper, Norman, eds. Australia in World Affairs, 1950–1955. Melbourne: F.W. Cheshire, 1957 and Australia in World Affairs, 1956–1960 Melbourne: F W Cheshire, 1963.

Harding, Thomas. The House by the Lake. London: William Heinemann, 2015.

Harper, Norman. A Great and Powerful Friend. Brisbane: University of Queensland Press, 1987.

Harris, Stuart. “The Linking of Politics and Economics in Foreign Policy.” Australian Outlook 40, no. 1 (1986): 5–10.

Herr, Richard. “Australia, Security and the Pacific Islands.” The Round Table 95, no. 387 (2006): 705–716.

Hinds, Allister E. “Sterling and Imperial Policy, 1945–1951.” The Journal of Imperial and Commonwealth History 15, no. 2 (1987): 148–169.

Horner, David. High Command: Australia and Allied Strategy 1939–1945. Sydney: Allen & Unwin, 1982.

Hurst, Steven. Cold War US Foreign Policy: Key Perspectives. Edinburgh: Edinburgh University Press, 2005.

Kolko, Joyce, and Gabriel. The Limits of Power. New York: Harper & Row, 1972.

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Lee, David. Search for Security: The Political Economy of Australia’s Postwar Foreign and Defence Policy. St Leonards: Allen & Unwin, 1995.

Lipartito, Kenneth. “Reassembling the Economic: New Departures in Historical Materialism.” American Historical Review 121, no. 1 (2016): 101–139.

Lowe, David, ed. Australia and the End of Empires: The Impact of Decolonisation in Australia’s Near North, 1945–1965. Geelong: Deakin University Press, 1996.

Lowe, David. Menzies and the “Great World Struggle”: Australia’s Cold War, 1948–1954. Sydney: UNSW Press, 1999.

Macintyre, Stuart. Australia’s Boldest Experiment: War and Reconstruction in the 1940s. Sydney: NewSouth Publishing, 2015.

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McIntyre, William David. Background to the Anzus Pact. Basingstoke: MacMillan Press, 1995.

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 31→

McLean, David. “Australia in the Cold War: A Historiographical Review.” The International History Review 23, no. 2 (2001): 299–321.

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Meaney, Neville. “Britishness and Australia: Some Reflections.” The Journal of Imperial and Commonwealth History 31, no. 2 (2003): 121–135.

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Waters, Christopher. The Empire Fractures: Anglo-Australian Conflict in the 1940s. Melbourne: Australian Scholarly Publishing, 1995.

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1

The Dependent Dominion: Australia in 1941

“Australia is a British land of one race and one tongue.”1

Introduction

This chapter considers Australia’s ties to Britain before the Pacific War started in December 1941. It shows that, although real and numerous, when tested, many Anglo-Australian connections were to prove weak. Britain’s inability to aid Australia against Japan triggered the estrangement in 1942, but the fault-lines existed, albeit more faintly, before the outbreak of hostilities.

While Australia’s affinities with Britain were strong, the relationship had rested as much on Australian military and economic dependence on Britain as its innate sense of Britishness. American isolationism had amplified this reliance. Australian Prime Ministers regularly sought to establish security relationships with America in the form of a Pacific Pact, but all had been rebuffed. Indeed, as American diplomats reported, the U.S.-Australian relationship had deteriorated since their soldiers had fought together in 1918.

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The 1930s economic climate was a critical cause of this worsening relationship. Countries retreated to trade protectionism: Britain and her Dominions retaliated against the American Smoot-Hawley tariff by establishing a system of Imperial Preference at Ottawa in 1932. These steps created a bilateral trading system that significantly increased Anglo-Australian economic dependency. Before Ottawa, America’s share of Australia’s trade had been expanding at rates that, if continued, would have seen it replace Britain as Australia’s largest trading partner within twenty years. Ottawa reversed this trend, which only returned in the 1950s with the gradual re-establishment of multilateral trade. Establishing the historical context for the increased Anglo-Australian economic dependency in the 1930s illuminates why the changed economic and political conditions after the Second World War once again drew Australia closer to America.

Australia’s Britishness

Australia’s Britishness is a regular trope in commentaries of the half-century after Federation. John Curtin’s claim that Australia was a British land echoed his contemporaries and historians have highlighted it.2 Writing in 1930, Keith Hancock used the phrase usually credited an earlier Prime Minister, Alfred Deakin, to describe his countrymen, “among the Australians pride of race counted for more than love of country … defining themselves as ‘independent Australian Britons’ they believed each word essential and exact, but laid most stress upon the last.”3

Although, perhaps as an American mid-Westerner confusing English and British, Nelson Johnson, the American Minister in Australia, expressed a similar sentiment:

The Australian represents the purest type of Anglo-Irish-Welsh-Scotch. These people transplanted their culture, civilisation and habits of life to the Australian land … this people is [sic.] fundamentally jealous of its English heritage and may be expected … to give evidence of passionate loyalty to England and to the throne, and all that that symbolizes in the way of home, unity of culture and ancient heritage.4

Australia was undoubtedly culturally resolutely British throughout this period, but American determination to avoid political entanglement, together with Australia’s choices in the economic conditions of the 1930s, leading to bilateral trade and discrimination at the expense of multilateral links, only served to increase Australia’s British dependence. Consideration of these decisions shows how their subsequent reversal led to the changes in the Anglo-Australian and American-Australian relationships after 1941.

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While the strengths of Australia’s ties to Britain were apparent, the relationship’s weaknesses have been less considered but were to be equally important. Although Australians still inhabited, in Curtin’s words, “a British world of one race and one tongue” in 1941 and British heritage dominated not just Australia’s cultural but also political, economic and military links, this relationship was not as secure as Curtin’s claim would suggest. Carl Bridge has argued, “economically, socially and politically, Australia was firmly tied to the Empire in 1939.”5 The ties were real and numerous, but, when tested, many were to prove more ephemeral than firm. The Japanese threat and Britain’s inability to protect Australia caused Anglo-Australian separation in 1942, but the weaknesses already existed before the war. The relationship was built as much upon Australian dependency upon Britain as an innate sense of Britishness. This dependency was significantly due to the American adoption of isolationism and the Australian decision to seek economic security in bilateral trade ties with Britain in the 1930s.

Hancock foreshadowed the problem, suggesting that, as well as race, the historical strength of the Anglo-Australian link was based upon Australian “geographical policy of security” as:

Australia was not protected by a long, open frontier and the Monroe Doctrine. Depending on the British Navy (and the British money market) she could not but throw in her lot unreservedly with the British Empire, of which, after all, England was the head and cornerstone.6

By putting security and economics at the heart of Australia’s need for a protector, Hancock inadvertently portended the outcome when Britain could no longer provide either. Johnson’s report to President Roosevelt, written in 1942, and thus with the benefit of twelve additional years of experience, gave a sharper insight into the eventual weakness of Anglo-Australian links. Johnson argued that the relationship, although strong culturally and historically, had been ultimately based upon British strength: its ability to act as Australia’s protector and primary trading partner. Johnson explained that Australia’s “passionate loyalty to England” was logical when it could provide for Australia’s security and trade. Australia was “a country that has hitherto been secure and therefore able to develop its industries, both primary and secondary, to meet Empire needs,” but that, in the war, “Australia’s magnificent isolation took on a new meaning. It was cut off entirely from help from England; its cause was desperate. The United States suddenly took the place of the United Kingdom as Australia’s protector.”7

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A fundamental cause of this shift was the new American policy to act as Australia’s protector. Johnson did not explicitly articulate this to Roosevelt, but it was a radical change and enabled the Australian turn towards America. Since Federation, despite remaining racially and culturally British, Australia had regularly sought American security, particularly at times of rising tensions with Japan. However, America had just as regularly rejected any suggestion of an alliance or pact.

Australia’s economic behaviour had further hampered any possible U.S.-Australian rapprochement in the inter-war period. Although Australian trading and investment links with Britain remained strong, they had been declining since before Federation through to the 1920s. This trend was reversed in the 1930s depression, with the establishment of bilateral trading blocs and associated strong tariff walls. In America, Britain and the major European countries, “trade was channelled into self contained, regional, colonial and commercial blocs.”8 Britain and its Dominions established reciprocal Imperial Preference at the 1932 Ottawa conference. Australian trading links with America and Europe declined dramatically.9 Australia further exacerbated its poor trading relationship with America through its Trade Diversion policy. The rationale for this policy is considered below, but the U.S. reaction was entirely negative. Its Consul General, Thomas Wilson, described as “vicious,” discriminatory action, “unprecedented and more drastic than taken against American commerce by any other government no matter how strong or dictatorially governed.”10

The Impact of Ottawa

Australia had been economically dependent on Britain for over a century after white settlement; as shown in Table 1, as late as the end of the nineteenth century nearly three-quarters of Australian international trade remained with the United Kingdom. British exporters enjoyed preferred tariff rates, although free-trading Britain was unable to reciprocate.

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However, Britain’s share of Australian trade steadily declined in the early twentieth century with the development of multilateral trade. The United States (as a source of imports) and Western Europe and Japan (as export destinations) became increasingly important to Australia. Furthermore, American companies wishing to enter the Australian market realised that they could circumvent the Australian tariff wall by setting up local manufacturing operations. Kodak commenced making film in Australia in 1908, Kellogg’s packaged cereal and Ford assembling cars in 1925, General Motors took a controlling interest in its licenced vehicle body builder, Holden, in 1931, and Colgate-Palmolive, International Harvester, Coca-Cola and Heinz all commenced production in Australia.11

U.S. finance links grew too. After the First World War, Britain had encouraged Australia to turn to America for development finance. Despite initial Australian resistance, the City of London’s objection to what it described as Australia’s “excessive” borrowing led Queensland to become the first Australian government to borrow significant sums outside of London in 1921. In 1925, the Federal Government followed, again unwillingly and at British behest, and then New South Wales in 1927–28.12 Initially, Australian borrowing in the U.S. was reluctant, and there was a definite Australian preference to borrow in London when possible. Stanley Bruce, the Australian Prime Minister, told his British counterpart, Stanley Baldwin, “Australian public opinion [was] in favour [of] continuance [of] British finance.”13 However, Australia used competition between London and New York to negotiate pricing advantages in its loans.14 By July 1929, Australian Federal and State governments held 12% of their overseas debt outside London, but the recession closed the American window. In the 1930s, Federal governments focused on the conversion and refinance of existing debt and abstained from virtually all new external borrowings.15

The American assumption of market share from Britain had not been the result of any loss of Australian imperial sentiment; the 1920s witnessed the creation of the Empire Marketing Board that “proved a powerful instrument for creating voluntary preference.” Despite this, Australian trade with Britain continued to decline while the American share increased in this decade. As Wendy Way explained, “rhetoric was no counter to pragmatism.”16 Table 1 shows that Australian commerce with America and Western Europe expanded rapidly, doubling to over 30% of Australia’s trade by the late 1920s. However, the economic crisis of the 1930s led to countries building trade barriers to, as they believed, avoid importing unemployment. The 1930 American Smoot-Hawley Act significantly increased tariffs, particularly on agricultural products, so restricting Australian exports. In 1932, at Ottawa, Britain and the Dominions introduced Imperial Preference that, through its preferential tariffs, solidified Australian trade with Britain, reversing the diversification trend. In the 1930s Australian trade with Britain, America and Western Europe reverted to patterns previously seen before the First World War. Britain once again became Australia’s dominant trading partner.

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Table 1 Australian ​Trade 1892–1939

* Included within ROW

** France & Germany only

In the first three decades of the twentieth century, Australian trade had been developing at rates that, if continued, would have seen America replace Britain as its largest trading partner within twenty years. Graph 1 illustrates Australia’s trading patterns from 1892 to 1928 and, while recognising the danger of any projection, it extends the trend-lines of British (solid line) and American (dotted line) trade forward. This suggests American trade with Australia would have equalled British trade by 1939.

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Graph 1 Australian Trade Partners –1892–1928 and UK/U.S. Projected Trend-Lines to 1939

However, the impact of the Depression and the creation of bilateral trading blocs reversed the trend from Federation to the end of the 1920s. Britain and its Commonwealth, including Australia, entered into the Ottawa trade agreement to exchange tariff preferences with each other. Australian exports of primary products to Britain were advantaged; in return, imports of British manufactured goods into Australia received reduced tariffs. These preferences reinforced the development of the Sterling Area as a currency bloc. Because members of this bloc, which included Australia, conducted the majority of their trade in sterling, they chose to peg their currencies to the British pound, maintained their reserves in London and collectively pooled and rationed their hard currency usage, especially US dollars.19 Anglo-Australian trade reversed its steady fall and increased. Australian trade with other regions, particularly America and Western Europe, declined. Graph 2 illustrates the outcome.

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Graph 2 Australian Trade Partners –1892–1939

The pre-Ottawa trend only resumed in the 1950s when, reluctantly, the Menzies government accepted multilateralism. As explained in Chapter 9, Australia renegotiated Anglo-Australian commercial relations in 1956; within a decade, America overtook Britain as Australia’s largest trading partner.20

A further predictable outcome of the imposition of imperial preference in the 1930s was the deterioration of Australia’s relationship with America. Although Australia could, perhaps justifiably, claim that America had initiated the mutual trade barriers through the Smoot-Hawley Act, political consequences closely followed the economic deterioration. In 1908, the Admiral of the U.S. Great White Fleet, Charles Sperry, had told Deakin that the only real way that Australia could be sure of American military protection was to encourage American trade and investment in Australia.21 But this message was soon forgotten. As Carl Bridge and Bernard Attard noted, the Australian government showed a “ceaseless preoccupation with men, money and markets, which was usually more urgent than questions of security and defence” and “economic diplomacy … for long stretches completely dominated Anglo-Australian relations.”22

Australian economic diplomacy severely affected American-Australian relations too. America was vehemently opposed to Imperial Preference. Cordell Hull denounced Ottawa as “the greatest injury in a commercial way, that has been inflicted on this country since I have been in public life.”23 His Under-Secretary, Sumner Welles, claimed the “whole history of British Empire Preferences” was a “history of economic aggression” against America.24

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Until America and Australia were brought together by the Japanese attacks, economic differences continued to spoil the relationship. Australia had not only chosen Imperial Preference under the Ottawa Agreements but had positively discriminated against America through Trade Diversion, as explained below. Although this formally ended in 1938, its effect continued, resulting in a jaundiced view of Australia in the U.S. State Department. “There was a large undercurrent of resentment at what Australia has done” and Cordell Hull was “bitterly resentful of Australian perverseness.”25 As John Hickerson, Assistant Chief of European Affairs in the State Department explained, while America removed Australia from its trade “blacklist,” Australia failed to extend the same most favoured nation treatment to America that it offered to most European countries, so that, “prior to 3 September 1939 Germany received more favourable tariff treatment in Australia than the United States, as did Italy up to the Italian declaration of war on 11 June 1940.”26

This economic resentment mattered. Australian tariffs were not a simple commercial matter to be viewed through the prism of “low politics.” As Secretary of State, Cordell Hull had closely aligned U.S. economic policy with its foreign policy.27 He later explained this nexus in his memoirs, “with very few exceptions, the countries with which we signed trade agreements joined together in resisting the Axis. The political line-up followed the economic line-up.”28 Australia was one of the “very few exceptions.” Political relations with Australia were strained by not just the failure to sign a trade agreement but Australia’s active discrimination against America.

The Dependent Dominion

Ottawa and Trade Discrimination illustrate Bernard Attard’s description of Australia as “a dependent dominion.” Although Australian leaders negotiated within the imperial framework, they were ultimately unable to influence the terms of Australia’s trade, security and diplomatic relationships significantly and remained “reliant upon a continuing dependent relationship with Britain.”29

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Attard successfully integrates the “high politics” of Australian diplomacy with the “low politics” of its trade and economics and demonstrates that, before 1941, Australia was dependent upon Britain in both. Britain dominated Australian trade and investment and, due to market concentration and the commodity nature of Australia’s exports, it was unable to influence price; thus, Australia was a “price-taker.” The same was true for its security. Australians, occupying a vast continent with a limited population, a small tax-base and weak central government, believed they were unable to defend themselves and sought protection within the Imperial framework. Australia was a “security-taker” too.30

Attard applies the economic concept of dependency to both trade and security and thus facilitates an understanding of Australia’s position in terms of economic theory. Before American involvement in the Pacific War, Australia was dependent upon Britain and hence, effectively forced to take the “price” that Britain offered in trade, investment and security. A critical element of this dependency was the lack of any alternative for Australia, exacerbated by the circumstances of the 1930s when American political isolationism and the development of bilateral trading blocs enhanced Australia’s reliance upon Britain. Australia’s Trade Diversion policies from 1936 to 1938 illustrate its economic dependence upon Britain. Australia chose to actively discriminate against both its second-largest customer, Japan, and what had previously been its second-largest supplier, America, in favour of Britain.

Historians have debated the precise combination of factors in the Australian Diversion decisions. They have variously argued that it was an attempt to strengthen Australia’s bargaining position with Britain, an Australian concession to Britain enabling development of its “secondary industry to the detriment of British trade with Australia,” or the result of British pressure on Australia.32 Nevertheless, all have put the “paramount” importance of the British market at the centre of the anti-Japanese and American trade policies. This conclusion is consistent with Albert Hirschman’s theory of asymmetrical results of trade concentration upon different size countries.33 As shown by his concentration index (Table 2), after declining until the end of the 1920s, the smaller Australia’s export concentration increased significantly in the 1930s, thus increasing its political and economic dependence upon the larger Britain:

Table 2 Index of Australian Export Concentration 1913–1938

While this increasing economic reliance arose as Britain provided a sheltered market in the depression of the 1930s, Australia continued to seek an American alternative to its strategic dependence on Britain. As the American political commentator, Hartley Grattan noted in 1940:

←42 | 43→

The expectation of British aid in Australian defence is, after the trade and financial ties, the strongest material bond between the Commonwealth and Great Britain. Australia’s awakening to Britain’s weakness in the Pacific has done much to launch Australia on the course of developing a national policy in the Pacific … if she is not to stand alone, she must find her way into the American orbit … to afford some protection against the Japanese threat.34

However, this reaction to the approach of war in the Pacific in the late 1930s was not a new feature of Australian diplomacy. Australia’s reliance upon Britain was due to American unwillingness to play the role Australia sought for it within the Pacific as much as Australia’s own inherent Britishness. Contrary to its portrayal in subsequent accounts, John Curtin’s “look to America” was not an original idea.35 Indeed, it was part of a tradition of Australian Prime Ministers seeking an American alliance.

Australian Prime Ministers and America

While, historically, Australia had relied upon Britain for its security, its geographical isolation and Britain’s European entanglement diluted Australian confidence. Consequently, Australia, fearing its Asian neighbours, notably Japan, had sought the possibility of American protection from its earliest days. Australian Prime Ministers had regularly proposed an America alliance, usually expressed in the form of a Pacific Pact, whenever Australia felt the threat of Japan: following the 1904–5 Russo-Japanese War and, increasingly, in the 1930s and early 1940s. Deakin, Hughes, Lyons and Menzies, despite their own (and Australia’s) Britishness, had all “looked to America” before Curtin. They made these attempts in the face of British indifference or even outright opposition.

The conventional view of Australian-American relations in the period before Pearl Harbour overlooks these earlier Prime Ministerial attempts. This interpretation is encapsulated in the title of Raymond Esthus’s book, From Enmity to Alliance.36 Carl Bridge described it as “still the best book on US-Australian relationships in the 1930s.”37 However, by starting his account in 1931, Esthus portrays the 1930s enmity as natural, rather than a deviation from the more positive relationship that appears in a longer-term view. Australian pursuit of American military support had commenced soon after Federation.

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The 1902 Anglo-Japanese alliance exposed the contradiction between Britain’s global interests, with Japan as an ally, and Australia’s view of Japan as its primary threat. Despite British opposition, Deakin invited Theodore Roosevelt to send the Great White Fleet to Australia.38 Australia’s welcoming of American ships in 1908 underscored their feelings of racial empathy and regional vulnerability. The Sydney Morning Herald called the Fleet an expression of “the brotherhood of the Anglo-Saxon race,” claiming that, “America may be the first line of defence against Asia.”39 The following year, again to British opposition, Deakin proposed “an Agreement for an extension of the Monroe Doctrine to all the countries around the Pacific Ocean” to be supported by an American guarantee.40

Australian calls for American protection against Japan declined after the First World War. At the 1921 Imperial Conference, Billy Hughes’s abortive suggestion for a tripartite Pacific Pact had included America and Japan, while a further visit of the U.S. Fleet, in 1925, saw less fanfare than in 1908.41 However, Australian proposals for American assistance resumed as East Asian tensions increased fears of Japanese expansion. Joseph Lyons, Prime Minister from 1932, made two unsuccessful attempts at obtaining a U.S.-led Pacific Pact, firstly when he visited Washington in 1935 and then at the 1937 London Imperial Conference.42 Despite Hughes’s anti-American reputation, gained through his arguments with President Wilson at Versailles in 1919, by the late 1930s, he displayed an American affinity. As Minister for External Affairs, he opened the first direct Australian-American radiotelephone service, claiming bonds of kinship and aspiring to an even closer relationship, “what we are, you were; and what you are, we hope to be. We share a common heritage and love of liberty … On us, the people of the new world, much of the future of civilisation depends.”43

Robert Menzies succeeded Lyons as Prime Minister in April 1939. In 1940, German victories in Western Europe, leading to the fall of France, dramatically reduced the prospect of any British help to Australia against Japanese aggression. Accordingly, Menzies made three separate appeals for assistance to President Roosevelt, despite “Churchill and the other Dominion Prime Ministers [being] distinctly unenthusiastic.”44 As Peter Edwards argued, “it indicated a growing realisation in Australia that the strategic facts of life were pointing towards an increasing reliance on the United States for Australian security and, at least relatively, a decreasing dependence on Britain.”45

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Americans were also aware of Australia’s desire for protection. Even the strongly pro-isolationist Chicago Tribune commented in a November 1940 editorial entitled “Antipodes look to U.S.” that, “it seems clear, [they] are working hard to get a tieup with the United States.”46 However, Australia could only transfer its dependence if America was willing to act as a reliable ally. Before Pearl Harbour, it was not prepared to play that role. Australia finally established a legation in Washington at the beginning of 1940.47 The below Bulletin cartoon summarised Australian frustration at American isolationism. Australia’s first Minister, Richard Casey, is shown in the jungle, greeting his American host with the words, “Mr Livingalone, I presume.”48

In Darkest America. Source: The Bulletin, 17 January 1940

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Politicians as well as cartoonists held this view. In his first meeting with Casey, Roosevelt explained that, while America would readily respond to attacks on Canada and South America, “so far as Australia and New Zealand were concerned, the answer was that the element of distance denoted a declining interest on the part of the United States.”49

Australia’s dependency upon Britain was as much due to Australia’s inability to find acceptable choices as its acceptance of the constraints of the British World. As Neville Meaney argued, from before Federation, “Australia’s defence and foreign policy has been dominated by one idea -the search for security in the Pacific.”50 Although in this search, Australia turned most frequently to America, the Curtin government was equally prepared to seek Russian assistance in late 1941. While the historical focus on Curtin’s 27 December 1941 Melbourne Herald article has been upon its “look to America” (indeed, this is its usual short-hand title), it was much broader in its consideration of Australian allies and opportunities. A more radical idea it canvassed was the proposal that Australia seek Russian aid in its war against Japan.51

This suggestion was no idle mention. In an article of under a thousand words, Curtin referred to the prospect of Russian aid three times. His government had already pursued this diplomatically. In November 1941, it proposed not only an Australian trade and diplomatic mission to Russia but a guarantee that “any attack by Japan on Russia will be resisted by force by the British Commonwealth,” to be reciprocated by Russia “if Japan attacks in a southward direction.”52 It repeated this suggestion of reciprocal guarantees with Russia immediately before and after the Japanese attack on Pearl Harbour.53 Neither London nor Washington showed much enthusiasm for these approaches and Stalin rejected an American proposal that Russia actively co-operate in the war against Japan.54 Despite these rebuffs, the Australian government continued to pursue this idea, arguing that since “we believe we should bargain frankly for immediate Russian support against Japan… Attitude we are inclined to recommend is to accede to Stalin’s wishes as far as possible providing he undertakes to commence war against Japan in the near future.” They explicitly accepted that these wishes included Russian frontier claims in the West and the Far East.55

Russian disinterest has meant that these initiatives have been ignored; however, in contrast, historians quickly saw the ending of American isolationism as a first step towards the fracturing Australia’s ties of dependence upon Britain. The views of American diplomats in Australia also illustrate this change.

Australia through the Eyes of American Diplomats

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American diplomatic correspondence shows the shifting Australian relationships. While his predecessors’ reports outlined problematic relations with America, Nelson Johnson, arriving in September 1941, detected the possibility of real improvement.

Jay Pierrepont Moffat was the American Consul General, the then highest-ranking American official in Australia, from September 1935 to March 1937. At the beginning of his tenure, Australian had been attempting, unsuccessfully, to develop its diplomatic and economic ties to America. American rejections helped increase Australian dependency on Britain. As well as rebuffing Lyons’s proposed Pacific Pact, the American government also dismissed Australian suggestions of a trade treaty. Moffat’s initial instructions from Secretary of State, Cordell Hull, included a “hope that you will find opportunity to drop a hint in the right quarters that an agreement with Australia is not indicated in the near future.”56 Moffat passed on this message but, in return, was informed by Sir George Pearce, Minister for External Affairs, how Australian attitude had changed since the visits of the American fleet. He claimed that, “this feeling of comradeship and confidence had now almost entirely disappeared.”57 In addition to trade, Pearce listed concerns at American isolationism and indifference to Australian interests; its delays in entering the First World War and failure to join the League of Nations; its insistence on reducing British strength at the 1922 Treaty of Washington Naval Conference which Australia considered a real threat to her security; and “America’s increasing indifference to her Pacific obligations, as evidenced by her withdrawal from the Philippines.”58

Clarence Gauss commenced as the American Minister in Australia in July 1940. Before returning to America in March 1941, he complained “while the froth of words is poured out in America regarding Australia’s friendship for the United States, there are those who look in a practical, hard-headed way” and understand that it is “not very favourable.”59 He commented acidly on Australian-American economic relations, “there was little real attempt by Australia to deal favourably with certain outstanding questions of interest to this government.”60 Indeed, Australia and America had “most favoured nation” agreements with most trading partners, including Nazi Germany and Imperial Japan, but not each other. This agreement had to wait until February 1943.61

In contrast, when Johnson replaced Gauss, he was struck by how the impact of the economic recession of the 1930s and, particularly, the Japanese threat, were changing Australian attitudes. Reporting to Roosevelt, Johnson explained how Australia’s historical links with Britain, both economic and security, were threatened by recent events, “for a hundred years Australia has been carefully fostered by her leaders … as an economic adjunct of the United Kingdom. The new world will demand something more than this of Australia.”62

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He pointed to the linkage between Australia’s economic and strategic security and that, if Britain could not provide the latter, then this would undermine the former:

Corollary to the successful maintenance of this policy of Empire preference and high standards of living within Australia was the continued security of Australia from attack guaranteed by the Empire and by England. That security was proven false in December, 1941.63

While Australia’s strategic position was critical in the face of the Japanese threat, in the longer term, its economic security was equally important. Reflecting on this, Johnson commented on Australia’s economic position, its outlook after the war, and the potential implications for America. He told Stanley Hornibrook, the U.S. State Department Director of Far Eastern Affairs, of the considerable expansion in Australia’s “industrial establishment.” He explained that this, coupled with the need to provide employment, would lead to Australian import restrictions on British and American exporters, and noted that American investors would need to invest in Australian production rather than exporting finished goods.64

American aid to the British Commonwealth in the form of Lend-Lease had commenced in 1941. Johnson was aware of the esteem that Lend-Lease gave America in Australia but realised that this could quickly change, “just now Uncle Sam is in the ascendancy while Uncle Shylock has been shoved into the background.”65 Uncle Shylock had been used as a derogatory nickname for the United States during the inter-war period when it sought repayment of its First World War loans.66 He noted Australia’s economic dependence on Britain but perceptively discerned America replacing Britain in this role, “Australia lives like a parasite on the body of the Empire. At the moment there appears to be in process a movement intended to transfer its parasitic life from the United Kingdom to the United States.”67

Later in the same letter, Johnson referred to a cartoon in The Bulletin of an American cowboy in Australia with the sentiment, “The United States was taking over the protection of Australia.”68 He also noted “a good deal of resentment on the part of Australians against the attitude of the British in discouraging the growth of an industry here that might compete with British industry.”69 Johnson’s focus on economic and trade ties is important. He perceived the potential for American commerce and investment in Australia. He had last been in Australia in the 1920s, a period when U.S.-Australian trade links had been growing, before the changes wrought by the Depression, Imperial Preference and Trade Diversion, and possibly foresaw the prospect of a return to these earlier conditions.

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Conclusion

It is common to see the argument that the American and Australian economies as being not complementary since both export primary products.70 However, this assumes that Australia should try to run a balanced trade account with every individual country and, like Australia’s own Trade Diversion policy of 1936, fails to recognise that, ultimately, significant economic benefits come from specialisation and an acceptance that certain countries have natural advantages from which others can and should benefit. As early as the 1920s, and again in the 1950s, America provided the capital goods and surplus investment funds needed for Australian development. Arguably, it was political decisions in the 1930s and the late 1940s rather than any lack of economic complementarity that held the two countries apart. Sperry had pointed to the interlocking military and economic links; these were revealed during the Second World War when Lend-Lease and MacArthur’s troops both flooded into Australia and were rediscovered by the Menzies government in the 1950s. In the 1960s, America became Australia’s largest trading partner.71

Australian ties to Britain were undoubtedly abundant in 1941. However, at the political level, many of these links relied on Australian strategic and economic dependency upon Britain rather than kinship and race. Consequently, they proved to be weaker when this dependency was broken. America’s replacement of Britain as Australia’s protector in the face of the Japanese advances led to a military and strategic realignment based upon the need to defeat a common foe. But this initial rapprochement only lasted until American and Australian interests diverged again when the immediate threat faded.72

In contrast, the economic changes wrought by the war had the long-term effect of drawing Australia into the American orbit, despite attempts by the Curtin and Chifley governments to resist this pull. As will be explained in Chapter 2, these changes included America’s replacement of Britain as Australia’s primary trading partner; Britain’s economic decline relative to America and Australia; the development of Australia’s secondary industries reducing its trade complementarity with Britain; and the rise of the role of central government.

Notes

1Curtin, broadcast to Great Britain, 6 March 1941, JCPML00247/1, http://www.john.curtin.edu.au/audio/00247web.html.

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2For example, Carl Bridge and Bernard Attard, eds., Between Empire and Nation: Australia’s External Relations from Federation to the Second World War (Melbourne: Australian Scholarly Publishing, 2000); Meaney, “Britishness and Australian Identity,” 76–90; James Curran and Stuart Ward, eds., Australia and the Wider World: Selected Essays of Neville Meaney (Sydney University Press: Sydney, 2013); James Curran, Curtin’s Empire (Melbourne, Cambridge University Press, 2011); and Gare, “Britishness in recent Australian Historiography,” 1145–1155. British Australia was the subject of a special edition of History Australia in 2013 where, as Frank Bongiorno explained, there was “a large degree of consensus.” “Comment: Australia, Nationalism and Transnationalism,” 79.

3W. K. Hancock, Australia (London: Ernest Benn, 1930), 66.

4Johnson to President Roosevelt, 12 October 1942, 2–3, Johnson papers, Box 65.

5Carl Bridge, “Poland to Pearl Harbour” in Bridge, ed., Munich to Vietnam: Australia’s Relations with Britain and the United States since the 1930s (Melbourne: Melbourne University Press, 1991), 39.

6Hancock, Australia, 67.

7Johnson to Roosevelt, 12 October 1942, 15–16 and 23.

8Barry Eichengreen and Douglas A. Irwin, “Trade Blocs, Currency Blocs and the Reorientation of World Trade in the 1930s,” Journal of International Economics 38 (1995): 2.

9See Table 1.

10Wilson to Secretary of State, 15 January 1938. FRUS, 1938, The British Commonwealth, Europe, Near East, and Africa, Volume II, document 104.

11All other than Colgate-Palmolive: David Uren, Takeover: Foreign Investment and the Australian Psyche (Collingwood: Black Ink, 2015), 17, 53–54 and 64. Colgate-Palmolive: State Library of NSW, http://archival.sl.nsw.gov.au/Details/archive/110315738.

12Attard, “Financial Diplomacy,” in Bridge and Attard, eds., Between Empire and Nation, 117–120.

13Attard, 118–119.

14Kosmas Tsokhas, “Anglo-American Economic Entente and Australian Financial Diplomacy,” Diplomacy and Statecraft 5, no. 3 (1994): 620–641.

15Attard, “Financial Diplomacy,” 121–127.

16Wendy Way, “F L McDougall and Commodity Diplomacy,” in Bridge and Attard, Between Empire and Nation, 107.

17David Meredith and Barrie Dyster, Australia in the Global Economy: Continuity and Change (Cambridge University Press: Cambridge, 1999), 64 and 101.

18Meredith and Dyster, 64 and 101.

19Samuel Furphy, ed., The Seven Dwarfs and the Age of the Mandarins: Australian Government Administration in the Post-War Reconstruction Era (Canberra: ANU Press, 2015), 176.

20By 1966–68, the shares of Australia’s trade held by America, Britain and Japan were 19%, 18% and 16% respectively, Meredith and Dyster, Australia in the Global Economy, 187.

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21Sperry to Edith Sperry, 7 September 1908, quoted in Meaney, ed., Australia and the World, 174.

22Bridge and Attard, eds., Between Empire and Nation, 1–3.

23Hull quoted in R. N. Gardner, Sterling-Dollar Diplomacy in Current Perspective: The Origins and the Prospects of our International Economic Order (New York: Columbia University Press, 1980), 19.

24Callum A. MacDonald, “The United States, Appeasement and the Open Door,” in Wolfgang Mommsen and Lothar Kettenacker, eds., The Fascist Challenge and the Policy of Appeasement (London: George Allen & Unwin, 1983), 401.

25Moffat, January 1938, quoted in Harper, A Great and Powerful Friend, 80.

26Hickerson to Evatt, 23 April 1942, Johnson papers, Box 40.

27Gardner, Sterling-Dollar Diplomacy, 9.

28Hull, The Memoirs of Cordell Hull, Volume 1 (New York: Macmillan, 1948), 365.

29Attard, “Australia as a Dependent Dominion, 1901–1939,” Working Papers in Australian Studies, No. 115, Sir Robert Menzies Centre for Australian Studies, University of London (1999): 3.

30Attard, 13.

31Hirschman, 104.

32Tim Rooth, “Ottawa and After,” in Bridge and Attard, Between Empire and Nation, 146; A. T. Ross, “Australian Overseas Trade and National Development Policy 1932–1939: A Story of Colonial Larrikins or Australian Statesmen?” Australian Journal of Politics and History 36, no. 2 (1990): 185; and Ruth M. Megaw, “Australia and the Anglo-American Trade Agreement, 1938,” Journal of Imperial and Commonwealth History 3, no. 2 (1975): 204–205.

33Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1980). Hirschman focused on the political consequences of asymmetrical economic relationships between large and small states. He found that the asymmetrical trade relations benefited the larger country at the expense of the smaller.

34C. Hartley Grattan, “An Australian-American Axis?” First published in Harper’s Magazine (May 1940) in John Hammond Moore, ed., The American Alliance: Australia, New Zealand and the United States, 1940–1970 (Melbourne: Cassell, 1970), 28.

35James Curran outlines how, in popular mythology, Curtin is seen as the originator of Australia’s relationship with the United States, Curtin’s Empire, 1–6.

36Raymond A. Esthus, From Enmity to Alliance: U.S.-Australian Relations, 1931–1941 (Menasha, Wisconsin: University of Washington Press, 1964).

37Bridge, ed., Munich to Vietnam, 199.

38Russell Parkin and David Lee, Great White Fleet to Coral Sea: Naval Strategy and the Development of Australian-United States Relations, 1900–1945 (Canberra: DFAT, 2008).

39Roger Bell, “The American Influence,” Australia and the United States: Essays, http://australiaushistory.com/,144.

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40Deakin letter to British Colonial Secretary, Lord Crewe, 27 September 1909, quoted in Neville Meaney, “ ‘A Proposition of the Highest International Importance’: Alfred Deakin’s Pacific Agreement Proposal and its significance for Australian-Imperial relations,” Journal of Commonwealth Political Studies 5, no. 3 (1967): 211.

41Hughes’s Pact: T. B. Millar, Australia in Peace and War (Botany: Australian National University Press, 1991), 39. 1925 U.S. Fleet: Parkin and Lee, Great White Fleet to Coral Sea, 84–94.

42D. S. Bird, J. A. Lyons, The “Tame Tasmanian”: A Study in Australian Foreign and Defence Policy, 1932–39 (University of Melbourne PhD, 2004). 1935: 141–149 and 1937: 220–248.

43Hughes, 21 December 1938, Sydney Morning Herald, 22 December 1938, 10.

44Peter Edwards, “R. G. Menzies’s Appeals to the United States May-June, 1940,” Australian Outlook 28, no. 1 (1974): 69.

45Edwards, 69.

46Chicago Tribune editorial, 10 November 1940, 18.

47Announced in 1940, the process began in 1938, Esthus, From Enmity to Alliance, 68–69.

48Cartoon by Norman Lindsay, The Bulletin, 17 January 1940, 7, http://nla.gov.au/nla.obj-592080547; copyright, A., C. and H. Glad.

49R. G. Casey, Personal Experience 1939–46 (Constable: London, 1962), 10.

50Neville Meaney, “Australia’s Foreign Policy: History and Myth,” Australian Outlook 23 (1969): 173.

51Curtin, “The Task Ahead,” published in The Herald (Melbourne), 27 December 1941.

52War Cabinet submission by Evatt and Curtin to Cranborne, both 4 November 1941, Documents on Australian Foreign Policy 1937–49 (DAFP), Vol. V (Canberra: Commonwealth of Australia, 1982), documents 96 and 97.

53Commonwealth Government to Cranborne, 2 and 11 December 1941, DAFP, Vol. V, documents 153 and 179.

54Page to Curtin, 11 December 1941 and Casey to Curtin and Evatt, 14 December 1941, DAFP, Vol. V, documents 183 and 192.

55Curtin to Cranborne, 22 December 1941 and Commonwealth Government to Attlee, 5 March 1942, DAFP, Vol. V, documents 212 and 390.

56Secretary of State to the Consul General at Sydney, 23 September 1935, FRUS, 1935, The British Commonwealth; Europe, Volume II, document 14.

57Moffat’s diary quoted in Nancy Harvison Hooker, ed., The Moffat Papers (Cambridge: Harvard University Press, 1956), 129.

58Hooker, 129.

59Gauss to State Department, 14 January 1941, quoted in Bridge, Munich to Vietnam, 48–49.

60Robert Stewart to Gauss, October 1941 and Gauss, May 1941, quoted in Harper, A Great and Powerful Friend, 94–95.

61Bridge, Munich to Vietnam, 49.

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62Johnson to Roosevelt, 12 October 1942, 26.

63Johnson to Roosevelt, 22–23.

64Johnson to Stanley Hornibrook, 25 September 1941, Johnson papers, Box 65.

65Johnson to Stewart, 15 September 1941, Johnson papers, Box 39.

66For example, Benjamin D. Rhodes, “Reassessing “Uncle Sherlock”: The United States and the French War Debt, 1917–1929,” Journal of American History 55, no. 4 (1969): 787–803 and Liaquat Ahamed, Lords of Finance: The Bankers who Broke the World (London: Penguin, 2009). Chapter 7, on the U.S. role in the impact of the WW1 debts, is entitled “Uncle Sherlock.”

67Johnson to Hornibrook, 21 January 1942, Johnson papers, Box 65, LoC.

68Johnson to Hornibrook. Cartoon in The Bulletin, 4 February 1942, 7, http://nla.gov.au/nla.obj-532562224.

69Johnson to Hornibrook, 25 February 1942, Johnson papers, Box 65.

70See, for example, Carl Bridge, “Relations with the United States” in Bridge and Attard, eds., Between Empire and Nation, 173.

71By 1966–68, the share of Australia’s trade held by America and Britain were 19% and 18% respectively. Meredith and Dyster, Australia in the Global Economy, 187.

72See, for example, David Day, “Pearl Harbour to Nagasaki,” in Bridge, ed., From Munich to Vietnam, Bell, Unequal Allies, 144–172 and John Robertson, Australia at War 1939–1945 (Melbourne: William Heinemann, 1981), 163–167.

Bibliography

Primary Sources

Australian Archives

Department of Foreign Affairs and Trade (DFAT), online, https://dfat.gov.au/about-us/publications/historical-documents/Pages/historical-documents.aspx

Documents on Australian Foreign Policy (DAFP):

Volume V: July 1941–June 1942.

State Library of NSW, online, http://archival.sl.nsw.gov.au

United States of America Archives

Department of State, online https://history.state.gov/historicaldocuments

Foreign Relations of the United States (FRUS) series:

  1935, The British Commonwealth; Europe, Volume II.

  1938, The British Commonwealth, Europe, Near East, and Africa, Volume II.

Library of Congress, Washington DC

Nelson T. Johnson papers, MSS 27912.

←53 | 54→

Published Diaries and Memoirs

Casey, Richard Gavin Personal Experience 1939–46. London: Constable, 1962.

Hooker, Nancy Harvison, ed. The Moffat Papers. Cambridge: Harvard University Press, 1956.

Hull, Cordell. The Memoirs of Cordell Hull, Volume 1. New York: Macmillan, 1948.

Newspapers

Australian: Online, via Trove, https://trove.nla.gov.au

Sydney Morning Herald.

The Herald (Melbourne).

Other

Chicago Tribune, https://chicagotribune.newspapers.com

The Bulletin, via NLA, http://nla.gov.au/nla.obj-68375465

Secondary Sources

Ahamed, Liaquat. Lords of Finance: The Bankers Who Broke the World. London: Penguin, 2009.

Attard, Bernard. “Australia as a Dependent Dominion, 1901–1939.” Working Papers in Australian Studies No. 115, Sir Robert Menzies Centre for Australian Studies, University of London (1999).

Bell, Roger. “The American Influence.” Australia and the United States: Essays. http://australiaush-istory.com/.

Bell, Roger. Unequal Allies: Australian-American Relations and the Pacific War. Melbourne: Melbourne University Press, 1977.

Bird, David Samuel. J. A. Lyons, the “Tame Tasmanian”: A Study in Australian Foreign and Defence Policy, 1932–39. University of Melbourne PhD thesis, 2004.

Bongiorno, Frank. “Comment: Australia, Nationalism and Transnationalism.” History Australia 10, no. 3 (2013): 77–84.

Bridge, Carl, ed. Munich to Vietnam: Australia’s Relations with Britain and the United States since the 1930s. Melbourne: Melbourne University Press, 1991.

Bridge, Carl, and Attard, Bernard, eds. Between Empire and Nation: Australia’s External Relations from Federation to the Second World War. Melbourne: Australian Scholarly Publishing, 2000.

Curran, James. Curtin’s Empire. Melbourne: Cambridge University Press, 2011.

Curran, James, and Ward, Stuart, eds. Australia and the Wider World: Selected Essays of Neville Meaney. Sydney: Sydney University Press, 2013.

Edwards, Peter. “R. G. Menzies’s Appeals to the United States May-June, 1940.” Australian Outlook 28, no. 1 (1974): 64–70.

Eichengreen, Barry, and Irwin, Douglas A. “Trade Blocs, Currency Blocs and the Reorientation of World Trade in the 1930s,” Journal of International Economics 38 (1995): 1–24.

Esthus, Raymond A. From Enmity to Alliance: U.S.-Australian Relations, 1931–1941. Seattle: University of Washington Press, 1964.

Furphy, Samuel, ed. The Seven Dwarfs and the Age of the Mandarins: Australian Government Administration in the Post-War Reconstruction Era. Canberra: ANU Press, 2015.

←54 | 55→

Gardner, Richard Newton. Sterling-Dollar Diplomacy in Current Perspective: The Origins and the Prospects of our International Economic Order. New York: Columbia University Press, 1980.

Gare, Deborah. “Britishness in Recent Australian Historiography.” The Historical Journal 43, no. 4 (2001): 1145–1155.

Hammond Moore, John, ed. The American Alliance: Australia, New Zealand and the United States, 1940–1970. Melbourne: Cassell, 1970.

Hancock, William Keith. Australia. London: Ernest Benn, 1930.

Harper, Norman. A Great and Powerful Friend. Brisbane: University of Queensland Press, 1987.

Hirschman, Albert Otto. National Power and the Structure of Foreign Trade. Berkeley: University of California Press, 1980.

Meaney, Neville. ‘ “A Proposition of the Highest International Importance’: Alfred Deakin’s Pacific Agreement Proposal and Its Significance for Australian-Imperial Relations.” Journal of Commonwealth Political Studies 5, no. 3 (1967): 200–213.

Meaney, Neville. “Australia’s Foreign Policy: History and Myth.” Australian Outlook 23, no. 2 (1969): 173–181.

Meaney, Neville, ed. Australia and the World: A Documentary History from the 1870s to the 1970s. Melbourne: Longman Cheshire, 1985.

Meaney, Neville. “Britishness and Australian Identity.” Australian Historical Studies 32, no. 116 (2001): 76–90.

Megaw, Ruth M. “Australia and the Anglo-American Trade Agreement, 1938.” Journal of Imperial and Commonwealth History 3, no. 2 (1975): 191–211.

Meredith, David, and Dyster, Barrie. Australia in the Global Economy: Continuity and Change. Cambridge: Cambridge University Press, 1999.

Millar, Thomas Bruce. Australia in Peace and War. Botany: Australian National University Press, 1991.

Mommsen, Wolfgang, and Kettenacker, Lothar, eds. The Fascist Challenge and the Policy of Appeasement. London: George Allen & Unwin, 1983.

Parkin, Russell, and Lee, David. Great White Fleet to Coral Sea: Naval Strategy and the Development of Australian-United States Relations, 1900–1945. Canberra: DFAT, 2008.

Rhodes, Benjamin. “Reassessing ‘Uncle Sherlock’: The United States and the French War Debt, 1917–1929.” Journal of American History 55, no. 4 (1969): 787–803.

Robertson, John. Australia at War 1939–1945. Melbourne: William Heinemann, 1981.

Ross, Andrew T. “Australian Overseas Trade and National Development Policy 1932–1939: A Story of Colonial Larrikins or Australian Statesmen?” Australian Journal of Politics and History 36, no. 2 (1990): 184–204.

Tsokhas, Kosmas. “Anglo-American Economic Entente and Australian Financial Diplomacy.” Diplomacy and Statecraft 5, no. 3 (1994): 620–641.

Uren, David. Takeover: Foreign Investment and the Australian Psyche. Collingwood: Black Ink, 2015.

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Part II

Estrangement

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2

The War Economy

“All wars … involve revolutionary processes which tend to hasten movements within the social framework.”1

Introduction

This chapter does not seek to provide a full account of the Australian economy in the Second World War –this has already been written by the Official Historians, the Deputy Director of the Department of War Organisation of Industry (DWOI) and within stand-alone accounts in other histories of the war.2 What this chapter attempts is more trans-disciplinary: to explain the effects of Australia’s wartime economic changes upon its diplomatic relationships, especially with Britain and America.

←59 | 60→

These were not the only post-war transformations. However, they had a significant bearing on Australian foreign policy. Despite this, like much economic history, their effects are regularly overlooked. Instead, accounts of the period tend to emphasise the high politics of strategy or military or cultural impacts of war.3 In February 1942, the surrender of Singapore, the bombing of Darwin and fears of an imminent Japanese invasion threw Australia into crisis. Even so, the War Cabinet found the time to consider and accept the implications of American demands for general relaxation of trade barriers as a result of Article VII of the Mutual Aid Agreement.4 Consideration of economic factors should be equally to the fore in our understanding of the period.

Australian economic historians have underlined the importance of the Second World War to their field, calling it variously, “the point in Australian economic history when the nation arguably came of age,” “a watershed in Australia’s dependence on foreign capital” and “a critical break in Australian economic development.”5 As this book argues, accounts of this era overemphasise turning points and watersheds. However, four critical changes acted separately and cumulatively to start pulling Australia away from its economic reliance upon Britain for trade and investment, towards the United States. These events occurred during the war but had an ongoing impact. They also significantly influenced Australia’s overall relationships with both countries; as Roger Bell observed in Unequal Allies, “political, military and economic affairs were interrelated and largely complementary aspects of relationships between Australia and the US during the war and preliminary post-war planning in the Pacific.”6

The first change was Australia’s increase in trade with America, mainly replacing Britain. In the late 1930s, Britain accounted for nearly half of Australia’s external trade, almost four times the American share.7 The war caused an immediate fall in Anglo-Australian commerce due to British need for its own manufactures and the difficulties of war-time transport, and an increase in U.S. trade, especially in the form of Lend-Lease. America quickly became Australia’s principal source of both war and civil supplies; by 1943–44, it contributed more than twice the volume of war supplies as Britain, and the largest proportion of Australian civil imports. This period also sowed seeds of long-term change as, at American insistence, the price for Mutual Aid assistance was an eventual ending of Imperial Preference.

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Australian industrial expansion, both during the war and as a critical goal of post-war reconstruction, was the second difference. Since its earliest days, Australia’s position within the Empire’s economic system had been to export primary products to Britain and, in return, take British manufactured goods.8 However, during the war, production by Australia’s secondary sector surpassed primary for the first time. As late as 1937–38, the value of Australian primary production exceeded secondary by 10% in value; by 1944–45 not only had this been reversed, but the output of the secondary sector was 30% greater than primary industry.9 Although tensions had arisen, historically the British and Australian economies had been complementary.10 During the war, this harmony began to break down.11

The third change was the overall impact of the war on the relative economic stature of the American, British and Australian economies. Historians have regularly observed that the Second World War made the United States a global superpower and nearly bankrupted Britain.12 The reversal in the Anglo-Australian economic relations has been less frequently noted. Unlike Australia’s experience in the 1914–18 war, the Second World War acted as a positive boost to its economy: it built new industries, developed new trade links and was able to reduce its foreign debt. As Kosmas Tsokhas explained, “the war stimulated domestic industrialization and disrupted the system of imperial preference, especially with the introduction of lend-lease between Australia and the US. Reliance on the London capital market was substantially reduced and domestic borrowing became more important.”13

Despite attempts, especially by the Chifley governments in the late 1940s, to rebuild the old economic relationships between Australia and Britain, London could no longer provide sufficient capital or equipment for Australian development. But America could. Consequently, as Arthur Fadden told the Commonwealth Conference in January 1952, “under present day conditions we are forced increasingly to look to the United States.”14

The fourth factor was the increasing role played by the Federal Government, both generally and in economic affairs. Despite the failure of the 1944 referendum to codify the increase in Federal government powers into the constitution, the larger and more active role taken by Canberra during the war continued after 1945. The crisis of war had required an increased involvement; its perceived success led to a belief that this was needed in peacetime to avoid repeating the failures and mass unemployment of the inter-war period. Furthermore, not only was Australian government larger, but its increased involvement in economic planning and control inextricably led to more linkage between its roles in managing the economy, trade and international relations. When Australia needed American investment for its development programs, this led to political and diplomatic entanglement too. As Percy Spender, then Australian Ambassador in Washington, reminded Menzies in 1952, “it is not possible in the complex world in which we live to segregate economic policy from foreign policy.”15 It is also a reason why this book focuses on the role played by the Australian government in the economy and foreign policy, rather than broader cultural and societal factors.

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U.S. Trade and Article VII

John Curtin had signalled Australian reliance upon America in his “look to America” statement.16 While Australia’s most apparent needs at the end of 1941 were military, the disruption of the sea-lanes and Britain’s situation meant that Australia, in common with other Commonwealth countries, also sought American imports, both military and civil. Curtin complained of poor American support and supply, claiming “the United States production program is in a state of chaos” and outlining his frustrations regarding “his plea for aid.”17 In reality, American aid was forthcoming. By 1943–44, the United States was the principal external source of Australian war supplies and civil imports. Its share of the latter, £26 million, had increased by 77% since 1938–39, while civil imports from Britain had fallen 43% to £23 million. Although Britain continued to have the first call on Australian exports and was still the largest export destination, by 1943–44, its share of Australian exports had fallen by 43% to £31m compared to an increase in exports to America of 45% to £23m.18

The war disrupted existing trade flows and demonstrated American potential, not only as Australia’s military protector, but also as a supplier and a possible market for Australian goods. Contemporary observers recognised the potential long-term consequences. Writing in 1944, Ronald Walker, the Deputy Director of DWOI, explained:

The war-time change in the sources of civil imports might well be of lasting significance. On the one hand, many Australian importers, who had previously looked to the United Kingdom for their supplies, were now forced to comb the United States for suitable goods. On the other hand, many American manufacturers who had not previously sold to Australia began to develop an interest in the new markets to which they were introduced by direct inquiries or lend-lease … Whereas imports of American war supplies might be expected to cease after the war, these civil imports might be the nucleus for a considerable expansion, in the absence of specific restrictions.19

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The changing pattern of trade was not the only significant development. America provided much of its assistance to Britain and the Commonwealth through Lend-Lease (Mutual Aid). Under Article VII of the Mutual Aid Agreement, Commonwealth members accepted the elimination of discrimination in international trade and, arguably, the various bilateral provisions of the Ottawa Agreement. Having encouraged Britain to sign in February 1942, Australia signed a parallel Mutual Aid Agreement with the U.S. in September 1942.20

Economic historians place different weight on the impact of Article VII as opposed to the wartime trade patterns changes. John Crawford, Secretary to the Department of Commerce and Agriculture and later Trade, argued, “the real story of the post-war period stems from acceptance of Article VII, for this committed the country to the course of international collaboration.”21 Although the journey was winding, and Crawford accepts that, as late as 1948, Australia followed dual systems of bilateral trade in respect of Ottawa and multilateral under the General Agreement on Trade and Tariffs (GATT), “such movement as there has been since … has been further away from the Ottawa system.” Crawford uses “retreat from Ottawa” as a major theme of the period in his analysis of Australian trade relationships.22 By contrast, in The Australian Economy in the Long Run, Rodney Maddock and Ian McLean claim, “war also distorted the foreign influences on the economy…. It was in the war period that Australians learned to look to the USA rather than the UK.”23 However, these were mutually reinforcing elements. Both attracted Australia into the American orbit, which led Australia to multilateral trade and the increasing replacement of Britain with America and its post-war ally, Japan, as trading partners.

Acceptance of multilateralism was critical in loosening Anglo-Australian economic links. The inter-war period had demonstrated both the impact of freer multilateral trade and its later reversal through the Ottawa bilateral agreements. Table 3 overleaf has been extended from the period analysed in Chapter 1. It includes the war years and both the late-1940s and 1950s. The early 20th-century multilateralism had resulted in a steady decline in Anglo-Australia trade; American imports and exports to Japan became increasingly significant in the 1920s. But this was reversed by the impact of Imperial Preference in the 1930s and again in the late 1940s when Britain’s share increased. The gradual return to multilateral trade in the 1950s saw the resumption of the long-term trend of Australian trade with Britain, America and Japan. It also illustrates how the war had partially foreshadowed this change when, with the American replacement of British trade, it had briefly become Australia’s leading partner.

However, multilateralism and the relationship America were not the only factors changing Australian trade. The expansion of its secondary industries also altered the composition of the Australian economy.

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Table 3 Australian Trade 1892–1959

Industrial Expansion

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War demands boosted Australian industrial production. Post-war reconstruction further accelerated this change. The context for reconstruction was the 1930s Depression as well as Japanese wartime attacks; policymakers believed a larger, more industrialised Australia would provide security against both threats. Significant increases in Australia’s population and its manufacturing sector would provide the men and material against future invaders, while a more diversified economy would create more jobs and offset the price fluctuations that had plagued the primary sector in the 1930s. The performance of the Australian economy, particularly manufacturing, during the war, strengthened this belief. Despite the expansion of the Australian armed forces to 700,000, manufacturing employment increased by over a third to 750,000.25 Andrew Ross’s claim, in Armed and Ready, that Australia was not saved by America, “rather it saved itself,” would have been considered an exaggeration at the time. However, it is clear, as the Vernon Report noted, “increased productive capacity, new skills and technologies and the confidence acquired during the forced wartime expansion provided the basis for postwar industrial growth.”26

The increasing expansion of Australian secondary industries began to undermine its complementary trade relationship with Britain as a provider of primary products and importer of manufactured goods. Australia would both supply less of the former and take less of the latter. As Robert Holland explained, the Imperial Preference embedded in the Ottawa Agreement was effectively, “a mechanism which could provide a trading unit in which the traditional specialisations of function between ‘old’ and ‘new’ countries remained reasonably intact.”27

London based its view of the economics of its Commonwealth and Empire on this concept of complementarity. As late as 1950, Arthur Lewis had noted that the Colonial Office still had “the mystical view that the Almighty meant some countries to specialize in manufactures and others on agriculture.”28 Australian rejection of this role in favour of increasing industrialisation acted to undermine Imperial Preference and, with it, Australia’s close economic relationship with Britain. This shift had started before the war, the 1938 Anglo-Australian Agreement accepted Australia’s need to industrialise, and took at least a decade to emerge fully with the renegotiation of Ottawa in 1956. However, the events of the war strongly reinforced the change. As Ronald Walker observed, Australian development, industrialisation, immigration and reduced reliance upon trade with Britain were inter-related:

The course of the war had demonstrated the supreme importance of industrial strength, and had revealed Australia’s greatest weakness to be its small population. If the Australian population were to increase rapidly … there would be all the greater need for development works and for continuation in the process of industrialization. It would, therefore, tend to make Australia more self-sufficient and more heavily industrialized.29

Britain’s predicament partially drove Australia’s increasing self-sufficiency in manufacturing. Britain moved to strictly limit the export of metals, including steel and tinplate, during 1940.30 This constraint, together with its May 1941 restrictions on the export of iron and other related products such as metal-cutting tools, insulated wire cabling and wireless valves, meant supply was insufficient for Australian needs.31 Total British exports of iron and steel collapsed to a quarter of their 1938 volume by 1941 and just 7% of their pre-war total in 1943.32 Overall British exports fell to below a third of their pre-war level.33

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One result of this fall, in addition to the increased trade with America, was that Australia had to expand its own industries to replace what it had previously imported from Britain. It did so successfully. The wartime cost of producing Australian steel compared “favourably with those in any country in the world.”34 The direct needs of war industries also played a part. As well as the construction of a major new repair dock at Garden Island in Sydney, Australia’s need to supply its own and U.S. forces led to a rapid expansion in other manufacturing industries, especially chemicals, textiles and food preservation.35 By December 1943, America had 323,000 troops in the South West Pacific Area.36 Under Reverse Lend-Lease Australia provided “extensive clothing manufacture for the United States forces” and the “bulk of their foodstuffs.”37

This was not the first time that war had stimulated the Australian economy. The absence of imported manufactured goods during the First World War had resulted in an expansion of Australian secondary industries. Australian politicians had been impressed by the results, especially employment, and were reluctant to see them wither. The Massy-Greene tariff of 1921 had been introduced to support these new industries. Later inter-war Australian governments pursued similar development policies. During the 1930s, manufacturing employment increased from 18% of the workforce to 23%.38 Perhaps over-applying the Chifley and Menzies administrations’ development focus back to this period, Andrew Ross even argues of the 1930s Lyons government’s determination to expand manufacturing:

This national development policy was based on the realization that only an enhanced secondary industry could provide the employment opportunities necessary to attract a larger population. This population increase in turn was required to provide a large domestic market for primary products and a greater degree of defence security.39

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Nonetheless, the wartime Financial and Economic Committee concluded, in arguing the post-war importance to Australia of its secondary industries, much had already been achieved.40 They were also aware that Britain, as well as America, potentially opposed Australia’s secondary industries’ growth. Britain had already shown its reluctance to accept Australia’s industrialisation in 1938.41 America’s proposed post-war trade liberalisation also threatened Australian use of tariffs to protect its industrial sector. In return for assisting the British Commonwealth through Lend-Lease, America had required, in Article VII of its various Mutual Aid agreements with Britain and its Dominions, “provision for agreed action … to the elimination of all forms of discriminatory treatment in international commerce; and to the reduction of tariffs and other trade barriers.”42

While the Allies differed on the precise meaning of this phrase, America certainly intended it to reduce tariff barriers and end the Ottawa Agreement’s Imperial Preference.43 The State Department’s 1945 Policy Paper stated that, despite its desire to maintain the closest ties of friendship with Australia and New Zealand, “the United States will endeavour to persuade both Dominions to follow a broadly balanced post-war economic policy which would include a liberal non-discriminatory trade policy and would discourage the development of uneconomic industries in either Dominion.”44

These “uneconomic industries” were likely to include the newly created results of Australian industrial expansion. During the war, Curtin had complained about attempts to relegate Australia to being the “hewer of wood and carrier of water.”45 Australian policymakers wanted a more significant role based on industrial development behind tariff barriers.

Nelson Johnson had foreseen this problem and warned, “if we blot Australia out, economically or industrially, we will have sacrificed the only white center… upon which we can depend in maintaining stability in the Pacific.”46 In the immediate aftermath of the war, his advice was ignored. This attitude served as another impediment to American-Australian relations until, as explained in Part IV, the Menzies administration entwined development with national security in the Cold War.

Changing Relative Stature of the American, British and Australian Economies

The Second World War boosted the American and Australian economies: both grew significantly and reduced their government foreign currency debt. The Australian economy grew by 3.4% a year during the war; its highest rate of increase since before 1914.47 Government net foreign debt fell by over 10% in cash terms and the cost of funding it halved from 3.2% of national income to just 1.6%. The American rate of economic growth was much higher, its GDP increasing by 84% from 1938 to 1945.48 As Alan Milward explained:

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The United States emerged in 1945 in an incomparably stronger position economically than in 1941 … the foundations of the United States’ economic domination over the next quarter of a century had been secured … [This] may have been the most influential consequence of the Second World War for the post-war world.49

In contrast, Britain finished the war exhausted and impoverished. In 1938, its GDP per head was 98% of America’s; by 1950, this had shrunk to just 72%.50 Winston Churchill had declared that Britain’s war aim was “victory at all costs … however long and hard the road may be.”51 One cost of victory was Britain’s economic standing. A. J. P. Taylor called the Second World War, “the War of the British Succession.”52 In economic terms, this was a war America won at British expense. Although Lend-Lease provided the resources to deliver the eventual victory that Churchill sought, the road was indeed hard, and part of this was the price that America extracted for this aid.

Britain had to liquidate its global financial assets and surrendered its position as the leading trading nation. Economists have estimated that Britain lost around a fifth of its pre-war wealth, around £5 billion, including over £3 billion of overseas divestments.53 Britain turned “from being the world’s largest creditor [to], … at the end of the war the world’s largest debtor.”54 During the war, Britain, as a base for Allied munitions and operations, had virtually ceased exporting. Although Lend-Lease grants covered approximately half of the resultant £10 billion balance of payment shortfall during the war, Britain ended with overseas debts of £3.4 billion and was only able to avoid bankruptcy in 1945 with the aid of a $U.S. 3.75 billion loan.55 When Harry Truman assumed the American Presidency in April 1945, Henry Morgenthau, his Treasury Secretary, proudly told him “that the financial centre of the world was now located, not in London, but at his desk in the treasury in Washington.”56 Similarly, Dean Acheson, later U.S. Secretary of State, observed in 1947, referring to the three major Allied Powers that had won the war, “there are now only two powers left. The British are finished.”57

These Anglo-American changes had ongoing repercussions on Australia’s economic relations with both countries. Australian development required significant investment, in capital goods and finance. Historically Britain had played that role but, after the war, Australia came to see America as its only real source for additional capital. Contemporary American observers had predicted this outcome. Upon arriving in Australia in September 1941, Nelson Johnson was struck by how the depression and the war were changing Australian attitudes. In his earliest despatches, Johnson commented on Australia’s economic position, prospects after the war, and the potential implications for America. He noted the expansion of Australia’s “industrial establishment” and although:

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At the moment this industrial establishment is nearly 100 percent engaged in the production of war goods … thinking men look forward to the end of the war … When that time comes, Australian producers believe that their industrial machinery will be capable of providing Australia with most of her consumer goods, and of furnishing sufficient in excess of Australian needs to require a share of world markets.58

He explained that this, combined with the need to provide employment, would result in the imposition of import restrictions and hence American investors would need to invest in Australia rather than export finished goods.59 Within a fortnight of arriving, Johnson had gained a clear insight into potential longer-term U.S.-Australian economic relations and, in particular, how Australia, pursuing domestic industrialisation and full employment, might increase import protection to force companies wishing to continue business in Australia to manufacturing there. General Motors’s senior executives explained to him that they had commissioned a study of the Australian economy and believed that, after the war:

Australia will find itself equipped with a greater supply of machinery than ever before and will want to put the men from the army to work and will pursue a policy of excluding foreign made goods in favour of goods manufactured in Australia from Australian materials and with Australian labor.60

The GM study foreshadowed the conclusion that the Australian government reached, for the whole economy, but also specifically for the vehicle industry. In 1944, a policy decision the Official Historians of the Australian war economy described as driven by “one over-riding concern –employment,” resulted in the production of Australian built General Motors-Holden (GM-H) cars.61 When Johnson was writing, the Australian motor vehicle industry still mostly consisted of local bodybuilding combined with car assembly from imported chassis and engines. In 1939, the government had sought to develop local manufacture through a bounty payment to local engine manufacturers but restricted to just British companies. American vehicle manufacturers were potentially doubly disadvantaged, being subject to restrictions on chassis imports and effectively penalised by these benefits to British-only engine manufacturers.62 This situation was overturned in 1944 when, in a policy aimed at ensuring Australian-based vehicle manufacture, the Curtin government abolished the bounty and formally requested manufacturing proposals. GM-H quickly emerged as the victor.63

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The replacement of the bounty, a policy designed to boost British investment, with an arrangement resulting in an exclusive benefit to an American manufacturer was symbolic of the changing nature of Australia’s economic relationships with the two countries. The global strength of American businesses and the relationships they had built in Australia during the war were mutually reinforcing. Echoing Walker’s suggestions of wartime links being a possible “nucleus for a considerable expansion,” the Official Historians argued that, in addition to its strong market position, a critical factor in GM-H’s victory was the firm’s management’s familiarity with the Australian decision-making bureaucrats.64 It was also able to exploit these advantages: in the early 1950s, GM-H sold more vehicles in Australia than any other company, and, by the end of the decade, it had a market share more than double its closest competitor.65

The Role of Larger Government

In his official history of Australian politics during the 1939–45 war, Paul Hasluck, observed:

Among wartime experience in the Australian Federation is the centralisation of authority … During the war there was increased government direction and control over the life of the citizen … and with all this the growth of the idea of planning and directing the economy.66

Hasluck’s remarks are undoubtedly correct. However, despite his claims, perhaps coloured by his political beliefs, that this growth “had been harmful” and would be “resisted,” the centralisation and expansion of the Commonwealth’s role continued even in the subsequent peacetime.67 As David Lee explained, “this expansion in the powers of the federal government was supposed to be only temporary, but in fact it produced lasting changes in patterns of governance and public attitudes about the role of the national government.”68

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The war precipitated both an absolute increase in the role of government in Australia, and a strengthening of the Federal Government’s position at the expense of the states. The rise was not only quantitative but also qualitative. Canberra’s share of Australian GDP more than doubled during the war and continued at these levels even after peace had returned, as Table 4 overleaf illustrates, while the increasing complexity of regulatory government resulted in ministers needing to delegate authority to senior public servants. This expansion gave rise to a bureaucracy involved in policy formation, not just the management and administration of ministers’ proposals, and who were much more highly educated than before the war.69 These public servants played a critical role in the Australian government during the war but also, critically, afterwards. As the Official Historian, Gavin Long, noted, “the anonymity that had formerly cloaked the public servant largely disappeared.”70 Indeed, in the Chifley and Menzies governments, senior bureaucrats assumed such prominent roles that the legend of Canberra’s “seven dwarfs” emerged.71 A larger central government, with an expanded and more professional bureaucracy, believing that it had played a key role in securing victory, encouraged by Keynesian theories that it had an equally important responsibility to ensure prosperity in peacetime, was more interventionist, in both internal and external policy.

This Australian experience of war was not unique. Bruce Porter claimed that, “one consequence of European warfare from the Renaissance to World War II was the increase in the size and power of central government.”72 Porter found twelve different formative and reformative effects of war; Australia experienced eleven during the Second World War. Significantly, these include “the ratchet effect,” as Porter pithily observed, “what goes up seldom goes down,” this was indeed true of the growth of Australian government.73 During the war, the Federal Government more than doubled in size. Most of this increase remained throughout the 1940s and 1950s (and after) as demonstrated by the Table 4, showing the Commonwealth Government’s expenditure and taxation as a percentage of Gross Domestic Product (GDP) and the numbers of civilian public sector employees and government departments:

Table 4 Growth of Australian Government 1939–mid 1950s

a Julie Novak, Australia’s Big Government, by the Numbers (Institute of Public Affairs, 2013), 10, 13, 33 and 42. Novak extracted the historical data in her paper from Noel Butlin and Alan Barnard’s work in Wray Vamplew, ed., Australians: Historical Statistics, (Sydney: Fairfax, Syme & Weldon Associates, 1987).

* 1938 ^ 1945. Hasluck, The Government and the People, 1942–1945, 542.

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The increase was not just the Federal Government supplanting the traditional powers of the states, but a real expansion in the overall role of government in Australia. For example, in 1939, State and Commonwealth governments together raised 22% of Australia’s GDP (Commonwealth 9% and States 13%). By 1946, the overall take was 31%; the States’ share had reduced to 9%, but the Commonwealth’s more than doubled to 22%.74

The initial stimulus for the increase was the pressure of war. The Commonwealth government secured monopoly powers to raise income tax in 1942 as well as effectively total mobilisation, including conscription of both military and civilian labour. However, they retained many of these powers after; as Hasluck claimed of the tax power, “although presented … to meet a genuine and pressing wartime need, this set Australia on a course towards centralisation of fiscal control.”75 Uniform tax and the mobilisation of the military and civilian sectors had given the Commonwealth government the tools to win the war. Hence, Canberra retained in peacetime what Fin Crisp called the “new process of wide-ranging government command of the national economy as a whole.”76 This change, at least partially, resulted from the belief that, following Keynes’s economic theories, governments could control the economy and, conscious of the failures of reconstruction after the First World War and of the 1930s Great Depression, they should do so.77 As Chifley declared:

The ordinary people of Australia wonder what sort of democracy it is which is unmindful of their interests in peacetime, yet in wartime says to them, “Give us your best in the factory or the fields, give your lives for your country.” What happened previously must never happen again.78

The Federal Government played a critical role in Post-War Reconstruction; not just the development of secondary industries, but across a variety of areas including housing, health, rural reconstruction and training. Although the courts and then the electorate rejected the Chifley government’s attempts to nationalise banks, its long-term successes included the Australian-built Holden car, the Snowy Mountains Scheme and the opening of new universities.79 Despite the politics of the 1949 election, the winning Menzies government was not to reverse course; the Federal Government remained a significant player. It rebadged the Department of Post-War Reconstruction as National Development, but retained the key initiatives and public servants and, for example, social welfare spending continued to increase (from 4.5% in 1948/9 to 5.5% in 1953/4).80

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A larger, more proactive central government, believing that it could and should manage the economy, had to align its external relations with these domestic needs. As explained above, in Washington, Percy Spender noted the impossibility of segregating economic and foreign policy. Before the war, this had been a lesser concern: Joseph Lyon sought a military guarantee from the American government while Australia actively discriminated against the United States through its Trade Diversion policy. The failures of these policies and the centralising tendencies of the war both contributed to the change. The Curtin, Chifley and Menzies governments, understanding the results of the entanglement of their economic and foreign policy in their relations with Britain and the United States, showed a greater appreciation of the implications. The Menzies government looked to America for development capital and, as Spender reminded Menzies, America was less inclined than Britain to draw a line between political and economic co-operation nor “to regard as friendly those countries that co-operate politically even though they will not co-operate economically.”81

Conclusion

Australia’s wartime economic changes had lasting impacts on its diplomatic relationships with Britain and America. During the war, American trade replaced British and, although this reversed after 1945, the longer-term effects of Mutual Aid, in both the repercussions of Article VII and the wartime relationship were consequential. An industrialising Australia was both less complementary for British trade and needed investment capital that, given Britain’s relative economic decline, America was better able to provide. An expanded, and more influential, central government played a greater role in managing the results of these economic changes on Australia’s overseas relations.

Contemporary commentary illustrates the impact of the changes. In 1941, the Australian socialist historian, Brian Fitzpatrick had published an influential book on the Australian economy, entitled The British Empire in Australia: An Economic History. As well as emphasising and criticising the British role, he had argued that government had been playing an ever-reducing role in the Australian economy. He wrote that, “this change, which has something of the character of a retreat [,] became perceptible after the 1914–18 European war, and became more and more marked during the next twenty years.”82

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By the end of the Second World War, events superseded not only the book’s title but also its underlying argument. Canberra was playing a much-expanded role in the economy, including driving national development and managing international trade. Both these involved an interplay between economics and diplomacy. Furthermore, America had begun to replace Britain’s economic role; by the late 1950s, the left was warning against not British, but American economic imperialism. The Deputy Leader of the ALP claimed that Australia risked being “a land to be exploited by American tycoons … we have no intention of becoming a satellite of any dollar imperialism.”83 This tension between a need for American support and recoil against its strength and practices was to emerge much earlier, as Chapter 3 explains.

Notes

1Johnson to Howard, 3 March 1943, Johnson papers, Box 42.

2S. J. Butlin (volume III) and Butlin & C. B. Schedvin (volume IV), Australia in the War of 1939–1945, Series Four, Civil, Volumes III and IV, War Economy 1939–1942 and 1942–1945 (Canberra: Australian War Memorial, 1955 and 1977); Ronald E. Walker, The Australian Economy in War and Reconstruction (New York: Oxford University Press, 1947); and, for example, Marnie Haig-Muir and Roy Hay, “The Economy at War” in Joan Beaumont, ed., Australia’s War, 1939–45 (St Leonards: Allen & Unwin, 1996), 107–135.

3For example, Bell, Dependent Ally; Day, The Politics of War; Robertson, Australia at War and Horner, High Command.

4See Chifley and Evatt’s War Cabinet Submission, 10 February 1942 (document 324), Commonwealth Government memo to Secretary of State for Dominion Affairs, 11 February 1942 (document 328) and Keane’s memo to Curtin, 28 February 1942 (document 384) all DAFP, vol. V.

Details

Pages
XX, 292
ISBN (PDF)
9781433181405
ISBN (ePUB)
9781433181412
ISBN (MOBI)
9781433181429
ISBN (Book)
9781433181399
Language
English
Publication date
2021 (April)
Published
Oxford, Bern, Berlin, Bruxelles, New York, Wien, 2021. XX, 292 pp., 8 fig. b/w, 5 tables.

Biographical notes

Bill Apter (Author)

Bill Apter is an independent historian with a PhD from the University of NSW. He was born in England but has lived in Australia for half his life. Prior to completing his PhD, he qualified as a chartered accountant and worked in investment banking and the education sector.

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Title: Rethinking the Australian Dilemma