Whitlam and the US

The global economy is on the edge of recession. Our parliament is gridlocked and the media is abuzz with speculation of leadership tensions and early elections. Meanwhile, behind closed doors, our politicians are backstabbing one another in reports to the American Embassy in Canberra. The story is familiar, but it does not describe the present day. In this exclusive extract from The Australian Moment, George Megalogenis draws on US State Department cables to reveal new insights into the personalities behind the big clashes of the 1970s. It was a time of political, social and economic chaos. Gough Whitlam was fighting a war on two fronts, against his own party and an opposition that refused to accept the legitimacy of his first election win, let alone his second. Industrial strife was a routine part of daily life. And the economy was being choked by stagflation, where unemployment and inflation rose together. Today our society is more cohesive, our economy works better than most, but the politics has regressed. It’s the 1970s again, but there is no Whitlam, or Hawke or Fraser to fight for the nation’s soul …

THE Americans took Labor’s election victory in 1972 as the end of a great friendship. The US ambassador to Australia, Marshall Green, advised the State Department in Washington that the relationship between the two countries was “cooling”. In a briefing paper prepared ahead of Gough Whitlam’s first official trip to the US as prime minister, Green betrayed the superpower’s sensitivity by noting that Whitlam and others had been disrespectful to the Americans. “Australia has undergone a fundamental reorientation of its internal and external policies since the visit to Washington by then Prime Minister McMahon in November 1971,” Green wrote in July 1973. “The reorientation of its external policies in part has been a deliberate choice of Prime Minister Whitlam and in part has been accentuated in its impact by the critical and occasionally abusive tone used by Whitlam and some of his senior Ministers in expressing opposition to certain US policies.”

Green described the Australian Labor Party as “an eclectic and often factionalized coalition of trade union members, traditional radicals, miscellaneous Marxists, and, most significantly, with a leadership and growing majority of middle-class origins”. He added: “The ALP is often referred to as a ‘Labor’ party but it would probably be more accurate to refer to it as a Democratic party to the left of centre.”

Recently declassified US State Department cables offer a fresh way to tell the story of Australia’s descent into political and economic chaos in 1974 and ’75 through the loose lips of the main players in the Labor government, conservative opposition, the ACTU and the media. The documents are both painful and amusing, for they reveal the petty treachery of Australia’s elite. Bob Hawke briefed against Whitlam, and opposition leader Billy Snedden briefed against his Coalition partner Doug Anthony. Whitlam, interestingly, comes across as the least malicious. The harshest thing he had to say about a colleague was that Jim Cairns had been “bloody silly” in publicly attacking US foreign policy.

The Americans viewed Whitlam’s first year and a half in office, 1973 and early 1974, as a period of “confidence and experimentation” in Australia. They noted, however, that the Coalition effectively controlled the Senate and was preparing to use its numbers to bring on an early election, which Labor was expected to lose.

Whitlam was not above a little scheming himself. He tried to shuffle the Senate numbers in his favour by offering a foreign posting to the Queensland DLP senator Vince Gair. The appointment was secretly approved on March 21, 1974, the same day that Whitlam called a half-Senate election only for May 18. This meant that 31, not 30, Senate spots would be contested, which made it possible for Labor to gain the extra seat it needed to grasp Senate control. When the story broke, Snedden called Whitlam’s sleight of hand “the most shameful event by any government in Australia’s history”.

The conservatives activated their plan to force an early general election by threatening to block the so-called supply bills, which allow the government to pay, among other things, the wages of public servants.
Although Queensland premier Joh Bjelke-Petersen engineered a plan that successfully thwarted the Gair manoeuvre – by speeding through the writs for his state’s Senate vacancies before Gair had time to resign – Whitlam took the Snedden bait, calling for the dissolution of both houses of parliament for May 18. He reasoned, correctly, that the economy was slowing and that now was the best time to revive the mandate of 1972.
Bob Hawke told the US consulate in Melbourne in April 1974 that Whitlam “had made a massive blunder” and had placed the ALP “on the line” by calling an early election. Hawke dropped expletives into his assessment but the embassy was too polite to record them. His rage was most evident when he talked about Whitlam’s pro-Arab policies. “Hawke says party lacks money and momentum. Predictably, he feels he will not be able to approach Jewish community for campaign funds, as in past, because of Whitlam’s [unprintable] even-handed [unprintable] Arab policy”. The memo to US Secretary of State Henry Kissinger concluded: “Hawke was head of ACTU before 1972 ALP victory and he still will be if Whitlam loses. His reaction is probably index of trade union and party professional reaction. [The government’s] 1972 campaign promises are largely unfulfilled and for reasons not wholly chargeable to senatorial obduracy. Prime Minister’s habit of remaining above herd is not appreciated by herd.”
As the Americans got to know Hawke, and his ambition, they drew up a quick biography for internal use. They noted his love of drinking: “His record of 12 seconds for downing 2 pints of bitter toppled from Guinness Book of Records only this year [1974]. Hawke in recent years has sacrificed speed for distance in this field.”
And they noted his rivalry with Whitlam: “Always political creature, Hawke obviously enjoys constant speculation about his future. Elected Federal President of ALP in 1973, Hawke has worn two hats with varying success. Usual conflict in objectives, between Labor political and Labor union groups, has arisen in Australia. Hawke is often in dispute with Prime Minister Whitlam, sometimes publicly. As big [a] continent [as Australia] is, it can’t contain two super egocentrics like these, and their differences in foreign affairs frequently entertain public.” Hawke’s fear that Labor might lose seems reasonable given that the British conservative government of Edward Heath had just lost a snap election in February that year after one term in office.

In seeking a renewal of the 1972 mandate, Whitlam’s campaign looked back, not to the future. Snedden also had his eyes fixed firmly on the past. He simply wanted to reverse the 1972 decision. “The Labor experiment has been tried and it has failed,” the opposition leader said in his campaign launch speech on April 30. “Through broken promises and sheer incompetence, the Labor Party has forfeited the chance you gave it to build Australia.”

The campaign lacked the buzz of ’72. Snedden was a likable person but wasn’t taken seriously by the public. There was a sense of inconvenience in this election, coming just 18 months after the last contest, and the result was not what the Coalition hoped for because the electorate reaffirmed the ’72 verdict.

Labor’s primary vote of 49.3 per cent was down only 0.3 per cent on the benchmark of “It’s Time”. The government ceded three seats in NSW and another two in Queensland, but gained two in Victoria plus the newly created seats in Western Australia and the ACT, for a net loss of one seat.
The main event was the fight for control of the Senate, and with all 60 spots on the line because of the double dissolution of parliament, the verdict was gridlock. Labor and the Coalition won an extra three places each and were tied at 29 seats each, with two independents, one of whom would soon rejoin the Liberal Party. The DLP, which had held five seats in the previous parliament, including Gair’s, was wiped out. On the simple test of bums on the red leather of the Senate chamber, the Coalition was actually in a slightly worse strategic position than it had been during the Whitlam government’s first term because the balance of power had switched from the DLP to two independents.
If Whitlam had had the numerical cunning of, say, a John Howard, he would have claimed victory on the night of the election. But there were a number of seats still in doubt and the Senate tally could have taken weeks to finalise. Whitlam waited until the middle of the next week to assert his renewed mandate. In the intervening period, the Coalition argued that Labor’s claim to power was illegitimate because the vote had not been decisive either way.
Snedden refused to accept the final result, earning his place in the gaffe hall of fame by declaring: “We were not defeated – we did not win enough seats to form a government.” The conservatives had been undone by their own impatience. They understood that Labor was losing control of the economy, but in their rush to the ballot box they had picked the last decimal point in the cycle when Whitlam could pretend that stagflation might be avoided. The unemployment rate was still only 2.1 per cent when the poll was held, while inflation was at 13.7 per cent. In the US, it was 5.1 per cent and 10.7 per cent respectively; in Britain it was 3.6 per cent and 15.9 per cent. If Snedden had waited until later in the year he would likely have become prime minister.

Snedden talked tough, but behind the scenes he assured the Americans that Labor hadn’t lurched to the left. In an “extended and frank” luncheon with Ambassador Green on July 18, 1974, two months after the election, “he implied considerable parallels between his own views and those of members of the Labor Government on [a] number of issues, though not on defence policy”. Snedden, as the cabinet papers demonstrated in 1971 through his cautious approach to dealing with inflation, was every bit the interventionist that Whitlam was. The campaign talk by Snedden about Labor’s threat to bring “socialism” to Australia was just politics.

The sharpest observations Snedden had to offer were about his own team. “Snedden touched at some length on personalities. He disparaged the performance of Country Party leader [Doug] Anthony in the elections, observing that Anthony’s ill-considered statements and Snedden’s repair work had consumed total of 6 of the 18 days of the campaign, and consequent loss of time had hurt. Snedden said it wasn’t that Anthony’s intentions were not all for the best. Anthony simply could not intellectually grasp the implications of some of the things he said.”

While Snedden raged against the dying of his political light, Hawke had recanted his pre-election view of Whitlam and was now talking up the prime minister to the Americans. The change in the relationship was recorded in a secret cable from Kissinger back to Australia, based on a conversation Hawke had with an official in the US on July 25, 1974. Hawke, the document said, felt he had the support of Whitlam and Cairns “for any move he might wish to make to succeed Whitlam if and when Whitlam decides to retire … Hawke opined that this would happen following next general election, which he speculated would be held before end of next year [1975].”
Hawke’s ego was in overdrive: “In response to a direct question about what he would do if the opportunity were to present itself, Hawke said he would have to make that decision on the basis of whether or not he had sufficient ‘guts’ to fulfil what he called an ‘awesome responsibility’. Hawke also said that he would be required to change his living habits, including drinking, for which he is renowned in Australian pub circles, if he became prime minister. On the question of drinking, Hawke made it clear that he likes ‘grog’ and that it would be difficult indeed for him to turn the tap off completely. However, if the party had enough faith in him to honour him with the position, he would adopt a new public image.”

There was a discernible souring in the national mood during the winter of 1974. As the economy hurtled towards recession, the trade unions broke all previous records for strike action – 2809 industrial disputes, involving 2 million workers, and 6.3 million working days lost. This last figure was double the number of working days lost in 1971.
A sample of the industrial disputes then under way ranged from a nationwide shutdown of the ports by ships’ engineers and the threat of strike action by building workers in the ACT if poker machines were not introduced. The unions flexed their muscle at the slightest provocation, and their campaign reached its apotheosis of absurdity when they got into a fight with Frank Sinatra on July 9, 1974.
The American crooner had used the opening night of his tour in Melbourne to vent against Australia’s journalists. The men were “parasites, who had never done an honest day’s work in their lives”, while the women were “broads and hookers”. The journalists’ union demanded an apology, but Sinatra was unrepentant, so the argument escalated in the spirit of the times. The musicians’ union declared the tour black, the hotel employees’ union refused to deliver room service to Sinatra’s suite at the Southern Cross Hotel, and the Transport Workers’ Union refused to touch his plane. With only enough fuel to take him to Sydney, Sinatra was, in effect, a hostage of the ACTU. According to a front-page report in The Sydney Morning Herald on July 11, Bob Hawke said: “He’ll never get out of Australia.” The two performers, Sinatra and Hawke, met that day and after four hours of negotiation peace was restored. Ol’ Blue Eyes said sorry, the not-yet-Silver Bodgie called off the blockade, and the tour resumed.

An urge for anarchy had overwhelmed the government after its narrow re-election win. Caucus declared its independence from its leader by electing Cairns to replace Whitlam’s loyal lieutenant Lance Barnard as deputy prime minister. “That had a negative psychological impact on Gough,” his speechwriter and confidant Graham Freudenberg says, “because though Lance was not a strong figure in the government, he was immensely important to Whitlam personally as the one man he could trust, and the one who really knew the moods and the trends in caucus and, to an extent that Whitlam didn’t have, with the public.” Cairns didn’t watch Whitlam’s back in the same way; if anything, he had a knife pointed at it.

“A pervasive sense of gloom” had taken hold, the US embassy in Canberra said in a secret cable to the State Department in Washington, titled “Australia’s troubles and Whitlam’s troubles – a gathering crisis”. It states: “There is in Australia an aura of selfishness and structural animosity, with the states against Canberra, the ALP caucus against Whitlam, the opposition after narrow political advantage, individual unions elbowing for material gain, corporations passing the cost of excessive wage settlements on to the consumer, rural interests claiming discrimination and none of these players motivated by concern for the national wellbeing.”

The pot was roaring at the kettle because the assessment was written on August 29, 1974, three weeks after Richard Nixon had finally ended the American agony by resigning the presidency. The document does, however, capture an interesting change of heart towards Whitlam. At the start of Whitlam’s prime ministership the Americans had viewed him with great suspicion. Now that they had seen the complexion of the rest of his cabinet, the last thing the US wanted was to have him replaced by Cairns.
“Whitlam’s personal dominance of ALP and of Australian scene appears ended,” it states. “He will surely recover from present uncharacteristic slump but is unlikely to regain his pre-eminent position. He has been challenged successfully by caucus – e.g. Cairns’s election, parliamentary pay increases – and by his cabinet – economic policy, the budget. His inability to enlist union support is all too obvious. Whitlam’s weakened position within ALP government has worrisome implications for US. We have relied upon his basic moderation and his support of US defence facilities and other US interests.” Cairns, it was noted, had improved his image. “He is more and more acceptable to business despite his frank socialist objective.” But the Americans weren’t entirely sure. “We still hesitate to regard him as a real alternative to Whitlam.”
Another confidant of the Americans at the time was the “well-informed and extremely influential” Rupert Murdoch, who had just broken into the US newspaper market with two titles in San Antonio, Texas. His media stable at the time included the afternoon tabloid the Daily Mirror in Sydney, the national broadsheet The Australian, and the News of the World and the Sun in London. At a “wide-ranging and apparently very candid” lunch on November 15, 1974 with Marshall Green and senior embassy officials, Murdoch looked into his crystal ball and saw Whitlam’s demise. “Australian elections are likely to take place in about one year, sparked by refusal of appropriations in the Senate,” he said. “All signs point to a Liberal-Country victory, since the economy is in disturbingly bad condition and will probably not improve much of that time.”
Murdoch said that Bill Snedden would be the next prime minister. He didn’t see Malcolm Fraser taking Snedden’s place. Fraser was “the most brilliant as well as the most courageous of the Liberals but is regarded as too inflexible and too arrogant by his colleagues”.
Murdoch favoured Hawke over Cairns. “Bob Hawke is fiercely ambitious to become prime minister of Australia and could easily make it someday. He is intelligent and essentially moderate. He would be far preferable to Cairns but has little chance of defeating Cairns in the next few years. [He] sees the ALP going down to defeat and does not want to board the sinking ship.”
Graham Freudenberg traces Whitlam’s demise to the misreading of the 1974 election result. “The tremendous impact of the oil shock was really ignored. The very fact that the ’74 election was perceived by Whitlam and the government as a total endorsement of the [ALP’s policy] Program really precluded some sensible rethinking of the Program. There was no question of starting afresh, so we were locked into our unfinished business.”
The Whitlam government could barely control its own urge to spend and had little influence over the trade unions. Treasury lifted interest rates twice, in late ’73 and again in mid ’74, when the mortgage rate passed 10 per cent for the first time, but failed to kill inflationary expectations. The department had echoed the government’s policy error by damaging confidence without reducing the cost of living. Treasury didn’t see that it had given Labor the licence to ignore it.
“Our economic advisers were not getting a hearing or perhaps giving their best advice,” says Freudenberg. “For that I blame us more than them.” So Treasury had reason to be offended, and would soon have its revenge when it blew the whistle on the Loans Affair.

Edited extract from The Australian Moment: How We Were Made For These Times (Hamish Hamilton, $32.95), by George Megalogenis

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