How the Whitlam government paved the way for neoliberalism

Following WWII, the U.S. emerged as the undisputed leader and most dominant power of the capitalist world. Soon after the war, particularly following the 1949 Chinese Revolution, the U.S. devoted huge military and economic resources to crushing Communist-led insurgencies in Asia and beyond. However, it was not long before their supremacy gradually eroded, and their power weakened. The first clear signs of U.S. overextension came in the late 1960s as they stared down the barrel of imminent defeat in Vietnam. It was this context that triggered massive economic and political instability across the globe. Crises and revolutionary openings broke out from France, to Italy, Portugal and Spain. Australia was no exception.

The period of Gough Whitlam’s prime ministership intersected a decades-long crisis the likes of which had not been seen before, nor since, in capitalist Australia. Beginning in the early 1970s Australia’s highly protected and sclerotic industrial base was hit by a series of global economic shock waves that activated repeated recessions and runaway inflation. These external shocks showed that Australia’s archaic industry, sheltering behind massive tariff walls, was unviable and uncompetitive. Industries began to fail; bankruptcies and unemployment began to increase. To resolve this crisis in their favour and to avoid becoming “the poor white trash of Asia” (per Singapore’s Lee Kuan Yew, 1980), the Australian capitalist rulers had to urgently deregulate and modernise the economy.

This crisis for the ruling class was compounded by the extraordinary power of the highly organised proletariat whose constant industrial struggles exacerbated the huge pressures building up inside the country. The unions were not about to give up wages and conditions without a fight and were more than prepared to flex their muscles if slighted. For instance, in July 1974, when visiting worldwide celebrity Frank Sinatra launched a broadside against Australian journalists and then refused to apologise, his whole entourage was shut down. The musicians union black-banned the tour, the hotel employees union refused him room service and the Transport Workers Union would not refuel his plane. Before Sinatra finally gave in, ACTU head Bob Hawke warned, “If you don’t apologise your stay in this country could be indefinite. You won’t be allowed to leave Australia unless you can walk on water.” This example highlights the broad political power of the union movement and their readiness to challenge the bourgeoisie’s ability to run things.

For elements within the bourgeoisie, as well as leaders of the labour movement, the initial attraction of Whitlam was that he promised he could extract Australian capitalism from its malaise without any major clash or commotion. His program consisted of social reforms to placate a restive working class and a range of projects to retool Australian capitalism while opening it up to greater international competition. But this class-conciliationist outlook, captured by his almost evangelical 1972 “It’s Time!” election campaign song, projecting we could all go forward to “freedom” together, was doomed from the get-go. It consisted of trying to plaster the infamous social-democratic falsehood that the working class and bourgeoisie have a common interest on to a stormy reality that prevented this at every turn. Furthermore, there was no way Whitlam’s social-democratic reforms could resolve the problems, not least when the economic base of the country was falling apart. No manner of tinkering around the edges, band-aid solutions, half measures or more extensive Laborite schemes could resolve the crisis of Australian capitalism. Nor could Australian capitalism revert back to its previous troglodyte existence. The fact of the matter was the economy had to be restructured. This would either be carried out by the bourgeoisie or by the working class.

By 1974 the Australian economy, impacted by the huge OPEC oil price rises, had fallen into a shambles. The crisis shattered any illusions that the government could reform its way out of the situation. Whitlam turned to austerity measures attempting to restrain wages and wind back reforms. This was met with a strike wave of unprecedented proportions. In response the government adopted a wishy-washy anti-strike campaign that resolved nothing. It was becoming crystal clear to the bourgeoisie that Whitlam’s indecisiveness and conciliationism was only creating chaos and that there needed to be a showdown to subdue the unions. At the same time, Whitlam’s fantasy that somehow the jam of Australian capitalism could be fixed or massaged into place by his reform agenda was descending into farce. This was exemplified by the so-called “loans affair.”

Inspired by rising commodity prices and with the government in deficit, Whitlam and a small cohort of senior ministers started desperately searching for a magic bullet. Led by the minerals and energy minister they embarked on a cuckoo scheme to try to finance the development of Australia’s energy infrastructure by covertly borrowing massive funds from a dubious overseas commodity trader. The deal never eventuated. But when the scam got out, it showed in spades that the government was clueless when it came to solving the economic and political crisis. Whitlam’s thrashing about creating bedlam and the fact that he had crossed a red line by asking questions about the strategic U.S. spy base at Pine Gap prompted the capitalist rulers to sabotage his regime, ultimately orchestrating his dismissal by the British monarchy’s Australian representative, with the connivance of the CIA and British MI5.

However, far from resolving anything, Whitlam’s sacking only exacerbated the crisis as the proletariat mobilised to defend their interests and what they perceived to be their government. But unlike the bourgeoisie, who were ready to take decisive action, the working class had no revolutionary leadership that understood what was posed, the stakes involved and the need to resolve the question in the interests of the proletariat. It was in that political vacuum that Whitlam and ACTU head Bob Hawke quickly rallied to defend the rule of capital, directing workers to retreat and trust in the ballot box. Despite massive pressure from their base, the union bureaucracy—with yeoman’s service from the Communist Party—then quelled the outpouring of proletarian anger and outrage. This led to Whitlam’s overwhelming defeat at the 1975 election, ushering in eight years of the Fraser Liberal/Country Party Coalition government.

While Fraser came to office promising to curtail union power, he was not successful. Union-busting attacks were frequently met with stern resistance. For instance, in 1981 industrial unrest reached levels that were second only to those of 1974. Despite the fact that Fraser was openly pro-business and anti-union, he was not, however, fully committed to a boots-and-all showdown with the unions. Nor was he fully committed to the reorganisation of the economy that the period demanded. In fact, he rejected radical deregulation, throwing the report recommending he do so into the bin. Echoing the Whitlam government’s ill-fated loans fiasco, Fraser thought that a mining boom could miraculously solve the problems of the Australian economy without any major overhaul or restructuring. Thus, leading into the 1983 election, it still remained to be seen whether the bourgeoisie would take complete charge and reorganise the economy or whether it would be the working class.

The tumultuous period from Whitlam to the election of Hawke ten years later threw a spotlight over why only revolutionary leadership could have resolved the situation in favour of the working class and its historic interests. The Australian capitalist order was in crisis. Neither Whitlam’s attempts to conciliate the bourgeoisie and to try to make capitalism work, nor left trade-union militancy could solve the predicament. If anything, this lengthy period of industrial struggle highlighted how incapable trade-union militancy is in solving the problems of the working class. During this turbulent decade, the unions were able many times to push the capitalist rulers back to stalemate. At different junctures they made the country almost ungovernable. But because they had no political solution to the issues confronting the working class, their strikes and protests served only to deepen the crisis not resolve it. To achieve the latter, the proletariat needed revolutionary leadership.

When Whitlam was sacked, there was an outpouring of calls for a general strike from elements within the unions to the far left, including the SL/ANZ (forerunner to the SL/A). But these calls, including to restore the Whitlam government, were never linked to a political solution based on clearly recognising and resolving the actual crisis of the capitalist order. Instead, the Laborites and left argued that by pushing through a battery of more radical demands the chaos could be reined in. Or more union militancy would force the bourgeoisie to resolve the situation. These illusions neither recognised the nature of the impasse nor could they solve it. By not attacking the problem at its source, they deepened it. The fact that the SL/ANZ and other left groups called for socialist revolution didn’t help the matter either, because despite the radical-sounding words there remained no recognition of what the real tasks were to solve the issue.

The working class needed to take control of the situation by reorganising and collectivising the economy based on a central plan. It was not enough for revolutionaries to simply assert this. But through the whole course of the struggle the task was to guide the working class to develop their own understanding of the nature of the crisis and what needed to be done about it. To carry through this task required exposing that the ALP and trade-union leaders were obstacles to solving the crisis. But again, merely saying so did not constitute a revolutionary answer to the crisis either. This tumultuous period was marked not simply by the crisis of the capitalist system in general, nor by the treacherous nature of Laborism in general. As described above, it constituted an entire period marked by the specific crisis of Australian capitalism at a specific stage of development. Without a materialist understanding of the roots of this particular crisis, it was impossible to guide working-class struggles in their multiple twists and turns, nor motivate the urgency of a revolutionary break with Laborism.

The problem with the SL/ANZ was precisely its total lack of a materialist understanding of what was actually taking place. The SL/ANZ could therefore speak of the reactionary nature of the capitalist system, of the need for a workers government and of the treachery of Labor, but these were generalities invariably disconnected from the material reality and the tasks flowing from that. Amid the considerable proletarian ferment, revolutionaries would have developed a concrete program of struggle to address the actual day-to-day needs of the working class and to drive forward the instinctual strivings of the proletariat to take charge of society, rip the means of production and control of the state out of the hands of the bourgeoisie and resolve the deadlock in the interests of the workers and the oppressed.