A second menace to the Commonwealth lay in the debilitated condition of the central government. In the 1930s the federal public administration was, in Paul Hasluck’s words, ‘incredibly weak’. This has its roots in three decades of mismanagement.
In 1901 most of the difficulties of the creation of a public administration had been conveniently evaded. The functions of the new federal government were few – post offices, custom houses and a small army – and they were inherited from the colonial governments. They could be just ‘rebadged’. But there was a cost to this expedience – the best public servants stayed with the states, and only the ‘third tier’ of the civil service was willing to risk their careers in a new and puny form of government.
Further, the modicum of planning that legislators did afford the new public service was blameworthy: they deemed only a very modest educational accomplishment was required for general public administration. By law, recruitment into general administration was purely on the basis of an examination that was, as Giblin later put it, ‘suitable for the brighter boys of the age fourteen’. Further educational attainment was not only redundant, it was almost impossible since a maximum age for recruits of 16 was initially decreed.
The educational level did not improve with the rapid extension of Commonwealth responsibilities in the post-war world: it deteriorated. After 1918, the Parliament judged that the war veteran was the type most worthy of recruitment into public administration. The veteran was exempted from the standard examination and required to pass only a less difficult one. The age maximum was far more generous for veterans, 51 rather than 23. The health requirements were also less demanding. These concessions had an impact. Between 1918 and 1932, only 49 youths were recruited by the standard examination, rather fewer than four per year. Over the same time span, 1031 veterans were recruited. But these veteran recruits did not, as a rule, flourish: by 1939 no veteran had risen to a ‘senior appointment’. In the word of the historian of the Commonwealth Public Service, the recruitment policies in the inter-war period were ‘disastrous’ (Scarrow 1957).
Giblin would have been aware of similar problems in the service of the Tasmanian Government: ‘Youths were needed but were largely precluded from employment’ (Robson 1983, vol. 2, p. 463).[15] As Tasmanian Statistician in the early 1920s, Giblin had shepherded four junior officers in the public service through Bachelor of Commerce degrees at the University of Tasmania, and had arranged for their fees to be paid on the condition they stayed in the service for five years. Presumably Giblin obtained a more vivid view of the problems of the Commonwealth Public Service when appointed Acting Commonwealth Statistician in 1931. He quickly resolved to break down the barrier to young graduates and admit the first person with a university qualification to general administration in the Commonwealth Public Service. He would use his star pupil: Roland Wilson, BA, DPhil, PhD. He persuaded Sir Harry Sheehan, the Secretary to the Treasury, to appoint Wilson for six months from February 1932 as an ‘economics adviser’. How this was done is a mystery: it seems plainly to contravene the legislation, as Wilson was twenty-eight years old. The massive destruction of Treasury files from the period will ensure that this remains a mystery. But, somehow, it was done.
Still, the appointment itself did not clinch victory. ‘The thought of bringing a graduate into the Treasury was a very novel and unpopular idea at that time’ (Wilson 1984), and it was considered prudent to place Wilson into the Bureau of Census and Statistics ‘out of sight of Treasury officers’. Regrettably, the officers in the Bureau seemed to have no more liberal an outlook. On the first day of his appearance in the Bureau, its workforce initiated a sit-down strike in protest.
A more systematic solution for reform was required. For several years there had been a pressure to relax the de facto prohibition on graduates. The British Economic Mission of 1928 had favoured doing so, as did the universities, and the University Association of Canberra. In addition, the Commonwealth Bank, with a very similar recruiting regimen to the Commonwealth Public Service, had actually gone so far as to employ a single graduate in 1931 – Leslie Melville.
Giblin entered the fray with his paper, ‘The recruiting of the public service’ (Giblin 1929). In Britain, Giblin pointed out, the senior rank of the public service is ‘enlisted from men with the highest University qualifications … the first class final honours at Oxford or Cambridge’. In Australia, by contrast, ‘practically all vacancies in the Clerical Division of the Commonwealth service have been filled by returned soldiers, from whom no higher test has been required than reading, writing and very easy arithmetic’. As result of this ‘criminal short sightedness’, ‘the service has become the dumping ground of returned soldiers who have failed to make a living in any other way’.
Giblin proposed that 10 graduates per year be recruited. Within 30 years, nearly all of the 300 senior ranks would be graduates. To stimulate this, some suitable ‘cadets’ would be financed to attend university, while still performing some duties in the service. Within four years of completing their degree, they would be paid £500.
The Commonwealth Public Service Act 1933 was the fruit of these proposals, and invoked the first modest relaxation of the bar to graduates. The relaxation amounted to permitting a graduate to be recruited up to the age of 25. But that was all. No other concession was made. There was no ‘graduate loading’ which Giblin plainly wanted: they would be paid exactly as the others. The graduates were to begin at the bottom of the hierarchy. They must also have their degree from an Australian university, a worthless restriction. Finally, a limit was placed on graduate appointments: no more than 10 per cent of the intake.
Despite the modesty of the legislation, it was opposed by both Lang and non-Lang Labor factions in the House of Representatives. ‘The Labor left still regarded university training in the main a privilege of the wealthy’(Sawer 1963). Giblin had tried to assuage such sentiments: he pointed out that eight of 13 Cambridge graduates recruited into the British civil service that year had received their secondary education in government schools. In the Senate one Labor MP voted in favour, mentioning his student nephew. The more salient passion was not hostility but fear: ‘Labor as a whole reflected the fear of the public service unions that such recruitment would block promotion of those who rose from the ranks’ (Sawer 1972, p. 55)
But a signal had been given. Recruitment began in 1934 and between 1934 and 1941 about 10 per year were accepted, or around the number Giblin had envisioned.[16] Regrettably, this slow pace was overtaken by the war, and at its outbreak, 16 of 24 Permanent Heads had no tertiary qualifications (Scarrow 1957).
Perhaps more immediately useful than legislation was the intersection of the four with the dapper figure of Richard Casey - Baron Casey of Berwick and of the City of Westminster, engineer, aviator, Bruce protégé, Antarctica enthusiast, man about town, and from 1935, Treasurer.[17]
Casey found ‘economic experts’ congenial. The first of the species he became acquainted with was T.E. Gregory, during the professor’s 1931 tour of inspection: ‘a temperamental Jew’ he told Bruce, ‘with almost every superficial demerit possible, but with great fundamental intelligence and knowledge’ (NAA RGC 17 March 1938). With Gregory’s departure, Casey turned to the local varieties.
He was quick to court a little band that encompassed much of the locally available expertise: E. O. G. Shann, D. B. Copland, L. F. Giblin, Roland Wilson, Leslie Melville. He thought highly of them, read their papers, talked to them, corresponded with them. He came to regard Shann as a personal friend, and he held in especially high regard the younger Melville and Wilson. (Hudson 1986, p. 99).
His ‘especially high regard’ for Wilson arose from Wilson’s performance as the newly appointed Commonwealth Statistician. Casey was originally inclined to appoint a Briton to fill this post, but was persuaded by Giblin that Wilson was ‘the obvious man’. ‘In Wilson, Casey found a mind he could respect, and an undisguised expertise of which he was occasionally wilfully sceptical but more often in awe’ (Forster and Hazlehurst 1988, p. 73).
Casey’s interest in ‘the experts’ was sharpened by the poverty of the public service who worked under him. ‘There are very few men in the service I would like to have’. When a British official was seconded to his department, he declared: ‘It has been a revelation to me to have a first-rate civil servant to work for one – and it convinces me that Ministers in England must live a sheltered and pampered life – as compared with our lives here’.
Consequently, when in 1935 the prospect arose of Wilson resigning in order to fill the vacant chair at the University of Tasmania, ‘Casey was aghast (“I could not contemplate losing Wilson”) and he persuaded Cabinet to make Wilson as well [as Commonwealth Statistician] an adviser to the Treasury so that his salary would total what was needed to keep him in Canberra’ (Hudson 1986, p. 99).
Under Casey, Wilson was to expand the earlier efforts to improve the quality of public service. ‘If you wanted a book’, Wilson later recalled, you had to tell the librarian ‘what size it was, how thick, what colour the binding was, then he’d bring you three or four to pick from!’. Wilson arranged to appoint the first female librarian into the Commonwealth Public Service. He also ultimately succeeded in creating the category of Research Officer to hasten the absorption of graduates.
Casey was to rely on Wilson in a noisy and futile battle to impose on banks the kind of regulation that, in the mid-century, was imagined to be necessary to rational economic management. The background was the Royal Commission on Banking and Monetary Policy (January 1936–July 1937) which had manifested a general unease at the banking policy during the Great Depression. Something had to be done. Requiring the trading banks to lodge a minimum level of deposits at the central bank seemed in order. Expert opinion to the Commission was mixed. While Copland had favoured them in print (1937a), Giblin was unimpressed by the idea. Brigden declined to subscribe to any theories of control, and favoured gradual accretion of specific measures and powers of persuasion. Conceding no more than that compulsory minimum deposits might one day be desirable, Brigden suggested to the Royal Commission that such powers should be held in reserve until such time as the Commonwealth Bank of Australia considered it advisable to apply to Parliament for their temporary deployment. To Wilson, compulsory deposits ‘would be of little use as an instrument of credit’.
But compulsory deposits became a symbol to Casey, and to the banks, of the Commonwealth’s right to manage the banking system. Wilson was assigned to formulate a Trading Banks Bill.
Casey told Bruce: ‘The Trading Banks will give vent to piercing screams when the contents of the Banking Bill are made known to them’ (NAA RGC 17 March 1938). Presumably because of those screams, Cabinet hesitated to back the draft. Banking legislation ‘has really given me a headache’. At the close of 1938 the Trading Banks Bill was postponed. In May 1939, the Bill was watered down to remove licensing of banks, and enabling banks to fall below their ‘required’ reserves for a period of 13 weeks without penalty, and for any length of time beyond that with penalty (Sutherlin 1980, p. 268). Even this version was allowed to lapse. No Trading Banks Bill was ever passed.
Years later Wilson was to comment that Casey was a more efficient engineer than politician. The insufficiency of an expert public service in securing reform had been made plain by Casey’s conduct.
The same lesson was to be taught in even more painful terms to J. B. Brigden, in the fiasco over national insurance, perhaps the greatest legislative busted flush of the Australian Commonwealth.
Australia’s old age pension system had never been a contributive scheme. It had been funded directly from general revenue since its introduction in 1908 by Alfred Deakin. Anxiety about the potential burden of its unfunded liabilities had been heightened by the fiscal crisis of the Depression. In October 1932 the Auditor-General produced a contributory plan for pensions. L. F. Giblin with H. C. Green had found fault with this proposal. But the Depression also produced a slump in the birth rate, which raised the spectacle of a shrunken working-age population being burdened with financing an unreduced pensions bill. Casey observed that the proportion of the population over 65 had tripled since 1888, and if these trends continued, then by 1978 there would be 54 old age pensioners for every 100 workers. A continuing budgetary discomfit also harmonised with a current of thought which saw social insurance ‘as an instrument which secured intra-class harmony by means of genuine reforms and State supervision whilst leaving the individualist ethos in place in the principle of individual contributions’ (Watts 1983).
The time for a contributory scheme of social entitlements had come. In 1937 the Lyons Government declared itself for a scheme that imposed small compulsory weekly contributions on all low-to-middle income employees – amounting to about 1.65 percent of average weekly earnings - to fund sickness, medical and retirement benefits. This scheme of ‘national insurance’ would require a ‘scale and complexity of legislation and administration rare in the Australian context’ (Watts 1983, p. 129). It would be, in Brigden’s words ‘the most ambitious financial project put forward under any national insurance scheme I have been able to discover’ (Brigden 1939b p. 147).
National insurance would need a commission to run it, and the commission would need a head. But whom? Casey complained to Bruce: ‘As you will realize, the range of choice amongst our existing public servants is limited’. Only one of the heads of the public service was deemed desirable: the Secretary of the Treasury, Harry Sheehan. And that welcome opportunity had vanished, Casey told Bruce, when a Commonwealth Bank officer ‘appeared on my doorstep in Canberra last week, breathless with excitement … After shutting all the doors and windows, he broke me the news to me that the Board were unanimous in recommending that Sheehan be appointed Governor [of the Commonwealth Bank]’(NAA RGC 17 December 1937).
The very paucity of the above led me to try to think of people outside the existing public service. This led me to think of the names of Brigden (Economist and in charge of the Bureau of Industry in Brisbane; now getting 2,000 pounds a year from Forgan Smith), Copland (in charge of the School of Economics in Melbourne and getting from all sources probably about 1,750 pounds per year), and Giblin. (NAA RGC 17 Dec 1937).
Giblin told Casey his own appointment was ‘out of the question’ but suggested Copland ‘would be an admirable choice’. Casey took Copland’s name to Cabinet, which was a ‘little stunned’, but offered no opposition. ‘He is rather keen about the prospect’ (NAA RGC 17 December 1937). But Copland was not appointed. Either a ‘stunned’ cabinet collected itself, or Copland became less keen, due to the emergence of the real possibility of his being appointed Vice-Chancellor of the University of Melbourne.
Giblin told Casey that Brigden was ‘the obvious economist’, and Brigden was appointed ‘Director’ of National Insurance on 14 Febuary 1938. On 6 July 1938, the day the Bill received vice-regal assent, Brigden was deemed ‘Commissioner of National Insurance’.[18] Brigden and his colleagues then ‘began an exhausting round of conferences and interviews only five days after the NIC was established’. A promotional campaign was launched on 11–12 July 1938 in the Albert Hall in Canberra. ‘Throughout July and August Brigden had a whirlwind itinerary which took him to each capital city in a little over a month’ (Watts 1983, p. 187). Every major trade union and friendly society was visited;[19] 1.7 million pamphlets were issued.
On 5 September Brigden declared: ‘National insurance was no longer a dream … it is here’ (The Age, 6 September 1938). National Insurance was, in fact, not there. It would not be there until 1 January 1939, and a diverse array of adversaries was striving to stop it.
These adversaries included ideological opponents. National Insurance embodied what might be called the principle of ‘compulsory thrift’; the poor will be compelled to help themselves.[20] By contrast, the Labor Party, and the left in general, favoured what might called ‘compulsory charity’; the rich will be compelled to help the poor. This genuine ideological stance could be nicely pegged on a commonplace vexation at compulsory contributions, and a buzzing profusion of small groups attacked the Commission. Thirty-one thousand protest letters were dispatched by representatives of the State Electricity Commission of Victoria. Social Credit claimed to have sent 20 000 letters. G. P. O’Day, the ‘red doctor’, and author of Why you should join the Communist Party of Australia, became ‘a tireless speaker against the legislation at countless suburban meetings organized – often by CPA members’ (Watts 1983).
In addition to these ‘ideological’ opponents were certain, not necessarily less noble, interested adversaries. General practitioners were dissatisfied. There was to be no ‘fee for service’ but only a not very large flat annual sum for every patient. Their representatives spent from May 1938 to mid-1939 white-anting the bill. Business groups were also hostile to National Insurance, as they would be required to match the contributions of employees (Hudson 1986, p. 105). At the same time farmers were unsympathetic because they were exempted from its benefits.
Brigden fought the propaganda battle. Thirteen Bulletins were issued by the National Insurance Commission in August 1938, along with ‘frequent radio broadcasts’, and by December 1938, over one million copies of the pamphlet, What national insurance means to the wage-earner, his wife and children, were distributed. Brigden directed his own staff to compose letters to the editor. Two-minute film ads by worthies of the day, including Ernest Bevin, were organised.[21]
It was not all lure and beguilement. Brigden also publicly attacked the means test.
I feel very strongly on that means test. I think in Australia the means test is a serious problem. It should not be taboo. Is it a fact that the Australian habit of concentrating public assistance … tends to increase the number of persons in necessitous circumstances? I will not say that it increases the cadgers and scroungers of the country: I would rather let other people use those words. Like the problem of soil erosion, it involves the problem of the erosion of national character. (Brigden 1939b, p. 150).
The battle was wearing. ‘National insurance has been a tremendous grind’ wrote Casey. Brigden told a public audience that national insurance was proving ‘extremely difficult’, thanks to the late start, and the elevation of perfection above improvement. ‘It may be too ambitious’ (Brigden 1939b p. 147). He was frustrated by the lack of public interest. ‘The intellectuals in Australia have taken the faintest possible interest in national insurance … intellectuals do not care whether the cow calves or breaks its Australian neck’ (Brigden 1939b, p. 149).[22]
Brigden and Casey were struggling to avoid retreat. Brigden devised a scheme to include farmers, but this was rejected by Treasury. Brigden had ‘a key role in negotiations with doctors’ seeking to reconcile them (Watts 1987, p. 17). In November Brigden persuaded Casey that implementation should be delayed from January until April 1939. ‘Casey may well have been working … with Brigden on a fall back position’ (Watts 1983). But restless political forces were closing in on the wounded prey. In February 1939, Earl Page, very lightly discarding the principle of Cabinet unity, publicly urged scrapping the legislation. In a drastic rescue measure, on 15 February 1939, old age pensions were dropped from the scheme, and unemployment benefits introduced.
It was to little effect; Lyons was not backing National Insurance. In truth he had made it known in 1938 that he did not want the legislation passed, and only agreed to its passage in the face of Casey’s threat to resign (McLachlan 1948, p. 253). Lyon’s sudden death on 7 April 1939, therefore, may have appeared as an opportunity. Had not Menzies actually resigned in March, in protest over Lyons’ lethargy over National Insurance? But any such hopeful expectation was soon disappointed. As Wilson remarked later concerning these events, Menzies was never really interested in economics ‘unless it was going for him’ (quoted in Sutherlin 1980, p. 270).
Casey, Menzies’ only rival, was removed from Treasury. The national insurance legislation was suspended in June 1939. And Brigden ‘came close to a complete physical break down’ (Watts 1983, p. 134). He remained the commissioner of a non-existent commission. To relieve ‘the embarrassment of Brigden’s position’, he was appointed secretary to the newly created Department of Social Services. This was accomplished on 29 August 1939. The passage of a few days was to make the issues of social services less urgent.