Australia

ATLANTIC

March 1952

on the World today

AUSTRALIA is the chief Western base in Southeast Asia. It was so in the last war: it can and must, be so again. It is obviously essential to hold the ring around Communist China, Japan, Indo-China, and the Philippines are in the front line. But a front line needs a main base, and this Australia can provide in cold war, in hot war, or in peace.

Its military assets are fighting men who, when trained, are second to none in courage — as Korea shows today — and in jungle lighting — as the Japanese found to their cost in New Guinea. Australia is also an easily defended base since all the great harbors and the industrial and agricultural areas lie to the south behind an immense shield of desert —a desert far more extensive than the stretch of barren land that defended Cairo against Rommel.

But its greatest asset, in war or peace, is that it is one of the few countries in the world producing a food surplus, and one of the even fewer whose output of food can be very greatly increased. It is true that nearly half of Australia is either desert, or fit for nothing more than light grazing. But only 8 million people live in the remaining territory, and there is much new land to be brought under cultivation for the first time.

The new assets

When Singapore felt in 1942, the Australians improvised a very complete arms effort in a remarkably short period and greatly extended the country’s industrial capacity . This extension has had its drawbacks, but it does mean that if war should come, Australia could provide not only food but industrial services to the armies in the field. Its heavy industry is not yet adequate for a new war effort — steel production is still under 2 million tons a year — but the country could be an efficient and effective industrial auxiliary.

These are the assets. They are backed by one of the most articulate and intelligent peoples in the world and strengthened by the existence of free institutions in a free society rooted in the great traditions of the West. From Suez to Panama, throughout the unstable world of Asia, one looks in vain for the political foundation stones upon which, ultimately, all stability depends. In Australia, by a supreme chance of geography’, history, and exploration, they exist.

The building up of a North Atlantic community for defense does not help Australia. In some ways, it has even given the Australians a sense of being cut off. In the areas which Vitally concern Australia— Far Eastern policy, Pacific strategy, the Middle East, and slerling-dollar relations—there is little trace of an agreed Western “grand si rategy.” Australia is to some extent confused by the confusions of its great partners.

Yet the first frustrations are undoubtedly internal. With a national income of over £A3000 million for a population of just over 8 million, Australia is one of the wealthiest nations in the world. The wealth is also reasonably well distributed by taxation and social services of the normal Western stamp. But the basis ol all this wealth is primary production — the steady output, of foodstuffs, of wool and minerals, chief among them lead and zinc. These primary products make up 80 per cent of Australia’s exports, and the country’s economy depends ultimately upon this vital sector.

Equally, however, successful primary production depends upon basic development — upon good roads and railways and efficient ports for export, upon power for rural electricity and for the foodprocessing industries, upon fuel and steel and, everywhere and in every possible way, upon waler. Water is Australia’s great shortage. Lack of water creates the deserts, sets the final limit to expansion, and is the recurrent specter of drought years.

If Australian economy expands

In other words, if the Australian economy is to be strong and expansive and if it is to play its full part in peace or in cold or hot war, it must extend its primary production and it must see that the bases of expansion — water, power, fuel, transport, and steel — keep pace with the growth of the economy. In fact, they must keep ahead, since the speed of their expansion sets the pace for all the rest.

For a variety of reasons, this is not taking place in Australia. Primary production was depressed in the thirties. The war saw a great expansion of manufacturing. After the war, the mushroom industries were kept in being to prevent unemployment. But although the reasons were understandable, the results have been unsatisfactory.

The number of men working on the land has declined; the service industries absorb more workers than any other section; basic transport and industry are short of manpower and capital; secondary and tertiary industry, which includes an immense range of nonsense such as chromium ash-tray production and the output of glass statuettes, has swollen to absorb a larger proportion of the working force than is the case even in the highly industrialized United States.

The result of this unbalance is obvious. Food production is falling. Steel output is below capacity and well below need. Electricity is zoned and rationed, and blackouts cripple industrial productivity. Fuel is chronically short, and transport, as a result of war and of poor post-war maintenance, is in very dubious shape.

Since the economy cannot expand its basic supplies and since demand is kept high by keen world demand for Australian products and by Iuli employment at home, the result is internal inflation. Inflation in turn has mopped up all the safety margins. Australia entered the last war with reserves of power, fuel, and transport capacity. There are no reserves today.

There is little reason, however, in the economic field why most of the deficiencies which impede Australia’s primary production — and incidentally its defense effort —could not be made good in little more than eighteen months. The degree of unbalance, though dangerous, is not large. Probably not more than 125,000 workers need to change their jobs from less essential to essential production. The redeployment of capital may be of the order of some £A200 million. The general prosperity of the community and the great skill and reliability of the labor force could make such a readjustment relatively painless.

The real obstacles lie in the political field. To gel resources out of the unessential, semiluxury industries and into the defense effort — into primary production and into fuel, power, transport, and steel means treading on a few toes, and neither Government nor Opposition in Australia is well equipped for this essential activity*.

The Government is a Coalition of the Liberal and (’ountry Parties. The Country Party has close links not only with some primary producers but with the manufacturing industry as well, and many of the industries which support the Coalition are those which, in Australia’s real interests, should be reduced. But what enterprise wants to be reduced while inflation-inspired demand is still on the upward swing?

After two years in office, the Government has not succeeded in getting much of the unbalance out of the Australian economy. The budget of 1951 produced some deflationary effects by higher taxation and cuts in Government spending. Credit has also been more closely controlled, but there is some sign of relaxation already. Meantime, the rise in prices goes on.

Australian Labor

Labor might be more attentive to the needs of basic industry, but it too is pledged to support all industries that give employment. The notion of transferring workers from less essential to more vital production is not a very popular one. The notion of a defense effort is even less so, for Australian Labor, the most isolated of all Labor Parties, is somewhat taken with the idea that rearmament is really not necessary and that “Russia will not starl a war.”

The fundamental economic issues in Australia have not in fact occupied the real attention of the Australian parliament. The political drama of the last lwo years has been the Government’s effort to deal with Comniunism by legislative means and its failure to do so.

Communism is a real problem in Australia, for some of the basic trade unions have been captured by the Communists and this control has been used with purpose and effect to disrupt industrial life. The waterside workers, the steel men, the miners, some of the transport workers, have had Communist officials, and it is certain that the keen dislike fell for Communism by the vast majorily of Australians was one of the chief reasons for the victory of the Liberal and Country Parly Coalition in 1949.

In 1950 the Government produced a bill outlawing Communism. This law, however, exceeded the powers which Australia’s Constitution confers upon the Federal Government, and was declared invalid by the High Court of Australia early in 1951. The Government then held another election strictly upon the Communist issue and as a result obtained control in both houses of the legislature. Thus reinforced, it proceeded to hold a referendum, asking the people to vote to the Federal Government the powers which the Constitution did not confer. The answer of the people was to return a small negative majority and there the matter rests.

The narrow vote which swung the referendum was almost certainly determined by general disgruntlement at continued rises in prices and at some of the Government’s measures for dealing with it — particularly the dismissal of 10,000 civil servants within a week or so of the referendum. In other words, the underlying economic difficulties have forced their way into the political arena.

This apparent deadlock is, however, only part of the story. The unions themselves have taken alarm at the aims and methods of the Communists, and in every key union active groups of Labor unionists are contesting Communist control, and in the steelworkers’ union and in several of the big ports have already scored a signal success. Their efforts will clearly be more effective the more stable and prosperous and expansive the Australian economy can become. Thus, once mores political action and economic policy have proved to be inseparable.

The British-American link

This state of affairs is both a warning and a challenge not only for Australians but for Australia’s powerful allies. If the Australian economy cannot be maintained on a resilient and expansive basis, if food production falls, if the defense effort does not take shape, Australia, instead of being the strong link in BritishAmerican Pacific policy, may become largely ineffective.

The Australians have had very little help and guidance from either London or Washington on the ways and means of carrying out what should be a common task. In the first place, Australia needs a joint British-American strategy because Australia’s policy is so involved with British and American decisions that their repercussions are certain to be a determining force.

The community is inescapably British by sentiment, by outlook, by massive economic interest. Equally it is bound by its defense needs and by many economic ties to a closer relationship with America. If it is forced to choose between these two centers of attraction, the result will be confusion, division, and inaction.

The first essential in a successful Australian development is an agreed strategy between London and Washington. This is surely not impossible. On the contrary, every practical interest presses in that direction. The more Australia can become a producer and supplier of sterling-area food, the less will be the strain upon the dollar reserves of the sterling countries. America can never become a great market for all Australia s products. Britain is Australia’s greatest market and will remain so.

Equally, however, it is in Britain’s interest that the expansion of Australian food supplies should not preclude the selling, say, of fat lamb to North America, or other transactions which would increase the flow of dollars into the sterling area. The interest is the same — the expansion of Australian primary production — and this means investment in the land, in food-processing industries, and in primary production of all sorts. Much of British and American capital is being directed into the “frills.” Australia’s -vital economic interest is for n repetition of such moves as the granting by the World Bank of a 100-million-dollar loan, all of which has been spent upon capital for basic development.

For a coördinated defense

In the political and strategic field, British and American interests in Australia are complementary, not competitive. Both nations need a Far East that is stable. Both nations need a successful policy for budding up prosperity in Asia. The Colombo Plan, in which Australia took the initiative, does not compete with Mutual Security Aid or President Truman’s Point Four program. The various schemes can accomplish more if they are closely coördinated.

If war were to come. Britain and America would gain if Australia’s main responsibilities had already been agreed and if the arms it would receive from both sides were already allotted and standardized. As it is, very few Australians have any idea how the new Pacific Pact fits into their Commonwealth obligations and how much assistance they would receive on either side. The result is a degree of hesitation in the defense effort and a certain underlying irritation with both powerful partners.

This point of psychology is, perhaps, the most urgent of all. It is perhaps not sufficiently understood in either London or Washington that, on the one hand, Australia is a tremendous potential asset in Asian and Pacific strategy but that, on the other, it cannot be taken for granted. London’s relative neglect of Australia Is, unhappily, ancient history, i The symbol of it is the failure of both Winston Churchill and Clement Attlee to spare even a week to visit this part of the British Commonwealth.

But Washington seems to fall very easily into the same error. The good will created by John Foster Dulles in coming to explain the Japanese treaty to the naturally reluctant and suspicious Australians can be easilydissipated by continued neglect of Australia’s interests and potentialities in other fields. Australia is a key asset of the Western world in the critical East. But much more time and thought must be given to it if its full advantage is to be safely won.