The Money Men Chris Bowen (the red fox clan .txt) 📖

reluctant adherent to Keynesian economics. He completely accepted that governments should intervene to stimulate the economy and avoid depression, but was less convinced that Keynesian weapons like reductions in government expenditure (or increases in interest rates) could be used to effectively rein in inflation. Rather, he preferred to have his hands on the direct levers of rationing. Here Chifley was at odds with his bureaucratic advisers, who universally supported moving to more-indirect levers of economic management than the blunt instrument of rationing.24 These advisers also felt that the Keynesian weapons of contraction, including the winding back of public works, should be deployed to reduce the growing inflationary tendencies in the economy. It is undoubtedly the case that the advisers were right and the government was wrong.

Chifley’s predilection for rationing would be a significant factor in his government’s defeat in 1949. The federal election of 1946, however, was a different matter. It saw the Chifley government safely re-elected with the loss of just six seats (including Forde’s seat of Capricornia in Queensland). This was a significant achievement. It was the first time Labor had ever won two consecutive federal elections, and the victory was owed in no small measure to the faith the Australian people had in Chifley’s ability to manage the transition from wartime to peace. Labor certainly reminded the voters that they had been up to the task of managing the war effort, whereas the conservatives had fallen short. But the shock defeat of Winston Churchill’s Conservative Party just a year earlier was a clear reminder that members of the public wanted governments to know what was necessary for a successful peace, not just successful war.

Australia’s Role in the Postwar Global Economy

As World War II came to an end, the Allied governments began to plan for global institutions to manage the world economy and avoid a return to the boom and bust of the interwar years. With the United States and Great Britain leading the way, and advised by Keynes, the Allies agreed on the Bretton Woods settlement, by which the world’s key exchange rates would be pegged and two important new institutions would be established: the World Bank, to finance development and combat poverty, and the International Monetary Fund (IMF), to facilitate financial stability and assist countries facing trading crises. Australia’s stance on its involvement in the postwar international settlement became a proxy debate.

As federal treasurer, Chifley needed little convincing as to the efficacy of the proposed new arrangements. He was quickly convinced of their merits. Chifley argued that if the world was to avoid a return to depression, it would need to embrace world trade and what today is called globalisation. He was unquestionably on the right side of history. Australia has never needed to call on the assistance of the IMF, but it is unthinkable that a modern, advanced economy like Australia would not be involved in such an important global institution. Chifley, however, was taking on powerful forces within his own party and government. He was arguing that Labor should embrace an internationalist, outward-looking approach, while the majority of his own Cabinet were deeply suspicious of international financial institutions and inherently isolationist. Chifley had to stake a large degree of his authority and credibility, as well as employ all of his political skills, to ensure that Australia participated. As the political historian Professor Pat Weller observes, Chifley’s manoeuvres in ensuring Australia’s participation made him an ‘example of a political craftsman’.25 It would take him two years to prevail.

Cabinet initially showed its reluctance on the entire question of postwar global cooperation by declining to send a minister to lead the Australian delegation to the Bretton Woods discussions in July 1944. The delegation sent was still high-powered, led by Professor Leslie Melville and including future Treasury secretary Fred Wheeler. But nonetheless, at every opportunity, the Cabinet, despite Chifley’s urgings, failed to support involvement in the IMF. It was first considered in August 1944, but Cabinet decided to defer consideration until the positions of the United States and the United Kingdom were clear. Chifley went back to the Cabinet, this time as prime minister, in late 1945. By this time, the United States had ratified the arrangements, but Cabinet again obfuscated. The following year was the crunch year—1946 was when Australia needed to decide whether it was going to be an original member of the IMF. It was also the year Chifley used his skills and authority to maximum effect.

In January 1946, Chifley urged membership of the IMF on his Cabinet. The Cabinet minutes show this was the only time that a Chifley recommendation was voted down by his Cabinet colleagues. However, Chifley evidently worked hard to persuade his peers, because by that June, he was arguing before the national executive of the ALP that the majority of Cabinet agreed with him that the IMF was an integral part of efforts to avoid another recession and that Australia should join it. The national executive endorsed the prime minister’s approach by seven votes to five.

In November, Chifley moved in the Labor Caucus for the endorsement of Australia’s membership of the IMF. It was a tumultuous debate. Cabinet members asked for Chifley’s guidance as to whether they were bound to support his position. He gave a magnanimous (and too generous) verdict, ruling that ‘When a Cabinet decision is reached it should be supported by ministers but there is no inflexible rule in this regard. The action of ministers is left to their own personal honour; ie a technical right exists for the minister to disagree with the ruling of Cabinet.’26

Six members of the Cabinet took this permissive ruling as a green light to defy their prime minister at the Caucus meeting, which was no doubt a significant factor in the Caucus resolving to defer the decision for a special national conference of the ALP. However, a special national conference needed the concurrence of the national executive, whom Chifley had already won over. When the Caucus was informed of this,