|Interviewer: Robin Hughes
Recorded: January 23, 1992
This is a transcript of the complete original interview conducted for the Australian Biography project. Each transcript page covers one videotape (approximately 35 minutes). There is also QuickTime video of the full interview available. To play the video, click on the icon in the right hand column. In addition, each question in the transcript is linked to the video. Clicking on a question will play the video from that point. (Help with this feature.) Optionally, you can download the video file for offline viewing (approx. 10MB).
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After the talks had been completed in Geneva, there was a further phase that took place in Havana.
Well actually it wasn't after that; they were going on parallel. Well, all through that Geneva period the content of the Charter was being debated just as passionately as the negotiations because after all the tariff negotiations were intermittent. You swapped your lists and you went away and studied them and sent telegrams back to your own country about what you could do and what you couldn't offer and so on. So that in between, the time was devoted to considering the problems for which the Charter was designed to deal with. How could developing countries protect their capacity to develop, against the kind of threat which a major established community like the United States, and, well, Germany if it hadn't been the enemy? All of those things had to be discussed. And how was it proper for a country to continue to maintain exchange control? Was it proper for a country in balance of payments difficulties to put on extra tariffs temporarily, to have import quotas and things? All these kind of issues which are ...
Still very relevant. All those were debated, and finally an agreement was reached about how they should be - what were the behavioural rules, what was it proper for you to do, and how did you resolve disputes if people were dissatisfied by the application of those rules. And that charter was very important to Australia because we said, 'Look, we have used the tariff as a way of protection [for] Australian industries, primary industries and secondary industries against positions in which our problems arise, because United States and other big industrial countries, do not maintain full employment for their people. Their people haven't got incomes, they can't buy our wool, they can't buy our wheat, so we have problems'. So the Charter set off by saying that the Charter is based upon the powerful industrial countries, the countries with capital who are lenders to the world, have an obligation, to maintain employment in their own country, and to have - where they have surpluses - to make them available for the developing countries so that they can carry through their development plans. So the Charter was, in a way, an expression of the conviction of Australia and developing countries, that they were entitled to things that made it possible for them to industrialise, if they wanted to industrialise, or to develop an economy which accorded with their ideas. So now, that was and ...
Finally after very great ... well, either the ... three years of negotiation, we reached a kind of agreement on the content of that Charter, and it was right at the end of that ah, that the final negotiations in Havana, which really was by that time - even the Charter was substantially finished - it really was a kind of wrap-up of the whole business, and was going on - going to be a great celebration. Now right in the final stages of that, the Americans came into the meet[ing], to a meeting and said that they wanted these two parts of this deal separated, they wanted the Agreement on Tariffs and Trade - the tariffs, they wanted that dealt with first, separately from the Charter see. And because they said that the President could approve an agreement negotiated about tariffs but he couldn't approve a decision to accept the Charter, that would have to go to Congress see. So anyway we had - this was quite a violent discussion, and I was being kind of ... I was old enough, even then, as a young man to remember that an agreement set up the League of Nations had been reached after the end of the First World War and despite the fact that it was an American idea, and put forward by President Wilson, after the war they repudiated that agreement and the League of Nations came into existence without American participation, and was weak and ineffective and failed. And so I drew attention to this risk and said that a lot ... from my point of view, as the leader of the Australian Delegation, I felt that the negotiations on tariffs had been made on the understanding that there would also be adopted, the content of the Charter, see. But what in fact, and this I ... The Leader of the American Delegation was outraged that I should suggest that they would go back, America would go back on this commitment see. But in fact of course when ah, election - the election to Congress was coming up President Truman, who was a bit worried about his own chances, just announced unilaterally without any discussion with the countries with [which] these negotiations had been conducted, that he was not going to put the Charter before Congress. So that the - what seemed to me to be an essential component in that settlement, that creditor countries, the big, wealthy, industrialised countries had obligations, they at least had obligations for their people to be fully employed, to have income to spend, and so that developing countries didn't have to resort to tariff protection and other things, to the same degree in order to make their economic and political ambitions effective.
Well as I say I've ... it's ah, always has seemed to me to be - that in effect the Americans went back on a commitment, which as far as the people ... which had been entered into with full knowledge of the President, it - he received exactly the same kind of communication from his negotiating team as Chifley did from me and the others so that ... Anyway it was a negotiated agreement, negotiated within the full knowledge of the President of the United States who repudiated it absolutely. Now I believe that ah, that it's taken a long time for the situation to emerge, but in the present circumstances, the United States has one of the highest levels of unemployment in their history, at the moment. If all those people had incomes to spend, they would want the things which we have to sell, see, and which other people have to sell see. The whole, you know, the fundamental proposition which really was the way in which the Labor Party was persuaded to adopt - go into these negotiations and to make the concessions on tariffs to give away the protective devices on which they had relied before, because they believed they were getting a commitment of the United States, the biggest ... but also other creditor nations, industrialised nations that they would perform their part of the function.
Do you feel that when the chips are down the big powers will always act in their own interests?
Yes I do. I have - certainly I've never seen anything. We had Mr Bush out here a few weeks ago, we were asking that he considers the problems created for Australian wheatgrowers, because they cannot get access to the American markets and that the Americans are taking away the markets which Australian wheat producers regard as traditionally theirs. And if they - if that level of unemployment could be abolished, this whole context would be different. So that, but what did he say? He said he refused to consider the problems of the Australian wheatgrowers, but said well, part of his purpose of his visit to Japan was to persuade the Japanese to make access to their markets [for] American goods, the primary purpose of his visit. Yeah so - and that I think is characteristic. He will never get countries of that kind to go back on what they believe to be - what they feel to be interests which are critical to their economy.
After all the work that you'd put into this, the enormous amount of effort and energy and thought, how did you feel when that happened?
Oh, it was hard to have ... well I just - I did feel utterly and completely disillusioned. And that disillusionment in a sense you know continues. But I believe there was an opportunity to establish a pattern of international trade where the participants were conscious that they had to make concessions to [the] needs, particularly of the poorer and developing countries, and that is what is missing in the world at the present time, see. We go to - we still can sometimes negotiate things about tariffs, and the other mechanical things because sometimes those are mutually beneficial, even if the other aspects of the situation are harmful. But we lost an opportunity to establish - not exactly a model - because it was anticipated that there would be problems, that there would be disputes, but there was provision in the Charter for the way in which you behaved when you did have - when you felt that you couldn't observe the conditions of the Charter. You didn't just go off and repudiate it. You went to the Governing Body of the Tariff, the Organisation of International Trade. And you explain your problem and they say say, 'Well what do you want to do?' 'Well we want to have a temporary increase in our tariffs, or we want to put on an exchange control for a while, we want to do this or we want to do that.' And you sit down and negotiate about it, and [you] can't do that now.
It wasn't probably the only time in your career though that a far-sighted rational solution was beaten by short-term selfish goals. Do you, do you feel that this belief that just leave things alone, they'll all work out, that there's a natural sort of ... market forces and people acting in their own interests can eventually sort out some kind of way of operating. I mean you're taking the line of the planner, the person who integrates and has an overview. Were there other occasions when you found yourself up against a different point of view?
Oh yes, I suppose you could say that it's been that the whole ... all the ... see, that doctrine of full employment - that the government has an obligation to see that there is employment for to each person, for it's people and also that their - they have obligations to consider the problems of other countries. In a way the whole Post-War Reconstruction's domestic settlement was based upon that hypothesis see. It - and it ... but it was a thing that was unpopular with the powerful industrialists who saw, felt, themselves to be in a position where they could get the benefits of their negotiating power, without having to accept these other commitments. So, you know I - and progressively the Keynesian idea of running the economy on the basis primarily of full employment but of concern for its operation and implement and it's and was pro ...
... progressively replaced by a - leave it to the market which will give an outcome which is desired by the market; i.e. by the people who have the greatest clout in the market, the people who have most money to spend.
But after post-war reconstruction, you went to the Commonwealth Bank and it has, of course, been said I think by you ... You comment in Trial Balance about a banker's - a Central Banker's wife who said to you, 'What are Central Banks for, except to protect the wealth of the rich'. I suppose in moving into the Commonwealth Bank you were faced with the idea of putting some of these personal philosophies on the line in a banking context. Was this something new to the banking world in Australia?
Oh, by that time it was quite familiar to the Commonwealth Bank I think, and I think to ... also to be fair, I found that in the period during, after, the end of Post-War Reconstruction when as Head of the Central Bank and part of the Commonwealth Bank or of the Reserve Bank, I had a responsibility for dealing with the heads of the private banks. We had regular meetings with them, the discussions were about our policy - the Reserve Bank - or w[ere about] Commonwealth Bank policies which were explained in Keynesian terms. And their people, their research people, their economists, got the material on which our judgements were made, so that you know, I think there was a period when - well not when we were, you know, one happy family by any means - but where there was a sufficient consensus for the system to work, without ... I think that you know, a period from ... let me see, after the end of the Korean War fifty what was it? Ah, you know about '54, '55 after they ... through to when I left the Bank - '68, it's a period really of quite astonishing stability. General prosperity, occasional hiccups, but no major economic crises over that - despite very difficult things internationally.
And why do you think that was? How do you think you achieved that?
Well I don't ... I think it would be arrogant to suggest that it happened because of what we did. Although I think that was a significant part of it. But it happened because - well the influences in operation in the economy, were compatible with that kind of arrangement and the constraints, which [it] was necessary to impose, were constraints which, taken by and large, were accepted by the financial system, and not as perfect, but there was sufficient agreement for that kind of approach to economic management to be regarded as acceptable. And I think people felt that overall there were times when they got sick of us and we were ... they lost opportunities, but on the whole I don't look back on those debates with the private banks and the people who ran the State banks and the people who ran finance companies and so on, I don't look back on them as periods of intense hostility and that, see. You know, on the whole there was a - a kind of consensus.
For most of the time you were at the Commonwealth Bank and then at the Reserve Bank, you had the one Prime Minister, Menzies, and so this has often been described as the stability of the Menzies era. What role do you think he played in that?
Well I think ...
And what did you think of him?
... it's a very important distinction there. See, when he came to office, he and Fadden, they came to office promising ... some of them, some of them were promising to sack me, have me sacked, but some of the - but they were promising a lifting off of controls. See merely get rid of rationing no, not merely to have petrol freely available, but to get rid of controls altogether, particularly the ...
Deregulation to run - have the economic, the financial system released from the Central Bank controls. Now they started to do that and it - it was very unfortunate for them, but it happened to coincide with the period leading up to and the period of the Korean War and we had - it was the second or the third year of the Menzies period - inflation at the rate of 20% per annum for one year. That terrified them, and so that they looked with much less hostile eyes on ideas for constraint, in the use of controls when they were necessary, and so ... I had - in other words I think Fadden, Menzies and I and Roland had certainly different views about all of these things, but they were differences of degree, not of absolute terms. No one was suggesting that controls should be completely abolished. We argued about how intense they should be, and that it was desirable for them to be released, but you released them as and when you could. So that - and that I think was - so that in a sense it was a period of Menzies - Menzies stability was true, except that the beginning of it was a period of absolute inflation, initiated partly by Menzies' and Fadden's desire to get rid of rationing, to get rid of controls, to release the banking system and so ...
And let the market work.
Let the market work yes.
[end of tape]