When this lockdown is lifted, it’s not impossible the capitalist machine proves its resilience yet again and the economy is surprisingly fine. We need however to consider the other end of the spectrum.
The definition of a depression is a 10 per cent decline in GDP or a two-year recession. There is a chapter in Australian history that provides a roadmap to a robust recovery. Most think the Great Depression was a time of endless misery but Australia’s performance was actually glorious. We entered the 1930s in arguably a worse economic mess than any other Western nation and on the precipice of being Argentina II – a wealthy nation which blew it. We however bounced back quickly and ended the 1930s in an enviously solid position compared to most.
In 1932, Australia had the second highest unemployment in the Western world – 32 per cent. US unemployment at around the same time peaked much lower at 24.9 per cent. But check out our recovery. By 1936, unemployment in Australia was in single digits while in the US it was still a stubbornly high 15.5 per cent. The US Dow Jones took till the middle of the 1950s to return to its 1929 peak but the Australian bourse smashed past its 1929 peak by just 1935.
Australia’s performance in the 1930s should be celebrated but it is forgotten because the hero of period was Joe Lyons.
Barring John Curtin in World War II, no prime minister has faced such cataclysmic circumstances as Lyons and turned it around so stupendously. In the process Lyons won three out of three federal election victories – all big ones too including the biggest two-party-preferred win ever with a whopping 58.5 per cent in 1931. So when a party wins 53 per cent 2PP in the modern era and it is referred to as a landslide, Lyons can paraphrase Paul Hogan: ‘that’s not a landslide – 1931 was a landslide.’
If Lyons was so great why is he forgotten? His American contemporary was the economically-woeful Franklin Delano Roosevelt who is endlessly lauded. Lyons ratted on Labor and Laborites mostly write our history so they ignore him (they can’t criticise him). Liberals think politics begins with Robert Menzies and are ignorant of what came before. It didn’t help that Menzies and Lyons had a falling out when Menzies resigned as the Deputy PM and was openly manoeuvring to replace Lyons as PM in 1939. Menzies would have lost a ballot but at the height of that stoush Lyons had a heart attack and died. Menzies then dominated conservative politics for the next three decades and so it was best not to mention the emperor’s foe.
Born in 1879, Joe Lyons was from a poor Irish Catholic family in northern Tasmania. He became a schoolteacher and helped to found the first ALP branch in his area. He was elected to the Tasmanian state parliament in 1909. In 1923, he became premier. He surprised the business community, and became popular with them, thanks to his careful eye on public expenditure at a time when other Labor premiers were spendaholics. Lyons was re-elected with a huge margin in 1925 but when he lost by a seat in 1928 the incoming premier praised Lyon’s economic stewardship.
As the 1929 federal election approached, the opposition leader, Labor’s James Scullin, was rightly confident of victory but he had a problem. Federal Labor had been out of power for thirteen years and not one member of Scullin’s team had ministerial experience. Scullin therefore invited Lyons (as well as a former Queensland premier) to come to Canberra to add some ballast. Lyons agreed and so when Scullin won office he could say that while none of his cabinet had federal ministerial experience it did have two former state premiers.
If Scullin’s government wasn’t chaotic from day one it was from day two because that was when the Great Crash of 1929 hit. That crash should have been a routine recession but the dopey American president at the time Herbert Hoover (Republican) decided the answer was massive government intervention in the economy and a recession morphed into a global depression.
It did not help that the previous government of Stanley Bruce had racked up eye-popping debt and now commodity prices crashed. The Scullin government was soon at war with itself. It split acrimoniously and publicly three ways between socialists who advocated reneging on the debt and printing and spending money. Others (including Scullin) dithered but a handful led by Lyons argued for economic sanity – i.e. repay the debt, savagely cut spending and encourage business. The economy was collapsing and the government was a mess. Communists and proto- fascists frequently clashed in city streets. Things were grim.
When Scullin travelled to London in 1930, Lyons was made Acting Treasurer and did all he could to promote sane fiscal policy. Lyons infuriated the caucus nutters so when Scullin returned Lyons was pushed aside. The economy continued its descent into hell.
Lyons then sat on the cross bench with a handful of the other former Laborites. Around this time a young barrister who was now a Victorian state MP invited Lyons to a meeting in Melbourne. His name was Robert Menzies and he outlined a plan: Lyons should defect to the opposition and become leader. Lyons signed up on the proviso the old Nationalist party be rebadged the United Australia party. In a rare political act the incumbent opposition leader stepped aside. The conservative side of politics was now led by an Irish-Catholic – extraordinary given the sectarian divide at the time. For Labor, Lyons was King Rat and the abuse hurled at him across the chamber when the news hit was intense.
Amidst the economic carnage, the new opposition leader toured the nation. He was greeted everywhere with huge Trump-style crowds heralding him almost as a messiah. Lyons swept to office in late 1931 and enacted Margaret Thatcher-style reforms. The free market immediately weaved its magic and it was all up from there.
Lyons always retained his working-class demeanour and was devoid of hubris. He lacked the brilliance and intellect of Menzies but he is easily Australia’s most popular PM over a sustained period.
Our current prime minister, Scott Morrison, finds himself at a familiar crossroads. He can either follow the easy but dumb policies of Herbert Hoover and the dumber policies of Franklin Roosevelt (which is what Labor wants) or he can take the tough decisions, emulate the truly great Joe Lyons and Australia can once again outperform the world.
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