The 10-billion-dollar collapse of the wool industry is considered one of Australia's biggest business disasters, and for the first time, the shocking true story behind this colossal collapse is revealed. Spanning 170 years from the birth of the industry in 1840 and its boom during the 1950s through its unraveling from 1980 to 1991, this is a searing account of greed, political corruption, and heavy-handed protectionism. As it uncovers the never-before-seen archival sources, government and board papers, and private correspondence and shares exclusive interviews with key whistle blowers, this narrative unveils the gripping true story of government corruption in a seemingly untouchable industry.
|Publisher:||University of Queensland Press|
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About the Author
Charles Massy is the founder of the leading merino stud Severn Park and is recognized as an innovator in marketing and merino genetics. He is the author of The Australian Merino and of several articles on the wool industry, merino and wool history, and the environment. He has also held positions on the boards of the Australian Wool Research and Promotion Organization and the International Wool Secretariat.
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Breaking the Sheep's Back
The Shocking True Story of the Decline and Fall of the Australian Wool Industry
By Charles Massy
University of Queensland PressCopyright © 2011 Charles Massy
All rights reserved.
'An inexorable current': The political antecedents of disaster — 1840 to 1951
Riding off the competitive advantage of 'free' land — courtesy of Aboriginal dispossession — Australia was, by the 1850s, a massive producer of wool. By the 1870s Australian sheep breeders had reinvented the ancient Merino breed: an action that arguably saved the British wool textile industry from extirpation by cotton, and which involved for the first time in human history the re-engineering of an animal breed for industrial machines. This all culminated, by the 1880s, in the greatest wool economy the world had ever seen.
The squatting phase of Australian land possession and subsequent political fights led to huge inequities in land distribution and ownership, and resulted in an Australian 'squattocracy'. This exclusive group of landowners became politically powerful, with close connections in government, the legislature, and big business. For this influential group the English system of landed power, wealth and social position was successfully replicated. The squatters ruled their vast estates like lords and expected to be called 'Sir' or 'Mister'; they had teams of servants, along with city homes in Toorak, Bellevue Hill and Adelaide Terrace, from where they retreated into their mock-London clubs.
They controlled vast acreages, much of the nation's stud Merino genetics, and, at critical stages, much of the power in the wool industry as well as the state and federal legislatures. Their hierarchical social system lived on in most established grazing districts until well after World War II. Generally well educated (it was expected that many squattocracy sons would study at Cambridge or Oxford) and often imbued with an ethic of noblesse oblige, they believed they had a duty to lead. Outside of parliaments and legislatures they could be found on the boards of leading companies (particularly those impinging on the pastoral industries, such as banks, pastoral broking houses, shipping and insurance companies), and they assumed positions on key government committees, and leadership and policy roles in areas of public wool industry governance. This was particularly so from the 1890s and through the twentieth century, as agricultural politics became more organised and more powerful. Also, such members of the squattocracy were almost invariably of a 'liberal', free-market persuasion. This in turn set up a clash with the radicalised and disaffected, more agrarian–socialist, small, yeoman–farmer types.
A blending of factors after World War I consolidated the dichotomy in Australian wool politics. First, upon Federation, Australia's 'fathers' chose a middle political and institutional path that leaned more to an 'interventionist–redistributive' state than an American laissez faire approach. Second, there was an influx of hundreds of thousands of yeoman farmers on either side of the Great War (and later after World War II) under various land-settlement schemes — most of which proved abysmal failures. There was also the colonialist ceding by Australia to Britain of essential strategic war commodities, including wool, during World War I and the beginning of concomitant government and agri-political interference in wool governance issues. This included the role of Sir John Higgins in a tireless effort to install a government-controlled empire reserve price scheme — Higgins being the officious, ambitious and imperialist mining engineer chosen by Prime Minister Billy Hughes to run the World War I wool acquisition scheme from 1916 to 1922. Then followed the blind imperialism of Prime Minister S.M. Bruce through the 1920s as he took the nation deeper and deeper into an imperial quagmire of co-dependence, exploitation and industry protection (of the wool industry, he once famously stated in London in 1932 that 'Australian and Bradford interests were identical'). Finally, there was the unremitting hard times for wheat and wool producers between the wars.
The result in rural Australia, and its large combustible constituency confronted by the abacus of debt, was not just the rise of farmers' state and federal political parties, but the formation, too, of separate commodity-based organisations, including those representing the mass of hard-done-by, smaller-acre yeoman wheat-and-sheep 'cockies'.
* * *
Beginning in the 1920s and consolidated in the 1930s, there occurred the harnessing of the twin steeds in the protectionist carriage: the conservative federal Country Party and disaffected, radicalised and organised agrarian–socialist agri-politicians and their constituents. Out of this came an obsessive focus on collectivist 'marketing' and ever-mounting pressure for market protection, subsidies, 'price stabilisation' and, in the wool industry, a reserve price scheme.
The upshot of the 1920s and '30s, therefore, were agri-political and Country Party organisations that, given the right circumstances, could be made to dance to the tune of agrarian socialism as conducted by a radicalised farming community. Such organised agricultural communities not only thought themselves as existing apart from the rest of Australian society, they also regarded politics as a 'system of group warfare' while they became extremely adept in the dark arts of lobbying and political influence.
This group of radicalised smaller-acre farmers in 1939 finally formed their own specific agri-political organisation: the Australian Wool Producers' Federation, later to become the Australian Wool and Meat Producers' Federation (AWMPF). This organisation — 'the Producers' Federation'— was led by radical wheat–sheep farmers and was specifically designed to combat the free-market philosophies of the graziers' organisations (led by the national Woolgrowers' Council, the forerunner of the future AWGC or Graziers' Council), and to push for an 'Empire Marketing Plan', subsidies and a reserve price scheme.
To outsiders, the wool industry looked prosperous, industrious, and harmoniously unified. But below the surface there was a different reality. The formation of the Producers' Federation not only signalled the start of a vicious five-decade-long struggle over marketing reform within the wool industry, but also a deadly battle over power within Australia's largest export industry between members of grazier organisations and of the Producers' Federation.
This struggle would reignite with each wool price slump, and constituted a regularly occurring cycle that carried with it a 100 per cent correlation with political agitation. Fuelled by irreconcilable schisms in social, political and philosophical views, it also had powerful undertones of class consciousness and envy — especially when mixed with a single-minded zealotry about attaining the Holy Grail of a reserve price scheme. Ultimately, this was a battle over who should decide major questions of policy for the industry and who had the key say with government.
To the great frustration of succeeding governments (particularly a Country Party coalition partner desiring a reserve price scheme) who repeatedly sought clear direction, this agri-political dichotomy ensured that the policy process over wool marketing would remain a vicious and confused dogfight for decades to come.
The problem for the wool industry, however, was that successive federal governments were sucked into the maelstrom of wool industry politics and, worse, into direct involvement in industry affairs. This had begun with compulsory wool clip acquisition in World War I; was exacerbated by the Scullin Government's 'Grow More Wheat' campaign of 1930 (whose failure and perceived government betrayal was a key radicalising influence on wheat–sheep farmers); and became linked to British imperial plans for a RPS (first promulgated by Sir John Higgins after World War I).
Sustained pressure for such an imperial wool marketing plan culminated in the 1931 Empire Wool Conference and a move to establish a body for research and promotion of Australian wool. This came to fruition in 1936 with the formation of the first Australian Wool Board, established under the Wool Publicity and Research Act that also provided for a compulsory tax of six pence per bale of shorn wool to fund its activities. Arising from the Conference was also the creation of the International Wool Secretariat (IWS) in 1937, comprising the three founding dominions of Australia, New Zealand and South Africa. Its charter was to act as an imperial wool publicity organisation. This too was funded by compulsory statutory grower levies. These compulsory taxes on all woolgrowers proved a fatal development because not only had the federal government inserted its foot in the wool industry's door but agri-politicians — due to their official representative role — now also became involved in industry governance.
Through successive pieces of federal legislation, both grower levies and concomitant federal and agri-political involvement were increased over succeeding decades; first via the Australian Wool Board, and then its subsequent forms, including the Australian Wool Commission, the Australian Wool Corporation, and the long-lasting IWS. Such legislation and restructuring seemed to accompany every wool industry crisis, which in turn triggered an inevitable review or official inquiry, such as occurred in 1930, 1946, 1953, 1958, 1962, 1969, and beyond. With each successive escalation in statutorily sanctioned governance and its accompanying institutions came increased agri-political power, and with this an ever-intensifying dogfight over wool marketing between the two polarised camps.
Following the 1930s, this dogfight was further exacerbated during World War II and the period to the end of the Korean War. As had occurred with their predecessors in World War I, Australia's two Anglophile leaders, London High Commissioner S.M. Bruce and Prime Minister Robert Menzies, once more delivered to Britain what were vital strategic colonial war commodities of wheat and wool. This further entrenched government and agri-political interference in the running of the wool industry.
Because of compulsory wool taxes first imposed in 1936 and 1937, agri-politicians had been designated and empowered as the woolgrowers' representatives, though membership of the first statutory wool boards came entirely from the grazier-dominated Woolgrowers' Council. For the following years to 1945, the Australian Wool Board was a grazier and Woolgrowers' Council bastion, despite the protests of leaders of the Producers' Federation. At the same time, the board of the large and well-funded global marketing body of the IWS (whose first effective chairman in London was Australian Ian Clunies Ross) had also become infected by warring Australian agri-politicians — though their main focus would be on the Australian Wool Board (in its various guises).
Just as had occurred with Sir John Higgins (the autocrat who ran Australia's World War I acquired wool clip), when the Producers' Federation succeeded in gaining equal representation on wartime wool boards from 1942, they began a strong push to commit Australian wool marketing to the socialistic scheme of total clip acquisition by the government and a reserve price scheme (RPS). As a result, when peace returned, the Wool Board became equally divided between three agri-politicians from the Woolgrowers' Council and three from the Producers' Federation. With further supporting legislation for levied research and promotion, the respective wool boards became a honeypot to rent-seeking agri-politicians, while the split board representation became a recipe for ongoing dysfunction well into the 1970s.
As Australian woolgrowers enjoyed the brief Korean War wool boom (triggered by a run on global wool stocks and a secret ploy by the US government to acquire the Australian wool clip), the industry experienced its first major political battle: a national woolgrower referendum in 1951 over a British imperial RPS (key proponents of this being the new Menzies Coalition Government, driven by Country Party members and the Producers' Federation). Eighty thousand woolgrowers voted to overwhelmingly defeat the RPS proponents, and the industry moved into the uncertain waters of the 1950s and 1960s.
The highly charged seven-month-long referendum battle only created further political tension and agitation in the industry and, amongst a few key and powerful leaders, an unwavering drive to introduce a national RPS, irrespective of the democratic wishes of the woolgrower plebiscite. This combination of factors provided an inexorable power to the current on which the wool industry was now carried — driven by deep, deep springs of hardship, betrayal, identity, belief, ideology and emotion. And catalysing subsequent events were a few extraordinarily powerful and charismatic leaders: larger-than-life 'wool emperors', prime ministers, cabinet ministers and leading bureaucrats and agri-politicians.CHAPTER 2
Of patriots, government princes and wool emperors
Robert Menzies's leadership during his second stint as prime minister (1949–1966) encouraged a provincial and backward-looking mediocrity. Social commentator Hugo Wolfsohn said in the early 1960s that 'the institutionalisation of mediocrity' had led to Australia 'rusting up'. Donald Horne agreed. He said the 'established rhetoricians and ideology makers' like Menzies exhibited values that were 'largely a third-rate imitation of the paternalistic postures of the nineteenth-century British upper class'. A legacy of the prosperous, predictable and safe years of the Menzies era is that Australian leaders appeared not to change their ideas and adapt to the rapidly unfolding changes and challenges of the 1960s and later. 'There are few "new men" gathered together in the precincts of power to revisualise the images of the nation so that change may become possible', said Donald Horne as early as 1964. The Menzies era reveals that the men at the top — a provincial generation — did indeed seem ill prepared for the future; in Horne's words, 'their modest and obsolete ideals' had already been met.
While Menzies's leadership set the tone, he was not the only, and certainly not the most, influential figure in the wool industry of the mid-twentieth century. That honour is shared by three men: Sir John (Black Jack) McEwen; his departmental head and close confidant and ally, Sir John Crawford; and finally — and arguably the most influential and certainly the most charismatic of those involved in helping to chart a blind course for the wool industry in the next twenty-plus years — Sir William Gunn, the most famous of all the 'wool emperors'.
* * *
John McEwen's interest in politics came early, stimulated both by his history readings late at night and his harsh farming experiences. At age nineteen he joined the increasingly radicalised, wheat-cocky dominated VFU (Victorian Farmers' Union). By then a struggling dairy farmer, McEwen witnessed the 1921 collapse in dairy prices and was soon advocating help for the soldier–settlers who had begun to go broke on their pitifully small farms and to walk off in droves. While watching the cruelty of the bank foreclosures on those around him, the tough McEwen survived through hard, back-breaking work.
During the difficult 1920s and '30s McEwen rose to become a political leader. He also joined the Country Party, becoming active in its organisation. He was eventually elected to federal parliament in 1934 as Member for Echuca. He soon further aligned himself with the federal Country Party and its views. In his maiden speech to parliament, McEwen appealed to the government to provide wheat growers with 'permanent assistance, not a mere palliative'.
McEwen briefly became a minister for the first time after the 1937 election, but soon lost his portfolio when Country Party leader Earle Page refused to serve with Robert Menzies. Critically, McEwen was in parliament in 1941 to witness the Independent Member Alex Wilson cross the floor and help bring down the government on a Labor vote of no confidence. The power of agrarian politics was dramatically affirmed for McEwen, as Wilson was a Mallee farmer and ex-president of the Victorian Wheat Growers' Association (VWGA).
By the time he became a minister again in 1949, John McEwen had matured into the unremittingly tough leader who was to dominate Australian politics for more than the next twenty years. His public persona was described in terms of a 'patriot', and a 'national leader, international negotiator and statesman', who was 'single-minded, dedicated to the point of ruthlessness, demanding, domineering, tough, unbending, unforgiving and seemingly humourless'. Paul Kelly wrote in 1986 of McEwen that it is his 'imprint which remains indelible upon the nation today. The economic structures created by post World War II governments were carved by McEwen'.
Excerpted from Breaking the Sheep's Back by Charles Massy. Copyright © 2011 Charles Massy. Excerpted by permission of University of Queensland Press.
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Table of Contents
Foreword Jack Lewis vii
Acronyms and Glossary xi
Part I The Rise of Statutory Intervention-1840 to 1987 1
1 'An inexorable current': The political antecedents of disaster-1840 to 1951 3
2 Of patriots, government princes and wool emperors 10
3 The binary choice-1950s to 1958 17
4 'If the play gets rough, I can mix it': Bill Gunn, wool warrior-1958 to 1965 27
5 'Marketing mesmerism'-1966 to 1969 40
6 'All your danger is in discord!'-McEwenism to late 1960s 51
7 'The spontaneous uprising of the unwashed peasantry'-the great wool coup of 1970 58
8 'Without ever admitting to having done so': The Wool Commission-up to December 1972 73
9 'Requiring the wisdom of Solomon': The Wool Corporation-1973 to 1975 84
10 'No retreat' in a fool's paradise-1976 to 1981 95
11 With the cylinders all loaded-1982 to 1987 102
Part II Setting the Floor-1986 to June 1988 117
12 'A contagion': The wool boom-up to 1988 119
13 The start of the great bull run-late 1987 to January 1988 128
14 Hubris-early 1988 135
15 'On a collision course with the AWC board'-February to May 1988 144
16 The folie de grandeur: The Wool Corporation board-1988 155
17 'The price that could floor the wool industry'-May to 24 June 1988 162
Part III Into the Rapids-July 1988 to April 1990 177
18 'In so deep it must keep going'-July 1988 to December 1989 179
19 'A nightmare in the making'-late 1989 to February 1990 195
20 'No time for hard hats'-February to April 1990 209
21 'Flying blind without radar': IWS shenanigans-from late 1989 223
Part IV Into the Bunker 233
22 'Encouraged into bad cul-de-sacs'-Autumn 1990 235
23 'Let them eat mobile phones'-April to May 1990 244
24 'More to do with egos than economics'-17 to 21 May 1990 260
25 Last stand at Roma-21 to 27 May 1990 267
26 The fatal cut-28 May to 6 June 1990 282
Part V Denouement 291
27 'No better than incompetent gamblers'-June to September 1990 293
28 'Nothing short of insanity'-September to November 1990 305
29 The insurgency-October 1990 to January 1991 318
30 The crash-mid January to 11 February 1991 330
Part VI The Aftermath 351
31 'Death by ten thousand cuts'-February 1991 to today 353
32 Counting the costs 367
Select Bibliography 417