T. A. Coghlan, London Opinion, and the Politics of Anglo-Australian Finance, 1905–1909

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T. A. Coghlan, London Opinion, and the Politics of Anglo-Australian Finance, 1905–1909 1
This article examines the interactions between the opinions of London finance and politics in New South Wales and the Commonwealth of Australia at the onset of the twentieth century. It focuses in particular on the appointment and early activities of Timothy Augustine Coghlan, who, with several breaks, held the post of agent-general for New South Wales between 1905 and 1926, although he is better known as a pioneering statistician and economic historian. In particular the article examines the context surrounding his appointment, his attempts to improve his state’s image, and his reflections on the way debt curtailed Australian independence. Though this the article contributes to the ongoing debate surrounding Cain and Hopkins’ writings on structural and relational power and the ‘rules of the game’, arguing that these are useful starting points for the analysis of a pervasive politics of finance within the British World.
On 30 March 1906 the agent-general of New South Wales (the state’s official representative in London) sent a brief letter to the Australian Prime Minister, Alfred Deakin, making the striking claim that, ‘So long as Australia is a borrower it must pay attention to the opinions of this country. … our statesmen should aim for independence of England. No country is totally free that owes money abroad’.2 The agent-general in question was Timothy Augustine Coghlan, a man best remembered as a pioneering statistician and economic historian.3 Between 1886 and his appointment as agent-general in 1905, Coghlan was New South Wales’ Official Statistician. He revolutionized the collation and presentation of statistics in the colony, something widely acknowledged in Australia and Britain: he was made a fellow of the Royal Statistical Society in 1893. He advised successive governments on a wide range of issues across two decades, and contributed to the broader intellectual life of the colony–publishing articles in the Sydney Bulletin and the Daily Telegraph. The son of Irish migrants, he was also a member of the Catholic Literary Association. He might have continued his career in Australia. In 1905, in Coghlan’s first year as agent-general, Deakin offered Coghlan the newly-created post of Federal Statistician. He declined, remaining in London until his death in 1926. Statistics loss was ultimately economic history’s gain. While in London Coghlan wrote a pioneering four-volume economic history of the continent – Labour and Industry in Australia, published in 1918: a foundational work of Australian economic history.4 All of this makes Coghlan’s comments on the political implications of Australian relations with the London capital market and its opinions all the more intriguing.

This article examines Coghlan’s appointment as agent-general of New South Wales in 1904, and some of his early activities in England. Through this it charts the links between London ‘opinion’ (to use his term) and politics in New South Wales and in the Commonwealth of Australia, federated in 1901. In so doing it seeks to explore debates surrounding Cain and Hopkins’ recent writings on the influence of British finance on the politics of settler societies within and beyond the British empire. In their 1993 magnum opus they argue that since economic growth in such societies relied on imports of British capital, it was necessary for these countries to conform to ‘rules of the game’ to ensure that capital continued to flow. Adapting Robinson’s model of collaboration, they suggest that the ‘rules’ were recognized by colonial business and political elites who acted to ensure that they were adhered to: especially at moments of economic crisis.5 R. V. Kubicek, Jeff McAloon, and the recent Oxford History of the British Empire Companion Volumes on Australia and Canada criticized this model, pointing out the considerable ‘agency’ exerted by settler societies in their dealings with London.6 Cain and Hopkins have recently clarified their position, distinguishing between power at what they call structural and relational levels in international relations. The relational level refers to particular encounters between historical actors; the structural level refers to the framework within which these encounters took place. Hard bargaining (and the occasional fleecing of the British investor) took place within a structure controlled in Britain. Structural power (as Cain and Hopkins call it) was perfectly compatible with considerable agency.7

How this model might be applied analytically, and how structural power relates to the earlier phrase – the ‘rules of the game’ – requires further explanation.8 This article makes two suggestions. The first is that we ought to separate firmly the structural economic dependence from the notion of the ‘rules of the game’. The process of economic development in Australia, and elsewhere, depended on global connections, especially with Britain. Clearly an economic imbalance existed between Britain, a creditor nation, and Australia, a debtor nation bound to Britain both by the frequent need for fresh capital and also (especially from the 1890s) by the need to service existing debts.9 However, it is argued that the political implications of this dependence on British capital markets were mediated by the understandings of political economy constructed within the City. These understandings were not so much a neatly formulated ‘package’ (to use Hopkins’ phrase) but a rougher set of partly reconciled assumptions concerning political economy.10 In other words economics needs to be separated clearly from assumptions about political economy.11 The second suggestion is that the influence of these assumptions or rules within colonial and dominion politics depended not only on shifting economic fortunes (as emphasized by Cain and Hopkins) but also a shifting political backdrop, and on the degree to which dependence was recognized and understood to have political implications.12

Once a distinction is made between financial dependence and understandings of political economy, the construction of those understandings (or ‘opinions’ to use Coghlan’s word), becomes crucial to operation of the politics of finance. This in turn requires consideration of the means through which information about political and economic events in Australia (and elsewhere) was interpreted, and reactions to those events articulated. Information reached the City by a number of routes. Informal connections and correspondence played an important role, and much discussion (often unrecorded) took place in clubs and offices in the Square Mile. 13 Yet the City also had a vibrant print journalism which played an important role in the construction of the rules.14 The press bought a good deal of news before financiers and investors – often penned in Australia – and as this article shows (contrary to the recent arguments of Thomson and Magee) news from Australia at least was by no means predominantly benign.15 Journalists writing in the financial and general press recorded (and to some extent shaped) the views of investors and financiers with whom they frequently enjoyed close contact.16 Coverage in the London press frequently attracted attention in Australian newspapers, and cuttings were often forwarded to colonial governments to illustrate and elaborate on City opinions described in correspondence.17 The press played crucial roles in mediating the process by which City understandings of political economy – the rules – were applied to events overseas, and by which these understandings were made known.

Through these suggestions, and attention to opinion formation in the City (particularly in the press), this article seeks not so much to contradict as to refine Cain and Hopkins’ model. This model becomes more subtle if we divorce structure from power, and economic dependence from understandings of political economy. It is capable of extension beyond the moments of financial crisis that feature heavily in Cain and Hopkins’ account to chart a politics of finance binding Australia and the City, generated by debt, and mediated by assumptions about the political economy. The effects of this politics of finance depended on the ways in which these assumptions were applied in particular circumstances by groups in the City, and in Australian politics. The fluidity of opinion, and gyrations of political life meant that it only became imperialistic (in other words only very occasionally led to the exertion of decisive control on a ‘relational’ level) in certain circumstances: normally, the coincidence of an economic crisis, relative unity of opinion in London, and power lying in the hands of a responsive political alliance in a borrowing nation.18 However this should not mask the pervasive if subtle pressures generated at other times by financial dependence on the City.

To illustrate these ideas, this article examines New South Wales and Australia’s relations with the City between 1901 and 1914 through the figure of Coghlan. It focuses particularly on his engagement with London ‘opinion’ and especially the financial press – not least because Coghlan himself thought this engagement to be central to his role. It seeks to show the complex and deep links between political life in New South Wales and the City, links generated by debt, meditated by understandings of political economy in the City and Australia. It is divided into three sections. The first examines the circumstances leading to Coghlan’s appointment – which can only be explained in relation to the financial and political exigencies facing the New South Wales government in 1905. The second looks at attempts by Coghlan and his contemporaries to improve New South Wales’ and Australia’s images in the London press. The third charts debates about Australian dependence in 1906 prompted by moves by Alfred Deakin’s government to transfer the debts of the states to the Commonwealth.

T. A. Coghlan was appointed temporary agent-general for New South Wales in January 1905. He held the post until 1915, and was recalled between 1916 and 1917 and from 1922 to 1926, holding the position almost until his death in 1926.19 Agents-general had emerged during the second half of the late-nineteenth century to represent self-governing colonies in Britain. They liaised with the British government, supervised colonial purchases, co-ordinated the recruitment of emigrants, and managed relations with the London capital market.20 They were not always noted for their calibre or vigour. In 1905 the Melbourne Age observed that, ‘the average Australian agent-general is an ex-cabinet minister… With the attainment of office, he has only to rest and be thankful’.21 Coghlan was by no means a model agent-general. He was an exceptional official, not a mediocre politician and, from his arrival in London, he rarely rested. He may have been thankful and, for Coghlan himself, the appointment (initially temporary but confirmed in 1906) had a number of attractions. It gave him access to archives in London to write his economic history, while, according to Neville Hicks, his wife enjoyed London’s social whirl. Moreover, for a long time, Coghlan hoped to become Australia’s first High Commissioner.22 However, this helps explain why he accepted the post, not why it was offered. To understand this it is necessary to place Coghlan’s appointment in economic and political context.

In the early 1890s, eastern Australia’s long economic boom came to an end. Marvellous Melbourne’s real estate market had collapsed, and the terms of trade shifted against the wool industry, Australia’s dominant exporter. Due to these internal difficulties, and the Baring crisis of 1890, borrowing in London became hard. Falling export earnings, and lower capital imports, created balance of payments difficulties which placed a strain on the colonial budgets. Matters became worse in 1893 when a number of Australian banks were forced to suspend payments (in part due to withdrawals by nervous British depositors) tightening credit and creating further economic atrophy. Finally, from the mid-1890s much of eastern Australia suffered prolonged drought which dramatically reduced sheep numbers and hence export earnings.23

As Cain and Hopkins point out, colonial governments responded to this economic crisis by dramatically reducing expenditure and raising taxation to ensure that debts remained serviced – accentuating the depression.24 All this produced widespread unemployment in the eastern states. The difficulties of the working classes increasingly came to be expressed in what Peter Love has called populism: a loosely defined antagonism to a status quo perceived to favour the moneyed classes or ‘money power’ at the expense of the masses.25 If in the early 1890s economic survival rested on ensuring credit was maintained, by the turn of the twentieth century political survival turned partly on tackling unemployment. The New South Wales ministries of William Lyne and John See pursued aggressive policies of public works between 1899 and 1902, winning ‘populist votes’ and the support of the emerging New South Wales Labor Party. This policy was facilitated by a revival of borrowing in London around the turn of the century (see Figure 1).26
[Insert Figure 1 hereabouts]
The woes of eastern Australia, and New South Wales in particular, had not gone unnoticed in the Square Mile. From the 1890s, Australian borrowing was increasingly criticised in the City – especially in the press. While a host of issues were discussed, three proved particularly persistent: first, it was alleged that some colonies (especially New South Wales) were over-borrowing to create employment; second, that Australian governments were hostile to immigration which might expand production; and third, that these problems were rooted in the democratic nature of colonial politics, and especially the rise of the trades unions and Labor parties. Vaguely bracketed together as ‘socialism’, these groups were accused of being unreliable guardians of the interests of capital.27

Hostile coverage in the London press frequently originated in Australia. As Bernhard Ringrose Wise–a former Progressive politician who moved to London in 1905–reflected: ‘no story circulates in England to her discredit which has not originated in some article in an Australian newspaper or some speech by an Australian politician’.28 Often such commentary deliberately sought to apply pressure on wayward governments through the capital market. For example, the Economist’s perennially gloomy Melbourne correspondent warned in 1902 that, ‘A disastrous crisis will occur in Australian public finance, unless British investors decline … to lend any more money, a step which would compel economical administration’.29 The role of these antipodean contributions must be carefully considered. Such writers were not shaping City assumptions about political economy but applying them in the Australian case. The Economist’s readers did not need the Melbourne correspondent to persuade them that extravagant public expenditure was a danger to public finances and hence to investors. Rather the correspondent applied assumptions he and they shared to show that extravagance was a problem in Australia.30 The very fact that Australian politics spilt over into the London press reflects the degree to which important aspects of Australian domestic politics were entwined with, and potentially sensitive to, London financial opinion.

After a brief honeymoon with federation in 1901, hostile coverage of Australia revived dramatically.31 By 1904 the London correspondent of the Melbourne Age warned that ‘a large and influential’ section of the press, and many businessmen in London regarded ‘Australia – or rather... its newer political tendencies – [with] uniform dissatisfaction and pessimism’. This dissatisfaction rested on a fear of Australian ‘socialism’ which was considered ‘narrow and self-centred’; ‘un-British’, ‘predatory’ and ‘incompatible with imperialism’. The correspondent warned that this would ‘damage public and private credit, check investment… and annually divert from the commonwealth hundreds, perhaps thousands of desirable emigrants’.32 Many also noted the relatively low price of Australian government stocks. At one stage New South Wales’ were lower than those of the small and relatively poor colony of Natal, which caused consternation in Sydney.33 Further cause for alarm came in July 1903 when the underwriters who increasingly dominated the issue of colonial government stocks temporarily refused to support further issues. The strike seems to have been targeted at British municipal as well as colonial borrowers, and was intended to give the market a chance to absorb the large amounts of stock left with the underwriters.34 Even if it was not intended to send an overtly political message, it was an ominous sign of weakening credit.

[Insert figure two hereabouts]

Such ill omens would have been worrying enough given the desire for fresh borrowing. However in 1904, 1907, 1908 and 1913 New South Wales had to renew many millions of existing loans (see Figure Two above). Indeed, as Coghlan showed in 1902, loan renewals would be a feature of anglo-Australian financial relations for generations.35 Weak credit and low prices would worsen the terms of renewal and potentially increase the costs of servicing the debt. In 1904, in response to particularly acute problems on the capital market, New South Wales’ progressive treasurer, Thomas Waddell, responded by slashing loan expenditure from £4 million to £1.5 million, reversing the ministry’s public works policy.36 Despite this, the criticism of New South Wales continued.37 Thus, at the time of Coghlan’s appointment, the need to renew existing debt as well as aspirations to obtain fresh capital both created good reasons for indebted state governments to take note of London’s opinions.

These financial exigencies were reinforced by political developments. Australian federation in 1901 shifted conflict about tariffs, the traditional dividing line in politics in both New South Wales and Victoria, to the federal arena. State politics became particularly discordant as close links to federal politics (where tariff policy remained a live issue until 1907) maintained divisions between the non-Labor parties.38 Moreover, new dividing lines emerged surrounding – amongst other things – labour policy and public expenditure. As we have seen, the Lynn-See ministry, composed of former protectionists drew support from Labor for a policy of expansive public works. In this context the former Free Trade (now Liberal) party in the state sought to revive its support by arguing for ‘reform’ of the public finances. Inspiration came from Victoria where a mass movement (the so-called Kyabram movement) had emerged dramatically in 1901, helping deliver office in 1902 to a government (led by W. H. Irvine) determined to reduce expenditure and to confront trades unions. In May 1903 Irvine defeated a rail strike – the railways being one of the largest public sector unions in a victory applauded in the City.39 In 1902, in New South Wales, a Taxpayer’s Union was founded to attempt to unite the remnants of the Liberal/Free Trade party with businessmen under the banner of ‘Kyabramesque’ reform. However, the movement split between the tougher minded People’s Reform League (supported by employers and other businessmen), and the more moderate Liberal and Reform Association, incorporating the Liberal party led by Joseph Carruthers. While the People’s Reform League failed to attract a large following, the Liberal Reform Association constructed a state-wide organization, and enjoyed Kyabram levels of membership. In the June 1904 elections Carruthers gained an overall majority in the New South Wales Legislative Assembly.40

Overseas debt formed a prominent component of Liberal’s case – linking retrenchment and the interests of the masses. Thus, one manifesto attacked the ministry for seeking to ‘maintain an artificial state of prosperity [which] is more than the country can bear’, resulting in ‘less employment for the people, more money going out of the country to pay English creditors and harder times for everybody’.41

By contrast with Irvine and the Kyabram movement, Carruthers’ rhetoric of reform was far less confrontational.42 Thus, he described the Victorian railway strike as a ‘calamity’, arguing:

Whatever system of economy was practised ought to be in stopping extravagance and leakages in the public expenditure, and restricting the huge system of borrowing money without making any class bear the burden for the whole community.43
He reiterated that his reform would not be reactionary, but in the interests of ‘the community as a whole’.44 In speeches, and in office, he proved far less willing to cut budgets or confront public sector workers than Irvine.45 Consequently, he was accused of betraying reform, not least by the Sydney Morning Herald, with criticism of New South Wales in London (much of it of Australian origin) often used to condemn his alleged timidity.46 As well as the need to renew loans, and the continued desire for new capital, Carruthers had good political reasons to seek to improve the state’s image in the London press.47 It would help disarm his critics in the state.

Prior to Carruthers’ election, agents-general had tended to do little to confront criticism in the City. Indeed in 1904 New South Wales lacked a permanent agent-general. The state’s former governor, the Earl of Jersey, represented the state, and thought replying to criticism would only likely to stir up further controversy.48 Carruthers, along with many others, became frustrated as masterly inactivity yielded few results. He complained in the Sydney Mail that ‘public credit’ suffered due to the British public’s ‘dense ignorance’ and the fact that only condemnatory material appeared in the press. He thought the ‘other side’ ought to be published and particularly, ‘facts, such as are contained in Mr Coghlan’s statistics’.49 As a result, in January 1905 Carruthers decided to send Coghlan to London in person to re-organise the agent-generalship and ‘to keep a watchful eye upon the letters of Australian correspondents to English newspapers, and to lose no time in replying to incorrect statements or figures’.50 The Sydney Daily Telegraph supported sending the state’s ‘ablest financial expert’ to London since ‘Our credit is bad, and our need of renewal loans is imminent’.51 Carruther’s arch-critic, the Sydney Morning Herald half-heartedly concurred, but snidely remarked that a vigorous ‘reform’ would have been more effective.52

Coghlan’s appointment, then, is revealing. A weakening of the credit of New South Wales, the desire to borrow for public works, the necessity of renewing old debt, and Joseph Carruthers’ political exigencies all made Coghlan’s dispatch to London desirable. He was to take on the London critics, and be seen to do so. The appointment reflected the close links between the City and New South Wales politics, links arising from the state’s sizable debts in Britain. These links become more apparent in the next section, which follows Coghlan’s campaign to correct misstatements in London.
On his arrival in London in spring 1905, Coghlan immediately launched an almost single handed campaign to counter slights on Australia. Coghlan later recounted to Deakin that, in the middle of 1905, ‘I was engaged daily in controversy, indeed for several weeks I did nothing else but answer attacks on Australia’. He claimed to have produced over 50 letters in the middle of 1905 alone.53 Bullish articles correcting alleged misstatements appeared in papers such as The Times Financial and Commercial Supplement, The Economist, The Statist, the Financier, the Daily Chronicle, and the Daily Mail.54 Coghlan filled over 50 pages of a cuttings book with offending articles, along with his replies, in 1905 and 1906 alone.55

Coghlan’s approach, and its limitations, can be seen in a particularly bitter encounter with the Daily Mail in December 1905. By then Coghlan had become a story in his own right. The Mail alleged that he had been sent to spread misinformation. It also claimed that the state was trying to silence the paper’s Sydney correspondent (an employee of the Sydney Daily Telegraph). The state wished to obscure poor progress due to the ‘disastrous policy of the Labour party, which had declared war on God, capital, and children’. Rural production and population was stagnating and farmers were emigrating to Chile. Finally it alleged that ‘the declarations published in England to the effect that Australia is now anxious for settlers and immigrants are only means of influencing the British investor in Australia’s favour’.56 Coghlan wrote an irate response. He denied any pressure to silence the Mail’s Sydney correspondent, and accused the paper of doctoring a telegram to exaggerate the numbers leaving for Chile. He concluded that, given more space, he could:

Prove … that socialism is not rampant in Australia, that the Labour party has not … declared war on God, children, or capital, that immigration is not discouraged, that the birth rate (though greatly reduced) is still at the same level as it is in this country, that the States are not burdened with debt, that the financial condition of the country is not unsatisfactory, and that so far from taxes being heavy, they are lighter than in almost any other English speaking country.57

The exchange typifies Coghlan’s approach. He aggressively denied particular allegations but rarely tackled their underlying assumptions (that a rampant socialism should concern investors, that encouraging immigration was desirable, and so on). In this instance, as in many others, the Mail in turn rebutted Coghlan’s letter. The agent-general, despite operating within the rules, rarely got the last word.58

Coghlan’s crusade certainly won supporters back in Australia. In September 1905 the Melbourne Age commented that ‘When the slanderers and libellers… published their diatribes against Australia, Mr Coghlan seized his pen, and with the training of a Statist, and the quill of a ready writer, promptly exposed their falsehoods’.59 Yet, the effectiveness of the campaign was questioned by some. Varying views can be found in correspondence with Deakin. Indeed, Coghlan’s own verdicts shifted. In October 1905, he wrote that the task of ‘defending Australia’ was ‘hopeless unless the impression that we refuse admission to our own (i.e. British) people is entirely removed’.60 However, by April 1906 Coghlan reported that ‘we are again taken into favour – unless investors are frightened off by some extreme proposals’. He thought the change had been caused partly by the ‘fine season’ (the lifting of the drought had boosted trade and government revenues) but also by the ‘marked actions of the agents-general in upholding the fair name of the country’.61 Others were rather less convinced by Coghlan’s tactics; especially his vendetta with the Mail. B. R. Wise was among several correspondents who complained to Deakin that ‘Coghlan has again shown his inability to understand London ways. A personal call on Harmsworth instead of a “scoring” letter would have got the “Mail”‘.62 The former South Australian premier and retired agent-general, John Cockburn, agreed that the Mail was, ‘hopelessly alienated’ by Coghlan’s attacks. ‘One can do wonders’, he proceeded, ‘with the press if one goes judiciously but offensive measures are worse than useless though the gallery may applaud’.63 Even one of Coghlan’s closer allies amongst the agents-general – Walter James of Western Australia – wrote to his premier that New South Wales’ confrontation with the Daily Mail would adversely affect all Australian states’ credit.64

In fact Coghlan was not averse to operating behind the scenes. In May 1905 he persuaded the Standard to withdraw a letter repeating the ‘usual tissue of lies’. In this instance Coghlan played on the imperial loyalties of the Standard’s editor, H. A. Gwynne that ‘certain papers’ were harming the ‘imperial idea’ since Australians were ‘resentful of the mountains of abuse heaped on the country since the close of the South African War’.65 Coghlan secured, or at least claimed to have secured, a change in the Daily Mail’s Sydney correspondent by applying pressure during the Mail’s 1907 confrontation with Lever Brothers. The Mail had been campaigning against Lever’s moves to create a soap combine, and to reduce the size of a bar of soap. Lever engaged the prominent lawyer, F. E. Smith, sued, and, in July 1907 was awarded £50,000 in damages.66 Coghlan proudly recounted to Deakin how he exploited this moment of weakness, and wrote to Harmsworth personally to demand that the Mail change the paper’s Sydney correspondent. Harmsworth apparently ‘saw I was making out a strong case for publication and capitulated’. Tellingly, Coghlan considered this to be the ‘best day’s work I have done since I came to London’.67

Australia’s image in Britain began to improve from 1906, but rather different techniques were added to the Coghlanesque rebuttal (which continued to be deployed). Their basis was articulated in a perceptive report written by the Western Australian agent-general, Walter James, in August 1905. Although an admirer of Coghlan, James argued that:

to deal with specific misrepresentations as they arise is not sufficient; our objective should be to alter that condition of mind which accepts misrepresentation more readily than it listens to facts.68

James’ solution was to spend money on advertising: an activity he considered worthwhile even if it did not increase migration since ‘we shall suffer serious financial loss if we ignore the value of public estimation in fixing the prices we pay for the money we borrow’.69 Over the next five years increased press advertising, a strong showing at the 1908 Franco-British Exhibition (with Coghlan’s involvement), and, as Bernard Attard has shown, the appointment of an Australian high commissioner all sought to improve Australia’s image amongst potential investors.70 Again such measures again did not alter the ‘rules of the game’ but rather exploited their looseness. They restated the country’s economic fundamentals (against the backdrop of a now recovering economy) in order to minimise its alleged political failings. As George Reid, Australia’s first High Commissioner, told a London audience: ‘Young people in young countries could travel more rapidly than the older people in the older countries… the advantage of a young healthy patient was that the doctors could not very easily kill him’.71

Edwardian Australia’s defenders sought either to directly challenge or subtly subvert the widespread notion in the City that Australia had become a risky destination for British capital. They did not challenge prevalent notions of political economy. Rather they recognised these rules but challenged their application to Australia in the Square Mile (and indeed by the Australian right). Coghlan’s press campaigns sought to deny outright that various rules had been transgressed (thus implicitly conceding that transgression was a legitimate concern for investors). Others followed Walter James’ advice, and (as in the quote above) argued that seemingly undesirable political measures posed little risk to investors, an argument which was far easier to make as the Australian economy recovered in the late-1900s. The goal of Australia’s defenders was to transform opinions in London on Australia, not the assumptions about the political economy of capital export underpinning those opinions. They did not challenge the rules but played within them. In 1906 Coghlan was to reflect on the political consequences of this relationship with London opinion for Australia.

In the early part of 1906 Coghlan’s attention turned to the proposed transfer of the debts of the states to the Commonwealth. The transfer of those debts extant on the eve of Federation was permitted by Clause 105 of the Australian constitution (the transfer of subsequent debt required the approval by referendum). This scheme had first emerged in the federation debates of the 1890s.72 As a larger unit, it was expected that investors would consider the Commonwealth’s finances to be more stable, reducing risk and hence the rates of interest charge on loans.73 For the federal government, there were also political attractions. Control of the debts created claims on the tariff revenues that the federal government shared with the states. The constitution only fixed the distribution of these revenues for the first ten years of the Commonwealth’s existence. Control of the debts would create a moral claim on the customs and excise revenues, three quarters of which were accounted for by the interest burden.74 Moreover the Commonwealth did not borrow in London before 1914 (although it came close in 1909). Since ‘public works’ were a key economic policy tool, and were funded by the states’ borrowings, centralizing Australian borrowing might also impart control of development policy.75 In short, consolidation would help ‘bind the states to the chariot wheels of central government’, as Alfred Deakin put it.76

In 1906, Deakin’s federal government began exploring the practicality of consolidation. That spring the Australian Treasurer, John Forrest, visited London with consolidation high on his agenda.77 Coghlan seized on Forrest’s visit to produce a particularly wide ranging report – possibly another bid for the High Commissionership.78 The majority of its pages focused on practical and technical matters. However, a crucial middle section turned to the determinants of stock prices and their political repurcussions. It was widely recognised (not least by Coghlan) that the scheme could only result in savings if the Commonwealth would be charged a lower rate on its borrowing. Therefore, as Coghlan pointed out, the scheme’s potential savings turned on stock prices, and drawing on all his experience of Australian financial dealings with London, produced a list of their determininants – effectively distilling his understandings of the rules of the game.

Through this list (reproduced in Appendix One), Coghlan suggested credit was determined by a combination of technical, economic, and political factors. Of these, Coghlan emphasised in particular, arguing that political reputation had ‘most influence’ on investors and financiers since ‘there is no class of persons which political dispositions and prejudices more largely affect their dealings’.79 As a result:

… as long as Australia seeks further money from the London market, either for new undertakings or for renewing old loans, attention will have to be paid to the opinions of the British investors on certain political matters.

Coghlan re-iterated the low repute of Australian stocks, and thought that the underlying cause lay ‘the ludicrous yet oft repeated assertion that there is a considerable section of the Australian people who favour legislative proposals tending to diminish the security of private property’.80 It was ‘useless’ to try to correct this assertion, and futile to ignore its effects.81 Hence, Australia should direct its energies to financial independence since ‘no country can call itself entirely free that depends upon the opinion of a small section of the population of a far off city’.82 Coghlan was silent on how this independence might be achieved.83

At this point, Coghlan’s views ought to be set in the context of his own understandings of the role of British capital in Australian economic development. Coghlan long seems to have doubted the value of borrowing overseas. In the early 1890s he condemned the expropriation of ‘surplus value’ by British capitalists in the Sydney Bulletin.84 This scepticism crept into his official publications which naturally took a more neutral tone, not least to avoid alarming British investors.85 For example his Seven Colonies of Australia may have concluded that ‘the larger portion of loans has been well expended’, but it also criticised the ‘vigorous policy of public works’ undertaken in the 1880s, and described payments to British investors as an annual ‘tribute’ of £16,261,000. He also wrote of payments to absentee landlords as a ‘drain’, echoing radical Labor rhetoric and (perhaps unconsciously) critics of British rule in India such as Naoroji and Dutt.86 A similarly cautious verdict can be found in Labour and Industry: the excesses of the 1880s (with their painful repercussions in the 1890s) are condemned, but British capital is granted a minor part elsewhere in a narrative which has as its central dynamic (as Holton argues) the rise of a democratic nation based on the development of natural resources whose equitable distribution was secured through struggle of workers against squatters and speculators.87 It may seem odd that Labour and Industry marginalises the role of British capital in Australian despite its author dealing daily with the City. Yet what better way to make the case for financial independence than to show that Australian economic development had not, in fact, depended on London’s goodwill?

Coghlan circulated his document on States debts amongst the agents-general, showed it to Forrest, and forwarded copies to Deakin and Carruthers. Reactions varied. Although intended as a joint report, it was not endorsed by the other agents-general. A critical letter from J. W. Taverner of Victoria invoked the doctrine of responsible government:

To admit the right of British investors to question the particular party that may be in power for the time being, in my judgement, would be a challenge to self-government under the British flag.88

Similar sentiments were shared by John Forrest, the visiting federal treasurer.89 Confronted with the queasiness his stark admission of Australian dependence had evoked, Coghlan defended himself to Deakin, arguing that Taverner and Forrest were ignoring ‘the principal facts of the situation’.90 Carruthers released it to the Sydney press late in June.91 The Sydney Morning Herald acknowledged the instinctive ‘blush of national feeling’ at the idea that ‘our own affairs can be affected by any outside consideration’, but continued that, ‘no nation, any more than any individual can be said to be independent, self-contained, or self-supporting in the absolute sense of those expressions’.92 Having marginally failed to coin the word globalization in answer to fears of imperialism, the Herald continued:

So long as Australia seeks further money on the London market… we will have to pay attention to the opinions of the British investor…. it must be clear to everyone that if we want [British] money, and the labour market should be able to furnish an answer to that, we must take some allowance to the views of those whom we are in the habit of asking to lend it…93

As a result, it was essential to avoid ‘wild-cat legislation’, ‘extravagant expenditure’ or anything that suggested that ‘faddists and socialist experimenters’ were in control.94 The logic of debt and need to maintain credit, the Herald argued, necessitated a political response to reassure nervous British investors.

This final comment revealed the strong links between debt consolidation and the configuration of politics in the early Commonwealth. It was a direct criticism of Deakin who, in the complex three way politics following federation, relied on the votes of Labor members in the federal parliament.95 Increasingly calls were heard for Deakin to unite with the anti-socialist George Reid against Labor, calls supported by the Herald, and many other non-Labor politicians, including Joseph Carruthers.96 In 1905 Carruthers linked this to the City’s fears of Labor, writing to Deakin, ‘we in the State Govt [sic] know that in our financing we discover that the real opinion of Australia and the causes that hold her back. The Labour party is the “bête noir” to the forces that control our affairs’.97 Deakin was determined to resist such arguments and stick with Labor (indeed the fusion of the two federal non-Labor parties in 1909 was ultimately precipitated by Labor ceasing to support Deakin and the Progressives).98 Coghlan wrote rather apologetically to Deakin that: ‘Of course I quite understood what would happen when my report reached the hands of the Australian Tories. The true lesson taught by what I have said is that Australia cannot be itself entirely independent until it is free from the load of debt which it has to carry’.99

Furthering fusion may be one reason why Carruthers published Coghlan’s report; however, publication also served another of his political interests: the defence of states’ rights against the Commonwealth government.100 In 1907 Carruthers was to confront the Commonwealth by trying to secure the admission of wire-netting to New South Wales free of duty.101 We saw earlier that the consolidation of the debts looked likely to increase the power of the federal government. Coghlan’s report argued (in its more business-like sections) that consolidation would not result in savings; and anything that obstructed the economic case for consolidation served Carruthers’ defence of state rights. In 1908, in the Financier and Bullionist, invoked the City’s instinctive fear of Australian socialism in defence of states rights, arguing that since Labor had more influence at the federal level, and since this was recognised in London, it was unlikely that the Commonwealth could borrow any more cheaply.102

In the end, the consolidation of the debts was only effected in 1927, when a loans council was established which federalized the debt with the states retaining considerable leeway in their development policies.103 However the controversy surrounding Coghlan’s 1906 report highlights the links between Australian politics and the City. It showed three different conceptions of these links current in contemporary Australian political discourse. Two strands acknowledged the political repercussions of dependence, either embracing it (like the Herald) or arguing that it made financial independence essential (like Coghlan, or indeed many in the Labor party).104 A third (including Forrest and Taverner) rejected this analysis, or chose not to emphasise it, asserting that economic dependence had no significant political effects – or ought not to in the context of ideas of responsible government. The issue also showed the links between finance and two leading issues in the early Commonwealth: states’ rights, and the development of federal party politics. Debt spawned complex links between the City and federal politics. This perhaps explains why Deakin consistently found time (even as prime minister) to write a column for the London Morning Post.105

Coghlan’s appointment , early activities, and reflections as agent-general all reveal the central role played by ‘opinion’ in the City and Australia in intermediating between a structural dependence on British capital, and its political implications. The New South Wales premier, Joseph Carruthers, appointed Coghlan both because his government needed to renew loans and had aspirations to raise fresh capital, and because hostile commentary in the City – much of it Australian in origin – amplified and legitimated the voices of domestic critics who wished him to retrench state expenditure more radically, in part to maintain credit. Meeting these critics by changing policy risked eroding support; ignoring them carried equal risks. Thus Coghlan’s appointment, and his explicit instructions to counter hostile criticism in the City, owed its rationale to the combined economic and political pressures originating from financial dependence. His assault on Australia’s ‘slanderers’ equally reflected these exigencies seeking to improve his states image in the eyes of potential investors (as well as other audiences, particularly prospective emigrants). Coghlan’s campaign, along with more subtle defences of Australia, did not seek to shift the framework of assumptions within which Australia was judged, only the judgements reached. They took place within a field, or set of rules, which Australian participants could not determine, and at best could only subtly shift. This was the central point of Coghlan’s report on the consolidation of the state debts, which explicitly highlighted the power of London opinion. Australian reaction to the report revealed differing conceptions of the degree and desirability of dependence, and the ways in which the views of London finance were inextricably linked to two major political issues in the early commonwealth: the balance of state and federal responsibility, and the federal party system.

Thus this article has examined, through Coghlan’s experiences, the ways in which ‘opinion’ (to use his phrase) played a crucial role in the politics of anglo-Australian finance. It has highlighted two forms of opinion: the ‘rules’ or assumptions constructed in the City, and the understandings of the political implications of what has been termed the ‘structural financial imbalance’ held in Australia. Both interpreted, mediated, and shaped the ways in which financial connections manifested themselves in Australian politics. The City was a key forum in Australian political life. Opinions articulated there (often of Australian origin) were frequently relayed back into discussions in the Commonwealth. These opinions could attain purchase (as in 1904 in New South Wales) due to the desire (or need) for new debt, the difficulties of managing (and reducing the burden of) existing debts, and because credit in London was used in political discourse as a barometer of economic competence. Image in the City could not be ignored by Australian politicians for both economic and political reasons. The influence of the City and its Australian allies depended, though, on the degree to which alliances could be built within Australian politics with groups committed to maintaining credit, and this process of alliance building was never solely about placating London. There were moments of economic crisis when maintaining credit did become critical (the 1890s or the 1930s). Such moments brought unusual clarity to the City’s thinking. Then, the stark choices faced by Australian politicians tended to strengthen (often decisively) the case of the kind made by the Herald in response to Coghlan’s report: that Australia’s economic fate rested on credit in the London capital markets.106 Yet a search for moments of decisive control should not blind us to this omnipresent and often deeply contested politics. Such moments were, to use a well worn analogy, the tip of the iceberg. Beneath lay a politics of finance intermediated by opinion that pervaded, but also had the potential to disrupt, Britain’s relations with the settler societies of the British World.

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