Tiberius with a Telephone

by Patrick Mullins

  Neither this nor the clear signs that Gorton would not move for ratification were enough to distract from the obvious about-face. Within a few months, Gorton had gone back on an election commitment, Labor noted. What else could he go back on? It was a revelation of weakness compounded by the conspicuous decision to sign without ratification. As British diplomat Martin Reith observed privately:

  Mr Gorton has made nothing but losses out of the late decision to sign the Nuclear Non-Proliferation Treaty. The styling was so wrong — all the appearance of having been taken under pressure, Mr Whitlam’s or worse still Mr McMahon’s — and instead of killing it now, the implied unwillingness to ratify still leaves his opponents with the chance of a second go.53

  It all served to overshadow the role played by officials within the department and, indeed, the scale of one of McMahon’s achievements while minister for external affairs.54

  While McMahon triumphed over Gorton this time, there were to be occasions when he lost — and not just to Gorton. Having nursed it for the two years since McMahon rendered it redundant, having spoken to Gorton about it in 1968, and no doubt aware that his own mooted retirement left a finite opportunity to get it through, John McEwen saw that the time had come to try again on his Industry Development Corporation — and, this time, to ensure that he would win. In January 1970, he wrote to Gorton suggesting that they co-sponsor a submission to cabinet to establish the AIDC. His language was grand, significant, heavy on nationalism. He knew how to attract Gorton’s attention. The AIDC, McEwen suggested, had the potential to be the ‘most fundamental breakthrough in development policy since 1949 — a breakthrough with great national appeal and tremendous economic advantage’.55 Lenox Hewitt’s support, in his private advice, was coloured by appeals to Gorton’s dislikes. Writing of McMahon’s Resources Development Bank and Treasury’s earlier opposition to the AIDC, Hewitt argued that it was ‘difficult to avoid the conclusion that the attitude of the Treasury in this whole matter has been one of a dog in the manger determined to preserve a monopoly on borrowing abroad — perhaps because of a fear that the competitive institution might be a success’.56 The appeals worked. Gorton was on board.

  He and McEwen circulated the revived proposal on 23 January. The reasoning for the AIDC was much the same as before: there was ‘a need and opportunity to develop policies aimed at encouraging industry growth and Australian participation therein’. The AIDC would facilitate the ‘development and expansion of Australian industry’. It would have a particular emphasis on export-oriented industry and the preservation of maximum Australian ownership, they argued. By borrowing funds in international markets, the corporation would invest in and lend capital to Australian companies, allowing them to expand, resist foreign takeovers, and increase their ability to generate capital. Speed was of the essence: Gorton and McEwen wanted the announcement to be made ‘as soon as Parliament resumes’ so that the corporation could open its doors by the following year.57

  But cabinet was not about to give the go-ahead quite so quickly, even with the prime minister and deputy prime minister urging approval. Despite the inclusion of a nineteen-page document rebutting potential arguments, the cabinet meeting on Wednesday 28 January was contentious. Ministers questioned the measure on philosophical and logistical grounds. McEwen, outlining the proposal, was not to be dissuaded. ‘We are talking about something to operate 100 years,’ he said, to McMahon’s note that capital inflow was down and Bury’s concern at the difficulties of raising funds abroad. ‘Not [a] matter of now [current] international markets.’ McMahon was unconvinced. He insisted that Treasury supply a ‘special paper’ on the AIDC.

  In the face of these delaying tactics, McEwen was calm. ‘I’m open minded on that.’ But he wanted approval of the AIDC before the departments got their chance to weigh in. ‘If Cab[inet] accepts principle then Treasury, Trade, and AG’s [Attorney-General’s] go through,’ he said.

  McMahon and Bury tried to forgo that. To McMahon’s suggestion that the Department of National Development also contribute comments, McEwen was dismissive. It did not really concern the department, which did not really have the expertise anyway, he said. What he wanted was simple and straightforward: ‘Would hope Cabinet approve in principle,’ he repeated.

  Gorton echoed him: ‘I would hope Cabinet accept in principle.’ The prime minister now came in to take over from McEwen and argue the case. There was a problem, wasn’t there? If there was, what did the government lose by trying to fix that problem? he asked. ‘I think it is something we ought to try.’

  Bury successfully pressed for time for the Treasury to comment. His department had only received the submission on the Saturday night, he said, and the Australia Day holiday had drastically limited his department’s scrutiny of the submission.

  McMahon reiterated his wholesale opposition to the AIDC. There was no need for the corporation. Its certain failure would affect the government, he said. And the political consequences could be disastrous. ‘I would like to leave matter to merchant banking. I’d hate to see Corporation in hands of Whitlam.’ McEwen was happy to rejoin this battle. Their exchanges were sharp. There, again, was the gulf that had separated them for years. McMahon’s stance reflected his longheld faith in markets, his belief in the orthodoxies dominant in his state. He wanted to see the problem — if it was really as bad as McEwen and Gorton suggested — handled by the Resources Development Bank or by the private sector. But McEwen’s response was as it had always been, and again in conformity with the economic orthodoxy widespread in Victoria. Okay, McEwen replied. ‘You said is there a demonstrated need for this Corporation to attack [the] problem. I go back and say here is a demonstrated need for some kind of protection.’

  The debate continued after lunch. Gorton tried to move things along — ‘I still think Cabinet express desirability subject to paper from Treasury for next week,’ he said — but McMahon was blunt: ‘No. With weight of you and McEwen behind it [this] puts impossible burden on us.’ Nonetheless, McEwen and Gorton pressed for a result then and there. ‘I should like decision,’ Gorton said. He wanted initial approval, but his ministers were ready to quarrel over that, too. Fraser wondered if initial approval could be conveyed ‘more strongly’ to Treasury, so that its comments were more helpful. Other ministers wondered if ‘approval’ was too strong. Should the decision say that cabinet was ‘strongly attracted’ to the proposal? Gorton and McEwen would have none of it.58 Pending comments from the Treasury and the Attorney-General’s Department on the establishment of the corporation, cabinet gave its ‘initial approval’, said the resulting minute.59

  When Gorton and McEwen fronted cabinet on 5 February, they were able to secure firm approval. Cabinet decided to establish the AIDC ‘along the lines’ set out in the original submission.60 But this meeting was even more contentious than the previous one. The sceptical Treasury comments that McMahon and Bury had wished to present were met with a determined rebuttal from both Gorton and McEwen. ‘I’m astonished at paper,’ Gorton said. McEwen thought it dishonest and a distraction, intended ‘to make bloody fools of [the] PM and myself on something we never suggested,’ he said. ‘… I’m outraged by this paper.’ McMahon, fighting a losing battle, nevertheless continued to press for the primacy of the Resources Development Bank. McMahon’s opposition required Bury to be effective; he was not. Bury could not push back on Gorton and McEwen. ‘What in hell has this got to do with proposal [the] PM and I put up?’ McEwen demanded to know, to one of Bury’s concerns. ‘Nothing!’61 The fervour of the prime minister and the Country Party leader was obvious. ‘They both regarded this almost as an act of faith,’ Bury said later.62

  Gorton, for his part, admitted that the proposal was divisive: ‘It [the AIDC] quite clearly had very strong opposition.’ Malcolm Fraser pointed out that the submission enjoyed the support of only two people, but McEwen had a ready answer: ‘Malcolm, there are times when you need to understand that it’s the weigh
t and not the numbers that counts.’63 Gorton concurred with this: ‘It’s quite a thing, I think, to expect a Cabinet to knock back something that’s strongly approved by both the Prime Minister and the Leader of the Country Party,’ he explained later. To Gorton, it was evident that it was his advocacy that made the difference: ‘It [the AIDC] wouldn’t have been set up but for me.’64

  News of the decision was leaked to the press by the weekend, and, in a subsequent cabinet meeting, the suspicion for the leak fell on McMahon. ‘I want to say again that [journalist Max] Walsh called me,’ McMahon protested. ‘He had the story — if you read what he said, he talked about the eclipse of McMahon. Is that something I would have been likely to give him?’65 But McMahon was certainly spreading stories. When he rang Howson on 8 February, McMahon was suggesting that Gorton had thrown his weight around to ensure the AIDC was approved. ‘Apparently in Cabinet eight Ministers voted against it,’ Howson wrote in his diary, ‘but, after lunch, led by Ken Anderson, five Liberal Ministers changed their minds and voted with the PM and Jack.’ In the same conversation, McMahon also deliberately moved to sabotage the cabinet decision: ‘Bill has asked me to try to gain some support from other Liberal backbenchers to oppose it in the party room.’66

  Those backbenchers duly did so. Early in March, when the AIDC was brought to the party room, up to twelve Liberals spoke against it, and Gorton was left to defend it on his own. For critics like Howson, the meeting was another opportunity to show that the party was divided, that there was a gulf between the prime minister and his dissatisfied backbench.67

  Yet a similar gap could be said to exist within the ministry — between the old, practised hands, like McMahon, and the new ministers rising to prominence under Gorton. The tall, aloof, and habitual pipe-smoker Malcolm Fraser was the most conspicuous of these. An Oxford graduate and grazier, Fraser had been elected as the member for the Victorian electorate of Wannon in 1955 when he was but twenty-five years old. He had then spent ten years on the backbench, ostensibly in obscurity, but with the growing recognition of peers and observers that he was a formidable presence.68 Fraser’s ministerial career had only begun when Holt appointed him minister for the army in 1966, yet from there it developed quickly — to minister for education and science, in 1968, and then minister for defence, in 1969. Fraser was ambitious, intelligent, and, in the coming months, would demonstrate an unexpected toughness: first, by successfully renegotiating the terms of the delivery of the F-111 with an intransigent United States; second, by standing up to McMahon.

  McMahon and Gorton had agreed in December 1969 that McMahon would make a ministerial statement about his new portfolio early in the parliamentary session. When McMahon discovered that Fraser also intended to make a ministerial statement, he became adamant that as the senior minister his should go first.69 His anger when that was refused was nothing, however, when he read the draft of Fraser’s statement late in February.70 It seemed a clear trespass into McMahon’s portfolio of external affairs, with an extended opening statement on the ‘broad picture’ of world relations and how they related to defence needs. McMahon told Plimsoll to speak with Tange and have the sections removed. In this, Plimsoll was unsuccessful, and he advised McMahon to speak with Fraser himself.71

  McMahon did so on 6 March. Their meeting was heated. McMahon demanded that Fraser remove the first sections of the speech. He threatened to brief colleagues and the press that Fraser was ‘overstepping the line’ if he refused. But McMahon’s bluster went nowhere. The much-younger Fraser would not be cowed, even by a colleague as senior as McMahon. He refused to remove the sections, arguing that they were important to the substance of the speech, and appealed to Gorton. The prime minister backed his defence minister, and McMahon fumed.72 The slight was obvious, well known to many, and a decided rebuff of McMahon’s authority.

  At other times, however, there was clear cooperation within the ministry. One such occasion was the joint cabinet submission that McMahon made, with Bury, to explore what it would mean for Australia to seek membership of the Organisation for Economic Cooperation and Development (OECD), an organisation designed to foster better economic growth and trade through the exchange of ideas and policies among governments.73 Concerned by the possible influence it might have on Australian and international trade, McEwen found the OECD’s emphasis of free trade extremely troubling, and believed that Australia’s proper place did not lie with the largely industrialised countries that comprised the OECD’s membership. ‘Australia will only join the OECD,’ he said, ‘over my dead body.’74

  Nonetheless, to officials within the Department of External Affairs and the Treasury, the OECD was worth joining. As the departments said, the OECD was ‘the major forum for consultation on economic matters among Western governments at a high policy level’. Moreover, ‘it is in the OECD that the formative (and often decisive) discussions take place on many important matters — including financial matters (such as the position of sterling) which are of importance for our general relationships with the major countries of Europe, the United States of America, and Japan’. The departments never left it alone, and a working party in 1969 that included McEwen’s Trade and Industry continued to discuss whether Australia should join. They were helped by McEwen’s eventual decision to be flexible: in exchange for conditions that would allow Australia to maintain its tariff system and the Department of Trade and Industry’s input over matters of direct concern, he agreed not to oppose another submission recommending that Australia consider joining.

  As one who had absorbed the arguments of Treasury and, now, External Affairs, McMahon wrote to Gorton to argue that the option be explored. ‘The arguments for Australian membership of OECD are based on an assessment of the widest financial, economic and political benefits as the Treasurer and I see them[,] which would derive from our membership of what is essentially the main organ for economic co-operation between countries of the Western world,’ he wrote, on 2 April.75 It was a moment when coordination paid off. On 30 April, cabinet approved the submission from McMahon and Bury, and resolved to explore the possibility of Australian membership of the OECD.76

  CHAPTER THIRTY

  Le Noir

  1984

  Given their long, fractious, and well-publicised relationship, a question of interest for the book was what McMahon might say about John McEwen. McMahon would surely have special words for the man who had speared his hopes of becoming prime minister after Harold Holt’s death, and he would surely feel some urge to air their many heated clashes in cabinet.

  Ostensibly, McMahon would write his story of these battles; he could respond, too, to McEwen’s dour, spare autobiography, which a Canberran economics historian had put together from a series of interview transcripts after McEwen’s death in 1980. Privately printed by McEwen’s widow, a copy of John McEwen: his story had been sent to McMahon’s office upon publication, with a note that the book was for those ‘likely to be interested in John McEwen’s “own story”’.1

  McEwen’s comments about McMahon in his book had been largely benign. Though he had strongly implied that McMahon was an inveterate leaker to the press, and suggested that McMahon was out to sabotage McEwen, there was little in the manner of blunt criticism. The most strident accusation he had levelled was that McMahon ‘did not impress the House or the country with his strength of character’ while prime minister, and had not learned when to exercise his own judgement about questions of policy.2

  Whether because of this or some feeling of restraint about the treatment of the dead, what McMahon had to say about McEwen was unexpectedly soft. He echoed much of what he had already said in public. There were few denunciations, and little gloating. He wrote that McEwen had been mistaken on questions of trade and tariff policy, occasionally vindictive in his conduct, and had strongly wished to become prime minister properly, whether by transferring to the Liberal Party or with its acquiescence. McMahon was also generous. Just as he had when Mc
Ewen died, McMahon had called McEwen a giant of Australian politics, a much admired and respected figure.3 He even admitted to some feelings of pity. Recalling both McEwen’s battles with neuro-dermatitis — which occasionally left McEwen with bleeding, bandaged feet4 — and the death of McEwen’s first wife, Ann, in 1967, McMahon wrote of once seeing the Country Party leader standing alone, and feeling profoundly sorry for him.

  And yet, just as with Menzies, McMahon’s treatment of McEwen — where he would fit in the memoir — was a problem. Bowman was quick to diagnose the issue: skipping over McMahon’s early time in politics meant that their relationship was difficult to understand. ‘Like Menzies,’ wrote Bowman to McMahon, ‘he [McEwen] will appear and reappear in season until the time comes to deal with him thoroughly.’ Discussions of McEwen were slotted in around the 1967 devaluation debate, the problems with Newton, with Gorton, and with McEwen’s decision to rescind his veto in 1969.

  For Bowman, rewriting the manuscript and trying to fit it all together in a way that was understandable and comprehensible meant a considerable re-adjustment. The time to deal with McEwen, he wrote to McMahon, had to be ‘when, after Holt’s death, he says he and his party will not serve under the Liberal Party’s deputy leader if he [McMahon] is elected Prime Minister’, in the eleventh chapter.5 McMahon had agreed to the solution Bowman proposed, but, as ever, it was a shaky agreement. There was no telling whether it would hold when Bowman reached it.