Social democratic governments and business.

Gallop, Geoff ; Patmore, Greg

Social democracy emerged with industrial capitalism and the working class which came with it. It began as part of the movement for socialism to become a left-of-centre party for political, social and economic reform. Social democrats chose trade unionism over syndicalism, parliamentary democracy over the dictatorship of the proletariat, and reform over revolution. Labour parties in countries such as Australia, New Zealand and the United Kingdom fell within the broad definition of social democracy. Within its ranks, it has experienced disagreement and sometimes heated battles over nationalism and internationalism, state enterprises and co-operatives, social tradition and individual freedom and centralisation and devolution. However, one issue above all has been at the heart of internal debate and public commentary about social democracy--what is (and what should be) its relationship with business?

Labour historians have traditionally focussed their interest on the relationship between Labor/Social Democratic Parties and trade unions and highlighted the role of capital in opposing the mobilisation of industrial and political labour. Yet business interests have found that Labour/Social Democratic Parties may also be favourable to their interests, despite links to unions, longstanding sympathy for state intervention in the economy, and even the nationalisation of private capital as occurred in the UK, for example.

While the major thrust of traditional Labor Party thinking in Australia historically favoured nationalisation and state intervention through parliamentary democracy, it always focused on monopolies, profiteers and the 'money power' rather than the complete overthrow of the capitalist system. Labor Party activists accepted the need to capture the state through parliament to control capitalist excess. They viewed the state as a neutral arena that could be used to prevent the exploitation of workers and improve their lives. The parliamentary approach of the Labor Party was in clear contrast to the ideas of anarchists and syndicalists who emphasised alternative paths such as mutual aid or revolutionary industrial unionism. (1)

Once the Labor Party gained representation in parliament and formed governments there were divergent views on what to do next. The behaviour of state Labor Governments before 1925 was very different in NSW and Queensland. The Queensland Labor Party government, elected with T.J. Ryan as Premier in 1915, pursued a program of public enterprises that emphasised social benefit rather than profit and reduced prices on food and services. The Ryan Government defended the interests of striking workers and opposed the introduction of military conscription by a Federal Labor Government. It tried to increase taxation on the income and assets of pastoralists and force employers to pay for unemployment insurance. According to Irving and Seager, the Queensland Government 'was therefore in its main thrust an anti-capitalist government'. (2) By contrast the NSW Labor Governments of J.S. McGowen and W.A. Holman took a less sympathetic view of strikers. Premier Holman left the Party over conscription and brought down the NSW Labor government in 1916. In NSW, Labor ran state enterprises to raise revenue to assist capital through tax relief and the provision of infrastructure. Irving and Seager claim that 'Workers and consumers got nothing out of state enterprises in New South Wales'. (3)

Support for parliamentary strategy meant the acceptance of certain conventions and limitations such as constitutions and hostile upper chambers. As the dismissal of the Lang NSW Government in 1932 and the Whitlam federal government in 1975 highlight, despite all the rhetoric of defiance, the authority of the respective vice-regal representative was ultimately accepted. Equally, a parliamentary strategy also necessitated expanding the electoral appeal of the party beyond its trade union base to win office and secure government. While the unions dominated Labor conferences, particularly at the state level, they could not deliver the votes of all union members. This meant compromises with groups such as the Roman Catholic Church, farmers, shopkeepers, democrats and Australian nationalists. (4)

There are several reasons why social democratic governments may have favourable attitudes towards a business viewpoint and even adopt pro-business strategies which may conflict with the short or long term interests of their traditional constituencies such as trade unions. There is a longstanding recognition by labour historians of the issue of ideological capture. Whatever minor politically differences social democrats may have with business interests, they fundamentally support the notion of a capitalist market-based economy. Social democrats have become incorporated into capitalism by the very nature of their ideology, which supports the market for a good deal of economic activity. Notions such as 'civilising capitalism' highlight a desire to reform rather than transform the system. Indeed in recent times many social democrats have argued for a widening of this market sphere through the de-regulation and privatisation of much activity previously seen as the preserve of government. Social democratic governments have come to oppose government monopolies in the interests of a more flexible and competitive economy. They support the regulation of the labour market in the interests of the health and welfare of the workers, but not at the cost of undermining business and economic growth. Critics of social democracy have linked this with a reduction in the commitment of social democrats to social and economic equality.

This widening of the market sphere by social democrats has not been accepted by all sections of the business community. Some sections of Australian capitalism such as banks and manufacturing have benefited from regulation and protection from global competition. Social democrats, conversely, have found themselves in alliance with sections of capital that favour deregulation and the elimination of protectionism. The role that social democrats played in relation to debates within the business sector about what best guarantees the success of a capitalist economy has always been more significant than narrowly based class-based accounts of labour politics have recognised. These issues need to be further explored.

Secondly, there is the pressure that business interests can bring to bear on governments through both lobbying and more overtly hostile methods such as negative advertising campaigns and contributions to political rivals. In recent times the role of lobbying has come under the spotlight. In earlier times more direct methods were used. For example, the Queensland Labor Government in the early 1920s found that when it attempted to borrow funds to purchase private industry it faced a capital blockade organised by Queensland pastoral capitalists through the London money market. (5) As the resonance of more explicit class based politics has diminished, the political strategies of capital have changed. Large companies can employ specialist staff and engage lobbyists to persuade governments and their ministers to shift their positions on issues that may be unfavourable to them. In many ways, the effectiveness of such activity is determined more by the importance of the particular business interests to the economy than by the activities themselves. This is particularly the case with respect to Australia's resource sector, which has become a major source of jobs and income.

Finally, there is the issue of corruption, particularly in areas of narrower economic activities, such as public contracts and land development applications. While brown paper bags filled with money is the traditional image of corrupt politicians, other forms can be far more subtle, including duchessing politicians with expensive dinners, accepting positions with business interests immediately upon retirement and substantial political donations. In Australia suggestions of corruption have in recent times have been directed towards the Labor Party particularly at a local government and state level. As public convictions are rare, historians find it difficult to find surviving documents and gain oral testimony that will implicate Labor and Non-Labor politicians. A historian would have to have forensic accounting skills or find an indiscrete private diary to substantiate any claims of corruption. This has become less so in the Australian states of Queensland, New South Wales and Western Australia, each of which has a powerful anti-corruption Commission. In the heated world of conventional politics, allegations of political corruption may have to be treated with scepticism, particularly if made by a political opponent. Allegations of corruption in the 1940s against NSW Labor Premier William McKell, for example, were fuelled by police critical of the Premier's support for an unpopular Police Commissioner. (6)

Despite these difficulties, some labour historians have recognised the problem of corruption for Labor in Australia. William Holman, who became a Labor Premier and later switched to non-Labor over the issue of conscription, was one of several politicians receiving payments from a steel manufacturer to obtain favourable government contracts. (7) More notorious, and highlighted in Frank Hardy's novel Power without Glory, was the influence of gambling promoter, John Wren, on all politicians in Victoria in the first few decades of the last century. Frank Bongiorno has charted his influence on the early Victorian Labor Party. (8) Chris McConville has noted the problem of corruption for political labour at the local government level in New South Wales and Victoria in the inter-war period and beyond. He argues that when Labor in Sydney took control of many urban councils 'ALP mayors and councillors won a special reputation for graft and double-dealing'. (9) While there was a 'Robin Hood' aspect in 'stinging' property developers and industrialists for the benefit of the workers, worker support was garnished by nepotism and the receipt of cash payments by councillors and inspectors for turning a blind eye to breaches of council by-laws. (10) In more recent times Royal Commissions such as that into 'WA Inc.'--the association between the Burke WA Labor Government and local business interests (11)--have uncovered similar misconduct. The power and influence exercised by organised labour with its powerful factions and factional personalities has become the subject for investigation and debate about the potential for corruption as well as about the role of party members and the need for democratic reform in the Labor Party.

The relationship between social democratic parties and business interests is a fluid one. While social democrats do not support the overthrow the capitalist system, and believe that the market has a role to play in the economy, their support for the level of state intervention and regulation will vary according to their perception of the performance of the economy. For example, the recent Global Financial Crisis has prompted some social democrats again to rethink the extent of the boundary between the private and public sectors both in terms of public expenditure and public regulation. The state has made a comeback not just because of global instability but also because of the pressures from international terrorism, potential pandemics and climate change. (12) One must not conclude, however, that this has led to a significant change in the social democratic view of the role of the private sector as the basis for the economy.

The following seven articles in this thematic section of Labour History allow us to examine the relationship between labour parties and business in three countries Australia, New Zealand and the United Kingdom. The focus is primarily on the Australian experience since the 1980s. These articles were originally presented at a symposium organised by the Business and Labour History Group at the University of Sydney in September 2009 and then presented by the authors to Labour History for refereeing.

Four of the articles provide broad insights into the relation between social democratic governments and business. Damien Cahill recognises the tensions for labour parties in balancing capital's need for capital accumulation with the need to serve the interests of its traditional supporters in the industrial labour movement. Joe Collins and Drew Cottle question the assumption that the Hawke-Keating Labor Government in Australia was the political wing of a 'neo-liberal coalition' which included 'an aspirant group of capitalists and an obscure group of radical intellectuals' who aimed to set up a new political and economic order. Instead the Hawke and Keating Governments represented the birth of 'neo-laborism' which was a pragmatic approach to policy that tried to overcome the problems of 'electoralism' and 'laborism' that plagued previous Labor governments. Peter Skilling examines the language of the most recent New Zealand Labour Government to highlight the shift away from the traditional language of class associated with social democracy towards a discourse based on partnership, which constructed business as a vital partner in dealing with the common challenge of an increasingly competitive global economy. Ashley Lavelle takes a pessimistic view of the impact of the growing links between labour parties and business in Australia and the United Kingdom in recent years. Unions have lost their special place in the labour parties and have become another lobby group attempting to influence a labour government.

Several articles focus on more specific dimensions of the relationship between social democratic governments and business. Murray Goot examines the role of Australian governments, particularly Labor Governments, in establishing government enterprises to reduce costs or improve the quality of goods and services. These enterprises all but disappeared with the rise of an industry policy influenced by neo-liberalism. Goot uses a historical approach to criticise current dogma which severely limits the role of government enterprises in contemporary Australia. Harry Knowles, Greg Patmore and John Shields explore the long-term backdrop to the decision by the Hawke Labor Government to grant a banking licence to the US banking giant Citibank. While the Australian Labor Party had a long-term hostility to private banks, the entry of Citibank and other foreign banks into Australia ironically provided an opportunity for Labor to 'ginger up' the Australian-owned banks. The article highlights the range of strategies that business can use to influence the polices of both Labor and non-Labor parties. Martha Knox Haly looks at the impact of neo-liberalism on the NSW Department of Community Services. Welfare work was outsourced to the charitable sector and public welfare expenditure was slashed. While both Labor and non-Labor Governments in New South Wales were influenced by neo-liberalism, the Carr Labor Government engaged in 'soft neo-liberalism.'

What these articles tell us is that any study of the relationship between social democratic governments and business needs to go beyond the general and theoretical to the particular and the empirical. The context for this relationship differs, with varying organisational structures and cultures. There are different levels of transparency in different jurisdictions just as there are different understandings as to what is acceptable and unacceptable behaviour in the dealings between social democratic governments and business. The vessel entitled 'Social Democracy and Business' is not empty nor is it determined.

Endnotes

(1.) G. Patmore, Australian Labour History, Longman Cheshire, Melbourne, 1991, pp. 80-81.

(2.) T. Irving and A. Seager, 'Labour and politics in Canada and Australia: towards a comparative approach to developments to 1960', Labour History, no. 71, 1996, p. 263.

(3.) Ibid.

(4.) Irving and Seager, 'Labour and politics', p. 268; R. Massey, ' A Century of Laborism, 1893-1991: a historical interpretation', Labour History, no. 66, 1994, p. 46; S. Scalmer, 'Labor's golden age and changing forms of workers' representation in Australia', Journal of the Royal Australian Historical Society, vol. 84, no. 2, 1998, p. 189.

(5.) Irving and Seager, 'Labour and politics', pp. 263.

(6.) C. Cunneen, William John McKell. Boilermaker, Premier, Governor-General, University of New South Wales Press, Sydney, 2000, pp. 184-187.

(7.) G. Patmore, 'The "Birmingham of Australia" and Federation: Lithgow, 1890-1914', in M. Hearn and G. Patmore, Working the Nation: Working Life and Federation 1890-1914, Pluto Press, Annandale, 2001, p. 194.

(8.) F. Bongiorno, The People's Party: Victorian Labor and the Radical Tradition, Melbourne University Press, Melbourne, 1996, ch. 7.

(9.) C. McConville, 'Conflicting Loyalties', in V. Burgmann and J. Lee, Staining the Wattle: A People's History of Australia since 1788, vol. 1, Penguin, Fitzroy, 1988, p. 18.

(10.) Ibid., pp. 18-19.

(11.) R. Tiffen, Scandals: Media, Politics & Corruption in Contemporary Australia, University of NSW Press, Sydney, 1999, pp. 24-6.

(12.) G. Gallop, 'Towards a new era in strategic government' in J. Wanna, A Passion for Policy. Essays in Public Sector Reform, ANU E Press, Canberra, 2007, pp. 75-89.

Geoff Gallop is a Professor in the Graduate School of Government at the University of Sydney. He was a Minister in the Lawrence Labor Government from 1990 to 1993 (holding a range of portfolios most notably Education, Fuel and Energy and Minister Assisting the Treasurer) and when that Government was defeated in 1993 he took up a range of Shadow Ministerial appointments. In 1994 he was elected Deputy Leader of the State Parliamentary Labor Party and in 1996 he was elected Leader. He was the Premier of Western Australia from 2001 to 2006.

<Geoff.Gallop@sydney.edu.au>

Greg Patmore is editor of Labour History. He is Pro Dean of the Faculty of Economics and Business, The University of Sydney, and director of the Business of Labour History Group. His current research projects include a history of employee participation in Australia, Canada, Germany, the UK and the US in the period from 1914 to 1939, consumer co-operatives and a history of Citibank in Australia. <greg.patmore@sydney.edu.au>