Chapter 4
Defeat and surrender
The reasons for Reid’s defeat at the 1906 federal election have been clouded by his declaration shortly afterwards that “the result of the election, in the light of any appeal for fiscal peace, was a distinct adoption of the protectionist principle throughout Australia.” However, Reid lost just one seat net at the hands of protectionists in the actual election; his decisive losses were at the hands of the Labor party in New South Wales. Reid had hoped to decimate Labor’s representation from New South Wales through a vast and expensive anti-socialist campaign, which mobilised thousands of right wing activists. Instead he failed to win a single Labor (or Deakinite) seat and lost five of his own, four to Labor. Whatever his successes elsewhere, Reid had been beaten in his own home territory, the state where he had been a successful Premier, where his anti-socialist campaign had had the virulent support of its major daily newspapers.
Reid’s losses reflected both weaknesses in his own campaign, and a surge of support for Labor. In Werriwa, the sitting member Conroy regarded Reid’s Anti-Socialism as a betrayal of free trade and did little to defend it. In both New England and Macquarie, Labor won despite having been unable to field a candidate in 1903. In Macquarie, the defeated candidate was the Freetrade party Whip and central organiser of the Australian Democratic Union, Sydney Smith. It appears Smith did too little to retain his own seat. Reid also lost South Sydney. Reid had expected to win the new seat of Cook with John Hindle, Chairman of the Importers Association of Sydney, but lost to the very young Labor candidate, JH Catts. In Dalley, there had been no Labor candidate in 1903, but in 1906, Labor won over 47% of the vote, and a staggering 45% in Reid’s own seat of East Sydney. Reid’s campaign was not a total failure; Labor found its own majority slashed in many seats, because it was there that the ADU campaigned most vigorously.
Had Reid been able to keep all his New South Wales seats, and win three from Labor or Lyne — and one imagines that the Reid organisation would have regarded this as the minimum for which they were aiming — there would have been 40 Anti-Socialists in Parliament — a majority — and Reid would have had 26 direct followers, making his by far the largest and most coherent party. In that situation, the Deakin-Labor alliance may not have survived. The negotiations which led to Fusion in 1909 would have started in December 1906 with Reid’s party negotiating as an equal, if not dominant partner.
Historians do not seem to have found the 1906 election to be an interesting subject for research, and have tended to focus on the overly negative nature of Reid’s campaign — against socialism rather than for any program of action. Some have even pointed to the inappropriateness of his self-deprecating, raffish drollery. As important as these may have been, they do not explain the result in such a hard-fought campaign where political principle was so strongly to the fore.
Labor’s high vote was largely the product of a year in which working class militancy began to revive after the serious recession of 1902-3. By 1906, recovery had turned into raging boom, but workers found they were forced to take industrial action to get any share in it. According to the conservative contemporary historian, Henry Gyles Turner:
the man [sic] whose horizon was bounded by salary or wages suffered from an unexplained increase in the cost of living, which dampened his ardor and stimulated discontent… And the result of this wide discontent was shown in labor disputes and threatened strikes, which were very prevalent in the years 1906-7.
In July 1906, the complaints of the Sydney correspondent of the Insurance and Banking Record reflected the rapid growth of trade unionism, militancy and labourism:
The Labour cauldron appears to be constantly seething. At the present time there is trouble at some of the collieries with the boy drivers and wheelers; tobacco workers to the number of over a hundred employees are out on strike mainly over trouble arising from the employment of female labour; and the Government tramway employees have held largely attended meetings denunciatory of the management under which they work. The arbitration court apparently is all but useless in connection with these matters, and it would seem that legislation so far has only had the effect of giving more scope for the work of the agitator.
Alongside this growing class consciousness was a growing rejection by workers of the anti-Catholic sectarianism for which Reid’s Freetraders were notorious. Since 1788, anti-Catholic sectarianism had been a fundamental weapon of the authorities in New South Wales, anxious about maintaining internal social control. Sectarianism set worker against worker, selector against selector, and created a bond between the Protestant worker and the Protestant employer, the Protestant selector and the Protestant squatter. Campbell argues that many of the branches of the free trade Liberal and Reform Association in New South Wales were little more than fronts for the Protestant Defence Association. In Leichhardt, in 1904, for example:
the local branch of the Australian Protestant Defence Association selected Mr. R. Booth to carry its flag in the coming contest in opposition to Mr. Hawthorne, and, it is claimed, practically the same body the following night formed itself into the local Liberal and Reform Association.
New South Wales had seen an especially frantic mobilisation of sectarianism in New South Wales from 1901-1904 when the Protestant Defence Association was under the leadership of Rev Dill Macky. The scale of sectarian animosity can be gleaned from the fall-out from Prime Minister Edmund Barton’s audience with the Pope in the Vatican, on his return from the Colonial Conference of 1902. A petition was taken up disapproving of Barton’s action, and opposing conferment on the Pope “of any position of honour or dignity in the Commonwealth”, signed by 30,000 Protestants, and presented to the House of Representatives by WH Wilks, a Freetrade member for a largely working class electorate in Sydney.
Labor appears to have confronted and rejected sectarianism to some considerable extent. W Farmer Whyte tells the story, presumably told by Hughes himself, of the Labor MP’s favourite chairperson, a large man called Macdermott. “He rarely opened a meeting without announcing that he would have no ‘shenannikin’ and no ‘sectarianism’ — or, as he was wont to call it, ‘Dill-Mackyism’.” At one meeting, a question about Hughes' opinion on the local option was declared by Macdermott to be out of bounds. “We’ll have no damn sectarian questions here!” he shouted and told bouncers to remove the questioner. Not only did the sectarian offensive fail, but it helped stampede the vast majority of Catholics behind the Labor party, also contributing materially to Reid’s defeat.
The first economic consequence of Reid’s defeat was the introduction and  imposition of the new tariff schedules in August 1907. The tariff proposed by Sir William Lyne was seriously protective and set significantly higher than the level proposed by the protectionist members of the Tariff Commission, a fact which rankled export industries. Even more threatening, Lyne announced that the tariff was effective from the day of its announcement and in the event of schedules being reduced by parliament, there would be no refund of any extra duty paid.
The initial response from the Pastoralists’ Review and the Australian Mining Standard was extremely bitter and hostile, the former warning of an “outburst of popular indignation which has swept over the country,” even in Victoria.
What can be said in favour of the outrageous duty on wire netting, for example? Could any penalty imposed even by the Arbitration Court work more hardly on the man who is struggling against rabbits?…rabbits will spread once more, and this, followed by a drought, will be about the end. Then nearly everything the pastoralist uses will be taxed out of all knowledge. His vehicles will be raised in price at least a third, and probably more. His kerosene, his oils, paints, &c., the machinery he uses, his boring tools, his tents and tarpaulins, the galvanised iron which he utilises in great quantities, his fencing wire, and the articles of food with which he has to feed his shed hands (to whom he has now to pay the increased rates under the late arbitration award) are all increased in price inordinately.
The mining journal, normally a far more restrained publication, was just as angry at the “excessive and almost prohibitive customs duties” which had “come as a great surprise to the community”. It rejected any notion that the tariff was needed to help manufacturers of mining machinery; they’ve “been busier than for years past, which is proof that the protection they at present enjoy…the advantage of being on the spot, and the ability to meet exactly the local requirements, are ample”. While mining employed 111,714 workers and machinery worth £12,476,177, the manufacturers of mining machinery employed 15,0222 using machinery worth £1,195,637. The great industry was being sacrificed to the small. The unfairness of the new tariff was highlighted by the case of the Great Cobar Ltd mining company. It had just bought £71,000 worth of new machinery, most of which could not be made in Australia. The total duty under the old tariff was £8,890; under the new tariff it was £25,988, about $3 million more in 1998 values. In a letter to the mining journal, the company argues that the alternative to paying the extra tariffs is “to be content with Australian machinery which is 20 years behind the times.” The result is extreme discontent.
Even responsible politicians now do not hesitate to advocate separation. In New South Wales, Queensland, and West Australia the movement in this direction is almost daily gaining momentum, and unless a wiser and more conciliatory policy is adopted it is impossible to foresee the result. Resentment at the cruelly oppressive and grotesquely impolitic character of the tariff is one factor which has contributed to this end. The duty on wire-netting is condemned all over Australia. The imposts on woollen clothing, tea, kerosene, and other every-day necessaries have evoked warm protest from countless public meetings…
Two things stand out about the treatment of the issue in these industry journals; the extremes of anger do not last more than a month or two, and are certainly not repeated in 1908, when the shape of the tariff is finally being decided. Indeed, the coverage is either dropped entirely (Pastoralists’ Review) or becomes entirely technical (Mining Standard). The second thing is that Reid is almost never mentioned, either by name or implication. It is as if there was no Freetrade party, formally or informally, to whom the pastoralists and mining companies could turn. However, this attitude may have been due to a reluctance to stir up the fiscal divide at a time they were agitating for anti-socialist unity. Larsson notes that Reid was frequently absent during the debates, and his leadership was criticised intensely by the Sydney newspapers who had traditionally supported him. Unlike the pastoralists, the mining companies succeeded in getting significant changes to the tariffs, aided by both anti-Labor and Labor MPs.
Labor’s approach to the second tariff debate was very different to 1901-2. According to Larsson, there was “no…Labour interest in the ‘breakfast table’ items as there had been in 1901-2.” When it came to farming interests, mining interests or clothing, Labor was more likely to vote with Freetraders. Labor support for the Protectionists in divisions rose from 40% in 1901-2 to 90%, reflecting the confidence of most Labor MPs that New Protection would deliver benefits to workers in manufacturing.
Once the tariff debate was finished, in late May 1908, relations between Deakin and the Labor party deteriorated, and in November, Andrew Fisher moved no confidence and the Deakin government was defeated. With a minority Labor government in office again, there were immediate moves to amalgamate the three anti-Labor parties. Within days, George Reid had been told by his parliamentary colleagues that he was an obstacle to fusion, and he promptly resigned as party leader, handing over to his long-time deputy, Joseph Cook. But despite the intense desire of both Cook’s party and the right wing Tariff Reformers to see a fusion, and despite several months of negotiation, it did not happen. Forrest refused to serve under Cook, nor Cook under Forrest. The former Freetraders would not agree to fuse with Deakin’s party unless Deakin was part of the government, and not a backbencher as in 1904-5. Deakin was holding out.
The future of Deakin’s Protectionist group was grim. The 1908 federal Labor conference had rejected any future alliances and banned any offers of immunity. The most striking aspect of the debate is the bitterness of delegates from Victoria, Queensland and Tasmania, where they had learned from experience the treachery of liberals and their ability to turn Labor politicians into “rates”. No doubt the intense class anger in the unions and workplaces was a factor in the debate; WA Holman was criticised for asking Labor party members to trust their parliamentary representatives.
Deakin would not be actively involved unless the fusion was on the basis of his platform. And in the end, that was the basis on which fusion was negotiated in May 1909, in the days leading up to the resumption of parliament for 1909. The distance that now existed between Deakin and the Freetraders can be seen in the ultimatum Deakin gave Cook, listing four specific commitments he insisted they make. These were: that anomalies in the tariff or special emergencies should be dealt with “from the Protectionist standpoint”; that an amendment to the Constitution be supported to secure New Protection; that compulsory military training be introduced up to the age of 21 years; and that distribution of customs revenue after the expiry of the Braddon clause in 1910 must be governed by “the legitimate needs of the Commonwealth.” These were all points on which the former Freetraders could be expected to resist. Significantly, only one of them was about protectionism, the first. The new protection clause was to give the Commonwealth power to determine fair wages and conditions, an extension of Arbitration which most Freetrade MPs had disliked even in its more limited form. Deakin’s distrust of the former Freetraders on defence is clear in the item on compulsory military service, and the final item demands that they commit themselves to properly fund the proposed navy and old age pensions, measures they were largely hostile to.
Most historians have regarded the acceptance by the former Freetraders of these humiliating conditions as unremarkable. Certainly they had agitated for a united anti-Labor party, but there is no evidence that they had expected it to involve them renouncing so much of their politics. And there is evidence that Cook faced resistance from his party room. Patrick Glynn certainly opposed fusion, telling his colleagues that:
a coalition based upon compromise of matters with substance, and without a real cementing principle, was spineless; and, by diminishing independence of judgment and criticism, not conducive to honest and effective government.
The complete surrender by the former Freetraders was not “inevitable”, but exceptional, an event requiring exceptional circumstances to bring it about. Those exceptional circumstances are to be found in the rising tide of class struggle, from 1906 and peaking with the Broken Hill strike of 1909. This appears to be one of the great periods of working class mobilisation in Australian history this century, and it impacted most forcibly on the business heartland of the Freetrade party.
The upsurge involved both political radicalisation, extensive union organisation and strikes. By 1910, there were 127,000 trade unionists in New South Wales, 60% in unskilled areas like mining, pastoral and transport — the Freetrade heartland. Union militancy was fuelled in early 1908 by anti-union amendments to the Arbitration law in New South Wales, and in July by the striking down of the Harvester Award, which had itself been a great moral victory for the labour movement. There was a series of major strikes in 1907 — a major coal lumpers strike, a coal strike in Newcastle in which the miners demanded a 20% increase in the hewing rate, and a miners’ strike in Cobar. The Pastoralists’ Union was appalled in July 1907 when the conservative Justice Richard O’Connor handed a 20% pay rise to pastoral workers. In the pages of Pastoralists’ Review, it is a far more serious and extensively discussed problem than the protective tariff of Sir William Lyne. But 1908 was the year that class struggle really took off. There was a NSW timber strike, a shipping strike in March, another coal strike in Newcastle, a painters strike in NSW, a lockout at the Lithgow iron works and the high point of the year, the Sydney tram strike of July-August, and a rock-choppers strike.
The nature of the strikes, and the confidence and determination they reveal amongst workers is one of the greatest concerns to employers. The coal strikers in Newcastle in late 1907 failed to give the required 14 days’ notice, and lost a week’s pay, but gained a tactical advantage over the employers in the process and obviously figured they would come out in front. The striking miners called for a general strike on the coalfields, and the Australian Mining Standard whined that, “Once more has compulsory arbitration in New South Wales proved inadequate to prevent a strike.” In Melbourne, bakers refused to accept the award of a judge, won what they wanted from the employers, and then fined men who obeyed the court. The judge resigned. The Sydney correspondent for the Insurance and Banking Record exuded a sense of despair as it recorded the “considerable unrest” and strikes in various trades.  
Many employers are beginning to recognise that, costly as it may be and harmful to trade, as well as greatly inconveniencing the general public, a general strike would probably be the best and cheapest way in the long run to settle present difficulties; they are beginning to feel that the struggle must come, and that the effect would be to clear the air.
There was aggression too from the new Premier of New South Wales, Charles Wade, who repealed the Arbitration Act in mid-1908, substituting an Industrial Disputes Act with new powers to enforce awards and penalise strikers. Wade’s new law galvanised working class anger. The moderate Sydney Labor Council called on unions to refuse to register under the Act, and anger at the Act sparked the Sydney tramway strike of July 1908. Support for the strike was on a colossal scale; 70,000 workers rallied in the city in support of the strikers and 10,000 in Newtown.
Perhaps a final measure of the growing working class militancy was the mushrooming influence of the Industrial Workers of the World, the revolutionary syndicalist organisation which believed in direct action against the employers, and industrial unionism to make workers strong. A wave of enthusiasm for IWW ideas saw the Sydney Labor Council conference discussing the IWW preamble and constitution as a basis for organisation. In February 1908, Newcastle miners were asked, “Are you in favour of the basic principles of the I.W.W. or the Australian Labor Federation?” and 2154 out of the 6054 who voted favoured the IWW. According to Verity Burgmann, “The assumption is that Arbitration and wages boards have failed to protect the worker.” The IWW grew rapidly amongst miners in particular.
By mid-1908, leading trade union officials and Labor politicians were feeling sufficiently threatened to actively denounce the IWW. William Morris Hughes devoted several of his “Case for Labor” columns in the Daily Telegraph to a discussion of the problems of the general strike. In Parliament, Holman warned Wade of the consequences of his approach.
I have in an emphatic way taken upon myself the unpopular task of urging the organised workers of the State to stick to the law and to parliamentary methods… But if the Premier is to come in and prove to the workers that parliamentary methods are futile…the Premier and no one else is responsible for any lawlessness or violence which may result.
All these tensions came to the boil with the great Broken Hill dispute of 1908-9. BHP announced that, due to the sharp fall in metal prices, it would be cutting wages from 1 January 1909. The Police Commissioner sent 50 police to Broken Hill in early November, and BHP management prepared for a violent confrontation, stocking up the mine with arms and provisions. The manager provoked an outbreak of violence on 4 January by telling police to go away and then personally provoking the pickets, giving the government the excuse to send in hundreds more police, attack the pickets and arrest the strike leaders. There was an intense level of support for the miners throughout the entire working class. On all sides, the bitter 1892 strike was being discussed. The Pastoralists’ Review reached a new pitch of hysteria.
The time has come for this sort of thing to cease…if necessary the State must be backed up in its efforts to preserve order, even to the extent of a public demonstration under arms.
The Broken Hill dispute is the usually-forgotten backdrop to the negotiations about fusion. The first contingent of police arrived in Broken Hill a week before Andrew Fisher was sworn in as Prime Minister. The following day, William Knox, the Tariff Reform MHR for Kooyong and a Director of BHP, declared it was time for all anti-socialists in parliament to unite. The strikers capitulated in meetings on 19 and 20 May, 1909, and the Port Pirie smelter workers, who had struck in solidarity and for their own demands, marched back to work on 22 May, two days before Forrest, Cook and Deakin met to resolve the terms of fusion.
For Australia’s pastoralists and landowners, Labor’s promise to introduce a federal land tax was another reason to insist that the former members of the Freetrade party accept whatever was necessary to ensure bourgeois unity and Labor’s defeat. In March 1906, long before the working class militancy which produced the Sydney Tram and Broken Hill strikes and the wave of interest in the IWW, Pastoralists’ Review had made clear that pastoralists were prepared to accept higher tariffs if the result was anti-Labor unity.
A few more duties here and there must be borne so long as the anti-Labour party can be kept solid. If that can be done Australia will indeed go forward with a fair breeze. But if the great majority of otherwise sensible people in the community are fighting about free-trade and protection, the Labour party will naturally be their masters, and the policy of the last four years be continued and made worse.
This was written before the boom had reached its peak, when higher tariffs were less affordable. How much more, then, was it the attitude of New South Wales’ export and commercial capitalists during 1908 and 1909?