Catholicism's Condition

No Set Agenda
Paul Collins,
David Lovell Publishing

No Australian who has paid even cursory attention to public debates in the last few years could fail to be aware that something is seriously amiss in the Catholic Church.  Besides periodic controversies attending the moral, financial and doctrinal improprieties of some churchmen -- not to mention the political sympathies of some Church agencies -- we have been treated to countless assurances by journalists and concerned Catholics that the Church has been embroiled in crisis ever since the Second Vatican Council.  Given the institutional power of the Church, this crisis has significance for far more people than just its members;  it has also provided the licence for any number of books and articles on the subject of what is to be done.  Of all the accounts vying for the Catholic mind, however, No Set Agenda, by Father Paul Collins, must surely rank among the most influential.

Amongst Catholic commentators in this country, perhaps only B.A. Santamaria can match Paul Collins for both prominence and persistence in recent times.  Collins' book Mixed Blessings became one of the two most influential analyses of the Church at the time of the Pope's Australian tour in 1986.  Since then, as presenter of ABC Radio's Insights program and as a frequent interviewer on ABC TV's Compass (and now as Director of ABC Religious Radio), Collins has enjoyed privileged access to a wide and apparently appreciative audience.  His views are likely to command wide assent not only among Catholics, but also among other Christians.

CHURCH OF WASTED POTENTIAL

In No Set Agenda, the portrait he paints of the Church is, on the whole, a bleak one.  It is a picture of wasted potential, self-doubt and confusion of identity.  Whereas in many other parts of the world (notably in Latin America), Catholicism is "an extraordinarily creative and radical force", "seriously engaged in the religious, spiritual, ethical, cultural, political, environmental and economic issues of our time", Collins thinks that in Australia this is sadly not the case.  "To a considerable extent", he believes, "the Church has lost its sense of being both 'Catholic' and 'Australian'.  Its leadership has largely retired from engagement with the issues that face our contemporary society and many church people have retired into their own safe sub-culture".

This situation would seem to be the product of practices which are as deeply ingrained in the Church as they are unsuited to the demands of modern social life.  To start with, there is an "unspoken but profound ambivalence about living in a liberal democratic society".  Steeped in the ways of hierarchy, the bishops and their spokesmen appear incapable of entering the sophisticated public discourse of our society -- often giving an impression of nervousness or of unsmiling, inhumane or moralistic simplicity in the face of complex human and ethical issues.  Worse still, the procedures of episcopal appointment ensure that the best people for the jobs -- the strong, outspoken ones who can show respect for conflicting views -- are the very people least likely to reach leadership positions.

According to Collins, clerical celibacy is another major contributor to the church's malaise.  Like most American (and presumably, Australian) men, most priests are emotionally immature.  But whereas the ordinary man is given countless opportunities to overcome his immaturity through situations of personal intimacy, for the priest no similar chances arise;  the duty of celibacy precludes them.  This leaves clerics psychologically unprepared to meet the demands now made upon them.  The results are "radical loneliness" and lack of vocational satisfaction.  Many of the most creative men are either stifled or driven to leave the priesthood altogether, placing further burdens on those who remain while diminishing the likelihood that the reforms so urgently needed will be initiated by the clergy themselves.

With the people who celebrate the Mass in such a sorry state, it would be remarkable if the ceremony itself were not affected.  And indeed Collins informs us that "the sad realityis that most liturgy in Australia is dull, lifeless and boring, and in some places it is quite appalling".  Again, worship is often perfunctory, unprepared and unimaginative, while the music is almost universally bad -- tuneless, difficult to sing and cliche-ridden.  Collins, however, does not lay all the blame for this at the feet of the priests.  Another major factor is that in Australia Catholics lack the common culture necessary to sustain a "coherent and living liturgical celebration every Sunday".  Nor are things helped by some heavy-handed attempts to make perfect strangers behave like a community of the closest friends, since most Catholics go to Mass not to overcome social alienation, but to enter the presence of the living God.

A further pressure on the liturgy comes from what Collins believes to be the "orientation of post-modern Western culture toward the superficial accessibility of words and away from other deeper forms of symbolic understanding".  This has led the Catholic Mass in a Protestant direction, focusing on reading and interpretation of the Bible more than on the symbolic action which renders Christ truly present.  Collins rather boldly declares that "you cannot blame people for not going [to Mass];  the miracle is the faith of those who still do".

Mention of Mass attendance brings us logically to the laity, for if there is one thing which can be said with confidence about such a large and heterogeneous body of people, it is that fewer and fewer of them are fulfilling their obligation to attend Sunday services.  Collins quotes one researcher's calculation that in 1985 only 36 per cent of Catholic women and 32 per cent of Catholic men attended weekly Mass (as compared with 60 per cent and 42 per cent in 1967).  He also tells us that statistics from the Melbourne Archdiocese's annual Mass count indicate an attendance rate of just 24 per cent of the nominal Catholic population.  I understand from newspaper reports that more recent figures suggest a slight improvement, but this could offer churchmen little solace in the face of such a marked long-term decline.

Collins estimates that less than 25 per cent of Catholics can be classed as "serious", that is, as those who practise regularly and whose convictions are deep.  Even among this group, however, he thinks there can be only 10 to 25 per cent (maybe five per cent of the whole Catholic population) for whom the Faith is the "radical and central focus of their lives and the foundation of their meaning structure".  The others see commitment in largely moralistic terms, going to Mass, for example, because "it is a sin not to".  For these people, as for the so-called "Christmas and Easter Catholics", belief is essentially subjective or private:  they want a personal experience of God and a church that will comfort them like a friend, protecting them from the stresses of the secular world;  they see commitment to the Faith as a matter of Mass attendance, sending their children to denominational schools and complying generally (which can often mean highly selectively) with the doctrinal and moral teachings of the Church.  Ministry they see as someone else's responsibility.  Few of the laity evince (or have ever evinced) the strong commitment to social justice which is meant to be an integral part of living Catholicism.

Collins supports his picture of the Church with a plethora of sociological and historical references, and the casual reader could be forgiven for seeing No Set Agenda as the last word on the condition of Catholicism.  There are, however, several grounds for treating the book with greater scepticism, not least of which is that its author's ambitions do not rest with the mere sketching of a vivid panorama.  Collins also aims to fill the void he has perceived -- to present at least a partial agenda upon which to focus the energies of his co-religionists during the 20th century's final years.

SO-CALLED REACTIONARIES

Superficiality and imprecision -- the characteristic flaws of journalism -- are much in evidence in No Set Agenda, especially when Collins holds forth on the subject of so-called reactionaries in the Church.  When first we meet these shadowy figures, we learn that they denounce Collins as a "Judas" and "subversive" disloyal to the Pope.  They define the Church "far too narrowly", finding the perfection of tradition always in the period before 1962, and are really a tiny, albeit vociferous minority of Catholics.  Collins thinks that far more notice is taken of them than their numbers warrant (curiously, however, this doesn't deter him from referring to them repeatedly throughout the book).

As we read on, we learn that these troglodytes are showing signs of increasing anti-clericalism, blaming the fall in practice rates and vocations on "liberal" clergy and church bureaucrats who fail to teach "correct" doctrine and who do not maintain the proper discipline.  Despite their alleged paltry numbers, there is also evidence that a "sizeable coterie" of "reactionary types" has attempted to take Holy Orders.  Collins congratulates seminary officials for trying to keep such undesirables out, despite the shortage of priests.  In his words:

"It is to the credit of almost all Australian seminaries that they have tried to face the difficult task of making sure that only men adjusted to life and ministry in the contemporary church are ordained" (p.133).

Paradoxically, within world-wide Catholicism, and to an extent in Australia, it is "reactionary" organisations like Opus Dei, Italy's Communion and Liberation and the Neo-Catechumenate which have been successful in harnessing the idealism and energy of young people.  So it would seem that you can keep them out of the priesthood, but you can't keep good reactionaries down!

I suspect that few of the people Collins has in mind when he bandies about this term "reactionary" in fact deserve the label.  Although he is very free with the names of supposedly "reactionary" organisations, he is disinclined to identify many individuals whose views we could elicit for independent assessment.  His reticence would not appear to stem from old-fashioned good manners, either, for he is quite willing to criticise other people who decline to name names (for example, when John K. Williams writes very generally of environmentalists who hold a religious view of nature, Collins suggests he is creating a straw man).  In the one case where Collins is prepared to single out an individual "reactionary", namely Melbourne Auxiliary Bishop George Pell, the evidence he proffers is too weak to stand up to much scrutiny.

In his first chapter Collins gives a quotation from a speech Bishop Pell made in 1988, wherein he expressed the conviction that a style "which is a mite more confrontational and certainly less conciliatory to secular values" would enable the Church to stem the exodus from its ranks and attract more converts.  "The Cross", he argued, "is a sign of contradiction".  Collins says that this sounds reasonable enough, but adds that Pell "then goes on to outline the type of traditional Catholicism that he thinks should be revived", a type which Collins takes to be "little different from pre-Vatican II Australian Catholicism in the 1950s".  No further quotations are provided in order to establish the resemblance, but this does not deter Collins from concluding that "what the Bishop is actually calling for is the restoration of a Catholic sub-culture".

One would never guess, from Collins' account of that 1988 speech to the Conversazione of the Seminar on the Sociology of Culture, that the Bishop expressed support for some matters dear to Collins' own heart.  He expressed the hope, for instance, that the Papal encyclicals on social issues would be supplemented by regular statements from the Australian bishops (like that on wealth distribution), and that these would be "serious contributions to national debate and equally serious efforts to convince the majority opinion in parliament and population".  So far from advocating a retreat to the sub-culture, he insisted that the Church must speak out on social issues, and not only on abortion, euthanasia and IVF either, but also "social justice questions such as expanding Australian poverty, justice for Aboriginals and our responsibilities to Asian refugees and the poor overseas".  Anticipating Collins' criticisms somewhat, the Bishop pointed out the need for Catholics to "move much more into television" and to "radically upgrade our present efforts, which are amateurish and second-rate".  He also called for a major effort to extend ecumenical contacts with the Greek Orthodox.

Bishop Pell did, it is true, urge that devotion to Our Lady and the saints be encouraged;  also that children in Catholic schools be told regularly of the duty to attend Sunday Mass and of the Ten Commandments' status as part of Divine Revelation.  In addition, he rejected the ordination of women and the general re-introduction of married clergy.  Yet unless one can establish that such stances are incompatible with Vatican I1 (and the Council documents do not support such a claim), it is difficult to see how they can betoken a longing for pre-Conciliar arrangements.

"AMORAL CAPITALISM"

Collins' comments about free-market economics are as hackneyed as they are unbalanced.  "Economic rationalism", we are told, "is just another name for selfish and amoral capitalism", an " 'open slather' for competitiveness, individualism and particularism to run riot, allowing the most ruthless and amoral to enhance their financial power and prestige at the expense of others, especially by the manipulation of debt".  He says it is ironic that "a number of Australia's recent free-market buccaneers are Catholics and that it was state and federal Labor governments that created the conditions for this totally unproductive and immoral form of capitalism".  He chooses to ignore the fact that the "buccaneers" generally did not make their millions through competition in a free market but through corrupt deals with government mates, and that it was the advocates of the free market who provided some of the stoutest criticism of those deals.  I would not wish to pretend that free-marketeers are saints (nor, I dare say, would the people themselves), but from the way Collins carries on one would think they were the repositories of all evil.  Has there never been a ruthless or amoral public servant, happy to prosper at the expense of the tax-paying public?  Come to that, are we to believe that every single advocate of protection speaks out of disinterested conviction rather than self-interest?  Collins is blind to such considerations, and this lack of proportion does him no credit.

Perhaps the silliest claim of all in No Set Agenda, however, arises during Collins' discussion of the different Christian conceptions of God.  Strains of Christian mysticism imagine God as an impersonal "presence" rather than as a person, and Collins laments that "some parts of contemporary spirituality have lost this awareness and are riddled with excessive emphasis on the personal nature of God".  As an illustration of this "excess", we are told that "in the liturgical texts of the church there is constant reference to God as 'Father'.  The Latin word underlying this is so much more impersonal, referring to God as Deus.  'Father' is not the meaning of the word at all".

Now, Collins is under the impression that he received an excellent training in philosophy during his years in the seminary, but he must have either skipped or slept through every session on Latin;  how else could he have missed the facts that the Latin for "Father" is not Deus but Pater, and that the liturgical texts of the Church are full of references to both words?  The Credo, for example, begins with "Credo in unum Deum/Patrem omnipotentem/factorem caeli et terrae", which translates as:  "I believe in one God, the Father almighty, maker of heaven and earth".  One does not need to be fluent in Latin to appreciate the distinction, just to be the owner (as I am) of a reliable Latin-English Missal.

The deficiencies of Collins' analysis find their counterparts in his prescriptions.  For a man who claims to be in the business of agenda-setting, he can be insufferably vague -- perhaps even evasive -- about what ought to be done.  Concerning the roles of women, for example, he warns darkly that "if the church does not address this issue it will not only lose half its constituency;  it will lose its right to articulate the basic issues facing humankind and in the process lose its own soul".  Portentous stuff indeed, but as the case of Bishop Pell shows, the church is actually addressing the issue;  it is very firmly saying "No" to the possibility of priestesses.  One presumes that Collins uses the word "address" as a synonym for unconditional surrender to secular enthusiasms like feminism, but this idiosyncratic use of language hardly aids the reader's comprehension.

It is implied that the vocations crisis makes the acceptance of married priests and female priests, in tandem with a further expansion of lay ministry, the only alternative to the horrid prospect of "priestless parishes".  Yet earlier this century in many parts of Australia (such as in far-western Victoria, whence came relatives of mine) priests were in such short supply that they would have to travel hundreds of St Patrick's Cathedral, Melbourne miles from town to town of a Sunday in order that each community would receive mass at least once per week.  These limitations on the availability of priests did not impair the parishioners' faith -- it may even have paved the way for the historically exceptional intensity of devotion in the 1950s.  When one considers the improvements in transportation which have been made in the last 50 years, there is no reason why Catholicism cannot cope quite well with fewer male priests.

SOCIAL JUSTICE

Social justice is undoubtedly a high priority for Collins.  "To be a Catholic these days demands a commitment to justice", he says, and prophesies that "for the Catholic of the near future sins against social justice will be seen to be as serious as sexual sins were in the past".  Yet the sorts of policies and activities to which he expects Catholics to commit themselves in pursuit of social justice are nowhere spelled out.  From his intemperate remarks about economic rationalism we might guess that Collins harbours the usual anti-capitalist sympathy for punitive wealth redistribution through taxation, but this is just a guess.  He suggests that Jesus' call to his disciples to "leave all and follow him" is a call for "risk-taking flexibility", an injunction to abandon the everyday pre-occupation with security;  but this is a voluntary decision for each believer to make, not for the government to enforce, and it can tell us nothing about what is "socially just".

Regarding the Aborigines, Catholics must apparently abandon their "arrogant" and "European" impulse to convert them from their polytheistic religions, and instead provide support to them as they struggle for land, the preservation of their cultures and an assured place in the political process.  Collins tell us "it is impossible to generalise about their culture and their religion, which differs markedly from place to place", and on the very next page proceeds to make a gross generalisation:  "Aborigines see the land as a living reality ... They look at the land with reverence, and not with the greedy eyes of mining or logging companies or developers".  Yet suppose we leave his self-contradiction aside and grant him the innumerable regional differences in Aboriginal beliefs (considering that their traditional cultures were pre-literate and flung across a sparsely-populated continent it would have been remarkable if there had not been variations).  If Aborigines are so diverse, why should we assume that all of them will find Christian proselytising "arrogant", "paternalistic" or an imposition?  Why should Catholics forebear from welcoming whichever Aborigines prove receptive into what is supposed to be, after all, "the one true Church"?

The biggest issue of all for Collins is the "ecological crisis".  Having been told that "all other theological, moral and pastoral issues fade into insignificance beside this", we might expect his agenda to be explicit here if nowhere else;  but such an expectation would be in vain.  The problems of the environment apparently stem from the "exploitative anthropocentrism" which dominates our consciousness, and for which Christianity bears a large share of the blame.  To combat it, Catholics must embrace a new cosmology:  "today's theology cannot begin with the parameters of biblical history, for this is too narrow.  We have to begin with biological history ..."  But what this cosmology will actually amount to, is anybody's guess.  About the only practical conclusion Collins draws is that Catholics must reverse their attitude to immigration.  Keeping the population down to preserve Australia as a "world 'national park' for the future" may be "morally more justifiable" in the long-term than sharing our assets with people from less fortunate lands.  "There is agreement to preserve Antarctica as a world heritage area so we ought to be thinking of Australia in the same way".

THE PHONEY REVOLUTION

Ultimately, No Set Agenda generates more heat than light for Catholics attempting to make sense of what is happening in their Church and how best they can apply their energies.  A more illuminating account has been provided by Piers Paul Read, the British Catholic novelist, in a recent pamphlet for the Claridge Press.  In Quo Vadis:  The Subversion of the Catholic Church, Read writes:

"Because few Catholics have actually read the decrees of Vatican 11, 'progressive' theologians and 'renewing' catechists are able to postulate a revolution in Catholic thinking which in fact never took place".

This may explain the vehemence and abandon with which some "progressives" fling the "reactionary" epithet around, for how else than by silencing or discrediting the orthodox could those making illicit changes in the name of Vatican II conceal the credibility gap which yawns constantly before them?

Read remarks that "it is common today to describe the opening sessions of the Council as a struggle between liberals and conservatives in which the liberals triumphed.  Reading the decrees of the Council it seems more accurate to describe what difference there was as between conservatives and arch-conservatives".  The Council confirmed the infallibility of the Pope and decreed that Catholics must give "loyal submission of the will and intellect ... to the authentic teaching of the Roman Pontiff even when he does not speak ex cathedra [i.e. infallibly]".  It merely allowed that a wider use could be made of vernacular languages in the Mass, while holding that "the use of the Latin language, with due respect to particular law, is to be preserved in the Latin rites".

Read reminds us that Gaudium et Spes, the Council's Pastoral Constitution on the Church in the Modern World, warned Catholics "in their zeal to promote social justice ... against forgetting the primary teaching of the Gospel.  They must be careful to distinguish earthly progress clearly from the increase of the kingdom of Christ ... Christ did not bequeath to the Church a mission in the political, economic or social order;  the purpose he assigned to it was a religious one".  This cuts to the heart of the matter.

The true objectives of the Church are, in the best sense of the phrase, out of this world, which is why its rituals and church buildings should be designed to express the sacred -- the "set apart".  One can find a flicker of recognition of this fact in Collins' discussion of the Mass, when he says that "the celebration of a liturgical action should lift those participating out of everyday reality and move them into a sacramental space which transcends time and within which the risen Christ is personally present".  Collins has rightly been praised for these words by Dr Geoffrey Hull, a devotee of the traditional Tridentine Mass, writing in the January 1992 issue of AD2000.  Unfortunately, however, Collins seems incapable of thinking through all the implications of the insight.

In the immediate aftermath of the Council, the people who pushed the liturgy in the vulgar Protestant direction Collins abhors were generally the same people who dissented from the Church's moral teachings (which Collins thinks is quite acceptable) and sought the same egalitarian, Presbyterian model of ministry that Collins seems to favour.  In each instance their motivation was the same:  a belief that "desacralisation" (as it was called) and all the other changes would make the Church more "relevant" to the surrounding secular society.  Collins seems to think one can embrace this "progressive" this-worldly outlook in respect of doctrine, organisation and moral teachings without losing the sense of the sacred in the Mass;  but it just will not work.

The real choice for Australian Catholics is not, as Collins supposes, between the ghetto and engagement with the burning social issues of our time.  It is between a religion oriented primarily towards the service of the transcendent God (one component of which service is to aid one's fellow men) and an ethos which focuses on worldly expectations and worldly blights to such an extent that God gets shoved to the background.  It never seems to occur to Collins that Catholics should pray for a rise in vocations;  yet the call to the priesthood is supposed to be a gift of God's grace, in which case prayer should be an efficacious solution to the problem.  Collins' mentality has been secularised, and this makes No Set Agenda a very poor guide for Catholic action in the 1990s.

Menzies and the Middle Class

Robert Menzies' Forgotten People
Judith Brett,
Pan Macmillan Publishers Australia.

It is the fashion among today's "clever" people to pour scorn on those who influenced or controlled Australia's destinies in the past.  These earlier leaders were apparently misguided nincompoops who must be held largely responsible for the deplorable situation in which Australia now finds itself.  Although a rather too critical book, Judith Brett's Robert Menzies' Forgotten People avoids this absurdity.

For nearly two decades after the War, Menzies dominated the Australian political stage like no other politician before or since.  He was respected, even feared, not only by his opponents but also by many in his own party.  His exceptional talents were conceded by all.  Under his leadership Australia prospered, the economy grew rapidly, living standards rose year by year, unemployment was almost non-existent and inflation minimal.  There has been no other period in this century where Australia's economic performance even remotely rivals that of the Menzies era.  Perhaps he was lucky in that the economic winds were generally blowing strongly in his favour.  But whether or not this is so, he provided the country with a sense of stability and a background of solid continuity which have been missing in the years since his retirement.  Whether one liked or disliked him, agreed or fundamentally disagreed with him, most Australians felt that nothing could go too seriously wrong while he was at the helm.  With others there was an element of risk;  with him the risks were minimised;  it was wise therefore to play safe.  There can be no doubt that in the main he inspired confidence both in his own country and overseas.  This was no small matter.

Yet with all this unparalleled record of achievement, Sir Robert remains something of an enigma, a difficult but fascinating study for biographers and political scientists.

The latest work is Judith Brett's Robert Menzies' Forgotten People -- an extensive character analysis rather than a biography.  It is a bold attempt at throwing new light on the forces that drove Menzies and on the contradictory and often puzzling elements in the make-up of his character.  In order to do so she resorts to Freudian psychoanalysis.

I find this part of the book most unconvincing.  Here I am influenced by the fact that I knew Menzies personally. ^[1]  Judith Brett attributes much of Menzies' overriding ambition to a reaction to the dominance and authority exerted by his father within the family.  Put simply, the son was determined to show that he was a bigger and better man than his parent.  Even the prime ministership of Australia was not in his eyes sufficient for this purpose.  He looked further afield to prove himself, even to achieving supremacy among the great of England.  Brett suggests he wanted a place in the British War Cabinet -- which is perfectly understandable -- not just for itself but so that he could intrigue against Churchill and ultimately displace him as the British Prime Minister and leader of the Empire.

All this was early in 1941:  not long after the Battle of Britain, not long after his tremendous wartime speeches, when Churchill must have been on a pinnacle with the British people.  Churchill, of course, had, too, a vast experience of war.  Menzies had none and was, by common consent of his peers, not so much a man of action as one with an extraordinary skill in the use of words.  In war, the ability to act decisively and comprehensively is vital.  But Menzies, like Asquith in World War I, was the cool, logical advocate rather than the man of action.  One had the impression that he had not mastered the particular mystique of getting things done and done quickly.  This part of Judith Brett's book, which is the most original part, based on a piece of speculative psychoanalysis, has, I believe, little foundation in fact.

DICHOTOMY IN HIS CHARACTER

Having said that, I think Robert Menzies' Forgotten People is in many ways an admirable book and a credit to the industry and scholarship of its author.  She writes with insight and penetration on many aspects of Menzies' character.  Judith Brett is right to attribute great importance to his famous radio talk in 1942, The Forgotten People, the forgotten people being the middle class.  Menzies himself was middle-class to the bootstraps.  He had all the virtues -- although in a magnified form -- and all the defects -- also in a magnified form -- of that class.  He had the ambition, the work ethic, the basic honesty, the proud independence, the sense of service, the respect for moral values, the responsibility and essential decency of its better representatives -- at least in the Menzies era.  But also, strangely for a man of his transcendent talents and superb intelligence, he had the defects of the middle class -- the insularity, narrowness, complacency, self-satisfaction, intolerance, suspicion of the unusual, lack of imagination.  In his public life Menzies exhibited these weaknesses in a most exaggerated form.  It is this dichotomy in his character -- high intelligence, peerless talents, unswerving honesty on the one side, the petty, unattractive smallnesses and narrowness on the other -- that makes him such a difficult person to understand.

Menzies had little interest in the world beyond that of the English-speaking peoples.  Unlike Casey, he displayed no curiosity about the Asian countries.  Judith Brett relates that when he visited India in 1959 he did not, according to the Australian High Commissioner, Sir Walter Crocker, "ask a single question about India ... He wanted to see none of the sights and he had no curiosity about and no interest in India or Indians".  When one thinks about it, this is nothing short of astounding.  Nor, says Brett, did his curiosity even extend to Europe.  Even more astounding!  The Australian middle class of that period was certainly cocooned in its own little world, but not quite so much as Menzies appeared to be.  He certainly seems a bad "choice" to carry out negotiations over the Suez Canal with Nasser.  Brett writes:  "Casey's attempts to advise Menzies on the way the Egyptians felt were of no avail".  There were other questionable essays into the wider world -- for instance, his performance at the United Nations in 1961, his attitude to Britain's joining the European Community.

There were other not negligible shortcomings besides his insularity.  Judith Brett writes of his "vindictive wit".  I doubt whether "vindictive" is a fair description of his remarkable but rather cruel talent, which he could not resist using, for making fun at other people's expense.  It was one of his most unattractive traits.  Few people escaped the sharp edge of his merciless tongue.  He did not seem to realise how much pain it inflicted on others.  He could be generous -- sometimes over-generous -- in his praise of people to their face.  But the fact that he made slighting references to the intelligence and idiosyncrasies of so many people, made you wonder what he would say about you when you were not in his presence.  Those who make a practice of constantly denigrating others do so because they feel inferior:  they raise themselves, in their own estimation, by lowering others.  It is a not uncommon practice but those who indulge in it mark themselves down as little men (or women).  But Menzies was anything but "a little man".  He was a human being far above the common run.  He had no need to resort to the ridicule and the denigration of his peers.

Associated with this was his well-known aversion to having people with brains too close to him:  he wanted to shine alone.  This was a major weakness but not an altogether unexpected one in a man who had fought his way to the peak from small beginnings.  He had a reputation -- apparently not undeserved -- for being ruthless in dealing with possible political rivals -- Casey and Bruce for instance -- "Ming the Merciless".

Menzies was probably a little over-suspicious of others, their intentions and ambitions insofar as they might affect himself.  C.D. Kemp had a clear recollection of an amusing incident during the convention Menzies called at Canberra in 1944 to launch the new Liberal Party.  At dinner one evening in the Hotel Canberra, Menzies entered the dining room and espied Captain A.C. Leech and Kemp already seated not far from the door.  He moved in their direction, then suddenly dodged behind one of the pillars (which were a feature of the hotel dining room) and poked his head out, the rest of his body being concealed.  With his hand cupped to his mouth, and in a mock whisper he said, "Seen anything suspicious, boys?"  They collapsed in laughter.  They knew what was in his mind.  In fact, his performance throughout the convention was masterly, and they said so in their subsequent report on the proceedings.

The 1949 election was a climacteric in Menzies' career:  it brought him the Prime Ministership which he retained for the unprecedented period of 17 years.  It is, therefore, somewhat surprising that the book he wrote after his retirement devotes less than a page to this crucial event.  Menzies attributes the Liberal triumph to the people's rejection of the Socialist State.  This may be true enough as far as it goes:  but the key issue of the election was almost certainly the threatened nationalisation of the banking system, which Menzies mentions only in an almost off-handed fashion.  There can be no doubt that the shrewd campaign against bank nationalisation, organised and led not by a politician but by the Chief Manager of the National Bank, Leslie McConnan, ^[2] contributed to a major extent to the overthrow of the Labor Government in December 1949.  In his book Menzies fails to mention this important, indeed, critical, fact and the name of McConnan finds no place in the index to Afternoon Light.  It is a strange and, one might say, an ungenerous omission.

Afternoon Light has some purple passages but, considered as a whole, is, I think, somewhat disappointing.  One would have expected something more weighty and instructive from a man who had been at the helm of his country in affairs for so many years.  It smacks too much of an essay in self-justification.  Moreover, it is rather uneven and ill-proportioned.  The final chapter is on cricket (late in life Menzies still retained an almost school-boyish hero-worship for the great figures of the game).  He too frequently writes in the same mannered and self-conscious idiom which one had come to expect from him in his speeches, but which seems inappropriate in written prose.  With his transcendent talents he could, one feels, have done a great deal better.  Nevertheless Afternoon Light makes interesting reading, and has its high moments.  It contains, for instance, a beautiful and moving chapter on his parents.

A DECENT MAN, AN HONEST GOVERNMENT

Most of those who knew him must have been aware of the flaws in Menzies' make-up.  But then, all men of size have their shortcomings and, in Menzies' case, one would have to say they were far outweighed by his virtues.  Judith Brett's book fails to give sufficient emphasis to his manifest qualities.  Essentially a decent man himself, he gave decent and honest government.  One wonders what he would have thought of today's politicians with their lavish retirement benefits largely financed by the taxpayer.  When he retired from politics he had little, apparently not enough to purchase a home in Melbourne.  But then Menzies was contemptuous of the purely materialist values and scornful of those who were driven by them.  He had no great regard for businessmen as a species (neither, for that matter, did Casey).  One thing is certain -- the disasters and excesses of the 1980s, from which Australia is now suffering grievously, could simply not have happened if he had been at the helm.  This is worth more than a moment's reflection.  There is no doubt that the ruling passion of his life was his desire to serve and lead his country (although it is true that he believed he was much better fitted to do this than anyone else).

To gain a just appreciation of his stature one has only to consider most of those who have succeeded him in the prime ministerial office.  He appears a giant among pygmies.  He brought to public life a balance and a style and dignity that were conspicuously lacking in the Hawke years, and his behaviour after retirement makes a vivid contrast with that of Hawke, which has demeaned the great office which he (Hawke) held.

One of Menzies' most revealing speeches was given at a private dinner in his honour in 1954 at the Athenaeum Club and attended by some 150 of Melbourne's business leaders.  This speech, more than any other heard, expounds Menzies' philosophy of politics.  The concluding words are worth recording:

"If it [politics] is all expediency, if it's all what will win votes next week or next month, you don't need me.  There are much better phonograph records than myself.  All you need is a few humble obedient time-servers and if those are what you want you'll get them ... But, you know, if politics were only a matter of occupying a job, how many of us would be in it?  Did anybody suppose that a man like myself who loves the law, and the practice of the law, and the whole philosophy of the law, would go into this turbulent stream for a job?  A job!  Of course not!  And what I ask you to realise is that people like myself -- and I'm not the only one -- go into this life because they have beliefs, because they have a faith, because they believe that there is something that matters for their country".

NOTES

1. I have always been puzzled as to how biographers can paint a perfectly accurate picture of their subjects without personal knowledge.  Of course, I am not suggesting that this should be a necessary qualification for the biographer;  otherwise probably few biographies would be written.
2. See C.D. Kemp, "Sir Leslie McConnan and the Battle for the Banks".

Bank Nationalisation Delusions

FOREWORD

We are indebted to the Editor of the "Australian Quarterly" for permission to reprint our article from its December, 1992 issue.  Publication of this article in pamphlet form will render a service to many thousands of people who are not regular readers of the "Australian Quarterly" -- a journal of high standard which especially provides a venue for well informed opinion.

The article is reprinted as published in the "Australian Quarterly" except that sub-headings have been inserted.  In addition, some fresh material, specially written for this pamphlet, appears in an appendix.  This should be of considerable help to those readers who are unfamiliar with banking technique.  The description given of the mechanism of the "special accounts" throws much light on some of the discussion in the House of Representatives when the Bank Nationalisation Bill was being debated.

We deal with a subject of lasting importance -- the relationship between employment and the volume of credit.  Accordingly our view will continue to be of interest whatever might be the outcome of the Banking Act of 1947.  We argue that this Act is based on the entirely false assumption that the volume of credit is the principal determinant of the volume of employment.

Much stress in public and private discussion is often placed on credit control as the essential means for preventing violent changes in national prosperity.  It seems, however, that very little can be achieved in the way of maintaining the level of economic activity by regulating the outflow of credit.  Of far greater stabilising effect, we argues, are the numerous non-monetary factors, among which good government occupies a dominating position.

A FALSE AIM AND A FALLACIOUS ASSUMPTION

The Federal Labour Government's case for nationalisation of the trading banks posits a utopian objective and rests on a doctrinaire assumption which, cannot be reconciled with academic theory nor verified by appeal to statistical facts.

The objective was explicit and was mentioned by practically all government speakers. ⁽¹⁾  No common terms were employed by them but a uniform idea prompted their utterances.  The direct -- immediate -- purpose of the Bill can be summarised as:  "the maintenance of full employment".  We call this the "disclosed objective" to distinguish it from the Labour Party's final objective of full socialisation (see appendix A) which the Government did not reveal was the end which the Party's platform states is to be achieved after the banks are nationalised.  The assumption was implied rather than expressed, but it was the foundation upon which every member of the Government based his advocacy for the Bill.  It concerns the highly technical problem of the relationship between the volume of credit and the state of business activity.

We examine briefly both the objective and the assumption.  Their emotional content, however, is of considerable propaganda value, especially with the politically regimented masses, and it therefore makes impartial examination extremely difficult except to those experienced in cold theoretical analysis.  Yet they are open to the charge of callous disregard of human welfare, such as was implied in the winding up speech of the Rt. Hon. J.B. Chifley on the Second Reading debate.  His exposition of Labour's "philosophy", because of the emphasis he placed on his Party's lofty ideals and humanitarian motives, was inappropriate to the occasion if not in bad taste, and carried the pointed inference that members of the Opposition were indeed base fellows devoid of human feelings.  Even if the Prime Minister succeeds in establishing a monopoly bank, he will never convince those who are not members of his own Party that he and his followers have a monopoly of noble aims and manly virtues.

Neither the requirements of modesty nor the demands of statesmanship are satisfied by the machinery clauses of the Bank Nationalisation Bill, the Prime Minister's explanation accompanying it and the supporting speeches of the members of his Government.  Nor would it be correct to affirm that all Opposition members, during their Second Reading speeches, excelled in dialectical chivalry, in analytical technique or in familiarity with the theoretical structure of the Government's case.

FULL EMPLOYMENT UNOBTAINABLE

Opposition members examined the disclosed objective of the Bill, but always in a context which tacitly assumed that it was attainable in a free society and they made no attempt to assail the Government's basic assumption.  If they had shown that the objective of full employment (see appendix B) is impracticable and that the assumption of a close connection between credit and business activity is invalid, they would have utterly routed the Government on the debating front.  The Bill would have run its allotted course through the House, but the people would have been better informed.

No apology need be offered for attacking the maintenance of full employment as a practical objective, for the conditions which would accompany its achievement are so repugnant to democratic ideology and practice that those who point them out should enhance their political prestige, even though their opponents charge them undeservedly with indifference to human welfare.

The retort to this charge is that prolonged full employment is incompatible with either a stationary or a rising living standard and with the retention of personal liberty.  So long as people value the right to choose their own jobs and to spend their money as they wish, they will refuse to accept the increasing restraints which a policy of full employment makes inevitable, especially if the alternative is pointed out to them of sustained incomes, through thick and thin by means of adequate insurance, which only an enlightened democracy with a free enterprise banking system can guarantee.

A critical examination of the disclosed objective of the Bill soon reveals the implied assumption upon which justification of the measure is based.  It is believed by most Government members that full employment would be assured if the banks were state-owned because this would ensure that the volume of credit would be fully controlled by the Government.  The underlying assumption of this belief in its simplest form is:  "Credit creation is the principal determinant of employment".  Expanding this statement and inverting the order of the concepts we can write:  "Changes in the volume of employment are the result chiefly of variations in credit policy".  More technically, "the Trade Cycle (see appendices C and D) is mainly a monetary phenomenon."

CREDIT CONTROL LIMITATIONS

From this assumption the Government proceeds to argue that, having accepted responsibility for maintaining full employment, its power over credit must be absolute.  This requires that the trading banks be nationalised so that the amount of credit they create when they make advances and destroy when they call in overdrafts, may be strictly in accordance with the Government's wishes as expressed in the advance policy of the Commonwealth Bank.

The Government ignored the Opposition's arguments, convincing to all but intellects debauched with socialism, though inexpertly presented, that the Commonwealth Bank already had more than ample weapons to batter into submission any trading bank foolish enough to defy the Government's policy.  But the Opposition did not go far enough in its attack.

Mr. Chifley had said in his Second Reading speech:  "It would be disastrous, from the point of view of the people of Australia and the prospects of economic stability, if Sections 18 to 22 of the Banking Act (i.e. those that deal with Special Accounts (see appendix E)) were held to be invalid."  But he made no real attempt to find support for this frightening statement by examining the technique of central bank control.  It was surely being less than just to the people of Australia for him merely to state that the Special Accounts technique was necessary for preventing "secondary inflation", without saying why this method of control was essential.  He would have met the position if he had shown precisely why all the other control devices were inadequate.

The Opposition by its unworthy silence gave assent to his blunt assertion that "the Special Accounts are the crux of the control of credit".  It would have penetrated the Ministry's studied indifference but it would not have swerved the Government a fraction of a degree from its Caucus-determined course, if the Opposition had pointed its argument with a little more realism by indicating that the Commonwealth Bank's armoury would not be weakened to any significant extent in times of peace if special accounts were abolished.

LIP SERVICE TO THE GOLDEN AGE

Some Government members were more explicit than others in their statement of the connection between credit creation and the volume of employment.  Some were so hazy that it was obvious that they were entirely ignorant of the elements of the question and were merely stumbling over their "parts".  Some were so extravagant in their claims as to make the Government's case a mockery.

The Prime Minister in his Second Reading speech said:  "No single factor can do more to influence the welfare and progress of a community than the management of the volume of money.  Mismanagement of money, on the other hand, has contributed to the greatest economic disasters of modern times -- booms and slumps, mass unemployment, waste of resources, industrial unrest and social misery."  If this statement were true and if the volume of money could not be controlled unless the banks were state-owned, only the Devil himself would oppose bank nationalisation.  Yet no facts have ever been discovered to give any substance to these premises.

The Minister for Transport (Mr. Ward), always more vicious and spiteful than his Leader, snapped out in reply to Mr. Menzies:  "The Government was determined to prevent private individuals (i.e. the trading banks) from creating a depression".  This assumes a far more potent influence of credit over employment than Mr. Chifley admits.

The Minister of Post-War Reconstruction (Mr. Dedman), whose speech far exceeded in merit that of any other Government supporter, informed the House that the Government sought to forge the most powerful weapon possible (i.e. a nationalised monopoly bank) to combat another depression, while the Minister for Works and Housing (Mr. Lemmon) considered that with the banks nationalised it would be possible to see that there was full employment and sufficient money for the community to buy the goods its workers created.

The Minister for Air (Mr. Drakeford) assured the House that the Bill was an honest attempt by the Government to protect Australia from future depressions.  And not to be outdone, the member for Newcastle (Mr. Watkins), apparently wishing to demonstrate the simplicity of the whole problem, declared briefly that with nationalised banks the spread of a depression could be prevented because money could be made available for work.

The member for Riverina (Mr. Langtry) made the most astounding statement of all and actually believed it.  With simple sincerity he declared that the Bill would give the Golden Age to the people.

UNIMPORTANCE OF MONEY

If the Golden Age could be introduced so easily, we would have attained it long ago, for nothing is simpler in a modern capitalist economy than to control the issuance of credit.  We have made no appreciable progress towards Utopia during the last several decades, not because of any failure to regulate the volume of credit but because the factors which have most influence on the volume of employment are non-monetary in character and are largely uncontrollable.

The dominance of the non-monetary factors was recognised by the British Royal Commission (Macmillan) on Finance and Industry which said in 1931, referring to the existing depression:  "On the other hand, it seems to us equally clear that the economic difficulties of the post-war decade are primarily due, not to any wanton misbehaviour on the part of the monetary factors (see appendix F) themselves, but to unusually large and rapid changes on the part of what are rightly described as non-monetary phenomena, these non-monetary factors again themselves producing monetary changes.  In particular, war and post-war non-monetary causes led to the great and unwanted flow of gold to the United States from which such vital consequences have ensued."

"Our view is, therefore, that the price level is the outcome of interaction between monetary and non-monetary factors, and that the recent world-wide fall of prices is best described as a monetary phenomenon which has occurred as the result of the monetary system failing to solve successfully a problem of unprecedented difficulty and complexity set it by a conjunction of highly intractable non-monetary phenomena.  Whether the international monetary system could have solved its problem is a matter on which we should hesitate to express a dogmatic opinion."

Mr. Chifley is aware of these non-monetary factors and for a brief moment seemed to appreciate their dominating influence.  Towards the end of his speech, when he was less dogmatic on the relation between credit and employment than in his opening remarks about the so-called "mismanagement of money", he said "Fluctuations in business activity and employment are not solely due to monetary causes, but they are certainly greatly influenced by financial policy."  If this concession to moderation had been sustained the Prime Minister would have been confronted with even greater difficulties in justifying his Bill.  A factor which is not dominant, but only "greatly influences" employment would provide far less warrant for his drastic proposal.  Later, therefore, he returned to his former view claiming that "no element in the working of our economy has a greater influence for good or evil upon economic and social welfare than the management of money and credit."

This is an entirely erroneous view and is not made respectable because it is held by ever so many worthy Australians.  It is the result of a superficial examination of an exceedingly complex problem and fails to discern the basic causes of the credit operations which may or may not directly influence the state of business activity.

CONFIDENCE CREATES CREDIT

What should be the first concern of a statesman bent on maintaining full employment is not the creation and cancellation of credit, not monetary policy, but the innumerable forces which give rise to the decisions of borrowers and lenders.  Of far greater influence than Mr. Chifley's "single factor" in determining economic conditions are the anticipations of producers which determine finally the credit accommodation producers demand and the accommodation they are granted.

These anticipations are governed by existing conditions of demand and production costs, price changes and interest rates, wage movements, the trend in raw material supplies, seasonal prospects, technological developments, provisions for obsolescence, scientific discoveries, taxation rates and incidence, government expenditure, the social, economic and cultural policies of governments, international relations, trade treaties and production policies of other countries.  Some of these factors may be subject to the direct influence of credit policy while others may be its determinants.  Among the most potent agencies of prosperity and depression, because they enter so vitally into the decisions of business men, investors, manufacturers and agriculturists, and because at times they directly stimulate the rate of credit expansion and on other occasions retard it, are such non-monetary factors as the state of the weather, the "output" of inventive genius and, above all, the behaviour of politicians.

Clearly then, of far greater significance than the advance policy of the trading banks is what the customers of the banks think about the political future.  They will not have a rosy outlook and will not be in a borrowing mood if they see the Government playing ducks and drakes with democratic traditions, the working community laughing at law and order, and legislators hurling disgusting epithets at the judiciary.  These are the vital considerations in an employment policy, not the operations of the banking system.

BANKS ARE CREDIT CHANNELS

Those who attribute power to the banks "to control the lives of the people" through their advance policy, overlook the fact that borrowing is the counterpart of lending.  It takes two to make an overdraft;  the really active partner in this "quarrel" is the borrower.  In the granting of overdrafts the banks are passive in the sense that they cannot make advances until they are requested to do so by their customers.  The brilliant Oxford economist, Mr. R.F. Harrod (see appendix G) says this:  "It is one thing to allow that the banks alter the quantity of money by their loan operations.  It is quite another thing to allow that their loan operations produce a direct variation in the quantity of investment in the community. ... As lenders the banks are hopelessly and irretrievably in the position of middlemen.  They can only lend what is lent to them. ... The banks are mere conduit-pipes."

This view, which must come as a great shock to amateur monetary theorists infected with the virus of socialism, is supported by a group of experts of the Royal Institute of International Affairs in these words:  "Credit policy alone cannot create a flow of new investment ... the banks cannot put more money into circulation;  it is the public who do that;  the banks can only refrain from stopping them."

It comes down to this, that because the processes of production depend on the decisions of producers, which are the result of anticipations based primarily on non-monetary factors, the most perfect control of credit will never control the volume of output -- not even in a socialist state.  The most that can be claimed for "management of money and credit" is that it is but an insignificant agency in determining the level of employment.  "We are reluctant to suppose," comments Harrod, "that man's course of endeavour can be governed by something so superficial and artificial as his own banking system."  This, of course, is the modern version of John Stuart Mill's dictum:  "There cannot, in short, be intrinsically a more insignificant thing in the economy of society than money, except in the character of a contrivance for sparing time and labour."

But Mr. Chifley thinks differently.  It may be that he is endowed with unique insight into these intractable problems -- problems which have perplexed the world's most learned economists.  If he is, Australia of all countries must assuredly be the most blessed;  if he is not, then our citizens are the innocent victims of unprecedented humbug.

CONSUMERS CALL THE TUNE

Some years ago the view was widely held that booms and depressions were due almost entirely to monetary causes -- that was when Mr. Chifley was up-to-date.  It was said that if too much money were injected into the economic system, there would be a boom leading to unhealthy inflation, while if too much money were drained off, a depression would ensue.  The object of stabilisation policy, therefore, was to keep the supply of money regulated so that both inflation and deflation would be avoided.

A typical theory of those days was that of the "equilibrium rate" of interest -- the rate which would keep the economy on an even keel.  A prevalent idea was that this rate would maintain equilibrium between savings and investment.  Mr. J.M. Keynes (see appendix G), in his "Treatise on Money", adopted this view, but in later works rejected it because he said that savings and investment in any given period must always be equal.

"If we examine the details of any actual instance of the Trade Cycle," says Lord Keynes in his more recent work, "The General Theory of Employment, Interest and Money", "we shall find that it is highly complex and that every element in our analysis will be required for its complete explanation.  In particular we shall find that fluctuations in the propensity to consume, in the state of liquidity preference, and in the marginal efficiency of capital, have all played a part."  The propensity to consume is the proportion of their income which consumers choose to spend on goods for immediate consumption.  Liquidity preference is the proportion of their savings which they desire to hold in the form of money.  The marginal efficiency of capital is the factor which determines the borrowing plans of producers.  It is the relation between the prospective yield of capital equipment and its supply price or replacement cost.  These are non-monetary factors in the sense that they are decisions which are not dictated by the actions of credit authorities.

Keynes lays great emphasis on the marginal efficiency of capital, which really reflects the decisions of producers.  The "prospective yield" of capital depends on their anticipations which are based on innumerable factors, some of which we have previously mentioned.  Indeed, he considers that the Trade Cycle is best regarded as being caused by a cyclical change in the marginal efficiency of capital, though complicated and often aggravated by associated changes in the other significant short-period variables of the economic system.

PRODUCERS INITIATE PROSPERITY

The significance of this analysis is the emphasis it places on factors outside of the direct control of the banks.  This fact is further stressed in his treatment of the influence of interest rates on the investment policy of producers.  A reduction in interest rates of itself will not stimulate investment during a depression.  Later, however, it "will be a great aid to recovery and, probably, a necessary condition for it.  But for the moment, the collapse in the marginal efficiency of capital may be so complete that no practical reduction in the rate of interest will be enough."  In other words, the producer will not be induced to initiate recovery by the offer of cheap credit.  Keynes goes on to say that "it is not easy to revive the marginal efficiency of capital, determined, as it is, by the uncontrollable and disobedient psychology of the business world.  It is the return of confidence, to speak in ordinary language, which is so insusceptible to control in an economy of individualistic capitalism.  This is the aspect of the slump which bankers and business men have been right in emphasising, and which the economists who have put their faith in a 'purely monetary' remedy have under-estimated."

The dominance of non-monetary factors in business conditions is mentioned by Professor Haberler (see appendix G), another world-famous economist.  For the League of Nations he examined in 1937 existing trade cycle theories.  He emphasised the importance of the forces which give rise to the "turning points" of the cycle.  An upswing or downswing, he says, may be initiated by any primary change which affects investment, income or expenditure, sufficiently to set in motion some highly important cumulative secondary changes.  The primary change may be due to any one or more of many factors such as those we have previously examined.  Money may play an important role, especially in the cumulative stages of an upswing or a downswing, but of greater importance are a multitude of non-monetary factors which initiate, aggravate or retard these cyclical fluctuations.  Haberler also makes provision for the possibility, suggested by some economists, that the cycle is a never-ending series of mechanical upswings and downswings without any special "primary" change.

THE VITAL FORCES IN PROSPERITY

Other economists are even more insistent than Haberler on the comparative unimportance of monetary factors in causing cyclical fluctuations.  Harrod, for instance, considers that the level of business activity depends on three "dynamic determinants", the community's propensity to save, the shift to profit and the amount of capital used in production.

He attaches greatest importance to fluctuations in the demand for capital goods.  After a depression capital equipment is very depleted and as prosperity returns the demand for new capital goods is very great.  This leads to an expansion of output in the capital goods industries to a level which, after restocking has been completed, is too high for the demand for these goods by industries making consumption goods.  This causes retrenchment and unemployment in the capital goods industries and the consequent loss of income and spending power is transmitted to other industries, thereby initiating a downswing to depression.  Eventually, when existing capital equipment begins to wear out, the demand for capital goods revives and the whole cycle starts all over again.

These changes in demand are interwoven with monetary factors but they are non-monetary in themselves.  They embody the principle of "the acceleration and magnification of derived demand" mentioned by Haberler.  Of all the theories advanced in explanation of industrial fluctuations, the most feasible are those which take account of the disequilibrium which arises between the output of capital goods and the demand for them.  Harrod's theory falls within this category.

Commenting on older trade cycle theories, Harrod refers to the "multifarious phenomena of banking and finance" as "mere instruments and intermediaries by which the fundamental forces do their predestined work".  He states further:  "It appears improbable that the cycle owes its origin to initial fluctuations in the quantity of money ... A more plausible form of the theory that monetary changes are the initiating causes connects them with changes in the velocity of circulation."  He admits that the rate of interest and monetary policy, usually regarded of central importance, "play a part, although, I submit, a subordinate one."

CREDIT CONTROL WILL NOT PRODUCE ECONOMIC SECURITY

Thus our analysis has shown how complex is the trade cycle and how difficult is the problem of its solution.  It is a problem which has baffled the keenest professional brains throughout the world.  That, apparently, is of no concern to the Government members, for they are proceeding with their plans hilariously and against the popular verdict, seemingly unaware of the solid body of expert opinion which refutes the naive belief that control of credit is the principal determinant of the level of employment.  They do not realise that under the attack of modern theory their basic assumption crumbles ignominiously into valueless rubble and the structure erected upon it tumbles into ruins.

"What will the ordinary man get out of this Bill?" asked Mr. Menzies in his Third Reading speech.

"Security from depression," replied Mr. Riordan (Minister of the Navy).

"The answer is not to be found in windy generalisation," retorted Mr. Menzies.

That dialogue epitomises the issue.  If, however, the ordinary man imagines that security resides in a government monopoly bank, he will be bitterly disillusioned as soon as the icy blasts of the next depression reach Australia -- a depression which Mr. Chifley so confidently predicts.  Mr. Chifley is fortunate indeed in that he can see no inconsistency between this forecast and his promise of a Golden Age.  Or has he some magic wand with which he can deflect the hurricane?

TOTAL SOCIALISATION VIA BANK NATIONALISATION

Meanwhile, the trading banks, which have committed no other crime than that they have occasioned the displeasure of Caesar, are to be butchered to make a socialist holiday.  But far worse than that, Australia is to be forced by amateur experimentalists in "political science" into taking a step which the supporters of bank nationalisation have said, in their own conferences again and again during the last quarter of a century, was intended to be a first vital move towards the Party's objective of "socialisation of industry, production, distribution and exchange" -- an objective, that is, of total socialisation.

The question for each of us is, whether we should accept the carefully considered opinion of eminent modern economists such as Haberler, Keynes and Harrod, or whether we should believe the utterances of Federal Labour Members, which are so obviously based on out-of-date theories, heavily influenced by nineteenth century Marxist dogma, and liberally sprinkled with half-truths, red herrings and political catch-cries.

The Chifley Government does not hesitate to blame the banks and former governments for not possessing in 1929 all the knowledge of cyclical fluctuations and trade cycle policy which has now been gained through later experience and the progress of economic thought.  Yet it steadfastly clings to outworn economic theories of the previous century.  We are tempted to ask whether in this instance Lord Keynes' observation has any application:  "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.  Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back."

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APPENDIX A:  FULL SOCIALISATION

The Australian Labour Party's objective is more correctly described as total socialisation because it covers every aspect of economic activity.  Despite disclaimers from time to time, the A.L.P. is a socialist party pledged to total socialisation.  Its declared objective is "socialisation of industry, production, distribution and exchange."  This could not possibly be achieved without at the same time socialising consumption.  Any society in which all economic activity was regulated would require the functioning of a central planning authority, such as is envisaged in a "Supreme Economic Council" (see the official Report of the All-Australian Trade-Union Congress June 1921, page 9, when total socialisation was accepted as the Party's objective).

As we live in a democracy, we can take no exception to any political party promulgating an objective, however violently we might be opposed to its policy.  Yet we have just cause for complaint if a party does not keep its real purpose ever before the electors and fails to inform them of the precise steps it intends to take and of the social economic and political consequences of its proposed actions.

APPENDIX B:  "FULL EMPLOYMENT"

The objective of "full employment" has captured the imagination of a large number of people, especially the victims of the last economic depression.  The term has been used, however, by many responsible people with little, if any, consideration for what the maintenance of full employment involves.  Their main concern has been to "cash-in" on the people's natural desire for security.  In "full employment" they have had an effective political catch-cry.

It is one thing to get into office through advocacy of a lofty ideal, but quite another thing to take acceptable practical steps towards its achievement.  If our political leaders had given a full account of the means which would have to be used to ensure continuation of full employment, comparatively few of their supporters would show enthusiasm for it.

Yet to question the practical possibility of full employment is not to court despair, but to make a realistic approach to the problem.  Although fluctuations in business activity will not be eliminated, appropriate steps can be taken which will rob depressions of many of their terrors.  One essential step is the introduction of unemployment personal insurance paid for by the insured persons in proportion to the benefits they receive.

Because of the different meanings given to the term "full employment" and a shift in official opinion over the last few years, the issue of full employment has been a little confused and has not been squarely faced by the community.  At one time some politicians held out a vote-catching promise of one hundred per cent, employment -- "every one in a job all the time" -- "a job for every worker in the community".  Later on when they realised that this promise was just a little too fantastic, they shifted their emphasis and, in official circles, but not on the election platform, spoke of "a high level of employment".  Now it seems that this much-watered-down conception of "full employment" is becoming unpopular with those who realise its full implication.  In official circles, for instance in the British White Paper on Employment Policy published in May 1944, we read of an "adequate volume of employment".

Accordingly, we can no longer accept the original meaning of "full employment" as a practical objective, although doubtless some politicians will still dangle it before the public.  Both a "high level of employment" and an "adequate volume of employment" allow for temporary employment due to seasonal variations and to technological changes such as the introduction of new machinery and new methods of production.  They also recognise the possibility of some "depression unemployment".

The reason for this striking change in the meaning of "full employment" is the realisation that one hundred per cent, employment could be achieved only by thorough-going regimentation of workers and their jobs through complete central planning.  Another name for this is total socialisation.

APPENDIX C:  THE TRADE CYCLE

The term "trade cycle" is a technical name used to describe periodic changes in general economic conditions.  These changes are also referred to as "business cycles" or "booms and depressions" or "upswings and downswings" or "cyclical fluctuations of trade".  There are two points to consider -- the fluctuations in certain variables and the time element.

First, the trade cycle involves changes in many variables which are frequently lumped together under the headings of "general economic conditions" or "the level of business activity".  The most important variables are the volume of production;  the level of real incomes and the level of employment.  Changes in these are accompanied by variations in business profits;  in the prices and volume of trade in goods, services and stock exchange securities;  in the size of business stocks of goods;  in the level of interest rates and of bank overdrafts;  in wage rates and rents;  and, in fact, in all the so-called "economic factors".

When production, incomes and employment are at a high level there is said to be a state of prosperity and when they are at a low level there is a depression.  No entirely satisfactory explanation of the causes of these changes has ever been given.  As the article in the Quarterly shows, the problem is a highly complex one.  Consequently no simple single remedy is available.

Concerning the time element, various attempts have been made to discover a regular time sequence of booms and depressions.  In some phases of history these phenomena have occurred at fairly regular intervals, while in others the rhythm has been much more irregular.  The most that can be said with any certainty is that prosperity follows depression and depression follows prosperity in a never-ending cycle but that the duration of prosperity or depression varies considerably from time to time.

Some economists have endeavoured to show that the trade cycles which we encounter during comparatively short periods of, say, eight or ten years, are super-imposed on long-term trend cycles extending over periods of fifty years or more.  As yet insufficient evidence is available to prove the existence of a continuous long-period cycle.  In any event, its duration would probably vary considerably, as with short-period cycles.

It is interesting to note that not all unemployment is of a depression or cyclical character.  Some of it is caused by technical changes in methods of production and by expansion of some industries and contraction of others.  This is usually described as technological or frictional unemployment.  Temporary unemployment may also be caused by seasonal changes, involving variations in the demand for particular types of labour according to the time of year or the state of the weather or the size of agricultural crops, and so on.  Consequently, the trade cycle does not necessarily give an accurate indication of changes in the volume of employment.

In the same way, it must not be assumed that every rise in prices generally is part of a cyclical upswing or boom and that every fall in prices generally signifies a cyclical downswing to depression.  It is possible to have a change in the general level of prices which is merely an adjustment to a new and more or less permanent set of circumstances.  For example, the forty-hour week in Australia in bound to cause a permanent rise in costs and prices regardless of any cyclical movements.

APPENDIX D:  THE PRICE LEVEL

"The Price Level" is a term used to denote the level of prices generally.  The idea or concept is easy to understand, but measurement of the price level is an extremely difficult problem.

Accurate measurement would take into account the prices of all goods and services.  In practice, however, this is impossible, so a rough calculation is made by recording the prices of selected goods in a "representative basket" and then working out their average price.  This price is expressed by an "index number".  Usually the average is not a simple one but a "weighted average" which assigns to each article and service a weight or prominence roughly indicating its importance in the consumer's budget.  For example, if the average consumer purchased a certain number of articles of one kind and twice as many articles of another kind -- prices being the same for both -- the weight applied to the second article would be double that applied to the first.  If the prices of the two articles were not equal, further adjustments would be necessary.  Many difficulties of measurement arise, especially in deciding who is the "average consumer", what goods and services should be included in the "representative basket" and what weights should be assigned to each article or service.

A distinction is often made between the general price level of all goods and services and particular price levels of certain types of goods and services or of certain sections of an economy.  For instance, the Commonwealth Statistician calculates price levels or price "indices" for wholesale prices and for retail prices in various districts, and for different groups of goods and services.  Indices are also prepared for various classes of primary production, for exports, for imports and for share prices, as well as for rents and wage rates.  An important distinction is often made by economists between the price level of consumption goods (i.e. goods available for immediate consumption) and capital goods (i.e. durable goods such as machinery and buildings used for the production of consumption goods).

APPENDIX E:  THE "SPECIAL ACCOUNTS" MECHANISM

"Special Accounts" are balances of the trading banks held by the Commonwealth Bank.  Unlike other trading bank balances kept at the Commonwealth Bank "special accounts" cannot be operated on except by the Bank's consent.  Accordingly, the balances on the "special accounts" are not available to the trading banks for the purpose of making advances.

These accounts, introduced during the war (November 1941) by Government regulation were subsequently made a permanent feature of central bank control by the 1945 Banking Act.  This new mechanism was introduced because the Federal Government believed that it was an essential addition to the instruments of credit control.  That their importance is overstressed is claimed in the Quarterly's article.

The Government regulation and the subsequent 1945 Act empowered the Commonwealth Bank, at its discretion, to direct each trading bank to lodge a specified sum on "special account" each month up to a total amount not exceeding the increase in that bank's assets since August 1939.

Some idea of the size and importance of these accounts may be derived from the following table: --

NINE AUSTRALIAN TRADING BANKS

	Special Accounts. £ million	Total Assets. £ million
Quarterly Average   1942, March quarter   1942, September quarter   1943, September quarter   1944, September quarter	27.2 38.2 106.2 182.8	459.7 462.2 536.9 604.6
Monthly Average   1945, September   1946, September   1947, September   1947, November	219.6 251.3 236.3 248.7	657.3 692.7 716.9 735.2

The rate of interest paid by the Commonwealth Bank to the trading banks for these balances is ½ per cent.  On a large proportion of the deposits which give rise to these balances -- approximately one-third -- the trading banks pay members of the community interest rates ranging from ½ per cent. for three months deposits up to 1½ per cent. for deposits of 24 months and over.

Balances held in the "special accounts" arise from actions taken by the Federal Government and the Commonwealth Bank.  How this is brought about is shown by the following set of figures.  The discounting by the Commonwealth Bank of £10m. treasury bills, and the subsequent Government expenditure of this amount, are traced in accountancy form through the books of the Commonwealth Bank and the trading banks.  For the sake of clarity in exposition it is assumed that the whole of the £10m. comes to the trading banks in the form of deposits.  In practice some of the £10m. would get into deposits of the public with the savings banks and some of it would be held as additional cash in the pockets of the people.

1. BEFORE INTRODUCTION OF SPECIAL ACCOUNTS

(a) Commonwealth Bank discounts for the Commonwealth Government £10m. of treasury bills.  This affects the accounts of the Commonwealth Bank thus: --

Liabilities		Assets
Government deposits	+ £10m.	Treasury Bills	+ £10m.

(b) Government pays out £10m. and when this reaches the trading banks the position is: --

Commonwealth Bank

Liabilities		Assets
Government deposits	Nil	Treasury bills	+ £10m.
Trading banks' deposits	+ £10m.

Trading Banks

Liabilities		Assets
Customers' deposits	+ £10m.	Balances with Commonwealth bank	+ £10m.

(c) Before the advent of "Special Accounts", this additional £10m. in the balances of the trading banks with the Commonwealth Bank could have been used by them as a basis for an expansion in advances to their customers.

If the trading banks were working on a cash ratio of 10 per cent. they could increase their advances by some £90m., supposing that all the new advances made to customers were used by them to pay accounts due to other customers with credit balances.  The books of the trading banks would then read: --

Liabilities		Assets
Customers' deposits	+ £100m.	Balances with Commonwealth Bank	+ £10m.
(The original £10m. created by advances)	+ £90m.	Advances	+ £90m.

Thus the cash ratio would then be 10%, i.e. £10m. balances with the Commonwealth Bank to £100m. customers' deposits.

In other words, if the central bank discounts £10m. treasury bills, this increases the banking system's cash and deposits by a like amount.  The increase in cash permits the banks to increase their advances and consequently their deposits rise, to the limit imposed by their ratio of cash to deposits.

In this example 10 per cent. has been taken as the ratio in order to simplify the calculation.  It must not be supposed that the banks inevitably and invariably work on this precise percentage.  Nor is there any automatic relationship between cash reserves and advances.  The cash-deposits ratio is never more than a guide to the banks respecting their advance policy.

2. AFTER INTRODUCTION OF SPECIAL ACCOUNTS

Now, however, that the Special Accounts are in operation the trading banks cannot, except with the permission of the Commonwealth Bank, use any of the £10m. as a basis for increased advances.  The Commonwealth Bank puts the tag of Special Accounts on the £10m. balances of the trading banks with it.  The £10m. is "frozen" and the position as shown in the books is: --

Commonwealth Bank

Liabilities		Assets
Government Deposits	Nil	Treasury bills	+ £10m.
Trading banks' balances	Nil
Trading banks' Special Accounts	+ £10m.

Trading Banks

Liabilities		Assets
Deposits	+ £10m.	Balances with Commonwealth Bank	Nil
		Special Accounts with Commonwealth Bank	+ £10m.

APPENDIX F:  MONETARY FACTORS

Monetary factors are those associated with the supply of money, that is, with the operations of the monetary and banking mechanism.  They include central bank activities such as the issue of notes and coin, the granting of credit to the Government, the discounting of treasury bills, central bank purchases and sales of securities, advances policy control through "special accounts", interest rates and foreign exchange rates.  They include also the granting of advances and other activities of the trading banks within the limits laid down by the central bank.  Moreover, some operations of the Government are closely associated with monetary factors.  For example, government expenditure on public works might be regarded as a monetary factor, especially if the works were financed in such a way as to change the volume of money in the community -- as for instance by means of central bank overdraft or by treasury bills discounted with the central bank.

Of far greater influence on general business conditions and the volume of employment are the "non-monetary factors" which are all those influences not directly associated with the supply of money.  Among the most important in the long run is "confidence" which is a reflection of the political situation.  Other vital influences, most of which are beyond the realm of human control, are consumers' tastes and preferences for some goods rather than others, the proportion of their income which the community choose to save, the psychology of producers, new inventions and technical progress, seasonal changes, good and bad harvests, diseases, the level and trend of wage rates, rents and the cost of raw materials, the efficiency of labour, the efficiency of management, strikes and lockouts, wars, earthquakes, tariffs, movements in external prices, external trade policy, and political decisions of other governments.

Some factors might be regarded as border-line cases that cannot easily be allocated definitely to one or other of these two categories.  The foregoing description, besides illustrating the general distinction between monetary and non-monetary factors, gives support to the contention that control is highly complex.

APPENDIX G:  PERSONAL NOTES

R.F. HARROD:  Mr. Harrod is Joint Editor of the British "Economic Journal", a publication of high standard and reputation throughout the world.  He is a first-class honours graduate of Oxford University where he was a lecturer in economics from 1929 to 1937 and again in 1946.  During the war he served in Mr. Churchill's private statistical staff at the Admiralty and also in the Prime Minister's office.  From 1943 to 1945 he was statistical adviser to the Admiralty.  He has been a member of the Council of the Royal Economic Society since 1933 and is a fellow of Nuffield College.  His publications include "International Economics", "The Trade Cycle", "Britain's Future Population", "A Page of British Folly."

Mr. Harrod's book, "The Trade Cycle", is a brilliant contribution to trade cycle theory.  It has thrown much light on various aspects of this very difficult problem.

JOHN MAYNARD KEYNES:  Mr. Keynes, subsequently Lord Keynes, was a brilliant British economist and government adviser.  He was a Fellow and Bursar of King's College, Cambridge;  Fellow of Eton College;  a Director of the Bank of England;  a Trustee of the National Gallery;  Chairman of the Council for the Encouragement of Music and the Arts;  Member of the Chancellor of the Exchequer's Consultative Council;  High Steward of the Borough of Cambridge;  President of the Royal Economic Society;  Chairman of the Arts Theatre of Cambridge and Officier de l'Orde de Leopold.  He was a member of the Committee on Finance and Industry, 1929-31;  and Editor of the Economic Journal, 1911-1944.  His publications include "Indian Currency and Finance", 1913;  "The Economic Consequences of the Peace", 1919;  "A Tract on Monetary Reform", 1923;  "A Treatise on Money", 1930;  "The General Theory of Employment, Interest and Money", 1936.

During World War 2, Lord Keynes was one of the British Government's most influential financial advisers and he was the leading exponent of the "compulsory savings" plan adopted in Britain to help in financing the war.  At the termination of hostilities he was the chief British economist engaged in drawing up the Bretton Woods Agreement between the nations for the principal purpose of stabilising exchange rates and facilitating international trade.  He died in 1946.

GOTTFRIED VON HABERLER:  Formerly a leading economist in Vienna, Professor Haberler was engaged by the League of Nations to summarise and synthesise the most important trade cycle theories existing at the time.  The first edition of his book, "Prosperity and Depression", was published in 1937 and since then it has been twice revised, enlarged and reprinted.  The Professor had at his disposal the services of numerous other statistical and economic experts employed by the League of Nations and as a result his book is a comprehensive and most useful compendium on the subject of booms and depressions.

In 1933 Professor Haberler published a comprehensive book on "The Theory of International Trade".  He is now Professor of Economics at Harvard University in the U.S.A.

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ENDNOTES

1.  This refers to Second Reading speeches in the House of Representatives on the Bank Nationalisation Bill.