The Neoliberal Australian Labor Party Once Tried to Nationalize the Banks

In 1947, Ben Chifley’s Labor government proposed nationalizing the country’s banks. It was the biggest challenge to capital by a reforming government in Australia’s history, igniting what historian A. L. May called “the Battle for the Banks.”

In response to Chifley’s move, competing factions of capital united, pooling their resources, connections, and institutions to face down the threat. The Australian capitalist class recognized that an attack on one section of capital by a Labor government threatened their collective interests.

To reinforce the campaign, the Right revived right-wing mass organizations dating back to the Great Depression and set up hundreds of new anti-socialist groups. Bank employees and their unions also rushed to the side of their bosses.

Just days after Chifley announced his nationalization plans, a crowd of three thousand people assembled outside Sydney Town Hall. Liberal Party leader Robert Menzies announced it was his melancholy duty to declare “war on the [real] fascists of Australia . . . the Labor party.”

This mobilization defeated Chifley’s plan, and the fallout shaped Australian politics for decades. Labor went on to split in 1955 and remained out of government for a generation. It was a death blow to the “socialist objective” of the world’s first governing labor party.

“Throw your old guns aside, my boys; the ballot is the thing.” So wrote Rockhampton unionist William Kidston after the 1891 Shearers’ Strike went down in defeat. Following the 1893 Bank Crash, employers exploited the economic downturn to mount a savage assault on the growing union movement. As James Scullin, Labor prime minister during the Great Depression, later reflected: during the late nineteenth century, the “forces of Government, backed by the police, the courts, and the military, were behind the employers in every struggle.”

Throughout the 1880s, the Intercolonial Trades Union Congress debated the question of “reform or revolution.” Ultimately, however, the bitter fights of the 1890s convinced doubters to focus their energy on the battle for the ballot. Political power, they reckoned, would help the working class overpower capital. The ultimate goal, however, was still the end of capitalism.

In the 1930s, representatives of British banking capital led by Sir Otto Niemeyer brought James Scullin’s Labor government to its knees. Scullin’s treasurer, “Red” Ted Theodore, had proposed a proto-Keynesian fiscal policy to deal with the Great Depression. However, the federal government lacked the power to regulate credit, crippling his vision. This experience convinced many Labor leaders and activists that the only way to avoid future depressions was to nationalize the banks.

Labor came to power again during WWII. Placing the Australian economy on a war footing required significant government intervention, with the banking sector not exempt. The Australian ruling class, fearful of an Axis victory, did not try to stop John Curtin’s Labor government from using the full powers of the state to discipline capital and strengthen the war effort.

These wartime exigencies gave the federal state power to modernize key sections of the economy and create full employment. Chifley became prime minister following Curtin’s death in 1945 and continued an ambitious reform agenda. As Labor’s 1945 White Paper put it, war “has taught us valuable lessons which we can apply to the problems of peace-time.”

Chifley’s 1945 Banking Act was proposed to maintain wartime regulations on the banking sector. But the banks brought a legal challenge to the act, and the High Court overturned it in 1947, putting Labor’s postwar reconstruction plans on the ropes.

On August 15, 1947, Chifley opened a debate in his federal cabinet. He proposed that “the Government could either swallow the decision . . . or they could remove the challengers by nationalizing the banks.” The members of his cabinet were gobsmacked. After a moment of silence, they enthusiastically voted in favor of pressing ahead.

The proposal was simple. The Commonwealth Bank — then publicly owned — would acquire other banks’ assets and business infrastructure, whether voluntarily or by compulsion. Chifley’s plan guaranteed shareholders generous terms of compensation while promising bank employees work at the Commonwealth Bank with better conditions.

In the twilight hours of that cabinet meeting, Chifley read out the first draft of his famous “the light on the hill” speech, which reaffirmed Labor’s commitment to socialism:

We have a great objective — the light on the hill — which we aim to reach by working for the betterment of mankind not only here, but anywhere we may give a helping hand. If it were not for that, the Labour movement would not be worth fighting for.

Attorney general and future Labor leader H. V. Evatt had briefed Chifley the day before cabinet met. Evatt assured Chifley that his new legislation was constitutional and that this time, it would pass the inevitable court appeal by the banks. Even in the worst-case scenario, he insisted, the government could appeal to the Queen’s Privy Council in Britain, which was then Australia’s highest court.

The Labor government had recently been reelected with a mandate to deliver reform, so Chifley believed it would be unnecessary to mount a campaign in support of bank nationalization. He sincerely thought it would be possible to achieve socialism by “sensible parliamentary means.” However, he was no Marxist, and he had little understanding of what overcoming capitalism would require.

In the biggest misstep of his political career, Chifley announced his new proposal with a simple forty-four-word statement published in the morning papers. As Geoffrey Blainey remarked in his history of National Bank of Australia (NAB), these forty-four words “framed the announcement that incited the fiercest political controversy since the conscription referendum of 1917.”

Australia’s eight major banks held meetings in both Melbourne and Sydney to plan a “two-year publicity campaign.” They aimed to pressure Labor to either drop the legislation or put it to a referendum. Meanwhile, the banks launched a new High Court challenge.

L. J. McConnan, chairman of the bank’s peak group, the Associated Banks, understood that “the Banks will not get far by trying to defend themselves as Banks.” Instead, they needed to counter Chifley’s nationalization plans with an anti-communist scare campaign.

Robert Menzies claimed that if Labor’s plan was successful, the next step would be to “socialize the shops or the newspapers, or even, heaven knows, the Churches.” An emergency meeting of the Associated Banks of Victoria agreed that the fight would be won by arousing “the public to the dangers of an extreme socialistic trend in the affairs of the country.”

Throughout Australia, employers’ associations and bodies declared their support for the campaign. In Queensland, for example, groups such as the Employers Federation, the Brisbane Chamber of Commerce, and the Queensland Farmers Federation formed a coordination council. It organized fundraising, campaign materials, and lobbying efforts.

Remarkably, the Graziers’ Association of Victoria — which had historically fought against the banks — went so far as to call a special meeting which threatened to withhold supplies of food and other primary products if the legislation was enforced. Australia’s capitalist class effectively threatened to starve the public to turn them against Chifley’s parliamentary idealism.

As an anti-socialist wave swept the land, the same farmers’ wives who had been devastated when banks foreclosed on their farms during the Great Depression suddenly became the banks’ biggest defenders. The United Women Citizens’ Movement Against Socialization brought more than three thousand middle- and upper-class women out in protest at Sydney Town Hall. The right-wing Country Women’s Association ran events on an almost daily basis.

With thousands of branches in Australia’s cities, towns, and rural areas, the banks were well placed strategically to mobilize against nationalization, and their war chest was virtually bottomless. With the names, occupations, and addresses of almost every Australian adult in their possession, the banks also effectively had their own electoral roll at their disposal. Within a week, every Australian had received anti-nationalization letters from their banks, and local bank officers soon began canvassing their customers in person.

Despite having received a guaranteed job offer at the Commonwealth Bank with better conditions, the vast majority of bank employees sided with their bosses. Unions representing bank workers elected their own Committees of Management. As the minutes of a Western Australian Committee noted, the bank workers’ unions were prepared to “do all things necessary to combat the proposal.”

Bank officers held a rally at Sydney’s Domain, asking the assembled crowd if they opposed the plans. Over ten thousand people raised their hands in a thunderous “aye.” Bank officers organized thousands of other meetings across the country. In Orange, New South Wales (NSW), two thousand people out of a population of fifteen thousand attended an open mass meeting.

Historian S. J. Butlin described the anti-nationalization effort as “probably the most intense and concentrated campaign ever experienced in Australia.” Virtually all print media flew the anti-nationalization flag. The Argus, a Melbourne-based broadsheet, published a typical editorial warning that “totalitarianism” and “Goebbelism” were just around the corner. The banks waged their fight on the airwaves as well, sponsoring popular programs like “Star Pupil” and “Musical Families” to ensure their message would be heard broadly.

This campaign also spurred the revitalization of right-wing, Depression-era citizens’ organizations across the country. A survey conducted by the Sydney Morning Herald in December 1947 found that over two hundred anti-socialization organizations had emerged in NSW country towns alone. Police reports found that many of these groups organized on the “lines of the New Guard,” a fascist paramilitary group that had flourished in the 1930s.

Although some local Labor branches, trade unions, and supporters of the Communist Party campaigned for Chifley’s plan, Chifley himself refused to mobilize extra-parliamentary support for it. As historians John Faulkner and Stuart Macintyre put it: “Menzies and the banks were given a free run” to organize virtually unopposed.

In some states, conservative politicians refused to wait until the next federal election and tried to force an early one. In an unprecedented move, Victorian MLA and banker Sir Frank Clarke used the conservative majority in the state’s upper house to block its budget bill. The same thing happened in Tasmania. Liberal Party historian Gerard Henderson described these moves as a “cynical political exercise” that had nothing to do with state politics.

Before the crisis escalated, the High Court upheld the banks’ challenge to Chifley’s proposal on constitutional grounds. The government’s appeal to the Privy Council also failed. As the 1949 election approached, protest committees redeployed hundreds of paid staff away from the anti-nationalization campaign to canvass for the Liberal Party instead.

The Labor Party, already exhausted by the war and the reconstruction effort, now found itself worn down even further by the anti-nationalization campaign. The ALP lost the 1949 election to the Liberals, whose seat share rose from twenty-six to seventy-four — enough for a majority.

Sydney’s Chifley Tower, named after the former prime minister, boasts that it is “Sydney’s most prestigious tower.” It is home to dozens of private equity, capital, and investment banks. Despite the global financial crisis and the scandals revealed by the 2017 Royal Commission into the banking sector, the Labor party today accepts large donations from three of the four major banks. The party is further from its “socialist objective” than at any time in its long history.

In the aftermath of the campaign against Chifley’s plan, little changed for the bank employees. They still worked a six-day week on a lower wage than the average semiskilled worker. One Western Australian bank clerk reflected: “We lined ourselves up with the boss . . . but did we get anything?”

McConnan, the general manager of the NAB, later answered that rhetorical question in a report to shareholders. He noted that “not one of the thousands of bank officers engaged in the fight for their freedom [was] rewarded one single penny.” The same bank officers who organized against their own interests went on to lay down organizational structures that allowed their 1960s counterparts to launch strikes improving their conditions and pay.

The right-wing campaign united anti-Labor forces and the fledgling Liberal Party. It taught them how to organize, fundraise, and make effective use of the media. After the Liberal Party’s 1949 election win, Robert Menzies remained in office until 1966, defining an era in Australian politics.

Chifley remained Labor’s leader in opposition. In 1950, he collapsed and died in his bedroom at the Hotel Kurrajong. A few kilometers away, the Jubilee State Ball was in progress in Parliament House. Menzies announced the death of his predecessor to the assembled politicians and VIPs:

It is my very, very sorrowful duty to tell you tonight during these celebrations, that Mr Chifley, former prime minister, and leader of the opposition, is dead. . . . Although we were political opponents, he was a great friend of mine, and of yours, and a fine Australian.

Chifley and the ALP fatally underestimated the extra-parliamentary power of capital. If they had embarked on their bank nationalization plan with a clearer understanding of what would be necessary to defeat that power, Australia might have taken a great step toward achieving Labor’s socialist objective.