Another take on Whitlam, Population, Energy Resources, and the Khemlani loan scandal
The Australian government seemed to be boldly seizing the initiative to defend Australia's energy resources against a background of worsening international events. As other old colonies across the sea rose up and nationalised their oil reserves, there are signs that the Whitlam Government was planning to do the same, when it was cut down. When I was engaged in a research thesis that I finished in 2002, I approached the history of the Whitlam government at an angle from which it had not previously been approached. This article is based on an extract from Sheila Newman, The Growth Lobby and its Absence in Australia and France, 2002. (This is a new URL that does not require log-ins)
Initial Reaction in Australia to the First Oil-Shock
With regard to population policy, the will to population stabilisation was present at the level of ALP party politics and at a popular level as well in the early 1970s.#fnEgw1" id="txtEgw1"> 1 ALP policy was heading towards one of population stabilisation before the Whitlam government was elected.#fnEgw2" id="txtEgw2"> 2 The strategy of reducing immigration in order to alleviate the pressure of population growth in the cities was debated and adopted at the ALP's June 1971 policy conference in Launceston.#fnEgw3" id="txtEgw3"> 3 On 13 October 1972, Tom Uren, who was to become the Minister for Urban and Regional Development, referred to the role of immigration in affecting urban population pressures.#fnEgw4" id="txtEgw4"> 4 In a policy speech opening the 1973 election campaign Whitlam also referred to the changes to immigration policy.
Contrary to suggestions that ALP policy to reduce immigration was not in response to international economic considerations,#fnEgw5" id="txtEgw5"> 5 I would argue that the beginnings of the oil-shock#fnEgw6" id="txtEgw6"> 6 may be dated to well before the time of the ALP conference in Launceston, in mid 1970.#fnEgw7" id="txtEgw7"> 7 In fact, the evidence suggests that ALP energy policy was formed as the situation that culminated in what is known as the 1973 oil-shock evolved.#fnEgw8" id="txtEgw8"> 8 This was due mainly to the influence on ALP energy policy of the extraordinary Rex Connor, who was to become Whitlam's minister for Minerals and Energy. Connor was unusually attuned to global and local mining and energy economics and is said to have anticipated the oil-shock.#fnEgw9" id="txtEgw9"> 9 In fact Connor claimed this feat himself on behalf of the ALP:
The national policy on minerals and energy approved at the 1971 Launceston Conference of our party has proved to be not only singularly relevant but even historically visionary in the light of subsequent events. We anticipated the world energy crisis (1973), have dealt with international currency turmoil, established a sound export pricing policy, checked the inroads into Australia of the multinational corporations, and secured the respect and understanding of our trading partners.#fnEgw10" id="txtEgw10">10
There was to follow an extraordinary sequence of events, as the Whitlam Labor Government emerged gloriously from many years in the wilderness only to sink, almost without a trace, like the lost city of Atlantis, along with all its brilliant policies and plans, in a series of devastating international and national events.
On 7 December 1971 Whitlam moved to recommence suspended debate on the need for Australia to establish sovereign control over the mineral resources of the sea bed off the Australian coast.#fnEgw11" id="txtEgw11">11 In December 1972 the Whitlam Labor government took office.#fnEgw12" id="txtEgw12">12 In May 1973 Cabinet authorised Rex Connor to confer with State Mines Ministers on the construction and operation of a national pipeline system.#fnEgw13" id="txtEgw13">13
The Australian government seemed to be boldly seizing the initiative to defend Australia's energy resources against a background of worsening international events. Across the sea other old colonies rose up and nationalised their oil reserves.#fnEgw14" id="txtEgw14">14 In September 1973 Algeria suspended immigration to France. In October OPEC oil ministers used oil as a weapon in the Arab-Israeli war and Saudi Arabia, Libya and other Arab states announced an embargo on oil exports to the United States and the Netherlands. In November the Arab oil-producing states proclaimed a 25 % cut in oil production, and threatened worse; Germany officially suspended immigration from outside the European Economic Community (EEC)#fnEgw15" id="txtEgw15">15 and President Nixon signed the Emergency Petroleum Allocation Act (EPAA). In February 1974 Libya nationalised three US oil companies and Nixon and Kissinger announced a seven point plan to make the US energy independent. In June the IMF created a special fund to lend money to nations that had become indebted due to the high oil prices. In July France suspended immigration from outside the EEC.#fnEgw16" id="txtEgw16">16 In Australia the government implemented progressive reduction of the new settler program between December 1972 and late 1975, from 140,000 to 50,000.#fnEgw17" id="txtEgw17">17
On December 13, 1974 the executive council of the Commonwealth of Australia, made up of Prime Minister Whitlam, Attorney-General Murphy, Treasurer Cairns, and the Minister for Minerals and Energy, Rex Connor,#fnEgw18" id="txtEgw18">18 met to seek four billion US dollars to finance national energy self sufficiency and to fund unemployment reduction.#fnEgw19" id="txtEgw19">19 For this they sought $US 4,000,000,000 (four billion US dollars). The minute of the meeting stated,
"The Australian government needs immediate access to substantial sums of non-equity capital from abroad for temporary purposes, amongst other things to deal with exigencies arising out of the current world situation and the international energy crisis, to strengthen Australia's external financial position, to provide immediate protection for Australia in regard to supplies of minerals and energy and to deal with current and immediately foreseeable unemployment in Australia."#fnEgw20" id="txtEgw20">20 (My emphasis)
At this point Australia was momentarily poised on a similar policy path of self-sufficiency to France and the EEC's. But this was not to be. The Whitlam Government was brought to an abrupt and ignominious end by the associated Khemlani loan scandal.#fnEgw21" id="txtEgw21">21
On 16 October 1975 Governor General Kerr dismissed Whitlam from office.#fnEgw22" id="txtEgw22">22
The Khemlani loan objectives (stated in the above minute) had not been conceived overnight. The kind of loan was itself a method of avoiding surrendering ownership of Australian oil assets to foreign oil companies and the objectives it sought to finance were ideologically based on the premise that population and energy consumption stabilisation, plus national self-sufficiency were the way to go for the long term future.#fnEgw23" id="txtEgw23">23 (Would national exploitation of petroleum and gas reserves have assisted paying back such a this loan?)
The Whitlam government was a government by intellectuals at a time of heightened ecological and environmental concern. This concern manifested in many contemporary conservationist activities and documents in the Australian and international community.#fnEgw24" id="txtEgw24">24 It is often forgotten that the United States attempted to introduce a formal population policy under President Nixon, as well as energy conservation, as a result of a National Security Study undertaken in 1974.#fnEgw25" id="txtEgw25">25 At the same time, the Australian Government undertook a national population enquiry, resulting in the Borrie Report, 1975.#fnEgw26" id="txtEgw26">26 This conservationist and global outlook seems to have disappeared from ESSS – and to have been revised and forgotten in Australia under Fraser and subsequent economic rationalist governments.#fnEgw27" id="txtEgw27">27
There is no doubt that Whitlam was a sophisticated electoral player and he would probably have used anti-immigrant preoccupations in marginal seats to his advantage.#fnEgw28" id="txtEgw28">28 International comparisons, however, testify to an over-riding motive for reining in immigration-led population growth, that of energy conservation and infrastructure consolidation. These motives dominated in France, where energy conservation efforts were considerably assisted by massive industry restructure and increased efficiency.
The evidence is thus strong that Australia's policies to lower immigration at this time reflected a similar Malthusian basis to France's. This seems even more likely when they are considered in conjunction with other Whitlam government contributions to demographic policy, in the realms of increased foreign aid for population control, subsidised abortions, subsidised access to contraception, grants to State and Federal family planning clinics, and promotion of women's rights.#fnEgw29" id="txtEgw29">29 In addition, urban planning initiatives under the Whitlam government were complimentary to population stabilisation. These planning initiatives focused on consolidation, redistribution of metropolitan coastal growth to inland rural areas, financial support for State purchase and development of land for resale at low prices for home building, and funding and support for public housing.
Finally, the Whitlam government abolished the Department of Immigration and replaced it with the Australian Population and Immigration Council. Of the decision to cut down on immigration, Whitlam himself writes,
"The Government, due to the advent of the world recession, was forced to constantly reduce its annual targets for migrant intake. The size of the new settler program was reduced from 140,000 to 110,000 in December 1972, to 80,000 in late 1974 and to 50,000 in late 1975. On 2 February 1975, the Australian Population and Immigration council was established to assist the Government in the accurate assessment of Australia's immigration and population needs."#fnEgw30" id="txtEgw30">30
Clearly Whitlam was contemplating the review of population goals for the long term. His government was, however, suddenly dismissed from office and replaced by a government with very different objectives. Had the growthist lobby groups actually managed to engineer a situation favourable to their interests or did this come about entirely fortuitously?
There is room here for an ideologically related political explanation.
The threat of the possibility of long term Malthusian policies was only averted because the Whitlam Government was sacked. A traditional reason given for the sacking is that the government showed itself to be so financially incompetent and procedurally unorthodox with regard to procuring finances, that the opposition had virtually no alternative but to block supply and the Governor General had virtually no option but to dismiss the government.
A political opportunity was thus created for a caretaker opposition government to step in. This caretaker government was subsequently elected to office amidst the disarray of the ALP.
Another interpretation, (reserving judgement on the quality of the Whitlam Government's policies and practices) might be that the political fortunes of this government suffered due to the impact of the global economic crisis on the Australian economy. The 25% across the board tariff reductions that Whitlam introduced#fnEgw31" id="txtEgw31">31 had alienated manufacturing and farmers. Changes to land planning development and housing and cuts to immigration had alienated property development, building materials suppliers, and banks and building societies. There were therefore many important and influential dissatisfied voices supporting the opposition and the Governor General. And so a way had been left open whereby the Fraser opposition might exploit any vulnerability in the Whitlam Government.
If the Whitlam Government had not run so counter to entrenched growthist interests, would the opposition have been able to mobilise such support?
The new Fraser government was a vehicle for a new ideology which not only favored the old guard that had a vested interest in high population growth, but which took their interests much further. This was the beginning of important changes liberalising Foreign Takeovers and Acquisitions law, and of greatly increased foreign borrowing for development, in exchange for equity.#fnEgw32" id="txtEgw32">32 I will be expanding on these post-Whitlam themes at the end of this chapter and in Chapter Eight.
#fnEgw1" id="fnEgw1">1.#txtEgw1">↑ Money, Jeanette, Fences and Neighbours, Cornell University Press, 1999, p.188-189 argues that immigration was a sensitive matter at the level of a number of marginal electorates, particularly those suffering from competition for limited services and ammenities. She attributes this to anti-immigrant feeling, rather than to a resentment at population pressure, but nevertheless she provides evidence for popular concern about immigration, for whatever reason.
#fnEgw2" id="fnEgw2">2.#txtEgw2">↑ Money, op.cit., p. 188. Money theorises that Whitlam had a number of strategies for attracting the swing vote in some marginal urban electorates at the time of the 1972 Federal elections. One of these, according to Money, was "to resolve urban problems, in part by reduced immigration intakes"
#fnEgw3" id="fnEgw3">3.#txtEgw3">↑ Money, op.cit., p.189, citing Grattan 1993:129 and Price 1974.
#fnEgw4" id="fnEgw4">4.#txtEgw4">↑ Money, op.cit., p.190, citing, Sydney Morning Herald, 13 October 1972.
#fnEgw5" id="fnEgw5">5.#txtEgw5">↑ See Chapter 4 of this thesis.
#fnEgw6" id="fnEgw6">6.#txtEgw6">↑ Previous explanations for these changes have related them either primarily to local economic and employment policy (Birrell and Birrell, 1987, op.cit. p.93) or to political exploitation of anti-immigrant sentiment (Money, op.cit., p.192). However these explanations depend on situating the 1970s oil-shock related world economic recession at a much later date than I do. It is doubtless a matter of opinion whether one chooses to identify that recession as beginning earlier or later, however it seems inarguable to me that the early events I refer to were all part of the phenomenon.
#fnEgw7" id="fnEgw7">7.#txtEgw7">↑ Beginning on May 3, 1970, the OPEC countries faced their first world customers with a series of incremental and increasingly hostile demands for higher prices. In February 1971 Algeria nationalised 51% of French oil concessions and this act was followed by several other oil producing countries. On August 15, 1971, US President Nixon froze all wages, prices, salaries and rents - this was the devaluation of the US dollar. OPEC immediately told its member countries to negotiate price rises to compensate the lower US dollar. Data for these dates comes from the Chronological table entitled: World Oil Market and Oil Price Chronologies, 1970-1999, available as a download from the United States Energy Information Administration: http://www.eia.doe.gov/emeu/cabs/chron.html, edited to January 25, 2000. See also Appendix 3, for more detail, from page 2.
#fnEgw8" id="fnEgw8">8.#txtEgw8">↑ See Appendix 3, "Energy and Oil Shocks", p.3.
#fnEgw9" id="fnEgw9">9.#txtEgw9">↑ Rick Wilkinson, A Thirst for Burning, The Story of Australia's Oil Industry, David El Press, Sydney, 1983, p. 138.
#fnEgw10" id="fnEgw10">10.#txtEgw10">↑ Wilkinson, A Thirst for Burning, op.cit., p. 138. Wilkinson comments, on page 139, "There is little doubt that some of Connors's ideas were far-sighted. ... He was correct in predicting the 1973 oil crisis and then, at a time when people world wide had overcome the fright of the OPEC moves, Connor continued to champion conservation of energy. Unfortunately he was denied the mean of achieving it. ..."
#fnEgw11" id="fnEgw11">11.#txtEgw11">↑ Whitlam, The Whitlam Government, Viking, Ringwood, Victoria, 1985, p.256.
#fnEgw12" id="fnEgw12">12.#txtEgw12">↑ Ibid, p. 768.
#fnEgw13" id="fnEgw13">13.#txtEgw13">↑ Ibid, p. 259.
#fnEgw14" id="fnEgw14">14.#txtEgw14">↑ See Appendix 3, "Energy and Oil Shocks", p.2.
#fnEgw15" id="fnEgw15">15.#txtEgw15">↑ Weil, La France et ses étrangers, op.cit., p.80.
#fnEgw16" id="fnEgw16">16.#txtEgw16">↑ Weil, La France et ses étrangers, op.cit., p 85.
#fnEgw17" id="fnEgw17">17.#txtEgw17">↑ Gough Whitlam, The Whitlam Government, op.cit., p.502.
#fnEgw18" id="fnEgw18">18.#txtEgw18">↑ Brian Buckley, Lynched, The Life of Sir Phillip Lynch, Mastermind of the Ambush that Ended Gough's Run, Salzbury Publishing Pty Ltd, Toorak, Victoria, 3142, p.34.
#fnEgw19" id="fnEgw19">19.#txtEgw19">↑ Paul Kelly, The Unmaking of Gough, Allen & Unwin, 1994, p. 191. The Governor General later signed the minutes of this meeting and those of a later one that reduced the loan sought two billion. Kelly and Tom Uren, (Straight Left, Vintage, 1995 pp. 209, 222, 223, 236-7), describe Rex Connor as having an impressive knowledge of the mining industry. Apparently Gough Whitlam had no knowledge of the industry at all and was convinced that Connor was a visionary.
#fnEgw20" id="fnEgw20">20.#txtEgw20">↑ Ibid.
#fnEgw21" id="fnEgw21">21.#txtEgw21">↑ This event that has not been much studied to date by demographic sociologists. Money, op.cit., p.197-198, comments on the lack of attention to the period in general. Khemlani was the name of a shadowy figure from whom the government was supposed to be seeking the loan.
#fnEgw22" id="fnEgw22">22.#txtEgw22">↑ Whitlam, The Whitlam Government, op.cit., p.769.
#fnEgw23" id="fnEgw23">23.#txtEgw23">↑ This was also the time in the international geophysical community that the Hubbert Peak theory that oil would peak in the 1970s or in the 1990s (depending on population and consumption) was much discussed - in much wider circles than among geophysicists. References: M.K. Hubbert, "The Energy Resources of the Earth", Scientific American, vol. 224, 1971, p.69, and the Hubbert Peak page on http://www.oilcrisis.com/ (last downloaded on 14/2/2001. Hubbert had a theory that massive human population growth was a transient product of a transient fossil fuel era and he propounded the merits of a steady state economy and encouraged national self sufficiency.
Whitlam and his government planned to make Australia energy self sufficient and to develop her reserves without "selling off the farm". Objections are occasionally raised that Australia (and the US and Canada) did not experience much pain during the First Oil shock. This is true, relatively speaking, but in Australia's case this was partly due to Whitlam's strategies to counteract the effects of the shock, as well as to the high value of the Australian dollar at the time, which meant that when petrodollar prices rose, Australia was less affected. Bradshaw, Foster, Fellows and Rowland, "Patterns of discovery in Australia: part 2," Oil and Gas Journal, Petroleum Publishing Company, Tulsa, Okalhoma, USA., June 14, 1999, p.111. "In 1973 the global price of oil soared when war in the Middle East led to the Arab oil embargo, but, in Australia, political factors – regulated markets and prices and taxaaion – effectively blocked the effect of high oil prices." Refer also to the section on Oil in the Background Theory Chapters of this thesis, where a detailed history of significant events contributing to the definition of the first Oil Shock are given and which show that the USA and others took a number of decisive actions in response to the crises as they arose.
#fnEgw24" id="fnEgw24">24.#txtEgw24">↑ The very widely read book predicting global energy and materials shortages, The Population Bomb, by Paul Ehrlich, Simon & Schuster, Brookvale, New South Wales, Australia, came out in 1968. Consider also "Nugget" Coombs Boyer lecture of 1970, "A god-like viewer ... could property conclude that the human species was like a cancerous growth reproducing itself beyond control and living parasitically on, rather than symbiotically with, the rest of creation and threatening not merely the environment, but itself as well", The Boyer Collection, ABC Books, 2001, cited by Frank Devine in his column in the Australian, 12/7/2001, p.11
#fnEgw25" id="fnEgw25">25.#txtEgw25">↑ Stephen D. Mumford, The Life and Death of NSSM 200: How the Destruction of Political Will Doomed a U.S. Population Policy, Centre for Research on Population and Security, Research Triangle Park, North Carolina, 1996. This study also contains an appendix recommending population growth reduction as a method of combatting fossil fuel depletion.. (Appendix 2.) NSSM 200 stood for National Security Study Memorandum. This was an interagency study of world population growth, US population growth, and the potential impacts on national security. In this work evidence was given to support an argument that population policy initiatives failed largely due to interference from a lobby group of Catholic bishops in the United States (pp. 179-352).
Aristide R. Zolberg, "Are the Industrial Countries under siege", in G. Luciani, (Ed), Migration Policies in Europe and the United States, 1993, Kluwer Academic Publishers, Netherlands, pp.53-82, p. 61 : "In the 1970s, mounting objections by conservative segments of the citizenry to the presence of culturally and often somatically distinct minorities, as well as the oil crisis and ensuing economic crisis, prompted the governments of the industrial countries to undertake a drastic reevaluation of ongoing immigration, but the difficulty of reducing the flows to the desired level, as well as to restoring the status quo, precipitated renewed fear of 'invasion'. In the United States, in the 'stagflation' 1970s, estimates of illegal immigrants escalated to as high as twenty million, on the basis of which it was argued that the nation had 'lost control of its borders'. The major solution proposed was to impose sanctions on employers of unauthorized labour, but this failed of enactment because of resistance by organized business interests, so that in 1979 the Congress established a commission to overhaul the entire immigration system."
See also Mumford, The Life and Death of NSSM 200, op.cit., pp.51-57.
#fnEgw26" id="fnEgw26">26.#txtEgw26">↑ Borrie, W.D., First Report of the National Population Inquiry, The Government Printer of Australia, Canberra, 1975.
#fnEgw27" id="fnEgw27">27.#txtEgw27">↑ Sharon Beder makes a good case that this was due to intentional anti-conservation/anti-environmental activity by corporations from the early 1970s in the United States and Australia as do Beck and Kolankiewicz about the retreat of the US environmental movement from advocating population stabilisation. Sharon Beder, Corporate Spin, The Corporate Assault on Environmentalism, Scribe, Melbourne, 2000, p.15 and Roy Beck and Leon Kolankiewicz, "The Environmental Movement's Retreat from Advocating U.S. Population Stabilisation (1970-1998): A First Draft of History," Journal of Policy History, Penn State University, USA.,Vol. 12, No.1., 2000.
#fnEgw28" id="fnEgw28">28.#txtEgw28">↑ As suggested by Jeanette Money, see my literature review, Chapter 4.
#fnEgw29" id="fnEgw29">29.#txtEgw29">↑ There are many references for positive contributions to innovations in these fields. As well as Whitlam's book, The Whitlam Government, op.cit., the chapters, "Health", "Women", "Migrants", "Cities", Siedlecky and Wyndham, Populate and Perish, Australian Women's Fight for Birth Control, Allen & Unwin, Sydney, 1990, p.136-137, detail his government's support for family planning, subsidising of the contraceptive pill and health rebates for abortions. References for comparison with French policy may be found in several sources, for instance, Weil, La France et ses étrangers, op.cit., pp.81-86 and 243-254.
#fnEgw30" id="fnEgw30">30.#txtEgw30">↑ Whitlam, The Whitlam Government, op.cit., p.502. According to Robert Birrell & Tanya Birrell, An Issue of People, 1987, op.cit., pp.89 - 93 the Labor government's reduction in immigration was largely conceived as a measure to offset the impact of the rise in unemployment that the government expected would result temporarily from some massive cuts in protectionist tariffs for the manufacturing industry, however Whitlam's own statement contradicts this and the origins of this policy are dated to quite an early period, Rick Wilkinson, A Thirst for Burning, op.cit., p. 138, "[Connor's] opening words left no doubt that he felt Australia was on the right path: 'The national policy on minerals and energy approved at the 1971 Launceston Conference of our party has proved to be not only singularly relevant but even historically visionary in the light of subsequent events. We anticipated the world energy crisis (1973), have dealt with international currency turmoil, established a sound export pricing policy, checked the inroads into Australia of the multinational corporations, and secured the respect and understanding of our trading partners.'" On page 139: "There is little doubt that some of Connors's ideas were far-sighted. ... He was correct in predicting the 1973 oil crisis and then, at a time when people world wide had overcome the fright of the OPEC moves, Connor continued to champion conservation of energy. Unfortunately he was denied the means of achieving it. ..."
#fnEgw31" id="fnEgw31">31.#txtEgw31">↑ Birrell, Robert and Birrell, Tanya, An Issue of People, 1987, op.cit., pp.92-94.
#fnEgw32" id="fnEgw32">32.#txtEgw32">↑ For a description of the gradual changes from the late 1970s prior to Keating's deregulation of banking, see Trevor Sykes, The Bold Riders, op.cit., pp.13-17. Martin and Schumann in the Global Trap, op.cit., p.109, suggest that the first and second oil shocks caused the post war "Keynesian edifice to totter", so that much of the Western world became dominated by the dogma of the "so-called neo-liberalism and monetarism associated with Reagan's advisor, Milton Friedman and Thatcher's mentor, Friedrich August von Hayek", after the conservative victories in Britain and the US in 1979 and 1980. On page 133 they observe "the concept of deregulation found enthusiastic support in the 80s among the managerial elite in Western Europe, but nowhere except in Britain was there a political majority behind it."