Eras Journal – Robinson, G: The Political Economy of Maritime Industry Non-Reform in Interwar Australia: The Establishment of the Maritime Services Board of New South Wales
The Political Economy of Maritime Industry Non-Reform in Interwar Australia: The Establishment of the Maritime Services Board of New South Wales
Over the last twenty years Australian public enterprises have undergone fundamental transformations, they have either been privatised or obliged to prioritise profitability and operate in a competitive market. This has been a central component of ‘microeconomic reform’. Proponents of such reform consider it a necessary response to Australia’s declining external economic position. But in the 1930s an even more drastic decline in Australia’s economic position did not lead to similar policy changes. The debate about maritime services administration in Australia in the 1920s and early 1930s anticipated many of the issues raised by proponents of microeconomic reform. Exporters, shipping companies and the federal government complained that maritime services agencies placed excessive cost burdens on Australian exports. State government and the agencies disputed these claims. The creation of the New South Wales Maritime Services Board (MSB) in 1935 concluded this debate in New South Wales but it was little more than a rationalisation of existing administrative structures. The Australian debate about port administration in the 1920s and 1930s exemplified microeconomic non-reform.
New South Wales Maritime Services in 1920
With its population clustered around the shore and an economy dependent on primary production exports, interwar Australia was as Frank Boeze phrases it an island nation. A large number of government agencies impacted on the interface between Australians and the sea.
The government agencies involved in maritime services can be illustrated by reviewing the passage of a cargo ship from the high seas to the wharves of a NSW port. As a ship approached the shore it made use of coastal lights, which since 1915 were operated by the Commonwealth government. River and harbour lights remained the responsibility of the state Navigation Department. This body comprised a Superintendent of Navigation and associated staff. The Department also provided pilotage, and was responsible for marine inspection and licensing. Outside Port Jackson it was responsible for the upkeep of ports, harbours and other navigable waters. The Department was formed in 1900. It replaced the ‘Marine Board’ whose members had been elected by shipowners. This body was criticised by the Labor Party, which alleged it was partial to shipowners in its administration of maritime legislation. These complaints, together with revelations of administrative ineptitude and malfeasance, led to the replacement of the Board by the Navigation Department.
If the ship entered Port Jackson, as did most cargo vessels, it was in waters under the jurisdiction of the Sydney Harbour Trust (SHT). The Trust, made up of three Commissioners appointed by government for seven-year terms, provided all maritime services in Port Jackson, apart from pilotage. It had title to the bed, shores and wharfage of the port (although most wharves were leased out). It maintained the port and undertook services such as dredging. The Harbour Master, an employee of the Trust, exercised a general supervision over vessels in the Port. The Trust was established in 1901. The immediate cause of its formation was the bubonic plague outbreak of 1900. This was attributed to the dilapidated and unsanitary condition of wharves and other contiguous premises. Outside Sydney the Public Works Department (PWD) was responsible for capital works and maintenance of ports, on behalf of the Navigation Department. The Navigation Department did not have to pay for capital works at ports under its control, these were undertaken by the PWD, whose susceptibility to political influence meant that funds were frittered away over 34 outports. The Navigation Department ran at a substantial surplus and this was paid to the government’s Consolidated Revenue Fund (CRF). The government advanced funds to the SHT for capital expenditure but the Trust had to pay interest on these advances, and was indebted with the cost of the 1901 wharfage resumptions. The Trust had a capital debt of £11.6m in 1932, compared to only £0.15m for the Navigation Department.
The financial objectives of the Trust and Department were not defined in legislation. Both were empowered to levy a variety of charges on shipping using ports for either imports or exports. A key element of microeconomic reform has been the argument that public assets should earn a commercial rate of return. This obligation was placed upon the corporatised bodies that replaced the MSB in 1995. The Commissioners of the Trust never clearly articulated financial targets but their responses to critics and their practice suggest that they sought to break even, not to maximise profits, and to facilitate exports. The later objective was pursued by imposing heavier charges on imports than exports: in 1915 inward wharfage rates were 250% higher than outward wharfage.
The focus of business concern and complaints was on the Port of Sydney. In 1926 77% of maritime services income came from SHT charges and rents. For the Trust’s first eight years it paid its surplus revenue to a sinking fund, and from 1909 to the State Debt Commissioners. In 1914 this requirement was abolished (retrospective to 1912) and until 1928 Trust surpluses were paid directly to the CRF. This arrangement led business to complain the Trust was being used as a taxing agency. In 1928 the finances of the Trust were separated from the CRF and the total of interest on the 1901-12 surplus was allowed in reduction of its capital indebtedness.
The Political Context of Maritime Services Policy in the 1920s
Australia’s involvement in the First World War led to a split in the Labor party over the issue of conscription, but in the longer term the more significant political impact of the war was to encourage the political mobilisation of farmers. This was a response to the dramatic expansion of state intervention in commodity markets during the war. The enduring outcome of this mobilisation was the Country Party. From 1923 this new party entered a Commonwealth coalition with the Nationalists, with Country Party leader Earle Page serving as deputy Prime Minister to Stanley Bruce. However there were fundamental divergences between the two parties particularly at the level of their electoral base. The grassroots membership of the Country Party was sympathetic to economic liberalism, in particular free trade and the winding-back of the industrial arbitration system. These demands reflected the concerns of farmers who had to compete on world markets while bearing domestic costs increased by tariffs and arbitration. Free trade labour market deregulation held little attraction for most urban voters. The Nationalists showed little interest in adopting these policies. The Country Party leadership, once they had opted for coalition with the Nationalists, had to manage the discontent of their activist support base, as conservative coalition governments continued to implement policies that increased domestic costs.
At the same time that the Nationalist-Country Party alliance was under threat from the right Labor challenged it from the left. It offered to farmers a platform of economic autarky where farmers would rely on a home market bolstered by price support schemes. This autarkic appeal was difficult to sell to exporters, but Labor bolstered its rural appeal by telling exporters that they were disadvantaged by the excessive charges of shipping companies. British companies held a dominant position in Australia’s external trade and most cargo was carried by lines that operated under the ‘conference’ system of agreements between the companies on uniform rates for cargo and passenger carriage.
Particularly in the early 1920s critics of the shipping companies defended the publicly owned Commonwealth Shipping Line (CSL) as a restraint on the shipping countries. Many farmers were distrustful of the shipping companies and in particular the conference system. In 1923 the CSL, facing heavy losses, agreed to set rates in conformity with the conference. Despite this Labor continued to defend the Line as a potential restraint on shipping rates. In 1927 the federal Country Party leadership defied many Party members to support the Bruce government’s sale of the Line.Leading Nationalists were supportive of the shipping companies and Bruce supported the conference system, which he believed enabled improved service and cheaper freights. He complained that Australians found it difficult to accept companies required a profit to continue operating and that the widespread belief that freight rates were excessive led producers to demand government assistance in compensation. The federal conservatives knew that their sympathy for the shipping companies, and support for the sale of the CSL, would have to be presented carefully if it was not to be electorally costly. From the perspective of the federal coalition there was an interest in persuading rural exporters that it was not the shipping companies that were their enemies but rather other participants in the maritime industry. Chief among these was maritime labour, but state governments were also a convenient target.
State governments were in a different fiscal position from the federal government during the 1920s. Commonwealth expenditure declined from its wartime peak, but the states had to finance infrastructure development and increased social services and higher wages for state employees (who increasingly came under the coverage of federal arbitration). Conservative state governments might believe that lower port charges might benefit the economy as a whole but there was no guarantee that state budgets would benefit directly.
The Emergence of Port Charges as a Political Issue
Port charges became an issue in public debate following the First World War. The SHT’s file on the issue commenced in 1919. The disruption of shipping and wartime inflation put the Trust under financial pressure and in 1917-18 it increased wharfage rates.
The shipping industry reacted with particular hostility to these increases in charges because in the postwar years a problem of overcapacity in the international shipping industry developed. This was a persistent pattern in the shipping industry as technological change consistently increased the capacity and speed of ships, but after 1918 it was aggravated by the return of merchant shipping from war service and the impact of deflation and tariff increases on the demand for shipping services. Having invested in substantial fixed capital items such as ships shipowners were reluctant to accept that this capital had lost value. The SHT also had large fixed capital investments, but its position was even more constrained than shipowners, for it had to pay fixed interest on capital to the government rather than dividends that could be adjusted. Marxist writers, such as David Harvey, have highlighted the extent to which capitalist economies are prone to cycles of overaccumulation. Harvey has argued that overaccumulation of capital leads to diversion of investment away from the production process into other more speculative areas. Simon Stratton has applied this insight to explain the recent spate of redevelopments of former maritime industry precincts for recreational purposes. In the 1920s, the overaccumulation of fixed capital in British industry made Australian government bonds an attractive investment. These bonds financed physical infrastructure investment, whose level was subject to political rather than economic determination. But interest on these funds that financed these infrastructure investments had to be repaid. The financial viability of the SHT was dependent on the welfare of a shipping industry plagued by the overaccumulation of capital. The complaints of shipowners about excessive Trust charges (which were necessitated by its debt burden) is an illustration of Harvey’s contention that the shifting of surplus capital into secondary cycles of accumulation is ultimately counterproductive.
The conference system maintained freight rates above their pre-war level, but they still declined: from 1918 to 1926 freight rates for wheat and wool fell 71% and 44% respectively. In Australia, higher tariffs and the decisions of arbitration tribunals prevented domestic costs falling to the same extent as occurred in Australia’s major trading partners. Harbour dues were among these domestic costs and the SHT, along with other Australian port authorities, did not repeal the increases of 1917-18. From the early 1920s calls for the reduction of Australian costs, particularly wages and government charges such as harbour dues became staple themes in the shipping press.In 1921 the Commonwealth Navigation Act, which reserved the domestic Australian trade to vessels manned under Australian conditions, was proclaimed.
The comparison between Australian and British ports charges highlighted the issue of maritime administration. Several British port authorities reduced charges in this period. Many of these authorities were representative trusts whose members were elected from a range of interest groups concerned with the operation of the port, such as shipowners and wharf operators. The trusts were financially autonomous and retained their own revenue.Australian capital city ports did not compete to the extent of British ports. In the 1920s there was not the competition between states for investment that recent microeconomic reform proponents have identified as an incentive to reducing public sector imposts on capital. From the early 1920s port administration entered political debate and this debate centered on the charge that the non-representative character of most Australian port authorities, and their financial subordination to state governments, made them unresponsive to industry needs.
The many different port charges imposed on shipping made a comparison of costs between Australia and Britain difficult. Kevin Burley has undertaken the most detailed analysis. He concludes that contrary to the complaints of international shippers it was domestic shippers who contributed the bulk of port taxes, but it was the case that in the major ports ships paid more in dues than was expended on the port. Charges were a small portion of overall costs, but aggregated across several ports they were higher. The Australian costs that were definitely higher were wages. In 1923-24 the 34 NSW outports lost £57,758, but the Trust surplus was £91,731. From the perspective of the port system as a whole, Sydney subsidised the outports.
The Commonwealth Government Attempts Port Reform
Prime Minister Bruce displayed an awareness of the importance of transport, where infrastructure was provided by the states, for national development. His was the first government to establish special purpose grants for the states, in this case for roads in 1923. Bruce took the port charges issue to the May 1923 Premier’s conference. Subsequent historians, relying on an article by A. G. Whitlam and Bruce’s later comments, have claimed that this conference reached a clear agreement that port charges not be used as a means of indirect taxation. In fact although state representatives agreed in very general terms that charges should not serve as indirect taxes, they disputed Bruce’s claims on the level of charges and all the conference agreed was that the Commonwealth would investigate the matter further and recommend actions to the states.
The pattern of state government acknowledgment of the port charges issue followed by legislative inaction was apparent in NSW. The 1922-25 Nationalist government ignored its election promise to establish a representative structure for the SHT. When shipping companies did approach state governments they were referred to the port authorities themselves. The authorities, including the SHT, were unsympathetic. They disputed claims that their charges were high, in comparison to either London or the other Australian states, and argued their own cost burdens meant they hardly broke even. The Trust refused to make any criticism of its subordinate financial position to the state government. It was the state auditor-general who was more critical, although indirectly, of the failure of government to allow the Trust to credit surpluses against its capital debt.
In 1925 the Commonwealth took the initiative in the port administration debate. It commissioned Sir George Buchanan, an English engineer and former president of the Rangoon Harbour Trust, to prepare a report on Australian ports. Buchanan’s terms of reference included port administration and ‘any direction in which…charges could be lessened without impairing the efficiency of port management’. His early criticism of industrial disturbances and state enterprise inefficiency drew criticism from the labour movement.
Buchanan reported in October 1926. He argued that as a trading nation Australia must continue to facilitate exports. In his specific recommendations, Buchanan relied on the work of another British engineer, Bryson Cunningham, who was the leading authority on port finances and management. Cunningham argued ports should be managed by financially independent trusts representing the interests involved in the port’s operation. Government representatives should be a small minority. Buchanan agreed with Cunningham. He held the SHT was neither financially autonomous nor ‘free from political interference’, and recommended its replacement by an autonomous representative trust. However, he was skeptical about any immediate reduction in port charges and recommended this depend on a review of the port’s capital debt once autonomy had been granted. He praised the ‘excellent work’ of the PWD and advised it should retain control of works outside Sydney. Neither Cunningham nor Buchanan advocated a privatisation of port operation. Both took the Port of London Authority (PLA) as a model, and one reason for its formation in 1907 was the belief London was losing commerce to continental ports, financed and operated by government. Cunningham argued that cutthroat competition between private dock companies in London before 1907 meant that they lacked the resources to adequately develop the port. Buchanan defended public ownership and argued that port development had to be kept ahead of current trade requirements but admitted that public ownership might lead to uneconomic port developments that might only be profitable in the distant future or not at all.
The Buchanan report foundered on the rocks of federalism. A Commonwealth government proposal for a national conference on reforming port operations was not taken up by the states. The Trust employees union, the Sydney Harbour Trust Officers Association, rejected Buchanan’s judgements that port finances were not conducted on business lines but hoped that financial autonomy for the Trust might result in higher salaries. It is not surprising that no response came from the NSW Labor government of Jack Lang. Labor was deeply opposed to representative bodies as a result of the experience of the Marine Board. Labor would have noted that business interests had proposed to Buchanan that a representative trust be established. In 1928, the Hobart Marine Board, elected entirely from shipowners, importers and exporters, came out in support of Bruce government legislation against maritime unionism, to the embarrassment of other port authorities.
The failure of the Bruce government’s attempt to reform port administration contrasts with the more recent success of the Commonwealth in leading the states to reform their business enterprises. This success has been despite the unchanged constitutional position. Two factors are significant here. First, the Commonwealth lacked the financial leverage over the states it gained with uniform taxation after 1942. Second, it revealed the more polarised character of public policy debates in the interwar period. In the 1990s the estimates of economic gains produced by microeconomic reformers were widely accepted as legitimating the economic reform process, but in interwar Australia agencies or individuals, who were supportive of market liberal reforms, were not accepted as impartial by Labor governments.
The State Government Implements a Partial Reform
The political polarisation around state enterprise policy meant that any significant initiatives towards a more market-liberal model of port administration required a change of state government. In 1927 Lang was defeated and the Nationalists, led by Thomas Bavin, returned to government in NSW. This was the first non-Labor government since 1920 to have a secure parliamentary majority. It included the Country Party, which had previously supported fiscal autonomy for the Trust. But most significant was the presence in the government of the former head of the state Treasury Bertram Stevens, first as Assistant Treasurer, and then from April 1929 as Treasurer. Stevens was a state politician who sought a leadership role in national economic policy.
In 1928 Stevens implemented a major reform of state government finances to separate business enterprises revenues, including those of the SHT, from general government revenue. A renewals’ fund was established so the Trust would make provision for depreciation. He claimed this reform would allow the reduction of port charges. Opposition leader Lang claimed the SHT was a successful ‘socialistic enterprise’, and that if state enterprises were permitted to maintain surpluses they would drive private companies out of business. SHT revenues should be used for the benefit of the whole state and Stevens’ reforms favoured the wealthy.
There was a string in this microeconomic reform tail. The Trust was allowed to credit the surpluses it had earned in 1910-12, and which had been retrospectively annexed to consolidated revenue, against its capital debt. Despite this, the Trust was lumbered with a capital debt of £11.2m, which included assets that the Trust and business observers believed had depreciated completely. Nor was there any compensation for the 1913-28 surpluses, some £1.5m, previously paid to consolidated revenue.
The 1928 reforms initiated a flurry of speculation about further reform. The Chamber of Commerce welcomed the reform and proposed a ten-member representative trust. The Governor’s speech opening parliament in September 1929 foreshadowed reform of an undefined type. The press claimed the Trust would be reconstituted by the addition of members with commercial experience. In October 1929 Stevens declared his willingness to receive communications from employees on the restructuring of the Trust, but in February l930 Bavin stated that no immediate reform of the Trust was proposed. There was press speculation that when Trust president W. Loveridge retired in January 1930 an appointee from the business world would replace him, but Loveridge’s replacement was the Trust secretary E.W. Austin. In 1931 Stevens claimed he had intended to reduce the Trust commissioners to one and establish an advisory board representing primary producers and exporters. As NSW Premier from May 1932 Stevens implemented reforms to statutory authorities in harmony with his statement of 1931. His government reduced the number of executive positions in statutory authorities on grounds of economy, but it refused to place public assets under the control of representative boards, despite the demands of some business groups. The government’s inaction could have reflected internal divisions; some Nationalists with business ties might have supported a representative trust and the Country Party would have had concerns about the position of regional ports in any reformed arrangement. Most of all port administration was probably pushed down the legislative agenda by the growing economic crisis.
The willingness of the state government to take up some aspects of the Commonwealth’s reform proposals did not mean it was willing to surrender power to the Commonwealth. The failure of the Buchanan report led the federal Attorney General, John Latham, to consider constitutional amendment to give the federal government power over intra-state trade. This was supported by the 1929 report of a Royal Commission on constitutional reform. The states were unimpressed. In 1929 negotiations between the NSW and federal governments to rationalise the administration of maritime laws failed, as neither government was willing to cede its responsibilities to the other.
The Commonwealth and the Shipping Rates Controversy
In 1929-30 the Commonwealth government dramatically increased its level of involvement in the determination of freight rates. Its intervention demonstrated clearly its priorities of managing discontent among farmers. These priorities were consistent through the change of government in October 1929.
In early 1929 press reports suggested that freight rates on the Australian route were likely to be increased. Labor blamed the sale of the CSL for the increases and Bruce advised the companies that any increases would have negative political implications. The government initiated discussions with the shipping companies. These led to the convening of an April 1929 conference in Sydney made up of representatives from the shipping companies and agricultural and pastoral exporting interests. The shipping companies presented financial information to the conference that they argued confirmed that they were making a loss on the Australian trade. Producer representatives accepted this evidence. Burley calls this ‘noteworthy success by the shipowners in convincing an audience of skeptics’. But producer leaders tightly managed the participation of producer representatives in the conference. Their concern was to form a united front between shippers and producers and deflect radical criticism of the companies as exploiters. Central among these were Frederick Tout, president of the NSW Graziers’ Association. Tout was aware that farmers often blamed middlemen who stood between them and the final consumer for their difficulties but he believed that these beliefs were invalid. He was also by nature a conciliator; in 1931 he chaired the meetings that united the divided non-Labor groupings in NSW to prepare a united front against Lang. Although the Graziers’ Association was an affiliate of the Country Party it was much more willing than the Country Party’s other affiliate, the wheat-farmer dominated Farmers and Settlers’ Association, to make allowances for the need of the Nationalists to appeal to an urban electorate. Pastoral capital had a hegemonic consciousness in contrast to the narrowly corporate consciousness of manufacturing capital. At the April conference some producer delegates were concerned about the reluctance of the shipping companies delegates to make any definite commitment on freight rates. Tout knew that something had to be offered to these delegates. The major proposal that supporters of the companies made was to support ‘rationalisation’ in the shipping industry. Bruce told conference delegates that unregulated competition in the shipping industry was to blame for overcapacity in the industry, which worsened the financial position of the companies. Rationalisation, he argued, would benefit both producers and shippers. The final report of the conference also raised again the issue of port dues and proposed that surplus earned by port authorities be applied to port services. It argued again that the 1923 Premiers Conference had agreed to this.
The conference agreed that a representative body be formed to bring together producers and shippers and that this should have responsibility for approving freight rates under the conference system. This form of corporatism without labour was established in June 1929 as the Australian Overseas Transport Association (AOTA) with Tout as its president. AOTA survived the 1930s but it faced incessant criticism from some producers aggrieved with the freight rates to which it agreed. Nominally AOTA was a private organisation but the federal government actively supported it throughout the 1930s. Boeze argues that AOTA was intended to act as an ‘effective counterweight to the concentrated power of the shipping conference’. Some producers probably hoped this, but this was not the intention of those such as Tout who set the agenda of the organisation.
The conference report defended the conference system and argued that competition by vessels outside it led to overcapacity. It was concerned that the conference system might be illegal under Commonwealth anti-monopoly legislation. Bruce’s government committed itself to legislative reform to exempt conferences from this legislation, subject to the approval of their charges by AOTA. It fell to the Scullin Labor government, elected in September 1929, to introduce the legislation. Some Labor MPs opposed the legislation in caucus but the parliamentary debate was cursory. Labor now defended the conference system and argued that it was not in the interest of the companies to set excessive rates. One Labor MP considered the legislation would preserve employment in the shipping industry. The Nationalist leadership, champions of organised capitalism, agreed with Labor on the deficiencies of unregulated competition, and the legislation was passed.
The leading role of the Nationalists in the formation of AOTA provides an example of how they related to business interests. The close links between the Nationalists (and later the United Australia Party) and business organisations were always controversial. Some contemporary observers, taking up on earlier Labor criticisms, tended to present the Nationalists as the direct vehicles of business interests. More recent historians have stressed the autonomy of interwar non-Labor governments from business interests. But although an instrumentalist view of the Australian state is not defensible, it is clear that the state acted to maintain the alliance of foreign capital and the domestic petty-bourgeoisie (farmers). Non-Labor political leaders, such as Tout, feared that farmers might be seduced away from the conservative parties by radical plans of inflation and unilateral debt reductions. In terms of a structural Marxist model we could identify the shipping companies and large-scale pastoral capital as part of what Nicos Poulantzas calls the power bloc, that is an alliance of dominant classes with the smaller-scale farmers as supporting classes. Once Labor abandoned its radicalism of the early 1920s its suspicion of market forces suited it as much as the Nationalists to an active role for the state in bringing together the various property-owning classes.
The NSW committee of AOTA was quick to demand of the state government that port charges be reduced, that Sydney port be made self-supporting and that the state directly fund outports. Government ministers claimed that the reforms of 1928 had removed any ground for complaint. In September 1929 a committee representing NSW and Victorian Railways and Commonwealth Departments of Defence and Treasury recommended that state governments should not use port charges as indirect taxation and that unprofitable regional ports be directly subsidised by government and that some be closed. It further proposed that the main overseas trading ports be administered by small representative trusts. The British Economic Mission of 1928-29 agreed. Throughout 1930 state governments insisted that the reduction of port charges was financially impracticable.
The Lang Interregnum
The stormy term of Lang’s second government from November 1930 to May 1932 had little impact on NSW port administration.
Labor put forward legislation to incorporate the functions of the Trust into a Greater Sydney Council. The government stressed that this reform would not alter the administration of maritime services. The Legislative Council amended the legislation to exclude the Trust and restrict the franchise. Labor then withdrew the proposal altogether.
Austin took up the position of Trust president, having been warned by Stevens that the Trust faced difficult times.The Trust went from a £120,494 surplus in 1929 to a £157,374 deficit in 1932. In 1930 interest payments absorbed 73% of SHT revenue and legislation removed the requirement, introduced in 1928, that the SHT make contributions to a renewal fund. The Trust reduced expenditure to a level where Austin was concerned about long-run maintenance but continued to complain of its interest bill.
The depression, and in particular the trend to economic autarky, worsened the downturn in the shipping industry that had begun from 1925. Burley suggests that in the 1930s only reliance on reserve funds permitted shipping companies to return a profit. The conference system restrained falls in freight rates. From Sydney to London wool freight remained virtually unchanged, rising from 1.125d per lb in 1928 to 1.5d in 1930 and falling back to 1.125d in 1934, but there was a fall in wheat freight rates, which per ton varied between 47s6d to 21s3d in 1927 and by 1934 were down between 27s6d to 20s. The shipping companies continued to complain about port charges and pointed to the example of the Port of London Authority, which reduced charges after 1929. The Trust did not reduce charges; although there was some rationalisation of categories, its charges remained unchanged from 1926 to 1931. Austin’s response to complaints from shippers was to dispute their comparisons of charges and highlight the cost burdens on the SHT and its capital debt. Compared to his predecessors, Austin was more willing to express criticism of how government treated the Trust.
Labor in government had no objections to complying with the wishes of the Trust. In December 1931 the government, at the request of the SHT Commissioners, legislated to enable the SHT to charge for use of sheds on wharves and to levy wharfage charges on vessels that offloaded midstream to evade wharfage charges. One non-Labor MP accused the SHT of always increasing charges, rather than reducing expenditure, and of having built wharfage in excess of current requirements. In the end the opposition agreed that legislation requested by the SHT commissioners should not be opposed.
The defeat of the Greater Sydney plan did not end Labor’s attempts to reform maritime administration. Lang advised Cabinet on 25 January 1932 that a bill would be prepared to amalgamate the SHT and Navigation Department.According to a press report, these bodies were to be merged into a ‘NSW Harbours Board’. The current Trust members would be the commissioners of this new body. Lang defended this proposal on the grounds that it would reduce government expenditures as demanded by the opposition and business groups. If the proposal had been implemented there is little doubt that it would have followed the Lang Labor pattern of providing for direct ministerial control. The only issue that seems to have concerned the government about maritime services administration was the preservation of a closed shop for the Waterside Workers’ Federation, against Commonwealth government opposition. Later comments by Austin deprecating public service politicisation and corruption suggest he would been concerned by Labor’s initiative. During early 1932 the Lang government was preoccupied by its struggle with the Commonwealth government that ended with its dismissal. Not surprisingly, legislation to reform maritime administration never made it to parliament.
The Establishment of the Maritime Services Co-ordination Board
At the June 1932 NSW elections Bertram Stevens led a coalition of the UAP and Country Party to office. The newly elected, but ambitious, Eric Spooner was Assistant Treasurer and took responsibility for the SHT. Spooner was aligned with a group of UAP rebels who criticised Stevens’ acceptance of the Country Party’s economic interventionism. To Spooner the public service, through its own self-interest, unknowingly laid the basis for socialism. State enterprise was inherently inefficient due to lack of personal interest for its employees. Stevens’ allocation of the Transport portfolio to Country Party leader Michael Bruxner indicated the importance of transport policy to the Country Party, which believed north coast ports were neglected by governments in favour of Sydney.
Labor’s defeat raised immediate hopes among the business community that the new government would act on the issue of port charges and administration. Although the conservatives had defended the Trust against Labor’s Greater Sydney plan some conservative MPs had sympathised with the ideal of a representative Trust. When AOTA requested reductions in charges Spooner encouraged them to appoint a committee to confer with the government on the reorganization of maritime services. A trade publication declared that ‘as the ideas of the present government are in line with AOTA requirements’ a sound reorganization was to be expected. In August 1932 Spooner told a mercantile deputation that options were constrained by the difficult position of state finances but that he was considering proposals for the representation of commercial interests in maritime administration.
Spooner initiated a review of maritime services administration. In November 1932 he introduced legislation to establish the ‘Maritime Services Co-Ordination Board’ (MSCB) with five members: SHT President Austin, D Williams, Navigation Department superintendent, an officer of the Public Works department H F Searle, and two ministerial nominees: W. N. Cuthbertson and G. C. Boehme of the mercantile firm Dalgety & Co. (and the AOTA) who had been active in opposition to McKell’s Greater Sydney proposal. Trust staff and Labor parliamentarians demanded Trust employees be represented on the Board. Spooner rejected these calls, and argued employees could contribute nothing to the Board. The MSCB was to report on possible measures to improve the co-ordination and efficiency of maritime services with particular reference to the removal of duplication, the control of dredging and the applicability of the Public Service Act to maritime services employees. Spooner argued the legislation would contribute to the rehabilitation of state finances and that the board structure was required to enable a ‘comprehensive investigation’.
The finances of the Trust improved as the economy recovered. In 1934 it earned a surplus of £3,586. It now sought to appease its business critics. Overseas export wharfage charges were reduced on the grounds that this benefited Australia’s trade position. However the Commissioners refused to reduce charges on goods exported to other states, on the grounds that they should not bear the burden of compensating manufacturers for higher taxes and wages in NSW that the government ‘no doubt for very good reasons’ would not alter.
The Co-ordination Board at Work
Spooner closely monitored the Board. At its first meeting he advised members to conduct a comprehensive investigation and provide him with progress reports to assist his guidance of their inquires. The Board soon concluded that a statewide authority be established despite opposition from the Chamber of Commerce who feared that such a body would confuse the finances of Sydney and the outports. The reasons given for the amalgamation of navigation services were those of co-ordination, the ending of conflicts of jurisdiction and improved efficiency. The MSCB responde2d to business concerns and recommended that the finances of outports should be kept separate from those of Sydney. Other issues caused significant divergences of opinion among Board members and between them and Spooner.
(a) Construction and dredging
In 1933 the Industry Commission recommended that Australian port authorities should restrict themselves to provision of core services and contract out as many services as possible. The work of the MSCB considered this issue. The SHT and the PWD had a history of disputing responsibility for maritime works. Austin believed the PWD’s services were more expensive than those of private contractors. The PWD sought to take responsibility for dredging in Sydney harbour from the maritime authority. The SHT responded that PWD dredges were overstaffed and their staff overpaid, and that dredging required negotiations with the maritime community. The PWD argued that its dredging staff required compensation for living outside Sydney and that vesting of dredging in the maritime authority would not reduce Departmental staff levels as dredging was only one of the duties that its staff undertook. In June 1933 the Board proposed that the maritime authority could conduct its own dredging or employ the PWD or private contractors. Spooner rejected this decision. He told the MSCB that no government agency would contract out services unless it was forced to do so, and that his commitment to this was absolute. The majority of the Board relented and agreed that the maritime authority should not have its own dredging plant and that the PWD or private contractors would carry out any dredging required. Austin dissented, and so did Boehme, despite his private sector background, who feared that if the SHT dredges were absorbed by the PWD the later would be left with an effective monopoly of dredge services. Spooner also rejected the Board’s initial conclusion that the maritime authority should conduct its own works. Against the dissent of Austin, the final report proposed that the SHT plant be transferred to the PWD.
(b) The Public Service Act and maritime services employment
The coverage of maritime services staff by the Public Service Act was disputed between unions and departments. SHT staff claimed that for them to come under the jurisdiction of the PSB would disrupt the good relations that existed between the SHT Commissioners and staff. The Public Service Association, supported by PWD dredging staff, believed that all marine staff should come under the Public Service Act. Spooner was hostile to public service job security and believed it was a ‘decided advantage to…govern employees on a hire and fire basis’. In this matter the Board refused his advice and proposed that maritime staff come under the PSB’s jurisdiction. Austin dissented claiming the duties of a port should ‘be conducted on business lines and dissociated…from the ordinary routine of government departments’.
(c) The Constitution of the Authority
In considering the structure of the new authority the MSCB took evidence only from business interests. The Chamber of Commerce and the Interstate Steamship Association supported a representative trust on the British model.Such a view of port administration has been persistent among business interests. Even in the 1990s some port users still supported representation of interests on port authorities, to the annoyance of microeconomic reform advocates.
The issue of business representation divided the business and bureaucratic members of the MSCB. Austin had a consistent record of opposing representative trusts. On the MSCB he argued they were inappropriate in developing countries where port subsidies were required. He argued that commercial representatives would not consider the interests of the port as a whole and that once commercial representation was introduced other interests such as local government might seek representation. The SHT Commissioners had a long record of contrasting their speedy decision-making with what they saw as the slow processes of representative trusts. Austin, despite the opposition of Boehme and Cuthbertson, was largely successful. The MSCB proposed a five-member board, two of whose members would be part-time commercial representatives. A five member advisory council would represent business interests. Spooner opposed the advisory council proposal, but it survived to the final report because of the enthusiasm of MSCB secretary G. Faulkes, who derived it from the work of the British political scientist Harold Laski. Boehme and Cuthbertson carried their dissent to the point of arguing that the maritime authority president should have a background in commerce. The option of a fully representative trust had been defeated.
(d) The Navigation Department
In October 1932 D Williams, head of Commonwealth navigation services in NSW, was appointed head of the Navigation Department. This implemented a limited rationalisation between state and federal services. Spooner insisted that states’ rights were a ‘burning question’. Witnesses from shipping firms, along with Boehme and Cuthbertson, argued that federal administration of navigation laws might be detrimental to their interests and opposed any transfer of navigation services to the commonwealth. They had the support of the PWD but Williams and Austin dissented claiming that substantial economies would result from the state surrendering navigation services to the commonwealth.
The Legislative Outcome
The Co-Ordination Board reported in October l933, but legislation to establish the Maritime Services Board did not come before parliament until October 1935. It is likely this delay was due to divisions within the government. The MSCB recommendation for a state-wide Sydney based port authority had led to protest meetings on the north coast that demanded the establishment of regional harbour boards. In July 1933 Spooner advised the Board that cabinet was divided between supporters and opponents of a statewide authority. It is likely that Country Party ministers were among the latter.
The Maritime Services Board Act followed the recommendations of the MSCB with two significant alterations. MSB staffs were to be excluded from the jurisdiction of the PSB. Trust staff welcomed the exclusion and their employment rights were not affected. Advisory committees for Newcastle and Port Kembla replaced the advisory council proposal.
The labours of the Co-ordination Board had resulted in a proposal for little more than an administrative rationalisation. The Harbours Board proposed by Lang’s government would probably have provided for ministerial control and included an employee representative but apart from this it would have probably been similar to the MSB. The Co-ordination Board was stacked to produce a predictable outcome. It was an exercise in symbolic politics to conciliate AOTA.
Labor opposed the Bill, on opportunistic and principled grounds. The opportunistic appeal was to rural voters. Labor MPs supported the creation of a separate authority for ports outside Sydney in an effort to divide the coalition.Government MPs rejected Labor’s appeals and argued that local harbour boards would not be financially viable.The acceptance of the MSB by the Country Party demonstrated Bruxner’s hold over his fellow party members, but the Country Party had also extracted concessions: in early 1936 Spooner reversed his position of a few months earlier and gave a commitment that no outports would be closed. Somewhat inconsistently Labor also complained that a single maritime authority would drain resources from Sydney to support outports. In fact the bill kept the finances of Sydney and the outports separate, even though the Board took over services at the outports from the Navigation Department. Labor was more convincing on the issue of the structure of the proposed maritime authority. Lang denounced the Bill as the ‘most reactionary…legislation…for a long time’, and argued that the MSB would be a ‘shipowners’ board’ like the old Marine Board. Another Labor MP accused the government of being ‘board mad’ in an effort to obstruct future Labor administrations, and proposed instead that maritime services come under a department attached to the PWD. Labor MPs supported employee representation. For this principle they could claim substantial support. Cunningham, whilst critical of ‘socialistic’ proposals for control of ports by workers, supported a limited measure of labour representation. Winston Churchill, as British government minister responsible for the formation of the PLA in 1907, defended labour representation on the grounds that although it was a ‘particular class, that class in so large and its interests are so interwoven that it cannot be dismissed as wholly sectional’. Spooner argued that employee representatives could contribute nothing, as they would be concerned only with their own conditions.
The Maritime Services Board Act passed parliament without amendment and took effect from January 1936. Continuity was retained from the MSCB and SHT by the appointment of Williams and Austin and SHT Commissioner W. O’Connor as full time members of the new Board, and Boehme as a part-time Commissioner. The only new member was shipping agent D. Sims. In the daily operations of the Board a distinction developed between the ‘sub-board’ of three full time commissioners from whom the president and vice-president were drawn and the full board, including the part time members, that met weekly.
From 1920 to 1935 mercantile and shipping interests mounted a determined campaign for the reform of NSW maritime administration on the lines of British ports. This crusade received support from expert commentators. This campaign failed. It lacked effective political supporters in the Australian context. Rural exporters might have supported a representative trust, but their main concern with port administration was the chimerical belief that with government support an undefined number of outports could rival Sydney. The shippers’ and Buchanan’s complaints about how outports were subsidised only alienated them from the economic liberal cause. At the state level the Country Party leadership was committed to coalition with the Nationalists and had accepted responsibility for state finances. For state conservative politicians the imperatives of budgetary balance overrode business complaints. Until the Depression, the Trust ran at a surplus and thus there was not the incentive to reform it that there was for unprofitable state enterprises. Among the state conservatives there was a tradition for support for an active state role, upheld in particular by Stevens, a former public servant and a pioneer of conservative Keynesianism in Australia.
Labor trenchantly opposed any form of representative authority, but it lacked clear ideas about the economic role of port administration. This indifference to the economic aspect of port administration was also apparent in Queensland where Labor was preoccupied by the symbolic issue of the reform of Harbour Board franchises rather than addressing harder issues of the financial viability of the Boards or their contribution to economic development.Trust commissioners accepted Labor government policy on issues such as compulsory unionism and did not insist on the letter of industrial awards. So long as bureaucrats accepted Labor policy Labor governments were disinclined to drastically restructure statutory authorities. Similarly once British Labour became a party of national government it dropped its early enthusiasm for the administration of ports by representative trusts, with labour representation, and instead implemented direct government control.
Once the decision had been taken in 1901 to nationalise Sydney wharfage, rather than hand it over to a representative trust, as occurred in London, it was a difficult decision to reverse. The SHT Commissioners argued that as taxpayers had paid for the resumption of wharfage in 1900 it would not be appropriate for the Trust to be representative of specific interests. There was a representative component to the Melbourne Harbour Trust established in 1876, but as Joy Parnaby argues this was a defensive stroke by the Victorian mercantile elite, who anticipated correctly that their position of dominance in Victorian politics was coming to an end. By the time of federation the political influence of mercantile capital was in decline, substantially accelerating in the interwar period. Even the federal conservatives were distrustful of market forces as shown by their enthusiasm for rationalisation. The Commonwealth was more sympathetic to the case for a representative trust, than were the states, but it lacked leverage over the states. From the viewpoint of reward for political effort by Commonwealth governments there was more to be gained by facilitating co-operation between the shipping companies and producer groups.
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 My thanks are to due to the comments of anonymous referees on an earlier version of this paper. Thanks also to Martin Painter and Ross Curnow of the Department of Government at the University of Sydney for comments on an honours thesis, portions of which have been incorporated into this paper. Back
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