Breaking the Sheep's Back

By Charles Massy

The 10-billion-dollar collapse of the wool industry is considered one of Australia's biggest business disasters, and for the first time, the shocking true story behind this colossal collapse is revealed. Spanning 170 years from the birth of the industry in 1840 and its boom during the 1950s through its unraveling from 1980 to 1991, this is a searing account of greed, political corruption, and heavy-handed protectionism. As it uncovers the never-before-seen archival sources, government and board papers, and private correspondence and shares exclusive interviews with key whistle blowers, this narrative unveils the gripping true story of government corruption in a seemingly untouchable industry.

• Language: English
• Publisher: University of Queensland Press
• Release date: Jul 1, 2016
• ISBN: 9780702246838

Charles Massy

Charles Massy gained a Bachelor of Science at Australian National University (ANU) in 1976 before going farming for 35 years and developing the prominent Merino sheep stud “Severn Park”. Concern at ongoing land degradation and humanity’s sustainability challenge led him to return to ANU in 2009 to undertake a PhD in Human Ecology. Charles was awarded an Order of Australia Medal for his service as chair and director of a number of research organizations and statutory wool boards. He has also served on national and international review panels in sheep and wool research and development and genomics. Charles has authored several books on the Australian sheep industry, the most recent being the widely acclaimed Breaking the Sheep’s Back, which was short-listed for the Prime Minister’s Australian Literary Awards in Australian History in 2012.

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Uncertainty²

Introduction

In mid twentieth century the Australian wool-growing industry was the greatest wool economy the world had ever seen. It was the backbone of the nation’s economy for 120 years, being the nation’s largest export earner and wealth-builder for all but a decade in that period. This industry helped shape modern Australia, the national character, and the country’s broader patterns of development since the 1840s. A Merino ram’s head adorned the shilling coin, and wool industry icons were featured on the new decimal notes. Woolgrowers sat on Reserve Bank and tariff boards, and their often flamboyant leaders were famous Australia-wide. For their annual ‘royal’ sheep shows, pastoral society presidents could call upon the governor-general or the prime minister to conduct the obligatory grand opening.

Then, in a little over two decades at the end of the twentieth century, the wool industry self-destructed. How did this happen? What were the policies, the political, economic and social developments, and the leadership failures that led to this demise? And why wasn’t such a collapse prevented when an imminent disaster had been obvious to so many for so long? This book seeks to answer these questions, and to articulate some of the important lessons that may be gained. This analysis—in lieu of an eloquent ‘public’ silence—is therefore also an attempt to prevent such a disaster ever occurring again, and to suggest a pathway for renewal of a once great industry.

Eminent historian Barbara Tuchman exposed in her 1984 book, The March of Folly, the poor decision-making behind a series of major political disasters dating back to the Trojan War in Classical Greek times. She defined folly as ‘the pursuit of policy contrary to the self-interest of the constituency or state involved’.³ The egregious folly that was the Australian wool industry’s self-destruction culminated in the crash in 1991 of the Australian Wool Corporation’s reserve price scheme (RPS), a government-backed attempt to ‘stabilise’ prices. This precipitated what, in today’s monetary values, stands as the biggest corporate-business disaster in Australian history. It also precipitated an almighty smash for the global wool textile industry.

The chain of events leading to the spectacular collapse of the Wool Corporation’s RPS had been repeatedly predicted (and in precise and accurate detail) since the 1920s by international observers and by Australia’s best economic, business, academic and government departmental brains. These warnings gathered weight and momentum through each decade, reaching a crescendo in the years before the 1991 collapse. Yet the warnings were to no avail. A group of government ministers, agri-politicians and wool industry and statutory leaders ignored the perspicacious and prophetic advice as they led the industry down the path towards calamity.

The antecedents of the great wool crash of 1991 are indivisible from the core threads of modern Australian history. The country was a British colony and a young settler society at the end of European industrialisation. Australia’s wool assumed primacy in the nation’s colonialist-supply role to Britain. National and wool industry leaders, imbued with British imperial dependent attitudes, ceded the national wool clip to Britain in both World War I and II. The statutory control and administration of the giant Australian wool clip in turn allowed the government’s foot in the door of wool industry governance.

In parallel with this, Australia’s constitutional ‘fathers’ and then subsequent federal governments chose a path of industry and social protection. The ongoing inculcation of protectionist attitudes resulted in a relentless drive by leaders in government and the wool industry for protection of woolgrowers from harsher commercial realities, such as competition from other fibres. In just over five decades from the 1920s, this became manifest in a long-running drive to institute the RPS; a scheme, primarily through the management of supply, of which its raison d’être was ostensibly to ‘stabilise’ prices, but in reality was to become a mechanism to try and force customers to pay more.

Linked to the above development were the casualties of failed Australian land-settlement policies—large numbers of generally smaller-acre yeoman farmer types. This socio-economic group, when put through the ringer of tough economic and climatic times in the 1920s and ’30s, aligned with the protectionist and increasingly powerful and agrarian socialist federal Country Party. In tandem these two elements, in the face of vehement free-market opposition, relentlessly pushed for the ideological Holy Grail of an RPS for wool.

The vehicle for the eventual imposition of such a scheme (in the hands of powerful wool emperors and leading Country Party cabinet ministers) was the compulsory imposition of statutory wool taxes (imposed to fund promotion and research) following the formation of the Australian Wool Board in 1936 and the International Wool Secretariat in 1937. The existence of these boards in all their evolving forms (especially as the Australian Wool Corporation from the 1970s) didn’t just sanction ongoing federal government interference, it also encouraged the disastrous meddling of agri-politicians. These factors—compulsory taxes and concomitant agri-political representation—constituted a deadly political virus that proceeded to infect the body-politic of the wool industry. This virus slowly spread, resulting in widespread and ultimately deadly consequences for the industry.

The still largely unknown decision by the Menzies Government in 1950–51 to reject an offer by the USA government to acquire the Australian wool clip during the Korean War, and instead to turn to the ‘mother-country’, Britain, marked a turning point for the Australian wool industry with the disastrous Korean War wool boom. It was from this time that the industry’s fortunes turned down, and man-made fibres and cotton became the modern nemesis of the famous old wool textile fibre. In turn it led to the decision by protectionists in the Menzies Government, by agri-politicians, and by powerful wool industry ‘emperors’ to attempt to confront the wool industry’s massive global fibre competitors with political and non-commercial strategies.

By ignoring the defeats of two major national woolgrower referenda over the institution of a RPS (in 1951 and 1965), the result was a covert Country Party cabinet-led coup in 1970 that finally succeeded in imposing statutory intervention and the RPS. This scheme came under the Australian Wool Corporation in 1973. The Hawke–Keating float of the Australian dollar in 1983 and subsequent measures to dismantle the constricting chains of government and industry protection followed, exposing the wool industry to the international reality of a rapidly evolving and fiercely competitive market place, and to an inevitable fate if radical adjustments were not rapidly made. But no policy changes occurred—the statutory run industry seemed incapable of flexible change.

Following the spectacular collapse of the Wool Corporation and the RPS in February 1991, the opportunity to complete one more key economic reform and dismantle the remnants of statutory intervention in the wool industry was missed by the Hawke Government. And so the industry stumbles on, trapped in a non-commercial, non customer-focussed culture—and still under inept statutory governance.

*

The research and writing of this book began twelve years ago, but its gestation comprises my 36-year involvement in the wool industry. I have spent years researching and writing about Merino and wool history, which deepened my knowledge of the industry. But when I began to breed a different type of Merino sheep, using new molecular genetic and biological knowledge, I encountered for the first time the belief systems and associated power structures underlying the Australian wool industry. Further, my involvement with some of the world’s leading artisan-craftsmen wool manufacturers in Italy and England, and later in Japan, America and other parts of Europe, opened my eyes to the way the industry had, from 1970 onwards, turned its back on the vital practices that had begun in the early Middle Ages: the never-ending quest for better fibres, better yarn and innovation; and a treasuring of the customer. These practices had ensured the success of a wonderful fibre but they were now no longer valued.

In 1993 I was appointed to the statutory boards of the Wool Corporation’s successor (AWRAP) and of the International Wool Secretariat (IWS). Here, in following a ministerial brief, I attempted to be a change agent. I encountered resistance and Machiavellian power games among statutory bodies, agri-politicians, and national, state and university research and extension organisations, just as I had in my breeding/genetic work. I did not last long on the boards.

In 1996, the editor of Australian Farm Journal commissioned me to write a series of five articles. They were intended to address some of the historical, cultural and power issues in the industry, and also to present a vision for its future. After the second article the wool industry establishment explored every avenue in their attempts to block the articles. Their actions included an injunction from statutory authorities; late night phone calls from assorted industry captains threatening punitive litigation; warning phone calls by the then minister’s office; and other means of pressure. Despite these attempts, the articles were published.

It was the aggressive and highly revealing behaviour by the wool establishment that finally convinced me to write this book. I now understood more clearly the subterranean issues that were unknown to the vast majority of hard-working, heavily taxed woolgrowers following the 1991 reserve price scheme collapse. These issues included an industry in denial as to the causes of the downfall; the wielding of retrograde, hidden power at many levels of the industry; and the pursuit of a myopic business model that excluded better options and so constituted enormous opportunity cost for an entire global value-chain. But it was also an industry still with enormous potential: it’s just that it had lost its way—a clear path—and was unable to offer an alternate and brighter future.

This book also exposes how the wool industry’s prevailing governance continues to shackle its present and future, which is why the industry today has shrunk to one-third of its size (in terms of wool production and value) of that two decades earlier.

This situation poses confronting questions for industry leaders, industry participants, agri-politicians, and for the current agriculture minister and federal government, including:

Why does anachronistic statutory intervention still continue in the Australian wool industry?

As illustrated by the long-running sheep mulesing debacle, why do industry leaders and the present statutory industry body of AWI (Australian Wool Innovation) still nourish the old agri-political belief that holds that the customer is the enemy or continue pursuing long-proven failed strategies such as generic marketing?

Why does the industry continue to spurn the key competitive approach of our fibre competitors: of a never-ending focus on investing in fibre quality improvement and subsequent branding and integrated value-chain marketing strategies?

Above all, why is there still such faith in what philosopher-economist Friedrich von Hayek called the ‘fatal conceit’: the belief that people can order things better than the market? Though this is not to say that the market has ‘inherent wisdom’, merely that hitherto (and like Churchill’s views on democracy) it has proven to be the best system we have to date.

Australia’s greatest corporate-industry disaster was precipitated because crass party politics corrupted proper political process and ignored sound cautionary economic and philosophical advice, principles and experience. The present reality is of an old industry trapped in a strait-jacket that is determined by historical events. This ‘path-dependence’—an existence where current behaviours, patterns, habits and culture are constrained by past historical processes and the institutions they spawned—clearly needs to be acknowledged and dismantled, piece by piece, if the wool industry is to be turned and so realise its enormous potential.

Perhaps the story unravelled here can shine a light on a pathway to a more vibrant future.

Geoff Pryor, 1980

Part I

The Rise of Statutory Intervention—

1840 to 1987

‘Growers must understand that their security blanket is being used to suffocate, not to nurture and warm.’

ACIL, Agricultural Marketing Regulation, 1992

1

‘An inexorable current’: The political antecedents of disaster—1840 to 1951

Riding off the competitive advantage of ‘free’ land—courtesy of Aboriginal dispossession—Australia was, by the 1850s, a massive producer of wool. By the 1870s Australian sheep breeders had reinvented the ancient Merino breed: an action that arguably saved the British wool textile industry from extirpation by cotton, and which involved for the first time in human history the re-engineering of an animal breed for industrial machines. This all culminated, by the 1880s, in the greatest wool economy the world had ever seen.

The squatting phase of Australian land possession and subsequent political fights led to huge inequities in land distribution and ownership, and resulted in an Australian ‘squattocracy’. This exclusive group of landowners became politically powerful, with close connections in government, the legislature, and big business. For this influential group the English system of landed power, wealth and social position was successfully replicated. The squatters ruled their vast estates like lords and expected to be called ‘Sir’ or ‘Mister’; they had teams of servants, along with city homes in Toorak, Bellevue Hill and Adelaide Terrace, from where they retreated into their mock-London clubs.

They controlled vast acreages, much of the nation’s stud Merino genetics, and, at critical stages, much of the power in the wool industry as well as the state and federal legislatures. Their hierarchical social system lived on in most established grazing districts until well after World War II. Generally well educated (it was expected that many squattocracy sons would study at Cambridge or Oxford) and often imbued with an ethic of noblesse oblige, they believed they had a duty to lead. Outside of parliaments and legislatures they could be found on the boards of leading companies (particularly those impinging on the pastoral industries, such as banks, pastoral broking houses, shipping and insurance companies), and they assumed positions on key government committees, and leadership and policy roles in areas of public wool industry governance. This was particularly so from the 1890s and through the twentieth century, as agricultural politics became more organised and more powerful. Also, such members of the squattocracy were almost invariably of a ‘liberal’, free-market persuasion. This in turn set up a clash with the radicalised and disaffected, more agrarian–socialist, small, yeoman–farmer types.

A blending of factors after World War I consolidated the dichotomy in Australian wool politics. First, upon Federation, Australia’s ‘fathers’ chose a middle political and institutional path that leaned more to an ‘interventionist–redistributive’ state than an American laissez faire approach. Second, there was an influx of hundreds of thousands of yeoman farmers on either side of the Great War (and later after World War II) under various land-settlement schemes—most of which proved abysmal failures. There was also the colonialist ceding by Australia to Britain of essential strategic war commodities, including wool, during World War I and the beginning of concomitant government and agri-political interference in wool governance issues. This included the role of Sir John Higgins in a tireless effort to install a government-controlled empire reserve price scheme—Higgins being the officious, ambitious and imperialist mining engineer chosen by Prime Minister Billy Hughes to run the World War I wool acquisition scheme from 1916 to 1922. Then followed the blind imperialism of Prime Minister S.M. Bruce through the 1920s as he took the nation deeper and deeper into an imperial quagmire of co-dependence, exploitation and industry protection (of the wool industry, he once famously stated in London in 1932 that ‘Australian and Bradford interests were identical’⁴). Finally, there was the unremitting hard times for wheat and wool producers between the wars.

The result in rural Australia, and its large combustible constituency confronted by the abacus of debt, was not just the rise of farmers’ state and federal political parties, but the formation, too, of separate commodity-based organisations, including those representing the mass of hard-done-by, smaller-acre yeoman wheat-and-sheep ‘cockies’.

*

Beginning in the 1920s and consolidated in the 1930s, there occurred the harnessing of the twin steeds in the protectionist carriage: the conservative federal Country Party and disaffected, radicalised and organised agrarian–socialist agri-politicians and their constituents. Out of this came an obsessive focus on collectivist ‘marketing’ and ever-mounting pressure for market protection, subsidies, ‘price stabilisation’ and, in the wool industry, a reserve price scheme.

The upshot of the 1920s and ’30s, therefore, were agri-political and Country Party organisations that, given the right circumstances, could be made to dance to the tune of agrarian socialism as conducted by a radicalised farming community. Such organised agricultural communities not only thought themselves as existing apart from the rest of Australian society, they also regarded politics as a ‘system of group warfare’ while they became extremely adept in the dark arts of lobbying and political influence.⁵

This group of radicalised smaller-acre farmers in 1939 finally formed their own specific agri-political organisation: the Australian Wool Producers’ Federation, later to become the Australian Wool and Meat Producers’ Federation (AWMPF). This organisation—‘the Producers’ Federation’—was led by radical wheat–sheep farmers and was specifically designed to combat the free-market philosophies of the graziers’ organisations (led by the national Woolgrowers’ Council, the forerunner of the future AWGC or Graziers’ Council), and to push for an ‘Empire Marketing Plan’, subsidies and a reserve price scheme.

To outsiders, the wool industry looked prosperous, industrious, and harmoniously unified. But below the surface there was a different reality. The formation of the Producers’ Federation not only signalled the start of a vicious five-decade-long struggle over marketing reform within the wool industry, but also a deadly battle over power within Australia’s largest export industry between members of grazier organisations and of the Producers’ Federation.

This struggle would reignite with each wool price slump, and constituted a regularly occurring cycle that carried with it a 100 per cent correlation with political agitation. Fuelled by irreconcilable schisms in social, political and philosophical views, it also had powerful undertones of class consciousness and envy—especially when mixed with a single-minded zealotry about attaining the Holy Grail of a reserve price scheme. Ultimately, this was a battle over who should decide major questions of policy for the industry and who had the key say with government.

To the great frustration of succeeding governments (particularly a Country Party coalition partner desiring a reserve price scheme) who repeatedly sought clear direction, this agri-political dichotomy ensured that the policy process over wool marketing would remain a vicious and confused dogfight for decades to come.

The problem for the wool industry, however, was that successive federal governments were sucked into the maelstrom of wool industry politics and, worse, into direct involvement in industry affairs. This had begun with compulsory wool clip acquisition in World War I; was exacerbated by the Scullin Government’s ‘Grow More Wheat’ campaign of 1930 (whose failure and perceived government betrayal was a key radicalising influence on wheat–sheep farmers); and became linked to British imperial plans for a RPS (first promulgated by Sir John Higgins after World War I).

Sustained pressure for such an imperial wool marketing plan culminated in the 1931 Empire Wool Conference and a move to establish a body for research and promotion of Australian wool. This came to fruition in 1936 with the formation of the first Australian Wool Board, established under the Wool Publicity and Research Act that also provided for a compulsory tax of six pence per bale of shorn wool to fund its activities. Arising from the Conference was also the creation of the International Wool Secretariat (IWS) in 1937, comprising the three founding dominions of Australia, New Zealand and South Africa. Its charter was to act as an imperial wool publicity organisation. This too was funded by compulsory statutory grower levies. These compulsory taxes on all woolgrowers proved a fatal development because not only had the federal government inserted its foot in the wool industry’s door but agri-politicians—due to their official representative role—now also became involved in industry governance.

Through successive pieces of federal legislation, both grower levies and concomitant federal and agri-political involvement were increased over succeeding decades; first via the Australian Wool Board, and then its subsequent forms, including the Australian Wool Commission, the Australian Wool Corporation, and the long-lasting IWS. Such legislation and restructuring seemed to accompany every wool industry crisis, which in turn triggered an inevitable review or official inquiry, such as occurred in 1930, 1946, 1953, 1958, 1962, 1969, and beyond. With each successive escalation in statutorily sanctioned governance and its accompanying institutions came increased agri-political power, and with this an ever-intensifying dogfight over wool marketing between the two polarised camps.

Following the 1930s, this dogfight was further exacerbated during World War II and the period to the end of the Korean War. As had occurred with their predecessors in World War I, Australia’s two Anglophile leaders, London High Commissioner S.M. Bruce and Prime Minister Robert Menzies, once more delivered to Britain what were vital strategic colonial war commodities of wheat and wool. This further entrenched government and agri-political interference in the running of the wool industry.

Because of compulsory wool taxes first imposed in 1936 and 1937, agri-politicians had been designated and empowered as the woolgrowers’ representatives, though membership of the first statutory wool boards came entirely from the grazier-dominated Woolgrowers’ Council. For the following years to 1945, the Australian Wool Board was a grazier and Woolgrowers’ Council bastion, despite the protests of leaders of the Producers’ Federation. At the same time, the board of the large and well-funded global marketing body of the IWS (whose first effective chairman in London was Australian Ian Clunies Ross) had also become infected by warring Australian agri-politicians—though their main focus would be on the Australian Wool Board (in its various guises).

Just as had occurred with Sir John Higgins (the autocrat who ran Australia’s World War I acquired wool clip), when the Producers’ Federation succeeded in gaining equal representation on wartime wool boards from 1942, they began a strong push to commit Australian wool marketing to the socialistic scheme of total clip acquisition by the government and a reserve price scheme (RPS). As a result, when peace returned, the Wool Board became equally divided between three agri-politicians from the Woolgrowers’ Council and three from the Producers’ Federation. With further supporting legislation for levied research and promotion, the respective wool boards became a honeypot to rent-seeking agri-politicians, while the split board representation became a recipe for ongoing dysfunction well into the 1970s.

As Australian woolgrowers enjoyed the brief Korean War wool boom (triggered by a run on global wool stocks and a secret ploy by the US government to acquire the Australian wool clip), the industry experienced its first major political battle: a national woolgrower referendum in 1951 over a British imperial RPS (key proponents of this being the new Menzies Coalition Government, driven by Country Party members and the Producers’ Federation). Eighty thousand woolgrowers voted to overwhelmingly defeat the RPS proponents, and the industry moved into the uncertain waters of the 1950s and 1960s.

The highly charged seven-month-long referendum battle only created further political tension and agitation in the industry and, amongst a few key and powerful leaders, an unwavering drive to introduce a national RPS, irrespective of the democratic wishes of the woolgrower plebiscite. This combination of factors provided an inexorable power to the current on which the wool industry was now carried—driven by deep, deep springs of hardship, betrayal, identity, belief, ideology and emotion. And catalysing subsequent events were a few extraordinarily powerful and charismatic leaders: larger-than-life ‘wool emperors’, prime ministers, cabinet ministers and leading bureaucrats and agri-politicians.

2

Of patriots, government princes and wool emperors

Robert Menzies’s leadership during his second stint as prime minister (1949–1966) encouraged a provincial and backward-looking mediocrity. Social commentator Hugo Wolfsohn said in the early 1960s that ‘the institutionalisation of mediocrity’ had led to Australia ‘rusting up’. Donald Horne agreed. He said the ‘established rhetoricians and ideology makers’ like Menzies exhibited values that were ‘largely a third-rate imitation of the paternalistic postures of the nineteenth-century British upper class’. A legacy of the prosperous, predictable and safe years of the Menzies era is that Australian leaders appeared not to change their ideas and adapt to the rapidly unfolding changes and challenges of the 1960s and later. ‘There are few new men gathered together in the precincts of power to revisualise the images of the nation so that change may become possible’, said Donald Horne as early as 1964. The Menzies era reveals that the men at the top—a provincial generation—did indeed seem ill prepared for the future; in Horne’s words, ‘their modest and obsolete ideals’ had already been met.⁶

While Menzies’s leadership set the tone, he was not the only, and certainly not the most, influential figure in the wool industry of the mid-twentieth century. That honour is shared by three men: Sir John (Black Jack) McEwen; his departmental head and close confidant and ally, Sir John Crawford; and finally—and arguably the most influential and certainly the most charismatic of those involved in helping to chart a blind course for the wool industry in the next twenty-plus years—Sir William Gunn, the most famous of all the ‘wool emperors’.

*

John McEwen’s interest in politics came early, stimulated both by his history readings late at night and his harsh farming experiences. At age nineteen he joined the increasingly radicalised, wheat-cocky dominated VFU (Victorian Farmers’ Union). By then a struggling dairy farmer, McEwen witnessed the 1921 collapse in dairy prices and was soon advocating help for the soldier–settlers who had begun to go broke on their pitifully small farms and to walk off in droves. While watching the cruelty of the bank foreclosures on those around him, the tough McEwen survived through hard, back-breaking work.

During the difficult 1920s and ’30s McEwen rose to become a political leader. He also joined the Country Party, becoming active in its organisation. He was eventually elected to federal parliament in 1934 as Member for Echuca. He soon further aligned himself with the federal Country Party and its views. In his maiden speech to parliament, McEwen appealed to the government to provide wheat growers with ‘permanent assistance, not a mere palliative’.⁷

McEwen briefly became a minister for the first time after the 1937 election, but soon lost his portfolio when Country Party leader Earle Page refused to serve with Robert Menzies. Critically, McEwen was in parliament in 1941 to witness the Independent Member Alex Wilson cross the floor and help bring down the government on a Labor vote of no confidence. The power of agrarian politics was dramatically affirmed for McEwen, as Wilson was a Mallee farmer and ex-president of the Victorian Wheat Growers’ Association (VWGA).

By the time he became a minister again in 1949, John McEwen had matured into the unremittingly tough leader who was to dominate Australian politics for more than the next twenty years. His public persona was described in terms of a ‘patriot’, and a ‘national leader, international negotiator and statesman’, who was ‘single-minded, dedicated to the point of ruthlessness, demanding, domineering, tough, unbending, unforgiving and seemingly humourless’. Paul Kelly wrote in 1986 of McEwen that it is his ‘imprint which remains indelible upon the nation today. The economic structures created by post World War II governments were carved by McEwen’.⁸

On rising to become one of the most powerful men in the country after the election of the Menzies Government in 1949, McEwen acted on his hard-won lessons as a small soldier–settler cum cocky and young Country Party member. He set out to bring straying farmers into the Country Party fold, where he largely succeeded in wedging them between the rock of high tariffs and the hard place of protection from the real marketplace.

McEwen’s right-hand man, John (JG) Crawford, rose to become one of Australia’s most stellar public servants. The two made a dramatic contrasting pair: the minister, tall, dark, severe and imposing; the diminutive public servant with a large head (and famous as one of the ‘Seven Dwarfs’ of leading public servants at this time). As with McEwen, Crawford experienced hard times in the Great Depression: an experience, combined with his training in both agricultural economics (particularly in America) and as a rural bank advisor in NSW, that greatly influenced his thinking in regard to rural policy and marketing. As a result Crawford, like McEwen, became a strong proponent of the need to support farmers, including installing some type of price stabilisation and ‘orderly marketing’.

Crawford was appointed Wool Advisor to the Commonwealth Government in 1950. This was the key wool policy advice role for the cabinet, and it put him on the Wool Board as well. Equally, if not more significantly, in 1950 Crawford was also appointed Secretary of the Department of Commerce and Agriculture under its new minister, the deputy Country Party leader John McEwen. Crawford and McEwen were to remain a close team in government for ten years, with Crawford first as the head of this department at a critical phase for the wool industry, and then from 1956 to 1960 as head of McEwen’s reorganised Department of Trade. By this stage McEwen had become leader of the Country Party and thus deputy prime minister. He became arguably the most powerful man in the nation after the prime minister, and the gloved fist behind Menzies’s throne.

*

William (Bill) Archer Gunn was born into a family rooted in a Queensland grazing and pioneering ethic. Gunn and his siblings grew up in the pioneering world of isolated rural Queensland in the early twentieth century. With abundant itinerant labourers after the war and a neighbouring camp of down-and-outers in the tough years of the early 1920s, the young Bill Gunn came to rub shoulders with, and manage, a wide cross-section of humanity, and to experience the usual and various bush crises, including drought, fire and flood.

By the time he moved full-time into agri-politics in 1946, it was clear Gunn’s bush experience had done much to mould the man who would become such a giant in the wool industry. The rugged, knockabout self-reliance; the decision-making and accepted consequences of one’s actions; the individualistic and initiative-dependent life; the capacity to be fearless whatever the consequences, plus a dash of recklessness if required; the gregariousness and hospitality of open-faced, open-armed, outback bushies; the facility to get on with all people and to read them and their motives, and to knock heads together when required—all these traits were shaped on the Queensland pastoral backblocks.

There is no doubt that Gunn, as he gained experience in the agri-political world in the meat and wool industries, had a unique ability to see the big picture and to work towards a larger vision when compared to his fellow rural politicians. But the problem was the veracity of the vision. Gunn’s vision of the future ultimately did not mesh with the rapidly changing economic and political events that the wool industry now encountered.

Physically Bill Gunn was a big man, in his prime weighing in at over 114 kilograms (18 stone), and nearly two metres (6 foot 5 inches) tall. As he rose to become nationally and then internationally famous, his large, hulking frame, lumbering gait, and unsophisticated provincial manner became world famous.

Gunn’s soft, brown and slightly protruding eyes usually held a quizzical expression and offset his dark jowls. In the late 1950s and through the ’60s when known worldwide as ‘Mr Wool’, Gunn still dressed like a schoolboy in a playground fight. Despite the greatest attention by minders he would appear dishevelled within minutes, the best quality Italian or English suit literally sagging and creasing like a hessian sack. Mounting the stage at an international conference or stepping up to the podium or microphone, his shirt often hung out, his fly could be half down, buttons undone or missing, shirt collar dirty or folded under a tie that, more often than not, was askew. On more than one occasion odd socks were clearly visible.

Because Gunn stuck his neck out when supporting the government in the 1951 wool referendum campaign, his big break came in 1951 when he met John McEwen. Gunn later described the meeting. He had just become President of the Graziers’ Federal Council (GFC—the national graziers’ body) in a year that included a failed wool referendum and so had been, in Gunn’s words, ‘pretty rugged for the Government and the wool industry’. As soon as practicable, Gunn remembered:

I went to Canberra to see McEwen. I said, ‘I’m here to pay my respects to you as the minister I’ll be dealing with’. It was the best thing I ever did. He said the government can’t afford a war with the pastoral industry and vice versa. He said, we’ve got to work together. He said, ‘There’s the door. Kick it in, walk in, no appointment is necessary’.⁹

Obviously aware of Gunn’s role in standing up to the establishment graziers in the 1951 referendum fight over a reserve price scheme, McEwen took an instant liking to him. He recognised his no-nonsense approach and felt an affinity with a man who had experienced a similar tough bush upbringing to his own. McEwen’s biographer, Peter Golding, said of the McEwen–Gunn relationship that Gunn became one of McEwen’s closest friends:

Gunn was a soul-mate because, like McEwen, he knew what it was like to be set upon by people he was trying to help. Gunn and McEwen had a special rapport. When Gunn’s telephone rang at 1 a.m. he knew it could only be McEwen. As Lady Mary McEwen said, ‘They were simpatico’.¹⁰

Simpatico and, soon, a powerful political partnership to be reckoned with.

The first move occurred in July 1951 when Bill Gunn was appointed to the Wool Board, which he found an unprofessional, disorganised mess. His fellow Board members were political appointments from their respective agri-political organisations. The board was split down the middle between the free-market graziers from the Woolgrowers’ Council, who were riding a high after their 1951 referendum win (when they blocked the imposition of a reserve price scheme by Menzies, McEwen, Crawford, et al., and Producers’ Federation supporters), and the smaller wheat–sheep farmers of the Producers’ Federation—inveterate and never-to-be-dissuaded passionate interventionists. Constant infighting was the order of the day, and so the board was totally ill equipped to confront the enormous challenges about to beset the wool industry. Making matters worse, complacency was redolent in the afterglow of the Korean War boom. The same parlous state of governance reigned on the board of the IWS, which relied on Australian woolgrower funds for two-thirds of its budget. Never one to be backward, Gunn told all and sundry what he thought of this mess.

The broad-shouldered, big-booted and ham-fisted Goondiwindi grazier was backed by McEwen and set about vigorously turning the statutory wool world upside down over the next decade and more. Therefore, Gunn’s pathway to power and influence, and his introduction of agri-political muscle into the administration of regular affairs of the wool industry, was through the existing but ineffectual statutory wool boards. Comprising the Australian Wool Board and the IWS, these were initially token bodies, with token woolgrower representation, established to administer levy and tax funds on promotion and research.

The problem for the wool industry was that, while Gunn restructured both the Wool Board and the IWS, and placed competent people in key positions, he pushed both organisations towards support of statutory intervention and a reserve price scheme. Gunn’s legacy was to convert both the Australian Wool Board and the IWS from statutory appendages to interventionist vehicles.

3

The binary choice—1950s to 1958

The Korean War wool boom—the greatest, but also the most damaging, boom to that date in history—constituted the apogee of the Australian wool industry’s long history. It peaked in May 1951 at the crazy height of 375 pence per pound—way beyond the fabled ‘pound for a pound’ of 240 pence. The boom was driven by post World War II recovery, the exhaustion of the giant World War imperial stockpile, and the American government’s desire to clothe their armed forces in Australian wool—‘All wool and a yard wide’ being their quartermaster-general’s slogan. The latter drive came after American authorities had watched the British government and its manufacturers mercilessly exploit Australia’s compulsorily acquired clip (an act that historian Les White called ‘self-imposed colonialism’¹¹) between 1915 and 1922, and again in the first half of World War II, including the uncompromising lock-out of American manufacturers. Consequently, the US government in August 1950 made a secret and formal approach to the new Menzies Government to acquire the entire Australian clip. Wedded to imperial loyalty, Menzies and his cabinet rejected the American bid—the Commonwealth Wool Advisor and head of the Department of Agriculture, John Crawford, telling Cabinet that, among other reasons, Australia shouldn’t accede just ‘to dress US Army privates like officers’. Cashed-up and with deeper pockets, the spurned Americans were therefore forced onto the auction floor (with the US head buyer responding that ‘We will have to use the long purse’).¹² This was what blew apart the wool market.

Subsequently, Australia’s rejection of the American secret offer in favour of a British imperial wool marketing and reserve price scheme only rubbed further salt in the American wound. The move also led to the unsuccessful 1951 national wool referendum. But after the brief euphoria surrounding high wool prices, it all went south from here, and the boom’s reverberations echo to this day.

There were three reasons for this. First, as with any boom the following bust wrought awful, worldwide devastation of merchant and manufacturing capital across the globe. Following the concomitant loss of centuries of diversity, skill and knowledge of entrepreneurial capital, the industry never recovered. The three great wars of the twentieth century to this time (World Wars I and II, and the Korean War) had sustained wool, confirming Trotsky’s famous dictum that war was ‘the locomotive of history’, but this time the engine ran over the Australian wool industry.

Second, having spurned the US government’s demand to acquire the Australian clip because of its British imperial allegiance, the Australian Government did not just help fuel the 1950–1952 wool firestorm, but also helped drive US government policy to both penalise Australian wool and encourage its home-grown man-made fibre manufacturers. After this, therefore, via tariffs and other measures, Australian wool was increasingly overpriced in the lucrative American market. In a paraphrase of Winston Churchill’s famous quote concerning communism, from this time ‘a textile curtain descended across the American continent’.

The third and most critical factor of all was the rapid emergence of modern man-made fibres and the subsequent renaissance of the cotton industry. Treasury head Roland Wilson in August 1950 had warned Cabinet to treat seriously the American offer and ‘not offend American opinion on this’ and ‘not encourage them to build up their flocks or substitutes’. For woolgrowers and their leaders up to the 1950s and even later, synthetic fibres comprised some bogey issue on the periphery, as nebulous as the Min-Min lights dancing on the outback’s horizon. But from the mid 1950s they quickly loomed as the largest shadow in the wool industry’s firmament. Accelerating in the late 1950s and 1960s the entire textile industry was turned upside down when petrochemical-derived fibres, produced by the leviathans of global business, went into mass production at cheap prices, suddenly rendering wool uncompetitive in most markets. Making matters worse, the wool industry’s old nemesis—cotton—reinvented itself to keep pace with the man-made fibre industry. Wool was left at the starting gates.¹³

The consequences of this global revolution in fibres were cataclysmic for the wool industry—both commercially and politically. Relevant to this story, though not realised at the time, the seeds of political discontent lay in the new competitive fibre challenge.

After the Korean War boom, therefore, the Australian woolgrowing industry had two choices. The first was to adopt the approach that had led to such success for the wool textile industry over the previous eight centuries: meet increased competition with healthy competitive means via improving fibre and cloth quality and also production and manufacturing efficiencies, so as to meet customer needs at the right price. However, the Australian wool industry, confronted by such a massive disjunction in competition, took the other choice with which it could attempt to meet its competition: to seek a political path to combat competition.

On this binary choice would hang the future of the industry.

*

When Sir William Gunn became Wool Board chairman in 1958, he was already widely known. His leadership during the breaking of the 1956 shearing strike catapulted him to national prominence, and he now sat on meat and wool boards and a host of commercial and public boards, including that of the Commonwealth Bank and later, in its new form, the Reserve Bank. So by 1958 Gunn was already a knowledgeable and formidable operator, full of cunning and political savvy, and tireless in his work on behalf of the wool industry.

As the cost-price squeeze on the wool industry mounted due to the cut-throat pressure of the man-made fibre and cotton assault, the years between 1958 to 1969 became a period of constant infighting and pitched battles between the free-market graziers on the Woolgrowers’ Council and the increasingly agitated and militant market interventionists of the Producers’ Federation. The latter were supported by Sir William Gunn and his Country Party backers, and their senior bureaucrats in Canberra. This coalescence of interests was aided by two historical factors. First, since the time in the early 1920s when the first ‘Wool Emperor’, Sir John Higgins—manager of the World War I stockpile under the giant British imperial company British–Australian Wool Realisation Association (BAWRA)—had briefly run a RPS, the belief had grown into an idée fixe that such an unproven scheme had been successful. This furphy was reinforced after the successful sell-off of the World War II stockpile under the next imperial organisation, the Joint Organisation (JO), but where an RPS played no actual role. The second factor was that after