Book Launch: ‘The Modest Member: The Life and Times of Bert Kelly’

Hal Colebatch’s ‘The Modest Member: The Life & Times of Bert Kelly’

Centre for Independent Studies

4 December 2012
The Hon Malcolm Turnbull MP

In 1930, in a well-known passage in his history of Australia, Sir Keith Hancock described the tenacious grip that protectionism had established over our nation’s politics and political economy in barely two decades:

Protection in Australia has been more than a policy: it has been a faith and dogma. Its critics, during the second decade of the twentieth century, dwindled into a despised and detested sect suspected of nursing an antinational heresy. For Protection is interwoven with almost every strand of Australia’s Democratic nationalism. It is a policy of power; it professes to be a policy of plenty.

Behind Hancock’s observation lies the 1909 ‘fusion’ of George Reid’s free traders and Alfred Deakin’s protectionists into the first Liberal Party. Merging the two conservative groupings successfully imposed the now-familiar Labor/non-Labor structure on our politics. But to achieve it Reid was forced to abandon free trade and ultimately accept ‘protection all round’. Support for tariffs (and engagement in the associated favour-granting and back-scratching) quickly became entrenched across politics, companies and trade unions.

Not everyone was happy with the economic aspects of what Paul Kelly has termed the Australian Settlement. In the half-century after 1909 there were periodic calls for more free or open markets, and even a few warnings of baleful long-term consequences.

Such views often emanated from farmers, miners or West Australians, who in each case carried – then as now – a disproportionate share of the costs of protection. But these dissenting voices were largely ignored.

High immigration rates and commodity prices would conceal Australia’s relative decline compared to other OECD nations until the 1970s, when it finally became clear how far down the per capita income rankings we had slipped.[1]

This then was the environment that Bert Kelly, a farmer from South Australia, entered when he was elected to Federal Parliament in 1958.

  • The overwhelming political consensus was strongly in favour of industry protection, regulation and direct government involvement in many sectors of industry
  • The most powerful interests within capital and labour were direct beneficiaries of the system.
  • Statutory boards manned by political appointees were in control of matters ranging from the tariff on imported motor vehicles to the accessibility of raunchy literature and the marketing of eggs.

In short, almost everyone with any influence had at least some stake in the existing system (or at least they thought they did).

The consumer sovereignty and open markets championed by Bert Kelly and his many intellectual successors inside the Liberal Party sit at the very core of what our side of politics should stand for and, by and large, at least over the past thirty years has stood for.

While Liberals, and certainly liberals, should be proud of Kelly’s legacy, it must not be forgotten that his greatest opponents were on his own side of the chamber. The strongest advocate of protectionism and tariffs in his time was the leader of the Country Party John “Black Jack” McEwen.

Parents tell their children fairy tales – simple tales of good and evil – to send them to sleep. Political movements tell their supporters equally simplistic legends to keep them asleep.

Liberals like myself who believe in a free society and a market economy with limited government involvement are often described as “Deakinite liberals”. And yet Deakin was a passionate protectionist – the antithesis (in another era) of Bert Kelly.

And it must not be overlooked either that Hawke and Keating who opened up the Australian economy in so many ways and in particular reduced tariffs and government involvement in the economy had more in common with Kelly not to speak of John Howard than, for example, B A Santamaria who was as appalled by globalization and free trade as he was suspicious of markets.

When Kevin Rudd in his 2009 essay called for the Government to return to the centre of the economy – we mocked him as channeling Hugo Chavez. But we could just as easily accused him of channeling McEwen or, much as it would shock him, B A Santamaria.

In short – we should not delude ourselves with political humbug into imagining the opponents of freedom, economic, social, political, are only to be found on what we like to call the left.

Nor should we imagine that there are no advocates of big government to be found on what is called the right.

And of course unless you believe that politics is just a game between the red team and the blue team and that their respective policies do not matter at all, then it becomes fairly obvious that descriptions of “left” and “right” are often used inappropriately especially over time.

B.A. Santamaria and the DLP, Black Jack McEwen and the Country Party are often held up as champions of the “Right”. Certainly they were against Communism. They proclaimed a commitment to private property but had no hesitation, as Kelly pointed, out in transferring the private property (income) of exporters like farmers and miners (not to speak of consumers) to local feather bedded manufacturers via the mechanism of tariffs.

Kelly’s commitment to free trade has been vindicated by history and some would say his story is one of historical interest only. After all today, the Liberal Party is thoroughly committed to free trade. However I think there is a more profound message in Kelly’s life in politics.

Kelly was prepared to swim against the populist tide, to take on important vested interests, large donors to the Liberal Party and powerful ministers who would determine how far up he climbed or stayed on the greasy pole. But this courage was grounded not in some heroic principle but in a clear eyed analysis of the facts.

Politics is a business where too often detail is disdained and numeracy is scarce and yet without formal economic training, Kelly dug down into the depths of the Tariff Board’s decisions, exposed their absurdities and inconsistencies and explained their impact on the wider Australian economy.

He brought to that task a rigorous and open intellect determined to see the world as it is, not how we would like it to be. When, for example, he was asked to assess schemes for “opening up the north to agriculture” he coolly assessed them as expensive fantasies. He would not have supported the regular call we still have today for a pipeline from the Kimberley to Melbourne.

And yet while high tariffs are a thing of the past, we still spend billions supporting Australian industries with little analysis or understanding of its costs – politicians “save jobs” without any debate about how many other jobs are lost because of the public resources diverted.

As Kelly said in 1963 in the House:

‘The investment of foreign capital here is looked on with a certain degree of suspicion. However it is interesting to notice that when foreign capital arrives here, it is feather-bedded into the economy, and Australians who produce for the export market have to pay the cost.”[2]

In my own area of communications the National Broadband Network is a breathtakingly reckless example of big Government at its most profligate. While ubiquitous high speed broadband is doubtless a very good thing – the Rudd Government decided to deliver it by building an entirely new communications network itself and then without any analysis of alternatives or international experience to build it in the slowest and most expensive manner possible.

Existing networks which were capable of delivering high speed broadband, such as the HFC networks, are to be shut down so they don’t compete with the Government. And their owners paid handsomely for doing so. Laws were changed to make it effectively impossible for any new entrant to compete with it and justified on the basis that competition would undermine the economics of the NBN Co – so we were back in the 1950s when governments legislated and regulated to prevent private truckers from competing with government railways.

No country in the world, not one, is using so much public money to build a new Government communications monopoly.

As I was told last year in Shenzhen by my Chinese hosts “We wouldn’t do it like that here, we are very committed to competition in telecommunications.”

Most business people familiar with the project readily acknowledge that the structure of the NBN Co is thoroughly anti-competitive and that its design is far too expensive. But as it is the Government’s money (and not theirs or so they think) they will often shrug their shoulders and move on.

Bert Kelly on the other hand was consistent. Take his approach to dams for which there has always been an almost religious “hang the expense” enthusiasm especially during droughts.

In 1966 Kelly said in the House:

“I live in a dry area. A considerable creek runs through my property, however. Shiny-eyed people travel up from Adelaide, see that creek and say: “you must build a dam, Mr Kelly That is the thing to do that would solve your problems.” I know that I could build a dam and I know that I could fill it about one year in four. I know also that the evaporation rate in the district is about six feet per annum. If I wanted to store water for drought years, I would have to reckon on an 18 foot loss of water, and only what was left, after that, if anything would be effective water, Considerations of this sort make me stop and think about whether I should build a dam. Maybe if the Government built it for me, it would be all right. But that does not accord with my political philosophy. I have always understood that I should solve my own problems by tackling them myself as best I can.” [3]

One of the Liberal MPs most strongly influenced by Kelly was John Hyde, a West Australian wheat farmer who held Moore from 1974 until 1983 and along the way became the first member of the Coalition party room to label himself a ‘dry’.

In his foreword to ‘The Modest Member’ John notes that Kelly “used the opportunities afforded by his office to win public opinion for economic management that was efficient, mindful of the future and did not give a privileged few the capacity to raise prices above competitive levels at the expense of the many.”

You have to go to John Hyde’s own book, aptly entitled ‘Dry’, to get a slightly earthier feel for Bert’s contribution to his Parliamentary education.

Hyde describes how as a novice MP, in the waning days of the Whitlam Government, he was listed to speak in a debate on the economy by Vic Garland, then the Liberal Whip. Let me quote John’s book:

“I remember being told that all I had to do was to bucket the Government. Which I did, declaring that interest rates were too high. I said that at a time when inflation was high and rising, and if real rates were not already negative, they were soon to become so.”

“At lunch, Bert Kelly dumped himself beside me in the dining room. “Hyde, did you believe all that bullshit you mouthed this morning?”

“Well no, but Vic….”

“Well why say it?” [4]

In an era where there is an increasingly obvious deficit of public trust in our political parties and Parliament, that remains very good and wise advice.

Both John Hyde and Hal Colebatch point out that Bert Kelly was not an economist (although he did have a substantial head start compared to most people, economists or not, in becoming intimate with the vastly complex tariff schedules of the era, courtesy of his father Stan Kelly’s service on the Tariff Board from 1929 until 1940).

But he was without peer, in the eyes of many colleagues and observers, in his ability to use the most important platform provided in our democracy, the national Parliament, to explain his case to his colleagues, to politicians from other parties, and to the public. He used debates, committees and question time alike for this purpose.

Speaking in 1997 at an event honouring Kelly after his death, Gough Whitlam put it this way: “No private member has had as much influence changing a major policy of the major parties.”[5]

Of course Kelly was barely less adept in his use of the media. He stirred substantial public awareness of what at the beginning was his one-man campaign in support of free trade by writing columns that were clear, robust, often humorous and distinctively Australian – first as the Modest Member and then later the Modest Farmer and other guises. His columns ran in the AFR, the Australian and the Bulletin over the years.

His turns of phrase could be inspired. Anyone old enough to remember the two-airline policy or the debates of the 1970s about whether taxpayers and consumers should subsidise a domestic shipbuilding industry will enjoy Kelly’s description of these two industries as “our flying and floating feather beds”.

As Colebatch’s book makes plain, Bert Kelly was not the only pivotal figure in the battle over free trade and protectionism that resumed, after a fifty-year hiatus, in the 1960s.

His key antagonist (at least prior to the Whitlam Government), was another of the most influential figures of that period of Australian politics: Sir John ‘Black Jack’ McEwan, who led the Country Party from 1958 until his retirement in 1971.

While the original Country Party of the early 1920s was inclined towards open markets, this influence faded quickly. By the 1950s the intrusive industry policies and distorting taxes and tariffs that eventually became known as McEwanism – involving not only ‘protection all round’ for both manufacturers and primary industries , but direct grants or subsidies to mendicant producers too – was in full swing.

‘The Modest Member’ recounts one of the turning points of this era in 1958, when Arthur Fadden retired. Rather than taking the Treasury portfolio (which the Country Party had as its right), McEwan instead chose to stay at Trade, where he had been since 1949, and continue to build it up as a rival voice of authority on economic policy authority to Treasury.

As was often noted at the time, this was an era when the Department of Trade prevented more trade than it assisted.

The book also recounts how Kelly’s short ministerial career between 1967 and 1969 had the effect of greatly constraining his freedom to speak bluntly on trade and protection. While there is no proof, at the time there was speculation that pressure from the Country Party helped truncate Bert’s time in the ministry. But of course this permitted him to resume his campaign with full force, to the great annoyance of McEwan.

I don’t need to retell the story of the gradual turning back of protectionism and centralized economic controls, which began with Whitlam’s 25 per cent tariff cut in 1973, sputtered onward with Fraser’s partial dismantling of McEwanism and freeing of some financial prices, and then took off with the lengthy period of market reforms under Hawke, Keating and Howard.

But it is a fitting that Bert Kelly lived long enough to see the emergence of a vastly more productive, flexible and competitive Australian economy during the 1990s, and the emergence in most (but not quite all) industry sectors of the free and open market he so persistently advocated over the years.

[1] In 1970 Australia’s GDP per capita adjusted for purchasing power was still approximately 122 per cent of the OECD average. By 1980 this had declined to 110 per cent, and by 1990 to 105 per cent. After reaching a low of 102 per cent in 1992, Australia’s GDP per capita has since rebounded to around 120 per cent of the average across these mostly wealthy economies. See:

[2] “Modest Member” p. 133

[3] At p. 178 of Modest Member

[4] John Hyde, ‘Dry – In Defence of Economic Freedom,’ Institute of Public Affairs, Perth 2002, p.54.

[5] E.G. Whitlam in ‘A Tribute To The Modest Member: Bert Kelly,’ CIS Occasional Paper 60, 1997, p.8.