EMBARGO: NOT TO BE PUBLISHED OR BROADCAST BEFORE
6-pm ( Btsh. Summer time) July 6, 1964 or
3 am ( Est. Australia) July 7, 1964
BRITISH INSTITUTE OF MANAGEMENT
FIRST BAILLIEU LECTURE
THE-INTERDEPENDENCE OF POLITICAL AND
INDUSTRIAL LEADERSHIP IN THE MODERN STATE
by
THE RT. HON. SIR ROBERT MENZIES,
QoC., M. P.
PRIME MINISTER OF AUSTRALIA
deli vered
AT THE HALL OF THE. MERCHANT TAYLORS' COMPANY
THREADNEEDLE STREET, LONDON, E. C. 2.
on
MONDAY, 6th JULY, 1964
" THE INTERDEPENDENCE OF POLITICAL AND
INDUSTRIAL LEADERSHIP INII THE MODERN STATE"
There are two good reasons for my sense of pride
on this occasion. One is that it would be an honour for any man to
be asked to deliver to you the first Baillieu Lecture. Lord
Baillieu is a great Australian and a great man. He bears a
name greatly distinguished in what I will later refer to as the
" industrial statesmanship" of Australia. He has added to it
by his great services to British industry and international
understanding. The work of such men should appropriately be
honoured during the years of their activity; we have, as a
rule, a bad racial habit of deferring our praise to the obituary
column. My second reason is a quite simple and personal
one. Clive Baillieu is my friend, always more than faithful
and more than just to me. This personal reason enables me to
add affection to respect.
You have invited me to speak of the interdependence
of Political and Industrial leadership in the modern world.
There can be no more important subject. I am delighted with it,
for I have lived with this problem for many years as a political
leader, and am now given the opportunity of setting down, in a
more or less ordered form, some of the results of that experience.
I begin by saying that we must bring our vocabulary
up to date. The word " statesmanship" has usually been applied
to the highest level of politics. It has connoted the management
of state affairs which, when the term came into use, were
political affairs " pure and simple" if you will forgive such an
imaginative expression. Those were the years, not so many
generations behind us, when even lawyers could profess to find
an intelligible distinction between governmental functions and
business functions, with mutual exclusiveness.
Those days have gone. The lines have not been
merely blurred; they have disappeared under the pressure of
modern complexities. Today the management of state affairs
cannot be artificially confined in its scope. Politics and
industry are deeply involved with each other, acting and
re-acting upon each other. The qualifications of the modern
statesman will be inadequate or incomplete unless he is conscipus
of the problems of industry and the impact upon those problems
of political policies and actions. This is not just to say
that there has been a change in political outlook; it is also
to say that there has been a change in industrial outlook.
Neither change is as yet complete.
Industrial activities are, in the modern world, no
longer purely private matters, to be resolved by private decision
alone in the light of unfettered competition. I beg of you not
to think that I suffer from the reactionary socialist doctrine
which discourages the rewarded enterprise of the individual and
attributes quite mystical faculties to that omniscient and
omnipotent body, the State. What I am saying is that neither
politics nor industry can live alone. The old-fashioned " sturdy
individualist" who told government to keep clear of his business,
that he wanted neither help nor hindrance from it, is as dead as
the dodo. The doctrinaire socialist still flourishes, but, in
my country at least, his voice becomes fainter.
It is frequently charged against those of us who are
not Socialists that we are reactionaries; that we want to turn
the clock back; that we yearn for a restoration of laissez-faire.
In the modern world, this is quite untrue. The truth is that
it is the non-Socialists who have moved with the times. I can
understand, as an intellectual and historical exercise, how
Socialism attracted the support of radical thinkers after the
industrial revolution in Great Britain, the creation of " dark
satanic mills", the horrorsof child labour, when industrial power
was in a limited number of hands, when the rights of employed
people were either denied or imperfectly recognised, when the
infant Trades Unions were too commonly regarded as subversive
bodies, when social services as we now know them were almost nonexistent.
It is not strange that under these circumstances there
grew up in many thoughtful minds the egaliterian belief that the
creation of social and industrial justice demanded a high measure
of uniformity, and that uniformity could be achieved only by the
mastery and management of the State.
But we know, and occasionally admit, that there is no
uniformity among personalities, or talents, or energy. We have
learned that true rising standards of living are the product of
progressive enterprise, the acceptance of risks, the encouragement
of adventure, the prospect of rewards.
3.
These are all individual matters. There is no Government
department which can create these things. What governments can
and should do, when encountering some new problem or developing
state of affairs, is not to say " the Government will run this",
but first of all to seek the private enterprise answer, to help
the individual to help himself, to create, by legislation and
administration, a social economic and industrial climate favourable
to his activity and growth.
The validity of these theses is, in my own Australian
experience, covering a consecutive fifteen years of Prime
Ministership, seen with increasing clarity by a younger and, on
the whole, better educated generation of electors, who want the
opportunity to make their own way and place in the world. They
reject the enfeebling notion that the chief end of man, from
the cradle to the grave, is to be ordered around by, and live
dependent upon " the Government". There is some eloquent corroborative
evidence to support my own judgment. At the recent
Australian election the leader of the Labour Party, a party whose
principal objective has for very many years been " the socialisation
of the means of production, distribution and exchange", promise
that if elected he would, in effect, suspend the socialist objective
for the life of the Parliament!
Clearly the definition and function of Statesmanship
have widened. Industrialists may protest that politicians should
not interfere in business affairs. But it is impossible to
believe that in a complicated world of international trade and
finance, of economic theories and policies which are no longer
academic exercises but touch and concern all forms of human acticity,
and of the domestic social demands which have brought about what
we call " the welfare state", governments, however non-socialist,
can be passive observers.
Today's industrialists, whether primary or secondary,
and however individualist they may be, demand and obtain government
intervention by way of aid and organisation. I will illustrate from
my own country. There are internal marketing schemes for the
handling of certain primary products and price stabilisation
schemes administered through various boards for such commodities
as dairy products, wheat, and sugar. The farmer is still a free
agent, farming his own land and producing his own goods. But
he has called government aid in to secure for him the adequate and
reasonably stable prices which he needs to make his individual
enterprise effective and profitable.
Under special circumstances, government provides
subsidies. One example is butter, where a domestic subsidy gives
to the dairy farmer some assurance of a profitable domestic price
to be set off against his frequently unprofitable price on world
markets of considerable instability. Another is a recently
introduced bounty on superphosphates, designed to encourage the
use of fertilisers and the consequent increase of production and
reduction in costs.
The manufacturer has frequent resort to the Tariff
Board and special statutory authorities for customs tariffs and
bounties. In the broad sense, he looks to Government for
assistance and protection. He may not put it in so many words,
but he is acutely conscious of the interdependence of government
and industry. But perhaps he tends to over-simplify the problems
of government. He is occasionally disposed to see his own
industrial problem as if it were in a national vacuum. " My
business is being adversely affected by lower-cost imports; the
solution is a higher tariff; please provide it!"
This is, of course, a dangerous over-simplification.
Protective tariffs are designed to avoid unfair competition;
but they should not be designed to prevent all competition.
Complete domestic monopolies are inconsistent with international
trade. Now, whatever could have happened domestically in the
absence of government interventions and controls, it is clear that
international trade is today so involved with government trade
services, trade treaties, international conventions and export
inducements, that it could not survive without them. Speaking
again of my own country, this has been recognised by both government
and industry. We have regular consultations with industrial
and financial leaders. We are assisted in specific fields by
many groups of advisers. We have an expanding overseas Trade
Commissioner Service which provides an exploratory instrument
which individual industrial exporters could probably not afford.
An Export Development Council of leading businessmen advises us
on ways and means of increasing our export income. Two notable
results have been the creation of the Export Payments Insurance
Corporation with outstandingly good results and the
introduction of a scheme of tax concessions successfully designed
to encourage more production for export and a more vigorous search
for and development of new markets overseas.
We are, of course, all familiar with such intergovernmental
agreements as those relating to wheat and meat and
sugar and certain metals. On our side, at least, all such
agreements are worked out in the closest consultation with the
industries concerned. The Trade Treaty is now a commonplace. It enlarges
the horizons and opportunities of individual producers while
helping to bring into a healthy condition, the trade and financial
balances which are a constant care of government.
I will not seek to multiply instances or make anything
like a complete catalogue. But I will say at once that such
examples as I have given are all examples of the inevitable interdependence
of political and industrial leadership in the modern
world. Once this is acknowledged on both sides, the future
becomes clearer. But it must be acknowledged as a vital principle
of government, not just as an occasional and accidental by-product
of some extraordinary circumstance:
This truth is, in my opinion and experien.. as till
obscured by some antiquated dogmas, and prejudices, and limitations
of outlook. Thus, it is still the practice of many economists and
financial writers to refer to capital expenditure in " the public
sector" and in " the private sector" as if they were referring to
two mutually exclusive and indeed actively competitive zones.
Nothing could be more wrong. When private capital is laid out
upon capital expansions of industry, this is done on the assumption
that public capital expenditure will be made to provide the streets
or roads, the water services, the lighting services, the schools,
the means of public transport, the housing, without which an
extended industry could not hope to carry on. I would be
prepared to say that in my own country, the overwhelming bulk of
expenditure in the so-called public sector is basic expenditure
in the private sector. May I take just one rather striking
illustration. The famous Snowy Mountains Scheme at the headwaters
of the Snowy, Murray and Murrumbidgee rivers, will, when
completed, have cost well over œ 400 million, all provided by the
Commonwealth Government and therefore to be called expenditure in
the public sector. Yet, apart from some fractional supply of
electric power to the Australian Capital Territory, and to
governments in New South Wales and Victoria, the great purposes of
the Snowy Scheme are to provide hydro-electric power and light to
private industries and private citizens, at cost, and to provide
through its great dams and lakes, water for the
irrigation of the thousands of privately owned and operated farms
which will be brought into existence.
There are other old prejudices and limitations of
outlook in the industrial world. Let me look at some of them
quite frankly. In the economic field, now so directly and indirectly
affected by government economic policies and actions, it has
become essential that industrial leaders should understand
something of politics, should, by getting to know something of
the complexity of national and international economic problems,
come to understand that it is dangerous as well as selfish, to
behave like a pressure group. We have all seen occasions when
representative bodies in the business and industrial world have
demanded higher import duties at a time when the best judgment of a
wise and well-informed government might lead it to increase imports in
the interest of some international trading advantage. It is, I
suppose, natural that many men in industry should take short views and
be affected by the prospect of some immediate advantage. After
all, very few of us look over the wall of our own garden to get
a picture of the outside world. It is simple, and tempting,
to demand reductions of taxation when things are going well,
( so that they may go even better!), and not always popular to
point out that, while deficits in Government budgets are appropriate
in times of recession, they could hardly be deliberately planned
at a time of expansionary growth and inflationary pressures.
In short, there is still a considerable failure of
mutual understanding. Governments have a disposition to be
over-statistical and sometimes if I may make such a confession
to lean too heavily on economic orthodoxy or its current version
in a highly unorthodox and muddled world, where the laws of -reason
or of nature receive much violent treatment. We have discovered
that, in evaluating the effects of some economic measure, statistics
are not enough, for in their very nature, statistics are always
out of date. This is one of the reasons for my own Government's
consultations with industrial leaders whose knowledge is gained at
first hand in the factory and the market-place.
It is one of the occupational hazards of political
leadership or responsibility that, in our anxiety to avoid the
dangers of travelling in a " wilderness of single instances", of
being induced by hard cases into bad laws, we may, under the
compulsion to make laws of wide and general application, come to
treat men and women as just ciphers in a calculation, and not as
individual human beings whose individual welfare and development
must be the greatest ultimate concern of government.
Avoidance of this hazard requires constant contact
with people as well as papers, with practical managers of
industry as well as economists, with the people who provide the
revenues as well as those who spend them, with TradesUnions as
well as organisations of employers.
For, if we are to be civilised people in truth as
well as in name, we must be members one of another. For me,
the perfect society would be one in which, by equality of
opportunity and a full development of individual character and
talent, each citizen was independent in his own heart and mind,
but all citizens were inter-dependent in all social rights and
duties. dHas it ever occurred to you that, in spite of our
parliamentary democracy, the characteristic of which is that
the rulers and the ruled are the same people, putting into or
casting out of Parliament those of their own number whom they
freely choose, and thus coming to obey laws of their own making,
we still hear on all sides " why doesn't the Government do this or
that or cure this or that?", as if the Government was a foreign
body. I cannot suppose that this engaging habit is peculiar to
Australia. But it illustrates a serious defect in our social
development. Politics is too often, and by too many politicians,
seen as a clash of material interests, a " dialectical materialism".
Employment is seen, by too many advocates, as importing an inevitable
conflict between the interests of the employer and of the employee.
And there are those with " webbed and inward turning eye" who appear
to believe that there is a conflict betwee i government and industry,
that they do not understand each other and never will, and that
in this conflict each must get the better of the other if it can.
I imagine that the pure Socialist, the stern unbending nationaliser
of all industry, will seek to get rid of this conflict by making
Government the master. If our antipodean experience counts for
anything, the creation of a nationalised industry does not dispose
of the other problem of employer-employee relationships, but
rather complicates them by adding political overtones to industrial
demands. In all these matters, we need a greater sense of
inter-dependence. The great common interest in any industry is
that it should be successful, growing, and profitable. Only
thus can it provide a growing employment, good wages and conditions,
and personal security.
I do not want to be misunderstood on these points.
Though I am the leader of a great non-Socialist party, I am not
a doctrinaire anti-Socialist. I recognise that there are some
things which, in their very nature, lend themselves to government
management or control. Over our history in Australia, we have
established government control of the postal, telegraphic, and
telephonic services, the international communication services, the
railways. In a . country like Australia at least, such things lend
themselves to Government monopoly control, which nobody seeks to
change. But the practical difference between the Socialist
and the non-Socialist seems to be this. People like myself,
before resorting to State Management, first seek for the private
enterprise answer, Only when that is not forthcoming do we put
the Government in charge. The Socialist approaches the problem
from the opposite direction. He seeks first the Socialist
solution, and turns reluctantly to private enterprise only when
the Socialist plan proves to be unworkable. I, of course, know
but little of your domestic politics, nor would I dream of
embarrassing you by intervening in them. But I do know something
of the politics of my own country where, strangely enough, we have
parties superficially not unlike your-own* I will, therefore,
illustrate my point by reference, exclusively to Australia. It
must be admitted that the way of the Socialist in Australia is made
harder by reason of our Federal Constitution, with its division of
legislative authority between Commonwealth and States, and its
specific prohibitions of certain types of law, whether Commonwealth
or State. To economise on time, I will take three examples of
what I mean. The Commonwealth's power over broadcasting is
attributed to its specific constitutional power to make laws
with respect to " postal, telegraphic, telephonic, and other like
services". The first people to enter upon broadcasting in a
business way were private citizens. The business grew and became
more complicated. To avoid chaos, government intervened, first by
negotiating the acquisition of certain leading stations and then,
in 1932 by creating an Australian Broadcasting Commission more or
less on the model of the BB. C.
By 1942 the present pattern was established, The
AB. C. conducts national broadcasting services and is sustained
largely by listeners licence fees. There are licensed commercial
stations, which derive their revenue from advertising. This dual
system, though occasionally threatened by the Socialists, has
worked well, with a good deal of co-operation between " overnment
and industry. Australians would, in my opinion, strongly resist
a government monopoly of such a pervasive and persuasive means of
communication, instruction, and political propaganda, The dual
system preserves the right of choice of the individual listener,
and, by competition, improves efficiency.
More recently, we have dealt with television in the
same way, and for the same reasons.
My second example is that of the Civil Air Services.
These were pioneered by private enterprise, and with a great deal
of success. The Labour Government in 1945 decided to nationalise
the industry by first creating a National Airlines Commission with
power to conduct air services, and then, by a series of statutory
devices, giving it a monopoly, thus eliminating the private
services. The High Court found that the creation of a monopoly
in interstate air services violated Section 92 of the Constitution.
Since then, we have enjoyed the dual system, which provides a most
healthy competition, and has resulted in a very high . standard of
efficiency and safety. This system is not by any means accepted
by the Labour Party, but I think it will survive.
My third example is in interstate shipping coastal
shipping where a successful Commonwealth Shipping Line operates in
competition with private shipping companies.
These examples show that government organisms and
private enterprise can live together to the public advantage.
At the very least, they dispose of the false hypothesis that
there is an inevitable conflict between government and industry,
and that such a conflict can be resolved only by victory for one
side. You may think these remarks to be rambling, and even
irrelevant. Yet they all tend to confirm the truth that there is
an interdependence between government and industry.
Certain matters which seemed simple to me when I was
young now seem to me most difficult. This is inevitable when
you begin by seeing the problem from a distance and end by seeing it
from the inside. One lives and learns. Some things I have
learned to believe most strongly can be put in a short series of
propositions. 1. Rising material standards of life in a democracy
cannot be adequately attained unless industries
are developed, production increased, and the resources
of the nation expanded. They will not be attained
by a simple process of redistribution, nor by the
creation of a state of affairs in which we are all
employed by and dependent upon the State.
2. An uncontrolled and unregulated free competitive
enterprise would tend to destroy the weak, impoverish
the poor, and reduce that dignity of the individual
man and wompn which it must be the purpose of
democracy to create and enhance.
3. By seeking a compromise between these two extremes
we do not, as in the case of many compromises, arrive
at a weak solution. Paradoxically, we arrive at a
strong one. When we blend the two ideas, with
common sense and a spirit of co-operation, we secure
a modern state inii which there is more to distribute
because private citizens have been encouraged to
produce more, for profit and reward, and have been
helped to regard life as an adventure and not a
folding of the hands with a feeling of absolute
security. In that state the private entkepreneur
will observe his social and industrial responsibilities,
partly because 4overnment requires him to do so, but,
even more importantly, because he realises that the
adventures of discovery and risk investment, and
advances in skill and management, will reap their
richest harvest if the people employed in the enterprise
feel that they are getting their share in advancing
prospects and their full recognition as human beings.
In brief, it is in co-operation that we will do best.
Within that framework, there will still be conflicts about wages and
hours and long leave and retirement benefits and health schemes,
and even mutual criticism of Rovernment's bureaucratic tendencies and
the insensibility of the individual manufacturer to the overall
economic needs of the country. But they will all be more readily
resolved if all concerned are conscious of the paramount need for
co-operative effort in what is seen to be the common cause.
I will conclude by elaborating this a little.
Interdependence in leadership is designed to nourish a
sense of interdependence among the people, and in turn to be
nourished by it.
In my experience, all democratic governments are
accused by their opponents of sudden changes of policy. I will
not argue about this, except to say that changes of emphasis,
and changes made from time to time to meet special circumstances,
are not necessarily changes of policy. Rigidity of mind and
common sense must frequently be in conflict.
But I do believe that if we are to avoid what will
appear to be sudden decisions, or if we are to avert some of their
unhappy consequences, we must face up to some of the underlying
elements ( not always visible) in a sound national progress and a
developing economic strength.
11.
I have, I think, time to mention two of them.
One of them is public morale. If people know what
a government is aiming at, and what great industrialists are
aiming at, and they have respect for the honesty of purpose of
the leaders in each field, they will be less liable to panic
or to depression. This was gloriously proved by Winston Churchill
during the war. Great things though he did in many fields, his
vital contribution to victory was his fostering of morale. He
saw more clearly than most, and expressed more clearly than any,
that morale was the essential basis of survival and of victory.
What he did in war is no less necessary in peace.
Our economy tends to be plagued by booms and depressions. These
close relatives do not arise from purely material factors or
possess some inevitable character. Each is contributed to, if
not entirely created by, psychological factors. In the more
primitive days of banking, the " run on the bank" was the psychological
cause of insolvency much more frequently than it was the result.
In modern times, we have seen depressions accelerated by caution
and pessimism on the part of management as much as by fear in the
minds of the customers. As I once heard a noted economist say,
back at the beginning of the thirties, " Prices fall because
they fall!", i. e., because people tend to stop buying on a falling
market. If people understood the reasons for temporary fluctuations,
if they understood the purpose of government financial measures.
designed to increase or reduce the volume of purchasing power, to
restrain inflation or to encourage expansion, they would be less
inclined to aggravate their own problems.
This is, of course, easy to say. The civilian problems
of peace are less concentrated and less intelligible than the
civilian problems of war. But, if we had, in government and in
industry, a clearer sense of co-operation, of joint responsibility,
we might make a massive contribution to the spirit and morale of
our people. The other element goes beyond an understanding of
what we, government and industry, are doing and intending. It
concerns itself with what private citizens make of what they are
doing and intending theiselves. For it is upon their self
reliance and enterprise that our whole structure must be based.
They are under great temptations today, in the era of what has been
called " the welfare State". It will be fatal if they come to
regard the government as the only creator of all good things, as the
perennially solvent guarantor of personal prosperity for all.
For governments, and government departments, are administrative
rather than creative, nor can any government guarantee or financial
provision be any more effective than the sum capacity of the
people, as producers and earners and taxpayers, to provide.