When Queensland Went Socialist

Beginning with the colonization of Queensland in the 1820s, farmers steadily occupied crown land to rear sheep for wool to be exported back to Britain. Demand from Britain’s mammoth textile industry and capital loans from British financiers spurred the rapid growth of a profitable wool trade that in turn accelerated the growth of shipping and mercantile companies.

Although some farmers — known as “selectors” — settled with the legal sanction of the colonial government, the wealthiest pastoralists “squatted” illegally on choice land. And they did so with the tacit support of Queensland’s colonial government, which was entirely dominated by the “squattocracy,” as colonial Australia’s pastoral capitalist class came to be known.

In the late 1800s, however, trade unions and their political wing, the QLD Labor Party, presented a challenge to the squattocracy’s political hegemony. Formally established in 1892, QLD Labor first won a parliamentary majority in 1915, forming a state government under the leadership of T. J. Ryan, a brilliant lawyer, and his treasurer, “Red” Ted Theodore, a former union official.

Ryan’s electoral success was built in large part on QLD Labor’s “Fighting Platform,” which combined both socialist and petty-bourgeois elements into a kind of agrarian social democracy. Under its vision, the state would directly intervene into the economy, nationalizing key sectors and setting up vertically integrated state enterprises. State-owned mines would dig iron ore that would be refined at state-owned smelters, transported by state shipping companies, and sold to buyers at state stores.

This vision depended on creating a strong domestic manufacturing industry, centered around heavy industry. So Ryan’s flagship proposal was to build a new, publicly owned steelworks north of Brisbane.

In a uniquely antipodean take on land reform, QLD Labor hoped to foster the growth of a class of yeoman farmers, forming the basis for a worker-farmer alliance and at the same time creating a domestic market for its planned state industries. Ryan proposed carving up land that had been underutilized by squatters and giving it to soldiers returning from World War I. The state would then buy produce from small farmers at guaranteed prices and process it at state-owned butchers, mills, and canneries, supplying a prosperous and urbanized working class.

T. J. Ryan and Queensland Labor dreamed of transforming Brisbane, once the Moreton Bay penal colony, into a beacon of socialism, shining from the Sunshine State across Australia.

The Ryan government began by breaking up and regulating existing private enterprises, while taking some key businesses into public ownership as state monopolies and establishing other state enterprises to compete with the private sector. The Colonial Sugar Refinery (CSR), for example, was broken up. The state seized its refining and retail wings and implemented price controls on sugar, significantly reducing the cost of this key staple.

Soon the first state enterprises began operating across the supply chain, from paddock to table. Socialism at Work, a Labor publication, painted a picture of “cattle and young sheep” being slaughtered “at government abattoirs, and the meat and mutton hung up for sale at state butcher shops.”

Within a few years, the Ryan government had set up or taken over hundreds of businesses, including public transport, agricultural markets, canneries, retail stores, butcher shops, sawmills, mines, and smelters. Queensland even ran state-owned hotels, refreshment rooms, and an insurance agency. Working with unions, these state enterprises paid livable wages, setting a standard the private sector had to match, while also improving workers’ purchasing power by lowering prices on goods produced by state enterprises.

On the legislative front, the Ryan government finally legalized trade unions, introduced price boards and controls, and gave women the right to stand for Parliament. Ryan’s government also introduced some of Australia’s first welfare reforms, introducing an unemployment benefit, an old-age pension, and a workplace-injury compensation scheme.

While Ryan’s reforms were unprecedented, they were not intended to overthrow capitalism in the short term. As historian H. J. Thornton explains, “State enterprises were to be a primary tool, using market forces to manipulate certain labour and commodity markets.” For T. J. Ryan and his treasurer, “Red” Ted Theodore, Queensland’s path to socialism would differ from that of the newly formed USSR, which centered on workers’ councils, or soviets. As Theodore said, “State socialism is the first stage of socialism, people who advocate the introduction of a Soviet system here forget that we have our fight to wage.”

T. J. Ryan’s first-term reforms were popular and won QLD Labor a second term in 1918. Shortly after, however, Ryan moved to New South Wales and won the federal seat of West Sydney, with the goal of bringing QLD Labor’s vision of socialism to the federal ALP.

So Ryan left it to “Red” Ted Theodore to take on Labor’s historic enemy, the squattocracy, and their British financial backers. The battle was to be fought over the foundation of the squattocracy’s power — land.

Australia has a lack of fertile land, and so, during the early years of colonization, a free-for-all land grab saw wealthy pastoralists monopolize the best agricultural land. Although they paid rent to the state, pro-squatter legislation kept land rents artificially low. Meanwhile, small farmers — and capitalists who hadn’t secured land early — were subject to significantly higher taxes and rents.

In 1920, “Red” Ted’s Labor government sought to address this historic grievance with the Land Amendment Act, which reassessed land allocated for pastoral lease, bringing it in line with market valuation. QLD Labor’s intention was to break up the squattocracy’s monopoly by releasing fertile land for selection by farmers. Labor’s reforms threatened not only the squattocracy but also the profits of mercantile and financial capitalists, British and Australian, who had bet on them, as well as Britain’s textiles industry, which depended on Australian wool exports.

The squatters, bankers, and merchants did not sit idly by. Indeed, during T. J. Ryan’s first term, business and their representatives had already unleashed a barrage of litigation aimed at blocking QLD Labor’s push toward public ownership. Ultimately, however, Ryan’s government won the majority of these cases. As Ryan’s biographer, Denis Murphy, noted, the cases proved that

the government had the right to govern, and that provided it did so within the law it could be challenged only at the ballot box and not hounded through the courts by those with the money to pay high legal costs.

In 1920, however, Queensland’s upper house — which was controlled by squattocracy interests — refused to consider the Theodore Labor government’s land reform bill.

To challenge this, Theodore came up with a scheme worthy of Odysseus. Although members of Queensland’s Upper House were appointed, it was still subject to the legal authority of the more democratically elected Lower House. So Theodore’s government passed an act dramatically expanding membership of the recalcitrant QLD Upper House before stacking it with Labor supporters, who then voted for its abolition.

This removed the final barrier to the 1920 Land Amendment Act. Despite a failed last-ditch challenge in the High Court and a petition to the secretary of colonies in England, it became law. For the Queensland squattocracy and their well-heeled British backers, it was the last straw.

Sir Robert Philp was an exemplary capitalist. He earned a name in business managing a massive sheep and cattle company in QLD’s north before moving into politics and serving as premier from 1899 to 1908. Afterward he moved into the sugar industry before founding North Queensland Insurance Company and the Bank of North Queensland.

In the early years of Theodore’s Labor government, Philp and his banking and pastoral associates led the opposition to Labor, forming the “Constitution Defence Committee.” The committee functioned as a vanguard uniting rural, urban, and international capitalists against QLD Labor’s socialist program. Although they claimed to be defenders of transparency and proper parliamentary procedure, as historian G. C. Bolton observed, “Philp and many other conservatives like him believed that normal political convention should not apply to socialists.”

In January 1920, Australia’s leading squatters, bankers, and merchants called a “citizen’s meeting” in Brisbane, under the aegis of the committee. They resolved to send a delegation led by Sir Philp across the seas to Britain to organize a capital strike. They immediately sent a cable relaying their plans to the British Australasian Society, a pastoral company lobby in London. The society reciprocated by forwarding a petition signed by fifteen major Anglo-Australian pastoral companies and banks to the Theodore government. It threatened serious consequences if the government proceeded with land reform.

Meanwhile, to continue implementing the Fighting Platform, the QLD Labor government needed loans. This was a problem because virtually all of the QLD government’s loans and debts were held in the London financial market.

In 1920, Theodore estimated that Queensland would need a loan of £9,000,000, and set off to London to secure it. But before he had gotten off the ship, the English Saturday Review had already warned London financiers that Mr Theodore “is now in London to get, if possible, money . . . luckily, however, for the pockets of our capitalists there also arrived in London Sir Robert Philp.” As the Saturday Review concluded, the authority of Sir Robert Philp “is greater than that of Mr. Theodore, and we do not think he will get any money.”

The prediction proved sound, and Theodore returned to Australia empty-handed. He reported “an intense feeling of hostility” from the high priests of English finance, who promised that no soul in the British Empire would loan a single shilling to the QLD government unless it met five conditions.

First, British finance capital demanded that the QLD government repeal the 1920 Land Amendment Act completely and unconditionally. It also demanded that the government scrap its welfare reforms, including unemployment benefits and the old-age pension, and reverse the public takeover of the British Tramways Company. Finally, it demanded that the government amend the Succession Duties Act to ensure that British-owned estates were exempt from laws governing inheritance and taxation.

The Theodore Labor government refused these demands. In 1920, in the lead-up to a fresh election,  T. J. Ryan — now federal MP for West Sydney — returned to Brisbane to defend QLD Labor’s socialist reforms. As he explained in a rousing speech:

The Queensland Labor Government could get millions of money if it would consent to sell itself to the money lords of London. . . . Our opponents would allow the absentee capitalists to dictate the domestic policy of Queensland, but Labor, on the other hand, stands for complete, independent and untrampled self-government.

The electorate agreed and returned Labor to government for a third term in October 1920.

Despite its wealth of minerals, fertile land, and potential for growth, to develop, Queensland needed capital — capital that the Labor government did not have. So with credit blocked from London and forcible seizure off the table, the Theodore Labor government sought alternate means.

The timing could not have been worse. By 1920, the wartime boom was well and truly over, and unemployment was beginning to rise above 11 percent, forcing the government to put state infrastructure and relief work plans on hold. To make matters worse, Queensland was the only state in recently federated Australia where Labor held government.

Shy of large-scale expropriation — ruled out by Labor’s commitment to a parliamentary road to socialism — “Red” Ted’s government was left with two options. It could attempt to raise capital domestically through a public loan scheme, or it could seek alternative financial markets.

In January 1921, Theodore announced a domestic loan scheme. Initially Labor’s working class base received this with skepticism — who would have the means to participate in such a scheme? However, an unlikely ally emerged.

At first, Queensland’s comparatively small manufacturing capitalists had wholeheartedly supported the squattocracy and bankers. But the capital strike had disproportionately hurt their interests. As economic conditions worsened and credit dried up, QLD manufacturers found themselves unable to compete with interstate and overseas imports.

To even Labor’s surprise, the Queensland’s manufacturing capitalists rescued Theodore’s public loan scheme, helping it limp through the rest of 1921. However, the reality was that QLD manufacturing capital could only guarantee a fraction of the capital required and only for a limited time.

This left Wall Street as the only other option. In October 1921, Theodore managed to negotiate a loan of £2,400,000 from Wall Street to keep the government afloat. Between 1922 and 1923, however, the New York market became increasingly spooked by the British capital strike and the QLD economy’s deteriorating prospects. Although the Theodore government was able to secure a second loan of £2,000,000, Wall Street made clear that it would be the last. Not only was it significantly short of what was required, but it came with unsustainably high rates of interest.

Throughout 1920–22, in spite of the blockade, and thanks to American and QLD manufacturing capital, the Theodore government pushed ahead, albeit at a slower pace, with key elements of its platform, including the introduction of state baby clinics. By 1924, however, the government was out of money. It reduced public sector wages, abandoned the steelworks project, and put its farmer resettlement plans on hold.

Meanwhile, the Anglo-Australian wool industry gave anti-Labor parties a generous war chest to fund their campaigns in the state election of 1923. Even despite this, Labor still managed to hold on to power and win a historic fourth term.

By late 1923, however, it had become clear that capital did not care about Labor’s democratic mandate. Nothing but Labor’s capitulation could compel it to lift its embargo.

In January 1924, the Theodore Labor government was out of options. Theodore left for London to negotiate a compromise, and eventually an agreement was reached. In return for an end to the capital strike, Theodore agreed to introduce a new land act effectively protecting squatters’ privileges, as well as the profits of British investors. In return, British capital dropped its other demands and agreed to issue the QLD government a fresh loan.

When Theodore returned to Australia, conservative forces congratulated him for having finally seen reason. As the conservative Brisbane newspaper the Daily Mail editorialized:

Our only fear is lest, in seeking this method of righting a grievous wrong, we unwittingly strike a blow against our parliamentary system of government and our freedom as a self-governing people.

Meanwhile, many previous supporters of the QLD Labor government — including trade unionists, socialists, and members of the newly formed Communist Party of Australia — viewed the compromise as a betrayal. Moderates in the Labor Party — whose position had been strengthened by the defeat — viewed the compromise as a reality check on the politically possible.

The aftermath of the loans affair fatally wounded QLD Labor’s socialist vision. As historian Tom Cochrane noted in his study on the loans affair, the capital strike had dampened Labor’s enthusiasm for reform. Gone were the days of “Socialism at Work.” Instead, Labor adopted a more moderate platform, limited to nationalizing key pillars of the economy.

Disillusioned with state politics, Theodore resigned as premier in 1925 and followed T. J. Ryan’s footsteps with a move to federal politics. Scarred from the loans affair, Theodore concluded that it had proven the absolute limits of socialist reform. Embittered, his subsequent legacy is marked by hostility to socialist radicalism — Theodore was the prime mover of the QLD Labor Party’s “Anti-Communist Pledge,” which remains as a precondition of QLD ALP membership today.

Worse, at the height of the Great Depression, when renegade New South Wales Labor premier Jack Lang attempted to repudiate unfair British debts, Theodore — now federal treasurer — fought on behalf of his former mortal enemies, pressuring Lang to honor obligations to pay debts to London.

As Maurice Blackburn, socialist lawyer and founder of the eponymous law firm, later wrote, “At the back of the financier there lies in reserve all the power of Britain — political, judicial, and, at a pinch, military.” It’s a truth about capitalist realpolitik that “Red” Ted Theodore and QLD Labor had experienced firsthand.