QUADRANT March 1997

"1975" by GREGORY CLARK


Asked about 1975, the last convulsive year of the Whitlam regime, the late Robert Haupt is reported to have said: "Don't ask me, I was there." I know what he means; I was there too.

My 1975 began on a dry, hot Canberra afternoon in December 1974, straight off a plane from Tokyo, invited for drinks at the office of John Menadue, the former Whitlam aide who had just been hired from the Rupert Murdoch empire to head the Department of the Prime Minister and Cabinet (PMC). Menadue had been brought in by Whitlam to ride hard on an allegedly conservative, dyed-in-the-wool, anti ALP bureaucracy. Myself, Brian Johns and one or two others had been brought into PMC from outside to give Menadue moral support. As such, we were to meet regularly, with Menadue on Friday afternoons for beer and talk. The world was at our feet, even if it was the unstable world of political patronage.

But it was already a collapsing world. Menadue arrived that afternoon from a meeting with Whitlam. and R.F.X. Connor, Whitlam's minerals and energy minister. Connor was supposed to have some fantastic deal to borrow four billion dollars from an obscure Pakistani broker called Khemlani. And I had not even unpacked my bags.

I had been made a consultant, Assistant Secretary level, in something called the Policy Co-ordination Unit. It was to act as a kind of in-house think-tank - a small group of up-and-coming bureaucrats which Menadue had assembled to produce ideas, vet all cabinet submissions and make sure the bureaucracy implemented ALP policies. Our first job was Whitlam's long-dreamed plan to
clean up federal-state relations, in Canberra's favour.I assumed this meant we were supposed to come up with some practical ideas about changes in federal-state taxation, spending and other relations. But for my think-tank colleagues this was much too radical. As they saw it, the first task was to organise a series of federal- state conferences all around Australia to discuss things in detail before any serious changes were made. I warned Menadue that this was just the sort of bureaucratic slag he and we were supposed to oppose. But he went along with it all. When Whitlam fell ten months later the talkfests were still going on. Nothing had been achieved. But most of the bureaucrats involved had been able to further their brilliant careers. The bureaucrat most involved, Michael Codd, was to end up in Menadue's job a few years later.

In effect, Menadue had discovered that the bureaucrats were as afraid of him as he was of them. He could do his deals directly with them without the help of us outsiders. If anything we were a nuisance since we were seen as threats to the bureaucrats. Brian Johns ended up as a glorified press agent for the Whitlam office. I hunkered down in my PMC cell.

'When I found that the people around Whitlam
had to call him "Leader",
I decided that the lack of a
personal relationshp was not
such a loss after all.'

Worse was to come. The economy was in trouble - inflation, gross trade union demands, an over-valued currency. Menadue used to lament that if only he could get Whitlain to spend half a day or so thinking about the economy, things could be turned round. But Whitlam, the ex-lawyer, had more important things to think about - Aborigines, kangaroos, Opera House singers, meetings with Barry Humphries...


But he did listen to one economist -the economic rationalist Fred Gruen, who sold him the idea of an across-the-board 25 per cent cut in tariffs at precisely the moment when the post-oil-shock minerals boom had forced the Australian dollar into massive over-valuation. Overnight, large areas of reasonably efficient Australian manufacturing were wiped out. Unemployment jumped. Canberra then had to try desperately to maintain remaining employment by protecting the most labour-intensive and by definition least efficient industries.

Then when the minerals boom went into decline, the economy was pushed into the dilemma of current account deficits forcing the high interest rates which delayed the currency devaluations needed to stimulate the import-replacement manufacturing needed to absorb unemployment and cure the current account deficit. Did this shame our rationalists? Of course not. They simply saw it all as proof of the harm caused by their policies not being properly carried out.

I was reminded of the ideologues I knew in Moscow during the liberalising Khrushchev years. If the USSR was falling behind the US economically, that did notprove the failure of communism, they said; it provedsimply that the nation had strayed too far from true-blue communism.

'Whitlam deserved to be sacked, and not just because of the chaos of his administration. His efforts to bypass the Senate on supply were insane.'

My own attempt at intervention in the economy did not get far. A major inflationary factor at the time was the ease with which the Queensland coal miners could force through large wage rises, which were then picked up by other unions. Queensland mines were open-cut, low cost, and largely foreign-owned. Firms like Utah which had already amortised development costs could easily double or treble wages to pacify trade unions and still sell into energy-hungry Japan. In the process, of course, they made life very difficult for marginal, Australian-owned competitors.

The commonsense answer was a heavy export tax on the established Queensland mines, with revenues being used to help fund new Australian-owned projects or high-cost undergound mines in NSW hit by wage increases. In effect, firms like Utah would have to share with the rest of Australia some of the windfall profits created for them by the Middle East shieks.They would also be under welcome pressure not to cave in so easily, to trade union demands. And a precedent would be established for taxes on booming minerals exports generally to provide the revenues needed to ease the damage to manufacturing and employment from an over-valued currency.

But this kind of thinking was far too pragmatic for our Treasury rationalists. They liked the extra 500 to 600 million dollars revenue promised by the tax. But the idea of a discriminatory tax combined with industry policies was contrary to received dogma. So my proposal ended up as a small coal export tax on everyone - one that Utah could easily pay but which was just enough to kill the prospects of planned Australian projects and annoy our Japanese customers. It was so illogical and unfair that eventually it had to be abandoned.

The one area where I was of some use was in the cabinet sub-committee on resource development, set up belatedly to restrain Connor and his pet project to ban all export of Northwest Shelf gas so it could be piped at vast expense to the Australian east coast. Later, after leaving the bureaucracy, I wrote something ciriticising this particular folly, and got a sharp rebuke from a young ALP politician called Paul Keating praising Connor's wisdom and vision.



PARTLY AS A result of urging by Australian journalists in Tokyo in the early 1970s (in which I was fairly heavily involved) Whitlam had decided to consider the Japanese request for a Friendship, Commerce and Navigation treaty with Australia, similar to what Japan had with most of its other trading partners but which Canberra for its own anti-Japan reasons had for years rejected. But for Whitlam, that idea was far too common-or-garden: Australia hadto have something special - something that highlighted, the special importance we Australians were supposed to place on relations with Japan. The Nippon Australia Relations Agreement (NARA, Treaty) it was to be called, with the concept announced proudly by Whitlam. himself during a visit to Nara, Japan, back in November 1973. In mid-1975, I was made a member of the inter departmental committee (IDC) to draw up the treaty.

It was a parody of Canberra incompetence The Japanese had decided that if we were so detennisted to have a special treaty with them, then it should extend to them the same special investment rights we had given the US and UK in the past - retrospective most-favoured nation (MFN) treatment, as it came to be known. One could see the logic behind the idea. But politically it was a nonstarter and the Japanese soon realised this. Having made their point, they decided soon to ask simply for "fair and equitable" treatment.

But, to the deeply anti-Japan majority on our IDC, the "Japs" had revealed their predatory teeth and no amount of back-tracking could disguise their sinister intentions. Ile IDC head, a senior Foreign Affairs hawk put in charge of Asian affairs by Whitlarn and who was later to go on to even more senior appointments under Hawke and Keating, warned darkly that the words "fair and equitable" were simply a Trojan horse under which Japan would later demand retrospective MFN and seek to dominate the Australian economy.

I tried to point out the nonsense in all this: that no nation could propose a treaty wording with an ostensible meaning, and then later demand a quite different meaning; or that if Japan did make such a demand, Canberra could just say no; or that Canberra could cause serious trauma to Tokyo by demanding reciprocity, (that is, the same favoured treatment as the US had had in Japan in the immediate postwar years) and so on. Finally, if there really was a problem with "fair and equitable" why not just ask the Japanese to define it in advance, on the record?

I was wasting my breath. The Foreign Affairs type lectured us about Japan's ingrained cultural bias to cunning and duplicity (he had read the relevant books, he told us). Even to seek definition of "fair and equitable" would give those devious Japanese the chance to force their Trojan horse through our door. Hints were also made that I was out of the information loop and that those in the loop had top-secret information about how Tokyo did in fact have A plan later to use "fair and equitable" to demand retrospective MFN. From all this it followed that Australia should not just veto the Japanese draft but also suspend all further consideration. Only in this way could Tokyo be made to realise that we knew what they were up to.

Unbelievably, both Menadue and Whitlam went along with his nonsense. NARA was killed, though ALP hagiographers have since claimed loudly that Whitlam was on the point of concluding the treaty just before his unfair dismissal. As it turned out, the Fraser government quickly decided to ignore the IDC objections to the NARA treaty, and in, 1976 gave Japan a treaty very much like what it had wanted from the start - the Basic Treaty of Friendship and Co-operation, which included the dreaded words "fair and equitable". To this day Japan has made not the slightest hint of demanding anything like retrospective MFN.

(I discovered later that the "top-secret" information about Tokyo's planned MFN plots against Australia came from an ASIS hack in Tokyo whose job was under threat. A typical non-Japanese speaker based in Australia's expensive Tokyo embassy, he relied desperately on low-grade Japanese information sources to supply the dramatic insights that would keep his Melbourne bosses happy.

A further footnote to this wretched affair was the sending to Tokyo in 1975 of Canberra's top international law expert, to protest the illegality of Japan's claim to retrospective MFN, even after Japan had dropped the claim. His Japanese opposite number took a particular pleasure in pointing out how in the standard textbook of international law, it was noted that the first MFN treaty ever concluded - between Britain and Portugal back in the eighteenth century - had provided specifically for the MFN to be retrospective. What's more, the textbook happened to have been written by the. Canberra expert's grandfather. But this kind of insight did little to douse the flames of paranoia in Canberra. On the contrary, the fact that those cunning Japanese had done such homework was proof that they really did plan retrospective MFN!)

Obviously Australia could
not do a thing to prevent
the Indonesian takeover.
But it did not have to
endorse it.

BUT IT WAS MY old nemesis, Vietnam, which was to bring my 1975 to final disaster. Whitlam had chosen as head of his Foreign Affairs department the person who as number two in the Washington embassy had been largely responsible for encouraging US hawks to take a stronger line on the Vietnam War at crucial periods of US policy doubts during the Johnson administration. Most of the other people still dominant in Canberra's military/intelligence/ foreign affairs establishment were of similar hawkish bent, and were still happily churning out standard Cold War-style reports and assessments, as if there had been no change in government, Vietnam, or the Asian situation generally.

I tried occasionally to point out the inconsistencies in all this. Menadue, a closet dove, agreed. But he did nothing. Among the people around Whitlam at the time, the basic Attitude seemed to be to let the establishment play its Cold War games, while the government got on with other mattem All very pragmatic. And ultimately all very self-defeating.

In April 1975 1 was put on a committee to implement Whitlam's promise of Vietnam initiatives in the face of Saigon's impending collapse. The media were making a fuss about refugees trying desperately to get out of Da Nang, so the.first proposal had been to have the RAAF fly in aid to Da Nang. But Kuala Luinpur, our supposed frontline all1tjorhe against Asian communism, had refused W"Alit our Malaysian air base in any exercise: that mii~t antagonise Hanoi. So I suggested that we get the aid flown in via Hanoi, and in the process begin a working relationship, with the government there. Hanoi was agreeable. But our military hawks said that if RAAF crews were to fly into Hanoi they had to be decked out in full RAAF uniform. Hanoi said no to the uniforms, for obvious reasons. The hawks then said no to the planes. Whitlam's office went along with the hawks. The flights which could have put Australia, on the map in Vietnam never got off the ground.

But that defeat was minor compared with the Vietnam cables affair. About a week before Saigon fell to Hanoi's annies, someone in Canberra had the idea of sending a cable to Hanoi in Whitlam's name demanding an immediate end to all hostilities. Then as an afterthough; and to show how impartial we were, a similar cable demanding an immediate end to hostilities was also sent to the Australian embassy in Saigon for delivery to the South Vietnamese government. The Saigon cable never reached its destination, since the government there was in the final stages of collapse. As for Hanoi, its reaction to this piece of Canberra impertinence left the ears of our emissary there stinging.

And there the matter would have ended, if Andrew Peacock had not been visiting Saigon at the time and had the existence of the cable to Saigon leaked to him by the ambassador Whitlarn had kept there. Peacock arrived back in Sydney airport some time later to announce coyly that not only had Whitlarn failed to provide aid to the Da Nang refugees; he, Peacock, had documentary evidence to prove that Whitlarn had sought at the last moment to forbid Saigon from trying to resist Hanoi's aggression. A stab in the back, another Munich, he said sagely.

The media bought the story, and Whitlarn was hit by vigorous parliamentary questioning. He denied all knowlo* of any such document. Peacock then began slowly to divulge the contents of the Saigon cable. The conservative media, Fairfax especially, went into a frenzy. Whitlarn betrayed our ally; Whidam had lied to the house; Whidarn should resign.

By this time Whitlarn was in Jamaica for some Commonwealth conference, with all his top officials. As the media hysteria escalated I decided to try to find out what was going, on. Contact with one of the few antiVietnam War liberals still left in Foreign Affair's told me
about the existence of the Hanoi cable. To me the next move was obvious; release the contents of the Hanoi cable, and Hanoi's reaction to it, and the world would know that the Whitlam cables had been anti-Hanoi, not anti-Saigon. Do that and the Peacock claims would collapse overnight.

Foreign Affairs decided otherwise, It would be improper to reveal the contents of a secret document, I was told grandly - despite the fact that the Foreign Affairs man in Saigon had already revealed one of those documents (without reprimand, incidentally) and the other was in the hands of a communist government. So I cabled Menadue in Jamaica asking permission for PMC to release information about the Hanoi cable. Menadue agreed, but Brian Johns, his media adviser, refused to get involved. So it was left to me to handle the media. Overnight the crisis was defused.

Later, however, the Canberra Times, which had been slow with the story, decided to make a fuss about "a senior PMC consultant" releasing "secret information" to the media. Whitlarn was again questioned in parliament. He agreed profusely that it was indeed most reprehensible if any such thing had happened. My status as consultant was effectively ended. One accepts that there is little gratitude in politics. But one does not normally expect bastardry on this scale.

I HAD NEVER KNOWN Whitlain well, and during the entire period I was supposed to be working for his department I never met him. My only real involvement with him had been back in 1966, just before the Lyndon Johnson visit to Australia to drum up Vietnam War support. I had tried to get him interested in an enclave solution for Vietnam as an alternative both to the government line of "all the way with LBJ" and to the unpopular Calwell line about Australia pulling out of a dirty, filthy, unwinnable war. I got nowhere (Whitlam in those days went out of his way to avoid giving any impression of leftwing "softness").

But Jim Cairns went along with the idea, and in retrospect it is clear that it was the only way that the West could have salvaged something from the Vietnam disaster. Later in 1975, when I found out that the people around Whitlam hadto call him "Leader", I decided that the lack of a personal I relationship was not such a loss after all.

My one last fling in foreign affairs came during the East Timor crisis. Unbelievably, Whitlarn had decided that not only should we endorse the Indonesian takeover but that we should co-operate actively with Jakarta in the UN and elsewhere to help suppress or sidetrack protests from the East Timorrese opposition. Even worse, we set out successfully to persuade Washington to support us in this squalid activity.

Obviously Australia could not do anything to prevent the Indonesian takeover. But it did not have to endorse it. All it had to do was keep its mouth shut, something quite beyond Whitlam's ability. Invited to give a talk to ANU students, I criticised what we had done. The establishment, Foreign Affairs especially, was furious. But by that time I was already repacking my bags for Tokyo. Whitlam too was soon to be packing his bags.

Whitlarn deserved to be sacked, and not just because of the chaos of his administration. His efforts to bypass the Senate on supply were insane. Most of PMC had been dragooned into drawing up plans to take funds out of special accounts to run the government, for months on end if necessary. When the dismissal came, Menadue was genuinely upset over what he saw as Kerrs betrayal. Both Whitlarn and Menadue seemed to have been acting on the basis of some strong understanding from Kerr, only to have the rug pulled from under their feet at the last moment.

As the end approached, my main job became that of 'helping Menadue convince the world that he had a -strong interest in Japan (which he had, even if his knowledge was only superficial) and should become ambassador there. Many years later the Australian was to publish prominently a silly and defamatory story claiming I had wanted to be ambassador in Tokyo, and was furious when Menadue got the job. How wrong can you be! At the time all I wanted was to get back to Japan and distance myself from ever having anything to do with Canberra again.

Actually I did try foolishly to make one more intervention on the Canberra scene, in the mid-1980s, largely at the request of some manufacturers being badly squeezed by Canberra's laissez faire dogmatism. But by that time, the Bob Hawke economic rationalist orthodoxy was firmly in place: Australia did not need to give any special attention to its mid-tech domestic industries; the Clever Country was already poised to develop a range of, high-tech industries exporting into vast Asian markets. AAw years later under Keating, Australia, the Creative Nation, would not only sweep the world with its invention, it would also be the financial hub of Asia.

Today one has only to look at the headlines to discover the results of this bombast; Asian nations are now well ahead of Australia in high-tech. Even in mid-tech Australia is struggling. Casinos, breweries and media/real estate takeovers assisted by hordes-of lawyers have become the main economic stories. Australian banks are pulling out of Asia. The current account remains in chronic deficit. And all this is despite massive depreciation of the currency, to the level where Australian per capita income levels are now well behind those of Singapore.

The ultimate insult is the sight of Canberra's noisily anti-protectionist rationalists claiming credit for the economic stimulus provided by that depreciation. Devaluing one's currency happens to be the crudest form of protectionism, and would have been much less but for rationalist mistakes.

How does Canberra get to be so stupid? It is almost as if a special version of Murphy's Law existed, one that says that in any decision - be it economic policy, foreign policy, Medicare, Aborigines, multiculturalism, minerals policy, tax policy, you name it - Canberra is bound to get it wrong.

Canberra's isolation from the real world does not help. The giddy vulnerability of Australia's talkative classes to political correctness makes it worse, as does the willingness of the Canberra-based academics to prostitute themselves to gain political clout. Then there is the curious power vacuum inherent to a society that lacks history and compactness. As Margaret Whitlam was supposed to have put it: "You spend years in Opposition imagining that there are powerful forces at the top manipulating and controlling everything. But when you finally get there you discover there is nothing." Her husband did little to fill that vacuum, leaving the way open for a head-kicking, power-hungry ALP right adulated by a light-headed media. Already in 1975 the backroom confabs with "Richo" and company were under way.

The normal rule in politics - this time call it Clark's Law if you like - is for progressives to tend to get it wrong in domestic affairs, and right in foreign affairs. Conservatives, genuine conservatives that is, get it right and wrong in the reverse direction. They tend to get it right in domestic affairs since they are usually better attuned to the gut instincts and needs of the society. But they usually get it wrong in foreign affairs since gut instinct leads them to distrust the foreigners they do not know in favour of the foreigners they know - usually a very unsatisfactory basis for a foreign policy.

What has been remarkable about the ALP right was an uncanny ability to get it wrong in both directions. 1975 stands as a testament.

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