CHAPTER XXXI. FROM THE TREATY OF VERSAILLES TO THE SECOND WORLD WAR

With the Lyons government in office the argument about a policy for the depression was virtually settled, but Mr. Lang continued to resist for a little longer in New South Wales. He had already in April 1931 failed to pay interest on overseas debt, but the Commonwealth Government shouldered the responsibility. He introduced bills to reduce interest in New South Wales, though these were blocked by the Legislative Council. There was a run on the Savings Bank of New South Wales, and it had to close in April 1931. Mr. Lang's policy caused such strong feeling in New South Wales that his opponents organized a semi-military body, the New Guard, to call a halt by force if need be. Mr. Lang's supporters began to talk about 'the rise of fascism,' and the situation was certainly disturbing. But in 1932 Mr. Lang by acting unconstitutionally brought about his dismissal by the governor, Sir Philip Game, and Mr. B. S. B. Stevens became premier. Again at the ensuing elections in June 1932 Labour suffered heavy defeat, and remained out of office for the next nine years. Mr. Lang himself subsequently lost the leadership of the Labour party in New South Wales, but Labour throughout Australia was for many years handicapped by the dissensions which he caused in the movement.

Though the political issues were settled by June 1932 the economic situation was still extremely bleak. Unemployment amongst trade unionists had just reached the record figure of 30 per cent. of their membership, and prices for exports were still extremely low. In July 1932 Australia sent representatives to an Imperial Economic Conference at Ottawa, in an attempt, along with Britain and the other dominions, to increase inter-Empire trade. The Ottawa Agreements provided that the dominions should reduce the duty on British goods, and so increase the tariff preference which they already had over foreign goods. Britain, on the other hand, undertook to put tariffs on foreign goods, and to admit Empire products at lower rates of duty. At last Britain had succumbed to dominion and colonial pressure for Imperial Preference, which had been shrewdly and steadily applied for some 25 years. The result was that trade within the Empire certainly increased after 1932, but it was very largely at the expense of foreign countries. It is very doubtful whether the increased inter-Empire trade was worth the worsening of international relations that followed. Moreover, although the Ottawa Agreements gave some relief to Empire producers, they did not solve all the problems of export production. It was impossible, for example, for Britain and the Empire to buy even half the Australian wool clip. For this, and for many other products, Empire producers had to depend largely on sales to foreign countries. In 1938 Britain and the dominions recognized that Ottawa had not really solved the problem; to parody the words of Nurse Cavell, 'Ottawa was not enough,' what was required was a recovery of world trade. Fortunately this did begin to recover in 1933, and Australia benefited from it.