by Donald Horne
Two types of businessmen in Australia provide special problems – the spare-time directors who often sit on Boards, and the Men of Will who often run them.
In Australia company directors are not usually working directors as they are in America. A survey conducted in 1964 suggested that three-fifths of the directors came from outside the firms they directed. Directors are often amateurs and there are sometimes shareouts of directorships among old school friends and fellow club members. One single school provides a significant proportion of all the main directors in Melbourne; the membership of the Adelaide Club is largely the same as a list of the main directors in Adelaide. The racket of directorships in Australia is easy enough to organize. Ownership of companies is usually so wide that an oligarchy can perpetuate itself by perfunctorily submitting lists to amorphous shareholders. Even if there is a challenge the social homogeneity of the directing classes almost always crushes it. One sees here the ossification of institutions that is sometimes a characteristic of Australia. There is a mateship, a fraternity of directors, determined to maintain things as they are in the board room. One result of this is that the interests of the oligarchies may at times override the interests of the companies they control.
The American process of top management doing its managing from the board room is rare. The main breakthroughs are achieved by professional advisers, mainly accountants or lawyers (who, in America, are more usually hired for advice than put on the board) and both these classes of persons are often almost uniquely unsuited to the business of bold decision; it is more their job to evaluate the decisions of others. When put on a company board they sometimes reinforce the board’s conservatism although there have been some notable cases of accountants who have helped to keep companies going. There are of course some extremely competent directors but all too often these may sit on as many as a dozen boards, even more. There were competent directors on the boards of some of the companies that crashed so spectacularly in the early 1960s; but they seemed to be too busy to supervise closely the affairs of the companies they had been appointed to supervise.
It is difficult to see how business can be enlivened without the at least partial extinction of what amounts almost to a caste system, and its replacement, as in America, by a spirit of professionalism, loyalty to firms and a desire for efficiency.
Into this cosy world there barged the Men of Will described by Robin Boyd: ‘They are not the solid Australian fathers of finance and industry who are usually some ten years older and heavily conservative, nor are they the younger early-thirties men who began their careers in the atmosphere of easy mutual confidence. They are the miracle men of ambition, usually capable, always strong in will, the men who travel most, especially to America, who drive themselves and their big cars hard, who are consciously un-Australian in their attitude to work and who see themselves as the real life-savers that Australia always needed … All of them were born this century. The oldest finished school in the unsettled years after the First World War and the youngest had entered adult life before the beginning of the Second World War … They are more alert to international standards, especially American standards, than any executive Australians before them, but they are still real Australians in their suspicion of original Australian ideas and impatience with time taken in polishing any idea. For they are the exceptional, active product of a depressed, disenchanted, dull period in Australia’s development. They know themselves to be exceptional among their flat unenterprising contemporaries in their uninspiring school, university or apprenticeship days. Long ago they got into the habit of relying on their own resources on practically all occasions … So they became accustomed to making the decisions all round … Their faith in Australia has been and still is limited to their faith in themselves.’
Australia owes much to these men. Their sheer pleasure in bustle and in imposing their will on other men and their blindness to complexity drove them along in a series of gay improvisations that forced the pace. It was they who rigged up the modern look of Australia. The criticism of them is that their attitudes, once useful, may now stand in the way of further progress.
The kind of man in his fifties or early sixties who is now on top matured at a time that was so different from the present that his early experience may cripple him in facing new problems. Nevertheless he just goes it alone. He may be unable to see the importance of simple definition, to shape thinking and policy towards the future, to delegate administration, to institute planning, to encourage expertise, to sustain insight, initiative and teamwork. The job this kind of man is trying to do all by himself is often too big for him. He may not understand the increasing range of possibilities of the technological age and the new shape of business problems: to make the benefits of scientific and technological advance available to the public as quickly as possible. Technology has produced a greater momentum than the Australian concept of entrepreneurship may be able to keep up with.
Despite increasing industrialization there is an alarming shortage of capable managers, from foremen to managing directors. The whole tone of the country is not one in which capability is much regarded and the processes of training, advancement and selection often proceed on other grounds. The spirit of practicalism has meant a relatively late start in setting up institutions for the training of managers, although interest in management courses is now growing rapidly as the ‘Young Turks’ of industry prepare themselves for a takeover of responsibility. Perhaps those at the top (some of them are very old) instinctively resist the creation of what might finally prove to be a victorious new social class. The difficulties into which companies get themselves do not always arise from Government stop-and-go policies: they sometimes come from the fact that no one in the top management of a firm has read a book.
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A case can be made for saying that it does not matter if all Australian industry is foreign owned, if expenditure on research and development remains low and if manufacturing in Australia continues to be sheltered from external competition. Conditions for ordinary people will remain quite pleasant; they will still be able to cram their houses with the artifacts of the age, so why worry? What does it matter where the design for a new windscreen wiper comes from?
In fact Australia was chosen, in a Research and Development debunking discussion in England, as an example of a country for which it may be more economical to lease the fruits of modern research than to think up things for itself; the stock of scientists and engineers is small in Australia (per head of population it is only half that of the United Kingdom) and it is suggested that since they are in short supply they are best used in developing other people’s research. The first answer to this is that the stock of scientists and engineers should be doubled. It is not only research that is weak in Australia, but development too, and there should surely at least be more spending on that. And if the number of scientists and technologists was increased and there were more to go round it is not necessarily always true that it is cheaper to lease ideas from abroad. Naturally, Australian manufacturing does not itself have to think up everything it wants to make, but it is worth remembering, as P.C. Stubbs points out, that licence payments can take from 1 to 5 per cent of the works cost of production of consumer goods. In a paper at the 1965 ANZAS Conference, Stubbs estimated that a manufacturer of consumer durables who spent $600 000 a year on licences and another $100 000 on design translation could, for this money, set up a research and development unit of thirty-eight qualified workers and sixty-five to seventy assistants. And this would be only a fixed cost – it would not go up with increased sales, as licence payments often do. However, the even stronger case for native research is that Australia is particularly good at doing certain things – mainly in the primary industries – and that further spending on research, and even more on development, may strengthen this process. Its efficient steel industry and its other metal industries could also become stronger if native engineering and design could provide more things for the metal to be made in
to. The resources of its coal industry could be converted into economic enterprise with good research and development. This is not likely to happen while Australia continues to produce such a proportionately small number of graduates with higher degrees in science and engineering, the smallest proportion of such graduates among the prosperous nations (twenty per million in Australia, fifty per million in Britain, 388 per million in the United States). It is difficult to see how, as technology proceeds, Australia will be able to maintain its position even in the things it is good at, without spending more money on native talent; or even how it will be able to follow out the instructions it receives from overseas.
The social effects of Australia’s economic derivativeness may be even more important. It is likely to lead to a stupid society, a childish society that is self-confident with the familiar and uneasy with the unfamiliar, not capable of reacting to danger or making its own decisions. In such a highly commercialist society as Australia, in which commercialist standards permeate many other areas of power and decision-making, the fact that commercial success can be gained with such small inventive talents is likely to stupefy original decision-making and thinking in general. Australians do not suffer from the old colonial belief that you do not have to work for prosperity but they do tend to believe that no one has to think for prosperity and this is likely to affect their attitudes to those many matters that cannot be decided for them overseas. If Australia were Idaho, it would not affect its future no matter how stupid it was. But it is thousands of miles from Idaho.
Open spaces
Markets are declining for some of Australia’s rural industries. After the boom caused by the Korean War the terms of trade went against Australia (in general profile they have been going against Australia for fifty years) and by the beginning of the 1960s wool was threatened by synthetics, wheat by a world glut, and fruit and dairy products by the Common Market.
In advanced countries food production was constantly improving so that Australian foodstuff producers were becoming increasingly worried; Australia produced more and more food, when, as a result of its wars, the paying world was hungry but those who could pay for food were now growing much more of it themselves; the USA, Western Europe (as a whole) and the advanced Commonwealth countries all had certain kinds of food surpluses; and the size of these surpluses was likely to increase; except for meat, Australia’s position as a food supplier to the more prosperous parts of the world seemed in danger.
What is worrying for Australia is that the main decisions about the future of world trade in foodstuffs are largely political matters – matters of international commodity agreement, of unpredictable decisions by the controlled economies (principally Communist), of equally unpredictable political decisions within other countries (such as the desire to subsidise French farmers or the American quota arrangements) and the flukes of world politics (for example, Cuban sugar). The best Australia can do is to hope that the bottom does not drop out of all the foodstuff markets at once and to encourage shifts in food production where they are possible. One rather cynical solution that has been suggested is such an increase in population, accompanied by further industrialization to reduce imports, that Australia can eat its own food surpluses.
The other principal export – wool – would seem to have a more predictable future, yet what one might describe as the moral certainties of this $7000 million industry have withered with the development of synthetics. For most of Australia’s history wool producers looked at the future with long-term assuredness, although there were many short-term worries. Wool dominated Australian exports and Australian wool dominated the world’s fine wool markets. Merino rams were a symbol of national prosperity and even of national integrity. Several generations of Australians were taught to venerate not lions or eagles or other aggressive symbols of nationalism; they were taught to venerate sheep. The ‘squatters’ whose predecessors drove off into the bush with a couple of horses, some flour and sugar, a bullock dray, a flock of sheep, and a dog, and built their fortunes from simple bark huts, lived in style and dominated much Australian life. Their empires are now subdivided.
There may be a fake scare about wool markets. If someone engaged in protein research stumbles on a way to manufacture regenerated wool fibres, wool may be done for. Presumably this will happen some day but at present, although the production of synthetic fibres now exceeds world wool production and the price of synthetics is going down it is also true that world demand for wool increases as industrial efficiency and living standards rise. The preponderance of synthetics increases, but so does the demand for blended fabrics, part synthetic, part wool, so the total demand for wool increases, even if wool occupies a smaller position in the total textile market. Australian wool growers should spend more on marketing and research; they should certainly pay attention to the quality of wool and standards of classing, both of which are declining; but their greatest problem is not in selling wool, but in making money out of it; that in a protected economy their costs continue to go up but they can’t recoup them on the world market. There still seems to be a market for wool but it is becoming less and less profitable to grow wool. Failing wool farmers may switch to meat. Over a ten-year period Australian graziers grew almost a third more wool but the price they got remained much the same and production costs increased by about a quarter. Since there was considerable inflation over this period this means that as a whole producers made less real profit although they produced more. The position has been made worse by the encouragement of subdivision. Where there was once one station there may sometimes now be as many as twelve, each carrying overheads almost as great as the original station carried.
It is just possible that overseas investors may move into the wool industry and rationalize it. Since the production of fine merino wools has been one of Australia’s really significant world innovations, such an occurrence would be a considerable humiliation.
Research in the pastoral and agricultural industries is one field of research to which Australians attach importance and in which standards are of world class. However there is not enough of it. Problems queue up for the research scientists who are very good, but if there were more of them they could get more done. This is one field of specialist research where Australia makes regular contributions to world knowledge. If programmes were more lavish, specialists might be attracted from all over the world to Australia.
There should also be much more second-grade research into problems of farm management, much of it carried out in local districts. The State agriculture departments are understaffed; there are not enough agricultural colleges: there is not enough local extension work; and not enough men on the land have received the kind of technical training that lets them apply the benefits of research quickly and intelligently. Despite the excellence of scientific work there is still some resistance to new methods, both among wealthier property holders whose lack of training or feeling of social position can sometimes impede their acceptance of the merely expert, and among less successful farmers whose lack of education and capital make research meaningless. In the dairy industry the labour force might be cut by something approaching half if all the scientific knowledge now available were used and if the far too many small holdings were rationalized.
Although about one-third of Australia lies in the tropics, little more than 3 per cent of Australians live there. There is one school of thought that holds that this does not matter: it is argued that investment of scarce capital and manpower in other parts of Australia would bring greater development than equivalent investment in the North; that expensive price support schemes would be necessary for northern development; that it is doubtful if there are markets for the things that might be produced in the North; that countries already producing these things are becoming more efficient at it; that real diversification of growth is unlikely in the North; that investment in tourism (Come and See the Empty Spaces) might be the most economic investment; that the reason the North is undeveloped is due to fun
damental economic forces, not political neglect – it is not worth developing.
Some of these arguments have already been pushed aside by the discoveries of iron ore, bauxite, silver, zinc, lead, copper, and uranium: willy nilly this has caused development of isolated frontier settlements, based mainly on the investment of overseas capital, with Australian governments providing some of the infrastructure. Raising cattle seems a ‘natural’ industry for the North, now made more economic by the low costs of road trains. There are other pressures for developmental schemes to increase the cultivation of rice, cotton, peanuts, tobacco, linseed, safflower, cattle fodder. Development schemes now operate, but there is no coherence in them, nothing as imaginative as the National Reclamation Act passed by the American Congress in 1902, of which it has been said, because of the subsequent successful development of the seventeen ‘irrigation states’ of the American West, that it had an effect on America ‘as great as the Civil War, the development of the railroads or the coming of the aeroplane’. Migration has not been keyed to the potentials of the North; the construction of beef roads has been slow. According to engineers from France-Technique there is an enormous potential for electricity production from the large rise and fall of the tides on the Kimberley coast – ‘something of the order of several 10 000 million kilowatt hours per annum of continuous economic power’. (Present output of Western Australia is about 1000 million kilowatt hours.) Schemes like this have their season.