Jack Lang (Australian Politician) - The Crisis of 1931-32

The Crisis of 1931-32

Early in 1931, Jack Lang released his own plan to combat the Depression; this became known as "the Lang Plan". This was in contrast to the "Melbourne Agreement" which all other State Governments and the Federal Government had agreed to in 1930. Key points of the Lang Plan included the reduction of interest owed by Australian Governments on debts within Australia to 3%, the cancellation of interest payments to overseas bondholders and financiers on government borrowings, the injection of more funds into the nation's money supply as central bank credit for the revitalisation of industry and commerce, and the abolition of the Gold standard, to be replaced by a "Goods Standard," whereby the amount of currency in circulation would be fixed to the amount of goods produced within the Australian economy. The banks had indicated that if he paid the interest they would advance him an additional amount which was greater than the interest, thus giving him a positive cash flow.

Lang opposed the Premiers' Plan agreed to by the federal Labor government of James Scullin and the other state Premiers, who called for even more stringent cuts to government spending to balance the budget. In October 1931 Lang's followers in the federal House of Representatives crossed the floor to vote with the conservative United Australia Party and bring down the Scullin government. This action split the NSW Labor Party in two - Lang's followers became known as Lang Labor, while Scullin's supporters, led by Chifley, became known in NSW as Federal Labor. Most of the party's branches and affiliated trade unions supported Lang.

Since the Commonwealth Government had become responsible for state debts in 1928 under an amendment to the Constitution, the new UAP government of Joseph Lyons paid the interest to the overseas bondholders, and then set about extracting the money from NSW by passing the Financial Agreement Enforcement Act 1932, which the High Court held to be valid. Lang then contended that the Act was rendered null and void by contravening the 1833 prohibition of slavery throughout the British Empire; the Premier held that the actions of the Lyons government deprived the State of New South Wales of paying the wages of State employees and that this necessarily constituted an (illegal) state of slavery.

In response, Lang withdrew all the state's funds from government bank accounts and held them at Trades Hall in cash, so the federal government could not gain access to the money. The Governor, Sir Philip Game, a retired Royal Air Force officer, advised Lang that in his view this action was illegal, and that if Lang did not reverse it he would dismiss the government. Lang stood firm, and on 13 May 1932 the Governor withdrew Lang's commission and appointed the UAP leader, Bertram Stevens, as premier. Stevens immediately called an election, at which Labor was heavily defeated.

Gerald Stone, in his book 1932, states that there is evidence that Lang considered arresting the Governor to prevent the Governor from dismissing him, (which Lang admitted in his own book, The Turbulent Years). The possibility was sufficiently high that the armed forces of the Commonwealth were put on alert. Michael Cathcart and Andrew Moore, among others, have put forward the possibility that such a clash would have seen the Commonwealth Armed Forces fighting the New South Wales Police.

This was the first case of an Australian government with the confidence of the lower house of Parliament being dismissed by a Vice-Regal representative, the second case being when Governor-General Sir John Kerr dismissed Gough Whitlam's government on 11 November 1975. Game himself felt his decision was the right one, despite his personal liking of Lang. He wrote to his mother-in-law on 2 July 1932: "Still with all his faults of omission and commission I had and still have a personal liking for Lang and a great deal of sympathy for his ideals and I did not at all relish being forced to dismiss him. But I felt faced with the alternative of doing so or reducing the job of Governor all over the Empire to a farce." Lang himself, despite objecting to his dismissal conceded that he too liked Game, regarding him as fair and polite, and having had good relations with him.