The Purse Strings and the Policy Process: Bureaucratic Shaping of Industry Policy Capacity after...

The Purse Strings and the Policy Process:Bureaucratic Shaping of Industry Policy Capacity after1945*

Australian Journal of Public Administration • 60(1):21–33, March 2001© National Council of the Institute of Public Administration, Australia 2001. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK,and 350 Main Street, Malden 02148, USA.

RESEARCH & EVALUATION

Much literature in public administration debates the role of the public servant in the policy-making process. Some literature acknowledges an integral role of the public servant in theprocess. However, this role often remains obscure, due to being couched in abstract terms.The hierarchical structuring of responsibilities and power within bureaucracies impartsthe capacity for differential influence. This paper provides a case study of the role of thePublic Service Board (power over staffing) and the Australian federal Treasury (powerover the purse) in the shaping of the bureaucratic structure. The case study centres on theindustry policy bureaucracy in the volatile decade after World War II. In shaping thebureaucratic capacity, the Board and the Treasury exerted a discretionary influence on thepolicy process itself.

Evan JonesSchool of Economics and Political ScienceUniversity of Sydney

Do public servants make policy? Sir JohnCrawford was led to consider this question as adepartmental head in the 1950s (Crawford1960). He recalled lectures as a student in publicadministration (from the redoubtable FA Bland)in which the answer was clear-cut — ‘thedistinction made between policy andadministration clearly separated the decisionmakers, ministers, from their doers, the civilservants’ (Crawford 1960:36). Crawford’sexperience diverged from the purity of thelecture hall. ‘[C]ivil servants are not merelydoers; they are part of the complete process ofgovernment including the task of making policydecisions’ (Crawford 1960:37).

Acknowledgment of the integral role of thebureaucracy has often emphasised the latter’srole in ensuring continuity (cf. Spann et al.1973:326). The ‘Yes Minister ’ popularconception emphasises bureaucraticobstructionism. Yet the bureaucratic role mayalso be activist. Crawford noted that civilservants may ‘even initiate policies’ and ‘initiateand carry through policy decisions sometimeswithout formal clearance by ministers’.Crawford drew on his experience with tradepolicy, linking activism to a subject matter

whose complexity might transcend a minister’scompetence.

A deeper analysis would confront thephenomenon of bureaucratic hierarchy and thedifferential intra-bureaucratic capacity foractivism. The ‘central agencies’ have astructured capacity for the exercise of power ofan over-arching nature — treasury/financedepartments as ‘keeper of the public purse’;likewise agencies overseeing staffingprocedures. Such power can be used to channelpolicy imperatives, imperatives that transcendthe formal program of parties in office.

An exemplary demonstration of such powercan be found in the history of the secondaryindustry bureaucracy in Australia in the periodafter 1945. The end of World War II witnesseda federal Labor government committed to anassertive industry policy. Two motives wereparamount — permanent defence preparedness,and a robust national economy in which ahealthy second industry would play a significantrole.1 To this end, the Secondary IndustriesDivision was created in February 1945.

During the ensuing decade there was anattempt to build, for the first time at the federallevel, a formal industry policy apparatus. There

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© National Council of the Institute of Public Administration, Australia 2001

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was developed a range of assertive andinnovative, if eclectic, measures to support amanufacturing sector intended to be both broadand efficient (Jones 2000). In the early 1950sthese measures suffered a gradual attrition andeventual elimination. This transformationoccurred, to a significant degree, not throughexplicit decisions regarding policy priorities byCoalition cabinets. Rather, the transformationoccurred in large part through the decisions ofthe Public Service Board (PSB) in conjunctionwith the Treasury, and the bureaucraticmechanisms available to those institutions.

In particular, the PSB would be a constantand unwelcome actor in the life of the industrydivision until the division, truncated in scope,was absorbed within the Department of Tradein 1956. The history of the division between1945 and 1956 discloses that a long dispute overstructure and funding of the organisationprovides as much insight into industry policy-making in Australia as does an examination ofthe substance of the division’s operations itself.

What follows is a case study in publicadministration: the process of policy-making ‘bythe back door’. There are also implicationsregarding the subject matter of the study: theevolution of industry policy in Australia, theacceptable parameters within which such policyis effected, and the conventional interpretation ofsuch evolution and its causes. These implicationsare discussed briefly in the conclusion.

The Long Conflict over Organisationand FunctionThe Period 1946–50The immediate postwar period was one ofconsiderable strain, with the need to establish anormalcy of peacetime governmental rolescombined with the desire to maintain anenhanced governmental role for developmentalpurposes.

Treasury was concerned to re-establish itsauthority after being reduced in status by war-related ministries. The PSB was returned to fullstrength in January 1947, from that of a singlecommissioner, after marginalisation of its roleduring the exigencies of war (Australian PublicService Board 1973). The board’s formal rolewas in ensuring accountability within theCommonwealth bureaucracy — enforcing thereasonable standards of quality of performance,efficiency and interdepartmental coherence (cf.

Caiden 1967:191). Yet the federal public servicehad been expanded dramatically during the war,and was being pressed into new roles with thewar’s completion (Spann et al. 1973:374). Theenvironment appears to have imparted to boardstaff a missionary zeal in the execution of theirnew-found responsibilities.

Cabinet formally approved the establish-ment of the Secondary Industries Division (SID)on 15 May 1946, 15 months after its creation.2However, the division was approved only on atemporary basis, on the advice of the PublicService Commissioner. Treasury expressedhostility to the existence of the division andsupported the commissioner.3 It was authorisedthat permanent positions would be provided for‘in respect of proposed duties definitely of apermanent character, and where the occupantsrequired special qualifications and experience’.

The SID was housed in the Department ofPostwar Reconstruction, also temporary. Theintention was that it be placed in a permanentand major department. Under consideration wasa department of ‘Supply and IndustrialDevelopment’, in which defence preparednessand broader industrial development would bepursued in co-determination. However, therelevant interests could not be reconciled, andthe SID stayed in Postwar Reconstruction untilLabor lost office in December 1949.

In February 1947 the department requesteda name change for the SID and 51 permanentpositions. In April, the board approved the namechange and, in January 1948, the division wasbelatedly given the name signifying itspermanent ambitions — the Division ofIndustrial Development (DID). However, theboard deferred consideration of positions. Inmid-1947, the Treasury again queried thedivision’s role, and forced the department to aconference on the issue. Treasury expresseddissatisfaction with the rapid growth of thedivision and its presumed overlap with other(unnamed) departments. In July 1948 theminister brought forward proposals for theorganisation to be made permanent, whichcabinet approved in August.4 The proposalsfollowed a compromise established at the 1947conference, though differences evidentlyremained as to the meaning of that compromise.

The authorisation of May 1946 had resulted,by July 1948, in a staff of 329 persons. Manywere permanent Commonwealth public

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Bureaucratic Shaping of Industry Policy Capacity after 1945

servants, but the organisation had only nineapproved permanent positions. Cabinetapproved a permanent organisation, and for astructure based on a ‘ … nucleus of at least 100permanent positions desirable to give thenecessary stability to the organisation’.Moreover, ‘these should cover such duties andbe of salary ranges necessary to giveadministrative balance’ (Agendum 1497:8).

In the meantime, William Dunk had beenappointed chairperson of the reconstitutedboard. During 1947 Dunk moved to establishmechanisms for systematic review of the publicservice and, in November, gained Chifley’sapproval.5 Dunk acquired the formal basis forthe widespread application of ‘Section 17’investigations into staffing efficiency. Inpractice, the s.17 investigations were selectivelyapplied, and the DID was to be included in thisselective category by 1951.

Change of Government and the Evolution ofPrioritiesThe Coalition was elected in December 1949on a wave of rhetoric promising free enterpriseover socialism. In office, there was muchcontinuity, and the new government movedcautiously. The party’s platform promisedcontinued ‘industrial and rural development’.There were no ideologues in cabinet,6 and thosewithin the Party machine were marginalised.7

Early consideration of DID was in thecontext of the creation of a new Department ofNational Development (DND), over whichdiscussions were generally benign.8 Dunk andthe minister, RG Casey, were key deliberators,with input from related senior officials. DIDwent into National Development with thatdepartment’s creation in March 1950, as anintegral component of a broad developmentalistagenda. Both Dunk and Casey assumed acontinuity of organisation inherited from Labor.Indeed, in January Casey expressed concern atthe loss of top men out of DID to otherdepartments and the need to replace them. Theincoming government took no formal decisionsdiminishing the division’s role and constituency.

On the public service in general, thegovernment faced external criticism as to its sizefrom the press (and concern from stategovernments), but again moved cautiously.Menzies established a cabinet subcommittee onpublic service organisation, but its discussionsdisclose no dramatic enunciation of priorities.9

Conferences of Permanent Heads wereorganised by Dunk in February and November1950, at which there was an acknowledgedtension between staff control and policydemands, but attention was orientedpragmatically on temporary and exemptemployees. The impetus for more concertedchange ultimately came from external factors.

The Korean War was a catalyst for dramaticdevelopments. There was a redirection ofresources towards defence-related activities.Domestic cold war politics, but also financialrestrictions associated with membership of theSterling bloc, led Menzies to bring Australiamore within the American ambit (cf. Lee 1995).This move was symbolised by Australia’saudacious request for a $US250 million loanfrom the World Bank in August 1950, $US100million of which was approved within severalweeks. In seeking the loan, the government’spriorities were laid out (privately) for probablythe first time. The request outlined plans forsubstantial expansion and mechanisation ofagriculture; dramatic expansion of fuel andpower resources (especially coal and electricity);improvements in railway infrastructure;expansion in mining (especially non-ferrousmetals) and sections of the manufacturing sector,especially producer inputs.10 11

In principle, there appears no reason why adivision mediating with secondary industryshould not have played an integral part in theseactivities. Indeed, DID continued to beemployed for matters consistent with the broaddevelopmentalist agenda, including in mattersrelating to World Bank loans and the defenceagenda. Yet increasingly, DID found itselfwithout a natural home in the bureaucraticstructure. The DND did not become the centraldevelopmentalist agency that its first minister,Casey, had envisaged. Agricultural research andpolicy stayed with Commerce and Agriculture.National Development gradually became adepartment predominantly oriented towards theresources sector (though without any explicitcabinet decision to that effect).12

The Korean War also brought boom andinflation. Among the macroeconomic restrictivemeasures aimed at inflation was a decisive attackon public service employment.13 On 6 July 1951Menzies inquired verbally of Dunk, ‘how wecould reduce the strength of the public servicehaving regard to the extreme economic

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difficulties which face the Government’.14

Ensuing deliberations appear to have beenessentially in the hands of Dunk, in consultationwith Menzies. Cabinet ratified a substantial cutin numbers, of the order of 10,000 employees(thereafter known as the ‘retrenchment action’).In an extraordinary act of delegation, Menziesauthorised the PSB to decide on priorities forretrenchment.15 Dunk’s recommendations cameto cabinet in August.16 The language ofaggregates was used as a vehicle fordiscriminatory interventions. A policy directedformally towards overall cuts became a vehiclefor restructuring of priorities, through implicitand bureaucratic means. DID was a casualty ofthis process.

The Period 1950–51A change of government and unpredicted

pressures on the government were to have abelated impact on the status of the DID, albeitin indirect ways. Independently of these broaderchanges, the year 1950 found DID still engagedin a battle with the PSB and Treasury that hadbeen carried over from 1948.17 There existed adifference over the fundamentals — whatnumbers of staff the division is presumed to haveproposed and to deserve — in terms of cabinetapproval, and in terms of other criteria thatmembers of the board had absorbed in terms oftheir perceived role. The basic legitimacy of DIDwas still at issue, irrespective of general policydirections under the new government. The battletook place at the less visible level of engagementbetween DID and the PSB over staffing needs,and between DID and the Treasury over theannual estimates for staffing costs.

In March and April 1950 the divisionsubmitted to the PSB proposals for thereorganisation of particular sections — theDirectorate, and the Development and IndustriesBranches — apparently because of workdemands. The Victorian inspectorate reportedon these branches on 19 July. However, theboard decided to defer action on these branchesuntil it had considered the entire organisation.

The department submitted a proposal for thefull organisation to the PSB in January 1951.18

JES Stevens, DND secretary, noted that theproposed organisation was essentially thatalready in operation. Yet the department and theboard differed over perceptions of the other’srights, linked to the imprecise character of the

1948 cabinet agendum.19 The departmentclaimed that the PSB was misinformed as to theapproved numbers and the numbers currentlyunder discussion. At a conference between theboard and the division in 1947, 109 permanentpositions were agreed upon — 100 approved inaddition to 9 positions already created at the timeof the conference. Accordingly, 109 permanentpositions were provided for in the estimates of1949–50 and 1950–51 (although August 1950saw the department requesting 110 permanentpositions, to maintain the position of DeputyDirector, NSW).

FX Schneider, PSB Secretary, took as the‘bottom line’ the presumption that the numberof permanent positions would not exceed 100.For Schneider, the board could not approve of astructure with more than 100 permanentpositions without renewed cabinet approval, andthe matter was thus in the division’s hands toreturn with a more reasonable proposal.20

Agendum 1497 records that ‘… a nucleus of atleast 100 permanent positions was desirable togive the necessary stability to the organisation’(emphasis added). The agendum indicates thatcabinet intended that the Division was to be anorganisation of substance, entrusted with apolicy program of significant import. Schneiderhad moved the centre of gravity of the supposedconsensus to the technical issue of numbers ofpermanent staff, detached from the substantiveimport of the agendum, and reinterpreted theconsensus of a minimum of 100 (and practicallyestablished at 109) to read a maximum of 100.

Conflicts over detail and timing supple-mented differences over the big picture.Ironically, increased demands were being madeon the work of the division. The Labor govern-ment had augmented DID’s role in October 1949by handing it responsibility for governmentproperties suited to industry. Propertymanagement of ex-munitions sites had becomean extensive component of decentralisationpolicies, continued by the Coalition government.Capital issues control was re-established inFebruary 1951.

The Melbourne inspectorate responded tothe board in late March 1951 with recommend-ations regarding positions urgently requested byStevens — four senior positions, three in theTechnology and Management Branch. Theinspector acknowledged that ‘the proposedfunctions of the branch comes within the cabinet

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approval of 10.8.48’, and that the minister‘places particular store by the work of theproposed Technology and ManagementBranch’. The inspector was of the opinion that‘the Public Service Board on the other hand maydecide that an extension of the Division’sactivities in this field should again be consideredby Cabinet or by the Committee reviewing thefunctions of the Department’.21

The role of this branch was to adviseindustry on technical and organisational matters— effectively, to improve industrial efficiency.The inspector was not comfortable that adivision of the public service was providing suchservice, that it was providing it for free, and thatit was doing so on the division’s (accurate)presumption that there were no institutions inthe private sector possessed of the interest andcapacity to supplant such activity.

In Canberra, the Melbourne inspectorate’sreport was forwarded with support to InspectorJE Collings by Assistant Inspector W McGregor(previously an administrator in various policeand security organisations). McGregor repeatedagain cabinet’s intentions in May 1946 and inAugust 1948. He noted that the chairperson(Dunk) ‘has already expressed some doubts asto the necessity for extending into themanagement field and may wish to raise thematter with the Government in view of the factthat the Cabinet decision on function was givensome 21/2 years ago’.

McGregor claimed that ‘apparently little hasbeen done [by the division] in applied tech-nology or management during the interveningperiod’. This is a remarkable assertion andprofoundly inaccurate. The division had beenactive in both fields. The ‘technology’ functionwas exemplified in the Employment of Scientificand Technical Enemy Aliens Scheme (ESTEA)by which German specialists were being broughtto Australia. The management function wasexemplified in the work of the MaterialsHandling Bureau (Jones 2000).

McGregor recommended the approval of thefour senior positions requested, but on atemporary basis. He reasoned that ‘it is difficultto see how the function could be of a permanentor continuing nature. While there is no doubt need,under present conditions, for the promotion ofefficiency in industry, to advance industrialdevelopment and stimulate production, it islogical to assume that a stage must be reached

when a full service of this kind by the C’wealthwould be no longer justified or evennecessary’.22

Collings in turn recommended to Dunk thatthe functions of the division be clearlyestablished and to consider the need forpermanency of this handful of positions whenthe substantive issue was settled. Yet thefunctions had already been clearly established;Collings intends that the functions should beestablished anew, with the new government. Thechairperson overrode McGregor and approvedthe three technology and management positionsas permanent. The chairperson did recommenda further conference of board, Treasury and thedepartment on divisional functions.23 The boardfinally approved the positions, subject to theavailability of funds, on 1 May 1951.

The Treasury saw otherwise. On 20 June thedepartment was advised that Treasury waswithholding funds ‘pending consideration of theoperations of the Division by the committeeconsisting of representatives of the Board,Treasury and the Department’.24

On 19 April 1951 the Melbourne inspec-torate reported on the parts of the division nottreated in its earlier report (30 March) and onvariations from its recommendations forparticular sections and positions from an earlierreport of 19 July 1950. On 10 April, the reporton the Sydney office was forthcoming, providedby Assistant Inspector NJ Lake.25 The Sydneyreport is prefaced by a long and intemperatestatement questioning the division’s role andsize. Like his Melbourne counterparts, Lake wasunhappy that a branch of the public service shouldprovide advice of a technical and organisationalkind to business, and that it should do so withoutcharge. Lake saw no natural cut-off point for thisagenda. Lake viewed the entire department asopen to the same excess:

[from the formal functions] it appears thatthe scope allowed the Department is mostextensive and if taken to the letter anorganisation many times the size of the oneproposed would be necessary.

… taken to an extreme and providing aminimum service to industry, the Divisioncould limit its activities to a Library serviceand to directing enquirers to sources ofinformation and to authorities who deal withthe various matters. If this limitation was

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placed on the Division in connection withits assistance to industries the staff proposalssubmitted could be cut considerably.

Indeed, on this logic, the division could beeliminated completely, as Lake’s position wasthat an information mediation house couldreadily be supplied by the private sector.

Lake devoted considerable space toproviding anecdotal information from officersof the NSW state department concerned withsecondary industry, jealous of federal activityin the same arena, as a vehicle to damn the roleof the federal organisation.26 In general, Lake’sreport is not a model of objectivity.

Inspector McIntyre (Lake’s NSW superior)reported to the board secretary on 27 July.McIntyre supported Lake’s position, althoughmore sober in tone. A handful of additionalpositions was supported, only four of theseprofessional positions. The inspectors were ofthe opinion that there existed too many seniorpeople and at too high a ranking, the problemin their estimation resulting from an overhangfrom the structures erected during war time.

Both NSW inspectors accepted that thepreponderance of temporary positions hadcreated problems for attracting adequatepersonnel and providing adequate career paths.This had resulted from the organisation itselfremaining temporary. Yet the Labor cabinet hadapproved the organisation on a permanent basisin August 1948; the PSB itself was responsiblefor the continuing uncertainty.

At this time, the detailed investigation wasovershadowed by the ‘retrenchment action’ fromabove. As Dunk was requested to find 10,000employees for retrenchment on 18 July anddelivered his report on 1 August, the proposedcuts would inevitably display a degree ofarbitrariness. No rationale was provided for thecuts. The experience within the DND isrepresentative of a selective and pragmaticprocess. The DID was to have its numbersreduced by the convenient percentage of 50percent (the Dunk Report recommends ‘reduceby half’).27 The smaller divisions of RegionalDevelopment and of Building Industry wererecommended for abolition save for a smallnucleus. By contrast, the Bureau of MineralResources was to be expanded, courtesy of aprevious ‘staffing authority’ to which theretrenchment action deferred, although its rateof expansion was to be restrained.

Within the space of one month (August–September), 9080 employees were designatedfor retrenchment. Cabinet softened the PSBrecommendation for DID, and DID was orderedto be reduced in numbers from 313, at May1951, to 201 (again an arbitrary number).28

The retrenchment action cut across theformal detailed work proceeding on thedivision’s size and structure — it was dramaticin its impact while lacking any rationale for thenature of the cuts. The Technology andManagement Branch was abolished, with theruling that these ‘have not been highlydeveloped’. Only Materials Handling survived,if attenuated, as a distinct function out of thisbranch.

The PSB investigation into the Melbourneoffice of DID had been completed by April 1951.Treasury had denied the funds for that structure;in that dangling state the priorities were reshapedby ‘the retrenchment action’ of the 1951 budgetcuts. The PSB inspectorate report on the NSWoffice did not eventuate until late July 1951. TheNSW office was hit disproportionately by theretrenchment action. The staff allocation inNSW was heavily reduced, from 80 to 38positions.

The Sydney inspectorate by this time hadacquired some sympathy for its subject —claiming that the reductions in the Sydney officeresulting from the retrenchment action had beentoo severe, and imbalanced. The formalprocedures of the PSB investigations had beenundermined by a blunt process of resourcereallocationby thePSBchairperson inhis capacityas administrator of the retrenchment action.

The Section 17 InvestigationA ‘Section 17’ investigation of DID was alsoinitiated, apparently sometime in 1951 (no dateis recorded). Section 17 embodies the ‘bread andbutter’ role of the PSB in ensuring efficiency instaffing and organisation, given delegatedresponsibilities. This investigation was formallydistinct from the longer term conflict over DIDfunctions and from the dramatic staffingimplications of the 1951 retrenchment action,but the three strands combined (albeitincoherently) to put permanent pressure on DIDand its department. Dunk had later defended s.17investigations as not concerning the board in thesubstantive operations of departments;29

however, the DID investigation belied this claim.The s.17 report on the central (Melbourne)

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office was completed in April 1952,complementing the report on the NSW office inNovember 1951.30 The report was sent to thedepartment in early May 1952. The report hadbeen sent by Dunk to Roland Wilson, TreasurySecretary, six weeks previously, with Dunk’spersonal and critical comments on the need forreform of the division.31 The Melbourne reportconcluded that the division was overstaffed. Ofthe 149 staff remaining in the central officefollowing the retrenchment action, the reportrecommended a reduction to 124 (whichincluded two temporary German scientistsemployed on the ESTEA scheme), includingelimination of nine permanent positions. Thereport claimed that the division was top-heavyand that classifications were too generous, somuch of the reduction needed to occur at seniorlevels.

The report was critical of the‘entrepreneurial thrust’ of the division —initiating contacts, forms of assistance (albeitmostly of an informational nature), and so on.There does appear to have been a ‘bower-bird’mentality within DID in its approach toinformation, to the establishment of contacts,and to the provision of a range of services.However, the tenor of the board’s report is notto direct pressure towards a more focusedapproach to services delivery, but towards theelimination of such activities within the division.

The inspectorate persistently found faultwith the division’s provision of services free ofcharge or with insufficient charges. It isinstructive that the 1948 agendum had mootedthat the Treasury consider the establishment ofa trust fund for recovering some costs associatedwith services. A trust fund was standardprocedure for fee-for-service activities (as withsome operations of the Council for Scientificand Industrial Research); failure to establish aDID fund lay with the Treasury itself.

More broadly, the board view combined thenotions that services provided to industry shouldbe cost recoverable but that, as a matter ofprinciple, the bureaucracy should not providesuch services.

This view is firmly within the liberalistpolitical tradition. Yet the underlying vision runscounter to the universal practice of bureaucraciesin twentieth-century ‘market’ economies. Thevision certainly runs counter to the long-standing support of bureaucracies in Australia

(at both the state and federal levels) for the ruralsector. The early 1950s were a period duringwhich bureaucratic support for both the ruralsector and the mineral sector was beingenhanced. In that context, the impact of theboard’s position was to differentiate anddiscriminate regarding the bureaucracy’ssectoral involvement in industry, singling outsecondary industry for an ‘arm’s length’relationship.

The board was understandably concernedwith potential overlap and duplication ofservices, and with the nature of the liaisonbetween the division and other departments. Thegeneral tenor of the s.17 report is that thedivision had either usurped the role of otherdepartments (for example, import licensing ofTrade and Customs) or was doing work moreappropriately handed over to other departments(the sponsorship of import and export licensesand of travel permits; statistical collection;property management; etc). Yet the report runscontrary to cabinet instructions, and to thegenerally cordial relations between the divisionand related service departments.

Of major significance is the attitude towardsthe division’s role in ‘technology and manage-ment’. The board’s long standing aversion to thedivision’s role in this respect is stated moreboldly in the s.17 report. The report questionsthat it was ever the government’s intention thatthe division be so involved, and quotes from the1948 agendum to support its case. Yet the excerptprovides evidence to the contrary.

The (Labor) government wished to replicatethe work performed by the Department ofMunitions ‘which has assisted many manu-facturers by advising them on the technical andorganisational problems of production’. Thegovernment was keenly aware of the divergencebetween ‘fundamental research’ (the bailiwickof the CSIR/CSIRO) and applied research. Thequoted agendum excerpt continues:

The ultimate aim is to ensure the allocationof the results of appropriate research in thefactory. Here, there exists a wide gap whichmust be bridged. The techniques of bridgingthis gap are engaging the close attention ofgovernments overseas, but the problem is,of course, more acute in a country likeAustralia which has developed industriallyin a precocious fashion (Section 17Report:11).

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There was a role, then, for a body to complementthe ‘fundamental’ research work done by theCSIRO, to assist industry in the take-up ofapplied research. The board was suspicious ofthe task, although acknowledging its desirability.Yet the board was opposed to ‘experts on thegovernment payroll’ investigating and advising‘on the problems of individual firms’. Theboard’s temper was for shifting the burden toprivate technical consultants and for industrydoing something to help itself. The boardacknowledged that it was making recommend-ations beyond its brief (‘Whilst it is appreciatedthe foregoing suggestion is a little outside thescope of the present investigation’), but madesuch recommendations nevertheless.

The report narrowly interpreted thedivision’s dominant function as an information-gathering and dissemination exercise. Emphasishad centred on the 1952 document, TheStructure and Capacity of Australia’s Manu-facturing Industries. This publication wasmassive in size (560 pages), comprehensive inscope, and was in preparation between March1950 and July 1952, being published in October.However, work on The Structure complementeda wide range of other activities, activities carriedover from the cabinet agenda of the previousgovernment, and continued under the presentgovernment.

Deliberations regarding the Sydney officeexperienced a separate trajectory. Following ameeting of board and departmental represent-atives in May 1952, the board recommended aslightly stronger organisation for the Sydneyoffice. The board agreed to augment the staff ofthe Materials Handling Branch, badly mauledin the retrenchment cuts. The board acknow-ledged the importance of the Sydney office asrepresenting a heavily industrialised state, and(by contrast with earlier statements by juniorstaff) had the tone of taking seriously the roleof the division. Yet this support was within thenew bottom line.

The NSW office, location of the MaterialsHandling Branch, remained extremely unhappyabout the rationalisation. The head of the office,JJ Sheils, expressed concern to the board’schairperson in November 1952.32 Sheils hadworked on materials handling problems duringthe war; it was on his initiative that the branchwas set up and placed in the division.

Sheils’ correspondence outlines a gulf

between the work on offer and the resourcesavailable. Wool handling was of major concernin the industry. The wool industry had beenstressing the pressures on wool growers due toincreased costs. The IDC on wool research inJuly 1952 endorsed a Materials HandlingResearch Program for wool handling, and votedfunds from a wool industry account to assist inits establishment.

Moreover, several reports on port operationshad made recommendations on improvingloading, not least via the palletisation of cargo.33

The Department of Shipping and Transportsupported the use of the division’s skills in thisprocess. The division was advising on handlingproblems of Tasmanian fresh fruit produce, andwas engaged in a packaging working party andin educational work. Sheils had been calling fora work value case on the Materials Branch forthe past year. Remarkably, the MaterialsHandling Branch had been excluded from thes.17 investigation because of uncertainty aboutits immediate future.

The Period 1953–56Correspondence between the department and theboard escalated during 1952 and 1953.Agreement on some details of the s.17 reportwas met only after a prolonged delay; otherdetails appear never to have been resolved inany formal manner. Differences over s.17 detailsblended into the long-term conflict. A newelement in this period was the more substantialrole of Treasury Secretary Wilson.

The profoundly negative approach of Wilsoncomplemented the adversarial approach of theboard. Raggatt had had discussions with Wilsonin early April 1953 regarding finalisingarrangements for the structure of the division.34

Wilson was recalcitrant — he was still notsatisfied that the functions of the departmentwere sufficiently explicit, and wanted furtherdiscussion. This was after three years ofdiscussions and downsizing. Wilson was loatheto rely on the authority of past cabinet decisionsor on PSB reports. Raggatt, finally impatient,claimed that the division had been subject to‘detailed enquiry and discussion’. Given thatsenior positions had been targeted by the report,he wanted to establish an agreement and get onwith the business. To ensure a stable footing forthe organisation, Raggatt was even prepared tosettle for less personnel than the board had

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recommended.As part of an extended correspondence,

Wilson wrote to Raggatt in August 1953 in thecontext of the budgetary preparations for thefinancial year 1953–54.35 This significant letterdeserves to be quoted at length:

I think it has been agreed in our discussionsto date that a major reorganisation of theDivision’s activities are called for. As youknow, I am firmly of opinion that much ofthe Division’s work overlaps the work ofother Departments, and that much of theDivision’s other work cannot be regarded asessential to the administration of theCommonwealth’s responsibilities.

The question is of particular and pressingimportance at the moment. The Treasurer hasexpressed serious concern at the rise inadministrative costs reflected in the draftestimates submitted by Departments and hasinstructed that the estimates be closelyscrutinised with the object of making allpossible economies.

In the light of the Treasurer’s instruction, andpending further consultations on the matter,I consider that a substantial reduction in thecost of the Division should be provided forin the forthcoming budget.

Wilson asserted that the division’s staff shouldbe ‘reduced to, say, 50 (including temporaries)by the end of December next’. Wilson intendedto provide funds that would set in train areduction along the lines of his vision for theorganisation. Wilson had also intimated his view,in an ensuing conference with the departmentand the board, that the division was undulyselfish compared to the ‘older departments’.36

The department’s presentation at theconference states succinctly the staff position.37

Prior to the 1951 ‘retrenchment action’, 313 staffwere employed by the division. Dunk’sretrenchment report recommended cutting thedivision ‘by half’; cabinet altered the numberto 201 positions. Raggatt claimed that the s.17investigation approved an organisation of 196positions. However, departmental appropriationof administrative functions and natural attritionhad left the division with 158 staff, including35 clerical and secretarial positions whosenumbers were relatively inflexible. In spite ofthese reductions, Raggatt offered the conference

a further reduction of 28 substantive positionsand 6 clerical staff, resulting in a total of 124positions.

Wilson offered temporary agreement to thedepartment’s offer of 124 positions. Wilson,however, insisted on yet another review toestablish both ‘minimum essential functions’and to reduce further the numbers involved inthe division’s core functions of informationgathering and distribution, which would be againsubject to Wilson’s acceptance.

Raggatt took issue with Wilson’sunderstanding of the conference — he had notagreed to any further staff cuts beyond thepresent concessions; and further review of theorganisation would need to occur simul-taneously with the staff reduction to the agreedlimit so that reductions would be functional forthe division’s long-term role.38

Board members were aware of the tensionbetween the department and Wilson,39 and ofthe adverse effect of continuing uncertainty onstaff morale. Nevertheless, the PSB memoaccepted the Treasury position demanding thedeferment of the offering of more permanentpositions and the deferment of promotions,especially at the senior level — effectively, thereinforcement of conditions underminingmorale.

Correspondence from the department to theboard, in August 1953 (several days before theconference) and in March 1954 (replying to theboard’s November 1953 reply to thedepartment’s August letter), highlights that thedivision’s responsibilities had been graduallywhittled away, in line with the board’s ambitions.On some minor matters the department wassticky, and the board acceded to these. A(further) conference with Treasury was to be theoccasion for further deliberation on the broadparameters of the division’s role, but most ofthis attrition was already underway.

Wilson held the power of the purse strings.Accordingly, the 1953 budget was the vehicle,on Wilson’s initiative, for a further discretionaryretrenchment action against the division inSeptember, mostly affecting the remaining non-permanent staff. The attrition of responsibilitiesfollowed the attrition of personnel.

The only major issue remaining to be settledwas that of the Materials Handling Branch, thesubject of a special conference. Cabinet, in themeantime, oblivious of the attrition of the

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division, had re-stated its desire that the divisionbe responsible for the administration of exportcontrol of scrap iron and steel.40

The ‘further review’, insisted on by Wilson,was performed by the inspectorate and reportedon in April 1954.41 The report recommendedfurther staff reductions, though of a marginalnature. The tenor of the report again indicatedsome sympathy for the division. To quote:

the various staff reductions, the freezing ofpromotions to positions since September1953, and the general uncertainty as to thefuture of the Division has caused seriousstaffing problems arising out of:(a) lack of morale;(b) loss of experienced staff and inability to

make suitable replacements; and(c) some misfits left by the processes of staff

contraction.It is essential in the interests of efficiencythat an adequate permanent organisation nowbe finalised.

To that end, the inspector recommended greateruse of permanence. Yet the PSB had beenantagonistic to DID’s request for a handful ofadditional permanent staff since early 1950.

The April 1954 report offered a favourablereview of the Materials Handling arena. It notedthat the costs were mostly financed from anindependent wool industry fund, andacknowledged that the branch ‘made a valuablecontribution to the problems affecting materialshandling generally and the results measured interms of savings run into millions annually at aconservative estimate’.

The report also acknowledged the demandsmade on the division in the management ofCommonwealth property, not least because ofthe scale and dispersion of the properties inaggregate. The report was highly critical of thecompetence of one particular individual with keyauthority. Ironically, the division had to makedo with makeshift staff for an ongoingresponsibility, as previous restructurings haddenied resources for property management.

In June 1954, Raggatt sent Wilson and Dunkconsiderable material on materials handling aspreparation for the forthcoming discussion.42

The board had consistently cast doubts on thepropriety of such work being done by thebureaucracy, and on the merit of the division

performing such work. Raggatt claimed that thebranch was generally recognised as an authorityin the field; that the branch received numerousrequests for assistance from private industrywhich it could not meet; government depart-ments (especially the Defence group) were inpersistent need of assistance; and that ‘there isno private agency to which the Government orindustry could turn for advice’.43

By July 1954, a meeting of departmentalofficers with Wilson had acquired Wilson’sagreement to provision of funds for the April1954 organisation approved by the board.Wilson, however, simultaneously stated hisopposition to the size of the organisation soapproved (now reduced in size). Wilson wantedfurther cuts and again came up with an arbitrarynumber (100). Wilson also expressed continuingdissatisfaction with the existence of theMaterials Handling Branch, offering the opinionthat if Defence wanted such advice, Defenceshould fund it.

After ‘overnight consideration’, Raggattagreed to a figure of 105, excluding materialshandling. This further reduction finally met withthe approval of Wilson and the board, and wasgiven assent in September 1954. Though in atruncated form, more positions were finallymade permanent, and belated acknowledgmentwas made of the importance of the propertymanagement section.

The division survived for another 18 months,in its now predominant role as information-gatherer.44 In March 1956 the division wasrelocated into the Department of Trade. A figureof 93 persons is noted as having moved fromthe division into the new department. Furtherattrition thus occurred in the interveningeighteen months.

The Process of Policy FormationThe phenomenon described above involves asubstantial reduction in the size and a qualitativediminution in the role of a division of theCommonwealth public service. Most of thattransformation was not the product of adeliberate and formal change in policy prioritiesat the level of government. One can reasonablyinfer, from archival sources, that significantresponsibility for the change can be attributedto the combined initiatives of the PSB and ofthe secretary of the Treasury.

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The board claims to have uncoveredinstances of incompetence, pockets ofinefficiencies, instances of inappropriateclassification, and a certain self-expandingtendency to make work. One can only accept atface value the word of the board inspectorateon these issues — that weaknesses and failingswere there to be corrected and restrained.

Yet this officially sanctioned work wassubordinate to inaccurate commentary on thedivision’s work, with perennial commentary onthe desirability of the work being done, withthe repeated unsubstantiated presumption thatwork was either the prerogative of other depart-ments or that the work was not appropriatelycarried out within the public service. Cabinetshad ratified such responsibilities for DID onseveral occasions. The early ratifications wereby Labor cabinets. The incoming governmenthad fostered the reproduction of the division’sbroad role; the board’s inspectorate found thistolerance unsatisfactory. The Coalition govern-ment continued to draw on DID advice in thefurtherance of its developmentalist priorities, andexplicitly reinforced specific responsibilities. Theboard and the Treasury secretary merely ignoredthis ratification.

In his 1974 memoirs, the chairperson of theboard, William Dunk, glossed over thecontroversy that the retrenchment actiongenerated at the time. Dunk defended thediscriminatory staffing reductions in thelanguage of aggregates.45 Dunk expressed pridethat the federal public service had enhanced itsprestige with private industry after the war(Dunk 1974:93). Yet Dunk’s board had overseenthe dismantling of a division whose quality ofpersonnel and culture of close interaction withindustry had served to foster the prestige thatDunk admired from the vantage point of aCanberra retirement.

Treasury action (in the person of RolandWilson) is distinguishable by its discretionarycharacter. On several occasions (Wilson toRaggatt, 4 August 1953; Raggatt to Dunk, 19July 1954), Wilson suggested an arbitrarynumber, substantially less than existing staffing,that he expected to be the basis for furtherdialogue. Wilson claimed to be acting on theTreasurer’s advice. It is doubtful that suchcommunication had taken place, but neither theTreasurer nor the Treasury secretary possessedauthority on staffing matters. Wilson’s influence

came to the foreground just as the boardinspectorate was expressing concern that thedivision had been treated unjustly. The actionsby the board and Wilson in combination served,over the long term, to emasculate the capacityof the division.

Theboard and its inspectorate, althoughactingprocedurally within its formal brief, persistentlyover-stepped the bounds of its formalresponsibilities. Treasury’s antagonism to thedivision from its formal establishment in 1946wasnoted above. That antagonism appears never tohave been abandoned. Although using theinstruments at its disposal, the Treasury secretaryacted in a discretionary manner, substantively andprocedurally. The actions by both parties highlightthat there is no clear demarcation betweenappropriate and inappropriate behaviour on theirpart. What is significant is the considerable power(de facto as well as formal) placed in the collectivehands of these parties through the instruments attheir disposal — respectively, the power overpersonnel and the power over the purse.

The Policy ImplicationsIn 1956 the DID’s role was essentially that ofinformation gatherer. In that state, it was movedinto the new Department of Trade and integratedwith branches brought over from Trade andCustoms to form the Trade and IndustriesDivision. What remained of industry policy in1956 was centred on those instruments carriedover from Trade and Customs — the protectivetariff and its temporary complement, importlicensing.

The conventional wisdom of economists andeconomic historians has it that Australianindustry lost its momentum during the years ofthe ‘post-war boom’ because the preferred policyinstrument was that of ‘inward-looking’ tariffprotection (cf. Anderson and Garnaut 1987).This state of affairs has been blamed on thepresumed power bloc under the auspices of theTrade Minister, Jack McEwen.

The conventional wisdom is simplistic. Theatypical emphasis on tariffs is a product of aparticular culture in which Australian economicpolicy is structured, and it reflects the evolvingpolitical and bureaucratic balance of power(Jones 1998). The inheritance of a substantialsecondary industry from World War II found theLabor government committed to ensuring its

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viability on an efficient and dynamic basis. TheDID was the key bureaucratic vehicle towardsthat end. The emasculation of the division’s rolenarrowed the parameters by which industrypolicy was conceived and implemented. It is acurious phenomenon that the over-dependenceon tariff protection in the 1960s was an outcomefor which the supposedly anti-protectionistforces (in particular, Treasury) themselvesplayed a positive role.

Notes* The author is grateful to the anonymous referees

for constructive assistance. The author is alsobeholden to the staff of the National Archives,whose patient assistance with archival materialhas been crucial to the writing of this article.

1. JJ Dedman, Minister for Postwar Reconstruction,to JB Chifley, Prime Minister, 13/12/1945;National Australia Archives (NAA), Series A461,Item BH/6/1/1.

2. Agendum 1178, 15/5/46. Cabinet Minutes A2700.3. ‘The Treasury strongly opposes the setting up of

a permanent organisation’ (PW Nette to Treasurer,4/6/46). A571/150, 45/877.

4. Agendum 1497, 10/8/48. Cabinet Minutes A2700.5. A451/1, 53/5255.6. The ‘inner’ Cabinet appeared to comprise

Menzies, Arthur Fadden (Treasury), Eric Harrison(Defence, later other portfolios), Harold Holt(Labour and National Service/Immigration), JohnMcEwen (Commerce and Agriculture), RichardCasey (Works and Housing/National Develop-ment), Percy Spender (External Affairs) andPhilip McBride (Interior, then Defence).

7. Hancock (2000:120) notes: ‘between 1950 and1954 the organisation ceased to exercise any realinfluence over policy-making or in theimplementation of the party platform. [TheGovernment] turned almost exclusively to thePublic Service and quasi-official bodies foradvice and ideas’.

8. See ‘Department of National Development:Creation of Department’, A451/1, 51/367, passim.

9. See A4933, Vol.1. An Advisory Committee wasattached to the subcommittee but no minutes werekept of this committee’s work.

10. President [Eugene Black ] to Executive Directors,IBRD, ‘Commonwealth of Australia’, Annex II,10/8/50, World Bank Archives, New York. (Copyobtained from Graeme Byrne, Snowy MountainsScheme historian). The request envisaged that thedollar loan would allow the purchase of a rangeof equipment and machinery from the USA tofacilitate a broad expansion unconstrained bybottlenecks.

11. The ‘main lines of development’ appear to havebeen coordinated by the Economic Policy Sectionof Prime Minister’s. The section had been takenover from the Department of PostWarReconstruction after its abolition on the advice ofAllan Brown. Brown, the outgoing Secretary ofPostwarReconstruction and the incomingSecretaryof Prime Minister’s, provides a personalembodiment of the continuity of ‘develop-mentalism’ after the change of government.

12. The department’s first effective Permanent Head(from July 1951), HG Raggatt, was a minerals‘man’, having previously been head of thedepartment’s Bureau of Mineral Resources.

13. Treasurer Arthur Fadden claimed that ‘Whilst areduction in the size of the Public Service cannotof itself make a substantial contribution tocounter-inflationary policy, it could be of crucialimportance in winning the community’s supportfor the drastic measures necessary in the fieldsof taxation and works expenditure. Sub. No.64,‘Economic Policy — July 1951’, 16/7/51. A4905/XM1.

14. ‘Reduction in Commonwealth GovernmentEmployment 1951’. A4940/1, C391.

15. Decision No.87 without submission, CabinetMeeting 18 July 1951. A4907/XM1.

16. Sub. No.172 ‘Reduction in CommonwealthGovernment Employment’, Report of the PublicService Board, 1/8/51. A4905/XM1.

17. There are no extant archival records for the periodbetween late 1948 and mid-1950.

18. JES Stevens, Sec. DND, to Sec. PSB, 19/1/51.A451, 70/588.

19. cf. B Hartnell, Director DID, to Pinner,Commissioner PSB, 24/8/50; Schneider, Sec.PSB to Sec. DND, 8/9/50. A451, 70/588.

20. Schneider to Stevens, 8/9/50. A451, 70/588.21. Tucker to Sec. PSB, 30/3/51. 70/588.22. McGregor to Collings, 12/4/51. 70/588.23. Memos, 12/4/51 and 26/4/51. 70/58824. Reference in the chairperson’s letter of 2 May

(not retained in file).25. Lake to McIntyre, 10/4/51. 70/588.26. The division and its NSW equivalent had been

engaged in a lengthy conflict regardingappropriate responsibilities with respect togovernmental support of industry. See MP217/1, A832.

27. PSB Report (see n.16), p.5.28. There is no record of cabinet deliberations on

these modifications. The fact of the modifications,however, provides testimony to the lack of inputof cabinet into the retrenchment action itself.

29. Conference of Permanent Heads, 3/2/54. A518/1, CA800/1/6 Part 1.

30. Report (33p. & 15p. apps.), A451, 70/591.

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31. Dunk to Wilson, 24/3/52. A451, 70/591.32. Sheils to Dunk, 12/11/52. A451, 70/588.33. In particular, the 1952 [Henry] Basten Report on

port congestion.34. Raggatt to Dunk, 14/4/53. A451, 70/589.35. Wilson to Raggatt, 4/8/53. A451, 70/590.36. File note from Dunk, 12/8/53. 70/590.37. ‘Staff Proposals: Division of Industrial

Development’, 12/8/53. 70/590.38. Letter to Dunk, 19/8/53; memo to Wilson, 1/9/

53. 70/590.39. Collings to Grainger, 7/9/53. 70/590.40. Raggatt to Dunk, 8/2/54. 70/590. Decision OC/

10, Overseas Commercial Relations Committee,on advice of the Materials Industry AdvisoryCommittee of the Department of DefenceProduction. A4940/1, C969.

41. ‘Review of Organisation of Division of IndustrialDevelopment’, Insp. B White to Collings, 14p.30/4/54. 70/590.

42. cf. ‘Activities of the Materials Handling Branch’(15p. + 2p. apps.) 15/6/54. A451/1, 70/590.

43. Raggatt to Wilson, copy to Dunk, 25/6/54. 70/590.44. Responsibility for Commonwealth property

management was passed to the Department of theInterior. The Materials Handling Branch remainedwithin National Development for another decadeand was disbanded only in the mid-1980s.

45. Dunk evaluated the action as ‘a bit of bloodletting[that] did us good and did the overall economygood’ (Dunk 1974:85).

ReferencesAnderson, K & R Garnaut 1987 Australian

Protectionism, Allen & Unwin, Sydney.Australian Public Service Board 1973 The Public

Service Board, 1923–73, AGPS, Canberra.Caiden, GE 1967 The Commonwealth Bureaucracy,

Melbourne University Press, Melbourne.Commonwealth of Australia 1952 The Structure and

Capacity of Australian Manufacturing Industries,Angus & Robertson, Sydney.

Crawford, JG 1960 ‘Relations between Civil Servantsand Ministers in Policy Making’, EconomicRecord xxxvi(73):36–50.

Dunk, W 1961 ‘The Role of the Public Servant inPolicy Formulation’, Public Administration,xx(2):99–113.

Dunk, W 1974 They Also Serve, Privately Published,Canberra.

Hancock, I 2000 National and Permanent? TheFederal Organisation of the Liberal Party ofAustralia 1944–1965, Melbourne UniversityPress, Melbourne.

Jones, E 1998 ‘In Search of McEwenism’, Journalof Economic and Social Policy 3(1):96–104.

Jones, E 2000 ‘Post-World War II Industry Policy:Opportunities and Constraints’ in Chris Lloyd edAustralian Institutions Transformed, forthcoming.

Lee, D 1995 Search for Security, Allen & Unwin,Sydney.

Spann, RN et al. 1973, Public Administration inAustralia, NSW Government Printer, Sydney.

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