Interesting article that is showing what consensus politics has to offer
Andrew Mellon and the lessons for Australia
John Hawkins, Chudleigh 03.06.13 3:00 am Tasmanian times
By January 1932 Andrew Mellon had been Secretary of the American Treasury for 11 years. His was an unelected external appointment to a position that remarkably he had retained under three different Presidents.
Mellon was a self made Pittsburgh billionaire, who prior to his appointment, owned with his brother a controlling interest in many companies including Alcoa, Gulf Oil, Pittsburgh Coal, The Union Trust and The Mellon National Bank.
These businesses had been Andrew’ Mellon’s personal creation. They made it possible for him to purchase from the Russians in the Great Depression 25 of the 50 finest paintings in the Hermitage Museum (Saint Petersburg, Russia) for more than US $7 million. As America was then on the gold standard, at $35 to the Oz this purchase in today’s money amounted to some $1.2 billion dollars. It was to result in the gift to the American people of his collection and the creation and building of a National Gallery in Washington; all valued on his death in 1938 at US$30 million.
For the first seven years of his appointment after the First World War Mellon - possibly the greatest financial genius of his time - had personally dragged the American and hence the world economy into the Roaring Twenties. Under his direction, by the start of 1927, taxes had been cut, government spending had been halved and American debt reduced by $6 billion. The surplus for the fiscal year 1927 had been estimated at $180 million; revised upwards to $300 million it came in at $636 million. A booming stockmarket had seen him reverse his low interest policy and three separate rate increases of 0.5% brought rates to 5%; as a result growth rapidly slowed.
Mellon’s world was about to change.
When attacked in the 1920’s, Mellon had been widely acclaimed as the symbol, if not the author, of US prosperity. But with the Depression, as the nation’s banker, he was to be reviled as a false prophet, a tax evader and a plutocrat who fiddled as the nation burned. As a result, a near 80 year-old Mellon submitted his resignation to President Hoover in February 1932 to take up the post of American Ambassador in London.
What lessons does his tale hold for Australia?
Costello like Mellon was a Conservative or Liberal but with one big difference: Costello was the elected representative of the people while Mellon was appointed by a President purely as a result of his proven financial skills. They both rode a boom - but for Costello and his reputation life was made easy when he was forced to dismount before the bust when the Howard Government was defeated.
Swan and Labor have had to deal with the resultant world wide GFC, a serious bust yet again instigated by the Americans. Remarkably Labor has kept Australia on an almost even keel with negative growth in only two quarters during the past five years.
But now is the winter of our discontent.
I suggest that if the American Depression was beyond Mellon in 1932 any future Australian Depression is certainly beyond an elected Australian Treasurer of whatever political complexion.
In a political role reversal to the situation in Australia moves were soon afoot by the Democrats (Labor) to impeach the Republican (Liberal) “Robber Baron” and as a result Mellon was attacked on charges of tax fraud as the country’s institutions teetered on the brink of collapse. Most American States had reached their legal debt limits and more than half had been compelled to shut their banks. In the remaining States withdrawals were limited to 10% of deposits. The New York Stock Exchange and the Chicago Board of Trade had closed down and cash had all but vanished from the economy.
It was in this situation that the canny Scots Presbyterian Mellon family announced that both they and their Bank were still highly liquid and their clients could withdraw any amount of money from their accounts. As a result ordinary people transferred their accounts to the Mellon Bank and the family became even richer ... if less powerful and more disliked.
Roosevelt (Labor) who replaced Hoover (Liberal) in his 1933 inaugural address summed up the post Mellon situation thus:
“Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious containment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; the farmers find no market for their produce; the savings of many years in thousands of families have gone…”
If this is beginning to sound familiar, as I suggest it should, the future then was to result in a Second World War.
The answer today from the intellectually bereft Abbott/Abetzian conservative side of politics is as yet unknown.
It could be suggested that our not so beloved pollies should try some form of consensus politics to deal with this now looming problem, for they appear to have little or no talent to distribute between them.
