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Issue #1528      23 November 2011

The Decline and Fall of the NSW Labor Party

A review of Rodney Cavalier’s Power Crisis

“There was a problem for a Labor government in attempting to sell the electricity industry. That problem was Labor policy.”

Without being aware of it, Rodney Cavalier has summed up the basic contradiction for all reformist politics in capitalist society. It has resonance in Australia and NSW, but it also reflects a global trend. Privatisation of state services has continued across the world in the face of popular grass-roots opposition. In NSW the situation was unique, because it brought down a government and destroyed the credibility of a party.

Rodney Cavalier is touted to be an elder of the NSW Labor Party and a member of the “Left”. He served in the Wran and Unsworth governments as Minister of Education, where, quite apart from a massive dispute with the Teachers’ Federation over the Dick O’Neill affair, his reputation as a “Leftist” still remains hard to prove.

Yet, in Power Crisis, Cavalier has written a frank assessment of the party he clearly loves and detests in the same breath. At times, especially when assessing its current dreadful state, it is searing in its honesty. It is certainly more objective and less self-serving in its analysis than former Labor minister Frank Sartor’s Fog on the Hill, and points to the guts of chronic decay in modern “liberal democracies”.

A brief history

Cavalier begins with the origins of the ALP itself. Yes, its political impetus was derived from failed strikes in the latter decades of the 19th century, but the party itself formed around local “Labour Leagues” so its structure tended to be around local politics and welfare issues. The Local Leagues preselected their candidates for elections, and supervised their performance.

When the Leagues unified and became state and federal party organisations, the situation became more complex. There were state and federal conferences to decide policy, and elected representatives to the various parliaments of the nation were required to take “The Pledge” to abide by the policies arrived at by the rank and file conferences.

When some leading federal Labor leaders, driven by WM Hughes, ratted on Labor policy (i.e. The Pledge) and tried to introduce conscription during WWI, the increasingly militant industrial wing of the ALP imposed its will. Unions demanded a bigger say in the formation and execution of Labor policy. Federally and in NSW, they achieved 60 percent representation at conferences, and were therefore able to dominate the State Executive and the election of permanent officers of the party machine.

To Cavalier, this was a catastrophe. Ironically for a “Leftist”, he clearly hates unions. For Cavalier, the future of the NSW ALP was handed to union officials rather than the true rank and file members from the Leagues (now called “branches”). This allowed people like JT Lang to do deals with key union leaders and assume complete power over the machinery of government.

Overlooking the fact that arguably the best reformist legislation in NSW history happened in the 1920s – reinstatement of locked out train and tram workers, widows’ pensions, child endowment, the 44-hour week, workers’ compensation, the Government Insurance Office and massive expansion of public infrastructure, to name a few – it’s clear to see how corrupt and careerist union leaders might exploit the 60 percent rule.

Many, especially right-wing, unions were undemocratic in their structure: delegates followed the leaderships’ directions and ultimately allowed the ALP machine, the General Secretary and his cohorts, to dictate which policies were to be pursued, and which not. Candidates could be “parachuted” into electorates above the wishes of the local Electoral Councils. These were the seeds of innate political corruption.

The “McKell Model”

Of course, the underlying tension of all Labor governments is broader than the demands of the party membership. There is the demand to govern for the whole electorate, as well as pressures exerted by the media, the constraints of capitalist institutions (eg the law, private property) and the demands of the true ruling class for profit.

Lang, for example, did not handle this broader constituency according to the rules. When the insurance companies refused to provide finance for workers’ compensation, and/or threatened to impose exorbitant premiums, he sidestepped them and created the Government Insurance Office (GIO). When the Depression hit, he refused to curtail his welfare program and repudiated loan repayments to British banks. For this last piece of rude financial cheek, he was sacked and Labor was left in the wilderness for a decade.

When Lang was finally packed off in NSW, the new political leadership under William McKell set up a system of delicate balances that allowed the parliamentary wing – Premier, Cabinet and Caucus – to run their own race, unfettered by interference from the party, and from unions. The conferences could still set policy, and the State Executive and General Secretary still had a role, which was to liaise between policy needs, membership, Trades Hall and the “politicians” and ensure the former were kept quiet and the latter did not become arrogant.

Cavalier’s verdict is that these were the halcyon years. McKell was elected in a landslide in 1944 and Labor ruled for the following 24 years. “Stability” had been achieved all throughout the worst of the Cold War and the Democratic Labor Party (DLP) split, and the ALP had found its “home” in NSW.

There was a cost, however. When one reviews those years and the reigns of Mckell, McGirr, Cahill, Heffron and Renshaw, there are not many notable “reforms” that leap into view. There was some “tinkering around the edges”. Working conditions and wages kept pace, and there was reasonably full employment. The public sector infrastructure grew, and was defended when criticism arose.

So that was it. Stability, political expediency and complacency became the norm. Worse, the ALP machine now considered the conquest and retention of power as its main purpose. Worse still, the continued success of the parliamentary wing in elections meant the rank and file membership of the party was now effectively cut off from its representatives in government. They could pass all the motions they wanted, make all the policies they liked, but it was only a “maybe” when it came to be enacted. The “safe”, “middle” electoral road was the one to take.

This explains why the “socialisation” plank in the party platform remained on the books for most of the 20th century, but never really saw the light of day.

The loss of ideology

Two intervals of Coalition rule under first Robin Askin and later Nick Greiner further convinced the NSW Labor machine that the Treasury benches were the glittering prize which had to be regained and kept at all costs. In the ’80s and ’90s the political marketplace required younger faces and smoother talkers, a better presidential image to fill television screens. The “right people”, notably Neville Wran and Bob Carr, were selected, groomed and teed up for the parliamentary wing to accept as leaders: both achieved record terms as Premiers, which seems to be their most memorable feature.

Wran was a lawyer and Carr a journalist who had repeatedly argued in public for the deletion of the “socialisation” objective. Gone were the days when union figures worked loyally for the betterment of their members, then turned their focus to years of Labor apprenticeship in the “bear-pit” of state parliament to earn the respect of their peers, and thus election to leadership of their party – gone forever!

The 1980s also saw a global onslaught of neo-liberalism: Milton Friedman, Thatcher, “Reaganomics”, slash and burn. No-one seemed to want the reformist zeal of a Whitlam, who had projected state intervention in a hundred different and creative ways, but who had ended in the debacle of dismissal and landslide defeat. The rise of Hawke, Keating and Carr was also the rise of the new pragmatism, where now the politicians turned Labor tradition on its head.

Federally, the Commonwealth Bank, QANTAS, the Commonwealth Serum Laboratories, the Commonwealth Accommodation and Catering Service, the Defence Service Housing Corporation and the Snowy Mountains Engineering Corporation were privatised by Labor, paving the way for Howard to float shares in Telstra in 1997. NSW got onto the fire sale bandwagon as well: the Government Printing Service, the Government Cleaning Service, the State Bank, the GIO and TAB all went the way of the short-term revenue fix, and budgets were “balanced”.

The irony is that practically all these Privatisations and ‘Public-Private Partnerships’ were done in mid-term, without reference to the people. They were never presented as policy in election campaigns because it meant electoral suicide, as happened in South Australia when the Olsen (Liberal) government revealed it wanted to sell South Australian Electricity, but was obliged under popular pressure to promise the retention of this asset before the 1997 election. After he scraped in, Olsen immediately reversed the policy and sold South Australian Electricity. At the subsequent election in 2002 the Liberals were booted into the wilderness.

During this whole period, the Left of the ALP in NSW remained cravenly mute. According to Cavalier, who is scathing of its token “socialist” tag, “ ... the Left was utterly routed in the battle of ideas. Post-1989 the Left did not offer a contest.” It remained a faction to procure positions according to pre-arranged formulas.

Without the Left contesting the economic sphere of wealth redistribution, the ALP lost its ideological rudder. It had become a political whore that paraded “gesture” announcements, and sold policy to the highest bidder or on the whim of the latest opinion poll. Now, increasingly alienated from its founding ideology and its membership, NSW Labor had to survive in office, on rat cunning.


Treasurer Michael Egan and Bob Carr were the first to try the sale of NSW Electricity, in 1997. It was clearly going to be a struggle because the Electrical Trades Union (ETU) had gleaned the support of other unions, and it was, furthermore, affiliated to the ALP. Carr found that Annual Conference would reject the proposal by an overwhelming margin. Carr and Egan, resentfully, dropped the idea.

Eleven years later, new Premier Morris Iemma did his sums. Pressure was mounting for a big investment in health, transport and energy infrastructure. For decades, refurbishment and construction investment had been ignored, while electricity was used as a revenue cash cow. To renew generators, poles and wires would cost the government at least $15 billion, whereas an undisclosed amount could be gained and spent if electricity were sold, and the investment decisions left to the new (private) owners.

Although it isn’t mentioned by Cavalier, there was also pressure, constant pressure, from neo-liberal think tanks, News Ltd articles, and a variety of private energy interests, to be rid of the “inefficient” millstone of public ownership to prepare NSW for the forthcoming national power grid – the grand, slick, ultra-competitive ship-shape future.

Iemma and his Treasurer, Michael Costa, had no mandate. The issue had never been raised in the 2007 election campaign, so the Owen Inquiry was set up straight after the win, in effect, to recommend privatisation. The ETU smelled a rat, and confirmed the support of Unions NSW and the President of the State ALP, Bernie Riordan – who also happened to have been in the leadership of the ETU – in again opposing the sale. In the months that followed, arduous “compromise” negotiations followed to secure the support of John Robertson, secretary of Unions NSW as well as the Labor machine, to no avail.

Several times, Iemma felt he had achieved a “deal”, but nothing concrete ever emerged. He and Costa resolved to take the matter to 2008 Annual Conference. Iemma suspected that there was a wider agenda to undermine him but really, he had managed to unify both Right and Left factions against himself because he had no strategy to convince the people of his own basic constituency, the Labor Party, of the wisdom of selling out.

The truth was that there was a wider agenda: unions, ALP members and, in fact, the general public, were tired of being treated like mushrooms by arrogant, heedless politicians. They were sick of the double-dealing. Privatisation had simply gone too far. The mass of people wanted a halt. They were drawing a line in the sand. Only the Big End of town wanted the sale. Yet Iemma and the politicians ploughed on.

The 2008 Annual Conference tore up the tacit consensus of the McKell Model. Backdoor press releases had warned the government would go ahead regardless of what the party Conference did. A red rag to an enraged bull. When the Premier addressed the packed Conference hall at Darling Harbour no one was convinced. Ministers like Meagher, Roozendaal and Keneally were heckled and booed. Costa stood enraged on the podium, banged his fist and abused the delegates. The motion to direct the government not to sell Electricity NSW was carried 702 to 107.

Iemma falls

One of the ironic touches Cavalier inserted in Power Crisis was the record of press attempts, particularly News Ltd attempts, to paint black as white: Iemma’s defeat at Conference became “... Iemma and Costa have won the first round.” and “... a mortal blow has been dealt to the union campaign against the state government’s power privatisation plans ...” and so on. Throughout the crisis, the media simply engaged in a program of wish-projection, bearing absolutely no relation to reality.

Egged on by the press cheer squad and trusting the loyalty of the parliamentary wing (the Caucus), Iemma and Costa chose to push ahead with the legislation to sell Electricity NSW. This now put intense pressure on every MP who owed their position to factions in the party, and to their local branches, and to the unions who had campaigned for their election. Left members, nominally opposed to privatisation anyway, were now especially under pressure. The sanctity of The Pledge was at issue. To ignore the wishes of Conference was to do exactly what Hughes had done over conscription, back in 1916.

As soon as the Premier had made his intention to proceed clear, the “Mr Fixits” of the party, Karl Bitar and Luke Foley from the machine, Eddie Obeid and Joe Tripodi in Caucus and in the background, Mark Arbib, all began looking at the declining polls and plotting Iemma’s exit. The unity of the party was at stake. Iemma was sliding. He was a handicap.

Meanwhile, Simon Benson from News Ltd’s Daily Telegraph wrote: “The campaign to dump Morris Iemma is dead in the water. Fini. Kaput. Terminado….”

In fact, for Iemma and Costa to survive, the sale legislation had to pass. This, however, relied on the assumed pro-privatisation ideology of the Liberal Party, to vote in favour of the Bill. Coalition leader Barry O’Farrell was no fool. He found problems with the provisions of the Bill. The Greens stepped up their opposition, exposed shonky holes in government sums, mobilised public opposition, and put pressure on Left Labor MLC’s. Scandals blew up under Iemma’s nose. Things began to unravel.

On August 28, 2008, the legislation was voted down in the Legislative Council. Costa became a loose cannon, publicly bagging everyone within range. On Friday, September 5, Morris Iemma was no longer Premier, Costa was no longer Treasurer, and the whole Cabinet had been put in a blender. Nathan Rees was the new Premier.

The charge to the bottom

The only reason Rees, a supposed “Left” candidate in a “Right” dominated party, became Premier was that he was about the only cleanskin that could be found. He was free of scandal, the taint of back-room shenanigans, a cabal of enemies, and any association with the privatisation of electricity. He also possessed a public face that might be okay.

Both Rees and Kristina Keneally were products of what Cavalier calls the new “political class”. These are the post ’70s aspirationals who want to be Premier or Prime Minister from day one. They leave university to become union functionaries (despite minimal experience in the work covered by said unions), political staffers or campaign advisers. Pure careerists. Jobs of this kind expanded around politicians as taxpayer funding towards “efficient government” increased in the ’80s and ’90s. Cavalier estimates that their numbers outstripped those of union operatives – there were over 100 in the Premier’s Department alone under Carr, and Rees was one of them.

He started in 1997 and worked over 10 years for Refshauge, Knowles, Iemma and Carr. He was “noticed” and a safe seat was found for him. He was elected to the Legislative Assembly in 2007, by 2008 he was Premier – a rocket rise, surely.

He was out of his depth, however. Now, the gloves of thwarted ambition were off, and bitter resentments against the “new boy” surfaced. Factional discipline disintegrated, and leaks designed to undermine Rees multiplied. Scandals, too many to list, erupted everywhere. Resignations, both of public servants and MPs, began to gain momentum.

Rees attempted to assert his authority by appointing the conservative, Eric Roozendaal, as Treasurer. His mini-budget axed the North West Metro, the South West Rail link, grants to parents, 20 percent of the senior public service and nurses’ overtime, while fees and taxes went up and public assets like NSW Lotteries as well as electricity retailers were put up for sale. So much for the “Left Wing” tag! Rees’ popularity, and that of the ALP, slumped to record lows.

At the 2009 Annual Conference Rees sought, and got, the power to ban donations from developers and select his own Cabinet. Conference delegates were now staring at electoral slaughter and the meltdown of the whole party edifice – they voted for Rees’ measures as a last desperate bid for survival.

Nonetheless the Premier lasted no more than 18 days beyond the Conference. The Mr Fixits could see their own heads on Rees’ chopping block. They moved rapidly to fix him.

Of all the despicable acts carried out by the puppet-masters, the most despicable and transparent was the gambit of the “woman card”: Kristina Keneally, the “first female Premier”, attractive and with a quirky accent, was handed a thoroughly poisoned chalice and set up to mollify the oncoming disaster. She had the ambition to take the job, she did her best, despite an avalanche of rats deserting the ship, and she walked the plank with a smile upon her face: the sacrificial woman of reformist politics.

The end of a party?

So, is this the end for the ALP? In the Appendices of Power Crisis, Cavalier provides some sobering figures: total financial membership of the NSW Labor Party had shrunk to 15, 385 by 2009, a mere one fifth of one percent of working people in NSW, and less than the supposedly “tiny” Communist Party membership of the 1940s (20,000). Over the past decade, over 100 ALP branches have shut down throughout NSW, including such totemic working class branches as Glebe, Lakemba and Lambton.

In his Epilogue, a bitter and disillusioned Cavalier asks: “Does party membership matter?”, and answers with a resounding “NO”, because money and media have replaced the need for troops on the ground, and commitment has disappeared from the Australian ethos. He then picks up his bat and ball, and like so many aggrieved Labor desolates, heads off for the refuge of the Sydney Cricket Ground Trust and his special seat in the Members’ Stand.

Of course the ALP will continue. It will be a shell of its former self, without principle, purpose or mass links to working people – purely opportunist. But in liberal “democracies” there will always be a need for a safe “alternative”, an “escape valve” for the excesses of the ruling class, until such time as the mass of people wake up to the game being played around them. There is evidence of disillusionment everywhere. In Britain, in Greece, in Japan, in the US, where less than 50 percent of eligible voters actually do so. The “Arab Spring” might well be pursuing ‘liberal democracy’, but the rest of the world is looking beyond.

The last word belongs to Marx and Engels, from the Communist Manifesto:

“…Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind.”

Cavalier, R, Power Crisis, 2010, Cambridge University Press, Melbourne  

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