By 1931 it had become obvious that "capitalism" had - as a system - failed miserably. It either had to be modified or replaced. The Establishment responded to the slump with plans for "austerity". In 1930 Sir Otto Niemeyer from the Bank of England visited Australia to "advise" governments to implement a" "deflationary" policy. Niemeyer contended that wages must be "depressed" (i.e. cut) to make our exports more competitive and to raise profits. According to Niemeyer (in a language we still hear nowadays) our living standards were "artificial in nature" and trade was the secret to "recovery". Indeed, "international trade" was supposedly at the root of the Depression. Niemeyer advised savage cuts in all existing social services. But more significantly Niemeyer demanded that Australia not default on her international loan obligations to Britain. With pressure tactics and careful diplomacy Niemeyer sold his sorcery to Australian state and federal politicians. They called it the Melbourne Agreement of August 1930.
According to Colonel Eric Campbell, founder of the New Guard, his movement was "a defensive organisation pledged to uphold law and order constitutionally and to support the police to that end". By the close of 1931 the New Guard had received 87,000 applications for membership in New South Wales and had built strong links with similar groups in other states. Its strongest support lay with ex-soldiers and ex-officers. His main aim was to crush "communism". The New Guard flourished in an age noted for its confusing attitudes as far as "patriotism" was concerned, when Australia feared that "protection" by our "Mother Country" was preferable to any statement or expression of political Australianism. Lang's nationalism was anathema to the officer and commercial classes; the ordinary ex-soldier became the bully-boy of those whose class snobbery was as much directed towards the poor veteran as the city working class.
The New Guard sprang from a shadowy "Old Guard" which drew its funds directly from large banks, insurance companies, and other firms (see Keith Amos: The New Guard Movement 1931-1935). Any talk of "debt repudiation" raised not the image of Australian self-determination but Bolshevism-Communism. The upper-crust cynically manipulated the New Guard to its end of smashing the Lang government by any means necessary - by direct threats of force and through press hysteria. The New Guard brought New South Wales to the brink of civil war.
In May 1932 Sir Philip Game, Governor of New South Wales, sacked the Lang government and ordered new elections. The New Guard automatically offered support to the "United Australia Party" (predecessor of today's Liberal Party). The press painted Lang as a wild man manipulated by the Communist Party, and his government was defeated at the polls.
With the "Communist danger" removed the New Guard rapidly declined and disappeared completely by 1935. It had done its job.
But Lang persisted. His meetings in 1931 and 1932 had been the largest ever seen in Australia. On one occasion, Sydney's Moore Park was tightly packed and included folk who had walked to Sydney from Bathurst. The slogan "Lang is right" had become the watchword of Sydney's unemployed. In 1933 Lang further developed his ideas on finance; he came to advocate views which took the best from Social Credit (while removing the obvious nonsense) and pushed for the "socilaisation of credit", i.e. using the Reserve Bank to provide funds for capital creation and for stimulating consumer demand. He spoke more than ever as a nationalist against the demands of international capital.
However, improvements in the unemployment rate (which was still high even in 1939!) removed the possibility of Lang's return to office. The politicians pulled Australia out of the slump by the hair of working men's heads.
John Thomas (Jack) Lang (born 21 December 1876, died 27 September 1975), also known as "the Big Fella", was a significant figure in New South Wales and Federal government and politics from the time of his election as a Political Labor Party (later Australian Labor Party) member to the NSW Legislative Assembly in 1913 until his defeat as an independent member of the House of Representatives in the general election of 1949. An attempt by him to enter the Senate as an independent at the 1951 election was unsuccessful.
Lang was Treasurer in the NSW Labor government of 1920-21, and Premier and Treasurer of the State twice (1925-27 and 1930-32). His first term brought many significant innovations, including child endowment, widows' pensions, increased workers' compensation rates, reversion to the 44-hour week, abolition of secondary school fees, and votes for all in local government elections. Lang's second term, which coincided with the worst years of the Great Depression, ended with the dismissal of his government by the State Governor (Sir Philip Game). Lang's dismissal arose from his defiance of the Commonwealth Government's financial agreements legislation
The Lang Labor Party was a faction that splintered from the Australian Labor Party (ALP) during the 1930s. The rift arose mainly from Lang's strong influence within the NSW branch of the party and the financial policy stances he took that placed him in opposition to the Scullin Federal Labor government. It was the votes of the five Lang Labor members who had defected from the ALP that brought down Scullin's government in 1931. Lang Labor was centred in NSW, and at one stage encompassed virtually the whole NSW branch of the Party. Lang Labor stood candidates in NSW for the House of Representatives at all Federal elections held during the 1930s. The party was represented by ten members in the House during this period: John Albert Beasley, Joseph James Clark, John Chambers Eldridge, Joseph Herbert Gander, John Smith Garden, Rowland James, Herbert Peter Lazzarini, Daniel Mulcahy, John Solomon Rosevear, and Edward John Ward. In addition NSW Senators James Patrick Dunn and Albert Rae also joined Lang Labor for part of their terms in the Senate from 1929-1935.