No stampede for gold, no pressure on liquidity, had endangered a major
bank in Australia until the early 1890s. Minor banks had fallen, but not major
banks. The stampede of 1893 was almost unthinkable—such was the outward
success of the banking system in Australasia. The unthinkable occurred. Half
of all the deposits in the Australianfinancial system were in banks which had
to close their doors and then reconstruct their business. Many of those
deposits were partly or fully locked up for years. The panic of 1893 made the
depression deeper and it severely damaged, in the medium and long term,
Australasia’s reputation as a safe and attractive haven for money. The banking
crash in Australia was probably more damaging than that in any other country
in the 1890s (Blainey, 1980, p. 328).
Then came a long drought. The pre-1890 optimism about the climate had
been breath-taking (Blainey 1980, pp. 352–3). The Federation Drought was
devastating. A little-known statistic from the Commonwealth Bureau of
Meteorology is that since 1900, when a nationwide annual rainfall could be
calculated, the two years of lowest rainfall were not in the vividly remembered
drought of the twenty-first century, but in 1902 and 1905. The population of
sheep was almost halved. In essence, the bank crashes and the drought
initiated the long-term decline of Australian incomes relative to American
incomes (McLean 2013, p. 139).
2.9 Where Would Socialism First Sprout? Australasia or Russia?
The federation of the six colonies—stirred mainly by those colonies suffering
most severely from the economic slump of the 1890s—was achieved in 1901.
In the next twenty years, a new round of political experiments was made, the
states initially being the busiest experimenters. Compulsory and preferential
voting (PV) were amongst the innovations.
After the 1890s interventionism became almost normal. Regulationism
soared as a general ideology, especially in the years 1900 to 1925.
Many governments set up state business enterprises. Queensland, for
example, founded state butcher’s shops and even planned a state steel indus-
try which would ship its iron ore from Yampi Sound in Western Australia. The
federal government created its own shipping line in the First World War, but
sold it in the 1920s. Expensive reservoirs and irrigation or hydroelectric
schemes became a priority of state governments. Welfare schemes, ranging
from old-age pensions to a basic wage, also became the vogue in the period
1895 – 1914.
Free trade, which was a semi-religion preached more than it was practised in
the late nineteenth century, declined during thefirst decade of the twentieth.
The economists remained true believers; those who managed the economy
Australian Exceptionalism: A Personal View