The Depths of Despair: Holden in the Depression

It cannot be overstated just how devastating the Great Depression was for Australia. By some metrics, we had it worse than any other country on Earth – a big call when Weimar Germany is also a contender, but I think the point can be made. For one thing, for the last half-a-century Australia had been a virtual workers' paradise¹, with high wages, strong unions and conditions (like the eight-hour workday) that were the stuff of dreams in other countries: We'd simply achieved a greater height from which to fall. For another, here the hardships started earlier, with the trouble beginning not in 1929, but in 1925...

The corner of Hay and Sussex Streets, Sydney, c. 1930. The Hotel Burlington building is seemingly still there, but next to it now is a gold statue marking the entry to Chinatown. (Source: englishhimki Livejournal).

Living Beyond Our Means
Australia had no "Roaring Twenties" of the kind seen in the U.S., but that doesn't mean there was no post-war splurge. Once the Great War ground to its bloody, uncertain conclusion (accompanied by the Spanish Flu, which brought mass death of a kind even the war hadn't managed), the Australian government came out with big plans for rebuilding. One such plan was the Soldier Settlement Act of 1916, which saw some 23,000 demobilised soldiers (British as well as Australian) brought out and settled on small farms, usually of around 1,000 to 1,500 acres (There are a lot of these around my home district, with one of them named Passchendaele. I don't think that requires further explanation). That's 23,000 soldiers together with their families, by the way, so it probably tops 100,000 people total – quite a migration, all told.

At the same time, both Federal and State governments were investing heavily in public infrastructure projects. Two such projects, just to give you the flavour of the era, were under the management of one J.J.C. Bradfield, an engineer at the NSW Department of Public Works. His first big project was the electrification of Sydney's rail network, which ran its first electric trains in 1926, with spurs running as far as Cronulla, Bankstown and Lithgow (gotta bring the city its coal). The heart of the city was linked to the North Shore via another colossal piece of infrastructure, this one a landmark even today and the reason Bradfield's name sounded familiar: the Sydney Harbour Bridge.

When we did Bridgeclimb in 2001, the guide asked us to imagine how it must've dominated the skyline in 1932. To an extent, it still does today. (Source: Daily Telegraph).

Projects like this were far from cheap, however, and the only way mere State governments could afford them was lots and lots of borrowing, mostly from London. This went double as tax revenues began to fall in the latter half of the decade, as the economic turbulence of the 1920s began in earnest.

See, the Great War had been a hugely expensive exercise for Mother England, not just in lives but in capital as well. I wish I could remember where I first heard it so I could cite it properly, but one source pointed that out that the fuse on a fragmentation shell was a high-tech item in 1914, one that took a highly-skilled lathe operator to make. From that perspective, the fortune expended on something like the week-long barrage that opened the Battle of the Somme can scarcely be imagined. Small wonder Britain ended the war owing staggering debts to the United States, and with scant hope of calling in her own debts from the other Entente powers, all of whom were either equally shattered by the war (France) or no longer even existed (the Russian Empire).

No attribution on this one, I consider it part of the redistribution of wealth.

The strain on the economy left Britain trying to balance inflation against labour relations for the first half of the 1920s, but the critical moment came in 1925. Chancellor of the Exchequer that year was none other than Winston Churchill², the most 19th Century of a cohort of very 19th Century men, and he thought the best way to return the British banking system to its former preeminence was to return the pound to the gold standard, at the level it had been in 1913 – in effect, turning a £1 note into a voucher for 8 grammes of gold.

The problem was, the pound had been trading substantially below that since the end of the war, so Churchill had just arbitrarily made the British pound more expensive. That in turn made British goods artificially expensive, correspondingly reducing demand in the rest of the world. Why pay extra for a British doodad, said the world, when you could buy an American doodad that was just as good at market rate? The result was a collapse in British exports, which in turn collapsed their demand for raw materials from Australia – there was no reason to import Australian wool if the looms in Norfolk and Yorkshire were standing idle.

An array of roughly-contemporary Australian coins. Being slightly more recent, the florin, sixpence and shilling feature the face of George VI rather than V. I'm still bracing myself for the first Australian dollar to feature Charles' ugly mug. (Own work).

Even worse, Australia couldn't really export to anyone else, either. Since 1910 we'd had our own currency – the Australian pound – but it had been pegged to the British pound at a ratio of 1:1. At the time that probably made sense, minimising the disruption of the changeover, but now it meant the Australian pound was just as overpriced as the British, hurting our exports. High grain prices during the war had encouraged farmers all over the world (but especially in the U.S.) to invest in machinery to expand production and meet demand. With the war over, however, and millions of soldiers returning to the plough, the world suddenly had grain to spare and prices collapsed. Wheat and wool remained in freefall through 1927 and '28, and to cover the shortfall in tax, the government had to fall back on even more borrowing. Australia was the largest single borrower from the City of London during the 1920s, but as commodity prices fell, the loans from London started drying up. The unemployment rate hovered between 6 and 11 percent for the rest of the decade – mild compared to what was coming, but profoundly shocking for a country that had enjoyed near-zero unemployment for the last few decades.

About All Those Resettled Soldiers...
A quick digression: Nothing provable, just me reading between the lines. I think there was a fair bit of *sniff* ideology going on with the Soldier Resettlement Act. In this era, anyone who was capital-e Educated was, by default, a Classics nerd, someone who knew their Thucydides, Virgil and Plutarch. I think the reason they were so bewitched by the idea of smallholding citizen-farmers is because that's what Rome had in the Republic's heyday. Like America's Founding Fathers a century and a half earlier, there was probably a strong, unspoken, but very genuine belief not just in the economic, but in the moral benefits of basing a society upon these people. I think if you cracked open the skull of a policy-maker circa 1928, you'd find they truly believed Rome rose to greatness on the moral gumption of good, honest, salt-of-the-earth soldier-farmers, and it was the loss of these people and the Marian switch to a professional army that led to the "decadence", decay and decline of Rome. That said, Resettlement was probably a major help in re-integrating our veterans back into society, and you only have to look at what was happening in Italy around this time to realise they got that much right, even if accidentally.

That said, the reality of the programme is that it took several million acres of arable land and placed it in the hands of people who didn't necessarily know anything about farming, especially in a harsh country where the principles of growing can be quite different. The page linked above mentions that out of 5,000 soldiers settled in WA, only 3,500 were still on the land by 1929 – the rest going bust and selling up even before the Great Depression. Some of that was the impossibility of making any money now the price of grain had crashed, but some of it was poor soil management bringing salt to the surface and making a Carthage of the land they'd been given.

Settled soldiers' cottage in Kentucky, NSW (Source: Wikipedia)

As for all that infrastructure investment, well, these were the final glory days of post-millennial optimism. You don't need a theology degree to get the gist of it: This was the same urge that led American progressives to ban slavery, but then overreach themselves by banning alcohol as well, leading to the evils of Prohibition. Basically, those living in the late 19th Century had seen science advance at breakneck pace, bringing steam trains and electricity (electricity must've seemed like actual witchcraft when it was new), antiseptic surgery that might not kill the patient and, yes, even the motor car. They were reading the signs and imagining where things might go in the future, and now they'd just suffered through the greatest war (and plague!) in human history, a Great Tribulation such was not since the beginning of the world, no, nor ever shall be. So was it such a stretch to believe maybe the Earthly Paradise started here, and we should get to work already? If so, that only made what happened next even more scarring.

The Crash of '29
The traditional starting gun for the Great Depression is September 1929. On the 20th of that month, famed British investor Clarence Hatry was gaoled for fraud along with several of his colleagues, leading to the suspension of his companies and the crash of the London Stock Exchange. Since London was the centre of world banking, investors in the U.S. got the jitters and the Dow began to tumble. October saw the first and sharpest declines, including the notorious Black Monday and Black Tuesday plummets, when the Dow lost nearly a quarter of its value in just 48 hours. A consortium of wealthy industrialists and bankers tried to stem the bleeding by putting together a quick slush fund and buying blue chip shares at well above market price: The crash paused for barely a day, then swallowed the slush fund whole as share prices continued to collapse. By the time the market bottomed out it was July 1932, and from a peak of 381.2, the Dow had dropped to just 41.2 – almost ninety percent of its value had been wiped out. With it had gone the life savings of millions, including even the most battle-hardened denizens of Wall Street, as ever-more-cynical traders had stepped in to "buy the dip" and got caught up in the ensuing ruin.

A common feature of all [previous crashes] was that having happened they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few people as possible escape the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. The bargains then suffered a ruinous fall. Even the man who waited for volume of trading to return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next 24 months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable. – John Kenneth Galbraith, The Great Crash 1929

A fascinating graph comparing the Crash of '29 with the 1973 Oil Crisis, the NASDAQ Crash of 2000 and what was then the ongoing Credit Crunch of 2008. If I have any Gen Z readers, feel free to file this one under, "How Millennials Got Like That".

The effects here in Australia were no gentler, even if we were, on paper at least, in a better position overall. Our share market bubble wasn't quite as inflated, one source told me – which is true – but then they cheerfully add, "We had no banking crisis", which is an odd thing to say when we'd simply outsourced our banking crisis. The hardships of the late 1920s had already brought down the Nationalist government and returned Labor to power – in a masterpiece of poor timing, just days before the start of the crash – leaving Australia in serious danger of defaulting on all those massive loans. In August 1930, the Prime Minister invited Sir Otto Niemeyer of the Bank of England out to Australia to advise on economic policy, a fact that left me muttering, "Oh no..." as I read it. I'd just finished listening to Behind The Bastards' three-part episode on the Irish Potato Blight³, so I knew exactly what the advice would be: Australia should pay back all debts in full, and if a lot of people died in the meantime, what of it?

So it was that Australia embarked upon the Great Depression in debt up to the ears and with absolutely no money available to help the enomous crowds of people who were now losing their jobs. At its worst, the unemployment rate reached 20 percent (among unionised workers, it got as high as 32 percent), and unlike the U.S., there was no FDR riding in on a white horse to offer us a New Deal: The only welfare was the so-called Sustenance Payment (inevitably, the "Susso"), which was only available if you were long-term unemployed, and only if you had no other assets, and even then was a pittance. The Susso varied from state to state (in South Australia it took the form of a voucher system), but in Queensland it was a cash payment, from which we can get some hard numbers. By 1932, the average weekly wage was £2 11s 8d, or roughly $302 in 2023: The Susso handed out between 3s to 4s/6d per child – by the same inflation factor, between $17 and $26 per week. Just imagine trying to feed yourself for $26 a week, never mind replacing worn-out clothes (or even just washing them), or supporting a family as well: There was no way in Heaven, Hell or other dimensions you were going to afford any kind of rent, which is why so many ended up living in shanty towns on the outskirts of more fortunate neighbourhoods.

The notorious "Happy Valley" at Brighton-le-Sands, Sydney, 1934. (Source: Wikipedia).

One of my grandmothers was 10 when the Depression came, and although she never really spoke about it, the few anecdotes she did leave us with paint a bleak picture. They were living in Newtown, Sydney, where her father had once been a cabinet-maker, but was now out of work with a stroke. Her mother, who'd worked as a scullery maid back in Britain, now had a job laundering lab coats for the doctors of RPA – a job that required labouring in brutal heat, so she usually came home with sweat rashes. She was paid per coat starched, which too often made only enough to feed her husband and three children, not herself: "I'm not hungry tonight, dear," was the usual excuse.

The laundry at Northampton General Hospital, Cliftonville, U.K., c. 1930. Since most of our equipment was British-sourced in this period, RPA was probably very similar (Source: Northampton General website).

Meanwhile, the job forced her to leave three little girls at home with a man now prone to rages: My grandmother told how she and her sister would hide in the cupboard, desperately trying to hold the door closed so he couldn't get at them. And, she never failed to remind us, you had either jam or dripping on your bread, never both.

No wonder people turned to Phar Lap and the Don.

And the Share Price Kept Falling...
Holden's Motor Body Builders Ltd. suffered through their own share of the collective misery – indeed, they could hardly avoid it. The Woodville plant, whose steel presses had stamped out 36,000 car bodies in 1928, saw deliveries drop to just 4,786 – again, before the Depression even began – and a pitiable  1,651 by 1931. Edward Holden searched frantically for ways to keep his factory open, even if it wasn't making motor cars, and found refuge of sorts in the food industry – always one of the last industries to enter a recession. Production lines that had so recently seen thousands of Chevrolets marching to completion were now reduced to the manufacture of fruit crates instead. Other diversifications included making steel golf club heads⁴ and filing cabinets, but even so the red ink remained and the share price dropped alarmingly low. There were layoffs and labour unrest: Holden's was pushed to the brink.

Paddy's Fruit and Vegetable Markets, Quay Street Haymarket, Sydney, c. 1930. Statistically, somewhere in this photo is a Holden's made fruit crate riding in a Holden's-made Chevrolet or Bedford (Source: City of Sydney Archives)

As fate would have it however, while Holden's was struggling with not enough money, their partners at General Motors Australia had the opposite problem. Tough government restrictions to keep money from leaving the country meant there'd been no way to repatriate their profits back to New York, leaving them with a Scrooge McDuck-style money bin and nothing to spend it on. The solution was obvious, even if it did make the Australians nervous – memories of GM's less-than-chummy 1925 takeover of Vauxhall were still fresh.

But Holden's and their 1,500-odd shareholders could hardly afford to be picky. Edward Holden flew to the U.S. to negotiate the acquisition of Holden's by General Motors Australia Ltd, submitting to a deal whereby GM's head office would hand over £1,111,600 for the company, including £550,000 in cash for Holden's £1 preference shares and the issue of 561,000 preference shares in exchange for Holden's ordinary shares. It was a bargain when the company's assets, which included Woodville, further assembly plants in Sydney, Melbourne, Brisbane, Adelaide and Perth, and various service depots, were together valued at more than £1.4 million ($135 million in 2023), but such was life sometimes. Thus was born, in March 1931, the firm of General Motors-Holden's Ltd, or GM-H, and the company that would one day proclaim itself "Australia's Own" became a wholly-owned American subsidiary years before Arnott's, Tooheys and Speedos made it cool. And, it must be said, years before they'd ever manufactured a complete car...

¹ As long as you were white, anyway. Recent digging into Australian movies has brought The Chant of Jimmie Blacksmith to my attention, the inspiration for which was the tragic true story of Jimmy Governor, which happened all around me as I write this. Post-invasion Australia was no paradise for its traditional owners, that's for sure.

² As an aside, I've heard the Chancellor of the Exchequer is the only member of the British parliament allowed to drink on the job, and only while delivering the budget. You just know Churchill abused the hell out of that.

³ Don't call it a Potato Famine. There was a potato blight, to be sure, but the famine was the result of deliberate consciously-chosen British government policy.

⁴ Of course golf survived just fine...