
Issue No 89		23 March 2001

LaborNET	Ask Neale	Tool of the Week

History

The Steel Octopus

By Neale Towart

Be prepared for a flood of Nostalgia from the media about the "Big Australian", as it prepares to flee our shores and finally internationalise its digging operations. Workers won't forget BHP's less than worker friendly past and present (and no doubt it's future).

Steel making will be an even smaller part of its future, if a part at all. Its origins were in mining with the move to steel being propelled by G.D.Delprat and then most forcefully by Essington Lewis. The wonderful play Essington Lewis - I Am Work by John O'Donoghue with music by Allan McFadden (last performed in Sydney at Belvoir St (about the time of the announcement of the closure of the Newcastle works) by the Hunter Valley Theatre Company, who had first performed it in 1987 (based around Geoffrey Blainey's The Steel Master) captured Lewis' driving role in making BHP into more than a mining company, and his importance in manufacturing industry expansion in Australia up to and after World War II.

The play and Blainey's biography show that Lewis was a visionary in many ways, but certainly not in the way BHP treated its employees.

Eric Aarons provided a different kind of searchlight on the ways of BHP in 1960-61, the occasion of BHP's 75 anniversary.

Tax Free Capital Gains

Aarons carefully examines BHP's declared profits and earnings and looks behind those to see how much the company is making in reality, using clever accountants to reduce profit figures, keeping dividends to shareholders low (there was no imputation then so dividends were properly taxed). Capital gains were not taxed, and this was the main method used to conceal profits. Aarons finds that the total amount of cash subscribed by BHP shareholders in its 75 year history was ďż˝60m. The total value of shares in 1961 was ďż˝315m so a tax-free capital gain of ďż˝255m results. The value of shares in 1940 was ďż˝25m, showing a huge increase up to 1961. Company tax paid in that time was ďż˝75m in total.

From this amount Aarons calculates that profit before tax was ďż˝210m and true net profit was ďż˝135m, more than double the disclosed ďż˝70m. These don't look like big numbers in terms of the billions involved in the current merger, but BHP's dominance and total control of steel making and marketing in Australia (protected by governments) made it a huge part of the Australian economy.

On top of the ďż˝255m tax-free capital gain, BHP made a bonus share issue at the end of 1960 - one share for two held - and wrote up the value of its fixed assets. BHP said the asset revaluation would considerably exceed the amount required for the paid share issue. If we say that the issue was half of the ďż˝315m mentioned as the value of shares in 1961, that is ďż˝157.5m.

Aarons calculates that the net capital gain has been ďż˝400m over 75 years but ďż˝350m has been revealed in the past 10 years, plus ďż˝30m in dividend payments. "That is, BHP shareholders have made about ďż˝380m total rake-off in 10 years without doing a tap of work, while tens of thousands of workers who toil in the heat and glare of the furnaces, on the ships and down the mines received only ďż˝300m in wages during the same period."

This can be shown by the value added by workers in the "smelting, converting, refining and rolling of iron and steel" industry. In 1957-8 new value added by labour was ďż˝70.4m, with wages paid ďż˝31.5m. After allowing for depreciation the monopolists share was ďż˝36.2m. Director's fees and salaries for the top brass are not included in the wages figure.

BHP Fails Australia

The Big Australian regularly failed Australia, Aarons shows. The company did not feel impelled to ensure that Australia was adequately supplied with steel, despite its huge profits. Many times Australia had run short during BHP's sole reign over the industry. The steel shortage was partly the cause of Menzies political difficulties in 1960-1 when a credit squeeze was imposed. The cost of importing the product was a huge drain on foreign currency reserves.

Corporate Connections

The extent of monopoly and interlocking interests in traced by Aarons. He lists the major shareholders and the directors of BHP, showing their other corporate connections. A chain of association that covers all forms of steel making and steel products, the cement industry, aircraft manufacture, chemicals, fertilizer, road building, grain milling and sale, insurance, wool broking and banking. (Essington Lewis was still there at the time, although Aarons notes that although he is very wealthy, his interests are in BHP and technical assistance to the Board).

As with John Howard's great play on the rise of a share-owning community, BHP made much of its 65,000 shareholders, disguising the fact that most shares were in the hands of multimillionaires.

Corporate Welfare

Corporate welfare has never been far from the success of BHP, and they certainly have never been too proud to let the state help them towards profits. For example, the Newcastle Iron and Steelworks Act of 1912-13 gave BHP a 50 year lease on 34 acres of waterfront land and the government undertook, without cost to BHP, to dredge and maintain a permanent channel from Newcastle Harbour to the company's wharves. The ALP was in government in NSW in 1912, and part of the ALP's platform at the time was "the establishment of a state iron and steel works". Aarons notes that the lease was up in 1962, and the ALP were in office in NSW and thus had the opportunity to act (the write up of asset value mentioned above was partly done as a provision to guard shareholder value against possible nationalization).

Many other examples of other state and Commonwealth welfare to BHP are provided. Aarons refers to it all as examples of state monopoly capitalism. Whatever monopolies want, monopolies get. Menzies boasted about his friends with BHP shares and the ways that he could help them. He appointed Essington Lewis as Director-General of Munitions in 1940. BHP did pretty well from war contracts.

"On Monday afternoon Mr Essington Lewis comes to me and produces two or three pages of paper involving some trifling expenditure of three, four, five or ten millions, and says, 'There it is, Mr Prime Minister,' and I sign the bottom corner, 'Approved'."

Working Class Leads Fight

The working classes had been the backbone of the vast increase in wealth of BHP shareholders, and the company was not backward its use of underhand tactics in provoking strikes, instigating lockouts, bribery, blacklists an its use of the courts to contain its 37,000 strong workforce, with many examples over its 75 year history (to 1960).

Early examples included miners at Broken Hill in 1889 having to strike to win union recognition, and again in 1890 to reduce hours from 48 to 46. The big strikes and reversals of 1892 saw this put back to 48, with a wage cut. A director at the time said he was devoting his life to "beating unions out of existence".

In 1909 a lockout of 6 months was imposed to reduce wages.

The move into steel making in 1915 saw an intensification of management efforts to get rid of unions and to exploit its workforce. A wage cut was won in 1916. In 1919, despite substantial profits, they got a 50% reduction in shift margins. In 1921 they closed the Newcastle plant, demanding a reduction in the basic wage and an increase in hours.

"During the 1930s, the Newcastle and Port Kembla plants were notorious for their inhuman treatment of the unemployed who were forced to gather each day outside the gate to be "chosen" like slaves at the market place."

The formation of the Communist Party in 1920 meant "a new a vigorous leadership" of the workers, and the communist leadership of the Ironworkers was crucial to the organization of BHP workers and the battle for better pay and conditions.

The takeover of the Ironworkers by the Groupers meant that "for quite a period BHP had practically an open go to exploit the workers and amass the huge profits revealed earlier."

A resurgence of activism began in the late 1950s, however, with a strike by tradespeople in 1961 and the sacking of 12 job delegates from the Amalgamated Engineering Union (AEU) being the catalyst for Aarons' researches and pamphlet. The showdown was brought on by BHP in an attempt to arrest the growing militancy of its workforce that had been gathering strength for a number of years. AEU members walked off, and ironworkers wanted to support them but were restrained by their union leadership.

The workers demanded support from the state ALP government, calling on it to implement ALP policy and nationalize BHP. The government, however, actually allowed uniformed police and federal and state security police to intimidate the workers and to prevent them holding a protest march. So great was the general outcry about the behaviour of BHP that the Arbitration Court reconvened and ordered a return to work and reinstatement of the workers. The workers defied the system, and won.

The People Versus Monopoly

"Monopoly's idea of patriotism is "what is good for BHP is good for Australia."

"Love of peace" is a phrase to conceal fat profits from war contracts and a relentless striving to dominate foreign markets and sources of raw materials, by war if need be.

Lenin on Monopoly

"Domination, and the violence that is associated with it, such are the relationships that are most typical of the 'latest phase of capitalist development'; this is what must inevitably result, and has resulted from the formation of all-powerful economic monopolies." (Lenin on Imperialism).

The Menzies government is talking about legislation to "control" monopolies. What will they do about BHP? It is nonsense to think of Menzies controlling BHP when it is BHP that controls him!

The end of BHP?, or, Back to the Future?

BHP has come full circle, with its profit now coming from mining ventures world-wide, and its steel division struggling against the economies of scale of the Korean steel makers in particular. The excellence of its workforce and innovation has ensured a niche for steel making in Australia, but the innovation and restructuring to maintain the profit flow has all been backed by governments (remember the Button Steel Plan?).

The play I Am Work changed the original line - "Oh we'd never leave Broken Hill [they did] and made it "Oh, we'd never leave Newcastle [they did]. Now the pundits are saying they won't leave Melbourne. Say it isn't so, Mr Anderson.

Eric Aarons; The Steel Octopus: the story of BHP, Sydney: Current Book Distributors, May 1961

Geoffrey Blainey; The Steel Master: a life of Essington Lewis. Melbourne: Sun Books, 1981; first published by Macmillan in 1971

View entire issue - print all of the articles!

Issue 89 contents

Interview: Paddy Takes the Helm
Irish, internationalist, republican, socialist & seafarer - Paddy Crumlin intends taking the old traditions of the labour left into the 21st century, the community and cyberspace.

Unions: Breaking the Mould
Mark Hearn looks at how women union delegates are helping to change the culture in the traditionally male bastion of glassworking.

Legal: Washing Their Hands
Mark Morey outlines how Liberal neglect of the working visa system has led to exploitation of guest workers.

International: Violence Betrays Shangri-La
Shangri-La hotel union members carrying a coffin marked Robert Kuok have been assaulted and beaten by police in Jakarta.

Economics: Corporations: Different Than You and Me
Corporations are fundamentally different than you and me. That's a simple truth that Big Business leaders desperately hope the public will not perceive.

History: The Steel Octopus
Be prepared for a flood of Nostalgia from the media about the ďż˝Big Australianďż˝, as it prepares to flee our shores and finally internationalise its digging operations. Workers wonďż˝t forget BHPďż˝s less than worker friendly past and present (and no doubt itďż˝s future).

Review: Mean Nation
John Allen charts the fall and fall of philanthropy in Australian society.

Satire: Ryan 'A Big Wake-Up Call For Me': Beazley
The narrow victory to Labor in the Ryan by-election has delivered a big slap in the face to Leader of the Opposition Kim Beazley.

» Abbott and ďż˝Drinking Buddyďż˝ Under Microscope

» Working Visas: Ruddock Sells Dump to Abbott

» Tourist Guides Bussed In

» Fair Wear Holds Breath as Carr Celebrates

» Labor to Restore Public Sectorďż˝s Dignity

» Its Time for Carr to Act on Safey on Building Sites

» Bread Maker Slices Workforce

» Workers Show Grace Under Pressure

» Engineers Win BHP Redundancy Case

» Transport Drug Pushers Not Charged

» Training Body Needs $150 Million to Cope with Growth

» HIH Urged To Safeguard Employee Entitlements

» Carr Proposal For Public Schools Flawed

» Human Smirk Returns to Spiritual Home

» McGauchie Appointment Draws MUA Fire

» Bove Loses McDonald's Raid Appeal

» James Hardie Called to Account

» Australasian Union Organising Conference

» Activist Notebook