Indigenous development – without community, without commerce

Anthony Smith, University of Wollongong

Most participants in the current debate about Aboriginal development believe that government policy has failed. Indigenous policy is now generally viewed as both permissive and powerless. Government handouts are seen as passive welfare or ‘sit down money’, which perpetuates Indigenous joblessness—and so permissive. And many Indigenous communities have been unable to combat self-destructive alcohol and substance abuse as well as criminal and violent behaviour—and so powerless.

There is much discussion about policy alternatives, but the growing separation between the commercial aspirations of Indigenous business and the need to deal with the negative effects of economic development remains largely unexplored. On one hand is a call for Indigenous business interests to be released from responsibility for solving community problems and administering government welfare and employment programs. In other words, Indigenous business needs to be set on a more equal footing with mainstream business. On the other hand is a call for greater focus on law and order to combat lawlessness. How these divergent policy goals might be reconciled is not clear.

History Wars and Failed Communities

Significantly, the call to free Indigenous enterprise from the shackles of welfare responsibility and the demand for draconian law and order responses both take as a starting point a shift away from the idea of ‘community’. Pronouncements from high profile Aboriginal political and business leaders, including Noel Pearson (2000), John Ah Kit (in Hirst 2002) and Warren Mundine (in Pearson 2005), accord with calls for fundamental change issued by historians and intellectuals such as John Hirst (2002), Rosemary Neill (2002) Gary Johns (2006) and Keith Windschuttle (2006). Government ministers and senators, including Tony Abbott, Mal Brough and Gary Humphries (Australian Broadcasting Corporation 2006), also echo these claims.

The Holt Coalition government first began the move away from the policy of ‘assimilation’.

Noel Pearson, for instance, has argued that ‘government policies which put an overwhelming emphasis on communities and none on families … “suppressed” families as the core unit of Indigenous society’ (cited in Neill 2002, p. 58). Pearson has also called for Aboriginal Australia to terminate its historic alliance with the communitarian left and instead to forge ties with the ‘Conservative Right’ (Pearson cited in Kelly 2002). Tony Abbott (2006) quotes John Hirst who has said that ‘The last oppressor of the Aborigines is the belief that they are a co-operative people naturally suited to self-government in small communities’. And Mal Brough has been quoted as saying that ‘Aborigines must move away from communities dumbed down by welfare dependency and damaged by a type of government-enforced communism where nobody owns land or businesses … and almost the only income is government subsidies and handouts which excludes them from the market economy and has failed’ (Carter 2006).

It is often forgotten by the neo-conservative right that the existing policy framework, and specifically the ideas of ‘community’ and ‘culture’, were first instituted in the late 1960s and early 1970s. It was the Holt Coalition government that first began the move away from the policy of ‘assimilation’. In 1967, Harold Holt stated ‘what we are doing will not mean that Aboriginals, as citizens, will lose their identity, their pride of race and their culture’ (cited in Smith 2002, p. 14, emphasis added). Recognising this sort of fine detail cuts across current attempts by neo-conservatives to portray policy failure as the result of Fabian folly.

Significantly, it was with bi-partisan political support that the new policy (a policy I have termed Indigenous trusteeship) was introduced when the long period of economic growth that followed World War Two came to an end, and the government had to deal with an escalating economic and social crisis, especially among rural and remote Aboriginal populations. As the Western Australian Acting Commissioner of Native Welfare pointed out in 1970:

Retention or rediscovery of “identity” is essential if a person is to adjust in any society … Socio-economic advancement of Aboriginals requires community effort to be successful. Sending them to gaol … is a negative approach, the positive one being to deal with the root causes of maladjustment found in the areas of health, education, and the social, home and economic aspects [emphasis added].

Proposed remedies—including the communitarian, romantic, and idealistic—to the evils of unrestrained capitalist development are by no means new. As Cowen and Shenton (1996) have shown, intentional development—often involving the reinvention of tradition and community—was first devised in the 19th century during in Europe with the aim of moderating the negative consequences of capitalist industrialisation, and of containing productive potential in regional and remote areas. Thus, governments of all political persuasions have instituted trusteeship as one means for dealing with the destructive elements of capitalist development since it began. They recognised that the social disorder caused by unemployment, poverty, and social dislocation is anathema to successful economic growth and commercial development. Trusteeship involved giving control over resources and responsibility for decision-making to a select group; particularly those—most often land and business owners—who were considered to have the wherewithal to provide for the welfare of affected populations such as the poor, unemployed, and dispossessed.

State Trusteeship

When the pastoral industry began, the most productive land was given over to white owned operations.

Until the early 1970s, the pastoral industry in northern and central parts of Australia was the cornerstone of the regional economy. When the industry began, large tracts of the most productive land were given over to white owned operations. During this period, under a policy I have termed ‘state trusteeship’, governments of all political persuasions assisted in providing much needed labour to these enterprises by such measures as subsidising the cost of maintaining Aboriginal labour on station properties, church missions and reserves; legally restricting the movement of Aboriginal people; and providing training and education. The key role of Aboriginal labour in the pastoral industry is difficult to overestimate. As the Secretary of the Northern and Central Pastoralists Association observed in 1927:

The aboriginal is a valuable adjunct to the pastoral industry, and without him … it would be impossible to carry on under conditions as they exist … Frankly until their profit and loss [accounts] warrant it, pastoralists think there should be no cash payment to or on behalf of aboriginals employed by them (cited in Smith 2004, p. 242).

Indeed, low-cost Aboriginal labour—either paid in kind or at wages well below award rates—is what maintained pastoral station profit margins up until the late 1960s.

What is more, until the early 1970s, governments imposed harsh restrictions and controls on Indigenous enterprises that were highly effective in curtailing commercial activity. Strict restraints on business activities and property and citizenship rights continued throughout the era of state trusteeship because Aboriginal people lacked political representation at any level. According to Ian Palmer, demands for the control and ownership of land by Indigenous persons, albeit largely unsuccessful, can be traced back at ‘least as far as the 1930s’ if not further (Palmer cited in Smith 2004, p. 243). In 1928 The West Australian newspaper reported that a number of Western Australian Aboriginals, some of whom were farmers, came together to form a short-lived political pressure group. The group formed in order to lobby the state’s Labor government for, among other things, citizenship rights, including the right to own property. These initiatives were vehemently opposed by the powerful agricultural industry and, with much assistance from their political representatives, the demands of Indigenous agitators were quickly silenced (Smith 2004, p. 243).

A few Indigenous businesses were active in the state trusteeship period, most notably the Northern Mining and Development Corporation (established in the 1940s) and the Pindan Group, both of which operated for a time in the Pilbara region of Western Australia. However, such enterprises were ruthlessly impeded in their operations because competing commercial operations, especially those owned by white pastoralists (who enjoyed strong links with government through agencies including the Pastoralists and Graziers Association), were greatly assisted by government policy of the time. Policy was aimed primarily at preventing the development of Aboriginal businesses as a competitive threat (McLeod 1984). It was not until the advent, beginning in the 1970s, of well-organised Indigenous political organisations, such as the Kimberley Land Council and Northern Land Council, that Indigenous enterprises began to receive royalty payments and other monies for commercial operations conducted on ‘their land’.

Until the early 1970s, governments imposed harsh restrictions and controls on Indigenous enterprises.

In the late 1960s mass unemployment began to emerge in the pastoral industry. But, and this is significant, before this unemployment was virtually unknown and labour shortages were often acute. Indeed, labour shortages in the Kimberley were so bad the mid-1960s that farmers at Kununurra ‘went to the extent of importing native labour from outside the State’ (Commissioner of Native Welfare 1966, p. 10). This action, according to the Department of Native Welfare, did not affect the ‘local employment situation in any way and the position for the future appears very promising’. The Department also argued that, in the ‘event of the pastoral award coming into force [as it did in 1968], a vast unemployment situation is not anticipated as it is felt that many employment avenues outside the pastoral industry will be open to native workers’ (p. 10). In 1968, the pastoral award was introduced for Indigenous workers; hitherto Aboriginal labour had been paid at rates below those paid to white workers (Smith 2002, p. 6). The Department’s optimism about future employment potential was, of course, based on the expectation that the long period of economic growth after World War Two would continue. Optimism also assumed continuity in the regional development policies of the state and federal governments.

In the 1960s capitalization and concentration of ownership increased in the pastoral industry. The cost of labour also increased, due to the granting of the pastoral award, among other things. International prices for pastoral output fell just as the costs faced by pastoralists began to escalate. To ensure even short-term viability of pastoral stations, a rapid restructuring in production methods was required. One immediate means for this restructuring was a shift to greater mechanisation (such as motorbike and aerial mustering). The expulsion of Aboriginal workers and their families from pastoral stations was another.

From State to Indigenous Trusteeship

In such rapidly changing circumstances, existing policy (state trusteeship) was unable to prevent or cope with the huge wave of migration from stations and outlying regions into towns and semi-urban centres. Kim Beazley senior, later Minister for Education in the Whitlam Government, recognised the shift in Aboriginal conditions and the ‘new’ parameters for government policy, when he pointed out that:

The Aboriginal population at present is an underprivileged, underfed, underpaid, untrained labour force, increasing in numbers and not closely considered. While we enthuse about the development of our natural resources we make no real effort to draw this force into the process of development. We are allowing social dynamite to accumulate (House of Representatives 1967).

At this point governments began to change policy, in close consultation with an increasingly politicised Aboriginal leadership. The new policy came to emphasise concepts of traditional culture, ethnicity, and community: a policy I have termed Indigenous trusteeship. And, notably, the new development policy attempted to join the business and political aspirations of an emerging Indigenous leadership with a project of economic and social development. It was hoped, for instance, that by acquiring pastoral stations for and on behalf of Aboriginal communities, who would then employ this surplus labour, the policy could stimulate both economic growth and deal with rural disorder.

International prices for pastoral output fell just as the costs faced by pastoralists began to escalate.

The transition to a new regime was, of course, neither smooth nor even. But as the contours of the new administration became clear, it is possible to identify some of its features. Importantly, the leading proponents of the policy in both the white community (for example, H.C. Coombs and William C. Wentworth) and Indigenous communities (for example, Charles Perkins) drew heavily on leading international developments in the area. As one British government report of the time noted: ‘Rural development is not the complete answer: but among the limited range of possibilities open with existing resources, it offers an opportunity to soften the impact of the harsh economic realities’ (Working Group on Rural Development, 1969, p. 8).

To arrest urban drift and to deal with emerging social destitution of unemployed station workers and their families, leading Aboriginals were now to be the agents or trustees for their community’s development. A major plank of this policy would involve recruiting nascent Aboriginal enterprises into organising and managing labour. Finance and labour would also be provided, and large tracts of land would be ceded to Indigenous individuals and organisations, especially in remote and regional areas.

Importantly, the evolving policy was introduced and guided by advisors such as Coombs and W.E.H. Stanner as well as cabinet ministers from both sides of politics, including Gordon Bryant and Wentworth. For example, Coombs was ‘instrumental in shaping the Holt, McMahon [Liberal] and Whitlam [Labor] governments Aboriginal affairs policy … Coombs also played a crucial role in steering Indigenous policy’ (Neill 2002, p. 255–256) away from assimilation (or state trusteeship) and towards Indigenous trusteeship. However, critics of Coombs—notably Geoffrey Partington (MacWilliam 1996) and now Windschuttle (Windschuttle 2006)—conveniently forget his work with both sides of politics and that it was informed by a keen international perspective.

From the early 1970s onwards, under this new policy, the purchase of land on behalf of Aboriginal organisations and individuals began on a large scale. Initially, land purchase in northern regions mainly involved the transfer of pastoral stations and former Aboriginal reserves to Aboriginal management. Soon after the 1972 election, the first two purchases were completed—that of Pantijan Station in the West Kimberley, for people living on the Mowanjum Mission near Derby; and that of Willowra, on the eastern edge of the Tanami Desert in the Northern Territory. Both purchases were presented as satisfying the ‘social needs of aboriginal groups claiming strong traditional attachment to the land’ (Young 1988, p. 3). These areas were to be places for sequestering surplus labour, as well as providing a basis for underpinning Aboriginal enterprises, particularly in pastoral and agricultural production.

Also, beginning in the early 1970s, Federal and State government agencies began to provide finance for the benefit of Aboriginal enterprises. The Commonwealth Capital Fund for Aboriginal Business Enterprises, established in 1968, became a principal source of finance for Aboriginal business ventures. The Commonwealth’s Capital Fund was in fact begun by Coombs and was devised to alleviate burgeoning rural unemployment and poverty. Coombs expressed intention was to prevent Aboriginals from becoming a ‘dependent, landless proletariat with no other options’ (Coombs 1993, p. 3).

Critics of Coombs conveniently forget his work with both sides of politics.

The Capital Fund was initiated when the scale and scope of Indigenous commerce had begun to increase. Importantly, the growth of Indigenous businesses now occurred in an environment in which governments offered positive forms of assistance, in stark contrast to the earlier period of state trusteeship. The stratum of Aboriginal leaders that either held or were seeking land were now able to gain public funds for economic activities and enterprise development on ‘their land’, and elsewhere. As a result, Indigenous commercial activities began to proliferate.

Originally, the new policy had welfare objectives and provided Indigenous organisations with significant government support in the form of finance, land, and labour. The establishment of Indigenous controlled agencies, such as Land Councils and later the Aboriginal and Torres Strait Islander Commission (ATSIC), was an essential component of the new policy regime. In this regard, the establishment of Indigenous organisations as a platform for the delivery of welfare services and later as a springboard for multiplex enterprises provides an example of the corporate organisation used by the Indigenous leadership to expand commercial operations. In many cases these agencies, usually controlled by the local Aboriginal leadership and their families, have become involved in broader commercial activities alongside their welfare responsibilities.

The Tensions Within

Beginning in the 1990s, there were calls from the Indigenous business class, now firmly established, to focus more explicitly on economic development, and particularly the employment of labour in the ‘real’ rather than the ‘welfare’ sector of the economy (Aboriginal Affairs Department 1996, p. 11). To deliver this outcome, Aboriginal business interests considered that secure legal tenure—that is, the transfer of freehold title direct to Aboriginal individuals and corporations—was the most ‘suitable’ and ‘correct’ course of action (Aboriginal Affairs Department 1996, p. 11). By calling for secure tenure (preferably freehold), Aboriginal corporations could potentially use their land assets for collateral in obtaining finance from the private sector, thereby freeing them from public sector scrutiny and welfare obligations (such as the communal distribution of revenue) that necessarily impinge on investment and commercial activities. To put it another way, demands for secure title represented a wider desire by Indigenous business to move away from simply providing a welfare service as Indigenous trustees, to more explicitly commercially oriented operations. More recently, financial institutions such as the Macquarie Bank have forged partnerships with some Indigenous corporations and local landholding families. Under these arrangements Indigenous corporations ‘contribute freehold or leasehold land for development, while Macquarie and other investors such as super funds would put in the money’ (The Australian 2006). It is worth mentioning that families rather than communities hold these commercial aspirations.

The establishment of Indigenous controlled agencies was an essential component of the new policy regime.

So as Indigenous enterprises have become more established, organised, and confident, the Aboriginal leadership has discernibly shifted its emphasis from providing a welfare function to a more commercially oriented view. That is to say, not only are these organisations increasingly employing large amounts of labour, but they have also begun to acquire significant assets. While government policy continued to emphasise these assets as communal and their managers as trustees, there has been increasing criticism from many ‘trustees’. For example, Pearson has said that: ‘Our failure to properly reconcile our social and cultural considerations with the imperatives of enterprise development, I suspect, is the greatest impediment to enterprise development in our communities and a central explanation for our failures to date’ (Pearson 2000, p. 89).

It has been well documented that serious conflicts have emerged between the community workforce and management in Aboriginal-owned enterprises. In the cases of pastoral stations and or ‘community’ enterprises, these conflicts revolve around the essential reason for the establishment of these enterprises. In one case, high profile Aboriginal leader, Galarrwuy Yunupingu (former chair of the Northern Lands Council), stood accused of redirecting millions of dollars in mining royalties to his immediate family, at the expense of providing basic community services (The Age 2006). Put simply, there is confusion and sometimes anger as to whether these operations are a commercial resource (owned by families) or a welfare measure (held on behalf of communities) (Arthur 1994, p. 31). One reason for these conflicts is that commercial entities must generate a profit—to remain viable, enterprises cannot allow their revenue to be distributed as largesse among their community members or workforce.

From one perspective, the drive to enterprise growth could be seen as a corruption of the original intent to alleviate the effects of Aboriginal unemployment and social dislocation. But from the point of view of the Indigenous business leaders who run them, it is simply a normal commercial aspiration to retain profits for expanded operations. Indeed, Indigenous businesspeople are now (rightly enough) pointing out the inherent discrimination in the expectation that Indigenous businesses should shoulder the burden of welfare responsibilities when other businesses are not expected to do so.

The End of an Era?

Contemporary debate about Indigenous policy (Indigenous trusteeship) has mostly focused on the destructive impacts of poverty, violence, and unemployment in many rural and remote Aboriginal communities. Because these communities have been at the forefront of state administration for three decades, the very nature of Aboriginal society and community has come under scrutiny.

Today’s policy response signals the end of an agrarian development policy.

Thirty years ago, when the likes of Nugget Coombs and Charles Perkins wrestled with the economic and social effects of economic downturn, proposed solutions did not rely on the draconian policing methods now widely proposed, nor rural to urban migration. In fact, they sought to find ways to re-mobilise agrarian labour within the constraints of the rural economy. Compared with that approach, today’s policy response signals the end of an agrarian development policy.

Until now, the tension between Indigenous welfare considerations and the ability to trade profitably has been manifest but unresolved. Many Aboriginal enterprises still manage welfare and commerce—indeed many rural organisations remain viable only on the basis of subsidised labour. But in many others, this tension can no longer be managed and a separation between welfare and commerce is underway.

Beyond the history wars, beyond the calls for a new paternalism by neo-conservatives, is the ongoing question of development. It may well be that calls from the right to end the current policy will be short-lived. One thing is clear, however: this policy interregnum will help to effect the growing separation between Indigenous business aspirations and the wider and ongoing problems of (especially rural) development.


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Anthony Smith has a PhD in economics. His research examined Aboriginal economic development in the Kimberley region of Western Australia. He spent three years in the North West of Western Australia working for an Aboriginal owned organisation and its Traditional Owners. Currently, among other things, he is an Honorary Visiting Fellow at the Graduate School of Business at Wollongong University and is writing a book on Aboriginal economic development. The author wishes to thank Michael Rafferty for his invaluable assistance in writing this article.