It’s well known that, in the late 1960s, the US governing elite, keen to advertise its pluralism, decided to cultivate what Richard Nixon called ‘black capitalism’.
As radical pressures mounted, giving a ‘piece of the action’ to a ‘Negro managerial class’ would, it was hoped, ease social conflict and safeguard the prevailing order. Elite prudence and self-preservation required that African Americans should be afforded ‘full participation in our free enterprise system’.
Shorn of euphemism and uplift, this meant that the enormous popular mass of African-American employees and poor would have to be supplemented, its anger diluted, by co-opting a small but visible and well-promoted number of Black employers and proprietors.
Through ‘the classic means: ownership of business’, a class of ‘Negro entrepreneurs with capital, business training and markets’ would gain a stake in the survival of status-quo institutions.
The activity of ‘militants’, meanwhile, was deliberately to be ushered into the safe channel of Black nationalism. Once there, it would be either suborned by establishment liberalism, or confined to a narrow niche by the endless cell division of identity politics.
Ensuing decades have duly shown the success of this policy, judged on its own terms.
Around the same time, Nixon announced ‘Indian control of Indian programs’, reviving the status of tribes as legal entities authorized to enter into ‘self-determination contracts’ with the federal government.
In 1971, following the discovery of oil at Prudhoe Bay, Nixon’s Alaska Native Claims Settlement Act ‘explicitly re-organized indigenous peoples into corporations composed of shareholders whose rights were based on genealogy, whose traditional lands became private, alienable property, and whose cultural products, a growing proportion of them trademarked under the Silver Hand, were directed toward the market.’
Leaders at the head of local authorities were thus granted administrative powers, control rights in property, and responsibility for service delivery of health programs, etc.
Less attention, however, has been given to a similar project begun around the same time by the Australian state elite.
According to conventional wisdom, acknowledgement of Aboriginal and Torres Strait Islander ‘land rights’ was a measure of compensatory justice won from the state as part of a movement for ‘self-determination.’
Yet there is plenty of evidence that the emergence around 1970 of new institutional forms, like incorporated land trusts and land councils, was part of a deliberate strategic initiative by Australian state managers, begun during the 1960s, to preserve the status quo.
To that end, a stratum of ‘community leaders’, ‘elders’ and Aboriginal business owners was cultivated, and a limited set of property rights and coercive powers assigned to them.
Smith describes the bipartisan project (which he calls indigenous trusteeship) thus:
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 organizing 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…
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.
The Commonwealth was granted concurrent legislative power over Aboriginal affairs in 1967.
At that time, state managers were preoccupied by both an upsurge of activism and deep changes to the pastoral industry across Australia’s northern half.
From about 1965 onwards, thousands of station hands and their families were expelled from cattle stations in Queensland, Western Australia and the Northern Territory. This followed the extension of the Pastoral Industry Award to Aboriginal workers, a downturn in beef prices, and labour-saving technical change (motorbikes, aerial mustering).
The social disruption was enormous.
Camps on the fringes of towns, scarcely provisioned with basic infrastructure, became crowded new living areas. Rates of infant mortality, respiratory and digestive diseases – having fallen throughout the twentieth century – suddenly rose again. In Western Australia, convictions of Aboriginal people for offences against property doubled in the course of three years; those for breaches of the Native Welfare Act quadrupled.
The degree of official concern can be gathered from the words of Kim Beazley Snr., speaking in 1967 before the House of Representatives:
[We] flinch from facing the fact that their employment opportunities at the present time are diminishing. The cattle industry has always been an employer of Aborigines, but changes in the working of pastoral properties are steadily reducing the need for a large labour force in that industry. As the demand for stockmen decreases more and more Aboriginal youths will become dispirited and disillusioned unless remedial action is taken. Where Aborigines live on the fringes of towns, in the cities or in the north…[continuation of] the policies of complacency pursued by Australian governments in the past are simply going to generate purposelessness, despair and passivity, or else a socially explosive atmosphere among them… The Aboriginal population at present is an underprivileged, underfed, underpaid, undertrained 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.
Politicians repeated, with a mixture of trepidation and pleasure, remarks made by Charles Perkins to the Sydney Morning Herald:
There is a subversive influence in Aboriginal affairs throughout Australia which is trying to undermine the confidence of the Aboriginal people to cope with their situation, to undermine the confidence of the white community in the Aboriginal people, and by so doing to create a situation of disorganisation which can be manipulated politically.
The following year (1968), a Cabinet submission issued a warning to an Interdepartmental Committee investigating Aboriginal affairs:
Hesitation in formulating a policy could have quite serious repercussions for us, both internally and internationally. Communists are devoting great efforts to capturing Aboriginal organizations, and unless we have an alternative to offer, they are likely to succeed.
The favoured policy response, in the language of the time, was to foster ‘economic independence’ and a layer of Aboriginal people to ‘manage their own affairs.’
More details were set out in an appendix to the Cabinet submission, on “Encouragement of Newly-Emerging Forms of Aboriginal Society”:
The types of Aboriginal self-help organizations, which it is desired to encourage, are proprietary companies, co-operatives, savings and loans groups, social welfare associations etc.
(a) It is envisaged that these organizations should register with appropriate State Authorities (e.g. registrars of co-operatives) and with the Office of Aboriginal Affairs. It is intended that Special Liaison Officers be appointed to work, preferably in association with State and other authorities, to train Aboriginal groups to form and conduct such organizations.
(b) It is hoped that in time the elected officers of these organizations might constitute a source of whence consultants and possibly Aboriginal Council members could be drawn.
W.C. Wentworth, who in the Gorton Government became Minister-in-charge of Aboriginal Affairs, spoke before the House of Representatives in August 1967:
I do not think that in the future our Aboriginal people should be treated simply as employees. In common with other Australian people they have to be given the opportunity to take over certain functions of ownership. I do not think a policy which is directed simply at their employment opportunities is good enough either for them or for Australia.
Then there is the development of the reserves that have been kept for our Aboriginal people. Certainly in the north of Australia – I know something of the north – the resreves which are appropriated for them are sufficient to give them a good and rich life. It is not always easy to say how these reserves should be developed. I believe that in some cases they should be developed on a group basis. We have made the mistake, perhaps, in the past of trying to rubbish too much of the Aboriginal organisations as based upon a group concept. In this period of transition, which may be for more than one generation, the group concept could perhaps be developed for the advantage of the Aboriginal people, because it is their concept.
C.E. Barnes, Minister for Territories, delivered a statement to Parliament regarding a conference of Commonwealth and State Ministers responsible for Aboriginal welfare, which had been held in Perth during July 1967:
Conference recognised that the advancement of Aboriginals should be considered not only in terms of their becoming wage and salary earners in the community but also in their taking up avenues of self-employment or business undertakings. These developments should be fostered wherever possible. Conference drew attention to the value of the continuing development of individual business and corporate enterprises conducted by Aborigines and affirmed that the further development of such projects would contine to be encouraged.
Ministers noted that considerable attention been devoted to the question of “land rights” for Aborigines during the referendum campaign. A major concern appeared to be that Aborigines should have the opportunity to own or lease land on reserves and they should be given assistance to establish themselves on the land.
This was not idle verbiage. In 1968, Commonwealth legislation created a Capital Fund for Aboriginal Business Enterprises, to ‘enable persons of the Aboriginal race of Australia to engage in business enterprises that have prospects of becoming or continuing to be successful.’ Firms backed by the fund were required to ‘be predominantly Aboriginal owned or have a preponderance of Aboriginal shareholders.’
But what Perkins described as a ‘new Aboriginal leadership’ was not merely to be concerned with commercial activities. It also assumed responsibility for administrative tasks, including provision of housing and municipal services.
This layer also took up positions on land councils and trusts, newly created statutory bodies to which communal title was vested. While property was officially held by local populations, council and trust members acted as their trustees or agents.
The latter were thereby conferred with some of the prerogatives that usually make up the private propertyholder’s bundle of rights. They controlled the management of land, negotiated the terms of its use and made decisions regarding its development. Of course, these trustees were legally obliged to act in the interest of the communities on whose behalf they held property titles. And directors were not assigned rights of residual claimancy over the net income generated by these assets.
But a more insuperable case of the principal-agent problem can scarcely be imagined.
Representatives privately negotiated land-use agreements with mining firms and governments (and had responsibility for managing asset portfolios). Beneficiaries couldn’t observe or monitor the performance of trustees or agents, and neither effort nor competence could reliably be inferred from the outcome of negotiations. In the event of an unfavourable agreement of terms, trustees could plausibly claim they secured the best equity stake, lump-sum payment, royalty equivalent, infrastructure provision or ‘community development’ package they possibly could, given the circumstances. Trust beneficiaries, since the native-title group endured in perpetuity, included unborn future generations who, of course, could not issue directions to trustees.
The very purpose of mandating that corporate trusteeship would be the form in which land was held and managed on behalf of native-title owners was, as Paul Keating explained to parliament, to ‘facilitate dealings in relation to the land’, i.e. to allow mining transactions to be undertaken with outside parties, without the mining enterprise having to negotiate with individual members.
Meanwhile the trustee’s right to manage and disburse the group’s funds (e.g. through granting business loans and operating licenses to entrepreneurs and firms) allowed them to nurture patron-client relationships. More generally, they could invest in establishing personal contacts and improving their social status, allowing them to participate in government advisory panels, earn consultancy fees, sit on executive committees, gain directorships and otherwise pursue private benefits.
(See Tirole and Aghion’s observation that, where agents perform such duties independently or behind closed doors, administrative power in an organization effectively confers ‘real’ authority over assets to bureaucrats, in the absence of formal legal rights. The principal or owner, on whose behalf power is formally being exercised, is reduced to rubber-stamping decisions).
It was presumably to paper over such obvious agency problems, whereby trustees of ‘communal property’ became endowed with such clear privileges, that the new policy so readily invoked the unifying notions of ‘community’ and ethnicity. The vast gulf in status, incentives and personal experience between the Indigenous population and its ‘leadership’ was to be bridged by the bonds of traditional culture.
That one concern behind this agenda was the maintenance of social control and discipline can be seen from the following statement of aims by the Woodward Royal Commission (1973) into Aboriginal Land Rights.
The promotion of social harmony and stability within the wider Australian community by removing, as far as possible, the legitimate causes of complaint of an important minority group within that community. The provision of land holdings as a first essential for people who are economically depressed and who have at present no real opportunity of achieving a normal Australian standard of living.
A further consideration was to facilitate investment in e.g. resource extraction without provoking the sort of political disturbance or combustion of ‘social dynamite’ which worried the politicians quoted above. This was helped by the creation among the Aboriginal and Torres Strait Islander populations of a thin layer of bureaucrats and employers imbued with the same priorities and preferences as state executives and capitalist firms.
The West Australian Commissioner of Native Welfare remarked in 1971 on the effects of the new policy of consultation and self-management:
[It] is an indisputable fact that, for the first time, there is genuine consultation between Aboriginals and the government and the hard facts of economic and political reality are being absorbed by an emerging [Aboriginal] leadership… All Superintendents report that, at a regional level, the methods of handling matters of local concern have been immeasurably assisted by the understanding and advice of the Consultative Committee.
These two functions – social control and facilitation of profit – often dovetailed.
A case in point is the career of Ernie Bridge, cattle-station owner and WA State Minister under the Labor Government of Brian Burke. Bridge was a founding member of the Aboriginal Lands Trust in 1972, and later (in 1975) an inaugural member of the Aboriginal Lands Fund Commission.
According to the minutes of a WA Lands Trust meeting in December 1974, Bridge remarked that ‘for some time now councillors from various Aboriginal reserves have undertaken the task of maintaining discipline among their own people… In order for this system, which has proved successful, to continue, Mr. Bridge suggested that perhaps a set of uniforms be provided.’