Magazine of the Socialist Party, Australian section of the CWI

The origins of capital and labour in Australia

In the Communist Manifesto, Karl Marx and Frederick Engels wrote: “The history of all hitherto existing society is the history of class struggles”. There is no doubt that in Australia no less than the driving force of history has been the struggle between capital and labour. In this article Anthony Main looks at how these two classes came into being.


January 26, 1788 was the day the British Empire officially landed the First Fleet on the Australian continent. Invading the lands of the indigenous Aboriginal people, they occupied an area at Port Jackson (Sydney) and set up a penal colony. At that time the continent was known to many as New Holland. Named by Dutch explorers, they had charted the coastline but had made no attempt at settlement.

It was from 1788 onwards that the process of establishing capitalism in Australia began. The new colony, to be named New South Wales, was to be a fillip to the British Empire, as they had recently lost their colonies in North America after the American Revolution.

Australian capitalism and the working class developed in very unique circumstances. Unlike other parts of the world, there was no transition from feudalism. Instead Australian capitalism was set up anew on stolen land.

Aboriginal people had been on the continent for more than 60,000 years. Like hunter-gatherer societies throughout the world, they developed highly sophisticated means of living off the land. This extended to the large-scale use of fire in landscape management. Some groups planted and harvested crops and practised aquaculture. Small settlements, including shelters with stone foundations, marked places where people lived semi-permanently.

For a long time non-Aboriginal Australians were taught that these societies did not truly ‘use’ the land; this was meant to justify colonisation and to paint Aboriginal people as unsophisticated. However, this form of economy makes intensive use of the land, and involved the widespread development of specialised technology. It was capable of sustaining small populations with an abundance of varied food, while still leaving ample time in people’s lives for ceremonial and leisure activities. These societies traded extensively with each other, but this trade benefited whole communities; it was not geared toward extracting and accumulating profit for a minority.

When the British arrived they set about creating a new type of system. Their profit-driven capitalist system was incompatible with the old mode of production. To establish capitalism the British would have to replace the old order. They did this successfully and, in a matter of mere decades, the imposition of capitalism had wrought devastating changes on the Aboriginal population.

The development of Australian capitalism can only be properly understood from an international perspective. It was a direct result of processes that were taking place on a world scale. British capitalism was expanding at the time and opportunities were opening up for trade in the East. The Pacific region itself was rich in natural resources and ripe for exploitation.

The changes that were taking place as a result of the industrial revolution in Britain saw many thousands of people pushed from their land and into urban areas. Poverty and hardship in the cities increased dramatically and harsh laws were introduced to protect the profit interests of the capitalist class. For example the death penalty could be imposed for theft, while even lesser crimes saw people jailed, sometimes for life.

Penal settlement

With the poor and desperate filling up the jails in Britain, many convicts were sent abroad. But when the North American colonies won their independence in the 1770s, a new location for convicts was required. Dealing with the convict problem was a key reason the British decided to set up a penal settlement, but, at the same time, the new British colony was also of strategic importance. It would help prevent their French rivals from setting up a Pacific trading hub on Australian soil.

Around 1000 people arrived on the First Fleet; 700 of them were convicts. The British officers in charge of the expedition were ill equipped for the tough task of building a new settlement on unfamiliar territory, and initially the project almost failed. Very quickly the officers requested that “free settlers” with farming knowledge also be sent in order to help consolidate the colony.

Grants of land were made to free settlers as well as to British officers. Convicts were forced to work on the land as part of their punishment. From the outset select privileged individuals were essentially provided with free capital and cheap coerced labour. This gave them an enormous advantage and it was these individuals that formed the embryo of the Australian capitalist class.

Small scale trade between these individuals saw the beginnings of a market emerge. When more ships arrived from Britain carrying goods small shops were also established. From these simple beginnings the foundations of a new capitalist economy were laid.

When convicts finished their sentences they were allowed to work for small traders and farmers for modest wages. Some convicts who were considered of “good conduct” were allotted small parcels of land, but the main beneficiaries in the early days were undoubtedly the British officers. They monopolised many parts of the nascent economy for themselves and granted each other huge tracts of land.

At the time there was a shortage of coins, so the main medium for barter was rum. The officers maintained tight control of the supply of rum and as a result became known as the “Rum Corps”. The officers used the wealth they had accumulated to wield undue political and economic influence. Even in the first decades of colonisation, a sharp divide was developing between the rich officers and landowners and the rest of the population.

Sheep’s back

In 1805 an officer brought the first flock of sheep to Australia and set up a small sheep station. The growth of the textile industry in Britain meant that there was an increasing demand for wool. With improved farming techniques, an ideal climate, free land and forced convict labour, the wool sector expanded rapidly in the years to follow.

In 1807 a mere 245 lbs of wool was exported. This increased to 175,400 lbs by 1821 and then to a massive 3,693,241 lbs by 1836.

As the international demand for wool increased the colonial government and the capitalists required more land to graze sheep on. This was land that Aboriginal people were then using. The Aboriginal population was seen as a hindrance to making profits and to overcome this, the colonists embarked on a violent campaign to drive Aboriginal people from their land.

At the behest of the needs of world capitalism, tens of thousands of Aboriginal people were either driven out into remote areas or killed. Some were brutally murdered, while others died of starvation or diseases like smallpox and tuberculosis. These diseases were introduced by the British, and were previously not present amongst the indigenous population. There is some evidence that smallpox was introduced deliberately as part of a military strategy in 1789, as had been done thirty years earlier in North America.

The creation of huge sheep pastures also meant that major changes were made to the natural environment. Many of the plants and animals that the Aboriginal people had previously relied upon for food were destroyed. This impacted on their ability to hunt and gather food, and to farm and fish. As a way to feed themselves, sometimes Aboriginal people would spear sheep. The sheep grazers often responded by indiscriminately killing Aboriginal people in retaliation.

A very sharp, but essentially unequal, struggle took place between the British colonisers and the Aboriginal people. A series of conflicts occurred, with the Aboriginal people fighting hard to defend themselves, their land and their way of life. Alongside small scale conventional warfare, Aboriginal people also engaged in forms of sabotage to resist. Buildings were burnt, horses were killed and livestock was stolen.

Aboriginal genocide

Unfortunately the British colonisers had the upper hand in the conflict, primarily because they were armed with far superior weapons such as guns and poisons. The way that Aboriginal people were socially organised also made large scale defence of the land difficult to organise.

A multifaceted war of attrition took place which saw the Aboriginal population decimated. From an estimated population of over 700,000 at the time of the 1788 invasion, almost 90% of all indigenous people had been wiped out by 1900.

In the early days Australian capitalism was undoubtedly built on the sheep and convict’s back, but it was also created amidst the bloodshed of the Aboriginal people. The genocide that took place stemmed from the very foundations of the new capitalist property relations that were being created.

Flowing from the way they lived, Aboriginal people did not adhere to the capitalist concept of private ownership. In contrast the colonisers were essentially seeking to privatise the land for themselves in order to exploit it.

The British colonisers brought with them all sorts of backwards ideas. In part their brutal racism towards the Aboriginal people was formed by their attitude towards black people under slavery, but was also used to justify the dispossession that made it possible to expand the colony. They considered black people to be inferior beings. Convicts were also seen as inferior, again to justify their harsh treatment and the exploitation of their labour.

Convict exploitation

Convicts were routinely lashed for refusing to adhere to orders. Solitary confinement and hard labour were common punishments. The harsh treatment was designed in part to deter rebellions; despite this, there were many attempts by convicts to resist and to fight for improved conditions.

Go-slows and sabotage were just some of the tactics that were used by convicts to win concessions – they first won limits on the amount of hours worked, and then the right to work for pay some of the time.
Uprisings like the famous Castle Hill rebellion also took place but, because of the economic conditions the convicts faced, a struggle for their full emancipation was not possible. Some of those who did manage to escape the regime ended up becoming bushrangers and lived as outlaws.

By the 1820s a small but thriving capitalist economy had taken root alongside the penal settlement. A new merchant class had also emerged and it was beginning to break the monopoly of the British officers. Banks and trading companies were set up and a stable currency was eventually established. This further undermined the influence of the officers, and the capitalist class began to diversify.

British capitalists were encouraged to invest in Australia, especially in the agricultural sector. The importing and exporting of goods increased and alongside wool the sale of timber, whale oil and seal skins added to the growth of the economy. The increase in trade saw an expansion of the sea ports, and saw more and more workers being employed in the maritime industry.

Working class

In was in these conditions that the Australian working class started to come into being. Capitalists could exploit the land, but much more value could be produced by also exploiting the labour power of workers. Convicts provided the first forms of labour in Australia, but as the economy grew, more ‘free labour’ was required. Those convicts who had served their time gradually became wage labourers and new workers with certain skills arrived from Britain.

It didn’t take too long for these workers to come together in an attempt to improve their circumstances. Many began to organise in “societies”. These were generally temporary combinations of workers set up around specific demands – usually improvements to wages and conditions. Even in the early days of Australian capitalism workers knew that their interests were more likely to be advanced if they acted collectively.

In 1823 the British government set up a Legislative Council and formally recognised Australia as a colony. The draconian Masters and Servants Act was introduced in 1828, with the aim of controlling workers who had begun to struggle for a bigger share of the wealth, and limiting their ability to organise collectively. While a struggle was taking place over the wealth created, the early workers’ movement was still too immature to challenge the existing social order.

In the early 1840s Australia experienced a severe economic crisis precipitated by intense land and stock speculation, as well as a drought. A number of banks collapsed and unemployment became a major issue. While many ordinary people struggled to make ends meet the colonial government pulled out all stops to support the profit interests of the rich land owners and capitalists.

The economy eventually recovered and, as capitalism developed further, there was a need for even more labour. Migration programs from Britain were established with land prices being set just out of reach of the majority. This forced most new arrivals into the labour force and solidified the economic hold of the rich land owners. The land owners became known as “squatters”, as they had essentially gained usage rights by first occupying the land.

‘Free labour’ struggle

At this time a struggle was set in train between the squatters and the emergent classes of workers and merchants in the cities. The squatters wanted to maintain the cheap system of convict labour, while the workers wanted free labour instituted more widely.

For the workers the presence of convict labour drove down wage levels and prevented the extension of their rights through the introduction of self government. For the merchants and small traders, free labour would be a boost to their fortunes, with the population’s spending capacity vastly increasing. The increase in the population to meet the needs of the growing cities and towns saw the balance of forces tip in favour of a system of free labour.

The transportation of convicts was also increasingly seen as an ineffective form of punishment, as many convicts in Australia were actually better off than those who were poverty stricken in Britain. Transportation to New South Wales was stopped in 1840 but attempts to restart it were made in 1848. Mass meetings and protests were held in opposition and the government was forced to abandon all attempts to transport convicts to Sydney in 1850.

The discovery of gold in Australia in 1851 put one of the final nails in the coffin of convict transportation, as it was seen as ludicrous to send criminals to a land where they could potentially strike it rich! From 1850 to 1868 only very small scale transportation took place. All up, in the first 80 years of colonisation around 162,000 convicts had been sent to Australia. 80% of all convicts sent to Australia were transported for crimes against property, as opposed to only 3% who had been transported for “crimes against the person”.

Gold rush

It was against the backdrop of the 1850s gold rush that Australian capitalism really began to take shape. The gold rush transformed the Australian economy dramatically, with a long boom taking place from the 1850s to the 1890s. During the 1850s the population of the colony essentially tripled with thousands of people immigrating from all corners of the globe.

As the size of the working class increased, so did its capacity to wield more influence. With the economy expanding at a rapid rate, workers in the cities, diggers on the gold fields, and small merchants and traders demanded a bigger share of the wealth being created. Mighty battles took place, most famously the Eureka rebellion at Ballarat.

Prior to the 1850s the convict system hindered the establishment of an organised labour movement. On the one hand the government exercised near dictatorial powers, while on the other hand the capitalists and rich squatters prioritised the use of convict labour in order to maximise profits.

From the 1850s this system was diminished and more formal trade unions were established. A number of successful organised struggles were waged. While coming into being later than many of their counterparts around the world, the Australian working class was able to take advantage of the relatively high standards of living created by the economic booms in wool and gold.

Australian workers of this era forced a whole series of significant concessions from the capitalist class, including male voting rights, land reforms and the 8-hour working day. In many cases these reforms were won decades in advance of workers overseas.

Latent power

Early capitalism in Australia benefited immensely from the land that was stolen from indigenous people as well as the super-exploitation of convicts. Wool and gold provided the basis for capitalism to expand, but the bulk of the wealth that was created came from the exploitation of workers. As is the case with capitalism everywhere, workers are exploited in the sense that they are only paid a portion of the wealth they produce. The rest is kept by the capitalists as profit.

An unequal system was put in place from the outset in Australia. However, in its wake a social force – the working class – was created. Today, most people in society are working class. Our class is unique in that it is the only force in society that has the latent power to stop the exploitation and oppression that capitalism bases itself on.

If the working class acts collectively and aligns itself with other oppressed people, it has the potential not only to win reforms but to create a new type of society that uses the wealth generated for the betterment of all. By taking the economy into public hands, we would be able to use this wealth to end the poverty and environmental devastation of capitalism, and bring about a kind of society that can provide a high quality of life for all people – not just a tiny minority.

Understanding the history of the struggle between capital and labour in Australia is but the first step to effecting such a change.

By Anthony Main