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Two great assets of the NSW Labor Party – the 2KY wireless station and the Labor Daily – are plums for which many people have hungrily licked their lips. Some have been able to take a bite, but nobody – yet – has been able to snatch them for their own, their very own. Mr Lang is now trying to pluck these golden plums.
Truth's description of the «chilly, alert atmosphere» of the Labor Council when Lang addressed it on 2KY was an indication of the storm which would gather strength over the next three years. The communists, both overt and covert, and the non-communist left wing opposed Lang's move to integrate the radio station with the newspaper and, to widespread surprise, his plan was defeated.
In August 1936 the unions in the Labor Council called what would be the first of many meetings to oppose Lang's control of the party machine. Lang immediately expelled four members of parliament, 17 union officials and a number of others. «This lit the fire,» recalled Hughes many years later.
In December 1936 another major conference of anti-Lang unions and ALP branches was held. By this time it was clear that Lang was also trying to entrench his total control of the Labor Daily. In the preceding months the militant unions had begun to organise the union shareholders to vote against Lang directors on the newspaper's board. But after the ballot opened, it became clear that Lang's men had systematically tried to rig the vote. Ballot papers disappeared, others never arrived at union offices. On Christmas Eve 1936 the result of the ballot for directors was due to be announced but before that could be done the Miners' Federation began a legal challenge to the conduct of the ballot.
In the following year, 1937, a pending federal election led to an uneasy peace in the factional warfare. In June the four expelled MPs were readmitted to the NSW branch after demands from the federal ALP executive. The anti-Lang dissidents continued to mobilise although Lang remained firmly in control of the state party machine. In October the factional warfare revived. Labor had lost the federal election and in the Labor Daily case the Equity Court largely accepted the anti-Lang unions' claim that their board candidates each gained an average of 19,000 votes to the Lang unions' 14,000. On appeal the full court partially reversed this result but it was clear, as anti-Lang unionists pointed out, that «future ballots will result in Mr Lang's influence being completely destroyed».
In 1937 the anti-Lang forces had formalised their opposition to Lang by creating a nameless seven person committee to direct their struggle. Later that year it appointed a full time organiser, Walter Evans. Evans had been a member of the ALP state executive in 1932 and also a member of the left wing of the Labor Party. By 1937 Evans had become an undercover member of the CPA. As dual members of the CPA and ALP, Hughes and Evans would lead the growing anti-Lang struggle within the NSW branch of the Labor Party for the next two years.
Throughout the period Hughes remained in contact with the CPA largely through Ernest Knight, the CPA official who was responsible for party work among the trade unions in Sydney. Knight had a nondescript office in near the dockside in Sydney unadorned by any sign. Hughes, as a Clerks' Union official, excited no attention by visiting Knight's office as he did hundreds of other city offices to collect membership dues. As an increasingly significant Labor Council official, Hughes could also regularly visit all leftwing unions and thereby keep in touch with leading CPA trade union officials. On one level there was no secrecy at all about the growing alliance between CPA members and the anti-Lang Labor forces. At the weekly meetings of the NSW Labor Council this co-operation occurred in public. As well, there appears to have been at least two types of dual membership of the ALP and CPA. While Hughes' membership was «deep cover», other communists' allegiances were not so hidden. The editor of the miners' union newspaper, Edgar Ross, who was a member of the Botany ALP branch, recalled that his CPA membership was known to non-communist anti-Lang ALP members.
In the following years the organisation of the communist underground in the ALP became more systematic and was directed by the CPA Political Bureau which met every six weeks. Both Hughes and Edgar Ross (the most senior surviving dual members) state that they did not know the identity of all the dual members in the ALP but their identities must have been known to the CPA Political Bureau. Both Hughes and Ross later minimised the degree of organised CPA activity within the ALP and claim that there was never a fraction meeting of this group or any other defined organisational expression. Yet minutes of the Political Bureau clearly record such a meeting.
In February 1938 the anti-Lang forces tasted victory, when they took possession of the offices of the Labor Daily. Behind the scenes the Political Bureau of the CPA discussed the situation and devised «a plan covering the taking over of the Labor Daily and replacement of various members of the staff». The price of victory was the repayment of a loan which Lang had earlier made to the newspaper. The Labor Council decided to make a clean break and to change the format and name of the newspaper. What emerged in late 1938 was the Daily News. To bankroll this undertaking Hughes called on a rather unusual source. For some time Hughes had been cultivated by the general manager of the Bank of New South Wales, Sir Alfred Davidson, a forward-looking banker who made a habit of selecting and promoting talented young people. Davidson had been appalled by Lang's hostility to the banks while Premier and made overtures to Lang's enemies on both the right and left. For example, Davidson paid for an organising tour by Hughes of interstate trade union centres when the anti-Lang forces were trying to influence the ALP federal executive. Davidson apparently looked on Hughes as a possible national Labor leader with whom he could garner some influence. In establishing the Daily News Hughes used his influence with Davidson to get a substantial bank loan. A version of the Hughes-Davidson relationship appeared in Lang's autobiography in which Lang said that in 1938 Davidson invited the visiting British Labour figure, Ernest Bevin, to a dinner with Hughes, Evans, Lloyd Ross and F. O'Neill, all Labor dissidents. At the time, however, Hughes' contact with Sir Alfred Davidson was by no means public. The unusual alliance between a communist and a top banker was one of the odd consequences of the CPA's underground work in the Labor Party.
The growing CPA influence within the Labor Party was of great interest to the Communist International largely because of its wider world campaign against isolationism and in favour of collective security. From July to November 1937 the Anglo-American secretariat of Comintern held a series of discussions on «the Australian Question» and spent considerable time on the closely intertwined issues of foreign policy and the position of the Labor Party. Among those present were the French Comintern leader Andre Marty and the British representative, Robin Page Arnot, as well as CPA Political Bureau members Richard Dixon and Jack Blake.
To achieve a collective security pact linking the Soviet Union to Britain, the election of Labor administrations in countries of the British Empire was crucial. To achieve this the CPA worked to strengthen anti-fascist feeling in the society generally but in particular to use its secret members in the Labor Party to change its isolationist policy. In early July Dixon addressed the Anglo-American Secretariat arguing that Australia's main responsibility was to work for a change in British policy, which was then both warlike and opposed to collective security involving the Soviet Union. Change was possible because «the British Government is sensitive to Dominion pressure». To «bring about such a rupture with this Empire front on foreign policy, it is essential to defeat the Lyons government and elect a Labor government». Dixon noted that Lang's group was dominated «by the Catholic element» and that this was the reason that the Labor Party had made no declaration on Spain, although the trade unions on the NSW Labor Council had. Dixon summed up as follows:
Just a few words about our views on the question of influencing the Labor Government should it be elected. Our first line is that we expect to bring pressure to bear on the Labor Government through the trade union movement. Secondly, our line is to bring about a plan of getting as many Communists as possible within the LP. The Party in New South Wales has one or two Communists in the LP Executive. In Victoria out of 46 organisations, we have about 34 in which we have Communist organisation. At the same time we are trying to get direct union representation at the LP conference. This would mean we would probably control in the future the LP conference.
In spite of the CPA's growing successes with this tactic, Andre Marty made a number of wrong-headed criticisms. He began by criticising the strong trade union roots of the CPA though this was the very thing which had given it such strength in the Labor Party. Marty argued that this meant the CPA was tainted with anarcho-syndicalism. «[T] he whole leadership is composed of trade union functionaries,» he complained. Anarcho-syndicalism led to a neglect of political work, as opposed to union work, and was one explanation for the lack of growth of the CPA, he said. Marty reiterated Dixon's point on peace and collective security. Australia had the potential to affect global politics through the election of a Labor government which would in turn affect British foreign policy. «The power of the Dominions – Canada, Australia, New Zealand – is very high. They must speak and [then?] they can change the policy of the British Government with the help of the British working class.» In the Pacific, peace through collective security was necessary as a defence against Japanese aggression.
A similar point was argued by another member of the Anglo-American Secretariat, Mehring, who argued that in order to defeat Labor neutralism, the CPA should «show that Australia is being threatened by the aggression of Japan». The CPA's later targetting of the export of Australian scrap iron to Japan was to crystalise much of the debate over foreign policy both within Labor and Australia more generally. Bans on Japanese ships culminated in a major confrontation in December 1938 when the CPA influenced waterside workers refused to load iron bound for Japan. Though the iron was eventually loaded, the bitter dispute threw into sharp relief the communists' policy of sanctions versus the neutralism of federal Labor.
In 1938 the CPA's dual-track strategy of working within and outside the Labor Party began to pay dividends. In spite of the loss of the Labor Daily Lang remained in control of the NSW Labor Party but had led the ALP to another defeat in the March 1938 elections. The Federal Executive of the ALP began to sniff the wind as the power base of the mighty Lang slowly ebbed away. In early 1939 the Federal Executive finally acted decisively. It decided on a «Unity Conference» of the Lang and anti-Lang groups to resolve the split. The February meeting of the Central Committee of the CPA was addressed by Hughes and Evans, at that stage nominally prominent Labor figures. In May the CPA executive held a meeting with its Labor Party fraction, which discussed the coming Unity Conference at length. The meeting concluded that the emergence of a parliamentary-based «centre party» was crucial to the outcome of the conference and resolved to «strive to the utmost» to work with them. It also decided to fight to alter the basis of representation of unions and branches. Both aims would be achieved and both proved crucial to the outcome of the conference.
The Unity Conference inspired by the Federal Executive finally took place on August 26–27, 1939. While Lang glowered from the public gallery the result on the conference floor soon showed the anti-Lang forces were in control. Hughes moved the key resolution structuring the future organisation of the party, which won 221 to 153. Shortly afterwards fist fights broke out in the gallery and order had to be restored. The conference put undercover CPA members in key roles on the executive. Jack Hughes became Vice-President (an office he held simultaneously with the powerful Presidency of the New South Wales Labor Council) and Walter Evans became General Secretary of the NSW branch of the ALP. A week later Hughes conducted a ballot for parliamentary leader and a rebel from the Lang camp, William McKell, finally toppled Lang.
It is one of the ironies of politics and history, that a moment of triumph is often followed by an inexorable plunge into disaster. During the Unity Conference there had occurred what seemed at the time merely a minor disruption. A delegate unsuccessfully proposed the suspension of standing orders to discuss the international position. But the chance for a debate was brutally cut short by uproar when he explained his motive. He wished to move a resolution «expressing abhorrence with the onward march of fascism» and viewing with disgust the signing of the German-Russian Non‑Aggression Pact. Criticism of Russia was guaranteed to provoke loud opposition from the anti-Lang Left. However, defence of this pact became the seed of destruction, which would destroy both the CPA's influence and the strength of the broader Left within the NSW branch of the Labor Party for decades to come.
The Non‑Aggression Pact was quickly followed by a German invasion of Poland, which was then divided between the USSR and Germany. On September 3, Britain, which had undertaken to assist Poland, declared war on Germany. Initially, however, due to poor communication with the USSR and following the logic of the united front the CPA and its undercover Labor fraction boldly declared their support for Britain's war against fascism. In a radio broadcast for a federal by‑election in the seat of Hunter, Jack Hughes echoed these sentiments. But as the line of the Communist International became clearer the CPA's attitude to the war soon began to change toward one of opposition to Britain's war on Germany. This had two consequences for the CPA dual members who had fought for three years to unseat Lang and had won at the Unity conference just a month earlier. First, instead of remaining in the broad stream of the militant unionism, they now had to swim against the tide of incomprehension of their own sympathisers whom they had won by their opposition to fascism and isolationism over the previous three years. The second consequence flowed from this very public shift in the line: the communist dual members in the Labor Party rapidly became identifiable as dogmatic adherents of the CPA.
The resulting situation was the undoing of the CPA's new found influence in the Labor Party but this was of no consequence to the Anglo-American Secretariat of the Comintern. A Comintern report noted that the Australian government of R.G. Menzies as «the weakest government in the British Empire». It anticipated that the Menzies government's would be replaced by a Labor Party whose leadership «is being increasingly put under pressure by the growing anti-war movement». It noted with satisfaction that the CPA had rectified its line on the war with a statement on December 8, 1939, admitting that the party had «misunderstood the importance of the Soviet-German Non‑Aggression Pact».
After the CPA's political somersault on the war, the issue of communism in the Labor Party sharpened. With the Easter 1940 annual conference approaching, John Hughes received a call from the state Labor leader, William McKell, whom he had helped install. McKell wanted to meet him. Hughes later recalled:
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