Why Australia’s Gold Rush Ushered in Political Freedom (as Well as Wealth)

Nineteenth century gold miners brought democracy and property rights to Australia, as well as riches. But the history was at times bloody.

Historically, the connection between gold and liberty is a potent one. Indeed, it is no exaggeration to assert—if you will pardon the pun—that they are two sides of the same coin. Australia in the 1850s provides a sterling example.

Gold’s allure dates so far back that to say it is “prehistoric” is not inaccurate. Long before any written records, it was widely prized. Though the yellow metal has also been found on every continent, it was not until 1848 in California and 1851 in the Australian states of New South Wales and Victoria that a genuine “rush” to acquire it unfolded on a grand scale.

The Australian Gold Rush that began in 1851 produced remarkable transformations. Australia’s population quadrupled from 437,655 that year to 1.7 million twenty years later.

For centuries before the mid-19th, dictatorial regimes quickly grabbed new gold for themselves or deployed force to stymie the efforts of ordinary people to acquire it. In the 1840s and ‘50s, both California and Australia (despite the latter being founded as a penal colony) were much freer places. Greedy kings and potentates were absent. A private citizen could buy or rent a piece of land, or stake a claim on vacant land, and keep whatever gold he found for himself. Gold fever in both California and in the Land Down Under, half a world apart, prompted large numbers of fortune-seekers to migrate and dig up whatever they could find.

Gold has multiple applications, from metallurgy to jewelry to art, but its most important utility in history has been as a preferred and freely chosen medium of exchange, or money. No other medium—especially government-issued fiat paper—yields the long-term economic stability that monetary gold can boast. Even today, the phrase “as good as gold” is a high compliment. No one ever declares that something is “as good as unbacked government paper” unless he intends it as an insult.

Big, rapacious, liberty-squelching governments typically hate gold, or at least gold in private hands as money. Why? Because they cannot print it. Because it is a reliable competitor for the people’s confidence. And because it exemplifies the very honesty that dishonest politicians despise. If they desire to control you or enrich themselves (or both), they will invariably seek to control money. They seem to know a version of the Golden Rule instinctively: He who owns the gold makes the rules.

In small, easily transportable quantities, gold represents highly concentrated wealth that its owners can take with them while escaping a repressive regime. People have concocted ingenious ways to do so, from putting it in their teeth to painting it and inserting it in wagon wheels. When governments debauch their paper currencies, gold is a primary refuge into which people flee.

During the gold rush, miners (or “diggers” as they are often called in Australia) had to pay British authorities for a gold license. It was essentially a tax.

(As a valuable precious metal with many of the same attributes as gold, silver has performed similar duties in history. It has often served as subsidiary coinage by the free choice of market participants.)

For a quarter century before the California Gold Rush, British colonial authorities tried to keep news of small gold finds in southeast Australia from becoming public. They feared a gold fever-inspired uprising amongst the more unsavory elements of society. But when thousands of Australians left to join the fun in California, the authorities reversed themselves. According to the National Museum of Australia, the governor announced a reward for anyone who could find it in commercially viable quantities. With major discoveries in the states of New South Wales and Victoria in 1851, the rush was on! Even many Australians who went to California returned home and started digging.

One of the titles I proudly hold at FEE is Ron Manners Global Ambassador for Liberty, named for an old and generous Australian friend who knows the gold business well. In the 1980s, he founded Croesus Mining and during his tenure with the firm, it produced 1.275 million ounces of gold.

“The influence of prospecting and mining in Australia runs deep,” says Ron. “Even today, it’s the single biggest reason why the country survived the coronavirus crisis and could still pay its bills.”

Expenditures last year for gold mining in Australia hit a new record, helping to make the country the world’s second largest gold exporter, behind Switzerland. Having earned his fortune in the business, Ron founded the Mannkal Economic Education Foundation and supports liberty-minded groups like FEE.

The Australian Gold Rush that began in 1851 produced remarkable transformations. Australia’s population quadrupled from 437,655 that year to 1.7 million twenty years later. Ancillary industries from agriculture to ranching blossomed. Gold financed massive railway and irrigation projects and modernized towns and cities. The National Museum of Australia asserts that because of the riches flowing from the mines, “Australians soon had the highest standard of living on earth.” Moreover, gold’s connection to liberty in Australia is direct and profound, in great measure due to an event called the Eureka Revolt.

It was the gold miners who brought democracy to the colony and protected the concept of property rights for Australians.

During the gold rush, miners (or “diggers” as they are often called in Australia) had to pay British authorities for a gold license. It was essentially a tax, though the miners could not vote. The franchise was the exclusive privilege of what Ron Manners calls “a very, very private club of people.”

Historian Alex McDermott of La Trobe University in Victoria notes that as the gold near the surface ran out, miners had to work harder and dig deeper to find the mineral, which set the stage for confrontation with the governing British authorities:

Not meeting with any luck, many miners avoided paying the license fee, hiding down shafts or running off through the trees when police made periodic sweeps of the goldfields to check for licenses. The police, a pretty rough and raw lot, responded by cracking down. Anyone found without a license on them—even if they’d left it back in their tent while going down the water-soaked shaft, for instance—was arrested and carted off to the lockup. If no lockup was nearby, they could just be chained up to a tree and left there for hours, or overnight.

To say this infuriated the miners is to understate the case significantly. They figured they were British subjects in a British colony—just because they’d sailed halfway round the world to get there didn’t mean they could be deprived of their rights and have punishment such as arbitrary imprisonment inflicted on them.

This amounted to “taxation without representation,” and the miners said so in those very same words, echoing American rebels of the 1770s. Ron Manners is even less charitable toward the authorities and their police in Victoria than McDermott. As he puts it,

The license fee was collected by a bunch of armed thugs who were not paid a wage at all. They were paid out of the license fees that they collected and the process of doing that was to go around to the top of every shaft, shouting down “Produce your license!” The digger had to then climb up the ladder laboriously, produce their license and then go down the ladder again. Then about an hour later another thug would come along requesting, “Produce your license!” The prospector would have to climb up the ladder again. They were not getting any work done. How long can you put up with this nonsense?

The monthly license fee being extracted by force from the diggers was equivalent to a week’s wages. That is a tax of about 25 percent with almost nothing offered in return. They say that a fine is a tax for doing wrong, and that a tax is a fine for doing well. But this tax or fine was being forcibly extracted and it applied whether you found gold or not.

When local magistrates cleared the owner of the Eureka Hotel in Ballarat of murdering a digger, other miners were outraged. They burned the hotel to the ground, then demanded that the Governor release the arsonists, abolish the gold license, and grant men the right to vote. They burned their gold licenses, built a crude fort they called the Eureka Stockade and hoisted for the first time a flag featuring the constellation of the Southern Cross. That flag has ever since symbolized freedom against the tyranny of colonial authorities and the independent spirit of Australians.

As news reached them that British troops were on their way to crush the rebellion, the miners of the Eureka Stockade swore the following oath: “We swear by the Southern Cross to truly stand by each other and defend our rights and liberties!”

The miners fought valiantly but were so vastly outgunned that the battle, which took place on December 3, 1854 near Ballarat in the state of Victoria, lasted a mere 15 minutes. Thirty miners and five soldiers were killed. In one of its videos cited below this article, the National Museum of Australia documents the extraordinary events that followed:

The government may have won the battle but it lost the war as Victorians overwhelmingly supported the defeated miners. The rebels were acquitted of treason and the gold license was replaced by a “miner’s right,” which allowed the diggers to mine, vote, and occupy vacant land for a small annual fee.

Miners were subsequently elected to Victoria’s Legislative Council, including their leader, Peter Lalor. This upswell of activism for democratic values led directly to other reforms important to Australia’s political development as a free society—reforms such as the secret ballot and eventually, women’s right to vote (1908).

Since the Gold Rush of 1851-71, more than 2,500 tons of gold have poured forth from the mines of Victoria’s Golden Triangle. That river of yellow metal produced the two largest chunks of gold ever found in the world—the “Welcome Stranger” nugget (173 pounds) and the “Welcome Nugget” (152 pounds).

In a remarkable way, Ron Manners explains, “It was the gold miners who brought democracy to the colony and protected the concept of property rights for Australians.”

That is quite a feat, wouldn’t you say? In the entire history of paper money, I can recall no instance in which one could make the comparable claim, “It was government with its printing presses that brought democracy and protected property rights.”

So to all the reasons that governments don’t like gold, add one more: Sooner or later, it beats them. Three cheers for Australia’s gold miners, past and present!

---