Arbitration In Contempt
The Political Barriers to Changing Centralised Industrial Relations
We now have an opportunity to pay homage to an unsung,
or inadequately sung, hero, H. R. Nicholls, Editor
of the Hobart 'Mercury', who on the seventh day of
April, 1911, published a leader concerning the separation
of powers. In the first instance it concerned the powers
of government and the powers of a court---the Arbitration
Court---but it also concerned the power of the unions
to dictate to both. Three-quarters of a century later
the argument is still active and relevant.
Anyone who has even wet his toe in the waters of the
traditions of Western limited government, and the rule
of law, will understand that the editorial concerned
the liberty of the subject faced with the tyranny of
arbitrary power. Yet Nicholls was prosecuted for contempt
of court. The Commonwealth gave notice that the High
Court would be moved that Nicholls be ordered to stand
committed to prison for contempt of that Court, or
alternately for contempt of the Commonwealth Court
of Conciliation and Arbitration. Happily, and to the
credit of Chief Justice Griffith and Justices Barton
and O'Connor, the case was dismissed by the High Court,
but the fact that the prosecution was brought at all
should have sounded an early warning to those who care
for liberty under law in this country.
Today at least one thing has changed for the better:
I do not expect to be charged with contempt of court
for observing that events since 1911 entirely vindicate
Australia does not have a terribly bad record with
We do not fear arbitrary arrest.
We have seldom been conscripted for military service.
In spite of Joh's industrial laws and the 'racial
discrimination act', speech is relatively free.
In spite of Section 54B of the Western Australian
Police Act, the right of free assembly is more or less
In spite of episodes like the misuse of town planning
regulations to control the activities of the Orange
People in the south-west of WA., we are more or less
free to worship as we will.
In spite of some arbitrary powers in trade and town
planning law, we are mostly governed by ex ante rules
rather than by the whims of men.
In spite of the notorious retrospective tax event
and the not so notorious but even more clever example
of retrospective legislation, which claims to part
of the Ashton Diamonds Find were struck down by a retrospective
law, our legislators seldom make us liable and never
make us guilty after the event.
The rhetoric of the Human Rights Commission notwithstanding,
we are not often personally liable for the sins of
our class or group except to the extent that we have
Private property is very often devalued by government
action but governments usually refrain from outright
expropriation without compensation.
Our homes are our castles apart from the entry powers
of the officers of some dozens of statutory authorities.
We do give homosexuals, prostitutes and junkies a
needlessly hard time but less so than in most nations.
It is far from a perfectly libertarian record but it
cannot be argued fairly from what I have said so far
that Australians have a particular disregard for civil
liberties. Indeed we spend a great deal of time talking
about them as though we understand them. No politician
I know of would admit to not caring about the liberty
of individual Australians. Yet in one area,
and I believe the area stands alone, tyrannous law
-that is, law which denies basic human rights---is
the norm rather than the exception, and private gangs
exercise coercive authority which elsewhere is reserved
to the state. That area is industrial relations.
We would be horrified if it had been our police or
army which damaged Dollar Sweets' property or used
force to prevent lawful movement in and out of the
factory. We normally insist that persons and companies
which wilfully or negligently cause damage to other
persons or companies compensate the damaged party if
they have assets to do so.
Although a successful civil action was mounted in
the Dollar Sweets case, such actions seem very much
more the exception than the rule.
For most of our history, and as a rule today, trade
unions seem to be beyond the reach of time-honoured
common-law remedies. Statutory remedies, like Section
45D of the Trade Practices Act, are new and still uncertain
in their use. The statutes that made them can easily
be unmade by any government needing to conciliate or
appease union power.
Unions have bankrupted people by breaking their collective
word, or by preventing others from keeping faith, which
is worse because it affects the liberty of third parties.
We outlaw restrictive trade practices in all activities
but employment, and by all organisations but trade
unions and employer's cartels which are accorded 007
licences to kill free transactions.
We object when the law takes someone's land or house
or car without fair compensation, yet we acquiesce
in the expropriation of a person's most important property,
his skill. Skills lose their value if they cannot be
sold to employers or customers, but an unemployed person
cannot demand damages from the law-maker who regulates
the labour market, and prevents him selling those skills
to a willing buyer. A man's right not to associate
with, say, a church is zealously guarded, but he is
compelled, on the pain of loss of the use of his skills,
or in some industries, by the risk of falling down
a lift well, to belong to a union . We do not normally
condone violence and as a rule only condone force if
it is ordered by a court following due process; but
we are remarkably tolerant of union which employ force,
and even violence, against other Australians.
As Brendan Behan (and John Stone) have remarked: 'It
is a quare world'.
My purpose is to shed a little light on why our meticulously
legitimate democratic governments, which in other places
guard the liberty of their subjects quite well, abrogate
this responsibility when they come to industrial relations.
In the process, for those who believe that the industrial
relations world is altogether too `quare', I hope to
identify some of the barriers in the way of political
improvement of the system. Barriers cannot be crossed
until they are recognised. Some barriers can be neither
crossed nor breached even when identified. These must
be recognised for what they are and a way around them
found which is not a disguised way back. Nothing is
usually gained by turning these insurmountable barriers
into barricades and much potentially productive effort
We are indebted to the Hancock Enquiry for a particularly
clear statement of what I believe is the barrier upon
which all others rest. The Hancock Enquiry did not
discuss trade union power in normative terms: it just
described it and accepted it . At page 633 of Volume
2 we find this statement:
gy with civil litigants and sporting contestants ignores
a major ingredient of the industrial relations scene
-the phenomenon of power. If we ask why litigants
and sportsmen usually accept the adjudicators' decisions,
we find part of the answer in the ethics accepted by
the disputants; but part, too, lies in their relative
weakness. The two factors are interrelated: the ethic
of accepting decisions gains strength from the difficulty
of doing otherwise. By contrast, trade unions are,
to varying degrees, centres of power: they replace
the powerlessness of individual workers with collective
strength. It is a mistaken view of the pluralistic
society to assume that every `subject' is equally dominated
by the might of the state and its arms of enforcement'
This is tantamount to saying that England under the
barons, and China under the warlords, were well-governed
because the powerful could enjoy the fruits of their
power. The whole history of democracy is the history
of equalising the domination, of striving to overcome
the natural tendency for the powerful to get special
treatment because they are powerful. This acceptance
of might as right may result from an attempt by the
committee to avoid explicitly adopting the ACTU position
that unions deserve special treatment because they
are unions, but it is no less shocking for that.
The union movement is in essential aspects above the
law. As the Hancock Committee so dearly said it is
beyond the control of government.
Dr. Peter Scherer described unions this way:
'Australian unions are part of the state, but in
the sense of local governments with entrenched traditions
and autonomy. They are creatures of the state yet not
subservient to it---unruly principalities rather than
vassals' [p92 Wages Wasteland]
Even though Dr Scherer makes it plain that the unions
are substantially created by the state, I think he
sees `entrenched traditions' as in some way legitimising
union power much as the power of sovereign states is
legitimised by tradition. He gives us an important
clue to an understanding of union power, so well described
by Hancock, and of governments' dealings with unions
dare I say, so misunderstood by everybody.
There can be no doubt that `entrenched traditions'
do legitimise certain union prerogatives in the eyes
of many Australians. In particular the union, and most
of its works, are legitimate in the eyes of most of
its members. Other unions' actions may not be, and
the public, as the opinion polls often demonstrate,
may be fed up to the back teeth with union intransigence,
but the opinions of outsiders are not considered by
the union rank and file, any more than the rank and
file of Argentina or Britain considered world opinion
at the time of the Falklands war.
I am tired of people telling me that union rank and
file are about to revolt against the union leadership.
They may complain about it as some people complained
about Mrs. Thatcher and millions groaned under Galtieri:
when faced with an outsider they rallied.
People who want to understand the strength of trade
unions could do worse than study the Rakneeshi sect.
Common bonds are emphasised, information is slanted
and a sense of persecution is engendered by the sect
leaders. Faced with internal dissent the court persecution
until outsiders rise to the bait: this process can
be discerned in the Argentine Government's behaviour
prior to the Falklands war.
It is the same in families, including the Cosa Nostra.
A family unites against outsiders. Its members feel
it is a legitimate entity, and they defend it almost
irrespective of the legitimacy of its actions in the
eyes of others. Police don't like dealing with family
quarrels or union disputes for this reason. The warring
parties unite against the common enemy, the outsider.
In some ways, dealing with trade unions is for a government
like dealing with another nation. They are out of the
world of the rule of law, and in the amoral, uncodified
world of real politik. A prime minister can no longer
simply ask 'What should I do?' but must ask 'What can
I do that is in the interests of my State?' The law
is no longer binding, any more than the rulings of
the Court at the Hague are binding. He is faced with
another legitimacy---that of the union. It makes no
difference that the legitimacy is questioned by the
rest of society so long as it is accepted by most unionists.
Whatever there may once have been, there is no similar
legitimacy to be found among employers' or consumers'
Prime Ministers dealing with trade unions are in the
same position that the kings once were in dealing with
the barons. I remind those who despair that union power
will ever be subjected to the law that the barons were
tamed and eventually reduced to the status of common
citizen in everything but name. Their vassals transferred
legitimacy to the king and later still to Ministers
legitimised by Parliament. In the last decade something
like this has happened in the United States as the
new economic realities have become more apparent. Even
in Britain some of the more destructive unions, like
Scargill's N.U.M., have been losing both membership
and public support.
The T.U.C. is split because unions like the electricians
will not any longer accept its authority.
Many people and organisations beside the legitimate
government and trade unions have the power to tell
others what to do. Parents, bosses, bureaucrats, policemen,
captains, coaches, teachers, in fact everybody exercises
discretionary authority sometimes. The difference between
these and the unions is that unions are not effectively
subject to laws---laws which among other things protect
the rights of those who are being ordered about. Only
the unions and the government have sovereignty. When
a government must refer its budget to the ACTU for
prior approval one might well ask who has most?
It is the unions and not the Industrial Relations
Club, nor the Arbitration Commission, nor the Industrial
Court which have sovereignty. Now is a good time to
challenge what has for many years seemed to me to be
a rather silly myth fostered by the Industrial Relations
Club in its own interest. The myth in question is
the story that the Bruce government was destroyed because
the electorate was wedded to the industrial arbitration
system we suffer or enjoy.
I was nine years a federal politician and although
I claim no great expertise, and was said by some to
be rather cavalier about electoral popularity, I absorbed
something of the interests and behaviour of voters.
The precise nature of the regulation of industrial
relations seemed too esoteric an issue, too far from
the common man's interests, too debatable on a high
plane to win or lose elections.
Electors sack governments that are performing badly
and take the replacement more or less on trust. Nevertheless
I have far more faith than most people in their good
sense. Who will quarrel when I say that the McMahon,
Whitlam and Fraser Governments were all due to go?
So was the Bruce Government due to go.
The Bruce Government was forced to an early election
on a bill to strip the Arbitration Court of its powers.
It then lost the election very badly.
But before we accept that the public sacked the man
who tried to abolish the Arbitration Court, let us
look at all the other reasons which might have induced
traditional Nationalist or Country Party voters to
vote for the ALP.
The economy was in a mess and learned people were
blaming Bruce for at least some of its troubles. The
high level of foreign debt was worrying the City of
London, where most of it had been raised. No doubt
the worries of the City were well covered by the Australian
press. Those who remember the Edward Shann Memorial
Lecture of two years back, delivered by Mr John Stone,
will recall that Shann had been critical of the high
level of foreign borrowing. Official unemployment was
eleven percent, and the statisticians missed many of
Bruce's Government was divided not by just a few men
sulking over dashed ambitions, a common enough circumstance,
but by more serious cleavages.
First among these was one of the all time great haters,
Billy Hughes. From the beginning the Bruce-Page Government
was certain of nothing but trouble from that quarter.
It is important to understand Hughes's exceptional
capacity for making trouble. He had been Australia's
wartime leader. He had divided the Labor Party on the
conscription issue, and led the newly formed Nationalist
Party. His oratorical style, extravagant and bitter,
had been sharpened on anyone who had stood in his way
from Deakin onwards. In 1923 he stepped aside to allow
Bruce, a relative newcomer to politics, to form a coalition
government with Page's Country Party which refused
to serve under him. He left not just the leadership
but the Ministry, and sat on the back bench nursing
his grievance in the apparent hope that Bruce would
quickly fail and that he would be recalled. Bruce did
not fail until 1929, and Hughes became increasingly
Hughes had the standing and political skill to damage
Bruce's marriage with the Country Party was not an
entirely happy union. The Country Party gained a disproportionate
share of Cabinet posts. If that fact was not resented
by Nationalist politicians then politicians in the
twenties were different men from the ones I knew.
Country Party diehards in Parliament, and more particularly
in the bush, hoped that a Country Party holding the
balance of power would gain substantial concessions
for rural constituencies by playing the major parties
off against each other. This prospect would almost
certainly have proved illusory but those who clung
to it were not easily convinced (and nor have their
successors been). The Country Party had to give away
its free trade ambitions to coalesce with a Nationalist
Party influenced if not dominated by protectionist
For a small governing party in a house of only 74
members, the Bruce-Page Government had an unusual number
of disaffected men. Dissent arose over many personal
and policy issues beside industrial arbitration. Hughes,
Stewart, Littleton Groom and Watt had been attacking
the government, from the government benches, for years.
At the end a vote of confidence in Bruce was carried
by the Party Room but the fact that it was moved was
evidence enough that he was in deep trouble with his
own troops. It is said to be an axiom of politics that
divided parties do not win elections. The divisions
within the coalition which defeated Hughes in the Chamber
may well have been enough to defeat Bruce at the polls
even if the economy had not been failing.
There were other issues which went against Bruce in
1929, some minor, some important. Early in the life
of the coalition there had been an argument with the
States over abolition of the per capita grants by which
State budgets were subsidised. It is a measure of the
irrationality of State-Federal relationships that even
the States which benefited from the change, such as
WA, attacked Bruce. Towards the end, the Commonwealth
was endeavouring, as so often since, to restrain State
Government profligacy without doing enough about its
own. Any Federal politician will testify that premiers,
particularly from one's own party, are damaging critics.
Bruce, who had used the law against law-breaking unionists,
had withdrawn charges against one John Brown, a wealthy
coal owner alleged to be conducting a lock-out. Bruce
said the charges were withdrawn to preserve industrial
peace--- the usual reason---but this time the beneficiary
was an employer, not a union. When his intervention
did not produce a return to work, Bruce was accused
of having one law for the bosses and another for workers.
The accusation was plausible; it may have been fair;
it certainly did nothing enhance the legitimacy of
Bruce's subsequent industrial relations actions or
the standing of the Bruce-Page government. Another
source of trouble for Bruce was that the amusement
industry campaigning fiercely against a new amusement
Finally, Bruce's action was not against industrial
arbitration as such. He had been a strong supporter
of the Commonwealth Arbitration Court. In 1928 he had
amended the C & A Act to strengthen nominal authority.
In 1926 he endeavoured to have a referendum carried
to transfer jurisdiction to it from the States. As
late as 1929 Bruce had said: 'To lose the protection
of the arbitration law would be a tragedy for every
working man'. Two months later he forlornly sought
a voluntary transfer of powers from the States. Despairing
of the ineffectual Court and unable to strengthen its
powers, he then introduced legislation to abolish it,
that is to return all the powers to the States.
It was this legislation which precipitated the downfall
of his government.
'Smith's Weekly' wrote this: 'By August 1929 Bruce
had put three bombshells under his ministry (John Brown,
arbitration and amusement tax ) and timed them all
to go off at the same moment'. [p 188 Cecil Edwards]
There was another greater bombshell, the economy.
Bruce's faith in the Arbitration Court had been misplaced.
It had not prevented industrial trouble to that time
and it had allowed costs to get out of line with what
could compete in increasingly tight world markets.
(It has performed little better since.) He foresaw
the coming economic crisis: indeed his mournful speeches
may well have contributed to his decimation at the
polls. His solution was to strengthen the Arbitration
Court's legal authority. But the trouble was not a
lack of legal authority but lack of the power to enforce
the law as it stood upon men and women who recognised
another legitimacy---union legitimacy.
That the electorate should have strong views on the
Arbitration Court is inconsistent with electoral behaviour
as I experienced it. However, I would expect the electorate
to have strong views on its own earnings and on unions.
Those are matters of day-to-day experience.
Bruce was trying to reduce the living standard of
a country which had been living beyond its means and
which was heading into deep trouble. It was not the
instrument but the fact that concerned his electorate.
If the Arbitration Commission can be shown to be keeping
wages down, a la Accord or a la anything else, it might
well be ripe for abolition. I predict it will not run
the risk but the superannuation case might be seen
as something of a test case.
The electorate is schizophrenic about unions as it
is about unruly principalities and for the same reason.
Some members of the community are very sympathetic
to union behaviour but opinion polls show that the
majority are not. The public are aware of the unions'
power to make life difficult: they therefore often
urge appeasement. Confrontation is about as popular
as a foreign war; that is, very popular so long as
we look like winning and the cost is not too high,
but otherwise very unpopular. A little union-bashing
is worth votes in an election campaign because most
people are sick of being bashed by unions, but the
support soon evaporates in a prolonged strike. Considerations
of realpolitik override ethical and legal considerations.
There are sometimes exceptions, of course: during the
recent British coal-miners' strike public opinion was
always on the side of the Thatcher Government and against
Scargill and the N.U.M. But Scargill's ostensible demands
were manifestly impossible to satisfy and his real
ultimate aim looked to be something like the destruction
of the British economy. Many British people opposed
Scargill with almost the spirit that they had shown
in the Second World War. But such situations are rare
and I would be surprised to see such a situation in
With hindsight, the Bruce Government's attempts to
curb union excesses look as though they would have
been costly failures. Legal confrontation has a poor
record and is unlikely to succeed for reasons already
discussed. If they looked that way with foresight also
we have yet another reason for the demise of the Bruce-Page
Government which has nothing to do with any affection
for the Arbitration Court or its hangers-on the Industrial
Professor Lauchlan Chipman put it this way:
'What can those who are committed to the value
of representative democracy and liberty do? The first
is to acknowledge that it is unrealistic to expect
Governments to do anything positive for the very problem
is that it is not an absence of legal or constitutional
capacity (although in Australia there is an inelegant
division of the relevant constitutional powers between
Commonwealth and States) but an absence of political
capacity which paralyses governments in their dealings
with agreed union excesses'. [Wages Wasteland]
Having spent some time considering what cannot be
done about industrial relations it is time to suggest
what can be done. But one more warning: there are no
The task is to break down union sovereignty---bring
unions under the law---by some means short of beating
unionists up in a bloody skirmish. If the change is
not to involve violence or that proxy for violence,
fear, the transfer of sovereignty must be voluntary.
I know that I have just mouthed a tautology but the
point seems to escape people.
The task then is to break down the legitimacy in eyes
of those who matter, rank and file unionists, of trade
Recently I was asked by the Trade Union Training Authority
to talk to about twenty shop stewards and union officials,
one of whom had just come from the picket at Mudginberri.
There was the expected light-hearted exchange of insults
without malice, but the guys and gals, with the very
minor exception of one white collar type, were very
friendly---more friendly than a random group of constituents
from my political days would have been. Yet I found
it almost impossible to communicate. I did not accept
their basic premises and they did not accept mine.
In particular they did not agree with me that bosses
and workers had common interests, that rising living
standards had resulted from productivity gains rather
than changed shares or that the class war was an artificial
construct rather than a fact of nature. Because we
could not agree on fundamentals what I had to say had
no relevance to them and sadly I wasted their time.
Only the white collar chap was impolite enough to say
Obviously the causes of unemployment and the nature
of fundamental human rights need to be explained. My
experience is that the average trade union member does
not want to take unfair advantages of other people;
he certainly does not want to be seen to do so. In
this he is very like the average non-unionist. My experience
of the average union boss, such as it is, is that he
too is what the Americans would call a pretty regular
guy. He is prone to self-deception, he gets a biased
flow of ideas and information, and from it selects
what suits his preconceptions---like the rest of us.
But also like the rest of us these people are susceptible
to ideas. If we allow an iron curtain to separate us
from these unruly principalities we will deserve the
trouble from them that we will get. If we want to improve
unions we must be prepared to be interested in them.
We must be prepared to help those people---often very
brave people---who are trying to reform some of the
worst and most destructive unions from within. We cannot
be put off by our own laziness, busyness, nervousness
or miserliness. There are many ways we can help good
and responsible people and ideas.
If we are to have a Human Rights Commission it should
be given an Act which specifies the rights not of classes
but of individuals---the rights of free movement, assembly,
association, speech, worship, property and work. Each
of these rights has its reverse---the right to stay
at home, not to march, not to join, to remain silent,
not to worship, not to own and not to work, that is
to strike. Each is a right that should not be taken
away by some temporary majority (all majorities are
It is no accident that the most damaging union activity
has been in industries which have no effective competition
from an industry covered by another union. The metal
trades and other tariff-protected industries, the building
industry which enjoys natural protection, the airlines
which have in effect a statutory monopoly, and the
public sector are prime examples of industries which
can pass costs and unemployment on to others. The most
important things that a government can do to limit
union excesses are to lower trade barriers, deregulate
Dr. Scherer writes:
'There is no great revelation to observe that
union principles have captured the Arbitration Tribunals.
The Tribunals were established not to control unions
but to encourage them, not to protect the public from
irresponsible unions but to protect workers from a
greedy public'. [WW p94]
'...the combined effect of the State and Federal
legislation encouraged unionism to such an extent that
the number of union members tripled between 1906 and
1914 and for many years Australia had the biggest ratio
of unionists to employees of any nation in the world'.
It is the unions not the Commission which command
allegiance. I believe the government could reduce the
Commission's power without damage to itself or society
so long as it is seen to be confronting the Commission
rather than the unions. Now that the Commission claims
to be holding down wages might be a good time to reduce
its capacity to maintain monopolies.
How this can be done is well beyond my brief but the
last two chapters of Wages Wasteland, a book
from which I have already quoted indicate some options.
A study of Margaret Thatcher's approach to industrial
relations would indicate some more. She did not go
bull-headed at the unions, Heath did that. She changed
the legislation a little at a time to reduce union
privilege on each occasion making very sure that she
fought from the moral high ground. No occasion justified
a union show-down---even the coal-miners were divided
on whether to strike. The softly softly option is available
to an Australian Government and is in fact implicit
in the opting-out proposal floated by the Opposition.
Several years ago I wrote:
I see no reason to change my mind today.
'Those who believe that democratic governments
can force the obedience of any substantial minority
delude themselves (but) what will not yield to force
might yield to leadership. If the Australian public
is brought to understand the nature of monopoly power,
in particular its social and economic costs, then the
weight of democratic public opinion would oppose the
maintenance of any position of privilege. Then actions
which are in restraint of trade or which damage others
might suffer a legal restraint which enjoyed almost
universal support even within the unions and, what
may in the end be more important, those who abused
monopoly would suffer widespread opprobrium.
'But if any government is to be strong enough to
remove any of the privileges of trade-unions, it must
have the support of almost the entire public. No narrow
majority would do.
'Trade unionists are unlikely to forego any of
their monopoly rights unless they are convinced that
the same principle is applied to everybody.
'The first requirement of good industrial relations
is a public understanding of the nature of the problem'.