Arbitration In Contempt

The Political Barriers to Changing Centralised Industrial Relations

John Hyde

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 Nicholls' stand.

Australia does not have a terribly bad record with civil liberties.

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 respected.

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 personally sinned.

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 is wasted

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' (v2p633)

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' organisations.

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 the unemployed.

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 bitter.

Hughes had the standing and political skill to damage any politician.

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 Victoria.

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 tax.

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 Australia.

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 Relations Club.

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 quick fixes.

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 union sovereignty.

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 so.

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 temporary).

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 and privatise.

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'. [WW p88]

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:

    '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'. I see no reason to change my mind today.