Arbitration In Contempt

Padded Arguments from Padded Trade Unions

Geoffrey Blainey

[This paper was first published in Blainey: Eye on Australia, Schwartz & Wilkinson,
Melbourne, 1991 and is re-published with permission]

When 7 weeks ago I was asked whether I would launch this book I had no idea of what I was consenting to. I guess I have spoken at more book launchings than almost anyone in Australia, but I can recall no other book of recent years whose launching has been so widely and excitedly discussed. Certainly no book of mine has ever been so awaited. Even more curious, the publicity has come from the very politicians who hope that the book will not be read. In the last year Canberra has set in motion million-dollar advertising campaigns but hardly one of those propaganda campaigns has been as effective as that directed by the Labor ministry, unwittingly, against this book.

The book is a critique of the present and recent state of industrial relations in Australia, of the role of governments and their arbitration tribunals, the role of unions and employers, and the poor performance of the economy as a whole. These are legitimate subjects for criticism. Mr Hawke actually made his reputation, when working for the ACTU, by making criticisms---many of them outspoken---on such topics. Members of the federal cabinet, in recent weeks, have expressed alarm that members of the H R Nicholls Society should be trying to change the present system of industrial relations. But my understanding, from this book is that the H R Nicholls Society was founded in January only because Mr Hawke's government announced that in Autumn 1986 it would implement some of the revolutionary proposals contained in the Hancock report on industrial relations. The government has therefore been unwise to spread hysteria over a vital national topic, a topic which the government itself had placed on its political agenda.

Some critics have seen this book as simply an adventure in union-bashing. 'The Age' on 16 September gave the headline position in its column of letters to the editor to a writer who said that the main aim of this Society was to abolish unions. He produced no evidence for that sensational assertion. You will find none in this book I would think every one of the 12 contributing to this book sees a role for unions. I certainly do.

Hence two years ago I agreed (because no union would) to underwrite half of the cost of the first big Australian exhibition of those ornate banners which once led the trade union's processions.

I view trade unions as a vital and important institution in this nation, but they are not more important than the nation and at times the harm the nation and not least the trade unionists and their families. As many of the chapters in this book suggest, trade unions at key times have tended to become independent nations defying the wider nation. Trade unions are extremely powerful in Australia mainly for two reasons:

    1. The public opinion which tolerates unions even when their power is excessive and their actions are unjustifiably dislocating.

    2. The favoured position granted unions by the law or captured in defiance of the law. This topic is discussed again and again in this book and is prominent in the chapters by Hugh Morgan on trade union power, by Wayne Gilbert on the S.E. Queensland power dispute of 1985, by Ian McLachlan on farmers and Paul Houlihan on Mudginberri, and by Peter Costello, John Hyde, Ian Spry, Gerard Henderson and G.O. Gutman.

Why did trade unions gain such power and why, on those occasions when their use of power is excessive, is there such public tolerance? I believe that in the depressed years 1890-1905, big business and employers generally were seen as too powerful in Australia. As a result a popular manifesto of political and economic measures strengthened the trade union movement, making it possibly the world's strongest. Even by 1911, as the dispute between Mr Nicholls and Mr Justice Higgins indicates, there was, in the new Arbitration Court, an inkling of a doctrine called the divine right of Labour.

You can read of the episode here. In 1911 the turbulent topic of labour relations at Broken Hill was before the Arbitration Court, and Mr Starke the barrister informed Mr Justice Higgins that at Broken Hill the trade unions broke agreements with impunity and in so doing 'were encouraged by the Government of this country'. The government then was Andrew Fisher's Labor government. Higgins, on hearing this imputation, and it was not made against him as a judge, erupted: 'I will not allow you to speak of the Government of this country in that way...You have no right to speak in that way.' This was a strange outburst. Higgins, in high emotion, went on to say twice that the barrister had no right to speak in that way about 'those above us'. Here was an independent judge, seemingly expressing how beholden he was to the government, or how much he venerated the government. It so happened that H R Nicholls, the octogenarian editor of the Hobart Mercury, repeated in an editorial that Mr Justice Higgins was very much beholden to the federal government. He was then charged with contempt of court. It's an important case in the freedom of the press, for Nicholls was acquitted. It's an illuminating episode in the history of Australian arbitration, for Mr Justice Higgins did more than anybody to create the halo around that arbitration system which is under scrutiny in this book.

Over time, these new laws and rulings, many of which were justified at the time, ultimately pushed the pendulum too far in the other direction. Today, in aggregate, trade unions can be too powerful. After reading the 12 essays in this book I see little to weaken this conclusion and much to strengthen it.

A persuasive ideology justified the power and practices of trade unions. Sympathy for the under-dog was the most potent argument. It remains a powerful argument but not in those situations when the under-dog becomes the over-dog. If we realized how outdated are some of the trade unions' arguments, we would think twice about accepting some of the practices based on those arguments.

Here are three examples of padded or blind arguments.

First, the trade unionist is said to require special rights because he---unlike many other people---has only his labour and skill to sell. But at least 94 per cent of the working population now primarily exist by selling their labour. How can 94 per cent really possess, at times, a right to special immunity from the law?

Another traditional argument of unions is that they are busily fighting monopolies. But Australia has changed, and monopoly is now more a mark of trade unions than of big business in Australia. The opinion of John Hyde is that today, 'We outlaw restrictive trade practices in all activities but employment.'

Thirdly, in the 1890s, in a simpler world, it was possible to say that labour was fighting capital. In many disputes a victory for the unions was a symbolic victory for the average Australian. Today, capital has changed; and the big rich owner is not so typical; and a big company has tens of thousands of shareholders representing every section of society, including the superannuation funds catering for hundreds of thousands of average Australians. Not only has capital changed but the public sector of the economy has become massive. A victory for a union in a dispute with the public sector is in no way a defeat of capital, as the term was once understood. And if an excessive claim by unions succeeds in the Commonwealth Public Service, the gain, say, for 5,000 unionists might come from the pockets of all taxpayers, including 3 million trade, unionists. Thus the union movement, in addition to its numerous legitimate victories, has become a specialist in self-inflicted wounds.

There can be little doubt that the typical trade unionists in Queensland have so far gained far more than they lost through the defeat, last year, of the unions associated with the South East Queensland Electricity Board. According to this book, about $30 million a year has thereby been saved, productivity in that electrical network has increased by an astonishing 30 per cent, and some 600,000 Queensland customers have cheaper and more certain power than they would otherwise receive. The defeated unions have a case: the victorious customers have, in my eyes, a much stronger case. But you read and judge.

In the last week nothing has been more illuminating than to hear public service unions, claiming immunity from economic pressures, oblivious that their immunity will probably damage all other trade unionists. We need to look afresh at the myths---facts in 1900 but myths today---that are invoked to justify support for more extreme union power.

This book looks at a wider range of issues than the question of the power of unions. It examines the present arbitration system and doubts whether its advantages now exceed the disadvantages. Readers may or may not accept the case against our hallowed arbitration system, but the case is powerful and deserves attention.

The book looks also at some of the important economic decisions made by governments and tribunals. Sir John Kerr, who was a leading barrister in industrial law in the early 1960s, examines the Northern Territory Cattle Industry Case of 1965, which Sir Richard Kirby, president of the Arbitration Commission, sensed was his Commission's 'greatest contribution' to Australian society. By raising the wages of Aboriginal pastoral workers, the Commission evicted large numbers of them from that industry which was their only stronghold in the outback. The Commission had predicted that there would be 'welfare problems' amongst unemployed Aboriginals but noted that those problems 'will be dealt with by those most competent to deal with them'. Unfortunately we have not proved competent to deal with them. Citizens might well ask how the massive unemployment in so many Aboriginal districts could possibly come from an arbitration system that wished them well.

The evidence is in this book.

The young in the cities, like Aboriginals in the bush, have also suffered from new wages policies. Many job creation schemes for the young are really job-destruction schemes. The schemes knowingly destroy nearly all the jobs they have created. The dead end job, at one time a derided concept, is now deliberately created, in huge numbers, by the Hawke government and several state Labor governments and acclaimed as work experience or evidence of economic recovery.

Why are so many young Australians unemployed? Does our arbitration system help to condemn the young to unemployment? The burden of our serious unemployment is shouldered mainly by the young, but this was not so during the world depression. It is not so in Japan today. In this book Michael Porter informs us that Japan's unemployment rate by 1983 would have come close to ours if she had had our proportion of juvenile unemployment. The percentage of unemployment amongst our young is three times as high as in Japan. One reason is that youth wages are much lower in Japan, and so employers are more willing to employ young people. G.F. Carmody notes, in his chapter on the retail industry in NSW, how arbitration decisions to pay high wages to the young are actually depriving the young of employment opportunities. And yet the retail trade potentially is the great employer of those aged from 15 to 19.

This book centres on our attitudes and theories. It simply asks, in the light of a wealth of experience, are we being sensible? Are we the victims of our own misguided theories? Isn't it ironic that in the very name of equality and fairness, our employment policies have singled out for penalties the outback Aboriginal and the young in the cities and towns?

This book is about values and priorities, and about rewards and penalties that no longer make adequate sense. I conclude with my own example. We have gained kudos, deservedly, through the victory in the Americas Cup. As Western Australians now know, large economic rewards in tourism and in potential foreign investment have come from our first victory in the Americas Cup. But it would be even more beneficial if Mr Hawke along with the arbitration authorities gave thought to our bigger ships. It so happens that our nation, of all the world's nations, has the second longest navigable coastline. How we cope with that coastline is vital not only for our defence but also our standard of living. And yet what we achieved at Newport, Rhode Island, we cannot achieve in Australia. Our coastal shipping is far from efficient. We are a world leader in the alumina industry, but now it costs more to ship alumina from central Queensland to the smelter in Tasmania than from Europe to Tasmania. It is better to operate efficient cargo ships than one fast racing yacht. But if, as a nation, we gather our wits about us we can do both.