Back to the Waterfront

Industrial Relations Reform: The State of Play

N R Evans

It is nearly five years since the H R Nicholls Society was founded, in the shadow of the Hancock Report, and it is appropriate to stand back and consider what is the state of play in Australia on industrial relations reform.

In any great debate over the state of the nation a key element is the general state of the economy. Are the people prosperous? Are employment and opportunity for enterprise readily available? Is there confidence about the future?

These questions have only to be asked to elicit a ready response. Australia is in bad economic shape. Standards of living continue to decline. Confidence in the future is shaken. Unemployment is rising again and birthrates are falling. The birthrate figures are indeed fascinating. Our total fertility rate has been below the 1930's depression levels since the late seventies. It has fallen every year this decade from 1.938 in 1981 to 1.840 in 1988. The 1989 figure will not be released until the end of this month. This is not the occasion to take up debates about immigration but the very strong identification between birthrates and confidence in the future, is not an argument which has to be laboured. The sustained decline in our birthrate could be turned around by a major improvement in our living standards.

Bankruptcies have escalated in the last eighteen months and the bad debt provisions of the major banks are many billions of dollars and many sleepless nights. Our monthly current account deficits and our growing overseas debt are symptoms of a serious economic disorder.

Under these circumstances there is fertile ground for advocates, like the members of the H R Nicholls Society, of labour market reform. The labour market is by far, the most important market in the economy. Australia, since federation, has been subjected to ever increasing measures of economic regulation and government interference. The high point of the drive to assert more and more political control over the economy was the Chifley Government's attempt to nationalise the banks in 1946. That Paul Keating, after strong and vitriolic opposition to the recommendations of the Campbell Committee, should have freed up the capital markets, deregulated financial markets and invited in foreign banks, in 1983, is an outstanding example of the way in which intellectual tides can sweep up unsuspecting people and bring them to shore.

As our economic problems mount up, as bankruptcy and unemployment grow, as financial institutions such as Pyramid and Estate Mortgage go belly-up, the protagonists of central planning and government intervention are developing a counter-attack. From Kenneth Davidson in 'The Age' to Billy Wentworth in 'Quadrant', the old arguments against economic freedom, and for controls, protectionism, regulations and monopoly privilege are being refurbished and re-run.

There is, and it is an extraordinary thing, a great deal of passion in these arguments. Despite the evidence of Eastern Europe and the Soviet Union, there is still an enormous distaste, enmity is more accurate, in the minds of our chattering classes, for the freedom of the market place. Kenneth Davidson is their invaluable spokesman, and his recent attacks on Paul Keating provide us with ample warning of the way in which the debate is going to be carried. Martin Ferguson, the new, charming and articulate President of the ACTU, is the latest addition not so much to the ranks of the chattering classes, but to the ranks of the defenders of privilege and monopoly.

Davidson is important in our analysis because he expounds the doctrines of the chattering classes in the purest form. While no longer a declared socialist Davidson avows the efficacy of 'public' ownership, public monopoly, government intervention and regulation, and trade union privilege. The financial collapse of the Farrow group, and the near bankrupt state of the Victorian government and the State Bank, are blamed wholly upon Mr Keating and his deregulatory activity of 1983. This line of argument has been picked up by a surprising range of commentators, not so much because they liked John Cain more but they liked Paul Keating less.

The arguments put forward by Davidson and his colleagues have to be taken seriously, not for their content which is confused and sometimes laughable, but because in desperate times crazy arguments can sometimes win the day. Do not forget that the German inflation of 1922 produced Hitler and all of the consequent tragedy, affecting many, many millions of people, right on down to the present day. The Davidsons of our time have to be answered, indeed pursued, so that as our situation deteriorates and the people get increasingly desperate, we do not do things which will take us into catastrophe.

Many of the economic problems we now experience, declining living standards in particular, are, in large measure, due to the cumulative impact of decades of ever increasing labour market regulation. The present Government is deeply, irrevocably, committed to centralised planning of the labour market. The Treasurer is locked into a duumviracy with Bill Kelty and there is a deep contradiction between Mr Keating's laudable attempts to open up the telecommunications industry to new entrants, for example, and the Telecom unions' adamant refusal to allow competition of any kind. This conflict is an example of the insoluble contradiction between an open, free, competitive economy which Keating has sought for the financial sector, and the closed, monopolistic, tightly regulated economy which he has defended in the labour market.

There is little comment from the press on this fundamental issue. Paddy McGuinness of course is the outstanding exception. Des Keegan, our founding president John Stone, John Hyde, keep reminding us in their columns of this impasse, but there is little general understanding within the community of the significance of it all.

The great war-cry of the abolitionists in the debates leading up to the American Civil War was that the nation could not endure 'half slave and half free'. Australia will not reverse the present drift into impoverishment until the understanding that a successful economy cannot remain 'half slave and half free,' is widely and deeply embedded in the public consciousness. I am not advocating civil war to achieve this ambition. But we do need much tougher polemic. The deep causal connections between Bill Kelty's antics in the IRC, and our continuing economic decline, have to be constantly explained, in language which ordinary people understand.

As John Hyde pointed out in his paper to the H R Nicholls conference in Canberra, 'No Ticket, No Start---No More', the trade unions will fight hard to retain their monopoly privileges. In telecommunications, in education, in hospitals, in electricity supply, in the airline industry, in railways, shipping, on the waterfront, we can see the battle going on. At the moment, primarily because we have Labour governments in Canberra and Brisbane, and because the Greiner Government has a hostile Upper House, the trade unions are holding their own. Because the federal Government has based its own legitimacy on the Accord, and therefore on the legitimacy of trade union privilege, it cannot attack trade union monopoly. Hence it cannot win any of these arguments.

The trade unions, the ACTU particularly, are aware that they have long term problems. Their attempts to improve their standing with the public are manifest in the money they have spent in advertising, particularly on TV. However, their principal strategy to ensure long term survival, in the face of declining private sector membership, is based on union amalgamations, and an attempt to place in legislative concrete the corporate system which has evolved under the Accord. The new Industrial Relations Bill is part of this process.

There is a passage in Machiavelli which Bill Kelty has either not read or not understood. In Chapter 20 of 'The Prince' we read

    'A prince who fears his own people more than he does foreigners should build fortresses; but he who has more cause to fear strangers than his own people should do without them.... The best fortress which a prince can possess is the affection of his people; for even if he have fortresses, and is hated by his people, the fortresses will not save him; for when a people have once risen in arms against their prince, there will be no lack of strangers who will aid them.'

Bill Kelty, the Minister, Senator Cook, and the ACTU-government apparatchiks are now frantically building a chain of new fortresses, a Maginot line of giant unions, each with great concentrations of monopoly power. There is, for example, to be one maritime union, embracing the Seaman's Union, the WWF, the Australian Stevedore Foremen's Association and the Australian Stevedore Supervisors' Association, which will control recruitment and contestability throughout the Australian waterfront and coastal shipping industries. These giant unions with great incomes and large staffs are required, somehow, to preserve the privileges of the ACTU and the trade unions, when political fortunes change and the McLachlans and the Costellos are in government.

It is, in my view, a major miscalculation. These new organisations will have no history, no tradition, no unforced allegiance. They will be nothing more than rule books and monopoly rents, held in place by legislative decree, and commanding no allegiance from the membership. A letter published in the Melbourne 'Sun', from A. Jones of Newport, a week ago, summarises the position.

    'After working for 30 years I have found out that the working man is not the union any more.

    I work for a boss who pays me, and I pay union fees to my other boss.

    At the place where I work we decided to change unions in line with restructuring and to our amazement we were rushed into the Arbitration Commission faster than the BLF.

    There the two unions argued who would represent us and I was told the workers would have no say in what union they would be in. A judgment would be handed down by either the Arbitration Commission or the ACTU as to who would own us.

    What is the trade union movement coming to when this is allowed to happen? I have always thought the members were the union but as it turns out this is not so.'

For every A. Jones of Newport there will be many hundreds of unionists who resent, as he does, what is being done but would not dream of writing a letter to the newspaper.

All of the time and energy that has gone into building Bill Kelty's new Maginot Line is doing little more than eroding whatever is left of the real social fabric of trade unionism. Who will defend these great fortresses when they are put to the real test? Certainly not Mr A Jones of Newport.

There is, however, a different program to the amalgamation and concentration of union power which merits much greater concern on our part. This is the campaign to introduce 'right to strike' legislation into our various parliaments. Those of you that heard Professor John Niland in Sydney will recall that he defended the idea that 'the right to strike' should be given legislative support. The Evatt Foundation has recently published a booklet by Dr Roy Green, currently a senior lecturer in economics at the University of Newcastle, but formerly Principal Secretary to Ministers Willis and Morris.

Let me quote from introductory summary.

    'The right to strike is a basic liberty in a democratic society. It is enshrined in a key ILO Convention, to which Australia is a signatory. Australia may well be in breach of this convention, as well as being at odds with the law and practice of most comparable countries......

    'It is argued here that the traditional British 'immunities' approach to legal protection, (Dr Green is referring to the 1906 Trade Disputes Act) which has dominated thinking in Australia, is inadequate. An alternative approach would be to enact a 'positive right' to strike and take other forms of industrial action, as in Western Europe labour law systems. This could be confined with a modified form of immunities to exclude common law, on the American New Deal legislation'.

That Professor John Niland, IR guru to the Greiner Government, supports these sorts of arguments tells us that here we have a real problem. It is important therefore to understand why these soothing phrases carry deadly implications.

The development of the West, from the C16 onwards, as the world's most prosperous, advanced society, took place because it was in the West, notably in Britain and in the Netherlands, that the sanctity of private property, and the law of contract governing exchanges of property rights, became embedded in the social framework. Modern technologically advanced society is based fundamentally on private property and the law of contract.

The law of contract in the work place, as Richard Epstein so brilliantly explained in Melbourne two months ago, usually boils down to the contract at will. Under this contract the employer can say to the employee, 'You're fired', and the employee can say to the employer 'I quit'. Under the contract at will they can say these things to each other, and act upon them, without impairment or legal constraint.

A 'right to strike' if given legislative authority, will destroy the contractual basis of the labour market. What it gives to the employee is the right to say to the employer, 'I quit', and in the next breath to say, with complete legal force, 'and you must hold this job for me until I choose to reclaim it'. It is as complete an attack on foundations of the law of contract as can be imagined, and the consequences for our economic health, such as it is, are profound.

I predict we are going to hear a lot more of this 'right to strike' argument in the months ahead, and we must be well briefed on the details as well as the broad sweep of its implications. The employer organisations will be crucial in this matter, and as soon as we have an edited copy of Richard Epstein's paper we will have it available for wide distribution.

The campaign for the 'right to strike' is the antithesis of building fortresses. A good example of how dangerous a fortress can be is the particular danger to the trade unions from the Accord, and the special relationship between the Victorian Government and the Victorian Trades Hall Council.

The problem for them is this. The unions require statutory support for their privileges and their monopoly rents. the government requires the support of the unions for the operation of the Accord, and the centrally planned wage fixing system. The Opposition has found itself compelled, by fundamental political forces, to oppose the idea of a special relationship between government and unions. If the Accord produces prosperity and all the good things which flow from that, then the unions win, the Labor Government wins, and the Opposition loses.

If contrariwise, for whatever reason, prosperity fades further and further into the past, if recession should move into depression, and government and unions feel it necessary, in the face of continuing, or worse accelerating, economic decline, to undertake new initiatives, to pass new Industrial Relations Bills, to continually restructure, to have fewer and fewer unions, then when eventually the government falls, because of the special relationship, because of joint responsibility for what has happened, the trade unions, the ACTU, the Victorian THC, will fall with the government. They will become politically irrelevant.

This is the strategic position, and it should give us good grounds for believing that if we persist in our efforts of argument and explanation, our ambitions for reform will be fully realised.

In the short term, however, the trade unions have good cause to be pleased with themselves. Reform legislation in NSW is being mangled, if not subverted, by the Legislative Council. When the Bill went to the Upper house, 328 amendments were put forward. The Government either accepted or was responsible for 90 of them. To be an expert on that situation would require a close involvement in what has gone on, but my understanding of the situation is as follows.

The nonsense which Professor John Niland, at our last conference in Sydney, stressed as crucial to the new industrial relations order in NSW, the distinction between interest disputes and rights disputes, has been accepted in the amended Bill. Enterprise agreements have been virtually destroyed. Access to Common Law remedies will have been closed off entirely by the time the Bill has passed through the Legislative Council. State secondary boycotts, those not outlawed by Sections 45D & E, will be legal. An amendment to deem sub-contractors as employees, aimed directly at Troubleshooters type workers, will most likely be carried.

The Bill seeks to lay down a collective bargaining regime, modelled on the American pattern, in which penalties for breaches, however, are very modest.

If the Greiner Government accepts these amendments and passes them into law it will be a tragedy. On one issue alone, loss of common law remedies and inability to outlaw secondary boycotts, the Bill should be withdrawn.

The Queensland Government carried legislation in May which has made illegal, from September 30 next, the Voluntary Employment Agreements which had been secured under the legislation passed by the previous government. The Liquor and Allied Trades Union has, in the meantime, sought to impose an award on the employees at Power Brewing, in lieu of their Voluntary Agreement. The employees at Power Brewing voted unanimously against the incursions of the Liquor and Allied Trades Union into their affairs. Whether or not as a response to that show of contempt the L&ATU sought an award which would have resulted in a pay drop of $60 per week for all Power employees. Fortunately for the workers at Power Brewing the L&ATU is now in a state of disarray as its officials seek to grapple with the problems occasioned by the results of the Cook Enquiry.

The other vital feature of the Queensland legislation of May, which was debated for all of 41 minutes in the Legislative Assembly, was the repeal of the Industrial (Commercial Practices) Act.

This Act had provided for small unincorporated businesses in Queensland, what Sections 45D & E of the Commonwealth Trade Practices Act have provided for incorporated businesses, or businesses with interstate or international trade. That is quick relief from secondary boycotts. The membership of the Queensland Liquor and Allied Trades Union dropped from 35,000 to 8,000 when the use of secondary boycotts was made illegal under the Industrial (Commercial Practices) Act. The threat had been that beer supplies would be stopped if the hotel management did not enrol all workers in the union. That the threat had been effective became clear, when it became illegal. Now that secondary boycotts can again be effectively applied it will be interesting to see how quickly, despite all the evidence of criminality in the Liquor Trades Union to come out of the Cook Enquiry, membership of that union increases.

The Goss Government may succeed, for a time, in turning the clock back. But the examples of the Power Brewing Agreement, the Metway Agreement, and the SEQEB Agreement, will not be forgotten. If we look around the political situation in the various states Victoria may be the next state to give statutory protection to voluntary agreements.

The significance of these events cannot be overestimated. The workers at Power Brewing, at Metway Bank, are ordinary Australians. They, not the trade union officials of the L&ATU and other unions, represent the workers of Australia. Their message to politicians in and out of government is that Martin Ferguson or Bill Kelty represent only the apparatchiks of the ACTU and, to a lesser extent, the affiliated trade unions, and the fortresses they are building are designed to protect them from their own people, their own rank and file.

The main performers, regrettably, play out their parts in Canberra, as the Government battles against a sea of economic troubles. Reform in telecommunications and the waterfront, two vital areas, is stalled. Although it is unlikely, the Beazley megacom proposal may even fail at the special ALP conference scheduled for 24th September. That would be a crippling blow to the Government, six months after re-election. More probable than outright failure is even further emasculation of the Beazley plan in terms of competition and contestability. As it stands the Beazley plan will make no significant contribution to our productivity, our business costs, our international competitiveness. Mel Ward has made that very clear. And giving Telecom access to the OTC cash box makes the WA Inc ploy, of allowing Mr Bond to raid the Bell Group cash box, look like a play with Monopoly money.

On the other side of politics the intellectual and moral stiffening which has taken place since the last election is beginning to show. Ian McLachlan is speaking all over the country of the 'golden door', opening into the world of voluntary agreements, which will liberate employer and employee from the shackles of the arbitral tribunals and the trade unions. His key message has not been so much about the technicalities of opting out but of the credibility of the commitment.

That credibility is greatly enhanced by his own reputation. But it is further enhanced by the parallel commitment to the rapid reduction of tariffs to insignificant levels, as urged by the Garnaut Report. That commitment is only credible in the context of really radical labour market reform.

One of our members, Gerry Gutman, reminded us in his book of 1981, 'The Retreat of the Dodo', of the close intertwining of protectionism and legally privileged, monopoly trade unionism; a connection which began with the Higgins' Harvester judgment of 1907. The attack on protectionism has been a vital part of the attack on trade union privilege and monopoly.

The essential feature of the ACTU/Government fortress building program is the conviction that a Coalition Government will never command a majority in the Senate, and that the Democrats can always be relied upon to block the major reforms which are required. Whether or not that turns out to be the case is impossible to predict. There are, of course, solutions to an intransigent Senate. As Gough Whitlam demonstrated, a double dissolution and a joint sitting of both houses of parliament can be used to obtain passage of a crucial Bill, or indeed of a number of crucial Bills.

The Labour Market Reform Bill is the foundation stone of any successful economic recovery in Australia. There can be no tariff reductions, no expansion of or investment in export industries, no arresting of economic decline, without root and branch labour market reform. The next task of the H R Nicholls Society is to embed that understanding deep inside the minds of our parliamentary representatives. Any Bill that the Democrats, now the most reactionary political group in the country, will currently accept will not be nearly adequate for our pressing needs. A double dissolution and a joint sitting will almost certainly be the immediate business of the new government, and the sooner that is understood, accepted and proclaimed, the greater will be the credibility of the whole program of economic reform.

Let me conclude with a broad summary. It is clear from many opinion polls that the trade unions do not enjoy any significant public support for their privileges and monopoly powers. The continuing decline in union membership, particularly in the private sector, underlines this fact. The arbitral tribunals likewise, are declining in standing and prestige. There is, I think, a growing understanding of the close link between trade union privilege and our declining economy. We must do all we can to drive that connection home. The opposite side of that coin is the strong connection between freedom, economic freedom, and prosperity. Our task is to ensure that when the opportunity comes, and it will come I suspect, sooner than we may think, we are ready, prepared to seize the occasion, and perform a great service for our country.