Paul Kelly in his justly celebrated book The End of Certainty,
described the 1980s as the period in which the political settlement
established by Alfred Deakin during the first decade of federation
began to come apart. Kelly summarised his thesis in these words,
The ideas which constitute the Australian Settlement, though
devoid of formal definition, may be summarised under five headings---White
Australia, Industry Protection, Wage Arbitration, State Paternalism,
and Imperial Benevolence... This framework---introspective, defensive,
dependent---is undergoing an irresistible demolition.
The words 'irresistible demolition' are arguably too strong.
But the fiscal pressures generated by burgeoning welfare expenditures
in the post-Whitlam period, and the consciousness that Australia
was falling behind in its international standing, combined to
create a mood on both sides of politics that something had to
be done to re-invigorate Australian economic life. Thus began
the historic process of winding back Australian protectionism
which began on a bipartisan basis with the Hawke Government in
White Australia ended with Holt. Imperial Benevolence, at least
in its British form, ended with the fall of Singapore on 15 February
1941. Protectionism is still alive in key industries such as autos,
and there are continual rustles from the protectionist snake elsewhere.
But the economic experience of the last 15 years has been so beneficial
that it is difficult to imagine, at least in the foreseeable future,
a return to Deakinite protectionism.
As an aside, it is worthwhile commenting on the way in which
the Deakin legacy still pervades Australian political and economic
life. That Deakin was a political leader with extraordinary gifts
is beyond argument. Whether he used those gifts for good or ill
is far more controversial. Colin Clarke wrote somewhere, 40 years
ago or more, that Deakin was mad and brought great harm to Australia.
Currently, Bob Birrell, I think in response to Paul Kelly, is
working on a Deakin restoration project.
For my purposes today, I want to argue that the system of wage
arbitration which Deakin introduced in 1904 still sucks the vitality
out of this nation like a parasitic tapeworm and which, although
it does not destroy the host, manifestly enfeebles it. The state
of our labour market is the most serious domestic economic and
political problem that Australia faces.
Nothing determines the capacity of a society to grow in prosperity
more than the efficiency with which the labour market functions.
That efficiency is manifest, for better or worse, in the transaction
costs involved in people finding jobs, and in the effectiveness
with which they work in those jobs.
In an economy characterised by the division of labour, and
the wide variation in the risks that people are prepared to accept
in their choices in life, there are, ultimately, only two ways
of organising the daily working life of the community. First is
the market method, in which people make their own arrangements,
by agreement with each other, about what they do, how they do
it, and what price is to be charged for their services to each
Second is what we can call the hierarchical method, in which
the decisions of daily working life are made at the top of the
hierarchy and then handed down and elaborated as they go down
the line. This model is typical of families, of military units
such as naval ships and army battalions, and used to be more-or-less
typical of industrial and commercial corporations, particularly
large corporations. It is also typical of those churches which,
like the Church of Rome, remain episcopal in their structure.
Socialism is a political doctrine which espouses hierarchy,
and opposes the market, as a method for arranging economic life,
and it achieved intellectual and political hegemony in New Zealand,
Australia and Great Britain before and after the Great War of
1914-18. Henry Bournes Higgins, particularly, was very critical
of the market. In his decision in the 1909 BHP case he attacked
bargaining between employer and employee, and what he called the
'higgling of the marketplace'.
The great problem of hierarchical organisation, a problem which
we now understand much more clearly than our grandfathers could,
is that running a family on an hierarchical basis is difficult
enough; maintaining a naval ship in service, for example, requires
very great skill, unusual intellectual and political capacity
and much professional dedication; running a business corporation
as a hierarchy is now seen as being almost impossible; but to
control a nation's economy in continuing hierarchical mode is,
manifestly, beyond all bounds of possibility.
In adopting Higgins' scheme for wage arbitration, Deakin opted
for hierarchy in Australia's labour market, and appointed Higgins
as the second president of the Arbitration Court, conjointly with
a place on the High Court, in 1905. Higgins was our first labour
market archbishop, and his successors in the Australian Industrial
Relations Commission continue in that episcopal role to this day.
So that it can impose its wishes on parties in the labour market
(the essence of Wage Arbitration) the AIRC has been delegated
law-making powers by the Federal Parliament. These powers relate
to the lawfulness, or otherwise, of labour market contracts between
people defined as employers, and people defined as employees.
One of the most over-worked metaphors in the ongoing struggle
between hierarchy and freedom in the labour market is the use
of the sporting metaphor of 'umpire' to describe the AIRC, and
to justify the law-making powers which that body enjoys. The term
'umpire' is as misleading a metaphor as can be found. The AIRC
is not an umpire, it is a board of selectors and a rules committee
combined. As a board of selectors it has ruled that hundreds of
thousands of Australians are not eligible to take part in the
most important game of all, the game of working for a living and
contributing in that way to the well-being of the community as
well to one's own well-being and self-esteem. The unemployed are
rubbed out by the AIRC in its role of team selectors, as unfit
to play the game. As a rules committee, on the other hand, the
AIRC issues huge volumes of regulations prescribing in great detail
how the work of a particular industry is to be carried out. These
regulations act as a barrier to the development of more efficient
work practices and arrangements. Getting them altered can take
years of expensive advocacy and litigation, is sometimes impossible,
and is often, therefore, never attempted. The cost to the Australian
nation of this rules committee role is impossible to estimate,
but it must be immense.
The AIRC is therefore a body which has very great authority
(although this delegated authority is essentially the authority
to destroy rather than to build), and throughout its history there
have been power struggles between the Federal Government and the
Commission, and between the trade unions and the Commission (originally
the Arbitration Court). Given the fact of this pervasive power,
it is a curious fact that the media has never, at least since
HR Nicholls went for Justice Higgins in the Hobart Mercury
in 1911, taken a real interest in how this power is exercised.
A book should be written which describes and analyses the various
scandals which have characterised the life story of the Arbitration
Court and its successors. But for the purpose of this document
it will suffice to tell the story of Jim Staples, formerly a Deputy
President of the Commonwealth Conciliation and Arbitration Commission,
but also entitled to the rank, style and title of a judge, including
the appellation 'Justice'.
Jim Staples was born in very humble circumstances in Sydney
in 1929 at the onset of the depression. Because he was intellectually
very gifted he did very well, indeed, at school and won scholarships
to the University of Sydney where he graduated in law. He graduated
despite his intense commitment to political activism as a member
of the Communist Party. He was expelled, in due course, from the
Communist Party because of his activity in distributing Kruschev's
secret speech to the XXth Party congress.
After some not very financially successful years at the Sydney
Bar, he was appointed to the Conciliation and Arbitration Commission
as a Deputy-President by the Whitlam Government in February, 1975
on the advice of Clyde Cameron, at that point still the Minister
for Labour and Immigration. Once there, he quickly became a scandal
within the world of the Industrial Relations Club.
The beginning of wisdom in the world of the Australian Industrial
Relations Club is the understanding that the whole edifice is
built on total intellectual confusion. This deep confusion is
plainly manifest in the writings and judgments of the Club's founder,
Henry Bournes Higgins, High Court Justice and the second President
of the Arbitration Court, from 1905 until 1921. This confusion
has been compounded from generation to generation.
The source of this confusion is the attempt to reconcile socialism,
or hierarchy in the labour market, with freedom elsewhere in economic
life. It is an impossible task, but it has been going on since
Higgins set out to create, what he described with breath-taking
but unconscious arrogance, as a 'new province for law and order'.
It has been the attempt to impose hierarchical control over and
above the contractual basis of labour market transactions, the
'higgling of the marketplace.'
In the early days, this hierarchical control was offered to
employers as a remedy against strikes, picketing and other forms
of trade union violence. It was offered to the early trade unions
as a certain road to higher wages. The latter turned out to be
true, at an appalling social cost of high unemployment amongst
the lower-skilled sectors of the workforce. The former turned
out to be an illusion. It also led to massive transfers from the
export sector of the Australian economy, the pastoral, agricultural
and mining sectors, to the protected manufacturing and service
Once established, the institutions of hierarchical control,
the arbitral tribunals of labour market regulation, wanted a continuing
role in the political and economic life of the nation. Further,
as their belief in the doctrines of hierarchical efficacy increased
in intensity, the reach of their decision-making has also increased.
At first, it was minimum weekly wages. Then it was annual leave.
Then it was time allowed for coffee breaks. And most recently
it has been the detailed control over the causes and procedures
of terminations of employment. The amount of detail now set out
in the awards which are handed down as a routine matter is quite
extraordinary in its complexity and scope.
It has been obvious for decades that this is no way, as the
Americans say, to run a railroad, let alone an economy which has
to provide sustenance, let alone prosperity, for a nation of nearly
20 million people. The only way for the members of the Industrial
Relations Club to carry on, then, given the quite absurd nature
of their situation, was to maintain a tight solidarity in the
face of any questioning or derision. And this is where Jim Staples
comes in. Having been appointed to the Arbitration Commission,
with the rank, style and title of a judge, he began to apply his
mind to the issues before him, acting as if in fact he were a
real judge, supposed to be deciding real cases. He clearly did
not understand that the whole thing was a charade. He was an innocent
abroad, not understanding that his required role was that of a
fixer, of running with the pack, helping to keep everyone---unions,
employer organisations, etc---more or less together, so as to
maintain the illusion of judicial impartiality, and therefore
the fitness of the statutorily established hierarchical authority
for imposing decisions on labour prices, hours of work, tea breaks,
sick leave, maternity leave, overtime, penalty rates, etc., etc.
Justice Staples never understood this. He began his judicial
career by castigating BHP, arguably the most loyal corporate member
of the IR Club, for some misdemeanour or other with the following
Let them, [ie BHP] then, twist slowly in the wind,
dead and despised, as a warning to the Commission of the limits
of persuasion by a public authority upon those who zealously
uphold the privileges of property and who exercise the prerogatives
of the master over those of our citizens whose lot falls to be
their employees. [Interpolation mine.]
For this he was removed from heading the maritime industry
panel in the Commission, and soon was sent on a global mission
to study human rights in several countries.
When he came back from his studies he soon achieved fame by
awarding to the wool storemen and packers a rise of $12.50 and
$15.90 when the Club had agreed amongst its members that the going
rate in these cases was $8. His judgment contained the following
For the quantification, then, what shall I do? I am already
reeling under the advice of many prophets. There is no Polonius
at hand to give me memorable precepts as he did Laertes when
he fled the confusion. I shall simply select a figure as Tom
Collins selected a day from his diary and we shall see what turns
up. Such is life.
Such candour threatened the very
existence of the whole industrial relations edifice in Australia.
A very large and expensive institution, complete with the trappings
of judicial rank and style, was being held up to public ridicule
by one of its own. And this ridicule was the outcome of actually
taking seriously the ideas which legitimised the institution.
Justice Staples was never given any further cases by the President
of the Commission, and in the fullness of time, the Hawke Government
passed a new Industrial Relations Bill in 1989, which abolished
the Conciliation and Arbitration Commission and set up in its
place the Industrial Relations Commission. The judicial personnel
of the new body were identical to the personnel of the extinguished
body, save one. Justice Staples was not appointed to the new Commission;
instead he was offered a judicial pension of $90,000 pa.
The Jim Staples story is a very persuasive example supporting
the argument that specialist tribunals are, everywhere and always,
politicised bodies designed to achieve a politically desired outcome.
The AIRC and its antecedents have always been, and remain to this
day, political institutions, and their continuing survival is
based on reading with sufficient acumen the winds of political
change. Back in 1911, H.R. Nicholls was cited for contempt of
court by H.B. Higgins because Nicholls rightly and accurately
described him as 'a political judge'. That Higgins was genuinely
outraged by Nicholls' quite proper description of him is testimony
to the deep intellectual confusion which is characteristic of
Higgins' entire career. Australia's great jurist Sir Owen Dixon,
when upon taking his oath of office as Chief Justice in April
There is in Australia a large number of jurisdictions and
a confusion in the public mind as to their function.... The public
does not maintain the distinction between the administration
of justice according to law and the very important function of
Owen Dixon understood very well the distinction between 'administration
of justice according to law' and the use of delegated statutory
powers by industrial tribunals to achieve results which satisfied
perceived political balances of power. This activity, carried
out for more than 90 years, has caused great economic damage;
damage which today is most clearly manifest in our scandal of
It is accepted wisdom in political life that it is not the
level of unemployment which matters, but rapid increases in unemployment.
Like much accepted political wisdom, this argument, which is used
to justify indifference to reform, glides over the immense social
and budgetary costs of unemployment. In Australia we have enjoyed
quarter-on-quarter growth rates since 1994 which are unprecedented
in our economic history. Yet unemployment remains intractably
high at about 7 per cent, between 600,000 and 700,000 people.
Yet if Australia matched the US labour market in its capacity
to include people within its structures, we would today have an
extra 600-700 thousand people active in the labour market. It
doesn't follow that we would have zero unemployment, but it does
follow that a very large number of Australians would be much better
off than they are now.
At the same time, it has to be said that the US labour market,
whilst significantly better in terms of the freedom to generate
jobs than ours, is a long way short of the Australian labour market
which the HR Nicholls Society wishes to see established here.
Such a labour market would really drive Australia forward to prosperity
and international standing.
I wish to conclude on this note. Australia is a country with
a population less than 20 millions, who live in a region inhabited
by many hundreds of millions of people, for whom the experience
of political stability, and freedom, has been rare or non-existent.
If we are going to pass on this country as a free and sovereign
nation to our descendants, we are going to have to build up our
population, and we are going to have to become much wealthier
than we now are. Wealth will enable us to buy, maintain and operate,
the expensive defence equipment which will generate international
standing and provide security for Australia. A small, poor country
in this part of the world, is a country without a secure future.
So reform of the labour market is not only essential to our
prosperity. It is essential to our future sovereignty and independence.
And, at the moment, the conjunction of political forces is favourable
Central to reform is the abolition of the Industrial Relations
Commission. There are very many examples from the history of the
AIRC and its antecedents which prove the political, ie discretionary,
nature of this institution, and the published proceedings of the
H.R. Nicholls Society contain many of these case studies. The
key issue today is that the AIRC is the central cause of our unemployment.
If we are to move rapidly back to full employment, the Government
will have to repeal the law-making powers of the AIRC or, preferably,
abolish the institution entirely. Such reform will allow people
to make their own arrangements according to the well-developed
principles of contract law as exemplified within the domestic
building industry, and the Australian economy will begin to grow
again as the magic of freedom, working within the disciplines
and spontaneous order of the marketplace, begins to work.
Justice Michael Kirby made particular reference to this development
in his Richard Kirby Lecture:
'I have always considered that a serious blow was done to
the Commission when it was reconstituted from the old Arbitration
Commission. The fundamental convention, previously observed in
federal courts and tribunals, was breached when Justice Staples
was not reappointed to the IRC.'