Socialism As It Is

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The "State Socialism" of Australia and New Zealand is fundamentally
agrarian; its real basis is a modernized effort to establish a nation of
small farm owners and to promote their welfare.

Next in importance and closely connected with the policy of gradually
bringing about the division of the land among small proprietors, is the
policy of the government ownership of monopolies. Already New Zealand is
in the banking business, and the Australian Labour Party proposes a
national bank for Australia. National life and fire insurance are
instituted in New Zealand; the same measures are proposed for Australia.
Already many railroads are nationally owned, and it is proposed that
others be nationalized. Already extensive irrigation projects have been
undertaken; it is proposed that the policy should be carried out on a
wider scale. But the Australian Labour Party is not fanatical upon this
form of "State Socialism." It does not argue, like the British
Independent Labour Party, that the civilization of a community can be
measured by the extent of collective ownership, for Australasia's
experience has already shown the immediate and practical limits of this
kind of a movement. New Zealand is already burdened with a very large
national debt; Australia proposes that its debt shall be increased only
for the purpose of building commercially profitable railways or
irrigation schemes, etc., and not in any case for the purpose of
national defense or for other investments not immediately remunerative.

The national debt, aside from that based on profit-making governmental
undertakings, like railways, is to be reduced, and nationalization of
other monopolies is not to be undertaken until new measures of taxation
have become effective. These are a graduated land tax and an extension
of the graduated income and inheritance taxes.[79]

The program concludes with vigorous measures for national defense.
Australia is to own her navy (supported not by loans, but by taxation),
and is to be as independent as practicable of Great Britain. She feels a
need for military defense, but she does not propose to have a military
caste, however small; the whole people is to be made military, the
Labour Party stands for a citizen defense force and not for a
professional army. Finally, Australia is to be kept for the white race,
especially for British and other peoples that the present inhabitants
consider desirable.

There remains that part of the program which has attracted the most
attention, namely, the labor reforms: workingmen's insurance, an
eight-hour day, and an increase of the powers of the compulsory
arbitration courts. Already in fixing wages it has been necessary for
the court to decide what is a fair profit to the employers, so profits
are already to some degree being regulated. It has been found that
prices and the cost of living are rising still more rapidly than wages;
it is proposed that prices should also be regulated by withdrawing the
protection of the customs tariff from those industries that charge an
unduly high price.

I have mentioned the labor element of the program last, for the
Australian Labour Party is a democratic rather than merely a labor
movement. The Worker's Union, and the Sheep Shearer's Society of the
Eastern States, enrolled from the first all classes of ranch employees,
and "even common country storekeepers and small farmers."[80] Some of
the miners' organizations have been built on similarly broad lines, and
these two unions constitute the backbone of the Labour Party. The
original program of the New South Wales Labour Electoral League, which
formed the nucleus of the Labour Party in 1891, proposed to bring
together "all electors in favor of democratic and progressive
legislation," and was nearly as broad as the present program; that is to
say, it was by no means confined to labor reforms.

But are there any other features in the Australian situation, besides
the dominating importance of the land question, that rob this program of
its significance for the rest of the world? It cannot be denied that
there are. In the first place, it is only this recent social reform
movement that has begun to put New Zealand and Australia under real
democratic government, and this democratization is scarcely yet
complete, since the constitutions of some of the separate Australian
States and Tasmania contain extremely undemocratic elements; while the
federal government is dominated by a Supreme Court, as in the United
States. Consequently it is only a few years in some of the States since
such elementary democratic institutions as free schools were instituted.
It is evident, on the other hand, that countries establishing democratic
or semidemocratic institutions under the conditions prevailing in the
world as late as 1890, when the great change took place in New Zealand,
or during the decade, 1900-1910, when the political overturn gave
Australia to the Labour Party, should be more advanced than France,
Germany, Great Britain, or the United States, where the latest great
overturn in the democratic direction occurred in each instance a
generation or more ago.

So also Australia and New Zealand which, on the one hand, are still
suffering from the disadvantage of having lived until recently under a
system of large landed estates, on the other hand have the advantage of
dealing with the land question in a period when the governments of these
new countries are becoming rich enough, through their own enterprises,
to exist independently of land sales, and when farmers are more willing
to increase the power of their governments, both in order to protect
themselves from the encroachments of capital and of labor, and directly
to advance the interests of agriculture. The campaign to break up the
large estates has kept the farmers engrossed in politics, and this has
occurred in a period when industrial organization has made possible a
whole program of "Constructive State Socialism." By taking up this
program the farmers and those who wished to become farmers have at once
looked to their own interests and secured the political support of other
small capitalists and even of a large part of the workingmen.

But working against the nationalization of the unearned increment,
against the policy of leasing instead of selling the public land,
central features of every advanced "State Socialist" policy, is the fact
that the small farmers, daily becoming more numerous, hope that they
might themselves reap this increment through private ownership. In no
national legislation is it proposed to tax away this increment in
_agricultural_ land, which preponderates both in New Zealand and
Australia. But, while in other countries the agricultural population is
decreasing relatively to the whole, in New Zealand the settlement of the
country by the small farmers has hitherto led it to increase, and the
new legislation in Australia must soon have the same result. So, in
spite of the favorable auspices, it seems that the climax of the "State
Socialism," the transformation of the small farmer into a tenant of the
State is not yet to be undertaken, either in the shape of land
nationalization or in the taxing away of unearned increment. And while
the Australian Labour Party as an organization favors nationalization, a
large part of those who vote for this party do not, and its leaders have
felt that to have advocated nationalization hitherto would have meant
that they would have failed to gain control of the government. And in
proportion as the new land tax creates new farmers, the prospects will
be worse than they are to-day.

The existing land laws of New Zealand are extremely moderate steps in
the direction of nationalization. In 1907, after the best land had been
taken up, a system of 66-year leases was introduced, but only as a
voluntary alternative to purchase. After 1908 the annual purchases of
large estates were divided into small lots and leased for terms of 33
years, but this applies only to a relatively small amount of land. It
was only in 1907 that the graduated land tax began to be enforced in a
way automatically to break up the large estates as it had been expected
to do, and it was only in 1910 that the new and more heavily graduated
scale went into effect. And finally it was only in 1907 that large
landowners were forbidden to purchase, even indirectly, government land.
It has taken all these years even to discourage large estates
effectively, to say nothing of nationalization.

"Some writers have predicted that the appetite for reform by
taxation will grow, and that the taxation will be increased and the
exemptions diminished until all the rent will be taken and the land
practically confiscated, according to the proposals of Henry
George. But the landless man, when he becomes a landholder, ceases
to be a single taxer, and is strongly opposed to Socialism. The
land legislation of New Zealand, although apparently Socialistic,
is producing results directly opposed to Socialism by converting a
lot of dissatisfied people into stanch upholders of private
ownership of land and other forms of private property. The small
farmers, then, are breaking away from their former allies, the
working people of the towns, who now find themselves in the
minority, but who are increasing in numbers and who will demand,
sooner or later, a large share in the product of industry as the
price of loyalty to the capitalistic system."[81]

Without land nationalization the process of nationalizing industry
cannot be expected to proceed faster than it pays for itself--for we
cannot reckon as part of the national profits the increased land values
national enterprises bring about. Nor will capitalist collectivism at
this stage proceed even this fast. Not only do the small taxpayers
oppose the government going into debt, but as taxpayers they are
responsible for all deficiencies, and they want only such governmental
enterprises as both produce a surplus and a sufficient one to pay the
deficits of the nonproductive departments of government. To-day only
about one fifth of the taxpayers pay either land or inheritance taxes.
But the increasing military expenditures and the greater difficulty of
securing large sums by indirect taxation will increase this proportion.
It is likely, then, that State enterprises which, under private
capitalism, were used recklessly as aids to land speculation will now be
required, as in Germany and other continental countries, to produce a
surplus to relieve taxpayers. Private capitalism used the State for
promoting the private interests of its directors, State capitalism uses
it to produce profits for its shareholders, the small farmers, as
taxpayers, or in the form of profits distributed among them as
consumers. Only as the government begins to take a considerable share of
that increased value in land which nearly every public undertaking
brings about, will _all_ wisely managed government enterprises produce
such profits.

The advance of "State Socialism," though it has several other aspects,
can be roughly measured by the number of government enterprises and
employees. The railways, telegraphs, and the few government-owned mines
of New Zealand, have been calculated to employ about one eighth of the
population, a greater proportion than in America or Great Britain, but
scarcely greater than in Germany or France--and not a very great stride
even towards "State Socialism." And it seems likely that the present
proportion in New Zealand will remain for some time where it is.
Government banking, steamships, bakeries, and the government monopoly of
the sale of liquor and tobacco might not prove immediately profitable,
and are less heard of than formerly.

Where "State Socialism" has proceeded such a little distance, the
material benefits it promises to labor (though in a lesser proportion
than to other classes) have not yet accrued. "It must be admitted,"
write Le Rossignol and Stewart, "that the benefits of land reform and
other Liberal legislation have accrued chiefly to the owners of land and
other forms of property, and the condition of the landless and
propertyless wage earners has not been much improved." Indeed, the
condition of the workers is little, if any, better than in America. Mr.
Clark writes: "The general welfare of the working classes in Australasia
does not differ widely from that in the United States. The hours of work
are fewer in most occupations, but the wage per hour is less than in
America. The cost of living is about the same in both countries. There
appears to be as much poverty in the cities of New Zealand as in the
cities of the same size in the United States, and as many people of
large wealth." It is no doubt true, as these writers say, that, of the
people classed as propertyless, "many are young, industrious, and
well-paid wage earners; who, if they have health and good luck may yet
acquire a competency" in this as in any other new country. Yet it is
only to those who "have saved something," _i.e._ to property holders,
that the State really lends a helping hand.

Even when New Zealand becomes an industrial country, the writers quoted
calculate that "it should be possible for the party of property to
attach to itself the more efficient among the working class, by giving
them high wages, short hours, pleasant conditions of labor,
opportunities for promotion, a chance to acquire property, insurance
benefits, and _greater_ advantages of every kind than they could gain
under any form of Socialism. If this can be done, the Socialists will be
in a hopeless minority."

Here we have in a few words the universal labor policy of "State
Socialism." Labor reforms are to be given to the working class first, to
encourage in them as long as possible the hope to rise; second, when
this is no longer effective, to make the upper layers contented, and
finally to "increase industrial efficiency," as these same writers
say--but at no time to put the workers on a level with the
property-owning classes.

Indeed, it is impossible to do more on a national scale, as these
writers point out, for both capital and labor are international. If
"State Socialism" were carried to the point of equalizing the share of
labor, either immigration would be attracted until wages were lowered
again, or capital would emigrate, or the nation would have to defend its
exclusiveness by being prepared for war.

"It is hard to see how any country, whether Socialistic or
individualistic in its industrial organization, can long keep its
advantage over other countries without some restriction of
immigration. A thoroughgoing experiment in collectivism, therefore,
could not be made under favorable conditions in New Zealand or any
other country, unless that country were _isolated_ from the rest of
the world, _or_ unless the whole world made the same experiment at
the same time."

As between comparative isolation possibly in the near future and
world-wide or at least international Socialism, certainly many years
ahead, the Australian Labour Party, under similar circumstances to that
of New Zealand, has chosen to attempt comparative isolation. It does not
yet propose to keep out immigrants, but it makes a beginning with all
non-white races, and it stands for a policy of high protection and a
larger army and navy. Naturally it does not even seek admission into the
International Socialist Congress, where if any Socialist principle is
more insisted upon than another it is Marx's declaration that the
Socialists are to be distinguished from the other working class parties
only by the fact that they represent the interests of the entire working
class independently of nationality or of groups within the nation.

Moreover, the militarism necessary to enforce isolation may cost the
nation, capitalists and workers alike, far more heavily than to leave
their country open to trade and immigration. Indeed, it must lead, not
to industrial democracy, or even to capitalistic progress, but to
stagnation and reaction. The policy of racial exclusion will not only
increase the dangers of war, but it will bring little positive benefit
to labor, even of a purely material and temporary kind, since the
farming majority will not allow it to be extended to the white race.
Instead of restricting immigration, the new government projects require
a thicker settlement, and everything is being done to encourage settlers
of means and agricultural experience, and we cannot question that the
coming of white laborers will be encouraged when they are needed.

The size of the farms the government is promoting in New Zealand proves
that the country is deliberately preparing for a class of landless
agricultural laborers, and Australia is following the example. Since
these new farms average something like two hundred acres, we must
realize that as soon as they are under thorough cultivation they will
require one or more farm laborers in each case, to be obtained chiefly
from abroad, producing a community resting neither on "State Socialism"
nor even on a pioneer basis of economic democracy and approximate
equality of opportunity similar to that which prevailed during the
period of free land in our Western States.

Unmistakable signs show that in New Zealand an agrarian oligarchy by no
means friendly to labor has already established itself. Even the
compulsory arbitration act which bears anything but heavily on employers
in general, is not applied to agriculture. After two years of
consideration it was decided in 1908 that the law should not apply on
the ground that "it was impracticable to find any definite hours for the
daily work of general farm hands," and that "the alleged grievances of
the farm laborers were insufficient to justify interference with the
whole farming industry of Canterbury" (the district included 7000
farms). Whatever we may think of the first justification, the second
certainly is a curious piece of reasoning for a compulsory arbitration
court, and must be taken simply to mean that the employing farmers are
sufficiently powerful politically to escape the law. The working people
very naturally protested against this "despotic proceeding," which
denied such protection as the law gave to the largest section of workers
in the Dominion.

What is the meaning, then, of the victory of a "Labour Party" in
Australia? Chiefly that every citizen of Australia who has sufficient
savings is to be given a chance to own a farm. A large and prosperous
community of farmers is to be built up by government aid. Even without
"State Socialism" or labor reform the working people would share
temporarily in this prosperity as they did to a large degree in that of
the United States immediately after the Civil War, until the free land
began to disappear. It was impossible to pay exceptionally low wages to
a workingman who could enter into farming with a few months' notice.

The Labour Party hopes to use nationalization of monopolies and the
compulsory regulation of wages to insure permanently to the working
classes their share of the benefit of the new prosperity. How much
farther such measures will go when the agricultural element again
becomes dominant is the question. It is already evident that the
Australian reform movement, like that of New Zealand, includes, or at
least favors, the same class of employing farmers. The fact that a
Labour Party is in the opposition in New Zealand, while in Australia a
Labour Party has led in the reforms and now rules the country, should
not blind us to the farmers' influence. The very terms of the graduated
land tax and the value of the farms chosen for exemption show
mathematically the influence, not alone of the small, but even the
middle-sized farmers. Estates of less than $25,000 in value are exempt,
and those valued at less than $50,000 are to be taxed less than one per
cent. Such farms, as a rule, must have one or more laborers. Will these
employees come in under the compulsory arbitration law? If they do, will
they get much benefit? The experience of New Zealand and the present
outlook in Australia do not lead us to expect that they will.

Many indications point to a coming realignment of parties such as was
recently seen in New Zealand, when in 1909 it was decided to form an
opposition Labour Party. And it is likely to come, as in New Zealand,
when the large estates are well broken up and the agricultural element
can govern or get all they want without the aid of the working people.
Already the Australian Labour Party is getting ready for the issue. Its
leaders have kept the proposed land nationalization in the background,
because they believe it cannot yet obtain a majority. But it may be that
the party itself is now ready to fight this issue out on a Socialist
basis, even if, like the Socialist parties in Europe, such a decision
promises to delay for a generation their control of the government. If
the party is ready, it has the machinery to bring its leaders to time,
as it has done on previous occasions. For it already resembles the
Socialist parties in Europe in this, that it makes all its candidates
responsible to the party and not to their constituents. That is to say,
while it does not represent the working people exclusively, it is a
class organization standing for the interests of that group of classes
which has joined its ranks, and for other classes of the community only
in so far as their interests happen to be the same.

Already the majority of the Labour Party voters are undoubtedly working
people. When it takes a definite position on the land question, favoring
one-family farms and short leases or else cooeperative, municipal, or
national large-scale operation, and states clearly that it intends to
use compulsory arbitration to advance wages indefinitely, including
those of farm laborers, there is every probability that, having lost the
support of the employing farmers, it will gradually take its place as a
party of permanent opposition to capitalism, like the Socialist parties
of Europe--until industry finally and decisively surpasses agriculture,
and the industrial working class really becomes the most powerful
element in society.

Space does not permit the tracing of the "State Socialist" tendency
in other countries than Great Britain, the United States, and
Australasia. Originally a brief chapter was here inserted showing
the similar tendencies in Germany. This is now omitted, but the
frequent reference to Germany later in dealing with the Socialist
movement makes a brief statement of the German situation essential.
For this purpose it will be sufficient to quote a few of the
principal statements of the excellent summary and analysis by
William C. Dreher entitled "The German Drift towards Socialism":

"The German Reichstag passed a law in May, 1910, for the regulation
of the potash trade, a law which goes further _in the direction of
Socialism_ than any previous legislation in Germany. It assigns to
each mine a certain percentage of the total production of the
country, and lays a prohibitory tax upon what it produces in excess
of this allotment. It fixes the maximum price for the product in
the home market, and prohibits selling abroad at a lower price. A
government bureau supervises the industry, sees that the prices and
allotments are observed, examines new mines to determine their
capacity, and readjusts allotments as new mines reach the producing
stage....

"But the radical features of the law are not completed in the
foregoing description. The bill having reduced potash prices, the
mine owners threatened to recoup themselves by reducing wages. But
the members of the Reichstag were not to be balked by such threats;
they could legislate about wages just as easily as about prices and
allotments. So they amended the bill by providing that if any owner
should reduce wages without the consent of his employees, his
allotment should be restricted in the corresponding proportion....

"While the law is indeed decidedly Socialistic in tendency, it is
not yet Socialism. It hedges private property about with sharper
restrictions than would be thought justifiable in countries where,
as in the United States, the creed of individualism is still
vigorous; and yet it is, in effect, hardly more than a piece of
social reform legislation, though a more radical one than we have
hitherto seen....

"In Germany, 'the individual withers' and the world of State and
Society, with its multifarious demands upon him, 'is more and
more.' This is, of course, a Socialistic tendency, but the
substitute that the Germans are finding for unlimited competition
is not radical Socialism, but organization....