Socialism As It Is

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Dr. Flexner is then reported to have quoted the following from a
Springfield Republican editorial:--

"Germany could readily train her masses with a view to industrial
efficiency, whereas our industrial efficiency is only one of the
efficiencies we care about; the American wishes to develop in many other
ways, and to have his educational system help him to do it."

[56] _New York Times_, Nov. 12, 1911.

[57] F. H. Streightoff, "The Standard of Living among the Industrial
People of America."

[58] Interview with Sir Joseph Ward, New York, April 15, 1911.

[59] Winston Churchill, _op. cit._, p. 325.

[60] Winston Churchill, _op. cit._, p. 186.

[61] Winston Churchill, _op. cit._, pp. 240, 243.

[62] Winston Churchill, _op. cit._, pp. 250, 252.

[63] Lloyd George, _op. cit._, pp. 68-69.

[64] Winston Churchill, _op. cit._, p. 197.

[65] Winston Churchill, _op. cit._, p. 197.

[66] The _Outlook_, June, 1911.

[67] Sidney Webb, the _Contemporary Review_ (1908) and "Basis and Policy
of Socialism," pp. 83, 84.

[68] The _Survey_ (New York), 1910, pp. 81-82, 466, 731-732.

[69] H. G. Wells, "First and Last Things," p. 133.

[70] Edmond Kelly, "Twentieth-Century Socialism," p. 314.

[71] _Vorwaerts_ (Milwaukee), Feb. 3, 1898.

CHAPTER V

COMPULSORY ARBITRATION

So far I have spoken only of the constructive side of the new
capitalism's labor program, its purpose to produce healthy and
industrially efficient laborers so as to increase profits. "State
Socialism" gives the workingman as a citizen certain carefully measured
political rights, and legislates actively in his behalf as a
profit-producing employee at work, but its policy is reversed the moment
it deals with him and his organizations _as owners and sellers of
labor_.

Towards the individual workers, who are completely powerless either
politically or economically until they are organized, the new capitalism
is, on the whole, both benevolent and actually beneficent. But it does
not propose that organized labor shall obtain a power either in industry
or in government in any way comparable to that of organized capital.

"Successful State Socialism," as Victor S. Clark says in writing of the
Australian experiments, "depends largely upon perfecting public control
over the individual."[72] But compulsory arbitration of labor disputes
which reaches the wage earners' organizations, is far more important to
"State Socialism" than any other form of control over individual. A
considerable measure of individual liberty may be allowed without
endangering this new social polity, and it is even intended
systematically to encourage the more able among the workers by some form
of individual or piece wages--or at least a high degree of
classification of the workers--and by a scheme of promotion that will
utilize the most able in superior positions, and incidentally remove
them out of the way as possible leaders of discontent.

Nor is it intended to use any compulsion on labor organizations beyond
that which is essential to prevent them from securing a power in society
in any way comparable to that of property and capital. For this purpose
compulsory arbitration is the direct and perfect tool. It can be
limited in its application to those industries where the unions really
occupy a position of strategic importance like railroads and coal mines,
and it can be used to attach to the government those employees that are
unable to help themselves. I have mentioned those weaker groups of
employees who would be unable to improve their condition very materially
except by government aid, and, even when so raised to a somewhat higher
level, have no power to harm capitalism. Compulsory arbitration or some
similar device must therefore replace such crudely restrictive and
oppressive measures as have hitherto been applied to the unions.

In the United States all "dangerous" strikes are at present throttled by
court injunctions forbidding the strikers to take any effective action,
and boycotts are held to be forbidden by the Sherman law originally
directed against the "trusts." Recently the Supreme Court decided that
the officers of the American Federation of Labor were not to be
imprisoned for violation of the latter statute. But the decision was
purely on technical grounds, and the court upheld unanimously the
application of the law to the unions. There is little question that the
attorney for the manufacturers, Daniel Davenport, was right when he thus
summed up the court's opinion:--

"It held that the boycott is illegal; that the victim of the
boycott has the right to go into court of equity for protection by
injunction; that such court has the right to enjoin any and every
act done in enforcing the boycott, including the sending out of
boycott notices, circulars, etc., that the alleged constitutional
right of free speech and free press affords the boycotter no
immunity for such publication; that for a violation of the
injunction the party violating it is liable to be punished both
civilly and criminally."

Against this law and the use of injunctions in labor disputes the
Federation of Labor has introduced a bill through Congressman W. B.
Wilson, which aims to free the unions from these legal obstacles by
enacting that no right to continue the relation of employer to employee
or to carry on business shall be construed as property or a property
right; and that no agreement between two or more persons concerning
conditions of employment or its termination shall constitute a
conspiracy or an offense against the law unless it would be unlawful if
done by a single individual, and that, therefore, such an act is not
subject to injunctions. While neither of the great parties has
definitely promised to support this particular measure, one party has
made a vague promise to restrict injunctions, and the leaders of the
progressive wings of both are quite definite about it. Nearly half of
the House of Representatives voted for the repeal of the Sherman law as
applied against union boycotts. Senator La Follette has demanded the
abolition of this species of injunction, and Governor Woodrow Wilson has
accused our federal courts of "elaborating a theory of conspiracy
destined to bring 'the sympathetic strike' and what is termed 'the
secondary boycott' under legal condemnation."

Such reforms are not as radical as might appear to Americans, for the
boycott is legal in Germany, while the crime of "conspiracy" was
repealed in Great Britain in 1875, and the rights of strikers were
further protected in that country by the repeal of the Taff Vale
decision against picketing a few years ago, and yet unions are in no
very strong position there. And weak as they are, the talk of compulsory
arbitration is growing, and it seems only question of time until some
modification of it is adopted. And, though the abuse of injunctions and
the other forms of anti-union laws and decisions now prevailing will
probably be done away with in this country, there is little doubt that
here also employers will use some great coal or railroad strike as a
pretext for enacting a compulsory arbitration law.[73]

Similarly, as governments continue to take on new industrial functions,
great importance is attached to the right of government employees, now
denied, to organize and to join unions. Senator La Follette and other
progressives also champion this right against President Taft, and will
doubtless win their fight, but, as I shall show later a right to
organize does not mean a right to strike--and there seems no probability
that any government will fail to answer the effort to strike on any
very large scale either by punishment for conspiracy against the State
or by excluding the strikers permanently from government employment.
They will doubtless be offered, as in France, instead of the right to
strike, the right to submit their grievances as a body, if they wish it,
to some government board (see Part III, Chapter VI).

The Australasian labor leaders were the first and are still the chief
advocates of compulsory arbitration among the unionists, and if they
find it used against them they have nobody but themselves to blame. That
Labor is disappointed in the result in those countries is shown by the
fact that of late years, both in Australia and New Zealand, the most
important strikes have been settled outside of the compulsory
arbitration acts, and Mr. Clark states that he is unaware of any
important exception.

But that the workers in Australia still hope to use this legislation for
their purposes is shown by the referendum of 1911, by which they sought
to nationalize the State laws on the subject. At the time of the
railroad strike in Victoria, Australia, in 1903, a law was passed which
imposed a penalty of "twelve months' imprisonment or a fine of one
hundred pounds" for engaging in a strike on government railways, and
made a man liable to arrest without warrant or bail "for advising a
strike orally or by publication, or for attending any meetings of more
than six persons for the purpose of encouraging strikers." Even then the
limit had not been reached. In 1909 the Parliament of New South Wales
passed an act especially directed against strikes in any industry which
produced "the necessary commodities of life [these being defined as
coal, gas, water, and food] the privation of which may tend to endanger
human life or cause serious bodily injury," and the penalty of twelve
months' imprisonment of the Victorian law was extended to all this vast
group of industries also. The law of New South Wales was most stringent,
providing that any one taking part in a strike meeting under these
circumstances is also liable to twelve months' imprisonment, and that
the police may break into the headquarters of any union and seize any
documents "which they reasonably suspect to relate to any walk-out or
strike." Under this law the well-known labor leader, Peter Bowling, was
sentenced to one year of imprisonment.

The unions violently denounced this enactment, but chiefly as they had
denounced previous legislation, on the ground that it permitted
_unorganized_ workmen to apply for relief under the law. That is to say,
while the employers were using the law to make striking a crime, they
were extending such benefits as it produced to the nonunion workers who
can often be used as tools for their purposes. But the astounding hold
that "State Socialism" has on the Australian masses, especially on the
working people, is shown by the steadfast belief that this measure can
be amended so as to operate to their interest. Bowling and his unions
made a serious agitation for the general strike against the coercive
measure just mentioned, but it was only by a tie vote that the New South
Wales Labour Congress even favored protest in the form of cancelling the
agreement which the unions had made under the Industrial Disputes Acts,
while in the next elections New South Wales returned a majority of labor
representatives opposing Bowling's policy of radical protest. That is,
the majority of the working people still express confidence in the
possibilities of compulsory arbitration, and even want to extend it.

Professor Le Rossignol of the United States and Mr. William D. Stewart
of New Zealand have undertaken a careful and elaborate investigation of
compulsory arbitration in New Zealand.[74] A reference to a few of their
quotations from original documents will show the nature and
possibilities of this coercive measure as it has developed in the
country of its origin. The original law in New Zealand was introduced by
the Honorable William Pember Reeves, the Minister of Labor, in 1894, and
was supported by the labor leaders. Mr. Reeves says: "What the act was
primarily passed to do was to put an end to the larger and more
dangerous class of strikes and lockouts. The second object of the act's
framer was to set up tribunals to regulate the conditions of labor."

"Mr. Reeves' chief idea," say our authors, "was to prevent strikes, and
a great deal more was said in Parliament about industrial peace than
about the improvement in the conditions of labor which the act was to
bring about. But there can be little doubt that the unionists, without
whose help the act could not have been passed, thought more of the
latter than of the former result, and looked upon the act as an
important part of the new legislation for the benefit of the working
class." Here is the contrast that we must always keep in mind. _The
purpose of the unionists is to see if they cannot obtain improvements in
their conditions; the purpose of the employers and also of "the public"
is to prevent strikes._ One of the most able students of the situation,
Mr. MacGregor, has shown that since the passing of the law the latter
purpose has been thoroughly accomplished, since it has been used not
only as was originally intended, to settle labor disputes which become
so serious as to threaten to "arrest the processes of industry," but
that it has practically built up a "system of governmental regulation of
wages and conditions of labor in general." That is to say, the law has
accomplished rather the purposes of the employers than those of the
employees.

In another point of the most fundamental importance the law has become
something radically different from what the labor leaders who first
favored it hoped it would be. The act of 1894 was entitled: "An act to
encourage the formation of industrial unions and associations and to
facilitate the settlement of industrial disputes by conciliation and
arbitration." By the amendment of 1898 the words, "to encourage the
formation of industrial unions and associations," were left out. Thus
the law ceased to be directly helpful to the very unions which had done
so much to bring it about and are the only means employees possess to
make the law serve them instead of becoming a new weapon for employers.

An early decision of the Arbitration Court in 1896 had declared that
preference should be given to the unionists. "Since the employer was the
judge of the qualifications of his employees, the unionists did not gain
much by this decision," say Le Rossignol and Stewart. "In later awards
it was usually specified that preference was granted only when the union
was not a closed guild, but practically open to every person of good
character who desired to join." These later decisions brought it about
that the so-called preference of unionists became no preference at all.
"The Arbitration Court, except in a few minor cases, has refused to
grant unconditional preference and the unionists, realizing that
preference to an open union is no preference at all, now look to
Parliament for redress and demand statutory unconditional preference to
unionists."

In 1905 strikes and lockouts were made statutory offenses, and a single
judge was given the power practically to force the individual worker to
labor. After ten years of trial the law had become almost
unrecognizable from the workingman's standpoint, and from this moment on
the resistance to it has grown steadily. In a decision rendered in 1906,
the Chief Justice said: "The right of a workman to make a contract is
exceedingly limited. The right of free contract is taken away from the
worker, and he has been placed in a condition of servitude or status,
and the employee must conform to that condition." Not only do judges
have this power, but they have the option of applying or not applying it
as they see fit, for the amendment of 1908 "expressly permits the court
to refuse to make an award if for any reason it considers it desirable
to do so." With a law, then, that in no way aids the unions, as
such--however beneficial it may be at times to the individual
workingman--and which leaves an arbitrary power in the hands of the
judge elected by an agricultural majority, what has been the _concrete_
result? Especially, what principles have been applied by the judges?

Of course the first principle has been that all the working people
should get what is called a "minimum" or a "living" wage, but our
authors show that merely to keep their heads above the sea of pauperism
was not at all the goal of the workers of New Zealand. No doubt they
were already getting such a wage in that relatively new and prosperous
country, yet this was all the new law did or could offer, besides
keeping existing wage scales up to the rising cost of living. Anything
more would have required, not compulsory arbitration, but a series of
revolutionary changes in the whole economic and political structure.
"Another stumbling block in the way of advance in wages is the
inefficient or marginal or no-profit employer, who, hanging on the
ragged edge of ruin, opposes the raising of wages on the ground that the
slightest concession would plunge him into bankruptcy. His protests have
their effect on the Arbitration Court, which tries to do justice to all
the parties and fears to make any change for fear of hurting somebody.
But the organized workers, caring nothing for the interests of any
particular employer, demand improved conditions of labor, though the
inefficient employer be eliminated and all production be carried on by a
few capable employers doing business on a large scale and able to pay
the highest wages."

Here is the essential flaw in compulsory arbitration in competitive
industries (its limitations under monopolies will be mentioned later).
The courts cannot apply a different standard to different employers. On
the other hand, they cannot fix a wage which any employer cannot afford
to pay or which will drive him out of business. That is to say, the
standard tends to be fixed by what the poorest employer can pay, the
employer who, from the standpoint either of capital or of labor or of
efficient industry, really deserves to be driven from business. An
exception is made only against such employers as cannot even afford to
pay a _living_ wage--these alone are eliminated.

Le Rossignol and Stewart show that in view of these considerations the
court has repeatedly stated that "profit sharing could not be taken as a
basis of awards, on the ground that it would involve the necessity of
fixing differential rates of wages, which would lead to confusion, would
be unfair to many employers, and unsatisfactory to the workers
themselves."

With such a principle guiding the court, and it is probably a necessity
under commercial competition, it is no wonder that some of the
representatives of the unions have claimed that annual real wages have
actually fallen. "It is not easy," say our authors, "to show that
compulsory arbitration has greatly benefited the workers of the Colony.
Sweating has been abolished, but it is a question whether it would not
have disappeared in the years of prosperity without the help of the
Arbitration Court. Strikes have been largely prevented, but it is
possible that the workers might have gained as much or more by dealing
directly with their employers than by the mediation of the court. As to
wages, it is generally admitted that they have not increased more than
the cost of living. A careful investigation by Mr. von Dalezman, the
Registrar-General, shows that, while the average wages increased from
1895 to 1907 in the ratio of 84.8 to 104.9, the cost of food increased
in the ratio of 84.3 to 103.3. No calculation was attempted for clothing
or rent." If we take it into account that rents have risen very rapidly
and are especially complained of by the working people, we can see that
real wages, measured by their purchasing power, probably fell in the
first twelve years of compulsory arbitration, notwithstanding that it
was on the whole a period of prosperity in the Colony. For ten years, as
a consequence, the complaints of the workers against the decisions have
been growing, "not because the wages were reduced, but because they
were not increased and because other demands were not granted."

When the unions perceived that the principles for which they have been
contending were not granted, and that their material conditions were not
being improved, it was suggested that the judge of the Arbitration Court
should be elected by the people, in the hope that the unions might
control the election, "but this would be at variance with all British
traditions and could not be brought about," say our authors. No doubt
British tradition has had something to do with the matter, but the
impracticability of this remedy is much more due to the fact that the
employees confront an agricultural and middle class majority.

At first it was the employers who were displeased, but now they are
becoming converted. The employers, say Le Rossignol and Stewart, "have
come to realize that they might have lost more by strikes than they have
ever lost by arbitration; and, since the workers have been dissatisfied,
the employers are more disposed to stand by the act, or to maintain a
neutral attitude, waiting to see what the workingmen will do."

It would seem, then, that the real gain from the law has been through
the abolition of strike losses, and since these had previously been
borne by employers and employees alike, this saving has been pretty
equally divided between the two classes, neither making any relative
gain over the other. But at the bottom this is a blow to the unions, for
the purpose of every union policy is not merely to leave things where
they were before, but to increase the workers' relative share. Any
policy that brings _mutual_ gain requires no organized struggle of any
kind. It is the workers who are the plaintiffs, and the employers the
defendants. When things are left _in statu quo_ it is a moral and actual
defeat for the employees.

This is why, in the last two or three years, the whole labor movement in
New Zealand has arisen against the law. In 1908 the coal miners' union
refused to pay a fine levied against it, alleging that it had no funds.
"In this position the union was generally condemned by public opinion,
but supported by a number of unions by resolutions of sympathy and gifts
of money. Finally, the Arbitration Court decided to proceed against the
men individually for their share of the fine. The whole of the fine,
together with the costs of collection, amounting to over 147 pounds, was
recovered by means of attachment orders under the Wages Attachment Act
of 1895. According to a recent decision of the Court of Appeals, the men
could have been imprisoned, if they had refused to pay, for a maximum
term of one year, but it was not necessary to do this, and public
opinion was not in favor of imprisonment for the offense."

This and other strikes in 1907 and 1908 "caused a widespread opinion
among _employers_ and the general public that the act should be amended
chiefly for the sake of preventing strikes. The laborers, as a class,
were not enthusiastic about the matter, since the proposed amendments
were designed to compel them to obey the law rather than to bring them
any additional benefit." After having been debated for a year, a new law
was passed, and went into effect January 1, 1909. This new law, though
still compulsory, repeals some of the features of the previous
legislation which were most obnoxious to the unions. Even this act,
however, they found entirely unsatisfactory, and "during the year ending
March 31, 1909, sixteen workers' unions, and a like number of employers'
unions, had their registration cancelled for neglect, while two other
unions formally cancelled their registration." This meant practically
that these unions have withdrawn from the field of the act and expressed
their disapproval of compulsory arbitration, even in its recently
modified form. Not only have the unions been withdrawing, but, freed
from its bondage, they began at once to win their most important
strikes, indicating what its effect had been. Even the employees of the
State have been striking, and successfully.

"The workers' position is embarrassing. The original act was passed for
their benefit as well as to prevent strikes, but when it could no longer
be used as a machine for raising wages, they were the first to rebel
against it." There can be no doubt that our authors are correct, and
that the working people are beginning to feel they have been trapped. In
both New Zealand and Australia they have given their approval to an act
which in actual practice may become more dangerous than any weapon that
has ever been forged against them. The only possible way they could gain
any advantage from it would be if they were able to elect the judge of
the Arbitration Court, but, to obtain a political majority for this
purpose, they would have to develop a broad social program which would
appeal to at least a part of the agriculturists as well as to the
working people, but here we turn to the considerations to be brought out
in the next chapter.

Mr. Charles Edward Russell, as the result of two visits to Australasia,
has very ably summed up the Socialist view of compulsory arbitration in
_The Coming Nation_, of which he is joint editor. Mr. Russell says:--