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The Pamphlet Collection of Sir Robert Stout: Volume 79

[Labour the Average Fixer of Values]

page 44

Labour the Average Fixer of Values.—Before dealing with the Arbitration Act, it will be necessary to explain that every commodity and service is bought and sold at its average necessary and unnecessary cost in labour in production, conveyance, and distribution, but to fully comprehend this we must trace every commodity through all its useful and useless stages, not only to the land on which the rude material of which it is composed was produced, but it must include the original labour cost of clearing the land and rendering it productive.

The rent of land is the superior productive power of that particular land over the poorest or most inconvenient in use; but even the privilege of levying rent has been originally purchased by labour, conquest, or fraud.

All capital is accumulated labour (though all accumulated labour is not capital). If we trace the average capital cost of a commodity, which may be a sixth of the total, we must recollect that it was produced by labour, and in a well-managed community, when only necessary labour is exerted, we shall find that the labour cost will be about a half of what our commodities and services cost us at present in New Zealand, 1909, about a half of our labour being wasted in competition and its consequences.

Professor Le Rossignol, an American economist, has, however, just discovered that the price of commodities depend first and chiefly on their utility, and their labour cost is only a secondary consideration. The Professor has arrived at this conclusion by too restricted a view, by omitting many factors which govern the cost. It is true that a commodity urgently wanted will on rare occasions command a price out of all proportion to its labour cost, while a commodity laboriously wrought will have no exchangeable value.

The Professor quotes intangible things, such as conscience and honour; as when a citizen sells his vote or an alderman his conscience for gold, these people have neither conscience nor honour to barter, and if they had, it has cost as much in labour to procure votes and to mount the alderman's chair for all voters and aldermen as the honour is worth to the honourable or the gold to the knaves. When an honourable man aspires to the Mayoral robes page 2 of Auckland, he values the honour of the position as an equivalent for his labour, and a knave estimates his chances of bribery are to him worth the labour and risk of detection.

Again, Professor Rossignol quotes the varying recompense of authors to prove that the labour has no relation to the recompense. Here he is selecting extreme cases instead of taking the average of all authors. Every author does not write for money; a popular novelist can make more money than Shakespeare. Many professional men do not work for money, but for love and esteem.

The Professor quotes curiosities as having an exchangeable value out of all proportion to the labour of procuring them. If, instead of selecting an extinct bird's egg, he will take the whole value of curiosities, and compare them with the whole labour exerted in collecting them, he will find that the two will balance, or nearly so.

He next selects an empty town allotment as being worth a high price, though no labour has been spent upon it; but if he will enquire what all empty lots cost when purchased from Government and add the annual rates and the usual interest, he will find that its high value has been purchased at a proportionate labour cost.

Some evidence can be brought against every theory. I am told it can be proved the world has not the curve the globe theorists claim for it; yet no reasonable judge would find for the flat theory while we have such overwhelming evidences in the globe's favour. The Professor can no more prove that commodities exchange at their utility price than Henry George could prove that capital was unnecessary as a factor in production while a labourer could subsist on nuts and berries provided by Nature while he worked to provide his own capital, or that a lazy landowner could cause a trade depression by consuming the produce of the labour of others.

We may take it for granted that no proprietor will pay for the exertion of labour on a commodity unless he thinks it will not only be useful when finished, but, further, that it will sell at a paying price. Capital oft becomes obsolete, but labour never, as the wants of man always exceed his ability to produce. We often do see labour hawking itself in a capitalistic community, but that is because those who want it cannot pay for it, and those who can will not employ it.

Arbitration Act.—The Conciliation and Arbitration Act was passed to prevent strikes and sweating, but I could see from the commencement, in 1897, that the trades unions intended using it as a means of raising wages in each trade at the expense of the rest of the community. I wrote to Sir Robert Stout, who was at the time supposed to be our only M.P. who possessed a considerable knowledge of political economy, and I gave amongst other page 3 explanations the following:—Suppose a community existed with only 20 occupations or trades, and an equal number were employed in each, and all received a pound a week, and one trade, say, the builders, applied to the Arbitration Court for a rise of wages, and got them doubled, the community's total income being the same as before (except a small reduction for Court expenses), all the other wages would be reduced to 19s. Although this appears to me as clear as noonday (and I am dull of understanding), Sir Robert, with all my other explanations and illustrations, could not see it. He seemed to think the Arbitration Court was a divine institution, who could perform miracles; that they had only to say to the Omnipotent, give this set of workers 1s. worth a day more commodities for an hour a day less work, and it is willed and done. Converting water into wine would be an easy matter in comparison, as there was the water to work upon, whereas the Court had no material to work upon—nothing but its airy conceit in itself and its unbounded confidence in Mr. Seddon's wisdom and power.

I sent a letter to the "Auckland Star" explaining that when the Court advanced the wages in one employment other incomes would be reduced in proportion; that the Court had no more knowledge of the laws which governed wages or the justice or injustice of differing recompenses for the various employments than they have of the laws of nature. I asked one of our M.P.'s, who was a member of the Conciliation, if he had seen my letter, and what he thought of it. He replied: "I think there is much truth in it." But I noticed he acted as if he had never seen it.

When the Arbitration Court first opened, the working classes were delighted; the wages of each trade were advanced from 3s. to 6s a week, and the week's work shortened a few hours. Mr. Seddon became the object of their gratitude, if not of their worship; the Court was regarded as an institution which could cure all industrial troubles, and make the working classes prosperous, contented, and happy. A doctor who had discovered a remedy for a universal disease could not have been more anxiously awaited. Every worker felt that he was working for many shillings a week less than he need to do, if only he could get the Court to operate on his case. They felt that if the great Seddon ever erred, it was in not appointing 20 Courts instead of one.

I attended one of the Court's sittings; one could easily distinguish the employees from the employers—while the workers were cheerful and happy, like a victorious army in the hour of victory, the employers were crestfallen, careworn, and gloomy. The Court had not only charged them with their own desperate defence, but that of the general public. One of the labour leaders said something about the workers having captured the legislature. This sent a thrill of terror through the defence. I seated myself page 4 amid a coterie of employers, and explained to them that I had made a special study of political economy; that Mr. Seddon was one of the most ignorant politicians on the subject in Australasia; that if the Court advanced the wages of their workmen and shortened hours, the whole double advance could and would be charged on to their customers; that if they were hemmed in with a lot of restrictions, and were harassed and impeded by inspectors, and occasionally fined for technical breaches, all these expenses and consequent reduced output would be charged on to the consumer, three-fourths of which the workers would ultimately pay; that their own reduction of profits would only be in the same proportion as that of the workers; that their loss of pride and interest in their establishments in having to divide the management with the inspectors, that would be rather a sentimental than a material loss; that if Mr. Seddon exercises his authority as apostle of God's Own Country, it can only be maintained by the gratitude of the workers and awe-inspiring dread of the employers. As for the shortage of cash to pay the increased wages, we must import an extra million, which will cost about 1s a head a year for the whole population. One of the employers, who was a carrier, had taken a three years' contract for cartage based upon present wages. The Court's award in hours and wages was likely to be equal to an advance of about 2s a day. This would result in a heavy loss. He had been induced to sign this contract under the impression that no material change would be made in our laws for at least three years; then he was called to one Court of justice, a Court of arbitration, of peace, and harmony, where impossible conditions would be imposed upon him. This would force him into another Court of justice, where a penalty would be inflicted for breach of contract. "You see," he urged sadly," when the Arbitration Act was passed, the Contract Act should have been revoked. Is this not rather the devil's than God's country, where one law is made to break another, and entrap such as are trying to keep them! Can you suggest how I can get out of this difficulty scathless?" I replied:" Enter your name upon Mr. Seddon's list of friends and be honoured. There is no alternative but the Bankruptcy Court." Though these wretched employers were soothed by my sympathy, T could see they had little faith in my opinions.

Political economy is, with the medical, a dark science. We do not know what are the causes of most of the bodily diseases from which we suffer, and still less do we know how to cure them. I consider the political the second in importance of all sciences to civilised capitalistic society. Though I believe I understand more of its principles than any other person in this colony, I believe there is far more unknown to me than what I know. I would seriously ask our employers of labour and intelligent business men, who have watched the Arbitration and its consequences for page 5 the past 12 years, if they do not feel ashamed when they think that it took them several years to find out that when the Court raised the money or nominal wages of their employees, they could charge it to their customers in higher prices for their goods. It is often from these men we choose our legislators. We had not, I will venture to say, a single member in the House, when the Act was passed, who knew this, as simple as it seems to them now. Mr. James Regan, who first acted as advocate for the Auckland workers, would pick out a firm who were making 20 per cent. profit, and say to the Court, "The men do not wish to smash the firm, but they think they are entitled to a little more of the wealth they produce, and the firm a little less profit than they have hitherto got." The employers' representative was dumb; he could not, at least he did not, reply, and judgment went by default. The first to discover this were Australian legislators, who visited this colony, and were requested by their respective governments to inquire into our labour laws. They reported there were no strikes, but wherever the Court had made an award the price of commodities were advanced; but they did not trace the advance to the awards. But after a year or two it was traced, and the employers' representatives made the most of the discovery. Mr. White, of the Kauri Timber Company, about 1906, told the Court that the fixing of wages was immaterial to the Company. All the Court had to do was to fix the rate, and the Company would alter the price-list accordingly. Some of the more intelligent and reasonable of our labour leaders now admit it. When Mr. Seddon was in Australia, just before his death, he advised the labour leaders to be careful what they did, as things do not always turn out as they are expected, and sometimes they seem to have the opposite effect. This I understood to allude to the New Zealand Arbitration Act. It is generally calculated that the Act has directly and indirectly reduced wages from 15 to 20 per cent. This reduction has been brought about first by the expenses of the Court, the inspectors of awards, the extra magistrates required to adjudicate upon alleged breaches, the expenses of employers in attending Court, the fines inflicted on employers, the extra profits required by employers on account of the annoyance and vexation in attending to answer charges of technical breaches.