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extraction of the sugar by cane-crushing machinery, and the refining. The third process is controlled by the C.S.R., which, formed in 1854, gradually killed or absorbed nearly all rival refiners. Hence, it is able to fix the price at which it will buy raw sugar from the cane crushers. It is getting the mills definitely into its own hands, and to-day crushes over one-third of the Australian cane crop. This enables it to control the price given to the canegrowers, and so the planters find themselves between the upper millstone of the millers' offer and the nether one of labour demands. The refiner profits highly, the miller may do well, but the grower, who is the basis of the industry, and the most valuable person from the point of view of settling the tropics, fares badly, and gets a bare living. The generous bounty system and protective tariff which Australia provided to encourage a white industry has benefited few but the refining company. Out of its huge profits the company has been able to build up plantations in Fiji and refineries in New Zealand. In 1913 it capitalized £250,000 of reserves; three years later it produced £3,250,000 of hitherto undisclosed assets and proceeded to use them as the capital of the C.S.R. (Fiji and N.Z.), Ltd. All these shares it gave to its shareholders as a bonus. It pays a steady 127 per cent. profit. So strong was the concern that in 1911, when the price of sugar was raised £3 10/- per ton in about three months, a Royal Commission was appointed to inquire into the whole situation and suggest remedies. The Commission recognized, on the one hand, that the company had brought a high standard of efficiency into the work, and that its industrial methods were better than those which would prevail were the industry to go back into the hands of many small competing firms. On the other hand, it pointed out the injustice of low prices to the grower and high prices to the consumer, and suggested (1) that the price of raw sugar should be fixed on a sliding scale by the Interstate Commission, and the price of cane by boards representing the growers, millers, and Interstate Commission, (2) that the tariff rate on raw or refined sugar should fluctuate in inverse ratio to movements in foreign market prices. Neither recommendation was adopted.
Regulation. The Commission just referred to was not the first attempt to find some way of dealing with the activities of trusts. In 1906 the Federal Parliament passed a measure containing large slices of the Sherman Act (see Chapter XI), but this Act had no effect in spite of subsequent amendments. In Australia, as in every country, the results of anti-trust legislation have been approximately nil. During the War Australian trusts and rings made hay, and eventually all governments were compelled by popular clamour to undertake price-fixing. But here again the results were very small. Trust-bursting is a remedy no longer advocated, and the only solutions of the trust problem are public regulation or public ownership. It is generally admitted that the trustification of industry has resulted in the elimination of wasteful competition and competitive costs, the institution of greater efficiency in production, and the supply of better goods and services than were possible under the old wild competitive conditions. How to retain these benefits and yet prevent the community from merciless exploitation is one of the most important tasks of economic statesmanship to-day. Drastic regulation by the state, price-fixing, fuller publicity of accounts, etc., may be possible and useful, though experience suggests that such attempts at restraint might be evaded. Co-operation and public ownership suggest partial solutions, which depend for their success upon factors which will be considered later. Meanwhile combination, not competition, holds the field.
Books Recommended. Marshall, A., “Industry and Trade''; Macgregor, D. H., “Industrial Combination”); Jenks, J. W., "The Trust Problem” Hobson, J. A., “Evolution of Modern Capitalism," chaps. 7-9; Hirst, M., “Story of Trusts”; Macrosty, “Trust Movement in British Industry''; Carter, G. R., “Tendency Towards Industrial Combination”; Dawson, W. H., “Industrial Germany” and “Evolution of Modern Germany''; Wilkinson, H. L., “Trust Movement in Australia”; Brown, W. Jethro, “Prevention and Control of Monopolies.'
MODERN ECONOMIC AND SOCIAL PHILOSOPHIES.
BEFORE proceeding further with our study of modern economic movements, it is necessary to survey the chief economic and social doctrines which have influenced men's minds during the last 150 years. To a certain extent individuals and governments act under the guidance of some theory. The conduct of men and the policies of statesmen usually have behind them a philosophy of life and statecraft. Often it is implicit, vague, inconsistent, and based on personal or class interests; frequently it may be shelved when some strong claim of self-advancement, some popular passion, or some urgent public evil calls for action in a completely opposite direction. It is frequently a policy of expediency rather than of principle; it is opportunist, meeting difficulties as they arise, and catering for the needs of the dominant class. But, nevertheless, the voice of the philosopher makes itself heard at times; political parties adopt a certain point of view, and so, broadly speaking, we can say that the legislation of an epoch is based on some underlying principle.
Liberty and Authority. The two great alternative social creeds are those which centre on liberty and authority. The former seeks the welfare of mankind by allowing the individual the greatest possible freedom of action. Legislation is to clear away obstacles rather than impose restraints. Interference, prohibitions, and regulation are to be reduced to a minimum, and men left free to create their own conditions and shape their own destiny. The advocates of non-intervention declare that men know what is good for them far better than does the state; they maintain that state regulation checks enterprise and hinders progress. Therefore let governments keep their hands off economic and social life, and all will be well. Such an attitude assumes that the individual is capable of seeing and of securing his best advantage; it presupposes a harmony between men in society; it estimates at a very low mark the intelligence of the statesman. It thinks of man and the state as antagonists, with the state a possible oppressor—and always a blunderer.
Opposed to this theory is that which demands for the state large powers of control. Those who urge this doctrine admit that a man may pursue a line of advantage for himself, but his actions may be to the detriment of the state. They point out that many, by reason of some disability, are unable to act as they would wish, and may be trampled down by the strong. Individualism—the gospel of liberty-is a splendid doctrine for the strong and wealthy, but cold comfort for the weak and poor. Further, they declare that the state must think in terms of the national group, and act in a way which will foster development along lines that are best for society as a whole. This in practice means the prohibition of certain activities which are harmful to the life, morals, or strength of the community, the protection of the weak and the curbing of the unscrupulous strong, the undertaking of works which are essential to national character and progress, and the encouragement of industrial and agricultural development in a direction calculated to produce national strength and economic independence. The
theory may go so far as to demand that the state shall enter the field of production, and become the owner of the means whereby wealth is produced, distributed, and exchanged. Such a doctrine thinks of man and the state working in harmony; but it has no illusions about the perfection of human character, and hence, while acting as a guide, the state must also check man's evil, anti-social impulses.
These two rival points of view. have alternately dominated men's minds during the ages. At times the latter has been uppermost, and been responsible for the erection of a substantial edifice of government control. This in time has become oppressive, for the state often fails to see that conditions are changing, and insists on regulating to the point of excess. Hence, on the eve of a new era, authority tends to hinder the adoption of new ideas or devices; regulation tends to be static, but human activity is dynamic; more progressive men therefore take up the opposite creed, denounce the state as an oppressor, and seek to strip it of its power. Hence comes a reaction, precipitated generally by some big revolution in religion, politics, or industry, and the elaborate structure of state control is destroyed. But in course of time liberty proves itself as unsatisfactory as was its predecessor; injustices spring up, the weak are trodden underfoot, while the strong reap an abundant harvest. Therefore the cry arises for control, for regulation, for protection of the poor. Once more the state awakes to a sense of new responsibilities, and begins to build up a system of social and economic legislation. This continues for a period, until men realize that the new order is far from perfect, having created almost as many problems as it solved. Thús arises a feeling of revolt against state omnipotence, and again there is a trend towards liberty. And so the world seems to go on, alternating between these two extremes.
Many illustrations might be given to support the above general statement. One of the best instances is provided by the changes in British thought and policy between 1760 and to-day. At the former date economic life was highly regulated on every hand. A mass of legislation had been accumulated to control a certain economic order—that described in the first chapter. But voices were already being raised in criticism, and when the Industrial Revolution came along, creating a new industrial system, the old laws were obstructive. Hence, under the stress of new methods and vigorous criticism, they were consigned to the scrap-heap, and for a time liberty prevailed. But liberty brought forth tares as well as wheat; in fact, the proportion of tares was so excessive that when men began to examine the crop they recognized the need for a radical change in policy. Once more the state began its big work. Factory and wages laws, public health provisions, state insurance, old-age pensions, education, taxation of wealth, etc., all came in time. But here again, 50 years of vigorous state policy have resulted in discontent. The new heaven fails to come to earth, and just before the War there was a visible reaction against the state's power. As a recent writer has said, “A certain tendency to discredit the state is now abroad” (Barker), and we have not yet heard the last of this tendency.
The last hundred years, therefore, provide us with a liberal period, an era of growing state control, and an incipient reaction against the state. The dividing line between the first and second epochs can be fixed roughly about 1848.
The Rise of Individualism. The last half of the 18th century wit. nessed a big literary glorification of “Liberty.” In the political arena,
despotism and bad government were attacked with great vigour, and the rights of the individual placed in opposition to those of the state. Tom Paine and Godwin declared that government was an unnecessary evil, and was responsible for the unhappiness, poverty, and misfortunes of men. Rousseau, the greatest political influence of all, began his famous work, “ The Social Contract,” with the assertion that man was originally free, but was now everywhere in chains; those chains were kept on him by the despotic governments of the world, who had deprived him of all the rights which were formerly his. This idea of the rights of man had a great influence on the French Revolution, and one of the first declarations of the revolutionaries ran as follows:-“The end of every political association is the conservation of the natural and imprescriptible rights of man. These rights are liberty, property, security, and resistance to oppression. Liberty consists in the freedom to do anything that does not injure others.” Throughout all such writings ran the theme that liberty was a natural thing, an inalienable birthright, which had, however, been filched from man by the many laws and oppressions of despotisms. Therefore government was a necessary evil, if not a usurpation, which must be destroyed, or, at least, taught to know its place.
It was during this era of revolt against governments that economic thought took shape, and consequently the early economists took up the cry of liberty. In France, where industry and commerce were strangled by over-regulation, a group of economists, called the Physiocrats, pleaded for economic freedom. Their line of argument was very interesting, and was adopted by nearly all the later writers. They declared that there are natural laws for society, just as there are natural laws in the physical world. Gravitation is a law of nature; the planets are guided in their courses by natural forces; chemistry, botany, anatomy, and all other physical sciences have their laws laid down for them by Nature, Providence, God—whichever name you care to use. In the same way there are laws provided by Nature to guide and control human society and economic activity. If this is so, then all attempts at regulation by the state are unnecessary, harmful, and even impious. Therefore the state should find out these laws, conform to them, and clear its statute-book of anything which interferes with Nature's decrees. The policy of statesmen should be laissez-faire-let alone, don't touch, be quiet. Nature will regulate life, and men may rest assured that her control will be for the ultimate benefit of mankind.
Adam Smith. The first great British economist, Adam Smith, grew up among such ideas, and his “Wealth of Nations”' is in many respects a plea for economic liberty. The elaborate network of state control spread over the whole economic life of the nation was to him a trap, holding men to the ground when they might be soaring to better things. He therefore urged that the net be cut away at once, and men restored to a state of natural liberty. But what would men's motive in conduct be when that day came? Smith answered, “Self-interest, the desire for individual advancement, selfishness.”
A low motive certainly, but an unalterable law of Nature, which would bring all things right in the end. For Smith believed that the Invisible Hand, which had cast men in a naturally selfish mould, continued to guide their activity in a way which produced the greatest benefit to society. Witness the following extract:-“Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he may command. It is his own advantage indeed, and