The "Socialism" of New Zealand; by Robert H. Hutchinson

Preface

STATE Socialism is a condition of society which seems at present to be the goal toward which Capitalist society is progressing. It is, in one way of looking at it, a merging of the governmental forces within a nation, and the construction of a new and more closely knit society out of the individualistic and competing elements within it. There is clearly a tendency in industry and in government to concentrate their powers and eliminate the loose, decentralized elements which work against their efficient management. We are all being bound together by a new order of things, a condition which has beneath its structure a most virile, economic foundation.

Neither is this growing State Socialism an isolated t^ thing, peculiar to any one country or section of the world. It is impossible to point to any one place and say, "There we have State Socialism," or "There we have pure Capitalism," or "There we have pure Socialism," for no one place is so constituted as not to have elements of all three conditions in it. The fact to be grasped is that this economic phenomenon is a progressive, growing thing, not anywhere an accomplished fact. It is a "becoming," i not a "being." It is a thing we are moving toward, and what we are concerned with now is rather the way we w are getting there than a study of what it is actually like % when reached. The value of a glimpse into a country | like New Zealand is that we can see a little what it is likely to be further along the road than we ourselves are i at present.

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Following upon the rapid development of Capitalism, and as a natural reaction against its evils, has come the phase of government regulation and control of industries. The invention of machinery and of labor-saving devices, and the rapid growth of factories and the change in social life which accompanied them, meant at the same time the rise into power of a group of capitalists controlling things much as they chose. It was the era of laissez faire. Then followed the advent of the "people" into the control of government and the regulation of industrial conditions through the government. The political history of the last century is the story of the growth and extension of the governmental machinery into new kinds of activities and broader fields, and of the growing complexity and economic power of the State. New things belong to the State. Where before it had only to protect the nation and preserve the rights of the individual, it has now the business of operating some industries and controlling others, and of assisting its citizens or subjects in things which had previously been left to charity.

All these things must be considered within the scope of Socialism, but they are by no means all of Socialism, though some people have mistaken them for such. Communities in which the government has taken to itself the control and management of varied businesses and has pursued a "paternalistic" trend in legislation are often termed "Socialistic." But the term has only half its full meaning and is generally misleading. The very kernel of Socialism may be wanting. True, the Government may own and control business, but who owns and controls the Government?

What the effect of the present war will be on the structure of future society is not so easy to foretell. But from the nature of the measures taken by the belligerent governments it should be of interest to the person who

PREFACE Vll

appreciates the difference between Socialism and State Socialism. When one thinks of Germany nowadays one pictures a powerfully centralized mass of people divided roughly into those who command and those who obey, and the controlling power of it all, the government. So it is also with the other warring countries, and so it is becoming, though with less pronounced rapidity, among the nations at peace. State Socialism seems to be on the horizon.

New Zealand is a good place in which to study State Socialism because there is more of it there than in perhaps any other place in the world. Some have studied New Zealand because of its "Socialism" and written much on the success of it all. And we might conceive of persons writing on "Capitalism in New Zealand" because there is Capitalism there also. Everything is a matter of degree, and often quite opposite things are found side by side. Therefore, he who turns his attention to New Zealand must be prepared to find things much the same as they are in other civilized countries. In New Zealand only the degree to which this or that has been developed, the distance along which it may have progressed, is different.

This book is the result of an eight months' visit made to New Zealand with the idea of investigating its institutions. It had not been my intention to publish a volume on the subject of New Zealand, but as I grew to know the country I felt very strongly the need of a book which would treat the subject from a new and very much neglected point of view. The purpose, then, in publishing it is to give some account of the working of New Zealand's advanced legislation, but more especially to dispel the prevalent idea that her progressive institutions have in any way solved the problems of capital and labor.

It is now twelve years since Henry Demarest Lloyd wrote A Country Without Strikes. That book appeared

Vlii PREFACE

at a time when other countries were taking an interest in New Zealand's radical measures, and it helped to stimulate investigations and further publications. Not only the arbitration of industrial disputes was made the subject of discussion, but other features of the colony's administration were eulogized, and New Zealand became known as a political and sociological laboratory. The enfranchisement of women, the Government ownership of railroads and mines, and social legislation were pointed to by reformers and Socialists as eminently successful tests of the measures they advocated, while capitalists and the more conservative economists foretold the collapse of the rash young colony.

Upon reading the literature of the past on the subject and comparing its trend with present conditions, one cannot help receiving the impression that much that was prophesied for and against the venture has not come true. Yet it is just this literature which is responsible for the current ideas of New Zealand's success, many of which ideas are entirely erroneous.

The events of the past decade and particularly of the last two years fully prove that what was said of New Zealand at the time that Mr. Lloyd wrote cannot be repeated with any truth today. Certainly, in the face of the serious industrial upheaval of November-December, 191 3, the title of Mr. Lloyd's book would no longer be valid. Obviously the subject of industrial arbitration must be considered in a new light. Likewise the effect of the extensive business undertakings is assuming a somewhat different aspect, and the humanitarian measures, once regarded so approvingly, are now thought of with less enthusiasm.

In fact New Zealand has been entering upon a period of transition from one epoch to another. The era of her so-called "Socialistic" legislation is past and the true

PREFACE IX

results of those measures are becoming apparent. In a mild way, we may say, New Zealand has been showing the first symptoms of entering upon a revolutionary phase, that is, in contradistinction to the evolutionary phase which she has completed. She can proceed, I am convinced, no further along the lines which have guided her up to now ; no further, I mean, and at the same time maintain her comparatively high standard of prosperity.

Mr. William English Walling, in his books on Socialism, has shown more clearly than perhaps any other writer, that before true Socialism will be reached nations will pass through transitional periods of State Capitalism and State Socialism. New Zealand's evolution and her present condition contain many facts which bear out the truth of this forecast and illustrate its operation. It seems, therefore, a singularly opportune moment for publishing a book on the subject, and the only apology I offer in adding it to the already rather extensive literature on the subject is the need of a revaluation of New Zealand's success, and that I would gladly grasp this opportunity to direct the attention of Socialists and others towards the dangers of "Reformism" and "State Socialism."

I have thought it necessary to devote a chapter to a brief outline of New Zealand's evolution, because without some appreciation of the nature of her economic development and the kind of problems the early settlers had to solve one is apt to fall into the error of believing that the colony was founded by a handful of idealists — as was Brook Farm, for example. There has also been allotted considerable space to an account and criticism of the recent strike because it seems to be the culmination of a series of events and the eruption of the most important forces which have been current in New Zealand for the last decade. It was no spontaneous or fruitless event, it was rather a symptom of the colony's present state.

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The subjects of industrial arbitration and woman suffrage are discussed more in connection with New Zealand than many of her other institutions. For this reason there has been given over considerable space to the former, and the latter has been treated in a rather broader way than its purely political significance would warrant. The nature and effect of her social legislation has also commanded wide interest, and I have therefore devoted a proportionately liberal space to its consideration. Much has had, therefore, to be omitted.

A word as to the definition of "State Socialism" might not be out of place. Mr. Walling, in his Progressivism and After makes a distinction between State Capitalism and State Socialism. The central feature of the former, he says, "is the development of the small capitalist class and of its control over government;" while that of the latter "is the development of a class of more or less privileged wage or salary earners who are either employed directly by the ever-expanding government or owe their superior advantages, in some way or other, to legislation." The State Socialism of New Zealand would not exactly fit either of these definitions. But should we follow Mr. Walling's terminology, "State Capitalism" would more nearly suit the case of New Zealand. We should have to modify it, however, by saying that there is no "small capitalist class" pure and simple which rules. There are large corporations and companies which are very powerful.

I owe a great deal of thanks to my friends in New Zealand who did so much to help me. And the chapters on Woman Suffrage and Social Legislation are mostly the work of Delia Hutchinson, my wife. I must thank her, too, for her intelligent and severe criticism.

Robert H. Hutchinson.

Contents

CHAPTER PAGE

PREEACE V

I. The Historical Evolution 3

Chapter I The Historical Evolution

THE scope of New Zealand's history, as far as it concerns our purpose, falls within the last fifty years. Up to the year 1870 the labors of the early settlers were confined to the solution of the problem of how to obtain the bare necessities of life and to secure a foothold in their new habitation. Not only had the land itself to be conquered and new territory opened up, but the hostile attacks of the natives had to be guarded against as well. The former problem would have been by itself comparatively easy of solution, for the soil of the new country was fertile and its harbors good, but the presence of a hostile race retarded progress and necessitated an appeal to the home country for assistance. By 1870, however, the principal ports had been occupied, some of the best agricultural and pastural land was in use, the native tribes had been subdued, and the rudiments of a government established. The critical period was successfully passed ; the settlers had laid thefoundation of a nation.

By 1870 there were ten distinct settlements which, judging their relationship by their facilities for communication, might have lain thousands of miles apart. Sodaily they were equally disunited, and their governments and institutions were also unalike. Though there was a central government for the whole colony, little interest was taken in it and the autonomy of the provinces was jealously guarded. There was no national sentiment.

The year 1870, however, marked a change. The wars against the natives were terminated, and the colony's success, together with the discovery of gold, attracted a swarm of new settlers. The gold "boom," however, proved to be an exaggeration, and when the bubble burst a horde of men were left in the mines and the cities without work. There was no export of meat and very little of dairy products, and the imports far exceeded the exports ; furthermore, there was a large national debt. On the other hand, though things appeared to have reached a condition of stagnation and many lost courage and began to emigrate to the more promising shores of Australia, there were those who realized that New Zealand was not by nature a poor country and that if the momentary depression could be safely passed the future would realize the potentialities of the land. An unlimited source of wealth lay in the forests and fields and only awaited the liberating energy of the settlers. Only the initiative energy of capital and labor was wanting. New Zealand must have more money and more men.

The colony now entered upon a period of borrowing and building. A systematic scheme for the transportation of immigrants was followed, and artisans, farmers, and prospectors of all sorts flooded the country. Men were set to the work of construction and it was not long before railroads and telegraphs were extended, and new ports all along the coasts opened up. How important the construction of the railroads was may be appreciated when it is realized that the size of an industrial community and the political structure based upon it, depend upon the extent of its transportation facilities. The effect upon New Zealand was momentous. Measures, too, were passed enabling the workers to obtain homes in the country and to turn their efforts into farming and sheep raising. To this period belong the Insurance and Public Trust Offices, and the Village Settlement Act. Rapidly the country yielded a mine of wealth, and where before New Zealand had been but a struggling little settlement, an economic nonentity, she now became a member of the commercial world.

It was ever the dream of the early settlers to establish themselves securely upon large tracts of land and to found a sort of hereditary aristocracy, so to speak, after the fashion of the English gentry. Thus far the scheme had worked favorably. At their call men had come, opened the land for them, settled upon it and worked it for them, and were producing wealth for the community. The threatening and perilous gaps which had impeded this would-be aristocracy had been successfully bridged; but only to lead to another difficulty — the new-comers demanded their share in the spoils and in the government.

All these changes necessarily worked their effect upon the character of the people. With manhood suffrage attained and the country well on the road to prosperity, people sought its shores as much for the economic liberty it could give them as for the wealth and adventure which attracted the first comers. Most important was the effect upon the central government. Hitherto weak and without policy, it was now looked to for the general management of these affairs, and grew, through the exercise of its powers, strong. Of course, there were centrifugal forces at work, operating to maintain the autonomy of the provinces, but in 1879 they succumbed, and the provinces were abolished. With the fall of the provinces there arose the two parties which still dominate political life. One stood for the maintenance of things as they were; the other for further borrowing and more progress. The spirit of the latter was in the air and the process of borrowing and building went on apace.

The rush onward was almost blind in its impetus. Though laborers came pouring into the country it became increasingly impossible to absorb them, and the ranks of the unemployed began to bulk large. Eager for immediate returns, the provincial governments had thrown open large tracts of land for settlement but at prices which enabled only those who were possessed of capital to purchase. A wave of speculation resulted and little by little the small holder became a negligible quantity. This was the era of large estates and the rule of the squatter oligarchy.

It seemed, however, that New Zealand had pulled herself out of the dark days of 1870 only to find herself during the early 8o's in still more hazardous straits. Excess of immigration had filled the country with unemployed, and the markets were glutted with the primary products of the land. Borrowing had been going on apace but there were no means within sight of repaying even the interest. Things seemed very black indeed.

Perhaps the lowest state of depression in the history of New Zealand was reached in the year 1884; and yet it was just in that year, dramatically enough, that an invention was put to practical use which not only saved the young colony from bankruptcy but gave to both the country and the city populations a new impetus and brought into the colony a goodly revenue. That invention was the process of refrigeration by which meat, butter, cheese, and other such perishable commodities could be transported without any appreciable deterioration over great distances and stored for comparatively long periods. Its importance to New Zealand can hardly be overestimated. Butter, cheese, and meat poured forth from the country into the London markets ; new farms were established to supply the demand ; with the return of wealth new and more efficient methods of production were employed, and a labor market was opened both in town and country for the unemployed. Within twenty years the value of the cheese export had multiplied by almost 311, of butter by nearly 202, and the meat export rose to £3,520,000 where before it had been nothing.

Meanwhile beneath this dazzling prosperity the forces which had worked for manhood suffrage in the previous decade were gaining in strength and were beginning to take on a new aspect. The new energy set in motion by the institution of refrigeration transformed the population from a stagnant mass into a lively and rapidly changing body, with business acting and reacting more briskly than before. Things changed rapidly, and with them changed people's social relations and political views. The lion's share of the prosperity was falling to the large landed proprietor, and the humbler citizen, whose ambition it was to possess a bit of the soil himself and share in the good fortune, saw in the large holdings his chief obstacle. Likewise the city laborer, struggling against rising prices and low wages, felt that he too was not receiving the just returns of the prosperity which he helped to create ; and, recognizing the plight of the small farmers, realized that the source of their ills was much the same as his. A feeling of common purpose arose between these two classes and they combined for the realization of their aims through political instrumentality.

It was in the year 1890 that their efforts took effect and ushered in a new era for New Zealand. Several influences combined to make that year a turning point. In spite of the prosperity introduced by the use of refrigeration it was the prosperity of a minority, and large numbers of people, discouraged by their prospects, left the colony. The departures were now in excess of the arrivals. The land question was becoming acute, taxes on the small farmers were beginning to chafe, and absenteeism of the worst sort was becoming rife. Henry George in the same year made a lecture tour of Australia, and new theories of land-tax and values were in the air. Socialist pamphlets were current and there was an outcry against labor conditions which was stimulated by the revelation of sweating in Dunedin. Meanwhile, trade unions had developed and were becoming active. In 1890 occurred the great maritime strike of Australia which momentarily unbalanced its trade and stirred labor circles to their depths. Hopelessly defeated, the trade unions turned their efforts into political channels and joined their forces to those of the discontented farmers. That year, too, was the first in which manhood suffrage and the one-man-one-vote principle, together with direct nominations and the alphabetic ballot, went into effect. These were all contributory causes of what was to come, and it must not be thought that the political revolution was brought about by the action of a "labor party" electing "labor" candidates. The actuating force was a combination of trade-unionism and agricultural uprising.

The result was a decade of that progressive legislation which awakened such widespread interest and misgivings, and suddenly made New Zealand famous. Land was resumed and large estates broken up, progressive taxation of land values and of incomes followed, industrial arbitration was instituted, employers' liabilities, pensions and factory acts were passed, among many others, to protect the workers, and the State continued to extend its activity into the field of business. The twofold obstacle of landed aristocracy and ruthless employers was removed, and men of humbler means received their opportunity. Where there had been acres of unused soil there were now hundreds of busy little farms, and where there had been industrial strife and oppression there was now peace and comparative freedom. It was this cycle of welfare which brought forth those numerous eulogies which have unfortunately done so much to obscure the real truth about New Zealand.

It was a prosperity which could not last. In one sense the crisis of 1890 might be called a revolution, for it caused the transfer of power from one interest to another. Yet in another sense it was no revolution, for though the seat of power may have been shifted, the economic and political structure of society remained in all essentials the same. Dominance had merely been transferred from the shipping companies back to the farmers ; but this time it was to the smaller farmers who had enlisted the city laborers in their cause.

It was generally supposed of New Zealand during those years that labor was uppermost ; but such was by no means the case. True, the unions had obtained a grip on their antagonists which for the moment was most effective in securing for their members a share of the profits ; but the illusion must be dispelled that New Zealand was a socialistic state owning and administering her industries on a collectivist basis. The gap between capital and labor was there as truly as anywhere else, but it had diminished to such an extent that casual observers failed to really see it. Neither is it entirely correct to believe that the employers were forced by labor, in every instance, into granting concessions. Quite as true was it that they saw the advantages which would acrue to themselves from a contented and healthy working population where labor was so valuable, and were not only ready to grant concessions but even proposed such measures themselves. In 1906, however, under the Ward administration, a new

IO THE HISTORICAL EVOLUTION

policy was inaugurated. Social legislation, political reform, the extension of State activities became a thing of the past and progress seemed to have stopped. "We have gone far enough," was the cry, "let us rest and enjoy our prosperity."

The Liberal government continued their administration along these lines until 191 2. By that time the political make-up of the Liberal Party had somewhat changed, for it now represented the manufacturing and shipping interests rather than the farmers. But the latter had gathered strength, and with their recapture of political supremacy the pendulum again swung in the other direction. Within their ranks the more influential were the large holders who wanted, naturally enough, the freehold and the abolition of the restrictive measures which had bound them in the past. The result was a reaction which has made itself felt in every department of New Zealand's life and has been the immediate cause of the recent strike.

Such in brief is the history of New Zealand. So very different in many respects has been its development from that of larger countries like the United States that it has been difficult for many people to understand New Zealand's evolution and fully to appreciate what she has done and what she has failed to do. It would not seem out of place, then, to point out a few comparisons and contrasts between the development of the United States and New Zealand with the purpose of better understanding the latter's position ; and incidentally it may help us see more clearly which way we are going.

At the time of their early settlement and development two radical differences lay between the factors which

ermined the destinies of the two countries. One lay in the nature of the countries themselves; the other, in the ideas which the early settlers brought with them.

The wonderful land which greeted the American pioneer was, to all intents and purposes, limitless in extent and inexhaustible in its yield. There was room for many millions more of population and the resources seemed so generous that conservation need never enter into account. With a small population spread over this tremendous area centrifugal forces naturally predominated and individualism tended to develop. By the time that the rapid industrial and economic progress of the United States set in, there had already been accumulated considerable capital which lay in the control of individual men and only awaited the influx of labor to set it at work. Once the opportunity had come, the capitalist wanted freedom to expand and conquer the riches of the country. He had no use for the government except as a means of protecting private property. Competition was his key-note, and he did not need the help of his neighbor.

In New Zealand it was different. The country was tiny and though it proved fertile the settlers felt its limitations at once. If the colony was to be populated and developed it must be done systematically and with forethought, and there must be no waste. The abolition of the provinces and the supremacy of the central government might correspond, roughly, to the events of 1789 in the United States, for then it was that the two countries respectively evolved a national self-consciousness and a united policy. But at this point the paths of their progress diverge, America along the lines of free individualism, New Zealand along those of collectivism. The ready money which in America was at the disposal of a handful of men, in New Zealand was not forthcoming. Advancement must be made through collective action and borrowing. In America the great land-holders and manufacturers did not inhibit the industrial pioneer; with a little energy he could be one himself, for there was plenty of room. In New Zealand these elements were an obstruction to progress, and the work of their abolition served to promote the feeling of mutual helpfulness among the rest of the population. If the Americans had no need for the government, the New Zealanders had every need for it; it was theirs, they had made it, and they would use it.

The other radical differences underlying the development of the two countries is to be found in the economic and political philosophies of the respective settlers. It was religious and political disabilities which drove people out of Europe in the 17th and 18th centuries, and the settlers of the American colonies came inspired with hopes of freedom in those respects. The United States was founded upon the theory of Democracy, and the first half century of its history was a vain attempt on the part of the masses to realize that Democracy. The industrial development of the United States, however, took place during the reign of the laisscz faire theory of economics, and any interference of the Democracy with business independence would not be tolerated.

Like America New Zealand was populated by men and women who were driven by force of circumstances from their homes. Her shores, however, were sought by persons who left their homes, not because of religious or political persecution, but as a result of economic pressure. They were not deluded by any ideal of Democracy ; those times had passed. They did not want freedom of worship or equality at the polls ; they wanted conditions and opportunities under which they could make a living ; they wanted to escape the grip of the financier and the monopolist. Furthermore, the doctrine of laissez faire was rapidly giving way to the idea of state intervention and even of state control. It would not be an unheard-of thing for the government to control the actions of the labor employer, and for the State itself to enter business would not be a very radical step. Besides, if the State was not rich enough to undertake an enterprise, who was ? With these conceptions and sentiments in their minds, it is not difficult to understand how it was that the rapid development of what has been termed "State Socialism" took place in New Zealand.

To the rest of the world it seemed as though New Zealand was working out her problems of economics in the same way as America had struggled with her Democracy in the early century. Indeed, it would not be so fanciful to liken H. D. Lloyd, extolling the merits of this new "Socialism," to de Tocqueville eulogizing the success of the American "Democracy" in 1832.