One Democracy to Another

I

WE of Australia and New Zealand, your English-speaking opposite numbers on the west shores of the Pacific Ocean, and particularly those of us who have had the privilege of knowing and therefore esteeming you of the United States, have been watching with anxious sympathy your developments since 1932.

To few, if any, in Australia has the United States meant more than to me personally. Nothing but kindness has been shown to me during all my visits, and particularly during the long and anxious war years of 1915 and 1916. My wife and I and our children will always remember that with gratitude.

And so I am emboldened with all humility to write of my impressions during a strenuous two months’ visit in North America, from Los Angeles through the South to Savannah, Georgia, stopping at numerous centres; to Washington, thence into Virginia, and thence to New York; to Boston, Montreal, Ottawa, and Detroit; to Hamilton and Middletown, Ohio; to Chicago; to Beloit, Wisconsin; to St. Paul and Minneapolis, and to Vancouver. At all these centres I had the opportunity and privilege of full discussion with many shades of opinions and knowledge. I hope that the comments in this article will perhaps make some slight contribution towards the restoration of stability and return of confidence which, all will admit, are needed in the United States to-day.

The problems of all democracies are the same. The difficulties vary according to the number of people and the complexity of each civilization, and are influenced greatly by many other circumstances and conditions. The homogeneity of the Australian people, the comparative poverty of the nation, the fact that Australia is a great export country and depends upon its exports to maintain its financial integrity, are pertinent factors in the Australian picture. Again, Australia started to experiment with measures of social adjustment thirty years ago, the prime cause of this early action being the inherent feeling against the growing abuses of the industrial era. This feeling was strong in Australia because many of its people were sons and daughters, either of rebels against early nineteenth-century social conditions in Great Britain, or of adventurous spirits who flocked to the country in their thousands in the 1850’s and 1860’s, attracted by the lure of easily won gold.

I was in Great Britain and Germany in 1895 and 1896, and again in 1911 and 1912. I was impressed and somewhat saddened by the growing indications of social revolt against industrial conditions. Social adjustment of a major type or social revolution would probably have occurred in Great Britain before 1920 if the Great War had not intervened. Visiting the United States and Canada at intervals from 1896 onwards, and living for nearly two years in North America during 1915 and 1916, I viewed with growing concern the impact of the overintensive industrialization of this country, the dangerously rapid increase of wealth, and the absence of any national realization of the necessity for forethought and preparation against accumulating dangers of an out-ofbalance social system — safe only when on the upgrade of prosperity.

And then, after more than twenty years of work as an indust rial leader, for nearly ten years I served under various prime ministers of Australia in the study of national problems. Slowly, but to an ever-increasing extent, I came to wonder whither we were all drifting. I was brought almost daily into contact with conditions illustrative of the creaking and groaning financial and industrial system. With others, I began to realize that we were approaching the end of an era and that stronger and stronger methods of adjustment in our democratic system were urgently necessary. Otherwise, so it seemed to us, the desperation of the majority, the almost inarticulate resentment against uncontrolled forces, would create conditions leading to the dictatorship of a wellorganized, forceful minority. This minority would plan ahead, white-ant, and then capture the military organization of the country, and maintain its power through its control of armaments and, where necessary, its use of the machine gun. Such control would probably be welcomed by the desperate many as the only alternative to social chaos.

And so it has happened in many countries.

II

The economic blizzard struck Australia in 1930 with a force and suddenness unexampled. Australia had been spending annually for years approximately £40,000,000 of loan money obtained from overseas. The development of works financed by these loans came to an end because, almost without notice, Australia found that it could not borrow a penny overseas. Nearly 30 per cent of our people previously gainfully employed were suddenly thrown out of work. Confidence was destroyed; all expenditure except that absolutely necessary ceased. No new houses were being built, and the overseas prices of our export products fell alarmingly. It was even thought that it might be necessary to declare a state of national emergency.

But slowly the nation began to face its facts. The great majority determined to assist in every way to avoid repudiation of payments for interest and services overseas even to the extent of heavy sacrifices internally. Over £30,000,000 annually was required to meet these charges overseas. The Commonwealth and state governments cooperated to a marked degree and were assisted by many of us (irrespective of class or section) in business and industry. An almost unanimous individual approval was obtained for the government’s proposal of a 22½ per cent reduction of interest on all Australian bonds held in Australia, amounting to approximately £500,000,000. Legislation enforced a similar reduction on preference shares and debentures and other fixed-interest stocks. Following upon this contribution by the rentier, the Federal Arbitration Court decreed a 10 per cent reduction in the basic wage of all wage earners within the Court’s jurisdiction, and this was in general applied throughout the Commonwealth.

This action, taken by the Court after a long, patient hearing, was decided upon with sincere regret, because of the realization that the reduction in purchasing power of the great mass of the people was inadvisable under normal circumstances. It was felt, however, that every step to restore confidence and thereby to restore employment was essential. Again, a minimum cost of production of our main exports was important as a contribution towards meeting our overseas obligations. The decision of the Court was loyally accepted by the people of Australia as a regrettable necessity, and no serious industrial disturbance took place.

The Commonwealth Bank, acting to a certain extent as a Federal Reserve Bank and with the support of the governments in general, depreciated the currency by 25 per cent in relation to sterling. The depreciation of the currency raised the price of all primary produce, including gold, other metals, wool, wheat, and fruit, so that the producers received for such articles, the value of which was determined by overseas prices, 25 per cent more in Australian currency. The states applied special unemployment taxation and the Commonwealth assisted the states in many ways to carry on and to help industry. For instance, it granted a sum of £500,000, distributed by a special committee to the various states, to revive the gold-mining industry, which had fallen from its high estate during years of prosperity when costs were high and the price of gold was low. In 1929 the output of gold had fallen to 432,000 ounces; the output in 1937 was nearly 1,400,000 ounces.

Relief works were organized, moratoria were declared to protect the honest, distressed debtor, and primary producers, such as wheat growers, were assisted for some years by the Federal Treasury through the state governments to the extent of millions of pounds. For instance, the direct assistance given by the Federal Government to keep the wheat farmer on the land was over £14,000,000. Together with the assistance, direct and indirect, given by the state governments and by private creditors, the total was well over £20,000,000. Of these facts I am well aware, because I was chairman of the Royal Commission on the Wheat, Flour, and Bread Industries, which established during 1934 and 1935 the economic facts applying to these industries.

Australia had many trials and tribulations during this stressful period of years. There was not complete unanimity between all the governments, but the adjustments were finally achieved. When Mr. S. M. Bruce was Prime Minister, prior to 1930, he had arranged with the states to consolidate all government loans and establish a Central Government Authority—the Loan Council, to control all government borrowing and to guarantee jointly the financial integrity of all states. This agreement, supported by the strong action of the Central Commonwealth Bank, enforced finally the financial adjustments desired by the majority of the governments.

The Commonwealth Bank assisted materially to tide over the financial troubles by issuing Treasury Bills in order to finance the deficits of various state governments. Slowly, since then, the finances of the governments have improved, until to-day collectively the deficits have been eliminated. Another great problem has arisen, however, owing to the enormous increase in the estimates and expenditure for defense — approximately £40,000,000 spread over three or four years. Rut that is another story not directly connected with the theme or purpose of this article.

When I left Australia early in February last, economic conditions were fairly good. Unemployment was less serious, confidence was good, and the national feeling was steadier and more consolidated than I had known it for years. True, the nervousness about the future of international affairs in the Pacific Ocean area was a distinct factor in steadying the nation. Taxation is heavy, but is more or less cheerfully borne. The reduction in the basic wage of the wage earners had been restored, and a prosperity bonus of 6s. 6d. per week (say $1.50) had been added, subject to review from time to time.

But we are still concerned about two great problems: (1) the threat to world peace due to the population pressure of three great virile ‘dictatorship’ nations; (2) the comparative absence of study leading to solution of the world-wide problem of the adjustment between production and consumption.

None of us can or should forget that the two things that worry the average citizen of democratic, quasi-individualistic countries are the fear of sickness and the fear of unemployment. We must at long last swing more and more of our research work from material to social investigations. All great industries today have scientific research organizations — governmental and private. But shame on us, we have no research institutions for the social sciences — the science of mankind. The need is urgent, vital, imperative, and woe betide us if we delay.

We, the leaders of industry and commerce and finance, have never yet realized our duty to society. We have thought too much and too long of financial results, of scientific material improvement. We have forgotten that democracy predicates and demands individual contribution toward social adjustment and security, and that the greater our job and our position, the greater our responsibility for social duty and performance. However much we may try to comfort ourselves by the repetition of the idea that the dictatorship form of government is inherently unsound and unstable, there is little evidence to support this pseudo-comforting thought when consideration is given to the ever-growing complexity of national life. By common consent, dictatorships are solving, temporarily at least, problems which democracies have failed to solve (I might almost say, have not attempted to solve) — namely, the increasing disparity between our abilities to produce and to spread the benefits of increased production. Governments are necessary to industry and commerce. Industry and commerce are necessary to governments. But the greater opportunities for service lie with industry and commerce.

I fear that the reverse has been applying of late years. And whose fault is it? Is it not a fact that Franklin D. Roosevelt, Neville Chamberlain, Anthony Eden, Léon Blum, John L. Lewis, Harry Bridges, Premier Aberhart of Alberta, Hitler, Mussolini, Stalin, and indeed all of us, are products of certain sets of conditions? Are not conditions controllable if sufficient prevision and consequent action are applied?

III

And now I come to the impressions gathered during two intensive months in North America. I was alarmed by the first impact with the mental atmosphere in your great country. On the steamer from Australia and after I landed, discussions proceeded normally until the President and the Federal Administration were mentioned — and then ‘ the deluge.’ Normality disappeared and storms rose, and I could get no further. However, a little experience led to methods of approach which avoided this trouble, and then I found almost invariably a serious disquiet and much searching of heart and mind. There was a sincere desire to discuss the problem, and no effort to avoid plain facts and possible unpleasant eventualities — also always a request for an unvarnished and complete expression of my own views and impressions. And so I gained encouragement and hope.

Briefly one thing, and one thing only, alarms me in the United States to-day, and that is the ever-widening chasm between the two great buttresses of any democracy — the central government, on the one hand, and the leaders of the great organizations of industry, commerce, and finance on the other. And the social responsibility to the great mass of the nation is in danger of being more and more overlooked as the song of hate rises in intensity, as the chasm widens and deepens, and as the social structure shakes and trembles on the edge.

I think that at this time of writing that is not an exaggerated picture. At least I write as I feel, and I believe that my two years of active life in this country enable me to sense the atmosphere reasonably quickly and accurately. At any rate the survey I submit has the agreement and support of almost everyone I have met.

Realizing that the failure of your great nation to adjust on a democratic basis will mean the disappearance of democracies in our British Commonwealth of Nations, I have called up the courage to write as I find, with a prayer that my small contribution will help.

Things change quickly, and even before this article is published I believe the promise of improvement will have appeared. I have been more optimistic than many of the men and women with whom I have conferred during the past two months. And this is so because I have found throughout the nation many people who are beginning to realize that they each individually must take a hand — that democracy is based upon the individual, and that the ‘inevitableness of gradualness’ must be adopted as the watchword of democratic adjustment.

I quote from the New York Times of Sunday, April 3, a portion of an article by Winthrop Case, ‘The Business Cycle Now at a Decisive Stage’: —

The problem seems to come back once more to the question of confidence. Revival in the all-important durable-goods industries and the reduction in their unemployment rest on the willingness of individual and corporate buyers to make purchases that necessarily tie up their resources for a considerable length of time. For the individual, this implies confidence in the job, and this in the end comes equally back to the confidence of industry’s leaders.

Fortunately, Congress is showing a more conciliatory attitude toward business. Whether business has or has not coöperated as much as it ought, whether or not the administration has shown itself vindictive or punitive, are beside the point. The fact remains that our economic system, for better or worse, must in the end be carried on by its individual leaders. The government may help or it may hinder, but it cannot drive.

The elastic limit of the nation has been sorely tested. Your nation has been trying to achieve in five years what we in Australia, under easier conditions and with a more homogeneous people, have partially achieved in thirty years.

The great mass of the people of any democratic country are content to wait provided they know that a policy of adjustment and amelioration is in progress, with the approval of the majority of the leaders of all sections of the community.

The great internal problem facing all of us is to find out how all sections of a democracy can live together in reasonable comfort — ever disputing, ever striving for improvement, but with inherent mutual consideration and respect. If we fail — dictatorship comes, and then individualism lies only with the dictator and with regimentation of the whole nation.

To me the great tragedy of the present position is that the greatest and richest democracy in the world, which should be leading us in our struggle to avoid the danger of dictatorship, is to-day so torn with internal strife as to be impotent internationally — in this respect.

We in Australia are a small nation, internationally of little moment. Some of us are striving to assist by, for instance, directing the policy of our companies producing commodity goods towards minimum fair returns on a reasonable capitalization, with the purpose of maintaining internal price stability on the lowest possible level. In other words, we believe that industry can help by aiming at security and stability rather than at excessive fluctuating profits. This policy will help the maintenance of confidence and combination of the highest volume and velocity of currency circulation — and therefore maximum employment. Further, we are helping in the study of national economics, and are urging the importance of an economic general staff for the Commonwealth — a recognized and approved economic fact-finding body, staffed by the best brains, in whom the people have confidence.

The remaining democracies of the world must get closer together and help each other more to learn, know, and understand the steps which must be taken to adjust continuously toward a better and fuller life for everyone, including ‘the forgotten man.’

We have to realize and understand the increasing tempo of change. We must actively remember that peoples of our race do not want dictatorial unified clique control. Rather do they subconsciously pray for security on some reasonable or even primarily a comparatively lower basis, so long as they have hope, and a chance for their children. They do not want to destroy private enterprise, and will respond so long as they understand and are coöperatively informed of affairs and the development of a policy of progressive adjustment.

Ignorance and suspicion are the main causes of industrial trouble. We none of us have yet brought ourselves to a full acceptance of the necessity for mental honesty in our comments and proposals on industrial and national affairs. We cannot too often tell ourselves that the real wealth of a nation — the only enduring worth-while wealth — is in the spiritual, mental, and physical health of the citizens, and that in a democracy we are all trustees.

While recognizing the difficulties of rival unions, I must say that the right of men (with only their labor to sell) to organize is fundamental, and our experience is that, when this is accepted, slowly but surely the unions develop leaders who are students of economics and moderate men who know that a quart cannot come out of a pint pot.

A spirit of compromise and coöperation will lead to an adjusted democracy if we will all help. This article sounds like a sermon, but it is at least based upon a long life of experience and observation, and an appreciation of an exceedingly critical and temporarily dangerous state of affairs.