A Policy of Free Exchange: An Argument Against Socialism and Socialistic Legislation

By Thomas Mackay

Thomas Mackay (1849-1912) was a successful English wine merchant who retired early from business so he could devote himself entirely to the study of economic issues such as the Poor Laws, growing state intervention in the economy, and the rise of socialism. Mackay was asked by the individualist and laissez-faire lobby group, the Liberty and Property Defense League (founded in 1882 by the Earl of Wemyss), to put together a collection of essays by leading classical liberals to rebut the socialist ideas contained in
Fabian Essays in Socialism edited by George Bernard Shaw in 1889. The result was a volume of essays called
A Plea for Liberty: An Argument against Socialism and Socialistic Legislation which appeared in 1891, and another volume of essays
A Policy of Free Exchange: Essays by Various Writers on the Economical and Social Aspects of Free Exchange and Kindred Subjects, which appeared in 1894.Two of the guiding intellectual lights of the Liberty and Property Defense League were Herbert Spencer (1820-1903), whose
The Man versus the State had appeared in 1884, and Auberon Herbert (1838-1906), whose
The Right and Wrong of Compulsion by the State had appeared in 1885. Both Spencer and Herbert were troubled by the direction in which the British Liberal Party was heading, away from strict adherence to policies of individual liberty and non-intervention in the economy and towards a “New Liberalism” which laid the intellectual foundations for the modern welfare state. The aim of Mackay and the members of the Liberty and Property Defense League was to use the occasion of the publication of a major defense of state interventionism in the economy, the
Fabian Essays, as an opportunity to oppose all advocates of these policies whether from the “right” (the Liberal Party) or the “left” the Fabian socialists and the Labour Party. The result were the two volumes mentioned above. The strategy adopted was to argue against both the morality and the practically of socialism. The latter resulted in many essays showing how specific examples of state intervention or control, such as electrical distribution or public housing, led to unintended, harmful consequences.The ideas expressed in the two volumes,
A Plea for Liberty and
A Policy of Free Exchange, are still timely even after the passage of some 110 years. In spite of the fall of communism and the discrediting of the idea of a centrally planned economy, myriad government interventions in the operation of the economy are still with us, seemingly entrenched and impossible to remove. It is thus interesting to see the response to socialism by free market people who were present at its birth.Dr. David M. Hart

Library of Economics and Liberty

December, 2002Recommended ReadingEric Mack,
“Foreword” to Herbert Spencer,
The Man versus the State, with Six Essays on Government, Society, and Freedom (Indianapolis: LibertyClassics, 1981).Eric Mack, “Introduction” to Auberon Herbert,
The Right and Wrong of Compulsion by the State, and Other Essays (Indianapolis: LibertyClassics, 1978).Jeffrey Paul, “Foreword” to
A Plea for Liberty: An Argument against Socialism and Socialistic Legislation, consisting of an Introduction by Herbert Spencer and Essays by Various Writers, edited by Thomas Mackay (1891) (Indianapolis: Liberty Fund, 1981).Edward Bristow, “The Liberty and Property Defence League and Individualism,”
The Historical Journal, 1975, vol. XVIII, no. 4, pp. 761-789.N. Soldon, ”
Laissez-Faire as Dogma: The Liberty and Property Defence League, 1882-1914″, in
Essays in Anti-Labour History: Responses to the Rise of Labour in Britain, ed. Kenneth D. Brown (Macmillan, 1974), pp. 208-233.J. W. Mason, “Thomas Mackay: The Anti-Socialist Philosophy of the Charity Organisation Society,” in
Essays in Anti-Labour History: Responses to the Rise of Labour in Britain, ed. Kenneth D. Brown (Macmillan, 1974), pp. 290-316.J. W. Mason, “Political Economy and the Response to Socialism in Britain, 1870-1914,”
The Historical Journal, 1980, vol. XXIII, no. 3, pp. 565-587.

Book Cover

Translator/Editor

Thomas Mackay, ed.

First Pub. Date

1894

Publisher

New York: D. Appleton and Co.

Pub. Date

1894

Comments

Collected essays, various authors.

Copyright

The text of this edition is in the public domain.

by the Hon. J. W. Fortescue

IV.

State Socialism and the Collapse in Australia

THE literature of State Socialism is ever increasing, though it is but rarely enriched by the addition of such a volume as that written by Dr. Pearson under the title of
National Character. Possibly it might seem a depreciation of the value of this book to rank it in so narrow a category as that of State Socialistic literature. The scholarship, the wide culture, the encyclopaedic study and research which show themselves on every page, have been duly recognized by critics far more competent to appreciate, though not less ready to admire, than the present writer; and praise from such quarters might reasonably be held to claim for it a higher place. None the less, however, is it certain that Dr. Pearson’s book is an inquiry into the working of State Socialism—a forecast of its probable effects on human character—to which the writer, by his own admission, has felt himself impelled by ‘twenty years’ residence under the Southern Cross.’ In other words, we owe this book to the inspiration of Australia; and this is a highly significant fact.

‘The history of the English Colonies in Australia and New Zealand is particularly instructive because it shows what the English race naturally attempts when it is freed from the influence of English tradition. The settlers of Victoria and, to a great extent, of the other Colonies, have been men who carried with them the English theory of government; to circumscribe the action of the State as much as possible; to free commerce and production from legal restrictions; and to
leave every man to shift for himself with the faintest possible regard for those who fell by the way. Often against their own will the colonists have ended by a system of State Socialism that rivals whatever is attempted in the most bureaucratic nations of the Continent. The State employés are an important element in the population; the State builds railways, founds and maintains schools, tries to regulate the hours and wages of labour, protects native industry, settles the population on the land, and is beginning to organize systems of State insurance…. Planted in Australia the Englishman…is rapidly creating a State Socialism, which succeeds because it is all embracing and able to compel obedience, and which surpasses its continental State models because it has been developed by the community for their own needs, and not by State departments for administrative purposes.’ Of course it does not follow that they are right; but ‘it is surely safe to say that political experiments which half a dozen self-governing British communities are instinctively adopting deserve attention as an indication of what we may expect in the future.’

This quotation gives the key to Dr. Pearson’s design. State Socialism ‘succeeds’ in Australia: Dr. Pearson will work out for us the probable results of its success in the civilized world at large. The argument is developed briefly as follows. It seems absolutely certain that the higher races—i.e. those that are held to have attained the highest form of civilization—are confined within certain unchangeable limits by the influence of climate. Australia is a country in point, half of it being, so to speak, ‘a white man’s country,’ half of it distinctly not so. Having established his position as to the ‘unchangeable limits of the higher races’ (a most valuable and interesting chapter, by the way, on a sadly neglected subject), Dr. Pearson passes on to consider how confinement within those limits is likely to affect those races—how, in fact, they are to survive, or rather think they are to survive, restriction within their own climatic borders, the increasing competition of the inferior races, the consequent closing of the outlets for trade and energy. He answers—and he gives
good ground for his answer—By resort to State Socialism! Englishmen, for instance, losing faith in themselves, will fall back on the State and State Socialism, and resign themselves to a stationary order in society—wealth and population ceasing to increase. From such stationary order is likely to result increase of standing armies, of great cities, and of national debts—the first by no means an unmixed evil, which is more than can be said of the other two. The nation is bound to remain the unit of political society, because the interests and feelings of different races and countries are too discordant to be harmonized under a central government. The future of society will, then, depend very much on the perpetuity of national feeling. Given that perpetuity of national feeling, and with it the exaltation of the State to the highest place in the minds of men, we may expect—what? The millennium? No; ‘the decline of the family and the decay of character.’

Such is the conclusion to which Dr. Pearson is irresistibly led by his review of the prospects of State Socialism as a success; and we cannot sufficiently admire the practical courage and candour wherewith he has given it utterance. He holds no brief for or against State Socialism; he accepts it as inevitable; examines it in an impartial spirit and pronounces judgement without flinching. Not unnaturally, therefore, his work has been branded by many as pessimistic—after the usual fashion of those who strike unpleasant arguments with a label and therewith declare them slain. Personally I cannot see that it is more pessimistic than optimistic; for surely it is an optimistic assumption that State Socialism will successfully fulfil the functions that are generally prescribed for it. Moreover this assumption, as it seems to me, is rather more than the mere acceptance of an hypothesis for the sake of argument. ‘In Australia State Socialism
succeeds,‘ are Dr. Pearson’s own words. Does it succeed? That is a question to be examined rather than begged.

In a chapter—the most optimistic chapter in his book—on the advantages of an enhanced national feeling, Dr. Pearson has much to say of the hold that a State, which confers in
numerable benefits on its citizens, should thereby acquire over them. Such enlargement on the topic is pertinent, because it is on the perpetuity of national feeling (according to Dr. Pearson) that society depends in the future. A few quotations will make the matter clearer.

‘Whatever may have been the case in old days, a child’s obligations to the State are now infinite. The State watches over the infant from birth; provides that the growing child shall not be stunted by excessive toil, is properly clothed and fed, and so educated as to have a fair start in life; it assures the adult against starvation, protects him against tyrannical employers and from the criminal classes that prey upon property; it secures him liberty of thought and faith; and it offers him the means of safe and easy insurance against illness or death.’

Again: ‘The love of any man speaking the English tongue for his country is now for a land that can give him ampler protection than his fathers ever dreamed of, that invests him with the privilege of a dominant race, that adjusts his public burdens so as to be least onerous, that gives him the right to assist in the making of laws, that protects him against his own weakness, and offers him the means to start on equal terms in the race for honour or wealth.’

And yet again: ‘It is now the State which is fascinating every family by proffering the
bâton de maréchal to its children as it forces upon them an education that will fit them to rise to wealth or dignity… The broad fact remains that human co-operation for political ends is yearly becoming more fruitful of good purpose, and more successful in its attempts to relieve want… Neither is it only material benefits with which a great country endows its citizens…the citizens of every historic State are richer by great deeds that have formed the national character, by winged words that have passed into current speech, by the examples of lives and labours consecrated to the service of the common-wealth. The religion of the State is surely as worthy of reverence as any creed of the churches, and ought to grow in intensity year by year.’

‘
It is, however, the note of every true religion that if it promises great good it demands proportional sacrifices.‘

It is in this last sentence that the difficulties of State Socialism really confront us. I am not concerned to dispute that in the religion of the State, as outlined by Dr. Pearson, there is much that may elevate and ennoble; nor that the State, as apparently the less unintelligible abstraction, may command readier and more willing worship than Humanity. But abstractions are abstractions, and no profusion of capital letters will make them concrete. We are forced to ask, What is the State? With Dr. Pearson we must set it down at something higher than merely ‘the casual aggregation of persons who find it to their advantage to live in a certain part of the earth’; and if we desire to appraise it at its highest—as worthy of its capital letter—we must treat it as an abstraction, and a remarkably vague abstraction. But human creatures who, like the Australians and, indeed, the majority of English-speaking peoples, have a decided bias, temporary or permanent, towards materialism, are somewhat impatient of vague abstraction. Even three hundred years ago the framers of the Anglican Articles of Belief thought it expedient to define the visible Church. There is no such formula, so far as I know, for the visible State. Such phrases as ‘a congregation of faithful men in which the pure gospel of State Socialism is preached and salaries are received according to Act of Parliament,’ are insufficient and out of date. Men seek for something terse and tangible, and accordingly objectify the State in the Government for the time being; and in that Government seek for the outward manifestation of those hidden qualities, which, by their hypothesis, are comprehended in the abstract idea of the State.

There is one divine attribute, and one only, that is assigned by its devotees to the State—namely, omnipotence. It is thought that the State, in virtue of some mysterious and unexplained qualities, can do for men what they cannot do for themselves—enjoys, in fact, powers that are practically superhuman. Even Dr. Pearson, soberest of writers, seems to lend countenance to this astonishing doctrine when he
employs such loose expressions as that ‘the State offers a man the means to start on equal terms in the race for honour and wealth.’ That the State may profess to make the offer is likely enough; but herein it arrogates superiority to Fate, which, in my judgement, is not a tenable position. This omnipotence of the State is, however, assumed, as I have said, and in common with other attributes finds objectification in the reigning Government. It is, moreover, by no means surprising that the faith therein is never stronger than in a democracy. For democracy (to employ Dr. Pearson’s excellent definition) seems really to mean the vesting of power in the people in such a way that their changes of purpose may have instantaneous effect given to them. It is the peculiarity of a democracy that it never believes that a Government cannot do a thing: it believes only that it will not do it. So if one Government declines to give instantaneous effect to one change or another of its purpose, it seeks another that undertakes the duty; and some party can always be found to make the undertaking. Hence the eternal cry of the disappointed agitator—’We can expect nothing from
this Government. But wait a little; a time will come.’

Nor can it be denied that to a superficial observer the State seems to possess some attributes that are generally accounted divine. To the mass of mankind material considerations are paramount—it is not sweetness and light, but fullness and warmth, that signify happiness. If the prayers of the world for a single day could be summarised it would be found, I cannot doubt, that the commonest and most constant petition is for the grant of material benefits. The Lord’s Prayer itself contains the material clause, ‘Give us day by day our daily bread.’ Those, however, who utter it in other than a merely formal spirit rarely hope to see a raven fly in with provisions through the window, or to find an angel at the door with a bread-basket. They trust that the prayer may be answered according to the inscrutable wisdom of a Power that has allowed men to starve before now; and they are stimulated by their trust to individual endeavour. Not so with the State. The State undertakes immediate and direct
supply of material benefits. Men go to the State and ask, if not for bread, at all events for work—and they get it. They ask higher wage for that work—and they get it. They ask for reduction of hours of work without corresponding reduction of pay rate—and they get it. They ask for relief from the burden of educating the children which they have begotten into the world—and they get it. They ask for protection against the consequences of their own folly—and the State undertakes to grant it. They ask for an equal start in the race for power and wealth—and the State promises it. They ask for the moon—and the Government, or objectified State, binds itself to give the demand its most serious consideration.

For it is the peculiar attraction of the deity of the State that it is never absolutely inexorable. In fact it is a deity that can be coerced. Jehovah may be adored or blasphemed; the idol of the savage may be feasted or whipped by the helpless and the starving; and the food supply is not thereby visibly affected. The State, on the contrary, in its objectification as the reigning Government, can always be squeezed. Nor does it object to such pressure. Ministers of the State wherein State Socialism prevails are as vain, as ambitious and as arrogant as the high priests of any church; and they rejoice in every new appeal to their authority as fresh evidence of the faith that is reposed in them. They borrow prestige from the mysterious abstraction, of whose bounty they are held to be the dispensers; and they know that every addition to the prestige of the State is an addition to their own. To this source may, perhaps, be traced the ever increasing intensity and passion of the struggle for the government of men. All great rulers, from Moses onward, have testified to the thanklessness of this task of government. Cromwell would sooner have kept a flock of sheep; Danton would rather have been a poor fisherman; but still men press and hustle each other in the race for authority to rule. The State is omnipotent; with such omnipotence at their back they can seize the reins with a light heart.

Now if the faith, alike of ministers and citizens, in the
omnipotence of the State be taken as the test of success, then assuredly Dr. Pearson has some reason to claim success for State Socialism in Australia. Everything that the devotee of the State chose to demand from his idol has practically been granted or promised. The State has provided, in one or other or in all the Colonies, all the cherished privileges that were enumerated a few pages back. Moreover, it has made the provision of work doubly attractive, in the eyes alike of worker and onlooker, by declaring the work to be reproductive—in fact, to pay for itself. Thus, a railway not only furnishes employment and wage during its construction; but, when constructed, assumes the guise of a national benefit, and, more curious still, of a national asset. Moreover, in Australia the State grants all these privileges unconditionally, without demanding any service from its citizens in return. The logical complement of State Socialism is compulsory military service; a subject on which Dr. Pearson’s remarks are well worth reading. But, from the point of view of national defence, Australia has no occasion to compel military service. Her defence is undertaken by England, and depends on the British fleet, which was specially increased for the purpose at British expense, and is maintained at no greater cost to the six Australasian Colonies than an annual payment of £125,000, divided between them. Thus, in all its doings, the State in Australia omits to train its citizens to the idea of sacrifice. Noting, no doubt, how thoroughly the citizens appreciated the duty of the State towards themselves, it counted on them for as thorough an appreciation of their duty toward the State; in fact, it calculated (if it thought about the matter at all) that multiplicity of benefit would breed infinity of obligation.

Finally, therefore, as the crowning attraction and supreme revelation of its omnipotence, the Australian State bestowed all these benefits upon its citizens, apparently free of charge, by the simple expedient of borrowing scores of millions of pounds from the British capitalist. It is true that taxes were levied; but very largely in the form of protective customs duties, which are always popular among those who seek an
easy life; and, indeed, it is pretty evident from the latest developments that the State virtually provided the citizens with money to pay taxes withal. Of course the amount of the debt always appeared as an offset against the national prosperity; and here the fiction of the ‘reproductive’ works came usefully into play. If the British capitalist happened to observe that he had lent the State ten, twenty or forty millions, the high priests waved their hands towards railways and irrigation schemes, and said, loftily, ‘There are your millions; not idle, but breeding new millions.’ So the prestige of the State grew and waxed great; and therewith that of the ministers also; for they needed but to wave their hands, and the land was filled with plenteousness. And they looked upon the work of their hands, and saw that it was good. And Mr. Froude journeyed to Australia to see the wonderful things that were there; for the fame thereof had reached his ears in his own country. And he saw the ministers of the State, and communed with them; he saw their work also, and blessed it. And his blessing is a curse unto Australia unto this day. And passing over to New Zealand he saw there George Grey, the seer (which had formerly been of the ministers, but was cast out), and he communed with him, and cursed New Zealand. Notwithstanding, his curse was changed into a blessing. And other men also came from England to see Australia, which blessed it, and gave glory to the State, not knowing what they did. Nay, there were that blessed it, not having seen it with their own eyes; and of all these the blessing is changed into a curse.

Undoubtedly, in the piping times of the ‘eighties,’ the Australian Colonies, judged by certain standards, were quite ideal States—paradises of the working man, and so forth. Their success was frequently quoted as conclusive evidence of the value of State Socialism and of the infinite power of the State for good; and they were consequently flattered and belauded to an extravagant degree. Nor were they backward to accept such homage. The Australian Colonies began to look upon themselves as decidedly superior communities;
and the men that directed them began to imagine themselves statesmen. To nourish the prevailing sentiment of national self-satisfaction, the Governments instituted that peculiar form of national advertisement which is known by the name of ‘statistics’—statistics of ‘realized wealth,’ ‘national resources,’ ‘national assets,’ and the like—all designed to assure the world in general, and the people of England in particular, that the Australians were, for all their State comforts, the most energetic, industrious and enterprising folk in the world. Now, no one likes to be called energetic and industrious so much as the man who never does more work than he can help; and accordingly the Australian working man heard and was delighted. Nor was he altogether without justification. All official documents declared Australian prosperity to be phenomenal; and that prosperity was certainly due to some one’s exertions—why not, therefore, to his own (as every one assured him), with the help and guidance of an enlightened abstraction called the State? Deity and devotee alike live on faith, and thrive with its increase. So the game went merrily on during the eighties, becoming fast and furious towards their close, till at last it culminated in the year 1888. That year was marked in Sydney by a great festival to celebrate the centenary of the arrival of the first two convict ships at Botany Bay; and in Melbourne by a great Exhibition to commemorate the fiftieth anniversary of the foundation of Victoria.

Shortly after, the tide began to turn. The first blow dealt at the omnisufficience of the State was struck by an Australian newspaper, the
Melbourne Argus, which discovered and gave publicity to the fact that the surplus shown by the Victorian Treasurer for the financial year just expired (1889) had no existence except in imagination. Further inquiry showed that the surpluses of some previous years had been obtained by a manipulation of the public accounts, which in a private firm would not have been considered straightforward. Though known and remarked in the Colonies, this incident of the sham surplus of 1889 was unheard of in England until Mr. Charles Fairfield made it public in the pages of
A Plea for
Liberty. Other attacks followed Mr. Fairfield’s, as the mysteries of Australian State Socialism were gradually unveiled; and at last the ministers took fright and began to admit, in Australia at least, that matters might not be in quite so satisfactory a state as could be desired. In England they continued, through their instruments, to puff the perfection of their system and to denounce the attacks of critics as persistently as ever. Still, the steadiness of the downward tendency was too strongly marked to make denials and denunciations of any avail. The Colony of Victoria, wherein Dr. Pearson made his principal study of the success of State Socialism, presents, perhaps, the most instructive picture of financial collapse—Victoria was the
enfant gâté of the British State Socialist, the darling example of such critics as Sir Charles Dilke. Her decline and fall may be traced in the following brief statement.

July, 1889. The Treasurer announced a surplus of £1,600,000.

Nov. 1889. The Treasurer announced that the surplus of £1,600,000 had sunk to £142,000; and that there were liabilities of £5,600,000 to be met. Liabilities accordingly met by means of loans, and finance declared (by Mr. H. Willoughby,
Nineteenth Century, Sept. 1891) to have been ‘put straight without the slighest confusion.’

1890. Treasurer announces a surplus of £600,000 on the past financial year.

1891. Treasurer announces a deficit of £797,000 on the past financial year, reckoning to June 30; and of £1,418,000, reckoning to July 1; also that £1,700,000 had been borrowed from trust funds (Government Savings Bank deposits) in anticipation of loans. £3,000,000 were borrowed in London during the year, of which £900,000 were for conversion of a matured loan.

1892. Treasurer announced a deficit of close on £1,600,000 for the past financial year. £3,000,000 raised by loans during the year 1892.

1893. Estimated deficit of £2,500,000. Collapse.

There is no necessity to dilate further on the present financial
condition of Australia—it has been all too sorrowfully brought home to hundreds of ruined Englishmen. ‘When a State undertakes enterprises beyond its strength, it always does it at the risk of bankruptcy,’ writes Dr. Pearson, very sagely; and bankruptcy is the fate that has overtaken Victoria, New South Wales and Queensland. Now it is agreed by common consent that finance is the principal test whereby the success or failure of a system of administration should be tried. Applying this test to Australia we are surely forced to the conclusion that State Socialism, so far from succeeding there, is a hopeless and disastrous failure. Now, the practical certainty of bankruptcy in these three provinces, and particularly in Victoria, has been patent to any man who chose to use his eyes, since the year 1890, if not from still earlier times. Dr. Pearson’s book bears date 1893; and we must, therefore, assume that, at all events to the close of 1891, he still considered State Socialism to be a success in Australia. Consequently we can only conclude that he would not regard such a test as final, and would require further evidence to convince him that he was mistaken. I can hardly believe, I confess, that if his book were still unprinted he would leave the passage about the success of State Socialism in Australia unaltered. But his subject is a wide one; and he expressly disclaims the consideration of such possible contingencies as the trial of impracticable experiments, and the resort to such old failures of the past as unlimited issues of paper money by ‘ignorant tribunes of the people.’ We are, therefore, driven to apply some other test. It may, of course, be said, and indeed it has been said, that the financial collapse in Australia is due merely to a fortuitous concurrence of unfortunate circumstances; that it is merely transitory and superficial, and that it will be followed by speedy and solid revival. It has also been said that the collapse was due to the malicious attacks of English critics, who sought notoriety by uttering dismal prophecies of Australia’s failure, and secured fulfilment of those prophecies by decrying her credit. But it would be as reasonable to attribute the outbreak of an epidemic of typhoid fever to
the predictions of a doctor who condemns the sanitary condition of a town. The fact that it could be predicted is sufficient evidence that the collapse was due, not to unlucky mischance, but to simple and ascertainable causes. If, in spite of national bankruptcy, success can still be claimed for State Socialism in Australia, it can be upon one ground only—viz. that, though the State may have failed (let us say through excessive zeal) in its duty to the citizens, yet the citizens have redeemed such failure through their infinite devotion to the service of the State.

Now, I have already described, in Dr. Pearson’s own words, the consummation which he hopes may be reached in the growth in each individual citizen of a proper sentiment of gratitude, loyalty and piety toward the State—I have sketched what the State has undertaken to do, and what it actually has done (no matter at whose expense), for its citizens in Australia; and it now remains to examine what return the citizen seems likely to offer to the State. ‘It is the note of every true religion that, if it promises great good, it demands proportionate sacrifice.’ ‘What reward shall I give unto the Lord for all the benefits that He hath done unto me?’

The peculiar tendency to accumulate large debts, which present experience has shown to be characteristic of State Socialism, has not escaped so keen an observer as Dr. Pearson. His residence in Victoria cannot but have forced this danger upon his notice, and presented it to him as real and pressing. It is evident, indeed, that this peculiarity has puzzled and disturbed him not a little. ‘The day may come,’ he hopes, ‘when a man who leaves an old and indebted State will be like the partner who peremptorily withdraws from an embarrassed firm’; but he admits that if thousands of citizens who have supported a policy of lavish expenditure leave the country when the burden of taxation becomes unpleasant, the very existence of the State may be imperilled. I have little doubt but that this latter sentiment was suggested to Dr. Pearson by (among other examples) what happened in New Zealand in the year 1888—9. New Zealand, it should be mentioned, at that time led the race
of extravagant administration among the Australian Colonies; and, indeed, is still rather ahead of her sisters in the matter of certain State institutions—e.g. State insurance. Her career was, however, cut short in the nick of time by Mr. Froude’s strictures in that delightful but inaccurate book
Oceana. New Zealand gained a bad reputation in the English money market; the supply of loans was cut off; and she found herself on the brink of bankruptcy. Now, there can be no doubt whatever that the adventurous politician who initiated and encouraged the policy of extravagant borrowing in New Zealand was cordially supported by the mass of the people. To this day, I venture to affirm, there are many in the Colony who still swear by him. Nor is it altogether surprising considering that, as if by the waving of a magic wand, he flooded the country with money, and began an era of apparently unexampled prosperity. Let it be noted meanwhile that in New Zealand there was no concealment of the financial position by mishandling of the accounts. The annual balance sheets showed faithfully enough a deficit just about equivalent to the amount of the annual interest due on the loans; so that it was sufficiently patent to any intelligent man that the interest on old loans was discharged, not by the labour of the citizens, but by the complaisance of the British capitalist. No sane man could believe that such a system would last for ever; yet it was stopped, not by the unwillingness of the citizens to continue it, but by the refusal of the British capitalist any longer to support it. Now, innocent people might suppose that citizens under such obligations to the State as in New Zealand would have stood by her in the hour of her trial. Nothing of the kind. No sooner was the borrowing stopped than the ‘working men,’ the adult males, who are generally reckoned to be the cream of the population, streamed away in thousands to Australia. So far from making a sacrifice for the State, which had nursed them so tenderly, they not only forsook her, but in many cases left their wives and children behind to be a burden to her. Those who remained sought by every means in their power to shift the weight of their obligations to the State
on to others’ shoulders. Sir George Grey openly proposed that, under the form of an income tax, a fraction of the interest due to the English bondholders should be confiscated for the benefit of the State, which meant, in plain words, repudiation. The Government, without going so far as this, imposed this income tax upon the foreign holder of debentures in New Zealand companies; and has got into some trouble in consequence, though not with its own citizens.

So much for New Zealand. Sensible colonists who watched the exodus of the working man from that country on the cessation of the borrowing policy, predicted (not without bitter satisfaction) that he would soon return, a wiser creature than when he left. And so in fact it has turned out. Compared with the crashing collapse of Victoria, New South Wales and Queensland, the fall of New Zealand appears like a gentle subsidence. The ‘working man’ of Australia, sworn supporter of reckless extravagance, ‘cleared out’ directly there was a question as to the payment of the bill; and fled to New Zealand, South America or any country where he could hope to receive benefits without repaying them. Nay, a few hundred extremists, so we read in the papers, have started off to construct a Utopia which shall satisfy all their ideals; schismatics from the established State religion which once commanded their reverence in Australia, embarked on some parody of the
Mayflower, bound on the welcome and simple mission of forming a fool’s paradise. But the bulk of the emigrants, so far as I can gather, has made its way to New Zealand; deserters, some of single, some of double, some of triple dye, but all alike without shame. Within six months of their arrival they are entitled to a vote; and, with unconscious irony, will probably press for the imposition of heavy burdens on absentee proprietors and absentee lenders. Absentee debtors, of course, are not to be classed with such vermin. The devotee of the State has but two clauses to his prayer—’Give us day by day our daily bread,
and forgive us our debts.‘

It may be said that such citizens as these are no citizens. Possibly; but why, then, does the State so readily grant them
the privileges of citizenship, asking at very most no more from them than an occasional service on a jury—a service, by the way, which, being properly within the domain of the State, not infrequently finds its way into private hands, to the great discomfort of justice? There is, I think, but one answer—the religion of the State encourages hirelings rather than shepherds.

Now let us consider the case of the citizens who remain faithful to the country of their birth or their adoption. Some, beyond all question, remain true to her from really high motives of sentiment and honour—the men who would never desert a companion in misfortune or disgrace, much less a country. But are such motives bred by the lavishment of material benefits? Surely not. Were the sharers of the
sportula the men who stuck to their Roman patrons in their fall as well as their prosperity? I do not think so.

But there is a much larger body that stays from sheer inability to go away. These are mainly of two classes—salaried official employés of the State, too old, too strongly committed to her service, or too much narrowed in the discharge of the duties thereof to begin life over again; and the country people, who are attached, partly by sentimental, more often by commercial, ties to the soil—the working moiety of the population, which produces whatever wealth is produced in the country. The first is that over which the State has most immediate and complete control. They are simple dependents—the one class from which the State can extort sacrifices. As the easiest, they are always the first victims of retrenchment; and the first cry in a country where State Socialism has brought about financial embarrassment is ‘Cut down the salaries of the Civil Service.’ The ministers lend a willing ear: salaries are cut down, old servants are discharged, with or without an inadequate composition for the pension to which they were entitled by the terms of their contract; and the whole service is disheartened and demoralized. These men are among the few that have faithfully served the State; and this is their reward. Is it conceivable that such involuntary Abdiels should keep their loyalty, love and zeal towards so faithless and oppressive a taskmistress?

The people who work on the land are in rather a different position. Although from the mere fact of dispersion they cannot organize themselves to put pressure on the State like the townsmen, yet they have compelled the State in some measure to justify their faith in its omnipotence. Of course they have ever been the last to receive protection for their industries; but they would not consent eternally to pay through the nose for every tool, utensil and garment in order that the townsman might prosper and amuse himself; and accordingly, together with the privileges extended to every citizen, they have occasionally exacted special favours, such as bounties and the like. Now, these men have always felt a conviction (and quite justifiably) that they are the true Australian citizens—ready, it is true, to take anything that they could get from the State, but proud to think that they were not dependent on it, nor bound to it by a daily increasing sum of uncancelled obligation. To them the collapse must have been a more than ordinarily painful surprise. They know that they have worked on as usual, and yet they learn of failure after failure of banks and business firms—probably enough of the disappearance of their own earnings in such failure. They hear of public liabilities whereof the total seems ever to increase, of a public revenue that never ceases to fall, of business at a standstill, of a Government at its wit’s end. They hear of imperative necessity for immense retrenchment and new taxation; reduction of the benefits granted by the State, increase of the burdens to be borne for her. Lastly, they hear that thousands of taxpayers have fled from the coming wrath, and that thousands more are preparing to follow them; and that they who have always worked must stay and work on, in difficulty and discouragement, to pay the piper to whose music the fugitives have danced.

Then they ask, Why this collapse? Who is responsible for it? And the answer is, The State. It was the State that promised to create universal prosperity and universal contentment; and to carry out its promise utilized, not its own resources, but money borrowed from other countries. The State had ideas of ready-made prosperity as of a ready-made
suit of clothes. It seems so simple to take a man of fine physique, clap him in a borrowed suit of fine clothes, call him a millionaire, and bid him go play. But, the true workers rejoin, Why so sudden a collapse? Surely there should have been unmistakable warnings. We had no such warnings. The balance sheets and official information furnished by the State through its ministers were, at any rate till quite recently, most satisfactory and reassuring. The answer is, The State your god is a jealous god, and does not like its devotees to think that they can do without her, still less that she is wholly dependent upon them. It was a part of her policy to conceal from you that you were the only true workers in the country, and that without you she was nothing. It was equally part of her policy to conceal from the British capitalist the fact that he has hitherto paid the interest on the money that he has lent her out of his own pocket. Whether from unwillingness to lose faith in the omnipotence of the State or from fear of publishing the discovery which they had themselves made, that such faith was groundless, successive batches of ministers so garbled the financial accounts and returns of the State as to convey a wholly false impression. Hence a general feeling of distrust and uncertainty towards Australian State balance sheets at the present moment. In Victoria these balance sheets were presented with various suppressions and omissions according to the interest of the reigning Government in showing a deficit or a surplus, i.e. a deficit as the creation of their predecessors in office, a surplus as the production of their own talent. In New South Wales the dispensers of the riches of the State have recently made some very candid admissions. ‘The Colonial Treasurer is practically powerless to control the finances; he is liable at any moment to have accounts to meet of the very existence of which he was unaware’—such is the confession of the present Treasurer. You ask, How about the ‘reproductive public works?’ wherein the borrowed money was invested; and you point triumphantly to the Victorian railways, which, according to official returns, paid not only the interest on the capital borrowed for their construction, but a small percentage of profit also. Well, by this time you must
know that these official returns were misleading. Those railways never did pay that interest, and at the present moment are less likely to pay it than ever. In 1891 the earnings were avowedly £332,000 short of the interest on the capital outlay, and in 1892 £445,000. If you ask about another class of ‘reproductive’ public works, those constructed for purposes of irrigation for the benefit, at any rate ostensibly, of you in the country, I must point out to you that the aggregate arrears of interest due from local bodies on this account rose from £200,000 to £300,000 between 1891 and 1892, and that you may as well write off these sums and more as bad debts. It is of no use for you to say that much of the money spent on these reproductive works was wasted; that some of the railways, for instance, ought never to have been made at all; that many ought to have been delayed for ten, twenty or thirty years; that nearly all should have been constructed at much smaller cost; and that if you had had any idea of the haphazard fashion in which the affairs of the State were conducted you would have risen to put a stop to the system. All that is no doubt very true, indeed, has been admitted to some extent by ministers. You supposed, at any rate hoped, that all was right, and never dreamed that the ministers of the State were deceiving you. But you must remember that the ministers are but men, like you believers in the State, concerned to uphold its divinity, and therefore unwilling to profane its mysteries.

All this, though interesting, is but a digression from the most important point, namely, that the State looks to you and to your exertions to discharge liabilities incurred partly for your good, but chiefly for the good of others. You must not complain of this. You must not say that the State has done you more harm than good by attracting all labour away from you to its own works, and encouraging the population to do artificial work in the towns, instead of natural work in the country, and that its eternal interference has been the ruin of Australia. The interest on the debt must be paid, and you have got to pay it.

Can we believe that these citizens will feel gratitude and
devotion towards the State which has so deceived them? Will they not rather curse her for the injustice that she has wrought? For has not each man the perfect right to say that if the State had but openly shown him the true nature of her doings he would have renounced his allegiance and left the country while he could, without loss of independence, character or honour?

Meanwhile, the State has made a last effort to retrieve its damaged character. In the general distress the people, demoralized by long dependence on its bounty, call louder than ever on the State for help; and the State has responded. In Victoria it tried, besides other experiments, to avert the failure of banks, by declaring them closed for five days; which is as though a doctor should stop a man’s breath to save him from breathing his last. Needless to say, the few banks that were confident as to their soundness refused to avail themselves of this enforced holiday; while those that knew their own unsoundness closed for five days, reopened—and failed—as it was inevitable that they should fail. In New South Wales and Queensland, the Governments, still filled with the omnipotence of the State, have undertaken, with no mightier engine to hand than an ordinary paper mill, to create money, under the name of ‘Treasury Notes,’ ‘Treasury Bonds,’ and so forth. This, of course, is no new thing. The State has set itself the same task at various periods in various countries; but it is significant that such ‘money,’ whether designated ‘Treasury notes,’ ‘Cedulas,’ or ‘Assignats,’ has never failed to fall into early disrepute. These ‘State promises to pay’ are in reality nothing more nor less than drafts on the credulity of those who believe in the omnipotence of the State; and human credulity finds its limits very swiftly, when pounds, shillings and pence are in question. Thus in two at least of the Australian provinces the State has fired its last shot. What may be the ultimate outcome of these issues of forced paper it is difficult to say. The issue, of course, is declared to be limited, and all reissue to be forbidden; so that at present the scheme does not come under Dr. Pearson’s category of ‘old failures’; but it is a disquieting
reflection that issues of forced paper have a tendency to outlive the term originally assigned for their existence. In any case there is but one source from which these promissory notes can be redeemed, viz. the labour and production of the workers in the country districts, who are already sadly overburdened. The truth is that the State in the last resort can find neither help nor salvation except in the private enterprise, which in Australia it has done its best to extinguish; but this truth being unpalatable, both to itself and to its worshippers, the State leaves no means untried to disguise it. By the people these paper issues have been hailed with acclamation as a stroke of magical beneficence; in other words, neither Government nor people are alive to the fact that a State’s promise to pay is a people’s promise to work.

Looking, then, at the situation from both sides—from the side of the State in respect of the benefits which it has conferred upon the citizens and from the side of the citizens in respect of the obligations which they recognize towards the State—I find it impossible to justify Dr. Pearson’s assumption that State Socialism succeeds in Australia. The experiment may have been interesting, but the result is failure; and the immediate products are a bankrupt treasury and a demoralized people. The reign of State Socialism in Australia has been a reign of gambling, pure and simple; and the tendency to gambling is of all tendencies that which an Australian Government should have been most careful to discourage. For the English have a natural passion for gambling only less intense than have the Chinese; and Australia is from the nature of the case a gambling country. So treacherous is the climate, with its alternation of heavy destructive drought and heavy destructive flood, that even the soberest work on the land partakes heavily of the nature of gambling. If the new settler begins with a good season, he makes money very rapidly; if with a bad, he is, for all his efforts, not less rapidly ruined. On this point all men with experience of Australia seem to agree—there is, as a rule, no medium between these two extremes. Then, as if this were not
enough, the State aggravates the uncertainty of work on the land by continual tinkering at the land laws—now withholding the public land from sale, alleging scruples about ‘alienating the national patrimony,’ now disturbing the holders of land already alienated, now proposing to repurchase the ‘national patrimony’; so that men can hardly tell what their rights in the land may be; while rabbits, by a strange irony, enjoy undisputed possession of thousands of square miles. Another natural stimulus to the gambling spirit was the discovery of gold; which, though commonly accounted a blessing, is in reality the greatest curse that can oppress a country—offering royal roads to wealth, and discouraging steady industry. As if this were not enough, the State floods the country with borrowed millions, thus obtaining and promoting, directly and indirectly, an unprecedented extension of credit for its citizens. Hence, as was to be expected, more and more gambling, culminating in the frantic speculation known as the Melbourne Land Boom of 1888; when the price of real property in Melbourne actually rose above that in the City of London; while the State, to keep the ball rolling, carelessly squandered a quarter of a million
*3 of borrowed money on a great exhibition.

The prevalence of the gambling spirit, and the direct encouragement thereof through precept and example by the State, has, of course, left its mark on commercial morality. I must guard myself against misconception and the accusation of Pharisaism by saying at once that I do not think English commercial morality is much to boast of; and am rather inclining to the opinion that the old and extinct aristocratic prejudice against trade had its root in something greater and stronger than the mere pride and folly of caste. I am not concerned to deny, meanwhile, that the morality of the tradesman or merchant or banker has as good a right to distinct existence and special recognition, as such, as the morality of the advocate or the politician; for every profession and calling has its own ethical code—known to the
outside world as etiquette, and to the initiated as business. But, making all these allowances, I do not think it can be disputed that the standard of commercial morality in Australasia is low, and lower than in England. The position can be illustrated by the different treatment of bankruptcy in the Colonies and the old country. Gambling and bankruptcy are intimately connected together—gambling being carelessness, indifference, contempt, but always at bottom defiance towards obligation; bankruptcy the admitted inability, from whatever cause, to fulfil obligation. The attitude of law and still more of society towards bankruptcy is a sure index to the standard of respect that is paid to the sanctity of obligation in any community. If any one will compare the bankruptcy laws of England with those, say, of New Zealand, I do not think he will find any difficulty in deciding which are the most stringent, or, in other words, make most for honesty. But the social attitude towards bankruptcy in the Colonies is even more significant. Bankruptcy is attended by comparatively few difficulties; and is accompanied by no stigma. Perhaps this may be more excusable in a new country than an old, but it is not less dangerous. Dr. Pearson justly says that ‘in a new society a man goes on experimenting till he finds the career in which he works best; and that this facility has a great effect in promoting individualism.’ I think that it has a great effect in promoting bankruptcy also; for, through the too lax acceptance of the principle, the liberty to experiment
ad libitum is construed as the right to fail
ad infinitum. Hence to have ‘passed through the court,’ as the phrase runs, is in the Colonies held to be rather an evidence of enterprise than a certificate of failure. It cannot astonish us, therefore, to find bankruptcy in high places in the Colonies. I take no such unfair test as a mere enumeration of the Australian premiers, past and present, who have been obliged to confess insolvency; for misfortune spares no man. I take the recent and significant case of a politician who quite lately held the office of premier. This gentleman, while yet in the first blush of bankruptcy and of intimate connexion with a business whose failure had justly or unjustly provoked severe criticism
in the Colony, was actually selected for the appointment of Agent-General in England; and this at a time when his prime duty would have been to reassure British capitalists as to the safety of their investments in his Colony. The press, to its honour, opposed the appointment and forced the Government to cancel it. But conceive the selection of a bankrupt for such a mission; and consider the standard of commercial morality in a country where such a selection could not merely be thought of, but was only most reluctantly withdrawn, as much from policy as shame, in deference to the press. It is the standard reproach against two great rival English statesmen, that the one lived a gambler and the other died a bankrupt. If his marvellous talents and amazing personal charm cannot save the fame of Fox; if his lofty character and transcendent services cannot wholly efface the one stain on the memory of Pitt, surely it is a mistaken and unwholesome leniency to leave similar failings in Australian politicians wholly out of account.

Let us take another aspect of Australian commercial morality. It is constantly claimed on behalf of Australian ministers, that they have never diverted the riches of the State to their own personal gain. Let us freely grant that in some important English-speaking communities such virtue is all too rare; and let us give all honour to Australasian ministers for that they still hold it dear. But what are we to say to the publication of misleading accounts, false balance sheets and fictitious returns by authority of the State? It cannot be urged that ministers were unaware of the irregularity of their proceedings, for it was constantly brought to their notice by the auditors. It cannot be advanced that political exigency is sufficient excuse; for the ministers and their apologists expressly debarred themselves from any such plea. They asserted again and again that the money borrowed by the State was expended on commercial undertakings in accordance with business principles; and they must, therefore, be judged by the code, not of political, but commercial ethics. What, again, are we to say of the ministers who, after admitting, under the legitimate torture of press criticism,
that a certain balance sheet was misleading, not to say false, none the less advised the Governor to countersign that same false balance sheet, and suffered it to pass into the English official returns as correct? What, further, shall we say of the people which, after the exposure of such a scandal by the press, allows the guilty ministry to remain quietly in office, and retire on its laurels? Lastly, what shall we say of New South Wales and of its present Premier? In the summer of 1892 that Premier, Sir George Dibbs, came to England to support the tottering credit of his Colony. He wrote a long letter to the
Times in defence of Australian financial administration in general, and of New South Wales finance in particular; he succeeded in reassuring English investors to some extent (for he was received with honour in high places, and even knighted), and is said to have actually raised the New South Wales Government Stock one per cent. He then pressed the Chancellor of the Exchequer hard to open Colonial Government Stock to English trustees; most fortunately without success. Shortly after he returned to his Colony. Within six months he saw it sunk in hopeless financial collapse; within nine he had, by the establishment of a forced paper currency, virtually admitted its bankruptcy. Now, one would have thought that a Premier so ignorant of the financial condition of his Colony as to cry up its soundness and stability (and make a journey to England for the purpose) but half a year before a confession of insolvency—one would have thought, I say, that a minister so ignorant, would have been forthwith driven from office. On the contrary, he not only remains in office, but has received a public testimonial (£700 was, I think, the amount subscribed) for his eminent services to his country. Such sympathy with ignorance seems, at first sight, a little difficult to account for, in view of the free education so liberally supplied by the State to every citizen in New South Wales, though, to directors of shaky companies, and indeed, to debtors at large, it must be very full of encouragement and comfort. But surely it must be conceded that a community in which executive power and public feeling conspire to set at naught the sanctity of
obligation, is, to say the least of it, in a very unsound condition. The whole fabric of State Socialism depends for stability and coherence on the due maintenance of mutual obligation between citizen and State. Yet the State, as we have seen, neglects to uphold it, even as between citizen and citizen; and if man keeps not faith with his brother, whom he has seen, how shall he keep it with the State, which he has not seen? Why, lastly, should men hesitate to abuse the trust of their fellow men, when the State itself, which is the pattern for all, does the like to a fellow State?

It may be replied that education is the means whereby such evil may be corrected. Now, we hear a great deal about education in Australia and of the consequent intelligence of its citizens; but the same fundamental mistake runs through the whole scheme of Australian State Socialism—namely, the grant of benefit without the exaction of sacrifice—and in the case of education shows itself as the imparting of knowledge without the enforcement of discipline. Mr. Gladstone recently said that the English are an undisciplined race; and the assertion contains so much truth that it is much to be regretted that it should have been spoiled by its context; for the English are at any rate patient of discipline, which is precisely the point at which the Irishman fails. The English, as compared with the Germans, are decidedly undisciplined; and the Australians, as compared with the native English, are even more decidedly undisciplined. The cause is not far to seek. A settlement in a strange land is not formed by the steady, the soberminded and the commonplace; these can do well enough at home; but by the discontented, the restless, the adventurous and the enterprising, who are attracted by the relief from discipline and restraint—by the liberty to fight the battle of life in their own way. Even after the settlement has become a colony the population is fed mainly by the influx of men of similar temperament; for the man who leaves his native land—whether as an emigrant to seek his fortune or as a colonist to make a new home—is plainly a man who is not satisfied with it and hopes to do better. Thus in all new countries there is, so to speak, a kind of hereditary
predisposition to indiscipline, which shows itself mainly in the relaxation of parental authority. All the more reasons, it will be urged, why the State should take the rising generation in hand. The State has taken the rising generation in hand accordingly, and has absolved parents from all responsibility in respect of the making of citizens. The decline of the family, which is the fate that Dr. Pearson predicts for the civilized world, is rapidly accomplishing itself in Australia; but the rise of the State in its place is invisible, except to those who pretend to see it in columns of reckless expenditure. The ministers of the State have so little conception of the responsibility that the State has assumed that they ignore the necessity for inculcating obedience as the first of all lessons. In one Antipodean Colony which I know, it was proverbial that if a schoolmaster attempted to enforce discipline by proper punishment, the parents promptly complained to the member for the district, the member complained to the Minister of Education, and the schoolmaster ran great risk of dismissal. What wonder that the children kick up their heels at all authority, and grow up to become larrikins? Parents wash their hands of them as soon as they are old enough to be put in charge of the State; the State washes its hands of them as soon as school hours are over; and yet the children are expected to grow up good citizens. As to higher education, Dr. Pearson, who is a most competent witness, shall himself tell us how and why it is valued in Australia: ‘In the English Colonies I have known the tendency is to tolerate University training as a necessity for professional men; but to regard primary school education, or something only a little above it, as sufficient for all the needs of practical men and men of the world. Indeed, high schools in Australia seem to be maintained chiefly because some people like their children to have the distinction of a rather costly training; because a few others intend to send their sons and daughters into professions; and because a good many find it convenient to keep their children of a certain age away from home during the day.’

Such is the spirit in which the citizens receive such gifts of the State as they consider to pass the needs of every day.
How, then, to recall Dr. Pearson’s words already quoted, are they to gain knowledge of the immaterial benefits with which every historic State endows its citizens—the great deeds which have formed the national character, the winged words that have passed into current speech, the example of lives and labours consecrated to the Commonwealth? It is to historic England that the Australian owes whatever significance he may possess. What does he know of it? and in what light is that historic England displayed to him by the State? First, as a credulous and convenient loan agency, and latterly as a grasping and suspicious creditor. Whether it wished it or not, this is what the State in Australia has done; and for noble deeds, winged words and lofty examples the Australian must fall back on such men as Sir George Dibbs.

This is on the whole the blackest blot on the administration of State Socialism in Australia—it has corrupted the national character. If the situation were merely that of communities wherein a few rogues at the head of affairs had embezzled public money, borrowed on the public credit, and absconded therewith, then we might contemplate it with comparative equanimity and look with confidence for ultimate revival. But in Australia such a scandal in high places has been escaped only at the price of far greater mischief. The borrowed millions have been lavished on the people at large—every soul has had his share of the plunder—and the absconders are numbered by thousands. The colonists have played at work for so long that they have forgotten how to work in earnest; and industry and honesty have gone to the wall. And yet, if we forget (as we can afford to forget) the early days of penal settlement in Australia, and think only of more recent times, I think we must admit that there was plenty of good human material to the State’s hand for the making of a solid and prosperous community. The deeds of the pioneers and explorers and early settlers are rightly enshrined as monuments of energy and enterprise; and it is not too much to say that the early traditions of Australia are of hard work, perseverance and self-help. Whatever of good there is in Australian life (and there is much) is due to these
traditions and to the habits that grew up along with them. Colonial hospitality is proverbial—indeed, hospitality (as we understand it in England) is too weak a word to express this side of the colonial character. Colonial neighbourliness is another virtue which equally deserves to pass into a proverb. Indeed, I know nothing more beautiful to see than the spontaneous and unreflecting self-abnegation wherewith colonists come forward to share the burden of a neighbour’s sickness or distress. Young clerks, for instance, who are busy at their desks all day and, it may be, have to prepare for an examination all the evening, relieve each other and keep each other company over a neighbour’s sick bed—sacrificing pleasure, health, rest, and even prospects, without the slightest consciousness of performing more than the simplest neighbourly duty. Such virtues as these the State could not destroy if it would; but the old energy and self-reliance it has done its best to destroy, with a lamentably full measure of success. ‘The Lord will provide’ is a text with a dangerous double-edge; ‘the State will provide’ is an excuse for idleness and shiftlessness; ‘the State will provide at another States expense’ is an irresistible exhortation, not only to idleness, but dishonesty. It has first corrupted the commendable and sturdy pride of the colonists in their young motherland into noisy, blatant conceit, and finally smothered it in shame.

Seeing, then, things as they are, I think we have at least as much right to take State Socialism in Australia for a failure as Dr. Pearson has to treat it as a success; and that we are justified in reasoning from this failure to other failures, just as he reasoned from this assumed success to other successes. Of course it may be urged, not without plausibility, that the experiment of State Socialism has not been fairly tried in Australia; that it is incomplete; that the system has broken down for the moment only; that the recuperative power of young communities is great; that one should not be in too great a hurry to rush to sweeping conclusions. That there may be some force in such objections I will not dispute. But I am obliged to ask, What is a fair trial of State Socialism? Are we to declare all trials unfair, until at last one be found,
or claimed, to be successful? And when are we to declare the experiment complete, if not at the stage where the explosion of bankruptcy brings the whole laboratory about the experimenters’ ears? As to the recuperative powers of young communities
*4, these depend not upon mere natural resources, but principally upon the citizens, or, as we may now say, with thanks to Dr. Pearson for teaching us the word, upon national character. The national character in Australia has, I think, been sufficiently proved to have suffered very seriously from State Socialism. Where, then, is ground for hope of swift recovery?

Let us now, therefore, pass to the consideration of the question whether State Socialism is as likely to break down in other countries as in Australia. The Australian Colonies are under the rule of a democracy; and, as Sir Henry Maine pointed out many years ago, democracy is a terribly expensive system of government. Are we to look for a similar collapse of State Socialism in Germany, where administration is from long habit and tradition conducted on the most economical principles, and the people, from long centuries of suffering and misfortune, are drilled, disciplined and patriotic? And if not in Germany, are we to look for it in England, which represents the mean between these two extremes? I do not question for a moment but that in all cases the effect of State Socialism will in the long run be the same. For, whether under the guidance of an enlightened despot, of a hare-brained Kaiser or an ordinary demagogue, State Socialism seems to proceed on a false principle towards the fulfilment of an impossible task. At the core of the system is to be found the oft-exploded
fallacy that all men are equal; presenting itself in the still more preposterous notion that all men are equalizable. On what other possible hypothesis could Dr. Pearson have worked out his conclusion as to the decay of individual character? State Socialism is, in fact, the creation of the ever-increasing multitude of civilized men who are oppressed with the sense of the finality of this life. They have seen, from the teaching of history, that hitherto it has always been the fate of a large fraction of mankind to serve the remainder; that in fact history is simply the record of the struggles of individuals to pass from the class that serves to the class that is served, and of the efforts of communities to adjust the relations between the two to the current ideas of justice. Speaking generally, it can hardly, I think, be denied that the fraction of mankind that is served is superior to the class that serves it. It is not necessarily a question of merit in them; it is simply an exemplification of the unpleasant but incontestable truth that, broadly speaking, a lucky man for the purposes of this life is better than an unlucky man. The Church, while unable to resist the temptation to try and do something towards relieving the distress of the unlucky, always kept the promise of redress in a future life in reserve as a final resource, when all others should fail. The State is far bolder. It undertakes to make this life potentially endurable and pleasant to all—to say that henceforth there shall be no such division of men into servers and served; but that all men shall serve the State, and the State serve all. And this it hopes to accomplish by taking the human organism in hand almost from the cradle, passing it (to take an extreme case) through the State crèche into the State school, and from the State school into the State workshop, from the State workshop to the State asylum for the old, and from the State asylum to the State grave. But this is a process which costs money; and who is to provide the money? In Australia it was claimed for a time that this problem had been solved; but in truth it was only evaded. State Socialism there worked on the old lines—that there was a class to serve and another class to serve it. The class to be served was the colonist, and the class to serve was the British
capitalist. But the British capitalist kicked; and the system broke down, with disastrous results both to capitalist and colonist; and now the situation is recognized in its true light as reversed, i.e. that the capitalist claims the service of the colonist.

In other countries the methods of State Socialism can be only superficially different. The savings of successful natives instead of those of foreigners will be appropriated for the supposed happiness of the unsuccessful, and the certain demoralization of all. This has been done even in Australia itself, where the Government Savings Bank deposits have in some cases been taken by the State to meet current expenses, and virtually form a portion of the national debt: indeed, in Victoria the
Melbourne Argus openly says that they may as well be reckoned as such. Now, if a schoolmaster were to fix an arbitrary standard of marks, far below the ‘highest possible,’ for his pupils, and, deducting the excess gained over that number by the first boy, should add the difference to the marks gained by the last boy, we should call him an idiot, ignorant of the rudiments of his profession. Yet this is the process which under State Socialism the State proposes to pursue towards its citizens. The pace of a cavalry charge is (or rather was) supposed in theory to be regulated by that of the slowest horse in the regiment. Military men, by reputation the most precise and hidebound of pedants, have freed themselves without difficulty in practice from so absurd a restriction; for they recognized the value of the counter-proposition—that if every bridle could be cut at the supreme moment, a cavalry charge could not fail to sweep everything before it. Yet the pace of the slowest horse is the ideal which, consciously or unconsciously, State Socialism has perpetually before its eyes. The carthorse cannot gallop like the thoroughbred, so the thoroughbred must be hobbled to bring him back to the carthorse. It is claimed, of course, that State Socialism can, so to speak, raise the general average speed of the carthorse; and so conceivably it may, but, by Dr. Pearson’s own confession, not by very much. But the point is that the ideal of the State, particularly of the
democratic State, is the lowering of standards. The same influence is at work everywhere and is traceable with equal clearness in trades unions and would-be-intellectual society cliques, viz. the reduction of the standard of excellence to the shallowness of the meanest member’s capacity; the claim that the best shall fare no better than the worst; the ostensible exaltation of all geese to be swans; the veritable attempted degradation of all swans to be geese.

Now, is it conceivable that such a system can endure? That the State will attempt to make it permanent I cannot doubt, for I have seen in Australasia with what desperate jealousy it will endeavour to throttle all private undertakings which it chooses to consider encroachments on its province; nor do I think it the least unreasonable to believe that, in its efforts to enforce it, the State may be as intolerant of the right of private judgement, and as ruthless in its endeavour to suppress it, as any church. But that the system will break down in bankruptcy long before it can be pushed to the limits now assigned to it seems to me to be inevitable. For from whence are to come the funds to support it? It is useless (as has been very frequently pointed out) to indicate the millionaire with one hand and the pauper with the other, and ask whether it is right that the one should have been permitted to make his million and the other to sink to starvation. If a country wants millions it must allow those that can to make them, or it will never get them at all; in a word, it must give the lucky men liberty to follow out their luck. If, while a man is trying to make his million, the State perpetually interferes to prevent him from making it, the million will never be made, by the State or the beggar or any one else. But this is exactly what State Socialism proposes to do, forgetting that though the State can make, and does make, beggars by the thousand, it cannot make a millionaire. Nor does it weigh in the slightest degree with the officials of State Socialism that a millionaire, when once he has made his million, as often as not hands back a large portion of it, of his own free will, to the service of the public. The making of a million is one way whereby a man can show
his superiority to other men, if in no more than the art of thriving according to the material standard of this world; and demonstrated individual superiority is what State Socialism cannot endure. For State Socialism in practice is the embodiment of the jealousy that the unsuccessful feel towards the successful. Meanwhile, when the cloud of bankruptcy comes up over the horizon, the State (as may be observed in Australia) suddenly relaxes its hold of individuals and begs them to go to work as they will, so they do but consent to save it; in a word, State Socialism falls back on personal liberty and private enterprise as its only hope of salvation. It is noticeable too that in this way, as in others, the State, so far from holding the highest place in men’s minds, grows to connote something of inferiority, to become, in fact, somewhat a term of opprobrium. In the public offices of the whole world the delay which the State alone can afford to permit in the transaction of business is so well recognized as to enjoy its own name of ‘red-tape.’ But this is a small thing compared to certain others. In London, for instance, some of the working class prefer to pay for the education of their children in private establishments rather than suffer them to associate with those that they meet in the State schools. So also in a New Zealand town I saw a private school, which undertook no more, nominally, than the elementary State schools, filled up immediately with children of parents for whom the State standards were not high enough. These parents, almost all of the working class, preferred to educate their children at their own expense rather than make them over to the State to be educated gratis; and this, not from mere vulgar love of ostentation, but from honest preference for what was good though dear over what was cheap and nasty. In plain English, the State standard represented with them the lowest, and was accordingly contemptible to them. So likewise with the Civil Service. While the State lived on borrowed money the Civil Service was overgrown and overmanned. When the State came to live upon its own resources all this was changed and the service became, very naturally and justly, a by word. Thus, not only did the State earn an evil name as
an employer, but, worse still, it was badly served. Finally, we come to the crucial instance of State credit. Dr. Pearson’s remarks on the superstitious trust reposed in a State guarantee are so admirable that they must not be weakened by paraphrase in these pages. It is sufficient to say that he shows with unerring force that a guarantee by the State, to merit confidence, requires as good testimonial to character as that of any other corporate guarantor. We use the phrase ‘as safe as the Bank of England.’ There is no corresponding Bank of Australia; but the Government Savings Bank takes its place as the nearest equivalent. Yet the State Savings Banks in Australia, as we have seen, are used by the Australian Governments as milch kine; and the deposits in one case have been swept into the national debt. As to State railways and State works, enough has already been said. State balance sheets seem to be at least as dubious in some European countries, where State Socialism is in the ascendant, as in Australia itself. Latterly, State prosecutions have also fallen into disrepute, as they well might, after the Panama scandals in France, and the minor, but equally unpleasant, ‘Davies’ scandals in Australia. All these things tend to bring the State into contempt, and, more, into well-deserved contempt—a dangerous and lamentable thing, even in a free community; a fatal calamity in a country governed according to the standards of State Socialism.

But, in spite of the acknowledged and unacknowledged drawbacks of State Socialism, it is likely, so Dr. Pearson warns us, to be forced upon us by circumstances, e.g. by the limits imposed on the higher races by climate, the consequent closing of present outlets for trade and energy, and the turning of every nation inward upon itself. But, admitting as we freely may, the reality and pressure of these dangers—what deliverance is to be expected from the State? Compulsory military service—a people in arms. I am not one of those who lightly dismiss the advantages of compulsory military service, and condemn it as anathema; but surely efficient military service is as much dependent on national character as any other national service. Surely a people
which throws itself in despair into the arms of an helpless abstraction; which fears the bare idea of the worst going to the wall; which shrinks from the laws of nature and tries to evade, instead of obeying and so subduing them—surely such a people will never win battles. Destruction of family ties (a consummation which is rapidly accomplishing itself) and decay of individual character—are these the stuff of which conquering armies are made? It must be remembered too that highly civilized communities have generally ended by hiring mercenaries to do their fighting for them; and the same may happen now—nay, is more than likely to happen, if the natural outlets to individual energy are closed—with the usual results. State Socialism, in seeking to lessen competition, is destroying the fighting spirit.

Then once more the question of money crops up—money, the sinews of war. Also there is another consideration to which we are led by Dr. Pearson’s vision (amply justified by existing conditions all round us) of future increase of great cities, standing armies and national debts, viz. How are these communities, cramped within their own limits, to be fed? If the town population is for ever to increase at the expense of the country, where is the food to come from? From the inferior races outside those limits? But they may have none to spare, or refuse to spare what they have. State Socialism delights in large towns, for it is in them that the power of the State may be most strikingly exhibited, while the sense of oppression born of confinement within streets helps to render men more docile to its teaching. In the country the State can never obtain the ascendency which it may gain in the towns; and it is in the country accordingly that the men who love liberty and independence are most likely to be found. In Australia, as we have seen, State Socialism, which for a time kept town and country alike in subjection, by pampering both at the expense of the British capitalist, has been compelled to transfer all burdens to the country. Whether the country will stand it remains to be seen; but that it will do so without a struggle to assert its political supremacy I do not believe. Thus there is every indication
that State Socialism, so far from promoting peace and contentment within a community, simply tends to embitter the country against the town; and it is in the combat between the two that we may expect to see it fall, both in Australia and elsewhere. For though we have few clues as to the issue of such strife, we have at least one, and that of no ordinary significance, viz. that life in large towns means physical degeneration. In England the country has now lain for some years under the heel of the towns; but the towns must decline with the decline of foreign trade, which townsmen in their wisdom are doing their best to accelerate. When the ‘boom’ on which the English towns grew and throve for half a century has been finally broken down (the process of destruction is still going on)—then, perhaps, we may expect the English State to remember that there are country districts and country interests even in England. Whether the country districts will feel as kindly towards the State, and help her in her hour of need, is another question.

Altogether, we are forced to accept Dr. Pearson’s conclusion, which is (if I understand it aright) that State Socialism is the death-cry of our civilization. It is only reasonable to assume that our civilization will perish just as other civilizations have perished before it—for it seems to be incontestable that the lower races tend to outbreed the higher, just as curs outbreed pure foxhounds. The tendency of the moment (and it may be of more than the moment) is to abandon all effort and to yield place to the inferior races, provided they will but let us alone to enjoy our State Socialistic dreams. Ireland, it is said, stops the way—is the bar to all English legislation. In that case—long may she stop the way, and keep us from the most ignoble form of national suicide!

J. W. FORTESCUE.

The
net loss on this exhibition exceeded £200,000.

I am aware that two of the Australian provinces have recently succeeded in floating loans in London, and that it is now assumed that their principal difficulties are over. None the less I see no occasion to alter a word that I have written; for without going into detail I may say that I do not share the general confidence in such sudden resurrection from collapse; and am strengthened in my opinion by two recent enactments of the Parliament of New Zealand, which could only have been passed in the fear of a serious financial crisis, and are not justified even by that. If New Zealand’s recovery be so slow and uncertain, how much slower and more uncertain must Australia’s be!

Essay VI, Acworth

Categories: Thomas Mackay

A Policy of Free Exchange: An Argument Against Socialism and Socialistic Legislation

By Thomas Mackay

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by the Hon. J. W. Fortescue

IV.

State Socialism and the Collapse in Australia

Annual EconTalk Survey

A Policy of Free Exchange: An Argument Against Socialism and Socialistic Legislation

By Thomas Mackay

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Translator/Editor

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by the Hon. J. W. Fortescue

IV. State Socialism and the Collapse in Australia

Annual EconTalk Survey

IV.

State Socialism and the Collapse in Australia