Australia and New Zealand are commonly taken as the most advanced of all countries in government ownership, labor reforms, and "State Socialism." Indeed they are often pictured as almost ideally governed, and the credulity with which such pictures are received shows the widespread popularity of "State Socialism."

The central principle of the Australian and New Zealand reforms is, however, not government ownership or compulsory arbitration, as commonly supposed, but a land policy. By means of a progressive or graduated land tax it is hoped to break up all large estates and to establish a large number of small proprietors. When it was said to Mr. Fisher, the new "Labour Party" Premier of Australia, that this policy was not Socialism, he replied laconically, "It is my kind of Socialism."[78]

The "State Socialism" of Australia and New Zealand is fundamentally agrarian; its real basis is a modernized effort to establish a nation of small farm owners and to promote their welfare.

Next in importance and closely connected with the policy of gradually bringing about the division of the land among small proprietors, is the policy of the government ownership of monopolies. Already New Zealand is in the banking business, and the Australian Labour Party proposes a national bank for Australia. National life and fire insurance are instituted in New Zealand; the same measures are proposed for Australia. Already many railroads are nationally owned, and it is proposed that others be nationalized. Already extensive irrigation projects have been undertaken; it is proposed that the policy should be carried out on a wider scale. But the Australian Labour Party is not fanatical upon this form of "State Socialism." It does not argue, like the British Independent Labour Party, that the civilization of a community can be measured by the extent of collective ownership, for Australasia's experience has already shown the immediate and practical limits of this kind of a movement. New Zealand is already burdened with a very large national debt; Australia proposes that its debt shall be increased only for the purpose of building commercially profitable railways or irrigation schemes, etc., and not in any case for the purpose of national defense or for other investments not immediately remunerative.

The national debt, aside from that based on profit-making governmental undertakings, like railways, is to be reduced, and nationalization of other monopolies is not to be undertaken until new measures of taxation have become effective. These are a graduated land tax and an extension of the graduated income and inheritance taxes.[79]

The program concludes with vigorous measures for national defense. Australia is to own her navy (supported not by loans, but by taxation), and is to be as independent as practicable of Great Britain. She feels a need for military defense, but she does not propose to have a military caste, however small; the whole people is to be made military, the Labour Party stands for a citizen defense force and not for a professional army. Finally, Australia is to be kept for the white race, especially for British and other peoples that the present inhabitants consider desirable.

There remains that part of the program which has attracted the most attention, namely, the labor reforms: workingmen's insurance, an eight-hour day, and an increase of the powers of the compulsory arbitration courts. Already in fixing wages it has been necessary for the court to decide what is a fair profit to the employers, so profits are already to some degree being regulated. It has been found that prices and the cost of living are rising still more rapidly than wages; it is proposed that prices should also be regulated by withdrawing the protection of the customs tariff from those industries that charge an unduly high price.

I have mentioned the labor element of the program last, for the Australian Labour Party is a democratic rather than merely a labor movement. The Worker's Union, and the Sheep Shearer's Society of the Eastern States, enrolled from the first all classes of ranch employees, and "even common country storekeepers and small farmers."[80] Some of the miners' organizations have been built on similarly broad lines, and these two unions constitute the backbone of the Labour Party. The original program of the New South Wales Labour Electoral League, which formed the nucleus of the Labour Party in 1891, proposed to bring together "all electors in favor of democratic and progressive legislation," and was nearly as broad as the present program; that is to say, it was by no means confined to labor reforms.

But are there any other features in the Australian situation, besides the dominating importance of the land question, that rob this program of its significance for the rest of the world? It cannot be denied that there are. In the first place, it is only this recent social reform movement that has begun to put New Zealand and Australia under real democratic government, and this democratization is scarcely yet complete, since the constitutions of some of the separate Australian States and Tasmania contain extremely undemocratic elements; while the federal government is dominated by a Supreme Court, as in the United States. Consequently it is only a few years in some of the States since such elementary democratic institutions as free schools were instituted. It is evident, on the other hand, that countries establishing democratic or semidemocratic institutions under the conditions prevailing in the world as late as 1890, when the great change took place in New Zealand, or during the decade, 1900-1910, when the political overturn gave Australia to the Labour Party, should be more advanced than France, Germany, Great Britain, or the United States, where the latest great overturn in the democratic direction occurred in each instance a generation or more ago.

So also Australia and New Zealand which, on the one hand, are still suffering from the disadvantage of having lived until recently under a system of large landed estates, on the other hand have the advantage of dealing with the land question in a period when the governments of these new countries are becoming rich enough, through their own enterprises, to exist independently of land sales, and when farmers are more willing to increase the power of their governments, both in order to protect themselves from the encroachments of capital and of labor, and directly to advance the interests of agriculture. The campaign to break up the large estates has kept the farmers engrossed in politics, and this has occurred in a period when industrial organization has made possible a whole program of "Constructive State Socialism." By taking up this program the farmers and those who wished to become farmers have at once looked to their own interests and secured the political support of other small capitalists and even of a large part of the workingmen.

But working against the nationalization of the unearned increment, against the policy of leasing instead of selling the public land, central features of every advanced "State Socialist" policy, is the fact that the small farmers, daily becoming more numerous, hope that they might themselves reap this increment through private ownership. In no national legislation is it proposed to tax away this increment in agricultural land, which preponderates both in New Zealand and Australia. But, while in other countries the agricultural population is decreasing relatively to the whole, in New Zealand the settlement of the country by the small farmers has hitherto led it to increase, and the new legislation in Australia must soon have the same result. So, in spite of the favorable auspices, it seems that the climax of the "State Socialism," the transformation of the small farmer into a tenant of the State is not yet to be undertaken, either in the shape of land nationalization or in the taxing away of unearned increment. And while the Australian Labour Party as an organization favors nationalization, a large part of those who vote for this party do not, and its leaders have felt that to have advocated nationalization hitherto would have meant that they would have failed to gain control of the government. And in proportion as the new land tax creates new farmers, the prospects will be worse than they are to-day.

The existing land laws of New Zealand are extremely moderate steps in the direction of nationalization. In 1907, after the best land had been taken up, a system of 66-year leases was introduced, but only as a voluntary alternative to purchase. After 1908 the annual purchases of large estates were divided into small lots and leased for terms of 33 years, but this applies only to a relatively small amount of land. It was only in 1907 that the graduated land tax began to be enforced in a way automatically to break up the large estates as it had been expected to do, and it was only in 1910 that the new and more heavily graduated scale went into effect. And finally it was only in 1907 that large landowners were forbidden to purchase, even indirectly, government land. It has taken all these years even to discourage large estates effectively, to say nothing of nationalization.

"Some writers have predicted that the appetite for reform by taxation will grow, and that the taxation will be increased and the exemptions diminished until all the rent will be taken and the land practically confiscated, according to the proposals of Henry George. But the landless man, when he becomes a landholder, ceases to be a single taxer, and is strongly opposed to Socialism. The land legislation of New Zealand, although apparently Socialistic, is producing results directly opposed to Socialism by converting a lot of dissatisfied people into stanch upholders of private ownership of land and other forms of private property. The small farmers, then, are breaking away from their former allies, the working people of the towns, who now find themselves in the minority, but who are increasing in numbers and who will demand, sooner or later, a large share in the product of industry as the price of loyalty to the capitalistic system."[81]

Without land nationalization the process of nationalizing industry cannot be expected to proceed faster than it pays for itself—for we cannot reckon as part of the national profits the increased land values national enterprises bring about. Nor will capitalist collectivism at this stage proceed even this fast. Not only do the small taxpayers oppose the government going into debt, but as taxpayers they are responsible for all deficiencies, and they want only such governmental enterprises as both produce a surplus and a sufficient one to pay the deficits of the nonproductive departments of government. To-day only about one fifth of the taxpayers pay either land or inheritance taxes. But the increasing military expenditures and the greater difficulty of securing large sums by indirect taxation will increase this proportion. It is likely, then, that State enterprises which, under private capitalism, were used recklessly as aids to land speculation will now be required, as in Germany and other continental countries, to produce a surplus to relieve taxpayers. Private capitalism used the State for promoting the private interests of its directors, State capitalism uses it to produce profits for its shareholders, the small farmers, as taxpayers, or in the form of profits distributed among them as consumers. Only as the government begins to take a considerable share of that increased value in land which nearly every public undertaking brings about, will all wisely managed government enterprises produce such profits.

The advance of "State Socialism," though it has several other aspects, can be roughly measured by the number of government enterprises and employees. The railways, telegraphs, and the few government-owned mines of New Zealand, have been calculated to employ about one eighth of the population, a greater proportion than in America or Great Britain, but scarcely greater than in Germany or France—and not a very great stride even towards "State Socialism." And it seems likely that the present proportion in New Zealand will remain for some time where it is. Government banking, steamships, bakeries, and the government monopoly of the sale of liquor and tobacco might not prove immediately profitable, and are less heard of than formerly.

Where "State Socialism" has proceeded such a little distance, the material benefits it promises to labor (though in a lesser proportion than to other classes) have not yet accrued. "It must be admitted," write Le Rossignol and Stewart, "that the benefits of land reform and other Liberal legislation have accrued chiefly to the owners of land and other forms of property, and the condition of the landless and propertyless wage earners has not been much improved." Indeed, the condition of the workers is little, if any, better than in America. Mr. Clark writes: "The general welfare of the working classes in Australasia does not differ widely from that in the United States. The hours of work are fewer in most occupations, but the wage per hour is less than in America. The cost of living is about the same in both countries. There appears to be as much poverty in the cities of New Zealand as in the cities of the same size in the United States, and as many people of large wealth." It is no doubt true, as these writers say, that, of the people classed as propertyless, "many are young, industrious, and well-paid wage earners; who, if they have health and good luck may yet acquire a competency" in this as in any other new country. Yet it is only to those who "have saved something," i.e. to property holders, that the State really lends a helping hand.

Even when New Zealand becomes an industrial country, the writers quoted calculate that "it should be possible for the party of property to attach to itself the more efficient among the working class, by giving them high wages, short hours, pleasant conditions of labor, opportunities for promotion, a chance to acquire property, insurance benefits, and greater advantages of every kind than they could gain under any form of Socialism. If this can be done, the Socialists will be in a hopeless minority."

Here we have in a few words the universal labor policy of "State Socialism." Labor reforms are to be given to the working class first, to encourage in them as long as possible the hope to rise; second, when this is no longer effective, to make the upper layers contented, and finally to "increase industrial efficiency," as these same writers say—but at no time to put the workers on a level with the property-owning classes.

Indeed, it is impossible to do more on a national scale, as these writers point out, for both capital and labor are international. If "State Socialism" were carried to the point of equalizing the share of labor, either immigration would be attracted until wages were lowered again, or capital would emigrate, or the nation would have to defend its exclusiveness by being prepared for war.

"It is hard to see how any country, whether Socialistic or individualistic in its industrial organization, can long keep its advantage over other countries without some restriction of immigration. A thoroughgoing experiment in collectivism, therefore, could not be made under favorable conditions in New Zealand or any other country, unless that country were isolated from the rest of the world, or unless the whole world made the same experiment at the same time."

As between comparative isolation possibly in the near future and world-wide or at least international Socialism, certainly many years ahead, the Australian Labour Party, under similar circumstances to that of New Zealand, has chosen to attempt comparative isolation. It does not yet propose to keep out immigrants, but it makes a beginning with all non-white races, and it stands for a policy of high protection and a larger army and navy. Naturally it does not even seek admission into the International Socialist Congress, where if any Socialist principle is more insisted upon than another it is Marx's declaration that the Socialists are to be distinguished from the other working class parties only by the fact that they represent the interests of the entire working class independently of nationality or of groups within the nation.

Moreover, the militarism necessary to enforce isolation may cost the nation, capitalists and workers alike, far more heavily than to leave their country open to trade and immigration. Indeed, it must lead, not to industrial democracy, or even to capitalistic progress, but to stagnation and reaction. The policy of racial exclusion will not only increase the dangers of war, but it will bring little positive benefit to labor, even of a purely material and temporary kind, since the farming majority will not allow it to be extended to the white race. Instead of restricting immigration, the new government projects require a thicker settlement, and everything is being done to encourage settlers of means and agricultural experience, and we cannot question that the coming of white laborers will be encouraged when they are needed.

The size of the farms the government is promoting in New Zealand proves that the country is deliberately preparing for a class of landless agricultural laborers, and Australia is following the example. Since these new farms average something like two hundred acres, we must realize that as soon as they are under thorough cultivation they will require one or more farm laborers in each case, to be obtained chiefly from abroad, producing a community resting neither on "State Socialism" nor even on a pioneer basis of economic democracy and approximate equality of opportunity similar to that which prevailed during the period of free land in our Western States.

Unmistakable signs show that in New Zealand an agrarian oligarchy by no means friendly to labor has already established itself. Even the compulsory arbitration act which bears anything but heavily on employers in general, is not applied to agriculture. After two years of consideration it was decided in 1908 that the law should not apply on the ground that "it was impracticable to find any definite hours for the daily work of general farm hands," and that "the alleged grievances of the farm laborers were insufficient to justify interference with the whole farming industry of Canterbury" (the district included 7000 farms). Whatever we may think of the first justification, the second certainly is a curious piece of reasoning for a compulsory arbitration court, and must be taken simply to mean that the employing farmers are sufficiently powerful politically to escape the law. The working people very naturally protested against this "despotic proceeding," which denied such protection as the law gave to the largest section of workers in the Dominion.

What is the meaning, then, of the victory of a "Labour Party" in Australia? Chiefly that every citizen of Australia who has sufficient savings is to be given a chance to own a farm. A large and prosperous community of farmers is to be built up by government aid. Even without "State Socialism" or labor reform the working people would share temporarily in this prosperity as they did to a large degree in that of the United States immediately after the Civil War, until the free land began to disappear. It was impossible to pay exceptionally low wages to a workingman who could enter into farming with a few months' notice.

The Labour Party hopes to use nationalization of monopolies and the compulsory regulation of wages to insure permanently to the working classes their share of the benefit of the new prosperity. How much farther such measures will go when the agricultural element again becomes dominant is the question. It is already evident that the Australian reform movement, like that of New Zealand, includes, or at least favors, the same class of employing farmers. The fact that a Labour Party is in the opposition in New Zealand, while in Australia a Labour Party has led in the reforms and now rules the country, should not blind us to the farmers' influence. The very terms of the graduated land tax and the value of the farms chosen for exemption show mathematically the influence, not alone of the small, but even the middle-sized farmers. Estates of less than $25,000 in value are exempt, and those valued at less than $50,000 are to be taxed less than one per cent. Such farms, as a rule, must have one or more laborers. Will these employees come in under the compulsory arbitration law? If they do, will they get much benefit? The experience of New Zealand and the present outlook in Australia do not lead us to expect that they will.

Many indications point to a coming realignment of parties such as was recently seen in New Zealand, when in 1909 it was decided to form an opposition Labour Party. And it is likely to come, as in New Zealand, when the large estates are well broken up and the agricultural element can govern or get all they want without the aid of the working people. Already the Australian Labour Party is getting ready for the issue. Its leaders have kept the proposed land nationalization in the background, because they believe it cannot yet obtain a majority. But it may be that the party itself is now ready to fight this issue out on a Socialist basis, even if, like the Socialist parties in Europe, such a decision promises to delay for a generation their control of the government. If the party is ready, it has the machinery to bring its leaders to time, as it has done on previous occasions. For it already resembles the Socialist parties in Europe in this, that it makes all its candidates responsible to the party and not to their constituents. That is to say, while it does not represent the working people exclusively, it is a class organization standing for the interests of that group of classes which has joined its ranks, and for other classes of the community only in so far as their interests happen to be the same.

Already the majority of the Labour Party voters are undoubtedly working people. When it takes a definite position on the land question, favoring one-family farms and short leases or else coÖperative, municipal, or national large-scale operation, and states clearly that it intends to use compulsory arbitration to advance wages indefinitely, including those of farm laborers, there is every probability that, having lost the support of the employing farmers, it will gradually take its place as a party of permanent opposition to capitalism, like the Socialist parties of Europe—until industry finally and decisively surpasses agriculture, and the industrial working class really becomes the most powerful element in society.

Space does not permit the tracing of the "State Socialist" tendency in other countries than Great Britain, the United States, and Australasia. Originally a brief chapter was here inserted showing the similar tendencies in Germany. This is now omitted, but the frequent reference to Germany later in dealing with the Socialist movement makes a brief statement of the German situation essential. For this purpose it will be sufficient to quote a few of the principal statements of the excellent summary and analysis by William C. Dreher entitled "The German Drift towards Socialism":

"The German Reichstag passed a law in May, 1910, for the regulation of the potash trade, a law which goes further in the direction of Socialism than any previous legislation in Germany. It assigns to each mine a certain percentage of the total production of the country, and lays a prohibitory tax upon what it produces in excess of this allotment. It fixes the maximum price for the product in the home market, and prohibits selling abroad at a lower price. A government bureau supervises the industry, sees that the prices and allotments are observed, examines new mines to determine their capacity, and readjusts allotments as new mines reach the producing stage....

"But the radical features of the law are not completed in the foregoing description. The bill having reduced potash prices, the mine owners threatened to recoup themselves by reducing wages. But the members of the Reichstag were not to be balked by such threats; they could legislate about wages just as easily as about prices and allotments. So they amended the bill by providing that if any owner should reduce wages without the consent of his employees, his allotment should be restricted in the corresponding proportion....

"While the law is indeed decidedly Socialistic in tendency, it is not yet Socialism. It hedges private property about with sharper restrictions than would be thought justifiable in countries where, as in the United States, the creed of individualism is still vigorous; and yet it is, in effect, hardly more than a piece of social reform legislation, though a more radical one than we have hitherto seen....

"In Germany, 'the individual withers' and the world of State and Society, with its multifarious demands upon him, 'is more and more.' This is, of course, a Socialistic tendency, but the substitute that the Germans are finding for unlimited competition is not radical Socialism, but organization....

"The State, of course, takes hold of the individual life more broadly, with more systematic purpose. The individual's health is cared for, his house is inspected, his children are educated, he is insured against the worst vicissitudes of life, his savings are invested, his transportation of goods or persons is undertaken, his need to communicate with others by telegraph or telephone is met—all by the paternal State or city.

"Twenty-five years ago the Prussian government was spending only about $13,500 a year on trade schools; now it is spending above three million dollars on more than 1300 schools....

"The Prussian State had also long been an extensive owner of coal, potash, salt, and iron mines. In 1907 a law was passed giving the State prior mining rights to all undiscovered coal deposits. In general, however, it must cede those rights to private parties on payment of a royalty; but the law makes an exception of 250 'maximum fields,' equal to about 205 square miles, in which the State itself will exercise its mining rights. It has recently reserved this amount of lands adjacent to the coal fields on the lower Rhine and in Silesia. The State has already about 80 square miles of coal lands in its hands, from which it is taking out about 10,000,000 tons of coal a year. Its success as a mine owner, however, appears to be less marked than as a railway proprietor; experienced business men even assert that the State's coal and iron mines would be operated at a loss if proper allowances were made for depreciation and amortization of capital, as must be done in the case of private companies. The State also derives comparatively small revenues from its forest and farming lands of some 830,000 acres, which were formerly the property of the Crown....

"The most important State tax is that on incomes, which is in all cases graduated down to a very low rate on the smallest income; in Prussia there is no tax on incomes less than $214. The cities also collect the bulk of their revenues from incomes, using the same classification and sliding scale as the State.

"A highly interesting innovation in taxation is the 'unearned increment' tax on land values, first adopted by Frankfort-on-the-Main in 1904, and already applied by over 300 German cities and towns....

"The bill before the Reichstag [since become a law—W. E. W.] extends sick insurance to farm laborers and household servants, a change which will raise the burden of this system for employers from $24,000,000 to $36,000,000. The bill also provides for pensioning the widows and orphans of insured laborers at an estimated additional expense of about $17,000,000....

"A better result of the insurance systems than the modest pensions and the indemnities that they pay is to be found in their excellent work for protecting health and prolonging life. Many offices have their own hospitals for the sick, and homes for the convalescent....

"All these protective measures have already told effectively upon the death rate for tuberculous diseases. In the three years ending with 1908, deaths from pulmonary tuberculosis dropped from 226.6 to 192.12 per 100,000.

"The accident system has also had a powerful effect in stimulating among the physicians and surgeons the study of special ways and means for treating accident injuries, with reference to preserving intact the strength and efficiency of the patient....

"Bismarck once, in a speech in the Reichstag, explicitly recognized the laborer's right to work. Some twenty German cities have given practical effect to his words by organizing insurance against nonemployment; and the governments of Bavaria and Baden have taken steps to encourage this movement. Under the systems adopted, the laborer pays the larger part of the insurance money, and the city the rest; in a few cases money has been given by private persons to assist the insurance."[82] [N.B. The word "Socialistic" is used by Mr. Dreher in the sense of "State Socialism," as opposed to what he calls "radical Socialism."]