The Legacy of the Hungry Mile

Terminating the Button Rents on Australia's Waterfront

Ian McLachlan

There is now almost universal recognition that Australia's stevedoring and waterfront industries constitute a major economic problem, contributing in a unique way to our declining competitiveness and our growing economic plight. The papers we have heard this afternoon have outlined, from various perspectives, the range and extent of this problem. The work of the Inter-State Commission over the last two years has been important in surveying the features and drawing a map of the waterfront and its associated industries. Its various reports are helpful documents, providing us with a common text for reference purposes, for debate and argument.

However, surveying the complex terrain and drawing a map of the waterfront and its associated industries is one thing. finding a way out of the maze which they comprise, is another. Today I have to take issue with the Waterfront plan put forward by the ISC. I do not believe the ISC has the answer to our problems.

The ISC's report, and its Waterfront Plan, was conceived five years ago. In September 1984, the then minister for Transport, Mr Peter Morris, also known as the Minister for Inquiries, established the Task Force on Shore-Based Shipping Costs under the chairmanship of Mr lan Webber. This Inquiry's Report of June 1986 was the launching pad for another inquiry into the same problem, this time by the ISC.

In December 1986, Mr Morris, together with the then Minister for Employment and Industrial Relations, Mr Ralph Willis, jointly announced that the ISC would be required to formulate a blue print for dealing with 'long term structural issues in the waterfront industry'. The ISC's Waterfront Plan was released last March. As I have said, this plan is fatally flawed. Nonetheless it is undergoing further modification by the AEWL and the WWF under the WIRA negotiations.

This is, to put it kindly, microscopic reform at glacial speed and fits into the long tradition of our history of expensive, official inquiries into the waterfront and maritime industries in Australia. These inquiries, and the governments which acted on their reports, have, tragically, embedded and compounded the problems of these industries.

There is, beyond argument, the need to look at this industry with fresh eyes; to seek to understand where, and when, and why we went wrong; and then to propose fundamental solutions, rather than reforms at the margin.

To understand the waterfront we need what economists call a model. For this purpose let us compare Australia to a large productive valley, entirely surrounded by very high and impassable mountains, except for one well defined pass, a sort of Khyber Pass. In this broad and fertile valley, we grow wool and wheat and meat and many other crops. We mine coal and iron ore, gold, base metals, alumina, and we truck these things out through this metaphorical Khyber Pass, which is our only access to the outside world.

In return for these commodities we bring in computers, and photocopiers, and machinery and some motor cars and all the things we need to prosper according to the contemporary modes of life.

Our problem is that this metaphorical Khyber Pass, through which all our trade has to flow, is owned and controlled by what is virtually an hereditary caste. This caste is an exclusive group of citizens. They have hereditary rights to the control of the Pass and they charge very substantial toll fees for the right to move goods through the Pass. Not only do they impose these exorbitant fees, but permission to move to and fro is unpredictable and sometimes arbitrary.

These privileged citizens, then, have hereditary rights to what economists now call monopoly rents. Senator Button some months ago, quite rightly, drew attention to an example of what appears to be an unusually pure form of monopoly rent, one deserving of textbook recognition. I propose that we should call it the Button Rent, in the Minister's honour.

The Minister referred to a waterside worker who was in the enviable position of being driven in a taxi to the port, to clock on, and then driven immediately home again, in the same taxi. He had enjoyed this lifestyle for twenty years.

I do not know whether it was the perception that the taxi fare was also part of this privileged wharfy's emolument which particularly excited Senator Button's indignation. We were not told the gentleman's name so we cannot ascertain what I am confident is also true, and that is that this person almost certainly inherited his job, and therefore his rent. This phenomenon of hereditary rights is one to which I shall return. It is an intriguing and, I think, very important part of the waterfront picture.

In Chile, until recently, the Button rents were even more highly developed. The waterside workers of that country, the trade unionists, were the owners of a medallion, which was passed on from father to son. The holders of the waterfront medallions received the Button rents from the port authorities but the actual work on the waterfront was carried out by subcontractors who were paid by the medallion owners at marginal and very low rates.

These are examples, at home and abroad, of what are legally sanctioned monopoly rents. As well as these legally sanctioned rents there is, however, a substantial body of industrial folk lore concerning the payment of illegal commissions. It would be surprising if all of the monopoly rents took the form of legally sanctioned payments, or recognised and accepted forms of quiet life on the job.

There is an obvious difference between the model I have proposed, of an Australia surrounded by impenetrable mountains except for the one passage through the mountains, and the reality of our situation.

Australia has an enormous coastline with many fine harbours. Why do we not have competition, within ports and between ports, for the transport of our goods in and out? Why is it that the existence of these substantial monopoly rents do not constitute a powerful incentive for new entrants to come into the industry and make a killing?

The answer, briefly, is that Billy Hughes, back in the first decade of this century began putting together what became a very successful monopoly, the Waterside Worker's Federation. The WWF has had ups and downs in its history but, particularly since the last war, it has survived and prospered as a monopoly enterprise. The children, grandchildren, and now great grandchildren of those privileged few who were mesmerised by the gifted Welshmen eighty and more years ago, have done well out of his creation.

Since Hughes was expelled in 1916 the WWF has had some able leaders, notably Jim Healy, and more recently Charlie Fitzgibbon. This leadership is an important part of the history of the creation and sustaining of a monopoly on Australia's waterfront.

The story of the creation of the WWF and the collection of the first, ever so reasonable, monopoly rents, is described in Fitzhardinge's biography of Billy Hughes. In 1899 Hughes was a member of the NSW Parliament representing the electorate of Lang, which covered the Darling Harbour wharf area where the coastal and interstate shipping was then concentrated. The waterfront union, like the Shearers' Union, had been broken by the crash of the 1890's and Hughes set out to rebuild it.

Hughes worked energetically for three months, persuading wharfies to join what was, in 1899, a totally moribund and bankrupt organisation. In December of that year Hughes was elected Secretary of the reconstructed branch of the Sydney Wharf Labourers Union, with a membership of 1500, and 200 pounds in its bank account.

As well as organising the wharfies Hughes organised the Trolley, Draymen, and Carters' Union. This trade union brought into Hughes' orbit the workmen who carted produce and material from the Sydney wharves to the adjacent warehouses and the Sussex St produce stores. Unorganised, they offered a likely source of alternative labour should the need arise; organised, they could be valuable allies in any dispute on the wharves. Hughes became President of this union, and remained in that office until 1916.

Hughes became the federal member for West Sydney in the first Commonwealth Parliament. When he left for Melbourne in May 1901 to take up his seat he was ambitious to create a federation which would unite all the waterfront unions, and he had secured the authority of his own Sydney union for that purpose. During the next twelve months he made rapid progress with his plans. However, early in March 1902 he found that the Sydney wharfies had gone cool on a federation, and were concerned to obtain registration with the newly created NSW Arbitration Court.

Hughes went back to Sydney and turned the Sydney wharfies around. He told them of the advantages of being able to 'discommode', 'inconvenience', and 'harass' (as he put it), through the good offices of the Australia wide WWF, shipping and stevedoring operations anywhere around Australia. The speech is quoted at length in Fitzhardinge's biography, and it is well worth reading.

In Sydney and Newcastle in February and March of 1908 there was a major waterfront strike. Billy Hughes, now a leading member of the Federal Parliamentary Labor Party, was also President of the WWF, General Secretary of the Sydney Wharf Labourers Union, President of the Trolley, Draymen and Carters Union, advocate for the Merchant Service Guild, and an extremely skilful manipulator of the press. He had a total victory over the shipowners, the stevedores, the Master Carriers and the Employers Federation.

This victory was a major step forward along the road to total control over the labour supply on the waterfront, a position finally achieved in 1942 with the establishment of the Stevedoring Industry Commission, under the National Security Act of 1939. The SIC, as part of the wartime arrangements with the trade unions, and in a position of acute labour shortage, gave the WWF responsibility for the supply of labour.

After the war there was a period of major industrial unrest. The communist issue was the dominant issue in industrial relations, indeed in politics generally. Various Acts relating to the waterfront were passed but the WWF always maintained its monopoly position as supplier of labour.

Having established an unchallenged monopoly all that remained was to legitimise and increase, bit by bit, the monopoly rents. But in the end, the monopoly rents are never enough. The successful monopolist is always, like Clive of India during his impeachment proceedings, pleading 'By God, Mr Chairman, at this moment I stand astonished at my own moderation'.

As soon as the monopoly rent becomes an important aspect of remuneration, the pivotal issue always arises of how to regulate recruitment into the industry.

There are theoretically a variety of methods of selection of new members. Vacancies could be auctioned. Or licences could be issued and traded as in taxi cabs. The Wharfies adopted the hereditary principle and have found it very successful. I have not been able to discover when it happened, but it must have been fairly early on in the history of the union.

Recently the hereditary principle was extended to include descent to the female line. 'The Australian' carried a story, on the 12 July last, concerning the successful application by Miss Sandra Elliman for a vacancy as a trainee stevedore in Townsville. I quote from the article.

'Although other women have been allowed to join the WWF she is the first to be given the opportunity to work alongside the men.

There can be no argument she has the pedigree for the job---her father and 39 year old brother are employed as stevedores in Townsville's bustling port. In fact Mr Ray Elliman, 59 and one of the established characters of the Queensland waterfront, was given his start as a 21 year-old on 10 July 1951, on the recommendation of his stevedoring father Jack---38 years to the day Sandra reported for work.

After undergoing a series of five written tests to assess her general intelligence and aptitude for the demands of wharf work, Miss Elliman fronted a selection panel last month made up of representatives of the Association of Employers of Waterfront Labour and the local WWF branch.

She and five male recruits were approved out of 76 applicants.'

There can be no doubt that the principle of sons and daughters following their parents into their occupations, be they professional, or on the land, or in trades, or even in politics, is widely accepted, and supported. The present Premier of Victoria gained critical support in his run for office, because his father had held the same office. Wills have been overturned by the courts in favour of the children of the deceased who have claimed they have been treated unfairly.

Machiavelli tells us that 'men will sooner forget the death of their fathers than the loss of their patrimony.'

The conservatives amongst us (and we all have a conservative streak) may admire an industry in which family inheritance is so deeply entrenched. However, we have to understand that this hereditary rule is a very successful mechanism for limiting the claimants to monopoly rents; rents which have been built up since Billy Hughes first set out to establish the monopoly more than eighty years ago.

A monopoly rent is a very different thing from other forms of property which are passed on from parents to children. Indeed, the fundamental difference between the ISC report, and my argument here, is that monopoly rents are not legitimate property rights. On the contrary, they are morally equivalent to ill-gotten gains, even though in this situation they are sanctioned by government approval.

Not only are those rents, in my view, illegitimate but, furthermore, they are now well beyond the capacity of the nation to support. Our competitiveness in international markets is critically dependent upon having waterfronts which are themselves internationally competitive. From that view point a particularly damaging monopoly rent on our waterfront is the one which takes the form of the benign neglect of duty or obligation---the quiet and easy life.

The WWF maintains its monopoly position not only through its control of labour recruitment but also, as the ISC report states, through its ability to prevent new entrants into the stevedoring business. Virtually all stevedoring in Australia is now carried out by five companies. Any new contestant in the stevedoring industry must obtain the approval of both the WWF and the AEWL before having access to waterfront labour.

This arrangement was formalised by the Kirby Conference in 1977, with the caveat that approval of new entrants should not be unreasonably withheld. That caveat was, arguably, for the benefit of public relations purposes only.

The ISC Report wrongly attributes the possibility of collusion to the degree of concentration in this industry. Concentration may be helpful in organising collusion but it is not a sufficient condition for it. It is the absence of any real and effective threat of new entry into the industry which enables, promotes and entrenches collusion.

The existing stevedoring companies are entirely protected, by the WWF, from the threat of new entrants. The individual ports tend to be monopolistic enterprises mostly operating under statute. The whole industry has become elegantly and tightly structured as a monopoly. This is where the Australian Waterfront differs in a significant way from the British Waterfront. Up until last April there were, in Britain, two waterfront industries. One industry was very much like our own. It was made up of 63 ports, called Scheme Ports, which operated under the National Dock Labour Board Scheme. The other waterfront industry operated outside that Scheme, and comprised 36 ports known as Non-Scheme ports. The Scheme Ports operated under legislation similar to our own. The elements of this industry were:

i. joint control and management of workplace decisions including discipline;

ii. a guaranteed minimum weekly wage;

iii. the determination of the size of the work force register of each port;

iv. the legal definition of dock work and the reservation of such work for registered dockworkers (RDWs)

v. the allocation of all RDWs as permanent workers to registered employers.

This constitutes a very similar panorama to our own waterfront. The difference in Britain was that 36 ports were outside this legislation. In Australia the monopoly is as perfect a device as can be contrived.

In Britain, as one would predict, many of the scheme ports have suffered from chronic decline, and most of the 36 non-scheme ports, contrariwise, have prospered mightily.

The largest non-scheme port is Felixstowe. Yet 30 years ago, Felixstowe was a small East Anglia grain port. It is still denigrated by wharfies in Scheme Ports as 'the farmers' port'. I am one farmer that wants farmers' ports, like Felixstowe, all around Australia.

Today Felixstowe handles 13 million tonnes of cargo. It is the fourth largest port in Britain. Profits were 1.5 million pounds last year and are expected to double this year. Two hundred extra workers were put on last year, with a 21% increase in cargo handled.

Felixstowe is the best known of the non-scheme ports because its growth has been the most dramatic. But the 36 non scheme ports (out of the 99 total) handle 55% by value of all British exports. It would have been easy for the UK Government to let the scheme ports just wither on the vine. But that Government, early this year, decided to tackle the problem. Doubtless the fact that the Port of London lost 19 million pounds last year, and the Port of Bristol lost 11 million, helped to concentrate its mind wonderfully.

It repealed the legislation which established the Dock Labour Scheme last April, and the Minister's statement in the House of Commons is worth quoting. Mr Norman Fowler, Secretary of State for Employment, inter alia, said,

'The scheme will not simply wither away of its own accord. For that to happen our great historic ports as well as smaller ports around the country would have to close permanently.

That would involve abandoning major facilities with all the natural advantages of location and tidal waters, fixed assets and infrastructure, much of it provided at public expense over many years.

The government has concluded, therefore, that positive action is needed to free the scheme ports from their present artificial constraints.

Our intention is to bring all port employees and dock workers into exactly the same position as other employees and workers. The only way this can be done is through the abolition of the Dock Labour Scheme.

Its amendment or restriction would not remedy present defects and would merely create new problems.'

The policy of the UK government in repealing the special legislation covering the scheme ports contrasts dramatically with the ISC Waterfront Plan.

That Waterfront plan, resiles from any attempt to break the monopoly power of the WWF. I quote:

'For over four decades it has been the practice to require waterside workers to be members of the WWF. The Commission does not see any advantages in reopening this issue now and there are substantial potential disadvantages that could arise from injecting a particularly contentious matter into arrangements that require cooperative work for their solution'. (Vo1 1 p198)

The whole purpose of establishing and maintaining a monopoly is to collect the monopoly rents and, in the case of the WWF, to bequeath them to one's descendants. There can be no lasting and dramatic improvement in the performance of our waterfront industries until the monopoly power of the WWF, on which all the various monopoly rents in that industry are based, is broken. There is no purpose in seeking to disguise, or obscure, that fundamental truth.

The ISC Report, whilst it acknowledges the problem, seeks to glide around this fundamental issue. The Commonwealth Government itself has refused to entertain even the most marginal reforms for permanent stand down provisions, or a reduction of union coverage.

If it is agreed, then, that it is the monopoly of the WWF which has to be broken (and such a resolve would, in itself, be a major step forward) how it is to be done?

In Chile they solved the problem of the inherited medallions by buying them from the owners and then declaring the waterfront to be free for any contestant to enter. The costs of moving things on the Chilean waterfront are now one quarter of what they were. As Jose Pinera has said:

'We have moved the coast of Chile 5000 miles closer to our markets.'

In Australia, perhaps regrettably, we have no medallions to buy.

Senator Fred Chancy has called for a Wapping for the Australian Waterfront. Who could disagree with him? It seems to me that that metaphor is an inspired and illuminating one. First it suggests the prospect of replicating, here, the industrial and economic impact of Wapping on the British publishing industry. That impact has been dramatic. British publishing has boomed since Wapping. Second, it is welcome because 'Wapping', the name of the Docklands area in East London where Rupert Murdoch located the new plant, has a satisfying, onomatopoeic ring to it.

The triumph of Wapping was due to the entrepreneurship of Rupert Murdoch on the one hand, and the upholding of the rule of law by the British courts and the Thatcher Government on the other.

I am confident that the spirit, the drive and the energy of Australia's entrepreneurs, once they are unshackled from the monopoly powers of the trade unions, can do for the Australian waterfront what Wapping has done for British publishing.

Once Commonwealth legislation is passed, giving lawful contracts between participants in stevedoring, and other waterfront work, a legal status that is superior to awards of the IRC (or of any of the other statutory bodies to be found littering the waterfront) Australia's entrepreneurs will surely soon create a Wapping on our Waterfront.

There should be no constraint, other than common law constraints, on these contracts. The other requirement for the recovery of freedom, efficiency and prosperity on our waterfront is the statutory reassertion of the principal of freedom of association. In politics, in sport, in religion, in professional life, we take freedom of association for granted. The proposal that we should all have to pay, through tax imposts, for the upkeep of our churches, and for the stipends of the clergy, would be regarded, today, as close to lunatic.

The argument that all ex-servicemen should be compelled to join and pay dues to the RSL or that all farmers should be compelled to belong to the NFF, would be bitterly, and properly, attacked by most editorialists. But in industrial relations, we have become accustomed to accepting the most blatant and oppressive denials of liberty.

One of the major problems that has grown up over the years is that employers have become accustomed to agreeing to, and becoming accomplices in, these attacks on freedom. Legislation reasserting the principal of freedom of association should therefore contain provisions for significant penalties for employers who connive, and assist, in enforcing membership of associations upon people who do not want to belong to them.

Employers, journalists and politicians particularly, have become very easily impressed over the years by bluster. Last week the Minister for Primary Industries and Energy, John Kerin, let it be known, indirectly of course, that the NFF's proposals for greatly improved productivity at the Fisherman's Island Wheat Terminal, could lead to 'an industrial bloodbath'.

Similarly, well after the live sheep dispute in 1978, our current Prime Minister, Mr Hawke, conjured up for his biographer images of unprecedented violence during that dispute, which he had been able to ward off by means of his presidential incantations.

The words, 'industrial bloodbath', remind me of the immortal exchange between Owen Glendower and Henry Hotspur in Henry IV part I. Glendower boasts to Hotspur

'I can call spirits from the vasty deep.'

To which Hotspur replies

'Why so can I, so can any man, but do they come when you do call for them?'

The conjuring up of bloodshed, domestic fury, fierce civil strife, is certainly mischievous. And it is all the more mischievous because it is all Glendower style bravado. The spirits from the vasty deeps, which they use to frighten the timid souls of many employers, are phantoms of the imagination. We have shown that to be so in the Wide Comb dispute, at Mudginberri, in every place where we have stood our ground on the rule of law.

The argument that the Australian people will support civil insurrection against the rule of law is a fantasy.

Once legislation reasserting the legitimacy of contract and freedom of association on the waterfront is passed; once the rule of law in the waterfront is re-established; new or existing participants in the waterfront industries will seek to take advantage of the freedom, under the law, that we used to have. They will do so because freedom allows us to become prosperous, and we all prefer prosperity to impoverishment.

There is no doubt that this proposal will be described as confrontationist. Tas Bull may well have a conniption. The great virtue of this proposal is that it does confront, without equivocation, the problem we face. It puts forward a measure which will do for our waterfront what Wapping did for the British publishing industry.

In Britain, after the passage of the legislation, of last April, repealing the Dock Labour Scheme, Mr Todd, General Secretary of the TGWU (Transport and General Workers' Union) told the Tilbury waterside workers on 12 July,

Familiar words indeed. Yet while Mr Todd spoke, 18 out of 63 ports had ignored the call to strike. By 28 July last, 2,432 dockers were working normally, 4,247 were on strike, and 2,542 had taken redundancy. A the beginning of August another 1,000 dockers were back at work.

A few days later the dispute which Mr Todd had earlier described as 'the like of which had never been seen had disintegrated completely. This story of the British waterfront bears directly on our Australian situation. We have almost identical industrial history, cultures and institutions; virtually identical habits of thought and language.

We can learn two lessons from the recent British experience. The first is that the comparison between the scheme ports and the non-scheme ports shows that the degree of labour regulation is in inverse proportion to the efficiency of the port.

The second is that the threat of union action should not deter our resolve to implement waterfront reform. Often these threats are mere bluster. I suspect this is true of the threat of 'industrial bloodbaths' over Fishermans' Island Terminal.

If the custodians of the present waterfront monopoly threaten, like Owen Glendower, to call up spirits from the vasty deep, let us say to them, with Winston Churchill:

Let us go forward and put this thing to the test.

I have no doubt that Australians, everywhere, will support a government which stands for freedom, and the rule of law, not only the waterfront, but in all of industry and commerce.