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The Concept of Liberty

There is no aspect of social development which is not uniquely related to liberty. Liberty, I believe, is social development.

Social and political discussion has always been concerned with the nature of liberty and how it can be obtained or enlarged.

Despite this, definitions of liberty are uncommon.

Liberty is sometimes thought of as something to do with metaphysics-a relationship between the individual and God or freedom of will. More commonly it is thought of as the relationship between individuals who live in a community.

It is in this latter sense alone that liberty will be considered in this lecture. It is possible to consider liberty in this sense, as an objective. Social and historical matter-something to which the scientific method can be applied.

Most controversies about free will serve only to obstruct or delay the solution of real social problems.

Man has will power and may decide to act or to refrain from acting. But whether he decides one way or another there are certain forces or causes operating. Though the individual is morally and intellectually free to choose his own action, and the importance of this cannot ever be overestimated, the range of his choices will be determined by the circumstances of the society around him. The surrounding circumstances allow the statement of social laws or tendencies, in a field certainly more complicated than some of the natural ones, but one which is subject to consistent relationships. Social law means that in the myriad decisions of the free agents who comprise a society, there can be discovered a certain general tendency or uniformity of action, deviation from which is so slight that it does not impair the usefulness of a general statement. This is because the controlling or determining considerations are always the social ones. The decisions that influence progress or social changes are social choices or choices of the majority. This is no less true in a very undemocratic community than in a democratic one.

To allow consideration of liberty in this social sense to be confused or obscured by discussion of free will in any other sense, would be to accept a task which is incapable of objective testing.

In its social sense, liberty is most often thought of as the absence of restraint or lack of interference. Harold Laski is an example. In his Liberty and the Modern State, he wrote:

I mean by liberty the absence of restraint upon the existence of those conditions which in modern civilisation are the necessary guarantees of individual happiness...freedom exists in a State where a man knows that the decisions made by the ultimate authority do not invade his personality.

Liberty is likely to appear in this way to people who have already considerable opportunity or power to act and when their normal or potential scope is interfered with. It is, in a sense, a middle class concept of liberty.

Liberty is less frequently thought of, not as something negative-the absence of restriction-but as a positive factor: the scope, power or opportunity to act or do things.

This positive aspect of liberty is more likely to appeal to those who have little scope of action already; to those concerned with the basic elements of life who have not known the refinements of freedom of speech or artistic expression, but who have acquired a vision of greater possibilities. This can be said to be a working class or colonial concept of liberty. Liberty therefore will not always appear to be the same to all people. Liberty to people in India is sufficient food to survive; in China it may be to be part of a great movement of national construction, which leaves little room for personal choice; while to the Australian intellectual it may be not to be asked to take part in a peace meeting.

The negative or middle class concept of liberty is one largely derived from the revolution against feudalism.

In this concept both social organisation and action by governments were seen as inimical to liberty. Liberty was the state of affairs in which every individual acted as an individual, in which the system worked naturally and in which governments did no more than protect property.

It was Adam Smith who wrote most vividly what the rising middle class wanted to read. It was conveyed to them in books, poems and songs. According to Gide & Rist in A History of Economic Doctrines:

The conclusion is hinted at again and again, and the impression left upon the reader's mind, is that no other conclusion could ever be possible. Smith thought of the economic order as an organism-the creation of a thousand human wills unconscious of the end wither they are tending, but all of them obedient to the impulse of one instinctive, powerful force.

Adam Smith decided that this "powerful force" was the "natural effort of every individual to better his own condition" and, according to the French scholars of economic thought, Gide and Rist, it was seen as the "essential spring of human life and social progress hidden deep in the heart of every individual".

Liberty was the state of affairs in which there was nothing whatever to prevent the outflow of this essential spring of human life and social progress.


Democracy, of course, originated in individualism. Individualism, the essential spring of human life and social progress lying within the individual, not only justified a state of liberty, but consistent with circumstances, produced the democratic state. However, this concept of liberty is no more than one aspect of it and was then consistent with greater liberty, with growing democracy and with social progress. But this did not mean that social organisation and government action were eliminated or even reduced. The class which demolished feudal institutions and rules in the name of liberty, established new social organisations and elaborate legal relationships which enlarged its liberty, but did little to enlarge the liberty of the working class. For most of the working class it was not restriction upon action, but lack of opportunity, neglect and poverty which hit them hardest.

Liberty does not and cannot consist of absence of social organisation. Social organisation has always had an historical aspect which means much liberty and power for some, and little for others. But it is only by social organisation that liberty can be enlarged. This is because liberty is not merely a negative quality, not merely an absence of restriction, not a life in isolation, but liberty is essentially rational, social action.

In this respect Adam Smith's concept of liberty was essentially metaphysical. To him liberty was not enough in itself. It had to lead to social progress. But how could he be sure that the "inner spring...hidden deep in the heart of every individual" would do so? His answer was purely metaphysical. When every individual was left free to "better his own condition", he would be led by "an invisible hand" to act, at the same time, in the social interest.

Like the rest, this metaphysical proposition was not left long to stand. It was subjected to the inexorable process of testing against reality. No concept of liberty can long be considered as independent of, or unrelated to, the actual economic and social conditions of the time.

About 100 years before Adam Smith, John Locke had expounded the attractions of the natural order and had seen good "somehow to be the final goal". But he had said that unless there was "democratisation of property", as well as political democracy, then the latter could not work. However, it was about 100 years after Adam Smith before the economists began to describe the actual economic and social conditions which were necessary if his metaphysical proposition about the equation of self and social interest was to be realised. These economic and social conditions were those of "perfect (or pure) competition".

There had to be democratisation of property-every producer must be small scale; there must be widespread knowledge of all processes, prices and profits; and there must be no restrictive agreements or associations.

However, economic development brought new and large social organisations. The old concept of liberty (which was nothing more than the truism that if all individuals were similar in power and all acted as individuals then none could much harm anyone else), was no longer tenable.

And so those who thought about liberty began to emphasize more and more that liberty was not the absence of restriction but it was what you could actually do. It was recognised that what you could do depended upon the extent to which you could work with others, within some form of social organisation, and upon the extent to which you could use or draw upon accumulated knowledge of your environment. It was recognised that what man could do depended upon social cooperation and upon his access to scientific knowledge-itself a social product.

The concept of liberty in the old sense, the middle class sense, has become the greatest internal threat to social progress in western civilisation. Not only has it bred self-concern, apathy and cynicism, but it produces most of the restrictions that are today placed upon liberty.

The old concept of liberty is still accepted in Australia by the established class, by the patriotic, the conservative people. But it is they who are responsible for restrictive trade practices, for the tapping of telephones and for attempts to outlaw defined types of person rather than defined types of action, for guilt by association. It is they who are responsible for the greatest threat to liberty in Australia today-the heavy cloud that hangs in the atmosphere, sensitive, or so it is felt, to any unorthodox social or political remark or association which, if detected, would prevent appointment to the public service or promotion anywhere in the establishment, or would disqualify the guilty from becoming an Australian citizen.

Mr Chifley's "spies, pimps and informers" have become a reality in Australia.

The Threat of Communism to Liberty

But here, of course, occurs the inevitable proposition: All these restrictions on liberty are justified, because they are necessary to preserve liberty from Communism.

To be concerned with liberty today we must, therefore, turn our attention to this matter. The threat of Communism is seen to exist in two conditions. First the existence of several powerful countries which offer a threat to others in the normal sense that powerful countries have always done. In this sense communist countries are no different to Japan or Germany before the war, or France or Russia in preceding centuries. But communist countries are seen to present a threat in a special sense. They are strongly influenced by a theory, which commits them to a course of action to extend the area of Communism. Consequently it is possible for people to say that "Communism is an implacable enemy dedicated to our destruction," as the former Minister for External Affairs, Lord Casey, said in Parliament last year.

Just as the threat is in two aspects so is the action taken by communists. The first aspect is the direct military action which may occur which in essential features would be the same as that taken by any country. The second is the action of communists within the political or military boundaries of other countries, which is, or may be, consistent with the action or interests of communist countries.

For these reasons communist countries have occupied an abnormal position in their relations with capitalist countries.

However, the threat of Communism, involving as it does two aspects, cannot be treated as if it involved only one. Its first aspect, the normal military threat emanating from a powerful country if it emerges into war, is likely to be met by military action. But the second aspect of this threat, its revolutionary or ideological aspect, and the consequent action taken by communists within political or military boundaries of other countries, is a social or political matter and can be met only by social or political methods.

There is a great deal of confusion about these two aspects of Communism. Both aspects are treated as if they were the same and equally military. For example, the threat of Communism in Australia, which is essentially a social or political matter, tends to be treated as if it were a military matter directly related to the military power of communist countries.

I believe the separation of these two aspects of Communism is essential to prevent unnecessary encroachments upon liberty in Australia.

Whatever our view of the threat of Communism seen as a military threat emanating from communist countries it is not the same thing as the threat of Communism from communists in Australia. Whatever is the military threat it can be met by a foreign policy and a consistent defence policy which is appropriate to it. Evidence accumulates that Australia's foreign policy is most inappropriate and that our defence policy has with it little consistent relation. Indeed, because of the nature of our foreign policy, it is most difficult to design a defence policy at all.

The threat of Communism in Australia, as it is in other countries, is largely a matter of economic and social discontent. Whilst support for communist, or any radical or dissident point of view, will continue to exist and in many ways lead towards economic and social progress, it will not and cannot be a threat to the status quo unless the level of economic and social discontent is high. In a country like Australia where it is most difficult even to change the government, there is little chance that the State will be overthrown.

Expanding liberty in Australia will be very much influenced by the extent to which communist countries and individuals can become normalised in their relations with others. Whilst this depends much upon the behaviour of these countries and individuals, there can be little doubt there is less difference between them and others than either group believes. If we accept the assumption that modern weapons are so powerful that total war will never be chosen, then it is reasonable to anticipate that relations between communists and others will become increasingly normalised. Provided that Australia maintains foreign and defence policies consistent with security, which is not the case today, and maintains a satisfactory rate of social progress, Communism will not represent a threat.

The most important task today in the interests of liberty is to stress the importance of peace and international cooperation rather than the reverse.

Liberty and the Catholic Church

Whilst there are significant and largely unnecessary restrictions on liberty in Australia, they can be exaggerated. Most of those which do operate, originate from those who assert they are defending liberty against Communism and among those are the actions of a few leading Roman Catholic clerical and lay figures who seek to direct or advise members of their faith how to act in political matters. The essence of this direction has been that "no Catholic can in conscience vote for the Australian Labor Party".

Whilst it may be that this direction is nothing more than a personal view or opinion of those concerned, the direction comes with all the force and authority possessed by Archbishops and Bishops of this faith. Of course, declarations of the Church are expected to be accepted even though they may not "seem to be proved by the arguments put forward [and the] obligation to obey still exists". To say the least these directions tend to be confused or associated with the authority of the Church and tend to be accepted with an obligation to obey. There can be no doubt that this process represents a significant threat to the liberty of political decision.

This has particular significance because the pronouncements do not concern matters of morals but concern practical, political matters such as the so-called unity tickets about which the Archbishops and Bishops have no direct knowledge, or special competence, and who have to rely upon others whose special interests must colour and condition their observations.

So far in Australia, organisations which can claim some effective obligation to obey have not significantly interfered with liberty. But both the Roman Catholic Church and the Communist Party can claim the operation of an obligation to obey, in relation to their pronouncements. There can be little doubt that where the individual consents to accept this obligation in relation to doubtful matters, he is forfeiting the requirements of a free or open society. It may be possible under some circumstances to justify this practice, but it is impossible to understand how anyone can think that those circumstances exist in Australia today.

Whilst these restrictions upon the individual are important, liberty in Australia cannot much be enlarged by merely resisting them. Nor can it be much enlarged by encouraging the individual to behave as an individual, to look more to his self-interest. Nor can it be much enlarged by leaving the individual in the confusion and disorder of modern laissez faire. Liberty is what you can do, and you can do more only by social action, by larger knowledge, by cooperation.

Liberty and Society

The individual has a very limited range of action if he is alone. The uncivilised savage was not a free man, his life was "nasty, brutish and short". Man has not fallen from grace, not from a state of felicity in far off days. On the contrary, society is a creation by which man attains a fuller liberty. The essential feature of society is cooperative action in economic production. It is by this means that man's power grows and with that power grows liberty. Man can do very little alone or with a few of his fellows. He attains freedom by cooperation with increasing numbers. As cooperation extends beyond the family, beyond the clan, beyond the region or the nation into the great international world, liberty grows. As cooperation extends beyond the race, creed or colour until all, irrespective of their race, creed or colour take part equally in it, then liberty grows.

Growing scientific knowledge adds to liberty and growing understanding of art enlarges it. Science and art themselves are social products. It is by the application of cooperation, science and art to economic production that man gains his greatest liberty. However economic production is vital to the state or condition of liberty. Generally, the more advanced his powers of production, the freer man will be.

But economic production takes on various forms. Within and arising out of economic production exist all the restraints of a society. Those who take part are free to do what the system allows. There is feudal liberty, mercantilist liberty, capitalist liberty and there is Chinese and Soviet liberty. Whilst the liberty of these systems change over time, the general nature of them cannot change rapidly. There can be political revolutions in a few weeks or days, but social and economic revolutions take years. The liberty of feudalism, of mercantilism, of capitalism, of China or of the Soviet Union is not something that the people living in them have willed or chosen; it is, as they are themselves, a social product of an historical development. Whilst the restraints, obligations and duties of a society can vary in degree they cannot vary rapidly and they are also the very means by which liberty is obtained. The liberty of capitalism involves increasing self alienation within a large scale industrial structure; the liberty of China involves mass action to dam great rivers and to cultivate the soil. The price of liberty has been said to be, not eternal vigilance, but eternal work.

The nature of liberty and its future can be usefully considered only in relation to the system of economic production to which it relates, and depends very significantly upon the solution of problems that exist in it.

Karl Marx was perhaps the first to state what has since become a common assumption: "The relation of industry and of the world of wealth in general to the political world is the chief problem of modern times." When this statement was made in 1844 it was by no means obvious. Very little relation was seen, then, between industry, wealth and politics. Wealth and politics have of course always been closely related; but wealth was seen as a natural result, as invulnerable and unrelated to politics, as incapable of being changed as the oceans or the mountains.

Today, industry and wealth are the prime concern of politics. It has been by the growth of industry and wealth that liberty has been so much enlarged. Capitalism has been a revolutionary system.

In 1877 Lewis Morgan who, like Marx, opened new trails, was able to foresee another of its results when he wrote:

...since the advent of civilisation the outgrowth of property has been so immense, its forms so diversified, its uses so expanding and its management so intelligent in the interests of its owners, that it has become, on the part of the people, an unmanageable power.

Of course what Morgan was able to recognise in 1877 has grown tremendously since then. This growth gives greater force to Morgan's prediction that:

The time will come nevertheless when human intelligence will rise to the mastery over property, and define the relations of the state to the property it protects, as well as the obligation and the limits of the rights of its owners. The interests of society are paramount to individual interests and the two must be brought into harmonious relations.

Private Property

The Australian system of economic production is of course based on private property in the means of production. Private property is the foundation of all power and the source from which it is derived. When Australia was first established there was not one square inch of land which was privately owned but the original foundation of power in Australia was private ownership of land. W G Spence in his book Australia's Awakening sets out his belief that private ownership of land was the "bedrock of the labour movement". The "essentials of wealth production", he wrote, had "come [by 1890] into the hands of the few."

The growth of manufacturing and service industries at first reduced the concentration of ownership and increased the opportunities for workers to become owners, but rapidly concentration came again.

By now the chances of gaining any measure of power or independence by means of ownership of property in Australia are as restricted as in any capitalist country in the world and are not available for any more than 15% of the people. The Australian people have not mastered property. Property is their master. It is today an unmanageable power. These circumstances are the most vital ones in the determination of the nature and scope of liberty. Private property in Australia is "on the part of the people an unmanageable power", and not only the enlargement of their liberty, but retention of it, depend upon finding a way to make the management of property subject to the will of the people. This is the central theme of this lecture. How can this vital question for liberty become a reality? How can the management of property become subject to the will of the people?

There can be no simple or single way of achieving this result. Persistent attempts by anti-socialists to assert that there is a strict meaning of socialism and to establish such a meaning to suit their own purposes, have been unable to hide the difficulty of defining it, or of anticipating its form in a particular country. Whilst there is no strict meaning of socialism in the sense of the form it will take, it does possess, at least, some essential elements. First and most important of all, it must include control by the people of the means of production. This may, of course, range from control or operation by the State, to guilds, or cooperative groups. Second, socialism must be based upon a system of priorities quite different from those of capitalism. The needs of the poorer people and social needs must be given priority over the created wants of comfortable people. Where capitalism relies upon acquisitive motives, socialism relies upon cooperative ones. Finally, socialism is concerned with equality.

However, the application of these principles will produce results which depend upon circumstances. In Australia, circumstances include the fact that there is not a revolutionary situation. On the contrary there is induced general satisfaction, if not lack of concern, with social questions. But there are some particular and significant general problems. It is the working out of solutions to these problems from which socialism-making the management of property become subject to the will of the people-is likely to come. Perhaps these problems can be summed up into two forms:

1. The distribution or redistribution of income, or in particular the power of management to fix prices and thereby transfer wage and tax costs or, in other words, the problem of inflation.

2. The disproportionate allocation of resources between public and private uses.

Both forms of problem are a direct and necessary result of private management of resources and cannot be solved unless there are considerable changes in the management of them. The view that control of the means of production is irrelevant to the solution of these problems is clearly incorrect and misleading. Perhaps the irrelevance of socialism to the solution of the problems of inflation and redistribution have been most clearly put in Australia by Professor Arndt and in England by the former socialist, Douglas Jay.

All attempts to secure higher real wages, or higher real social services, are breaking increasingly upon the rock of the power of management to transfer wages and taxes into prices. This was the central theme of Dr Coombes' lecture here last year.

Dr Coombes suggests that the weaknesses of the affluent society were all related to the determination of prices of "management rather than by the market for a wide range of goods". He sees the resultant increasing share of the national income which "goes to profit earners (sic) associated with the provision of transport, water supply and power [which] tends to lag behind the growth of industry and commerce, and that schools, universities, hospitals and other social equipment suffer by comparison, as does also housing."

Dr Coombes, of course, does not think that the power of management, which is used to transfer wage costs into prices, will be used to transfer tax costs into prices. Consequently he believes that trade unions should give up trying to obtain wage increases and turn to seeking increases in social services.

On the other hand Mr Wheelwright, Senior Lecturer in Economics at the University of Sydney, has correctly pointed out that there is really no effective mechanism in the economy to secure a flow of funds for those purposes, which Dr Coombes sees as those which "suffer by comparison with industry and commerce", which would be sufficient to maintain parity with industry and commerce, let alone to advance more rapidly.

It should be clear then that management of resources is the very essence of the problems involved both in inflation and in disproportionate allocation of resources between public and private uses.

Transfer of Power

What is involved, then, is to reduce the powers of management to determine prices, to transfer from its control some part of the flow of national income which it now controls and to turn that part of the flow into the public sector of the economy. To achieve social progress, or greater liberty, we have to change the flow of national expenditure. To achieve this, public authorities have to acquire some of the powers now exercised by private management. To this extent and very soon, private property must be made subject to the will of the people. The most likely powers for these purposes in the next stages are the Commonwealth industrial and taxation powers, and full and logical use of the banking powers.

At present the industrial powers are used alone to control wages and trade unions, but it is apparent that prices and profits have as much relevance to the prevention and settlement of industrial disputes as have wages. Even the present Commonwealth Government, almost bankrupt as it is of positive ideas on economic problems, has been unable to ignore the growing significance of monopolies and restrictive practices. Its Attorney-General being led to an end "which is no part of his original purpose" may well complete the constitutional structure required for full exercise of the industrial power, by enacting monopolies legislation and giving the power to adjudicate it to the Industrial Court.

This Court will of course, in this respect, remain merely a legal fiction. Some years will pass before it can be given the planning role and powers and the factual statistics necessary for it to assist in securing that flow of natural expenditure which is necessary to achieve social purposes.

Use of the Commonwealth taxation powers to redirect part of the national income now flowing into industry and commerce has to be based upon recognition of the nature of the flow at present and requires a tax which is the most difficult to transfer into prices.

The essential feature of inflation at present is that it is profit or capital appreciation inflation. Aggregate profits have risen recently as a consequence of management's power to determine prices. But such profits have not significantly been distributed into current incomes. This is in part a result of efforts to avoid taxes. An indication of this is that Company Income has risen only slightly as a proportion of Gross National Product in recent years; the income of Unincorporated Businesses and Professions has fallen, but depreciation allowances have risen from about 4% to 7.7% of Gross National Product. This significant growth in retained funds has provided the incentive, in capital appreciation, and a substantial part of the means, in proceeds of the sale of appreciated assets, for the ratchet like process of bidding up existing land and capital, of which contemporary creeping inflation consists.

It would seem easier and more effective to divert from industry and commerce some of these funds before they are retained into capital appreciation, rather than allow them to pass into this form and then tax them as capital gains. The first step would be to change the basis of depreciation allowances, from current funds for capital replacement, to actual new, net investment. Having achieved this it may be difficult to increase much the proportion of Gross National Product obtained in company taxation because of the fact that a very high proportion of it flows through those companies which have the greatest ability to determine their own prices and therefore to transfer taxes. But once the tax avoidance escape into capital appreciation is regulated current income can be taxed by the tax most difficult of all to transfer-personal income tax. It is well to notice that this form of tax has returned an aggregate which has fallen as a proportion of Gross National Product in recent years from about 10 or 11% to about 7% or about £250 million in 1959/60 values.

It may well be that the disproportionate allocation of resources which is the fundamental weakness of the affluent society may be mainly determined at present by the approximately 4% decline in the proceeds of personal income tax. The £260 million in 1959/60 values which is involved in this reallocation is doubtless sufficient to measure the extent to which those purposes with which Dr Coombes is concerned have suffered "by comparison with industry and commerce".

It is quite apparent that the Commonwealth Taxation Department now enters in a very detailed manner into the determination of the flow of funds which are acquired by the large companies. This Department must possess already the most adequate factual basis of any public authority to determine the flow in accordance with any requirements. To achieve a more socially beneficial flow of funds it would be necessary to replace the free enterprise criteria upon which the Taxation Department works with criteria based on social priorities to secure a marked difference in the allocation of funds in the economy.

It is obvious that the Government-contrived escape of the trading banks from the powers of the Commonwealth Banking legislation has no justification in common sense or constitutional law. It may be difficult to place hire purchase companies, short term money market concerns and others under this legislation. It may be necessary to do so by referendum. But full and effective use of the Commonwealth Bank as a lender and effective control of these new credit institutions are essential to achieve social priorities.

Whilst cutting down the powers of what Dr Coombes calls the monopolistic elements, by use of the Commonwealth Arbitration powers on the one hand and by the Taxation authority on the other, and full use of the banking powers will not result in any sudden or revolutionary growth in the influence of the will of the people upon the management of resources, it seems beyond doubt that these are the channels along which future developments will occur. It may well be that the probable resistances of the monopolistic elements may expedite and extend the public power.

In the sense that socialism means bringing the means of production more and more under the influence or subject to the will of the people, socialism is of vital importance both in removing the restrictions that free enterprise has imposed upon capitalism and in enlarging, in general, the liberty of the people. Socialism is not a restrictive condition. It is capitalism that has become characterised by restriction. Socialism does not introduce controls, socialism makes capitalist controls subject to the will of the people.

Socialism and Democracy

Socialism does not limit democracy, socialism extends democracy from the superficial political field into the fundamental economic or production field. In socialism democracy does not stop at the factory gate, socialism extends to this important activity. It would be fatal for liberty to imagine that no more is needed than management of the flow of national expenditure from several central positions. Employees must take part in management if liberty is to grow.

Whilst socialism is the extension of democracy into the productive operations of a society, in a country like Australia it depends significantly upon political action. In such a country it is possible to advance to socialism only as a result of action taken through Parliament and, in fact, through the Commonwealth Parliament. Whilst it is true that the power of any Labor Party must depend absolutely upon the trade unions and without them it would be unable to make such an advance, it is also true that the trade unions alone would not be able to achieve socialism or to achieve it so soon.

Even where these developments depend upon some particular action by the trade unions themselves that action can be much more effective it is based upon, or backed by, consistent and favourable legislation.

It is almost impossible to say what will be the forms or types of institution by which the will of the people will eventually be exercised upon the operation of the means of production in the future, even in a country like Australia. But there can be little doubt that their development, in the absence of serious international conflict, will be gradual but certain; that they will result from the solution of recognised problems and by the development of existing institutions in the course of that solution. Equally, there can be little doubt that the initiative will remain with the Australian Labor Party-the party of movement in Australia. This initiative is likely to be expressed through the Commonwealth Parliament, restricted as it is for that purpose.

Whilst the extension of public control of the means of production can be considered as good in itself because it means more democracy, more liberty, that is not its only justification. An extension of public control of the means of production is necessary to solve the problem that Dr Coombes outlined in his lecture and with which I began this analysis.

Under present circumstances not only are real wages not increasing satisfactorily, but there is little chance of extending the services which comprise the Welfare State. At present it would require at least £350 million to bring them to 1949 values and to add no more than the most conservative additions. This leaves out altogether the needs of the States for essential public works and services.

Contemporary capitalism may be able to manage slowly to increase real wages and allow overtime, good behaviour and other fringe benefits, but it cannot achieve that flow of public expenditure necessary to provide such things as a general health service, a universal national retirement allowance related to service and income on retirement; to convert housing into a social service and to provide cultural and educational facilities to raise community attitudes and scientific ability to reasonable standards. The reason for this inability of capitalism is that profit incomes must increase faster than the rest or full employment will not be maintained.

Capitalism's only prospect, therefore, is to extend the old means test type of social service, increasingly paid for by flat rate contributions such as in the medical service or by commodity taxes-this type of contribution or tax can be transferred into prices and, therefore, not reduce the profit rate.

Capitalism has not been able to face the task of transferring more from the private to the public sector of the economy as the tax figures show so clearly:

Taxes as a percentage of Gross National Product
1947/48 1949/50 1951/52 1953/54 1955/56 1958/59
Commodity 11.2 10.4 11.7 10.6 10.6 11.4
Company 3.5 3.1 3.9 2.9 3.5 3.6
Income 8.8 7.8 11.0 9.4 8.0 7.2
23.5 21.3 26.6 22.9 22.1 22.2

Not only, of course, is it difficult for Governments to raise taxation but even if they succeed an increasing proportion of the tax proceeds will be transferred into prices. The power of the monopolistic elements to pass on wage increases into prices, recognised so clearly by Dr Coombes, will allow them also to pass on taxes into prices.

It is apparent from this that public control of the means of production in some form must extend to ensure that a sufficiently high proportion of Gross National Product is retained in the public and social service sector to achieve what is both a logical development of our own past and is already being achieved by some other countries.

Increasing public control of the economy and the means of production is not irrelevant to this, as those educated in the conservative and pessimistic Keynesian tradition assert, but on the contrary, public control is the only means by which it can be achieved.

Not only is increasing public control essential to obtain needed funds for social development, but it will be necessary, sooner or later, to maintain the level of employment.

These circumstances, it will be readily seen, are most important to the question of liberty-once liberty is seen as the opportunity to act, to do things-and not just a matter of being left alone. The unavoidable future is that the public sector of the economy must grow and public control must extend. The only real problem facing democratic capitalism is: Can this be done democratically and constitutionally? This depends upon the understanding and strength of the Labor movement and its loyalty both to the need to subject the unmanageable power of property to the will of the people, and to liberty.

To achieve greater liberty in Australia it seems that we must hold clearly in our minds the need to subject the power of property to the will of the people, and at the same time, to hold equally clearly what Leonard Wolf has called a "fearless trust in freedom". These are the guiding stars of social progress.

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