“THE GREAT CRASH, 1929”

by John Kenneth Galbraith, Mariner Books, Boston, 1997

“No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time...The great wealth created by our enterprise and industry, and saved by our economy, has had the widest distribution among our own people, and has gone out in a great steady stream to serve the charity and business of the world. The requirements of existence have passed beyond the standard of necessity into the region of luxury. Enlarging production is consumed by an increasing demand at home and an expanding commerce abroad. The country can regard the present with satisfaction and anticipate the future with optimism”. 

So said the lame duck US President, shortly after his successor had been elected. The complacent tone could be George Bush, but incoherent Dubya was never this flowery. The effusion to Congress was the 1928 offering of Calvin Coolidge, whose orotund flow was very much a Twenties style. The content, though, is as Bushy as a Texan ranch. This one Coolidge paragraph contains around ten assertions. They’re sentiments that 80 years later, Bush, in his inchoate way, expressed. They set out the assumptions that have led commentators to link Coolidge and Bush as contenders for the ranking of worst President ever. A reason for this judgement is that every statement was dangerously wrong.

Coolidge’s decade is still often dubbed the Roaring Twenties. Popular conceptions tend to imagery of flappers and fat cats, dancing the Charleston and quaffing champagne as a reaction to what was then called the Great War. This scenario made some fun movies but poor history. The myth implies that the crash of 1929 was the fault of society at large. All America was getting greedy and having too much fun, so all America had to be punished. For Coolidge’s soulmate successor, Herbert Hoover, who took over as the markets crashed, it was a convenient fiction as it diverted responsibility from where it lay, giving rise to a notion that the Depression was a moral lapse. By suggesting that the fault lay not in economic policy but in personal excess, the governing elites hoped to evade accountability. 

They also waylaid analysis, the resulting amnesia allowing a dismal history to be repeated. We’ve been reminded that the events of October 1929, when Wall Street crashed, and the market falls since October 2008 look remarkably similar, and there’ll never be a shortage of know-it-alls willing to explain just how much this time mirrors the last time. The difficulty for the layperson is knowing whose account to rely on. One thing we know. The present crisis is one of those occasions when the people least qualified to comment are the ones with the right sounding credentials. Fashionable economists got us into the mess by repeating the mistakes of their predecessors 80 years ago. They’re not a reflective lot. As one reviewer has quipped : “Bulls don’t read. Bears read financial history”.

If you emulate the bears and read one book on the subject, make it this one. Galbraith has read the history. He’s also written more of it than anyone else, and he’s been consistently shrewd. If the bulls had read Galbraith, they might not have stampeded over the abyss. Like Coolidge, the moneyed classes of the 1920s liked to believe that everyone was getting rich because of American hard work and ingenuity. Here - to continue the comparison of decades - the tone resembles the 1990s, and the recent President who comes to mind, the Coolidge figure, is Bill Clinton. It was Clinton who enabled the reckless policies that followed under Bush. Both Coolidge and Clinton encouraged well-off Americans to regard the poor as undeserving. The conventional wisdom became a complacent certainty that the triumph of the US economy had freed up business to trade with the rest of the world so that one and all would march into a joyful future of perpetual peace and prosperity. 

Self-Congratulatory Fables

Hence the legends about millionaires leaping from windows. Galbraith reports that in reality suicide statistics of the period don’t show anything unusual - though, always sardonically witty, he does say that “two men jumped hand-in-hand from the Ritz. They had a joint account”. Hence the stories about shoeshine boys snapping up stocks and the wise plutocrats taking this as evidence that it was time to sell. These self-congratulatory fables allowed the rich to preserve their self-created aura of having possessed a wisdom that menials could never and should never attain. It’s more than false. The poor weren’t really buying stocks at all, if only because they were getting poorer throughout the decade of the Twenties.          

In his landmark study, “The Quest For Security In New Zealand : 1840 To 1966”, WB Sutch cites the officer in charge of the Auckland Central Mission : “After four years of social work I have granted over 23,000 interviews to people seeking food” (p126). That was in February 1929, when New York shoeshine boys were said to be running margin accounts. “Every afternoon”, the Sun newspaper reported, “the queue is waiting there - waiting to ask for food and clothes and fuel”.

In comparison to America, New Zealanders’ insecurity was mild. In most of the globe most people lived tenuously, with Britain, the other great powerhouse, having its one and only general strike in 1926. But on Wall Street the bulls kept bulling. “Never before or since have so many become so wondrously, so effortlessly, and so quickly rich” (which raises an incidental question : does this still hold true, or would the instant billionaires of Russia and China have hogged at the trough even more? Galbraith first published “The Great Crash” in 1955. This edition is dated 1997).

Unproductive Money

The money was effortless because it wasn’t gained from or put to productive work. Then as now the big spenders “leveraged” other people’s money, dumping it into “investment trusts”. There the Wall Street manipulators, bored by companies which made things that people used, elaborated pyramids of increasingly dicey speculation. It was a foreshadowing of today’s - yesterday’s - derivatives markets. The parallels keep presenting themselves. Just as the 1929 crash was preceded by a real estate bubble in Florida, the 2008 version was preceded by the 1999 dot com bubble. Then as now the neoliberal cheerleaders prattled about how financial markets were infallible. Galbraith mentions the prophets Hayek and von Mises, “economists” who inspired our latter day speculators to preach the virtues of how supposedly “natural spontaneous” markets provide complete information - all that “transparency” - as opposed to the murky evils of State regulation.

But as we now have to be reminded yet again, the investment trusts set new standards for being opaque and evasive. It might have been true that the mythical shoeshine boys didn’t understand the market but that was because they were never told the truth about how it worked. No-one was. The key for a successful con is the ability to manipulate the wannabes who mediate between the elites and the rest of us. It helps to coin mystifying labels. “By the summer of 1929”, Galbraith wryly comments, “one no longer spoke of investment trusts as such. One referred to high leverage trusts, low leverage trusts, or trusts without any leverage at all”.

The former US Federal Reserve boss, Alan Greenspan, has quite rightly been cast as a scapegoat for our current woes because he blew the financial and housing bubble that has so closely replicated the bubbles of the Twenties. When it comes to guru status, Greenspan tops the recent pantheon, and he’s admitted to being quite a mathematician, with access to 200 PhDs. Yet he’s been as dumb as a shoeshine boy. He now declares that he couldn’t understand the investment models that were all the rage because they guaranteed gaudy returns annually for ever. That sounds humble. Someone should ask the great man why he discovered this only after he quit the Fed and after the bubble burst. They might also ask why one of the world’s most important policy makers didn’t grasp a truth about supply and demand that should be apparent to the average Year Nine student. 

Galbraith has a keen eye for fallible human nature. He quotes a typical example of the euphoric Twenties. An influential business writer warned against banking regulation by arguing that the Federal Reserve Board shouldn’t “deny investors the means of recognising economies which are now proved, skill which is now learned, and inventions which are almost unbelievable”. Greenspan’s dot com bubblers and hedge fund gamblers have been there and done that (Greenspan called deregulation “regulatory competition” [sic and sick]). The mundane fact is that in the Twenties neither the proven economies nor the learned skills nor the unbelievable inventions existed.

Back then in the bad old days an influential professor touted a shyster with extravagant flattery : “Today the shrewd, worldly wise candidate of one of the great political parties chooses one of the outstanding operators in the stock market ... as a goodwill creator and popular vote getter”. Assuring his audience that the Street was inhabited only by the honourable, the professor pleaded : “Have we not heard their voices over the radio? Are we not familiar with their thoughts, ambitions and ideals as they have expressed them to us almost as a man talks to his friend?”

Whatever his academic qualifications might have been, the professor reveals himself to be a man ready and willing to be duped. Galbraith’s insight into human nature is a big part of why his explanations are so much more insightful than those of the rationalist economists who are proud of their ability to disregard truths about the way people behave. Galbraith recognises that adults like the professor and the journalist still thought like children, all of whom know that the popular kids were right. The popular kids, in both the extreme markets under review, were the bankers and brokers. 

Rooster Today, Feather Duster Tomorrow

That might be why, in periods of excitement, like the Twenties, or of panic, like the Thirties, the smart money smarties become reef fish. Galbraith understood that “[b]etween human beings there is a type of intercourse which proceeds not from knowledge, or even from lack of knowledge, but from failure to know what isn’t known.... Wisdom itself is often an abstraction associated not with fact or reality but with the man who asserts it and the manner of its assertion”.

In his timely critique of the New Zealand economy* Bryan Gould pointed out that despite the endless hype we’ve endured from our latter day business writers about all those innovative geniuses transforming the world, the policies they were pushing had the contrary effect of rewarding old and static money. Galbraith makes the same point about the Twenties. The guys with a gift for self-promotion, the ones who with no irony have been presented to us as “gurus”, are the grandsons of those earlier snake oil stock market salesmen. Galbraith suggests that despite their enjoying a cultivated “mystique” they behaved with “startling incompetence”. *I reviewed Gould’s “Rescuing The New Zealand Economy” in Watchdog 119, February 2009, online at http://www.converge.org.nz/watchdog/19/07.htm. For an anticipation of the current mess, see my review of “Traders, Guns And Money” by Satyajit Das, in Watchdog 116, December 2007, online at http://www.converge.org.nz/watchdog/16/08.htm.

The one obvious way to calm the racket would have been to set margin requirements, limiting the amount of unsustainable and frenzied loans that fuelled speculation. Eighty years later, though, the “investment” bankers were too greedy to have learned that simple lesson about debt. And when the Thirties downrush came, the bankers who were supposedly putting reassuring money into the system were secretly selling. The parallels with the present are many and direct. Bernie Madoff, a contender for the bigggest swindler of all time, ran a pyramid scheme whereby original investors were paid beguiling dividends from new advances. These scams are still called Ponzi schemes, after Charles Ponzi, who provoked the 1925 Florida real estate bubble.

The wise men, those popular schoolboys, kept up a reassuring murmur. Repeatedly they affirmed that the system was “fundamentally sound”. Galbraith writes that the most prestigious opinion former was the Harvard Economic Society. Between November 1929 and October 1931, the august gentlemen at the society published no fewer than 17 articles to this effect. In fact, so frequent and so inaccurate was the claim of “soundness” that among the historically literate such a claim became a joke. Yet tin eared John McCain, old enough to have been living during the Great Depression, felt able to say, in October 2008, that the American economy was “fundamentally sound”. That’s the level of idiocy we’re looking at.

Andrew Mellon, Treasury Secretary and billionaire, is a central character in the story, both for his role and his mentality, and he has obvious current equivalents. After October 1929 Mellon got on a high horse. The crash, he lectured, was desirable. “It will purge the rottenness out of the system. High costs of living will come down. People will work harder, live a moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people”. In 1928 his tone had been rather more jaunty : “There is no cause for worry. The high tide of prosperity will continue”. Logicians might see contradiction, but in their own terms the Mellons of the world are consistent in their readiness to believe whatever is convenient to believe at the time. The Depression, Mellon pointed out, would enable a sort of shock and awe. He and his mates could “liquidate labour, liquidate stocks, liquidate the farmers, liquidate the farmers, liquidate real estate”. After 9/11 Bush told New Yorkers to shop. On Crash Tuesday 1929, Mayor James Walker said he wanted Hollywood to “show pictures which will reinstate courage and hope in the hearts of the people”.

It is often said that easy credit (to the shoeshine boys) caused the Depression. Galbraith points out that this is “obviously nonsense”. In 1929 the stock market might have been booming, but the American economy was contracting. Production had peaked in June, and had gone steadily down over the next four months. The decade 1919-1929 saw output per worker increase by 43%, but wages didn’t increase. Most people couldn’t afford the consumer durables that power the real economy, and the shoeshine boys of New York were feeling the pinch. So (in the real economy) there was too much production and too little consumption, profits were falling, and the rich looked for new sources of easy money from capital investment. 

Inequality Is The Problem

The basic, structural problem was inequality, the rich being too rich to need to buy staples and the poor being too poor to afford them. The top five per cent of Americans were taking in a third of all income, twice the proportion that they got in the boom years after 1945. Galbraith shows how quick profits for the rich depended on high investment and/or high luxury spending. Both these are inherently unstable and erratic. The great bubbles in history have all been blown up by the fads and excesses of the very rich. They’ve all burst, and they always will. 

The culture was exemplified by an investment trust known as the United Founders Corporation. In a sort of derivatives-cum-Ponzi concoction of “financial incest”, this lot parlayed an original outlay of $US500 to a market value of over $US1 billion. Just as we have recently become accustomed to talk of trillions of dollars, that was undoubtedly the first time average punters had come across a billion as a measure of money, yet by the end of the summer of 1929, US brokers’ loans totalled over $US7 billion. The investment trusts paid dividends from operating companies and paid interest on the bonds of holding companies. Interruption to the cash flow from anywhere in the structure meant default, leading to a downward spiral of collapse and deflation. Another domino effect - a structural difference from 2008 - was allowed by the way banking was organised, there being many small independent banks which were easily toppled. At the end of the supposedly gung-ho good times, during the first six months of 1929, 346 banks had failed.

A third key policy blunder was the unexamined dogma that budgets had to balance. The elites insisted on this not for the stated reason of preventing waste - Republicans then and now presided over extravagant governmental incontinence - but because it was a tool to prevent a larger investment in social needs. The consequence was that the Government had no room either for tax cuts for the non-rich or for an injection to increase purchasing power or for public works projects to create jobs. Not that Hoover would have chosen any of these options.

After Hoover’s one disastrous term President Franklin Delano Roosevelt poured in the money, as Barack Obama is doing now. Does this allow hope? A final similarity between then and now is the pragmatism of both FDR and Obama. Until the collapse, Roosevelt anyway had been a conventional child of his time, but both he and Obama (whose economic advisers are Clintonian neoliberal free traders) came to see that investment in productive activity was the obvious way to save the system from itself. A motivational guru might say that crisis breeds opportunity.

Galbraith’s son James followed Ken into economics. He’s just come out with a book whose thesis is that the defining feature of the economy that Obama has inherited is “the systematic abuse of public institutions for private profit or, equivalently, the systematic undermining of public protections for the benefit of private clients”. The last time James visited his dying father they discussed the book. Ken liked the title, his last boast to James being that he would have written a better book to make the same case. The title : “The Predator State : How Conservatives Abandoned The Free Market And Why Liberals Should Too” (reviewed in New York Review of Books, 6/11/08). 

“BAD SAMARITANS :

The Myth Of Free Trade And The Secret History Of Capitalism”

by Ha-Joon Chang, Bloomsbury Press, New York, 2008

Not long ago South Korea was less than half as well-off as Ghana. Now it’s doing much better, enjoying rich-world living standards. Ha-Joon Chang, a Korean, was born into poverty. In his lifetime, he tells us, his native country has grown at a rate that the UK took 200 years and the US 150 years to achieve. How come? And why has Ghana regressed?  The answer, Chang expounds, in this fluent book, is that Korea has ignored the advice of neo-liberal economists, whereas Ghana has not had the domestic resources to defend itself from the experts. Orthodox policy, as devised by free traders, is misguided. Chang, himself an economist, but grounded by a pragmatic empiricism, discerns three confusions as to cause and effect that have misinformed the theorists. These confusions have condemned the Ghanas of the world to be stuck in poverty.

It’s often said that the difference between the world’s societies is a function of culture. We tend to think of Chang’s Korea as hard working and serious, with legions of workers punching the time clock, but Chang recalls a time not so long ago when it was common to arrive an hour late for everything. That was dubbed “Korean time”. There are scores of such “cultural” time zones. My Canadian cricket team, which would often trundle onto the field to start play shortly before the scheduled tea break, used to run on “ Caribbean time”. Ghana probably runs on “Ghanaian time”.

It used to be said also that Korea was “Confucian” in its values and so it was, if Confucian meant that the poor and feudal country was hierarchical and static. Modern Korea is still deemed to be “Confucian”, but now that term connotes a disciplined and industrious capitalism. In other words, the labels are attached to disparate qualities. Confucianism, Chang remarks, is a loose enough concept to be called religious, when it isn’t the name of a faith at all. Confucianism hadn’t changed; Korea had.

Which Asian culture encourages “easy going” and “emotional” people who live only for the present?  Which European culture is indolent, individualistic and excessively emotional? That’s how Japan and Germany, now seen as anything but laid back, were typecast in the 19 th Century. Popular prejudices come and go, and in the case of Japan and Germany, they have reversed. This is because culture doesn’t determine the economy; the economy determines culture. By appreciating this, the world’s many cultural critics would free themselves from delivering moral judgements. These are unhelpful not only because they so easily tip into racist stereotype but because they mistake symptom for cause. Chang suggests that cultural attitudes in modern Japan and Germany have more in common with those in modern Korea and Italy, say, than they do with the lands of their grandparents, whose values would have been comparable to those of past or present Ghana. 

Some might find this a tad doctrinaire. Chang might be right to say that culture is not the ultimate determining factor and that we should not see it in moral terms, but, in the here and now, some societies are in fact disadvantaged by these cultural factors. Chang’s talking generational change, but businesses will site plants in places where the shift starts on time. A second error, held to be a universal truth by neo-liberal economists, is the belief that independence leads to success. In reality, it’s the other way round. Chang illustrates this by considering his six year old son. Chang’s feudal ancestors, motivated by necessity, and his neo-liberal colleagues, motivated by ideology (and both proud of their rational self-interest) would recommend that the boy get a job and earn his keep. His father wants him to get an education.     

Industrial culture allows an investment in the future as an escape from the tyranny of the ever present which is the trap of poverty. This is something that all parents know, as do all entrepreneurs, workers, artists, students, athletes and craftsmen. The whole idea of deferred gratification is based on our experience that we put up with things for the sake of future reward. So ingrained is the ethic that just to state it, as this paragraph is  doing, is to set down banality. Yet neo-liberalism demands that we pretend otherwise. It allows no explanation of economic backwardness that is not condescending and false. The former “Korean time” zones of the world are filled with people who are condemned to back breaking hard work. It’s not that they’re indolent or stupid. They don’t keep industrial time because, as a cultural habit, they don’t expect a better future.

The Myth Of The Level Playing Field

Chang dissects the central metaphor of neo-liberalism, the level playing field, by pointing out that an American corporation and a landless Latin American peasant are not equally advantaged. The rules might state they exist in formal equality, and trade lawyers might point to clauses to prove the pure symmetry of their relationship, but the contracts rarely reflect reality. As Chang puts it, a level playing field doesn’t provide equal opportunity if the teams are not equal. Chang’s six year old won’t be able to compete with Western graduates if he drops out of primary school. 

The third misconception is the neo-liberal assertion that growth (Chang’s son working in a sweat shop) leads to investment (Chang’s son getting a degree). In fact, investment leads to growth. The free traders like to point to occasional growth spurts in the undeveloped world (a useful metaphor in this context) but the bursts don’t last. Children mired in poverty are stunted, and the six year old low end unskilled wage slave will become a 60 year old low end unskilled wage slave - if he lives that long.

The level playing field logic of neo-liberalism denies subsidies or tariffs, or any measures to help the six year olds to grow to adulthood. By thus locking in existing relationships, the free traders privilege the strong at the expense of the weak. “The free market”, Chang concludes, “dictates that countries stick to what they are already good at”. Chang looks at two successful corporations that helped their countries mature. Nokia led the transformation of Finland from being a hewer of wood and drawer of water to being a rich independent economy. Nokia did not make a profit for 17 years. Japan’s Toyota, which has been called the world’s pre-eminent car maker, did not make a profit for 30 years. In their formative years, Nokia and Toyota were shielded from foreign competition, and neither would have survived had they been forced to bend to free trade dogma and denied State protection. Not long ago Finland and Japan were as poor as Ghana.

Free traders never tire of telling us that governments don’t work, and that any publicly owned asset is being badly run. This is another item of faith that evidence seldom supports, yet it is widely believed because it bashes politicians. Chang points to an array of State owned successes. He starts with Singapore Airlines, a frequent pick as the world’s best airline. This is an apt choice in that service industries catering to the well-off are those which popular mythology understands to be the exclusive domain of privateers.

All Successful States Have Protected Their Own Economies

Free traders swoon over Singapore, which they hold up as a pinnacle of Confucian virtue - in this context, that means free market capitalist. Chang shows that in reality most of its many successful businesses are publicly owned, as they often are in other dynamic Asian economies like Korea, Taiwan and Japan. He points out yet another common misunderstanding. When economies fail - he discusses Argentina and the Philippines - neo-lib spin doctors pass it off as a result of their having too much public influence. Yet the fact is that Argentina and the Philippines have always had a much smaller State sector than have the successful Asian economies. 

Perhaps that’s why the “Confucian” gambit is played - as a way of saying that a sort of Asian exceptionalism is in play. If it were true that Asia was doing well for cultural reasons, the propagandists might still be able to tell us that their prescriptions are accurate for the rest of us who are undisciplined or corrupt. But it isn’t true, so they can’t. The evidence points in an opposite direction. The world’s least successful economies have a higher level of private ownership. More than that : none of the big global players became dominant without State aid. This holds true for the chief proponents of free trading. Chang shows how, since the 18 th Century when Alexander Hamilton abandoned the advice of then free market champion Adam Smith, the US economy has always done best in precisely those periods when it abandoned laissez faire. The industries that have driven America in recent memory, like aerospace, computer technology and - if you’re old enough - cars, all prospered because of government help.

Britain is often said to have been the one true champion of free markets, the pioneer. But the UK, too, spoke with forked tongue. Despite the grand rhetoric about the liberating genius of free trade, the UK prospered in those periods when it nurtured its industries behind tariff walls, and used the Royal Navy and the Bank of England to hold down potential rivals and build up exports. Hong Kong, for example, that great champion of free markets, became a British colony because Her Majesty needed a base from which to force China to become addicted to opium.          

An earlier Chang book was titled “Kicking Away the Ladder”. He returns to the metaphor here. The idea is that the US, the UK and their mates, the rich club, having climbed to the penthouse on ladders provided by their governments now want to keep the undeveloped world (the Ghanas) in the cellar by denying them the support they themselves enjoyed. There’s more than a hint of hypocrisy in their claims of philanthropy. Hence Chang’s title. Beyond all the incantations of the virtues of unbridled capitalism and beyond all those level playing fields, there’s nothing much more in play than old-fashioned greed.  

This account could hardly be more timely. The crisis in free marketeering that we are now living through has reminded us that real wealth derives from the real production of things that people need. It’s another simple truth that we should have known already. Like Galbraith, whose analysis is complementary, Chang disdains the arid abstractions of the free traders primarily because they’re based on falsehoods. One theme underpins everything he’s saying in this wise book : no enduring wealth has ever been created by following their advice. When we check the facts that Chang provides, it becomes clear that there no exceptions. There are no magic lands where people have prospered by granting all power to neo-liberal economists.

“CORPORATE COMPLICITY & LEGAL ACCOUNTABILITY”,

International Commission of Jurists, Geneva, 2008

A page turner this isn’t. In fact it’s hard to come up with pages more likely to be flipped than those of a monograph by around 80 lawyers working for the world’s most cavernous bureaucracy. The United Nations is widely derided as a talking shop, and what can those slippery lawyers be saying? When it’s needed to speak, the UN has notoriously fallen silent. What did the lawyers do to end the murders in Bosnia or Zimbabwe or Somalia or Rwanda? What have they done to prevent the genocides and the “failed states”?   

Or, at the other end of the scale, how strongly has the UN stood up to the powerful? When George Bush made a point of insulting it, the UN could do little to respond. Bush was largely about posture and rhetoric, a matter of setting a tone, so a specific response might have been elusive. Yet all this recent history suggests that a direct challenge to the schoolyard bully, a showdown of sorts, doesn’t look likely, not when the abusers of human rights include some of the world’s big corporations. 

In the other corner is the International Commission of Jurists (ICJ), a body which gathers in comfy Switzerland under the auspices of the United Nations. Typically they’re academics and judges, bureaucratic systems men. OK, there’s a smattering of women. It’s said that a camel is a horse designed by a committee. What do you call a report from 80 international jurists? A surprisingly useful read. The Commission gives every impression of wanting to call the bad guys to account. They might not have got far yet, but there are good reasons for that, one of them being the difficulty of coming up with an accepted definition of words. According to the ICJ, the key concept is “complicit”, whose technical meaning is to “aid and abet”. To make a charge stick, a corporation would have to be found to have “enabled” or “exacerbated” or “facilitated” an abuse. These epithets, and the distinctions between them, are given precise and clear definitions. 

That’s encouragingly down to earth. Also welcome is an apparent ICJ optimism that we can expect future charges to be laid. The Commission argues that the world’s peoples now expect a “broadening concept of ethical responsibility” and that victims are increasingly likely to seek legal redress. We won’t put up with stuff our parents and grandparents had to accept. That’s probably broadly true, but a third trend is less benign. The ICJ notes that “through privatisation and sub-contracting, companies often exercise sensitive functions that were once reserved for the State”. 

Back to optimism. The “basic principles of legal responsibility are clear” and the time-dishonoured excuses of ignorance won’t wash. The corporates can’t say that nastiness would have happened anyway. They can’t say that they had no control over their foreign agents or that foreigners have different standards. A “don’t ask, don’t tell” defence won’t get you off. The corporates can’t play Herod.  Neither can a defendant say that he was just following orders. Which brings us to the Nuremberg Trials. Looking for examples to illustrate its principles, the ICJ keeps returning to those trials of the Nazi war criminals, which set precedents for prosecuting the abusers. The post-war was also a moment when the starkest of evil doers was down and out and the victors, in a fleeting moment of unanimity and influence, had a common interest in dealing to it. The closest recent parallel might be post-apartheid South Africa, where the Truth and Reconciliation Commission further developed principles of accountability. 

No Power Or Will To Prosecute Corporations

The good news is that the ICJ reckons there is no legal impediment to convicting a corporation for human rights abuses. The bad news is that it hasn’t happened yet. This is at least partly because of those definitions. Courts have historically dealt with individual responsibility, and according to the ICJ there are legitimate reasons why it’s been hard to prosecute corporations. Perhaps so - but let’s cut to the chase. The unspoken problem is that the UN has neither the power nor the will to prosecute serious cases. The drive to privatise has undermined the public institutions that exist to hold abusers to account. The consequence is that, having stated the situation, the ICJ doesn’t propose solutions. It would think that it has neither the mandate nor the ability to do so. After teasing us with the prospect of action, the lawyers won’t move far from their Geneva armchairs.

“Samuel Parnell: A Legacy”

by Paul Corliss, Purple Grouse Press & Unions Canterbury, 2008. $10, plus postage

In 1840, George Hunter a Scottish migrant, having landed in Port Nicholson, asked a carpenter he’d met on board to put up a store for him on Lambton Quay. Samuel Parnell agreed, but on condition that he work no longer than eight hours a day. At first Hunter wasn’t keen, but Parnell wouldn’t budge. Hunter was to become the first Mayor of Wellington. Parnell became a legend (trade union historian Bert Roth alludes to a less colourful version, the building in question being a warehouse in Petone.) 

It seems that the pair subsequently got on well enough. Hunter would have been surprised by Parnell’s directness. Back in Britain, seven years previously, the working day had been set at 15 hours, with a 12 hour limit for teenagers. True, there was a bold new eight hour day, a compliance cost imposed by a meddling nanny state, but it applied only to children between nine and 13. Adults, a commission agreed, should not be denied their right to the “freedom of labour” to work from 5.30 in the morning to 8.30 at night.

Hunter’s problem was that Wellington boasted only three carpenters, so he had little choice. Parnell knew there would always be other offers. He had not sailed to the new land to work for the man, the whole idea of emigration being to escape the rigidities of Europe’s class system. The right to an eight hour day, at least around Wellington, was confirmed the next year, in 1841, when workers downed tools on the road to Hutt. Like the carpenter, Parnell, if they were to sell their labour, they could hold out for a decent contract.

Parnell was influenced by Robert Owen, who, a generation before, had advocated “eight hours labour, eight hours recreation, eight hours rest”. In Australia in the 1850s the slogan became “eight hours to work; eight hours to play; eight hours sleep and eight bob* a day”. The right was won in Victoria in 1856, when building workers forced a 48 hour week, a reduction from 60 hours (Corliss notes that the work week probably ran for six days). One Melbourne man remarked : “It is neither right nor just that we should cross the trackless regions of immensity between us and our fatherland, to be rewarded with excessive toil, a bare existence, and premature grave”. A motto stated : “Labor, Recreation & Peace”. *Bob was a slang term for a shilling. Ed.

Slow Progress

In the old, industrialised world, with its large numbers of displaced people, employers had long held the upper hand. Not until 1847 was a ten hour day conceded in the UK, while French workers had to toil for no more than 12 hours after 1848. In the US, the May Day celebration of workers’ rights followed a demonstration on May 1, 1884 which demanded the eight hour day.  Corliss charts NZ’s subsequent evolution. Labour Day became a holiday in 1899, the culmination of a decade of reform. Annual holiday entitlement is one marker. In 1944 came the two week break. By 2003 we’d crawled to four weeks. This is less than swift progress, a reminder that our national reputation as an enlightened society is as much the result of circumstance as design.       

In fact, in 1884, Parliament was still rejecting an official eight hour day. In the House, just down the street from where Parnell had put up Hunter’s shop, the debate echoed old world privilege and bias. Corliss cites an MP who declared that a shorter day “would materially interfere with the country’s social fabric, because, having worked eight hours during the day, a coachman might refuse to take his master to the opera at night, or a domestic might refuse to bring a glass of wine or a candle for a guest”.

Parnell first lived on Willis Street. For a long time, while still building, he farmed 35 acres in Karori. He then moved back into town, first to Ghuznee Street, then to Cambridge Terrace. His is absolutely, positively, a Wellington story. His public funeral in 1890 was well-timed. Corliss offers us newspaper accounts which show that respect for Parnell’s legacy reflected an emerging consensus. The wind was shifting toward the pragmatic and moderate - Parnellian-Ballance-Seddon Liberals. (Not for the last time) laissez-faire exploitation had been discredited.  When you take something for granted as Kiwi employees came to expect job security and a somewhat egalitarian society, you don’t talk about it. Corliss notes that our current obsession to do with “work-life balance” has come about because we’re out of balance. He concludes with a Parnellian (humane and sensible) look at current labour issues. 

Parnell Defines The National Spirit

Parnell is remembered for more than the day in 1840 when he negotiated with Hunter. There’s something in him which defines the national spirit. Both the Hunters and the Parnells of New Zealand became do-it-yourselfers. To Parnell, the “triple eight” day was practical. Men needed time for their own work. It was also moral. Parades came to be adorned with banners reading : “Give us this day our daily bread” or “The staff of life”. There’s a clear line running from Parnell through to the Christian socialism of Prime Ministers like Peter Fraser and Walter Nash. From this ethic evolved our distinctive culture of the bach, the Christmas-New Year shutdown, and the weekend.  

Paul Corliss , a unionist and current Roger Award judge, writes engagingly. He’s always succinct and witty. He’s also modest. He outlines the context, indicates the issues, presents key sources, directs the reader to Websites, and guides us through the claims of other claimants for the niche Parnell occupies. Corliss’ colossal enthusiasm makes him the ideal person to tell the story.