Preface

One of the issues raised at the General Election in July, 1945, and one that will be fought out in Parliament and at future elections, is the issue of State control over industry. Although it is not a new issue, various factors, including the growth of monopolies in many industries and the experience of extensive Governmental control during the war, have combined to give it increasing prominence. Above all is the advent to power of the Labour Party. The Labour Government is nationalising the Bank of England, the mines and railways (as well as other industries later on), and is actively pursuing a policy of intervening in industries, such as textiles, that are said to be in need of reorganisation if they are to be able to compete effectively with more modern and better equipped competitors abroad.

It may be thought that as the various points of view are being debated so fully by the Tory, Liberal and Labour parties that there is no need for a statement representing the attitude of the Socialist Party of Great Britain. This pamphlet is designed to show that there is a specifically Socialist attitude to these problems and that it is not being put by any political party in this country except the S.P.G.B.

In the chapters that follow we show that schemes of nationalisation, municipal ownership, public utility boards and State regulation of monopolies will not solve the problems that confront us, and that the solution is only to be found in the establishment of Socialism. Those who believe that nationalising the mines, railways and other industries will lay the foundations for a new social order, and those who mistakenly believe that these schemes are the same thing as Socialism are asked to consider carefully the principles and policies of the Socialist Party of Great Britain as outlined in the following pages. Many workers who have reached the conclusion that the existing order of things needs drastic changes if the world is to be made fit to live in have failed to realise that the change is needed at the very foundations of society. Clear thinking about this problem will prevent precious years being wasted on experiments that are bound to prove ineffective, merely postponing the application of the real solution

THE EXECUTIVE COMMITTEE OF THE

SOCIALIST PARTY OF GREAT BRITAIN

First Edition,

December, 1945

Preface

01 The Socialist Attitude in Brief

02 What is the Source of Property Incomes?

03 Wrong Economic Theories leading to Wrong Labour Party Policies

04 The Passing of Competition and Rise of Monopoly

05 When and Why the Capitalists support Nationalisation

06 The Profits of Nationalised Industries

07 The Workers under Nationalisation

08 Compensation or Confiscation?

09 Karl Marx and Nationalisation

10 What is to be Done?

Chapter 1 The Socialist Attitude in Brief

On the inside cover of this pamphlet will be found the Object and Declaration of Principles of the S.P.G.B. There, in compact form, is a statement of the aims and methods of Socialists. It was drawn up in 1904 when the S.P.G.B. was founded and it has not needed to be revised at all. If it is examined and compared with the points of view now being expressed on nationalisation and monopolies one very important feature will be noticed. This is the fact that whereas other organisations are interested in the extent to which industry shall be controlled and regulated, and in the machinery of control, the S.P.G.B. has always been interested primarily in the question of the ownership of industry. This is not an accidental or unimportant difference. It goes right to the root of the question what form social organisation should take. While non-Socialists (including the Labour Party) take sides in the dispute whether industry should be left alone or brought under State control, and whether State control would be more efficient or less efficient than existing private control, Socialists urge the workers to concern themselves with the problem of ending all forms of private ownership, including that form of private ownership which consists of wealthy individuals investing their capital by lending it to the Government instead of putting it into private undertakings. Both are forms of the capitalist socialist system and both must be ended if Socialism is to take the place of Capitalism.

A capitalist is a person who owns sufficient property (whether in land, or in a business, or shares in a company or investments in Government loans, etc.), to be able to live on the income derived from his property without the necessity of earning his living. A member of the working class is a person who, not owning property at all or having only an insignificant amount of it, has to earn his living by working for a capitalist or for the capitalist State. The great majority of the population, including of course the wives and children of the workers, are in the latter group : they constitute the working class.

It will at once be noticed that it would be an impossibility for all the population to be capitalists just as it would be impossible for all of the population under a slave system to be slave-owners. Slave-owners could not exist unless some of the population were slaves. Likewise capitalists, living on incomes from property ownership, could not exist unless there were wage and salary earners, working for the capitalists. It will be noticed, too, that what the capitalists are concerned with is receiving their income from their investments and it matters little to them whether they receive it as rent from land, as dividends on shares in a private company, as interest on the stock of a public utility board such as London Passenger Transport Board, or as interest on money lent to the Government or to a Local Authority.

Now let us examine some of the arguments put forward by different groups of capitalists, bearing in mind that all the time each group of property owners sees things in the light of its own self-interest or what it believes to be its own self-interest.

The proprietor of the small business, in which he also very probably takes an active part in management along with his employees, usually opposes not only State control but also the monopolising activities of the big concerns. The small man only wants the State to intervene when it is a question of protecting him against his overpowering rivals. He claims that the small concerns are more enterprising and economical and he charges the big concerns and State enterprises with being bound up with “red tape” and bureaucratic methods.

The directors and shareholders in the big concerns while ready to make similar charges against Government monopolies defend their own form of organisation by claiming that the bigger the concern the more economical and efficient it can be. Only the large and wealthy organisations, they say, can afford to install expensive up-to-date machinery and organise research into new discoveries. They claim, too, that they are not merely profit-seeking bodies but are “servants of the public”, providing the best goods at the lowest prices.

Still more is made of this argument about being “servants of the public” by undertakings the activities of which are restricted by Acts of Parliament and by the supervision of appropriate Government Departments. Under this heading comes the London Passenger Transport Board. Others are the Port of London Authority, and Central Electricity Board. Broadly, those bodies are subject to some measure of Government control over the persons appointed to the boards of directors who manage them, over the fares, etc., they may charge to users, and over the interest rates that may be paid to the investors who purchase their Stocks. Usually these investors receive a fixed rate of interest and not, as on the ordinary shares of private companies, a dividend which may be higher one year and lower the next year according to the amount of profit that has been made.

Lastly, in order to complete the picture, there are the State-operated concerns such as the Post Office in this country and railways and other undertakings in some other countries, and the numerous water, gas, electricity, tram and bus undertakings operated by Town and County Councils. These State and Municipal undertakings are financed by loans bearing various fixed rates of interest and the investors, while sure of their income, do not have the right of exercising control over the way the undertaking is run such as is possessed by shareholders in a private company.

The advocates of these State or Municipal undertakings argue that they are free from the “profit motive” and that they are run solely to serve the public by competent and disinterested officials and staffs who can have no other motive than that of public service.

It is not intended here to go into the details of the various forms of organisation. What concerns us at present is to point out that however much they may differ from each other in respect of the way in which they are controlled, they all serve the same purpose of providing the capitalists with opportunities of investing their capital in order to receive an annual return on it. They are all of them forms of capitalism and capitalist property. The form of control differs from one to the other, but to the capitalist they all provide means of investing capital in order to receive from it a property income.

It will now be clear what is meant by our earlier statement that while non-socialists in the various other parties are divided among themselves about forms of control, the socialist and only the socialist recognises that the question of paramount importance to the working-class is to end all forms of capitalist ownership no matter what may be the form of control under which it operates. The community as a whole can never obtain real control until it obtains ownership.

The Socialist Party of Great Britain is not in favour of private competitive capitalism, or capitalist monopolies, or Public Utility Boards, or State and Municipal undertakings. Why the Socialist Party is opposed to them all will be better understood when we have examined in more detail what is the source from which all forms of property income are derived by the different groups of capitalist investors. Here it will suffice to point to the contrast between the Labour Party’s demand for “the progressive elimination from the control of industry of the private capitalist ( Labour and the New Social Order, 1918, p.12. Our italics) with the S.P.G.B.’s demand for the elimination of the propertied class from ownership of the means of production and distribution.

While the Labour Party is content to leave the capitalists as an owning class provided their undertakings are to some extent controlled or regulated by the Government, the S.P.G.B. aims at a system of society based upon the common ownership and democratic control of the means of production and distribution.

Chapter 2 What is the Source of Property Incomes?

What is the ultimate source from which the landlord derives his rents, the industrial or commercial capitalist his profits, and the money-lending capitalist or investor in State or Municipal loans, his interest?

This is a question to answer to which economists have written at great length, but most of what has been written does not throw much light on the question. It is a curious thing that some of the earlier writers were more clear and helpful than those who have followed them. This is partly owing to the fact that the outward and confusing appearance of things serves to hide the underlying reality, and partly also because many of the later writers have been more interested in defending the capitalists against criticism than in uncovering truths inconvenient to the capitalist system of society.

Socialists are indebted to Karl Marx for his revealing study of the economics of capitalism. His explanation stands alone as the one unshakeable doctrine, yet it is rejected not only by the capitalist economists and politicians whose motive for hostility is understandable, but also by such parties as the Labour Party which criticise capitalism and seek to improve it. It is our purpose in this chapter to show that the gulf which separates the socialist, on the one side, from capitalists and Labour Party reformists on the other is their respective attitudes towards Nationalisation and State control of industry, can be traced back to the acceptance by the capitalists and by the Labour Party of unsound economic theories and their rejection of the only satisfactory explanation, that of Karl Marx. Wrong theory, in the field of economic and politics, as elsewhere, leads to wrong policies and wrong actions.

The question to be answered is “What is the ultimate source of rent, profit and interest?” How is it that property owners who do not themselves play any active part in growing food, manufacturing clothes and building houses, nevertheless are able to eat the choicest foods, wear the best clothes and live in the most spacious and convenient houses?

Of course the landlord knows that he receives rent from his tenants, whether those tenants are factory owners, farmers, or house-occupiers. The factory owner knows he receives his profit from the sale of the goods produced by the workers in his factory. The money-lending capitalists (including the investor in Government or Municipal loans) knows that his interest likewise comes ultimately out of the proceeds of the sale of goods. Though the interest paid on State Loans, etc., comes actually out of taxes and rates levied by the Government or Local Councils, those who pay the rates and taxes also derive their incomes directly or indirectly from the sale of goods. Likewise, the worker who rents a house is able to pay the rent only because his employer has sold goods and can pay wages out of the proceeds of past sales of the goods the worker produced for him.

Ultimately, therefore, all forms of property income and also all the wages and salaries of the members of the working class arise from the sale of commodities, that is goods produced for sale.

What is it that gives goods of all kinds a value and enables them to be sold at their appropriate prices which provide both for the wages of the workers and for the profits, rent and interest of the propertied class? The explanation is that commodities have values which arise from what Marx termed the “socially necessary labour” embodied in them. To take a simple explanation, a bicycle worth £6, a suit of clothes worth £6, and a certain weight of gold worth £6, all have the same value because the amount of labour required in their production is the same. This illustration is expressed in simple form in order not to complicate it with unnecessary detail, but it should be observed in order to avoid misunderstanding firstly that the selling price of an article may in practice deviate from value, and secondly only that labour is value-producing which is “socially necessary” labour – mere wasted labour due to the inefficiency or laziness of the individual concerned does not count. Also labour of greater skill counts proportionately more than labour of less skill.

All property incomes and all wages and salaries are derived in the last resort from the sale of goods that possess values proportionate to the amount of socially necessary labour required in their production.

The next point to notice is that there is one commodity which has two peculiar features. This commodity is the “labour-power”, the (physical and mental) energies of the worker. Its first peculiar feature is that it is possessed by the working-class who, apart from this, have no commodities to sell. Not having any other commodity to sell, the worker has to obtain his livelihood by selling his “labour-power” to the capitalist, for the hour, day, week or month as the case may be. Like other commodities it has a value, which is proportionate to the amount of labour required for its production ; which means the amount of labour required on an average to produce the food, clothing, shelter, etc., of the worker and his dependants. Under the different climatic conditions of different countries and the different conditions of different occupations the worker requires differing amounts of means of subsistence, but this is a qualification which need not detain us in considering the simple elements of the position.

The second peculiar feature possessed by the commodity “labour-power” is that it has the quality of being able to produce a value greater than its own. When the worker expends his labour-power by working on the employer’s raw materials he is capable of adding a value greater than the wage he is paid, or in other words a value greater than the value of the food, clothing, etc., that he consumes. In a working week of six days, for example, the worker may be working, say, three days producing value equal to the value of his means of subsistence (his wages), but in the remaining three days he will continue to work producing value which is retained by the capitalist. This “surplus value” is the source from which all forms of property income, all profit, rent and interest are derived.

This, then, is the answer to our question. The property income of the capitalists (like the income of slave owners in former times) is derived from the exploitation of the workers. The workers are carrying on their backs the whole of the propertied class.

Though most workers instinctively feel that somehow or other they are the victims of what has been called “the great money trick”, and feel that though they receive the “fair market value” when they sell their labour-power, they are in some way or other being swindled, it is nevertheless true that this fact of exploitation is not generally understood. What hides it from sight and understanding is the apparently free nature of the contract that the workers or their trade unions enter into with the employers. This surface appearance makes it seem that the contract between workers and employers is just like any other bargain entered into voluntarily, as, for example, the contracts between capitalists when they buy and sell commodities. The wage contract however only seems to be free, in truth it is forced. The capitalists, because they are the owners of property and their ownership is endorsed by law and backed up by the State and its police and armed forces, can impose more or less their own terms when they bargain with the propertyless working-class. They are able to do so for the reason that the workers are always only a short distance from destitution. The workers must accept more or less the terms that are offered because otherwise they face unemployment and have not the means to hold back for more than a short time. The workers’ bargaining position is helped but necessarily to a limited extent only, by trade union organisation.

Exploitation did not begin with capitalism though its form in earlier times was different and easier to understand. A slave, “owned body and soul” by a slave-owner, knew very well that he was labouring to keep the slave-owners as well as himself. He did not imagine that he was entering into a voluntary arrangement. Similarly a serf, who might be working unpaid for three days on the Lord of the Manor’s field and three days on his own, could clearly see that he was being robbed and exploited. As the Kentish priest John Ball, leader of the peasants revolt in 1381, pointed out in one of his stirring declarations, “things will never be well in England so long as there be villeins and gentle folk. By what right are they whom we call Lords greater folk than we? On what grounds have they deserved it? Why do they hold us in serfage? . . . How can they say or prove that they are better than we, if it be not that they make us gain for them by our toil when they spend in their pride? . . . They have leisure and fine houses ; we have pain and labour, the rain and the wind in the fields. And yet it is of our toil that these men hold their estate.” (Quoted in A Handbook of Socialism. W.D.P. Bliss. 1907. Swan Sonnenschein, p. 209.)

Exploitation still goes on though slavery and serfdom have long been abolished, but now it takes the form of “wage-slavery”. Then it was more open and unmistakeable, now it is less easily perceived because of the greater complexity of capitalism and particularly because the worker bargains with the capitalist to receive a certain agreed sum of money as wages.

Defenders of capitalism cleverly seize upon unessential and often no longer existing features of their system in their effort to show that property incomes arise from sources other than the exploitation of the workers. They talk of the thrift and self-denial of the capitalist. It is true that in the early days of capitalism a thrifty worker might sometimes hope to become owner of a small business, and exceptionally it can happen to-day, but it is mere playing with words to liken the wealthy man’s investment of part of his superfluous income to an act of self-denial or thrift ; not to mention the fact that the bulk of the present-day accumulations of wealth are not the result of saving by the present owners but are the result of inheritance.

Capitalists talk of their “work”, ignoring the fact that in their capacity as capitalists they do not engage in production themselves. If they choose to work that is something outside their function as capitalists. In the early days of capitalism the capitalist did normally play an active role in the work and management of his business, but now, with the rise of joint-stock companies in which ownership of the concern is in the hands of numerous shareholders, the typical capitalist is a mere passive investor, leaving the control of the business to a board of directors. Small undertakings, personally managed by a proprietor or partners, are no longer the predominant type of capitalist concerns. Even in the remaining small concerns the capitalist is an exploiter though he may at the same time take an active part in the work of the undertaking, and of course in such a case he expects to receive a larger income than if he were merely an investor.

Another defence of capitalism is that the capitalist is an indispensable “supervisor” or “organiser”. This also was true at one time but is now the exception. Once the concern has reached more than very small size the owners have to employ members of the working-class to do the supervising and organising work.

Much has been made of the so-called superior knowledge and abilities of those capitalists who are actively engaged in the work of their businesses. It is sometimes the case that they have considerable technical knowledge and administrative experience and it would not be possible at short notice to find workers able to step into the shoes of the men at the top, but this is not a question of superior intelligence, but is merely the result – as every worker knows from practical experience – of the fact that those in control are able to train themselves and their sons and other selected persons to carry on the particular function required of them while the ordinary workers are deprived of opportunities to acquire any specialised knowledge except when the employer permits them to do so.

We are sometimes told that the key men of modern industry are not the workers but the inventors and discoverers. The answer to this is that it is not the capitalist who provides the inventions and discoveries but rather that the inventors and discoverers have to come to the capitalist for him to make the result of the work a commercial (that is to say a profit-making) proposition. Moreover the gigantic concerns which more and more dominate modern industry no longer leave inventions and the discovery of new methods to chance, but carry on special departments, staffed of course by members of the working-class on an employee basis, to co-operate in scientific research. Invention is becoming a highly organised branch of mass-production industry.

It is, moreover, well known that wealthy concerns operating an established process profitably, sometimes acquire patent rights of a new process only for the purpose of preventing its use by rival concerns, and without utilising the process themselves until years afterwards.

Lastly it is pointed out by capitalist economists that, in any event, the worker cannot work without tools, plant, factories, etc., and that these are provided by the capitalist. This is a mere juggling with words. These necessary items in production are themselves the product of the labour of workers engaged in those branches of industry and they are “provided” by the capitalist class in the same sense that the slave-owner “provided” the land, buildings, tools, etc., by allowing (or rather compelling) the slave to produce them ; and in the same sense that the functionaries of a Municipality “provide” the municipal buildings that are often adorned with a commemorative tablet inscribed “Erected by the Mayor, Aldermen and Councillors”.

The propertied class (most of whom have inherited their property or the bulk of it) provide the instruments of production only in the formal sense that they allow the working-class to produce and operate them – on condition of course that the workers agree to their own exploitation, working part of the week to produce the equivalent of their wages and the rest of the week creating surplus-value which is the source from which all the sections of the propertied class derive their profits, rent and interest.

Before leaving this question it is instructive to notice that the Labour Party and similar organisations do not accept the Marxian explanation. Instead they endorse various theories which in greater or lesser degree approve property incomes, and deny that they are the result of the exploitation of the workers. Such theories sometimes concede that the landlord is a parasite but not that the industrial capitalist and money-lending capitalist is in the same category. Basing their policy on such theories, parties like the Labour Party are prepared to change the form under which industry and land are controlled and are prepared to deprive landlords and industrial capitalists of the right to have any direct control over the day-to-day administration of industry and agriculture, but are oblivious to the fact that the paramount need of our times is the abolition of private ownership of the means of production and distribution, the suppression of all forms of property income, and the achievement of the social ownership of these means of production and their democratic control by and in the interest of the whole community. It is for this great social transformation that the Socialist Party of Great Britain exists.

Chapter 3 Wrong Economic Theories leading to Wrong Labour Party Policies

It is only necessary to glance at the economic theories held by the leaders of the Labour Party and similar bodies to understand whence comes their unsound and anti-Socialist attitude towards the problem of ending the capitalist system. Anxious though they may be to do something practical to abolish the evils they see around them, they are thwarted and restricted by the basically unsound theories they hold. As has been emphasised before, they can only see the problem as one of control and not – as it really is – one of ownership. They are willing to loosen the grip of the capitalist on the administration of industry but would allow ownership to remain essentially intact though changed in outward appearance.

It has been remarked before that the primary interest of the capitalist is to receive an income from his investment, but within this primary interest different groups of capitalists have sectional interests. In a new and expanding business those shareholders who own “ordinary” shares, on which the dividend is not a fixed amount but fluctuates from year to year with the amount of profit, are in the position of anticipating that profits may continue to increase, thus affording them an increasing income. Other investors who do not hold ordinary shares usually receive a fixed rate of interest, this being the condition on which their particular class of shares or stock is issued. It will be seen that there is more of a speculative element in the first kind of investment than in the second ; the holders of the second kind of investment are in effect giving up the chance of higher dividends in return for greater security. The largest element of security (coupled of course with a willingness to take a smaller return) is to be found by investing in Government or Municipal loans. In practice it is not only that some investors look more to security while others look more to the prospect of a larger income. What often happens in practice is that wealthy individuals or Insurance Companies or other bodies with large funds to invest, guided by investment experts, spread their investments over many different types of investment, often including holdings in companies or Government or Municipal loans all over the world.

Let us now see what is the attitude of the capitalist towards a proposal to establish an amalgamation of companies, a monopoly of a whole industry, a State supervised Public Utility Board, or to go over to complete State or Municipal control. (The reasons for such developments will be examined in a later chapter.) Each investor and each type of investor will be concerned with the problem whether the change will improve his position, give him a larger return or alternatively give him greater security. If the concern in which his capital is invested is past its most prosperous period, faced perhaps by dangerous competition such as the competition of motor transport with the railways, he may wonder whether it would not be prudent to seek amalgamation or get the Government to bail him out. These are the questions the capitalist asks, and answers to the best of his knowledge ; but in public (as part of his natural endeavour to strike the best possible bargain) he may talk about the desirability of competition and the abuses of monopoly, the inefficiency of big business, the bureaucratic evils of Government Departments, and, of course, he will claim to be interested not only with his own investment but with the welfare of the customers. This, however, is only “sales talk” ; if the terms offered are sufficiently attractive the capitalist will enter into amalgamation or sell out to the Government notwithstanding all the high-sounding principles he may have enunciated. As a case in point, when in 1868 the telegraph companies and the railway companies (which also had telegraph systems) were faced with the decision of Disraeli’s Conservative Government to take over the telegraphs as a State concern “the Parliamentary Bill was opposed at the outset by both the telegraph companies and the railways, but during its passage through Parliament terms were agreed with both these interests and the opposition was withdrawn”. (The Post Office, Sir Evelyn Murray, Secretary to the Post Office. Putnams, 1927, p. 69.)

Likewise with the railways to-day. Now that they are losing more and more of their profitable traffic to road transport concerns and have a very uncertain future, the directors, in public, oppose the whole idea of State railways, but in July, 1942, it was reported that there had been a rise in the prices of railway shares and “the current market explanation . . . was that it was inspired by statements of trade union officials that plans for the unification of the railways under a public board are well under way” (News Chronicle, 8 July, 1942). Obviously some of the railway shareholders thought that unification and a change in the form of control might benefit them, though the City Editor of the News Chronicle himself thought differently. In his view there was “very little reason to suppose that the merging of the railways, if it comes off, will either benefit the stockholders or, indeed, produce substantial working economies.”

On 7 June, 1942, the City editor of the Sunday Express also reported the “slow upward move in home rail stocks,” and said : “The buying is based on the theory that Britain’s railways will never return wholly to private ownership . . . Instead of a fluctuating income dependent on operating results, their (i.e., the shareholders) revenue would be fixed.”

The News Chronicle writer in the article referred to above described the suggested unification of the railway under a public board as “socialisation”, and this brings us to the many Labour Party spokesmen and theorists who hold the same misconception.

A man whose works have had considerable influence in Labour Party circles and in the I.L.P., of which he was a member, is Mr. R. H. Tawney. In his book The Acquisitive Society (George Bell, 1921, pp. 66 and 117), after condemning various formers of private property, he argues that the payment of what he calls “pure interest” will be necessary under “Socialism”. It is justified, he says, provided that the owner of the capital is not allowed to have any share in or responsibility for, the organisation of the industry. The late J. Ramsay MacDonald, leader of the Labour Party and for many years a prominent member of the I.L.P., held the same erroneous view as Mr. Tawney. In his Socialism, Critical and Constructive, he wrote :–

“When Labour uses Capital and pays it its market value, property is defensible ; when Capital uses Labour and retains as its reward the maximum share in the product upon which it can keep its grip, property is devoid of a sure defence.” (Cassell’s Pocket Edition, 1929, pp. 302-3.)

An old I.L.P. pamphlet How Socialists would run Industry (1925, p. 14) asked “Why should not Labour hire capital and devote the whole of the surplus to the improvement of the service?” and went on to propose that “the surplus earnings after paying a fixed rate of interest for the hire of loan capital, should . . . be reserved for specific purposes . . .” (Our italics).

In another I.L.P. pamphlet Socialism in the Village (1920) we read :–

“The owners will receive Government Bonds in return for their land, the interest on which will be more than covered by the rents paid to the State.” The pamphlet went on to express the view that “there is every reason to expect that agriculture will yield a far better return to labour and capital than it now does.” (Our italics).

Though the above quotations are taken from publications more than 20 years old it will be found that the theory on which they are based is still held in its entirety by the Labour Party and trade unions to-day. Their proposals for nationalisation or State control are still framed on the principle of depriving the capitalist of his control of industry while guaranteeing him a fixed return on his capital.

Subsequent programmes of the Labour Party adhere to this illusory change of form while retaining the substance of the exploitation of the workers by the capitalists. The Labour Party programme For Socialism and Peace (1938) contains the following:–

“The public acquisition of industries and services will involve the payment of fair compensation to existing owners ; but thereafter the former owners as such should have no further part of any kind in the control or management or policy or finances of the publicly-owned concerns. The suggested basis of compensation, broadly, is the net reasonable maintainable revenue of the industry concerned” (p. 19).

It was on this basis that London’s buses, trams and tubes were merged into the London Passenger Transport Board on the initiative of Mr. Herbert Morrison in the Labour Government of 1929-31 (though the merger was actually not completed until 1933, by the National Government). The capitalist investors who had their money in the private companies were compensated on the basis of the average net profits for the preceding three years. The stock of the new undertaking, London Passenger Transport Board, pays interest at 4½%, or 5% in the main, though what is known as “C” Stock pays whatever amount is available fro ; profits but in any event not more than 5½%.

Under the Labour Government’s Bill to nationalise the Bank of England (October 1945) the stockholders are to receive as compensation the same dividend, 12%, as they have received each year for the past 20 years. For each £100 of Bank Stock they will receive £400 of Government Stock paying 3% a year.

In an article demanding nationalisation of the railways the Scottish journal Forward, which professes to have “advanced” Labour views, instanced the L.P.T.B. as a model for railway nationalisation – “after all, nationalisation of railways would not be a leap in the dark. It is many years now since the London Passenger Transport Board came into existence, and nobody can seriously argue that this has been a failure either as a public service or as a commercial undertaking.” (Forward, 11 March, 1944). It may be remarked in passing that the employees of the Board who have several times come out on strike over wages and conditions, as well as the users of the service, know very well that the Board is not different from any other profit-making concern. Despite the claim of its originator, Mr. Herbert Morrison, that it is a form of “socialisation”, it is merely one of the many forms of capitalism. Only when industry and transport, etc., are owned and democratically controlled by the whole community can service to the whole community be a reality. Nationalisation or State capitalism is not the solution to the problem.

Chapter 4 The Passing of Competition and Rise of Monopoly

There was a time when avowed defenders of capitalism rested their principle charge against Socialism on the plea that capitalism means free competition of independent undertakings and that Socialism would fail because it involves the ending of that competition.

Even as late as 1927 the late Lord Melchett (then Sir Alfred Mond), head of the great combine Imperial Chemical Industries, Ltd., devoted space in his book Industry and Politics (MacMillan, 1927), in the chapter “Why Socialism Must Fail”, to the benefits of competition. He claimed that “captains of industry” are produced by competition and he wondered “what is to happen when these men disappear, as they must do in time? What is the machinery which is to create the new captains required to direct industry and commerce?”

“Competition,” he wrote, “is the breath and soul of human endeavour, whether in business, in sport, in politics, or in any other form of human activity. It is nature’s way of proving who is the best man.”

Sir Alfred Mond wrote his book just after the formation of the combine of which he was head, a combine designed, of course, to eliminate competition between the component companies, though at the same time it was obviously also aimed at meeting the competition of foreign concerns. The Manchester Guardian Commercial, writing at the time I.C.I. Was formed, had this to say :–

“We may take it for granted at the outset that the object of the promoters is less to consolidate the chemical industry into a better dividend-earning machine than to build up a more easily managed organisation for the purpose of meting foreign competition, itself very closely organised. Naturally, any success obtained in this direction will be reflected in the profits, but a mere profit-seeking policy alone has not hitherto led to gigantic grouping of this character. There will now be a concern which will be more capable of talking on equal terms with I.G. Farbenindustrie A.G. of Germany and the two combines in the United States, Du Pont’s and the Allied Chemical Industry” (M. G. Commercial, 28 October, 1926). Even then, though he proclaimed that competition is so beneficial Sir Alfred Mond was an advocate of reaching agreement with the foreign combines – in other words, of eliminating competition, as far as possible, abroad as well as at home. The Manchester Guardian Commercial anticipated that “in view of Sir Alfred Mond’s persistent advocacy of international co-operation it will not be surprising if an effort is made to arrive at some agreement with the German trust granting an exchange of patents and experience with the British and delimiting markets to satisfy the German demand.”

Under Lord McGowan, the present head of I.C.I., the combine has fulfilled the anticipations of the writer quoted above. Lord McGowan, rebutting a charge made in U.S.A. that I.C.I. and the American chemical combine, Du Pont’s, had instructed their representatives in South America to continue co-operation with representatives of a German corporation in Chile and Bolivia after the outbreak of the war, issued a statement in January, 1944, in which he said that “for over 40 years I.C.I. (or its predecessor companies) have pursued a policy of co-operating with the great American chemical firm Messrs. E. I. Du Pont de Nemours & Co. . . . “ (quoted in Labour Research Dept. Fact Service 14 January, 1944), while the Observer (23 January, 1944) stated that close association between I.C.I. and the German combine I.G. Farbenindustrie A.. existed before the war.

It is a far cry from the late Sir Alfred Mond’s eulogy of competition to his successor Lord McGowan’s statement to the company in May, 1944, attacking what he called competition “carried to extremes.” The Times (13 May, 1944) said, of this statement :– “He has lost none of his mistrust of competition ‘carried to extremes’” ; but The Times went on to say that inquiry is warranted “into what is meant” by that phrase. The Manchester Guardian of the same date quotes Lord McGowan as having declared his belief in international agreements with private groups abroad “as instruments of world rationalisation of industry”, and as having expressed the fear that without such co-ordination this industry would “suffer the economic anarchy of cut-throat competition.”

Lord Melchett, director of I.C.I. and son of the late Sir Alfred Mond, had likewise repudiated his father’s declared belief in competition, for in 1935 he introduced into the House of Lords the “Industrial Re-organisation (Enabling) Bill” (which however was not passed). The object of the Bill was to give the majority of owners in any industry the legal power to force re-organisation on the industry notwithstanding the opposition of a minority with the object, among others, of “eliminating wasteful competition”.

In short when capitalists used to attack Socialism for being against competition, they held that competition was “the breath and soul of human endeavour” ; but when, in the course of the natural capitalist development towards monopoly, these same capitalists have done their utmost to eliminate competition they denounce it as “cut-throat” and as “economic anarchy”.

An interesting sidelight on the I.C.I. is that when, in 1892, Frederick Engels wrote about the early trend towards monopoly, in his Socialism Utopian and Scientific, he referred to the formation in 1890 of United Alkali, a merger of 48 English alkali concerns (Allen & Unwin edition, pp. 68-69). The capital of United Alkali was £6,000,000, a very large amount in those days, but United Alkali was one of the companies which in 1926 merged into I.C.I. and that company now has an increased capital of £74,000,000, owned by 180,000 shareholders, and employs 100,000 workers in its home factories alone (Manchester Guardian, 13 May, 1944).

Some other giant concerns with headquarters in Great Britain are the following :–

Lloyds Bank Ltd. (capital £73,000,000).

Dunlop Rubber Co. Ltd. (capital £12,773,000).

Prudential Assurance Co. Ltd. (capital £2,250,000 ; assets £240 million).

Lever Bros. & Unilever Ltd. (capital £69,597,000, owns interests in over 300 associated companies operating all over the world).

Shell Transport & Trading Co. Ltd. (£41 million).

Cable & Wireless Ltd. (£30 million, owns practically all telegraphic, cable and wireless systems of British Empire).

London, Midland & Scottish Railway (£305 million).

It should be noted that the above figures of capital relate to the total of capital issued. Many of the stocks and shares are priced at far above their nominal value (as a consequence of high rates of profit being earned by the companies) and the total assets of the companies are often very much more than the figures of issued capital.

According to Mr. H. Leak, chief statistician of the Board of Trade, “though there were in 1935 some 257,000 firms (including local authorities) active in industry, British industry as a whole was dominated by no more than 2,000 separate large undertakings and the 1,000 largest businesses were responsible for half of all industrial output”. (The Times, 21 February, 1945) ; and as The Times points out, much further amalgamation has taken place since 1935.

Although there are and doubtless will continue to be large numbers of small and medium-size concerns, industry, commerce, transport and banking are more and more coming under the domination of huge amalgamated undertakings, or of national and international cartels and associations set up for the purpose of eliminating competition, fixing prices, or dividing up the market so that rival firms do not compete in the same region.

Up to the middle of the 19th century and for many years afterwards the prevailing attitude of capitalists and of capitalistic politicians was one of opposing the encroachments of monopolistic concerns of all kinds. Thus when Disaeli’s Tory Cabinet had decided in 1868 that the Government should take over existing telegraph systems from the companies they did not at first propose to give the State telegraphs a monopoly, “but by 1869 opinions had changed and it was thought prudent to obtain protection against the establishment of new companies,” and a new Act in 1869 established the desired monopoly, (The Post Office, Sir Evelyn Murray, p.2.)

The general line of development has been that in periods of fairly widespread trade expansion and capitalist prosperity competition is not very keen – there is room for all and all are expanding. In such a period the Government (which is in a position either to encourage or to prohibit combines) has little occasion to interfere and the capitalists, not being faced with ruinous competition, do not strongly favour it. The great body of capitalists at such a time would be against the establishment of a monopoly in any field that might prove detrimental to their general interest, and if for any reason such a monopoly is established (e.g., the postal, telegraph and telephone monopoly) they would use every effort to see that its charges were strictly controlled.

When, however, capitalism has one of its recurrent crises of “overproduction”, trade declines, prices are cut and capitalists find themselves forced by competition to sell at small profit or even at a loss. Then amalgamation and other means of eliminating competition are the order of the day in those industries which have already reached a stage of development which makes such amalgamation practicable. The formation of such monopolies or near-monopolies itself produces a new problem for capitalists in general and particularly for the smaller concerns and for the industries not yet capable of unification, the problem that their interests will suffer through the activities of big and powerful groups which can at least temporarily force up the prices of their products when competition is eliminated. To meet this situation the capitalist groups whose interests may be adversely affected call upon the Government either to prevent the monopoly or at least to control its activities. A typical example of this was the way in which the British railways developed towards amalgamation. The traders who used the railways for transporting their goods and whose interests were threatened, pressed the Government to place legal restrictions on the charges made by the railways.

The late Mrs. Lilian Knowles in her Industrial & Commercial Revolutions in Great Britain during the 19th Century points out that at the end of the century rising railway costs and declining dividends forced the companies to the view that “the only hope seemed to be amalgamation to stop competition”. “Violent competition”, she wrote, “inevitably gives rise to amalgamations and the railways were no exception.” (Pages 281 and 283, 2nd Revised Edition. Routledge, 1922.)

The large number of independent railway companies were gradually reduced by amalgamation, with consequent avoidance of competition, and at the same time traders waged an unceasing struggle to get Government intervention to control the railways’ charges for the carriage of their goods.

In 1872, in response to the fears of the traders, a Commission was appointed to inquire into threatened amalgamation schemes, but the progress of amalgamation was inevitable and when in 1911 another official inquiry took place the report found “that the era of competition between railway companies is passing away and it was recognised by witnesses on behalf of the traders that this could not be prevented.” (Knowles, p. 284.)

The railways, here and abroad, were among the first undertakings to take the path of amalgamation, but what happened to the railways is more or less typical of the evolution of industry generally.

One important point to notice is that amalgamation and the demand by other capitalists that monopoly should be prevented, or failing that controlled by law, has everywhere caused the Governments more and more to abandon their earlier attitude of laissez-faire, that is of leaving industry to conduct its own affairs without State interference. Mrs. Knowles makes the following comment on this :–

“The chief characteristic of railway development between 1873 and 1894 is the progressive intensification of control of the railways by the State. The development of Germany and the growing world competition were important influences in the general reaction from laissez-faire, but the tendency to abandon it as a maxim of State policy, is, however, noticeable first of all in the railways and this is true not merely of England, but of the United States” (p. 275).

After the War (1914-1918) the considerable number of railways still in existence as separate bodies were compulsorily grouped by Act of Parliament into four large systems. The second world war promises to lead to further unification, necessitated in order to protect the railways from road transport competition which was growing rapidly in the years before 1939.

Leaving the railways and looking at the progressive elimination of small competing firms in industry generally we have the findings of two official bodies which reported in 1919 and 1927.

The Committee on Trusts reported in 1919 :–

“We find that there is at the present time in every important branch of industry in the United Kingdom an increasing tendency to the formation of Trade Associations and Combinations, having for their purpose the restriction of competition and the control of prices.” (Report. Page 2).

“ . . . . Trade Associations and Combines are rapidly expanding in this country, and may within no distant period exercise a paramount control over all important branches of the British Trade.” (Report. Page 11).

The Committee on Industry and Trade reported in 1927 as follows :–

“The progress of the industrial revolution in Great Britain during the earlier half of the 19th century was marked by increasing freedom and fierce of competition in industry as old restrictive regulations were swept away and as transport enormously improved . . . during the last quarter of the century there was a marked trend towards the limitation of competition in many ways.” (Third Report, p. 68).

The Report went on to say this about “associations for allocating contracts” :–

“Such associations exist in certain industries where work is allocated by tender. The Association decides which firm is to receive a particular contract and it is arranged that other firms either do not tender or tender high. In some cases it is arranged that the members of the Association shall each be allocated a particular area.” (Third Report, p. 71).

It is true that many of the associations formed by competing companies to eliminate competition do not last a long time. They are constantly breaking up and being re-formed. Often their initial success is, in the long run, a direct cause of their undoing because, by raising prices and consequently profits in the industry concerned, they give an additional stimulus to outside monied groups to enter that field in competition with the associated companies, or to seek to produce cheaper substitutes for the article in question. An example of a “cartel” that broke up was the Mercury cartel formed by Italian and Spanish groups. The Manchester Guardian gave the following account :–

“A group of producers concluded a high-minded cartel to stabilise supplies and prices and then proceeded to screw down supplies and screw up prices. This went on merrily until somebody grew tired of it. A search for mercury was started overseas, and within a year or two the supposed monopoly was exposed as a bluff. The United States is now probably producing not much less than Italy, and a large output has been developed in Mexico and Canada. Preparations are being made in China for the development of large mercury deposits. Never again will the Italo-Spanish cartel recover its restrictive grip.” (Manchester Guardian, 8 March, 1944).

Nevertheless the failure of that attempt and of similar attempts in other fields does not alter the fact that capitalist concerns are more and more trying to eliminate competition by one means or another, and that failure on a too limited basis will not prevent further, more widespread, attempts later on.

The Times in 1941 and 1942 published articles surveying the development of capitalist industry in recent years. Below are extracts from the articles and from the editorial comment :–

“The early philosophers of capitalism wrote of it as a highly competitive system. The labourer could not be exploited because employers were fighting each other for his services. The entrepreneur was the servant, not the master of the consumer. He could not charge exorbitant prices, or make excessive profits ; he must always strive to introduce new inventions ; his inefficiency was penalised with loss. How different is this picture from the world we know to-day. Already before the war the iron and steel industry, transport, textiles, shipbuilding, and all our staple trades were riddled with price agreements, quotas, or restrictions of one kind or another ; in all the consumer had been dethroned.” (The Times, 18 September, 1942).

“The typical British industry to-day is privately owned but centrally controlled. It is not often realised to what an extent combination, in its carious forms such as price-fixing arrangements, market-sharing agreements, rings, cartels, trusts, pools, combines, and plain monopolies, has spread over British industry. The trade in which prices are determined by competition and in which the newcomer can enter on terms of approximate equality is now a distinct rarity. It would be an easy task to show how, in a wide range of industries, prices in the British market have been kept above the world level. There have been several public demonstrations of the art of excluding the newcomer and of hamstringing the firm that is ill-advised enough to try to increase its technical efficiency and thereby its competitive power. The great bulk of British industry is divided into industrial fiefs fully as much as if every industry had been nationalised by the State. Furthermore the tendency has been immensely strengthened by the war. In some industries a controller chosen from the trade itself has been given legal powers. In others, the Government has, in effect, made the trade association responsible, first for organising the export trade, and now for devising a scheme of concentration.” (The Times, 29 November, 1941).

The comment of The Times’ editor on this was as follows :–

“The abandonment of laissez-faire as a basis of industrial policy has been brought about not by the triumph of any contrary doctrine, but by the natural trend of modern industry towards monopoly. Individualism in economic life has been driven to the wall not by the State collectivism of nineteenth century socialist theory, but by the practical collectivism of the corporation, the trust, and the cartel. ‘Private enterprise’ is a misnomer when applied to the vast industrial and commercial organisations which are the characteristic and dominating feature of the modern economic system . . .” (The Times, 6 December, 1941).

While, as The Times has it, “the natural trend of modern industry” is towards monopoly, and “individualism in economic life has been driven to the wall” that is not to say that the process is, or will ever be, complete, or that the capitalists themselves are all in favour of it. The small firms will fight hard to save themselves from being crushed out of existence. Their efforts are backed by certain influential groups and from time to time, here and in other countries, they succeed in getting governments to limit and control the process. Lord Beaverbrook’s Daily Express, for example, carries on a campaign both against the co-operatives societies and the combines :–

“Make the small trader secure, clip the claws of the Co-ops and the combines . . . Dig up cartels by the roots. Now is the time to end the international cartels . . . There can be no healthy growth where cartels flourish”. (Daily Express, 18 March, 1944).

It may be noticed in passing that the Daily Express does not accept the logical course of refusing to accept advertisements from the combines, justifying its attitude on the plea that it “does not allow any advertiser, big or little, to influence the news in the news columns.” (Daily Express, 12 May, 1944).

Moreover it is absurd for this newspaper with its 3,000,000 circulation and its control of other newspapers to talk of making the small trader secure. One consequence of the growth of the handful of mammoth newspaper groups was that between 1910 and 1928 the number of newspapers in the United Kingdom declined by 181, quite apart from the fact that many are now controlled by one or other of the big concerns. London now has three evening papers : it formerly had nine. (The British Press, Europa Publications, 1929. Pages 26 and 27).

In the United States at the moment international cartels to eliminate competition are in disfavour. The Assistant Attorney-General made the following declaration :–

“After the war America will join in foreign trade on a scale never before imagined, but she will have no business with any foreign cartels.” (Daily Express, 17 May, 1944).

It can however be foretold with certainty that when capitalism produces its inevitable next crisis and trade depression, if not before that happens, the urge to enter international cartels will arise once more. Of course there will be no smooth passage for cartels in the future any more than in the past. Rival groups backed by their governments will continue to fight against each other and even within the cartels the struggle will go on over the share of the world market that is to be allotted to each national group. It is, however, undeniable that the old defence of capitalism that it is a system which lives by and encourages competition no longer harmonises with the facts of the situation. In the words of The Times “private enterprise is now a misnomer.”

Chapter 5 When and Why the Capitalists Support Nationalisation

A curious and unfounded myth held by many of the Labour Party advocates of nationalisation or Government control is the belief that it is specifically a Labour Party project and that it marks hostility towards capitalism. The truth is far otherwise. Except that when Mr. Herbert Morrison used the term “socialism” he really means nationalisation or State Capitalism, he spoke only the truth when he told the boys of Malvern College “that more Socialism was done by the Conservative Party, which opposed it, than by the Labour Party, which was in favour of it.” (The Times, 12 February, 1944).

Practically all the schemes of nationalisation have been carried out by avowedly capitalist Governments, Liberal or Tory.

In order to see the matter in correct perspective it will be useful to examine some of these schemes and see why they were carried out. It will be found, broadly speaking, that they are the outcome of a cleavage of interest between particular groups of the capitalist class and the main body of that class. The State, the “committee for managing the common affairs of the whole bourgeoisie” as Marx called it, intervenes when the interests of the class as a whole are being injured or jeopardised commercially or from a military standpoint by some group which owns a key industry or transport system, or when for some reason (usually the great cost involved) a new technical development is being hampered by the inability of private groups to handle it on a sufficiently large scale. The Indian Government is at present planning to set up State ownership of various industries, the reason being that the industries are essential and private capital to develop them is lacking. “Nationalisation of those major industries would be undertaken only if adequate private capital was not forthcoming.” (Daily Telegraph, 23 April, 1945).

Because one of the greatest obstacles to the early expansion of capitalist trade and industry was defective transport and communications it was in this field that State intervention occurred first and on the largest scale.

Let us glance first at the nationalisation of the roads in England. Until the 18th Century the public highways were earthen tracks or bridle paths for pack horses or riders, and for 200 years or more they had been kept more or less in order in each Parish by the compulsory labour of persons living there. At the end of the 17th Century wheeled traffic was still uncommon :– “It was, however, increasing with the expansion of trade and the growing necessity to move large quantities of goods. These wheeled vehicles wore the earthen surface of the highways into great ruts and the roads became more and more of a scandal just at the time when it became more and more necessary to be able to move masses of raw material or manufactured goods. The whole industrial development of the 18th Century would have been held up if the roads could not have been improved.” (Mrs. L. Knowles, Industrial and Commercial Revolutions. Routledge, 1922. 2nd Revised Edition, p. 236).

Mrs. Knowles goes on to explain that, in accordance with the tradition of the English Government, of leaving everything to individuals, the practice developed during the 18th Century of landowners and others obtaining power under a Private Act of Parliament to reconstruct stretches of road to make them suitable for wheeled traffic. They formed what were called “turnpike Trusts” and were allowed to make profit by charging tolls to the users of the roads. This, however, left a great network of parish roads which were still unmettalled tracks.

“Out of a total length of recognised public highways in 1820, amounting to 125,000 miles, only 20,875 miles were under the turnpike trusts ; the remainder were cared for in 1830 by the inefficient labour of the poor, or the equally unsatisfactory labour of those who had to render six days compulsory service.” (p. 238).

The system of compulsory labour was abolished under the Highways Act of 1835. Then “just as the highways were really improving they were overwhelmed by the ‘calamity of the railways.’ The coaches that had paid such a large proportion of the tolls were taken off the roads ; the turnpikes became bankrupt and the Government was obliged to abandon the policy of laissez-faire and do something for road maintenance. The turnpike trusts were gradually wound up . . . In 1888 the care of the main roads was transferred to the County Councils, the others being given over to the Rural or Urban District Councils.” (pp. 238-9).

Mrs. Knowles draws attention to the different course taken by road development in France where for reasons of State and for the speedy movement of troops roads were early under the care of the central government.

From roads let us turn to railways. Here again England and the Continental countries followed divergent courses. In England the railways were built to cater for existing traffic, and accumulations of capital were there ready to find scope for investment. The State, therefore, did not need to give financial assistance to start the railways and had no military motives for doing so. On the Continent capital was scarce, the traffic did not already exist in profitable quantities, and the State had to intervene both to provide the necessary capital and because of military needs. The continental railways were largely planned for strategic reasons. Such lines as those in Prussia leading to the Russian frontier would not have been built if commercial reasons alone had dominated.

It is interesting to notice that the United States, in later years held up as the outstanding example of an “individualist” country abhorring State interference, was early in the field with Government subsidies to develop the railways. “The United States, which followed English tradition so closely in its turnpikes, did not follow it in its railways at first. Improved transport was so vitally necessary to a new country that the State Governments subsidised and encouraged many railways between 1830 and 1838, raising the money by loans. No less than 42,871,084 dollars were spent by the States on railways before 1838. A great financial collapse followed in 1837 ; some States repudiated their debts and sold their railways, and the new State constitutions nearly all inserted a prohibition on the use of State funds for internal improvements. After that they adopted the English method of allowing private individuals to finance the railways. The peculiarity of the railways of the United States lay in the fact that they were built in advance of existing traffic in order to open up the country.” (Knowles, p. 254).

As has already been mentioned, trade depression and acute competition led the English railway companies to seek salvation in working agreements and amalgamation. When this occurred the Government stepped in and exercised more and more control over the conduct of the railways in order to prevent the monopoly they held from being used to the detriment of traders. Under the 1888 Railway and Canal Traffic Act maximum rates had been fixed for all the railways and they were restricted in various other ways, but this by no means satisfied the opponents of railway monopoly, and as Mrs. Knowles points out, this cessation of competition was giving rise in the early years of this century “to proposals to develop the canals as competitors, and to the question of the acquisition of the railways by the State.” (p. 284).

After 1918 a new factor entered into play, the competition of road transport. Just as the turnpike road interests had earlier tried to resist the encroachments of the railways so now the railways have made every effort to cripple and hamper their road haulage competitors, though latterly trying to achieve this purpose by acquiring road transport services themselves.

At the present time the situation is further complicated by the coming development of air transport, and the railway companies have entered this sphere too.

In the meantime the road transport interests which, until comparatively recently, proclaimed the need for competition are, through the Road Transport organisation Joint Committee, urging the need to oppose “unregulated re-entry into the industry after the war as a means of avoiding the chaotic conditions and unbridled competition that would otherwise result.” (Economist, 4 March, 1944).

The question of nationalising the railways is now being keenly debated. The spokesmen of the companies, concerned as they are with profit (and also no doubt with their own positions as directors who may become redundant with further amalgamation whether under the State or under a public board), mostly oppose any change. Lord Royden, Chairman of the London, Midland and Scottish Railway dealt with this at the Annual Meeting in March, 1944. He said that those who propose changes “not only fail to show that there is any lack of efficiency or economy in the present system but apparently have not considered what such a transfer would involve. It would, for example, be impossible for the State to stop with the purchase of the railways alone ; sooner or later it would be compelled to buy up all other forms of public transport in order to abolish competition between the State-owned system and those remaining in private ownership.” (The Times, 4 March, 1944).

Lord Royden, in the customary manner of those who invoke the “public interest” to support a campaign designed to defend a private capitalist interest, affirmed that “it is surely contrary to the public interest that the Government should be directly concerned in the management of any trading undertaking” ; but he disclosed clearly what is the dominant consideration in the minds of the Railway shareholders, in his further remarks about the possible setting up of a public board to control railways or the whole transport system. “The proprietors”, he said, “would continue to take the risks on the capital employed, but they would have no power to protect their capital or their income against loss.”

He went on : “If any suggestion were made . . . that your interests though remaining at your risk should be handed over to the management of any body not appointed by you, I am sure that those amongst the proprietors who would favour such an arrangement would be few and far between.”

Those remarks need to be read in conjunction with Lord Royden’s further opinion that if the railways were transferred to “some quasi public body not appointed by the proprietors, the result . . . would be no better than nationalisation, and possibly worse.” It will be noticed that the emphasis all the time is on the question whether or not the shareholders are to run the risk without themselves having the power to protect their capital and income ; thus he left the door at least half-open to an arrangement which removed all risk by giving a fixed rate of interest guaranteed by the Government. If the railway shareholders had such a guarantee offered to them and had to face the alternative possibility of retaining control of a railway system doomed to continually declining traffic and profits, it is quite certain that they would easily swallow their alleged opposition on principle to Government control, and would accept the offer if the terms were good enough.

In 1937 Mr. William Whitelaw, Chairman of the London and North-Eastern Railway, in an interview with the News Chronicle (29 December, 1937) declared that he had no objection to nationalisation of the railways on “fair terms” and “as a large stockholder myself I should have no hesitation whatever in taking Government Stock instead of Company Stock.”

Let us now consider communications services, posts, telegraphs, telephones, cables and wireless, which, like roads and railways, are of vital concern to manufacturers and traders as a whole.

The Postal service began in 1482 with the organisation of relays to carry the King’s despatches.

During the next century the King’s Posts were carrying private letters as well, and Queen Elizabeth gave an order that no letters were to be sent to or from foreign countries except by these Posts.

Under Charles I, in 1635, a Postmaster General of England for foreign parts was appointed who ran the posts, thus relieving the King of the cost, and at the same time made large sums of money for himself. Later, under the Commonwealth, the Posts were put up to tender and “thus began in the form of an annual rent the Public Revenue of the Post Office.” (The Post Office. H.M. Stationery Office, 1911).

In 1860 a private 1d post system in London was taken over by the P.M.G. under monopoly and, with many detailed changes and developments, that system has continued to this day.

The English Postal service it will be noticed is an example of a service which began for the convenience of the Government, and only later became a service for the use of business men and private citizens. Later on this was to a large extent the line of development of telegraphs in the continental countries, though not in England.

“In the United States and in Great Britain, as soon as the telegraph had been demonstrated to be something more than a scientific toy, it was taken up and rapidly exploited as a commercial enterprise…” “On the Continent of Europe it was otherwise. Commercial telegraph companies did not spring into existence . . .The public administrations and military authorities alone displayed any active interest in the improvement of existing means of communication.” (A.N. Holcombe, Public Ownership of Telephones on the Continent of Europe, Harvard University Press, 1911, p. 8.)

Mr. Holcombe points out that in France in 1845 the first electric telegraph line was constructed by the Government for its own purposes and the line was not open to the public. After the installation of a short line by a railway company, for operating purposes only, the Government forbade any further private construction. The attitude of the French and other Governments is explained by military considerations.

“In the middle of the 19th Century, war, both foreign and domestic, was never a remote contingency in European politics. The powers that were had every incentive to prevent an important military and political instrument from passing beyond their control, to fall perhaps into improper hands” (p. 9).

Mr. Holcombe quotes a French Minister of the Interior who declared in the Chamber of Deputies in 1847 : “The Telegraph must be a political instrument, not a commercial one” (p. 11).

In Prussia the attitude was much the same and it was the military authorities who displayed from the first a keen interest in the new invention. They planned a comprehensive telegraph system and recalled Siemens (a name still associated with the production of electrical equipment) to the army to carry out construction. Only later did the authorities open the service to the public, and then only with the object of helping to defray the expense to which they were committed.

Mr. Holcombe emphasises the point that nowhere in the Continent was there any controversy over the question of the State operating the first telegraph systems, and he recalls that the short-lived German National Congress at Frankfurt in 1848-9, in Section 44 of the draft Constitution, provided for the organisation of an imperial telegraph system, to be administered as a Governmental undertaking throughout all Germany (pp. 14-15).

Speaking of the continent generally, he says :

“If the public authorities had done nothing, doubtless sooner or later the scattered railway signal services would have developed into services of real public benefit, or else commercial undertakings would have entered the field directly. In the beginning, however, the general public was indifferent . . .

“The needs in response to which the electrical telegraphs were first called into existence, on any considerable scale, were purely military and political . . .” (p. 15).

Reverting to England, where the telegraphs first grew up round the railways and were jointly used by the railways and the public, and then were developed also by private telegraph companies, keen competition existed and rates were cut to an unprofitable level. “But experience proved that the flat rate (1/- for 20 words) was unremunerative, and by agreement among the companies a uniform zone tariff, in which the 1/- charge was limited to distances of a hundred miles or less was restored.” (The Post Office, Sir Evelyn Murray. Putnam. 1927, p. 67.)

The companies, being interested in making quick profits, naturally concentrated their services on the populous towns which yielded the bulk of the traffic, and left many of the smaller towns and most of the rural areas unprovided for. “In the largest towns the companies’ offices were grouped in the business centres in close proximity to each other, leaving the suburbs and outlying districts with no telegraph office within convenient distance ; while in the smaller towns the office was usually situated at the railway station, which in those days was often more than a mile from the centre of population.” (Murray, p. 68.)

Here was a situation where the desire of business men and of the Government and private users to have a national network of telegraphs, was contrary to the interest of the capitalists who had their money invested in the telegraph companies.

Among the bodies that urged the Government to solve the problem by nationalising the telegraph systems were the Edinburgh Chamber of Commerce and the Association of Chambers of Commerce of the United Kingdom.

“Some of the defects,” says Sir Evelyn Murray, “were the rest of competition rather than of private ownership and might have been met by amalgamation. But the political objections to conferring a monopoly of an important and growing public service upon a private corporation were recognised and nationalisation was generally accepted as the remedy. It was claimed that with a unified Government system, duplication of plant, offices and personnel could be eliminated and that the consequent savings would be available either for an extension of the system into unremunerative districts or for a reduction of the tariff or both” (p. 68).

As has already been mentioned, a Tory Government in 1868 decided to buy out the private interests and in 1869 Parliament gave the Post Office a telegraph monopoly. The Railway Companies and the Telegraph Companies having at first opposed nationalisation withdrew their opposition when very lucrative compensation terms were agreed, based upon 20 years’ purchase of the net profits in the preceding year.

Although, by a High Court decision in 1880, it was decided that a telephone is a telegraph for the purpose of the Acts, and therefore came under the Post Office monopoly, the British Government at the time was reluctant to take on the responsibility and decided instead to grant licences to telephone companies, but with the retention of trunk lines in the hands of the Post Office and with restrictions designed to protect the telegraphs.

Later on, owing to protests about the restrictions on the activities of the companies, they were allowed to construct their own trunk lines.

By 1891, when the principal telephone patents expired, one company, the National Telephone Company, had established a virtual monopoly by buying up or extinguishing its rivals.

In 1892, owing to dissatisfaction with the cost and quality of the National Telephone service, the Government decided to purchase the trunk lines, limit the Company’s licenses to specified districts, and to operate telephone services elsewhere under the Post Office monopoly.

The next development was the recommendation by a Select Committee of the House of Commons that there should be active competition with the N.T.C. both by the Post Office and by Municipalities, and under the Telegraph Act, 1899, local authorities were empowered to defray the cost of local telephone services from the rates. Although several Municipalities wanted to establish local systems in competition with the company, local areas were already too small for efficiency and only one Municipal service, that at Hull, still survives. Eventually, in 1911, the Government took over the property of the N.T.C. for an arbitrated price of about £12,500,000.

Sir Evelyn Murray, former Secretary to the Post Office, states in his book The Post Office, that up to 1900 at any rate the Government’s whole policy regarding the telephones was to keep out of having to operate a State service, yet at the same time they realised from the experience with the telegraphs, that nationalisation was probably inevitable in the long run. They therefore followed the policy in the intervening period of preventing the companies from becoming too lucrative so that when they did have to purchase it would not be at the exorbitant terms such as those exacted by the telegraph companies. Murray also points out how the technical conditions of telephones largely dictate policy. If there are competing systems intercommunication between them is essential if the service is to be of any use to subscribers, and this means agreement to establish uniformity of operating methods, standardisation of plant, etc., and thus competition virtually disappears. “Competition, however salutary in other spheres is fatal to an efficient telephone service” (p. 126).

American experience has led to the same trend as regards unification, though there the monopoly is a private one. Holcombe in his Public Ownership of Telephones on the Continent of Europe wrote : “Competition in the telephone business has existed for nearly a score of years in a large part of the United States. By the expiration of the active telephone competition was removed, and to the American public at that time competition seemed the promptest and most effective method of regulating the then existing telephone monopoly. Until the general economic crisis of 1907 the contest was hotly waged between the ‘Bell’ and the ‘Independents.’ Since then a tendency has developed towards monopoly conditions in the telephone industry. To-day (i.e., in 1911), in view of the altered conditions, the public is reconsidering the policy of competition as applied to telephones.

“The alternative to competition is legal monopoly, either public or private.”

The high degree of concentration under the control of the “Bell” system is shown by the number of telephones inside and outside the system. In 1938, out of 19,953,000 telephones in U.S.A., 15,761,096 were in the Bell system, while the number of Bell-owned and Bell connecting systems was 19,885,000. (Statesman’s Year Book, 1940, p. 521.)

Although the demand for nationalisation is apparently not strong in the United States, there is a considerable movement towards bringing the private monopoly under closer regulation.

It may be mentioned that telegraphs in the U.S.A. have likewise moved steadily towards amalgamation. Although, until recently, there were 11 companies, nine of them were very small and the telegraphs were largely in the hands of the Western Union Telegraph Co.

In 1943 the only other company of considerable size, Postal Telegraph, was compulsorily amalgamated with Western Union.

In Germany, where Bell’s telephone system was actually introduced as a regular means of public communication before it had reached that stage of development in its country of origin, the United States, it was from the first a State system, being grafted on to the existing State telegraph system.

The next stage of development of the communications services was the rise of wireless telegraphy and telephony, and we can now briefly examine the situation that arose in 1928 in Great Britain owing to the fact that the Post Office “Beam” wireless telegraph service was so successful that it was ruining the cable companies whose services could not compete with wireless.

This new situation is of particular interest because it marks a very greatly changed attitude of the capitalists generally towards monopoly. Fifty years earlier the capitalist State would not have contemplated allowing a private monopoly to be formed. If, for technical reasons, there had to be a monopoly in the hands of the State so that it could be strictly regulated in order to serve the interests of the capitalists as a whole. But by 1928 opinion had changed with experience, and private monopoly (under restrictions imposed by law) had become politically practicable.

The treatment of cables and wireless and the formation of the Cable Wireless Merger by the Government illustrates this change.

The “Imperial Wireless and Cable Conference” 1928 reported that “the cable undertakings operating between the constituent parts of the British Empire could be unable to continue on a paying basis in face of unrestricted competition on the part of Beam Wireless Services.”

Accordingly, the Conference recommended, not the nationalisation of the companies, but the unification of company cable and wireless systems under a merger Company, to which were to be transferred both the Post Office Beam Services and Government-owned transatlantic cables, the former on a 25 years lease and the latter on payment of a stated sum.

Among the reasons urged by the Conference for this step were the possibility that bankrupt cable companies might be acquired by foreign purchasers and that “cables . . . still possess great value for the maintenance of necessary communications between the constituent parts of the Empire for commercial and strategical purposes.”

Fifty years earlier it would have been hardly conceivable that Parliament or business interests generally would have approved the establishment of a private monopoly, but with the development of capitalist industry towards monopoly, the establishment of the Cable and Wireless Merger had become acceptable.

The establishment of the £30,000,000 merger company, in 1929, was carried a stage further in 1945 by turning it into a public utility corporation.

A further indication of the same change of attitude was the widely backed campaign led by Viscount Wolmer, at one time Asst. P.M.G., to take the Post Office or part of it out of the hands of the Civil Service. A memorial was sent to the Prime Minister in November, 1931, signed by about 200 M.P.’s, which urged re-organisation of the Post Office, and contained the following passage :– “Some of us may feel that a public utility company might be the best instrument for carrying out functions that are mainly commercial. Others of us believe that in recent years public opinion has watched with favour the evolution of special machinery for the conduct of essential national services on lines adapted in each case to the most efficient treatment of the particular problem in question” (Times, 25 November, 1931). Although the proposed change did not take place, it is by no means impossible that some such change may occur in the coming years.

What may we conclude from the various developments outlined in this Chapter? Firstly, that as a matter of history measures of nationalisation have been the work of Liberal and Tory Governments and not of Governments which were or claimed to be hostile to capitalism.

Secondly, that the capitalists themselves, both in their separate industrial groups and as a whole, have no deep-seated hostility to nationalisation. Subject to the preservation of their interests as receiver of property incomes they have always been prepared to consider nationalisation on suitable financial terms.

Thirdly, that the attitude of capitalist groups and capitalist governments is based simply on considerations of expediency, dictated by the circumstances of each case. The same group or government may support nationalisation of one service and oppose nationalisation of another, and may support at one period and oppose at another.

Fourthly, that though there is an undeniable tendency of capitalism towards monopoly and the elimination of competition, it is not possible to affirm that there is necessarily a permanent tendency towards strict nationalisation. While the idea of private monopoly was intolerable to the capitalists as a whole in the 19th Century, later developments have made private monopolies practicable, and tolerable to the capitalists as a whole, provided that they are subjected to some degree of State regulation.

Fifthly and lastly, the various measures of nationalisation have never been caused by any desire on the part of the capitalists to curtail their own property interests for the benefit of the rest of the community, but have been brought about for all kinds of reasons (including military and strategic reasons), all of which are strictly in harmony with the maintenance of the capitalist system of society. When Mr. Churchill in a broadcast said : “There is a broadening field for State ownership and enterprise, especially in relation to monopolies of all kinds” (Times, 5 April, 1943), nobody imagines he, or the Tory party of which he is leader, contemplates abolishing or weakening the capitalist system of society.

Chapter 6 The Profits of Nationalised Industries

In the many schemes which have transformed private industries or services into nationalised or municipalised services or put them under public utility corporations, and in the many proposals originating with the Labour Party or with trade unions in particular industries for further nationalisation, provision is invariably made for the capitalist owners to be compensated either in the form of purchase outright for a lump sum or in the form of exchanging their existing shareholdings for State bonds or the securities of a public utility corporation. In the negotiations that take place about the terms of the purchase the capitalist group concerned may make a very good bargain or may not do so well, just as in any other financial deal in which both sides are trying as well as they can to estimate uncertain future prospects. It is generally agreed that the British Telegraph companies were paid excessive compensation in relation to the actual market value of their property. On the other hand the railway companies and London Passenger Transport Board which entered into a war-time agreement to receive a fixed rental of about £43 millions a year have since regretted their bargain and have tried to re-open the matter. True they have received more profit than before the war, but they have seen the Government during the later war years actually retaining more than half the profits. Apparently the companies did not correctly estimate how much railway traffic and revenue could increase.

Generally speaking, however, when the capitalists’ property is taken over for nationalisation, they get value for value and it is interesting to notice that the Labour Party proposal’s for nationalisation include provision for “fair compensation” based on the “net reasonable maintainable revenue of the industry concerned.”

The capitalists thus receive in exchange the things they are primarily concerned with, either a lump sum for investment elsewhere or a continuance of their property income. They lose control but not ownership, and the nationalised concern continues to carry the financial burden. In other words, the exploitation of the workers and production of surplus value for the propertied class continues.

As this aspect is to some extent hidden by the complicated financial arrangements, a few examples will make it clear.

The London Passenger Transport Board had (at 30 June, 1939 – see 6th Annual Report and accounts) an issued capital of about £112,000,000. About £40,000,000 of this carries interest at 5 per cent ; about £46,000,000 interest at 4½ per cent ; and the remaining £26,000,000 carries an amount of interest not to exceed 5½ per cent. Actually in the first ten years of its existence, ending on 30 June, 1943, the Board paid an average of 4.7 per cent on the two first groups of capital and 3.3 per cent on the third group (Times, 30 June, 1943).

In its first year the stockholders received in dividends well over £4,760,000, and in 1938-39 the amount was about £4,466,000.

It should be observed that while, under the terms of the Act, the stockholders have no voice whatever in the management, “they would have the right, if the Board should default on its financial obligations as laid down in the Act, to apply to the High Court for the appointment of a receiver . . . It is a primary requirement of the Act that the Board should fulfil its financial obligations and conduct the undertakings in such a manner and fix such fares and charges as to secure that the revenues shall be sufficient to meet all prescribed charges (Times, 30 July, 1943).

Here, then, we have an example of a so-called public service, in which priority is given to meeting obligations to the capitalist investors – yet some misguided people refer to it as “socialisation” (one of them is Mr. Herbert Morrison, a leading member of the Labour Party, who was responsible for the original scheme). Another prominent Labour Party member, the late Right Honourable H.B. Lees Smith, who was P.M.G. in the Labour Government 1929-1931, wrote an article in the Spectator (26 December, 1931), in which he discussed a proposal to put the Post Office, or at least the telephones, under a “public corporation like the Port of London Authority or the Electricity Commissioners, which are largely immune from Parliamentary control or interference.”

He wrote this : “There is no reason in principle why the Labour Party should not accept this proposal, for it carries out the latest development in Socialist theory. As long as an undertaking is carried on, without any vestige of private profit, by a body acting on behalf of the public, it is an example of Socialism. Any inquiry into suggestions along these lines will be interesting, but those who undertake it should bear in mind that they are not examining the question of private enterprise versus Socialism, but of one form of Socialism versus another form of Socialism.”

He continued : “The form of Socialism that is contained in such public corporations as the Port of London Authority has proved itself to have great advantages . . .”

It will be seen that when the late Mr. Lees Smith talked of “no vestige of private profit” he was merely drawing a distinction between the interest the stockholders receive from holdings they have in a public corporation and the profit they would receive on shares in a private company – from the point of view of the capitalists a distinction without any real difference.

In the Port of London Authority to which he referred as a form of “socialism” the Dock Companies were given stock to the value of about £22 millions in exchange for their properties, the stock carrying interest some at 3 per cent, and some at 4 per cent.

An interesting sidelight on this is that in earlier days when the Labour Party favoured outright nationalisation on Post Office lines, and was opposed to Public Utility Corporations, the Port of London Authority was denounced by Mr. Herbert Morrison as a form of capitalism ! In a letter to the Daily Herald (30 July, 1923), he protested against Labour Party supporters expressing approval of the P.L.A., and wrote : “The P.L.A. was established by Mr. Lloyd George some years ago to enable the capitalists of the Port to have the advantages of public credit and to do for themselves collectively what they and a number of private companies have been unable to do with success individually . . . The Port of London Authority is a capitalistic Soviet . . . the constitution of which is thoroughly objectionable from the Labour and Socialist point of view, and which has certainly not been as friendly to the workers of the Port of London as it might have been.”

The position with regard to Municipalities which borrow money from investors to establish municipal gas, water, electricity, etc., undertakings or build houses, is the same in effect. Thus the London County Council has numerous loans outstanding which are dealt with on the Stock Exchange and carry interest at varying amounts ranging from 2½ per cent to 5 per cent. These interest payments total several million pounds a year.

Undertakings, such as the Post Office, that are acquired outright by the State may present a more obscure picture, but they are not essentially different from the other forms. The main difference is that the interest payments to investors are not associated directly with the Post Office but are merged in the National Debt as a whole. Thus, when the Telegraphs were purchased, the Government borrowed money in the form of consols, and used the money to buy out the companies. Including interest on further money borrowed for the development of the service up to 1877 “the annual charge for interest, at the rate of 2½ per cent in perpetuity, on the outstanding amount of Consols is £271,691.” (Post Office Commercial Accounts, 1939. H.M. Stationery Office, p. 36.)

On the Post Office as a whole, including telegraphs, telephones, etc, capital for development is provided by loans authorised periodically by Acts of Parliament and by advances from the treasury, the money actually being borrowed from the National Debt Commissioners. Each year before the war the Post Office published what are called “Post Office Commercial Accounts”, which show the financial results of the Post Office on an ordinary commercial basis. These accounts show the surplus made by the Post Office on the year’s working “after charging interest on capital”. In 1939-40, for example, the interest charge was £7,223,297 and the surplus after charging interest was £7,246,841. In most recent years the surplus was in the region of £11,000,000 or £12,000,000, and since 1939-40 it has presumably been much larger as a result of the raising of the letter postage rate to 2½d.

The purpose of the above examples is to show that nationalised industries are not essentially different from private ones – both kinds are a means by which the capitalist obtains his property income, out of the surplus value produced by the working class.

Major Attlee, leader of the Labour Party and former Postmaster-General, in an article in the New Statesman (7 November, 1931), actually described the Post Office as “the outstanding example of collective capitalism.”

It may be useful here to draw attention to the much more fully developed forms of State capitalism in Russia at the present time. In that country industries and services are to a large extent financed through loans raised by the Government. At 1 January, 1933, the total amount of the loans outstanding was over 10,000 million roubles, and it is increasing yearly (Statesman’s year Book, 1940, p. 1266). Some of the loans are lottery loans on which the investor, in addition to the repayment of his capital, has the chance of winning a large sum of money in the lottery ; other loans carry interest at 4 per cent. (Statesman’s Year Book, 1940, p. 1266).

With the growth of inequality of incomes in Russia in recent years, due to unequal wage rates for different grades of workers ; to the large sums of money given as prizes for work the State wishes to honour, such as the 100,000 roubles given to Ilya Ehrenburg, a journalist, for his book The Fall of France (Evening Standard, 19 May, 1942) ; and to the rise of rouble-millionaires among the collective farmers (see Soviet Millionaires, Russia To-day Pamphlet, 1944, 2d), the minority of wealthy investors is obviously playing a larger part in Russian industrial life. Already cases have been reported in Soviet War News, 6 January, 1943, of individuals able to give or invest sums ranging up to 300,000 roubles (at 25 roubles to the £ this is equivalent to £12,000).

In Russia, as in other countries where investment in State loans exists, the property income so derived is based on the exploitation of the working class, and is of c