The Rise of Sir John Ellerman: The Rewards of Capitalism (1933)

From the August 1933 issue of the Socialist Standard

Last month the richest man in England, Sir John Ellerman, died. He was reputed to be worth about £30 million at the time of his death, and a few years ago he owned properties estimated at £55 million. His income was upwards of £1 million a year, about £20,000 a week, equal to the wages of eight or nine thousand workers.

Those who profess to believe that capitalism distributes rewards, according to ability, diligence, thrift and other so-called virtues, hastened to point out what a splendid example Sir John Ellerman set to all of us. Was he not abstemious, they said, spending only a small part of his income ? That is true. He was in the habit of spending on his own personal needs a mere 4 per cent. or 5 per cent. of the sums coming to him day by day from his investments, but that 5 per cent. meant £50,000 a year—a mere trifle of £1,000 a week.

It was inevitable that the slush-writers of the daily Press would tell us of a romantic rise from poverty to fabulous wealth; of how their hero started with nothing. He did indeed—if we can describe as “nothing” a bagatelle of £20,000 or so, which he inherited from his maternal grandfather.

The frenzied lunacy of modern capitalism can be illustrated in certain of its aspects from the life of Sir John Ellerman. We may believe that a sure £1,000 a week could provide a very pleasant existence, although in this case it included such eccentricities as frequent pleasure cruises on his own liners, Sir John Ellerman being the only occupant, travelling in magnificent solitude on a boat equipped to carry 250 or 350 passengers. Perhaps the journalistic apologists for capitalism will try their hand at discovering some ethical or economic justification for this appalling wastefulness when there are thousands of over-worked and undernourished working men and women, to whom such a cruise, which they cannot afford, might mean restored health and happiness.

Yet, in spite of his wealth, those who knew him said that he had no interest in life outside financial operations and the control of his wealth— “his work was his hobby and his hobby was his work."

We defy the capitalist economists and the capitalist Press to give a reasoned defence of a system which gives to one self-centred individual, obsessed with the single pleasure of exercising his financial skill, complete control over the means of life of tens of thousands of men and women. He controlled nearly 300 ships. He owned £3 million of house property. In Earl’s Court alone he recently sold an estate of 1,150 houses and nearly 200 blocks of flats. Yet he used only one house himself. He was ground landlord of a large part of Oxford Street. At one time he had a large interest in The Times and was proprietor of The Financial Times and several other papers. He took no interest in the journalistic side, but regarded them simply as means of piling up money. He had extensive brewing interests. At one period he had no less a sum than £10 million on deposit with London banks. In the last twelve months he made two separate loans of about £1 million to public companies.

On an occasion like this, the newspaper writers boast about the stupendous wealth of the multi-millionaires as if it belonged to them. Yet this will not prevent them in a few weeks' time from asserting that “we are all capitalists now," that “wealth is becoming more and more equally divided," that companies are owned by small shareholders only, and so on, ad nauseam. By coincidence the man who is particularly notorious for keeping these false notions in circulation by his speeches and letters to the Press (Mr. Walter Runciman) is himself interested in shipping and cannot be unaware of the great fortunes made by Sir John Ellerman and others in that industry.

The reality of the contrast between the riches of the few and the poverty of the many was brought out in an advertisement issued last year by the Confederation Life Association as part of a campaign for popularising insurance. The Association claimed that carefully compiled statistics show that out of an average group of 100 men aged 25, 58 will be alive at 65. Of these 58, one will be wealthy, two fairly well off, five able to live on their savings, and 50 without enough to support them.

That is one side of a picture, the other side of which is the £30 million fortune of Sir John Ellerman.

In passing, it is worth while pointing out once more the absurdity of the assertion by Major Douglas, that all property belongs to the bankers. Sir John Ellerman was not a banker. The richest living man in England is the Methodist, Mr. Joseph Rank, who is also not a banker but has vast interests in flour milling. Other recent big fortunes disclosed at death have been Sir David Yule, £25 million—Anglo-Indian merchant; the Earl of Iveagh, £11 million—head of Guinness brewery; Sir George Wills, £10 million—tobacco; and Sir Joseph Robinson, £10 million—diamond magnate.

Facts, however, appear to matter little to the blind defenders of capitalism, or to the one-eyed critics of certain features of capitalism who belong to the Douglas school. 

Edgar Hardcastle

How Many Shares Have You? (1975)

From the September 1975 issue of the Socialist Standard

How often have Socialist speakers heard the absurd defence of Capitalism that, because anyone can now own “shares” in companies, everyone is a capitalist. The argument goes on to claim that therefore the working class are no longer the deprived majority of society.

W. S. Gilbert would no doubt have retorted “if everyone is somebody, then no-one’s anybody”. And of course, even if it were true that most people own a handful of shares it would not alter one iota of our fundamental criticism of capitalism. Our criticism is that capitalism is incapable of solving the major social ills that it constantly creates. All it does produce are profits for the capitalist class and problems for the working class.

But the claim is false. It is by the possession of shares that the capitalist class in advanced western capitalism (a different arrangement prevails under Soviet capitalism — no less anti-social) claims most of its ownership of the means of production and of the commodities that are produced. Shares are either owned by individuals or by companies, unit trusts (the so-called “institutional shareholders”) and the like.

As far as individual shareholdings are concerned, there is no doubt that the overwhelming majority of the population don’t own any. In his book Unequal Shares A. B. Atkinson says that 5 per cent of the population own over 96 per cent of the privately held shares and 1 per cent own 81 per cent. That does not leave much for the rest of us. Clearly the majority of workers have never seen a share certificate, let alone owned one.

With institutional shareholdings the position is more complicated. A good deal of the shares are owned by companies whose shares are themselves privately owned. “But what about pension funds and the like?” the defender of Capitalism plaintively bleats. “They are held for the benefit of the workers, for retirement money, injury pay etc. In effect, these are owned by the workers.” Rubbish.

According to the Royal Commission on Income and Wealth (Report No. 1, 1975) only 12.2 per cent of the total number of shares quoted are owned by Pension Funds. These funds are established by large firms like ICI or Fords for sound economic capitalist reasons. And they are set up to benefit the companies (i.e. the shareholders).

Indeed it is a well established principle of British Company Law that all moneys must be used by the company for the benefit of the shareholders only. When the old News Chronicle was closing down in the early 1960s the directors wanted to pay some of the money realised from the sale of the company’s assets to the work force as compensation for their loss of jobs etc. The high court stopped them. Money given to workers was not being used in the best interest of the company it said. The only way the money could be lawfully distributed was to the shareholders.

So in order for these “pension funds” to be lawful, the company must show that they are in the best interests of the company’s owners. And they are. There are many reasons why it is of direct benefit to the company to have pension funds and it would take a whole issue of the Socialist Standard to explain them fully. But some of the more obvious ones are these: —

1. It is another bait for the work force, just as luncheon vouchers or sports facilities etc. are. Workers know too well the miserable pensions the state will pay them when they retire and “non-contributory pension schemes” are one of the things the employer can offer to supplement a low wage.
2. Once employed the worker is encouraged to feel that he has a “stake” in the company and that if he leaves he will lose his right to a pension or it may be reduced.
3. Above all, the money in pension funds belongs to the company. Admittedly it cannot actually be spent by the capitalist class, but then neither can machines. When profits are “ploughed back” into a business these are not lost to the capitalist class. On the contrary, they represent a greater accumulated share of capital than was represented by the company’s assets before. A pension fund is as much a part of the capital of a company as is the factory or the stock-in-trade, and this will be reflected in the value of the shares on the stock exchange.

Capitalism doesn’t give workers shares, it only gives them crumbs. Socialism will mean free access, not unequal shares.

Ronnie Warrington

Who Owns “Our” Country? (1930)

From the November 1930 issue of the Socialist Standard

Runciman answered.

Periodically, Mr. Walter Runciman and the Economic League compile impressive-looking figures of the total amount saved by workers and other small investors and deposited in the Post Office Savings Banks, Building Societies, Registered Provident Societies, etc. On the basis of this, the Economic League coined a slogan, “Every man a capitalist.” The total amount looks considerable until it is remembered how many people there are among whom the ownership of it is divided. The true position has now been analysed and explained by Mr. Hargreaves Parkinson, of The Economist, in his book, “The Small Investor” (Blackie & Son, Ltd., 4s.). He points out in Chapter XIII that the total amount of savings in all kinds of institutions, and including an estimate of the amount of small investments in Stock Exchange securities, represents only from 10 per cent. to 14 per cent. of the total wealth of Great Britain.

This means that over 75 per cent. of the population own between them only from one-tenth to one-seventh of the total wealth. The remaining 86 per cent. to 90 per cent. of the national wealth is the private property of less than one-quarter of the population (see pages 108-110).

It may also be remarked that Mr. Parkinson’s estimate of the amount of small investors’ savings errs decidedly on the liberal side. He assumes, for example, that the £290 millions in the Post Office Savings Banks and the £130 millions in the Trustee Saving’s Banks belong wholly to small depositors, whereas investigation has shown that to a very large extent these totals are the property of a few relatively large depositors.

However, his conclusions are sufficient to show that Mr. Runciman’s figures prove the exact opposite of what he contends. They illustrate not that there is a high degree of equality, but that there is a staggering inequality as between the 25 per cent. of wealthy persons and their families, and the 75 per cent. who make up the rest of the population.

Edgar Hardcastle

Cooking the Books: Oliver in Blunderland (2007)

The Cooking the Books column from the July 2007 issue of the Socialist Standard

In a recent speech Tory MP and would-be intellectual Oliver Letwin – his last brilliant idea was the poll tax – ventured to discuss Marx and Marxism. After mocking Gordon Brown for mouthing sounds such as “post neo-classical endogamous growth theory” he himself offered an alternative set of sounds in “shift the locus of debate from an economo-centric paradigm to a socio-centric paradigm”, and continued:

“It all goes back to Marx. Before Marx, politics was multi-dimensional – constitutional, social, environmental as well as economic. But Marx changed all that. The real triumph of Marxism consisted in the way that it defined the preoccupations not only of its supporters but also of its opponents. After Marx, socialists defended socialism and free marketeers defended capitalism. For both sides, the centrepiece of the debate was the system of economic management” (Daily Telegraph, 10 May).

Marx did argue that the key issue in politics ought to be the ownership and control of the means of wealth-production, but unfortunately the actual debate in the 20th century was not between socialism (common ownership) and capitalism (sectional ownership). It was merely over the best way to manage capitalism: through state ownership and control or by leaving things to the free play of competing, profit-seeking private enterprises.

This debate, says Letwin, is now over:

“Since Thatcher, and despite recent recurrences of something like full-blooded socialism in some parts of Latin America, the capitalist/socialist debate has in general ceased to dominate modern politics. From Beijing to Brussels, the free market has won the battle of economic ideas”.

In other words, except for Chavez we’re all pro-capitalists now. We have, claims Letwin, “entered a post-Marxist era”.

He is assuming that socialism and government ownership are the same thing and that Marx favoured government ownership, and concluded that anyone favouring government ownership was a Marxist. Both premises and the conclusion are wrong.

That government ownership is socialism is a popular misconception and, to be honest, is how the word “socialism” has come to be used. But it has never been accepted by Marxian socialists, who have always drawn a distinction between state capitalism (nationalisation by a capitalist government) and socialism.

Nationalisation has been carried out by all sorts of governments, both in Britain and in other countries. The Post Office became a government monopoly in Britain in 1680. A Tory government nationalised the telegraph system while successive Liberal and Tory government nationalised the telephone network. An Act of 1844, piloted through by Gladstone, provided for the nationalisation of the railways if need be. In France cigarette production was a government monopoly and in Prussia the railways were government-owned. So, on Letwin’s logic, Napoleon, Gladstone and Bismarck must have been Marxists.

Marx was always clear that socialism as such had nothing to do with government ownership of capitalist industry. It was a new social system where the means of production would belong to the whole community – not the state, which as an instrument of minority class rule, would disappear – and where there would be production to satisfy people’s needs not for sale and profit, and so where there’d be no money, no banks, nor working for wages.

Socialism in this sense or capitalism should have been the burning issue of the 20th century but, as stated, unfortunately it wasn’t. Far from entering “a post-Marxist era” we are still in a “pre-Marxist era” where politics has yet to be what Marx wanted: a political struggle by the class of wage and salary workers to win control of political power with a view to establishing the common ownership of the means of production by the whole people.

Who are the capitalists? (1927)

From the November 1927 issue of the Socialist Standard

“Every Man a Capitalist” is the title of an article written by Sir Sydney Low, and published in the “Sunday Pictorial” (2.10.27). The sub-title is “‘How Wealth is Spreading Amongst the Workers.”

Sir Sydney accuses Socialists of being “dealers in popular unrest,” and states that for years past we have been saying that “the rich are growing richer and the poor becoming poorer.” Also, we have said this so often and so persistently that many earnest persons who are not Socialists are inclined to believe there must be some truth in the indictment. In fact, there is none. So says Sir Sydney.

Of course, we are very pleased to hear that we are making an impression upon “many earnest persons who are not Socialists.”

To show that the rich are getting poorer, Low tells us “they are not spending extravagantly, their lives are simpler and less luxurious than they used to be.” These unfortunate people are parting with “their large, expensive houses, and offering their estates for sale. Many of them protest that they are living upon their capital in order to pay their way.”

This is all very sad, but it is not proof that the rich are getting poorer. They may not be spending extravagantly because they desire to invest more; they may be living less luxurious and more simple lives in the interests of their health. But the really important point, which Sir Sydney overlooks, is that large estates cannot be sold unless there exist purchasers. Unless, therefore, he believes that the large estates are being bought up by unemployed miners and others who have been compelled to relinquish their former occupation, there must still be rich people willing to be extravagant and able to afford it.

Another factor ignored by Sir Sydney Low is that many of these estates have been broken up merely because of the tempting opportunity of netting big gains, owing to the demand for building sites.

Then to show how every worker tends to become a capitalist, Sir Sydney refers to the increase in the number of privately-owned motor cars. He says : “By the end of this year there will be 700,000 self-propelled private vehicles in England. And who owns them ? For the most part people of moderate and even small means.”

Our opponent, evidently thinking this fad not sufficient to convince the sceptical, put forth further evidence to show that some day every worker will be a capitalist. This time it is houses. He tells us that “since 1923 600,000 new houses have been bought by middle class and working class tenants.” These houses have been built with State, or municipal, aid. And then “hundreds of thousands of others already in existence or erected by private builders have been sold to occupiers of the same kind.”

“House owning,” he goes on, “is not the only method whereby the man of limited income is turning himself into a capitalist. He tends more and more to become an investor.” As evidence, Sir Sydney informs us, “National Savings Certificates are now issued to the value of over £642,000,000. It may safely be asserted that almost the whole of that £642,000,000 represents capital belonging to the small investor.” But does it in fact?

In 1922, that is, before the workers’ savings had been drained by five years of trade depression, unemployment, short time and lowered wages, the Montague Committee were only able to express the opinion that “at least half” of the total sold up to the 31st March, 1922, represented the subscriptions of small investors (see Colwyn Committee Report, page 21).

Mr. W. T. Layton, the Liberal economist and statistician, estimates that small investors hold £455 million out of a total £6,592 million, which makes up the Internal National Debt, the magnificent proportion of 7 per cent. (“Economic Journal,” June, 1927, p. 204.)

However, enough! Is it the private ownership of a motor car, whether a Ford or a Rolls-Royce, that makes a person a capitalist? No. Is a man a capitalist because he owns the house in which he lives? No. Is it the possession of a few Savings Certificates that makes a man a capitalist? No.

What, then, is a capitalist? A capitalist is one who owns enough property in the means of living such as land, factories, railways, steamships, raw materials, etc., to be able to live without needing to work. The income derived from this private ownership frees the capitalist from the necessity of working for his livelihood.

It may be asked, what, then, is a worker?

A worker is one who, not owning any or sufficient property, is forced to sell his labour-power to the capitalist class, in order that he may live.

Sir Sydney speaks of the “lower middle class and the “higher working class.” This is “confusion worse confounded” as there are only two classes in modern capitalism, those who live by working and those who live by owning. And, as shown above, it is the manner in which a person obtains his or her livelihood that places him or her in one of these two classes.

As to wealth spreading out amongst the workers, heaps of evidence could be put forth to show the contrary to be true. First of all the workers are painfully aware of the constant dwindling in their wages, and ever-present unemployment.

In the report of the Ministry of Health, 1926-27, it is stated : “Poor Law Relief has risen nearly 350 per cent. since 1914, but outdoor relief has risen by over 1,000 per cent. The number of persons receiving out-relief were, in 1914, 387,796; 1927, 1,722,084 ” (“Daily News,” 16.9.27).

Then Mr. Harold Cox, who is a defender of capitalism, writing in the “Sunday Times,” 31.7.27., says: “In round figures pauperism in 1914 represented 21 per 1,000 of the population, and in 1927, as stated above, just under 40 per 1.000. It is, therefore, not far from the truth to state that the proportion of paupers to self-dependant citizens has doubled since 1914.”

The above facts show the falsity of Sir Sydney Low’s argument. As capitalism develops, the major portion of the wealth produced ccncentrates still further into fewer and fewer hands. It is, therefore^ obvious that the poverty of the mass must increase relatively to the wealth of the propertied class.

And as bad as the lot of the workers may be at the moment, it will tend to become worse with the further development of capitalism.

The only solution to the poverty problem of the working class is not for individual workers to buy a motor car, a house, or a few Savings Certificates, but to organise in the Socialist Party in order to do away with capitalism, the cause of their poverty, and to bring into existence Socialism, the social system which will free them from poverty.

C.

The wealthy workers ! (1927)

From the October 1927 issue of the Socialist Standard

The concentration of vast capital into the hands of a continually decreasing number of Capitalists, accompanied by more efficient methods of production, swells to an enormous extent the wealth of this class. While, on the other hand, this development brings with it a more intense form of exploitation, greater insecurity, unemployment, and poverty of the wealth producers. The result is that, as Capitalist society develops, the distinction between the two classes becomes wider and clearer; and the opposition of interest more intense.

These facts are having a powerful influence on the minds of the workers, and are slowly but surely preparing them to accept the principles of Socialism.

Having progressed so far towards an understanding of their class position, they become less easy to deceive. Consequently the older political parties, who openly defend the present system of society, and claim that there is no alternative, can no longer command the support of an overwhelming majority of the workers as they did in the past. Hence the need, to the Capitalist class, of a political party that can secure the support of this discontented section, by criticising the system, and when necessary expressing sympathy towards Socialism, and that can, at the same time, be relied upon to maintain Capitalist society.

This is the cause of the rapid growth of the Labour Party. Experience and Socialist propaganda, however, will complete the lesson the workers have commenced to learn. They will then realise the futility of fighting for anything but Socialism, and will join the Socialist Party, that has Socialism, and that alone, for its object.

The awakening of the workers to their class position is, to the Capitalist, a serious affair, and it is the endeavour to delay that understanding which prompts them to publish articles, such as this from which we quote :—

“According to most Socialist, and all Communist, writers and speakers this country is divided between the “capitalists” and the “workers,” that is to say, the Haves and the Have-Nots. They try to delude people into believing that practically all the capital is in the hands of a relatively small minority ; the rest of the community consisting of the toiling but unpropertied masses. Nothing could be a more ridiculous travesty of the facts. The truth is that a very large proportion of the people of this country, including the workers with hand or brain, are owners of capital. “—(The “Daily Mail,” 11/6/27.)

It will be most gratifying to the workers to realise that, after all, their poverty is only a delusion. But what a pity the million miners did not know that they had such resources to draw from when they were locked out. And why did King Fuad of Egypt feel it incumbent on him to donate £1,000 to the London poor during his recent visit?

Another point that is often raised is the increase in the number of small investors. This appears at first sight to contradict the assertion that capital is concentrating into fewer hands. But upon closer examination it will be seen that the contrary is the case, and the increase in small investments is actually an effect of that concentration.

In the first place, this increase only applies to money invested in savings banks or public companies, and takes no account of capital held by people who use it as private traders. Consequently, if they are compelled to sell their business and invest the money in one or another of the concerns mentioned, that would be registered as an increase in the amount of capital held by an investor of moderate means. But all that has happened has been a change in the form of their property. Take, for example, a man with a capital of £3,000, and using it to run a private business. He finds his business failing on account of competition from a more powerful competitor. Now, according to the way he acts, we get the following results :—

(1) He may see the danger before much harm is done, and be successful in selling his business without any great loss, and transfer the money to one of the concerns mentioned. With the result as above, the transfer of capital would be reckoned as an increase, when no increase had taken place.

(2) Assume that, before he is able to sell his business, he shows a considerable loss, and is compelled to accept for it half its former value, viz., £1,500, which he invested in the same way as in example No. 1. Here the result is that there is registered an increase of £1,500 in capital held by people of moderate means, but in actual fact there is a decrease of £1,500 owned by this group.

(3) Or again, he may hang on to his business until he is forced out, as a bankrupt. In which case there is a loss of £3,000, but it is not registered as a decrease by these one-eyed statisticians, because a view of this side of the question would be fatal to their case.

If we take the period 1906 to 1926, and consider the rate at which small businesses have either been crushed out or absorbed by larger ones, and they in turn swallowed up by more powerful combines, it is easy to account for this increase in the amount credited to depositors of small means, running parallel with the concentration of capital. The greater the concentration, and the more general large-scale production becomes, the greater becomes the amount of capital that is forced out of the channels of private trade into those of investment. And the fact that a few of the small fry are able to rescue a part of their capital from the share-shark infested waters, and place it in the safest position they know, accounts for this supposed prosperity of the working-class. A delusion which arises, as we have seen, through the competition between Capitalists—the weaker being pushed, at an ever-increasing pace, into the ranks of the “Have-nots.”

In face of the trials the workers experience in their struggle to live, such attempts to mislead them must fail. And as the system develops, the need for a change in the basis of society from the private ownership in the means of life to common ownership becomes more evident. When the majority of our class realise this simple fact, they will join with us in the fight to secure control of the political machinery and armed forces for the purpose of establishing what must be the one and only object of a working-class political party—Socialism.

Ted Lake