Why Socialists Oppose Nationalisation. (1924)

From the November 1924 issue of the Socialist Standard

The Case Against Government Ownership.

The Socialist propagandist is frequently asked by opponents, and by those who sympathise but are only slightly acquainted with the Socialist case, to defend “Nationalisation.” It is usually with surprise that the enquirer learns that the Socialist Party is not in favour of, but opposed to, the many forms of State or Municipal ownership.

While a few Conservatives, considerable numbers of Liberals, the bulk of the Labour Party, and the I.L.P. are advocates of Nationalisation, the Socialist Party does not hold that the workers can usefully support this demand. Our general reason is one that lies at the back of all our principles, that is, that Nationalisation will not benefit the workers. It is a matter of complete indifference to us whether this or any other proposal is, or is not, useful to the other class, the employers.

What, then, is Nationalisation? Let us take the mining industry as an illustration. At present certain moneyed people, capitalists, invest part of their capital in the lease of coal-bearing soil, machinery, etc., and use part in employing miners and clerks and managers to carry on the various processes connected with the hewing, hauling, sale, and distribution of coal. After they have paid wages and all expenses, they expect to, and actually do, receive in the price of their coal, an amount greater than the total they have spent on getting and selling it. The difference between income and expenditure goes into the pockets of the shareholders or owners as profits or dividends, and this happens irrespective of whether those shareholders have or have not any knowledge of coal-getting, and irrespective of whether they spend the whole of their time idling and enjoying themselves, or whether they take an active interest in the concern in which their money is invested. Generally speaking, the amount of their profits depends not on their own efforts, but on the amount of capital they happen to possess.

This is the normal organisation of the capitalist system in its undeveloped or “competitive” stage, and it is objected to by us and by the advocates of Nationalisation. The agreement between us, however, does not go very far. We object to the control of the means of life being in the hands of non-workers. We object to the owners of capital being permitted to consume part of the wealth the workers have produced while they take no active part in production themselves. We hold that society can now dispense with the capitalist class, because they no longer perform any function which cannot be performed at least as well by members of the working class, by which we mean all those people who, because they do not possess property, are compelled to offer their services to those who do. We do not regard the investment of capital as a service which entitles the owner to live at the expense of those who do the work. We therefore advocate Socialism, which is a social system in which every able-bodied person will be expected to engage in wealth production before he earns the right to enjoy the use of those things which society can provide for its members. Society itself will set aside wealth in the form of machinery, etc., for the purpose of future production, instead of paying a privileged class for permission to use the results of the workers’ past labour, as is done at present. The capitalist class will cease to exist.

This is Socialism, but it is not Nationalisation. Nationalisation, or Municipalisation, is said to exist when the State or some local authority takes over or initiates an undertaking instead of leaving it in the hands of any capitalist or group of capitalists who choose to invest their money in it. Thus the railways in Germany, the Post Office and Telegraphs in Great Britain, and butchers shops, sawmills, and other concerns under Labour Governments in Australia, are nationalised. This development is a natural successor in certain industries to the early competitive stage of capitalism. For instance, the overwhelming importance to a great trading nation of efficient means of communication and transport makes it imperative that private individuals shall not be entitled to act quite irresponsibly. The result of leaving such industries in individual hands would have been a chaotic lack of organisation which, while profitable enough to the owners, would have been fatal to those industries which needed cheap and, above all, dependable and widespread transport services. In self-interest, therefore, the capitalist class as a whole, through their Governments, had to step in and either take over, or at least control, those services which had become too big and important to be left in individual hands without grave danger to the stability without which trade would be impossible. There may, of course, be other reasons for the introduction of national control. Bismarck took over the German railways partly for military purposes, partly in order to have a source of income outside the control of the German Parliament, and lastly because he hoped with centralised control to be able to deal more effectively with any attempted insurrection by the German workers. He and other Continental Ministers have used bureaucratic control to stamp out Socialist propaganda by penalising the active workers, and by denying State employees ordinary political rights. In France, State employees, like those in most Continental State concerns, have been denied the right to organise or to strike, and have been compelled to carry on blackleg services by the simple device of calling them to the colours. Sometimes in wartime and only during that emergency it becomes imperative for other industries temporarily to be put under the sole control of the Government. This happened here during the last war.

Again, it may happen that, owing to changed world conditions, new inventions or some such reason, a powerful group of capitalists may be faced with the threatened loss of the whole capital invested in an industry, as might happen, for instance, if oil fuel completely replaced coal. In such circumstances thé owners, if powerful enough, would become enthusiastic supporters of Nationalisation, in the hope that they might get compensation and pass their losses on to the State. A circular recently issued by a firm of Leicester stockbrokers to their clients, explaining why they favoured Nationalisation of the mines, may very well be dictated by a fear of this kind. (See August issue.)

There is yet another frequent explanation of capitalist enthusiasm for State control. La Follette, who is running as Third Party candidate for the U.S.A. Presidency, is an old-fashioned representative of capitalist interests who regards trusts and combines as a departure from the early “purity” of the capitalist system, and he wants the Government to intervene and, if necessary, take over certain vital industries. He is getting quite an unexpected amount of support from a host of small capitalists, manufacturers, farmers, etc., who are being slowly throttled by the banking, railway, and other rings, and who wish to put back the economic development of society. In this country we have Mr. Clynes, who believes, like La Follette, that it is better to have a large number of small capitalists than a small number of large capitalists. (Preface to the “Failure of Karl Marx.”)

Now, if you examine all the schemes put forward by these various advocates of Nationalisation you will see why it is that the Socialist opposes them. They all of them perpetuate the very feature which is essential to capitalism and which leads us to seek the abolition of the system. We do not hold that capitalism would be all right if only profits were limited to 5 per cent. or 1 per cent., or that it would be all right if trusts were abolished or prevented from charging high prices. We know very well that it is the system itself which is the cause of the chief economic evils from which the workers suffer, and these were as bad, and in some respects far worse, before trusts and combines had been heard of. We do not share the pathetic belief of the “Daily Herald” in 1923 (November 12th, 1923, and following days) that capitalism would be all right and there would be no unemployment if only wages were higher. Their unfortunate example was America, but we learn from the “Daily Herald” of October 23rd that there are now more than 5,000,000 unemployed in that country in spite of “high wages.” For the Socialist, capitalism is the enemy; not big capitalists or little capitalists, not high wages or low wages, not efficient or inefficient capitalism, but simply capitalism. And the essential feature of capitalism is reproduced in all these nationalisation proposals. IN ALL OF THEM THE CAPITALIST INVESTOR IS STILL GOING TO BE ALLOWED TO LIVE ON THE PROCEEDS OF HIS INVESTMENT. The only difference—a minor one—is that he will receive interest on Government or Municipal Bonds instead of receiving profits or dividends on ordinary company shares. He will still be able to live without working, and the system which permits this will still be the capitalist system.

The main underlying cause of the worker’s poverty is the private ownership of the means of producing material wealth. The class that lives by owning, maintains its position because it controls the political machinery and can invoke the aid of the armed forces whenever necessary. The remedy can only be the abolition of private ownership, and this can be done only in face of the opposition of the present owners. Examine Nationalisation proposals on these three claims : (1) That it solves the whole problem. (2 That it improves the workers’ position within the present system. (3) That is makes the final solution easier than it would otherwise be.

The “Daily Herald” (July 27th, 1923), under the heading “Socialism at Work,” instanced the Port of London Authority as a Socialist success. “… What Socialists propose is to set up other bodies like this very enterprising and energetic Port of London Authority.” It has on other occasions mentioned in the same connection the Post Office, and Municipal tramways, electricity undertakings, etc. Now, are these things Socialism, or do they as Socialists contend, merely alter superficially the form of the capitalist system?

First, let us take Mr. Herbert Morrison, Secretary of the London Labour Party.

  “The Port of London Authority 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 had 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” (“Daily Herald,” July 30th, 1923).

The last remark refers, of course, to the many strikes to enforce better working conditions. We do not care to question the “Herald’s” assertion that “By the unanimous admission of the capitalist Press it works exceedingly well.” It is, however, sufficient to say that the capitalist Press does not usually describe in these terms anything which is likely to benefit the workers at the expense of their employers. Next, I am going to quote another Labour supporter, Mr. G. T. Sadler, LL.B., writing in the “Herald” on the subject of the capitalist nature of Municipal undertakings (April 2nd, 1924) :—

  “Many socialists have the idea that by municipalisation they can get rid of capitalists. May I remind such that by municipalisation you create State capitalists? This process has been long going on in all our chief towns. Take a few examples— 

The debt of—

L.C.C. £105,000,000

Lincoln £1,667,000

Liverpool £22,000,000

Manchester £31,000,000

Leicester £4,995,000 

“On all this interest is paid, say, 5 or 4 or less per cent.—to capitalists ! ”

Mr. Sadler is wrong in only one respect—in thinking that Socialists share this Labour Party idea.

To show how completely many critics of the capitalist system miss the really vital feature is well illustrated by another reform of capitalism advocated by the Labour Party. In the “Daily Herald” (October 20th, 1924), Mr. Emil Davies has an article in which he holds up for the imitation of English workers a milk-distributing co-operative society formed four years ago in Minneapolis. He says : “Those who produce and those who distribute the necessaries of life” will, in the co-operative commonwealth, “not be the wage slaves of people who allow the real workers a mere subsistence, and themselves take large profits which enable them to live in luxury.” He then goes on to tell us that this concern, employing only 400 workers, actually made £40,000 profit last year ! He admits that the workers who formed it could raise only trifling amounts of capital themselves, and it was to outsiders that they had to go to start the business. Thus they began operations with promises and actual investments totalling £23,000, and it is of course mainly to these investors that the profit goes. If this instance of intensive exploitation were really what Socialists aim at, the workers might justly detest the name of Socialism. In fact, co-operative capitalism is open to the same criticism as State capitalism or any other variant of the wages system. And. as Mr. J. A. Spender, the Liberal economist, correctly says, “the MacDonald-Webb School of Socialists . . . would disown the Marxian doctrine. . . . These men have no economic doctrine about wealth or its distribution between classes, and are more correctly called State-capitalists than Socialists” (“Weekly Westminster,” October 25th, 1924).

Even the “Herald” has been compelled on occasion to see the weakness of its own party’s position when some particularly flagrant case has come to its notice. Thus in an Editorial of April 12th, 1924, we find the following :—

  “We do not believe that there is any fundamental distinction so long as the wage system exists, between the relationship of a private employer to his workers and the relationship of a municipality or State to its workers. In each case the latter sell their labour-power, and their capacity to sell it at a fair price depends on their capacity, through their trade unions to refuse to work.”

This brings us to the second argument in favour of Nationalisation, i.e., that it improved the position of the worker within capitalism. The “Herald,” in April, 1924, thinks that it makes but little difference, and we are all familiar with the poverty and discontent among postal employees, who complain, moreover, that the Labour Government has been not better, but worse, in respect of the restrictions imposed upon Civil Servants in their political activities. There is no evidence that State employees in Germany or under Australian Labour Governments have been better off than workers in private employ doing similar work. And if, as the “Daily Herald” points out, “the price of Nationalisation were the giving up of the weapon of self-protection” (the strike), then “under capitalism a nationalised industry would actually be worse off than those left in private hands” (September 13th, 1922). Lest it be thought that there is no possibility of this right being denied, it is as well to remember that the Court of Enquiry set up by the Labour Government after the London Traffic Strike (“Daily Herald,” April 12th, 1924) recommended that there should be compulsory arbitration, which, as the Editor said, meant in practice the taking away of the right to strike. This report was signed by the Labour representative, Mr. Pugh.

There still remains the argument that Nationalisation is economically desirable because it paves the way for Socialism. If it is merely size that counts, then this argument obviously fails, because the trust has solved the problem of large-scale organisation, and in many industries the international combine has been organised across State boundaries and over a larger field than any single Government can possibly cover. Cotton and oil are instances of this. Further, from the point of view of the future, State enterprises are economically bad, because they often introduce political considerations which are less likely in the trust. As pointed out above, Bismarck, when he took over and extended Prussian railways, was influenced largely by purely military needs and not only by the question of providing an efficient means for the transport of goods. In short, the technical and organisational basis of Socialism has long been prepared, and there is no need for half-way houses. The problem before us is solely one of propagating Socialism, no less in States like Queensland, with its ten years of Labour Government, and countries with a relatively high proportion of nationalised industries, than in countries where competitive capitalism is still strong. The private property of the capitalists, which is what we desire to take for society, cannot be touched until the workers as a whole will back up such a step. Advocating Nationalisation within the capitalist system is unnecessary, because the pressure of their own problems will force the capitalists to do this in suitable industries, and its advocacy is injurious to workers because it obscures the real aim and delays its realisation.

Edgar Hardcastle