The following piece, written by the late Pieter Lawrence, is the second chapter of his 2006 work, 'Practical Socialism - Its Principles and Methods'.
Chapter 2
The Myth of Nationalisation
The association of socialism with nationalisation has been an unfortunate political diversion. It has wasted the energies of countless millions of working people and even worse, has led to great misery and disillusion. The history through which this false idea developed has been long, but as we have seen from the definition of socialism given in the previous chapter none of its basic features, common ownership, democratic control and production solely for needs are compatible with the operation of nationalised industries. The idea that socialism means nationalisation has resulted partly from an uncritical reading of an important but early socialist text.
Some years ago, during a television interview, the film maker, Orson Welles was asked about his adaptation from Shakespeare in the making of his film “Chimes at Midnight”. On hearing the interviewer describe it as a “masterpiece,” Welles took a long, pensive draw on his cigar and looked embarrassed. Eventually he murmured – “Unfortunately, a rather flawed masterpiece.”
If we could imagine Karl Marx being similarly interviewed his admirer might well refer to “The Communist Manifesto” as a “masterpiece,” in which case, it is likely that a latter day Marx might also react with a similar pained response. He might also take a long thoughtful draw on one of his cheroots and in retrospect think of his early masterpiece as somewhat flawed.
Nothing in the wisdom of hindsight can alter the main achievements of the historic pamphlet by Marx and Engels. Its early date marked it as a great breakthrough in revolutionary thought. But its issue in the l840’s, before they had refined their economic and political theories was a handicap. It explained with clarity the problems being suffered by the oppressed majority. But the so called revolutionary programme set out in the Communist Manifesto which was based mainly on state ownership or nationalisation was fatally flawed.
The problem was compounded when the pamphlet became required reading for many who aimed to change society. In this way it became a great influence on working class movements, especially in the 20th Century. Any failures of these movements should not of course be laid at the door of the Manifesto. Nevertheless, accepted by many, uncritically and literally as a guide to policy and action, or perhaps used in other cases with cynical bad faith, the Manifesto put a stamp of socialist authority on policies that led in many cases to great suffering and misery. The bitter truth being that this was amongst the very people that the Manifesto had set out to liberate.
Nor can we can attach any blame to Marx for the atrocities carried out by tyrannical regimes who came to run nationalised state capitalist industries in his name. This would be both unjust and absurd, perhaps like blaming Jesus Christ for the cruelties of the inquisition. Even within his own lifetime Marx had already begun to dissociate himself from some of his followers, saying on one occasion – “I am not a Marxist!”
We should now recognise that the revolutionary programme set out in the Manifesto was a recipe for state capitalism. Not that Marx was unaware of this but he saw it as the beginning of a process of change to that would lead to a new society. It said, “ …. the first step in the revolution by the working class, is to raise the proletariat to the position of ruling class, to win the battle for democracy" “The proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the state, ie, of the proletariat organised as the ruling class; and to increase the total of productive forces as rapidly as possible.”
There then follows a list of ten main actions that such a working class government could take, including, “ … application of all (land) rents to public purposes,” “A heavy progressive or graduated income tax,” “Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly,” “Extension of factories and instruments of production owned by the State; …” etc. All these actions, which we would now call reforms, had to assume a continuation of property, income tax, a banking system, State owned means of production. The irresistible logic of these measures had to mean that production of commodities would continue for sale on markets with a view to profit.
Notwithstanding this, the clear intention of Marx and Engels was that over time, these state institutions would be drained of their capitalist functions and the State itself would become redundant. “When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power (State) will lose its political character.” “In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association in which the free development of each is the condition for the free development of all.”
But the Manifesto made no attempt to set out how, through this controlled process of political and economic management, capitalist production would be converted into socialist production. The best indication we have from the text is, “Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production, by means of measures, therefore, which appear economically insufficient and untenable, but which in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production.” This may seem very promising, but, to be frank, this passage is not just vague, it is cryptic to the point of being unintelligible. It expresses more optimism than analysis or clear description. The programme was perhaps an indication that in the 1840’s Marx and Engels had simply not thought through the question of how society could be changed from capitalism to socialism through nationalisation.
The result was that the problem of how capitalist production could be abolished and replaced with socialist relationships of common ownership, democratic control and production for needs was glossed over in the Manifesto with a few fine sounding revolutionary phrases. But the subsequent irony was that the reasons why its programme could never achieve more than a state capitalist system were implicit in Marxian theory as developed in his more mature years.
The gradualist route to the establishment of socialism, mainly through nationalisation, is at the present time, a discredited idea but it may not remain so. Despite all the past failures of this doctrine, in the constant search for ways out of unsolved social problems, where memories are short, hope springs eternal and there is a chronic reluctance to learn from experience, it is possible that the idea may regain some popularity. The idea of nationalisation emerged with the Communist Manifesto in the mid l9th. Century, became the main currency of radical thought and went on to dominate working class politics for much of the 20th. Century. It became a common theme of Labour, Social Democratic and Communist parties as well as nationalist movements throughout the world. The idea of achieving a basic change in society through state ownership and state direction of the economy has been one of the most potent political ideas of modern times.
But in every case where the policy has been applied, by governments as different as the Bolsheviks in Russia, the so called “communist” regimes of Eastern Europe and China, the Labour Government in Britain after 1945, Yugoslavia, Cuba and other places, we find that there has been no progress towards socialist society. These have been political experiments involving over half the world’s population since the end of the 2nd. World War yet all these people and their descendants have never escaped from living in capitalist systems.
This has been the result not only of the work of political gangsters such as Stalin, Ceaucescu, Milosovik or Mugabwe who used the language of socialism to gain control and then run state systems for their own power and personal enrichment. We may also assume honest and sincere men and women, dedicated to working for the interests of the great majority and who saw state control as a way of introducing a new society based on equality and cooperation.
For example, during the early years of the Labour Party in Britain, the way forward seemed straightforward. Once having formed a government, the “commanding heights” of the economy would be nationalised. These would include the biggest of the industrial and manufacturing companies such as the steel producers, the railways, coal mines, gas and the Bank of England, etc. This would be a first step towards the end of capitalist ownership and the beginning of “socialist” or public ownership. Swingeing death duties and inheritance tax would further reduce an unequal division of wealth. State funds would become available for housing and education and a National Health Service. On the industrial front strong trade unions supported by Government would be in a position to win wage increases and the profits of the remaining capitalist companies would be further attacked by high taxes. Over time, the rich would be “taxed out of existence.” Unemployment would be ended. On the basis of rising living standards, a healthy, more prosperous and educated working class would continue to support “their” government whilst society was further transformed. This was the “socialist” dream of early members of the Labour Party.
Carried to office by an electorate that expected a basic change in society after years of war and the slump conditions of the 1930’s, the Labour Party in 1945 formed its first majority government. On the face of it, with its huge parliamentary majority there seemed to be nothing to prevent it carrying out its programme of change. Though it is doubtful if its leader, Clement Attlee, was ever a diligent reader of Marx and Engels, the language of the Labour Party at that time echoed much that was in the programme set out in the Communist Manifesto 100 years before. This was a large scale programme for nationalisation which was indeed carried out. It covered the coal mines, the railways and most road transport; the gas and electricity industries; the bank of England, cables and wireless, and iron and steel.
Many hopes were raised but what followed were years of hardship which were no less austere than during World War II. . There was no sign of socialism nor even a path leading towards it. Instead of partnership with the Trade Unions there was renewed industrial conflict.
Working people soon discovered that nationalisation or state capitalism does not differ from private capitalism as far as the exploitation of workers is concerned. For example, following the nationalisation of the railways, the journal of the National Union of Railwaymen said, “After three and a half years it seems to the man on the job that no favourable changes have taken place. Improvements in wages, working conditions and a relative responsibility in the running of the industry have just not materialised. On some counts there is a feeling that there has been a deterioration in standards instead of an improvement.
Nationalised transport is being operated on capitalist patterns, with capitalist forms of accountancy, with capitalist conceptions of industrial organisation. Any changes which have been introduced could well have been made by the private owners of transport undertakings. In fact, it is true to say, whether we like it or not, that a number of private enterprise firms provide better wages and conditions than those obtaining generally in nationalised transport.” (“Railway Review,” 27th July 1951.)
We shall never know if the editor of the “Railway Review” had at one time thought that nationalisation was a means of revolutionising society but certainly by 195l he had come to a more realistic view.
It is significant that some parties with absolutely no revolutionary aspirations but are more often associated with political reaction, have not only been in favour of nationalisation they have carried it out. For example, in the past Liberal and Conservative governments nationalised the postal, telegraph and telephone services. The first enabling act authorising the nationalisation of the railways (The Railways Regulation Act) was passed in 1844 under Sir Robert Peel’s Conservative Government, which was, ironically, four years before the issue of the Communist Manifesto. Though it was not carried out it was held over the heads of the railway companies to force them to reduce charges. In this it succeeded. Again in 1918, as a member of the Lloyd George Coalition Government it was Sir Winston Churchill who threatened the nationalisation of the railways. He announced, “the Government policy was the nationalisation of the railways. That great step it had been at last decided to take.” (“The Times,” 5th December 1918).
This partly provides an answer to the actual function of nationalisation. As well as being used for military purposes and for the control of powerful private monopolies it is also a means of maintaining a service which may be vital to the economy as a whole but which may have little prospect of making profit under private ownership.
Notwithstanding its alleged radical intentions, burdened by debt and outdated, run down industries, the actual role of the Labour Government’s state interventions after 1945 was to steer the British capitalist economy through its post war crisis. Nationalisation enabled the Government to carry out an investment programme in the vital sectors such as mines, roads, railways, steel and electricity etc. This set the foundations for expansion during the boom years of the capitalist economy in the l950’s and 60’s. Since then the Labour Party has become unashamedly committed to running the capitalist system.
Even recently, the desperate state of the railways has required a Government to ensure that this vital means of transport is able to continue with the support of Government funds. Far from nationalisation being a means of changing society, its real function has been to prop up the capitalist system. It has done this particularly in circumstances where profit expectations in the basic sectors of the capitalist economy are low and where private investors are unwilling to provide the required finance unless given guarantees of Government support.
A nationalised industry can be run at a loss for long periods but only whilst it is subsidised through taxation from other profitable parts of the national economy. Governments can play the game of robbing Peter to pay Paul but only whilst Peter can afford to be taxed from his own profits. Ultimately, nationalised industries cannot escape the over-arching constraints imposed by the profit motive on the general economy.
Few words are needed to dismiss the idea that following the Bolshevik take over in 1917 society in Russia was on course towards socialism. The grim history of Russia during the 20th Century tells its own story of gangster regimes holding power through intimidation, terror and murder with an enslaved population serving the ambitions of its rulers. The fact that the so called USSR justified itself through a pseudo socialist ideology tells us nothing about the truth of what was happening. All exploitative societies idealise their true nature and it matters little whether its rulers project a false image cynically or in self belief, the truth lies behind the propaganda in the real events of the time.
What cannot be denied is that the myth that society in Russia was progressing towards socialism was widely believed, a fact that not only diverted but distorted the working class movement for many years. It has been tragic indeed that countless millions of working people and others from all walks of life gave their support to the Russian system and the so called world wide “communist” movement. What the Bolsheviks actually achieved was a more rapid development of the capitalist system. They abolished the remnants of feudal society more or less overnight but the system of industrial development which they set up was a continuation of the state control by a state bureaucracy that was traditional in Russia with, eventually, Stalin as the new “Czar”.
The economic features of the system under the Bolsheviks remained capitalist in their operation. Labour continued in the form of wage labour, the means of production operated as invested capital, production commenced with an exchange of labour time for wages, the resulting goods took the form of commodities that were sold on the markets for profit. The function of labour was to create surplus value (value over and above its own value); this remained the source of accumulated capital. The fact that it was organised as a state system did not in any way alter its operation as a capitalist system. This merely meant that it was a state capitalist system. Ironically, its classification as a capitalist system applies the logic of a Marxian method of analysis.
The fact that the capitalist system developed mainly in Western Europe as a system of private capitalism in no way excludes its development in different forms in other places inline with different traditions of organisation and administration. Similar to the way that a state bureaucracy has been dominant in Russia history it has also been traditional in China which may partly explain the development of Capitalism in a state form in that country.
We have mentioned that the mechanics of how a state capitalist system could be converted through political control in stages into socialism was glossed over by Marx and Engels not just in the Communist Manifesto but subsequently. In the absence of a systematic treatment of this question they gave us a few fine revolutionary phrases. Despite their excitement at the rapid pace of development in their day, in retrospect, we are bound to say now that it had not yet established a realistic basis for world socialism and this was a disadvantage for Marx and Engels. But in any case, the task of setting out such a transitional programme of change is impossible. This is because the two systems are mutually exclusive.
Profit and capital accumulation are more than objects of capitalist production they are conditions of production. They act as economic imperatives which can perhaps be set aside for a time but continued losses inevitably lead to breakdown. These are the economic forces that shape our society. The idea that any government, however well meaning or inspired by revolutionary sentiment, can replace profit and the accumulation of capital with the needs of the community as the objects of capitalist production is a misguided doctrine that has led to failure, broken promises and boundless political confusion. It has put back the clock of social progress and made the sound work of building the socialist movement more difficult.
Throughout the capitalist system, unless subsidised from other sectors, every enterprise is compelled to be profitable or at least viable. The productive history of even a simple commodity is complex and can extend throughout the entire structure of world production. Capital circulates throughout the structure from the mining of raw materials, to industrial processing, manufacture of component parts to final assembly and distribution. As a part of this sequence, if a production unit fails to maintain profitability it will disappear from the structure and may be replaced by another, more viable unit. These are the pressures of economic selection which no government or corporation can control and which maintain the structure of production as an exclusively capitalist structure.
It has been suggested that a business can be run in a “socialistic” way, as for example with workers co-operatives. Certainly, a unit may be organised along more egalitarian lines but this cannot escape the economic pressures that determine whether or not it can survive. It could be a Kibbutz or a worker’s co-operative taking decisions collectively; it could be a monastery producing pottery, honey or herbs; in whatever way they are structured, authoritarian or democratic, and in whichever scale they may operate, as a part of social production they are a link in the economic circuits of capitalism and can only continue to operate within the pattern of buying, selling and profitability.
The irresistible mechanisms which only allow production units to operate on a capitalist basis rule out any possibility of combining the productive relations of capitalism and socialism. It is impossible to combine the class ownership of the means of production with common ownership by the whole community: it is impossible to combine a world wide division of wage labour with the work of free men and women co-operating without wages in their mutual interests: it is impossible to combine the production of goods for sale on the markets with the free distribution of goods solely for needs. It is impossible to combine profit and the accumulation of capital as the motive of production with the democratic choices of communities about how to deploy their resources. All these things which clearly distinguish capitalism and socialism are mutually exclusive.
The commodity, the article for sale, is invested with all the anti social features of the class society that has created it. We can only gain access to it by paying money; it serves our need only on condition that it first serves the profits of those who market it; it has been produced by wage workers whose economic function has been to generate more wealth for the company which exploits them.
Contrast this with a simple object of use which could be produced by free people in democratically run communities. Such an article of use would express all the life enhancing qualities of work carried out voluntarily by people co-operating in each other’s interests. It would not carry a price tag, it would not be sold, it would be freely available for consumption. By co-operation we do not mean relationships in which people sacrifice their self interest for the good of others. Co-operation is in the interests of both the individual and the community and is the natural expression of our social being. It is through co-operation that we best express and develop our individuality. Across the entire world, the vast majority of people have a great need to live by the creative values of social co-operation, to share in the work of running their communities and providing for each other.
The idea of using state control and nationalisation as a means of establishing socialism was always impossible. Capitalism and socialism are fundamentally different systems that cannot operate together. A society to be run democratically in the interests of all its members can only be established by conscious, democratic methods. For modern socialists the key to the question of the change from capitalism to socialism lies in the work of building the socialist movement to the point where there exists a majority of socialists. With this level of understanding and commitment there would be no difficulty in enacting the common ownership of all land and means of production and distribution. On this basis communities would them commence the work of co-operating to organise the new society. This policy is the only practical way to establish socialism and it makes redundant the whole question of how a so called “working class government” could convert capitalism into socialism over time through a programme of nationalisation.
Pieter Lawrence
