1210550501 Document 1-5 National is at Ion

8/8/2019 1210550501 Document 1-5 National is at Ion

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NATIONALISATIONATIONALISATION occupies a central place in the

soc ialist policy.The bed rock principle of social ism is that industry should

be directed by the state in the public interest, and not byprivate groups pursuing the objective of private profit. Thesoc ialist does not, as is commonly thought, seek to removealtogether from industry the ma king of prof it . He seeks onlyto ensure that the m aking of prof it and i ts d isposal a re con-trolled by the state rather than by private individuals andgroups. M ost government enterpr ises a im at earning a prof i ton their activitiesalthough experience in Australia at anyrate show s that only in com paratively few c ases ha ve they beensucc essful. The state-ow ned enterprise, just as the p rivately-ow ned, generally seeks to ma ke at least sufficient revenue toco ver its cos ts, and, w here neces sary, to pay interest on itscapital.

THE SOCIALIST POLICY Of NATIONALISATIONThe m odern socialist does not, as is often believed, proposeto national ise a l l industry. He propos es to national ise o nly acertain key sector com prising bas ic util it ies a nd services suc has f inance and ba nking, transp ort, the land, fuel and po w er,and a s om ew hat vaguely-defined sphere which he ca l ls large-sca le mono po listic industry. A large area o f econom ic activity

is to be left to p r ivate enterprise. Thus, in perhap s the mo stcom prehensive expo sition of present-day socialist policy* "TheSo cialist Ca se," the author, Dou glas Jay, say s "There is a verylarge class of industr ies to which na tiona l isation w ould onlybe a pprop riate at a very late stage, i f ever. This class includesvery sm all, very speculative and com pletely new trades. I t hasalway s been recognised that nat ional isat ion w ould cause thema ximum am ount of d if ficu lty, and do the m in imum am ountof good, in the case o f one-man or other very small businesses.To nationalise every taxi driver, every bookmaker, every

The policy and the argument on which it is built is endorsed by the BritishPrime Minister, Mr. Attlee, in a Foreword.

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haw ker, every village shop, o r every garage, would raise form-idable and proba bly insup erable problems of organisation."The redo ubtable Harold Laski fo llow s a very s im i lar pa th inhis book "Reflections on the Revolution of Our Time" pub-lished in 1943. Laski says "I do not think .this means thenecessity of taking over all industry and agriculture by thestate. Rather I th ink i t mea ns that the fundam ental basis ofeconom ic pow er shal l be in the hands o f the com munity." Thelong-range programme of the Labour Party in Australia,although drafted ma ny yea rs ago, is closely in line with theseprinciples. It calls for the nationalisation of shipping, publichealth, broadcasting, banking and insurance, sugar-refiningand m onopolies.

NATIONALISATION NOT THE EXCLUSIVE PROVINCE OF THESOCIALIST

Nationalisation as a p rinciple of policy is not how ever theexclusive province of the soc ial ist . Long b efore social ism be-cam e a burning question, even before there was a Labour Partyin Austral ia, public opinion and poli t ical parties strongly sup-ported the state ownership of public utilities. And in recentt im es not a few o f the outstanding examp les of governmentservices and uti li ties, such as the State E lectricity C om missionin Victor ia, have been the creation of no n-social ist adm inis-t rat ions. Only in 1946 the Adelaide Electric Supp ly Com pa nyw as p urchased and taken over for the South Australian Go v-ernment by the Liberal Cou ntry Party.

In England during the war, a number of notable pro-nouncem ents on na t ional isat ion were m ade by C onservativeP arty leaders. In his fam ous broadca st speech on p ost-w arpo licy in 1943, Winston C hurchi ll mad e the po rtentous state-ment: "There is a broadening field for state ownership andenterprise if we ca n m ake state enterprise a nd private enter-prise both serve the national interest and pull the nationalw aggon s ide by side, then there is no reas on for us to run into

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NATIONALISATION (continued)

that horrible, devastating squalid bog of bickering and con-fusion which mocked and squandered the hard-won victorywe gained a quarter of a century ago."* And O liver Lyttelton,Minister for Production in the British War Cabinet, appearsto have had the same general thought in mind in 1942 whenhe said "If anybody asked me whether there should be moresocialism or more capitalism, more government planning ormore free enterprise, my answer would be that we should havea great deal more of both."t

OVERLAPS PARTY POLITICAL PROGRAMMESNationalisation is thus a question which in a sense overlapsthe dividing lines of party political programmes. Both socialistand non-socialist parties have been responsible for the creationof state-owned enterprises of many kinds. In the main, thesehave covered essential services of a standardised type wherecomp etition would be palpably wasteful, and where the scope

for rapid technical developm ent is somewhat restricted. Theprovision of postal services, sewerage, the supply of water, aregood exam ples of industries which clearly could not be left tothe activity of private individuals, and in p ractically all coun-tries these utilities are under communal control. But there aremany other services, such as say transport, where the balanceis by no means so decisively in favour of state ownership.And there are still others, for example insurance andbanking and medical serviceswhich come within the orbit ofthe socialist for nationalisation where private competitionwould seem to offer clear-cut advantages. In these cases theonus is very strongly on those who propose nationalisation toshow clear cause why it is necessary and what benefits wouldfollow from it.The industries most suited for state ownership are thosewhere the service provided is of a more or less impersonalnature. This is in keeping with the intrinsic character of the

Something seems to have been amiss with the sense of direction of the pilotsboth in Great Britain and Australia. We appear to be deeply immersed in thebog which Mr. Churchill hoped we would avoid.t It should be borne in mind that these statements refer to England wheregovernment-owned industry did not at the time occupy nearly so large an areaas in Australia.

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state i tsel f . W ater is w ater, through w hichever pipe i t flow s;electricity is electricity, along whichever wire i t is conducted.But the pos ition is vastly different with say m edicine or bank-ing, w here the relat ionship between the provider and user ofthe service is ess entially perso nal. And it is in these fields thatthe believers in free enterprise are justified in fighting thethreat of unlimited state ownership or control with everyw eapon at their comma nd.

DIFFERENCE BETWEEN SOC IALIST AND NON-SOCIALIST ATTITUD E.Because social ist and non-social ist pa rties have s een f i tf rom t im e to t im e to estab l ish go vernme nt-ow ned u t il it ies o rto transfer industries from private to public hands, and becaus ein some cases non-socialist as w ell as s ocial ist pa rties are p re-pa red to conc ede that state enterprise m ight be further ex-panded, this does not mean that there is no fundamentaldifference in their policies tow ards na tiona lisa tion.In the f irst place na tional isat ion is a ma jor although notthe ma jorfeature of social ist po l icy. On the o ther hand, thenon-social ist, while he m ay be p repared to extend the scope o fstate industry in the light of inesca pa ble nationa l need, is in-f lexibly o pp ose d to na t iona l isat ion as a general principle o fecono mic a nd industr ial organisat ion. Mo st of the not incon -siderable area of activity now under private control which thesoc ial ist marks ou t for eventual governme nt ow nership, thenon-socialist would regard as entirely the prerogative ofprivate enterprise.The so cial ist 's phi losop hy that industry sho uld be con-ducted in "the p ublic interest" an d no t for private p rofit, leadshim to na tiona lisation as a na tural corollary. The no n-social ist,how ever, sa ys that in general the pursuit of private profit bestserves publ ic interest and that only in the few cases w here itclearly does no t do this, and where a m easu re of government

control without ow nership does not suff ice, should na tionalisa-t ion b e co ntemp lated. With the so cial ist , nat ional isat ion is afundam ental art icle of faith; with the no n-soc ialist it is som e-thing to be given a w ide berth excep t when sheer necessi tyma kes that impracticable.

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SOC IALIST ARGU MENTS FOR NATIONALISATIONTo suppor t nat ional isat ion a s a n econom ic p rogram me,the social ist advances a w ide variety of arguments. He claimsin the f irst place that the things produc ed s hould be decidednot by the prof it that can be m ade o n them, but by the needs

of the people w hich are capable of com monsense determinationby s om e central author ity. He states that p r ivate com peti tionis wa steful and very o ften leads to over-production a nd over-ca pitalisa tion in different f ields o f indu stry, thu s resu lt ing inan inefficient and uneco nom ic use of resources of ca pital andlabour. He po ints ou t that private enterprise ha s not ac hieveda sat isfactory relat ionship between m ana gemen t and labo ur,and that in fact good industr ial relat ions are impo ssible w hi lethe w orker has l i tt le or no stake in the ow nership of industry,and while he feels that industry is directed not primarily forhis bene fit but for the benefit of private sh areho lders.

To these co ntentions the m odern soc ialist adds tw o fur-ther arguments, and i t is o n these that he now lays his m ainemp hasis. He claims that over large sections o f industry w herelarge-scale mass production predominates true competition nolonger exists, and that industry has com e to be increasinglyorganised by mo nopo l ist ic groups w ho co mbine to f ix pr icesand restrict production in the interest of maximum profits.Thus, in his boo k, "The Social ist Cas e," Douglas Jay a dvancesthis a s the m ain reason for nationalisation.

"We m ust aim a t establishing publ ic ow nership a s w el las control in all cases where the search for private profitclearly conflicts with the basic human needs of the com-munity. And this is bound to happen in greater or lesserdegree where the forces of mono poly or imperfect comp eti-t ion a re strong. . . . W ith the ad m ission by indus trial iststhemselves that com pet it ion has largely vanished, thejustif ication for private ow nership and control has va nishedalso."

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He maintains further that the tendency of large-scalemass production is to concentrate economic power into fewerand fewer hands and this development is opposed to all con-cepts of democracy and representative government.

The second argument, which has great current popu-larity, is that if economic depressions are to be eliminated andthe econom y maintained in a more or less stable condition offull employment, a large measure of nationalisation is impera-tive. This argument is derived from the theory that instab ilityand fluctuations in economic activity are mainly caused by thewide variations of the capital expenditures of industry. Toreduce or eliminate these fluctuations it is therefore necessaryfor the tota l outlay on capital to be stab ilised at a high leveland this is virtually impossible while the great part of industryremains under the control of private groups.

THE COUNTER ARGUMENTS- It must be said at once that the theory that a large sectorof industry must be under government ownership and controlif full employment is to be preserved finds no acceptance inthe official statements of employment policy made during the

last few years by the governments of the English-speakingdemocracies. Nor is it accepted by Sir W illiam Beveridge. Inhis renowned work, "Full Employment in a Free Society," SirWilliam rejects the view that nationalisation is necessary to thesuccess of a policy for full employment.

If, as the socialist claims, private enterprise leads to anundemocratic concentration of economic power, this p roblemis not resolved by the simple expedient of nationalisation. Thiswould only aggravate the evil it.rofesses to correct. Forinstance, if an industry dominated by three large concernswere_to be acquired by the state, the result would be that onecentre of authority would be substituted for the three centrespreviously existing. In any case, monopoly is monopoly,


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whether public or private, but the former would have infin-itely greater powers for good or evil than the latter. Also,there is l i tt le in the history o f government o w nership to s howthat the state mo nop oly is any m ore sol ic itous o f the p ubl icinterest than the pr ivate mono poly, and m uch to sho w that itis often con sidera bly less eff icient. It is true that one of theessential elements of democracy is that power, whethereco nom ic or pol i tical, shou ld be w idely dif fused through thecom munity. Perhaps the strongest argument against the w holeso cial ist case is that so cial ism, in its ult im ate sta te, inevitablyinvolves su ch a central isation o f authority as to be incons istentw ith the dem ocrat ic process a nd any reason able degree ofpersonal freedom.

The c laim that nat ional isat ion of industry is nec essa ry toany substantial advancem ent in em ployer-emp loyee relationslooks more than a little sick in the light of post-war experi-ence b oth in Australia and Great Br i ta in. A goo d prop ort ionof the ma jor strikes in Austral ia since the en d of the w ar havetaken p lace in the p ubl ic ut i li ties, notably in the rai lw ays andtramways, and in publicly-owned coal mines. Others havebeen caused by political motives or by inter-union conflictsrather than by any d ispute between em ployers and labou r. I tis now gen eral ly ackno w ledged that no significant imp rove-me nt has oc curred in the labour situation in the coa l mines inBritain since they w ere acq uired by the Attlee Go vernmen t.In fact, one of the mos t disastrous po st-war stopp ages tookplace in Augus t and Sep tember of this year in the nationalisedGrimetho rpe C oll ieries in Yo rkshire.

The argument that competition is often wasteful over-looks the h istor ical fact that co mp etit ion, w hatever i ts draw -backs, has been the mo tive force behind the immense eco nomicadvance in the W estern dem ocracies over the last century a nda h alf. I f com peti tion doe s a t t ime s involve w aste, is i t not farbetter to have an econo my w hich is progressing rapidly evenat the co st of a l it t le w as te, than . an econom y w hich, althoughw ithout w astes, is dorm ant and stat ionary?

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Finally, the claim of the so cial ists that industry sho uld bedirected in the pub lic interest runs up against the problem ofwhat is the public interest and who is to define it. The truthis that the p ubl ic interest is an a bstract concep tion w hich per-mits of - no s imple definition. There are as many different viewson w hat consti tutes the public interest as there are peop le whothink. In advoc ating the planning of prod uct ion by the stateon the ba sis of huma n need the so cial ist has so far fai led toansw er satisfactorily how huma n need is to be determined. Heis content to leave that perplexing ques tion to be so lved by agovernm ent bo ard. P rivate en terprise in effect refers directlyto the people themselves for the answ er, w ho sho w their pre-ferences and state their requiremen ts through the op erat ionsof the free price market. In general it is true to say that abusiness w hich does not serve a de finite public need will fail torealise a p rofit on its activities.

But w hatever the arguments for and against nat ional isa-tion a s a p rinciple of poli tical policy, w e w ould be w ell advisedto keep an open m ind on w hether, in any part icular instance,government ow nership w ould better serve the p ubl ic interestthan private enterprise. A doctrinaire acceptance of national-isation without reference to the lesso ns of expe rience or to thereal practical advantages to be gained is utterly w rong, and canbe extremely dangerous. But it would be equally wrong toreject out of hand any specific proposal for a nationalisedindustry w ithout just consideration a nd me rely beca use it maycon f lict with r igid preco ncep t ions of w hat is r ight. Neverthe-less, hard and often disil lusioning experience w ith state e nter-prises in the British countr ies sho uld cause us to m ove verytentatively before indulging in further large-scale ex perime ntsin nationalisation. Pa rticularly is this so in Austral ia w here theeconomic area controlled by government-directed industry isgenerally conceded to be m uch greater in extent than in anyother Brit ish dem ocrac y.

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NATIONALISATION (continued)TH E VER DIC T U N FA VO U R A B LE

The verdict of those w ho ha ve closely studied the w ork-:ings of government-owned industry in Australia is seldomfavourable and often severely conde mn atory. In a w ork whichhas b een given far too l i tt le attention by the devo tees bo th ofleft-wing and right-wing politics, "State Socialism in Vic-toria," the author, Sir Frederick Eggleston, relates a long storyof financial misman agem ent and incom petence, of fai lure ofvision, o f po lit ica l interference, and of- general inefficiency onthe pa rt of ma ny gove rnme nt util it ies a nd services in Victoria.Sir Frederick Eggleston's conc lusion, w hich is supp orted by asearching examination into the facts, is worth repeating atlength:

"State S oc ialism has o n the who le failed in Victoria; ithas not secured an y st r ik ing succes s; it has no t changedsocial relationships for the better, and i t has ha d so me re-sounding failures; while the widespread reliance on Govern-ment has p roduced undesirable results in many w ays. Thereis m uch e vidence tha t the reas on o f this failure is a failureof the individual citizen in his relation to the State; heregards the State a s taking a responsibil ity off his sho ulders,and he does not make up by any ac t ion in the w ay of co-op eration or by d ischarging efficiently- his po litical respons i-bil it ies for the relief wh ich is given to him pe rsona lly. Su cha co nclusion w ill probably be hotly challenged by the advo-cates o f State So cial ism , and for evidence of i t the readerm ust be referred to the text. But i f the c onc lusion is true,i ts impo rtance mus t be recognised as crucial ; i t mea ns thatwh en the conditions ha ve been made m ost easy for the indi-vidua l and m os t has been don e for him, fai lure has bee nincurred becaus e of his failure to co-ope rate."

Sir Frederick Eggleston points out that the degree ofsuccess of the various governm ent bodies in Victoria has been

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in proportion to the extent to which they have been free frompolitical control and influence. But he also shows that inhardly any instance of a government-conducted industry hasit been possible to com pletely avoid political interference.

THE BODY AND THE SPIRITAll in all the argument between nationalisation andprivate enterpr ise is in many ways an unreal dispute. Already

a large part of economic activity in the English-speakingdemocracies, particularly Britain and Australia, is owned andcontrolled by the state. The modern econom y is not a privateenterprise economy nor a socialist economy. It is a mixture ofboth. If the ingredients of the economic cockta il were to bealtered too radically in favour of one or the other, the resultwould almost certainly be highly unpalatable. In certainlimited fields the organising scope and power of the state hasadvantages. In others, the courage, the elasticity, the venture-someness and initiative of individual enterprise is indispensableto progress..44e danger to private industry arises not so much' fromthe advance of state ownership, which, in spite of half a cen-

tury of unremitting propaganda, has made relatively littleprogress; it arises from the intensification of state control offree enterprise until it in effect ceases to be free . This is whatis happening today. Although a finger or two may have beenlopped off, the body of individual enterprise remains largelyintact. But the spirit is in real and imminent danger of beingcrushed under an overwhelming weight of socialist prohibi-tions and controls.

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1210550501 Document 1-5 National is at Ion

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