Capital Accumulation and Socialist Politics

...In the following discussion John Strachey, the well-known Brtish socialist econo, nist, raises a number of critical questions concerning the relation of accumulation to democracy and totalitarianism...

...Mr...

...A high rate of accumulation becomes at once less imperative and far easier to achieve...

...For the resources "saved" from consumption may not get used after all for the creation of new means of production...

...In the first place, a really considerable part is now taxed away again, pooled in the hands of the state, and used as society thinks best...

...This brings us to a concept used by modern economists—particularly Dr...

...This is an account of an economy in which the function of accumulation is in a state of transition...

...Such developments of the latest stage begin to point beyond the confines of the system itself...

...In 1953 the profits of all corporations appear to have been some $43 billion before tax...

...The real scandal is the existence of a category of persons deriving very large net incomes (in one way or another) from completely passive shareholding in the main productive enterprises of society, rather than the actual quantitative loss to the community which their expenditure represents.-Nevertheless, the long-term, as opposed to the immediate, economic gain of abolishing, or even markedly diminishing, unearned propertyderived income might be very great...

...Hugh Gaitskell, have laid great emphasis on limiting more and more the right to inherit considerable quantities of income-bearing property...

...To Marxists it is, of course, all-important, for it is the essence of exploitation...

...Many wage earners do realize more or less clearly that they and the technicians and executives are the people who produce the social surplus, and resent bitterly the fact that, legally at any rate, it is appropriated by passive shareholders...

...The higher it is set, the lower will be the standard of life (other things being equal) at the given moment...

...that he was confident of getting his share of the final products of these new means of production, as a result of using his weapon of demo cratic pressure...

...On the whole, then, the prediction that democracies, once at any rate they have begun to transform the social form taken by accumulation into a consciously set-aside fund—once they have begun to become socialist, that is to say, for this is one way of defining the essence of the transition—will prove spendthrift, and so cause their countries to fall behind in the race of economic development, will, I believe, prove to have little force, at least in the case of highly developed communities...

...It would not indeed double the rate of investment, for, as we shall see immediately, the savings of the rich are today far from being the only source of investment...

...dustrial societies need a lower rate of accumulation than has hitherto been supposed...

...On the other hand, it is this very characteristic of latest-stage capitalism which more than anything else complicates the problem of its transformation by democratic means into a predominantly socialist society...

...And these amounts are still high...

...Nor would it be true to say that all of this latter sum of E60 million represented the capital of individual rich men which they could have spent on luxuries instead of reinvesting in ICI...

...The fact is that the immediate economic gain of abolishing the private appropriation of the socially accumulated surplus would be by no means so great as would appear at first sight...

...For example, we are at once prompted to ask why the directors of the boards of the oligopolies accumulate in this way, if the process benefits them, individually and financially, but remotely, if at all...

...The Swedes actually claim a rate of 33-1 /3% per annum...

...Economic Report of the President 1954, Chart 23, p. 43...

...As soon as this has ceased to be a possibility, the electorate will be much more favorable to a high rate of accumulation...

...but the higher (other things being equal) will be the standard of life attainable in the future...

...erty-derived income, half of which they spend and half of which they save and re-invest...

...It evidently matters extremely to their directors that "their show" should expand and succeed even if they will continue to get much the same salaries, expense accounts and privileges after it has done so...

...For it must be agreed that the leaders of the national economy, the skilled technicians and the high executives (as contrasted with the functionless shareholders) must, at our stage of human development, receive very considerably higher incomes than the rank and file of the community...

...Paradoxical conclusions emerge from these considerations...

...This is not to deny that the amount of social waste represented by the luxury expenditure of the rich in all latest-stage capitalisms is considerable...

...The result appeared to be that the Russian differential was at least eight times as wide as the British, post-tax in both cases...

...How much, however, does the continuance of this scandal matter economically...

...But their arguments can never be taken on their merits so Iong as their suggestion for preserving the seed corn is—to continue the agricultural analogy—to let the landlords keep it as their absolute private property to do what they like with...

...Semi-collectivized Accumulation Writing in the nineteen-fifties, it is necessary to add a further qualification to the classical socialist objection to the private appropriation of the socially produced surplus...

...Victor Gollancz for example, in agreement with Bernard Shaw, deny the contemporary necessity for marked differentials in earned income...

...I believe that this contention has force for societies in one stage of economic development, but that it has much less force for societies which have reached a more developed stage...

...copyright, 1956, by John Strachey...

...Such countries as America, Britain, Australia and New Zealand, West Germany, Sweden, Holland, Canada—and more precariously France—are over the hump...

...As these pages were being first drafted in May, 1954, the largest of all British privately owned companies—Imperial Chemical Industries—issued its annual report...

...But this fact is habitually confused with the continued existence of very high unearned, property-derived, incomes, the huge differential effect of which taxation can do no more than mitigate, as we have seen...

...Under the pressure of wage earners resentful of the out-of-date social form taken by accumulation, namely, private profit, they might accumulate too intermittently or too sluggishly to hold their own in the race with the ruthlessly accumulative Communist societies...

...And yet in 1956 Sweden is accumulating at an exceedingly high per cent of her gross national product.* Again, the rate of accumulation instinctively established by the British Labor Government in 1945-1951 was much higher instead of lower than that which British capitalism had established in the nineteen-thirties...

...Sweden is by no means a fully socialist democracy...

...Keeping up with the Joneses" is a trivial matter compared with "keeping up with the ICI"—or with DuPonts or Fords...

...But surely it should not be pressed too far...

...For, it is suggested, their electors will always see to it that their governments devote a very high proportion of their gross national products to immediate consumption...

...Our experience is that the oligopolies accumulate very determinedly...

...Nevertheless she has now (1956) been ruled by Social Democratic governments, with socialistic and equalitarian tendencies, virtually without interruption, for twenty-five years...

...Colin Clark is now (1956) an advocate of this view...

...The answer must surely be that it matters to them a good deal, but not overwhelmingly...

...The wage earners, who have become conscious of what is happening, are now apt to grudge every penny put aside for accumulation, because it takes the form of totally unjustified unearned income...

...This fact is illustrated not only by the forty years' history of Russia since the Revolution...

...nineteenth century...

...On the other hand, a sceptically and conservatively minded Western wage earner might comment that in fact the considerable smaller proportionate deduction made in the form of private profit from his possible consumption was not, in the main, used for the luxury spending of the rich, but did get used for building new means of production,* * We shall find that the worst trouble under capitalism is that not only does some of it get diverted into luxury spending by the rich, but that at intervals some of it does not get used at all...

...We shall be much occupied by this aspect of the matter as soon as we remove our temporary assumption that the diversion of resources from consumption does always in fact result in investment in new means of production...

...If the level is set on the low side, all that will happen is that the present standard of life will be high, but its rate of growth over the decades relatively slow, and vice versa...

...The answer is no doubt complex, but in the main, surely, it must be that they accumulate in order to enhance the power and success of their organizations...

...But then it costs far more to build, equip and staff a first-rate new university than to build a first-rate new power station...

...And, after all, in some cases that is what does actually happen...

...The problem of capital accumulation, and the various forms it takes in different kinds of society, has become of worldwide importance, now that the "underdeveloped" countries are trying to industrialize themselves...

...It is the fact of underdevelopment, not the particular economic system, whether capitalist or socialist, which makes it difficult for democracy to function in a "pre-hump" society...

...The Amount, Not the Form For all these reasons it is becoming clear that what chiefly determines the standard of life of the mass of the population is not the social form taken by accumulation, e.g., whether it be private profit or a social fund, but its amount...

...There is a final reason why the basic problem of accumulation should be manageable for socialist democracies...

...During my period of office as Secretary of State for War, I had worked out a comparison of the differential as between the pay of a Russian private and a Russian Marshal on the one hand, and a British private and a British Field Marshal on the other...

...But then experience shows that it is also very hard to combine a capitalist economy and democracy at this "prehump" stage of economic development...

...Thus it may well 'prove to be true that it is very difficult to combine a socialist economy and democracy in communities which have not yet surmounted the "hump" in the process of industrialization—in, that is, what are often now called undeveloped countries...

...But once this hump is surmounted—and by whatever methods—the community will be able to develop, and in particular to accumulate, with far less difficulty...

...Can it be said, then, that they "exploit" their workers even more than do the capitalists...

...Thus, if we ignore for a moment the form which accumulation takes, the Communist societies undoubtedly deduct from their wage earners a larger proportion of their product than do the capitalist societies...

...No doubt...

...A few British socialists, Mr...

...Hugh Dalton and Mr...

...The importance of the amount rather than the form of accumulation has been brought into our consciousness by the fact that the Communist societies of our day, which have abolished the private appropriation of the social surplus, are nevertheless maintaining a higher rate of accumulation than any other societies of which we have evidence...

...That all depends on whether the question of the form or the amount of the deduction from possible present consumption is considered the main thing...

...Moreover, there is nothing inevitable about the state using its part of the social surplus for consumption after it has diverted it by tax...

...It is this monstrous contingency, even more than private profit, that "puts off" the present-day electorate from accepting a high rate of accumulation...

...Nevertheless, their tremendous rate of uninterrupted accumulation will undoubtedly stand the Communist societies in immensely good stead in the long run, even though it means that they have hitherto had to hold down the standard of life of the mass of their populations more rigorously, and more tyrannously, perhaps than capitalist societies have ever done...

...Moreover it presumes a progressive abolition of the functionless, unearned, property-derived incomes of the rich, as distinct from their mere mitigation by taxation...

...And if, on the whole, many people fancy that China will succeed in industrializing herself more rapidly than India, that is precisely because they think that the Communist dictatorship in China will squeeze a higher rate of accumulation out of the Chinese people than can be secured from the Indian people by a mixed process, which is partly capitalist and partly democratic socialist...

...After the transformation of the form and method of accumulation, it will not, I believe, prove difficult to convince modern electorates that a high rate of accumulation is in their long-run interest...

...Recent democratic socialist economists, notably Mr...

...Old-fashioned competition has been metamorphosed into a complex kind of rivalry...

...On the one hand, bitter experience in the first half of the century has taught us that the innate tendency of latest-stage capitalism is to attempt to maintain an extreme degree of inequality, and, associated with it, so high a rate of accumulation as to lead to periodic slumps and crises...

...For the bitter truth is that in such circumstances accumulation, under no matter what kind of social system, can only take place at the direct expense of the existing standard of life of the mass of the population...

...that he would rather have, say, 20% taken from him for private profit than 40% for a social fund...

...But it would, over, say, a decade, make a very useful difference...

...After all, we are at present asking the wage earners to abstain from consumption in order to provide high incomes* to the rich which they need not legally use for accumulation at all, but are quite free to dissipate in any form of luxury spending...

...Second, the great corporations, which have become the decisive units of production, are increasingly inclined to refrain from distributing a part of the remainder of their surpluses (after tax) to their individual shareholders...

...that for his part he was more concerned at the amount of the deduction than the form...

...And conservatively minded writers accordingly see in the taxation of profits and of large incomes in general a squandering of the seed corn of the community...

...they may simply be left idle...

...Before and After the Hump Indeed it has been argued that democracies, even if they have become socialist democracies, will never be able to match the rate of accumulations of the dictatorships...

...In capitalist societies of the latest stage, such as Britain and America, an important part of the social surplus never in fact reaches the hands of the individual owners of capital, although it still nominally becomes their legal property...

...And they comprise, let it not be forgotten, the larger parts of both the capitalist and the Communist worlds...

...It is reprinted here by permission of Randon House, Inc...

...India in a semi-capitalist form...

...In that case the ironic situation would have been reached that it was precisely the fact that accumulation took the sociologically indefensible form of private profit which was making adequate and successful accumulation difficult...

...The gigantic nations of Asia are, in the middle of the twentieth century, beginning the processes of industrialization...

...They are all used to build new steel works, power stations, atom plants, etc., etc., potentially at least for the ultimate benefit of the Russian people as a whole...

...Moreover, it has now been discovered by trial and error that this must be so, in the contemporary stage of human development, in any form of society, whether capitalist or Communist.* Once this is recognized, the fact must be faced that, while the amounts, in latest-stage capitalisms, spent by idle and functionless property owners would provide a useful fund for raising the standard of life of the masses, yet they would be by no means sufficient suddenly to transform that standard...

...If, then, the 5% of the national product used up by the rich in the spending of their unearned incomes was added to investment, it would permit, over the years, of a rapid acceleration in the rate of growth of the national product...

...Only £60 million had been raised from the market...

...The wage earners learned by agonizing experience in the inter-war years that maintaining a relatively low rate of consumption, in order to make possible a high rate of accumulation, may not, under capitalism, result in a rapid growth of society's powers of production at all...

...To the Marxist the decisive thing is that none of the vast sums deducted from possible consumption in Russia, for example, go into the pockets of Russian owners of the means of production in the form of private profit...

...So long as private shareholding in large, oligopolistic companies, which is now the economically decisive form of private property, persists, the wage earners can never feel that they are genuinely working either for themselves or for the community...

...I wish I could agree with them...

...For all that the acceptance of a high rate of accumulation will do to their populations is to impose an initially slower increase of their standard life than would otherwise have been possible...

...After all, we never even tried to establish democracy in the contemporary sense in Britain until we were well over the hump, somewhere about the third quarter of the * It may be that societies such as India with large quantities of unemployed andunderemployed labor will provide an exception to this rule, if they can find a wayof rapidly setting their people on to work...

...It is at least important in Britain, more important in America, and more important still, in proportion to the national income, in Western Germany (and, for that matter, in France and Italy) . But nevertheless it is not a very large factor in the standard of life which the wage-earning mass of the population of such societies can hope to achieve...

...Once accumulation predominantly takes the form of a publicly accounted for, continually discussed, social fund, instead of the large unearned incomes of irresponsible individuals, the difficulty of securing support for a high rate of accumulation will become much less...

...Thus the profound paradox might arise that, as the influence of the wage earners grows, and in spite of the fact that classical capitalism's supreme tendency was to accumulation a l'outrance, the contemporary democratic capitalisms might be, to some extent, immobilized by the play and balance of their own social forces...

...And I for one cannot imagine any way of effecting that abolition except by the transference of their income-bearing property to society...

...Of this, £153 million had been drawn from "sources within the company," i.e., from non-distributed surpluses of one kind or another...

...This would be so if the resultant saving (in real terms, the productive effort thus released) , instead of being distributed to the mass of the population, was used to increase investment...

...China is engaging on that process in a predominantly socialist form...

...A great part of it unquestionably represented semi-colIectivized surpluses of another kind, i.e., funds of insurance companies and similar institutions...

...On the whole this tax-diverted part of the surplus tends to be spent upon current consumption, usually by way of either social services or defense...

...The level which is achieved becomes a matter of social preference...

...Even the simplest peasant knows the necessity of putting aside the seed corn.t • By "incomes" I mean in this context the actual amounts which the rich do in fact, by one means or another, retain after tax...

...Till communities are "over the hump" the process of capital accumulation is both imperative—if appreciable progress is to be made—and at the same time extremely painful for the population...

...Clark points out that in future non-material forms of development, such as qualitatively superb educational facilities, may be more important than new material equipment...

...It may produce, instead, chronic mass unemployment...

...The article is taken from a chapter called "Accumulation, Democracy and Equality," from Mr...

...Once, however, the initial hump of industrialization has been surmounted a very different situation arises...

...This, however, presupposes a way of making sure that the extra accumulation thus effected actually would be used, i.e., invested...

...t An additional reason why the problem may not prove as intractable as had been supposed has recently been advanced...

...But, as we have seen, the degree of inequality has now been somewhat mitigated, on balance, by the pressure of the wage earners acting through democratic institutions...

...If these figures were really comparable in their method of calculation they would be much higher than either the current British or American rate...

...Increasingly they themselves use a part of their surpluses for developing their own means of production...

...In the Communist world Russia (and perhaps Eastern Germany and Czechoslovakia) alone has even approached it...

...Strachey's new book, published this fall, Contemporary Capitalism...

...This is undoubtedly a sound view, so long as it is realized that income from inherited property is merely the most scandalous case of the general scandal of the private appropriation of the socially produced surplus by means of private property in the means of production...

...But we must not lose sight of the other side of the picture...

...This must mean, unless circumstances are especially favorable, an initial fall in that standard.* It would be asking much of an electorate to ask it to vote itself such a fall in its own, by hypothesis, meager standards of life, however much the economists were to prove that this was the only way to raise those standards, at any speed, in the long run...

...And if at first hearing these seem but weak motives compared to real, old-fashioned self-enrichment, the answer must be that they have not proved so...

...Moreover, since their motive is the acquisition of prestige and power, rather than wealth, their motive for expansion is an unlimited one...

...But I am informed that there may be certain offsets...

...It showed that in the years 1945 to 1952, ICI had invested in new productive equipment, stock, etc., £213 million...

...but Russia may now (1956) be nearly over...

...they accumulate in order to be the directors of a concern of the first rather than the second magnitude...

...It is now suggested that really advanced in Evidence that this is so is provided by the example of Sweden...

...it need never mean an arrest of that rise or an initial fall...

...Of this sum $23 billion went in corporate taxes, $10 billion was held back by the corporations as undistributed profits and presumably reinvested, leaving only $10 billion to be distributed to individual shareholders...

...Conversely, the lower the rate of accumulation, the more of our products we shall be able to consume now, but the slower we shall enlarge our productive capacity...

...It will be extremely interesting to see whether or not Russia begins to develop democratic institutions if and when she comes down the developed side...

...This semi-collectivized process of accumulation on the part of the great corporations may well become an even more important factor than the pooling of surpluses in the national budget by means of taxation...

...The manhours of labor necessary to build the initial, basic industrial equipment of the country in question must be diverted somehow from the task of providing the existing supply of consumers' goods and services...

...Or again, we can take a much more general illustration from America...

...Whatever the objects of expenditure, it will, surely, be necessary to divert resources which could have been used for immediate consumption, if rapid development is to be achieved...

...This is a convenient view...

...It can be, and in Britain recently on occasions has been, used, directly or indirectly, for accumulation, i.e., it has been used to add to the community's stock of productive resources...

...Let us say, purely for the sake of argument, that the rich are receiving (net) 10% of the gross national product by way of prop * These differentials in earned income are much higher in Russia than in Britain...

...In other words, at any given level of national productivity, what in the main determines the national standard of life is not whether accumulation takes the form of private property or a social fund, but whether the rate of accumulation is set high or low...

...Thomas Balogh—the concept that there is a "hump" in the process of the industrialization and general modernization of a community, a "hump" which it is arduous and painful in the extreme to surmount...

...They accumulate for fear that their corporation will lag behind in the race for technical improvement, and may thus ultimately be swallowed up by a rival...

...It is suggested that technical progress is now being carried forward by means of discoveries and developments which save capital, per unit of product, quite as much as they save labor, so that we need worry our heads much less than had been supposed about this whole matter of setting aside resources for accumulation...

...t Thus the differentials in earned income in contemporary Britain may well be on the low, rather than on the high, side...

...But a more important question is this: how much does it matter in the minds and hearts of the Western wage earners themselves...