How to Make Collectivism democratic

...snd theoretically has an advantage over it T.V.A.'s appropriations must be approved by Congress which periodically throws the authority into the political arena, as the experience of the last ten years has shown...

...are men in charge of inditttriet...

...Threatened with insolvency, the necessity of earning its standard rate became London Transport's main concern and the chief advantage of the public over the private corporation was lost This redounded less to the public's disadvantage than the workers...

...In general, nmilar to head» of WPB, OPA, FEA, etc.— Ed...

...An independent and objective approach is more desirable to assure operation in the public interest—including that of th* consumer and worker...

...Neither Minster accepts responsibility for other than matters of general policy, so administratively each enjoys a very arge measure of autonomy...

...it believes thst the public, ss opposed to the privste, corporation provides the answer...

...London Transport stock was submitted for the stock of the acquired undertakings...

...Lalior, concerned for full employment after the war, thinks the vested interests hsve plsyed their parts so badly in the past that they would be miscast in such a role...

...In the case of fixed interest bearing stock the terms of acquisition offered no difficulty as did determination of compensation on capital stock...

...Thus the Central Electricity Board was established to build snd operste the "grid" system, trunk transmission lines, to set as the wholesaler and carrier of electricity to assure a statewide service...

...This lesson has been learnt and it is probable that future transfers will provide compensation on a different basis...

...The industrialists' play would be a plagiarism of the corporate state...

...The rate of interest paid on public corporation stock should normally be less than that paid on the stock of the private corporations acquired...

...If Labor is to "Save Its way, it will have to provide machinery for control which avoids an excess of bureaucracy on the one hand*) and leaves scope for initiative and enterprise on the other...

...Both were free from direct Treasury control, and the (wards were only indirectly responsible to the central government, which appointed them, through the respective Ministers, the Minister of Transport in the one case and the Postmaster General in the other...

...Such a general leveling down of interest rates would automatically reduce the burden of interest...

...parts company with Britain's concept of the public corporation...

...This was the main innovation of the London Passenger Transport Board...

...Similarly, Congress exercises a certain measure of control through its investigatory powers and its control of finance...

...As it turned out, compensation given placed on the board t burden of earnings at so high a level that the board was handicapped from the beginning, and one main advantage of transfer from private to public ownership the relegating of finance below service, was largely u»t, Financial independence Is one of tke chief ways in which bureaucratic control can be avoided...

...Te prevent this, compensation on acquisition needs te be so fixed as to assure that the capital structure is oni well within the capacity of the industry to bear...

...The community has priority over the stockholder...

...It is highly desirable that a publicly-owned service or industry should be self-supporting, but if it is handicapped with too heavy an interest burden the maintenance of earnings will be its main consideration...

...The charges of the former were estimated st cost, cost including interest on bonded indebtedness...

...la other words, those who held economic power in Hltain before the war...

...In neither case was a new principle in public ownership involved, neither administratively nor financially...

...Labor's a new democratic and social piece...

...The public corporation it th* sceepted form for operation of public services snd industry ss they pass from private to public ownership and operation...

...In this way was Britain's post office operated...

...A Tribunal was appointed for the purpose and the value fixed represented a number of years purchase of the annual income derived from coal royalties...

...The interest burden was m heavy that the standard rate on that portion of iti capital given in exchange for its equity stock was not earned, snd, theoretically, the holders of this stock had the right to apply to the courts for the appointment of s receiver...

...ANOTHER fault of London Transport was the constitution of the Board and lack of worker or consumer participation in management...

...It wss the proposals for the London Psssenger Trsnsport ."loard, introduced by Herbert Morrison, ns Minister of Transport in the second Labor Government, from which the present concept of the ..public corporation evolved...

...The basis proposal by Herbert Morrison waa net maintainable revenue apt this waa not carried through in its entirety...

...When the Board was created considerable debate took place at Lar*>r conferences on workers' control...

...The B.B.C...

...Here the T.V.A...

...If eompensstion is sgreed on a fair basis this would always be the case as no owner is entitled to greater compensation that his holding is worth, snd his holding is worth.no more then the industry can earn in the future...

...Discussion on the public corporation has since revolved around this body snd all major proposals for the transfer of industry to public ownership have since been based, in general but not m detail, on this model...

...It also relieves the government of responsibility from determining the equivalent value of •quity stock, because only one class of stock need be created and its pro rata distribution among stockholders can be left to the acquired concerns themselves...

...Itemises supervision of expeadituro destroys ¦exibility tad ialtiative, which is tke main advantage private claims over public enterprise...

...This was sn inherent weakness in the financial structure of the Board which is unlikely to be repeated on the formation of further public corporations...

...Determination of compensation in this way should reduce compensation payable—by a fairer assessment of vtlue, lower interest payable on public than private corporation stock, and lower still if government guaranteed—and the maintenance of revenue or financial considerationa would loom less large and leave the corporation fro* to operate as a public concern in the public interest...

...Reaction against governmental restriction end control follows and if Labor is to increase governmental control it must meet this objection...

...Where Tressnry control exists detailed budgets must be prepared, departure from which is impossible wittiest sabs*nneat application to tke Treasury...

...But both were created in connection with developing services and the capital involved in acquiring existing concerns was negligible in comparison to future development...

...Unfortunately, this procedure was not followed in the case of London Transport with the result that the interest burden was as great aft" as before its inauguration on July 1, 1933...

...The public corporation ia self-supporting, it is a financially independent unit...

...But continuity of management from the private combine, which controlled the major section of London's Transport, and the new corporation, resulted in continuity of policy and similarity of approach to problems as they arose...

...The London Passenger Trsnsport Board wss crested for the purpose of taking over snd operating a well established service snd constituted s major transfer from private to public enterprise...

...One of the main reasons why the public corporation is the most favored form for public ownership is its freedom from financial control by the central government...

...The public corporation operating as a public concern, combines managerial responsibility with public accountability...

...To some extent this is desirable but it would be preferable that the chairman of a public corporation should not be the previous chairman of the combine or one of the larger units acquired...

...While in other cases previous income ntsj not be so easily ascertainable, determination of s gloW sum for distribution as compensation has definite advantage over substitution of public corporation stock for stock of the acquired concerns, creation of public corporation stoc kfor the amount of the global predetermines the interest burden and prevents over coni-pensstion...

...How to Make Collectivism democratic By Ernest Davies THE PUBLIC CORPORATION IN Britain the necessity for the continuance of economic planning after the war has been generally accepted, and difference of opinion arises only over its nature and iu extent...

...Charges huve to be fixed to cover cost, which include interest on bonded indebtedness, including capital, given as compensation to acquired concerns...

...realising there can be* no eomole'c return te the states ana and that the national economy will reejaire a measure of planning and awsre thst the rent of the community will demand sn increasingly Inrge shsre of the national income, sre offering both te drew the plan* snd rsrry them eat...

...The procedure followed in the State's acquisition of coal royalties might offer a fairer basis of assessment of value...

...The controller...

...TlIE public corporation hus supplanted the former concept of nationalization as the accepted form of public ownership, because by minimizing control by the central government, it allows for the maximum freedom of alteration, but at the same time enables i's operation as a public service in the community interest, as opposed to operation for private profit for the shareholders' benefit...

...In yds respect it differs from T.V.A...

...Existing boards have prepared the way, and if the lessons sre well learnt from experience to date, particularly as regards compensation and msnsgement, they will play an important part in the postwar reconstruction of Britain For the present, public corporations constitute the most satisfactory mode for the operation of publicly-owned undertakings combining financial independence with managerial responsibility and with public accountability...

...Between the wars, this theory was abandoned in favor of public corporations, the first two of which, typically enough, were established by Conservative governments, namely the Central Electricity Board snd the British Broadcasting Corporation...

...Administration re<ls with a salaried board appointed by the gov-ernmtmt and responsible to it, but the board is left free to operate the industry without interference in day to dry administration from the Minister to whom it is responsible...

...In the circumstances the Board deserves the greatest credit for T.V.A.'s spectacular success and its "remarkable freedom from political jobbery...

...The straggle revolves amend »he is se be responsible for drawing and administering try plan, who are to bo the controllers' sad...

...above all, who will control the controller...

...SlX years' experience of operation, before wartime control was exercised, revealed London Transport's serious financial weakness...

...but less financial control and greater freedom from Congressional interference might hsve been to its silvan, tsge...

...This wss the reason given by the Board for rejection of the workers' demands during the 1937 bus strike...

...the lstter wss financed by the uniform license fee of 10 shillings, or two snd s half dollars, paid by all radio set owners...

...But the Minister declines to reply to matters other than general policy...

...Worse still for T.V.A., the successful claim of the Comptroller General for the right to audit T.V.A.'s accounts hss limited the authority's financial freedom...

...The policy decided was that worker representation qua worker was undesirable...

...This form of public control may therefore he destined to play s most important role in post-war development in Britsin...

...Further, it facilitates a government guarantee of interest, if found desirable, to free the corporation from financial worry...

...It was to enable tke board to be ss flexible snd as free from government interference ss private enterprise which conditioned the ¦¦snrial snd ndministrntive pattern of the pse-lie corporation...

...wus given a monopoly of broadcasting in sn early stage of its development...

...If too heavy a burden is imposed on the public corporation compensation has been too high...

...It the mines and the railways, the public utilities snd major industries, the public ownership of which is included in the program of the Labor Party, are to be nationalised in the next decade the manner of transfer and subsequent organization Is likely to involve the setting tip of public corporations...

...The former benefited from coordination of transport facilities but certain improvements in working conditions were refused on financial grounds...

...The Minister snswers for it in Parliament where opportunity for general debate on its policy is provide when the annual appropriation for the Minis-t try is voted...

...with its multi-purpose construction program is not comparable with ¦ public corporation which acquires a going concern...

...service over profit Before World War I the general socialist theory for transition from private to public ownership was the direct purchase of services or Industries by the state and subsequent operation by a government department under the appropriate Minister, directly responsible to Parliament...

...Admittedly the developing T.V.A...

...It was to be a self-supporting financial entity, which included responsibility for earning interest payable on its capital given as compensation to stockholders and municipalities from whom the various transport concerns were acquired to be coordinated into one system by London Transport...

...Apart from this general argument there is every reason for the reduction of the interest burden inasmuch aa the stock of a public corporation—because it is • public concern with public accountability — carriei greater security than that of a private corporation, especially when, on the formation of the public corport-tion, a public monopoly replaces competing private corporations...

...In these respects the Tennessee Valley Authority resembles a public corporation, operated as it is by a board enjoying managerial independence but being accountable to the Chief Executive, whose right to remove members of the board was proved in the case of its first chairman...

...the Labor movement prefers the state to do the planning and the community to execute the plans...

...War inevitably increases the one though not necessarily at the expense of the other...

...Note...

...Maneuvers hsve started for position, with the industrialists drawing their plans and giving themselves control, not only esst-fn- themselves for the mala role bat also undertaking te act as producer, stage manager and prompter aa well...

...TliE msiu characteristic of the public corporation is its tinsneisl snd administrative autonomy...