British Labor's New Look at Industry
HEALEY, DENIS
Policy statement recognizes that nationalization is no cure- all British Labors New Look at Industry By Denis Healey London In its latest pair of policy statements, the National Executive...
...Inside the Labor party the struggle between Left and Right, between conservatives and revisionists, can continue over the interpretation of the statement...
...The policy of these companies is determined not by their owners but by their managers...
...The new policy statement, "Industry and the Nation," however, does just this, though it is accompanied by another statement which is mainly concerned to justify the records of the industries which have already been nationalized...
...Industrial power in every large developed economy now rests with a managerial class which is responsible to no one...
...The problem has divided the ruling clique in the Soviet Communist party as bitterly as it has divided Conservatives and Labor in Britain...
...The form of ownership is irrelevant...
...The Tory party can simultaneously make jokes about "Socialists on the Stock Exchange" and affect to see a cunning plot to introduce wholesale nationalization by the back door...
...Its platform in the 1955 election gave prominence to only one measure of nationalization—the integration of the remaining private water companies into what is already almost entirely a public service...
...But both the British parties still present their policies in terms of an industrial structure which has long since disappeared...
...There are obvious political dangers in this ambiguity...
...Nevertheless, in its first period of real power, from 1945 to 1950, the Labor party did take 20 per cent of British industry into public ownership, by nationalizing the basic industries of coal, steel, electricity and road, rail and air transport, not to speak of the Bank of England...
...This would, of course, lead to the state owning a controlling interest in many firms...
...The Labor party's document at least states the problem intelligibly and emphasizes its importance...
...Moreover, as the general pace of industrial expansion quickens through state-maintained full employment, share values rise steadily and automatically, so that in Britain equity shareholders can expect about ?650 million a year in capital gains...
...Experience in Britain as well as less favored countries has already cast doubt on the assumption that the state can always be relied on to represent the people...
...And no particular industries are named for nationalization at present...
...In the 1951 campaign it promised to nationalize sugar and cement, but after it lost the election allowed this pledge to be forgotten...
...Though it contributes little in itself toward a solution, it gives the green light to those who may contribute more...
...Industry and the Nation," however, is mainly concerned to undermine the other assumption on which the doctrinaire theorem is based— the belief that private industry is run exclusively for the selfish profit of those who own it...
...The state has now assumed the main responsibility for preventing a slump in which general share values would collapse...
...The main theme of the Labor party's new statement is summarized in a quotation it uses from A. A. Berle: "The capital is there, and so is capitalism...
...When the Conservatives took office, they left most of these industries in public hands, denationalizing only the profitable steel firms and long-distance road haulage...
...Industry and Society" does not, however, offer a prescription which is fully worthy of its analysis...
...The managers obtain capital for expansion by retaining profits rather than by going in to the market...
...Recent American studies like Tht Organization Man have shown that it creates social and psychological dangers no less formidable than the political and economic difficulties on which attention is mainly concentrated at present...
...It is only in the last few years that Labor writers like Anthony Crosland, Roy Jenkins and John Strachey have adapted to the British political scene the work of Americans like Joseph Schumpeter, John Kenneth Gal-braith, James Burnham and Peter Drucker...
...Forty years ago, when the Labor party was reorganized to replace the Liberals as the second major British party, it was committed by its written constitution to achieve "the common ownership of the means of production, distribution and exchange" —an aim which even the Communist states are far from having attained as yet...
...This picture has long been familiar to economists, particularly in the United States...
...But rumors that it intended to nationalize the great industrial combine of Imperial Chemical Industries cost it many votes in the areas which depend on ICI for their living...
...The doctrinaire case for nationalization was based on the argument that, since private capitalists were bound to run the industries they owned purely for selfish profit, the public interest could be served only if the state, representing the people, replaced the capitalists as the owners of industry...
...On the other hand, the statement does envisage the nationalization of further industries by the traditional methods—but only after a public inquiry has proved its necessity in each case...
...It is mainly concerned to argue that, since the private investor no longer plays a productive economic role, the state should allow the people to share in his unearned income by taxing capital gains, by accepting private shareholdings in payment of death duties, and by itself investing in equities...
...The big investors tend to spread their holdings so widely that they are unlikely to be seriously affected by fluctuations in one particular industry...
...Insofar as they do use the market, they rely mainly not on the individual investor but on large financial institutions like insurance companies and pension funds...
...The private sector of the British economy is now dominated by 500 companies which are so large that no single capitalist can own a decisive share in them...
...For example, in 1950 it committed itself to nationalize the big insurance companies, then took fright when the powerful cooperative movement opposed this, and finally dropped the idea altogether...
...Indeed, the Labor party's constitutional commitment to total nationalization of the British economy appears nowadays only in the election propaganda of the Conservatives...
...The Economist has described the new statement as "The Mouse with a Leer...
...It could lose heavily if its programs appeared to be inspired by doctrinaire considerations rather than a pragmatic concern for the welfare and interests of the ordinary man...
...To take an extreme example, a 1 per cent holding in Shell Oil would have a market value of over ?5 million ($14 million...
...It presents the central problem in a form which will ultimately compel the Labor party to tackle it...
...The waning factor is the capitalist...
...But the statement explicitly rules out state interference in the management of such industries—such an extension of public ownership is justified, not, like nationalization, by the possibility of economic control, but by the wider distribution of property it involves...
...Another aspect of this industrial revolution is that the risk element in private investment is steadily declining...
...If it is accepted by the Labor party conference in September, "Industry and the Nation" will mark a definitive break, not only with the rigid commitment to nationalization as the main instrument of a socialist economic policy, but more important still, with the outmoded Marxian concept of capitalism under which nationalization was found to assume this importance...
...State control over nationalized industries is as difficult as shareholder control over private firms...
...In Britain, as in America, the structure of industry has changed fundamentally in the last fifty years...
...Though all Britain's nationalized industries have a better economic record under public ownership than private—and in the case of coal mining and civil aviation at least, better than comparable private industries in other countries—some of them have conspicuously failed to achieve satisfactory relations with the consuming public as a whole or with their own workers...
...A future Labor government would have a free hand to decide how much or how little it attempted to nationalize...
...But until now the Labor leaders have never dared to call down the wrath of their militants by challenging in principle the central role of nationalization as a socialist technique...
...Policy statement recognizes that nationalization is no cure- all British Labors New Look at Industry By Denis Healey London In its latest pair of policy statements, the National Executive Committee of the British Labor party has grasped the most dangerous nettle involved in its revision of the old orthodoxy—the role of nationalization as an instrument of socialist policy...
...Apart from agreeing to restore these industries once more to public ownership, the Labor party has had great difficulty in deciding what part, if any, nationalization should play in its next program of legislation...
...The fact is that nationalization is not popular with the average voter...
...Now that the Labor party's National Executive has given its imprimatur to this new description of contemporary capitalism, the stage is at last set for an attack on the real problems of the modern world...
...Certainly the Labor party must now justify any particular proposal for nationalization by showing that it is economically necessary on its merits...
...But, whatever the weaknesses of the policy proposed, the statement has immense importance in establishing a realistic picture of modern industry to replace the orthodox mythology of the past...
Vol. 40 • August 1957 • No. 33
