Socialist Studies Socialist Studies

Socialist Party of Great Britain - Camden and North West London Branches SPGB Lectures - (13.11.86).

Held at Marchmont Community Centre, Marchmont Street, Camden, London

Lecture 2 - Nationalisation and Privatisation

Chair Comrade D. Davies

Speaker Comrade Hardy

Mr Chairman and Comrades and Friends,

At the forthcoming General Election in about a year’s time, among the other things the electors are going to be asked is whether they approve or disapprove of the Thatcher Government’s action in privatising, as they call it, nationalised industries; that is selling them back to private companies to operate at a profit.

The Tories will say that privatising these industries will be good for everybody while the Labour Party will reply that it is bad for everybody. This is, of course, an example of the loose way politicians talk, because almost all the policies that governments ever enact are good for some sections of the population, and bad for some other sections; that is the capitalist class who own the means of production.

And there are always people in society, the majority working class, for whom it doesn’t make the slightest difference whether Government policy happens to take place or not. Well, we’re going to answer this question in relation to nationalisation and privatisation. Is privatisation or that matter nationalisation of any interest to the working class?

The Labour Party, as you all know, talks of nationalisation as a special hallmark of their Party although this is quite untrue. The Liberal and Tory Governments were nationalising particular industries long before the Labour Party was formed in 1906.

The present Tory Government has denationalised the Telephones but who nationalised the Telephones in the first place? It was the Tories who started this process and the Liberals who finished it off and they both accepted nationalisation as the normal practice for something like half a century.

The same applies to other Tory and Liberal Governments in the past. They nationalised some industries to achieve a particular object, in other words, they were behaving rationally and as politicians with certain responsibilities for running capitalism.

Now, the Tories have decided that the policy objective they wanted to achieve by nationalisation in the 19th century no longer serves their purpose because they can get the same objective in a different way.

The only political party in this country that has never advocated nationalisation or supported nationalisation or defended nationalisation is The Socialist Party of Great Britain, and likewise, of course, we’ve have never advocated, defended or supported private enterprise. Our object is for a working class majority to consciously and politically to get rid of Capitalism and establish Socialism not to play about with ways in which capitalism can be operated.

First, a word or two about what nationalisation means in practice.

An industry or service is said to be nationalised when it’s taken out of the hands of private owners and is owned and operated by the government either directly, as through a government department, or indirectly through setting up a public board like British Rail or The Coal Board and having them running the industry on behalf of the government.

In the 19th century the Postal, Telegraph and Telephone services were operated by the Post Office as a government department. It passed under the control of the civil servants and they were just like any other government department but with certain differences. Later nationalisation took the form of what they called Public Boards, as when the Labour Government in 1945 took over Coal, Fuels, Railways and various other industries.

The theory about these nationalised boards is that the Government provides the finance, say, of the Coal Board or British rail, and exercised some control. But the day to day operation of the Coal Board and the Railways and the seat of industry are supposed to be left in the hands of the members of the board itself. But the Government, of course, appoints the members of the board and can remove them any time they want. Usually, they appoint them for three years and then replace them with someone else.

Now the same kind of organisation exists when local authorities operate commercial services, such as the water supply, bus services and council houses. There is one municipality in this country, Hull, which also operates the telephone service by license from the Post Office/British Telecom, that’s the City of Hull Corporation.

I now want to turn your attention to the Fabian Society an organisation who was founded back in 1884. They were instrumental in the formation of the Labour Party to whom they later affiliated and provided a lot of the theory which underpinned the policy of Labour governments. It was the Sydney Webb, for example who wrote the 1918 Labour Party constitution and its Clause 4 which called for nationalization or state capitalism.

Sidney Webb used the term “common ownership” but it has no resemblance to the meaning ascribed to it by The Socialist Party of Great Britain.

The view of The Socialist Party of Great Britain is that:

Common ownership implies the absence of ownership and we specify that this common ownership is to apply to the means and instruments for producing and distributing wealth” (SOCIALIST PRINCIPLES EXPLAINED p. 8).

The difference between the Socialist object of the SPGB and the state capitalist object of the Labour Party can be seen in an article written by Webb in the Observer in 1917.

Webb stated that “common ownership” was an umbrella under which a range of options:

…from the co-operative store to the nationalised railway, and whatever forms of popular administration and control of industry, from national guilds to ministries of employment and municipal management, may, in particular cases commend themselves”.

The Fabians had a long history of advocating nationalisation. The Fabians published FABIAN ESSAYS in 1889 and they held out the prospect that the local authorities would take over a whole range of services and run them in competition with private industry.

Well, that expectation has not been fulfilled. And, as I say, the kind of operations run by local authorities has been fairly narrowly restricted although as far as central government itself is concerned there has been a whole lot of nationalisation of key areas of industry.

I have mentioned some of the commercial industries and services; coal, railways and steel that have been nationalised, but there are a lot of other fields, which in the past 150 years, the government has taken over but has formally been carried on by private individuals. Here, I have in mind, the health service, the education service, the turnpike roads, unemployment benefits and old-age-pensions.

At one time the education people received they either had to make provision for themselves or they went to the Church Charity schools or they got no education at all. For health they paid doctors or hospitals, so the hospitals were largely dependant also on donations given to them by the public.

Although the government took over road building part of the provision for trunk roads was in the hands of private companies. They were called the turnpike trust. The trust would be made up of a group of capitalists who would get together set up a turnpike trust, take over the building of some miles of road, and they got their profit by charging users, that is tolls for being on their roads and using them.

As for workers who became unemployed, they either had to depend on their own savings, or on what benefits that they might have got, to having contributed to Trade Unions and unemployment benefits, or to the Friendly Societies, or in the last resort they depended on charity or went into the workhouses. Likewise when workers became too old to work they had again to depend on their savings or any pensions they may have paid for in the Trade Unions or the Friendly Societies, or again to depend on charity. Now these arrangements have all been taken over by the government or by local authorities and the cost have been enormous.

I mentioned last time I was speaking here, that in 1886, the expenditure of the government in the year was £92 million, and in this current year it is £128, 000 million. When you make allowance for the fact that prices are nearly forty times what they were in 1886 the cost of government has multiplied 35 times, compared what it was a 100 years ago and the reason is the government has taken over all these functions, health, education, unemployment pay, old-age-pensions and so on.

When you have tried to examine the arguments about nationalisation, that is, either the kind of arguments the Labour Party would put up in favour of nationalisation or the others would put up against nationalisation, you may find it full of confusion. And the confusion is that whilst governments may act quite rationally and nationalise an industry for a real sound sort of purpose in line with either the general or particular interests of the capitalist class, in the political field they all talk very loosely about their real intentions.

The one difference though, between the Labour Party and the other capitalist parties is that the Labour Party didn’t only advocate nationalisation for a particular purpose but they made a principle of it.

They said:

look we are totally in favour of all nationalisation”.

The Tory party then retorted and said:

We’re against nationalisation

And of course it’s created an enormous amount of confusion. For example, the present Winston Churchill, a member of parliament, wrote a letter to THE TIMES not long ago, saying that the Tory Party was opposed to nationalisation, because nationalisation was “Socialism” which of course it wasn’t. But he had forgotten the activities of his grandfather, Sir Winston Churchill, who was a very active nationaliser and often carried on campaigning for nationalization for reasons beneficial to capitalism.

It was, for example, a Tory Government, which in 1844 and I emphasis 1844 not 1946, who passed the first Act of Parliament giving the government power to nationalise the railways. The Act was called a Permissive Act (I’ll deal later with the reasons why the Tory Government should have passed it at that time a little later in the lecture).

And then you have Churchill and Lloyd George, when, just after the First World War they carry on a campaign for nationalising the railways. Their idea was to run the railways at cost as a sort of subsidy for British manufacturers and exporters.

And it was Sir Winston Churchill who, a few years later, in 1943, gave a radio broadcast, (this was in the middle of the war), in which he said: “There is a broadening field for State Ownership and enterprise,” obviously intending, had the Tory Government won the election in 1945 that the Tory Government would itself have gone in for some nationalisation, probably coalmines. I will come back to that later.

And it was another leading Tory politician, Lord Beaverbrook, who in his EXPRESS newspapers for years carried on a campaign for nationalising the Bank of England, which eventually the Labour Party did in 1945.

It was Lloyd George, a Liberal, who, when he was Prime Minister after the First World War made the statement that his government had decided to nationalise the coalmines. Not long afterwards the Liberals got rid of him and they never did in fact carry through that promise by Lloyd George.

Now, I said the Labour Party had made a principle, of nationalisation. They said: “we’re in favour of nationalisation anyway”.

But if you look at the Labour Party statement you will find they are equally confusing.

For example, as soon as Philip Snowden became Chancellor of the Exchequer in a Labour Government he defended the Labour Party advocating nationalisation on the grounds that they were doing no more than the Liberal Party would find acceptable.

And although the Labour Party claimed that the nationalised Post Office was a form of “Socialism” the man who became first Prime Minister of the Labour Government, Clement Attlee, who had himself been Post Master General, wrote an article in a magazine in 1931, describing the Post Office, and I quote, “as the outstanding example of collective capitalism”.

And it was Herbert Morrison, later deputy leader of the Labour Party, who, in 1929 introduced a Bill nationalising London Passenger Transport Service. The Labour Government was thrown-out of office before they finished enacting the Bill but the Tories finished off passing the legislation. So you had the Labour Government starting a nationalisation policy and the Tories finishing it off.

An interesting point to make about Morrison was that a few years earlier he wrote about this same port of London Authority which he had accepted as the model for the London Passenger Transport Board and described it as, and I quote:

A sort of Capitalist Soviet and thoroughly objectionable from the Labour point of view.”

Just to finish this round of muddled statements its worth while bringing into the picture, Lenin the leader of the Russian Communist Party.

Bismarck, in Germany in the 1870s was responsible for nationalising a lot of German industry, partly for military reasons, and one of them was the Post Office. Karl Marx’s colleague, Frederick Engels writing about it said it was deplorable that misguided German Social Democrats should have welcomed this policy for what Engels described as a sort of “spurious Socialism”.

Engels said if nationalisation is socialism then we ought to say that the founders of the Socialist movement were Napoleon and Metternich

This is what Engels said:

But since Bismarck became keen on nationalizing, a certain spurious socialism has recently made its appearance -- here and there even degenerating into a kind of flunkeyism -- which without more ado declares all nationalization, even the Bismarckian kind, to be socialistic. To be sure, if the nationa¬lization of the tobacco trade were socialistic, Napoleon and Metternich would rank among the founders of socialism (ANTI DUHRING p.359 Foreign Language 1976).

And as an amusing aside he said:

are we to suppose the Prussian Government State brothels are socialism too?

That was Engels’s answer to them.

But, now look what Lenin said. Lenin writing about it in his STATE AND REVOLUTION made a foolish statement and I quote:

A weakened Social Democrat of the seventies of the last century, called the postal services, an example of the socialist economic system” (p 61 Foreign Language Press 1970).

This was Bismarck’s Post Office which Engels had derided in ANTI-DUHRING and in the pamphlet SOCIALISM: UTOPIAN AND SCIENTIFIC as a “spurious socialism”.

All the political parties have all created their own confusion as to what exactly they mean by nationalisation even when they either advocate it or oppose it. They’ve all got themselves into a shocking muddle.

The Tories are now set on a course of denationalising the nationalised industries. The Labour Party still wants more nationalisation, but they’ve watered it down and given it a new name; they now call it “social ownership” and the Liberal Social Democratic Party Alliance, so far as I can discover, are still sitting on the fence, as they were at the last election. They say: “Look we don’t want any more nationalisation, but we also don’t want to de-nationalise anything”. So for the time being the Liberal - S.D.P. Alliance can’t really be held responsible for anything.

But, now, getting it all into perspective look at the record of the parties with relation to the postal service. The Postal Service was nationalised in the 18th century and continued all through the 19th century up to this century by both Liberal and Tory governments.

The Post Office Savings Bank was started by the Liberals in 1841. I have already mentioned the railway nationalisation act of 1844 by a Tory government. The Telegraphs were nationalised in 1868 and 1869, the Tory government started the legislation, and the Liberals Government finished it off.

In 1871 a Liberal Government gave the Government power to take over the railways in time of war. In 1889, the Tories nationalised the cross channel cables and added them to the Post Office.

The Telephones were nationalised between 1880 and 1912, the Tories made the first move, the Liberals carried on, they both accepted the need to nationalise and they both were responsible for it.

The Port of London Authority was nationalised in 1908 under a Liberal Government. Central Electricity Board was nationalised in 1926 under the Baldwin Tory Government. The next year the BBC was nationalised again by a Tory Government under Baldwin. London Passenger Transport Board was nationalised by Labour and the Tories finished it. British Overseas Airways Corporation was nationalised in 1939 by a Tory Government under Chamberlain.

And coming right up to date, when Rolls Royce went bust in 1974 the Tory Prime Minister, Edward Heath under a Tory Government, nationalised the aero engine section of the former Rolls Royce Company.

In view of this record, you can understand, what Herbert Morrison meant, when in 1944, in the course of a speech to some school boys when he was telling them all about nationalisation, he told them:

More Socialism was done by the Conservative Party which opposed it, than by the Labour Party, which was in favour of it”.

Well, of course translating this into a more truthful proposition, more State-Capitalism was carried out by the Conservative Party which advocated nationalisation, when they wanted it, and were later on going to change their minds about state capitalism, than by the Labour Party, which was in favour of it.

However it should be remembered that, unlike the Tories the Labour Party was always so to speak, in principle, in favour of nationalisation. I will explain later on, why the Tories and Liberals were in favour of nationalisation, at one time, and why they’ve changed their minds.

But just a word about privatisation.

Privitisation is a rather hideous word but people know what it means. However this privatisation by the Thatcher Government isn’t the first time it has occurred.

In 1928 the Post Office, Wireless, Beam wireless Telegraph service, which they had rented from Marconi, was so successful, it was so much cheaper, that it was undercutting the Private Cable companies, and driving them out of business. And to save the cable companies from bankruptcy, the Tory Government, denationalised the Beam Telegraph Service. It was the UK receiving station for Marconi's UK-to-Canada Beam Wireless Service, the first transoceanic shortwave wireless telegraph service in the world.

In other words, they handed it over from the Post Office to a private company, the Cable and Wireless merger, for the purpose of saving the cable companies from being driven out of business. And after the Labour Government nationalised Iron and Steel in 1946, the next Tory Government denationalised it and then when the Labour Government came back in, in 1965, they nationalised it again. So, you’ve had some denationalising as well as nationalisation which has gone on before.

Back in the 1930’s a rather rash assistant Post Master General, a Tory, made a speech in which he advocated that the Telephone Service should either be put under a board, or alternatively should be denationalised and handed over to a private company. Nothing was done about it They set up a committee of enquiry, which recommended various things, but they recommended against doing that.

It’s also interesting to notice this; naturally, reading English newspapers you may get the impression that privatisation is a peculiarly English custom but, it isn’t that at all.

When the Mitterrand Government came to power in France they nationalised a lot of banks and insurance companies. The President was not defeated but the government was changed. They got a Tory Government in, and the present Tory Government in France is now de-nationalising the banks and insurance companies that were nationalised a few years earlier.

In Austria the government has told nationalised industries, that if they don’t stop making big losses, they will be denationalised.

In Japan the Postal Service has already been de-nationalised and handed over to a private company and they are now in the process of de-nationalising the Japanese State Railways.

The Turkish Government is privatising the nationalised banks in Turkey.

In Portugal in 1975, they nationalised more than half of Portuguese industry. The government now wants to denationalise it but finds that there are obstacles in the Portuguese Constitution and they’re now busy in altering the Constitution so that they can de-nationalise them again.

And in Germany, the Government policy is to denationalise some State industries but so far, they’ve made no progress. Of course they’ve met some opposition even inside their own party and in the nationalised industries themselves.

There is also the US. In the US, in 1975, half a dozen railway companies went bankrupt and the government had to step in and take them over, to keep the railways running. They are now trying to sell them back to the private sector, but, so far, they have been unable to get anyone to offer them the price that they think acceptable, but presumably, they will continue with this, and they will eventually denationalise these railways.

In all of the cases I have mentioned, in all these countries, the reason has been the same, either, an allegation of inefficiency, or that they’re making big financial losses. And just a last postscript to this trend, British Telecom having been denationalised itself, have set up a department whose job is to go round the world to make a little money by offering other governments, how they can denationalise their telephone services, for which, of course, British Telecom will want to be paid.

One of the reasons why the nationalisation picture is so confused is that the purposes which government’s has nationalised industries have varied from country to country, and from time to time, partly due to different countries having reached different levels of industry and finance.

Take the railways for example. In this country, early in the 19th century, all the factors were present for railways to be set up by companies, with the certainty that they would make profits. In other words, the traffic was there, the traffic was already being carried, on the roads by wheel traffic, and on the canals, but the railways could do it cheaper, and also, there was abundant capital looking for investment in Britain.

So, there was no reason at all, why the government had to step in, the companies stepped in, they set up the railways, and they were enormously profitable, they drove canals and the road transport people out of business but that’s the way things go under capitalism.

But in the US and some continental countries the situation was different, the traffic didn’t exist. For example in the US, particularly owing to the enormous distances to be carried, the traffic, for the railways to carry, was not already in existence and the capital wasn’t there to develop companies to do it.

What had to happen was the government had to step in. The State Governments in the US had to step in, provide the finance and build the railways. The reasoning was that once the railways were built they would then build up traffic for the railways to become profitable. But after a big financial collapse in 1837 the law was altered so that the State Governments in the US could no longer provide finance for the railways. But in the beginning the government had to do it. Later on when the traffic had already begun to develop and plenty of capital was available the US railways were set up by private companies.

Another factor which is always everywhere present, in some degree, about building roads and railways, was the military question. In France, Germany and other continental countries, which were land powers, the military factor was foremost in the building of roads and railways. Not only in constructing them but deciding where they were going to be built.

In other words the Germans wanted railways built where they would be available for the invasion of, for example, France or Russia. They couldn’t just leave it to companies to build railways where they were profitable. So in France and Germany the government took over the roads and railways from the first.

In Britain, a sea power, the military factor in roads and railways was less important, so for a time, as I have already mentioned, the trunk roads in this country were being built by the turnpike trust companies for profit. Later on it was decided they were not developing fast enough, and the government handed over the building of trunk roads in this country to the county councils.

If you take the Telegraph service it was developed in Britain by private companies again, because the traffic was there and there was plenty of capital available to invest in them.

But in France the first Telegraph was built by the army for the use of the army and the public weren’t even allowed to use them. It took years, before the government would let the public use the French army telegraph service.

And also, in later years, a lot of industrially backward countries, for the same sort of reasons; lack of capital, and lack of development, have had their governments to step in to build basic industries, the food industry, and the coal industry. These have had to be done by the government because capital wasn’t available and they couldn’t at that time leave it to private companies.

In some of these cases, Turkey’s one of them, the government stepped in and set up these various industries, and at a later stage, the government stepped out and handed them back over to private companies in order that private companies can carry on.

I now want to look a bit more closely at nationalisation in this country. Taking first, the non-commercialised services, the ones I mentioned previously; education, health, unemployment benefits and old-age pensions.

The government took over elementary education because industry and commerce were saying to the government:

look, it’s not good enough for us to have apprentices who learn the techniques of the industries; we want people with a general education in order that British industry can develop”.

And they looked to Germany. Germany had done it already and Germany was making rapid industrial strides overtaking and eventually passing British industry. And as I say, the capitalists here, said to the government:

look, you can’t any longer rely on people having to pay for their education or going to the church charity schools

So they nationalised education in the 1870s, in other words the government took it over entirely. As I say, in Germany they already done it, and the British Government were partly the people who were advocating this policy. They said:

look at Germany, look at what Germany has done, and we need to do the same”.

As regards the health service it was a similar sort of story. The Germans were in first, with this sort of social reform. And both in the First World War and the Second World War the authorities here were appalled to discover the low physical condition of the millions of people they had called up under conscription for the army.

As regards unemployment benefits this also was borrowed from Germany. Germany was first in State schemes to provide doles for the unemployed workers. Of course they had the great advantage and this was one of the reasons behind it that once the government provided unemployment pay they had put an end to the incessant unemployment riots and marches.

You look round, how many of these have taken place now, hardly any. The unemployed, so to speak, have been bought off from rioting and demonstrations by the government’s social reform of unemployment pay for the unemployed.

Another reason, of course is, when the workers got the vote, in the 1860s and 1880s, the Liberal and Tory parties had to compete for workers’ votes. Well, of course it had to be right at the forefront of their campaigning to say eventually that we have to set-up an unemployment scheme, which of course they did, a very comprehensive one.

When the Labour Government came into power in 1945 they did the same with regard to old-age-pensions for people who were too old to work. In 1911 Lloyd George started it, and he reckoned at the time, that it would be cheaper to pay people, I think the amount was ten shillings a week, rather than to have them going into workhouses where they cost a great deal more.

One last point to be said on this subject.

Although the so-called Welfare State, combining health service, sick pay and unemployment pay and so on were introduced by a Labour Government in the 1945 all of these reforms had been agreed during the war by the coalition government of Tories, Labour and Liberals. They had all agreed to these reforms and were all more or less committed to the same sort of policy whether the Tories or the Liberals, or a mixture of them had won the 1945 election, but of course, they didn’t.

When we come to the commercial nationalisation of the Post, Telegraph and Telephones Services, Coal, Steel and so on, the considerations were different. The problem there was the problem of monopoly.

Now Karl Marx pointed out a long time ago that there is a natural tendency for capitalist industries to go in for monopoly. He gave two reasons. First, with the development of machinery, the amount of capital required to run an industry becomes ever greater and greater, so they needed to get together to provide the capital. And second, if a group of capitalists in a particular industry formed together in a monopoly, they could then charge what prices they liked, and make super profits, and that, of course, is what each individual group of capitalists would like to do.

But, if any of them succeed in doing it, the rest of the capitalists are, of course, up in arms about it. The rest of the capitalists do not want to pay through the nose in order to be able to use some monopoly service.

Groups of capitalists therefore, are strongly urging the government all the time to deal with monopolies. Well, there are two possible solutions to the problem of monopoly, one is, to break the monopoly up, is the system the US has have more or less consistently used, the other is to nationalise it, put it under government control, so the government can, although it is a monopoly the government can keep the charges low and maintain certain standards of efficiency and provision of national service and so on.

Well, in the 19th century, the Liberal and Tory governments favoured the nationalisation solution.

As I said in the US, after a lot of attempts, and giving it up and trying again, and so on, the government favoured the anti-trust solution. And you will all of you have read, two or three years ago, following a decision in the US Supreme Courts, the US Government broke up, what was the biggest and richest corporation in the world, the American Telephone and Telegraph Corporation, which had got a monopoly of the US telephone service, that is the line the US has taken.

Well, what’s happened now, having had experience of nationalisation, and finding that a lot of conditions have changed; the Thatcher Government has decided to change its line. They still want to deal with monopoly but they have decided that it’s no use trying to deal with it through nationalisation of industries, so they have turned to the US system. In other words the Tory Government has strengthened the anti-monopoly laws and is hoping to deal with the problem in that particular way.

There is an interesting sideline on this. You will know that Thatcher frequently makes speeches saying she’s in favour of small companies; she wants small capitalists, to try or get going, and try and make a go of it. Well oddly enough, in 1921 it was the deputy leader of the Labour Party, Chandler Cline, who wrote this, he said:

The Labour Party prefers a large number of small capitalists to a small number of large capitalists

In other words this was Mrs. Thatcher’s view. I don’t suppose she read Cline on small capitalists but she or her advisors could have picked this up from the Labour Party of some sixty years ago.

But now, you can see why the Tory and Liberal Governments were in favour of nationalisation in the 19th century. And apart, from the Post, Telegraph and Telephone services, I’ve mentioned, in 1844, a Tory Government passed an act, giving them power to take over the railways.

Well, what had happened was this; the railways had got themselves a monopoly of transport, they had driven the canals out of business and the horse driven vehicles on the roads. They could charge what they liked and they charged high prices. And they did something else that the other capitalists found very infuriating. They would reach an agreement with a favoured customer and they would let this particular customer use the railways at a lower cost than his rivals. For all these reasons capitalists got together and pressed the government and the government passed this act, which, was saying to the railways:

Look, either you mend your ways, or we shall take you over”.

Another interesting thing about this was that it was a Tory government. The minister who carried it through was Gladstone. He was at the Board of Trade. Gladstone started life as a Tory minister and changed over and became leader of the Liberal Party. His rival Disraeli started as a Liberal changed over and became the leader of the Tory Party. It is an old English custom too change sides politically.

As you’ll recall Sir Winston Churchill started in the Tories, became an independent, then a Liberal and then became leader of the Tory Party. These professional politicians carry on in this particular way to suit their own interests or shifting changes in the interests of the capitalist class.

And of course, I’ve already mentioned that in 1921 Lloyd George and Churchill were advocating Nationalisation of the railways so as to run them at cost. It is a form of subsidising British production and British exports.

As regards Telegraph and Telephones both of them were nationalised on the demand of business people, the Chamber of Commerce, and so on. And what they had against the Telegraph and the Telephone companies was this: Telegraph companies or a number of them were in business to make profit, they would therefore, set up their Telegraph offices and their telegraph lines in the places where there was a lot of traffic, around the Stock Exchange, for example, and in Fleet Street for the newspapers.

And later on, the telephone companies did the same. They would concentrate on the towns. No Telephone or Telegraph company wanted to build lines out into the rural wilderness, or the lonelier parts of Scotland and so on. So the business people got together, and they said;

We want a national service and we want the thing to be spread into rural areas, as well as the rest

And it was for these reasons that capitalist pressure was behind the government in nationalising the Telegraph in1868 and Telephones later on.

One interesting thing about this was the Telegraph came first and the law gave the Post Office a monopoly of the Telegraph service. When the Telephone appeared the Post Office took a case to Court and got a High Court to hold that for the purpose of the Act the telephone is a telegraph. The courts agreed that the telephone is a telegraph and the Post Office automatically had a monopoly of the telephone service.

But, of course the real reason behind the Telephone and the Telegraph is this; not only were the Telegraph companies merging together and proposing a monopoly but later on the Telephone companies were merging together and approaching a monopoly in the national telephone service. Capitalists did not want the telegraph or the telephone to have a monopoly and were quite happy to see the government place them in a joint nationalised company.

Now, we’ve come to the present. The Thatcher Government has decided that the old policies no longer work and the way to do it is to use the US anti-trust system. Of course, in the meantime Nationalisation is not the vote winner that it used to be.

There is no doubt whatever that in 1945 when the Labour Party said we’re going to nationalise all of industry it was a vote catcher for them and enabled them to win the election. But people have a lot of experience now of nationalisation and I don’t think many people look at it like that any more.

And I’ll put this to you. In 1920, L. Chiozza Money an economist, who had been a prominent member of the Liberal Party, and joined the Labour Party, wrote a book about nationalisation which was full of examples of Nationalisation all over the world and the claim that they were all making profit and so on.

However in the latter days the outstanding feature of Nationalised services, not only here but in other parts of the world is that they don’t make profits, they make losses. And I put this to you. Is it everybody’s dream now of publishing a book with the title that Chiozza gave to it, he called it, “THE TRIUMPH OF NATIONALISATION”. I don’t think a publisher who would bring out a book like that now, would sell many copies.

But behind the Labour Party’s enthusiasm for Nationalisation was a very interesting but fallacious economic theory that people have paid little attention to it. Karl Marx pointed out that rent of land, industrial profits, and interest on borrowed money are all of them part of surplus value that the capitalists get by the exploitation of the workers. Surplus value, the amount over and above the value produced by workers to meet their wages and salaries is divided in practice into industrial profit, rent on land and interest on capital.

In other words, if you were a factory owner who doesn’t own the land and has to borrow money he doesn’t pocket all the profits he makes. He has to hand over the share to people from whom he borrowed money from, maybe the banks or somebody else and to the landlord if he’s on rented land. But they are all the same; all derived from surplus value from the exploitation of workers.

Now the early Fabian Society, though they were not Marxists, accepted this explanation albeit with some degree of confusion. They said there is no difference between rent, interest and profit, they all the same sort of thing.

But later on Professor Tawney, in a book called the “ACQUISITIVE SOCIETY” (1920) produced a new theory. He said that rent on land, and industrial profits, are quite different from interest. He said that interest on borrowed money is a natural and necessary feature of all forms of society whether capitalist or Socialist.

He wrote:

Capital…should always be got at cost price…it should be paid the lowest interest for which it can be obtained, but should carry no right either to residuary dividends or to the control of industry…

J. R. Macdonald the leader of the Labour Party, who was their first Prime Minister, took over this theory of Tawney; Tawney had a lot of influence in the Labour Party. His book was referred to by Richard Crossman as “his Socialist bible”.

Anyway, Macdonald accepted Tawny’s theory. Here is a quotation from Macdonald’s book “Socialism, Critical and Constructive,” published in 1929, and I quote:

When labour uses capital and pays it its market value property is defensible”.

Now you see if you take the view that rent, interest and profit are all derived from surplus value; that is from exploitation through the class monopoly of the means of production then profit isn’t defensible, nobody can put up a defense for it. However, Tawney and Macdonald are saying property is defensible if labour uses capital and pays it its marketable value.

Macdonald was also a leading member of the Independent Labour Party which was affiliated to and supported the Labour Party. Here is a quotation from an Independent Labour Party pamphlet called “HOW SOCIALISTS WOULD RUN INDUSTRY”. This was published in 1924 when there was a Labour Government. It said:

Why should not labour hire capital and devote the whole of the surplus to the improvement of the service”.

And another Independent Labour Party pamphlet called, “SOCIALISM IN THE VILLAGES,” said this:

There is every reason to expect, that agriculture will wield a far better return to labour and capital, than it now does”.

In other words, you have the Labour Party rejecting entirely Marx’s correct view about exploitation based on the working class producing surplus value as well as rejecting the confused Fabian Society view and coming over to Tawny’s erroneous position.

The one thing that Macdonald, Tawney and the Labour Party consistently said is that:

You hire capital to run the nationalised industry, but the people who are lending you the money, must in no circumstances whatever has any hand in the running of the industry

In short they used a spurious argument that nationalised industries belonged to everyone and if the State paid the wages, financed the industries and there were no private individuals either running the industries or directly living off the surplus created by the industries then exploitation does not take place

And the Labour Party has been quite consistent about it. And with one small temporary exception there never has been any share holders in nationalised industry that could sit on the board, have votes, play any part in the running of the industry. The only small temporary exception was the London Passenger Transport Board where one of the class of shareholders had not a fixed rate of return, but, a variable one, depending on the profits in the London Passenger Transport Board.

The lawyers got busy on this and said that if the interest their client was going to receive on the money they put into London Passenger Transport Board is going to depend on profits they will have some form of hold over it. So they got written into London Passenger Transport Board permission that if they did not get a return on their money, they could go to the courts and get London Passenger Transport Board declared bankrupt.

There has never been any such provision in any of the other industries which have been nationalised. Once you’ve got a nationalised industry there’s no existing provision as it were to of getting rid of them even if they make large losses unless that is by an Act of Parliament..

When the Labour Party nationalised the mines, the railways and so on, they paid thousand of million pounds to the former railway shareholders. And the shareholders lost rights to the business and the played no further role. They had no interest whether the Coal Board, the Railways or anybody else made a profit or a loss. They were out. They had got their money, it was absolutely guaranteed because the bonds they received weren’t charged on the Coal Mines or on the Railways; they were charges on the Treasury as part of the budget. So you see what this means. If the whole of the coal mines went out of existence the former shareholders in the coal companies would still go on getting their money and if all the railways were wound up the former railway shareholders would still go on getting their money. And on this the Labour Party has been consistent. They have always said:

We will compensate them but we will not let them play any part in the industry, once they’ve got out”.

Coming back to the Labour Party/Independent Labour Party concept of hiring capital and paying interest to the lenders, they thought it would work like this. They said the land would be nationalised so all the rents would come to the government, the owners of the nationalised industries would no longer receive profits they would be compensated in getting out. All the profits would come to the government and the only charge the government would have in the nationalised industry would be paying interest to the people from whom they had borrowed money.

Now, this looks beautiful on paper, and as they saw it on paper, they thought, look, there’s going to be enormous surplus coming into the hands of the government, so the government can do what it likes with. They said:

look you know, we’re going to have an enormous amount of money we’ve only got one charge on it, we’re going into profits we’re going to get the rent, we only have to pay the interest, we’ll have a lot of money left over, and they said, this big surplus fund, should be used to improve the service, to lower the charges, and raise the wages of the workers”.

That of course, was their dreamland. But now look at what actually happened in practice. They made the assumption that capitalist companies always made profit. They forgot all about the times, of course, when capitalist companies make losses and go bankrupt. They didn’t think that depressions would ever happen again.

I mean, they accepted the old Keynesian rubbish, they thought that there would not be any more unemployment, no more depressions, so they ruled out the possibility that a nationalised industry could run into depression. So they were quite certain you see that they were going to have, plenty of money to spare, and would be able to do all these things, raise the wages of the workers, improve the service and reduce the charges.

Lloyds Bank, three or four years ago, calculated all the financial returns of all the nationalised industries for the seventeen years from 1961 to 1977. Now I’ve told you what the dream of the Labour Party was when they nationalised various industries. I now read out to you the reality. I quote:

The table shows that the financial surpluses of the public corporations have at no point been sufficient to cover the interest costs on their accumulating debt in addition to wages and salaries, they have therefore, had to borrow, growing sums, to pay the interest that they could not cover, from their sales revenues”.

In other words, instead of the government having enormous income coming into it and only having to pay out a little interest it had to borrow money even to pay interest, because most of the nationalised industries had run into great financial difficulties. And as I just said that was up to 1977.

In1980 the total subsidies of the government to the nationalised industries for one year was eighteen hundred million pounds And as I have already explained the only people who never had to worry about it was the former shareholders for they were getting their money and it didn’t matter to them whether the nationalised industries were profitable or not.

There have been changes in the form of nationalisation, when the Postal, Telegraph and Telephone services were nationalised they were government departments, the staff were civil servants, they were under very, very rigid treasury control, with treasury people so to speak, sitting in the Post Office watching every penny they spent. I remember on one occasion some Post Office officials saying to me they couldn’t spend more than five pounds without getting treasury permission to do it.

Quite an exaggeration. But that was the sort of thing that occurred. A politician was appointed Post Master General. Now, you often get people saying:

Why, when the government appoints a minister in charge of a department don’t they put in a man who knows all about it”.

This is a naïve view. They didn’t put a teacher in charge of education, and a railwayman in charge of railways, and a coalminer in charge of the coal mines. These people, those who hold this naïve view, don’t understand the job of a political minister. Apart from telling the departments what they’ve got to do and carrying their views back to the government, the job of every minister is to prevent the government from spending too much money. That is what they’re there for. The Post Office is no exception. There has never been a Postmaster General appointed from within the Post Office.

The Postmaster General was appointed to carry on the Treasury work at keeping down Post Office expenditure because the Post office surplus, one of the revenue departments went to the Chancellor of the Exchequer as part of his budget revenue along with the other revenue departments Inland Revenue and Customs and Excise. But being a government department meant that every detail of Post Office expenditure had to come before Parliament.

Several times a year every detail of Post Office estimates had to go before Parliament where every MP could ask questions. They could look at everything every item of expenditure including every item of expenditure on wages, and the wages of hundreds of different Post Office departments. MPs would try to burrow into these reports and express views about them.

Then in the 1930s when the Labour Party was getting ready to come into office again, and carry on with nationalisation, Herbert Morrison and others, pointed out to Parliament that they could no longer run nationalised industries as government departments because if they did the whole of Parliament’s time, all the year round, would be taken up with discussing wages and all the other things about nationalised industries. So they said, you’ve got to take the Post office away from parliament. So they invented this Board system, where the government appoints a Board and the government provides the finance. The Board is supposed to have day to day responsibilities, for running these particular departments.

The nationalisation Acts setting up these Public Boards, required them to pay their way, in other words to make a profit. In recent years, both under Labour and Tory Government the Post Office and other nationalised industries were set a certain target of profit. They expected them to yield a profit on a certain amount of capital related to what was occurring, in private industry.

Now because the nationalised industries are now not exactly popular, the Labour Party has decided to invent a new form, and give it this new name, social ownership. And they announced the details of it with regard to British Telecom which is being privatised with thousands of staff taking shares –so-called “popular capitalism”. The Labour Party is going to revert to a form of nationalisation, and what they’ve said to the people who are now shareholders:

we shall take away your shares but will give you in return an interest bearing security but it will not give you any say whatever, in the running of the company”.

Some difficulties have arisen in the past and are going to arise in the future about the nationalised industries and they have never been solved. They concern the relationship between the Public Boards and the Government and Parliament.

I’ve said that in theory, the Boards were to have sole responsibility for day to day operations. But all the Boards whether either under Labour Governments or the Tories have complained bitterly that they’re continually being chased and harassed by ministers trying to interfere with the day to day operations including their charges, the wages they pay and all the rest of it. And the MPs complain that whereas under the old Post Office form they could always raise questions in the House of Commons about the Post Office because it was a Government department they haven’t got this facility with regard to the nationalised industries.

All the nationalised industry’s Boards want to have financial autonomy to do what they like about raising money and so on. I don’t think any government is ever going to let them have this freedom. They never let them have it in the past, and I can’t see them doing it now.

We now come to; the question that we put at the beginning when the Tories say Privatisation is good and the Labour Party say Privatisation is bad. And the question is this: how does it affect the working class? Look at what the Labour Party claimed when they went in for nationalisation. They said that the nationalised industries would be more efficient and more profitable. Actually there is nothing in this. The nationalised industry can be efficient as the Post office used to be, it can be profitable as the Post Office used to be, or it can be very inefficient and be unprofitable as some of the later ones have been. Just like any private company there is simply nothing in this for workers to have a particular interest.

The Labour Party believed that the nationalised industries would pay higher wages to the workers they employed. Right in the early days the Fabian Society launched this idea but wrote it in terms of municipalisation of local authorities taking over industries

There was a funny passage written by Bernard Shaw, he said:

look as soon the local authorities take over industry they’ll put up wages, they mustn’t put up wages to much and too fast, if they put them up immediately, all the workers employed in private companies working on the doorstep of the local authorities will want the municipal jobs, so they have to do it very gradually”.

If you can think back to the winter of discontent for example, that is, during the period 1978-79, when the Callaghan Labour Government tried to keep pay increases down to 5 per cent and when prices were going up by 10 per cent, the people who were striking against him were a million or more local authority workers. In other words Bernard Shaw’s dream of the local authorities paying more than everybody else just didn’t work.

In the ups and downs of wages it can happen from time to time that people either in nationalised industries or in the civil service gets more than people outside in the private sector. Other times they get less. It is just the way the thing goes and it can happen both ways.

In the 1920’s, for example, the government set up special economic committee to look into the fact, that they said certain industries including civil servants and the Post Office had got rates of pay above those in outside industries where rates of pay had fallen. Whereas in the last two or three years it has been the teachers, the health service workers, and the civil servants who are all complaining that their getting paid less than their opposite number in private industry. And it can happen both ways.

In the Post Office, right at the beginning, the Post Master in every district used to recruit some grades, like postmen, at whatever rate they could get them for. Then they tried to recruit according to the accepted local rates of pay. Later on they set up a system by which parliament would appoint a Select Committee which would take a thorough look into every detail of Post Office pay and make recommendations accordingly.

Later on they came into line with the civil service through the Civil Service Arbitration Tribunal. This produced a very elaborate system of pay comparisons which was set up in 1955 although it is now being suspended. In all these systems the key factor, all the time, about the pay of people in the nationalised industries, is what people are getting in private industry, and all these things can be argued backwards and forwards, once both sides had put in information about their own particular circumstances.

The other thing which particularly appealing to the Trade Unions was the other thing the Labour Party promised about nationalisation. And that it would give people job security. But how wrong they were.

There have been hundreds of thousands of railway men and steel workers who have lost their jobs in the last ten years. This included about half a million miners under the 1965 Labour Government with its National Plan. The government planned to get rid of these miners for the simple reason that the mines were being run at a loss.

It actually says in the plan:

we are closing down loss making pits as quickly as possible”.

I mean, this is something of course that’s got to be carried out by any capitalist government, whether they be Labour or Tory if nationalised industries are to be run at a profit. And if the demand changes and they are going out of business so jobs will be lost. Just like a private company they can’t give job security.

In the last two months there have been three reports in newspapers about coal mines being closed down, and miners losing their jobs. The first was in this country when a nationalised industry announced last week they are closing down mines in Scotland and 10,000 miners jobs will disappear.

My second example is from Japan, where the mines are privately run. They are closing down loss making pits in Japan, and 14,000 miners are losing their jobs in Japan.

My third example is in Hungary, where of course, the mines are nationalised, and capitalism in Hungary is run by a self-styled “Communist” government. They have closed down pits and the miners have been told they’ve got to work longer hours in order to make the mines more profitable. In all three cases, of course, it is exactly the same, that the mines are losing money.

Just a glance in the 19th century, the Post Office always had a queue of people wanting to get jobs in the Post Office, and it wasn’t so much the pay, the pay wasn’t particularly attractive, but it was of course, they did have a job for life, they had quite generous sick pay, and they had a non contributively pensions scheme.

In later years of course, other industries have acquired these same benefits and the Post Office ceased to be the attraction that it used to be. And one other thing, the Labour Party said, was that when all these industries were nationalised the workers will feel that the industry belongs to them so they won’t come out on strike again. In 1943 during the war, Winston Churchill made that statement of his, about there being a broad field for state-ownership and enterprise and as I say he probably had in mind the coal mines. A few months later, Harold Laski a prominent member of the Labour Party wrote an article in Lord Beaverbrook’s’ EVENING STANDARD appealing to Churchill to announce the nationalisation of the mines to improve the war effort, to get people to fight and be more willingly to support the war effort.

This is what Laski wrote:

The effect on output on absenteeism and on strikes would be immediate and important.”

And three years later the Labour Party carried that out that policy with their nationalisation of the coal industry. And you know what the result has been? Since all these industries were taken under State control the majority of all strikes are now in nationalised industries. The class struggle has continued unabated.

The workers soon found out that nothing had changed in nationalising the mines. And other industries accept this. All that had changed was that the mines were formerly owned by several hundred mine-owners who were linked to the Mine Owners Federation. These were the people the miners had to negotiate with for higher pay and better working conditions. When they were nationalised the miners were dealing only with one Board.

And of course the outstanding fact of all this was for about 50 years before the mines were nationalised the Miners’ Union and the Trade Union Congress carried on a campaign for nationalisation. When the Labour party came into power 1945 and introduced a nationalisation law they actually consulted the Miners Federation about what was to be in the Bill. And the Miners Union and the TUC both agreed with the legislation and they all voted for it. In 1946, they got the mines nationalised.

Well, now just think of 1926 when the Trade Unions were fighting the coal owners. The miners came out for seven months and were utterly defeated by the mine owners and the Government. Sixty years afterwards, in 1985, the miners again came out on strike. They stayed out for a year and were shatteringly defeated by the Coal Board and the Government. And this is the very same Coal Board that the miners’ union and the TUC spent fifty years urging the government to introduce as part of the nationalisation of coal. So they got what they were responsible for but it was hardly what they expected.

So what’s the Socialist position with regards nationalisation?

The Socialist Party of Great Britain never joined in the Labour Party campaign for nationalisation. We never advocated or defended, supported nationalisation. Nationalisation is State-capitalism. There is no difference between nationalisation and private capitalism accepts that the ownership and control is vested in the government appointed Board, instead of a company board of directors. Nothing has changed. The aim is the same, to make profit by the exploitation of the working class. In 1981, the chairman of the Post Office Board, who had been appointed by a Labour Government, made a speech, in which he said this:

We are proud to make a profit in all our businesses and we intend to go on doing so, it is in our customers best interests that the Post Office should be commercially motivated and that we should make profits to pay for growth and improvement in our services and repay loans”.

Now that speech, of course, could have been made by a Managing Director of ICI or Sainsbury’s to their shareholders annual meeting. Nothing is any different. Nationalisation is not Socialism. Nationalisation continues the production of commodities for sale at a profit. Socialism of course takes the opposite course, involving the abolition of buying and selling.

Nothing within Socialism will be bought or sold there will be no production for sale, production will be solely and directly for use, and that of course, is what the Socialist Party of Great Britain has been saying, ever since it has been formed in 1904, and we shall go on saying this, until the workers recognise, that by advocating and supporting nationalisation, it has been for the working class, fifty appalling wasted years.

Back to top

Socialist Studies

email: enquiries@socialiststudies.org.uk | www.socialiststudies.org.uk