Anthony Crosland: The Future of Socialism

The Future of Socialism

There are moments in the Labour Party’s history when Labour has, tragically, been radical without being credible. At other times Labour has been credible without being radical. The challenge, as Crosland always reminds us, is that in our programme and policies we be both radical and credible. And to achieve that we will have to, in Nelson Mandela’s, combine vision with action.

July 1940, the 21-year-old Fusilier Crosland had written to his schoolboy friend Phillip Williams: ‘I am engaged on a great revision of Marxism, and I will certainly emerge as the modern Bernstein’.

Socialism which Crosland preached was not something dreamed up out of books. He looked round the democratic world and identified two role-models. The first of these was the USA. He was immensely attracted by its openness, its dynamism and the absence of class barriers.

His other great role model was, of course, Sweden, where he greatly admired the progress made in eliminating poverty and achieving a wide measure of social and economic equality .

Conclusion of The Future of Socialism was the unimportance of the ownership of industry. He argued with passion that each specific proposal for public ownership must be justified by the contribution which it made to socialist objectives.

The socialist aim about which Crosland felt most strongly was equality. Within the Labour Party, Crosland became an instant hero on the Right, and a hate figure on the Left.

Hugh Gaitskell’s sudden death in 1963 almost certainly cost him the chance of becoming Chancellor of the Exchequer when a Labour government was formed the following year.

Throughout Wilson’s long tenure as Labour leader and Prime Minister, Crosland’s talents were underutilised. He held five ministerial posts , including important cabinet portfolios, but he was kept out of the top jobs. He was struck down by a severe stroke, and died a week later at 58, a similar age to his close friend and mentor, Hugh Gaitskell.

‘ We do not want to enter the age of abundance , only to find that we have lost the values which must teach us how to enjoy it . ’

The Transformation Of Capitalism

The Transfer of Economic Power

SOCIALISTS in the 1930s were united on the immediate objectives of a majority Labour Government. These were first the abolition of poverty and the creation of a social service state; secondly, a greater equalisation of wealth; and thirdly, economic planning for full employment and stability.

But many socialists , while assenting to these aims in principle, did so in a distinctly pessimistic frame of mind , thinking them probably unattainable within the existing economic framework.

Marxism was the dominant intellectual influence; and it made a profound impact on my generation of socialists in their formative years before the war.

In my view Marx has little or nothing to offer the contemporary socialist, either in respect of practical policy, or of the correct analysis of our society, or even of the right conceptual tools or framework.

The belief that the ‘inner contradictions’ of capitalism would lead first to a gradual pauperisation of the masses, and ultimately to the collapse of the whole system, has by now been rather obviously disproved. The second Marxist assumption, on which also much pre-war socialist analysis was based, was that society was effectively controlled by a capitalist ruling-class which held all or most of the important levers of power.

To-day the capitalist business class has lost this commanding position. The change in the balance of economic power is reflected in, and may be inferred from, three developments.

• First, certain decisive sources and levers of economic power have been transferred from private business to other hands.
• Secondly, the outcome of clashes of group or class economic interests is markedly less favourable to private employers than it used to be.
• Thirdly, the social attitudes and behaviour of the business class have undergone a significant change, which appears to reflect a pronounced loss of strength and self-confidence.

The most direct and obvious loss of economic power has been to the political authority. This is largely a consequence of the explicit acceptance by governments of responsibility for full employment, the rate of growth, the balance of payments, and the distribution of incomes.

The main instrument for exercising this responsibility is fiscal policy.

Since 1939, a considerable redistribution of personal incomes has occurred; and the gains have accrued largely to the workers, while the losses are at the expense of property-incomes – the share of net dividends, in particular, is much reduced. Before the war, it was always the working class which bore the brunt. Since the war, the outcome has been quite different.

‘Herein lay the whole secret of the middle classes’ attitude to the Government, which ranged from white fury to hurt bewilderment. The fact that governments now exercise this pervasive economic power, and that they do so from motives other than a desire to prop up private business, would be sufficient by itself to outmode most pre-war, semi-Marxist analyses of class power.

‘Whatever the forms of state’, wrote Laski in 1937, ‘political power will, in fact, belong to the owners of economic power.’ It would be more accurate to turn Laski’s statement on its head: whatever the modes of economic production, economic power will, in fact, belong to the owners of political power.

A second transfer of economic power has followed from the nationalisation of the basic industries. This has clearly diminished the power of the capitalist class. For practical purposes, therefore, economic decisions in the basic sector have passed out of the hands of the capitalist class into the hands of a new and largely autonomous class of public industrial managers.

Thirdly, there has been a decisive movement of power within industry itself from management to labour. This is mainly a consequence of the seller’s market for labour created by full employment.

Internal changes have also occurred within industry which significantly reduce the power of the capitalist class relative to other managerial classes.

The first, a consequence of the growing scale, complexity and technical intricacy of modern industry, is the increasingly specialised nature of business decisions. As a result, although the ultimate power of course remains in the hands of the top ‘lay’ management, more and more influence passes to the technical experts and specialists – the new ‘organisation men’. But much more significant, though many socialists are reluctant to admit it, is the change in the psychology and motivation of the top management class itself.

The divorce between ownership and management, and the relative growth of the joint-stock corporation with fragmented shareholding.

Business leaders are now, in the main, paid by salary and not by profit.

The economic power of the capital market and the finance houses, and hence capitalist financial control over industry (in the strict sense of the word), are thus much weaker. This change alone makes it rather absurd to speak now of a capitalist ruling-class.

The contemporary business leader does not want high profits primarily as a source of high personal income or consumption; since he does not own the business.

Profit remains an essential personal and corporate incentive – but largely as a source of strength and influence, and not as an avenue to a privileged consumption-position for the capitalist.

The old-style capitalist was by instinct a tyrant and an autocrat, and cared for no one’s approval. The new-style executive prides himself on being a good committeeman; and subconsciously he longs for the approval of the sociologist.

Economic power is only one aspect of social class; and other aspects may remain just as relevant even though this one has diminished in importance.

The argument of this chapter is simply that the intellectual framework within which most pre-war socialist discussion was conducted has been rendered obsolete, first by the fact that the economy is growing at a rapid pace, and secondly by the fact that we now have a quite different configuration of economic power.

Is This Still Capitalism?

Capitalism had been undergoing a slow, though painfully slow, metamorphosis since the turn of the century. Largely this was involuntary, in the sense that it was enforced by the rebellion of the non-capitalist classes against the unpleasant consequences of industrial laisser-faire, and by the growing power of the political and industrial Left.

Britain in 1939 remained, basically, an unreconstructed capitalist society.

Past history shows that democratic peoples and governments always move to the Left during a war. The important question is whether they stay there afterwards. Wars are only permanently revolutionary if followed by Left-wing Governments which dig in, consolidate the changes, and use them as a basis for further advance.

The Labour Party’s ‘Short-Term Programme’ of 1937. This was the most detailed and concrete programme of action to which the Party had ever committed itself. Its salient features were as follows:

• Finance: nationalisation of the Bank of England; control over new investment; redistribution of wealth by taxation.
• Industry and Agriculture: powers of compulsory acquisition of land by public authorities; nationalisation of railways and other unspecified ‘transport services’; nationalisation of coal, gas, and electricity.
• Social Benefits: holidays with pay; school-leaving age to be raised to 16: improved pensions, workmen’s compensation, and health services.
• Distressed Areas: control over the location of industry.

Professor Cole, Mr. Douglas Jay, and E. F. M. Durbin, in their works on socialism, all adumbrated very similar programmes.

Mr. Strachey, at that time considered rather far to the Left, produced a ‘Popular Front’ programme for the Left Book Club which was incomparably more modest. It consisted of six main items: the promotion of public or mixed investment, the lowering of the rate of interest to encourage private investment, redistributive taxation,  higher social services, a public banking system, government control over the balance of payments.

Greater social changes had occurred by the end of the first majority Labour Government than the most sanguine amongst pre-war Leftists had expected.

A passionate desire to restore the past must rest on a deep attachment – moral, ideological, or theoretical – to the virtues of that past. And this the British Conservative, typically pragmatic and empirical, seldom has.

The voters, now convinced that full employment, generous welfare services and social stability can quite well be preserved, will certainly not relinquish them. Any Government which tampered seriously with the basic structure of the full-employment Welfare State would meet with a sharp reverse at the polls; and this knowledge acts as rather a strong inducement to politicians not to tamper.

The word capitalism might reasonably be taken to mean one of two things. First, it might be used in a historical sense to describe the society which developed in nineteenth-century Britain.

What, after all, were the salient features of that society, which fundamentally determined its social character?

• The autonomy of economic life, the decentralisation of economic decisions down to the individual unit of production, and the subordination of these decisions to (mainly) market forces; that is, what is crudely called laisser-faire. Through fiscal policy, and a variety of physical, legislative, and financial controls, the state now consciously regulates (or seeks to regulate) the level of employment, the distribution of income, the rate of accumulation, and the balance of payments.
• At the level of the unit of production, decisions were effectively controlled by a class of private owner-managers, or capitalists. This situation no longer exists even in the unit of production. In the basic industries, nationalisation has wholly deprived the capitalist class of its power of decision.
• Industrial capital was privately owned. This is still true of the greater part of industry.
• The distribution of wealth was characteristically unequal for two reasons. First, the concentration of economic power in the hands of one class. Secondly, since this class was a capitalist one. Dividends net of tax are now only some 3 % of all personal incomes after tax.
• Capitalism was historically associated with an explicit, assertive, and, in the perspective of history, unusual ideology. The non-capitalist classes have always opposed an ideal of co-operation, social action, and collective responsibility to that of individualism; and as their power grew, so this ideal increasingly prevailed.
• Lastly, capitalism was characterised, largely as a consequence of these other features, by an intense class antagonism. Almost all the basic, characteristic features of traditional pre-1914 capitalism have been either greatly modified, or completely transformed. I believe that our present society is sufficiently defined, and distinct from classical capitalism, to require a different name.

It might be objected that the word capitalism has often been used not in the meaning so far assumed, namely as a definition or description of a whole society: but simply to describe one feature of that society. On this definition, any industrial society in which private ownership predominated, whatever its other features, would have to be described as capitalist.

The relations and modes of production which formed the basis of the Marxist analysis were twofold. First, the technological fact of large accumulations of industrial capital, leading inevitably to the factory system. Secondly, the social fact that this capital, that is, the instruments of production, was ‘alienated’ from the workers who actually produced, and controlled by a separate class of owners.

This separation, the fact that capitalist and labourer confront each other in the market as buyer and seller, leads inescapably to the basic features (in Marx’s view) of capitalism: the economic fact of the ‘exploitation’ of the worker (that is, the appropriation by the employer of surplus value), and the social fact of the relation between capitalist and wage-labourer. From these two facts in turn spring all the other typical features of capitalism – the political domination of the owners, the class-struggles, the pauperisation of the masses, inequality, and the rest.

Irrespective of who ‘owns’ the means of production in the legal sense, both ‘confrontation’ and ‘alienation’ are inevitable; and someone other than the mass of workers must ultimately take the production decisions. The basic factor is not ownership, but large scale; and a collectivist economy, with no private owners, is no less characterised by the alienation of control than a capitalist economy.

Since private ownership has little to do with the loss of control by the workers, and indeed is not itself the main source of control even where it still survives, it seems unlikely that the pattern of ownership will uniquely determine anything.

Is it then not clear that the ownership of the means of production has ceased to be the key factor which imparts to a society its essential character? Either collectivism or private ownership is consistent with widely varying degrees of liberty, democracy, equality, exploitation, class-feeling, planning, workers’ control, and economic prosperity.

The pattern of ownership, although it may influence, is unlikely to determine the extent to which such goals are attained. And even as an influence it is now less important than other factors, such as the managerial structure of industry, the level of employment, the strength of the Trade Unions, the general social climate, and above all the character of the political authority.

I conclude that the definition of capitalism in terms of ownership, whether or not it was helpful 100 years ago, has wholly lost its significance and interest now that ownership is no longer the clue to the total picture of social relationships: and that it would be more significant to define societies in terms of equality, or class relationships, or their political systems.

The Aims Of Socialism

The Traditions of British Socialism

The most common cry, is to urge that we ‘go back to socialist first principles’. This sounds both easy and attractive. But unfortunately the phrase ‘first principles’ is ambiguous.

Which of the following is to be held sacred as a first principle: nationalisation of the means of production (the means to a particular objective), the appropriation by the state of property incomes (the objective), the labour theory of value (by which the objective was often justified), or the underlying aspiration towards equality?

R. H. Tawney has written that ‘like other summary designations of complex political forces, Socialism is a word the connotation of which varies, not only from generation to generation, but from decade to decade’.

A Summary of Socialist Doctrines:

• The philosophy of natural law. This had its immediate inspiration in Locke. He was called in aid to prove that land was originally held in common, and that labour was the only true title to property.
• Owenism. Robert Owen, believing that character and states of mind depended on economic environment, maintained that so long as the economic system was competitive, it would breed neither good character nor general contentment.
• The Labour Theory of Value. Derived from Ricardo, this was forged into a weapon of socialist propaganda by the English pre-Marxist socialists (Hodgskin, Bray, etc.), and became the predominant intellectual inspiration of the working-class anti-capitalist movement, and in particular of Chartism.
• Christian Socialism. The aims of the Christian Socialists bore a close resemblance to those of Owenism, though of course the inspiration was different – in the one case a Benthamite belief in universal happiness, in the other a concern with Christian ethics.
• Marxism. Like some earlier socialist doctrines, Marxist economics were based on a Ricardian labour theory of value, and a somewhat more refined theory of surplus value and exploitation. Marx was in truth the founder of the State or collectivist tradition in socialism, as opposed to earlier notions of communal or co-operative ownership.
• The theory of rent as unearned increment. This was developed from the Ricardian theory of rent by John Stuart Mill , and was later popularised, with for a time enormous success, by Henry George. It was a doctrine directed primarily against landlords.
• William Morris and anti-commercialism. Competitive commerce degrades the worker as producer. It drains the craft and satisfaction out of labour; it destroys art and good design; and it creates a vulgarised upper class, and an intolerable gap between rich and poor.
• Fabianism. Their intellectual derivation was wholly non-socialist – from Ricardo, Mill, Jevons, and Henry George. The Fabians stressed the virtues of collective (state or municipal) action not only in respect of ownership, but in every sphere.
• The I.L.P. tradition. This has been extremely influential, but is not easy to define. It was the early Independent Labour Party that Professor Cole had in mind when he wrote of ‘a Socialism almost without doctrines … a broad movement on behalf of the bottom dog’. The internationalist tradition of the Labour Party stems far more from the ‘international brotherhood of man’ appeal of the I.L.P. , than from the ‘workers of the world, unite!’ slogan of the Marxists.
• The Welfare State or paternalist tradition: the rejection of the laisser-faire doctrine that the state has no obligation to its citizens (save for the protection of property), and indeed a positive obligation to remain inactive: and the affirmation of the opposite view that the state must accept responsibility for preventing poverty and distress, and for providing at least a subsistence minimum of aid to such citizens as need it.
• The ‘night-watchman’ view of the state (to use Lassalle’s phrase). It can perhaps be traced back first, amongst socialist thinkers, to Louis Blanc, but more reliably to Lassalle and the German Social-Democratic Party.
• Syndicalism and Guild Socialism. On the continent, Syndicalism constituted a separate tradition in its own right (especially in the Latin countries), with deep roots in anarchism. Guild Socialism was a violent reaction against collectivist state socialism.
• The doctrine of planning. This was a late development in socialist thought. By the late 1930s a variety of arguments were being used to support the case for planning – academic theories of ‘imperfect competition’, Pigovian welfare economics, the maldistribution of incomes, the distinction between ‘production for use’ and ‘production for profit’, and so on.

Five predominant themes can be distinguished (though they often overlap): the appropriation of property incomes, cooperation, workers’ control, social welfare, and full employment.

• The objective of the appropriation by society of the rewards of capital (rent, interest, profits) by means of the abolition of private property, and the substitution for it either of communal co-operative ownership (the land reformers, Owen, Morris) or collectivist state ownership (Marx, the Fabians, the modern Labour Party). Fiscal policies offer a simpler and quicker way of doing it than wholesale collectivisation. Private ownership is compatible with a high degree of equality, while state ownership, as the Russian experience has demonstrated, may be used to support a high degree of inequality.
• The objective of substituting for unrestricted competition and the motive of personal profit some more social organisation and set of motives, by means either of co-operative undertakings or state ownership. The first is ethical, and springs from a desire to replace competitive social relations by fellowship and social solidarity, and the motive of personal profit by a more altruistic and other-regarding motive. The aspiration has clearly not been fulfilled, the method of attaining a more co-operative society must be re-appraised in the light of technical changes and greater knowledge. The second objection to private profit and competition was economic, and related to the actual material results of classical capitalism. Production is undertaken for profit: that the distribution of purchasing power determines what is profitable: and that if this is very unequal, then the wants of the rich will be met before the needs of the poor. But if purchasing power is distributed more equally, it becomes more profitable to produce necessities, and less profitable to produce luxuries.
• The objective of workers’ control. Syndicalists, Morrisites and Guild Socialists, all starting from the belief that the central feature of capitalism was the exploitation of the worker, had as their common objective the control of industry by the actual producers. The means chosen were various – control by the Trade Unions, or Socialist Guilds, or Morrisite communes. The idea that the worker is an impotent wage-slave, contemptuously and ruthlessly exploited, bears no relation to modern conditions; nor does the belief that no help can ever come from the state. An important advance has been made, and the desire to improve the worker’s status has been partially fulfilled by other than the traditional means. Nevertheless, the objective is not yet fully realised, and is rightly engaging attention to-day.
• The welfare objective: the abolition of primary poverty, and the guarantee of a general subsistence minimum by means of universal social services. Primary poverty has been largely eliminated; the ‘Beveridge revolution’ has been carried through; and Britain now boasts the widest range of social services in the world, and, as a result, the appellation ‘Welfare State’.
• The objective of full employment, to be achieved by government planning, and notably by fiscal and monetary policies. I personally believe, and argue later, that the deflationary tendencies of the inter-war period were exceptional, and that the years ahead are more likely to be characterised by inflation than unemployment.

The Meaning of Socialism

The need for a restatement of doctrine is hardly surprising. The old doctrines did not spring from a vacuum, or from acts of pure cerebration performed in a monastery cell.

To-day traditional capitalism has been reformed and modified almost out of existence, and it is with a quite different form of society that socialists must now concern themselves.

Revisionism, by casting doubts on the need for militancy, or suggesting that the class-struggle is now rather out-of-date, challenges both his social and emotional security. Bernstein, the great socialist ‘revisionist’, discovered this more than 50 years ago.

This instinctive clinging to class-consciousness can still be found in the Labour Movement to-day. A people enjoying full employment and social security has lost its dreams, and lost the need to struggle; and the activists in consequence feel restless and frustrated.

Statements about socialism can never be definitely verified; and we cannot treat it as being an exact descriptive word at all.

History of socialist thought will provide dozens of different definitions, some in terms of ownership, some of co-operation, some of planning, some of income-distribution.

These ethical and emotional ideals have been partly negative – a protest against the visible results of capitalism – and partly positive, and related to definite views about the nature of the good society.

First, a protest against the material poverty and physical squalor which capitalism produced. Secondly, a wider concern for ‘social welfare’. Thirdly, a belief in equality and the ‘classless society’. Fourthly, a rejection of competitive antagonism, and an ideal of fraternity and co-operation. Fifthly, a protest against the inefficiencies of capitalism as an economic system.

The aspirations relating to the economic consequences of capitalism are fast losing their relevance as capitalism itself becomes transformed. But the remaining three more positive ideals, described above as stemming either from a concern with the ‘bottom dog’, or from a vision of a just, co-operative and classless society, have clearly not been fully realised.

Most people would agree that Britain to-day is a markedly less competitive society than it was a century ago.

To a large extent, security has replaced competition as the guiding rule of economic conduct. The extensive frontier of competition may, it is true, have widened. But this, ironically, is partly the result of action and pressure by the Left, since it follows from the progressive equalisation of opportunities for advancement. The antithesis of competition is not always co-operation – it may be social ossification, and the denial of individual rights. This clearly raises an awkward potential conflict of values.

On the one hand, the excesses of competitive individualism have been significantly moderated; on the other hand, competition is seen to have certain compensating advantages, not previously much discussed.

There appear to be two spheres in which it might be relevant: personal motives and relations at work.

Partly a factual statement, that people do work harder and feel happier if certain incentives are present: and partly a normative statement, that people should work for certain motives and not for others. I cannot see what national policy a Labour Government could have for inducing a general and deep-seated, as opposed to local and marginal, change in personal motives.

The second sphere in which the co-operative ideal is relevant (though it is closely linked with the first) is that of relations at work. The early socialists wanted people to work, not as separate individuals, but communally and co-operatively, organised in groups (co-operative guilds or communes) inspired with an altruistic collective purpose.

All we can say is that institutional change by itself is not enough.

This does not mean, of course, that there is no case for altering relations within industry, or for giving the worker more power. There is such a case. But it rests not on propositions about fraternity or social contentment, which our present knowledge does not justify, but on statements about social justice, the rights of workers, and equality.

The two remaining aspirations – the concern with social welfare, and the desire for an equal and classless society – still have a perfectly clear relevance. The first implies an acceptance of collective responsibility and an extremely high priority for the relief of social distress or misfortune.

The second distinctive socialist ideal is social equality and the ‘classless society’. The socialist seeks a distribution of rewards, status, and privileges egalitarian enough to minimise social resentment, to secure justice between individuals, and to equalise opportunities.

It is in the backward nations that the real poverty exists; and the inequality between those nations and Great Britain is far more glaring than the inequality between rich and poor in Britain.

Socialists must always remember that inter-national now surpass inter-class injustices and inequalities.

The Frankfurt Manifesto of the reborn Socialist International in 1951. The whole emphasis is placed on democratic planning, which is regarded as the basic condition of socialism. The purposes of planning are defined as ‘full employment, higher production, a rising standard of life, social security and a fair distribution of income and property’.

Poverty and insecurity are in process of disappearing. Living standards are rising rapidly; the fear of unemployment is steadily weakening.

‘Keynes-plus-modified-capitalism-plus-Welfare-State’ works perfectly well.

Significant residue of distress, resentment, and injustice affords a prima facie justification for further social change – as I think, and shall argue, in a socialist direction.

The Promotion Of Welfare

The Purposes of Social Expenditure

The history of the social services is the story of the gradual liberalisation of the definition of poverty: of the progress from a rigid destitution approach to a wider concept of a national minimum standard of life.

It was the Beveridge Report which gave the most complete and explicit statement of the philosophy of the national minimum. The social services had one prime object : the abolition of want.

Between 1946 and 1949 the whole field of social insurance and allied services was re-organised, co-ordinated and extended in a series of major legislative acts; and people hailed the arrival of the ‘Welfare State’ as though finality had been attained, and the social services had reached their ultimate form.

The Conservatives have been the first to respond with a clear-cut statement of purpose. This is set out in a book by two prominent Conservative politicians, one of whom later became Minister of Health. ‘Given that redistribution is a characteristic of the social services, the general presumption must be that they will be rendered only on evidence of need, i.e. of financial inability to provide each particular service out of one’s or one’s family’s resources.

Should we then go to the opposite extreme, and say that all benefits, whether in kind or cash, should invariably be both free and universal, with no obligation ever to prove need? The principle of complete ‘free universality’ is urged on the assumptions first that the rationale of the social services is to promote social equality, and secondly that ‘free universality’ is a necessary condition of social equality.

‘The strongest argument for showering benefits upon rich and poor alike, ’writes Mrs. Barbara Wootton, ‘is that nobody need then know who is poor and who is not.’

Social equality mainly requires the creation of standards of public health, education, and housing so high that no marked qualitative gap remains between public and private provision.

The important point is that ‘universality’ must follow from social equality, and cannot itself create it.

Social equality cannot be held to be the ultimate purpose of the social services. This must surely be the relief of social distress and hardship , and the correction of social need.

First, hardship may be caused by what is loosely termed secondary poverty: that is, ill-health, malnutrition, or deprivation of essential needs, due not to an absolute deficiency of income but to unwise spending. A second cause of hardship, again unrelated to primary poverty, is the decline in the size and cohesion of the family group. A substantial social provision, extending far beyond the conventional poverty line, is therefore required, not indeed to release the family from all its obligations, but to shoulder communally those obligations which even the most devoted family to-day, in view of its size and physical dispersion, cannot fulfil unaided. This calls for more nurses, nurseries, orphanages, small houses and service flats for the elderly, institutional facilities generally. The third cause of social hardship is the maldistribution of income relative to needs, both through time and between persons.

Even since the war, in the excitement of building the Welfare State, too much attention was paid to universal benefits, and too little to the relatively few, but often desperate, special cases.

In the past, social problems have been seen essentially as ‘category’ problems, and mainly also as problems of material deprivation. This was the philosophy underlying the Beveridge Revolution: that one isolated broad categories where need could be presumed without individual investigation, and then met the need by generous cash payments.

We shall increasingly need to focus attention, not on universal categories, but on individual persons and families: not on the economic causes of distress, but on the social and psychological causes.

The first signs of a wider view of the social services came with the experience of war.

Four main areas of need were isolated above; and if these are agreed, the priorities in social expenditure more or less sort themselves out. The first three – secondary poverty, the altered position of the family, and fluctuations in needs through time – point above all to old people, those with large families, and those whose earnings are interrupted by sickness.

If the object is to keep the standard of living in old age in a reasonable relation to that previously experienced, then pensions must vary with previous income.

The obvious solution would therefore be , as has recently been proposed in Sweden by a Government Committee, a universal, compulsory scheme superimposed on the existing national insurance scheme. Under the Swedish proposal, contributions would vary with annual income, and the pension with ‘life salary’ (i.e. the cumulative total of income earned during working-life).

The Search For Equality

The Determinants of Class

TWO developments have occurred which compel us to reconsider our approach to the second basic socialist aspiration, that towards social equality and a ‘classless’ society. First, it appears that after the redistribution of the last two decades, certain of the traditional socialist arguments for more equality no longer apply. Secondly, we have moved some way towards equality of incomes, yet we still seem far from a socially equal and classless society.

When people speak of class, they are assuming that society is divided into a limited number of strata, one above the other. Each stratum can be called a social class. Societies differ in respect of the number of strata, the distance between them, and the precision of the dividing lines.

Most sociologists adhere to an ‘objective’ theory of class determination; that is, they assume that social class is more or less automatically determined by certain objective and identifiable criteria, normally of an economic character.

The earliest such theory was of course the Marxist. Marx held that the forms and conditions of production were the fundamental determinants of the class structure and class attitudes.

Most sociologists before the war, while rejecting the Marxist theory as too narrow, nevertheless preserved a broadly economic approach. They took, as the main index of class, occupational or economic status in the widest sense.

A new emphasis in discussions of class. Veblen has come back into fashion; and great stress is once again laid on the social quality of consumption. A Veblenesque theory thus requires first that wealth is the one indispensable basis of esteem, and secondly that wealth is judged by the amount of conspicuous consumption.

Status is now assessed not solely by wealth, but also by the pattern of consumption; and this is judged not simply as a reflection of wealth, but as having an independent social value of its own.

This interacting triad, at the top of the social scale, of education, style of life, and occupational status is unquestionably a more important cause of social inequality than income.

There is evidently some sense in which power is a status-conferring attribute, with a strong influence on collective feelings of superiority and inferiority.

There has now grown up, following the rapid extension of the activities of the state, a parallel hierarchy of bureaucratic power in the political-administrative sphere.

Secondly, the ‘remote’ power to take decisions affecting not merely the individual, but entire categories of persons.

Political power can also have an influence on class attitudes, but in a democracy only, I think, if one party remains in office for a long period.

There are still other aspects of power of great interest from the point of view of class, such as social power in a small community.

But suppose that class is not objectively determined at all? Some sociologists now favour a ‘subjective’ theory of class. On this view, people belong to the class which they think they belong to, or are thought to belong to. Class, in the sense both of class-consciousness and the existence of clearly-defined classes, is an exceptionally marked phenomenon in British life. These two are not necessarily the same thing.

Whether national classes exist or not will depend on how far the separate determinants make a few broad and deep incisions into the social body, as opposed to innumerable shallow cuts; and how far these deep incisions coincide to form a single set of national divisions. This tendency is certainly evident in Britain. The hierarchies of education, occupational prestige, and style of life all show pronounced and visible breaks; and these breaks broadly coincide.

The tripartite division of working, middle, and upper classes. People accept this division subjectively as a reality; it influences their behaviour towards other people, and their social judgments.

People often employ a five-class framework when making social judgments (upper, upper middle, lower middle, upper working and working).

The consequence is a real class rivalry, either manifest or latent according to historical circumstances.

In Britain, for example, Labour and Conservative voters are more accurately divided by the median line of class position than by any other single factor.

The fact that classes have divergent interests, which are expressed in political terms, does not mean that violent class conflict is endemic in our society.

Differences in the degree of class-consciousness and social inequality between different countries would appear to depend, according to the argument of this chapter, broadly on the following influences.

• First, the technological factor: the stage of economic development reached.
• Secondly, the mobility factor: the degree of vertical mobility between classes, and the area of free social movement.
• Thirdly, the distance factor: the extent to which the various determinants of class make deep incisions, the social distance between these incisions.

In any given country, either a clear class stratification, or extreme status inequalities, are likely to rest on the same broad set of social factors.

The Case for Social Equality

At any time up to 1939, the case for greater equality, at least of incomes, seemed self-evident.

But we have now reached the point where further redistribution would make little difference to the standard of living of the masses. The main prop of traditional egalitarianism has been knocked away by its own success.

The traditional welfare argument, therefore, while it still justifies selective measures of redistribution towards small groups whose average gain might be significantly large, no longer clearly justifies overall measures of vertical redistribution; and one cannot state unequivocally that a greater equality of income will increase economic welfare.

Nevertheless the case can still rest firmly, as I believe, on certain value or ethical judgments of a non-economic character: on a belief that more equality, even though carrying few implications for the sum of economic satisfaction, would yet conduce to a ‘better’ society.

Extreme inequalities can obviously give rise to antagonism by evoking purely individual feelings of frustration, envy, and resentment.

We must now distinguish between what may loosely be called Economic Politics and Social Politics.

• Economic Politics are characteristic of any country or situation to which a Marxist analysis might plausibly be applied.
• Social Politics are characteristic of periods of prosperity, rising incomes, full employment, and inflation.

A marked discrepancy between the new economic and the old social status.

The combination of a newly-won high income status, and an apparent obsession with low social status, is significant.

Nobody now rationally believes in a theory of irreconcilable conflict, or that anything which helps the management must ipso facto hurt the workers.

The ethical basis for the first argument for greater equality is that it will increase social contentment and diminish social resentment.

We might diminish the extent of collective antagonism and resentment, and so increase social contentment, without increasing the sum of personal happiness in the community.

All children can, if the society so decides, at least be given an equal chance of access to the best education.

This chance does not exist in Britain, since the wealthier classes can purchase for their children the overwhelming social privilege, denied to other children equally deserving but less fortunate in their parents, of a public school education.

No one can argue that all citizens have an equal chance of acquiring property, and so of earning the due reward for the service of supplying capital. This would be the case only if all private property were ‘earned’, in the sense of representing the individual’s own accumulated savings, the fruits of his personal effort and abstinence. But in fact the greater part of it has been inherited; and its distribution is related not to the owner’s present or past performance, but to the accident of birth.

The greater the inequality, the heavier the concentration of power.

Authoritarian power to-day stems less commonly from monetary wealth or private ownership than from position in a bureaucratic hierarchy.

So far as the vertical spread is concerned, I feel rather agnostic. There are two uncertainties. First, how much should be allowed as rent of ability?

The individual’s ‘worth’ (in some sense) to the community.

Some danger point must evidently exist at which equality begins to react really seriously on the supply of ability (and also of effort, risk-taking, and so on), and hence on economic growth.

I am not convinced that the present: spread in post-tax incomes is really essential to incentive.

I believe that the vertical inequality in the distribution of these resources amongst the elderly , the sick, and those with large families constitutes a definite social injustice.

The third objection to extreme social inequality is that it is wasteful and inefficient.

Inherited property, nepotism, and class favouritism all prevent a fair and effective competition, on merit alone, for the highest posts.

Countries like Britain do not leap from one fully-fledged social system to another, but are, on the contrary, in a state of permanent transition.

I feel clear that we need large egalitarian changes in our educational system, the distribution of property, the distribution of resources in periods of need, social manners and style of life, and the location of power within industry; and perhaps some, but certainly a smaller, change in respect of incomes from work.

Is Equal Opportunity Enough?

It is in fact a complete illusion that British Conservatives really want a mobile equal-opportunity society on the American pattern.

Such is the society – restless, insecure, aggressive, and acquisitive – that results from the pursuit of equal opportunity.

Surely we are faced here with a positive mountain of irrelevance and exaggeration, even though an element of truth lies buried under it.

The absence of equal opportunity and social mobility is both a denial of democratic rights, and a positive cause of discontent.

The same movement of reform brought both the Welfare State and more equal opportunities. Possibly the latter have intensified insecurity.

Certainly too strong an emphasis on equal opportunity may, under certain conditions to be discussed below, lead to an excessive degree of competition, and hence of resentment and insecurity. But it will do so only if these conditions are present; and they need to be accurately defined.

Some degree of ‘éliteness’ is inevitable in any society – and indeed desirable, for we are not trying to create a mediocre mass society, in which everyone is levelled down to a uniform denominator.

Equal opportunity, if still combined, as it might be in Britain but is not in Scandinavia or North America, with a marked stratification between an élite and the rest of the population, will not remove all the discontents which extreme inequality creates, and in particular cases may even intensify them.

The conclusion must be that in Britain equality of opportunity and social mobility, though they lead to the most admirable distribution of intelligence, are not enough.

Some Arguments Against Equality; and the American Example

The largest inequalities stem not from the distribution of earned incomes, but from the ownership of inherited capital; and a desire to redistribute earned income is not one of the most urgent socialist objectives.

Is it true that greater equality will necessarily involve a cultural loss? The answer presumably depends on a comparison between the proportion of their surrendered wealth which the rich were previously spending on culture, and the proportion so spent by the transferees – the state, or the workers, or whoever they may be.

I therefore see no reason to think that the cultural loss from a further move towards equality, if indeed it is positive at all, cannot be offset by public action.

It is sometimes said that equality must threaten personal liberty.

It is clear that popular rule, or the participation of the masses in politics, is no guarantee of political liberty, and that ‘democracy’ in this sense and personal freedom are by no means synonymous.

But this has little to do with the point under discussion.

It would hardly be denied that the United States had more social equality, and less sense of class, than Great Britain.

I should have preferred to take Sweden, which in other ways comes much nearer to a socialist’s ideal of the good society: that is, it gives a higher priority to social welfare and the social services, it has a greater equality of wealth, it enjoys a more harmonious and co-operative pattern of industrial relations, it is characteristically ruled by socialist governments, and its cultural record is exceptional.

The determinants of class feeling are not the same in every country, but vary with the cultural and historical background; and in Britain, more than in most countries, class tension and hostility are concentrated in industry, and appear to derive from work-relationships.

Although vertical mobility is no greater in America, horizontal and geographical mobility both are.

The mobility factor therefore accounts for some part of the difference between the two countries. Historical factors naturally account for a further part.

This difference again reflects the fact that the U.S . never developed a stable, hereditary ruling-class.

Another major difference lies in the more amorphous character of American society, and particularly its greater ethnic heterogeneity.

• The first and most important is the educational system, which has none of the fissiparous effect on society produced by the British system. Different schools carry little weight in terms of job selection; and the school system does not, as it does in Britain, largely determine adult occupation, and hence access to other high-prestige criteria – income, power, and occupational status.
• Secondly, the pattern of consumption is markedly more equal than in Britain.
• A third factor is the diminishing importance of economic class pressures in a high-consumption society.

Class distinctions are less pervasive and less hereditary, social attitudes less class-conscious, the atmosphere more natural and unrestrained, the social ladder as a whole much shorter, and social envy and resentment less – in sum, social equality is greater.

The Influence of Education

The school system in Britain remains the most divisive, unjust, and wasteful of all the aspects of social inequality.

The 1944 Education Act set out to make secondary education universal; and formally it has done so. Yet opportunities for advancement are still not equal.

The third and most sensible approach is to work for a gradual integration of these schools into the State system of education. This is no more than a reversion to the proposals of the Fleming Committee, which, recognising even in 1944 the injustice of the present system, recommended that the independent schools should initially offer 25 % of their places to non-fee-paying pupils from State elementary schools.

Unfortunately this recommendation was not implemented after the war.

Most people would, I suppose, agree that leadership to-day called for three attributes, apart from a list of desirable moral qualities: it must be characterised by good judgment in public affairs, it must be technically efficient, and it must be democratic.

First, a Labour Government should explicitly state a preference for the comprehensive principle, and should actively encourage local authorities – and such advice carries great weight – to be more audacious in experimenting with comprehensive schools in the light of the marked success, described in Dr . Pedley’s survey, of the experiments to date.

Secondly, where new comprehensive schools cannot or will not be built, the object must be to weaken to the greatest possible extent the significance of the 11 + examination, and the rigidity of the prestige and physical barriers inherent in the present tripartite stratification.

THE second influence on social equality is ‘style of life’ and the visible pattern of consumption: that is, how wide are the contrasts, both in fact and in terms of how people feel, between the style and standard of living of different social groups.

The Pattern of Consumption

One aspect of this, is the consumption of ‘social’ goods such as health and education. Equality here, whatever the distribution of total income, can have a marked effect on social attitudes and the general sense of class equality. The higher the level of average income, the more equal is the visible pattern of consumption, and the stronger the subjective feeling of equal living standards.

In a pre-industrial society, the possibility of extending the number of goods consumed scarcely exists; it is ruled out by the slow rate of technical innovation.

It is the Industrial Revolution, and the higher rate of innovation associated with it, which both poses the problem for the rich, and ultimately makes its solution impossible.

It is thus a basic characteristic of the mass-production, mass-distribution and mass-credit economy, towards which we are now moving, that the rich will never be able to maintain an extensive lead in the consumption of new prestige-goods for more than a comparatively short period.

The percentage of working-class expenditure available for purposes other than food, housing, fuel, and light rose from 5 % in 1904 to 30 % in 1937, and must now be higher still.

There are clear political implications here for the Labour Party, which would be ill-advised to continue making a largely proletarian class appeal when a majority of the population is gradually attaining a middle-class standard of life, and distinct symptoms even of a middle-class psychology.

Generally, I have never been able to see why high consumption and brotherly love should be thought incompatible.

There seems nothing to justify the conclusion that because in the heyday of capitalism an aggressively individualistic and competitive society did display a rapid rate of growth, therefore it is the only one which can.

I therefore fail to see that to accept the virtues of rising personal consumption is in any way ‘unsocialist’, or will do anything in practice to lower the moral tone of society.

As soon as existing wants are satisfied, it is said, new ones will spring up in their place: the gap between possessions and desiderata never narrows: and rising personal incomes will therefore leave people just as dissatisfied as they are today.

No doubt the gap between possessions and aspirations is never fully closed. But because no saturation point exists, it does not follow that the gap is always constant.

Since the open advocacy of higher home consumption is sure to be resented and misrepresented in certain quarters, the qualifications must be explicitly set out.

First, I am asking that it be granted, not an over-riding priority, but simply the status of an important socialist objective.

The second qualification concerns the distribution of the additional wealth.

The socialist, by contrast, should favour a distribution according to a system of social priorities which will certainly require strict government intervention for its enforcement.

The Distribution of Wealth (I)

THE third distance factor to be considered is the distribution of wealth, that is, of the individual’s total command over economic resources, or spending power.

Inequalities of wealth may be considered unjust, first, if they stem from inherited property, and not from work. Secondly, large inequalities even of earned income may be thought unjust, either if they reflect not simply differences in ability but also differences in opportunity. Thirdly, injustice may arise if certain incomes are too generously treated by the tax system as compared with other similar incomes.

First, the unequal distribution of property is still the major cause of inequalities in spending power.

The second source of inequality is the distribution of incomes from work. Even after taxation, the spread from top to bottom is still about 20:1.

The high incomes are not genuine rents of exceptional ability, but artificial rents of a monopolistic character.

The third inequity is that the basis of British taxation provides only an indifferent measure of taxable capacity ; and the burden of taxation is therefore not allocated fairly between individuals .

As the Minority Report of the Radcliffe Commission pointed out, ‘the tax base lags increasingly behind true taxable capacity as we move up the income scale’.

The most important of these tax inequities, the exemption of capital gains, is intimately bound up with the first injustice discussed above, the unequal distribution of private capital.

The maldistribution of private property can be transformed in a number of directions. First, existing property can be transferred to the State by direct property taxation. Secondly, therefore, we need to increase the ratio of public to private property in order to ensure that more of these gains accrue in public, and fewer in private, hands. Generally, this requires that we should increase public savings – by encouraging the nationalised industries to make profits, and by running a Budget surplus: and limit private savings, mainly by high taxation of company profits.

Thirdly, therefore, we must limit the extent to which high (corporate) savings are reflected in an increase in the personal wealth of the rich.

The most obvious method of redistributing existing property is by death-duties. The first task of the next Labour Government in this field will be to reduce avoidance by a tax on gifts.

This distinction between income and property was always tenuous; and the argument was refuted once and for all by Sir William Harcourt, the author of the death-duties, in his famous Budget Speech of 1894.

We must therefore push on with higher property taxation, but accept, as a corollary, the necessity for simultaneous measures to discourage spending out of capital, and generally to encourage savings.

The socialist aim is the removal of extremes of wealth, not the reduction of all to the lowest common standard.

The Succession principle does less injury than estate duty to the saving motive, since bequests to the nearest relatives (widows and children) are more lightly taxed than other bequests.

Payment of death-duties in kind, which would be a form of gradual and piecemeal public ownership, would help to resolve the dilemma. The Government would need to establish a body of Death-duty Commissioners, analogous to the National Debt Commissioners.

The Distribution of Wealth (II)

FOR a steady advance towards equality, death-duties alone will not suffice.

An income basis of taxation therefore involves a bias in favour of property-owners, whose taxable capacity is under-stated as compared with those whose incomes are derived from work.

Such measures could take the form of a direct annual tax on property and/or a tax on capital gains.

The writers have usually assumed that anything called an annual capital or property tax would have very moderate rates, and would in practice, however assessed, be normally paid out of income.

Should the tax be assessed on capital or investment income?

A capital tax assessed on income would therefore not be a tax on capital at all, but merely a stiffer tax on unearned income. A regular tax which is to fall on capital must be assessed on capital. This raises the administrative problem of the valuation of private capital.

It would start, like the death-duties, only above a substantial minimum figure.

The Swedish rates, which rise only from 0.5 % to 1.8 % of capital.

There is one glaring deficiency, namely the exclusion of capital gains from the definition of income. Income is defined by economists as ‘the maximum value which [a man] can consume during a week, and still expect to be as well off at the end of the week as he was at the beginning’: that is, the net ‘increment of “spending power” or “economic power” in a period … the increase in the individual’s command over resources in a period’.

On these definitions, capital gains would appear to constitute income. They should logically, therefore, be taxed as income, as they have been in the United States for many years. There is no justification for leaving this huge accretion to private spending power untaxed, when incomes from work are treated so severely.

Capital gains are often realised in order to be spent, and it is well known that during a Stock Exchange boom luxury consumption is particularly heavy.

The introduction of a capital gains tax would permit a reduction in the level of corporate taxation.

The tax must be based on realised and not paper gains for overwhelming administrative reasons.

Realised losses should be allowed as an offset against realised gains (though not against other income), with provision for carrying forward. To reduce the administrative difficulties the tax should be limited, at least initially, to gains arising out of the sale of businesses, stocks and shares, and real property.

Socialists have no desire to penalise small savings, or enterprise and initiative; their aims are social justice and genuine equality of opportunity.

Power and Privilege in Industry

THE last two distance factors to be discussed are inequalities in the distribution of power, and in non-pecuniary occupational status.

The ‘mass-production world revolution’, it is said, has actually depressed the worker’s technical status at work.

The typical worker of the future will be not the robot figure on an assembly-line of Chaplin’s Modern Times, but the highly-skilled instrument-reader and repair-worker in a fully automatic factory.

However that may be, there is no disputing the second consequence of large scale: the tendency for decisions to be centralised, and power concentrated, in fewer and fewer hands.

Non-pecuniary status privileges are exceptionally widespread in British industry; and their persistence acts as a constant irritant.

This status inequality calls for action on several different fronts. It can be lessened, indirectly, by social service and taxation policy.

It will in practice be weakened as the educational and other changes discussed in earlier chapters diminish the natural class sentiment now so strong in Britain, so that the managerial classes lose their present ingrained assumption of social superiority. And it can be weakened by Trade Union action.

Workers in America are less suspicious of high profits and dividends, because they feel more certain that wages will obtain a generous share of any increase in productivity.

The greater industrial discontent in Britain does not, then, seem directly traceable to our industrial structure, so much as to our social system generally, the quality of management, and the absence of an explicit high-wage ideology.

There are some features of nationalisation, as so far practised, which may be positively bad for industrial relations. One is the pressure towards centralization. Another is the tendency to delegate responsibility for labour policy to an ex-Trade Union member of the Board, who has no experience or expertise in this specialised branch of management. A third is the generally low level of salaries as compared with private enterprise.

In Sweden, for example, ‘joint enterprise councils’ are widespread and effective. But they work only because both sides in industry take an enlightened interest in ‘enterprise economics’, and therefore take the whole business seriously.

It appears that greater industrial contentment requires three things.

• First, an attack on social inequality and class privilege generally.
• Secondly, a more effective assurance to the worker that he is not being ‘done out’ of wage increases which are his due.
• Thirdly, the spread of more enlightened management and Union policies.

Whether the Unions should give up their independence in order to participate in management.

The concept of ‘two sides’ in industry, and of divergent interests generally, is not a reactionary or obsolete one, but merely a statement of the obvious.

There would still be a conflict between workers in any one industry and workers generally, and between workers and employers in the same industry. There will thus always be potential conflicts between management and labour. And the workers ’ side must have an untrammelled Trade Union movement to defend its claims.

The Unions need to remain independent. They may well – indeed they must – exercise a growing influence on management.

The power of the Unions would be gravely impaired if they ceased to be an external, independent force, freely able to choose their tactics, without too many binding commitments.

If there are to be workers’ representatives on the Boards of industry, they should be chosen not by the Unions, but directly by the workers in each firm.

If we reject joint management, we are left so far with three minimum conditions for a reasonable distribution of power and status within industry.

• First, a more equal distribution of non-pecuniary privileges.
• Secondly, effective consultation at the point of production.
• Thirdly, the maximum Trade Union influence, though exercised from outside and not inside, at the national level of the industry.

Generally the Unions have contracted out of responsibilities other than the traditional one for wages and conditions.

The Structure of Private Industry

THREE further questions relating to status and power in industry remain to be considered. Would either social justice or contentment be improved first by a reform of company law: secondly, by an extension of profit-sharing: thirdly, by statutory dividend limitation?

It can hardly be denied that industry is in practice a joint enterprise in which management and workers participate as well as shareholders, and indeed participate rather more actively; and the law, by investing the shareholders alone with legal rights, does not merely fail to reflect the reality – it turns it upside down.

A century ago, industrial property-ownership fulfilled a vital economic function, being directly associated with active management. But to-day, over the bulk of industry, ownership and management have become divorced.

Dematerialized, defunctionalized, and absentee ownership does not impress and call forth moral allegiance. Eventually there will be nobody left who really cares to stand up for it – nobody within and nobody without the precincts of the big concerns.

There is therefore nothing to-day in the nature of investment or the function of the capital market which gives the investor any natural ‘right’ to sole legal control. Investment entails no social responsibility , and should carry no additional social rights beyond those, shared with all citizens, of protection against theft or confiscation. All it entails is an economic risk; all it is entitled to is an economic reward commensurate with that risk.

The most common proposals are that first the government, and secondly the workers, should have the right to representation on the boards of companies.

We are then left with the proposals relating to the legal position of the workers. First, it is suggested that the workers in a firm should become, if they so choose (and after a minimum length of service), legal members of the company, with the same rights as shareholders to receive financial information, and with some fixed proportion of total voting rights at annual general meetings. Secondly, the workers should have the right to elect a proportion of the Board.

The German Mitbestimmung Law gives one-third of the seats to the employees’ representatives.

The technical difficulties are manifest enough: the shortage of potential worker-directors of the right calibre – men combining a strong personality, some financial and technical knowledge, and ability in committee work.

What attitude, then, should the Labour Party adopt towards profit-sharing? The Conservatives seem suddenly to have discovered it as the new panacea for all our industrial troubles.

Profit-sharing might serve one of three useful purposes.

First, it may have some influence on the distribution of wealth.

Secondly, profit-sharing might be regarded as an alternative method of achieving the object of the Albu-Goyder reforms, namely to raise the legal status of the worker relative to that of the shareholder.

But thirdly, and in practice most important, profit-sharing may under certain circumstances increase industrial contentment.

While mildly welcoming, therefore, the spread of profit-sharing, I should much prefer the Unions to develop a more ambitious attitude to the wage-bargain, so that wages not only in fact obtained, but were clearly seen and known to obtain, a generous share of the benefits of rising productivity.

There can never be any scientific grounds for saying that an increase in net profits (even the residual increase after higher earnings have perhaps been paid to wage-earners) derives from a higher productivity of capital, as opposed to a higher productivity of labour or management.

A more equal distribution of industrial power seldom requires, or indeed can be obtained by, legislative change. It requires as an absolute condition the maintenance of full employment and a favourable political climate.

Trade Unions. If they press successfully – and they largely have the power to do so – for the equalisation of non-wage privileges, the spread of effective consultation, and ‘high-level democracy’ at the national and industry level, they can help to create a social-democratic atmosphere in industry.

Economic Growth And Efficiency

Investment, Savings, and Inflation

One can imagine a society in which the problem of production might reasonably be treated as secondary, because the standard of living was already so high.

Before the war, most socialists had visions of a similar state of abundance being quickly attained in Britain.

It was a world in which supply everywhere seemed to exceed demand.

It was thus not unnatural that socialists should repeat that ‘the problem of production is solved: only the problem of distribution remains’ – they were, after all, fortified by the authority of Keynes himself.

But to-day there are no such easy reserves waiting to be tapped. Employment could hardly be fuller than it has been since 1945; while the bulk of the population would not gain much materially from further redistribution. Improved living standards, or any other economic claims, can now be met only by higher production per head; and questions of growth and efficiency move into the forefront of matters to be attended to.

• First, we need more foreign investment to assist the rate of growth in the under-developed countries.
• Secondly, the relief of hardship and distress at home.
• Thirdly, the backlog of social investment. Hospitals , mental homes, new schools, slum-clearance housing, homes for old people, and the like.
• Fourthly, higher personal consumption.
• Fifthly, our balance of payments position is still precarious; and we need a larger export surplus.
• And, lastly, not only might a rise in manufacturing investment be a condition of accommodating all these claims, but a rise in certain hitherto neglected forms of non-manufacturing investment (e.g. roads) is an urgent necessity.

First, a high rate of capital formation is clearly a condition of rapid growth. It is an illusion to suppose that unemployment, because it (allegedly) strengthens incentives to work and the downward pressure on manufacturers ’ costs, is therefore necessarily beneficial to productivity.

Decisions about investment, in public as well as in private industry, are based on expectations about future demand, prices, and profits; and these in turn are influenced by the level of current demand and current profits.

The business community accepts the fact that prosperity is here to stay, not only because full employment will be maintained, but also because we have entered a period of rapid growth in personal incomes and consumption.

A guess for the next decade, it seems more likely that in a democratic, semi-egalitarian, full-employment economy of the post-war British type, investment incentives will remain buoyant, while on the other side the tendency will be towards high consumption and inadequate savings.

Stability is now almost as much threatened from the opposite direction; that is, by fluctuations in savings leading to periodic crises of inflation. Full employment is necessarily divided by only a narrow margin from inflation.

Under normal peacetime conditions, progress and efficiency require, amongst other things, the avoidance of periodic crises of serious excess demand (though it may be that a continuing mild inflation is inseparable from full employment).

The Problem of Private Profit

THE required level of total saving, whatever may happen in the field of personal or governmental savings, will certainly call for a high level of business savings, and hence for high profits in private as well as in public industry.

So long as we maintain a substantial private sector, therefore, socialists must logically applaud the accumulation of private profit.

The problem of profit is thus the central economic dilemma facing contemporary social-democracy; and attempts to resolve it will arouse profoundly traumatic emotions on the Left. We are here concerned with the economic role of profit in the sense of a surplus for accumulation. The role of profit as a source of accumulation became inextricably confused with the Marxist view of profit as ‘exploitation’.

Labour produces a total value greater than its current wage. In fact the emergence of surplus value, or profit, is in no way dependent on the conditions of capitalist production.

Economic growth depends on the setting-aside of some part of current output for the expansion or improvement of the instruments of production; that is, it requires the deduction of surplus value, and its use as capital for investment.

Marx never considered the possibility of exploitation in a socialist society, since he assumed on the one hand that the state would gradually ‘wither away’, and on the other that the transition to socialism would take place only after capital had already fulfilled its ‘historic function’ of developing the productive system to a saturation – point where further growth would be superfluous.

It remains true that capital creation must be a prime motive of economic activity in any developing economy; and this presupposes the creation of surplus value, i.e. the accumulation of profit.

The problem facing British socialists is therefore so to use our democratic institutions as to ensure that profit in the private sector is used primarily for re-investment, and not (either currently or ultimately) for distribution to private shareholders – is used, that is, mainly as a source of collective capital accumulation, and not as a form of personal income.

There are three possible approaches: through corporate taxation (i.e. to tax the profits themselves in such a way as to discourage high dividend disbursements), through personal taxation (i.e. to allow a free distribution of dividends , but to tax the dividends and, more important, the resultant capital gains, in the hands of the recipient), or through statutory dividend limitation.

The investment allowance, first introduced in the 1954 Budget. Whereas income and profits taxes are a positive tax on company savings, the investment allowance is a negative tax or subsidy on investment.

A Labour Government could encourage investment by raising the investment allowance, yet prevent either a fall in the total yield of profits taxation, or an increase in dividends, by simultaneously raising the rates of profits tax.

The second alleged danger of heavy business taxation is that it may adversely affect the supply of risk-capital, so that companies cannot invest as much as they would like for lack of the necessary finance.

Norway, which can boast the highest post-war ratio of fixed investment to gross national product of any country in Europe, has actually maintained a statutory limitation of dividends. Sweden, investing nearly 20 % of its gross national product and enjoying a rapid rate of productivity-increase, has had only a moderate rise in dividends and share values since the end of the war.

The whole spectacular post-1948 German expansion of output and investment was accomplished with only the bare shadow of a free capital market, and indeed with the whole financing of industry largely a matter of State dirigisme.

I conclude that the alleged ill-effects of high business taxation have been exaggerated in the past, and that ample counter-measures are open if they should materialise in the future.

There are two other possible methods. The first would be to transfer all or part of the taxation of the shareholder from corporate to personal taxation; the second would be the statutory limitation of dividends.

There is no evidence yet to suggest that we cannot run a mixed economy at a high level of employment and a healthy rate of growth, but without a progressive enrichment of the shareholder at the expense of the rest of the community.

There is no unique source of supply of new industrial capital, no unique position that the shareholder needs to occupy, and no unique level of property-incomes necessary for the growth of capital.

The Economics of Nationalisation

IN the 1930s, the central importance of nationalisation was taken for granted in the Labour Party. Nationalisation was desired partly for reasons specific to particular industries, that is, in order to control the use to which particular capital assets were put; and partly for reasons common to all industries, that is, because it was thought that ‘socialism’ was ultimately consistent only with the public ownership of all (major) capital assets.

• First, the Public Utility argument. It is a characteristic of certain industries providing essential services.
• Secondly, the Monopoly argument. Substitute public for private monopoly by means of nationalisation.
• Thirdly, the Basic Industry argument. There are certain commodities, used normally by a wide variety of other industries, on which the prosperity of the community depends.

These three arguments all relate to the essential structure of an industry, or its strategic position in the economy.

• The Efficiency argument, however, which comes fourth, has a more general application.
• Lastly, the Planning argument. Generally, this was based on the belief that the profit motive and the national interest must always be in conflict.

There were also the wider (and older) social arguments for the public ownership of all major industries. First, it was thought by some socialists that the profit-motive as such was ethically wrong, and could be eliminated only by nationalisation. Secondly, it was thought that harmonious labour relations and the creation of industrial democracy could be achieved only under public ownership. Thirdly, it was assumed that equality required the extinction of private incomes from property.

Indeed post-1945 experience in the planning field strongly underlines one of the main arguments of Part One, namely, that ownership is not now an important determinant of economic power. The Government has all the economic power it needs – the only question is whether it chooses to use it; and from this point of view the mere change in ownership did not always make a decisive difference.

We now understand rather better that monopoly, even when it is public, has definite drawbacks.

Perhaps the biggest change of view has occurred on the subject of large scale. Before the war, it was treated as axiomatic that, in the words of a typical and well-known judgment, ‘large-scale production, especially when conducted in large-size firms and plants, results in maximum efficiency’.

For the present, at least, it can hardly be denied that public-monopoly nationalisation, despite considerable achievements in certain exceptionally difficult industries, no longer seems the panacea that it used to.

There are no more public utilities (except for water), and no more industries (except for steel) which can be described as basic in the sense that coal or railways are basic.

Socialism, whether viewed in social or ethical or economic terms, will not be brought much nearer by nationalising the aircraft industry. A higher working-class standard of living, more effective joint consultation, better labour relations, a proper use of economic resources, a wider diffusion of power, a greater degree of cooperation, or more social and economic equality – none of these now primarily require a large-scale change in ownership for their fulfilment; still less is such a change a sufficient condition of their fulfilment.

Efficiency has little to do with ownership because in the modern corporation ownership has little to do with control.

The imposition of centralised monopoly control on an efficient competitive industry would certainly lead to a fall in efficiency.

The Forms of Public Ownership

‘We [nationalise]’, writes Mr. Strachey, ‘in order to extinguish the great unearned incomes which are to-day derived, not from anything that those who draw them do, but from what they own…. The real purpose of socialization is to secure the proper distribution of the net national product among those who create it.’ On this view it is more or less irrelevant in what order industries are taken over. The approach is wholly a priori.

It would probably be conceded that nationalisation had not so far made much difference to equality.

Nor was there much of a transfer in respect of new savings or capital gains.

The problem is then fundamentally one of the distribution of property: of how to redistribute existing property, both for its own sake and in order that future increases in its value may be more equally distributed.

It can be directly transferred to the State by death-duties, a tax on gifts, and a capital tax. The ratio of new public to private savings can be increased by Budget surpluses, heavy taxation of company profits, and allowing the existing nationalised industries to accumulate a surplus.

State enterprises should be as free to develop as private enterprises. They must be able to use their profits for new investment, to negotiate wages and conditions in the ordinary way, and to decide their price and output policies subject only to any planning controls which apply to the whole of the industry; to these, of course, they will be more than usually susceptible, and indeed a useful instrument for making them effective.

Private firms must borrow from the market; the State concerns should borrow from a public finance body.

The ideal approach, which would avoid both the element of compulsion and the charge of non-commercial motives, would be to establish a State investment-trust, provided with public funds but independent of the Government, with instructions simply to make a profit by buying, establishing, or selling productive concerns. Its choice of firms to acquire would be justified on clear commercial principles; and no question of compulsory, legislative discrimination would arise.

An alternative method, similarly non-compulsory and justified on commercial grounds, would be to encourage the horizontal expansion of existing non-governmental but socially-owned organisations.

The Co-operative Movement provides another possible vehicle of advance.

Even the Trade Unions, in certain other countries, indulge in competitive enterprise.

The ideal (or at least my ideal) is a society in which ownership is thoroughly mixed-up – a society with a diverse, diffused, pluralist, and heterogeneous pattern of ownership, with the State, the nationalised industries, the Co-operatives, the Unions, Government financial institutions, pensions funds, foundations, and millions of private families all participating.

We no doubt want more nationalisation than we now have. But I at least do not want a steadily extending chain of State monopolies, believing this to be bad for liberty, and wholly irrelevant to socialism as defined in this book.

What is unjust in our present arrangements is the distribution of private wealth; and that can as well be cured in a pluralist as in a wholly State-owned economy, with much better results for social contentment and the fragmentation of power.

The Role of Planning

Private business now finds it quite natural that Whitehall should intervene in the economy to a degree which would have been thought outrageous a generation ago. Indeed it constitutes a major victory for the Left, the significance of which is grossly underestimated by those with short memories, that the majority of Conservatives to-day would probably concede the right, indeed the duty, of the State to hold itself responsible for:

• The level of employment.
• The protection of the foreign balance by methods other than deflation.
• The level of investment and the rate of growth.
• The maintenance of a welfare minimum.
• The conditions under which monopolies should be allowed to operate.

Socialist views on planning have been similarly modified.

There has thus been, on both sides, a declining tendency to take up extreme positions; and the issue of planning (as opposed to the objectives of planning) is not now one of the fundamental differences between Left and Right.

Generally the issue now is not whether, but how much and for what purpose, to plan.

The main objectives of planning, as outlined in this book, are then a steadily rising level of investment, and a sufficient volume of savings and risk-capital to match it: a volume of home demand which does not pre-empt goods away from export: a situation in the labour market which does not give rise to a wage-price spiral: and an increase in the proportion of the national income devoted to social expenditure – all these to be achieved against a background of growing social equality.

The price-mechanism is now a reasonably satisfactory method of distributing the great bulk of consumer-goods and industrial capital – goods.

It follows that planning intervention on grounds of ‘superior knowledge’ will be justified only if two conditions are fulfilled. The Government must have an obviously clearer view of future demand than private industry. Even where this condition is fulfilled (that is, in the case of basic commodities whose required growth is broadly related to total growth), we need the further condition that Ministers should in fact accept the view of the central planners, and enforce it.

There are certain industries which require an exceptionally large amount of capital (and managerial skill) per unit of output; and these are normally the basic industries, whose expansion is a prior condition of expansion in the rest of the economy.

The other group of cases where intervention is often desirable is where private and social costs diverge – where, that is, the costs borne by, or gains accruing to, the community from a particular line of action are not fully reflected in the balance-sheet of the private (or nationalised) unit. This is the oldest of the economist’s justifications for state intervention.

An obvious example of this divergence is the location of new factories.

Another case where private cost fails to reflect the national interest is where the anticipated profit from an ‘essential’ investment is quantitatively insignificant to the individual firm, and scarcely worth the bother; yet, taking the whole of industry together, the total result of such investments would be of major importance.

How to ensure sufficiently high investment, exports, and social expenditure without inflation. That remains the essential role of planning.

The Future of Socialism

As our traditional objectives are gradually fulfilled, and society becomes more social-democratic with the passing of the old injustices, we shall turn our attention increasingly to other, and in the long run more important, spheres – of personal freedom, happiness, and cultural endeavour: the cultivation of leisure, beauty, grace, gaiety, excitement, and of all the proper pursuits, whether elevated, vulgar, or eccentric, which contribute to the varied fabric of a full private and family life.

Society’s decisions impinge heavily on people’s private lives as well as on their social or economic welfare; and they now impinge, in my view, in too restrictive and puritanical a manner.

But now we surely need a different set of values. Permeation has more than done its job.

The Webbs have won their battle, and converted a generation to their standards. Now the time has come for a reaction: for a greater emphasis on private life, on freedom and dissent, on culture, beauty, leisure, and even frivolity.

The level of material welfare will soon be such that marginal changes in the allocation of resources will make little difference to anyone’s contentment.

About Crosland from his wife

He was a pluralist. He wanted state ownership, private ownership, the co-operative principle to co-exist. His entire philosophy was designed to widen free choice, not narrow it. In the blood of the socialist, he asserted, ‘there should always run a trace of the anarchist and the libertarian, and not too much of the prig and the prude.’

Ability was a chance factor, he wrote, not something earned; it should be rewarded only while it was useful to society, not for its own sake.

He acknowledged his belief that a definite limit exists to the degree of equality which is desirable…

Arguments against abolishing fee-paying schools:

• A democracy cannot forbid people to found schools and charge for going to them.
• In any case, outright abolition is unenforceable: parents and teachers would devise a way to get around the law.
• Further waste of resources: many teachers at, say, Eton and Winchester, would emigrate.

The state sector must be strengthened so that it can match all but the very best fee-paying schools. Hence teacher supply is one of my priorities.

Suddenly, altogether bored by having to give this exposition, he drew it to a close. ‘Once the state system is strong enough to compete, if parents want to send their children to some inferior fee-paying school for purely snobbish reasons, that’s their affair. Why should they be denied the freedom to spend their money buttressing their egos if that’s what they want?’

Those who came into the Commons excited by The Future of Socialism looked about for its author. He had identified the issues, then pointed the way; as the world changed, he re-charted the course to reach the goal.

They wanted to rally round him, but he didn’t present himself to be rallied round.