Reclaiming Public Ownership

Making Space for Economic Democracy

Professor Andrew Cumbers

• Publisher: Zed Books
• Year: 2012
• ISBN:
  9781780323701
• Edition: 1
• Topic: Economics
• Subtopic: Political Economy
• Index: Economics

*** Winner of the Myrdal Prize for Evolutionary Political Economy *** The last few years have seen the spectacular failure of market fundamentalism in Europe and the US, with a seemingly never-ending spate of corporate scandals and financial crises. As the environmental limits and socially destructive tendencies of the current profit-driven economic model become daily more self-evident, there is a growing demand for a fairer economic alternative, as evidenced by the mounting campaigns against global finance and the politics of austerity. Reclaiming Public Ownership tackles these issues head on, going beyond traditional leftist arguments about the relative merits of free markets and central planning to present a radical new conception of public ownership, framed around economic democracy and public participation in economic decision-making. Cumbers argues that a reconstituted public ownership is central to the creation of a more just and sustainable society. This book is a timely reconsideration of a long-standing but essential topic.

PART ONE

Public ownership and its discontents

1 | Public ownership as state ownership: the post-1945 legacy

What this war has demonstrated is that private capitalism – that is, an economic system in which land, factories, mines and transport are all privately owned solely for profit – does not work. It cannot deliver the goods. (Orwell 1982 [1941]: 73)

Introduction

In late July 1945, as the Second World War drew to a close, the British people rejected their wartime leader, Winston Churchill, and his Conservative Party and presented the Labour Party with a historic landslide victory and its first ever majority government. Under the new prime minister, Clement Attlee, Labour embarked upon the most radical and left-wing programme of economic reform of any British administration in history. With its commitment to tackle the poverty, deprivation and unemployment that had plagued the country in the years before war, Attlee’s government embarked upon massive and unprecedented levels of state intervention in the economy. The centrepiece was an extensive programme of nationalization to take key sectors of the economy away from the oligopolistic private interests that the Labour Party and its supporters viewed as responsible for the economic anarchy of the interwar years.

The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain result of the concentration of too much economic power in the hands of too few men. These men had only learned how to act in the interest of their own bureaucratically-run private monopolies which may be likened to totalitarian oligarchies within our democratic State. They had and they felt no responsibility to the nation. (Labour Party 1945: 1)

For many on the British left, this was the moment when the long march along a parliamentary road to socialism took a massive step forward.

While the nationalization programme pursued in Britain reflected particular national concerns, it represented part of a much broader international shift in opinion away from the market as the key mechanism for economic development and towards the state and the use of economic management, planning and public ownership. For its part in fostering the economic, social and political conditions that had culminated in two world wars and a worldwide depression, the global capitalist system was firmly discredited. Additionally, through the contribution of the Soviet Union to the eventual defeat of fascism, the alternative economic model of communism and centralized state planning – whatever the developing misgivings about Stalinism – was firmly in the ascendant.

Laissez-faire (free market) capitalism was entirely discredited, to the extent that even some of its most avid and influential proponents severely doubted its ability to continue functioning in the aftermath of war. As Joseph Schumpeter, Professor of Economics at Harvard University, solemnly noted in 1943: ‘The all but general opinion seems to be that capitalist methods will be unequal to the task of reconstruction’ and it was ‘not open to doubt that the decay of capitalist society is very far advanced’ (Schumpeter 1943: 20, cited in Armstrong et al. 1991: 6).

Alongside the diminished standing of capitalism, the accompanying process of late nineteenth-century European empire-building was also unravelling with increased demands for political and economic independence among the colonized peoples. As Armstrong et al. put it in their authoritative account of the economic and political conditions of the time:

Much more serious for the long term prospects of the capitalist system than the physical destruction was the challenge to its effective functioning as a social system. In the defeated countries the war had discredited the capitalist class: its association with the horrific consequences of fascism and war had undermined its authority in the political sphere and industrially … Everywhere, with gathering momentum, people were demanding radical social change.

Moreover, it was not only the internal structure of the capitalist societies which was in turmoil. The old hierarchy of nation states was overturned, the continued domination of the colonial order was under challenge, and capitalism was confronting a hostile social system, that of the USSR, whose prestige had been enormously increased by the war. (Ibid.: 6)

In almost every Western developed economy trade unions and workers were successful in building strong mass organizations in the immediate aftermath of the war, while varying shades of anti-capitalist politics were in the ascendant. Socialist and communist parties made substantial advances in the first elections in France and Italy, in part boosted by the significant role they had played in the wartime resistance to fascism, and in the defeated countries, Japan and Germany in particular, workers were already occupying factories and large corporations, calling for economic democracy and workers’ control (ibid.).

While the more radical groundswell of the immediate post-war years was pushed back in North America and western Europe, as elements of the old order began to reassert themselves, and the geopolitical framing of the Cold War provided succour for embattled capitalist elites and moderate labour leaders to water down demands for more radical change, nationalization and state intervention became important parts of a new international economic policy paradigm which has among other labels been described as Fordism, the Keynesian Welfare State, Organized or Regulated Capitalism.

Central planning and nationalization were of course already in place in many parts of the world – notably in Latin America and the Soviet Union following various ‘revolutions’ – but it was in the period between 1945 and 1979 that they became hegemonic. They were also to the fore among newly independent countries throughout Asia and Africa, where they became an important part of a state developmentalist model in the 1950s and 1960s. Many countries rejected capitalism as part of the imperialist legacy, and turned instead to the Soviet Union for an economic model to imitate. Others at a more pragmatic level recognized that the absence of an indigenous capitalist class required the state to take on the mantle of economic development and entrepreneur (Chang and Rowthorn 1995). Ironically, even many of those countries that were to fall under the umbrella of US hegemony during the Cold War, notably South Korea, Singapore and Taiwan, used nationalization and state planning as integral components of national development agendas.

The British experience with nationalization

Between 1945 and 1951 vast swathes of the British economy were transferred out of the private sector and into public ownership. The nationalization programme of the Labour government extended to include the Bank of England, the civil aviation industry, the entire coal and rail industries, and public utilities such as electricity, water and gas. The final and most controversial nationalization was the iron and steel industry, eventually completed just after Labour left office in 1951 and subsequently reversed by the incoming Conservative government. Referred to at the time by the government as ‘socialization’ (Saville 1993a: 38), nationalization brought around two million workers into new public organizations so that by 1951 the public sector (including local authorities) numbered around four million; around 18 per cent of the total workforce (ibid.: 37–8). Significantly, though, apart from the Bank of England, there was no attempt to nationalize the wider financial sector or redirect its activities towards a programme of industrial modernization.

As noted earlier, these changes need to be framed within the broader political and geopolitical context. The experience of the Great Depression and the war had fomented popular demand for radical social change in Britain. Even many Conservatives accepted the need for economic and social reforms in the post-war years,¹ and until the 1970s there was a broad consensus between Labour and Conservative governments regarding the pursuit of full employment and the role of the state in intervening to amelioriate trade cycles and boost the economy. Many sections of private business were supporters of limited nationalization, especially of industries such as coal and the railways, which were chronically inefficient prior to the war. Nationalization was expected to deliver improved performance and the potential for lower prices in key sectors that would confer advantages on the rest of the economy (Armstrong et al. 1991; Saville 1993a).

In these circumstances, the new Labour government was responding to a broader mood for change within British society, rather than having its own deeply rooted blueprint. While the Labour Party was committed to an agenda of social justice and redistribution of income, to the extent that the 1945–51 government founded a national health service and welfare state – considerable and lasting achievements which have rightly been widely acclaimed – there was a marked absence of a deeper socialist vision with regard to the economy. In this sense, the radicalism of the 1945–51 Labour administration should not be overstated.

Neither socialization nor modernization There was certainly no profound ideological or theoretical perspective informing government thinking (Saville 1993b). If there was a deeper motivation, beyond the need for some form of government intervention to rebuild an economy shattered and largely bankrupted by five years of war, it was an economic modernization agenda rather than a socialistic one. Labour Party pamphlets and documents in the 1930s were full of the need for national economic modernization and productivity agendas as a critique of the failure of private interests in the face of increasingly stiff competition from the United States, Japan and Germany (Fyrth 1993). In many sectors of the economy, private cartels were making monopoly rents² without making investments in new technologies and methods, while unemployment had remained high right up until the outbreak of war. Comparisons with US production methods by the newly created Anglo-American Council on Productivity (under Stafford Cripps at the new Ministry of Economic Affairs) in 1947 revealed strong American advantages in almost every industry (Saville 1993a). Nationalization, allied to greater strategic planning of sectors, was therefore considered a more effective means of securing economies of scale and the necessary modernization policies to make British capital competitive in world markets.

While some on the left were influenced by Oskar Lange’s more radical vision of market socialism (where worker-owned enterprises might exist within an economy centred on the price mechanism), such radical agendas did not penetrate the upper echelons of the Labour establishment (ibid.). Although the party referred to its nationalization programme as ‘socialization’, this was largely a PR exercise for public consumption and belied the lack of radicalism underpinning nationalization either from a socialist or capitalist modernization perspective. The government was deeply suspicious of anything remotely ‘syndicalist’ that might provide more grassroots or shop-floor representation and influence on the councils of the nationalized industries.³ While intellectual figures such as Evan Durbin, Barbara Wootton and the Webbs were advancing radical agendas around socialist planning, even these figures set their faces against more radical proposals for worker ownership or economic democracy (Cunningham 1993). Despite the famous Labour Party Clause 4 commitment to ‘common ownership of the means of production’, it was clear that it was the existing state establishment which was to be entrusted with the management and control of public ownership rather than ‘the people’ themselves. Although there was labour representation on most of the new national corporation boards, this usually came from the trade union establishment and right-wing leadership rather than directly elected worker representatives; for example, in the case of the National Coal Board, successive National Union of Mineworkers general secretaries (even under Conservative governments) were board members. In some cases, former trade union leaders even became chairmen of nationalized industries, such as Sir Joseph Hallsworth (NCB) and Lord Citrine (British Electricity Authority) (Fishman 1993).

At a more practical level, there had been little discussion or detailed thinking either about the way the different nationalized industries should be organized or what detailed criteria they should be judged by. Manny Shinwell, for example, the new minister for the coal industry, started with what he admitted was as ‘an empty desk’ (cited in Nove 1983: 168). The government opted for what has become known as the ‘Morrisonian’ model of nationalization.⁴ The large centralized national public corporation, along the lines of the BBC – at arm’s length from government control but at the same time providing no effective voice in decision-making for either workers, consumers or user groups – became the main working model. Morrison’s model drew upon his own experiences before the war in setting up the London Passenger Transport Board (in 1931), where his emphasis had been upon the importance of a ‘public corporation run by business and expert interests. Distance from local authority or government interests was even seen as a virtue’ (Saville 1993a: 44). The lack of creativity or imagination surrounding the government’s plans and its willingness to defer to established interests became particularly striking characteristics of the nationalization process as it unfolded.

Despite the government rhetoric, and subsequent criticisms from the right (see Chapter 3), nationalization altered remarkably little in the political economy of the United Kingdom, either in switching the country on to a new growth and modernization trajectory, or in changing the dominant power relations within the economy. Regarding modernization, while there was a clear will to introduce new management methods and develop more strategic planning agendas, the new government lacked the willingness to fundamentally challenge the private business lobby or the ability to reorganize the machinery of the main economic ministries (particularly in challenging the dominance of the Treasury and financial interests) (Cunningham 1993).

In comparison with other European countries, where the prestige of the ruling business and political classes had been severely damaged by the war – such that economic policy agendas had explicit political motivations that were directed against business interests that had colluded with fascism (see below) – the British ruling class, though weakened by the war, remained strong and intact in the machinery of government and industry (Armstrong et al. 1991). The wartime government – which had involved more state control and eventually the development of a planned economy – had been a coalition in both the political and economic senses (including representatives of business and labour). Most of the industry boards set up to coordinate the war effort came from private industry, the civil service and the universities and remained largely in the same hands after the war (Saville 1993a). To take one important example, the Capital Issues Committee, established during the war to administer and regulate government borrowing for investment through the capital markets, was staffed by seven representatives from private industry (bankers, industrialists and stockbrokers) and one from the Treasury (Saville 1993b: xxix). Such relationships also characterized many of the new national planning boards and corporations during the 1945–51 period (Rogow and Shore 1955).

The civil service also continued to be staffed by elite groups, while many of the leading Labour politicians were themselves from an upperclass background.⁵ Those from a working-class background, such as Ernest Bevin, were either to the right of the party or, in the case of Manny Shinwell, the minister in charge of coal nationalization, showed a surprising complacency and lack of commitment to economic democracy (ibid.).⁶ One of the few on the left who might have argued for a more radical stance, Nye Bevan, had his hands full with th...

Table of contents

• Cover
• About the author
• Title
• Copyright
• Contents
• Tables and figures
• Acknowledgements
• Introduction: an unexpected guest – the return of public ownership
• Part One Public ownership and its discontents
• Part Two The return of public ownership
• Part Three Remaking public ownership
• Conclusion
• Notes
• Bibliography
• Index