Socialise the National  Income

The Next Step to Socialism

The standard of living of the working class must be raised immediately to the level enjoyed by the middle class. This is required, no merely for humanitarian reasons, but to remove the brake from the wheels of British industry and let it run freely and develop infinitely. The present system of distributing wealth, whatever merits it possessed in the past, now blocks industrial progress. It can produce the goods but cannot deliver them. The accumulation caused through inadequate distribution brings about a slowing down of production.

We have unemployment, low wages, a big dole bill, glutted markets, starving people, distracted shopkeepers, struggling capitalist, heartbroken managers, no peace in the present and little hope for the future. Any man who thinks he can descry the faintest shadow of a silver lining in the industrial outlook is hailed as a national prophet and his portrait embellishes the daily Press.

Forbidden Fruit.

It is difficult to stand in present circumstances and believe that we are the heirs of all the miraculous improvements of previous ages. Compare our position with that of the people who lived a century or two ago. To light a fire they laboured with flints and tinder. We possess the miracle of the matchbox. With electricity we spin, weave and sew. The telegraph supplants the leisurely courier. We speak to America more easily than we did with the next street. Even the thundering express that superseded the stage-coach is now beaten by the aeroplane. The coal-cutters and steam navvy we are familiar with, and the electrical working man is knocking at our door. In agriculture, where relatively we have made least

progress, we make use of the mechanical reaper and binder, the threshing machine, the milker, the churner, the Ford tractor, the scientific selection of seeds and chemical fertilising. In a word we enjoy all the means of creating a modern Garden of Eden, but, unlike Adam and Eve, we starve in the midst of plenty. To the majority of the people, most fruit is forbidden fruit. The country which can produce sufficient to maintain all its people in comfort need have no poverty. If people willing to work are in poverty, it must be due either to defects in the economic organisation of the country or a deliberate penal policy.

I do not believe that any section of the British people have a set purpose of imposing permanent material poverty on their fellows through pure malevolence. If such ogres existed, society would have them locked up. And yet isn't there an assumption of an evil streak in human nature when prominent statesmen make their appeals for goodwill in the fixing of wages? When we pray to God to soften the hearts of employers, we assume that they are severe by a deliberate act of will. They could be good if they would. But this is not so. They are almost as powerless as their victims. If malevolence on the part of employers were the root cause of poverty, we should meet the problem by holding National Days of Prayer at frequent intervals. The church would be working seven days a week on this job. The unemployed would spend their days in organised intercession. The Archbishop of Canterbury would be our leading statesman.

The charge of deliberate malevolence is no more true than other common charges. Leading capitalists attribute our industrial difficulties to the slackness of the workers, and Labour leaders often put the blame on the inefficiency of our employers. But British workers are not slackers and British em

ployers are not incompetents. Under any system that might be adopted, the industries would depend for management on those who manage them now and for workers on the present working class. It is open to anyone who thinks he can run the mines or steel works or shipyards more competently than they are being run to go in and show how. If he succeeds he will become a millionaire. It is competitive capitalism and not the capitalist, that has failed.

A Tottering System.

Let me show how the system has failed. The view has always prevailed that if we looked after the production of goods the consumption of them would look after itself. No one ever reasoned how it would. It was simply regarded as a law of nature. There was a hazy idea that every improvement in production would lower prices and automatically expand the outlet. People would buy more since more was being produced and goods were cheaper. Our industrial system is based on this belief. The system is tottering because the basis is unsound. It is probably true that when by an improvement in production the output of an article is increased per unit of labour employed, the real income of the workers is generally raised. But it is less true that the percentage of the selling price of the article now paid on/ wages is less. The result is that the workers can only afford to purchase under the new conditions a smaller precentor of their output. A fall in the price of a commodity is immediately followed by a corresponding fall in the price of the labour to produce it. So generally speaking the quantity of goods the wage-earner can purchase is not substantially increased. Our industrial system is tottering in Britain first because this is the most highly developed industrial country.

The system has reached its limit here earlier than else

where. It differs from America, France, Russia, and other countries in the stage of its industrial development. To a large extent it scrapped its agriculture and other pursuits and converted itself into a great workshop to supply the world with manufactured goods. For more than half a century it held unchallenged supremacy, enjoying almost a monopoly. During this period it became, as might be expected , the wealthiest country in the world, and this notwithstanding the fact that a large portion of its people were continually submerged in poverty.

The question naturally arises, Why is a continuance of this state of affairs no longer possible? The explanation will be found by examining briefly how we dispose of the goods we produce. Before doing so, I beg to submit that no country can produce goods, or import goods in exchange for its own products, at a faster rate than it can get rid of the goods. If Britain could produce ten times as much clothing as it does at present, production would still be confined to the amount of clothing purchased. If ten times the amount of food now imported from abroad were available, no importer would bring to this country more than he could reasonably expect to sell. Goods are disposed of mainly in two ways-for immediate or early consumption by the community and for investment, as capital, in the production and distribution of fresh goods. Food, clothing, houses, facilities for education and pleasure, etc, are of course, in the first category. New workshops, mills, mines, railways, etc, are in the second. I would call the second class surplus goods. The size of the outlet for the first class is determined by the extent to which people have the power to buy all the things they desire. At present only a few people have this power in full. The great majority are short of purchasing power.

No addition to the incomes of those now in a position to order all they want would induce them to order much more, but every increase in the incomes of the great majority would improve demand and stimulate trade.

Industry Fully Developed.

In the developing days of this country there was a huge outlet for goods of the second class that is now closed. The development itself was the outlet. Just think of the labour required for the construction of our network of railways and for the production of the material used therein. Let your eye glance over the industrial map of Britain. See the mines, docks, mills, warehouses, stations, sheds, shipyards, shipping fleets, foundries, workshops and a thousand forms of property. Then think of the outlet for materials and labour that these provided. In other words, consider the boom in industry we would have if the map was now blank and had to be dotted with all these works.

The development supplied a store for surplus goods. They were the working capital of the country. Every step in development increased production and now this has happened. Just when production has become most intensive this particular outlet is shut with a bang The country is almost fully developed. It has all the workshops it needs. The store is full. Any development by electricity schemes will not absorb goods to a great extent while adding vastly to our power of production. Nor will the maintenance or extension of existing plant. We must find a fresh outlet even greater than the one now almost closed, because the potential output is now much larger.

It is generally assumed that if we could somehow or other increase our foreign trade, an adequate outlet for our goods

would be found. But, as already indicated, the extent of our foreign trade is governed by our home market. Exports pay for imports. Generally speaking, the more we import the more we export, the less we import the less we export. If we could export goods for investment against which we did not immediately import foreign goods, the competitive system would obtain the same temporary relief as it did from the original development of our own country. If, for instance, we were allowed to plant Russia or China with workshops and railways as we did Britain during the nineteenth century, that country would be a storehouse for our surplus goods. But when the foreign factories were completed and began to pour out goods for us, the problem of a market would again confront us, only magnified one hundred-fold. The demand for goods caused by the building of the factory would cease and on top of this stoppage, the factory would add to the output of goods.

Lost Foreign Trade.

Instead of Britain being allowed greater scope for developing distant countries, the tendency is all the other way. Most countries are rapidly learning to build their own workshops and effect their own development as we did here. Every country is inclined to become its own storehouse. We have thus reached the time when goods have to be produced mainly for immediate consumption. I am not suggesting that everything to be produced in this country must be used here. We must import a large part of our requirements, and to pay for this we must export things which we make ourselves. There is much confusion of thought on this point. Most people imagine that in foreign trade we get rid of goods as completely as when our people purchase them for their daily needs or we use them in, say, making railways. There is all the difference in the world. When

we made �100 worth of rails to be used for Britain's first railway, no goods came into the market in return. But when we sell �100 of rails to Russia we expect to receive �100 of foodstuffs in return. Foreign trade is merely a system of exchange. Another country sends us the surplus of its particular goods in return for the surplus of our particular goods. We take an article from Britain's stock and put in its place a foreign article. The stock itself is not reduced. The stock is only reduced by what our own people purchase. The less foodstuffs they purchase, the less food we will import. The less food we import, the less rails we will export. And the less rails we export, the less employment there will be. The purchasing power of our own people is the determining factor in our home and foreign trade. We cannot produce beyond it. We cannot import beyond it. It is the regulator of our national industry and commerce.

Act Now-or Catastrophe.

While no other country has reached our advanced position, America, Germany, and others are moving rapidly towards it. If the entire industrial world reached it, before dealing with the difficulty of distribution it creates, we might be plunged into universal catastrophe. If Britain does not deal with its difficulty now, it must rapidly decline and ultimately be submerged in the deluge.

The most generally accepted alternative to our policy is to continue competing amongst ourselves, and as traders in the markets of the world. These markets are becoming more and more limited. Every improvement in production that is not accompanied by a corresponding increase in purchasing power, limits them further. The defenders of the competitive system say we should reduce our workshop and transport costs so as

to sell goods more cheaply than the American, the German, or the Japanese in these ever limiting markets.

What reduction in cost is open to us that could not be adopted by our competitors? If we invent a new machine or a new system of workshop organisation enabling us to get two nails for the wages we now pay in getting one, won't that new machine or that new system be available to our rivals next day? Cannot our new electricity schemes be equalled by their new electricity schemes? And if we reduce wages cannot they reduce wages? And when we all reduce wages won't the people have less to spend? And when they have less to spend won't the market for goods be less than before the cycle of wage-reduction began? There is no road that way. We must make the market larger and larger by enabling the workers to buy more and more.

The Power of the Savage.

A well-meaning employer engaged in competitive rivalry with others could not raise the purchasing power of his workers to the level now required to save industry. In the limited and competitive market he who produces most cheaply can undersell his rival, and as there is no room for both, the good man will die first. Nor could the employers acting collectively in a particular trade raise the purchasing power of the workers in that trade far beyond the standard paid to a similar class of workers in another trade. We could not pay scavengers �6 a week while miners were paid �2. Who would be a contented miner under such conditions?

The wages in our exporting industries, if fixed by competition must be controlled by the lowest wages paid for similar work in any part of the world. The skilful savage will determine the living conditions of the civilised British workers. It

is a system which in its very nature must bring down civilisation. Civilisation, in self-preservation, must organise to destroy this system. Britain must choose now between an earthly heaven or an earthly hell.

We propose to end now the competitive system of fixing wages and prices by the only way in which it can be done. It is idle to fix wages without controlling prices, while leaving wages to be fixed by the principles now in operation. We are familiar with the fact that wages are mainly determined by the cost of living. The war taught us this at least. It was plain to many people before the war. When American cheese sold at fourpence a pound in Lanarkshire the miner's wages was 3s, 6d, a day. By 1913 American cheese had risen to eightpence a pound and the miner's wage was 7s, a day. During the war the price of the cheese went up to 1s, 2d, and there was a corresponding increase in the wage of the miner. Labour is a marketable commodity. In the competitive system, as the price of other commodities rise and falls, so does the price of other commodities rises and falls, so does the price of the labour required in their production. And it follows from this that a cheapening of goods does not necessarily mean that the wage-earners will buy more of the goods. If they did, the necessary market for increased output would be found and the competitive system could be continued.

We must deal with wages and prices simultaneously. An increase of wages must be a real increase, that is, it must enable the worker to buy more goods.

The Bishops and the Baldwins.

And we must abandon the old idea of dealing with each industry or group of people separately. All the bishops and

Baldwins in the world could not, out of coal alone, in a competitive system, obtain a decent standard of living for the miners. No one contended during the recent dispute that the men weren't entitled to a decent standard of living. Everyone deplored that it was impossible to grant it to them. And the plight of the miner will soon be that of every large section of workers in the country.

What is the new conception that we wish to put in place of the old? It is that now, even with privately-owned industries, Britain should be treated as a National Workshop. No industry should be regarded as self-contained. Every industry must be looked upon and treated as a department of one workshop. The printer, the publican and the coal-miner will be engaged in separate departments of this national workshop. Each department will be judged by its national utility. The capacity of the nation as a whole, and not of what we now call an industry, will determine wages. We must stifle the parrot cry that each industry must "face its economic facts," even to the extent of suicide, and that the workers in it must be content to receive as wages the cash value, in a competitive market, of the things they produce, after allowing a reasonable return to the capitalist.

The Scavenger and "Economic Facts."

When we come to picture Britain as a nation and as one workshop we can see the folly of this sectional policy. There is scarcely a large business in the country in which there is not an essential department which, taken by itself, is unprofitable.

But the firm wisely treats its business as a whole. If we look beyond privately-owned concerns we see this new idea at present in operation. We do not ask the scavenger to face the economic facts or tell him that his wages will be fixed by the

cash product of his labour. Nor do we ask the policeman to

rely entirely for his income on what is obtained in fines from the weekly "drunks." We do not ask the soldier to live on his dead or the navy to live on the wind. The school teacher's income would be lower than the coolie's if he had to "face economic facts."

We are only suggesting that the same principle should be applied to fixing wages in privately-owned industries as now operates in national and municipal services.

WE are frequently told that if all the national income were equally distributed it would only add a few shillings a week to every worker's wages. This argument is quite irrelevant. We are not discussing how much we are producing but how much we are prevented from producing. No one has made a reasonable estimate of what the national income of this country would be if all its workshops, all its managers, and all its workers were fully employed. During the war we discovered large reserves of untapped labour waiting on the call but excluded from employment in a competitive system in which work is "scarce." Any capable industrial manager will tell you that if his market for goods were guaranteed and he could put all his brain-power into improving his machinery and his organisation, his output would benefit enormously. This national asset is now being lost.

Accept-or Starve!

The directors of an industry to-day fix the selling price of goods, the wages, and the salaries of that industry. They are interested parties. One man may thus have power to determine how the wealth produced by a thousand persons is to be distributed. There is nothing just or democratic in this system. It

is based on selfishness. For smooth working it requires a community of servile wage-earners and a few autocratic owners. The workers have little or no voice in fixing their standard of living. Capitalism has just demonstrated its power to defy and defeat the most powerful Trade Union in an industrial struggle. The policy of negotiation and conciliation now being strongly advocated is farcical. How can men with no power of resistance be free men in a conference room? However courteously the terms of the employers be submitted both sides know that these terms must be accepted by the workers. The alternative is starvation. The directors of the State will fix incomes tomorrow. They will, or should be, disinterested parties. At worst they will be the representatives of an interested majority in place of interested individuals. All workers by hand and brain will have a voice in the selection of the State directors. Under the new system the worker's political power will extend to his industrial conditions. He will not merely determine, by his vote, his relations with the colony of Kenya, but to a large extent his own domestic circumstances. He will be economically as well as politically enfranchised. He will have a voice in the price of his tea as well as in the tax on his tea.

The State department which fixes wages and prices will, of course, have a big say in deciding what is work of national importance.

Many occupations which are now extremely profitable to those engaged in them, but which add nothing in substance to the national wealth, will be scrapped and the people engaged in them released for additional useful production.

A Guaranteed Market

In this way also our national industrial efficiency and na

tional income will be considerably augmented. The sound and sensible nature of the policy is bound to attract support even from many intelligent capitalists. They will recognise that a guaranteed market more than compensates them for conceding to the State the control over wages and prices which is essential to the creation of the market.

The policy will involve State regulation of imports and exports. The need for this is largely recognised now, even in capitalist circles. Many leading capitalists recognise the national value of a system of licences for imports and exports.

We will import only what we cannot easily produce at home and export the things we can turn out most cheaply. But just as some essential, though seemingly unprofitable departments of our national workshop will require national aid, so it may be necessary to assist our exports by lowering the selling price of certain commodities abroad to compete with cheap labour in other parts of the world. Thus the burden would be borne by the whole nation instead of as now by the workers in the particular department. No doubt one of the first steps in the exercise of this new state management will be the national control of credit. There is now a great demand for this among manufacturers. The power of the banker over industry is strengthening daily. The competitive system forces the banker to be the brakesman of industry. He guarantees a certain return to his depositors. He must invest their deposits where they will bring a large enough return to pay interest to the depositors and a profit to himself. The investment must be in one form of property or another, maybe in mines, railways, house property, cotton mills, or Government stock. He has learned

from long experience that a glutted market, uncontrolled, may lead to a fall in prices that is disastrous to sellers. This happened frequently during the latter half of the nineteenth century. And he learned this also; that a collapse in one trade weakened prices in all trades. A sudden collapse in the price of ships reflected itself in the value of buildings. And a collapse in cotton prices reduced the value of railway stock. Every such collapse affected the value of his investment. His return from it was less, but his obligation to the depositor was fixed and binding. So he set himself the task of reducing the possibility of such an injury to his interests. Combine followed combine, until now the control of banking is really in very few hands.

Puppets of the Bankers.

Industry depends very largely on the goodwill of the banker. He creates money for industrial purposes, or withdraws it, as he desires. If he sees that the demand for goods is likely to equal the industrial output he is generous with credit. If the output appears likely to exceed the demand, he withdraws credit. The so-called captains of industry are more and more becoming puppets of the bankers. No nation in its senses would continue in such harness. Under the new system production will be controlled by the nation and not by a few financial magnates. Unwilling unemployment will be as rare as it was in war time. When the purchasing power of all the people has been raised to the highest level possible, there will be a demand for the labour of all. Britain's homes will be Britain's best market. At present we don't ask the unemployed to face the economic facts; we pay the nationally regulated incomes for idleness.. We are afraid to let them produce goods. Among all the possible schemes discussed as a mean of removing unemployment there is no proposal to put the unem

ployed to making of furniture or boots or clothing. And yet these are things largely and urgently needed by the unemployed people themselves. We set them to cut roads, or make drains, or playgrounds, or anything that will not bring goods into the market. Why? Because, even without their labour, the market is already glutted with goods, and they would only add to our embarrassment. In a blind way we recognise that what is required is more consumption, not more production. But under the new system there will be no bounds to the purchasing power of the people except their power of efficient, organised production. Limited consumption now means limited production. Unlimited consumption will lead to unlimited production. Under this policy nationalisation will take its proper place. After all, its real objective is improved production. Our problem to-day is not one of production. The improved production will become necessary and possible when we have removed the barrier of poverty which obstructs it now, and the value of nationalisation will then become obvious.

Mr. MacDonald's Warning.

Nationalisation of key industries before the competitive system of fixing wages and prices is abolished might easily worsen the condition of the workers. Complete nationalisation of these industries one by one and by Parliamentary procedure must take a long time. No one who understands the difficulties in the way would say that even with extraordinary political good fortune it could be accomplished in less than forty years. This is probably why Mr. MacDonald in a recent speech warned the workers not to expect too much in the way of an improved standard of living from the next Labour Government. If they are to wait patiently until industry has been completely organised on the basis of national ownership they need not expect any substantial relief in our time. And it is

difficult to see how, if the competitive system of fixing wages and prices were to endure, poverty would be abolished even under national ownership. At any rate, during the period of transition the workers would have a trying time.

The Example of Electricity.

The Electricity Bill recently placed on the Statute Book may serve as an example of what is likely to happen. The object of this measure is to supply privately-owned undertakings with current, through a State system, cheaper than they could generate it themselves. From the point of view of production the scheme, so far as it goes, is sure to be helpful. But here is what the "Daily Mail" said about it in a leading article: "In favourable circumstances the Government advisers report that when the consumption of electricity per head here reaches 500 units the amount saved will be �44.300,000 a year; and the saving in coal will be about one-fourth of the tonnage raised before the strike. Electricity, in fact, will dispense with the labour of 300,000 miners." These, in a competitive wage system, will cheapen the value of labour and assist in reducing wages all round. But if the competitive system were abolished before further great strides in production were made, a market could be made ready for the additional output by adding correspondingly to the purchasing power of the workers. By this course every step in nationalisation would be hailed as a blessing to the workers. In the competitive system the immediate effects of such steps may be popularly cursed. If the next labour Government were to abolish the competitive system of fixing wages and prices it would remove the greatest obstacle to nationalisation of the means of production and accomplish peacefully one of the most beneficent revolutions in the world's

history.

The Problem of Compensation.

Incidentally, this policy will solve many minor difficulties for the Labour Party. The problem of compensation will be simplified. At present it is a very serious problem. No one wishes to confiscate private property and yet, if five or six per cent bonds are to be substituted for shares, industry will remain in bondage. On the other hand the State which has power over the production of an industry or estate will be in a strong bargaining position when it wants to acquire it. Liberals who wish to support this policy must shed their Liberalism. Politics will no longer be a matter of labels. People will be for or against the competitive system. At present we have the anomaly of the keenest competitionists being members of a Socialist Party. This will no longer be possible. Free competition is the very antithesis of Socialism. Those who support competition will find their proper place in the ranks of the anti-Socialists.

Labour is now wandering in a dark ally, and yet the nation is steadily rallying to its side. Its millions of supporters expect it to abolish poverty now and not when they are dead. I believe that this policy would immediately realise the dreams of those millions and save Britain from disaster.