Nationalisation: a socialist analysis


In the spring of 1957 the National Industrial Committee of the Independent Labour Party published a pamphlet by Jim Graham entitled Socialism and Workers’ Councils. That pamphlet gave an indication of the kind of administration in the processes of pro­duction which would be compatible with Socialism as the I.L.P. understands it, and would in fact be a means of achieving Socialism.

In some sense the present pamphlet, by the same author, is a companion one to the earlier pamphlet, for it shows how capitalist nationalisation is not compatible with Socialism.

The author has been Chairman of the I.L.P. since Easter 1957, and has written two earlier pamphlets for the Party.

November, 1958.



THE nationalisation of certain industries: coal, gas, electricity and transport: and the method of their operation, has aroused much interest in the minds of the workers, and many questions have been asked about the results attained, and whether these results are of advantage to the workers concerned. The experience of the workers engaged in these industries, however, is not likely to raise much enthusiasm in their attitude to the change.

Why is it, now that the nationalised industries belong to the nation, i.e., to the people themselves, that the conditions of the workers are very much the same as they were before the change? Profit-making by the former owners has been abolished; and if there were profits before, surely the workers should benefit after the change. The nation now owns the industries and naturally should own the surpluses produced. On the face of it, there seems no good reason why nationalisation should have failed to bring about a great improvement in the conditions of the workers concerned.

To the workers the results have been disappointing, and many reasons have been given for the failure to attain better results. Some of the explanations show that many of those appointed to the administrative posts were not in favour of the change in any case, and made no effort to make the new system work efficiently. In other cases the industries which were nationalised were those which were badly run down, and in need of reorganisation and repair. To remedy this state of affairs would have involved a great deal of expenditure on the part of the former owners.

The inflated salaries paid to those holding managerial posts tended to separate and alienate them from the workers. The interests of management were, therefore, not in conformity with those of the workers. The position is made worse because in many cases the men chosen as heads of the nationalised industries are quite inexperienced in the particular industries to which they were appointed. In addition there is no effective link-up from the rank and file through to top-level management. The high rates of com­pensation paid to the former owners of the nationalised industries are other factors which must be taken into account.

Fundamental Issues

None of the above reasons, however, explains completely why the industries which were nationalised are not so beneficial to the working class as it had a right to expect. Without a knowledge of the fundamental issues which lead to the exploitation of the working class, there is bound to arise in the minds of the workers a great deal of confusion. It is necessary to investigate thoroughly the functions of the State in order to arrive at a clear understanding of these functions and their relationship to the different classes of society. As things are, shown even in the case of the small propor­tion of the industries taken over by the State, the productive relationships of society are scarcely, if at all, affected.

There is no doubt at all that nationalisation could make pro­duction, distribution and exchange far more efficient than they are at present under private ownership. The consequent centralisation of capital, which would abolish the smaller uneconomic units of private enterprise, would lead to more specialisation and hence greater efficiency. This advantage has always been recognised by the capitalist class, and is the reason why certain industries are under State ownership now.

Non-productive industries such as the G.P.O., rail transport, etc., do not yield possibilities of growing wealth; hence capitalism is quite prepared to accept and even welcome their nationalisation. In many cases State ownership provides cheaper and more efficient services in certain lines which do not return a profit, but are of greater advantage to the capitalist class as a whole. Let no one be deceived into thinking such services were nationalised for the benefit of the working class. It is obvious that services such as cleansing, sanitation and hospital upkeep are not amenable to profit-making for the capitalists, but such maintenance is necessary to public health. The capitalist class strenuously opposes nationalisation of steel, road-transport and similar industries which are capable of yielding large profits.

Reorganisation and Equipment

It is significant that the industries which were nationalised were those that were most urgently in need of assistance. They required new equipment and reorganisation, and this entailed the need for a great deal of capital expenditure, before they could have been made profitable. Thus it would have been necessary for the owners to have spent a great deal of money in order to have brought the industries up to date. The owners, therefore, found it much better to allow the State to take over the responsibility of running the industries, and they also found it more profitable to draw com­pensation from the State.

There is a difference between interest and profit and the owners showed how well they understood this. In general, within capitalist society, profits realise a greater return to the capitalist than does interest. This is because, in general, there is a greater risk in realising a profit from industry, than there is in making an invest­ment which will provide interest. With government backing, the former owners of the nationalised industries and the financial capitalists who provided the fresh capital were guaranteed against loss. In spite of that, compensation was paid out lavishly; and the State took over at a time when the industries which were nationalised were at rock bottom and in need of new and up-to-date equipment.

The element of risk in capitalist development is a most important consideration. The State removed that risk of loss to the owners by its action in taking over responsibility, compensating the owners, and paying a generous rate of interest on new capital. Very low rates of interest could have been agreed upon in view of the perfect security of the investment.

Compensation to Owners

What is called compensation is a capital sum which bears interest, and this interest must be paid out each year to the former owners of the nationalised industries. The capital also must be repaid within a certain number of years and this varies with the different industries. In the case of the coal industry the time extends to 50 years; and it extends to 90 years in the case of gas, electricity and transport.

The method of assessing the value of the industries varied. The shareholders in gas, electricity and transport were given stock equivalent to the price of the shares which prevailed on the stock exchange on a certain date. On the other hand, the coal owners were compensated by the amount agreed on by a tribunal com­posed of two judges and an accountant. Against this judgment the owners had the right of appeal if they were dissatisfied.

The sum arrived at by the tribunal was £164,660,000. A central board then allocated this sum according to the value of the collieries in their respective districts. The payment of principal and interest within the coal industry, therefore, must end in the year 2005 in conformity with the agreement allowing 50 years to pay. Com­pensation for the transport owners amounted to over £1,200,000,000, and the amount of capital necessary for development to £242,000,000. The compensation was issued at 3 per cent stock, and. the new capital at 4 per cent. The total repayment of com­pensation, and the new capital including interest, must be paid up by the year 2047. This shows that those responsible for nationalisation that in the case of the nationalisation of the Bank of England, the Economist’s remark, “The scrupulous care that is taken . … to change nothing that is of any account” (page 514, 13.10.1945), shows that the ruling class knows full well that nothing has changed fundamentally. Nationalisation does not abolish the exploitation of the workers, but alters the division of surplus value,’ giving emphasis to interest instead of profit. It does not in itself change the nature of commodity production, which is production for exchange in order to realise a profit; and not primarily for use.

Class Basis of Nationalisation

Nationalisation can be regarded as a form of the organisation of industry. There is no doubt, if considered in this way, it could be made to serve different interests. In the case of the workers controlling the State in their own interests, it could be made to serve them. As it is now, it is organised from a capitalist basis, but it could produce quite different results if the form of organisa­tion was based on the interests of the working class. That is the function of a State: to serve the interests of a class in society, and that class must be the ruling class whether it is the capitalist class or the working class.

Only a class movement, a movement whose object is to take possession of the means of production from the hands of the capitalists and put all power into the hands of the organised working class, could prove of any real use to the workers. That should be the primary object of our movement.

Compensation and Confiscation

Probably nothing concerning nationalisation produces more con­fusion or engenders more controversy than the question of compen­sation and confiscation of private property. Regarding all human rights, socialists are always in favour of the compensation of anyone suffering from the necessary changes in social relationships, and it would be wrong to advocate confiscation of anything except that which is detrimental to human progress.

Capitalism confiscates by far the greater part of the wealth created by the working class. That is the kind of confiscation socialists will stop. However, the real answer is that the question of compensation or confiscation does not arise. The restitution of the right of the working class to own and control the wealth it pro­duces cannot be disputed.

Why are there such tender feelings and sympathy for the owners of industry aroused when any fundamental change is advocated which would benefit humanity as a whole? This merely reflects the effect of the propaganda the ruling class continually presses on the mind of the workers.    The whole propaganda machine of the capitalist class is turned to this end.

Considered from a moral point of view, it is wrong to allow such a system, based on the exploitation of workers for profit rather than on production for use, to continue. It is not robbery for the working class to take over the means of production with the object of producing for use: it is robbery to expropriate the working class from what it has produced. As Robert Blatchford once so aptly remarked: “Socialism is not a burglar. Socialism is the policeman.”

Transition to Socialism

In the evolution of class society, and that is the only kind of society that has existed within the limits of written history, the function of the State is to uphold the interests of the ruling class. No State represents the interests of the whole of society. Very often is has suppressed the growth of certain private enterprises, but only for the benefit of the private owners as a whole. Within the limits of capitalism the workers are still a dependent class whether any industry is nationalised or not. It is possible, however, that nationalisation could be used to forward the interests of the working class. At present the State is used to exploit the workers in the interest of the capitalist. In a transition period the State would be taken over by the workers and used to prevent exploitation of workers.

The workers’ State, however, would differ from all other States that have existed in the past. Its function would be to restrain the reactionary capitalists until they were overthrown and such restraint was no longer necessary. With socialism a classless society emerges which needs no State in order to govern; but there will appear in its place an administration which will function in the interest of the whole of society. The State withers because it has no function in the higher stage of socialism. The advent of the Workers’ State is the only kind of nationalisation that can be of any real benefit to the working class.

Published by the National Industrial Committee of the Independent Labour Party

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s