In the City
The future of capitalism —I
Nicholas Davenport
A much more important subject to discuss than Mr Healey's (measly) Christmas pack age is the future on capitalism. Last week I chaired a lecture on this subject given by Professor Mortimer Adler in the auditorium of the American Embassy. Professor Adler is one of America's great educators. His Syntopicon, a two-volume index of 'Great Ideas' inspired the first volume of the new Encyclopaedia Britannica, over whose editorial board he presides. He was one of the founders of the Aspen Institute of
Humanistic Studies whose present chairman, Robert Anderson, has just rescued our Observer. Can Professor Adler, I asked, possibly come to the rescue of our capitalism ?
In his lecture the professor defined three types of capitalism. The first, 'bourgeois capitalism,' was an economy in which the Marxian class conflict really did exist, that is, between the few who were owners of capital and the mass of workers, the propertyless proletariat, who were exploited by them. There were no factory regulations for the safety, security and health of the workers: wages were as low as possible and working hours as long as possible. This existed in all the industrially advanced countries throughout the nineteenth century and even into the first decades of the present century. It came to a final end in Britain in 1945 and only exists today in out-of-the-way parts of the world where there is no political democracy.
'Bourgeois capitalism,' Marx predicted, could not survive because it sows the seeds of its own destruction. A capital-intensive economy—with ever increasing productive power on the part of invested capital— would produce more wealth than can be consumed by the proletariat receiving wages at a subsistence level, so that there would be cycles of booms and busts which would end in a final bust. This never happened, partly because the arch-bourgeois capitalists like Henry Ford realised that if they had to sell mass-produced goods in a mass market they would have to keep on raising the wages of the working class, partly because labour in the industrialised countries secured sufficient trade union power to cause the ruling class to pass some of the measures which Marx had proposed in 1848, such as graduated income taxes, wealth taxes, social security and state ownership of parts of the economy. This 'creeping socialism' would begin, Marx said, when the franchise was extended to the working class majority, which would raise 'the proletariat to the position of the ruling class.'
So a second form of capitalism emerged which Professor Adler calls 'welfare capitalism' or the mixed economy capitalism. We have it in a much more advanced form in Britain than in America but many Americans believe that under their new President they will move towards the British model. The trouble about 'welfare capitalism' is that the public sector enlarges itself at the expense of the private sector, so that the national resources are not used or exploited economically or efficiently. Moreover the state apparatus or bureaucracy inflates itself, so that more people do jobs for the welfare state than make goods to sell at home or abroad. The danger of 'welfare capitalism,' said Professor Adler, is that it may end up through economic mismanagement in the third form of capitalism, which is 'state capitalism,' which is communism.
How Marx would have laughed! Welfare capitalism, he would have said, also sows the seeds of its own destruction through economic mismanagement, which ends in 'stag-flation' as it is vulgarly called. So the only way out is to abolish the private ownership of capital and hand it over to the state. 'The theory of communism,' said Marx, 'may be summed up in a single sentence: abolition of private property.'
Mr Benn, our Secretary of State for Energy, was quite correct in saying that Marxism had been accepted by the Labour Party from its earliest days as one of its many sources of inspiration. After the ferment of the Russian revolution it had inserted in its constitution the Marxist Clause 4 which was amended at the party conference in 1929 to read: 'The common ownership of all the means of production, distribution and exchange.' But Mr Benn was quite incorrect in saying that Marxism and communism were not synonymous. He should go back to school and read the three volumes of Das Kapital. You cannot be a Marxist without believing in state capitalism, which requires the abolition of private property. The romantic Marxists may dispute this, but not the realistic ones.
Professor Adler, seeing the danger of 'welfare capitalism' slipping into 'state capitalism,' and realising that the remedy was not the abolition of private property but the widest possible diffusion of it, wrote a book in partnership with Louis Kelso called The Capitalist Manifesto. This was in 1958 and since then Louis Kelso has been developing a scheme for the wider ownership of capital which is now being considered by the Joint Economic Committee of the American Congress. It is called ESOP (Employee Stock Ownership Plan) and it involves the banks lending money to a company employees trust to acquire equity shares, the loans being repayable out of the dividends received but meantime guaranteed by a public board. New finance for industrial investment, which so worries the Labour Party here, is secured through new equity stock being subscribed by the employees stock ownership trust. The scheme is probably too complicated to appeal to our Labour Party, which was, after all, founded to destroy capitalism and all its tricks. But in America the labour unions were not formed to destroy capitalism but to get rrlre wages and fringe benefits out of company productivity agreements. So the Adler-Kelso plans are being seriously considered not only at Aspen Institute seminars but by the American Congress.
With the same object as Professor Adler I propounded a much simpler plan in my Split Society, published in 1964. This was for the workers to participate in the profits of industrial growth and technology through holding units in a public unit trust. I realised over twelve years ago that the workers were being alienated from our society, as Marx predicted, through dissatisfaction with the way in which the economy was being run. The Tory 'stop-go' system had infuriated them and the subsequent Labour mismanagement, which allowed wage-cost and monetary inflation to end up in massive unemployment, was making them despair or turn to communism. Obviously it was no good abusing the City and calling for more industrial investment if that meant more workers being made redundant through improved technology. So I suggested that the workers should share in the improved profits of industrial growth and technology through holding units in a national unit trust which would give them dividends to compensate them for part-time work and capital gains to improve their standard of living when the economy recovered and the share markets boomed. The details of this scheme which could heal our split society, on which Marxist Mr Benn feeds so voraciously, must be reserved for next week.
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