In the City
The future of capitalism —2
Nicholas Davenport
In Part l, I described the three forms of capitalism—first, the obsolete, bad old bourgeois capitalism, second, the welfare or mixed economy capitalism, under which we are now suffering, and third thestate capital ism, which is communism, into which we are now sliding if we don't take care. In Professor Adler's judgment inflation is built into the mixed economy or welfare capital ism and there is no cure for it except in Friedrnanism, which means cutting off the money supply in a ruthless confrontation with the trade unions and state employees. Inflation under welfare capitalism is worse,
he adds, in countries like Britain where labour is more radically to the left than in the United States. I should also add—especially when a Labour government is in power which has Marxist members in its Cabinet who are always trying to push us into state capitalism under the silly pretence that it is not communism and would not involve the abolition of private property. Mr Benn's lies I have already exposed.
Unknown to each other Professor Adler and I have been working on the same lines in an endeavour to show that the remedy for the inflationary slide of the mixed economy or welfare capitalism into state capitalism is not the abolition of private property but the widest possible diffusion of it throughout the working population. Professor Adler wrote his Capitalist Manifesto in conjunction with Louis Kelso in 1958 and from this Kelso has developed the Employees Stock Ownership Plan (ESOP) which is now being considered by the Joint Economic Committee of the American Congress, In May 1958 I proposed a state unit trust in this column of the Spectator—before I had heard of the Capitalist Manifesto—but no one took it up until a Labour ex-minister, Douglas Jay, appropriated the idea—without acknowledgment to the Spectator—in articles he wrote in 1962 and 1963.
The name I had given to it in my Split Society was SPUT—State Participation Unit Trust—which, I suggested, should buy carefully selected equity shares of well. managed companies quoted on the Stock Exchange as well as shares offered by trustees of deceased estates in payment of death duties. It was essential, I added, to keep the management of SPUT in expert hands independent of the Treasury so that it could have the status of a public board like the BBC. It would soon accumulate equity holdings larger in size than those of the private life and pension funds and unit trusts and it would become a major factor in directing capital into worthwhile investment for the growth of the economy because it would subscribe to the new equity share issues being offered in the capital market.
To start it off with sufficient capital 1 would stop the present flood of 'tap' issues on the gilt-edged market with preposterously high coupons and make an offer of £5,000 million of SPUT units on which a dividend would be estimated but not guaranteed. In this calendar year £7,500 million of 'tap' stocks have been issued with coupons ranging from 94 to 15i per cent— with the exception of the 'short' tap 3 per cent 1980 which was exhausted last week— and this has added more to the national interest bill than Mr Healey hopes to cut from current government spending. Business is being killed by this ultra-dear money policy. Instead of loading the national debt with interest coupons high enough to attract our frightened moneylenders, what a welcome financial relief for the Exchequer it would be to offer an equity stake in the economy—with a variable but not guaranteed dividend—to those stout-hearted and patriotic people who believe in the future of this once great industrial nation.
You may ask whether there would be a sufficient response to this issue. Of course, £5,000 million of SPUT units would not be subscribed in a month but they would be over a year or two. Personal savings are running at about £10,000 million a year (14 per cent of personal disposable income) and these are channelled through life and pension funds and unit trusts into ordinary shares as well as bonds. Would trade unions, or individual members of them, be sensible or patriotic enough to subscribe? Clearly not those Marxist members who want to introduce state capitalism and put an end to private property. SPUT is a scheme to make workers who have never had any property, except their personal belongings, accumulate some real capital for the first time in their lives. No trade union leader could say that it was against Labour Party policy to do so. In the new Statement of Aims of 1960, which was passed when Gaitskell failed to get the removal of the Marxist Clause 4 from the party constitution, it was recognised that 'both public and private enterprises have a place in the economy.' In other words Labour has accepted a mixed economy and the present leader of the party has recently said that priority should be given in economic policy to making the private manufacturing sector profitable and efficient because, he added, we have got to stop living on borrowed money and pay our way in the world. This makes it an ideal time to launch a public unit trust for equity shares.
You may object that it would start a boom on the Stock Exchange. Of course it would, but it would not be a bad thing from a revenue point of view to remove a bear market and revive a bull market which would contribute greatly to the capital gains tax. The boom could be kept well under control by a discreet buying policy of the board of directors of SPUT. It might be necessary for them to acquire some of the non-specialised commercial unit trusts and investment trusts whose total holdings are in excess of £8,000 million. It would be a good idea to take over the somewhat absurd Equity Bank recently subscribed by the insurance companies and investment and unit trusts to the tune of L30 million.
The main argument in favour of a public unit trust is that its equity buying policy would not only put a new spirit of hope behind private enterprise—for every ambitious entrepreneur has his eye on eventually floating his business on the Stock Exchange—but it would solve the problem of financing new investment in industry which the TUC is always moaning about. It could lead eventually to the ultimate collectivisation of capital which should please those Marxists who are not motivated solely by the pleasure of stealing other people's capital.
Participation in a public unit trust seems to me the only way of getting the bored and alienated factory workers to become interested in the creation of wealth through the productivity of new machines, for it would give them a share not only in the dividends from, but in the capital profits of investment in the new technology. They would not mind so much being made redundant if the redundancy money were invested in units which would appreciate in market value in every year the economy advanced. And why should not the Chancellor give the workers a kick-off by handing over to them the value of the tax reductions he had promised in the form of paid-up units in SPUT? (Incidentally they could be represented on the board through trade union members.) If we are to make a mixed economy work this seems to me to be the only solution. The Bullock Committee's idea of putting disgruntled workers on individual boards would make it quite unworkable.
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