Why Fascism? by Edward Conze and Ellen Wilkinson 1935
Re-Planning of Industry: The planning of industry is the core of all planning problems. The difficulties are so enormous in practice that they are avoided by theorists who like to construct working models of a new society, leaving out such essential factors as the certain resistance of some classes, and the possibility of securing the effective drive of others. It is easy to sit in a conference of enlightened capitalists, or at a Socialist summer school, and make plans for an excellent rearrangement of industry which would no doubt work perfectly provided that everyone was agreed on essentials. Such plans usually assume a willingness on the part of the opposing classes in the state to work together for a new social order – a willingness which may exist in the hearts of the individuals present at the conference, but which cannot exist in reality in a capitalist state. Schemes of social reorganisation on as large a scale as that contemplated by a planned economy can, in fact, only come about at a time of economic breakdown, when, in consequence of the excitement of the population, something must be done. This leads to widespread feeling against the existing system. That feeling is already growing in Britain as elsewhere. As Mr Lloyd George has said: ‘There must be something fundamentally wrong with our economic system because abundance produces scarcity...’ But it is when the breakdown becomes visible, what was a general vague feeling becomes a passionate conviction, that the question arises: who is to canalise this excitement, and what changes can it be used to force through? All the existing parties and institutions at such a time suffer from the general distrust. If we are to learn anything from the postwar experiences in Europe it is that this excitement was canalised by the Communist Party in Russia and in Germany and Italy by Fascism. The same situation that drives towards Fascism can be used to drive towards Socialism. What is not possible is that the situation that has produced the crisis and the parties that were in power at the time will be allowed to muddle along as before. At such a time the people who have some definite plan for dealing with the economic situation and who can get mass support for it will get the power. No excuses after defeat can veil the fact that the Social-Democratic parties were not prepared for the breakdown and were afraid of it. The Fascist parties welcomed it and prepared for it.
For the party which is to take power the planning of industry must become the central fact. Industry can be planned from three angles, it can be planned through credit, through production, or through the market. But only the planning of production itself gives direct control, effective for radical and lasting changes. Indirect control can be exerted by credit arrangements and by marketing schemes. Those who want to preserve private initiative prefer the indirect control – the sort of planning done by state credits and quota schemes. Planning for markets can be, and is being, done by the industries themselves – either in the form of encouraging sales – such as the Coal Council, a central body with coal owners, merchants and retailers represented, which promotes sales and encourages coal utilisation, irrespective of the conflicting interests of individual producers. Or it can be done by the parcelling out of the market into spheres, as the British brewers have done so successfully. Tariffs are a form of indirect planning, for which the assistance of the state is needed. Fixing of prices can be done either by the industry or the state. Fixed prices presume a fairly high degree of organisation within the industry – as blackleg-proof, for example, as the Light Castings Association which has been able to enforce a price list in its trade. But the fixing of prices of such monopoly trusts or associations only increases the fundamental contradictions of capitalism by fixing high prices, and accepting a restricted sale. If lower prices are fixed by the state either they are fixed on the general principle of yielding approximately as much profit as they would do without regulation, or less profit. In the former case, the fixed state price is only an indirect means of constituting monopoly trusts. But in the latter case, if the profit is lower than the capitalists feel they could otherwise obtain, then all sorts of devices are resorted to in order to break the price, or commodities disappear from the market, and the economic system is deranged until the state yields.
Should the Banks be Socialised First? All these indirect forms of central control cannot solve the crisis which is caused by the basic contradiction in the capitalist system. That problem can only be tackled through the socialisation of big industry which, by its large-scale productiveness, has intensified the crisis. But just because industrial production is the central source of power, the urge to avoid tackling it, ‘at least for a beginning’, is strong. Hence the many proposals to socialise the banks first, and then after an interval, presumably to take breath and see how it works, to proceed to the socialisation of industry. Mr Henri de Man has achieved considerable publicity on the Continent for his Plan de Travail in which he urges that the power of finance must be destroyed first. Credit must be nationalised. Then, with the help of the ‘anti-finance’ but capitalistically-minded middle classes, it will be possible to arrive at a ‘mixed economic system’, which will abolish unemployment and poverty.
The Socialist League also has decided to reverse the process adopted by the Russians. The real success in Russia has been the organisation of industry. The socialisation of the banks and the whole question of currency and monetary regulation has remained a weak part of their system. The socialisation of land in Russia is still in the stage of alternate victories and defeats of which no one as yet dare prophesy the end. The production of corn is still the same as in 1913. The power of the Bolshevik government, admittedly one of the most strongly entrenched governments in the world, is firmly based on its control of industrial production.
In view of the experience in Russia it is startling to find the Socialist League making the statement that the first step for a Socialist government will be ‘promptly to socialise the banks and financial institutions and vest in the community the ownership of the land’. After this has been done, key industries are to be socialised – say within the first five years. In reply to criticism they have said that they are already proposing a great deal for the first few months. But that is not the point. Success in the difficult process of altering the entire economic basis of a country is not dependent on quantities, but on beginning the work at the right end. Concentration on the desire to socialise the banks indicates a rentier view of economics. It can easily degenerate into an excuse for making no real attempt to grapple with the fundamental difficulties of the planned state.
To begin with, no one really knows anything very definite about finance, since it has no sound basis for prediction. That is its attraction for the speculator, the risk is so owing to the uncertainty of what is going to happen that the gains are correspondingly high. Finance experts admit the impossibility of understanding a financial system which is dominated by piracy and risk. It may be argued that it would be the first business of a Socialist banking system to define rules and see they were observed. But finance can only be given laws by first regulating the sphere of production. Money is a reflection of goods. If the whole production of goods is anarchic, the shadow – money – oscillates as violently. Money in a restricted sense has laws. A government that attempts to control finance without first having the control of production in its hands will find itself a prisoner of the laws of money and able to do little to curb the bigger pirates.
Another attractive feature of socialising the banks first is that the workers need not be troubled about it. The whole process can take place over their heads as it were, with only their benevolent cooperation in supplying the necessary votes in the first instance. This view of the workers is very hard to eradicate, even with the object lesson of a Hitler before our eyes. Power to make fundamental changes depends on the active participation and interest of the masses of the people. In order to get Socialism, in order to secure the drive necessary for a planned economy, the workers must be aroused into taking an active and interested part. The Italian, German and American population had to be raised to great excitement to get even the amount of state control reached in these countries.
The workers, of course, have all interest in questions of finance in so far as their private means are concerned. The scare about the Post Office Savings Bank deposits in 1931 shows that. But the interest is ineffective as a means of control. During the first few months, in which there will be the excitement and interest necessary for Socialistic measures, the most difficult ones for a new and experimental regime, the chief supporters of a Socialist policy will be carefully prevented from doing anything in the sphere which chiefly interests them – their place of production. But the sabotage in industry that will follow any real attempt to socialise the banks will create distress, just in those places of production where the workers feel it most. Confidence in the Socialist government will diminish and with it that support of the organised and mobilised working class which is indispensable to any real change.
The undue concentration on the socialisation of banking as being of primary importance rests on a certain misunderstanding. The main work of the banks is trading with titles of ownership. But titles of ownership lose their value if they are not backed by confidence. How catastrophically values can vanish has been shown in the various American crises. Obviously under Socialism these titles to ownership will not exist. The functions of present-day finance break down even when production is only regulated. It is interesting to see how this is working out even under the amount of regulation that exists in capitalist USA.
The reduction in the business operations of Wall Street and other United States stock and commodity exchanges is not due to the Securities Act, but to the control now exercised by the Roosevelt administration over a large part of the industrial system. The Treasury has gradually usurped to a very considerable extent the power formally held by the banking system. Control of the railways, public utilities like the Tennessee Valley Authority, with the possibility of the vast extension of its supply of electricity to seven other states, the immense engineering and building projects, the large-scale operations in agriculture with the various arrangements for bulk purchase, have simply cut away the ground from many of the financial transactions that were once the main interest of American financiers.
But if it be emphasised that this socialisation of the banks is only the prelude to the greater measures of socialisation, why attempt to socialise what must automatically disappear? Credit is based on confidence. The capitalist producer will not have much confidence if he does not know how long he is to be allowed to continue in business. The investing public will not know either how long the system is to last. The blunt fact has to be faced that with the advent of Socialism, or even of the coming into power of a government that has both the power and the will to socialise, the old machine of credit simply breaks down.
This need not necessarily be due to wickedness on the part of ‘Lombard Street’ or the machinations of the famous Old Lady of Threadneedle Street, but simply that a new kind of confidence has to be created to replace the old confidence. And that confidence can only be got from where in fact the capitalist got it – from production.
To attempt to put the banks first and industry second is simply to make a present to the capitalists of the means to smash the machine. Whether the capitalists are in for three months or three years after socialisation seriously starts, any credit given will not be used for the purpose for which it is granted, but in order to beat the socialisers, and it will be a smart accountant who will be able to track down all the ways in which this can be done. Are you to give credit to an enemy you propose at no distant date to deprive of his power? The idea that the active capitalist will be content with a moderate fixed income is again this curious rentier view of history which permeates so much Socialist theorising.
Neither Captain Macmillan nor the PEP group, soaked as they are in the atmosphere of active capitalist enterprise, make that mistake. The keen capitalist fights for power. He certainly risks being reduced to beggary, but that is part of the game. These are not the men to be conciliated by fixed salaries. They will fight for the system that gives them power, at least until they can be quite sure that the capitalist period is definitely ended. And they will be resourceful enemies. It is not only innocence but dangerous innocence to imagine that such men will submit to have their enormous power taken from them piecemeal because the House of Commons with a temporary Socialist majority passes a Bill to that effect.
Only a time of severe crisis will or can give the Socialist party the power to introduce Socialism, and that can only come about even then if the government is prepared to go for the main citadel of capitalist power. This idea that the banks constitute that power seems, even in view of the history of only the last half-dozen years of world crisis, the strangest of delusions.
Let us look at the plan in more detail. We will suppose that a Socialist President of the Board of Trade explains to the head of the Artificial Silk Trust that it is not proposed to socialise him – yet. The banks are to be socialised at once. The government will be prepared to continue his existing credit from the banks, even give a substantial increase if he desires it, provided that he will agree to certain measures of amalgamation, certain improvements in wages and working conditions. No hint of socialisation of the textile industry in that conversation. The Socialist government has its hands full with the banks. But election addresses promised ‘key industry to be socialised in five years’. The conference is suave, pleasant even. The industrialist will, of course, agree to any amalgamation, any increase in wages, any fixing of prices, with the necessary demur and the inevitable remarks about ‘times are changing and we must move with them’. He gets a useful government credit of a quarter of a million. Government auditors, of course. But he is left in power, with a probable year or two or three. Does anyone imagine that every penny of that credit will not be spent somehow in widespread propaganda to shake confidence in the government that so naively imagines that it has five years in which to socialise big industry at leisure?
The resources of the capitalist in the direction of sabotage are limitless. An actual story from Germany throws an interesting sidelight. A branch of the machine-making industry agreed to a fixed price-list for their product. The president of the manufacturers’ association had by far the most efficient plant. The high fixed price would have so cut his production that it would have meant ruin. So he made various contracts. In a typical one he agreed to sell a certain consignment for 150,000 marks. From the buyer he at the same time purchased a Chinese vase, worth a trifle, for 50,000 marks. The latter transaction went through his private account. What government auditor can check a ‘gentlemen’s agreement’ of this kind? If business men can outwit keen competitors in this way, by how many devices can they outwit a government when it is to the interest of them all to do so. To socialise the banks without first socialising industry is to take over the apparatus of credit while leaving with the enemy the foundation on which that credit is based.
It is usual to say that the credit is really the confidence felt in the nation and that is true, but it is the confidence felt in the nation’s power to produce, and to go on producing. How long will that confidence survive if the channels of that production (and hence the basis of credit) are left in the hands of those whose only chance of survival is to destroy that confidence?
This is not to argue that the banks should not be socialised. Obviously they must be as part of the general scheme. The abolition of the gold standard would be necessary, since a gold standard (even if it is veiled like the present British position, which is really on gold) enables foreign speculators to disturb reconstruction and would make the Socialists dependent on a factor outside their control.
For well-planned industry a whole new scale of values would arise. Prices are now fixed on a basis of price = hours of work + depreciation of factories + profit + supply/demand. Under a planned economy only the first two factors would be effective. The plans by which a Socialist government could finance its schemes have been worked out in detail and need not concern us here. Our argument is that it is necessary to socialise the banks, but that it would be suicidal to attempt to socialise them alone, letting the socialisation of industry wait for a more convenient season.