Small Is Beautiful: A Study of Economics as if People Mattered (32 page)

"property" at all ... since it is not identical with the rights which secure the owner the produce of his toil, but is the opposite of them.'

The so-called private ownership of large-scale enterprises is in no way analogous to the simple property of the small landowner, craftsman, or entrepreneur. It is, as Tawney says, analogous to 'the feudal dues which robbed the French peasant of part of his produce till the revolution abolished them',

'All these rights - royalties, ground- rents, monopoly profits, surpluses of all kinds - are "property". The criticism most fatal to them ... is contained in the arguments by which property is usually defended. The meaning of the institution, it is said, is to encourage industry by securing that the worker shall receive the produce of his toil. But then, precisely in proportion as it is important to preserve the property which a man has in the results of his labour, is it important to abolish that which he has in the results of the labour of someone else.'

To sum up:

a in small-scale enterprise, private ownership is natural, fruitful, and just.

b In medium-scale enterprise, private ownership is already to a large extent functionally unnecessary. The idea of 'property' becomes strained, unfruitful, and unjust. If there is only one owner or a small group of owners, there can be, and should be, a voluntary surrender of privilege to the wider group of actual workers - as in the case of Scott Bader & Co Ltd. Such an act of generosity may be unlikely when there is a large number of anonymous shareholders, but legislation could pave the way even then.

c In large-scale enterprise, private ownership is a fiction for the purpose of enabling functionless owners to live parasitically on the labour of others. It is not only unjust but also an irrational element which distorts all relationships within the enterprise. To quote Tawney again:

'If every member of a group puts something into a common pool on condition of taking something out, they may still quarrel about the size of the shares ... but, if the total is known and the claims are admitted, that is all they can quarrel about..; But in industry the claims are not all admitted, for those who put nothing in demand to take something out.'

There are many methods of doing away with so-called private ownership in large-scale enterprise; the most prominent one is generally referred to as

'nationalisation'.

'But nationalisation is a word which is neither very felicitous nor free from ambiguity. Properly used it means merely ownership by a body representing

... the general public of consumers. No language possesses a vocabulary to express neatly the finer shades in the numerous possible varieties of organisation under which a public service may be carried on.

'The result has been that the singularly colourless word "nationalisation"

almost inevitably tends to be charged with a highly specialised and quite arbitrary body of suggestions. It has come in practice to be used as equivalent to a particular method of administration, under which officials employed by the State step into the position of the present directors of industry and exercise all the power which they exercised. So those who desire to maintain the system under which industry is carried on, not as a profession serving the public, but for the ad- vantage of shareholders, attack nationalisation on the ground that State management is necessarily inefficient.'

A number of large industries have been 'nationalised' in Britain. They have demonstrated the obvious truth that the quality of an industry depends on the people who run it and not on absentee owners. Yet the nationalised industries, in spite of their great achievements, are still being pursued by the implacable hatred of certain privileged groups. The incessant propaganda against them tends to mislead even people who do not share the hatred and ought to know better. Private enterprise spokesmen never tire of asking for more 'accountability' of nationalised industries. This may be thought to be somewhat ironic - since the accountability of these enterprises. which work solely in the public interest, is already very highly developed, while that of private industry. which works avowedly for private profit, is practically non-existent.

Ownership is not a single right, but a bundle of rights. 'Nationalisation' is not a matter of simply transferring this bundle of rights from A to B. that is to say, from private persons to 'the State', whatever that may mean: it is a matter of making precise choices as to where the various rights of the bundle are to be placed, all of which, before nationalisation, were deemed to belong to the so-called private owner. Tawney, therefore, says succinctly:

'Nationalisation (is) a problem of Constitution-making.' Once the legal device of private property has been removed, there is freedom to arrange everything anew - to amalgamate or to dissolve, to centralise or to decentralise, to concentrate power or to diffuse it, to create large units or small units, a unified system, a federal system, or no system at all. As Tawney put it: '

The objection to public ownership, in so far as it is intelligent, is in reality largely an objection to over-centralisation. But the remedy for over-centralisation is not the maintenance of functionless property in private hands, but the decentralised ownership of public property.

'Nationalisation' extinguishes private proprietary rights but does not, by itself, create any new 'ownership' in the existential - as distinct from the legal

- sense of the word. Nor does it, by itself, determine what is to become of

·the original ownership rights and who is to exercise them. It is therefore in a sense a purely negative measure which annuls previous arrangements and creates the opportunity and necessity to make new ones. These new arrangements, made possible through 'nationalisation', must of course fit the needs of each particular case. A number of principles may, however, be observed in all cases of nationalised enterprises providing public services.

First, it is dangerous to mix business and politics. Such a mixing normally produces inefficient business and corrupt politics. The nationalisation act, therefore, should in every case carefully enumerate and define the rights, if any, which the political side, e.g., the minister or any other organ of government, or parliament, can exercise over the business side, that is to say, the board of management. This is of particular importance with regard to appointments.

Second, nationalised enterprises providing public services should always aim at a profit - in the sense of eating to live, not living to eat - and should build up reserves. They should never distribute profits to anyone, not even to the government. Excessive profits - and that means the building up of excessive reserves - should be avoided by reducing prices.

Third, nationalised enterprises, nonetheless, sh6uld have a statutory obligation 'to serve the public interest in all respects'.! The interpretation of what is the 'public interest' must be left to the enterprise itself, which must be structured accordingly. It is useless to pretend that the nationalised enterprise should be concerned only with profits, as if it worked for private shareholders, while the interpretation of the public interest could be left to government alone. This idea has unfortunately invaded the theory of how to run nationalised industries in Britain, so that these industries are expected to work only for profit and to deviate from this principle only if instructed by government to do so and compensated by government for doing so. This tidy division of functions may commend itself to theoreticians but has no merit in the real world, for it destroys the very ethos of management within the nationalised industries. 'Serving the public interest in all respects' means nothing unless it permeates the everyday behaviour of management, and this cannot and should not be controlled, let alone financially compensated, by government. That there may be occasional conflicts between profit-seeking and serving the public interest cannot be denied. But this simply means that the task of running a nationalised industry makes higher demands than that of running private enterprise. The idea that a better society could be achieved without making higher demands is self-contradictory and chimerical.

Fourth, to enable the 'public interest' to be recognised and to be safeguarded in nationalised industries, there is need for arrangements by which all legitimate interests can find expression and exercise influence, namely, those of the employees, the local community. the consumers, and also the competitors. particularly if the last-named are themselves nationalised industries. To implement this principle effectively still requires a good deal of experimentation. No perfect 'models' are available anywhere.

The problem is always one of safeguarding these interests without unduly impairing management's ability to manage.

Finally, the chief danger to nationalisation is the planner's ad- diction to over-centralisation. In general, small enterprises are to be preferred to large ones. Instead of creating a large enterprise by nationalisation - as has invariably been the practice hitherto - and then attempting to decentralise power and responsibility to smaller formations, it is normally better to create semiautonomous small units first and then to centralise certain functions at a higher level, if the need for better co-ordination can be shown to be paramount.

No-one has seen and understood these matters better than R. H. Tawney, and it is therefore fitting to close this chapter with yet another quotation from him:

'So the organisation of society on the basis of functions, instead of on that of rights, implies three: things. It means, first, that proprietary rights shall be maintained when they are accompanied by the performance of service and abolished when they are not. It means, second, that the producers shall stand in a direct relation to the community for whom production is carried on, so that their responsibility to it may be obvious and unmistakable, not lust, as at present, through their immediate subordination to shareholders whose interest is not service but gain. It means, in the third place, that the obligation for the maintenance of the service shall rest upon the professional organisations of those who perform it, and that, subject to the supervision and criticism of the consumer, those organisations shall exercise so much voice in the government of industry as may be needed to secure that the obligation is discharged,'

Nineteen

New Patterns of Ownership

J. K. Galbraith has spoken of private affluence and public squalor. It is significant that he referred to the United States, reputedly, and in accordance with conventional measurements, the richest country in the world. How could there be public squalor in the richest country, and, in fact, much more of it than in many other countries whose Gross National Product, adjusted for size of population, is markedly smaller? If economic growth to the present American level has been unable to get rid of public squalor - or, maybe, has even been accompanied by its increase - how could one reasonably expect that further 'growth' would mitigate or remove it? How is it to be explained that, by and large, the countries with the highest growth rates tend to be the most polluted and also to be afflicted by public squalor to an altogether astonishing degree? If the Gross National Product of the United Kingdom grew by, say, five per cent - or about Pounds 2,000 million a year - could we then use all or most of his money, this additional wealth. to fulfil our nation's aspirations'?

Assuredly not; for under private ownership every bit of wealth, as it arises, is immediately and automatically privately appropriated. The public authorities have hardly any income of their own and are reduced to extracting from the pockets of their citizens monies which the citizens consider to be rightfully their own. Not surprisingly, this leads to an endless battle of wits between tax collectors and citizens, in which the rich, with the help of highly paid tax experts, normally do very much better than the poor.

In an effort to stop 'loopholes' the tax laws become ever more complicated and the demand for - and therefore the income of - tax consultants becomes ever larger. As the taxpayers feel that some- thing they have earned is being taken away from them, they not only try to exploit every possibility of legal tax avoidance, not to mention practices of illegal tax evasion, they also raise an insistent cry in favour of the curtailment of public expenditure. 'More taxation for more public expenditure' would not be a vote- catching slogan in an election campaign, no matter how glaring may be the discrepancy between private affluence and public squalor.

There is no way out of this dilemma unless the need for public expenditure is recognised in the structure of ownership of the means of production.

It is not merely a question of public squalor, such as the squalor of many mental homes, of prisons, and of countless other publicly maintained services and institutions; this is the negative side of the problem. The positive side arises where large amounts of public funds have been and are being spent on what is generally called the 'infrastructure', and the benefits go largely to private enterprise free of charge. This is well known to anyone who has ever been involved in starting or running an enterprise in a poor society where the 'infrastructure' is insufficiently developed or altogether lacking. He cannot rely on cheap transport and other public services; he may have to provide at his own expense many things which he would obtain free or at small expense in a society with a highly developed infrastructure; he cannot count on being able to recruit trained people: he has to train them himself; and so on. All the educational, medical, and research institutions in any society, whether rich or poor, bestow incalculable benefits upon private enterprise - benefits for which private enterprise does not pay directly as a matter of course, but only indirectly by way of taxes, which. as already mentioned, are resisted, resented, campaigned against, and often skilfully avoided. It is highly illogical and leads to endless complications and mystifications, that payment for benefits obtained by private enterprise from the 'infrastructure' cannot be exacted by the public authorities by a direct participation in profits but only after the private appropriation of profits has taken place. Private enterprise claims that its profits are being earned by its own efforts, and that a substantial part of them is then taxed away by public authorities. This is not a correct reflection of the truth - generally speaking.