Chapter XV: Part 15

And now, if you agree with me that it is the duty of a Government to keep the value of its money always as nearly as possible at the same level, we are both up against the question, “What level?” Well, you may take it as a rule of thumb that the answer always is the existing level, unless it has been tampered with and has wobbled badly, in which case the easiest answer is “Whatever level it had before it began to wobble”. But if you want a real explanation and not a mere rule of thumb, you must think of coins and notes as useful articles which you carry about because without them you cannot take a bus or a taxi or a train, or buy a bun. There must be enough of them to supply you and all the other people who have purchases to make. In short, coins and notes are like needles or shovels; and their value is settled in the same way. If the manufacturers make ten times as many needles as anyone wants, then their needles will fetch nothing as needles, because no woman will pay anything for the one needle she wants if there are nine lying about to be had for nothing. So all that can be done is to take the nine worthless needles and use the steel in them to make something else (say steel pens), after which there will be no longer any useless needles, and the remaining useful ones will be worth at least what it cost to make them, because sempstresses will want them badly enough to be willing to pay that price. An intelligent community will try to regulate the supply of needles so as to keep their value at that level as nearly as possible. A Capitalist community, on the contrary, will regulate it so as to make needles yield the utmost profit to the capitalist. But anyhow the value will depend on the quantity available.

Now just as a needle is for sewing, and is of no legitimate use for anything else, so coins and notes are for enabling people to buy and sell, and no use for anything else. And one coin will do for many sales as it passes from hand to hand, just as one needle will do to hem many handkerchiefs. This makes it very difficult to find out how many needles and coins are wanted. You cannot say “There are so many handkerchiefs in the country which must be hemmed; so we will make a needle for every one of them”, or “There are so many loaves of bread to be sold every morning; so we will make coins or issue notes for the price of every one of them”. No person or Government on earth can say beforehand how many needles or coins will be enough. You can count the mouths you have to feed, and say how many loaves will be required to fill them, because a slice of bread can be eaten only once, and is destroyed by being eaten; but a needle or a sovereign or a Treasury note can be used over and over again. One pound may be lying in an old stocking until the landlord calls for it, whilst another may be changing hands fifty times a day and effecting a sale every time. How then is a Government to settle how many coins and notes it shall issue? And how is a needle manufacturer to decide how many needles he shall make?

There is only one way of doing it. The needle makers just keep on making needles at a fancy price until they find they cannot sell them all without charging less for them; and then they go on charging less and less, but selling more and more (because of the cheapness), until the price is so low that they would make less profit if it went any lower, after which they make no more needles than are necessary to keep the supply, and consequently the price, just at that point. The Government has to do the same with gold coins. At first, because gold is more useful for coins than for anything else, an ounce of gold coined into sovereigns will be worth more than an ounce of uncoined gold (called bar or bullion). But if the Government issues more sovereigns than are needed for our buying and selling there will be more sovereigns than are wanted; and their value per ounce of gold will fall below that of gold bullion. This will be shewn by all prices going up, including that of gold in bars and ingots. The result will be that gold merchants will find it profitable to melt down sovereigns into bars of gold to be made into watches and bracelets and other things than coins. But this melting down reduces the number of sovereigns, which immediately begin to rise in value as they become scarcer until gold in the form of sovereigns is worth as much as gold in any other form. In this way, as long as money consists of gold, and melting down cannot be prevented as soon as it becomes profitable, the value of the coinage fixes and maintains itself automatically. It is against the British law to melt down a British sovereign in the British Empire; but as this silly law cannot restrain, say, a Dutch goldsmith in Amsterdam from melting down as many British sovereigns as he pleases, it does not count.

Though this settles the value of gold money, and all prices can be fixed in terms of gold, a penny being the two hundred and fortieth part of a sovereign, half a crown the eighth part of a sovereign, and so on, yet you cannot have gold pennies or even sixpences: they would be too small to handle. Also, if you want to make or receive a payment of five thousand pounds, you would find five thousand sovereigns more than you would care to carry. We get out of the penny and sixpenny difficulty by using coins of bronze and silver, making a law that bronze pennies shall be accepted, provided not more than twelve are offered at a time, as worth the two hundred and fortieth part of a sovereign, and that silver coins shall pass up to £2. We get over the five thousand pound difficulty by allowing the Bank of England to issue promissory notes, payable at sight in gold at the Bank, for sums of five pounds, ten pounds, a hundred pounds, and so on. People hand these notes from one to another in buying and selling, knowing them to be “as good as gold”. Certain Scottish and Irish banks have the same privilege on condition that they hold sufficient gold in their cellars to redeem the notes when presented, and, of course, that they do not pay their debts in their own notes.

In this way we all get used to paper money as well as to bronze and silver coins: that is, we get used to pretending that a scrap of paper with a water mark is worth 615 grains of gold or thereabouts; that a bit of metal that is only half silver is worth a much larger piece of pure silver; that 240 bits of bronze are worth a sovereign, and so on. We find these cheap substitutes do just as well as gold coins; and we naturally begin to ask what is the use of having any gold money at all, seeing that we get on quite well without it. Paper is just as effective as an instrument of exchange, and much less heavy to handle. We measure prices in quantities of gold; but imaginary gold does for that as well as real gold, just as you can measure fluids by pints and quarts without having a drop of beer in the house. If only the honesty of Governments could be depended on, the use of gold for money would be a pure luxury, like using gold safety pins and diamond shirt studs instead of common ones, which fasten quite as well.

But that is a very large If. When there is a genuine gold currency, the purchasing power of the coins does not depend on the honesty of the Government: they are valuable as precious metal, and can be turned to other purposes if the Government issues more of them than are needed for buying and selling. But the Government can go on printing and issuing paper money until it is worthless. Where should it stop when the check of gold is removed? As we have seen, it should stop the moment there is any sign of a general rise of prices, because the only thing that can cause a general rise of prices is a fall in the value of money. This or that article may become cheaper by the discovery of new ways of making it, or dearer by a failure in the crops, or worthless by a change of fashion; but all the articles do not move together from these causes: some rise and others fall. When they all rise or fall simultaneously, then it is not the articles that are changing in value but the money. In a paper money country the Government should watch carefully for such movements; and when prices all rise together they should withdraw notes from circulation until prices all fall again. When all prices fall simultaneously the Government should issue fresh notes until they rise again. What is needed is just enough money to do all the ready money selling and buying in the country. When less is issued money gets a scarcity value; so that when you go into a grocer’s shop he will give you more for your money (falling prices); and when more is issued there is a glut of it and the grocer will give less for it (rising prices). The business of an honest and understanding Government is to keep it steady by adjusting the supply to the demand. When Governments are either dishonest or ignorant, or both, there is no safety save in a currency of precious metal.

Remember, by the way, that modern banking makes it possible to do an enormous quantity of business without coinage or notes or money of any sort. Suppose Mrs John Doe and Mrs Richard Roe are both in business. Suppose Mrs Doe sells Mrs Roe five hundred pounds’ worth of goods, and at the same time buys goods from her to the value of five hundred pounds and one penny. They do business to the amount of a thousand pounds and one penny; yet all the money they need to settle their accounts is the odd penny. If they keep their accounts at the same bank even the penny is not necessary. The banker transfers a penny from Mrs Doe’s account to Mrs Roe’s; and the thing is done. When you have to pay a business debt you do not give your creditor the money: you give him an order on your banker for it (a cheque); and he does not go to your bank and cash the cheque: he gives it to his own banker to collect. Thus every bank finds every day that it has to pay a heap of money to other banks which hold cheques on it for collection, and at the same time to receive a heap of money for the cheques it has received for collection from the other banks. These cheques taken together may amount to hundreds of thousands of pounds, yet the difference between the ones to be paid and the ones to be collected may be only a few pounds or less. So the banks began by setting up a Clearing House, as they call it, to add up all the cheques and find out what each bank ought to pay or receive on balance. This saved a great deal of money handling, as the transfer of a single pound from one bank to another would settle transactions involving huge sums. But it presently occurred to the banks that even this pound might be saved if they all kept an account at the same bank. So the banks themselves opened accounts at the Bank of England; and now their accounts with oneanother are settled by a couple of entries in the Bank of England’s books; and trade to the amount of millions and millions is done by pure figures without the use of coinage or notes. If we were all well enough off to have banking accounts money might disappear altogether, except for small transactions between strangers whose names and addresses were unknown to oneanother: for instance, you give an order and pay by a cheque in a shop because you can count on finding the shopkeeper in the same place if there is anything wrong with the goods; and he can count on finding you similarly if there is anything wrong with your cheque; but if you take a taxi on the way home, you can hardly expect the driver to open an account for you; so you settle with him by handing him his fare in coin.

This need for pocket money (change) is greatly reduced by Communism. In the days of turnpike roads and toll bridges every traveller had to keep a supply of money to pay tolls at every turnpike gate and bridge head. Now that the roads and bridges are communized he can travel by road from London to Aberdeen in his car without having to put his hand in his pocket once to pay for the roads, because he has already paid when taking out the communal license for his car. If he pays his hotel bills by cheque he needs no money for his journey except for tips; and when these fall into disuse, as the old custom of making presents to judges has done, it is easy to conceive motoring trips, in the Communist future, being carried out in the greatest luxury by highly prosperous but literally penniless persons.

In this way actual money is coming to be replaced more and more by money of account: that is, we still count our earnings and our debts in terms of money, and value our position in the same way, earning hundreds of pounds, paying hundreds of pounds, owning hundreds of poundsworth of furniture and clothes and motor cars, and yet never having more than a few pounds and a handful of silver in our pockets from one end of our lives to the other. The cost of providing coins and notes for the nation to buy and sell with is dwindling continuously to a smaller and smaller percentage of the value of the goods bought and sold.

It may amuse you to realize that when coinage disappears altogether it does not matter whether we call our debts sovereigns and pennies and shillings or millions and billions and trillions. When the Germans were paying millions for tram fares and postage stamps, no harm was done by the apparent magnitude of the price: poor men could still ride in trams and send letters. If only those prices could have been depended on to stay put, so that the poor man (or the rich one for that matter) could have felt sure that his million mark note would buy as much tomorrow as today, and as much next year as this year, it would not have inconvenienced him in the least that the million mark note used to be a bronze coin. Germany has now stabilized her currency at the old rate of twenty marks to the English pound. Austria stabilized hers at first at the startling rate of 300,000 tenpences to the English pound but had to alter this to 34½ sevenpenny schillings later on. Except for the look of the thing the change made no great difference to the marketing housekeeper. When prices are in millions she soon gets into the habit of dropping the six noughts in conversation across the counter. Such prices seem silly to us because we are not accustomed to millionaire scavengers and beef at billions a pound. We are accustomed to pounds worth 160 ounces of butter; but pounds worth half a grain of butter or ten tons of butter will do as long as they are stabilized at that, and as long as the money is either money of account, existing only as ink marks in ledgers, or paper notes of no intrinsic value. If a tram ticket costs a million pounds it can be paid more cheaply than by a penny, provided the million pounds be only a scrap of paper costing less than a disk of bronze.

To sum up, the most important thing about money is to maintain its stability, so that a pound will buy as much a year hence or ten years hence or fifty years hence as today, and no more. With paper money this stability has to be maintained by the Government. With a gold currency it tends to maintain itself even when the natural supply of gold is increased by discoveries of new deposits, because of the curious fact that the demand for gold in the world is practically infinite. You have to choose (as a voter) between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.

56

NATIONALIZATION OF BANKING

You now know enough about banking and the manufacture of money to understand that they are necessities of civilization. They are in some respects quite peculiar businesses. Banking heaps up huge masses of capital in the banker’s hands for absolutely nothing but the provision of a till to put it in, and clerks to keep an account of it. Coinage is useless without a Government guarantee of the genuineness of the coins, and a code of laws making it a serious crime for any private person to make counterfeit coins, besides settling the limits within which coins that are stamped with more than their value as metal (called token coinage) can be used for paying debts.

As it is impossible for any private person or company to fulfil these coinage conditions satisfactorily, the manufacture of money is a nationalized business, unlike the manufacture of boots. You do not see a mint in every street as you see a bootmaker’s. All the money is made in THE Mint, which is a Government factory of coins. If, in your disgust at the disagreeable white metal shillings which have been substituted since the war for the old silver ones, you were to set up a private mint of your own, you would be sent to prison for coining, even though you could prove that your nice shillings were worth more than the nasty ones of the Government. Formerly, if you had a quantity of gold, you could take it to the Mint, and have it made into sovereigns for you at a small charge for the King’s image and guarantee called seignorage; but you were not allowed to make the coins for yourself out of your own gold. Today the Mint will not do that for you because it is easier for you to give your gold to your banker, who will give you credit for its worth in money. Thus the whole business is as strictly nationalized as that of the Post Office. Perhaps you do not know that you can be prosecuted for carrying a letter for hire instead of giving it to the Postmaster-General to carry. But you can, just as you can be prosecuted for making a coin, or for melting one down. And nobody objects. The people who, when it is proposed to nationalize the coal mines and the railways, shriek into your ears that nationalization is robbery and ruin, are so perfectly satisfied with the nationalization of the Mint that they never even notice that it is nationalized, poor dears!

However, private persons can issue a currency of their own, provided it is not an imitation of the Government currency. You may write a cheque, or a bill of exchange, and use it as paper money as often as you please; and no policeman can lay a finger on you for it provided (_a_) that you have enough Government money at your bank to meet the cheque when it is presented for payment, and (_b_) that the piece of paper on which your cheque is printed, or your bill of exchange drawn, bears no resemblance to a Treasury note or a bank note. An enormous volume of business is done today by these private currencies of cheques and bills of exchange. But they are not money: they are only title deeds to money, just as money itself is only a title deed to goods. If you owe money to your grocer he may refuse to take a cheque in payment; but if you offer him Treasury notes or sovereigns, he must take them whether he likes them or not. If you are trading with a manufacturer, and offer him a bill of exchange pledging you to pay for his goods in six months, he may refuse it and insist on Government money down on the nail. But he may not refuse Government money. Your offer of it is “legal tender”.

Besides, money, as we have seen, is a measure of value; and cheques and bills are not. The cheques and bills would have no meaning and no use unless they were expressed in terms of money. They are all for so many pounds, shillings, and pence; and if there were no pounds, shillings, and pence in the background, a cheque would have to run “Pay to Emma Wilkins or Order two pairs of secondhand stockings, slightly laddered, my share of the family Pekingese dog, and half an egg”. No banker would undertake to pay cheques of that sort. Both cheques and banking depend on the existence of nationalized money.

Banking is not yet nationalized; but it will be, because the public gain from nationalization will lead people to vote for it when they understand it just as they will vote for nationalization of the coal mines. Business people need capital to start and extend their businesses just as they need coal to warm themselves. As we have seen, when they want hundreds of thousands they get them by paying enormous commissions to financiers, who are so spoiled by huge profits that they will not deign to look at what they regard as small business. Those who want tens of thousands are not catered for: and those who want modest hundreds are often driven to borrow from money lenders at high rates of interest because the bank manager does not think it worth the bank’s while to let them overdraw. If you could shew these traders a bank working not to make profits at the expense of its customers but to distribute capital as cheaply as possible for the good of the country to all the businesses, large or small, which needed it, they would rush to it and snap their fingers at the profiteering financiers. A national or municipal bank would be just that. It would bring down the price of capital just as nationalization of the coal mines would bring down the price of coal, by eliminating the profiteer; and all the profiteers except the money profiteers (financiers and bankers) will be finally converted to it by this prospect, because, though they aim at making as much profit as possible out of you when you go shopping, they are determined that other people shall make as little profit as possible out of them.

Nationalization of Banking therefore needs no Socialist advocacy to recommend it to the middle class. It is just as likely to be finally achieved by a Conservative Government as by a Labor one. The proof is that the first municipal bank has been established in Birmingham, which returns twelve members to Parliament of whom eleven are Conservatives, and strong ones at that. Only one is Labor. The Birmingham municipal bank has been so easily and brilliantly successful that unless it be deliberately sabotaged in the interests of the financiers by a press campaign against it, which is practically impossible in a city of manufacturers, it will lead to a development of municipal banking all over the manufacturing districts. Already there are several others.

Meanwhile the bankers and financiers continue to assure us that their business is such a mysteriously difficult one that no Government or municipal department could deal with it successfully. They are right about the mystery, which is due to the fact that they only half understand their own business, and their customers do not understand it at all. By this time I hope you understand it much better than an average banker. But the difficulty is all nonsense. Let us see again what a bank has to do.

By simply offering to keep people’s money safe for them, and to make payments out of it for them to anyone they choose to name (by cheque), and to keep a simple cash account of these payments for them, it gets into its hands a mass of spare money which it professes to keep at its customers’ call, but which it finds by experience it can hire out to the extent of about sixteen shillings in the pound because each customer keeps a balance to his credit all the time. There is no mystery or difficulty about this. It can be done by government or municipal banks as easily as petty banking, with its currency of postal notes and stamps, is done by our national post offices and savings banks. The only part of it that is not automatically successful is the hiring out of the money when it is paid in. A bank manager whose judgment was bad would very soon get his bank into difficulties by hiring out the spare money to traders who are in a bad way, either because their businesses were being superseded by new businesses, or because they were too honest, or not honest enough, or extravagant, or drunken, or lazy, or not good men of business, or poetically unfitted to succeed. But a manager who was too cautious to lend any money at all would be still more disastrous; for we must continually remember that the things represented by the spare money in the bank will not keep, and that if fifty billions’ worth of food were saved out of the year’s harvest and lodged in a State bank (or any other bank) it would be a dead loss and waste if it were not eaten pretty promptly by workers building up facilities for producing future harvests. The bank manager can choose the person to whom he lends the bank’s spare money; but he cannot choose not to lend it at all; just as a baker, when he has sold all the bread he can for ready money, must either give credit for the rest to somebody or else throw the loaves into the dustbin.

Only, there is this difference between the baker and the banker. The baker can refrain from baking more loaves than he can reasonably expect to sell; but the banker may find himself heaped up with far more spare money than he can find safe hirers for; and then he has not only to take chances himself, but to tempt tradesmen by low rates of hire to take them (“the banks are granting credit freely” the city articles in the papers will say), whereas at other times his spare money will be so short that he will pick and choose and charge high interest (“the bankers are restricting credit”); and this is why it takes more knowledge and critical judgment to manage a bank than to run a baker’s shop.

No wonder the bankers, who make enormous profits, and consequently have the greatest dread of having these cut off by the nationalization of banking, declare that no Government could possibly do this difficult work of hiring out money, and that it must be left to them, as they alone understand it! Now, to begin with, they neither understand it nor do it themselves. Their bad advice produced widespread ruin in Europe after the war, simply because they did not understand the rudiments of their business, and persisted in reasoning on the assumption that spent capital still exists, and that credit is something solid that can be eaten and drunk and worn and lived in. The people who do the really successful work of hiring out the heaps of spare money in the bank for use in business are not the bankers but the bank managers, who are only employees. Their position as such is not more eligible either in money or social standing than that of an upper division civil servant, and is in many respects much less eligible. They would be only too glad to be civil servants instead of private employees. As to the superior direction which deals with what may be called the wholesale investment of the banked spare money as distinguished from its retail hirings to ordinary tradesmen and men of business, the pretence that this could not be done by the Treasury or any modern public finance department is a tale for the marines. The Bank of England is as glad to have a former Treasury official on its staff as the London Midland and Scottish Railway to have a former civil servant for its Chairman.

57

COMPENSATION FOR NATIONALIZATION

By the way, when demonstrating the need for the nationalization of banking to you I did not forget that you may be a bank shareholder, and that your attention may have been distracted by your wonder as to what will become of your shares when the banks are nationalized. I have had to consider this question rather closely myself, because, as it happens, my wife is a bank shareholder. We might have to cut down our household expenses if everyone went to a national or municipal bank instead of to her bank. In fact, when banking is nationalized, private banking will probably be made a crime, like private coining or letter carrying. So we shall certainly insist on the Government buying her shares when it nationalizes banking.

The Government will buy them willingly enough, for the excellent reason that it will get the money by taxing all capitalists’ incomes; so that if my wife were the only capitalist in the country the transaction would be as broad as it was long: the Government would take from her with one hand what it gave her with the other. Fortunately for her there are plenty of other capitalists to be taxed along with her; so that instead of having to provide all the money to buy herself out, she will have to provide only a little bit of it; and all the little bits that the other capitalists will have to provide will go into her pocket. This transaction is called Compensation.

It is very important that you should grasp this quaint process which seems so perfectly fair and ordinary. It explains how Governments compensate without really compensating, and how such compensation costs the nation nothing, being really a method of expropriation. Just consider. If the Government purchases a piece of land or a railway or a bank or a coal mine, and pays for it out of the taxes, it is evident that the Government gets it for nothing: it is the taxpayers who pay. And if the tax is a tax like the income tax, from which the bulk of the nation is wholly or partially exempt, or the supertax and estate duties, which fall on the capitalist classes only, then the Government has compelled the capitalist class to buy out one of themselves and present her property to the nation without any compensation whatever. The so-called compensation is only an adjustment by which the loss is shared by the whole capitalist class instead of being borne wholly by the particular member of it whose piece of land or bank shares or other property the Government happens to want. Even that member pays her share of the tax without compensation.

Some ladies may find this clearer if an imaginary case is put before them in figures. Suppose the Government wants a piece of land of the market value of £1000! Suppose it raises that sum, not by taxing the nation, but by taxing the incomes of a hundred rich landlords, including the owner of the piece of land, making each of them contribute £10! The Government then takes the piece of land, and solemnly hands £1000 to its former owner, telling him that he has nothing to complain of, as he has been paid the full market value of his land instead of having had it wrested from him violently in a revolutionary manner, as the Bolshevists took the land from the Russian landlords in 1917. Nothing can be more reasonable and constitutional and customary; the most Conservative Government might do it; in fact (except for the substitution of all the landlords for a hundred selected ones) Conservative Governments have done it over and over again. None the less, at the end of the transaction a piece of land has passed from private property into national property; and a hundred landlords have had their incomes reduced by ten shillings a year each (the interest on £10 at 5 per cent). It is quite clear that if such a transaction is repeated often enough the nation will have all the land, and the incomes of the landlords will be reduced to nothing, although every acre has been bought from its owner at full market price. The process can be applied to bank shares or any other shares as easily as to acres.

Let me repeat that this is not something that may be done: it is something that has been done and is being done. It has gone so far already that a huge quantity of property formerly owned by private persons is now owned by the Government and the municipalities: that is, by the nation; whilst taxation has risen to such a point that the rich have to remind themselves continually that their pounds are only thirteen-and-fourpences or less, because the Government will take the other six and eightpence or more as income tax and supertax, and that even out of the thirteen and fourpence the municipalities of the places where their houses are (rich men keep from two to five houses) will take a considerable dollop in rates for pure Communism. At present they are selling their houses in all directions to speculators and contractors who have made large fortunes out of inflation and War; but these New Rich will in their turn be forced to buy oneanother out just as the Old Rich, now called the New Poor, were.

In this way you get the constitutional rule for nationalization of private property, which is, always to pay the full market price or more to the proprietors for every scrap of property nationalized. Pay for it by taxing incomes derived from property (there is, of course, no compensation for taxation). Your own rule as a voter should be never to vote for a candidate who advocates expropriation without compensation, whether he calls himself a Socialist or Communist, in which case he does not understand his own political business, or a Liberal. The Liberal impulse is almost always to give a dog a bad name and hang him: that is, to denounce the menaced proprietors as enemies of mankind, and ruin them in a transport of virtuous indignation. But Liberals are not, as such, hostile to capitalists, nor indeed to anybody but publicans and imaginary feudal landlords. Conservatives are practically always for compensation to property owners; and they are right; but they do not see through the trick of it as you now do.

Anyhow, always vote against the no-compensation candidate unless you are opposed to nationalization, and are subtle enough to see that the surest way to defeat it is to advocate its being carried out vindictively without a farthing of compensation.

There is, however, an alternative to compensated nationalization of private industries. Why should not the Government set up for itself in the industry it desires to nationalize, and extinguish its private competitors just as the big multiple shops extinguish the small shops, by underselling them, and by all the other methods of competitive trade? The Birmingham municipality has begun the nationalization of banking without troubling itself about the private banks: it has simply opened its bank in the street and gone ahead. The parcel post was established without any compensation to private carriers; and the Cash on Delivery development of it was effected without any consideration for the middlemen whom it superseded. Private employers have always proceeded in this manner on competitive principles; why should not the State, as public employer, do just the same?

The reason is that the competitive method is an extremely wasteful one. When two bakeries are set up in a district that could be quite well served by one, or two milk carts ply in the same street, each trying to snatch the other’s custom, it means that the difference between the cost of running two and one is sheer waste. When a woman wears out her hat, or rather when the hatmakers change the fashion so as to compel her to buy a new hat before the one she is wearing is half worn out, and fifty shops make new hats on the chance of selling that one to her, there is overproduction, with its sequel of unemployment.

Now apply this to, for example, the nationalization of railways. The Government could, no doubt, construct a network of State railways parallel with the existing railways; so that you could go from London to Penzance either by the Great Western or by a new State line running side by side with it. The State could then, by introducing the system of Penny Transport proposed by Mr Whately Arnold on the lines of Penny Postage, undersell the separate private companies and take all their traffic from them. That would be the competitive method. Then there would be two railways to Penzance and Thurso and Bristol and Cromer and everywhere else, one of them carrying nearly all the traffic, and the other carrying only its leavings and holiday overflows until it fell into hopeless and dangerous decay and ruin.

But can you imagine anything more idiotically wasteful? The cost of making the competing State railway would be enormous, and quite unnecessary. The ruin of the private railway would be sheer destruction of a useful and sufficient means of communication which had itself cost a huge sum. The land occupied by one of the railways would be wasted. What Government in its senses would propose such a thing when it could take over the existing railways by compensating the shareholders in the manner I have described: that is, distributing their loss over the propertied class without a farthing of expense to the nation as a whole?

The same considerations must lead the State to take over the existing banks. Municipal banks on the Birmingham model may be competing banks; but when a national banking service comes, it will come by way of nationalizing the existing private banks.

There is another objection to the competitive method. If the State is to compete with private enterprise, it must allow private enterprise to compete with it. Now this is not practicable if the full advantage of nationalization is to be obtained. The Post Office is able to establish a letter service and C.O.D. parcel post in every village in the country, and a telephone and telegraph service in most of them, with charges reckoned in pence and halfpence, on condition that profiteers are not allowed to come in and pick out the easy bits of the business to exploit for themselves. The Postmaster-General does things for the nation that no profiteer would or could do; but his rule is All or Nothing.

A Banker-General would have to insist on the same rule. He would establish banks, if not literally everywhere, at least in hundreds of places where the private banks would no more dream of opening a branch, even on the open-once-a-week scale, than of building a Grand Opera House. But he, too, would say “All or Nothing: I will not have any intelligent Jewish gentleman, or rapacious Christian person trained in the intelligent Jewish gentleman’s office, picking the plums out of my pudding”.

Yet do not conclude that all State activities will be State monopolies. Indeed the nationalization of banking will certainly enlarge the possibilities of private activity in all sorts of ways. But as the big public services will have to be made practically ubiquitous, charging more than they cost in one place and less in another, they must be protected against sectional private competition. Otherwise we should have what prevails at present in municipal building, where all the lucrative contracts for the houses of the rich and the offices of the capitalists and the churches and institutions and so forth go to the private employer, whilst the municipality may build only dwellings for the poor at a loss, which they conceal from the ratepayers by fictitious figures as to the value of the land. Municipal building is always insolvent. If it had a monopoly it could afford to make every town in the land a ratepayers’ and tenants’ paradise.

This reminds me to remind you that every nationalization of an industry or service involves the occupation of land by the State. This land should always be nationalized by purchase and compensation. For if it is merely rented, as I am sorry to say it sometimes is, the charges made to the public must be raised by the amount of the rent, thus giving the ground landlord the money value of all the advantages of the nationalization.

I have said nothing about one of the cruelest effects of superseding an industry by competition instead of buying it up. The process consists fundamentally of the gradual impoverishment and ruin of those who are carrying on the superseded business. Capitalism is ruthless on this point: its principle is “Each for himself; and devil take the hindmost!” But the State has to consider the loser as well as the winner. It must not impoverish anybody. It must let the loser down easily; and there is no other way of doing this except the way of purchase and compensation.

58

PRELIMINARIES TO NATIONALIZATION

You now see that nationalization and municipalization are so desirable as a means of cheapening the things we all need that the most violently anti-Socialist Parliaments and municipal corporations have established nationalized and municipalized industries in the past, and are quite likely to do so in future under electoral pressure from Conservative voters. You see also that the alleged enormous expense of buying out private owners, which has been alleged by a Coal Commission as an insuperable objection to the nationalization of our coal mines, is a bogey, because, though the coalowners (of whom, by the way, I am one) will be fully compensated, the proprietary class as a whole will pay the bill out of their unearned incomes, leaving the nation richer instead of poorer by the transaction. So far so good. Theoretically, nationalization is perfectly sound.

Practically, it takes, as the people very accurately put it, a lot of doing. A mere proclamation that such and such an industry is nationalized can do nothing but just put a stop to it. Before any industry or service can be effectively nationalized a new department of the Civil Service must be created to carry it on. Unless we had a War Office we could not have an army, because no soldier could get his pay, or his uniform, or his weapons. Without an Admiralty, no navy. Without a General Post Office and a Postmaster-General, no letters in the morning. Without a Royal Mint and a Master of the Mint, no money. Without Scotland Yard in London, and Watch Committees in the country, no police. And as in the present so in the future. Without a great extension of the Treasury, banking cannot be nationalized, nor coal without the creation of a Department of Mines much bigger than our existing Department of Woods and Forests, nor railways without a Railway Board and a Railroadmaster-General as important as the Post Office and the Postmaster-General.

Such institutions can be set up by stable and highly organized States only, which means--and here is the political moral of it--that they cannot be done by revolutions, or by improvised dictatorships, or even by permanent States in which, as in America, where in some cases the civil services are still regarded as the spoils of office, a new set of officials oust the old ones whenever the Opposition ousts the Government. What a revolution can do towards nationalization is to destroy the political power of the class which opposes nationalization. But such a revolution by itself cannot nationalize; and the new Government it sets up may be unable even to carry on the nationalized services it finds in existence, and be obliged to abandon them to private enterprise.

A nationalizing Government must also be financially honest, and determined to make the nationalization a success, and neither plunder it to eke out the general revenue, nor discredit and wreck it so to have an excuse for giving the nationalized service back to the private profiteers. State railways have sometimes been standing examples of what State management can be at its worst. The Governments, instead of keeping the railways in proper repair, grabbed all the money paid by the public in fares and freightage; applied it to the relief of general taxation; and let the stations and rolling stock decay until their railways were the worst in the world, and there was a general clamor for their denationalization. Private profiteering enterprises have gone to pieces in the same way and worse; but, as they have been responsible to themselves only, their failures and frauds have passed unnoted, whilst the failures and frauds of Governments have raised great popular agitations and even provoked revolutions. The misdeeds of Governments are public and conspicuous: the misdeeds of private traders are practically invisible; and thus an illusion is created that Governments are less honest and efficient than private traders. It is only an illusion; but all the same, honesty and good faith are as necessary in nationalized businesses as in private ones. Our British nationalized services are held up as models of integrity; yet the Postmaster-General overcharges us a little for our letters, and puts the profit into the pockets of the propertied class in the form of reduced income tax; and the Admiralty is continually fighting against the tendency to keep down taxation by starving the navy. These depredations do not amount to much; but they illustrate what may be done when voters are not vigilant and well instructed.

59

CONFISCATION WITHOUT COMPENSATION

Our study of nationalization by compensated or distributed confiscation has no doubt relieved you from all anxiety as to the need for nationalization without compensation. But there is always a loud-mouthed, virtuously indignant political group, still saturated with the revolutionary traditions of Liberalism, which opposes compensation. If the property owner is, in effect, a thief, they say, why should he be compensated for being compelled to cease to do evil and learn to do well? If by taxation we can make the whole capitalist class find the money to buy out the coalowners, and thus transfer their property to the nation to that extent, why not take the rest of their property simply for the sake of transferring it also to the nation? Our joint stock companies work as well with one set of shareholders as with another: in fact their shares change hands so continually in the Money Market that they never have the same set of shareholders from one working day to the next. If all the railway shares in the country were held on Monday by the inhabitants of Park Lane, and on Tuesday by the British Government, the railways would go on just the same. In like case so would any other of the great industrial services now in joint stock ownership. If a landlord had to hand over the title-deeds of half a dozen farms and an urban street to the Exchequer, the farmers would go on farming, and the tenants go on living in the street, unaffected by the obligation to pay their rents in future to an agent of the Government instead of to the agent of a duke or any other plutocrat. The business of a bank would proceed just as smoothly after as before the owners had handed over their claims on its profits to the Chancellor of the Exchequer. Then why not at once push taxation of capital to the point at which the capitalist taxpayer, unable to find the money, will be forced to surrender to the Government his share certificates, his War Loan interest, and his title-deeds? The share certificates would not be worth a farthing on the Stock Exchange, because there would be all sellers and no buyers there; but none the less each certificate would, like the title-deeds to the land, carry the right to an income out of the future harvests of the country; and if the Government could immediately use that income for the benefit of the nation, it would be extremely well worth its while to get hold of it by accepting the certificates at their face value.

It could even do so with a show of generosity; for it could say to the capitalist, “You owe the tax collector a thousand pounds (say); but instead of selling you up we are authorizing him to give you a clean receipt, not for the money, but for ten paper certificates marked a hundred pounds each, for which the cleverest stockbroker in London could not get you twopence”. “But”, exclaims the cornered capitalist, “what becomes of my income? What am I to do for a living?” “Work for it, as others have to do”, is the reply. In short, from the point of view of its Socialist advocates, taxation of capital, though absurd as a means of raising ready money for the expenses of Government, is a way of confiscating without compensation the title-deeds of, and thereby nationalizing, the land and the mines and the railways and all the other industries which the capitalists now hold as their private property.

The scheme is plausible enough.

60

REVOLT OF THE PARASITIC PROLETARIAT

But there is an objection to it; and that objection may be learnt from the stupidest woman you ask in the street. She will tell you that you must not take away the property of the rich, because “they give employment”. Now, as we have seen, it is quite true that fundamentally it is nonsense to say that an unproductive rich person can give employment in any other sense than as a lunatic gives employment to her keeper. An idle rich woman can give no productive employment: the employment she gives is wasteful. But wasteful or not, she gives it and pays for it. She may not have earned the money she pays with; but it will buy as good bread and clothes for her employee as the most honestly earned money in the kingdom. The idler is a parasite: and the idler’s employee, however industrious, is therefore a parasite on a parasite; but if you leave the parasite destitute you leave the parasite’s parasites destitute; and unless you have productive employment ready for them they will have to starve or steal or rebel; and as they will certainly not choose to starve, their choice of the remaining two alternatives (which they will probably combine) may upset the Government if they are numerous enough. And they are, as a matter of fact, very numerous, as you may see by counting the Conservative votes that are given at every General Election by people who work for weekly wages in wholly or partly parasitic occupations. The plunder of the proletariat is shared handsomely by the plunderers with the proletarians. If our capitalists could not plunder our proletarians, our proletarians and their middle class organizers, from the Bond Street art dealers and jewellers to the errand boys of Bournemouth, could not live on the custom of our capitalists. That is why neither Bond Street nor Bournemouth can be persuaded to vote for uncompensated expropriation, and why, if it came to fighting instead of voting, they would fight against it.