Chapter XVI: Part 16

The trouble would begin, not with the nationalized industries, but with the others. As we have seen, the mines and banks and railways, being already organized as going concerns, and managed by directors elected by the votes of the shareholders, could be confiscated by taxing the shareholders heavily enough to oblige them to transfer their shares to the Government in payment of the tax. But the income derived from these shares would therefore go into the pocket of the Government instead of into the pockets of the shareholders. Thus the purchasing power of the shareholders would pass to the Government; and every shop or factory that depended on their custom would have to shut up and discharge all its employees. The saving power of the shareholders, which means, as we now understand, the power of supplying the spare money needed for starting new industrial enterprises or extending old ones to keep pace with civilization, would also pass to the Government. These powers, which must be kept in action without a moment’s interruption, operate by continual expenditure (mainly household expenditure) and continual investment of the enormous total of all our private incomes.

What could the Government do with that total? If it simply dropped it into the national till, and sat on it, most of it would perish by natural decay; and meanwhile a great many of the people would perish too. There would be a monster epidemic of bankruptcy and unemployment. The tide of calamity would sweep away any Government unless it proclaimed itself a Dictatorship, and employed, say, a third of the population to shoot down another third, whilst the remaining third footed the bill with its labor. What could the Government do to avert this, short of handing back the confiscated property to the owners with apologies for having made a fool of itself?

61

SAFETY VALVES

It could distribute the money in doles; but that would only spread the very evil the confiscation was intended to destroy: that is to say, the evil of unearned income. A much sounder plan (and do not forget this when next you are tempted to give a spare £5 note to a beggar instead of putting it on deposit at your bank) would be to throw all the money into the confiscated banks, and lend it to employers at unprecedentedly cheap rates. Another expedient would be to raise wages handsomely in the confiscated industries. Another, the most desperate of all, but by no means the least probable, would be to go to war, and waste on the soldier the incomes formerly wasted on the plutocrat.

These expedients do not exclude oneanother. Doles, cheap capital available in Government-owned banks, and high wages, could be resorted to simultaneously to redistribute purchasing power and employing power. The doles and pensions would tide over the remaining years of those discharged servants of the ruined rich who were incapable of changing their occupations, and of the ruined rich themselves. The cheap capital at the banks would enable employers to start new businesses, or modify old ones, and to cater for the increased purchasing power of the workers whose wages had been raised, thereby giving employment to the workers who had lost their jobs in Bournemouth or Bond Street. The art dealers could sell pictures to the National Gallery and the provincial municipal galleries. There would be a crisis: but what of that? Capitalism has often enough produced displacements of purchasing power and loss of livelihood to large bodies of citizens, and fallen back on doles in the shape of Mansion House Funds and the like as safety valves to ease the pressure when the unemployed began to riot and break windows. Why should we not muddle through as we have always done?

Well, we might. But serious as the biggest crises of Capitalism have been, they have never been as big as the crash that would follow confiscation by the Government of the entire property of the whole propertied class without any preparation for the immediate productive employment not only of the expropriated owners (who are too few to give much trouble) but of the vast parasitic proletariat who produce their luxuries. Would the safety valves act quickly enough and open widely enough? We must examine them more closely before we can judge.

A civilized country depends on the circulation of its money as much as a living animal depends on the circulation of its blood. A general confiscation of private property and its incomes would produce an unprecedented congestion in London, where the national Treasury is, of money from all over the kingdom; and it would become a matter of life or death for the Government to pump that congested money promptly back again to the extremities of the land. Remember that the total sum congested would be much larger than under the capitalist system, because, as the capitalists spend much more of their incomes than they save, the huge amount of this expenditure would be saved and added to the Government revenue from the confiscated property.

Now for the safety valves. A prodigious quantity of the congested money would come from the confiscated ground rents of our cities and towns. The present proprietors spend these rents where they please; and they seldom please to spend them in the places where they were produced by the work of the inhabitants. A plutocrat does not decide to live in Bootle when he is free to live in Biarritz. The inhabitants of Bootle do not get the benefit of his expenditure, which goes to the west end of London and to the pleasure resorts and sporting grounds of all the world, though perhaps a little of it may come back if the town manufactures first class boots and riding breeches and polo mallets. The dwellers in the town enjoy a good deal of municipal communism; but they have to pay for it in rates which are now oppressively heavy everywhere. And they would be heavier still if the Government did not make what are called Grants-in-Aid to the municipalities.

An obvious safety valve, and a popular one with the ratepayers, would be the payment of the rates by the Treasury through greatly increased grants. If you are a ratepaying householder, and your landlord were suddenly to announce that in future he would pay the rates, you would rejoice in the prospect of having that much more money to spend on yourself. A similar announcement by the Chancellor of the Exchequer would be equally welcome. It would relieve the congestion at the Treasury, and send a flood of money back from the heart to the extremities.

Then there is the combination of raised wages in the confiscated industries with a flood of cheap capital pumped to all the business centres through the confiscated banks. The raised wages would check the flow of income to the Treasury by reducing dividends; and the cheapening of capital would enable new businesses to be started and old ones re-equipped to meet the demand created by the increased purchasing power (pocket money) of the wage workers and the disburdened ratepayers.

And there is always a good deal to be done in the way of public expenditure on roads; on reclamations of land from the sea; on afforestation; on building great dams across valleys and barrages across rivers and tideways to concentrate waterflow on turbine engines; on stations for the distribution of the power thus gained; on the demolition of slum towns that should never have been built, and their replacement by properly planned, healthy and handsome garden cities; and on a hundred other things that Capitalism never dreams of doing because it is impossible to appropriate their advantages as commercial profit. The demand for labor created by such operations would absorb all the employable unemployed, and leave only the superannuated and the incurably unemployable on the dole, with, of course, the children, on whom much more money could and should be spent than at present, with great uncommercial profit to the next generation.

All this sounds very reassuring, and costs little to describe on paper. But a few minutes’ reflection will dispel all hope that it could occur instantly and spontaneously through the uncompensated transfer of all existing shares and title-deeds to the Government. The Ministry of Health would have to produce a huge scheme for the grants-in-aid to the cities; and Parliament would wrangle for months over it. As to glutting the existing banks with spare money to lend without any further interference with them, the results would include an orgy of competitive enterprise, overcapitalization, overproduction, hopeless shops and businesses started by inexperienced or silly or rash people or people who are all three: in short, a boom followed by a slump, with the usual unemployment, bankruptcies, and so forth. To keep that part of the program under control, it would be necessary to set up a new department of the Treasury to replace the present boards of predatory company directors; to open banks wherever the post offices are doing substantial business; and to staff the new banks with specially trained civil servants. And all that would take longer than it takes a ruined citizen to starve.

As to raising industrial wages and reducing prices with the object of eliminating profit, that is so precisely the contrary of the policy which the existing managers of our industry have trained themselves to pursue, and which alone they understand, that their replacement by civil servants would be just as necessary as in the case of the banks. Such replacements could be effected only as part of an elaborate scheme requiring long preliminary cogitation and a practical preparation involving the establishment of new public departments of unprecedented magnitude.

Public works, too, cannot be set on foot offhand in the manner of Peter the Great, who, when asked to dictate the route to be taken by his new road from Moscow to Petrograd, took up a ruler and drew a straight line on the map from the word Moscow to the Neva. If Peter had had to get a proposal for a turbine barrage through a parliament with a fiery Welsh contingent determined that it should be across the Severn, and an equally touchy Scots contingent bent on having it across the Kyle of Tongue, he would have found many months slipping by him before he could set the first gang of navvies to work.

I need not weary you by multiplying instances. Wholesale nationalization without compensation is catastrophic: the patient dies before the remedy has time to operate. If you prefer a mechanical metaphor, the boiler bursts because the safety valves jam. The attempted nationalization would produce a revolution. You may say “Well, why not? What I have read in this book has made me impatient for revolution. The fact that any measure would produce a revolution is its highest recommendation”.

If that is yours view, your feelings do you credit: they are or have been shared by many good citizens. But when you go thoroughly into the matter you will realize that revolutions do not nationalize anything, and often make it much more difficult to nationalize them than it would have been without the revolution if only the people had had some education in political economy. If a revolution were produced by unskilled Socialism (all our parliamentary parties are dangerously unskilled at present) in the teeth of a noisy and inveterate Capitalist Opposition, it would produce reaction instead of progress, and give Capitalism a new lease of life. The name of Socialism would stink in the nostrils of the people for a generation. And that is just the sort of revolution that an attempt to nationalize all property at a blow would provoke. You must therefore rule out revolution on this particular issue of out-and-out uncompensated and unprepared general nationalization versus a series of carefully prepared and compensated nationalizations of one industry after another.

Later on, we shall expatiate a little on what revolutions can do and what they cannot. Meanwhile, note as a canon of nationalization (economists like to call their rules for doing anything canons) that all nationalizations must be prepared and compensated. This will be found an effectual safeguard against too many nationalizations being attempted at a time. We might even say against more than one nationalization being attempted at a time; only we must not forget that industries are now so amalgamated before they are ripe for nationalization that it is practically impossible to nationalize one without nationalizing half a dozen others that are inextricably mixed up with it. You would be surprised to learn how many other things a railway company does besides running trains. And if you have ever gone to sea in a big liner you have perhaps sometimes looked round you and wondered whether the business of making it was called shipbuilding or hotel building, to say nothing of engineering.

62

WHY CONFISCATION HAS SUCCEEDED HITHERTO

Now that I have impressed on you at such length as a canon of nationalization that Parliament must always buy the owners out and not simply tax them out, I am prepared to be informed that the canon is dead against the facts, because the direct attack on property by simple confiscation: that is, by the Government taking the money of the capitalists away from them by main force and putting it into the public treasury, has already, without provoking reaction or revolution, been carried by Conservative and Liberal Governments to lengths which would have seemed monstrous and incredible to nineteenth century statesmen like Gladstone, proving that you can introduce almost any measure of Socialism or Communism into England provided you call it by some other name. Propose Socialistic confiscation of the incomes of the rich, and the whole country will rise to repel such Russian wickedness. Call it income tax, supertax, and estate duties, and you can lift enough hundreds of millions from the pockets of our propertied class to turn the Soviet of Federated Russian Republics green with envy.

Take a case or two in figures. Gladstone thought it one of his triumphs as Chancellor of the Exchequer to reduce the income tax to twopence in the pound, and hoped to be able to abolish it altogether. Instead of which it went up to six shillings in 1920, and stopped at that only because it was supplemented by an additional income tax (Supertax or Surtax) on the larger incomes, and a partial abolition of inheritance which makes the nation heir to a considerable part of our property when we die possessed of any. Just imagine the fuss there would have been over this if it had been proposed by a Socialist Prime Minister as Confiscation, Expropriation, and Nationalization of Inheritance on the Communist principles of the prophet Marx! Yet we took it lying down.

You have perhaps not noticed how this taxation is arrived at in Parliament at present. The Chancellor of the Exchequer is the Minister who has to arrange the national housekeeping for the year, and screw out of a reluctant House of Commons its consent to tax us for the housekeeping money; for with the negligible exception of the interest on certain shares in the Suez Canal and in some ten companies who had to be helped to keep going during the war the nation has no income from property. Whom he will be allowed to tax depends on the sort of members who have been returned to Parliament. Without their approval his Budget, as he calls his proposals for taxation, cannot become law; and until it becomes law nobody can be compelled to pay the taxes. In Gladstone’s time Parliament consisted practically of landlords and capitalists and employers, the handful of working class members being hopelessly outvoted by the other three sections combined, or even single. Each of these sections naturally tried to throw as much of the burden of taxation as possible on the others; but all three were heartily agreed in throwing on the working class as much of it as they could without losing too many working class votes at the next election. Therefore the very last tax they wished to sanction was the income tax, which all of them had to pay directly, and which the wage workers escaped, as it does not apply to small incomes. Thus the income tax became a sort of residual tax or last resort: an evil to be faced only when every other device for raising money had been found insufficient. When Gladstone drove it down from sixpence to fourpence, and from fourpence to twopence, and expressed his intention of doing without it altogether, he was considered a very great Chancellor of the Exchequer indeed. To do this he had to raise money by putting taxes on food and drink and tobacco, on legal documents of different kinds, from common receipts and cheques and contracts to bills of exchange, share certificates, marriage settlements, leases and the like. Then there were the customs, or duties payable on goods sent into the country from abroad. The industrial employers, who were great importers of raw materials, and wanted food to be cheap because cheap food meant low wages, said “Let them come in free, and tax the landlords”. The country gentlemen said “Tax imports, especially corn, to encourage agriculture”. This created the great Free Trade controversy on which the Tories fought the Liberals for so many years. But both parties always agreed that income tax should not be imposed until every other means of raising the money had been exhausted, and that even then it should be kept down to the lowest possible figure.

When Socialism became Fabianized and began to influence Parliament through a new proletarian Labor Party, budgeting took a new turn. The Labor Party demanded that the capitalists should be the first to pay, and not the last, and that the taxation should be higher on unearned than on earned incomes. This involved a denial of the need for keeping Government expenditure and taxation down to the lowest possible figure. When taxation consists in taking money away from people who have not earned it and restoring it to its real earners by providing them with schools, better houses, improved cities, and public benefits of all sorts, then clearly the more the taxation the better for the nation. Where Gladstone cried “I have saved the income tax payers of the country another million. Hurrah!” a Labor Chancellor will cry “I have wrung another million from the supertaxed idlers, and spent it on the welfare of our people! Hooray!”

Thus for the last fifteen years we have had a running struggle in Parliament between the Capitalist and Labor parties: the former trying to keep down the income tax, the supertax, the estate duties, and public expenditure generally, and the latter trying to increase them. The annual debates on the Budget always turn finally on this point, though it is seldom frankly faced; and the capitalists have been losing bit by bit until now (in the nineteen-twenties) we have advanced from Gladstone’s income tax of 2d. in the pound to rates of from four to six shillings, with, on incomes exceeding £2000, surtaxes that range from eighteen pence to six shillings according to the amount of the income; whilst on the death of a property owner his heirs have to hand over to the Government a share of the estate ranging from one per cent of its fictitious capital value when it is a matter of a little over £100, to forty per cent when it exceeds a couple of millions.

That is to say, if your uncle leaves you five guineas a year you have to pay the Government seventy-three days income. If he leaves you a hundred thousand a year you pay eight years income, and starve for the eight years unless you can raise the money by mortgaging your future income, or have provided for it by insuring your life at a heavy premium for the nation’s benefit.

Now suppose this income of a hundred thousand a year belongs to an aristocratic family in which military service as an officer is a tradition which is practically obligatory. In a war it may easily happen, as it did sometimes during the late war, that the owner of such a property and his two brothers next in succession are killed within a few months. This would bring the income of £100,000 a year down to £12,000, the difference having been confiscated by the Government. If we were to read in The Morning Post that the Russian Soviet had taken £78,000 a year from a private family without paying a penny of compensation, most of us would thank heaven that we were not living in a country where such Communistic monstrosities are possible. Yet our British anti-Socialist Governments, both Liberal and Conservative, do it as a matter of routine, though their Chancellors of the Exchequer go on making speeches against Socialistic confiscation as if nobody outside Russia ever dreamt of such a thing!

That is just like us. All the time we are denouncing Communism as a crime, every street lamp and pavement and water tap and police constable is testifying that we could not exist for a week without it. Whilst we are shouting that Socialistic confiscation of the incomes of the rich is robbery and must end in red revolution, we are actually carrying it so much further than any other fully settled country that many of our capitalists have gone to live in the south of France for seven months in the year to avoid it, though they affirm their undying devotion to their native country by insisting that our national anthem shall be sung every Sunday on the Riviera as part of the English divine service, whilst the Chancellor of the Exchequer at home implores heaven to “frustrate their knavish tricks” until he can devise some legal means of defeating their evasions of his tax collectors.

But startling from the Victorian point of view as are the sums taken annually from the rich, they have not in the lump gone beyond what the property owners can pay in cash out of their incomes, nor what the Government is prepared to throw back into circulation again by spending it immediately. They have transferred purchasing power from the rich to the poor, producing minor commercial crises here and there, and often seriously impoverishing the old rich; but they have been accompanied by such a development of capitalism that there are more rich, and richer rich, than ever; so that the luxury trades have had to expand instead of contract, giving more employment instead of less. And they have proved that you may safely confiscate income derived from property provided you can immediately redistribute it. But you cannot tax it to extinction at a single mortal blow. You have always to consider most carefully how far and how fast you can go without crashing. The rule that the Government must not tax at all until it has an immediate use for the money it takes is fundamental: it holds in every case. The rule that if it uses it to nationalize an already established commercial industry or service it must have a new public department ready to take the business over, and must compensate the owners from whom it takes it, is also invariable. When the object is not nationalization, but simple redistribution of income within the capitalist system by transferring purchasing power from one set of people to another, usually from a richer set to a poorer set, thus changing the demand in the shops from dear luxuries to comparatively cheap necessities, then the process must go no faster than the capitalist shops can adapt themselves to this change. Else it may produce enough bankruptcies to make the Government very unpopular at the next election.

Let us study a sensational instance in which we have incurred a heavy additional burden of unearned income, so strongly resented by the mass of the people that our Governments, whether Labor or Conservative, may not long be able to resist the demand for its redistribution.

63

HOW THE WAR WAS PAID FOR

In 1914 we went to war. War is frightfully expensive and frightfully destructive: it results in a dead loss as far as money is concerned. And everything has to be paid for on the nail; for you cannot kill Germans with promissory notes or mortgages or national debts: you must have actual stores of food, clothing, weapons, munitions, fighting men, and nursing, car driving, munition making women of military age. When the army has worn out the clothes and eaten up the food, and fired off the munitions, and shed its blood in rivers, there is nothing eatable, drinkable, wearable, or livable-in left to shew for it: nothing visible or tangible but ruin and desolation. For most of these military stores the Government in 1914-18 went heavily into debt. It took the blood and work of the young men as a matter of course, compelling them to serve whether they liked it or not, and breaking up their businesses, when they had any, without compensation of any kind. But being a Capitalist Government it did not take all the needed ready money from the capitalists in the same way. It took some of it by taxation. But in the main, it borrowed it.

Naturally the Labor Party objected very strongly to this exemption of the money of the rich from the conscription that was applied ruthlessly to the lives and livelihoods and limbs of the poor. Its protests were disregarded. The spare subsistence needed to support the soldiers and the workers who were producing food and munitions for them, instead of being all taken without compensation by taxation, was for the most part hired from capitalists, their price being the right to take without working, for every hundred pounds worth of spare subsistence lent, five pounds a year out of the future income of the country for waiting until the hundred pounds they put down was repaid to them in full.

Roughly, and in round figures, what happened was that the National Debt of 660 millions owing in 1914 from former wars was increased by the new war to over 7000 millions. Until we are able to repay this in full we have to pay more than 350 millions a year to the lenders for waiting; and as the current expenses of our civil services (300 millions), with our army, our navy, our air force, and all the other socialized national establishments, come to more than as much again, the Chancellor of the Exchequer has now to budget for more than two millions a day, and get that out of our pockets as best he can. And as it is no use asking the proletarians for it at a time when perhaps a million or so of them are unemployed, and have to be supported out of the taxes instead of paying any, he has to make the property holders contribute, in income tax, supertax, and estate duties, over 380 millions a year: that is, a million and fifty thousand a day, or more than half the total taxation. This is confiscation with a vengeance.

Does it strike you that there is something funny about this business of borrowing most of the 7000 millions from our own capitalists by promising to pay them, say 325 millions a year whilst they are waiting for repayment, and then taxing them to the tune of 382 millions a year to pay not only their own waiting money but that of the foreign lenders as well? They are paying over 50 millions a year more than they are getting, and are therefore, as a class, losing by the transaction. The Government pays them with one hand, and takes the money back again, plus over 17 per cent interest, with the other. Why do they put up with it so tamely?

The explanation is easy. If the Government took back from each holder of War Loan exactly what it had paid him plus three and sixpence in the pound, all the holders would very promptly cry “Thank you for worse than nothing: we will cancel the debt; and much good may it do you”. But that is not what happens. The holders of War Loan Stock are only a part of the general body of property owners; but all the property owners have to pay income tax and death duties, and, when their income exceeds £2000, supertax. Those who did not lend money to the Government for the war get nothing from it. Those who did lend get the 325 millions a year all to themselves; but their liability for the taxation out of which it is paid is shared with all the other property owners. Therefore, though the property owners as a whole lose by the transaction, those property owners who hold War Loan Stock gain by it at the expense of those who do not. The Government not only robs capitalist Peter to pay capitalist Paul, but robs both of more than it pays to Paul; yet though Peter and Paul taken together are poorer, Paul taken by himself is richer, and therefore supports the Government in the arrangement, whilst Peter complains that the burden of taxation is intolerable.

To illustrate, my wife and I are capitalists, but I hold some War Loan stock, whilst all her money is in bank, railway, and other stocks. We are both taxed equally to pay me the interest on my War Loan; but as the Government pays me that interest and does not pay her anything, I gain by the transaction at her expense; so that if we were not, as it happens, on the communal footing of man and wife, we should never agree about it. Most capitalists do not understand the deal, and are in effect humbugged by it; but those who do understand it will never be unanimous in resisting it; consequently it is voteproof at the parliamentary elections.

This quaint state of things enables the Labor Party to demonstrate that it would pay the propertied class, as a whole, to cancel the National Debt, and put an end to the absurdity of a nation complaining that it is staggering under an intolerable burden of debt when as a matter of fact it owes most of the money to itself. The cancellation of the debt (except the fraction due to foreigners) would be simply a redistribution of income between its citizens without costing the nation, as a whole, a single farthing.

The plan of raising public money by borrowing money from capitalists instead of confiscating it by direct taxation is called funding; and lending money to the Government used to be called putting it in the Funds. And as the terms of the borrowing are that the lender is to have an income for nothing by waiting until his money is repaid, we get the queer phenomenon of lenders who, instead of being anxious to get their money back, dread nothing more; so that the Government, in order to get the loans, has actually to promise that it will not pay back the loan before a certain date, the further off the better. According to Capitalist morality people who live on their capital instead of on interest (as the payment for waiting is called) are spendthrifts and wasters. The capitalist must never consume his spare subsistence himself even when it is of a kind that will keep until he is hungry again. He must use it to purchase an income; and if the purchaser stops paying the income and repays the sum lent him, the lender must not spend that sum, but must immediately buy another income with it, or, as we say, invest it.

This is not merely a matter of prudence: it is a matter of necessity; for as investing capital means lending it to be consumed before it rots, it can never really be restored to the investor. Investing it means, as we have seen, allowing a body of workmen to eat it up whilst they are engaged in preparing some income producing concern like a railway or factory; and when it is once consumed no mortal power can bring it back into existence. If you do a man or a company or a Government the good turn of letting them use up what you can spare this year, he or she or they may do you the good turn of letting you have an equivalent if they can spare it twenty years hence, and pay you for waiting meanwhile; but they cannot restore what you actually lend them.

The war applied our spare money, not to a producing concern but to a destroying one. In the books of the Bank of England are written the names of a number of persons as the owners of capital to the value of 7000 million pounds. They are said in common speech to be “worth 7000 millions”. Now they are in fact “worth” nothing at all. Their 7000 millions have long since been eaten, drunk, worn out, or blown to smithereens, along with much other valuable property and precious lives, on battle-fields all over the world. We are therefore in the ridiculous position of pretending that our country is enriched by property to the value of 7000 millions when as a matter of fact it is impoverished by having to find 350 fresh millions a year for people who are not doing a stroke of work for her in return: that is, who are consuming a huge mass of wealth without producing any. It is as if a bankrupt, asked if he has any assets, should reply proudly, “Oh no: I have made ducks and drakes of all my assets; but then I have a tremendous lot of debts”. The 7000 millions of capital standing in the names of the stockholders in the Bank of England is not wealth, it is debt. If we flatly repudiated it, the nation would be richer not only by 350 millions a year, but by the work the stockholders would have to do to support themselves when their incomes were cut off. The objection to repudiating it is not that it would make the nation poorer, but that repudiation would seem a breach of contract after which nobody would ever lend money to the Government again. Besides, the United States, which lent us a thousand millions of it, might distrain on us for that amount by force of arms. Therefore we protest that nothing would induce us to commit such an act of cynical dishonesty. But that does not prevent us, as far as the debt is due to our own capitalists, from paying them honestly with one hand, and forcibly taking back the money plus seventeen per cent interest with the other.

By the way, lest somebody should come along and assure you that these figures are inaccurate, and that I am not to be trusted, I had better warn you that the figures are in round numbers; that they vary from year to year through paying off and fluctuation of values; that the thousand millions borrowed from America were lent by us to allies of whom some cannot afford to pay us at all, and others, who can, are trying how little we can be induced to take; that the rest of the money was raised through the banks in such a way that indignant statisticians have proved that we accepted indebtedness for nearly twice what we actually spent; that the rise in the market price of hiring spare money must have enriched the capitalists more than the war taxation impoverished them: in short, that the simplicity of the case can be addled by a hundred inessential circumstances when the object is to addle and not to elucidate. My object being elucidatory, I have left them all out, as I want to shew you the nest, not the hedge.

The point is that the war has produced an enormous consumption of capital; and instead of this consumption leaving behind it an addition to our industrial plant and means of communication and other contrivances for increasing our output of wealth, it has effected a wholesale destruction of such things, leaving the world with less income to distribute than before. The fact that it has swept away three empires, and substituted republicanism for monarchy as the prevalent form of government in Europe, thus bringing Europe into line with America as a republican continent, may seem to you to be worth the money; or, as this is not in the least what was intended by the British or any other of the belligerent Powers, it may seem to you a scandalous disaster. But that is a matter of sentiment, not of economics. Whether you regard the political result with satisfaction or dismay, the cost of the war remains the same, and so does the effect of our way of paying it on the distribution of our national income. We are all heavily taxed to enable that section of the capitalist class which invested in War Loan for five per cent interest (a high rate considering the security), to draw henceforth a million a day from the fruits of our daily labor without contributing to them. True, we take that much, and more, back from the whole capitalist class by taxation; so that what really happens is a redistribution of income among the capitalists, leaving the proletariat rather better off than worse, though unfortunately it is not the sort of redistribution that makes for equality of income or discredit of idleness. But it illustrates the point of this chapter, which is that a virtual confiscation of capital to the amount of thousands of millions proved perfectly feasible when the Government had employment in the shape of national service, even in work of destruction, instantly ready for an unlimited number of proletarians, male and female. Those had been halcyon days but for the bloodshed.

64

NATIONAL DEBT REDEMPTION LEVIES

Although the taxation of capital is nonsensical, it does not follow that every proposal presented to you in that form must necessarily be impracticable. It is true that the Government, if it wants ready money, can obtain it only by confiscating income; but this does not rule out operations for which no ready money is required, nor does it prevent the Government from taking not only the income of a proprietor, but the source of his income: that is, his property, as well. To take a possibility that is quite likely to become a fact in your experience, suppose the Government were driven to the conclusion that the National Debt, or some part of it, must be wiped out, either because the taxation needed to pay the interest of it is hampering capitalist enterprise, which would be a Conservative Government’s reason, or for the sake of redistributing income more equally, which would be a Socialist Government’s reason! To pay off what we have borrowed from America, or from foreigners of any nationality, would need ready money; and therefore the simple wiping out of this part of the national debt would be impossible except by flat repudiation, which would destroy our credit abroad and probably involve us in a war of distraint. But that part of the debt which we owe to ourselves could be wiped out without a farthing of ready money by a tax presented and assessed as a tax on capital, or rather a levy on capital (to indicate that it was not to be an annual tax but only a once-in-a-way tax). Take the war debt as an illustration of the possibility of a total wipe-out. Let us suppose for the sake of simplicity that as much of the National Debt as the Government owes to its own subjects is £100, all lent to it by one woman (call her Mary Anne) for the war, and, of course, long since spent and blown to bits, leaving nothing behind but the obligation of the Government to pay Mary Anne £5 a year out of the taxes. Imagine also that there is only one other capitalist in the country (say Sarah Jane), whose property consists of £100 from stocks and land yielding an income of £5 a year. That is, Sarah Jane owns the entire industrial plant of the country; and Mary Anne is the sole domestic (as distinguished from foreign) national creditor. The Chancellor of the Exchequer brings in a tax of 100 per cent on capital, and demands £100 from Sarah Jane and £100 from Mary Anne. Neither of them can pay £100 ready money out of their £5; but Sarah Jane can hand over all her share certificates to the Government; and the Government can transfer Mary Anne’s War Loan of £100 to itself. Mary and Sarah, left destitute, will have to work for their livings; and all the industrial plant of the country will have passed into the hands of the Government; that is, been nationalized.

In this transaction there is no physical impossibility, no selling of worthless shares for non-existent ready money, no rocketing of the Bank Rate, nothing but simple expropriation. The fact that the £200 at stake are really thousands of millions, and that there are many Marys and many Sarahs, each with her complement of Toms and Dicks, alters the size of the transaction, but not its balance. The thing could be done. Further, if the disturbance created by a sudden and total expropriation would be too great, it could be done in instalments of any desired magnitude. The 100 per cent tax on capital could be 50 per cent or 5 per cent or 2½ per cent every ten years or what you please. If 100 per cent meant a catastrophe (as it would) and 10 per cent only a squeeze, then the Government could content itself with the squeeze.

By such a levy the Government could take off the taxation it had formerly imposed to pay the home War Loan interest, and use the dividends of the confiscated shares to pay the interest on our war debt to America, taking off also the taxation that now pays that interest. If it were a Conservative Government it would take it off in the form of a reduction of income tax, supertax, excess profits tax (if any), death duties, and other taxes on property and big business. A Labor Government would leave these taxes untouched, and take taxes off food, or increase its contributions to the unemployed fund, its grants-in-aid to the municipalities for public work, or anything else that would benefit the proletariat and make for equality of income. Thus the levy could be manipulated to make the rich richer as easily as to raise the general level of well-being; and this is why it is just as likely to be done by a Capitalist as by a Labor Government until the domestic war debt is--shall we say liquidated, as repudiated sounds so badly?

The special objection to such practicable levies is that they are raids on private property rather than orderly and gradual conversions of it into public property. The objection to raids is that they destroy the sense of security which induces the possessors of spare money to invest it instead of spreeing it. Insecurity discourages saving among those who can afford to save, and encourages reckless expenditure. If you have a thousand pounds to spare, and have not the slightest doubt that by investing it you can secure a future income of £50 a year, subject only to income tax, you will invest it. If you are led to think it just as likely as not that if you invest it the Government will presently take it or some considerable part of it from you under pretext of a Debt Redemption Levy, you will probably conclude that you may as well spend it while you are sure of it. It would be much better for the country and for yourself if you could feel sure that if the Government took your property it would buy it from you at full market price, or, if that were for any reason impracticable, compensate you fully for it. It is true that, as we found when we went into the question of compensation, this apparently conservative way of doing it is really as expropriative as the direct levy, because the Government raises the purchase money or compensation by taxing property; so that the proprietors buy each other out and are not as a body compensated at all; but the sense of insecurity created by the raiding method is demoralizing, as you will understand if you read the description by Thucydides of the plague at Athens, which applies to all plagues, pathological or financial. Plagues destroy the sense of security of life: people come to feel that they will probably be dead by the end of the week, and throw their characters away for a day’s pleasure just as capitalists throw their money away when it is no longer safe. A raid on property, as distinguished from a regular annual income tax, is like a plague in this respect. Also it forms a bad precedent and sets up a raiding habit. Thus domestic debt redemption levies, though physically practicable, are highly injudicious.

65

THE CONSTRUCTIVE PROBLEM SOLVED

You may now stop for breath, as you are at last in possession not only of the object of Socialism, which is simply equality of income, but of the methods by which it can be attained. You know why coal mining and banking should be nationalized, and how the expropriation of the coalowners and bankers can be compensated so as to avoid injustice to individuals or any shock to the sense of security which is necessary to prevent the continued investment of spare money as capital. Now when you have the formula for these two nationalizations, one of a material industry involving much heavy manual work, and the other a service conducted by sedentary brain work, you have a formula for all nationalizations. And when you have the formula for the constitutional compensated expropriation of the coalowners and bankers by taxation you have the formula for the expropriation of all proprietors. Knowing how to nationalize industry you know how to place the Government in control of the distribution of the income produced by industry. We have not only found these formulas, but seen them tested in practice in our existing institutions sufficiently to have no more doubt that they would work than we have that next year’s budget will work. Therefore we need no longer be worried by demands for what people call a constructive program. There it is for them; and what will surprise them most about it is that it does not contain a single novelty. The difficulties and the novelty are not, as they imagine, in the practical part of the business, which turns out to be quite plain sailing, but in the metaphysical part: that is, in the will to equality. We know how to take the distribution of the national income out of the hands of the private owners of property and place it under the control of the Government. But the Government can distribute it unequally if it decides to do so. Instead of destroying the existing inequality it can intensify it. It can maintain a privileged class of idlers with huge incomes, and give them State security for the continuance of those incomes.

It is this possibility that may enlist and to a certain extent has already enlisted the most determined opponents of Socialism on the side of nationalization, expropriative taxation, and all the constructive political machinery of Socialism, as a means of redistributing income, the catch in it being that the redistribution at which they aim is not an equal distribution, but a State-guaranteed unequal one. John Bunyan, with his queer but deep insight, pointed out long ago that there is a way to hell even from the gates of heaven; that the way to heaven is therefore also the way to hell; and that the name of the gentleman who goes to hell by that road is Ignorance. The way to Socialism, ignorantly pursued, may land us in State Capitalism. Both must travel the same road; and this is what Lenin, less inspired than Bunyan, failed to see when he denounced the Fabian methods as State Capitalism. What is more, State Capitalism, plus Capitalist Dictatorship (Fascism), will compete for approval by cleaning up some of the dirtiest of our present conditions: raising wages; reducing death rates; opening the career to the talents; and ruthlessly cashiering inefficiency, before in the long run succumbing to the bane of inequality, against which no civilization can finally stand out.

This is why, though you are now equipped with a complete answer to those who very properly demand from Socialists constructive plans, practical programs, a constitutional parliamentary routine, and so forth, you are still not within eight score pages of the end of this book. We have still to discuss not only the pseudo-Socialism against which I have just warned you, but other things which I cannot omit without leaving you more or less defenceless against the alarmist who, instead of being sensibly anxious about constructive methods, is quite convinced that the world can be turned upside down in a day by an unwashed Russian in a red tie and an uncombed woman with a can of petrol if only they are wicked enough. These poor scared things will ask you what about revolution? what about marriage? what about children? what about sex? when, as they assume, Socialism will have upset all our institutions and substituted for our present population of sheep a raving pack of mad dogs. No doubt you can tell them to go away, or to talk about such matters as they are capable of understanding; but you will find that they are only the extreme instances of a state of mind that is very common. Not only will plenty of your most sensible friends want to discuss these subjects in connection with Socialism, but you yourself will be as keen about them as they. So now that we know exactly what Socialism aims at and how it can be done, let us leave all that as settled, and equip ourselves for general conversation on or around the subject.

66

SHAM SOCIALISM

The example of the war shews how easy it is for a government to confiscate the incomes of one set of citizens, and hand them over to another without any intention of equalizing distribution or effecting any nationalization of industries or services. If any class or trade or clique can obtain control of Parliament, it can use its power to plunder any other class or trade or clique, to say nothing of the nation as a whole, for its own benefit. Such operations are of course always disguised as reforms of one kind or another, or as political necessities; but they are really intrigues to use the State for selfish ends. They are not on that account to be opposed as pernicious: rogues with axes to grind must use popular reforms as bait to catch votes for Acts of Parliament in which they have some personal interest. Besides, all reforms are lucrative to somebody. For instance, the landlords of a city may be the warmest supporters of street improvements, and of every public project for making the city more attractive to residents and tourists, because they hope to reap the whole money value of the improvements in raised rents. When a public park is opened, the rents of all the houses looking on that park go up. When some would-be public benefactor endows a great public school for the purpose of making education cheap, he unintentionally makes all the private houses within reach of it dear. In the long run the owners of the land take from us as rent in one form or another everything that we can do without. But the improvements are none the less improvements. Nobody would destroy the famous endowed schools of Bedford because rents are higher there than in towns which possess no such exceptional advantage. When Faust asked Mephistopheles what he was, Mephistopheles answered that he was part of a power that was always willing evil and always doing good; and though our landlords and capitalists are certainly not always either willing evil or doing good, yet Capitalism justifies itself and was adopted as an economic principle on the express ground that it provides selfish motives for doing good, and that human beings will do nothing except for selfish motives. Now though the best things have to be done for the greater glory of God, as some of us say, or for the enlargement of life and the bettering of humanity, as others put it, yet it is very true that if you want to get a philanthropic measure enacted by a public body, parliamentary or municipal, you may find it shorter to give the rogues an axe to grind than to stir up the philanthropists to do anything except preach at the rogues. Rogues, by which perhaps rather invidious name I designate persons who will do nothing unless they get something out of it for themselves, are often highly effective persons of action, whilst idealist talkers only sow the wind, leaving the next generation of men of action to reap the whirlwind.