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.