Chapter III. Wrong Economic Theories leading to Wrong Labour Party Policies

It is only necessary to glance at the economic theories held by the leaders of the Labour Party and similar bodies to understand whence comes their unsound and anti-Socialist attitude towards the problem of ending the capitalist system. Anxious though they may be to do something practical to abolish the evils they see around them, they are thwarted and restricted by the basically unsound theories they hold. As has been emphasised before, they can only see the problem as one of control and not – as it really is – one of ownership. They are willing to loosen the grip of the capitalist on the administration of industry but would allow ownership to remain essentially intact though changed in outward appearance.

It has been remarked before that the primary interest of the capitalist is to receive an income from his investment, but within this primary interest different groups of capitalists have sectional interests. In a new and expanding business those shareholders who own “ordinary” shares, on which the dividend is not a fixed amount but fluctuates from year to year with the amount of profit, are in the position of anticipating that profits may continue to increase, thus affording them an increasing income. Other investors who do not hold ordinary shares usually receive a fixed rate of interest, this being the condition on which their particular class of shares or stock is issued. It will be seen that there is more of a speculative element in the first kind of investment than in the second ; the holders of the second kind of investment are in effect giving up the chance of higher dividends in return for greater security. The largest element of security (coupled of course with a willingness to take a smaller return) is to be found by investing in Government or Municipal loans. In practice it is not only that some investors look more to security while others look more to the prospect of a larger income. What often happens in practice is that wealthy individuals or Insurance Companies or other bodies with large funds to invest, guided by investment experts, spread their investments over many different types of investment, often including holdings in companies or Government or Municipal loans all over the world.

Let us now see what is the attitude of the capitalist towards a proposal to establish an amalgamation of companies, a monopoly of a whole industry, a State supervised Public Utility Board, or to go over to complete State or Municipal control. (The reasons for such developments will be examined in a later chapter.) Each investor and each type of investor will be concerned with the problem whether the change will improve his position, give him a larger return or alternatively give him greater security. If the concern in which his capital is invested is past its most prosperous period, faced perhaps by dangerous competition such as the competition of motor transport with the railways, he may wonder whether it would not be prudent to seek amalgamation or get the Government to bail him out. These are the questions the capitalist asks, and answers to the best of his knowledge ; but in public (as part of his natural endeavour to strike the best possible bargain) he may talk about the desirability of competition and the abuses of monopoly, the inefficiency of big business, the bureaucratic evils of Government Departments, and, of course, he will claim to be interested not only with his own investment but with the welfare of the customers. This, however, is only “sales talk” ; if the terms offered are sufficiently attractive the capitalist will enter into amalgamation or sell out to the Government notwithstanding all the high-sounding principles he may have enunciated. As a case in point, when in 1868 the telegraph companies and the railway companies (which also had telegraph systems) were faced with the decision of Disraeli’s Conservative Government to take over the telegraphs as a State concern “the Parliamentary Bill was opposed at the outset by both the telegraph companies and the railways, but during its passage through Parliament terms were agreed with both these interests and the opposition was withdrawn”. (The Post Office, Sir Evelyn Murray, Secretary to the Post Office. Putnams, 1927, p. 69.)

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