Small Is Beautiful: A Study of Economics as if People Mattered (31 page)

On the other hand, if all this is rather a sham and private enter- prise works for profit and (practically) nothing else: if its pursuit of other objectives is in fact solely dependent on profit-making and constitutes merely its own choice of what to do with some of the profits, then the sooner this is made clear the better. In that case, private enterprise could still claim to possess the power of simplicity. Its case against public enterprise would be that the latter is bound to be inefficient precisely because it attempts to pursue several objectives at the same time, and the case of socialists against the former would be the traditional case, which is not primarily an economic one, namely, that it degrades life by its very simplicity, by basing all economic activity solely on the motive of private greed.

A total rejection of public ownership means a total affirmation of private ownership. This is just as great a piece of dogmatism as the opposite one of the most fanatical communist. But while all fanaticism shows intellectual weakness, a fanaticism about the means to be employed for reaching quite uncertain objectives is sheer feeble-mindedness.

As mentioned before, the whole crux of economic life - and indeed of life in general - is that it constantly requires the living reconciliation of opposites which, in strict logic, are irreconcilable. In macro-economics( the management of whole societies) it is necessary always to have both planning and freedom - not by way of a weak and lifeless compromise, but by a free recognition of the legitimacy of and need for both. Equally in micro- economics (the management of individual enterprises): on the one hand it is essential that there should be full managerial responsibility and authority; yet it is equally essential that there should be a democratic and free participation of the workers in management decisions, Again, it is not a question of mitigating the opposition of these two needs by some half-hearted compromise that satisfies neither of them, but to recognise them both. The exclusive concentration on one of the opposites - say, on planning, produces Stalinism; while the exclusive concentration on the other produces chaos. The normal answer to either is a swing of the pendulum to the other extreme. Yet the normal answer is not the only possible answer. A generous and magnanimous intellectual effort - the opposite of nagging, malevolent criticism - can enable a society, at least for a period, to find a middle way that reconciles the opposites without degrading them both.

The same applies to the choice of objectives in business life. One of the opposites - represented by private enterprise 'old style' - is the need for simplicity and measurability, which is best fulfilled by a strict limitation of outlook to 'profitability' and nothing else. The other opposite - represented by the original "idealistic' conception of public enterprise - is the need for a comprehensive and broad humanity in the conduct of economic affairs. The former, if exclusively adhered to, leads to the total destruction of the dignity of man; the latter, to a chaotic kind of inefficiency.

There are no 'final solutions' to this kind of problem. There is only a living solution achieved day by day on a basis of a clear recognition that both opposites are valid.

Ownership, whether public or private, is merely an element of framework.

It does not by itself settle the kind of objectives to be pursued within the framework. From this point of view it is correct to say that ownership is not the decisive question. But it is also necessary to recognise that private ownership of the means of production is severely limited in its freedom of choice of objectives, because it is compelled to be profit-seeking, and tends to take a narrow and selfish view of things. Public ownership gives complete freedom in the choice of objectives and can therefore be used for any purpose that may be chosen. While private owner- ship is an instrument that by itself largely determines the ends for which it can be employed, public ownership is an instrument the ends of which are undetermined and need to be consciously chosen.

There is therefore really no strong case for public ownership if the objectives to be pursued by nationalised industry are to be just as narrow, just as limited as those of capitalist production: profitability and nothing else. Herein lies the real danger to nationalisation in Britain at the present time, not in any imagined inefficiency.

The campaign of the enemies of nationalisation consists of two distinctly separate moves. The first move is an attempt to convince the public at large and the people engaged in the nationalised sector that the only thing that matters in the administration of the means of production, distribution, and exchange is profitability; that any departure from this sacred standard - and particularly a departure by nationalised industry - imposes an intolerable burden on everyone and is directly responsible for anything that may go wrong in the economy as a whole. This campaign is remarkably successful.

The second move is to suggest that since there is really nothing special at all in the behaviour of nationalised industry, and hence no promise of any progress towards a better society, any further nationalisation would be an obvious case of dogmatic inflexibility, a mere 'grab' organised by frustrated politicians, untaught, unteachable, and incapable of intellectual doubt. This neat little plan has all the more chance of success if it can be supported by a governmental price policy for the products of the nationalised industries which makes it virtually impossible for them to earn a profit.

It must be admitted that this strategy, aided by a systematic smear campaign against the nationalised industries, has not been without effect on socialist thinking.

The reason is neither an error in the original socialist inspiration nor any actual failure in the conduct of the nationalised industry - accusations of that kind are quite insupportable - but a lack of vision on the part of the socialists themselves. They will not recover, and nationalisation will not fulfil its function, unless they recover their vision.

What is at stake is not economics but culture: not the standard of living but the quality of life. Economics and the standard of living can just as well be looked after by a capitalist system, moderated by a bit of planning and redistributive taxation. But culture and, generally, the quality of life, can now only be debased by such a system.

Socialists should insist on using the nationalised industries not simply to out-capitalise the capitalists - an attempt in which they may or may not succeed but to evolve a more democratic and dignified system of industrial administration, a more humane employment of machinery, and a more intelligent utilisation of the fruits of human ingenuity and effort. If they can do that, they have the future in their hands. If they cannot, they have nothing to offer that is worthy of the sweat of free-born men.

Eighteen

Ownership

'It is obvious, indeed, that no change of system or machinery can avert those causes of social malaise which consist in the egotism, greed, or quarrelsomeness of human nature. What it can do is to create an environment in which those are not the qualities which are encouraged. It cannot secure that men live up to their principles. What it can do is to establish their social order upon principles to which, if they please, they can live up and not live down. It cannot control their actions. It can offer them an end on which to fix their minds. And, as their minds are, so in the long run and with exceptions, their practical activity will be.'

These words of R. H. Tawney were written many decades ago, They have lost nothing of their topicality, except that today we are concerned not only with social malaise but also, most urgently, with a malaise of the ecosystem or biosphere which threatens the very survival of the human race. Every problem touched upon in the preceding chapters leads to the question of

'system or machinery', although, as I have argued all along, no system or machinery or economic doctrine or theory stands on its own feet: it is invariably built on a metaphysical foundation, that is to say, upon man's basic outlook on life, its meaning and its purpose. I have talked about the religion of economics, the idol worship of material possessions, of consumption and the so-called standard of living, and the fateful propensity that rejoices in the fact that 'what were luxuries to our fathers have become necessities for us'.

Systems are never more nor less than incarnations of man's most basic attitudes. Some incarnations, indeed, are more perfect than others. General evidence of material progress would suggest that the modern private enterprise system is - or has been - the most perfect instrument for the pursuit of personal enrichment, The modern private enterprise system ingeniously employs the human urges of greed and envy as its motive power, but manages to overcome the most blatant deficiencies of laissez-faire by means of Keynesian economic management, a bit of redistributive taxation, and the 'countervailing power' of the trade unions.

Can such a system conceivably deal with the problems we are now having to face'? The answer is self-evident: greed and envy demand continuous and limitless economic growth of a material kind, without proper regard for conservation, and this type of growth cannot possibly fit into a finite environment We must therefore study the essential nature of the private enterprise system and the possibilities of evolving an alternative system which might fit the new situation

The essence of Private enterprise is the private ownership of the means of production, distribution, and exchange Not surprisingly, therefore, the critics of private enterprise have advocated and in many cases successfully enforced the conversion of private ownership into so-called public or collective ownership Let us look, first of all, at the meaning of 'ownership' or

‘property’. As regards private property the first and most basic distinction is between (a) property that is an aid to creative work and (b) property that is an alternative to it. There is something natural and healthy about the former -

the private property of the working proprietor; and there is something unnatural and unhealthy about the latter - the private properly of the passive owner who lives parasitically on the work of others. This basic distinction was clearly seen by Tawney who followed that it is idle, therefore, to present a case for or against private property without specifying the particular forms of property to which reference is made',

'For it is not private ownership, but private ownership divorced from work, which is corrupting to the principle of industry; and the idea of some socialists that private property in land capital is necessarily mischievous is a piece of scholastic pedantry as absurd as that of those conservatives who would invest al~ property with some kind of mysterious sanctity.'

Private enterprise carried on with property of the first category is automatically small-scale, personal, and local. It carries no wider social responsibilities. Its responsibilities to the consumer can be safeguarded by the consumer himself. Social legislation and trade union vigilance can protect the employee. No great private fortunes can be gained from small-scale enterprises, yet its social utility is enormous.

It is immediately apparent that in this matter of private owner- ship the question of scale is decisive. When we move from small- scale to medium scale, the connection between ownership and work already becomes attenuated; private enterprise tends to become impersonal and also a significant social factor in the locality; it may even assume more than local significance. The very idea of private property becomes increasingly misleading.

1. The owner, employing salaried managers, does not need to be a proprietor to be able to do his work. His ownership, therefore, ceases to be functionally necessary. It becomes exploitative if he appropriates profit in excess of a fair salary to himself and a return on his capital on higher than current rates for capital borrowed from outside sources.

2. High profits are either fortuitous or they are the achievement not of the owner but of the whole organisation. It is therefore unjust and socially disruptive if they are appropriated by the owner alone. They should be shared with all members of the organisation. If they are 'ploughed back' they should be 'free capital' collectively owned, instead of accruing automatically to the wealth of the original owner.

3. Medium size, leading to impersonal relationships, poses new questions as to the exercise of control. Even autocratic control is no serious problem in small-scale enterprise which, led by a working proprietor, has almost a family character. It is incompatible with human dignity and genuine efficiency when the enterprise exceeds a certain - very modest - size. There is need, then, for the conscious and systematic development of communications and consultation to allow all members of the organisation some degree of genuine participation in management.

4. The social significance and weight of the firm in its locality and its wider ramifications call for some degree of 'socialisation of ownership’

beyond the members of the firm itself. This 'socialisation may be effected by regularly devoting a part of the firms profits to public or charitable purposes and bringing in trustees from outside.

There are private enterprise firms in the United Kingdom and other capitalist countries which have carried these ideas into successful practice and have thereby overcome the objectionable and socially disruptive features which are inherent in the private ownership of the means of production when extended beyond small- scale. Scott Bader & Co Ltd, at Wollaston in Northamptonshire. is one of them. A more detailed description of their experiences and experimentation will be given in a later chapter. When we come to large-scale enterprises, the idea of private ownership becomes an absurdity. The property is not and cannot be private in any real sense. Again, R. H. Tawney saw this with complete clarity:

'Such property may be called passive property, or property for acquisition, for exploitation, or for power, to distinguish it from the property which is actively used by its owner for the conduct of his profession or the upkeep of his household. To the lawyer the first is, of course, as fully property as the second. It is questionable, however, whether economists should call it