Can Putin Survive?
The Lessons of the Soviet Collapse
AT THE present time England quite clearly stands midway between capitalism and socialism. Every section of the community looks to the government for assistance of one kind or another. Manufacturers want tariffs, trade unions seek further protective legislation for labor, distributors demand regulated marketing schemes, farmers ask for agricultural subsidies. Quotas, fixed or minimum prices, state guarantees of credit or interest, monopolies and other restrictions are the order of the day. Thus the classic capitalism of the nineteenth century has been superseded. Its sanctions are no longer in operation, its assumptions are no longer valid, its moral authority has disappeared. Industry is hedged around with impediments to free activity, and the nation has entered upon a phase of irresponsibility in economic life in which neither government nor the individual is completely master of the situation. At the same time, no large section of the public at present really believes in a wholesale and immediate transformation of the productive system of the country to a collectivist basis, whether open or disguised.
It is easy to say, of course, that in such circumstances the nation suffers from the disadvantages of both capitalism and socialism without enjoying the advantages of either. That does not get one very far. What is of far greater interest and importance is to observe certain new forms of socialization which have gradually been evolving during the past decade and which present a radical departure from both the political and economic traditions that have previously obtained in England. Incidentally, it is worth noticing that the word "socialization" is of comparatively recent currency. Up till a few years ago people used to discuss -- whether favorably or unfavorably -- the nationalization of the means of production, or the nationalization of the railways and so forth. But now they speak of socialization, using a new word to express a new idea.
The productive enterprises operated directly by the central government are comparatively few in England. They comprise little beyond the Post Office, the Mint, the Stationery Office, the dockyards and other manufacturing establishments carried on by the war departments, the administration of crown lands, and the public houses (i.e. saloons) in the Carlisle District which are under state management. The Post Office is by far the largest and most important of these enterprises, including as it does not merely the carriage of mails but also the telephone and telegraph services, the Post Office Savings Bank and many other functions.
The Post Office is the typical example of a nationalized service in the old-fashioned sense of the term. The head of it is responsible to Parliament; he is a member of the House of Commons and a political minister of the government, though usually not in the cabinet. The Postmaster-General must be prepared to answer in Parliament for every official act committed by each one of the 230,000 postal servants. Every detail of the day-to-day administration is liable to be discussed and must be justified and defended. There is direct Treasury control over the revenue and expenditure of the Post Office; outlay must be sanctioned in detail, loans must be raised by and through the Treasury, and the profits of the department, which are considerable, go direct to the revenue side of the national budget. The Chancellor of the Exchequer controls the price policy of the Post Office on all major questions.
As an administrative organization the Post Office is regarded with disfavor both by individualists and by socialists. The attitude of industrialists is well illustrated by the memorial recently addressed to the Prime Minister on the subject, signed by 320 Members of Parliament -- more than half the whole House -- of whom 295 belong to the Conservative Party. The Post Office, declares this memorial, is a great commercial business unlike any other government undertaking; and the constitution of an ordinary government department is unsuited for the efficient conduct of a great economic service. The supreme head is frequently changed on irrelevant political grounds, there having been no less than four successive Postmaster-Generals in 1931. The present system of Treasury control hampers administration and prevents the department from building up reserves for its own development.
The criticism advanced by socialists and members of the Labor Party proceeds on three main lines of thought. In the first place, it is said, there is a complete absence of worker's control of any kind. The Post Office gives no more consideration to the employee's special interests than any private business. Hence, Trade Union leaders look upon it with an unfriendly eye. In the second place, there is a lack of control by the consumer, and the intervention of the Treasury on extraneous grounds leads to the sacrifice of the consumer's best interests. Thirdly, it is said there is an inevitable lack of efficiency in the present system. All up-to-date socialists and labor leaders in England now emphasize the need for optimum efficiency; and in effect they endorse the charges made under this head by the M.P.'s in their petition. Major Attlee, the Postmaster-General in the last Labor Government, says that in his opinion the department should be administered by a non-Parliamentary chief, or by a board appointed for a fixed term of years by the Minister of Transport, who should be responsible for controlling the broad policy of the Post Office. The present system of direct Parliamentary responsibility leads in his experience to timidity and centralization; it has militated against the adoption of a public relations technique in the service.
The British Post Office, be it said, is among the most efficient of the world's post offices. Indeed, some independent authorities regard its mail-carrying services as superior to those provided in any other country. Yet it is quite certain that so far as England is concerned the type of organization which the Post Office embodies is dead and obsolete.[i] This is due less to the emergence of political or economic theories concerning the management of state-owned institutions than to the almost unconscious growth of new social tissue. The theories have followed the facts.
The change of opinion has been extraordinarily rapid. In 1918 the Haldane Committee on the Machinery of Government, widely regarded as a progressive body, reported definitely against what they called "the system of administrative boards" which they held to be "obviously unsatisfactory." The Committee recommended that there should be no omission of the ordinary responsibility to Parliament of all state undertakings.
The very next year this advice was disregarded by the Forestry Act 1919, which established the Forestry Commission, consisting of eight Commissioners (three of them paid) appointed by the Crown for a fixed term of five years. The Commission is an independent body with a separate staff. It is charged with the important duties of promoting the interests of forestry, the development of afforestation and the supply of timber. It may assist education in forestry work, acquire land for afforestation or the management of woods, embark upon the sale or purchase of standing timber, and establish or operate woodland industries. It has a separate Forestry Fund out of which it may advance money by grant or loan.
In 1926 the Electricity Supply Act, introduced by Mr. Baldwin's Conservative administration, set up an almost similar institution in the shape of the Central Electricity Board to undertake the vital task of creating and operating the national "grid" scheme of electricity supply as the sole generating source of electrical power throughout the country. This step accomplished what is undoubtedly the most important piece of industrial reconstruction achieved during the post-war period. The Central Electricity Board is an executive body, as contrasted with the Electricity Commission, which is a planning and coordinating organ. It consists of eight members appointed by the Minister of Transport for a fixed term of years. The appointments are non-political, and the members have been chosen on account of their administrative ability, business experience, engineering qualifications, or knowledge of finance, electrical enterprise or labor questions.
Perhaps the most significant illustration of the new tendency is to be found in the field of radio transmission. Here we can trace the steps by which a new type of socialized institution came into being.
The original Broadcasting Company operated in England under a short-term license from the Postmaster-General. Statutory restrictions had been introduced as soon as the invention of wireless became a commercial proposition, and a centralized monopoly was established through the Post Office conferring a license upon one transmitting agency only. The company which enjoyed this privilege was a business enterprise most of whose capital was guaranteed by six large industrial concerns interested in the manufacture of wireless apparatus. Each of these guarantors nominated a director, and collectively they also appointed the chairman. The remaining shareholders were wireless manufacturers who together could nominate two additional directors.
The revenue of the company consisted of half the proceeds of an annual license fee of 10 shillings collected by the Postmaster-General from every listener. The profits of the company were limited to a dividend of 7½ percent, and various conditions were imposed reserving special powers to the government in time of emergency, restricting the transmission of news in the interests of newspapers, and calling for the erection of certain transmitting stations. Apart from this the company was accorded almost complete commercial freedom. There was only a very slight amount of public control to secure the protection of the consumer; all listeners were virtually in the hands of the company, which was itself in the hands of the wireless industry. The Postmaster could not intervene unless a breach of the license conditions had been committed; and these went no further than to require the company to provide a service to his "reasonable satisfaction." The difficulty of proving that a program of entertainment and instruction in a new medium is not "reasonably satisfactory" may be imagined.
The undertaking was beset by all manner of difficulties almost from the start. The public was suspicious and apprehensive of the vested interests involved, and many unfavorable allegations were made against the company. So restive did public opinion become that in 1925 an official Committee was appointed to consider in what manner the service should be carried on after the expiration of the company's license in 1926. There was, according to Sir John Reith, the chief executive of both the original company and its successor, no ground for public alarm or apprehension. "The stewardship," he declares, "had been interpreted as carrying the responsibility of contributing constantly and cumulatively to the intellectual and moral well-being of the community. A fresh tradition of public service had been founded. A new national asset had been created." Even if we assume that this was the spirit which animated the undertaking, it was difficult to reconcile it with the obligations to shareholders inherent in the privately-owned type of joint-stock corporation. There was everything to be said for establishing an organization whose constitution would be in line with the disinterested and altruistic attitude which Sir John Reith attributes to the management. This the Committee contemplated in their report, which recommended that the broadcasting service should be transferred to a public undertaking. At the same time they emphasized the desirability of leaving the service free from the irksome Parliamentary control traditionally associated with the administration of government enterprises. "We assume," they said, "that the Postmaster-General would be the Parliamentary spokesman on broad questions of policy, though we think it essential that the Corporation should not be subject to the continuing Ministerial guidance and direction which apply to Government Offices. The progress of science and the harmonies of art will be hampered by too rigid rules and too constant a supervision by the State."
The purpose and scope of the new British Broadcasting Corporation, which arose phœnix-like out of the ashes of the old company, are set forth in unequivocable terms in the preamble to the Charter under which it operates and from which it derives its existence. The Charter is declared to be granted in order that the broadcasting service should be conducted by a public corporation acting as trustees for the national interest. In view of the widespread interest taken in the radio, and the great value of the service for the purposes of education and entertainment, it is deemed desirable that the service "should be developed and exploited to the best advantage in the national interest." The Corporation is accordingly directed to apply the whole of its surplus revenue, if any, and its other income, in promoting this object.
The B.B.C. is managed by a director-general acting under a board of five governors who are appointed for a term of five years by the Postmaster-General. The governors are paid; but they are neither full-time administrators nor experts in any artistic or technical field. They are reputable persons of some public standing or business position. The Postmaster-General has stated in Parliament that he is himself responsible for questions of general policy but not for matters of detail or particular points of the service. The detachment of the service from the government is well illustrated by a recent incident. In a wireless talk on New Year's Eve, a speaker who was making a conspectus of European countries made some remarks about Poland which offended the susceptibilities of certain persons. The Polish Minister in London thereupon made a formal diplomatic protest to the Foreign Secretary. A short time afterwards it was announced by the B.B.C. that Sir John Reith had called upon the Polish Minister on his own initiative and had arranged a friendly settlement of the matter. Thus the whole matter was taken out of the hands of the Foreign Office.
Although the actual controls are slight the potential controls are considerable and fundamental. The compulsory annual license fees are collected from listeners by the Post Office, which deducts 12½ percent for expenses, and are then handed over to the Treasury, which deducts a further percentage for the purpose of taxation, and the balance is then doled out to the B.B.C. by monthly instalments. The Postmaster-General could, if he chose, decline to enforce the licensing regulations; and could, by abolishing or reducing the license fee, destroy the financial basis of the Corporation. The Corporation is required to give to the Postmaster each year a general report and a statement of its accounts duly audited. The present term of the charter is fixed for a period of ten years only; and it can be revoked even before then if the Postmaster-General certifies that its provisions are not being carried out. The B.B.C. is required to transmit anything required by a government department; or, conversely, it must refrain from broadcasting any matter on request of a department.
The B.B.C. is clearly a novelty in the British constitutional system. The main principles on which it is founded are: 1. centralized monopoly; 2. independence of the day-to-day management from Parliamentary control or ministerial interference; 3. self-contained finance; 4. an area of operation and a constitution designed on grounds of technical efficiency; 5. a personnel not subject to Civil Service rules in regard to pay, recruitment, promotion, etc.; 6. an explicit insistence on the disinterested service of the public as the sole aim of the undertaking.
There is no doubt that the B.B.C. has achieved a high level of success in the standard of its work. By general agreement it stands out preëminent among European transmitting agencies on an all-round estimate. For this quite practical reason the institution has made a considerable impression on the British public as a form of organization. At the present moment an even more ambitious project on the same lines is before Parliament and is almost certain to pass into operation.
The London Passenger Transport Bill aims at establishing a completely unified and integrated system of passenger transport for the metropolitan area. A London Passenger Transport Board is to be set up consisting of a chairman and four other members "who have had wide experience and have shown capacity in transport, industrial, commercial or financial matters or in the conduct of public affairs." Members of Parliament are ineligible. The persons comprising the Board are to be appointed for a fixed term of years, varying from three to seven, at the end of which they may be reappointed. They are removable by the Minister of Transport for inability or misbehavior. They are to be paid salaries and may not hold an interest in the Board's stock or in any other transport undertaking in the area.
The Board is to have transferred to it the huge mass of transport undertaking at present operating in the London area, namely, the vast Underground system (i.e. subway), the Metropolitan Electric Tramways (i.e. the privately-owned streetcars), fourteen municipal tramway systems, the London General Omnibus Company with its thousands of magnificent motorbuses, sixty smaller private motor-bus services, and the Metropolitan Railway. The Board will have a monopoly within the London traffic area for all vehicles except those used for long distance journeys such as the main-line railways and char-à-bancs. Its general duty is declared by the Bill to be that of exercising its powers in such a manner as "to secure the provision of an adequate and properly coördinated system of passenger transport for the London Passenger Transport Area." The powers conferred include the maintenance, management, operation, extension and improvement of the undertakings.
The amount of the compensation to be given to the present owners is to be fixed either by agreement or by an ad hoc tribunal to be appointed by the Lord Chancellor, and the basis in the latter case is to be the "value" of the undertaking transferred without any allowance for compulsory expropriation. The compensation will take the form of stock in the new enterprise. A transport fund will be established and the Board can issue its own transport stock of various classes -- subject to a maximum limit -- to bear interest, with one exception, at fixed rates of interest. In the case of the exception, the rate may fluctuate from year to year between 4½ and 5 percent as the Board may determine. A reserve fund is to be formed and the proceeds applied for "the benefit of passenger transport in the London Traffic Area including the development, extension and improvement of the undertaking and the reduction of fares." Fares and charges must be fixed so as to enable the Board to discharge all its financial liabilities under the bill.
The passenger transport of the capital city has for many years been in a condition of competitive chaos tempered by occasional mergers and running agreements. Efforts to secure a substantial amount of coördination have been made from time to time without success. Then in 1929 Mr. Herbert Morrison, the energetic and able Minister of Transport in the last Labor Government, produced the present Bill after prolonged negotiations with the principal interests concerned. Unfortunately, in an unguarded moment he claimed it to be "the greatest socialist measure of our time." The immediate effect of this indiscretion was to arouse a surging wave of doctrinal enthusiasm among his followers and a vast mass of prejudiced hostility among his opponents.
The delay in the passage of the bill involved by the crisis of 1931, the fall of the Labor Government, the general election, and formation of the successive "national" administrations has allowed the adherents of the various political parties to reflect upon the measure at length. And with further reflection there have arisen unforeseen perplexities. What is this scheme at bottom? Is it socialism? Or is it a more strongly fortified and permanently entrenched capitalism? Horrid doubts have begun to cross the minds of all kinds of people. If only they could discover whether the scheme was socialistic or capitalistic they would forthwith know whether to support or to oppose it as the case may be. But it is so difficult to know! All the old simple and clear-cut lines between private ownership and public provision seem useless as a guide. It was whispered that Mr. Bevin, the powerful leader of the Transport Workers Union, came to the conclusion that whatever the nature of the bill, it certainly offered little attraction to the Transport Workers' organization, for they were to have no representation on the Board, no guarantees of good labor conditions of any kind, and a single monopoly to bargain with instead of many competing employers. Of course this was a sectional view.
In the midst of this confusion the present government, in undertaking to reintroduce the bill, sought to reassure its Conservative supporters by making a fundamental change in responsibility. In the original draft the Board was to be appointed by the Minister of Transport -- that is, the government of the day. In place of this there has now been substituted in the Bill a fantastic arrangement whereby the Board is to be appointed by a body of "appointing trustees" consisting of the chairman of the London County Council, the chairman of the Committee of London Clearing Bankers, the president of the Law Society, and the president of the Institute of Chartered Accountants. These people obviously cannot have the faintest knowledge of London transport or the work and needs of the Board. This year's president of the Law Society is, for example, a solicitor living in Bristol. The whole ultimate control of the responsible Minister has been taken away. The Central Electricity Board, the B.B.C. and the Forestry Commission may be considered as socialized institutions working at one remove away from the impact of democratic government. The London Transport Bill in its present form will create an institution working at a hundred and fifty removes away from the impact of democratic government. Perhaps wiser counsels may prevail at the last moment.
Other examples could be given to illustrate the tendency to separate the regulation of publicly-controlled services from the general machinery of Parliamentary responsibility of the traditional kind. Thus the Race Course Betting Control Board which was set up by statute in 1928 to operate the totalizator is virtually an independent body. More significant was the establishment of the Area Traffic Commissioners, set up by the Road Traffic Act 1930. There has developed in England the most intense competition between road and rail transport, and this legislation was intended to modify the rivalry to some extent at least. The country was divided into large areas, and a series of new bodies called Area Traffic Commissioners set up in each of them. Each of these Commissions (consisting of a full-time paid chairman appointed for a fixed term by the Minister of Transport, and two other persons nominated by the city and rural local authorities within the area) controls the entire system of public service motor vehicles plying for hire in its area, by means of licenses. These licenses can be -- and are -- refused, or issued subject to stringent conditions relating to fares, routes, frequency of service, starting and stopping places and so forth. The Commissioners also have jurisdiction over the issue of personal licenses to the conductors and drivers of such vehicles. Their powers are extremely wide and their discretion well-nigh unlimited. In granting or withholding road service licenses for motor-buses and motor-coaches they are directed to have regard to a whole series of economic and social factors, such as the suitability of routes, the extent to which the needs of proposed routes are already adequately served, the extent to which the proposed service is necessary or desirable in the public interest, the needs of the area as a whole in relation to traffic, including the provision of adequate, suitable and efficient services and the coördination of all forms of passenger transport.
The Commissioners are removable for inability or misbehavior; and the statute expressly declares that they shall act under "the general directions of the Minister." But the Minister himself made it clear beyond doubt to the Standing Committee of the House of Commons which was considering the Bill that he had no intention of attempting to direct the Commissioners on every point of their duty or of accepting responsibility for them in any save in the broadest way.
If one were to attempt to interpret the phenomena here discussed, one might say that they betoken an attempt to achieve in varying degrees a threefold aim: first, to enlarge the unit of administration of socialized services to a national scale; second, to divorce the administration of economic functions from the ordinary political or "police power" activities of government; third, to separate the finances of these boards from the national budget -- that is, to give them self-contained finance unconnected as far as possible with the expenditure and revenue of the central Treasury.
The significance of the movement will be realized when it is remembered how deeply committed the Labor Party is to the socialization of the foundation industries. The public ownership of the land, coal and power, communications and transport, the control of credit, and industrial life insurance are placed in the forefront of the Party's official program. To these have recently been added the reconstruction of the cotton industry, iron and steel, the transformation of agriculture -- including the stabilization of prices by the collective purchase of grain and meat -- and the transference of the Bank of England and the great joint stock banks to public control. In "Labour and the Nation" the party expressly disclaims any intention of submitting these or other industries to a régime of "bureaucratic torpor." It emerges clearly from public discussion among the more intelligent progressives that if and when opportunity permits, the intention is to socialize the basic industries along the lines of the Central Electricity Board, the B.B.C. and the other institutions of which mention has been made.
If the attempt succeeds, it will be found that the relatively simple distinctions between private and public enterprise which have hitherto prevailed will become increasingly blurred, particularly where expropriated owners are compensated with guaranteed bonds carrying fixed rates of interest in the socialized undertaking. As a matter of fact, the need for evolving some clear body of principle to distinguish genuine from spurious forms of socialization is likely to become increasingly evident during the next few years -- that at least is the lesson of the Parliamentary debates on the London Passenger Transport Bill. If space permitted, I should endeavor to analyze the new conception of socialization into its essential constituent elements. In default of that, I would conclude by suggesting that the English experience of the past ten years, although not highly spectacular, offers valuable food for thought to everyone who believes that the future does not lie everywhere with either Karl Marx or Herbert Spencer.
[i] A Committee of Inquiry on the Post Office was set up as a result of the memorial mentioned above. Its Report (Cmd. 4149/1932 H.M. Stationery Office) is an inconclusive document. Broadly speaking, it recommends that the present political responsibility of Postmaster-General shall remain unchanged but that the Post Office finances shall be separated from the national Exchequer and be made "self-contained."