D. Hallas

The Significance of Nationalisation

(May 1951)

From Socialist Review, Vol.1 No.4, May 1951.
Transcribed by Mike Pearn.
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.


Between 1945 and 1949, the third Labour Government passed legislation nationalising the coal, gas, and electricity industries, the railways, road haulage, passenger transport, civil aviation, and the iron and steel industry. In addition, the bank of England and the Cable and Wireless Company were acquired by the state. (At the time of writing – Jan. 31st – passenger transport and the iron and steel industry have not been taken over.) during the last five years, these nationalisation measures have been the main object of political controversy on the domestic field, and they remain today the chief point of conflict between the labour an Conservative parties. Within the Labour Party itself, questions of the purpose, methods, and extent of nationalisation are a frequent source of discussion – and of dispute! This article is an attempt to analyse, from a Marxist viewpoint, the significance of those measures, and to suggest what steps socialist militants in the Labour Party should now propose.

Part 1
The Background

(a) The Accumulation of Capital and ‘Private Enterprise’

The basic contradiction of capitalism, from which, in the last analysis, flow all the crises, upheavals, oppression, lies, misery and wars of modern society, is between the vast productive forces at the disposal of a tiny minority of society on the one hand, and the restricted world market, due to the poverty of the masses, on the other. The abolition of this contradiction, which can only be carried out by the working class, is the prerequisite to any rational organisation of society.

There are two aspects to this task. The first, the centralisation of capital, the socialisation of production, is an inevitable result of the laws of capital accumulation. The second, the abolition of the contradiction between socialised production and capitalist accumulation, involves the abolition of class society, and must be carried out by the working class.

The process of capital accumulation leads to the formation of larger and fewer concerns in the decisive branches opf the economy. The motive force behind this tendency is the rise in the organic composition of capital, that is, the increase in the proportion of his capital which the entrepreneur has to devote to the replacement of raw materials, worn-out machinery, buildings, etc., (i.e. constant capital), as compared with the proportion which he uses to pay wages and salaries, (i.e. variable capital.) This rise in the organic composition of capital is due to the constant development of the technique of production which competition – national and international, commercial and military forces upon each enterprise, and which in turn, leads to a decline in the rate of profit. [1] to offset this decline, the capitalists seek to replace competition by monopoly in the various branches of industry. This tendency towards monopoly is strengthened by the periodic crises which convulse capitalist economies, by the elimination of weaker concerns, by the enormous growth of finance capital, and by the activities of the capitalist state.

The centralisation of capital takes various forms – trusts, cartels, price-rings etc., – but the effect of all these forms is the same, namely, to put the effective control of the means of production into ever fewer hands. Thus, for example, less than 3% of the share capital of ICI is legally owned by the board of directors, yet in practice they have absolute control over the whole huge mass of capital ‘owned’ by the other quarter-of-a-million-odd shareholders. Again, that colossal trust, the American Telephone and telegraph company, whose assets

“exceed in value the wealth of twenty-one states of the Union taken together, is indisputably controlled by a board of directors whose combined holdings amount to less than 4.6% of the nominal stock. But this board in turn is dominated by the nominees of the J.P. Morgan Company. Despite its mammoth size, the ‘ATT’ is only one small corner of the Morgan Empire, which includes the United States Steel Corporation, the General Electric Company, the Consolidated Edison Company, the United gas Improvement Company, the American & Foreign Power Company, the Electric bond & Share Company, the Niagara Hudson Power Corporation, the United Corporation, Stockard Bonds Inc., Montgomery Ward & Co., the International telephone & Telegraph Corporation, the Newmont Mining Corporation, the Chesapeake &Ohio railroad, the New York Central Railroad, the General Motors Corporation, E.J. Du Pont de Nemours & Co., and many others.”
(F Lundberg: America’s Sixty Families, Chap.II)

This process of centralisation has been described as the expropriation of the capitalist class within the limits of capitalist property forms. The great mass of shareholders are reduced to the position of mere rentiers, are at the mercy of a tiny financial oligarchy, and are without the slightest control over the property they ‘own’.

“Credit offers to the individual capitalist absolute command over the capital of others, within certain limits, and thereby over the labour of others. What ... (he) ... risks is social property, not his own. Both success and failure now lead simultaneously to a centralisation of capital and thus to an expropriation on the most enormous scale ... credit gives to those few, more and more the character of pure adventurers. It produces a new aristocracy of finance, a new sort of parasite. Thus we observe that a few individuals are able to appropriate social property.”
(Marx, Capital, Vol.III, Chap.XXVII.)

The free competitive capitalism of “private enterprise” is as extinct as the ichthyosaurus. It has given way to the dictatorship of industry by a handful of individuals. But,

“At a certain stage of development even this form ceases to be adequate, and the official representative of capitalist society, the state, must assume their direction.”
(Engels, Socialism, Utopian and Scientific, Section III)

(b) Capitalism and the State

The modern state, with its standing army, its permanent bureaucracy, uniform legal code, police and military services, etcetera, is a product of capitalist society. [2] During the early period of capitalism, the period of the primitive accumulation of capital, the monarchy and the bourgeoisie worked closely together. State regulation of and support for industry and commerce were taken for granted. Without the support of the state the bourgeoisie could never have become rich and powerful. Without the support of the bourgeoisie the state could never have broken the power of the great gangster nobles of declining feudalism, and could never have become the master of society. In Britain, the result of this period of alliance, which extended roughly from the beginning of the fifteenth to the beginning of the seventeenth centuries, was the bureaucratic, absolutist monarchy of the Tudor and early Stuart period. In the latter phase this state machine balanced between the various classes in society, and became, to a considerable degree independent of and oppressive upon its erstwhile allies. The seventeenth century saw the bourgeoisie, now much stronger both in wealth and in numbers, break the power of absolutism, and establish a new state machine controlled by itself and its allies, the new capitalist-landlord aristocracy. The political history of the next two hundred years consists largely o the history of the struggles resulting from the shift in power in this coalition, firstly from the aristocracy to the merchant capitalists, and then from the latter to the industrial capitalists. The economic history of the period is the history of the completion of the process, already begun in Tudor times, of the expropriation of the peasantry. The possessing classes, ruthlessly utilising the power of the state to drive the peasants of the land [3], achieved two purposes thereby. On the one hand the expropriations gave the land into the hands of the new aristocracy, (largely bourgeois in origin, and made possible in the development of large-scale, capitalist farming and, on the other hand, it created, on a huge scale, a proletariat a disposed class having nothing to sell but its labour power, time making possible the subsequent expansion of capitalist industry.

At the same time this period saw a progressive reduction in the state control of industry and commerce. Capitalist production could and did expand more rapidly on the basis of unfettered individual enterprise once the barriers to its development had been removed. The role of the state more and more approximated to that of a policeman, regulating, by means of the courts and the legal system, the conflicts between individual capitalists, breaking the resistance of the other classes in society, as in the case cited by Marx – see footnote 3 – and providing the force, both defensive and aggressive, with which to overcome the resistance of foreign communities – usually pro-capitalist – who were unable, in their benighted ignorance, to appreciate the civilising activities of the British bourgeoisie. The ‘Opium Wars’ with China in 1939-41 and 1856-58, provide excellent examples of this latter function of the State. Provoked by the British Government by means of the usual faked ‘incident’ followed by humiliating demands, these wars were waged in order to compel the Chinese Government to remove the barriers to the flow of British goods – in the first place, of opium – into China. (the importation of opium, grown on a large scale in the British Indian Empire, was prohibited by the Chinese Government in order to protect their population fro its injurious effects.) the real issue, however, was the ‘right’ of British capitalists to flood the country with cheap manufactured goods, principally textiles, and thus to destroy the native industry and to dominate the country as was the case already in India. The results of these highly successful acts of aggression were the annexation of Hong Kong, the granting of special privileges to British traders – including the exemption from Chinese law; the so-called extra-territorial rights – in the ‘treaty Ports’ of Canton, Shanghai, Amoy, Foochow, Ningpo, and Tientsin, which were now opened to British trade. To meet the cost of this ‘civilising’ mission the Chinese Government were forced to pay a heavy indemnity.

Th first half of the nineteenth century saw the highest point of the development of individualist capitalism or “free enterprise”. Subsequently the tendency was in the opposite direction. Before considering this development it is necessary to draw some conclusions about the nature of the state. It is clear from the above outline that the state machine is not the neutral, classless institution of the liberal ideologists and their latter-day social-democratic imitators. A state consists essentially of an armed force and a bureaucracy, separated from and standing above the people. It is an instrument of coercion:

“It is normally the state of the most powerful, economically ruling class, which by its means becomes also the politically ruling class, and so acquires new means of holding down and exploiting the oppressed class.”
(Engels, The Origin of the Family, Private Property, and the State, Chap.IX.)

There are periods, however, (the early seventeenth century in Britain, for example) when the state is able to act as a power in itself, not directly dependent on the ruling, economically dominant class, when:

“the warring classes are so nearly equal in forces that the state power, as apparent mediator, acquires for the moment a certain independence in relation to both.”
(Engels, ibid.)

Such periods are always periods of transition from one form of society to another. Such a period is the one in which we live.

(c) Society in Transition

By the end of the nineteenth century the process of the centralisation of capital was already far advanced. Competition was giving way or had already given way, to monopoly in the heavy industries. Finance capital, (i.e. capital controlled by the banks and insurance companies and used in industrial production) was rapidly assuming a dominant position in the economy. The financial oligarchy was well on its way to expropriating the ‘pure’ industrial capitalist. Modern imperialism, (ie, imperialism based on finance capital, as opposed to the older forms of imperialism based on mercantile capital) was setting the capitalist states at each other’s throats and leading to a rapid division of what was left of the pre-capitalist world between the big powers. The ‘peaceful’ expansion of capitalist production – was reaching its limits. The epoch of capitalism in decline, of imperialist wars of ‘redivision’, and of revolutionary upheavals was beginning.

Beginning also was the complete reversal of the nineteenth century trend towards the separation of industry and the state. In all the advanced countries the state now began to take on more and more purely economic functions. As early as the eighteen-eighties tariff walls were creeping up, and both direct and indirect state subsidies to industry had begun to re-appear. Both these forms of state intervention have, of course, been present in various guises throughout the entire history of capitalism, not excluding even the peak of the ‘free enterprise’ phase, but their relative importance has been very different in the various stages of development. Like the scaffolding used to support a building during its erection, they were essential in the early stages, but later, in the progressive, expanding period of nineteenth-century capitalism, they withered away. But scaffolding becomes necessary again when the building begins to show cracks in its walls, when the foundations begin to slip. Tariffs become prominent as the newer capitalist powers, especially Germany and the USA, sought to shut out the overwhelming flood of cheap British commodities. Regarded at first as a temporary expedient, they eventually become a permanent and essential feature of every capitalist economy, including that of Britain. Subsidies, usually in the indirect form of large state purchases of military and naval equipment, becomes prominent at the same time and some nationalisation projects also appeared. Thus for example, the telegraph and telephone companies of great Britain were nationalised in 1869 and 1892. The motive for this measure was to provide a cheap service for ‘business’ as a whole. In Germany the railways were state owned from the start, due to a lack of private capital ready to be invested I this enterprise, which, although as essential top industry and the state, appeared at the time to be unlikely to yield the average rate of profit then prevailing. The same was true of railway construction in the USA, but in this case the state subsidised the private concerns instead of nationalising them; more than $42,871,000 being used for this purpose prior to 1838, a colossal sum for those days. However, these developments were of symptomatic rather than of practical importance, and, from the ‘eighties until the first world war, monopoly capitalism developed in its purest form. State intervention became increasingly unnecessary to keep the machine running smoothly, but it was of distinctly subsidiary importance. By and large, the economic system was self-regulating. The turning point was the year 1914.

The first world war saw the complete breakdown of the automatic regulating mechanisms of capitalist production – the market and the stock exchange – and the rise of state regulation of production on a huge scale. This was no incidental, temporary measure; the war merely crystallised, albeit prematurely, tendencies that were inherent in the dynamic of capitalist development. The Manifesto to the Workers of the World issued by the inaugural congress of the Communist International in 1918, declared:

“There can be no return to ‘free competition’ or to the rule of trusts, cartels, syndicates, and other economic monsters. The only question is, what shall be the future mainstay of state production; the imperialist state or the state of the victorious proletariat?”
(Communist International, Vol.I No.I.)

In point of fact this prediction proved to be,. A little premature, but nevertheless the return to partial ‘normality’ in the twenties was only a passing phase, and the great depression finally shattered the illusions that ‘normal’ capitalist relationships would ever again prevail in the world market. Currencies automatically regulated on the basis of gold gave way top artificially manipulated currencies whose nominal exchange value often bears little relationship to their actual value in exchange. This in turn has led to the virtual abandonment of money altogether as the basis of international trade, and a reversion to the pre-capitalist method of barter. Tariff walls, themselves a deviation from the capitalist norm, gave way to quota agreements, import and export licenses, prohibitions, etcetera, in many cases amounting to a virtual state monopoly of foreign trade. The free world market, the creation of capitalism, has disintegrated and has been replaced by mutually hostile states, managed economies, each trying to increase the proportion of the total world surplus value it can seize at the expense of the others, and to decrease its dependence upon them for raw materials, etc. within each unit there is a steady growth of state capitalism. Compulsory cartelisation – as in the pre-1939 German steel industry – and legal monopoly – as in the British sugar industry – are supplemented by outright state ownership on an eve-increasing scale. In countries as diverse as Turkey and Great Britain, the Union of South Africa and Spain, Mexico and France, the Argentine, Burma, and Kuomintang China – now restricted to Taiwan – the state owns and operates a decisive section if industry. The evolution of state property forms takes place in each individual country as the result of a complex of the politico-economic needs of the ruling class and the exigencies of the class struggle. Whilst in each case there are unique features, there are also common ones – and the decisive common feature is, that every measure of statification is necessary to the economy, and, therefore, also to the ruling class. [4] But at the same time, every measure of statification weakens the direct economic, and therefore, political power of that same ruling class. The capitalist state becomes increasingly independent of the capitalist class, a trend which, SO LONG AS THE WORKING CLASS MOVEMENT EXISTS, renders the continued existence of capitalist class rule increasingly precarious. The social base of the exploiters becomes narrower, and increasingly bitter conflicts develop between the various sections of the plutocracy and between all of them and the state machine, now slipping from their grasp. Here is laid bare the root of the drive towards totalitarianism present in every modern society. The very existence of a powerful working class movement, whatever the character of the leadership, however stooped in bourgeois ideology it may be, must constitute, in these circumstances, a mortal threat to capitalism, because the working class is constantly being thrown into direct conflict with the state, the last refuge and the mainstay of dying capitalism. Every major strike, however limited its aims may be, now has revolutionary implications. The more the state takes over production, the more it involves itself, the less it is able to pose as an ‘impartial’ arbitrator in the class struggle. Hence the opposition of large sections of the bourgeoisie to nationalisation measures, a reactionary and ultimately futile opposition, but none the less real for that. Just as the bourgeoisie has been economically expropriated by a tiny financial oligarchy, so, today, it is being politically expropriated by the Frankenstein of its own creation – the huge and ever-growing state bureaucracy:

“The modern state, no matter what its form, is essentially a capitalist machine, the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers – proletarians. The capitalist relation is not done away with, it is rather brought to ahead. But brought to a head, it topples over. State ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.”
(Engels, Socialism, Utopian and Scientific.)

It is this fact that determines the attitude of socialists towards nationalisation. we support nationalisation measures as a means of weakening the power of the ruling class, of increasing the conflicts within it, and, above all, of bringing the workers into conflict with the state. Against ‘left’ sectarians we insist upon the progressive character of nationalisation. against reformists of all shades we insist upon the capitalist character of this type of stratified production, combat the illusion that it can, of itself, solve any of the problems of society, and argue the vital necessity of destroying the imperialist state machine. Today, more than ever before, it is all or nothing: either the working class will destroy state capitalism and establish that consistent democracy that is socialism, the classless society, or state capitalism will destroy the workers’ movement and impose a totalitarian servitude that may last for centuries. In the long run there is not third alternative:

“The productive relations of capitalist society approximate more and more to the productive relations of socialist society, whilst on the other hand its political and juridical relations are raising, between capitalist society and socialist society, a steadily rising wall. This wall is not overthrown, but is, on the contrary, strengthened and consolidated by the development of social reform and progress of democracy. It can be shattered only by the hammer blows of the revolution; that is to say, only the conquest of power by the proletariat can abolish class society.”
(Rosa Luxemburg, Social Reform or Revolution.)


(NOTE: The second part of this article, which deals with the specific problems raised by the nationalisation measures of the past five years in Britain, will appear in our next issue)


1. Rate of profit : surplus value divided by the sum of constant and variable capital.

2. States with these characteristics have, of course, existed previously, during a much earlier period of man’s social evolution. However, the society which preceded capitalism in Europe – feudalism – did not give rise to states in this sense. Those embryos were able to develop only as the bourgeoisie itself developed.

3. Some idea of the methods employed in this colossal theft can be obtained from Marx’s account – quoted in Appendix I of this article – of one of the last of those enclosures.

4. The Russian Revolution represents a very special case – that of the restoration of capitalism in a completely stratified form after the defeat of a proletarian revolution which had achieved power and expropriated the bourgeoisie in toto. Since this development is entirely different from that of the rest of the world it is not considered here. The case of the present regime in China is also omitted, and left for discussion in a later article. (Incidentally, little, if any more industry is nationalised under Mao Tse-Tung than under Chiang Kai-shek.)


Appendix I
Marx on the Enclosure of Land

He cites a shocking example for which the Duchess of Sutherland was responsible:

“This person, well instructed in economy, resolved, on entering upon her government, to effect a radical cure, and to turn the whole country, whose population had already been by processes of a like kind, reduced to 15,000, into a sheep-walk. From 1814 to 1820 those 15,000 inhabitants, about 3,000 families, were systematically hunted and rooted out. All their villages were destroyed and burnt, all their fields turned into pastures. British soldiers enforced this eviction and came to blows with the inhabitants. One old woman was burnt to death in the flames of the hut which she refused to leave. Thus this fine Lady appropriated 794,000 acres of land that has from time immemorial belonged to the clan.”
(Capital, Vol.I, Chap.XXVII)


Last updated on 13.8.2007