Karl Kautsky

The Labour Revolution

III. The Economic Revolution


(a) Socialization and Social Reform

SOCIALIZATION will have to proceed gradually, probably too slowly for the patience of the workers. It will not be able to effect a considerable immediate improvement in the wages of even the workers in the socialized undertakings.

The activities of Governments and Parliaments, after the workers have captured political power, will not therefore be confined to socialization. Measures will have to be adopted which will benefit not single groups of workers, but the whole of the poorer population, and visibly change their condition The wealthier the society is the higher the incomes which the capitalist class derives from the productivity of labour, the more drastic these measures will be, and all the heavier will be the burden of taxation which the State and the municipalities will be able to impose upon the possessing classes, in order to extend the scope of the social services.

It will be incumbent on us to create an adequate social health service, both preventive and remedial; to extend the educational system and transfer the cost of feeding and clothing the school children to the community.

The old people as well as the unfit must be properly cared for, and provision must be made for the unemployed which should be productive rather than a drag upon the rest of the community.

Finally, the State must grapple with the housing question, and commence the construction of cheap, healthy, and pleasant dwellings.

Provided they were energetically prosecuted, all these measures would inevitably effect a considerable improvement in the position of the masses, and remove the worst causes of moral degradation and intellectual backwardness. Add to them an ample training of the masses by the Socialist Party, the trade unions, and the works’ councils, and the result will be considerably to elevate the workers, to increase their capabilities for industrial self-government, to heighten their feelings of obligation towards national and municipal institutions, to increase their interest in the socialist regime, and to facilitate socialization. At the same time, these measures would curb the impatience of the masses, and enable socialization to be applied without undue haste.

When we say that socialization will necessarily be a slow process, we do not mean that the socialist regime will be lax, or will only proceed at a snail’s pace

Apart from socialization, it will find to hand an abundance of other important problems – we have here only indicated a few of them – which could be solved on a capitalist basis, without any socialization. Failure to solve such problems is not clue, to the economic conditions, but to the distribution of power in the State, and such problems should prove easy of solution as soon as this distribution of power is fundamentally altered in favour of the workers.

These reforms would have an important social significance. Although they would not abolish the antagonism between Capital and Labour, they would increase the power and intelligence of the workers, who would be more anxious than before to replace capitalist autocracy by industrial democracy.

Not until the socialized type of undertaking has become the dominant type in the process of production will society have found a basis upon which it will be able to develop its life without great class struggles.



(b) The Starting-Point of Socialization

We have seen that socialization will have to begin with definite branches of industry. Each country has a special economic structure, corresponding to the peculiarities of its soil and its history. Thus the starting-point of socialization will not be the same in every country. In Switzerland, for example, one could not commence with the coal-mines, because none exists there.

In all capitalist countries alike there is one great branch of industry, which represents a great social monopoly, is essential to the whole life of the community, and does not offer any special difficulties in its management: the railways.

In many States they are already nationalized. In such cases socialization would not make any change in the ownership, but only in the organization. State railways are everywhere managed by the State bureaucracy. In socializing the railways, the object will be to make their management independent of the State bureaucracy, to invest them with the self-governing attributes of an industrial democracy, which would administer the State property at the behest and according to the ordinances of the State.

In countries where the railways are not yet nationalized, the task of their reorganization will of course be bound up with their transformation from private into State property.

Where coal-mines exist, they will form the second starting-point of socialization. As the number of State mines is small, the socialization of the coal-mines involves in most cases the question of property as well as the question of organization.

Coal and railways will certainly form the starting-point of socialization in the two States where the rule of Labour is nearest at hand – England and Germany. The most stubborn and decisive struggles will be fought out over these questions. A. State power which controls these two strategic positions would possess the key to the domination of the whole process of production.

The State is not the appointed instrument of socialization in all branches of industry, although it has to create, by means of legislation, the foundation and the opportunities for socialization in all its manifestations. The constant aim of socialization is to replace production for profit by production for social requirements. In other words, those for whose needs production is carried on are to become the owners of the means of production. But the latter will not always be co-extensive with the inhabitants of the State. Many branches of production or of communications serve narrow local ends. Their consumers form a much narrower circle than that of the State. In this case it would be quite purposeless to nationalize the means of production or of communication. Municipal ownership and management is the proper solution of the problem.

Generally speaking, much greater progress has been made in the transfer of local monopolies to municipal management than in the nationalization of the great monopolies which dominate the whole country. The supply of water, gas, and electricity, and the roads have mostly been rnunicipalized. In this connection our duty will be to replace bureaucratic autocracy by a type of management which would accord a wide measure of self-government to the workers without losing sight of the consumers’ interest or creating a Labour aristocracy of the municipal workers.

Those municipalities which have Socialist majorities would of course endeavour to extend the range of municipal businesses which operate for urban consumption. In this connection they should not confine their efforts to businesses that are monopolies.

The bakers, for example, enjoy no such position: they maintain a strong competition against each other, and the private initiative of the entrepreneur still plays a great part in their circulation process.

Only, however, on account of this competition, which would cease of itself, if the municipality undertook the baking of bread. In the absence of competition the selling of bread would not require any special initiative. Bread is not subject to changing fashions, or individual selection and adaptation, and its market is steadier than that for other commodities. Considerable cost is involved by sending the bread from each bakery throughout a large town which contains a number of bakeries. If all the bakeries were under one control, each one would have allotted to it a special district, that which lay nearest it. This would considerably reduce the expenses of distribution, and enable the price of the loaf to be reduced and the wages of the bakers and their working conditions to be improved.

After the bread question, the question of housing would occupy a large share of the attention of socialist municipalities, which would have to take in hand immediately the improvement of the housing conditions of the whole of the poorer population. This would necessitate drastic alterations in legislation, but the chief part of the work would devolve upon municipalities, which would construct dwellings either by direct labour or through building co-operative societies. This would involve the nationalization or municipalization of building materials.

Yet a third type of production for needs is possible. The consumers of one or several articles could co-operate in order to acquire their own workshops, where production would be carried on for the needs of the association. Such establishments as these would only bear a socialist character if they were founded by wage-earners.

This brings us to the question of the workers’ co-operative societies. At the outset, their sole object is to remove the disadvantages of the parasitic middle-man so far as the working-class consumer is concerned, by purchasing direct from the producers and selling at net costs, adding something, of course, for administration and risks. But when the association becomes large enough, and especially when the local societies of a country are combined in a wholesale co-operative society, the latter may itself proceed to manufacture some of the commodities it handles.

It may be said that the co-operative society represents a Socialistic system of production, inasmuch as it does not produce for the market, but for the needs of its members, while, instead of aiming at profit, it offers its workers the best conditions that are compatible with the vitality of the undertaking under existing conditions.

The production earned on by the Co-operative Movement may become very extensive even before the workers have captured political power, as the case of England shows.

It will, however, be confined to a few branches of industry which directly produce for the personal consumption of the masses. Only a very few commodities which are destined for the personal consumption of the masses, and of these commodities mostly their finishing stages, fall within the scope of co-operative production. The production of the means of production remains practically impossible for it to attempt, and yet this type of production, with the progressive division of labour, tends to comprise the greatest part of social production and forms the proper province of large-scale industry, and thus the principal driving force of Socialism. The production of the Cooperative Movement will always appear very modest in comparison with the socialization to be enforced by the State and municipality.

Nevertheless, the productive activities of the co-operative societies may become very important, not merely as a pattern, but also through their economic and social effects upon many sections of workers. They will perhaps become even more important in primitive, agrarian districts than in the great industrial States. In the latter, the peasants and wage-earners are usually divided by powerful antagonisms. There the agricultural co-operative. societies are of quite a different character from the proletarian societies. We find a different state of affairs in Russia, in the Balkan States, and in Caucasia; and China and India may develop on the same lines. In these countries. industrial workers and peasants are still close together, and have recently waged great revolutionary struggles in the closest comradeship. It is true that the foolish coercion of Bolshevism has done everything possible to alienate the Russian peasants from the Labour Revolution, but even now the cleavage between the workers and peasants is not unbridgeable.

It is possible that the co-operative societies of the urban workers will secure a footing in the villages, and thus the enormous purchasing power of the whole agricultural population will to a large extent be put at the disposal of these societies. This will afford a much wider and stronger basis for the productive activities of the cooperative societies in these lands than is the case in the old industrial States.

The cooperative societies will become the most important, although not the only consumers’ organizations, which aim at producing for their own consumption. But man does not live by bread alone, but by every word that proceedeth from the mouth of God, in the words of the Bible. He does not merely need bread, fish, soap, boots, and the other commodities supplied by the co-operative societies; he also requires intellectual nourishment, and he will refuse to allow this to be prescribed and prepared by the authorities. Nothing more plainly reveals the cultural sterility of Bolshevism than the fact that it has rendered impossible in the Russian Empire any publishing agencies other than the State Publishing Department. In spite of all its coquetting with modern art and literature, Bolshevism has thereby proved to be the most formidable means for the stupefaction of the masses since the days of the worst fanaticism of the Christian and Mohammedan faith, in which the vestiges of the old Hellenic culture were extinguished.

Under a civilized Labour regime the reading public would resent the idea of any police supervision of its literature.

Any attempt to oust the capitalist publisher in literature could only be successful if he were replaced by the free organization of consumers. There are already organizations which publish periodicals, newspapers, and books, not in order to realize a profit, but in order to satisfy the 1ieeds of their members. The trade unions have their technical journals, as also the associations of doctors, engineers, etc. Nor are the newspapers of the Social Democratic Parties business institutions. Every other organization will have the option of publishing for the needs of its members and friends.

State and municipal publishing departments would be able to publish works which serve State or municipal purposes, national or municipal statistics, legal codes, school-books, or works whose value has been recognized by everybody – the so-called classics.

It is plain that socialization may start from the most various points, and for this reason assume the most various forms. Nothing could be more fallacious than the belief in a process of socialization which can be set in motion from above at one stroke, and would transform the whole of society into a single large barracks, or, as Lenin said, a single great factory. The starting-points and forms of socialization will be as infinitely varied as modern social life, and they will succeed and thrive all the better, the less occasion there is for bureaucratic intervention.

The periods at which socialization will be applied will differ as much as its starting-points and its forms. It is true that its enforcement by consumers’ organizations and municipalities depends upon legislation. But where the State contains a number of democratic institutions, cooperative societies and municipalities have sufficient scope, given the existence of a developed Labour movement, to enforce socialization at least in some provinces before the capture of the State power by the workers.

It is noteworthy that in this respect the capital does not set an example to the other towns. In this we may perceive a further distinction between the Middle Class and the Labour Revolution. In the Middle Class Revolution, the capital seized the initiative and gave the movement its tone. The English Revolution against Charles I would not have triumphed without London. What Paris signified for the Revolution from 1789 onwards is well known. In the year 1848 it was Paris, Vienna, and Berlin which determined the fate of the Revolution. In addition, the Russian Revolutions of 1905 and 1917, to a large extent middle class in their character, were carried out by St. Petersburg and Moscow.

The case is otherwise with the Labour Revolution, for which the purely industrial districts are far more important than the great capitals, whose industries are to a great extent luxury trades, and in which are concentrated the bureaucracy of the nation. Thus, even in Chartist times, London remained far behind the industrial North of England in respect of Labour unity and resolution. Since 1871 Paris has ceased more and more to be a Socialist citadel. The present weakness of Socialism in France is to some extent due to the fact that the industrial north was destroyed in the war. And Berlin to-day is so far behind the industrial districts of Germany in socialist energy that its Socialist majority cannot make itself felt. Only Vienna constitutes an exception among the capitals in this respect.

In the industrial districts proper we obtain Socialist majorities the soonest, but here their effects are not a little hindered by the majority of their population being very poor. The masses of surplus value which they produce are mostly either accumulated or squandered in the capital.

We must not therefore expect great things from the activity of the co-operative societies and municipalities so long as a decisive Socialist majority does not exist in the State itself. But, however difficult this activity has hitherto been, and however slender its success, its importance lies in its resembling those first steps which are notoriously the most difficult. They achieve significance of the pioneer order by virtue of the experiences they gather, which will have a beneficial influence upon subsequent experiments on a larger scale. Moreover, they exercise an encouraging and propagandist effect by providing an object lesson in the superiority of socialistic management. In this respect, the attitude of the workers in such an undertaking is decisive. The best organization and management are useless unless the workers are capable of self-government.

If the workers engaged in municipal services exhibit such capabilities, these undertakings will give an irresistible impetus to the extension of socialization to other provinces.



(c) Productive Co-operation

Apart from the experiments of small self-sufficing socialist communities or colonies, we find that the first form of socialization that is proposed is productive cooperation. A business is to be taken over by the workers it employs, who will organize it in their own way, draw up their own rules, and select their management. Here we find the most complete democracy of Labour. Here the workers control their own means of production and the whole product of their labour.

At one time, productive co-operation was regarded. as the means to the emancipation of Labour. The Liberal friends of Labour were distinguished from the Socialists only by their method of establishing productive co-operation. The Liberals believed that the workers would be able to emancipate themselves if they were careful to save enough money to establish such co-operative associations. The Socialists recognized the absurdity of this expectation. They asserted that productive co-operation would only be effectual for the abolition of wage slavery provided it were established on a large scale with the aid of State resources, the means of production remaining State property, and the co-operative societies organizing production by means of extensive associations.

Upon this point all Socialists were united. They differed with regard to the methods of securing State assistance. Louis Blanc, who was an enthusiastic champion of the idea of productive co-operation; believed that the inauguration of the democratic Republic would alone suffice to secure the necessary State assistance to the workers. Lassalle, who adopted the idea from Louis Blanc, thought that universal suffrage, even under the Prussian military monarchy, would induce the State power to assist the workers to achieve emancipation from the domination of capital.

Marx, on the other hand, regarded universal suffrage and the democratic Republic as necessary conditions for the emancipation of the workers. But it seemed to him that this emancipation could only come from a State power which had been captured by the workers, which presupposed not only universal suffrage and a Republic, but also a high degree of capitalist development, as well as a numerous, well organized, and adequately trained working class. Even he laid great stress upon productive cooperation, although the trade unions seemed to him to have more immediate importance.

To-day, the importance of trade unions is greater than ever, since they are no longer wholly concerned about wages and hours of labour, but are also actively engaged in home and foreign policy. On the other hand, productive co-operation has fallen into the background. Practical experience of these associations has given rise to many objections against them. To be sure, not a few of them are in a thriving state, and they demonstrate by their example that the industrial self-government is not a Utopia. But they are exposed to the hazards that affect all undertakings in the capitalist world. They do not all prosper; many fail or become bankrupt, because their managers lack the necessary commercial experience, and in the bourgeois world they encounter the strongest enmity among those they have to deal with as suppliers of materials, grantors of credit, or customers for products.

Ought the State to meet the loss of every co-operative association, no matter how incompetent the management, or how inadequate the personnel? If this were done on a large scale, it would undermine the State’s stability. A higher mode of production is not to be achieved by such methods.

Should the thriving co-operative associations assist the decaying societies? Should their members accept those of the bankrupt societies with equal rights in their midst? This prospect would not please them at all. In most cases they have only been able to overcome their initial difficulties by means of great privations and tireless industry. Should they now, when they have reached the point of reaping the harvest, share it with those who were perhaps less ready for sacrifice or less enthusiastic, and have therefore fallen into a parlous condition? Whether these suppositions be right or wrong, the evolution of co-operative societies is always as follows. Some of them fail, but those that survive continue growing, and engage new workers, not as partners, but as wage-earners. Thus the co-operative associations are in practice only a means of transforming a number of specially capable or lucky workers into capitalists not of abolishing the rule of capital itself.

Nevertheless, the co-operative idea need not be wholly abandoned. Hitherto it has always been pursued under circumstances which put great difficulties in its way. In a community dominated by the workers, it could develop more easily, and the objection that in its present form it only rears new capitalists could perhaps be overcome by special provisions.

However this may be, it now appears unlikely that cooperative production will ever become a general form of socialist production.

In his History of the 1848 Revolution, Louis Blanc gives a detailed account of the socialistic experiments which were undertaken in that year of revolution, under the pressure of the working class of Paris, and in face of the greatest opposition from the Provisional Government.

It is noteworthy that it was almost exclusively handicrafts for which productive associations were formed at that time with State assistance. This corresponded to the condition of Paris industry, in which the machine played no part at all, even at the time of the Commune of 1871.

The most important of the productive associations founded at that time was that of the tailors, which comprised 2,000 members, to whom was assigned as workrooms the former debtors’ prison of Clichy, as the Revolution had abolished imprisonment for debt.

The second productive association which arose under Louis Blanc’s influence was that of the saddlers. Both associations received the patronage of the State. The tailors received an order to make 100,000 uniforms for the National Guards, and the saddlers were given an order to manufacture the saddles that had previously been made by the military workshops.

By the side of the tailors of Clichy worked a third association, that of lacemakers, who were entrusted to make the epaulettes for the uniforms manufactured by the tailors.

In all the industries affected by the National Workshops experiment handicraft had not yet been supplanted by the machine. And each of these industries only employed workers belonging to the same vocation. The organization of the process of production was very simple, requiring no other knowledge than that derived from personal experience, which every worker could acquire after some time in his trade, and which would enable any intelligent and skilful workman to organize and manage the business himself.

Where productive co-operation is concerned with conditions of simple handicraft and does not have to produce for particular individuals, but for solid organizations with well-defined needs, wholesale buying societies, municipalities, and the State, it will acquire a certain importance for the socialization of production.

Yet as regards most of the branches of industry which it was thought would come within the scope of productive co-operation, the organization and management of the undertaking by the trade unions concerned, or what is called Guild Socialism, may prove more advantageous.



(d) Guild Socialism

In the middle of the last century, when the idea of the emancipation of Labour through productive co-operation was at its zenith, trade unions were practically unknown on the Continent. Even in England they were immature, weak, and divided, although already a force to be reckoned with.

Then the idea arose that productive co-operative societies might be organized more successfully by associating them with trade unionism. In 1882 I published an article on Trade Union Co-operation, in which I drew attention to the inadequacy of productive co-operation, and went on to say:

“This drawback may be overcome through making the associations the property of the trade unions, so that their profits would go to the whole of the organized workers. Of course, the trade union would not grant the workers in their employ any better conditions than their fellows enjoyed under private enterprise. The interests of cooperative workers would therefore be identical with those of other workers. If the business grew, more workers would be employed, and there would be an increase in the number of workers independent of capital. Every extension of the business would be a step in the direction of the emancipation of Labour, instead of, as to-day, a step in the direction of creating new capitalists.

“The proposal of trade union co-operative production is not new. In England in 1842 we find the members of ‘The Journeyman Steam Engine and Machine Makers Friendly Society,’ at their delegate meeting, proposing to spend the money of their society in the purchase of factories. In 1845 the proposal was repeated and seriously considered. In 1847 negotiations were recommenced, but immediately after the delegate meeting a period of such depression set in that all the funds had to be reserved for current expenditure.

“The events of 1848, which gave such an impetus to the Co-operative Movement in France, also produced an effect in England.

“The ‘National Association of United Trades’ proposed in their organ, The Labour League, that a sum of £50,000 should be raised as an ‘Employment Fund,’ and devoted to the establishment of undertakings which would admit members and subscribers who had lost their employment owing to conflicts with the employers.

“It was ‘The Amalgamated Society of Engineers’ which displayed the greatest vigour in this matter. In the first month after the amalgamation, members of the executive committee conferred with members of ‘The Society for the Promotion of Labour Co-operation’ regarding the best investment for their considerable funds. The consequence was a great agitation among the engineers in favour of the co-operative principle.”

In the year 1852 serious steps were taken to put the co-operative idea into practice. The purchase of a foundry had been decided upon the previous year. When a great lock-out was declared in 1852, it was desired to complete the purchase, in order to provide for unemployed members. But the lock-out ended with a defeat of the workers, and absorbed all the funds of the trade union, in spite of generous support from other unions. For the time being all attempts to establish or acquire workshops were paralysed. When trade unionism revived, the idea of productive co-operation had lost its fascination for the working classes.

And the economic prosperity which now set in brought such success to trade union activity that no further attention was paid to the idea of transforming the prevailing mode of production.

This brilliant state of trade union affairs ceased at the end of the seventies of the last century. In the article from which I have already quoted I stated:

“Now this happy period is over for England. Overproduction has become general, and makes itself felt even in the motherland of the capitalist mode of production. The preponderance of English industry disappears more and more, and with it the harmony between Capital and Labour. The trade unions are threatened with bankruptcy, and the working classes recognize more and more the necessity of drastic social reforms. It is no wonder that people are now reverting to the old proposal to establish co-operative production.”

Mr. George Howell, in his book The Conflicts of Capital and Labour, advocated this idea. On page 478 he states:

“Until they utilize some portion of their wealth in the manufacture of articles belonging to their own craft, they can only be viewed as temporary expedients for the relief of pressing necessities. As at present constituted and managed, trade unions live from year to year on their capital, instead of imitating the commercial classes, and growing rich out of profits.”

The idea was also championed by other English social reformers of repute, from whom the article above quoted provoked criticism. I pointed out that the resources of trade unionism were too limited to be pitted against the accumulations of capital; that the trade unions’ funds ought always to be in a liquid form, available for their wage movements, and that the trade union undertakings could not offer any remedy for unemployment, as they, too, would be subject to market conditions. Upon them would devolve the contradictory task of employing few workers in good times, and many workers in bad times.

The trade union productive associations could only become of importance if the State intervened, and placed the necessary resources at the disposal of the trade unions.

The English trade unionists would not listen to this criticism at that time. They saw in the State nothing but a bureaucracy with which they desired to have as little to do as possible, and it is only within the last two decades that this attitude has changed. The trade unions have received great accessions of strength, and have also come to the conclusion that purely trade union methods must be reinforced by political methods, and accompanied by the fullest use of democratic institutions for Labour ends. The trade unions have organized in the Labour Party, and the idea of capturing the State power, in order to shape it into an instrument for the economic emancipation of Labour, is making rapid progress in England.

Under these circumstances the idea of trade union productive co-operation has again arisen, but this time in a more rational socialist form.

The trade unions are not now to establish productive co-operative associations out of their fighting funds, but with State resources, and each separate establishment is to subserve the great common object of a new mode of production. Each trade union is eventually to carry on the whole branch of industry which employs its workers, and all trade unions together are to form a great social machinery of production. The means of production are to pass into the hands of the State, but production itself is to pass into the hands of the trade unions.

Such is the basic idea of Guild Socialism, to which we have several times referred. It originated in the country where trade unionism has secured a greater hold over the lives of the workers than elsewhere. The idea of Guild Socialism arose in England during the years which immediately preceded the war. It has produced a comprehensive literature, arid some attempts have been made to put the principle into practice. Building guilds have been formed in England during recent years, which have made contracts with various municipalities for the construction of a large number of houses. Building guilds upon this model have also been formed in Germany and Austria.

On September 16th the “Association of Social Building Guilds” was founded in Germany, with the support of the following trade unions: the associations of German building operatives, factory-workers, painters and lacquerers, wood-workers, metal-workers, technical employees, machinists, carpenters, stoneworkers, stonemasons, tilers, asphalters, glaziers, and saddlers. An industrial association would, of course, be able to organize the “social building guild” more efficiently than this collection of craft unions. In addition to the above mentioned trade unions, the State of Saxony and a number of German towns and co-operative settlements have invested capital in the social building guilds.

At the beginning of 1922 the building guilds were employing about 20,000 men, and the end of the business year had shown a turnover of 350 millions of marks. The contracts were secured under conditions of free competition. In all these contracts the tenders of the building guilds were about 40 millions (paper marks) lower than those of private enterprise.

Thus a beginning has been made. How rapidly this type of organization will spread depends in the first place upon its appreciation of the need for good workmanship and not less upon the contracts it will receive from Socialist Governments and municipalities, and eventually from Labour organizations, such as co-operative societies and the like. At the outset the building guilds will not be able to depend upon other contracts.

Yet it is not too much to believe that this type of organization has a great future, and will play a notable part in the organization of socialist production.

But Guild Socialism goes too far when it postulates the guild organization as the sole form of socialist’ production. Its primitive conception of the State and inadequate economics may be overlooked as mere academic questions, although they might also involve practical drawbacks. But to force the whole of the economic undertakings of the socialist society into the narrow groove which Guild Socialism proposes would be most detrimental. Its fundamental idea is excellent, but it should not be carried too far.

It is no accident that hitherto the guild idea has only been applied to the building industry. So far as I am aware, there are few indications regarding its application to other branches of industry.

Now the building industry has this in common with the trades concerned with productive co-operation in 1848: it is still in the handicraft stage. The machine does not yet play any part.

The name of Guild Socialism carries us back to the Middle Ages, and reminds us of “masonic lodges.”

Whereas in the other handicrafts of the Middle Ages each master laboured for himself in his workshop with one or two, or with no, journeymen, the case was different with the “free masons,” who had been organized since the twelfth century in brotherhoods, that is, in associations which resembled trade unions. When a building was to be constructed, and it was then usually an ecclesiastical building, the work was undertaken by a brotherhood upon the instructions of an ecclesiastical organization, or of a town, or of a feudal lord, and the brotherhood concentrated its activities in a masonic lodge erected close to the building. As churches were then built very slowly, often occupying a hundred years, the contract with the masonic lodge was a permanent one. The organization survived its members. Within it the artist was not yet separated from the simple workman. All the members shared in the rich experiences and the high degree of knowledge which were gradually accumulated in the organization, and were jealously guarded by them as a secret science. Consequently new members were only admitted after many precautionary measures and tests.

The absolutism which arose after the Reformation suppressed all independent organizations, and also made an end of the freedom of the journeymen’s associations. The organizations of free masons which had secrets from the authorities were bound to be detested. They could only maintain themselves as secret associations.

At the same time the material foundation of the masonic lodges, the construction of the Gothic arches, disappeared. In the new building art the workpeople were separated from the master builders and the artists, whose knowledge and qualifications were now learned at high schools, which, although public, were not accessible to the simple workers, who lacked the necessary means and preparation. Thus the brotherhoods with their secret science became superfluous for the building industry.

Whether the philanthropic secret societies of freemasons, which have arisen since the beginning of the eighteenth century, merely regard the decaying brotherhoods of the freemasons as a prototype, or whether they derive directly from them, does not here concern us.

In spite of the changes it has passed through, the building industry has remained a branch of industry of a peculiar kind, which alike to-day as in the Middle Ages, favours a peculiar type of organization, so that the masonie lodges of twentieth-century Guild Socialism arise from similar conditions to those which originated the masonic lodges of the brotherhoods of masons and stonemasons of the twelfth to the sixteenth centuries.

In addition to the fact that machinery plays no more part in the building industry than it did formerly, fixed capital is also of very slight account. It comprises nothing more than equipment and ladders. The land that is to be built upon belongs to the person who gives the contract. There is nothing to prevent him supplying the building material or paying for it himself; in that case the guild would merely perform the labour.

We are not suggesting that the guild system could only be applied to the building industry. It will doubtless prove the most appropriate type of socialistic organization for a whole series of other branches of industry.

In the building industry, however, it will exercise a revolutionary effect. Let us not forget that one of the most immediate and important cares of a Labour regime must be the improvement of housing conditions, for which it would earn the gratitude and support of three-quarters of the town and country population. The municipalities will be the appointed instruments of this great social reform, and the social building guilds will be their rigorous organs, which on their part will find their best support among the socialist municipalities.



(e) The Jointly-Controlled Organization

The building trade is, as a rule, more extensive and diversified than an ordinary handicraft in the workshop. It comprises not one, but various manual workers, such as masons, carpenters, tilers, etc. Yet each of these tradesmen works about the building for himself. They work side by side, or consecutively, not with each other.

The reverse is the case with large-scale modern industry. Each undertaking comprises members of the most diverse trades, who work with and for each other, each worker being dependent upon the labour of numerous others. Extraordinary organizing capacity and expert management are required to ensure that each individual is allotted his place and work in such wise that no friction or impediments arise, and all the labour-power employed is utilized to the utmost. And to this living labour-power, which frequently comprises a thousand persons, of the most varied kinds, is added an abundance of gigantic machines and buildings, and numerous, often extremely varied, raw materials and accessory materials from all countries, necessitating a complicated commercial apparatus, which is not less requisite for the marketing of the products.

This increases the demands on the knowledge and capabilities of the managing personalities to an extraordinary degree. This knowledge can only be acquired at technical colleges, which have hitherto been inaccessible to the ordinary workers.

Whilst the management is so far removed from the crowd of intelligent and experienced workers, the economic development has, on the other hand, considerably reduced the demands on the knowledge of the mass of workers in many modern businesses. The skilful handicraftsman, acquainted with every side of his vocation, is replaced by a labourer, who is taught to make a few manual operations, which are continuously repeated. Beyond this he knows nothing about the process of production in which he is engaged.

If the processes connected with the building trades and handicrafts are sufficiently simple to permit the majority of workers to elect managers for their businesses, this aspect of the question becomes all the more difficult in the degree that a branch of industry is developed on capitalist lines. At the same time, the consequences of a mistake would be all the more disastrous, inasmuch as the intensity and area of the economic effects are increased with the development of the undertaking.

The following consideration is even more important in this connection. We have already noted that Guild Socialism separates production and consumption on hard and fast lines. From this standpoint the production in each branch of industry is something that only concerns the workers engaged. As Cole says:

“Here it must be evident that the normal conduct of, and responsibility for, industry, will be absolutely in the hands of the Guilds, and that neither the State nor any outside body should have any say in nominating Guild officers or managers” (Self Government in Industry, 4th Edition, p.117).

And later:

“The control of actual production, he (the Guildsman) says, is the business of the producer, and not of the consumer. Only by giving the maker control over his own work can he satisfy the true principle of democracy; for self-government is no less applicable to industrial than to political affairs” (Self Government in Industry, 4th Edition, p.151):

According to this peculiar conception, “true” democracy consists in the fact that the community is not to be concerned with what one of its organs is doing. The State is required only for the purpose of making the individual trade unions masters of the means of production in their branch of industry. What they may do with their common property is nobody’s business but their own.

They are to be entirely independent in the process of production. Not until they bring the finished product to the market are the consumers to have the right to take part in fixing the prices. For this purpose they are to be organized:

“[Guild Socialists] hold that the economic relationship between man and man only finds full expression when producers and consumers alike are organized-when the producer and the consumer negotiate on equal terms” (Self Government in Industry, p.87).

But what if the negotiations should lead to nothing, if a guild should insist on its strong position? Would the result be struggles for power between a number of guilds and a number of consumers’ organizations?

“The nation is in all its aspects so interdependent, production and consumption are so inextricably intertwined, that no mere abstract separation of functions can form a basis for a theory of the modern community. The problem, I admit, cannot be left where it stands.

“Where a single Guild has a quarrel with Parliament, as I conceive it may well have, surely the final decision of such a quarrel ought to rest with a body representative of all the organized consumers and all the organized producers. The ultimate sovereignty in matters industrial would seem properly to belong to some joint body representative equally of Parliament and of the Guild Congress. Otherwise, the scales must be weighted unfairly in favour of either consumers or producers” (Self Government in Industry, pp.87-88).

It is of course quite erroneous to assume that an association of various guilds would merely represent producers’ interests. There would be scarcely a guild which would not stand to other guilds in the relation of consumer.

As against the coal-miners’ guild, practically all the other guilds would have consumers’ interests. On the other hand, in a socialist society every able-bodied person is not merely a consumer, but also a producer, and no person can be so bisected that he would adopt a different attitude in a Parliament from what he would in a guild association, both assemblies being elected by the same people.

As both bodies would be elected by different electoral systems, temporary difficulties might well arise between them, but these would rarely coincide with the line of demarcation between the interests of consumers and those of producers.

But let us assume that the union of guilds represent an interest common to all branches of production. And let us further assume that the distinctions between parties in the parliaments would not be determined by any motives other than consumers’ interests ostensibly common to all parliamentarians. What would be the use of a “joint body representative equally of Parliament and of the Guild Congress?” Its composition would have to be based on the principle that neither the Guild Congress nor Parliament would have a majority over its opponent. Now if the two sections could not arrive at an agreement, how would the body which is above them be in any better case? It would require, like all arbitrators, an impartial third party, who in this case would have to be neither worker nor consumer.

It is quite conceivable that Cole would relegate the creation of this supramundane being to a new theory which has yet to be formulated, the problem of which might be compared with that of squaring the circle.

If, despite these difficulties, the efforts to constitute this supreme sovereign body, which would be above the sovereign union of guilds and the not less sovereign Parliament, should be successful, the gain would not be very great. Just reflect how awkward it would be if the guild and the parliament were obliged to appeal to the highest judge whenever they had a dispute, and with what faction and impediments the whole process of production would then revolve. Each guild would have full liberty to organize production as it chooses, perhaps to the great detriment of consumers. The latter would only intervene when such injury had actually occurred, in order to demonstrate that they had been actually injured.

It would be far more fitting and effectual if, instead of producers and consumers always quarrelling and only coming together before the supreme court of appeal, institutions were set up, by virtue of which consumers and producers would be brought together in every branch of production at the very commencement of production, when the details of its organization and its management were being settled, in order to reach unanimous decisions upon these matters. This would involve not two, but three factors: first the producers, then the consumers, who would be directly interested in the products, as for example the farmers in the matter of agricultural machinery, and finally the community, which would represent alike the whole of the producers and the whole of the consumers, that is to say, the State.

Such a State, organized on scientific lines, would, under a Labour regime, be the impartial and supreme judge of the separate interests of the individual producers as well as of the productive consumers, who would be nothing else but other producers. In this way a harmonious and systematic organization of production to meet social requirements would be rendered possible.

Productive co-operation or the guild system would be appropriate in the case of handicrafts, and of the production of products where delay would not involve serious harm to those concerned. The higher the level of technical development to which a branch of industry has attained, or the more its uninterrupted and intensive continuance signifies a vital necessity, the more we shall require a form of organization in which all the interested parties, not merely the workers, should have something to say about the details of organization and management. This form has received the name of joint-control. While the idea of Guild Socialism has come from England, the idea of the jointly-controlled undertaking comes from Germany, to which Austria intellectually belongs. The most important spokesmen of the idea in Germany are natives of Austria, so that it may be described as a product of Austrian Marxism.

The best exposition of this idea is to be found in Otto Bauer’s Der Weg zum Sozialismus (1919). In his tracks followed W. Ellenbogen, whose booklet entitled Sozialisierung in Oesterreich, not only contains an outline of socialization theories, but also gives a description of the practical attempts that have been made in this sphere in Austria.

Alike in Austria and in Germany, jointly-controlled undertakings have been successfully organized, being for the most part State services which produced war material during the war and- are now being diverted to more pacific branches of production.

In Germany the idea of joint-control found expression in the proposals of the socialist members of the first and second Socialization Commissions, in which Hilferding and Professor Lederer played an important part: I reported upon the idea of socialization to the second congress of the Workers’ Councils of Germany, which was held in 1919, and this report was published in Vienna in pamphlet form, with the title What is Socialization? I venture to quote the following passages:

“With each branch of production that is transferred from capitalist to State or municipal ownership, a new organization should be created, which would enable the workers and the consumers, as well as science, to exercise the necessary influence upon the adaptation of the processes of production. Such an organization would be quite different from State bureaucracy as we have hitherto understood it. The details of the new organization would vary with the different branches of production. It can be made elastic and adaptable.

“Yet it might not prove possible to fit all the branches of production into the new organization immediately. Many of them would have to pass through a number of preliminary stages, but whenever they became ripe for socialization, it would be necessary, in spite of all variations in point of detail, to manage production through the cooperation of the three great factors: the workers, the consumers, and science.

“The co-operation of these three factors would produce the happiest results. If every branch of industry were abandoned to its workers alone, there would be a danger that the workers would raise wages, reduce hours of labour, diminish the volume of production, and increase the prices of their products, without troubling about the community. The essential workers would be in a position to do this the soonest. The dispensable workers would soon find there was a limit to forcing up the prices of their products. The whole process would culminate in the domination of the essential workers over those who were at least temporarily dispensable, such as a domination of coalminers over textile workers, tailors, shoemakers, joiners, etc., a state of affairs which would be as intolerable as capitalist exploitation.

“But if the decisions respecting any branch of industry rested with the consumers alone, we should run the risk of their striving to force down prices at all costs, even at the expense of the workers.

“If workers and consumers were combined in an association in such wise that neither section could dominate the other, they would have to endeavour to overcome their antagonism by means which would be beneficial to both.

“To discover these means is the task of the men of science, whose services would be enlisted as the third party in the organization of economy. Their duty would be to ensure that the most perfect technical appliances and organization were adopted in the undertaking, so that the greatest possible result would be obtained with the smallest expenditure of energy.

“Under capitalism the incentive to these efforts is profit. Under Socialism profit will cease to exist, but this incentive will be replaced by another at least equally strong, if the antagonism between the consumers and the workers can be overcome through the intervention of science.

“Now science will be able to do many more things under socialist production than it can do under capitalism. It will be entrusted with the task of organizing consumption as well as production on rational lines. It will be possible to do this when organizations of consumers as well as organizations of workers participate in the process of production. If, on the one hand, the technical experts ensure that more wealth is produced with an equal expenditure of energy; on the other hand, economists and statisticians will provide indications for the disposal of the products in a manner that will avoid waste and give a greater degree of satisfaction to the consumers.”

The details of organization may assume various forms. It will vary from industry to industry, from country to country, and from one stage of development to another.

As an example, I will quote the proposal which Otto Bauer made in his Weg zum Sozialismus:

“Now who is to manage the socialized industry? The Government? Assuredly not. If the Government controls as many undertakings as possible, it would be too powerful as against the people and the popular assembly; such an augmentation of governmental power would be dangerous to democracy. At the same time, the Government would be a bad administrator of the socialized industry; nobody manages industrial undertakings worse than the State. For this reason we have never advocated the nationalization of industry, but always its socialization. Then who is to manage the socialized industry, if it is not to be the Government?

“To-day, the big industrial concerns are controlled by a board of directors which is elected by the shareholders. In the future also every branch of socialized industry will be managed by a board of directors; but this administrative body will no longer be chosen by the capitalists, but by the representatives of those social sections whose needs the socialized industry is henceforth to satisfy. Now who has an interest in the management of the socialized industry? First of all the workers, the employees, and the officials who are engaged in this branch of industry; secondly, the consumers who need the products of this branch of industry; and thirdly, the State as the representative of the community. Consequently, the directorate of each socialized industry will be constituted somewhat in the manner following: a third of the members of the directorate will be elected by the trade unions of the workers and by the organizations of the employees employed in the branch of industry. Another third will be formed by the representatives of the consumers. For example, in the directorate of the mining industry there will be representatives of consumers partly selected by the organizations of consumers of domestic coal, and partly by the organizations of consumers of industrial coal. The last third of the members of the directorate will be constituted by the representatives of the State. They will be appointed, partly by the Chancellor of the Exchequer, so that the treasury interests are represented, and partly by the National Assembly or Parliament, so that the general economic interests of the nation are represented. The representatives of the workers and employees on the one side, and those of the consumers on the other, will have antagonistic interests to champion; for the one side will desire high wages, and the other low prices. The representatives of the State will function as mediators and arbitrators between the two parties.

“To a directorate constituted in this manner will be entrusted the supreme control of the branch of industry the appointment of the managing officials, the fixing of the prices of commodities, the conclusion of collective labour agreements with the trade unions and the employees’ organizations, the disposal of the net profits, etc. Special arrangements would be necessary to prevent the appointment of managing officials on personal or political grounds, and to ensure that the most efficient experts, engineers, and chemists were chosen. Perhaps the most appropriate means to this end would be as follows. The teaching staff of the technical high schools and the managing technical officials of the entire industry would form a committee, and this committee would be asked to submit proposals for each appointment of a managing official in a socialized branch of industry. The directorate of the branch of industry would then appoint one of the persons proposed.”

This differs very little from the proposal which the, majority of the first German Socialization Commission made in its report of February 15, 1919, dealing with the administration of a socialized mining industry. There it stated:

“It is recommended that the whole of the German mining industry should be placed under a coal council, which would consist of a hundred members, and meet about four times a year. The management of the undertakings, the workers, and the consumers would each choose twenty-five of these members, and the remaining twenty-five would be appointed by the State. Of these at least one-third are to be officials, while the remainder should be drawn from scientific, economic, and public circles.”

We have to reckon with the possibility that experience and theoretical investigations will bring many other proposals for socialization to light.

However such proposals may be devised, if they are to give satisfactory results, they will have to provide that no branch of industry and no undertaking shall be handed over to the workers employed in it, but that the consumers interested, as well as the community and science, shall have a right of participation. This participation should apply not merely to the disposal of the finished product, but also to the process of production itself.

Guild Socialism is perfectly correct in its contention that the worker demands freedom as well as good conditions of labour. He desires democracy to be introduced into industry.

But democracy signifies not anarchy, but submission of the individual to the decisions of the majority and to those of the managers which the majority appoints.

Although Cole recognizes this, he expresses the opinion:

“Similarly, while the workman has his foremen and his managers set over him by an external authority, then, however kindly they use him, he has not freedom. He must claim, as a necessary step on the road to industrial emancipation, the right to choose his own leaders “ (Self Government in Industry, 4th Edition, p.183).

Even under a system of extreme industrial democracy, the individual worker will always have his overseers, foremen, and managers imposed on him by an external power, that is, by the majority.

In this respect Guild Socialism draws a remarkable distinction. It does not regard the majority of the comrades in the same trade as a power external to the individual worker, but such an external power would be constituted by the majority of the members of his class, the workers in all other trades, who in a socialist society would be synonymous with the mass of consumers. For Guild Socialism the regulations of the guild are freedom, but the laws of the community are intolerable slavery. It has not emerged from the shell of syndicalism, although it does not share the latter’s repugnance towards State ownership of the means of production.



(f) Socialism and Profit

A further question arises in connection with the influence of workers, of consumers, and of the State upon the socialized undertakings: what is to be done with the surpluses? And ought the undertakings to yield surpluses at all?

The supporters of the jointly-controlled type of business mostly answer this question in the affirmative. In his Weg zum Sozialismus, Otto Bauer takes it for granted that the socialized branches of industry will make net profits.

“It goes without saying that a portion of the annual net profit will have to be employed to extend and perfect the productive apparatus of the branch of industry. The rest of the net profit will be divided between the State, on the one hand, and the workers, employees, and officials who are engaged in the branch of industry, on the other hand.”

Many Socialists have taken exception to the proposal that socialized undertakings and municipal services should be made to yield a surplus, on the ground that this is profit-making, and not Socialism.

This idea is derived from the old principle that each worker should receive the full product of his labour.

Now one thing is clear: the political rule of Labour will involve large State expenditure for various communal purposes, to which we have already referred: a revolution in housing conditions, improvement and extension of education, and also of the health services. Hitherto taxation has been regarded as the chief source of money for State purposes.

But there is something else to be noted: the further socialization progresses, the more will it narrow the field of exploitation for private capital, and the more will it have the effect of raising wages at the expense of profit, thus causing the rate of profit to fall within this constantly diminishing field.

The result will be a steady decrease in the volume of surplus value which goes into the pockets of the capitalists. Now it would be absurd to take measures to diminish this volume of surplus value and at the same time expect an enormous increase in the yield of taxation. If the enormous cost of the social services under a Labour regime is to be met by taxation, then, however high the super tax and the death duties may be, an ever larger portion of the burden of taxation will fall on the worker.

Now according to our assumptions, the wage of the worker will be increased to enable him to support the higher taxation. But would it not be absurd, for the sake of the socialist principle, to pay the workers in the socialized undertakings the amount of taxation in their wages, and then laboriously to take it back from them in a hundred different forms, in constant strife with the tax-gatherers and by means of a clumsy and expensive bureaucratic apparatus.

Once the number of socialized undertakings and the volume of their surpluses become large enough to cover the entire expenditure of the State and the municipalities, the great bureaucratic apparatus, which is to-day employed by the Inland Revenue, will become quite superfluous. We should then be rid of an appreciable portion of that State bureaucracy, to diminish which would be one of the most urgent tasks of victorious Labour. These expensive officials would then be free to undertake productive work.

Tariffs which are nothing more than taxes would inevitably disappear with a thriving system of socialist production. Socialism will proceed from highly developed industrial States, which would no longer need a tariff for infant industries, and would certainly not need a tariff to assure extra profits to the great associations of employers.

There remains the tariff which is imposed for the protection of branches of production which cannot flourish in the country because the necessary natural or social conditions are absent. Tariffs of this kind are only imposed for the purpose of impeding the natural and geographical division of labour, and therefore the development of the productivity of labour, artificially prolonging unproductive branches of industry at the expense of the community.

The abolition of such tariffs might sometimes be painful for many sections of workers. This is a reason to practise caution in the method of abolition, but that is no argument against abolition itself.

To renounce any revenue from the surpluses of socialized undertakings would seriously hinder their progressive development, and would render necessary the maintenance of a comprehensive bureaucratic machinery. This renunciation is by no means synonymous with Socialism.

The difference between Socialism and capitalism does not consist in the fact that the one makes a profit, and the other not, but in the fact that the one makes a profit for individuals, while the other makes a profit for the community. This is an extremely important distinction.

Yet it is not the sole distinction with regard to profit. Under capitalism, businesses have vitality only so long as they yield a profit. Profit is the soul of economy. Individual businesses or branches of industry may be ever so useful to the community, but they cannot maintain themselves unless they succeed in making the average rate of profit. On the other hand, every business can find sufficient capital if it can yield enough profit, however contemptible or injurious it may be for society.

This would be different in a socialistic organization of the process of production. It would now be incumbent on the management of a socialized undertaking to prevent any harmful employment of its means of production, however much profit it promised. The application of this principle would be all the stricter, the greater the influence, not merely of the producers of the particular branch of industry, but also of the whole body of consumers.

On the other hand, the socialist system of production would continue to operate particular businesses or branches of industry which appeared useful to it, even when they yielded no profit, and perhaps required subsidies. The establishment of schools, the construction of roads and bridges has never been a profitable business for the State or the municipality.

It must not be concluded from this that the question of a profit or a surplus is a matter of indifference to the municipal or communal services. At the present tune national or municipal institutions which do not pay for themselves can only be conducted with the assistance of taxes upon individuals, which are all the higher, the greater the services which the institution renders the community. The more socialization progresses, the more branches of industry are transferred to the ownership of the State and the municipality, the more the costly and circuitous method of taxation will be avoided as a source of State and municipal revenue, and the more dependent the public finances will become upon the surpluses of the public services. In these circumstances, particular undertakings and branches of industry may be run without surpluses, and may even require large subsidies. This is of course impossible for the whole of industry. The larger the subsidy for the one, the greater must be the surpluses yielded by the others.

Far from being unsocialistic, the system of surpluses will be important for a socialist regime, as the greater the social tasks to be undertaken, the more considerable will the surplus have to be which the socialized undertakings as a whole provide.

The difference between capitalism and Socialism does not merely consist in the fact that in the one case profits go into the pockets of individual capitalists, while in the other case they fall to the community, and that in the one case the business is run solely on account of profit irrespective of its beneficial or injurious effects, whilst in the other case only those branches of industry which are useful to the community are maintained, the injurious businesses being closed down, whatever profits they may yield.

While it must not create a privileged aristocracy of labour at the expense of other workers, the socialized undertaking should be a model concern in every respect, not least in regard to the position of its workers. The intellectual and physical elevation of its workers must form one of the chief cares of the management of the socialized undertaking.

Its methods of securing a surplus must consist in securing the greatest possible perfection of its technical installations effecting the utmost improvement of its organization, and taking measures which increase the strength and the zeal of its workers. In this respect, it will be able to accomplish more than a capitalist undertaking, as it will be organized, not upon the antagonism, but upon the co-operation of its employees in the establishment and conduct of the business.

The socialized undertakings as a whole will of course have to yield surpluses, and the means to this end is to raise the productivity of labour.



(g) The Spread of Socialization

Although the beginnings of socialization will be comparatively modest, the principle will exhibit a tendency to constant expansion, not only in consequence of the pressure of the working classes, but also for economic considerations.

Under the capitalist mode of production we find, by the side of the tendency of the individual business to expand, the tendency of various businesses to draw together and to be consolidated under a common management. This is partly the consolidation of businesses of the same type, which is called their horizontal connection, and partly the consolidation of different, but complementary, businesses, which is called their vertical connection,

The consolidation of businesses of the same type is effected chiefly for the purpose of eliminating competition and restricting production, in order to force up prices beyond the level they would reach under free competition, thereby securing profits in excess of the average. We find combinations of this character only where the large businesses are so highly developed that the number of undertakings of the same type in the State is very small, or where natural circumstances have limited the number of existing undertakings, as is often the case with the mining industry.

Apart from the restriction of production, this process of combination saves each undertaking the cost of seeking and attracting customers, that is, the cost of advertisements, commercial travellers, etc. When the grouping of businesses proceeds as far as trustification, when the individual business completely loses its independence, to the above named advantages may be added that of concentrating the whole of production in the best equipped and most lucrative works, and closing down the badly-equipped works.

Moreover, the starting-point of socialization will mostly be branches of industry which have already become cartels or trusts. But under certain circumstances, socialization would also have to commence with individual businesses.

Besides the desire to increase productivity, the socialized undertakings, as well as the capitalist undertakings, will be stimulated to effect combinations by the need for eliminating competition, although not for the same reasons. The socialized undertakings will have no inducement to eliminate competition in order to raise prices and gain extra profits through restricting supplies: such a step would meet with vigorous opposition from the consumers, who would have great influence in the socialized undertakings.

But precisely because of this, the elimination of competition would be effected without any injury to the community, whereas under capitalist production the abolition of competition would remove just that factor which is responsible for its greatest achievements in the sphere of the development of the productive forces, and without which the injurious features of the system would be sharply accentuated.

The socialized undertakings must endeavour to eliminate competition, not in order to benefit consumers at the expense of producers, but because the competitive struggle in the market necessitates personal initiative in the process of the circulation of commodities, which best thrives under private property in the means of production and the products, and which, as we have seen, represents a weak point of socialized industry. Of course, this is not an objection to socialization, but to socialization on the basis of competition. Although socialization can best be applied where capitalist development has eliminated competition, yet isolated socialized undertakings will have to try to attract within the sphere of socialization the private businesses that are competing with them.

By the side of this process of horizontal consolidation, the vertical process promises to become extremely important.

With the widely ramified division of labour that prevails to-day, it is seldom that the production of a product is confined to one undertaking. Most products have to pass through a series of undertakings, from the stage of raw material to the stage of the finished article. In the scale of businesses, each undertaking which is concerned with a later stage of the product stands towards the business which produced it or one of its constituent parts in the relation of consumer to producer.

Just as the interest of the generality of consumers is best safeguarded when they themselves control the means of producing the product which they consume, so is this also the case with the above productive consumers.

If a business produces the articles which it requires, or if its proprietor also owns the businesses which produce such articles, it can rely upon receiving them in the necessary quantity and quality, as the accessory businesses can be made strictly subordinate to the chief purpose of production.

The industrial combines endeavour to make extra profits for their branch of industry, and thus burden the businesses which work up their products. This would be avoided by the “consumer” business, if it controlled the undertakings of its supplies. It would save the extra profits of the cartels or trusts, and these profits could be utilized to sell its products more cheaply, thus dealing a blow at competition.

The progress of this tendency is to some extent impeded by the conditions of the division of labour, which have brought it about that a process of production which was formerly completed within the limits of a single business is now split up into a series of partial processes, carried out in a series of independent businesses.

The tendency to consolidate businesses which consecutively subserve the same process of production first arises among the gigantic concerns of modern times, and is confined to them.

What is true to-day of capitalist undertakings will be doubly true for socialized undertakings, especially when it is not a question of socializing isolated businesses, but a whole branch of industry, which is under common management and ownership. Then the tendency towards vertical consolidation will receive a great accession of strength and offer extensive opportunities for fruitful achievement. It will be an advantage rather than a drawback if the close interweaving of various branches of production renders it difficult to socialize one branch apart from the others.

For example, ironworks are to a large extent dependent upon the proper quality of cheap coal. The consequence has been that a number of ironworks has acquired coalmines. The socialization of the mines involves the question as to whether the principle is to be applied to the combined coal and smelting works. If this question be answered in the affirmative, it involves the further question: why stop at coal and the coal and smelting works, and why not also socialize the smelting works? Alfons Horten considers it necessary to socialize coal, iron, and steel together. It seems to him impossible, however, to socialize this immense sphere of industry at once. In opposition to most of the other proposals, he would not socialize one of these branches of production after the other, but all of them simultaneously, or only in part, at first about 10 to 15 per cent. of the existing coal-mines and ironworks (Horten, Sozialisierung and Wiederaufbau, 1920).

The principle of this proposal ought not to be rejected as a matter of course. Whether it is practicable or not is for the experts to decide. So far it has not found much favour.

However this may be, one thing is at least clear: the socialization of coal would involve a demand for the socialization of iron.

This project would receive an impetus from another branch of socialized industry, from the railways. The railways are such great consumers of iron, tires, sleepers, etc., their operation and their payability are so dependent upon the quality and the prices of iron products, that the socialization of iron would confer a considerable advantage upon them. If middle class Governments have hitherto refrained from taking such measures for the benefit of their State railways, this is due to the fact that, in the first place the management of the State bureaucracy has not achieved any good results, and secondly, the heavy metals industry together with the coal industry have formed the strongest power in most capitalist States. In France, England, and America, coal and iron, as well as railways, are the highest peaks of capitalism. The loss of these possessions would break the power of the financial magnates. If the railways have for a long time been nationalized in Germany and Austria, in spite of capitalist opposition, this is to be ascribed, not to the power of the working class, but to militarism, which required this instrument for making war and was even stronger than the great capitalists. In the seventies of the last century, when most of the Prussian railways were nationalized, capital was not so powerful as it is to-day. Railways were constructed as State enterprises in many economically backward countries, because it seemed there was slight chance of their becoming a lucrative property. But in the military monarchies, the great capitalists became reconciled to the State railways out of regard for their native militarism.

Now after losing the world war, when the German railways have lost any military significance, the great German capitalists are attempting to lay their hands on the State railways. Now it devolves on the workers to defend the State ownership of the railways for other than military reasons.

If the socialization of coal be joined to that of the railways, the socialization of iron will be involved as a consequence. On this ground the decisive battles of socialization will be fought.

For this purpose Social Democracy will need to exercise great power in. the State. So long as the workers are divided, and we have to tolerate temporary coalition Governments, the socialization of coal and iron is scarcely to be expected.

We do not rely eject capital from this achievement on coercion and confiscation in order to its domain. But it is absurd to expect from a social democratic party so long as it does no exercise political preponderance in the State, that is, so long as it is without the support of a decisive majority of the population.

The workers will have to exert their greatest energy in order to wrest from capital coal and iron, and in England and America, railways. When this has been accomplished, the further extension of socialization will still present great economic difficulties, at least in the case of certain types of businesses. But so far as it is a question of power, socialization will then be a decided question.

If socialization should prove economically advantageous in the three provinces above mentioned, nothing could impede its progress in a State dominated by the workers.

We may therefore expect that iron and railways will form a continuation of the vertical structure; that branches of the iron-using industries will be joined on to iron production, and that the railways will commence to manufacture their own locomotives and carriages in State workshops, which should still retain their autonomy. In order not to extend our discussion unnecessarily, we leave out of account the impetus to socialization which should come from the electrification of railways and the nationalization of water-power.

If the railways as a jointly-controlled undertaking are inspired by a socialist spirit, their administration will proceed even further. Uniforms are necessary for a number of railway servants who ought to be recognizable as such by the public. It would be most desirable to entrust the provision of these uniforms, not to private firms, but to the trade union of tailors, which would thus perform the functions of a guild, in the sense of Guild Socialism.

Again, the utilization of the bye-products of coal carries into the province of the chemical industry.

Municipal socialization will proceed on the same lines. From the municipalization of bakeries would follow that of the mills which supply the flour. From thence to the socialization of the flour trade, either through a municipal or a co-operative agency, is only a step. It goes without saying that the municipal roads, as well as the State railways, will be constant purchasers of the products of the State ironworks and carriage workshops.

Where the requirements of the public works of a municipality are not by themselves sufficient to keep a factory running, it would be necessary to form a union of municipal undertakings of the same type, for which a socialized factory would work, which either belonged to the State or to the united municipalities.

A great and fruitful task will devolve upon the municipalities under a Labour regime in connection with housing. The municipalities will be induced to entrust much of this work to building guilds. The municipalization or nationalization of cement and tile works would follow as a matter of course.

Next to the housing question, the socialization of the health service will be one of the important tasks of a Labour regime, and the solution of this problem will benefit not the workers alone, but the entire population. The organization of the public health service would transform the sale of medicines from a private into a socialized function. On the other hand, there would be a tendency to manufacture drugs as far as possible, which again would overlap into the chemical industry.

The third great task in the interest not merely of the wage-earners, but of the great majority of the people, which we may expect to be performed by a Labour regime, is the elevation of the general level of culture, especially through the extension and improvement of education. Differences of opinion among the population, especially political or economic, are not to be neutralized by the propagation of a State opinion.

In the year 1869 Marx made the following statement during a discussion upon education in the General Council of the International:

“Politic economy and religion ought not to be taught in the lower grade schools, or even in the higher schools; adults should be left to form their opinions on these matters, about which instruction should be given in the lecture hall, not in the school. Only the natural sciences, only truths, which are independent of party prejudices, should be taught in the schools.” (Report of the London Beehive)

It is characteristic of Bolshevism that it not only orders Communism to be preached as the State religion through the State organs in the school and in the press, but that it strictly forbids the expression of every other opinion within its sphere of influence. Such a proceeding is intelligible on the part of rulers who believe they are in possession of an absolute truth revealed by the divinity. It is a monstrous attitude on the part of men who assert that they take their stand on the basis of modern science.

It will be the duty of the educational institutions of the State and of the municipalities to provide those who seek instruction in these institutions with writing materials, lesson books, and classic works without payment.

A community which does not hold private profit in superstitious reverence will as a matter of course seek to supply this huge need through its own socialized factories. When we remember how enormous is the present-day State and municipal consumption of stationery, the increased consumption for social purposes would of itself lead to the socialization of the paper works.

In addition to the foregoing, there will of course be an extension of the productive activities of the co-operative societies. In many cases they will be the appointed agencies for bringing the finished products of State and municipal enterprise to the consumer.

Thus the network of socialized production for the purpose of supplying the needs of the population in the State will extend from year to year. The sphere of capitalist production will be subject to continual contraction, and this mode of production, through the increasing economic pressure and competition in the labour market exercised by socialized production, will be more and more obliged to adapt its own conditions of labour to those of the socialized model undertakings. The functions and the significance of the works committees in the capitalist undertakings will continually increase, as will also the influence exercised upon them by the consumers’ organizations. This process will be accompanied by an increasingly effective supervision of the process of production as a whole and by the compilation of more precise and comprehensive statistics of production and consumption, as the socialized branches of production will be public institutions without business secrets.

We cannot yet foresee how long this process of development will last. We cannot yet predict with any certainty that all production in. the future will be socialized. A large part of artistic and scientific production will be reserved to personal enterprise, although even in this province division of labour and co-operation will become a growing factor.

Apart from the production of isolated poets, composers, and painters, undertakings served by wage-labour will be able to exist in the midst of a socialistic society. But they would inevitably be of a different type from the undertakings of present-day capitalism, inasmuch as they would only be appropriate to those branches of industry in which the individual business did not require large capital so much as a dominant personality, a personality who would attract supplementary workers and offer them at least as good conditions of employment as the socialized undertakings. The business manager would then owe his position, not to the capital at his disposal, but to his personality, and his assistants would not be drawn to him through their economic necessity.

In the course of socialistic development, new experiences will be gained, and new problems and fresh possibilities will arise, the nature of which we have as yet no suspicion. They will add to the infinite variety of the forms of production which we can even now foresee, and which grow out of the wide ramifications of the division of labour upon which industrial capitalism is based. Although we aim at abolishing class antagonisms, it is not our desire to impose uniformity upon production or consumption. Such a step would be retrograde.

It is of course quite impossible to foresee the pace at which socialization will proceed in any particular country. Accurate as the Marxian prophecies have proved to be in respect of the direction of development, they have frequently been erroneous as to its pace. Historical development is generally more protracted than theory would lead one to expect, as the theorists are never in a position to take into account all the disturbing interludes that arise.

In any case, socialization will proceed all the more quickly, the more intelligent the workers are, the better they understand their problems, and the more capable they are of solving them.

In this respect important work of preparation may be done in the works councils, which should not merely be regarded as strategic positions or as a means for harassing capital, but above all as training centres for acquainting the workers with the problems of industry and the best methods of conducting it.

We have already referred to the fact that the capitalist world is not a good school for the development of the communal sense, at least as far as the workers are concerned. The class struggle, it is true, arouses strong feelings of solidarity, but only for the purposes of the struggle. In the case of some workers, the class struggle merely strengthens the feeling of solidarity with the Trade Union, in the case of others the feeling of solidarity with the whole class, but this would not necessarily create a strong communal sense towards the State and municipality. The State has hitherto appeared to the workers in the light of an opponent. Not until they have captured the State will their communal sense towards it become stronger. At the outset of socialization, it would not be advisable to expose the communal sense of the workers towards the State and municipalities to very severe tests, particularly in economic matters. Great struggles evoke great passions, heroisms, and selfless devotion. The leaden routine of daily toil in the workshop is not a fertile breeding-ground for great virtues.

Owing to the peculiarity of their Marxism, the Bolshevists sought to stimulate the defective communal sense of their workers by flaming moral exhortations, which of course did not have the slightest permanent effect. Then they resorted to compulsory labour. For these revolutionaries, as well as for the philistines, moral proverbs and the police force are the means for creating virtue.

Although a highly developed communal sense on the part of the workers would assist the success of socialization, we have to recognize that this depends upon factors which we are unable to create at will. What we Socialists can do in any case is to spread economic knowledge among the workers.

The more the workers recognize the force of economic laws, the more completely they are acquainted with the economic conditions of their own country in particular and of the world in general, the more clearly they perceive the limits of what is immediately practicable, the less likely will they be, once they have captured economic as well as political freedom, to act like school children who shirk every task and are ready for every prank the moment the master’s back is turned; and the more likely they will be to behave like responsible men, resolving of their own free will to perform whatever tasks are required.


Last updated on 27.1.2004