THE NEXT TEN YEARSIn British Social and Economic Policy

G. D. H. COLE

Volume 6

RoutledgeTaylor & Francis Croup

LONDON AND NEW YORK

CONTENTSPAGE

PREFACE . . . . . . . . vii

CHAPTER I

POLITICS, OLD AND NEW . . . . . . I

"Things can never be the same again"—The period of 'Recon-struction'—The return to 'normalcy'—Post-war boom and slump—Banking and unemployment—The restoration of 'private en-terprise' a failure—The growth of insecurity—The decay ofcapitalism—Socialist hesitations—Post-war economic problems:the coal industry—Nationalisation, old and new—Pre-war andpost-war unemployment compared—The wages question—Theneed for fresh political thinking—The flight from politics—Thevested interests and the common man—The post-war generationand its attitude—The intelligentsia—The case for political Ben-thamism—Are Utopias out of date?—The cant of Utopianism—And its virtues—The need for a self-acting economic system—Happiness as a political principle—And as a guide to individualconduct—The need for intellectual honesty—We must think outthe new problems of the post-war world.

CHAPTER II

BRITISH TRADE AND THE FUTURE . . . . . 22

Free Trade and the international division of labour—The growthof world Protectionism—The export of British capital and itseffects—Great Britain loses her monopoly—The 'balance of trade'before the War—British exports before and after the War—Thepost-war 'trade balance'—Can Great Britain afford to specialiseas much as before the War?—Or must we redistribute capital andlabour?—Our trade in coal and cotton goods considered—Wemust expect a permanent decline in the export of cheap cottons—The coal problem turns on an increased home consumption—Oilfrom coal—Increased efficiency may involve displacement oflabour—We must rely on exports less than in the past—This in-volves the development of the home market—And the revival ofagriculture—The problem of trade with the Empire considered

xi

xii THE NEXT TEN YEARS

—'Europeans' versus 'Imperialists'—The policy of the 'City'—Impossibilities of Imperial self-sufficiency—Economic Imperial-ism and the export of capital—Migration dependent on capitalsupply—The 'trade cycle' considered—Does it really exist?—Thealleged rise of new industries and shifting of industries to theSouth—Unemployment a proof of our political futility.

C H A P T E R I I I

T H E U N E M P L O Y E D . . . . . . . 4 8

Work or maintenance—Why Governments prefer to maintain theunemployed in idleness—False economy of this policy—Theneed for a totally new approach to the problem of unemployment—Work for all—The proposed National Labour Corps—To bebased on voluntary enrolment—A disciplined body—Working ata fixed standard of pay and hours—With additional allowancesfor dependents—The need for industrial training—Conditions ofservice in the Corps—Answers to criticism of the scheme—Thework of the Corps—Cleaning up England—Slum clearance andhousing—Attitude of building employers and workers considered—A retrospect of housing policy—The Labour Corps as anemergency organisation—Will it become permanent?—Theproblem of women's unemployment—Possible use of the LabourCorps by a reactionary Government considered—The Corps willincrease Trade Union bargaining power—Why it is indispensableto get the unemployed back to work.

C H A P T E R I V

T H E R E S T O R A T I O N O F I N D U S T R Y . . . . . 6 8

The National Labour Corps only an interim measure—We musttake steps for the lasting restoration of industry—The ElectricityAct—A first step towards the redistribution of our economic re-sources—The process of investment under 'private enterprise'—Can we afford to leave investment unregulated?—Do we save theright amount?—Or apply it to the right uses?—Saving and in-terest rates—Does the investor's advantage coincide with the goodof the community?—-Many socially desirable investments are un-attractive to the private investor—This especially true at present—Destruction of old capital through wrong application of new—Capital is really power over labour—And determines the distribu-tion of labour—The Labour Party's proposed Employment andDevelopment Board—The Liberals' proposed Board of NationalInvestment—Need for a body of this sort—Its functions andpowers—In financing public and statutory bodies—And in lend-ing to private industry—Argument from the growth of FinanceCompanies and Investment Trusts—Their economic effects con-sidered—Wanted: a State Investment Trust—Conditions of ad-vances to private firms and companies—Proposed extension of

CONTENTS xiiiPAGE

State control—State directors on boards of companies—CompanyLaw and Research Associations—The Labour Corps and the In-vestment Board as complementary aspects of a sound unemploy-ment policy—The economics of communal and private enterprisecontrasted.

CHAPTER V

THE NEW CAPITALISM . . . . . . 8 8

'Rationalisation' and 'Scientific Management'—The gospel of 'in-dustrial efficiency'—What does 'Rationalisation' mean?—Compe-tition no longer extolled as the key to progress—Capitalist com-bination and its growth—The effects of war-time control—Theworkers urged to produce more and the capitalists less—Theworkers' reply to the demand for higher output—Effects of thepost-war slump on Trade Unionism—Recent changes in pro-ductive technique and workshop practice—The decline of manualskill—Standardisation and its effects—Payment by results underthe new conditions—The 'Americanisation' of industry—Mass-production certain to increase—Reaction of technical changes onskilled and less skilled workers and on their relations and relativewages—Craft Unionism largely obsolete—The increased trans-ferability of labour—This weakens the workers' bargaining power—And reacts on the appeal of Trade Unionism—But it leads theworkers to look more for political remedies—The future of strikesconsidered—The changed attitude of the worker to his job—Workshop discipline—A keener demand for leisure—Can Capi-talism meet the workers' demands, and so outbid the Socialists?—This is the 'rationalisers'' hope—The dilemma of Capitalismstated—Even if it can solve the riddle of production, can it solvethe riddle of distribution too?—Capitalist restriction of output—The obsession of the 'limited market'—How coal and cotton metthe slump—How and why both failed—The right policy mustband purchasing power on what society can produce, and not'ration' production within a limited purchasing power.—Will'Rationalisation' solve this problem?—Lord Melchett and theTrade Unions—'Left Wing' critics of the Trades Union Congress—The expediency of a general negotiation—A temporary accom-modation needed—How >a Labour Government would increaseLabour's industrial bargaining power—What terms do the TradeUnions want to make?—Industrial Psychology and its uses—Theneed for a reorganisation of Trade Union machinery—'Rational-isation* as a challenge to Trade Unionism.

CHAPTER VI

RATIONALISATION . . . . . . 116

Rationalisation further considered—Can it raise the working-class standard of life?—The experience of Germany and America—The displacement of labour by mechanisation—Why rational-

xiv THE NEXT TEN YEARS

isation is inevitable—But unlikely to advance very fast—The atti-tude of British employers—Lord Melchett's policy—The legalposition of combines in Great Britain—And its effect on the formsof industrial combination—Should the law be amended?—Insta-bility of certain forms of combination—Does it benefit the con-sumer?—Probable tendency of capitalist policy—Breakdown ofdivisions between industries—Need for State control of combinesand State action to regulate their membership and policy.

CHAPTER VIISOCIALISATION . . . . . . 130

Socialism and nationalisation—The need for diverse forms ofsocial control—What is the 'capitalist system'?—Socialism not arigid scheme—How far do Socialists wish to 'nationalise' industry?—Nationalisation, old and new—Control of economic policy thevital matter—Parliament cannot administer industry—Nor isCivil Service control workable—Industrial administration anexpert affair—Need for a system of responsible expert commis-sioners—Who must be responsible to Parliament—But the prob-lem cannot be tackled industry by industry—The case of coalconsidered—What is the mining industry?—Desirability of main-taining existing business units in many cases—Public ownership ofminerals—Public capital for mining reorganisation—Form andconditions of State control—A Mining Commission—The market-ing of coal—Is this plan socialisation?—Ownership and control—The future of the coal mines under socialisation—The problemof wages, hours, and employment—The Eight Hours Act—Needfor European agreement on miners' hours—Should the mines besubsidised?—The cotton industry—Need for a wide measure ofsocialisation, to be carried through with an economy of parlia-mentary time—Should the railways be nationalised?—Railwaysand road transport—Methods of railway socialisation—Advan-tages of socialisation without direct purchase—:Need for a co-ordinating Power and Transport Commission—Which would beparallel to the Board of National Investment—The cotton in-dustry again considered—The policy of administrative socialisa-tion summarised—The problem of parliamentary control—Theordinary man's interest in economic affairs—The sphere ofexpert control—Measurement and publicity as the consumer'ssafeguards—Need for a reform of Parliament—Long and shortviews—Socialism must be at once opportunist and constructive.

CHAPTER VIII

WORKERS' CONTROL . . . . . . 158

Rationalisation and workers' control—Guild Socialism—Theinfluence of war conditions on the demand for control—The shop

CONTENTS xvPAGE

stewards movement—The effects of the slump—How far do theworkers want control?—Guild Socialism reconsidered—Where itwas in the right—Industrial Psychology and Welfare Work—The German Works Councils—A Works Councils Act neededfor Great Britain—The Councils to be linked up with the TradeUnions—The case for 'collective contract'—And for a system ofIndustrial Courts—Democracy and representation distinguished—Their respective spheres denned—Guild Socialism again con-sidered—The position of Trade Unionism in the new industrialorder—The Washington Hours Convention and the InternationalLabour Organisation—Industrial legislation and the TradeUnions—Scope for 'Guild' enterprise—Aided by State credits—rThe State and the Co-operative Movement—Need for diverseforms of enterprise co-ordinated under public control.

C H A P T E R I X

W A G E S — F A M I L Y A L L O W A N C E S — P O P U L A T I O N . . . 1 7 8

The working-class standard of life—Vital necessity of improvingit—Why it is difficult to bring about a considerable rise in wages—The relation between wages and employment—The 'economyof high wages' and its limits—The redistribution of incomes bytaxation the best immediate way of raising the standard of life—High taxation need not hamper industry—How far incomes areredistributed to-day—The case for Family Allowances—Whythese must be financed by taxation, and not by means of insur-ance or an 'industrial pool'—How large a scheme can the Stateafford?—The policy of a 'living wage' for all considered—De-velopments of the Trade Board system proposed—Wanted: aCentral Trade Board—The attitude of a Labour Governmenttowards Trade Union attempts to raise wages—The populationproblem—Effects of Family Allowances on birth-rates, death-rates, and migration—Birth-control—Quality more importantthan quantity in considering the population problem—Foodsupply in relation to population—The 'optimum' theory criti-cised—Effects of Family Allowances on Trade Union bargainingpower—Redistribution of incomes as a stimulus to economicprogress—Rival principles of payment, based on need and service—How they can be practically reconciled—Dividends for all?—Shall we reach full equality of incomes?

CHAPTER X

T H E S U P P L Y OF C A P I T A L . . . . . . 201

How will the measures so far proposed affect the supply ofcapital?—How far can the rich be taxed?—Functions of the pri-vate investor—The choices open to him—Large and small in-vestors—The effects of redistribution of incomes on the invest-

xvi THE NEXT TEN YEARSPAGE

ment market—And on State borrowing;—Income and 'capitalappreciation'—Can the latter be taxed?—Is the flow of capitalrightly directed between industries?—Or between industrial andother claims?—Types of investment—Fixed and circulatingcapital—'Free' capital and 'sunk' capital—Do banks create credit?—How bank credit affects the flow of capital—The relation be-tween credit and capital—The international flow of capital—Willhigh taxation restrict the supply of capital?—Why men save—The importance of business reserve funds—The 'national savings'analysed—How British industry is financed—Should business re-serves be taxed more highly?—Need for increased reliance onreserved profits for the financing of industry—Policy of theNational Investment Board as borrower and lender—Need foreconomy in the use of the available supply of capital—Develop-ment of State Savings Banks and of Municipal Banks—The casefor the nationalisation of insurance—Increased wealth as thekey to an abundant supply of capital—The future of taxationunder Socialism.

CHAPTER XIBANKS AND CREDIT . . . . . . . 224

The dislocation of the financial mechanism by the War—Its con-sequence in the activities of 'currency cranks'—Necessity of tack-ling the financial problem—The power of the banks and the Cityto embarrass a Labour Government—The present bankingsystem considered—The Bank of England as the chief controllerof the volume of credit—The joint-stock banks as the chief con-trollers of its direction—The competing demands for credit—Position and functions of the Bank of England—And of the joint-stock banks—The question whether bankers 'create credit' furtherconsidered—How the Bank of England controls the volume ofcredit—Bank Rate and open market transactions—The rate ofinterest and the demand for money—Bankers moved less by theprofit motive than by their ideas of 'sound finance'—The insist-ence on the 'liquidity' of banking resources—How the banksrestrict credit—The problem of 'frozen credits'—Does bankingpolicy favour speculation at the expense of industrial needs?—The reluctance to grant long-term credits—The London financialhouses and their work—Do bank credits involve inflation?—Thequantity theory of money—The relation between credit andcurrency—The expansion of credit and the price level—The goldstandard and its effects—Can credits be issued more freely?—Yes, if production can be increased—The State must socialise theBank of England—And place it under an expert commission—Itmust also socialise the joint-stock banks—But not the financialhouses at present—The economics of State banking considered—Financial policy an essential element in the revival of industry—But finance cannot create—It is a vital, but subsidiary, instru-ment of economic reorganisation.

CONTENTS xvii

CHAPTER XIIPAGP

AGRICULTURE AND THE LAND . . . . . 247

Political parties prolific in agricultural policies—The farmer as aninstinctive protectionist—But no party dare give him protection—Why a tariff on foodstuffs is impossible—The economics ofBritish wheat-growings—Reactions of higher prices on rents—Forms of protection without a tariff—Proposals to stabilise pricesby the control of imports—Bulk purchase schemes considered andapproved—But will they benefit the farmer?—They are morelikely to lower prices than to raise them—Agricultural productioncan be increased only if more can be produced at an economiccost—It is therefore necessary to concentrate on improving theefficiency of production and marketing of home produce—Wheatthe least hopeful field for experiment—Imports of foodstuffsanalysed—Cost of imported meat, butter, cheese, eggs, vegetables,and milk—We could produce far more of these at home—Thecase for an extension of small holdings for market-gardening,poultry-keeping, dairying, etc.—Access to the land—The Britishland system and its breakdown—The case for land nationalisation—The method proposed—Urban land values should be taxed—And the revenue given to the Local Authorities—Sitting tenantsshould usually be left undisturbed—The State directly, as well asthe County Councils, to provide small holdings—A State Agri-cultural Commission—The provision of capital for the farmer—And of long-term credit—The creation of co-operative agenciesfor short-term credit—A National Agricultural Bank—Thereasons for the slow growth of agricultural co-operation—In whatforms it can best be developed—Co-operative bacon factoriesand their problems—The function of co-operation in reducingswollen marketing costs—Need for State action to stimulateand co-ordinate local co-operative effort—Progress bound tobe gradual—Immediate steps summarised—The position of theagricultural labourer—Effect of Family Allowances on his stand-ard of life—Agricultural wages and their regulation—Small hold-ings and the labourer—Do the unemployed want to go back tothe land?—How far should Britain feed herself?—The idea ofself-sufficiency abroad—But the position of our export tradesdoes indicate the need for greater food production at home.

CHAPTER XIII

THE CONTROL OF TRADE AND PRICES . . , . . 276

Middlemen's costs too great—Need for improved marketingconditions—The work of the Co-operative Movement—Thetendency of productive concerns to do their own marketings—Orto start joint selling syndicates—Similar to producers' Co-opera-tive Societies—How far can such bodies control prices?—Bulk of

xviii THE NEXT TEN YEARS

distribution still 'unrationalised'—Dealers and their functions—Could these be performed more cheaply?—Desirability of stimu-lating the growth of consumers' co-operation—Co-operation andmunicipalisation: their respective spheres—Position of the smalltrader—Progressive socialisation of large-scale retail distributingagencies—The promotion of joint selling agencies under Statecontrol—The produce Exchanges—Lessons of war-time controlof trade—The rebuilding of Control Boards—The problem ofprices—The Food Council—Need for a better technique of con-tinuous investigation and report—And for a public mechanismfor the control of prices—The organisation of the export trades—The future of the merchant capitalist. - - •

CHAPTER XIVT H E EMPIRE—FOREIGN AFFAIRS . . . . . 292

This chapter limited to the purely economic aspects of imperialand foreign policy—The possibilities of developing Empire trade—And migration—Gains and losses of Empire—The exploitationof native labour—British and native capitalists—British policy inAfrica—Impossibility of withdrawal from imperial commitments—Great Britain and the Dominions—Investment of capital withinthe Empire—Bulk purchase of imperial products—The caseagainst tariff preference—Forms of preference without a tariff—Should the Dominions grant tariff preference?—Trade relationswith the non-self-governing territories of the Empire—Caseagainst planter-control—The Empire Marketing Board and itswork—Need for its development—Desirability of pooling theworld's economic research—Is 'Imperialism' the enemy?—Modern growth of Empires—Need for a change of policy designedto put native interests first—The problem of 'mandated' areas—The League of Nations in relation to non-self-governing peoples—Economic functions of the League—Disarmament—The Inter-national Labour Organisation—The International Economic Con-ference of 1927—The lowering of barriers to international trade—The growth of international capitalist combination preparesthe way for international State control—Need for internationalaction to raise the standard of life—Great Britain's interest in this—The Russian problem—Case for full recognition—China—Imperialism as a cause of war—The rights and duties of Britainas an imperial power—Why the British Empire should not bebroken up.

CHAPTER XV

LOCAL GOVERNMENT . . . . . . 3 1 2

Four reasons for the breakdown of the British system of LocalGovernment—Changes in the distribution of population—Theunsoundness of local rates—The reactions of unemployment—

CONTENTS xixPAGE

The development of road transport—The Conservative De-ratingscheme considered—Its effects on local finances—Block versuspercentage grants—The reform of the Poor Law—Highway ad-ministration—The case against the de-rating proposals—Unfair-ness to householders and traders—De-rating virtually a subsidy—Not needed by prosperous industries—The new Governmentgrant scheme unfair in its effects—Block grants an instrument ofreaction—The future of the Poor Law—A half-hearted reform—Unemployment and the Poor Law—Roads and the Road Fund—Further reforms of the rating system—The case for a combina-tion of block and percentage grants—The redistribution of PoorLaw functions—The problem of powers—Wanted: a LocalAuthorities Enabling Act—The future of municipal trading—The problem of areas—Town and country in Local Government—Housing problems—Town-planning and region-planning—The government of London—The case for Regionalism—Firststeps towards regional organisation—Electricity and region-planning—The classification of urban areas—The reform oflocal finance—The District Auditor and his powers—The growthof central control—Need for administrative devolution—Thefuture of regional government.

CHAPTER XVI

EDUCATION . . . . . . . . 341

Recent educational progress reviewed—The rise in educationalstandards—The 'economy' campaign—The Report of the HadowCommittee—Defects of the present administrative system—Thefalse division between 'elementary' and 'higher' education—Growth of the 'elementary' system—Central Schools—Need forunification of administrative control—Primary and post-primaryeducation—The present position of 'secondary' education—Raising the school-leaving age—A new secondary school system—The curriculum—The place of manual education—Should theschools provide vocational training?—Secondary education forall—The Grammar Schools and their functions—Future of theschool-leaving age—Free places and maintenance allowances—Class-divisions in the educational system—Administrative re-forms—Scotland—The problem of educational areas—RegionalUniversities—The school medical services—The supply andequipment of teachers—The teachers and the Universities—TheState in relation to University education—University extra-muraleducation—Research at the Universities—A standing UniversitiesCommission—State grants for University work—The develop-ment of Adult Education—The Workers' Educational Associa-tion—Adult Education and the Trade Unions—Education versuspropaganda—The National Council of Labour Colleges—Theproblem of State grants—The need for better adolescent educa-tion—A summary of immediate reforms.

xx THE NEXT TEN YEARS

CHAPTER XVIIPAGE

T H E LABOUR BUDGET—DEBT AND TAXATION . . . 3 6 5

Changing attitude towards the problem of taxation—Taxation asan instrument for the redistribution of income—The level oftaxation before and after the War—The growth of national ex-penditure analysed—How the national revenue is raised—TheNational Debt—The problem of debt conversion—Repudiationimpossible—The Capital Levy—The Colwyn Report and theproposed surtax—The Sinking Fund—The case for its suspen-sion—The American debt—The Socialist way of wiping off thedebt—The taxation of inheritance—The Death Duties—TheRignano scheme—Dr. Dalton's proposals—A plan for the aboli-tion of inheritance—The case of landed estates—Income tax andsurtax—Suggested revision of the taxes on incomes—Customsand Excise—The incidence of indirect taxation—The liquortaxes—Tobacco—Sugar and tea—Other indirect taxes—Pro-tective duties and their yield—Prohibition of imports preferableto a tariff—Repeal of protective duties—Socialism and FreeTrade contrasted—Luxury taxes—The effect of the proposedchanges in taxation as a whole.

CHAPTER XVIII

T H E LABOUR BUDGET—EXPENDITURE . . . . 389

An analysis of the national expenditure as it is—Revenue-pro-ducing expenditure—Debt charges—The fighting services—Thecosts of government—The social services—War Pensions—Pro-posed reductions in military and naval expenditure—Only theDebt and the fighting services offer real prospects of economy—New expenditure required—The cost of unemployment—Thedistinction between capital charges and charges on currentrevenue—The methods of new borrowing—Its effect on conver-sion operations—Cost of the National Labour Corps—How farwill it be an additional cost?—The Unemployment Insurance Acts—Rates of pay for members of the Labour Corps—Saving inPoor Law expenditure—Family Allowances—Cost of variousschemes—Case against differential rates—Cost of educationalreforms—The school-leaving age—Effects on unemployment of ahigh school-leaving age—Cost of Local Government reforms—Taxation of Land Values—The Labour Budget as a whole—Total potential increases in expenditure—Reductions in existingcharges—Loss of revenue—Yield of new taxes—Are the proposedrates of taxation too high?—The sum raised will be largely re-distributed as income—The relation of the proposed taxation tothe national income—Its effects on the supply of capital—Willthere be enough 'saving'?—Difficulties of the transition—Thevital problem is the restoration of industry.

CONTENTS xxi

CHAPTER XIXPAGE

THE NEXT LABOUR GOVERNMENT . . . . - 4 1 4

This book deals solely with immediate measures and not withSocialism in the abstract—A Labour Government is an imminentpossibility—But it cannot attempt to establish Socialism at a blow—Importance of selecting the right issues for immediate action—Why this book does not discuss personalities—The LabourParty's official programme—What is Socialism?—Need for a re-definition in the light of post-war problems—Post-war stabilisa-tion and its effects—The stabilisation of unemployment—Thedifferences between the Labour 'right' and 'left' wings con-sidered—How far are they real differences?—Communism inGreat Britain—A negligible factor—The task facing the nextLabour Government summed up.

CHAPTER XX

CONCLUSIONS . . . . . . . 423

The arguments and conclusions of the preceding chapters brieflysummarised.

A P P E N D I C E S —I . BRITISH T R A D E . . . . . . . 437

I I . U N E M P L O Y M E N T . . . . . . 444

I I I . WAGES . . . . . . . . 449

IV. T H E F L O W OF C A P I T A L . . . . . 4 5 1

INDEX 4S3