(c) Confiscation Or Compensation

The Middle Class Political Revolution had far greater obstacles to overcome, far more difficult problems to solve than are to-day connected with the conquest of political power by Labour under democratic institutions. The former had to crush the instruments of absolutism, and create a completely new State machine. As a rule, the Labour movement finds the democratic institutions which the Middle Class Revolution or its aftermath has brought into existence sufficiently developed to serve as an instrument for the emancipation of the workers, as soon as they have acquired the necessary strength.

The Middle Class Economic Revolution had at the outset only economic burdens and obstacles to remove, no new forms of organization to create. Now the Labour Economic Revolution has the task of erecting a strong new social structure out of the scattered material of the large undertakings which capitalism supplies, a new structure upon the same site as is occupied by the building which constitutes the old mode of production.

All the difficulties which beset the socialist task of reconstruction have not yet been exhausted.

The task of the Middle Class Revolution was all the easier inasmuch as everybody recognized that the feudal and the guild forms of production had long been obsolete, and had even become injurious. They could be abolished at one stroke in every branch of industry in a country ripe for revolution.

Since the fall of feudalism the capitalist mode of production has developed only gradually, and not in every department of economic life to the same extent. We find provinces in which the private undertaking has become a monopoly and is ripe for socialization, and others in which the immediate abolition of private enterprise is out of the question.

All Socialists who have been engaged upon the problems of socialization during recent years are agreed that it can only be effected gradually, and that for decades to come a considerable portion of our production will be conducted on capitalist lines.

Whence arises the great and difficult problem: to introduce socialist production and social property in the means of production, while permitting and even encouraging the continuance of capitalist production.

Nothing is more erroneous than the belief that it is incumbent upon the victorious Labour movement, as soon as it comes to power, immediately to bring capitalism as far as possible to a standstill. In doing so, the workers would not only injure the capitalists, but also themselves. If production came to a stop, the whole of society, including the workers, would collapse.

The continuance of capitalist production is a pressing need, wherever and so long as socialist production has not been introduced. However sharply opposed are the interests of Capital and Labour, they have this much in common: both of them thrive the most with the rapid turnover and the rapid accumulation of capital. In periods of prosperity wages as well as profits rise, whereas both fall in periods of crises.

The victorious workers would therefore have every reason, not only to facilitate the continuance of capitalist production in all provinces where immediate socialization is precluded, but also to ensure that socialization does not bring about an economic crisis. They must provide for the smooth continuance of production in capitalist undertakings.

This continuance would not, however, be solely threatened by the workers, who might imagine that their victory signified the immediate cessation of all work for the capitalists; it would also, and to a greater degree, be threatened by the capitalists themselves, for whom the rule of the workers would naturally be a thorn in the side.

If we expect from democracy that it will permit the workers to seize power without the exertion of brute force, as soon as they are sufficiently strong, and that it will rob the bourgeoisie of the opportunity of forcible resistance, this does not mean that the capitalists will involuntarily submit and will not seek to resort to every possible form of resistance. They will employ the opportunities of resistance which democracy offers, and which they lavishly make use of to-day, in conjuction with the other resources at their disposal, such as corruption, deception, and dissension.

Capital has yet another resource at its disposal: the strike. The capitalist can close down his business and thereby exert a pressure on society. In doing so he inflicts economic injury on himself and a permanent closing of the business would mean his utter ruin.

Nevertheless, it is quite possible that the whole body of capitalists would resort to this last desperate expedient, if the Labour regime proceeded simply to confiscate the undertakings which it intended to convert into social property.

Why should the other capitalists continue to run their businesses if the same fate threatened them to-morrow? Every consideration which would restrain them from bringing about the collapse of the detested socialist regime through a sudden crisis of general unemployment and general starvation would disappear.

In such a case, the Socialist who is infected by Bolshevism would resort to the means which is always ready to hand to remove a difficulty out of the way: force.

At the outset, one could simply punish every capitalist who closed down his business when it was confiscated. This would not make any impression if confiscation were the fate that sooner or later overtook every capitalist undertaking. And it would only be of assistance if only a few capitalists resorted to the expedient of closing their businesses. These businesses could be confiscated in order to be sold or leased to other capitalists, who would pledge themselves to run the undertakings. It is at least questionable whether valiant people could be found to invest money in a business which would be taken away from them after a few years without compensation.

In any case the employment of confiscation as a punishment would completely fail in the event of a strike of the whole or even of a considerable section of the capitalist class. The Socialist Government would soon have many thousands of bankrupt businesses on its hands, without any machinery for running them – as, according to our assumption, every undertaking that is ripe for socialization would already have been socialized. The result would be the complete economic collapse of the new Labour regime.

Now the comrade with Bolshevist tendencies would aver that this would be only a consequence of the weakness of the ruling Socialists. The latter should have proceeded further if the threat of immediate confiscation had proved unavailing, and by the simple threat of the death penalty should have compelled every recalcitrant capitalist to continue running his business.

Unfortunately, however, compulsory labour is an extremely imperfect form of labour. It is ineffective in direct proportion to the intricacy of the instruments and organization of production.

The Soviet State has already discovered this to be the case with manual labour, and emphatically so with the labour of the intellectuals. Although, as we have seen, Lenin flattered himself that the engineers and other experts would more readily serve the armed workers than the capitalists, he was fated to discover that the point of the bayonet is not the best incentive to labour.

And now we are to believe that even the functions of capitalism may be exercised through the pressure of terrorism. The acute crisis caused by a sudden stoppage of the whole process of capitalist production might perhaps be avoided, but only at the cost of a crisis not less dangerous in its incidence and a continuous decline in production. Red guards might bring the capitalist to his office every day, but would they also ensure that work was conscientiously and regularly carried on in the factory? Would they supervise the business correspondence, and ensure that sufficient coal and raw materials was always in existence, the machines kept in a state of repair, and the creditors paid at the right time?

This might be possible if reading, writing, and arithmetic were all that was necessary for the exercise of capitalist functions, and that these consisted in the registration and control of labour. But the Bolshevists know better to-day, and look to other methods than coercion to induce the capitalists to function.

The capitalist has not merely the task of keeping his business running. Upon him is imposed the extremely important historical function of accumulating capital, and constantly improving and extending his undertaking. Can this be done by coercion?

The greatest and in the long run only effective economic incentive is interest, either individual or corporate, not coercion.

If a Labour regime desires to counteract successfully the attempts at sabotage of those capitalists whom it still needs, it must give them an interest in the uninterrupted continuance and constant improvement of their undertakings.

This is impossible if every undertaking that is socialized is confiscated. This object can only be achieved if reasonable compensation is paid for the undertaking, when it is desired to socialize it. This compensation ought to be a payment to those who have kept their undertakings in a state of efficiency and conducted them with good commercial success. It ought not to be paid for obsolete, neglected, and badly managed undertakings, which as a rule only keep above water by the shameless exploitation of their workers.

By this means only will it be possible to solve the problem of socializing the process of production in those spheres where it has become a practical question, whilst ensuring the continuance and energetic development of production upon a capitalist basis in those spheres where the conditions for socialization do not yet exist.

The more we avoid economic convulsions, the more we achieve through pacific means, the less we have to resort to compulsory expropriation, even with compensation, so much the better. This does not depend upon our wishes, but upon the insight possessed by both sides into the relative strength of parties. The more impressive the power of the workers, the sooner will the capitalists be disposed to listen to reason. This power again will be all the more impressive in the degree that the socialist regime is enabled to establish socialist production in a successful manner. Object lessons will prove the most effective means of persuasion.

At the outset socialization will encounter the greatest obstacles, but as it progresses these obstacles will decrease, always supposing that the policy is thoroughly considered and applied with due circumspection. The Russian example has not precisely assisted the proselytizing force of the idea of socialization.

But many will ask, if the capitalists are to be fully compensated, what is all the bother about? The most suitable method of compensating the expropriated capitalists will be to allot to them State bonds, the interest on which would be equal to the total former profits of the socialized undertakings. They could also be paid in cash from the proceeds of a loan which the State would raise. To meet the service of this loan the State would be obliged to earmark such portion of the proceeds of the socialized undertakings as would be equal to the profits they formerly yielded. In this case it would seem that no change in the exploitation of the worker by capital had been effected. Now the State would have to conduct the business of exploitation on behalf of the capitalists, who had hitherto conducted it directly. This is true, but the following considerations must be borne in mind.

It would not do to raise the wages of the workers in such undertakings as had been ruthlessly confiscated for the purpose of socialization by an amount equivalent to the profits which these businesses yielded. This would be equivalent to paying a premium which they had done nothing to deserve to those whom chance had placed in such undertakings. Or ought we to transform these workers into an aristocracy of labour above those whom fate had been so unkind as to draft into vocations which were not yet ripe for socialization?

And how should we prevent these favoured undertakings being flooded with labour-power? Ought the workers already there and their progeny to be invested with a legal right to their positions, thus forming an hereditary aristocracy?

While the socialized undertakings should be model undertakings, and set an example to private enterprise in the improvement of labour conditions, they ought not to elevate their workers permanently above other workers.

It may be objected that the workers concerned would not demand that they alone should receive the profits of the socialized undertakings, but that these profits ought to go to the community, and not to private capitalists. The answer is that the proper method of diverting the surplus value which the capitalist class appropriates, to the service of the community is that of the taxation of large incomes, property, and inheritances. This method, which affects the whole class and not a few chance individuals, remains the best under all circumstances, even after socialization has commenced. Moreover, socialization would effect a considerable alteration, in so far as its progress would be accompanied by a diminution of productive capital, that is of the capital invested in productive undertakings, whereas incomes would increase. The latter are not only more easily assessed for taxation, but a heavy toll may be levied upon them without any danger to the continuance of production.

If we would divert the amount of interest payable upon the compensation awarded to the expropriated capitalists to the community, we should seek to achieve this object by taxing the whole of the capitalist class. This would be more rational from an economic standpoint, and more just according to our moral ideas than the plundering of a few capitalists who happen to be right in our path, whereby we should seriously obstruct and jeopardize the whole economic life.

This does not imply that socialization would not confer real and considerable advantages upon the workers. Only these advantages are of a different nature from the immediate raising of wages. We have seen that the motive of poverty, which was the exclusive incentive in the early struggles of the workers against capital, tends to fall into the background. The struggle assumes to an increasing extent the character of a struggle for power and freedom. It will be the loss of their power that above all else will make the capitalists hostile to socialization, even if they are adequately compensated. It would be absurd to expect that we could thereby buy the goodwill of the capitalists. Their hostility will remain, and we shall have to guard against it. But it will not display itself in forms that are so economically injurious as the obstructing of production. Against such a policy their economic interests will plead too strongly.

The autocracy of the owner will no longer prevail in the socialized undertakings. These, like every other organization, must have a direction, but this direction, instead of being independent of, would derive its authority from the workers – in part from the State which would now be ruled by the whole body of workers, and be finally identified with the whole of society, with the “consumers,” and in part from the workers employed in the branch of production and the particular undertaking itself, that is, the “producers.”

It might be thought that this alone would represent such enormous progress as to compensate the working class for its efforts, even if its victory did not immediately lead to increases in wages. It was said in bitterness that the recent German Revolution was at bottom only a rabid wage movement.

We do not suggest that the efforts of the workers to increase their wages should be slackened. Although the Labour class struggle might no longer be exclusively a struggle against poverty, there would still be a large amount of extreme poverty in society. Of few workers, even among the best paid, could it be said that their wages suffice to assure them an adequate share in the advantages of civilization. Socialism would be a poor thing if it brought to the masses only a greater measure of democracy in industry, and not increased prosperity and a higher civilization. Socialism will achieve both the one and, the other, but not both at the same pace. The democratization of industry must take precedence. If its economic results are those that we may expect, increased prosperity will follow.

The second great question involved in socialization is the following. We have seen that under capitalist production every increase in the productivity of labour almost exclusively benefits the owners of the means of production. This will cease with socialization, with the transference to the community of property in the means of production. Every item of technical progress every improvement in the methods and organization of labour, every extension of production will henceforth exclusively benefit the new owners of the means of production, that is, society or the workers. If hitherto the economic progress of the workers has been merely the result of their struggle and has been continuously threatened by new technical achievements, forms of organization and methods, henceforth their economic progress will be the effortless and automatic consequence of all these innovations, which will be transformed from their feared enemies into their best friends.

This new tendency in social development, which is diametrically opposed to the previous tendency, will exert an extremely beneficial effect, as soon as it becomes perceptible. It will constitute the second great achievement of socialization, which possesses the energizing quality of stimulating everybody who has recognized it for what it is to make the most enthusiastic and devoted efforts on its behalf, even if immediate and ample increases in wages are not immediately forthcoming.

Hitherto the growth of capital has been accompanied by an increase, often in the intensity, but always in the extent of the exploitation which it exercises. Such increase of exploitation will cease in the socialized branches of production. There will be an increase in the quantity of their products, but not in the volume of profit falling to the compensated capitalists, which will be fixed once for all.

The tendency will now be for the degree of exploitation to lessen with the growing productivity of labour. The interest paid to the capitalists will henceforth constitute an ever decreasing fraction of the total product.

It will be within the power of the community from time to time to effect an absolute diminution m the amount of interest paid to the compensated capitalists, either by means of the redemption of a portion of the State bonds or by their re-conversion when the rate of interest is falling.

Thus capitalist exploitation will be steadily diminished until it finally disappears.

Many Socialists may find it difficult to appreciate the arguments that are here set forth. In fact, if we regard the matter from the standpoint of class psychology, we should expect to find the revolutions of the bourgeoisie and of the proletariat exactly opposite to their real character. The bourgeois as an owner has respect for property; having much to lose, he is cautious and inclined to compromises. And it is precisely the revolution of his class that assumes a coercive and impetuous character, and explodes in civil war and acts of confiscation.

The case is the reverse with the worker. As one of the dispossessed, he is not keen about sparing the property of the great exploiters. He has little to lose and much to gain, and his position is so deplorable that he strives impatiently and impetuously for its immediate improvement. And yet the revolution of his class has the greatest prospect of achieving a peaceful consummation, without acts of coercion, each step being cautiously prepared, and forbearance being shown towards capitalist property.

This contradicts the psychic needs of the workers so much that anyone who wishes to paint the Revolution in lurid colours will easily earn great applause at Labour meetings. But it is not the psychic urge, the instinctive need, alone that is decisive in history. Of course no conscious human action can be executed without a preliminary act of will. Without will there can be no action. But the success of the act of willing depends upon material conditions, which may not be disregarded. He who determines to run his head against a wall will damage his skull, and the hurt will be the greater the more resolute his will to penetrate the wall in this fashion.

Economic necessity is the decisive factor in history, and our determination will only conduct us to victory if it coincides with what is economically necessary.

The Russian Revolution corresponded to the psychic needs of the workers far more than the method of the Labour Revolution which is here presented. But what is the outcome of it? Lenin announced triumphantly: I have ruthlessly beaten capitalism to the ground. But it will not let go of me, and now we both lie there interlocked, and if I want to stretch my limbs, again I must help my opponent to his feet.

Let us study our feelings and the applause of excited popular meetings less, and let us study the economic driving forces and their laws more. This is more tedious, and often very unpopular, but is the only way to conduct the Labour Revolution to victory.