Figure 1: SDAP-report
The present column discusses the SDAP-report Het socialisatie-vraagstuk, which was published in 1920. The aim is to re-evaluate the made proposals. For this purpose other sources of that era have also been consulted, such as Problemen der socialisatie by J. van den Tempel. Criticism can be found in Het socialisatie-rapport der SDAP by Joh.J. Belinfante and in Socialisatie by A. Zeegers. F.M. Wibaut, one of the authors of the report, replies in Over de kritiek op het socialisatie-rapport to the objections of the opponents1. The column is a bit long, because the footnotes contain many citations. If desired the reader can of course skip these often surprising citations.
Perhaps readers have wondered about the aims of some columns in the Heterodox Gazette Sam de Wolff. At least one reason is their indispensability for the publication of the present column. Since the commission of wise men in the social-democrat labour party (in short SDAP) has written its report, much knowledge has been lost2. On the other hand, since then many insights have been gained, which place the struggle for socialization in a new perspective. Various columns on this portal have elaborated on these aspects. For instance, previously the aspiration for socialization has been discussed in the context of the German social-democracy. A possible structure of the socialized production is sketched in the column about the Leninist economy.
The added value with respect to other publications about the Socialization report is the effort, which will be made here, to judge the contents with the wisdom of afterthought. Two questions will be considered. First, were the intentions of the report wise, at the time? And second, can something be learned for the present situation from the then intentions? Did the SDAP commission under the chairmanship of Floor Wibaut produce a pioneering result? Incidentally, where the political opponents mention advantages and disadvantages of socialization, which are not discussed in the report, this column will ignore them.
At the start some remarks must be made with regard to the terminology. Thus different terms are used, such as socialization, nationalization, cooperation, state property, and collective property. In a cooperation the workers and sometimes the consumers own the means of production. Due to the collective character this is sometimes called collective property, although in fact the enterprise remains private. Nationalization implies the transformation of the enterprise into a state property. In this column socialization is interpreted as nationalization, provided that it is accompanied by a democratic and politicalmanagement.
In the nineteenth century the socialization is recommended as a means to increase the social production and to enlarge the power of the working class. But behind these goals hides the search for meaning of life and for a social ethics. These get lost, since the industrial revolution and the division of labour destroy the traditional institutions. The reorientation requires a sociological analysis, which has been performed mainly by Karl Marx. He develops two concepts, namely the alienation and the exploitation, which both have since amply proved their utility.
In the view of Marx the human existence rests on three pillars, which he designates with the German terms total, persönlich and selbst-tätig3. People must be able to get a complete image of their environment. They want to develop their individual talents and skills. And they need the freedom and space to make that human capital productive in activities and acts, according to their own preferences. Note, that these are ideal demands, which ignore the material prosperity. But the income does evidently contribute to the motivation and to the pleasure of work.
The proletariat of the nineteenth century does not have access to these three conditions for a human life. The rapidly progressing division of labour limits the social horizon of the workers. And the mechanization of labour ousts the traditional skills, and dictates a harsh regime of labour discipline. The proletariat loses its say in the production process. Marx designates the severance of the self-determination and labour as the alienation. The bourgeoisie (the class of capitalists) uses her rising power for shifting the production from the consumer goods to the investment goods.
The economic development, which is chosen by the bourgeoisie, causes a rapid growth, but it also forces the living generation of workers to limit their consumption for the moment. The bourgeoisie can dictate this harsh regime, because the administration is not yet elected in a democratic manner, so that it is extremely dictatorial. The proletariat is unable to escape from the regime, because the bourgeoisie owns the means of production, which are indispensable for a competitive production. Marx calls this situation the exploitation of the proletariat.
After several attempts by the prolariat, in the beginning of the nineteenth century, to destroy the means of production in rebellions, the workers begin to understand that it is wiser to regain the ownership of the means of production. The socialization becomes popular, and therefore the ideology of socialism. The socialization is primarily the elaboration of the workers morals about a meaningful life. They want to realize labour-relations, that make the production humane again. Besides, the socialization is a means of power, because she tears the means of production from the bourgeoisie.
Since the conflict of interests leads to a struggle between the production factors labour and capital, the factor capital must be disowned. This is called the class struggle, because then the proletariat and the capitalists (bourgeoisie) were both true classes. The proletariat can liberate itself from the bourgeoisie, but pays for this the price of an uncertain future. At the beginning of the nineteenth century this choice is simple. The capitalism is repugant to such an extent, that parts of the proletariat come in a revolutionary mood. Instead of well-being there is an existential despair. An uncertain future seems more promising than the existing situation.
The social-democracy has tried to give a voice to the discontent4. At first the social-democracy wants to gain political power. The state is still identified with the bourgeoisie. Therefore in the beginning the social-democracy is in favour of the establishment of productive cooperations of workers, hoping to reduce the state to insignificance. Many experiments have been done with such cooperations, unfortunately with mediocre or bad results. The chaos in the Soviet-Union immediately after the October- revolution rigourously shatters the remaining illusions.
However, the irreconcilable opinions of the two classes make change unavoidable. Then the socialization of capital by the state (so the nationalization) is a logical option, because she strenghtens the political power by means of economic power. In remains unclear whether the new system will generate economic successes. There is obviously the hope, that happiness and satisfaction have a positive effect on the productivity of workers. In that way the socialization could lead to a larger social product, and to more material wealth.
On the other hand welfare and a meaningful life can clash with each other, namely when the love of ease would prevail. Wibaut admits that this is a danger, but he believes, that some prosperity may be given up in favour of a meaningful life and welfare5. According to him the abolishment of the class society can have a certain price. On the contrary, both the Socialization report and Van den Tempel state that socialization is only acceptable, when the productivity maintains at least her current level6.
The aim of the class struggle is to establish a new social order, wherein the class conflict is reduced and possibly removed. As long as the struggle is more a matter of morals than of economic efficiency, the revolutionary program does not need to be particularly concrete. But that changes when the proletariat gains the universal suffrage. In the Netherlands this occurs in 1917. Then a revolutionary civil war can no longer be justified. The socialization loses its value as an instrument of power. Henceforth it must be made plausible, that the socialization is truly an improvement with respect to private property. She transforms from a political measure into an economic measure.
In march 1917 the left carry out a revolution in Russia. This is the first time since decades that the problem occurs of reforming a capitalist system with semi-feudal administrative remnants into a socialist system. Unfortunately this process is ended prematurely by the Leninist coup d'état, which soon will degenerate into a terrorist dictature. But shortly thereafter, in november 1918, also in Germany the empire is replaced by the republic. In this revolution the SPD, the social-democratic party, even becomes the sole ruler, during a period of transition. Now she is forced to fill in her ideology with concrete proposals for reforms. These include the onset of socialization.
The position of the Dutch social-democrats is even more awkward. Already in 1917 the universal suffrage is established, which shows that the SDAP is supported by merely 22% of the voters. Already at the end of the nineteenth century the christian churches have founded their own political parties, and these succeed in getting round a large part of the working class. This refutes the expectation of the social-democracy, that she will obtain the majority without ado. Now it becomes necessary and even essential to yet convince the distrustful proletariat with credible arguments. The Socialization report is both a guideline for the SDAP herself, and a means for external propaganda.
The Socialization report consists of two parts, about macro-economics and micro-economics. In the first part the advantages of socialization at the macro-level are summarized. This part is ideologically biased. In the second part the desirable social and productive improvements are studied branch by branch. In almost all branches the report turns out to recommend the socialization or the central control at the level of the branch. It is obvious that this second part is technically outdated, and moreover rather dull, because socialization requires puzzling. Nevertheless, this part still contains some interesting elements, for historians.
Now it is interesting to study the arguments, which the SDAP Commission mentions in favour of socialization. They can be separated in two groups, namely the ideological arguments and the economical arguments. Thus one finds:
In the remainder of this column these six arguments will each be analysed.
According to the Commission the proletariat feels an aversion for working for the profit of the capitalists. The workers are annoyed by the conspicuous consumption of the elite. They prefer, that their efforts benefit themselves, either by means of higher wages, or by means of public services. This argument is refuted by the real world. For, the SDAP did not at all succeed to obtain the democratic majority during the elections. The Commission plays down the defeat in the elections with the argument, that the workers are deceived. In reality the workers do not reject the generation of profit, but merely the meagre share, which they receive as wages from the totally added value. The profit itself is not a source of alienation7.
Besides, the Commission bases her arguments on the false assumption, that due to their dislike to capitalism the workers are hardly motivated. Therefore their productivity lies below the actually feasible level. As soon as the socialization has removed their discomfort, they will make a larger effort and thus become more productive. This is a questionable argument, because it can become an obligation: after the socialization the workers have the moral duty to work harder. This is even more alarming, since apparently the Commission is not convinced that this change of attitude will actually occur. The new conscience is merely a speculative consequence of the transformed production system8. It is somewhat bitter, that for safety's sake the report recommends the introduction of the piece-wage9.
The origin of the private enterprises is the desire to make a profit. In other words, the social welfare is irrelevant in the system of private production. It is obvious that an effective demand for the product is needed, but this can be completely irrational and wasteful. On the other had the state enterprises are ultimately controlled by the society, so that the furthering of the general interest is guaranteed. And indeed the free market sometimes fails, for instance because the external effects of the production are not taken into account. Here the Commission has a valid argument.
The Commission believes that the solution is the almost complete socialization of the private enterprises. First, the enterprises must be united in so-called bedrijfsschappen, under the supervision of a Branch Council. The Council is composed of representatives of the workers, of the consumers, and of the management of the enterprises. So it is a democratic body, which is supposed to guarantee the general interest. For, in the Council all interests are represented. When unexpectedly unanimity can not be achieved, then the state can always intervene. The report rejects the productive cooperation as a form of management, because it represents merely the interests of the workers10.
In reality the general interest is naturally merely an abstract term. There are group interests, which in some way must be reconciled. When the reconciliation and adaptation succeed, then the worst class conflicts have been eliminated. Perhaps there are still classes, but their conflict is weakened. Thanks to the Council the furthering of interest can become more balanced. So it is pre-eminently an ideological body, which must guarantee well-being and welfare. The commission shows some bias in her confidence, that the representatives in the Council will commonly be able to compromize. Due to her own morals she underestimates the possibility, that henceforth the Council might become the stage of the class struggle11.
The socialization and the organization of enterprises in branch associations is an enormous endeavour, which clashes with numerous established interests. The consequences for the social harmony are uncertain. Besides the social development pushes in the wrong direction, because the people begin to embrace individualism. That frustrates the harmonious debate. Therefore the opponents of socialization argue, that the state disposes of alternative means of power for securing the general interest. The alternatives are less intrusive, and therefore less risky. Here one may consider the rules and regulation by the state. But the commission is convinced, that such regulation is merely patchwork.
Here the commission has a valid point. However, it concerns merely a minor effect, because the profit is just a fraction of the totally added value, and the consumption is again a fraction of this. For, a considerable part of the nett profits (after the deduction of taxes) is saved and subsequently invested in new means of production. And these expenses must still be done after the socialization. In other words, henceforth the former capitalists will have to work for their incomes, but they form merely a small percentage of the professional population12.
Again and again the commission complains about the fragmented supply of products and brands in capitalism, because she sees this as a source of waste. First each brand must make large costs for advertising in order to distinguish itself from the competition. At the time this was partly done by means of salesmen and agents of enterprises. Moreover, the diversity raises the costs of the retail business, because competing chains emerge.
Appartenlty large savings are possible on the trade costs by merging all those small producers. That is to say, the products must be standardized and normalized. This would also guarantee the product quality, which in capitalism is sometimes below par. Moreover, in this way the production costs are reduced, because thus the mass production becomes possible, which generates advantages of scale. In this respect the argument of the car builder Ford is famous: "The T-Ford is available in any colour, as long as it is black". With regard to "luxury" goods the commission even exhibits a bitter contempt, and she wants to discourage their production.
The mass production can indeed be a blessing for the elimination of a pressing shortage. But yet this argument of the commission is not truly convincing13. For, as soon as the most pressing needs are satisfied, the consumers will demand a differentiated supply. People want to express their identity and uniqueness by means of consumption. In fact there is not a single large product market, but a patchwork of partial markets with each its own target group. The enterprises serve the social differentiation by distinguishing themselves from their competitors.
The separate profiles of enterprises with a comparable product represent monopolistic competition, and nowadays she is the dominant market form. The commission, which is trapped in a vision of mass production and of increasing scales, fails to see the social development towards more product differentiation14. Her aim of standardization and norms does not satisfy an important human need, and might eventually result in social rebellion.
The most important argument for socialization is the increasing centralization in the economic branches. The enterprises can save on costs by expanding the scale of production, for instance in the collective acquisition of raw materials, or in the cooperation for the innovation of products. Therefore, at the beginning of the twentieth century the producers in many branches decide to make mutual agreements, and to unite in so-called cartels. Sometimes this even leads to the formation of trusts, wherein all producing enterprises are subjugated to a central leadership.
In principle the savings on costs benefit the consumers. The centralization is a logical development on the road towards a more efficient production. However, a problem is, that she is accompanied by the disappearance of competition. For, in perfect competition the product price is still dictated by the equilibrium between demand and supply. But as soon as a strong centralization is realized, with the monopoly as its ultimate form, then the leading producer is able to dictate the product price. In that situation the pursuit of gain degenerates. Then the chance is large, that the leading producer reduces his production in order to raise the product price.
The commission wants to control the monopolies by socializing the branches. In the preceding argument about the standardization and the mass production it has already been stated, that the centralization in itself is desired, and must be stimulated. Now when the monopolies are acquired by the state, then this guarantees the fair product price. The socialization is the natural completion of the historical development, as it were.
Yet this argument of the commission is controversial. State enterprises commonly adapt to the organizational structure of the state, namely the official bureaucracy. It is true that she is effective and reliable, but unfortunately she is not very efficient. Thus there exists the danger of rising production costs. The commission does see this danger, but she believes that it can be controlled by an enlightened socialist rule. The state enterprises must have a certain autonomy, with an independent management, which limits the bureaucracy. Opponents deny that this approach will work. Since the politics and the administration are in power, they will continually intervene in the managerial decisions15.
Another weakness in the argument of the commission is their conviction, that the centralization will occur in veritably all branches. Therefore the commission wants to socialize the complete economy, with the exception of some niches. Here the commission is clearly wrong, and at the time that had already been known for several decades, thanks to the marxist revisionism. Namely, in many branches the almost perfect competition remains the most efficient market form. The union of all these enterprises under the control of a branch Council adds little value, and can even lead to damaging regulations16.
This last point is truly an alarming aspect of the socialization report. An unchanged following out of the total socialization would make the economy substantially less efficient. Therefore the report must be condemned and rejected. Incidentally, the negative judgement is softened somewhat by the demand of the commission, that the socialization must not harm the productivity. Since in addition the commission is willing to realize the socialization in a gradual manner, it may be hoped that in good time the unholy idea of total socialization would have been renounced.
Moreover, the commission is prepared to start with the so-called partial socialization. In this case a state enterprise is established in the branch, as a competitor for the private enterprises. The state enterprise can break the price agreements within the branch, and keeps the entrepreneurs focused. Incidentally, the commission still hopes that in the long term the whole branch will become state property. Yet another option is the mixed enterprise, wherein the state is contents itself with a part of the shares. However, this is seen as a provisional solution. The opponents of socialization argue, that the abuse of a private monopoly can be combatted with anti-usury laws, and that moreover such a national monopoly is restricted by the foreign competition17.
The commission states, that in all branches backward enterprises are active, which use obsolete and out of date production techniques. Such enterprises have a productivity below average, and therefore in principle push the production costs upwards. Nevertheless the backward enterprises survive, because the entrepreneur still succeeds in making a profit, or sometimes because he severely exploits himself as a small independent. The commission wants to close the backward enterprises after the socialization. Henceforth everywhere in the branch the best production technique will be used. Here the socialization acts as a reconstruction and rationalization.
The argument of the commission seems justified, but on reflection it is somewhat naive. For, the diversity of production techniques is the consequence of the must praised innovation. As soon as the state prescribes a single production technique, it is by no means certain that this is indeed the most efficient one. It is certainly conceivable, the a mediocre technique is chosen, which perhaps will finally even degenerate to a backward level. In any case, this is the tendency, which was observed in the Leninist planned economies18.
The instrument of socialization is too rigourous for combatting a backward production technique. Somewhat more careful is the partial socialization, which implies that a state enterprise will push merely the weakest enterprises from the market of the branch. However, the state disposes over more constructive means, for instance the establishment of public knowledge institutes, which assist the industry and commerce in the modernization of the production process.
It can not be denied that the commission in its report got carried away by her own ethics and by her socialist sentiment. Around 1920 the marxist revisionism within the SDAP still meets resistance. The socialization became obligatory, and for this purpose halve truths were proclaimed. The ideology dominates over the common sense. Since at the time the social-democracy was an international organization, the foreign sister parties probably cherished the same ideas. The present-day reader is just relieved, that the report has never been used as a state policy. The result would have been an economic crisis. Moreover, the new policy is probably not an effective means for ending the exploitation and alienation. The commission herself is definitely not exempt from élite-like ideas.
At the same time the commission clearly tries to find a solid program. Sometimes the proposals remember of the Leninist state dirigism. At other places the report philosophizes about loose product associations, which confine their activities to collective facilities such as the inspection of goods and a knowledge-institute. The ideology still allows for latitude. Due to the plea for gradualness and for the maintenance of productivity it may be hoped, that the execution of the program would finally have resulted in the renouncement of the Leninist state dirigism. For that matter, reversely some opponents resist the socialization in all branches, which also testifies to an ideological blindness.
It must be stated, that the Socialization report lagged behind the historical developments. In itself this is understandable, because in the social-democracy the socialization is interwoven with the moral problems of meaning. Human values are persistent19. Some political ideologies, other than the social-democracy, had a clearer and better understanding of the requirements of the time. They recognized, that the economy requires a mixed public-private system. In retrospect the socialization has been a good solution for a limited number of branches. Thanks to the state enterprises the branches could be restructured, or built up more rapidly.
A historical lesson of the Socialization report is that for the various branches the advantages of socialization must always be analyzed. Nowadays the public administration sometimes is too easy in privatizing a state enterprise, and in shifting the responsibility to the private sector. Anyway, perhaps the social justification of this phenomenon lies in the fact, that it happens. The human nature leads mostly to a truly "natural" development - even though it sometimes takes some time.