Figure 1: Troelstra oord (burnt down)
In previous columns it is described how around 1930 the social-democracy experiences an identity crisis, especially in Germany and Italy, but also elsewhere in Europe. The theme of the socialization does not catch on, and the fascism dictates the order. The present column analyzes the recovery of the social-democracy in the following twenty years. The study consults three ideological works, that were published at the time. It concerns Ordening der wereldproductie by Wibaut, Ordening als socialistische etappe by Van den Tempel (Jr.), and International economic integration by Tinbergen1. As an introduction the column sketches once more the developments since 1900. The column ends with an evaluation.
The rise of the social-democracy is a reaction to the laissez-faire capitalism, which is not able to guarantee the general welfare. More and more people understand, that the transition to an alternative social system is inevitable. Originally the social-democracy wants to transfer the means of production from the capitalists to associations of workers. She is convinced, that the workers are capable of self-organization, and of a rationalization and a democratization of the production. Obviously, the core of her policy is the socialization. Then the social-democracy still identifies the state with a repressive and bureaucratic body, which is without future after the transition to socialism. For, at that moment the state is simply the armed branche of the exploiting elite.
In the early social-democracy the class struggle dominates everything, because merely the rudiments of a democracy exist. The universal suffrage is limited to those groups, that benefit from the ruling system. The socialists are convinced, that after a revolution even a moderate executive of workers will manage better than the existing capitalism. This explains also that Pieter Jelles Troelstra even in 1918 set ajars the doors towards a revolution (incidentally, his insinuation is not more than that2). He also wants to avert the danger of a revolution by other groups than the SDAP. In the following years, in 1919 and 1920, the executive of the SDAP still takes into consideration a possible revolution. Incidentally, she is not eager to take the lead, and stresses that under socialism hard work is still necessary. The executive of the SDAP expresses her fears by announcing the hated piece-wage, in the case of a socialist revolution.
Together with Beatrice and Sidney Webb, Troelstra belongs to the pioneers, who want to involve the working classe directly into the national government. The rising cartels and trusts in capitalism seem to herald a natural order of industrial branches. Besides, during the Russian rebellion of 1905 the working class turns out to organize sponaneously in councils. Therefore the ideas about a socialist worker's rule are obviously based on a system with industrial councils at the level of the productive branch. All those councils together can be represented in a central council. In the Dutch movement these new institutions are called bedrijfsorganen (industrial bodies).
Although the system of councils links up with the reality, its functioning remains uncertain. The experiences in Russia since 1917 are very disappointing. In addition, the situation of the proletariat improves considerably, notably in the twenties. Moreover, in the mean time the universal suffrage has been realized, and subsequently the proletariat does not in mass vote for the social-democracy. Apparently the social-democracy has over-estimated her attraction. The justification for a revolution weakens, and the social-democracy reflects on her political doctrine3. The model of the new bodies has indeed several weaknesses. It is rather obvious, that the enterprises will dominate the management of the industrial bodies and councils. Thus they can conspire with the workers, against the representatives of the general interest. The socialization could solve this, but unfortunately turns out to have her own economic disadvantages.
The political developments in the twenties are also disastrous for the social-democratic ideology. Both the roman-catholicism and the fascism embrace the idea of collective economic bodies, and thus they defeat the social-democracy in her own field. It turns out that socialism is not the natural doctrine of the proletariat, as many thought, but that other systems with a more absolute rule are preferred. When in the thirties both Italy and Germany have become fascist, the original social-democratic doctrine is in fact not longer tenable. It is hard to imagine the devastating mental disarray, that must have affected then aged leaders as Wibaut and Roland Holst-van der Schalk.
Naturally this does not mean, that the social-democracy abandoned her plea for socialization. But capitalist elements do enter in the party documents, such as the conjuncture program in the Plan van de arbeid. It would take another quarter of a century (!) before the complete socialization was truly abjured. The symbol for this moment is the German program of Godesberg, which is published in 1959. What remains are preferences for state enterprises in the essential branches, for a large public sector, for planning at the macro level, and for an egalitarian society with chances for all. Immediately after the Second Worldwar there is even a socialist revival, among others in Great-Britain (government Attlee) and in the Netherlands (cabinet Drees). But they are more concerned with the reconstruction than with the system-transformation. And they do not succeed in consolidating their power.
Wibaut is a member of almost all committees of the Dutch labour movement, that between 1920 and 1935 study the future social-democratic state. Therefore it is interesting to read his book Ordening der wereldproductie and to learn what he himself advocates for the socialist plans for reform. Incidentally, it is piquant, that the then young Tinbergen helps him to collect the statistical data for the book, and apparently also adds to the economic insights. It seems likely that reversely Tinbergen must have been influenced somewhat by the eminence gris of the Dutch labour movement4. Yet the two opinion leaders are separated by an ideological gap: Wibaut is still an original socialist, just like for instance Sam de Wolff, whereas Tinbergen wants to improve the world in a more gradual manner.
In ideological respect, Ordening der wereldproductie still fits in seamlessly with the other documents of the time, such as the report Nieuwe organen. The socialist revolution is unavoidable, because the capitalism can not satisfy all needs. It causes exploitation, because the appropriation of the product is individual. Notably the individual profit of the enterprises must be eliminated. Wibaut concludes from his extensive studies of cartels and trusts, that the enterprises are naturally inclined to cooperate and thus create monopolies. Thus they eliminate the competition, and subsequently can determine their own prices and profits. Moreover, the cooperation is an attempt of the enterprises to escape from the misery of the capitalist conjuncture5.
Besides, during the Great Despression since 1929 the state intervenes in the markets in a rigourous manner. This is indispensable, because due to the depression the global free trade collapses. All states try to optimize their production by means of economical protection. The result is that the structure of the national economies must be adapted radically6. The capitalist markets become extremely ordered, more than ever afterwards. Wibaut states that apparently the parliament is capable of controlling the economy. Yet he is not pleased by the developments. The protection leads to self-supply, that is to say, to autarky. This eliminates the international division of labour. However, the socialists, including Wibaut, and also large part of the middle class, believe that this division of labour contributes to the global welfare. Reversely, autarky leads to the impoverishment of all.
It has already been remarked, that according to Wibaut the desire for profit in the capitalist system will always lead to the formation of national cartels and trusts. The capitalism forces the states to order their industry and commerce in that hostile manner. But the elimination of the competition reduces the production volume, and the employment as well. So the capitalist monopolies are hurtful. Therefore the capitalism does not succeed in a rational international division of labour. There is no free formation of prices. Under those circumstances the production can be made just as well truly collective, as is proposed by socialism. In short, Wibaut pleads in favour of the socialization of the industry and commerce in all states. Next the global production can be ordered in a rational manner. This requires the establishment of an Economic World Council.
This must not be thought of rashly. The order implies that henceforth the products are made by the states with the least costs, for instance due to their natural advantages such as the climate, the condition of the soil, the raw materials, the geography etcetera. It is obvious that many production facilities must be transposed globally. This restructuring serves to remove the disproportions, and to eliminate squandering. Wibaut gives several examples of production and goods, probably suggested by Tinbergen, that illustrate the possible economies in the global production. Thus the global purchasing power can be increased, and the equilibrium between production and consumption is improved. The risk of crises diminishes. Incidentally, thanks to the ordering the speculation is eliminated.
Wibaut imagines the global order as a process of collaboration. The industrial states will transfer their knowledge to the developing states, and perhaps supply those with capital for investments. According as the welfare in the poor states increases, the industrial states enlarge the markets for their own products. Completely in accordance with the report Nieuwe organen, Wibaut wants to save on the distribution (advertising, wholesale, retail, transport). His expectations are high. Thus the markets are eliminated, and the product prices will be determined at the central level, by collective bodies. Since the demand and the supply are equilibrated, henceforth all production capacity will be utilized. The reader may understand, that the investments must also be controlled centrally. Wibaut actually advocates a planned economy, on a democratic basis.
Wibaut elaborates on his proposal. For instance, he wants to curb possible economic fluctuations by accumulating large stocks of products. The certainty of delivery takes precedence of the short-term efficiency. The accumulation of capital must continue, but on a collective foundation, so that the interest can disappear. The communal sense will dominate the individual interest. All these ideas are unusual to such an extent, that one wonders about their feasibility. Wibaut takes the voluntaristic standpoint, that it is possible, as long as the people want it. That argument evidently makes his system design more visionary than realistic. But it would be unfair to ridicule it, because nowadays indeed some of his communal bodies have been established. Besides, his plea for an international cooperation is admirable, in a time when for instance the trade unions demand a national protection.
The view of Wibaut will be discussed at the end of the column, but already now some remarks are cited from the biographies about Wibaut, namely F.M. Wibaut by Borrie and Wibaut de machtige by De Liagre Böhl7. According to Borrie (p.123), within the Labour and Socialist International (LSI) Wibaut has always pleaded for an international order, however without success. Withing the LSI the plan-idea has never become popular. De Liagre Böhl states on p.473, that Wibaut engages in wishful thinking, because in 1934 the fascism has already become dominant. On p.476 he cites a review from liberal thinkers: "[Wibaut] does not see the human reality in our world, but merely a scheme, which stifles his ideas". Yet an English translation of the book of Wibaut is published with the title A world production order, perhaps thanks to the mediation of Sidney Webb8.
The book Ordening als socialistische etappe has fallen into oblivion. Yet it is interesting, because it is the missing link in the social-democratic evolution. The author, Bas van den Tempel, is the son of the SDAP-minister Jan van den Tempel. He chooses a career as a teacher, among others at the Instituut Kuyper, established by Rudolph Kuyper. At the age of forty he yet becomes politically active for the PvdA, as an alderman in The Hague (1945-1949). Afterwards he remains a member of the city council, until 1958. He is also a member of parliament, from 1956 until 1967 (at the time double mandates were still common).
In Ordening als socialistische etappe Van den Tempel argues, that the socialization is the final goal of the social-democracy. As long as a parlementary majority is absent, the party must be content with ordering the economy. However, this will not remove the social conflicts of interest. The ordering must follow the concept in the already mentioned report Nieuwe organen. Thanks to the ordering the waste will decrease, and there will be full employment, so that the domestic product will rise. Van den Tempel advocates an rapid industrialization, because more and more workers will need to find a job there. Just like Wibaut, he expects, that the employment in the trade and in the services will decline. For, precisely those branches create waste, and a reorganization is necessary. Many of these activities can be entrusted to the state.
Van den Tempel recommends to first save in order to repair the war damage with that capital. But next the unearned incomes must be reduced, so that the wage level can rise. This will create room for a minimum wage. According as the capital stock grows, the rate of interest will fall. Therefore the households will invest less, and the state must take their place. Anyway, the socialization will reduce the private wealth. Henceforth the capital accumulation will be done by collective funds for pensions and insurances. The socialization eliminates the private monopolies, and guarantees that the general interest will be taken into account. It is clear that here Van den Tempel defends the socialist program, just like previously Wibaut.
However, he deviates slightly, because he wants to give more power to the state. It will decide with regard to the production volume, the product prices, the investments and even the wages. Those powers should not be given to the industrial councils, in the manner that is proposed in the report Nieuwe organen. For, Van den Tempel fears that the entrepreneurs will dominate the industrial councils, and that the workers, the consumers and the general interest will be heard insufficiently (see p.163). The interests of the enterprises would dominate. He does support the order according to branches, possibly combined with an increased scale by means of mergers. Thus Van den Tempel seems to advocate the state socialism, and he distances himself from the social-democratic system of councils. The danger of this choice for the Leninist model is that the bureaucracy will enjoy free play, but Van den Tempel thinks that this will turn out well.
States will more and more pursue a nationally planned economy, and this will curb the economic conjuncture. The stability increases. The international order can be restricted to a limited number of products. Here Van den Tempel apparently distances himself from the view of Wibaut. He even is an adherent of the bilateral or two-sided exchange, that has been proposed ten years before in the Plan van de Arbeid. The international deliberations should at most establish the framework for such bilateral treaties. Thanks to the two-sided exchange an equilibrated balance of payments is guaranteed. Van den Tempel believes that protection is an acceptable policy instrument. She is necessary, among others, to keep out the international conjuncture. He does not really trust the Keynesian monetary and financial policies (see p.92 and further).
Ordening als socialistische etappe can be called a realistic book, because the ideas and proposals connect well with the Dutch experiences during the Great Depression and during the war years. This pragmatism is the cause, that some elements appear, that are missing in the original social-democracy. Thus it is striking, that Van den Tempel wants to restrict the free trade and the international cooperation to a minimal level - in contrast with Wibaut. Another new element is his preference for a dominant (democratic) state. There he reinforces the proposals, which Wibaut already makes in this respect. Van den Tempel admits, that his ideology will excite much social resistance. Yet he still believes that she can be realized, when the people support her, just like Wibaut.
It has just been remarked, that Tinbergen does not empathically reject the existing economic system. Incidentally, immediately after the Second Worldwar the urgency has become less pressing, since a number of socialist institutions are realized. At the national level these are among others the Sociaal Economische Raad (in short SER) and the Centraal Planbureau (in short CPB). A start is even made with the establishment of the industrial bodies. At the international stage the agreements of Bretton Woods establish an order in the capital flows. The International Monetary Fund (in short IMF), the Worldbank and the United Nations are established, so that the visionary design of Wibaut partly becomes reality. The autarky and the trade protection are abolished in a rapid pace. This is perhaps in the spirit of Wibaut, but infringes upon the proposals in the Plan van de Arbeid.
Although Tinbergen is of the same generation as Van den Tempel, he clearly understand the importance of the international trade. Already in 1945 he writes the book International economic co-operation, which describes proposals for the international economic policy. This book may be inspired by Ordening der wereldproductie, although Tinbergen pleads more in favour of liberalization. The book is intended to be scientific, and therefore Tinbergen applies a more logical argumentation than Wibaut and Van den Tempel, who prefer ideological and moral arguments. But Tinbergen must evidently also make assumptions about the human nature, and here politics still enters the argument. Apparently Tinbergen is not completely satisfied with the book, because in 1954 he rewrites it as International economic integration.
Whereas according to Wibaut and Van den Tempel the economic competition results in a damaging struggle, Tinbergen states that she stimulates the production. In many industrial branches cartels and trusts do not appear, and even when they do form, they do not automatically result in self-enrichment9. Although he does not exclude the nationalization of enterprises, he believes that it is not a goal in itself, but merely a policy instrument for specific situations. Tinbergen argues that the optimal degree of centralization must be found, both at the national and international level, and calls this search process the international integration. The free trade leads to a division of labour on the basis of the relative effectiveness in the various states. Tinbergen states that this division of labour will appear by itself, as long as the political restrictions are removed. This will lead to the maximal welfare.
Under certain circumstances the free trade can be abandoned. For instance, sometimes first a period of adaptation is needed in order to restructure the economy. Notably emerging industries must sometimes be protected temporarily, until their size is sufficient to be able to compete effectively. Even the free-trade zones can become an obstacle for the global free trade. Then the degree of centralization is wrong. And the poorest states must sometimes first be supported, because the appropriate functioning makes certain minimal demands. Consider education and infrastructure for transport.
Incidentally, Tinbergen is not an advocate of a general liberalization and deregulation. He mentions six policy fields, where an international cooperation is desirable:
The fundamental goal of the international cooperation is the optimization of the international welfare10. To be specific, an equilibrated economic growth is pursued. The economic activity is an international interest. The regulation must guarantee, that the conflicts of interest are solved in a wise and harmonious manner. Decentralization of policy has the advantage of the largest possible freedom. But sometimes centralization creates a win-win situation, where the involved states mutually reinforce their policies, and the separate interests can be reconciled. In situations with large economic instabilities a central intervention is usually inevitable. For, the instability incites irrational and speculative behaviour on the markets.
Tinbergen pleads in favour of a decreasing economic inequality in the world, just like Wibaut. The acceleration of the transport and of the communication imply that the large differences in welfare turn into a global problem. Therefore the mobility of the production factors must increase. Tinbergen advocates an international capital fund, which can level the welfare on the basis of international solidarity. The economic integration must be accompanied by a political one. Unfortunately, the national will is still lacking. Nevertheless, progress is made with respect to several of the mentioned six policy fields. The United Nations (UN) try to order the trade in the GATT (now: World Trade Organization). The raw materials are addressed by the Food- and Agriculture Organization of the UN, and naturally by the EGKS (now: European Union).
The International Monetary Fund supervises the convertability and the rates of exchange of the currencies. Tinbergen advocates a growth- and stability-pact, so that the inflation can be curbed. In Europe this has now been realized. The Worldbank offers loans for investments, although on a too modest scale. However, the regulation of (economic) migration is hardly possible, and therefore Tinbergen prefers a policy aimed at family planning.
An inventory of the preceding reviews makes clear, that the social-democracy adapts to the public opinion. In the time of Troelstra she still wants to transform the workers into small entrepreneurs, albeit in an economy on a more rational basis. Since she canvasses for support among the common people, she defends the democracy and the universal suffrage. After the realization of the universal suffrage, she does not conquer the electoral majority, so that the movement experiences an existential crisis. The socialization of capital remains her reason for existence, although this should actually be an instrument and not a goal. Leaders like Wibaut and Van den Tempel defend this demand by pointing to the formation of cartels and trusts in capitalism. Tinbergen rightly states, that this tendency does not occur everywhere in the economy.
All SDAP reports since the First Worldwar complain about the waste in the trade and services (also financially). This shows that they grossly overestimate the utility and the importance of these branches. The social-democracy wants to establish her own state structure. In the beginning she still tries to conserve the individual entrepreneurial spirit by forming industrial councils at the top of the various branches and sectors. Here it must evidently be feared, that these councils will merely further the self-interest of the branch, and not the general interest. This aspect is underestimated in the reports Nieuwe organen and Het plan van de arbeid.
Therefore Van den Tempel and, to a lesser extent, Wibaut propose to revise the proposals, so that the state controls the entire economy. Then the production will be regulated by means of a central plan. Perhaps this is indeed the best option, but then the result is simply the planned economy of the Leninist regime. And that has performed poorly during the three quarters of a century, that she existed. This type of state socialism does not give satisfaction, because the economy becomes fossilized. It tries to solve problems by means of extra regulations and supervision, which increase the rigidity of the system, and thus create new problems. There is too much trust in the development of new scientific solutions for social problems. The expanding administration is inefficient, and suppresses the personal initiative and spirit of enterprise.
After the experience of the Leninist block of states even the detailed design by Wibaut for a global economic order must be rejected. For, it closely resembles the Leninist Comecon (council for mutual (state-)aid), which has never functioned well. The national plans turn out to be obstacles for the mutual cooperation. And De Liagre Böhl is evidently right, when he states that the general socialization has lost her credibility already during the thirties. However, it must be added, that the old socialist guard does not want to abolish it. The international bodies, desired by Wibaut, do emerge, but they have a liberal design, and rely on the markets.
It is surprising, that after the Second Worldwar Van den Tempel apparently wants to restore the socialization as the ultimate goal. His arguments in its defence do not convince. And thus it is naturally dogmatic and irresponsible to advocate such a rigorous social intervention. Tinbergen by no means gives up the socialization, but he does advocate a much lower level of ambition for the planning, the socialization, and the restructuring of the economy. In his view the private entrepreneurial production can be maintained, including competition. He formulates policy goals at the macro-economic level. Tinbergen may also give the impression of being too optimistic, while trying to make a silk purse out of a sow's ear. But yet his proposals and arguments remain within the boundaries of the reasonable - which can not be said from Wibaut and Van den Tempel.