Nationalisation: a key demand in the socialist program

[This article is an edited version of a talk originally given to the Melbourne branch of the Democratic Socialist Perspective in August 2008.]

For all the misery it represents for ordinary people, there is at least one positive result of the current capitalist financial crisis. The idea of nationalisation is getting an airing again in the West, however squeamish bourgeois leaders and pundits may be about using the actual word. Of course, this is clearly a case of governments mobilising massive resources and taking drastic action to save bankers and speculators from the consequences of their greed but, nevertheless, there it is. And if nationalisation — state or public ownership — is allowable in this dubious instance, why not for far more deserving and urgent causes such as saving the planet and the lives and welfare of masses of working people?

The question of nationalisation is important because it is simply impossible to conceive of addressing a whole series of key problems facing us today without a major expansion of the public sector and bringing the "commanding heights" of the economy under state ownership and control. Firstly, of course, there is the overriding issue of climate change and all the things related to that — especially energy and water sustainability, food security and the preservation of workers' jobs as the economy is restructured. Then there is the struggle to preserve workers' jobs and livelihoods in the face of widespread downsizing during the economic downturn.

By way of an introduction, the reader is referred to two articles I wrote for Green Left Weekly in 1995 (issues of September 6 and October 3 — see elsewhere on this blogsite). They provide a useful overview of the whole question of privatisation and nationalisation from a socialist perspective. The political background was the 1992 election victory in Victoria of the Coalition under Jeff Kennett. His seven years in power were marked by a veritable orgy of neo-liberal restructuring and harsh attacks on working people.

Public ownership in the past

Today we are living in the period of total neo-liberal madness — madness, it should be stressed, from the point of view of society as a whole but not from the capitalist standpoint — when just about everything in sight has either been privatised or is slated for privatisation. In official circles, the idea of state enterprise is decidedly on the nose. As the wretched Victorian Labor state transport minister Lynne Kosky has notoriously said, the government is not, or should not be, in the business of running the transport system. But it wasn’t always so …

In fact, historians have dubbed the period 1850-1914 in Australia as "colonial socialism". Large-scale public activity was carried out — especially in transport, communications, water supply and sewerage systems, and immigration to boost the population. Of course, it wasn't really socialism but rather public enterprise in the service of capitalism, creating the infrastructure that private enterprise needed but couldn't effectively organise itself.

The 1930s were the culmination of this process. The 1989 Evatt Research Centre publication State of Siege (Pluto Press Australia: Leichhardt, 1989) explains:

… the 1930s provide the highwater mark in the development of public enterprise and regulations … [The labour historian Brian] Fitzpatrick described a "remarkable change" in which "systems like supervision of labour relations in industry, and the institution of public financial and industrial undertakings … the New Protection and public competition with private enterprise in production" took hold. It gave "an impression that an experiment in state control or modification of capitalism was being pursued". [p. 5]

However, the reality was that private capital never lost its control of the country's economic organisation. It accepted public economic activity in essential areas in which it could not profitably operate — the railways are the prime example here. State enterprises which didn't come under this heading were generally sold off (as were the profitable NSW government brickworks, metal quarries and pipeworks in 1936).

Neo-liberalism today

Since the early 1980s, neo-liberalism has been in the ascendant. Internationally capitalism is in a period of sharply intensifying economic competition. Everywhere it demands that social expenditures be cut to the bone and handouts and tax breaks for big business increased; and it wants to get its hands on every bit of hitherto public enterprise that it might use to turn a profit.

The first of my 1995 articles lists the five main forms of privatisation under neo-liberalism: outright sell-offs, contracting out, liberalisation and deregulation, abrogation of responsibilities, and implementation of a user-pays regime. I don’t want to spend any time on these here — I'm sure we are all familiar with many examples under each heading.

We can also dismiss without much discussion the ideological justifications for privatisation. Whatever the faults of public enterprise under capitalism — and we are far from denying them — the idea that the private sector is inherently better or more efficient is utterly ludicrous. The only real "efficiencies" of the private sector lie in slugging the public and putting its hand out for ever more government subsidies and concessions.

We oppose privatisation in all its forms. It is a massive attack on working people and our quality of life. In opposition to neo-liberalism we must advocate nationalisation, public ownership and a massive expansion of public sector on all levels (federal, state and municipal). If we are to cope with a whole series of problems we need rational, democratic social and economic planning and for this all the "commanding heights" of the economy must be in public hands.

Transitional Program

On an April 2007 edition of Aló Presidente!, the immensely popular weekly television program of Venezuelan president Hugo Chávez — "a television chatshow like no other", as the British Guardian aptly described it — he urged viewers to study Leon Trotsky's 1938 Transitional Program. We can only concur. And in the light of the current global financial crisis some passages seem especially relevant.

There is a section on advancing the demand for the nationalisation of particular sectors of the economy.

The socialist program of expropriation [writes Trotsky], i.e., of political overthrow of the bourgeoisie and liquidation of its economic domination, should in no case during the present transitional period hinder us from advancing, when the occasion warrants, the demand for the expropriation of several key branches of industry vital for national existence or of the most parasitic group of the bourgeoisie …

The difference between these demands and the muddleheaded reformist slogan of "nationalisation" lies in the following: … we reject indemnification … we call upon the masses to rely only upon their own revolutionary strength … we link up the question of expropriation with that of seizure of power by the workers and farmers.

The necessity of advancing the slogan of expropriation in the course of daily agitation in partial form, and not only in our propaganda in its more comprehensive aspects, is dictated by the fact that different branches of industry are on different levels of development, occupy a different place in the life of society, and pass through different stages of the class struggle. Only a general revolutionary upsurge of the proletariat can place the complete expropriation of the bourgeoisie on the order of the day. The task of transitional demands is to prepare the proletariat to solve this problem. [Trotsky, The Transitional Program and the Struggle for Socialism (Resistance Books: Chippendale, 1999), pp. 32-33.]

We should stress that today our language — as well as our political circumstances — is a little different. When we advocate nationalisation we can leave open the question of compensation ("indemnification"). For us this is a question of political expediency and not of principle. In Venezuela, for instance, in most cases the state has purchased the enterprises it has nationalised — of course, the government has driven a hard bargain but it has the oil wealth and this policy is probably better politics (at this point at least) than outright confiscation.

In Australia, in the event of nationalisation we would advocate full compensation to any ordinary small investors who are simply trying to augment their modest incomes. But for large corporate owners and investors our attitude to compensation would be wholly determined by political considerations. Morally, we consider that we owe them nothing. Their enterprises have been built up through the toil of the workers and slugging the public. In most cases we would be in favour of simply expropriating the big capitalists. However, in certain exceptional circumstances it might make political sense to negotiate with the former owners in order to secure their cooperation.

Following this section, Trotsky includes a separate one devoted to the nationalisation of the banks and the financial sector.

It is impossible to take a single serious step in the struggle against monopolistic despotism and capitalistic anarchy — which supplement one another in their work of destruction — if the commanding posts of banks are left in the hands of predatory capitalists. In order to create a unified system of investments and credits, along a rational plan corresponding to the interests of the entire people, it is necessary to merge all the banks into a single national institution. Only the expropriation of the private banks and the concentration of the entire credit system in the hands of the state will provide the latter with the necessary actual, i.e., material resources — and not merely paper and bureaucratic resources — for economic planning. [ibid., p. 33]

How well this reads today! Rather than bailouts of the criminals responsible for the financial crisis, "merge all the banks into a single national institution" and "create a unified system of investments and credits, along a rational plan corresponding to the interests of the entire people". Use the truly immense resources suddenly revealed by the government response to the crisis to tackle global warming, keep people in their homes and provide everyone with decent jobs.

Of course, we are keenly aware that, ultimately, only the installation of a workers government based on the mobilisation of the working class and its allies can solve the problems of society. But the nationalisation demand points to what is necessary and is a key part of the struggle to get there.

Objections and problems

When the question of public ownership and nationalisation is raised, we often encounter various objections.

1. People might say, under capitalism what is the real difference between private and public ownership? For instance, look at the truly appalling Australia Post. It is run like a private corporation. Profitability and service to big business is its main concern; it has a whole raft of obscenely overpaid executives; in an effort to undermine the union and cut costs, it is engaged in a continuous assault on its work force; and through aggressive contracting out it is slowly privatising the whole service. (And, we might add, our post offices more and more resemble flea markets: as one waits in the inescapable queue one can peruse the merchandise bins offering André Rieu CDs or various dinky gadgets …)

Is this the sort of thing we want? Clearly not. We advocate something radically different. We want public enterprises to be run as genuine public utilities — public service and workers rights should go hand in hand. Public enterprises should be run democratically, controlled by boards representing both the community and the workforce. The corporate bludgers should be cleaned out; managers should be elected and receive workers wages with only modest margins for skill and responsibility.

2. Another argument is that the public doesn't relate to the idea of public ownership and nationalisation. However, this proposition is not borne out by the facts.

Firstly, look at the struggle in NSW: there the public massively opposes the sell-off of the power industry. Whatever the problems of the state-owned power industry — and there are a lot of them — people realise that privatisation will only make things radically worse.

Secondly, as the crisis deepens a lot more people will relate to calls for nationalisation and public ownership. Right now, lots of workers don’t relate to many things that we believe are objectively necessary. Our struggle is to get a hearing for our ideas.

Thirdly, as mentioned above, the intervention of capitalist governments around the world to prop up their system has been in sharp contradiction to their ideology of yesterday. The market wasn't left to sink or swim. In the US and the UK the government has taken over certain financial institutions lock, stock and barrel, i.e., it has nationalised them, whatever spin it tries to put on this fact. Thus, it seems, nationalisation is not only not impossible but even desirable in some instances.

Finally, the stirring events in Venezuela and Latin America will penetrate people's consciousness. In several countries there, with strong popular support, the state is resuming key entities and sectors of the economy. (Recently, for instance, the Chávez government announced it would nationalise the wholesale petrol distribution sector, saying it was making profits at the country's expense.)

3. In regard to nationalisation, in Australia we sometimes hear the cry that it is against the constitution. This is simply not true. There is no absolute prohibition, either on a federal or state level. (I'll say a little more about this later in relation to the bank nationalisation struggle of 1947-49.) But as Marxists we know that fundamentally it is not a question of what is written on a bit of paper — it is a question of the class struggle. With sufficient public support and mobilisation and sufficient political will and determination, a government can do just about anything. New laws can be passed, the composition of courts can be changed, etc., etc.

4. Another argument we may hear is that it won't or can't happen under capitalism. Again, this is ill-founded. The truth is that in the advanced capitalist countries, at particular times in particular circumstances, nationalisations have taken place. In Britain, for example, the iron and steel industry was nationalised in 1949 by the reforming postwar Labour government, the Tories denationalised it in 1951 and Labour re-nationalised it in 1967. Today, it is in private hands again. And as a result of the financial crisis the UK and US governments find themselves owning a number of key financial entities.

A lot of things we call for won't happen or are extremely unlikely to happen under capitalism. Alternatively, they might happen. But so what? The key thing is consciousness and the struggle. Fighting — and winning — on the question of public ownership can help to educate people about what is required and drive the struggle forward.

Chifley's effort to nationalise the banks

I would like now to look briefly at the struggle around bank nationalisation in Australia in 1947-49. We can learn a lot from a study of this largely forgotten episode.

Nationalisation of banking had been in the ALP platform since 1919 and it was one of the clearly stated “methods” of implementing the party's 1921 objective of "the socialisation of industry, production, distribution and exchange". During World War II, the banking sector had been stringently regulated. Chifley wanted to maintain a high level of control of the financial sector in the postwar period in order to underwrite the peacetime reconstruction effort.

Two federal bills passed in 1945 effectively continued the wartime banking regulations. Among other things they directed state and local governments and semi-government bodies to do all their business with the Commonwealth Bank. (This was then the state-owned central bank, there being no Reserve Bank.) In August 1947 the Melbourne City Council secured a High Court judgement ruling this provision invalid. Chifley concluded that other aspects of his regime of financial controls were at risk of being overturned in the courts and that nationalisation of the private banks was the only way to guarantee his program.

Robin Gollan, in his 1975 book Revolutionaries and Reformists (Allen and Unwin: Sydney, 1975), explains the significance of this chapter in Australian history:

The attempt [by the Chifley federal ALP government] to nationalise the trading banks was the strongest attempt ever made by an Australian government to control directly an important area of the capitalist economy. The issue, connected though it was with many others, dominated politics for more than two years, from August 1947 to the general elections late in 1949. In the course of the battle the conservative forces were more effectively organised for political action than they had ever been before or have ever been, or needed to be, since. [p. 222]

The government's announcement (in August 1947) touched off a veritable firestorm of opposition from the banks and the Menzies-led Liberal Party. They went all-out to kill the legislation. A.L. May, in his 1968 study, The Battle for the Banks (Sydney University Press: Sydney, 1968), gives a feel for this:

Some idea of the language used to describe the proposal by its opponents in comments, resolutions, letters, and editorials is gained from a published "sample" of adjectives used in the Sydney Morning Herald between 18-23 August [i.e., in the week immediately following the government’s announcement] …

Sensational, radical, unprecedented, spleenful, Red, revolutionary, dishonest, communistic, ill-considered, terrible, irresponsible, ruthless, authoritarian, totalitarian, unauthorised, insidious, subversive, disturbing, drastic, stupid, astonishing, tragic, iniquitous, impudent, arbitrary, violent, destructive, contemptible, mad, ominous, calamitous, audacious, illegal, sinister, servile, predatory, venomous, extremist, unwarranted, scandalous, unscrupulous, unjustified, undemocratic, unsound, doctrinaire, unconstitutional, putrid, appalling, tyrannical, anti-democratic, unnecessary, provocative, ill-conceived, dangerous, vindictive, shocking, deplorable, cynical, savage, wanton, petty. [pp. 35-36]

The banks organised on a truly tremendous scale. As Robin Gollan explains:

For two years Australians were subjected to the most intense, highly organised, highly financed, and unscrupulous propaganda campaign they had ever experienced. At first it was against nationalisation of the banks, but this by easy stages became an all-out attack on the government. It was a struggle, as they put it, in defence of freedom, against a government determined to regiment and dictate. The parliamentary opposition took the lead in public, but numerous citizens' organisations lent their support and helped with propaganda and money. The banks themselves appointed a general staff of senior officers and a small army of bank officials who became full-time political activists, supported by a larger contingent who gave part-time service. [Gollan, p. 228]

It is worth pointing out that the bank workers — "bank officers", as they were called — were overwhelmingly onside with the bank bosses and opposed to nationalisation. Being a bank employee was seen as a secure lifelong career path. In Sydney in September 1947 a bank officers meeting in the Domain protesting nationalisation attracted 10,000 people.

Against this right-wing barrage there was a only a very weak response by the ALP and the trade union movement. There were a number of reasons for this. Firstly, Chifley seems to have had no idea of what he was entering into. He did not want to challenge capitalism. He actually had quite modest objectives and blundered into nationalisation which the capitalists saw as a fundamental attack on all they held sacred. He was totally incapable of responding to what he had unwittingly unleashed.

Secondly, the Cold War was beginning and anticommunism was growing rapidly. The ALP-led trade unions were reluctant to campaign in a full-blooded way on an issue widely seen as a key Communist Party demand. Likewise, the growing Catholic Action "Industrial Groups" section in the trade unions, although nominally in favour of nationalisation, would have nothing to do with communists on any basis.

The issue was tested in the High Court in 1948 and before the London-based Privy Council in 1949, with the government suffering defeat in both cases. However, even in strictly legal terms, it is by no means clear that these judgements mean that any future nationalisation attempt will be automatically ruled out of order.

In the event, these setbacks plus the decisive victory of the Menzies-led Coalition in the 1949 elections buried the idea of bank nationalisation.

Then and now

Looking over the bank nationalisation struggle of the late 1940s from today's vantage point is very instructive. If there were a full-blooded attempt by a radical-minded government to nationalise the banks and the financial sector today, the bosses would be politically in a qualitatively weaker position. It would be impossible for them to simply replicate their 1947-49 Red-scare campaign. Conversely, any campaign for public ownership that was reasonably and resolutely led would seem to have a good chance of success or at least of winning substantial popular support.

For instance, would bank workers rally behind their employers as they did in 1947-49? It seems highly unlikely. Today they are a casualised, insecure, badly paid workforce. The prospect of permanent, secure, well-paid jobs with decent conditions in a universal state-owned bank would surely be very attractive to them.

Just look at the banks' anti-nationalisation advertisement from 1949 (reproduced here). How things have changed in 60 years! Today they simply couldn’t run this crap without being laughed out of town. Today banks mean casualised staff, queues, branch closures, being forced to transact your business at a hole in the wall out in the street and outrageous fees and charges, forever increasing. In some small rural towns there is no bank and people have to travel for 50km to find one. The big banks are widely hated.

Imagine — in today’s conditions — a massive all-out campaign for folding all the banks (and other financial institutions) into a single state bank, backed by a pledge to open branches in every locality and town, enable customers to interact with real people, cut the outrageous fees, provide cheap housing finance for ordinary people and provide permanent jobs for all finance sector workers — surely such a push would win overwhelming public support. The banks, we can be sure, would resist bitterly but amongst ordinary people they don’t have many friends.

Nationalise the entire energy sector

In New South Wales 2008 has seen a big campaign against the state ALP government's push to privatise the power industry. Polls have repeatedly shown over 80% of the public are opposed to the sell-off. The workers in the industry are opposed and the consuming public is opposed. ALP conferences have overwhelmingly opposed the privatisation. People understand that privatisation will mean higher electricity charges, a worse service and even less action on climate change. But a narrow clique of Labor cabinet ministers, responding to the insistent demands of their ruling-class masters, are determined to have their way on the issue, come what may.

In Victoria, the electricity sector used to be run by the State Electricity Commission. The SEC had many faults but at least the state's electricity system was an integrated whole — embracing generation, distribution and supply. The sell-off, it is important to note, did not begin with Kennett and the Coalition but with the ALP. In 1991 the Kirner Labor government sold 49% of the huge Loy Yang B power station. It also corporatised the SEC, preparing it for privatisation. After coming to power at the end of 1992, Kennett sold off the rest of the state's electricity assets.

Privatisation of the power industry in Victoria has long been a bipartisan policy. Campaigning for re-election, Labor refused to make any promise to renationalise the electricity sector (or indeed to reverse any of Kennett’s cuts in any fundamental way). Then, in 2005 the Bracks ALP government re-licensed the decrepit, heavily polluting — but privately owned — Hazelwood power station for a further 25 emission-spewing years.

Grappling with climate change (trying to halt and reverse it, coping with the inescapable consequences) is the number-one issue facing humanity in the 21st century. (There are other issues but this is the absolutely decisive one. If we don't solve it most of the human race will perish.) Making the "big switch" to renewable energy necessitates a radical plan and a complete restructuring of our economy. This cannot be done with the bulk of the economy in the hands of the profit-mad capitalist corporations.

At an absolute minimum, the whole energy sector must be placed in public hands. Its foundation charter must be to achieve a rapid phasing out of the fossil fuel-fired power stations; build up the renewable energy sector; and achieve a radical improvement in energy efficiency across the whole economy. Furthermore, all this has to be done on an all-out emergency basis. Only a strong public sector can possibly achieve this and achieve the redistribution of the workforce, preserving jobs and living standards and thus securing strong public backing for the necessary changes.

Public ownership key to job protection &: creation

The recent wave of factory closures, especially in Victoria, has led to significant job losses in the manufacturing sector. The looming recession will also lead to significant downsizing across the whole economy.

Decent redundancy agreements, protection of entitlements, retraining packages and special assistance in finding new work — these are all vitally important things to fight for. But what about protecting jobs in the first place and charting a course to create large numbers of new jobs?

Government handouts to big business won't save workers. The bosses will happily take the money but they have no commitment to their employees — only to themselves and their big shareholders.

In our opinion, calls to raise tariffs to protect workers' jobs are also misplaced. Such taxes on imported goods increase their cost to consumers but offer no guarantees to workers who remain vulnerable to losing their jobs due to new technology or the company relocating offshore where labor is cheaper. Corporations recognise only one imperative — to make profits for their big shareholders.

In the face of the escalating jobs losses, the Victorian ALP government has been accused by the union movement of not having an industry plan. However, although they won't be admitting to it in public any time soon, the Labor Party state government — and the Liberal opposition, for that matter — does have an industry plan. It's a very clear and simple one. Premier John Brumby and his gang intend to keep shovelling taxpayers' money to the big end of town, no matter what — through outright handouts, tax breaks and a host of concessions. This won't do anything to save workers’ jobs but it will keep the bosses happy.

Workers and trade unions need a totally different approach. Working people are not responsible for the problems of the capitalist economy. We want decent jobs, security, health and safety, and the futures of ourselves and our families protected — no matter what. The so-called "free market" can't and won't do this — irrespective of how many handouts the corporations are given.

Only a revitalised and massively expanded public sector can create the hundreds of thousands of permanent, well-paid, secure jobs that are needed to give work to all who need it. If the bosses want to close a factory or if it's really going broke, it should be taken into public ownership, reorganised and put to producing socially necessary things.

Conclusion

The nationalisation demand is not a panacea. It is one element in our transitional program, but an extremely important one for the times in which we live. Used intelligently, it can play an important role in the struggle. It is impossible to put forward effective solutions to the many problems we face without incorporating this demand into our program of struggle.