In addition to the advisory committees, there has been in one country after another, a movement in recent years, to set up central economic councils and to confer on these bodies’ advisory functions.
It is a way of integrating the economic life of the nation and the government takes the initiative of securing the cooperation of associations of labourers, professional men, farmers, manufacturers, traders, bankers, in fact, all major interests concerned in the act of production, and consults them in formulating policies of legislation or administration.
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Economic councils, therefore, aim to achieve the ideal of national industrial planning within the framework of the capitalist society.
A capitalist economy is the very negation of planned economy. It permits and emphasises economic freedom and the economic activities are the result of independent decisions arrived at by a multitude of persons.
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There is no coordination and the owners of land, labour, capital and organising ability are free to use their factors of production as they please and dispose of their earnings as they wish.
This incoherent pursuit of economic activities is responsible for many economic and political ills and the device of economic councils aims to remove that incoherency in order to maximise the interests of the society as a whole.
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The mechanism of modem roundabout production is highly complex and delicate. The producers in one industry are consumers of other industries. The separate trades are one another’s customers.
So intimately related are the many units in productive machinery that a boom or depression in one tends always to produce a boom or depression in others. This is supplemented by another fact.
The workers in one industry are the consumers of the products of their fellow workers engaged in another industry. Distress and depression in one industry consequently creates a vicious circle and there is depression all-round.
Just as depression in one industry tends to spread to others, so also prosperity in one industry spurs others to greater efforts. There is, therefore, synchronism of depression or prosperity, because bad times and good times in various industries synchronies or occur approximately at the same time.
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No factor of production can, thus, act in isolation. So the urgent need is to coordinate and regulate different and independent economic activities by setting up national economic councils jointly representing labour organisations, associations of industrial employers, chambers of commerce, professional associations, agricultural, banking and insurance groups and consumers’ societies.
The object of these councils is to assist the Ministry in planning economic legislation and to help Parliament in its consideration of such measures as the council may deem necessary and advantageous for the interests of the nation.
It may, accordingly, sponsor a large number of comprehensive investigations in problems like unemployment, housing, industrial organisation, labour relations, international trade and so on and these investigations may become the basis for subsequent legislation. Economic councils are, in every country, now regarded as a valuable aid in the formulation of national policy in economic matters.
It must, however, be remembered that their functions are essentially investigatory and advisory. They have no legislative functions and no power to make laws. They simply provide “the regular political authorities with vocational representative bodies whose research work and counsel can be of considerable value.”
In Germany, the Weimar Constitution of 1919 provided for the setting up of a national economic council and it came into being in 1920. It had a membership of 326 persons arranged in 10 occupational groups. These groups were represented according to their respective economic and social importance.
The council did not possess the power of legislation, but the Constitution required that important social and economic measures proposed by the Ministry should be submitted to it for its opinion before being introduced in Parliament.
The council was also empowered to introduce such measures on its own initiative and to have its proposals and views presented to the Reichstag, whether or not the Ministry assented to them.
Composed as it was of the representatives of important classes and interests of society, who were experts in their respective spheres, the National Economic Council of Germany was sufficiently capable of furnishing the legislature with/expert advice and keeping it informed of the legislative needs of the various interests which it represented.
In the first ten years of its existence, the Council “rendered useful service in considering proposed economic and social legislation, initiating occupational measures for parliamentary consideration, and giving the legislative authorities the benefit of its presumably expert advice.”
In several other States economic councils have been set up or provided by the Constitution. The Constitutions of Yugoslavia, Poland and Danzig, all provided for the establishment of such councils to assist their legislatures in making laws in respect of economic and social problems. More or less similar councils were also established in Italy, Spain and Portugal.
In France, too, a national council was set up by decree in 1925. In 1936, the council was enlarged and given a permanent statutory basis.
Its general assembly consisted of over a hundred members representing the consumers, the labouring classes, the agriculture, the commerce, employers’ associations, the educationists, the bankers, a small group of expert economists, etc. The Prime Minister was the ex-officio President of the Council.
The statutory functions of this body were to investigate national economic problems, and to advise the government thereon. All bills of an economic character, when introduced in Parliament, were to be forthwith submitted by the Ministry of the National Economic Council.
All decrees, if they had economic implications, were to be submitted to it. “In addition, the ministry may submit any economic question to it for study, and the same may be done by any parliamentary committee. Or the council may take up any economic problem and submit recommendations on its own initiative.”
Any Plan or any bill dealing with a Plan, of an economic and social character was submitted to it for its advice. The recommendations of the council were made to the Prime Minister, but its reports were to be laid before Parliament.
The British Economic Council consists of twenty persons. The Prime Minister is the ex-officio Chairman. The Chancellor of the Exchequer and three other Ministers are its ex-officio members.
It also includes such other Ministers as the Prime Minister may name and varying representatives of business, cooperative, trade union, scientific and other interests. “On the whole,” says Ogg, “the council’s usefulness has not yet been demonstrated convincingly.”
Recently, a further consultative device has been operated by the Board of Trade in the shape of “working parties.” The functions of these bodies are to examine the organisation of the main consumer’s goods industries and their methods of production and distribution, and to make recommendations for increasing efficiency.
In each “working party” one-third of the members belong to the employers, one-third go to the Trade Unions, and one-third are independent members nominated by the President of the Board of Trade. The President of the Board has also nominated an independent chairman.
“It has become plainer and plainer,” says G.D.H. Cole, “to those who have watched the operation of the economic councils in Germany and other countries that bodies which are based on the balancing of forces between the representatives of employers and workers are incapable of any real constructive achievement.”
The interests of the employers and the employees are essentially conflicting, and there is very little hope to reconcile them under the existing economic structure of society.
The result is that economic councils in all the countries where they exist have shown no sign of any independent initiative leading towards a reconstruction of the industrial system. The powers of these councils are merely investigatory and advisory.
They have been given far too little authority to achieve any considerable result. Moreover, in most cases their membership has not been such as to stimulate confidence and hope that they are likely to develop into satisfactory planning bodies.
“They have been constituted by too little of experts and too much of representatives of conflicting industrial interests, and their members have been, for the most part, far more intent on preserving the structure of the capitalism and preventing the growth of Socialist enterprise than on developing any coherent national industrial plan.” But Cole’s plea is for vocational representation which has hardly found favour in any country.
Referring to the National Economic Council of Germany, Laski had said that its power of initiating measures in parliament “tends to lead it to multiply suggestions for legislation without having the responsibility to carry them into effect.” It entailed upon Ministers a serious burden of extra labour.
“The need to appear and speak before it, the knowledge that its activity is always encroaching upon the margin of the Reichstag’s competence, the satisfaction of its immeasurable appetite for documents and information, are rather a hindrance than a help to the channels of administration proper.”