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I began this book to the tune of German bombs, and I begin this second chapter in the added racket of the barrage. The yellow gun-flashes are lighting the sky, the splinters are rattling on the housetops, and London Bridge is falling down, falling down, falling down. Anyone able to read a map knows that we are in deadly danger. I do not mean that we are beaten or need be beaten. Almost certainly the outcome depends on our own will. But at this moment we are in the soup, full fathom five, and we have been brought there by follies which we are still committing and which will drown us altogether if we do not mend our ways quickly.

What this war has demonstrated is that private capitalism—that is, an economic system in which land, factories, mines and transport are owned privately and operated solely for profit—does not work. It cannot deliver the goods. This fact had been known to millions of people for years past, but nothing ever came of it, because there was no real urge from below to alter the system, and those at the top had trained themselves to be impenetrably stupid on just this point. Argument and propaganda got one nowhere. The lords of property simply sat on their bottoms and proclaimed that all was for the best. Hitler's conquest of Europe, however, was a physical debunking of capitalism. War, for all its evil, is at any rate an unanswerable test of strength, like a try-your-grip machine. Great strength returns the penny, and there is no way of faking the result.

When the nautical screw was first invented, there was a controversy that lasted for years as to whether screw-steamers or paddle-steamers were better. The paddle-steamers, like all obsolete things, had their champions, who supported them by ingenious arguments. Finally, however, a distinguished admiral tied a screw-steamer and a paddle-steamer of equal horsepower stern to stern and set their engines running. That settled the question once and for all. And it was something similar that happened on the fields of Norway and of Flanders. Once and for all it was proved that a planned economy is stronger than a planless one. But it is necessary here to give some kind of definition to those much-abused words, Socialism and Fascism.

Socialism is usually defined as 'common ownership of the means of production'. Crudely: the State, representing the whole nation, owns everything, and everyone is a State employee. This does not mean that people are stripped of private possessions such as clothes and furniture, but it does mean that all productive goods, such as land, mines, ships and machinery, are the property of the State. The State is the sole large-scale producer. It is not certain that Socialism is in all ways superior to capitalism, but it is certain that, unlike capitalism, it can solve the problems of production and consumption. At normal times a capitalist economy can never consume all that it produces, so that there is always a wasted surplus (wheat burned in furnaces, herrings dumped back into the sea etc. etc.) and always unemployment. In time of war, on the other hand, it has difficulty in producing all that it needs, because nothing is produced unless someone sees his way to making a profit out of it.

In a Socialist economy these problems do not exist. The State simply calculates what goods will be needed and does its best to produce them. Production is only limited by the amount of labour and raw materials. Money, for internal purposes, ceases to be a mysterious all-powerful thing and becomes a sort of coupon or ration-ticket, issued in sufficient quantities to buy up such consumption goods as may be available at the moment.

However, it has become clear in the last few years that 'common ownership of the means of production' is not in itself a sufficient definition of Socialism. One must also add the following: approximate equality of incomes (it need be no more than approximate), political democracy, and abolition of all hereditary privilege, especially in education. These are simply the necessary safeguards against the reappearance of a class-system. Centralized ownership has very little meaning unless the mass of the people are living roughly upon an equal level, and have some kind of control over the government. 'The State' may come to mean no more than a self-elected political party, and oligarchy and privilege can return, based on power rather than on money.

But what then is Fascism?

Fascism, at any rate the German version, is a form of capitalism that borrows from Socialism just such features as will make it efficient for war purposes. Internally, Germany has a good deal in common with a Socialist state. Ownership has never been abolished, there are still capitalists and workers, and—this is the important point, and the real reason why rich men all over the world tend to sympathize with Fascism—generally speaking the same people are capitalists and the same people workers as before the Nazi revolution. But at the same time the State, which is simply the Nazi Party, is in control of everything. It controls investment, raw materials, rates of interest, working hours, wages. The factory owner still owns his factory, but he is for practical purposes reduced to the status of a manager. Everyone is in effect a State employee, though the salaries vary very greatly. The mere efficiency of such a system, the elimination of waste and obstruction, is obvious. In seven years it has built up the most powerful war machine the world has ever seen.

But the idea underlying Fascism is irreconcilably different from that which underlies Socialism. Socialism aims, ultimately, at a world-state of free and equal human beings. It takes the equality of human rights for granted. Nazism assumes just the opposite. The driving force behind the Nazi movement is the belief in human inequality, the superiority of Germans to all other races, the right of Germany to rule the world. Outside the German Reich it does not recognize any obligations. Eminent Nazi professors have 'proved' over and over again that only nordic man is fully human, have even mooted the idea that non-nordic peoples (such as ourselves) can interbreed with gorillas! Therefore, while a species of war-Socialism exists within the German state, its attitude towards conquered nations is frankly that of an exploiter. The function of the Czechs, Poles, French, etc. is simply to produce such goods as Germany may need, and get in return just as little as will keep them from open rebellion. If we are conquered, our job will probably be to manufacture weapons for Hitler's forthcoming wars with Russia and America. The Nazis aim, in effect, at setting up a kind of caste system, with four main castes corresponding rather closely to those of the Hindu religion. At the top comes the Nazi party, second come the mass of the German people, third come the conquered European populations. Fourth and last are to come the coloured peoples, the 'semi-apes' as Hitler calls them, who are to be reduced quite openly to slavery.

However horrible this system may seem to us, it works. It works because it is a planned system geared to a definite purpose, world-conquest, and not allowing any private interest, either of capitalist or worker, to stand in its way. British capitalism does not work, because it is a competitive system in which private profit is and must be the main objective. It is a system in which all the forces are pulling in opposite directions and the interests of the individual are as often as not totally opposed to those of the State.

All through the critical years British capitalism, with its immense industrial plant and its unrivalled supply of skilled labour, was unequal to the strain of preparing for war. To prepare for war on the modern scale you have got to divert the greater part of your national income to armaments, which means cutting down on consumption goods. A bombing plane, for instance, is equivalent in price to fifty small motor cars, or eight thousand pairs of silk stockings, or a million loaves of bread. Clearly you can't have many bombing planes without lowering the national standard of life. It is guns or butter, as Marshal Goering remarked. But in Chamberlain's England the transition could not be made. The rich would not face the necessary taxation, and while the rich are still visibly rich it is not possible to tax the poor very heavily either. Moreover, so long as profit was the main object the manufacturer had no incentive to change over from consumption goods to armaments. A businessman's first duty is to his shareholders. Perhaps England needs tanks, but perhaps it pays better to manufacture motor cars. To prevent war material from reaching the enemy is common sense, but to sell in the highest market is a business duty. Right at the end of August 1939 the British dealers were tumbling over one another in their eagerness to sell Germany tin, rubber, copper and shellac—and this in the clear, certain knowledge that war was going to break out in a week or two. It was about as sensible as selling somebody a razor to cut your throat with. But it was 'good business'.

And now look at the results. After 1934 it was known that Germany was rearming. After 1936 everyone with eyes in his head knew that war was coming. After Munich it was merely a question of how soon the war would begin. In September 1939 war broke out. Eight months later it was discovered that, so far as equipment went, the British army was barely beyond the standard of 1918. We saw our soldiers fighting their way desperately to the coast, with one aeroplane against three, with rifles against tanks, with bayonets against tommy-guns. There were not even enough revolvers to supply all the officers. After a year of war the regular army was still short of 300,000 tin hats. There had even, previously, been a shortage of uniforms—this in one of the greatest woollen-goods producing countries in the world!

What had happened was that the whole moneyed class, unwilling to face a change in their way of life, had shut their eyes to the nature of Fascism and modern war. And false optimism was fed to the general public by the gutter press, which lives on its advertisements and is therefore interested in keeping trade conditions normal. Year after year the Beaverbrook press assured us in huge headlines that THERE WILL BE NO WAR, and as late as the beginning of 1939 Lord Rothermere was describing Hitler as 'a great gentleman'. And while England in the moment of disaster proved to be short of every war material except ships, it is not recorded that there was any shortage of motor cars, fur coats, gramophones, lipstick, chocolates or silk stockings. And dare anyone pretend that the same tug-of-war between private profit and public necessity is not still continuing? England fights for her life, but business must fight for profits. You can hardly open a newspaper without seeing the two contradictory processes happening side by side. On the very same page you will find the Government urging you to save and the seller of some useless luxury urging you to spend. Lend to Defence, but Guinness is Good for You. Buy a Spitfire, but also buy Haig and Haig, Pond's Face Cream and Black Magic Chocolates.

But one thing gives hope—the visible swing in public opinion. If we can survive this war, the defeat in Flanders will turn out to have been one of the great turning-points in English history. In that spectacular disaster the working class, the middle class and even a section of the business community could see the utter rottenness of private capitalism. Before that the case against capitalism had never been proved. Russia, the only definitely Socialist country, was backward and far away. All criticism broke itself against the rat-trap faces of bankers and the brassy laughter of stockbrokers. Socialism? Ha! ha! ha! Where's the money to come from? Ha! ha! ha! The lords of property were firm in their seats, and they knew it. But after the French collapse there came something that could not be laughed away, something that neither cheque-books nor policemen were any use against—the bombing. Zweee—BOOM! What's that? Oh, only a bomb on the Stock Exchange. Zweee—BOOM! Another acre of somebody's valuable slum-property gone west. Hitler will at any rate go down in history as the man who made the City of London laugh on the wrong side of its face. For the first time in their lives the comfortable were uncomfortable, the professional optimists had to admit that there was something wrong. It was a great step forward. From that time onwards the ghastly job of trying to convince artificially stupefied people that a planned economy might be better than a free-for-all in which the worst man wins—that job will never be quite so ghastly again.