Front Page Titles (by Subject) ON THE ANALOGY BETWEEN THE POST OFFICE, TELEGRAPHS, AND OTHER SYSTEMS OF CONVEYANCE OF THE UNITED KINGDOM, AS REGARDS GOVERNMENT CONTROL.∗ - Methods of Social Reform and Other Papers
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ON THE ANALOGY BETWEEN THE POST OFFICE, TELEGRAPHS, AND OTHER SYSTEMS OF CONVEYANCE OF THE UNITED KINGDOM, AS REGARDS GOVERNMENT CONTROL.∗ - William Stanley Jevons, Methods of Social Reform and Other Papers 
Methods of Social Reform and Other Papers (London: Macmillan, 1883).
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ON THE ANALOGY BETWEEN THE POST OFFICE, TELEGRAPHS, AND OTHER SYSTEMS OF CONVEYANCE OF THE UNITED KINGDOM, AS REGARDS GOVERNMENT CONTROL.∗
It has been freely suggested of late years, that great public advantage would arise from the purchase and re-organisation of the electric telegraphs and railways of the United Kingdom by the Government. So inestimable indeed, are the benefits which the Post Office, as reformed by Sir Rowland Hill, confers upon all classes of society, that there is a great tendency to desire the application of a similar reform and state organisation to other systems of conveyance. It is assumed, by most of those who discuss this subject, that there is a close similarity between the Post Office, telegraphs, and railways, and that what has answered so admirably in one case will be productive of similar results in other parallel cases. Without adopting any foregone conclusion, it is my desire in this short paper to inquire into the existence and grounds of this assumed analogy, and to make such a general comparison of the conditions and requirements of each branch of conveyance, as will enable us to judge securely of the expediency of state control in each case.
It is obvious that I cannot, in the time at my disposal, take more than a simple and restricted view of the subject. I cannot, on the one hand, consider all the difficulties that arise from the partial monopolies possessed by private companies at present, nor can I, on the other hand, take into account all the social or political results connected with an extension of Government management.
Much difference of opinion arises, even in a purely economical point of view, upon the question of the limits of State interference. My own strong opinion is that no abstract principle, and no absolute rule, can guide us in determining what kinds of industrial enterprise the State should undertake, and what it should not. State management and monopoly have most indisputable advantages; private commercial enterprise and responsibility have still more unquestionable advantages. The two are directly antagonistic. Nothing but experience and argument from experience can in most cases determine whether the community will be best served by its collective state action, or by trusting to private self-interest.
On the one hand, it is but too sure that some of the state manufacturing establishments, especially the dockyards, form the very types of incompetent and wasteful expenditure. They are the running sores of the country, draining away our financial power. It is evident too that the House of Commons is at present quite incapable of controlling the expenditure of the dockyards. And as these establishments are never subjected to the test of commercial solvency, as they do not furnish intelligible accounts of current expenditure and work done, much less favour us with any account or allowance for capital expenditure, we have no security whatever that the work is done cheaply. And the worst point is, that even if Government establishments of this kind are efficiently conducted when new and while the public attention is on them, we have no security that this state of things will continue.
To other Government establishments, however, the Post Office presents a singular and at first sight an unaccountable contrast. Instead of Mr. Dickens's picture of the Circumlocution Office, we are here presented with a body of secretaries and postmasters alive to every breath of public opinion or private complaint; officials laboriously correcting the blunders and returning the property of careless letter-writers; and clerks, sorters, and postmen working to their utmost that the public may be served expeditiously. No one ever charges the Post Office with lavish expenditure and inefficient performance of duties.
It seems then that the extremes of efficiency and inefficiency meet in the public service, and before we undertake any new branch of State industry, it becomes very important to ascertain whether it is of a kind likely to fall into the efficient or inefficient class of undertakings. Before we give our adhesion to systems of State telegraphs and State railways in this kingdom, we should closely inquire whether telegraphs and railways have more analogy to the Post Office or to the dockyards. This argument from analogy is freely used by everyone. It is the argument of the so-called Reformers, who urge that if we treat the telegraphs and the railways as Sir Rowland Hill treated the Post Office, reducing fares to a low and uniform rate, we shall reap the same gratifying results. But this will depend upon whether the analogy is correct—whether the telegraphs and railways resemble the Post Office in those conditions which render the latter highly successful in the hands of Government, and enable a low uniform rate to be adopted. To this point the following remarks are directed.
It seems to me that State management possesses advantages under the following conditions:
1. Where numberless wide-spread operations can only be efficiently connected, united, and co-ordinated, in a single, all extensive Government system.
2. Where the operations possess an invariable routine-like character.
3. Where they are performed under the public eye or for the service of individuals, who will immediately detect and expose any failure or laxity.
4. Where there is but little capital expenditure, so that each year's revenue and expense account shall represent, with sufficient accuracy, the real commercial conditions of the department.
It is apparent that all these conditions are combined in the highest perfection in the Post Office. It is a vast co-ordinated system, such as no private capitalists could maintain, unless, indeed, they were in undisputed possession of the field by virtue of a Government monopoly. The forwarding of letters is a purely routine and equable operation. Not a letter can be mislaid but someone will become aware of it, and by the published tables of mail departures and arrivals the public is enabled accurately to check the performance of the system.
Its capital expenditure, too, is insignificant compared with its current expenditure. Like other Government departments, indeed, the Post Office does not favour us with any statement of the capital value of its buildings, fittings, etc. But in the Post Office accounts, we have a statement of the annual cost of buildings and repairs, together with rents, rates, taxes, fuel, and lights. In the last ten years (1856–65) the expense has varied from £39,730 in 1864 to £106,478 in 1859, and the average yearly expense has been £72,486, which bears a very inconsiderable ratio to £1,303,064, the average cost of the Post Office staff during the same years. Compared with £2,871,729, the average complete expenditure of the Post Office during the last ten years, the cost of the fixed property of the department is quite inconsiderable. This very favourable state of things is due to the fact that all the conveyances of the Post Office system are furnished by contract, while it is only the large central offices that are owned by Government.
Before proceeding to consider the other systems of conveyance, I must notice that the Post Office in reality is neither a commercial nor a philanthropic establishment, but simply one of the revenue departments of the Government. It very rightly insists, that no country post office shall be established unless the correspondence passing through it shall warrant the increased expense and it maintains a tariff which has no accordance whatever with the cost of conveyance. Books, newspapers, and even unsealed manuscripts, can be sent up to the weight of 4 oz. for a penny; whereas, if a sealed letter in the least exceeds ½ oz. it is charged 2d. It is obvious that the charges of the Post Office are for the most part a purely arbitrary system of taxes, designed to maintain the large net revenue of the Post Office, now amounting to a million and a half sterling.
It will thus be apparent that Sir Rowland Hill's scheme of postal tariff consisted in substituting one arbitrary system of charges for a system more arbitrary and onerous. This was effected by a sacrifice, at the time, of about one million sterling of revenue; but it must be distinctly remembered that it was net revenue only which was sacrificed, and not commercial loss which was incurred.
A telegraph system appears to me to possess the characteristics which favour unity and State management almost in as high a degree as the Post Office. If this be so, great advantages will undoubtedly be attained by the purchase of the telegraphs and their union, under the direction of the Post Office department.
It is obvious in the first place that the public will be able, and in fact obliged, constantly to test the efficiency of the proposed Government telegraphs, as they now test the efficiency of the Post Office. The least delay or inaccuracy in the transmission of messages will become known, and will be made the ground of complaint. The work, too, of receiving, transmitting, and delivering messages, is for the most part of an entirely routine nature, as in the case of the Post Office. The only exception to this consists perhaps in the special arrangements which will be needed for the transmission of intelligence and reports to the newspapers.
It is hardly necessary to point out, in the second place, that a single Government telegraph system will possess great advantages from its unity, economy, and comprehensive character. Instead of two or three companies with parallel conterminous wires, and different sets of costly city stations, we shall have a single set of stations; and the very same wires, when aggregated into one body, will admit of more convenient arrangements, and more economical employment. The greater the number of messages sent through a given office, the more regularly and economically may the work of transmission and delivery be performed in general.
Furthermore, great advantages will arise from an intimate connection between the telegraphs and the Post Office. In the country districts the telegraph office can readily be placed in the Post Office, and the postmaster can, for a moderate remuneration, be induced to act as telegraph clerk, just as small railway stations serve as telegraphic offices at present, the station-master or clerk being the operator. A great number of new offices could thus be opened, without any considerable expenses for rent or attendance. The Government, in short, could profitably extend its wires where any one of several competing companies would not be induced to go.
In all the larger towns the cost of special delivery may perhaps be removed by throwing the telegrams into the ordinary postal delivery. It is understood that a scheme for the junction of the telegraphic and postal system has been elaborated by the authorities of the Post Office, partly on the model of the Belgian service; and it has been asserted that the scheme would comprehend some sort of periodical deliveries. In the great business centres, at least, very frequent periodical deliveries could be made. For the services of a special messenger an extra charge might be imposed. Prepayment of all ordinary charges by stamps would greatly facilitate the whole of the arrangements; and it has been suggested that where there is no telegraph office, a prepaid telegram might be deposited in the nearest post office or letter box, and forwarded by the mail service to the nearest telegraph office, as is the practice in Belgium. It is evident that the number of telegrams will be increased, as the facility for their dispatch, by the united system of posts and telegraphs, is greater.
A low and perhaps uniform tariff would complete the advantages of such a system. It is supposed, indeed, that it would not be prudent at first to attempt a lower uniform rate than one shilling for 20 words; but it is difficult to see how a uniform rate of this amount can be enforced, when the London District Telegraph Company for many years transmitted messages for sixpence, or even fourpence.
The question here arises, how far the telegraphs resemble the Post Office in the financial principles which should govern the tariff. The trouble of writing a telegraphic message of 20 words is so slight, that the trouble of conveying it to a telegraph office and the cost of transmission form the only impediments to a greatly increased use of this means of communication. The trouble of despatching a message will undoubtedly be much decreased in most localities by the Government scheme, and if the charge were also decreased, we might expect an increase of communications almost comparable with that of the Post Office under similar circumstances. Even a shilling rate is prohibitory to all but commercial and necessary communications, the post office being a sufficient resource, where the urgency is not immediate. Accordingly it is found that a reduction of charges increases the use of the telegraphs very much. In the Paris telegraphs a reduction of the charge from one franc to half a franc has multiplied the business tenfold.
The experience gained too, in the reduction of the telegraphic rates in Belgium, on the 1st of December, 1865, is very important as to this point. When in 1865 the uniform rate was I franc for 20 words, the number of internal messages was 332,721, producing (with the double charge on the telegrams exceeding 20 words) 345,289 francs. In 1866, the number of internal messages was 692,536, or more than twice as many, producing 407,532 francs, the increase of receipts being 18 per cent. It is true that the working expenses were considerably increased at the same time, so that the net profits of the whole establishment fell from 204,940 francs to 122,112 francs. This loss of net revenue is partly attributed to the extension of the telegraphs to the remote villages. And it is probable that in future years the net profits will be to some extent recovered.
But it must be allowed that the working expense of the electric telegraph is its weak point. The London District Telegraph Company have not succeeded in paying dividends, although their low charges brought plenty of business. The French lines are worked at a considerable loss to the Government. Belgium is a country of very small area, which decreases the expense of the telegraphs, and yet the reduction of rate has caused a sacrifice of net revenue only partially made up by the higher profits upon international messages in transit.
It is quite apparent that the telegraphs are less favourably situated than the Post Office as regards the cost of transmission. Two letters are as easily carried and delivered at one house as a single letter, and it is certain that the expenses of the Post Office do not increase in anything like the same ratio as the work it performs. Thus while the total postal revenue has increased from £3,035,954, in 1856, to £4,423,608, in 1865, or by 46 per cent., representing a great increase of work done, the total cost of the service has risen only from £2,438,732, in 1856, to £2,941,086 in 1865, or by 21 per cent. In the case of the telegraphs, however, two messages with delivery by special messenger cause just twice the trouble of one message. The Post Office, by periodical deliveries, may reduce the cost of delivery on its own principles, but it cannot apply these principles to the actual operations of telegraphy; it cannot send a hundred messages at the same cost, and in the same time as one, like it can send one hundred letters in a bag almost as easily as one letter. It is true that the rapidity of transmission of messages through a wire can be greatly increased by the use of Bain's telegraph, or any of the numerous instruments in which the signals are made by a perforated slip of paper, or a set of type prepared beforehand. But these inventions economise the wires only, not the labour of the operators, since it takes as much time and labour to set up the message in type or perforated paper as to transmit it direct by the common instrument. Economy is to be found, rather, in some simple rapid instrument of direct transmission, like the Acoustic telegraph, than in any elaborate mechanical method of signalling. There is no reason, as far as we can see at present, to suppose that a Government department will realise any extraordinary economy in the actual business of transmission. The number of instruments and the number of operators must be increased in something like the same proportion as the messages. And as every mile of wire, too, costs a definite sum to construct and maintain in repair, it follows that, strictly speaking, the cost of transmission of each message consists of a certain uniform terminal cost, with a second small charge for wires and electricity, proportional to the distance.
It will be apparent, from these considerations, that we must not rashly apply to the telegraphs the principles so admirably set forth by Sir Rowland Hill, in his celebrated pamphlet on the Post Office. When the financial conditions of the telegraphs are in many points so different from those of the Post Office, we cannot possibly look for any reduction of charges to such an extent as he proposed in the case of the Post Office. Whatever reduction may be found possible will arise rather from adventitious points in the scheme—the economy in office accommodation, the aid of the Post Office in delivery, and so forth.
Under these circumstances it would doubtless be prudent not to attempt any great reduction of charges at first, and if we might eventually hope for a sixpenny rate for 20 words, it is certainly the lowest that we have any grounds at present for anticipating. And though uniformity of charge is very convenient, it must be understood that it is founded on convenience only, and it seems to me quite open to question whether complete uniformity is expedient in the case of the telegraphs.
So far, we have, on the whole, found the telegraph highly suitable for Government organisation. The only further requisite condition is that, as in the Post Office, no great amount of property should be placed in the care of Government officials. If experience is to be our guide, it must be allowed that any large Government property will be mismanaged, and that no proper commercial accounts will be rendered of the amount due to interest, repairs, and depreciation of such property. It is desirable that a Government department should not require a capital account at all, which may be either from the capital stock being inconsiderable in amount, or from its being out of the hands and care of Government officials. Now, this condition can fortunately be observed in the telegraph system. The total fixed capital of the telegraph companies at present existing is of but small amount. I find the paid up capital of the five companies concerned to be as follows:
The above statement includes, I believe, all the actual working public telegraphs within the United Kingdom, except those which the London, Brighton, and South Coast, and the South Eastern Railway Companies maintain for public use upon their lines. With the value of these I am not acquainted.
Omitting the Private Telegraph Company, as it is not likely to be included in the Government purchase, and having regard to the premium which the shares of the Electric and International Company obtain in the market, and the greater or less depreciation of other companies' shares, I conceive that the complete purchase money of the existing telegraphs would not much exceed two and a half millions sterling.
To allow for the improvement of the present telegraphs, and their extension to many villages, which do not at present possess a telegraph station, an equal sum of two and a half millions will probably be ample allowance for the present. The total capital cost of the telegraphs will, indeed, exceed many times the value of the property actually in the hands of the Post Office, but then we must remember that the latter is but a very small part of the capital by which the business of the Post Office is carried on. The railways, steamboats, mail coaches, and an indefinite number of hired vehicles, form the apparatus of the postal conveyance, which is all furnished by contract, at a total cost, in 1865, of £1,516,142. The property concerned in the service of the Post Office is, in fact, gigantic, but it is happily removed from the care and ownership of Government. Now, this condition, fortunately, can be observed in the Government telegraphs.
The construction and maintenance of telegraph wires and instruments is most peculiarly suitable for performance by contract. The staff who construct and repair the wires and instruments, are quite distinct from those who use them, and there need be no direct communication or unity of organisation between the two. Just as a railway company engages to furnish the Post Office with a mail train at the required hour each day, so it will be easy for a contractor to furnish and maintain a wire between any two given points. And it is obvious that the cost of a wire or instrument, and even the charge for the supply of electricity, can be so easily determined and are so little liable to variation that scarcely any opportunity will arise for fraud or mismanagement.
There is a company already existing, called the Telegraph Construction and Maintenance Company, which is chiefly engaged in laying submarine telegraphs, a work of far more hazardous character, but which it has carried on successfully and profitably. And it is certain that if it were thought desirable, some body of capitalists would be found ready to construct, hold, and maintain in repair the whole apparatus required in the Government telegraph service, at fixed moderate charges. Thus would be preserved in completeness those conditions under which the Post Office has worked with such pre-eminent success.
It can hardly be doubted then that if the electric telegraphs of this kingdom were purchased by the Government, and placed in the hands of a branch of the Post Office department, to be managed in partial union with the letter post, and under the same conditions of efficiency and economy, very gratifying results would be attained, and no loss incurred. But, inasmuch as the analogy of the telegraphs and Post Office fails in a very important point, that of the expense of transmission, we should guard against exaggerated expectations, and should not press for any such reduction of rates as would land us in a financial loss, not justified by any economical principles.
It might fairly be hoped that the Post Office department would be able to extend its wires to a multitude of post towns and villages which have not offered sufficient inducements to the present telegraph companies. The number of telegraph stations in the United Kingdom in 1865 was 1,882, whereas there were in that year 3,454 money order offices, and as many as 16,246 receptacles for letters, under the care of the Post Office. The number of private telegraphic messages in 1865 was 4,650,231, which bears but a small ratio (1 in 155) to the number of letters in that year, viz., 720,467,007. It is stated that in Belgium the telegrams are 1 in 73 of the letters, and in Switzerland 1 in 69. This disproportion is the less to be wondered at when we consider, that the telegraphs are only available in this country to those who dwell in large towns or near railway stations. No less than 89 towns of more than 2,000 inhabitants are said to be without telegraph offices, and among these Cricklade has 37,000 inhabitants, Gateshead 33,000, Oldbury 16,000, Pembroke 15,000, Dukinfield 15,000. I find that in the whole of the United Kingdom there is on an average one telegraph station to 16,500 persons; whereas there is stated to be one for every 15,000 in Belgium, and one for every 10,000 in Switzerland. It is well known that in the United States especially, the use of the electric telegraph is much more general than in this country. These facts seem to show that the policy of the existing companies has not led to that extensive use of the telegraph in which we ought to have been foremost. These companies are satisfied if they can pay a good dividend on a limited amount of capital, which they avoid increasing to any considerable extent. They have ceased to compete one against another, but are able to prevent any attempts to bring new capital into the field. Under these circumstances it cannot be doubted that the Government should immediately carry out the scheme which we have been considering for the purchase and reorganisation of the telegraphs.
Some persons might possibly be opposed to this extension of Government interference and patronage, as being not so much in itself undesirable, as likely to lead to a greater and more hazardous enterprise—the purchase and reorganisation of the railways.
It is well known that opinions have been freely expressed and discussed in favour of extending Government management to the whole railway property of the United Kingdom. I should not like to say that this should never be done, and there are doubtless anomalies and hardships in the present state of our railway system, which demand legislative remedy. But, after studying Mr. Galt's work on railway reform and attending to much that has been current on the subject, I am yet inclined to think that the actual working of our railways by a Government department is altogether out of the question, while our English Government service remains what it is.
The advantages which might be derived from a single united administration of all the railways are doubtless somewhat analogous to those we derive from the Post Office, but in most other respects the analogy fails completely and fatally. Railway traffic cannot be managed by pure routine like that of the mails. It is fluctuating and uncertain, dependent upon the seasons of the year, the demands of the locality, or events of an accidental character. Incessant watchfulness, alacrity, and freedom from official routine are required on the part of a traffic manager, who shall always be ready to meet the public wants.
The moment we consider the vast capital concerned in railways, and the intricacy of the mechanism and arrangements required to conduct the traffic, we must see the danger of management by a department of the English Government. The paid-up capital of the railways of the United Kingdom, including the outstanding debenture loans, amounted in 1865 to £455,478,143; whereas the current working expenses of the year were only £17,149,073, or 3¾ per cent. of the capital cost. More than half the receipts, or 52 per cent., go to pay a very moderate dividend of about 4½ per cent. (4.46 per cent. in 1865) on the enormous capital involved. The railways are altogether contrary in condition then to the Post Office, where the capital expense was quite inconsiderable compared with the current expense. And I think I am justified in saying, that until the English Government returns reliable accounts of the commercial results of the dockyards, and other manufacturing establishments, and shows that they are economically conducted, it cannot be entrusted with the vast and various property of the railways.
It has been suggested indeed, that a Government department would conduct the traffic of the railways by contract; but I am unable to see how this could be safely done. The care of the permanent way might perhaps be thus provided for, though not so easily as in the case of telegraph wires. But the other branches of railway service are so numerous and so dependent upon each other, that they must be under one administration. As to the proposal to break the railways up into sections, and commit each to the management of a contractor, it seems to me to destroy in great part the advantages of unity of management, and to sacrifice much that is admirable in the present organisation of our great companies. I am far from regarding our present railway system as perfect; but its conditions and requirements seem to me so entirely contrary to those of the Post Office, that I must regard most of the arguments hitherto adduced in favour of State management as misleading.
I may add that should a Government system of telegraphs prove successful, and should the public desire to extend state management still further, there is a most important and profitable field for its employment in the conveyance of parcels and light goods. Prussia possesses a complete system of parcel posts, and the Scandinavian kingdoms, Switzerland, and possibly other continental countries, have something of the sort. In this country the railways collect, convey, and often deliver parcels for high and arbitrary charges; a number of parcels companies compete with the railways and with each other. An almost infinite number of local carriers circulate through the suburban and country roads, in an entirely unorganised manner. The want of organisation is remedied to a slight extent by the practice of passing parcels from one carrier to another, in a haphazard sort of way, but at each step the parcel incurs a new, uncertain, and generally large charge. A vast loss of efficiency is incurred on the one hand by the parallel deliveries of a number of companies in each town, and on the other hand by the disconnected services of the private carriers. A Government system of conveyance, formed on the model of the Post Office, collecting, conveying, and distributing parcels and light goods, by one united and all-extensive system, at fixed and well-known charges, and carrying out this work by contract with the railways and with the owners of the carriers' carts in all parts of town and country, would confer vast benefits on the community, and at the same time contribute a handsome addition to the revenue. It would tend to introduce immense economy and efficiency into the retail trade of the kingdom, bringing the remotest country resident into communication with the best city shops. It would lighten the work of the Post Office, by taking off the less profitable and more weighty book parcels; and it would, in many ways, form the natural complement to our telegraph, postal, and money-order system. But a scheme of this sort is of course entirely prospective; and it seems to me sufficient at present for the Government and Parliament to consider whether the reasons brought forward by various individuals and public bodies throughout the country in favour of a Government system of telegraph communications are not sufficient to warrant an immediate execution of the plan.
11th June, 1867.
In the original paper as read before the Society, a scheme for a Government Parcel Post was more fully considered and advocated, but as there seemed no immediate prospect of such a scheme being discussed, the part of the paper containing it was abbreviated before printing. It now appears, however, that the Railway Commissioners in their Report, which has lately been published (dated 7th May), propose that the Railways should combine by aid of the Clearing House to form a consolidated system of parcel conveyance. Sir Rowland Hill on the other hand, in his separate Report, advocates a small parcel post at a uniform rate, to be conducted by the present machinery of the Post Office, such as had, it appears, been proposed by Mr. E. J. Page in his evidence. It appears to me more plain than ever that however great the advantages of such minor schemes, they should be considered only as preliminary to a general organisation for the conveyance of light goods (say up to 100 lb.) throughout the United Kingdom; in fact to a system of Parcel Posts almost co-extensive with the present Letter Post. I believe that it is almost impossible at present to conceive the advantages that would flow from the cheapness, ease, and certainty of transmission attainable in such a system.
[∗]Read at the Manchester Statistical Society, April 10th, 1867.