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THE RAILWAYS AND THE STATE.∗ - William Stanley Jevons, Methods of Social Reform and Other Papers 
Methods of Social Reform and Other Papers (London: Macmillan, 1883).
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THE RAILWAYS AND THE STATE.∗
Alittle experience is worth much argument; a few facts are better than any theory; the Government manages the Post Office with success; by a great reduction of charges it has created a vast business, and earns a satisfactory revenue; the Government has purchased and successfully reorganised the telegraphs, and is making them pay; therefore the Government ought to buy the railways, and we should then have railway fares reduced to a third of their present amounts, trains very regular, and accidents few or none. Such are, briefly stated, the reflections which have led many persons to join in an agitation, lately increasing, to induce the Government to undertake the gigantic task of acquiring, reorganising, and even working the whole system of railway conveyance in this kingdom. Although many other reasons, of more or less weight, are given for the change advocated, I believe that the main argument, consciously or unconsciously relied upon, is, that because the State Post Office and State telegraphs succeed, therefore State railways would succeed.
The argument from the Post Office is, in fact, continually appealed to. In his article upon the subject in The Contemporary Review of July last, Mr. Arthur Arnold says: “I regard the work of the railways as only a magnified postal system; the carriage of men and women, of boxes and bales, differs only in degree from that of letters and packets: as to the business of the State, it is evidently as lawful to do one as to do the other” (p. 248). He says again: “I conceive it possible that some day passengers and goods may travel by railway, as letters and parcels do by post, at one uniform rate—the same whether they be going thirty miles or three hundred” (p. 254). Mr. Galt, in the preface to his prolix work upon “Railway Reform,” published in 1865, describes the results of Sir Rowland Hill's postal scheme, and then asserts distinctly: “The same principles applied with equal force to the conveyance of passengers and goods by railway, as to the conveyance of letters by mail-coach” (p. xviii.). In his recent paper, printed in The Fortnightly Review for November, he repeats the same notions: “No better illustration could be given of the result that might be anticipated from a reduction in passenger-fares than what our experience affords us during the last thirty years by the reform of our Post Office, and the reductions effected in custom and excise duties. The cases are in every respect analogous” (p. 576).
Exactly similar ideas pervade the paper of Mr. Biddulph Martin, read before the Statistical Society in June last, as well as the speeches of his supporters in the important discussion which followed. Even so profound and experienced a statistician as the president, Dr. Farr, was misled, as I think, into asserting that “the railway system may, like the Post Office, put every station in easy communication with every other station; and some future Rowland Hill may persuade Parliament to do for fares on the State railways what it has done for the postage of letters.”
I need hardly stay to demonstrate that facts are valueless unless connected and explained by a correct theory; that analogies are very dangerous grounds of inference, unless carefully founded on similar conditions; and that experience misleads if it be misinterpreted. It is the party advocating State management who indulge in argument, theory, and speculation; and it is my purpose in this Essay to show that their arguments are unsound, their theories false, and their speculations chimerical. They misinterpret experience, they assume some doubtful facts, and they overlook other unquestionable ones; they advocate a measure which is fortunately so nearly impracticable, that there is no appreciable chance of its being carried out, but which, if it really were undertaken, would probably land us in great financial loss and much embarrassment.
All reasoning, no doubt, consists in arguing from case to case: we have experience of one trial, and we infer that what happens in this case will happen in similar cases. But, before drawing any such inference, we must carefully assure ourselves that the cases really are similar. If in regard to State control the railways are similar in economic and mechanical conditions to the Post Office, we may expect them to be successfully managed by a Government department; but if, as I believe, they lie under totally different conditions, the inference would be false, and we must look to quite different experience to teach us the probable result.
In a paper read before the Manchester Statistical Society in April, 1867, as also in evidence given before the Select Committee of the House of Commons on the Electric Telegraphs Bill, in 1868, I advocated the purchase of the telegraphs, on the ground that there was substantial similarity of conditions between the telegraphs and the Post Office. There appear to be four principal conditions under which State management of any branch of industry is successful:
1. The work must be of an invariable and routine-like nature, so as to be performed according to fixed rules.
2. It must be performed under the public eye, or for the service of individuals, who will immediately detect and expose any failure or laxity.
3. There must be very little capital expenditure, so that each year's revenue and expense account shall represent, with approximate accuracy, the real commercial success of the undertaking.
4. The operations must be of such a kind, that their union under one all-extensive Government monopoly will lead to great advantage and economy.
I need hardly point out in detail that these conditions are almost perfectly fulfilled in the postal system. The public often seem to look upon the Post Office as a prodigy of administrative skill; they imagine that the officers conducting such a department must be endowed with almost superhuman powers to produce such wonderful results. Many of those officials are doubtless men of great ability and energy; nevertheless, it would be more correct to say that the great public services and the satisfactory net revenue of the Post Office are due, not to them, but to the nature of postal communication. As Adam Smith said, “the Post Office is perhaps the only mercantile project which has been successfully managed by every sort of Government.” In spite of the defects inherent in all Government management, the Post Office yields a revenue, because the economy arising from a single systematic monopoly is enormously great in this special case.
I must draw attention to one point of postal administration which is entirely overlooked by the advocates of State railways, namely, that the Post Office department has always avoided owning any extensive property. They own the buildings at St. Martin's-le-Grand and the principal offices in some other large towns; but in all the smaller towns and villages they hire accommodation, or merely pay for it in the general remuneration given to the postmasters. For the rapid and regular conveyance of the mails the Post-Office is entirely dependent upon the much-abused railway system, without which, indeed, the post, as we now have it, would be impossible. Not even the horses and vehicles employed in the local collection and distribution of bags are the property of Government, being furnished, I believe, entirely by contract. From the latest report of the Postmaster-General, we learn that the total expenditure of the Postal and Money Order Department in 1872 was £3,685,000, of which £1,682,000 was paid in salaries, wages, and pensions; £928,000 for conveyance by mail-packets and private vessels; £619,000 for conveyance by railways; £145,000 for conveyance by hired coaches, carts, and omnibuses; while only £164,000 was expended upon buildings in the possession of the Post Office, and upon the taxes, fuel, lights, etc., required in those buildings. The last item, too, was unusually large during the year 1872, owing to an exceptional expenditure of £48,000 on new buildings. On the average of the fifteen years, 1858–1872, the whole expenditure on buildings, repairs, and other requisites has not exceeded £120,000 per annum, in addition to £22,000 or £23,000 a year for mail-bags. Much of the recent expenditure on buildings must be charged, too, on the money order and savings bank business of the department.
The state of things is somewhat different in the Telegraph Department; for though telegraphic work is favourably situated as regards the first, second, and fourth conditions, it involves a considerable amount of capital expenditure. The cost of the telegraphs in the possession of the Postmaster-General already amounts to nine or ten millions, and it will probably have to be increased from time to time. The working of this department will, no doubt, afford us valuable experience in the course of ten years for judging as to the practicability of State interference in other branches of communication; but I hold that the few years yet elapsed since the purchase are insufficient to enable us to estimate the real results. A profuse expenditure of capital is still going on, and large claims against the department are still outstanding. If we must draw inferences, they will, in my opinion, be of an unfavourable character. We learn that in effecting a compulsory purchase even from four or five comparatively weak companies, a premium of about 100 per cent. must be paid by the public. Great indignation has been expressed at the prices which railway companies have to pay in the purchase of land; but equally bad cases might be found in the telegraph bargains. If the reports in the newspapers are to be trusted, the Isle of Man Telegraph Company received £16,106 for their business and property, which allowed a distribution of £11,774 to shareholders, who had paid up £5,000: so poor, however, had been the previous prospects of the company, that the shares might have been bought some years before at 5s. per £20 share, or less than the 160th part of what was obtained from Government. Generally speaking, the holders of telegraph shares received twice as much as the commercial value at which their shares had been previously rated.
In February, 1868, after the telegraph shares had some-what risen, Mr. Scudamore estimated, in his official report upon the projected purchase, that the property and business of the telegraph companies would cost, at the most, three millions, and, adding £100,000 for the intended extensions, he named £3,100,000 as the required capital of the Department at the outset. In April, 1867, before the shares had risen, I had estimated the purchase-money as not likely much to exceed two and a half millions, to which I added an equal sum for the extension of the property. The actual cost of the scheme as yet cannot be stated at less than three times Mr. Scudamore's estimate, or nearly twice my own.
If we overlook the gigantic blunders made by the Department in conducting the purchase, and pay regard merely to the subsequent financial management of the telegraphs, we find little to give us confidence. Twice has the department defied the Treasury and the House of Commons by spending money without authority—the first time to the extent of £610,000, the second time to that of £893,000; these great sums being drawn from the general balances in the hands of the department, involving a distinct breach of trust as regards the Savings Bank balance. I need hardly mention the details of these extraordinary transactions, which will be familiar to many of my readers. The public seem to have condoned these irregularities with a facility which it is difficult to account for or to acquiesce in. The newspapers said that, if we are to have State telegraphs, we must find bold energetic officers, who will manage them with independence for the good of the public, and will not allow slight difficulties to hamper them. To put forward such a plea is to condemn State control altogether. If the circumlocution inherent in the relations of the Government offices, and the slowness of action of parliamentary Government be such, that the officers of an industrial department cannot successfully carry it on without defying all superior authorities and breaking the laws under which they hold funds, this is the strongest possible objection to State industry. Such difficulties never arose in the postal work, because, as I have said, the capital expenditure is there quite inconsiderable, and the current expenditure very regular in amount, so as to be easily estimated and controlled. Now, if out of a total not yet amounting to ten millions, a Government Department has managed to spend a million and a half without authority, what may we expect if a few energetic officials hold in their hands a property, of which the very lowest valuation is six hundred millions sterling, and a far more probable valuation a thousand millions? The Treasury does not even undertake to manage its own national debt, the work of which is placed in the hands of the Bank of England. I tremble to think what might be the financial results if a property exceeding the national debt in nominal value, and requiring in every part of it constant repairs, renewals, and extensions, were in the hands of a Parliamentary Minister, who might find some day that he had been illegally and ignorantly signing away great sums of money at the bidding of his subordinates.
Coming now to the subject of railways, it must be allowed that railway communication presents some conditions favourable to State control. The larger part of the traffic can be carried on according to a prearranged and published timetable, so that the public, whether in travelling or transmitting goods, will have apparently as good means as in the Post Office of scrutinising the efficiency of the department and exposing any laxity. The union of all railways in one complete system would allow of much economy in superintendence, in the use of the rolling-stock, the avoidance of competing trains, and so forth. The public would be saved from that most annoying circumstance, the missing of a train when passing from the lines of one company to those of another. It is commonly said, too, that enormous advantages will arise to the country when the rates of passenger and goods traffic are arranged with regard to the interests of the people rather than the interests of the shareholders. The elaborate system of classified rates for goods might be done away with, and all goods carried at two or three simple rates, little above the cost of carriage. I shall have to discuss various proposals which have been made, and will now only remark that the success of the Post Office is due to principles of management often exactly the reverse of those which it is supposed that the Government would apply to the railways. Mr. Galt and others strongly object to one kind of goods being charged differently to other kinds, when the cost of conveyance cannot be very different; but the Post Office charges a penny for the lightest letter, while it conveys two ounces of printed matter for a halfpenny. The very different postal rates for books, newspapers, letters, and cards form, in fact, a tariff carefully classified so as to produce a net revenue; and unless the somewhat high rates on sealed letters were maintained this revenue would soon melt away. The Post Office does not pretend to frame its tariff from regard to the cost of the services performed.
When we look more closely into the question of railway management we find all analogy to the Post Office vanishing. Not only is the capital of vast amount, being in 1871 of a total value of £552,682,000, but this capital is represented by property of the most various and complicated nature. There is not only the permanent way, with all its bridges, viaducts, tunnels, embankments, and other works, but thousands of station-buildings of all sizes, warehouses, sheds, repairingshops, factories, offices, wharves, docks, etc. etc. The locomotive department has the charge of about 10,500 engines, needing constant care and repairs; the rolling-stock department owns about 23,000 passenger carriages, at least 276,000 waggons of various kinds, and other vehicles, making a grand total of more than 312,000, exclusive of locomotives. The railways of the United Kingdom undoubtedly form the most elaborate and extensive system of industrial property existing, and it is strange to reflect that the whole of this vast system has been produced in the last forty years by the genius of British engineers and the enterprise of British men of business. It is especially to be remarked that the property of a railway company forms a connected whole, and in order to secure safety and efficiency every department and every man must work harmoniously with every other.
Now, if we want to know how Government officers would manage such a property, we should look, not to the Post Office, which owns no property of any consequence, but to the Admiralty, which holds the dockyards and maintains a large fleet, or to the department of Public Works. Unless these departments are foully slandered, they are not remarkable for economical management. The waste and jobbery which goes on in them is one of the stock subjects of indignant oratory when Members of Parliament meet their constituents. Mr. Mellor, M.P., a member of the committee which was lately inquiring into the mode in which Government stores were purchased and sold, declined to disclose any facts known to him in that capacity, but cited some cases previously made public. Not long ago, for instance, ten or twelve tons of soldiers' buttons, which had never been taken from their wrappers, were sold as old metal. In the sale of old ships the purchaser has in numerous cases received considerably more for stores on board of the vessel returned than the amount of his purchase-money. Thus The Medway of 1,768 tons was sold at Bermuda for £2,180, but the Government repaid the lucky purchaser £4,211 for spare stores; in short, they gave away the remainder of the ship, with £2,041 in addition. Many similar stories, showing the utter want of economy in some Government departments, have, from time to time, been current, and they probably represent a very small fraction of what there might be to tell.
Let us now turn to consider the actual proposals made concerning a reorganisation of the railway system. There are two principal schemes put forward, as follows:
1. The State shall purchase the whole of the railways, and shall undertake all new works and extensions, but shall commit the working of the traffic to contracting companies, who shall lease the lines in large blocks, and manage the traffic under the superintendence of the Railway Minister.
2. The State shall not only purchase the entire aggregate of railway property, but shall itself work the traffic, in the same manner as the telegraphs are now worked under the Postmaster-General.
It is remarkable that not one of the witnesses examined before the Railway Commission, intimately acquainted as they most of them were with railway traffic, would undertake to recommend the second scheme, though several of them held that great advantages would arise from the plan of leasing the lines in groups. It is especially worthy of notice that an elaborate scheme of the first kind was put forward by Mr. Frederic Hill, of the Post Office Department, in his evidence before the Railway Commission, and it was carefully considered and advocated by his brother Sir Rowland Hill, in his separate report as a member of that Commission. Mr. Frederic Hill has further stated his views in a paper communicated to the meeting of the Social Science Association at Newcastle-upon-Tyne, when they were fully discussed. The details of the scheme are too elaborate to be described here, and must be sought in the Reports of the Commission and of the Social Science Association (p. 450). Although there is much that is valuable in the proposals of these gentlemen, few have been found to concur in their principal suggestions, and the other members of the Commission declined to accept them. What chiefly strikes me in their opinions is the very distinct way in which Sir Rowland Hill and his brother, both possessing the most intimate acquaintance with the working of the postal system, decline to recommend that the Government should itself manage the traffic. Sir Rowland says: “I do not mean to recommend that any Government Board should take upon itself, in the gross, the duty now performed by railway directors. For the direct management of the lines I propose to provide by leasing them out, in convenient groups, to companies, partnerships, or individuals, as the case may be.” Mr. Frederic Hill unequivocally asserts, “that it is expedient that the State should purchase the railways, but that it is not expedient that it should undertake their management.” While entirely accepting their opinion against Government management, I fail to perceive how their own scheme could be carried out. It involves all the difficulties attaching to the acquisition, ownership, and extension of the vast railway property, and would, at the best, only secure a portion of the advantages arising from the more thorough-going schemes. I am, therefore, inclined to acquiesce in the opinion of Mr. Martin, who remarked that the leasing scheme appeared to be “an ingeniously contrived mixture of the disadvantages of both systems, without a single redeeming advantage.”
It is difficult to see how these leasing companies would differ from the present great railway companies, except that, having sold their property to the State at a profit, they would continue to work the traffic in comparative freedom from responsibility as regards the safety of travelling, or its financial results. Let it be especially remarked, too, that such a proposal runs directly contrary to all experience derived from the Post Office, which, as already stated, confines itself to the conduct of the traffic, while depending upon contractors, especially upon railway companies and steamboat owners, for the use of all fixed property. Nevertheless, it is seriously proposed that in the case of the railways the State should purchase, construct, own, and repair the fixed property, but should leave individuals to compete for the conduct of the traffic. Perhaps the best-established empirical generalisation in political economy—Mr. Mill's opinions to the contrary notwithstanding—is, that the State is the worst of landlords; and it is now seriously proposed to make it the landlord of the whole railway system. It would surely be a much more sensible suggestion that the Government should be the leaseholder, and while leaving the permanent way and other fixed property in the hands of the present companies, under contracts to maintain and repair them as required, should confine its own work to carrying on the traffic in a manner analogous to the postal system. Even to this arrangement, however, there are insuperable objections, especially the fatal division of authority and responsibility which it would produce. Unity of management is the prime condition of efficiency and safety in so complicated a system as that of railway conveyance.
I proceed to discuss in more detail the objections to the second scheme, that the Government should both purchase and work the railways. I dismiss, as of no account, some of the evils attributed to it, as, for instance, the great patronage and political influence which it would place in the hands of the Cabinet. My objections are, that it would realise very few of the prodigious advantages anticipated from it, and that it would probably be a disastrous financial operation. It is impossible that I should find space in this Essay to explain fully the objections arising against the scheme; I must confine myself chiefly to showing that the great advantages expected to accrue from it are illusory, founded on false analogies, and generally inconsistent inter se. Government is to give us low fares, better carriages, punctual trains, universal through booking; it is to carry workmen daily to and from their work at nominal charges, to convey goods at cost price, to distribute the mails free of cost, to do away with all the differential charges which enable some companies to earn a fair dividend, while it is at the same time to reap a net revenue from railway traffic, over and above the present average dividends and interest on loans, and in due time to pay off the National Debt.
Assuming for the moment that the notion of the English Government purchasing and working the whole of the railways is conceivable, my picture of the results would be very different. In the first instance the Government would pay from 50 to 100 per cent. more than the property is commercially worth; the economy arising from unity and centralisation of management would be more than counterbalanced by the want of economy in the purchase, use, and sale of stores; the Government must either manage vast factories for making and repairing engines, carriages, and all the complicated machinery of the permanent way, or it must be continually buying by contract and selling waste stores again, with the pecuniary advantages familiar to us in the case of the Admiralty Department. In planning extensions it must stir up all kinds of local interests and intense agitation and competition, and all the struggles of the Committee-rooms would be repeated in another and perhaps a more corrupt form. In adjusting claims for compensation, whether for lands taken for extensions, for patent rights appropriated, or for personal injuries suffered, great difficulties would arise; the probability is, judging from experience in like matters before, that the landowners would get as exorbitant prices as ever, while the patentees and the unmoneyed persons would go the wall. The Post Office never pays compensation, even for the loss of registered letters, and the Telegraph Department is following the same principle in disclaiming all pecuniary liability for negligence or accident in the performance of its work. The public, though it could not enforce private claims, would expect all sorts of remissions of charges, just as it is now urging upon the Telegraph Department the reduction of charges to 6d. per message. The Railway Minister would be the rival in importance of the Chancellor of the Exchequer, and it would be impossible for him to bring forward a budget showing a satisfactory surplus without raising clamours for the remission of railway taxation, as it would be called. In the complication of the accounts the railway budget would far surpass that of the ordinary revenue and expenditure, and would deal with larger sums of money. Unless these accounts were kept in a manner very different from those of any Government Departments yet known, difficult questions about capital and current expenditure would creep in, and doubts would arise as to the real financial position of the greatest property ever put under the management of a single man. Royal Commissions and Select Committees would sit from time to time to endeavour to seek out the truth, but unless their success was much greater than that of similar bodies which have inquired into other branches of the public accounts and expenditure, they would not save the financial condition of the railways from falling into confusion. No English Government Department has ever yet, I believe, furnished a real balance sheet, showing the actual commercial results of a year's work, with allowance for capital invested, unless it be the Post Office, which, as I have said, has little or no capital expenditure to account for.
Such would be the character of the results to be expected from State purchase of the railways, judging by experience from the other branches of administration most closely analogous. It is, of course, impossible to say exactly in what degree each particular evil would manifest itself, and there would, no doubt, be some considerable national advantages to partially counterbalance the evils. What I wish more especially to show in the remainder of this Essay is, however, that the great advantages expected from Government management are of a chimerical character. The argument that men and women and trunks can be posted about like letters, is akin to that which leads a man every now and then to jump off his own house-top, because, as it is a mere question of degree, he ought, with suitable apparatus, to be able to fly like the birds.
One of the principal advantages to be gained from the State purchase of railways, in Mr. Galt's opinion, is a great reduction of fares, perhaps to a third of their present amounts. As this reduction would lead to a great increase of traffic, probably three times that at present existing, the trains would be much better filled; he even holds that, with the economical arrangements which a Government Department would adopt, this threefold traffic might be conducted with an absolutely smaller number of trains than run at present. The only point admitting of serious controversy in this scheme concerns the average number of passengers now carried in a train. An interesting discussion arose several years since in The Times upon trai nweights, and it was shown by Mr. B. Haughton, of the engineering staff of the London and North-Western Railway, that for every ton of passengers carried in a train there are twenty tons of dead and non-paying weight; even in the goods traffic the train weighs more than twice what it conveys. The question thus raised is partly one of mechanics, partly of traffic management. If safe and durable carriages of less weight could be constructed, a great saving would doubtless arise; but I see no reason whatever to suppose that a single Government office would be likely to effec timprovements in mechanical construction which all the competing, dividend-earning companies, with their talented engineers, have been unable to effect.
There only remains, then, the question of filling the present trains much more full of passengers. The average number at present carried in a train is no doubt remarkably small. In 1865 Mr. Galt stated that the average number of passengers carried by each train was 71, or, including season-ticket holders, probably about 74. Excluding, however, the summer excursion traffic, he thought that the real average of the ordinary traffic was not more than 50 per train, and the chief ground of all his plans was the suggestion that, instead of 50, an average of 150 passengers might easily be carried in each train, without any appreciable extra cost.
The advocates of low fares seem entirely to forget that a train must be provided to accommodate the maximum, rather than the minimum, number of passengers. Passenger traffic is a most fluctuating and uncertain thing; the state of the weather, the season of the year, the days of the week, the occurrence of markets, fairs, races, public meetings, holidays, excursions, and events of all kinds, affect the numbers who travel by any train, and it is not within the powers of human wisdom so to vary the capacity of the trains from day to day that there shall always be sufficient accommodation, and little to spare. The difficulty is much increased by the necessity of consulting the comfort of passengers by providing three classes of carriages, distinct compartments for smokers and non-smokers, and especially through-carriages between important towns. A train thus contains, say, from five to twelve different kinds of passengers requiring distinct accommodation, and any passengers reasonably complain if they cannot find room in the kind of carriage for which they have paid, or if they have another class of fellow-passengers thrust upon them.
If it were the custom of railway companies to aim at filling their trains, the passengers would have to be almost indiscriminately mingled together; smokers and non-smokers would have to come to terms, through-carriages would have to be abolished, and, in fact, all that renders railway travelling tolerable would have to be relinquished. Moreover, when any accidental circumstance gave rise to a pressure of traffic, many passengers would inevitably be left behind at wayside stations. Now, men and women and children are not like goods, which can be laid aside for a few hours, or a day or two, until the pressure is over. They are greatly irritated and inconvenienced when delayed a few hours, and in the case of long prearranged journeys, or business engagements, detention from the want of train accommodation would be simply intolerable. In the case of omnibus traffic the vehicles can often be filled, because the distances are small, and the passengers left behind have the alternatives of waiting a few minutes for the next omnibus, or taking a cab, or, if it comes to the worst, walking. Omnibus trains running short distances, such as those on the Metropolitan Railways, can be filled pretty well on the same system, and it is not uncommon to have to wait for the next train. Reasonable complaints are made at present concerning the unpunctuality of travelling, and occasional detention from the failure of correspondence between trains; but this is nothing to what would happen if any attempt were made to fill carriages, on an average, say three-quarters full. Cheapness of travelling is not the chief benefit of railway conveyance; we gain still more from its rapidity, safety, certainty, regularity, frequency, and comfort. Millions of journeys are made in Metropolitan Railway trains, in spite of the bad air, at a cost of 4d. or 6d. or 8d., instead of by omnibus for 2d. or 3d. or 4d., simply to save time and trouble.
In order to reduce fares in any great degree, without incurring bankruptcy, every kind of retrograde measure would have to be adopted. In place of frequent half-filled rapid trains, a small number of large, slow, crowded trains, stopping at many stations, would have to be adopted, as on many Continental railways. Frequent changes at junctions would have to be made by those travelling to great distances, and the loss in time, trouble, and temper would more than balance any gain in money. Cheapness is not everything.
One of the wildest suggestions which has been made is to the effect that uniform fares for journeys of every length should be adopted. A gentleman proposed, I believe at a meeting of the Social Science Association, that passengers should be carried any distance at the nominal cost of 1s. first class, 6d. second class, and 3d. third class. He calculated that with a moderate increase of traffic this plan would produce a net increase of revenue of several millions yearly. Why not go a little further and carry passengers, like letters, for a penny stamp? Many people appear to have got a notion that there is some magical efficacy in low uniform rates, so that they are sure to produce a great net revenue. I can imagine no grounds for the notion except the great success of Sir Rowland Hill's penny postage. I believe it is the false argument from analogy again, that, because the Post Office pays with low uniform rates, therefore telegraphs and railways must pay under similar regulations. It would be interesting to learn how many persons, who in the present day admire and discuss the results of Sir Rowland Hill's reform, have ever taken the trouble to look into the original pamphlet in which he demonstrated the practicability of a uniform penny rate. They would there discover that his scheme was founded upon a most careful and scientific investigation into the cost of collecting, conveying, and distributing letters. He showed that even when the mails were carried by coach the average cost of conveying a letter from London to Edinburgh was only a 36th part of a penny. He concludes:∗ “If, therefore, the charge for postage be made proportionate to the whole expense incurred in the receipt, transit, and delivery of the letter, and in the collection of its postage, it must be made uniformly the same from every post town to every other post town in the United Kingdom, unless it can be shown how we are to collect so small a sum as the 36th part of a penny.” He advocated a uniform rate mainly on the ground that it was more nearly proportional to cost price than any other which could be levied, the costs of collection, sorting, delivery, superintendence, etc., being by far the most important items, and being the same whatever was the distance between the points of receipt and delivery. The same considerations apply, but in a somewhat less degree, to telegraphy. It requires but little, if any, more time to send a message a longer than a shorter distance. The terminal charges for collection, the time of the operator, and that of the delivering messenger still form a large part of the whole cost; but the varying extent of the wires employed, and the number of times the message has to be re-transmitted, create some difference between the cost of different telegrams.
In railway conveyance totally different conditions exist. The larger part of the cost of conveyance is proportional to the distance travelled, arising from the consumption of fuel, the wear and tear of the rolling stock and permanent way, the wages of the engine-drivers, stokers, guards, and other persons whose time is occupied, together with the interest upon the capital invested in the property which is employed. It is only the terminal cost of station accommodation, clerks, porters, superintendence, etc., which are the same for a long and a short journey, and even these would not be the same if the passenger on a long journey had to change carriages often, requiring additional station accommodation, re-booking, assistance of porters, etc. It is quite absurd, then, to apply to railway passengers, each weighing perhaps, on an average, five thousand times as much as a letter, any arguments founded on Post Office economy.
Schemes of uniform charges are almost equally impracticable, whether the uniformity is to extend over the whole kingdom, or only over defined distances. In the former case the uniform rate must either be so high as to constitute a huge tax on locomotion over short distances, or so low as to form a great premium on long journeys, producing a vast financial loss, which would have to be borne by the people through general taxation. If the charge is to be uniform only between limits, one charge for distances under ten miles, another for all distances under fifty miles, and so on, the absurdity of the proposal is much less obvious, but the practical difficulties would be found to be insuperable. Arbitrary boundaries would have to be drawn round every large town, on passing which the fare would become much greater. Barriers, far worse than any toll-bars, would be thus erected between town and country, and between one district and another.
One very plausible argument in favour of the transfer of the railways to the State is the profit which, it is represented, may be made out of the employment of public credit. The Chancellor of the Exchequer can borrow money at about 3 ¼ per cent. per annum, whereas a railway company cannot borrow under 4 per cent., and the average return to railway investments is about 4 ½ per cent. It seems, then, that by borrowing money at 3 ¼, and employing it in a business which, even when badly managed, pays 4 ½, there would be a clear profit of 1 ¼, which, upon a property of the value of five hundred millions, would give a clear revenue of six millions and a quarter annually. Nothing, however, could be more fallacious and unsound in every respect than such suggestions.
The good credit of the English Treasury merely means that all engagements will be paid. Railway companies are obliged to borrow on higher terms, because it is not sure that they will be able to declare dividends or pay interest on debentures when due, as many people have found to their cost. Now, if a Government Department undertakes to manage the railways they are bound to pay dividends, but unless they manage better than the companies they are likely to incur losses in some part of the business, which losses must be borne by the general revenue. The apparent net revenue of six millions and a quarter represents approximately the amount of loss to be expected. If the State manages the railways just with the same degree of skill and success as the companies, there would then be no gain or loss; if better, there would be gain accruing, not from good credit, but from good management; if worse, there would be certain loss. Thus, in theory, the use of the public credit proves to be a pure fallacy, and, if it were not so, there would be no reason why the Treasury should not proceed to invest money in many kinds of industrial enterprises besides railways and telegraphs.
When we come to look into the details of the financial operations by which the transfer would have to be effected, it will be found that loss is almost certain to every body of persons except the shareholders. It is not to be supposed that any shareholder will consent to have his income reduced by the sale of his property. Thus, a person holding £10,000 in railway debenture stock, or good preference shares, paying say 4½ per cent., or £450, will require at the least such an amount of Consols as will pay the same annual income, namely, £15,000, which, at the present market price, would be worth £13,800. The operation must really involve a great loss to the State, because it gives a certain income instead of a somewhat precarious one. As a matter of fact, it can hardly be seriously supposed that railway property could be purchased at its present market value. All the ordinary stockholders would claim compensation for prospective gains, and during the discussion of the project there would be an enormous rise in the value of the shares. During the recent abortive agitation for the purchase of the Irish railways, the market price of the shares in one company rose from 8 to 37, and in other cases the rise was from 13½ to 37½, from 33 to 84, from 46 to 65, from 66 to 93, from 99 to 112, and so on.
Now, the railway shareholders of the United Kingdom are almost co-extensive with the wealthy and influential classes. Those Members of Parliament who are not actually railway directors are probably, with few exceptions, shareholders, and it cannot be expected that they would consent to any sacrifice of their legitimate interests. The actual value of such a property as the whole railway system is a matter of speculation, but whoever suffers in the transfer, we may be sure that it will not be the shareholders or debenture-holders. If we may at all judge from experience furnished by the transfer of the telegraphs, everyone interested in railway property should agitate for its purchase by the State as the surest mode of increasing his own fortune.
There is yet another fallacy committed by the advocates of State purchase. They assume that because the Government have borrowed several hundred millions of money at 3¼ per cent., therefore they can borrow six hundred or a thousand millions more at the same rate. Such an assumption is totally unwarranted, and is opposed to the undoubted laws of supply and demand. Because there is a certain demand for Consols at 92 to the amount of seven or eight hundred millions, it follows almost inevitably that there would not be a demand for double the amount at the same price. There are a certain number of investors who prefer or require perfect security. To a great extent these investors are artificially created by the laws which oblige trustees and many public institutions to invest their property in the funds. There is another portion of the funds temporarily held by bankers, insurance companies, or other companies or persons having a floating balance of money. Other large portions are held by private individuals having a traditional attachment to the Three per Cents., or whose property has always been thus invested, and has descended to them in that shape. Now, it cannot be supposed that if another National Debt, equal to that already existing, were created, it could be absorbed by the same classes of investors. The ordinary railway shareholder is a more enterprising person than the Government annuitant. He would no sooner receive his share of the New Consols, equal in capital value to double the market value of his old shares, by paying the same or rather more annual income, than he would begin to think of getting 5 per cent. for his money instead of 3¼. He would seek for home or foreign investments of somewhat the same degree of risk and profit as his old shares, and unless the funds had already fallen considerably, he would assist their downward course by selling out. The old fundholders, unless they had foreseen the course of events, and sold out in good time, would thus suffer a serious depreciation of the market value of their property, whenever they had to sell it, and it would at the same time be quite out of the question to admit any right to compensation on their part, as this would establish a right to compensation on any future occasion when the Government might need loans, and thus lower the funds. State purchase would then, as it seems to me, resolve itself into an enormous job, by which shareholders would make their fortunes at the expense of fundholders, and of operatives and other unmoneyed persons.
Coming now to perhaps the most important point of the whole discussion, I must remind the reader of the fact stated above, that the Government will gain or lose by the railways, according as it manages them better or worse than the present companies. There are a few so undoubted advantages in unity of organisation, that, if not counterbalanced by the general laxity and want of economy in the care of Government property, a profit of some millions annually would thence arise. But in order that any such profit should continue to exist, the Government must work the railways at the rates which will pay best. It must make the railways a revenue department, like the Post Office, which takes care not to render its services at cost price. But the very writers who advocate State purchase, and tempt the public with glowing pictures of the profits to be thence derived, not to speak of the ultimate redemption of the National Debt, also tempt the public by promising a reduction of fares to a third of their present amounts. Now, these things are quite incompatible. If fares were much reduced, either the public must put up with very great inconvenience and discomfort in travelling, or else all net revenue must be sacrificed, and travellers must even travel to some extent at the cost of those who stay at home. We are told that there would be a great increase of traffic, and that, therefore, there would be a great increase of profits; but this argument is a complete non-sequitur, arising probably from false analogy to the Post Office business. In these days of high prices the butcher or coal dealer who should sell his goods below cost price would doubtless have an enormous business, so long as his capital held out. The railways would be in exactly the same position, except that they could carry on the process indefinitely by supplying the deficit out of the general revenue. Few people seem ever to reflect that postal communication stands in a very peculiar financial position, so that to argue from it to other kinds of business is to commit the logical fallacy of inferring from the special to the general. Its chief peculiarity is, that an increase of work done will not occasion a proportionate increase of cost. If twice the number of letters are collected and delivered, the labour of stamping and sorting is nearly twice as great, but almost all the other expenses increase in a very minor degree. The mails are of so small a weight in general, that the cost of conveyance is but little, if at all greater: this is true, at least of the letters, though not so strictly true of the newspapers and books, which form by far the least profitable part of the postal traffic. Finally, the cost of distribution is by no means proportional to the number, because the additional letters will often be delivered at houses which the postman would in any case have visited, and it can hardly be said to be more laborious to deliver ten letters than one. When additional letters are delivered at houses previously receiving none, these houses will usually lie within the circuit of the postman, so that his labour and time in making the distribution will not be much increased. The more, too, correspondence increases, the more obvious this source of economy becomes. If every house in the kingdom received a letter every day, and there were no heavy books or other matter to load the men unduly, then as regards the mere distribution, apart from sorting, the very same postman could deliver twice as many letters with hardly any increase of cost.
In the case of the railway passenger traffic, almost everything is different. Unless the comfort and certainty of conveyance are to be reduced, double the number of passengers must have nearly double the number of carriages, locomotives, engine-drivers, guards, etc. The station accommodation must be much increased, and more porters, clerks, and servants generally must be employed. It may sometimes happen that double accommodation more than doubles the cost, because in large towns and other confined positions very costly engineering works may be required to give additional space. No doubt, when a line of rails is but little used, it may be made to do double the work, and thus pay nearly double profit. Many of the chief lines in the kingdom, however, are already so overburdened with traffic, that expensive precautions must be taken to insure safety and efficiency, and an increase in that traffic involves a constant increase both of capital and current expenditure. This is the main difficulty in railway economy at the present time, and it will continue to be so.
Now, the railway reformers declaim at the same time against the extravagant expenditure of capital by the present companies and the high rates of charges. They do not seem to see that a reduction of charges would necessitate a further great expenditure of capital. It requires the utmost skill and care in the present traffic-managers to meet the strain upon the carrying powers of their lines occasioned by the progressive natural increase of traffic, and, if all the railways were managed by a few great officials in London, they would indeed require supernatural skill to carry, say a double or treble weight of persons and goods upon the same lines with equal speed and general efficiency. Yet this is what the railway reformers really contemplate and promise.
The general conclusion at which I arrive concerning the schemes of Government purchase is, that they are absolutely impracticable, and that the time, labour, print, and paper spent upon the discussion are wasted. Before I bring this Essay to a close, however, I wish briefly to examine the grounds upon which objections are raised to our present system. I feel sure that those objections are to a great extent erroneous, and that in many points the schemes put forward would greatly aggravate such evils as are at present existing.
There can be no doubt, for instance, that the punctuality of the passenger service has in the last two or three years been gradually growing less satisfactory, and much attention has been drawn to an apparent excess of railway accidents. I should like to see complete and accurate statistics of these accidents, and compare them with the amounts of traffic, before attaching so much importance to them as has of late been attributed to them by the newspapers. But taking, for the sake of argument, the worst view of matters—to what are such unfavourable results due? There is absolutely no evidence that railway management is becoming more lax; on the contrary, it is well known that the block system, and improved methods of signalling, are being gradually applied to all the lines of the kingdom; that the main trunk lines are in some cases being doubled; that stations and other necessary works are being extended at great cost; that the wages of railway servants are in many cases being raised and hours shortened; the tendency at least is always in the direction of improvement. How, then, do the results become worse? Simply, as I think, because the ever-growing traffic is overtaking the capacity of the lines and works. The effect is felt during these years, partly owing to the general activity of trade, which increases all branches of traffic, and places money in the pockets of the people, enabling them to spend more freely in travelling, and partly owing to the introduction of thirdclass carriages into nearly all trains, which measure has amounted to a substantial reduction of fares and extension of accommodation. The simple fact is, that many parts of the railway system are already worked beyond their safe capacity. There are not a few stations where three hundred trains, or more, pass in the twenty-four hours. When waiting for a short time at some of the great junctions, such as those of Crewe, Chester, Willesden, etc., I have often wondered at the system of management by which trains are successfully loaded and despatched every few minutes, and traffic of the most complicated description is regulated almost without a hitch. But, if traffic continuously increases, there must also be a continuous increase of station accommodation, sidings, spare lines of rails, and other means of avoiding the interference of one train with others. It unfortunately happens that the reconstruction of great stations is a most costly work. The public would not be satisfied with stations outside of the towns, and the new stations are for the most part situated in the very centres of trade and city traffic, where land is enormously expensive. The London and North-Western have recently spent half a million in the enlargement of the Lime Street Station at Liverpool, and before long they will have to spend nearly as much in a thorough reconstruction of the Victoria Station at Manchester. In both towns other large and central stations are in course of construction. Of the vast expenditure upon the numerous large metropolitan stations it is hardly necessary to speak. Allowing that the cost of travelling is somewhat higher in this country than on the Continent, I hold that for what we pay we get, as a general rule, services unparalleled in excellence.
The conclusive mode of deciding, as it seems to me, whether railways are badly and oppressively managed in this country will be to inquire whether, as a matter of fact, people are deterred from travelling by railways on account of the cost and danger. Every institution must be tried by its results, and if our railways are so much worse conducted than those of other countries, the proof ought to be found in the smallness of the traffic. I do not find that any of the writers who complain about our railways have taken the trouble to ascertain the comparative numbers of railway travellers in different countries. In the time which is at my disposal for the preparation of this Essay, I have not been able to discover the number of railway passengers on the much-praised railway system of Belgium, but so far as we can judge from France the advantage is vastly on our side. I find that in 1869 there were 111,164,284 separate journeys on the French railways, which, compared with a population of about thirty-eight millions, shows that each person on an average travelled not quite three times. Now, in the United Kingdom the number of railway passengers in 1867 was 287,807,904, which compared with 30,335,000, the estimated population for that year, shows that every inhabitant of the United Kingdom travelled on the average almost nine and a half times, or more than three times as often as an inhabitant of France. The use of the railways, too, seems to be very rapidly advancing in this country; for in 1870 every inhabitant of the United Kingdom travelled on the average 10·8 times by railway, and in 1871, not less than 11·8 times. Moreover, in these calculations no account is taken of the unknown number of journeys of the holders of season and periodical tickets. Estimate it how we will, the state of the passenger traffic in this country is very satisfactory.
People are fond of pointing to the Post Office as an example of the benefits of Government administration directed solely to the promotion of the public good; but between 1858 and 1870, the total number of letters delivered in the United Kingdom rose only from 545 millions to 863 millions, or by less than 59 per cent., whereas the number of railway passengers sprung up from 139 millions in 1858 to 336 millions, an increase of 141 per cent., being considerably more than twice the rate of increase of letters. If later returns were taken the results of comparison would be still more striking, owing to the recent great increase of third-class passengers. The Postmaster-General, too, lately discovered that he had been greatly over-estimating the numbers of letters delivered, the number for 1871 being stated now at 870 millions, instead of 915 millions as in the previous report. This vast error of 45 millions of letters, one of the largest errors I have ever heard of, does not increase our confidence in the Post Office statistics, and we are not informed how many years are affected by similar errors. The result of comparison must be in any case to show that these much-abused railway companies, acting only, as it is said, for the benefit of their shareholders, have yet developed business far more than the much-praised Post Office.
Taking all circumstances into account, there can be no doubt that England and Wales are better supplied with railways than any other country in the world. The comparison is complicated by the fact that countries differ very much in the density of population, and, as truly remarked by Mr. Dudley Baxter, it is absurd to suppose that the mountainous and thinly populated districts of Wales, Scotland, and the North of England, and Ireland, could be as closely reticulated by railways as the small, flat, densely-peopled kingdom of Belgium. Now the comparison of the area, population, and length of railways in the principal States of Europe gives the following results:
We find, then, that England and Wales are better supplied with railways in the proportion of 6 to 5 when compared with Belgium, although their population is less dense in the ratio of 389 to 451. Combining these two ratios, we discover that the length of railways here exceeds by 39 per cent. that in the best supplied Continental kingdom, regard being had both to population and area. This comparison is with respect to length only; if we looked to the comparative costs of the railway systems, which more nearly measure the difficulties encountered and the accommodation offered, the contrast would be far more striking. English railways cost about two and a half times as much per mile as those of the small kingdom of Belgium.
One of the chief complaints raised against the present state of railway conveyance refers to the high rates charged both for passengers and goods on British railways. Mr. Galt stated in 1866 that a person could travel 100 miles in a firstclass carriage in Belgium for 6s. 6d., in Prussia for 13s., while in the United Kingdom it would cost 18s. 9d. The Royal Commission upon Railways carefully investigated this subject, and their conclusions only partially bear out Mr. Galt's statements. They found that the average rates of charge in the principal European countries are as in the following table, the numbers denoting in pennies, and fractions of a penny, the cost of travelling an English mile:
There can thus be no doubt that the fares are higher here than in any Continental country, and compared with Belgium the excess is considerable. But the Commissioners point out that, before we come to any safe conclusion, other circumstances must be taken into account. It is not usual to have to pay anything for luggage on British railways, whereas such charges are frequent and heavy on Continental railways. Considerable reductions are here made upon return and season tickets, which are seldom allowed abroad. It is also to be noted that the low first-class rates are often found to be delusive, as long journeys must almost of necessity be made in express trains for which the rates are higher.
We should also take into account the much greater average speed of English trains, and the much better accommodation (always excepting refreshments) offered in the English railway stations. Third-class passengers can now travel in express trains at fifty miles an hour for less than a penny a mile. In the comfort of the carriages, however, the foreign railways are before us.
Before we could really decide whether the cost of travelling in this country is excessive, we should have to compare the general cost of living here and elsewhere. If railway fares are high, it is also easy to show, indeed it is a common complaint, that the wages of operatives are high, that prices of provisions are high, that the cost of land especially is high. Except possibly in the case of the unfortunate agricultural labourers, all classes in this country are more highly paid and live at a higher rate than in other European countries, and under those circumstances it is quite to be expected that travelling should be somewhat more costly. Now, if the advocates of State purchase wanted thoroughly to establish their case, they ought to show that in spite of the higher cost of things in England, the English Government manages to carry out other branches of administration at a lower expense than other nations. But if inquiry were made into the cost at which we maintain a soldier or a sailor, it would be found that our Government pays a great deal more than any other European State. The profuse and uneconomical expenditure upon our army and fleet is a perennial source of discontent, expressed both in and out of Parliament. Some of this excess may be explained as due to exceptional circumstances in our position, but much is due to the essentially higher rates of salaries, wages, and prices in this country. Thus the late Colonel Sykes, in comparing the extent and expenditure of the English and French navies in 1865, pointed out∗ the greatly higher rates of pay and allowances to officers and men, and the greater cost of provisions and clothing in the English navy. Yet the same Government, which is always wasting money on its army and navy, is to work miracles of economical management in the vastly more extensive, complicated, and delicate system of railway conveyance!
I must say, in conclusion, that I am perfectly aware of many evils and abuses existing in our present railway system. The charges for the conveyance of goods appear to be excessive in many cases, and it is remarkable that the goods traffic has not increased in anything like the same ratio as the passenger or the mineral traffic. There can be no doubt, too, that the arbitrary manner in which companies impose high rates where they have got the traffic safe, and lower them where traffic is to be attracted, gives rise to great grievance. It certainly seems to be quite intolerable that an almost irresponsible board of directors should be able to tax a town or a district after a fashion upon which the Chancellor of the Exchequer could never venture. The rates for the carriage of parcels, too, are very excessive and arbitrary; the whole of the arrangements, indeed, for the transmission of small goods in England are in a chaotic and utterly absurd state. It is in this direction, I believe, that the next important measure of Government management ought to turn.
I do not for a moment wish to assert that any railway company has acquired such right to a monopoly that it may go on indefinitely charging the public at unreasonable rates, nor do I think it right that a company should be allowed to make excessive profits from some portions of its lines to counterbalance the loss upon other portions. My argument is to the effect that the present companies do on the whole render better services to the public than those of any other railway system which can be brought into comparison with ours, and at charges which are, when all circumstances are taken into account, as low or lower than those elsewhere existing, as proved by the great numbers who do travel by railway. But in whatever points exceptions to this favourable state of things can be shown to exist, Parliament ought to apply strong remedies. The appointment of Railway Commissioners by the recent Act is a step in the right direction. If their powers are found to be insufficient to enable them to control the companies and prevent them from inflicting injustice, then their powers must be increased until they can carry out efficiently the purposes for which they were appointed. It is by applying ourselves to devise and create a judicious system of control and reform in details, and not by chimerical schemes of Government purchase, that we may really hope to improve and cheapen railway communication in the United Kingdom.
charles dickens and evans, ceyetal palace press.
[∗]The fairs of London were for centuries places of popular enjoyment such as it was, but have been all long suppressed, on account of the riotous and dissolute proceedings which they occasioned. May Pair, now known only by the name of the fashionable spot where it existed, was suppressed in 1708; Bartholomew Fair, in spite of being occasionally presented by the grand jury as a nuisance, “next only to that of the playhouses,” lingered on until it died out about fifty years ago, being gradually suppressed by the Corporation, who bought up the property.
[∗]“Essays and Addresses, by Professors and Lecturers of Owens College, Manchester,” 1874.
[∗]“Post Office Reform; its Importance and Practicability.” By Rowland Hill. London, 1837, p. 19.
[∗.]“Journal of the Statistical Society” for March, 1866, vol. xxix. p. 61.