The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• Translator's Note
• Where and Why Public Ownership Has Failed
• Book I: Public and Private Trading Operations
• Chapter I: Two Precepts
• Chapter II: The Three Mainsprings of Human Action
• Chapter III: Determining Motives of Private As Against Public Enterprises
• Chapter IV: Government and Municipal Trading Operations
• Book II: Financial Results of Government and Municipal Ownership
• Chapter I: Bookkeeping In State and Municipal Trading Enterprises
• Chapter II: The Belgian State Railroads
• Chapter III: Prussian Railroads
• Chapter IV: State Railways of Austria and Hungary
• Chapter V: Italian Railways
• Chapter VII: Railways of New Zealand
• Chapter VIII: Government Railroads In France
• Chapter IX: Public Vs. Private Operation
• Chapter X: The Holy Cities of Municipal Operation
• Chapter XI: Operation of Gas and Electricity In the United Kingdom
• Chapter XII: Tramways In Great Britain
• Chapter XIII: Housing of the Working Classes and Public Ownership In Great Britain
• Chapter XIV: Housing of the Working Classes On the Continent
• Chapter XV: Government Control of Food Supplies
• Chapter XVI: Victims of Government Ownership
• Chapter XVII: Charges, Debts and Credit
• Chapter XVIII: Fictitious Profits
• Chapter XIX: Fiscal Monopolies
• Chapter XX: The Alcohol Monopoly In Switzerland and Russia
• Chapter XXI: Financial Disorder
• Chapter XXII: The Purchase Price
• Chapter XXIII: Delusions of Profit and the Life Insurance Monopoly In Italy
• Chapter XXIV: The Fiscal Mines of the Saar District
• Chapter XXV: Public Versus Private Enterprise
• Book III: Administrative Results
• Chapter I: Administrative Results
• Chapter II: The Safety of Travelers Upon State and Private Railway Lines
• Chapter III: Disorders, Delays and Errors
• Chapter IV: Official Conservatism
• Chapter V: Labor
• Chapter VI: The Consumer
• Chapter VII: Programs of Organization and Regulation
• Book IV: Political and Social Consequences of Public Operation
• Chapter I: Socialist Programs and the Facts
• Chapter II: Bluff
• Chapter III: Results of Experience
• Chapter IV: The State a Dishonest Man
• Chapter V: Corruption
• Chapter VI: Nationalization of Public Utilities and the Foundation of Great Fortunes
• Chapter VII: Disintegrating Character of Public Operation
• Appendix %u201ca%u201d: Alcoholism In Russia
• Appendix %u201cb%u201d: the Financial Year In Australia
• Appendix %u201cc%u201d: the Shortcomings of the Telephone In England

THE MACMILLAN COMPANY
new york · boston · chicago
dallas · atlanta · san francisco

MACMILLAN & CO., Limited
london · bombay · calcutta
melbourne

THE MACMILLAN CO. OF CANADA, Ltd.
toronto

PREFACE

The chief difficulty in preparing this book has been to make a coherent arrangement of the material, as the various sources from which it has been gathered are more or less incomplete. Indeed the obstacles in the way of presenting a true picture of industrial enterprises, as operated by states and local governments, can scarcely be exaggerated.

The partisans of government and municipal ownership of every species of public utility have assumed a distinctive title. They call themselves representatives of the movement for direct operation (Représentants de la Régie Directe). Their leader in France is Edgard Milhaud, occupying the chair of Political Economy at the University of Geneva, where he makes a special point of emphasizing Socialism.1 In a little periodical, entitled Annales de la Régie Directe, he presents the case for all government and municipal undertakings, although his enthusiasm frequently receives cruel setbacks, as in the suicide of the Mayor of Elbeuf. He has also published several articles for the purpose of demonstrating that accidents are much less frequent upon government railways than upon the lines of private companies. We shall see later (Book 3, Chapter 2) the value of these attempts to justify his creed, and we may judge from them the importance that is to be attached to his other statements.

For the academic year 1911–1912, L'École des Hautes Études Sociales organized a series of conferences on the subject of public operation under the direction of M. Milhaud. It was considered advisable that at the close of this series a dissenting voice should be heard—a rôle ultimately assigned to me. In addition to ten preceding lectures, wherein the whole theory and practice of Socialism had been set forth, M. Milhaud was to speak for forty minutes, after which I was to be allotted forty in which to refute the points previously developed by him during 640 minutes. Then we were both to be allowed twenty minutes in order to sum up our arguments. I had at least the satisfaction of knowing that L'Humanité1 attached sufficient importance to this conference to announce that for several days before it was to take place entrance tickets would be reserved for “comrades”; under which conditions it was not difficult to foresee that the hall would be converted into a public assembly room.

His audience, thus prepared and won over, naturally gave M. Milhaud an enthusiastic welcome. However, despite some murmurs, it proved itself not unwilling to allow me to oppose my facts to his statements.

I borrow from the report of the discussion, as published in L'Humanité, November 14, 1911, the following résumé of the argument of M. Milhaud:

“Private monopoly, seeking nothing but maximum profit, is far more costly than public monopoly, which is not bound by the same conditions. Money costs public enterprises less, and, therefore, they can amortize their debt and thus reduce general expenses. On the other hand, heavier expenses for labor can be supported by public undertakings. The management of a public enterprise can even hope for profit, and all this can be accomplished within less rigid limits than those which necessarily confine private monopoly.

Milhaud concluded by outlining the tendency of public enterprises to become administrative autonomies. In order that they may escape pernicious bureaucratic influences, they are being transformed into separate commercial entities. Through increased control by the consumer, on the one hand, and by labor on the other, they are being gradually but completely socialized.

Through reduction in prices, these enterprises create larger bodies of consumers, and they also bring about more flexible relations between employers and employed. The representatives of collectivism, individual consumers and producers, may thus unite in behalf of social progress.”

When we come to examine the assertions of the propagandists of public operation, we perceive that they are of no better quality than any other Socialist theories; but the assured manner with which these statements are declared succeeds in disturbing and intimidating many people. Yet, in the elections of 1910, Paul Forsans, President of La Société des Intérêts Économiques, was able to organize a vigorous campaign against an alcohol and insurance monopoly.

French Socialists, unable to appeal to the experience of the Western (state) railroad, or the experience of the town of Elbeuf, say: “Very good, but in Prussia the state railways are altogether satisfactory, and, in all the important cities of Great Britain, Municipal Socialism is enjoying a veritable triumph.”

Such partisans quote the testimony of public departments, never weary of boasting of their own successful administration, and of municipalities which, inspired by local pride, declare that they have accomplished miracles. But how can we accept these prejudiced certificates of good conduct until we have been privileged to make a detailed inventory?

There is a crying need at the present time for collections of precise facts, which shall show the vanity and “bluff” of Socialist programs, and such facts must be placed before the public. My sole object in writing this book has been to present just such a compilation of rigidly investigated, authentic facts and figures regarding public ownership and operation. If I have not been able to affirm that government and municipal undertakings are efficient the fault is not mine. I have not found them so.

A well-known American, Arthur Hadley, President of Yale University, says, in his book entitled Economics:

“The advantages of intervention on the part of a government are visible and tangible facts: The evil that results from such intervention is much more indirect and can only be appreciated after close and intensive study.”

I have vainly sought for the benefit arising from public operation by states and municipalities. On the contrary an unbiassed survey of the whole subject forces me to testify to the resulting harm.

Y. G.

November, 1912.

For the American edition the facts and figures herein set forth have been brought up to date—June, 1913.

[1]See La Démocratie Socialiste Allemande, Paris, F. Alcan.

[1]The organ of the Socialist propaganda.