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

CHAPTER IV

STATE RAILWAYS OF AUSTRIA AND HUNGARY

1. The policy of Austria in regard to the railways has undergone many variations. In 1850 the government owned 61.38 per cent. of the railway lines. In 1855, however, imitating the example of France, which came to terms with the important companies, and, having need of resources, it sold its railways. Hence in 1860 it owned not more than 0.44 per cent., and in 1870 only 0.21 per cent. The economic development of Austria was slow; the railroads not very prosperous. The crisis of 1873 drove the government to constructing railroads. In 1880 it owned 17.23 per cent. of the lines; in 1890, 43.51 per cent.; and, in 1906, 67.95 per cent., or 21,600 kilometers (13,500 miles).

The operation of railways has been a serious drain on the state. In 1906 they yielded 2.85 per cent., and, in 1907, 3.01 per cent. But this sum includes neither interest nor sinking fund charges. In fact, operation of the state railways has not paid expenses, and has been a burden upon the Treasury. The lack of receipts is chiefly due to low freight rates.

Charles Lee Raper says:

“They (the freight rates) have been much higher than in the United States, though the character of the traffic of the two countries has had much in common. Both have had a large volume of the low grade commodities. It would, therefore, seem to be fair to say that the Austrian state service has not been notably successful in its cheapness.”

The superiority of private enterprises in Austria has been established by an investigation conducted by the British Board of Trade. Four private companies have never had to resort to a guaranteed reserve fund. During the period 1902–1906 one of them did not earn dividends on its capital; the second earned from 4 per cent. to 5.25 per cent., the third from 5.4 per cent. to 6.6 per cent, while the fourth earned from 11 per cent. to 12 per cent. And all these companies pay taxes to the state.

2. In 1889 Minister Baross established the zone system in Hungary. Bitter adversaries of the mileage (paliers) system were enthusiastic over the idea of introducing the zone system. The zones are only more extended units of distance than the 10 kilometer (6 miles) section of the Paris-Lyons-Mediterranean railway line of France—a privately owned line. The introduction of the system was simply a political move, for the real object was to attract to Budapest those Hungarians who lived in the far corners of the land, in order to make them admire the capital, and thus give them an exalted idea of the greatness of their country. In 1896, at the time of the Millennial Exposition, the railroads carried for nothing, and, I understand, lodged and fed entire families at Budapest. However, as a species of compensation for its complaisance in thus accommodating the country-folk, the railroad had increased the price of tickets for short distance traffic during the preceding year.

In 1903 other changes took place. As it has failed to yield the anticipated results, Hungary recently, in large measure at least, has abandoned the system introduced by Baross.

The average receipts per passenger per kilometer in six European states have been: (One heller equals $0.002.)

Financial returns upon the Hungarian state railroads were as follows (in 1,000 crowns; 1 crown equals 20 cents):

The service upon the state lines of Hungary during late years has given rise to numberless complaints: lack of comfort, insufficient rolling stock, too frequent delays, and numerous accidents.1

The former secretary of the ministry of Commerce, Joseph Szterenyi, in an address delivered before the Chamber of Deputies in 1912, stated that from 1890 to 1909 the number of passengers on the railways had increased about 300 per cent. During this period there have been years in which the increase of traffic has corresponded to the increase in the number of cars in the following ratios: 9.5 per cent., as against 2.5 per cent.; 8 per cent., as against 4 per cent.; 10.6 per cent., against 0.5 per cent.; 9 per cent., against 0.5 per cent., and even 11 per cent. against 0.1 per cent.

The available number of locomotives is even less satisfying. While the volume of traffic has increased about 51 per cent. the number of locomotives has increased only about 21 per cent. In 1909 it was estimated that 606 more locomotives would be necessary, in order to take care of the normal traffic. A number of locomotives then in use were over 35 years old. Although passenger traffic has increased in Budapest, at the eastern terminal about 550 per cent. and at the western terminal about 900 per cent., and although freight traffic has grown approximately 100 per cent., it is only recently that any particular effort has been made to improve the conditions mentioned.

From 1865 to 1907 the operating ratio increased from 55 to 77 per cent., and amounted to 80.6 per cent. in 1908.

Beginning with 1893 the cost of labor has increased by leaps and bounds. In 1904 the employees went on strike and stopped the trains, asserting that the increase of salary voted by the Chamber of Deputies was too small. Two separate awards of an increase in salary, the one in 1904 the other in 1908, have brought the total amount to 22,000,000 crowns.

Following changes in the locomotive service in 1906 there has been an increase in the consumption of coal of about 13 per cent., representing 4,000,000 crowns, and equaling a work increase of 30 per cent.

Maintenance expenses of locomotives and cars give the following figures: per locomotive, in 1905, 3,003 crowns, and, in 1909, 4,530 crowns; per passenger coach, from 640 to 820 crowns; per freight car, from 96 to 134 crowns. The working efficiency of the average car has fallen from 48 per cent. to 37 per cent.

In 1909 the excess of receipts over expenditures was less by 43,000,000 crowns than the sum necessary for interest and sinking fund charges. The zone system has recently been altered, in the hope of realizing more than 15,260,000 crowns.1

[1]Der Zonentarif der Ungarischen Staatsbahnen, by Rudolph Remengi, 1912, published by J. Benko, Budapest. Discussed in the Journal des Économistes, July, 1912.

[1]Journal des Transports, September 28, 1912.