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 XXII

THE PURCHASE PRICE

When there is some undertaking to be purchased the partisans of nationalization and municipalization always start the ball rolling by saying: “Oh, it will cost practically nothing,” and then they proceed to reveal their economic limitations by making estimates which are invariably lower than the facts warrant.

When the French government decided to take over the telephone, it estimated the cost at 5,000,000 francs. The company demanded 18,800,000 francs. The state was finally forced to compromise at 9,313,000 francs, a figure which, with interest and costs added, ultimately increased to 11,334,000 francs, or 126 per cent. more than the first estimate.

Again, when the government determined to purchase the Southern canal, an outlay generally regarded as wholly unnecessary, advocates of the enterprise were unanimous in their enthusiasm over the manifest bargain. “It will cost the state nothing.” But the arbitration commission ordered the state to pay to the Southern company an annual indemnity of 750,000 francs, based on a capital of 25,000,000 francs.

Nor is France the only country furnishing examples of such frauds. Switzerland had similar experiences when she decided to purchase the railways. The Federal government appropriated a sum of 54,300,000 francs for the Central. The line actually cost her 75,000,000 francs, or 20,700,000 francs (36 per cent.) more.

Fifty-four million francs was afterward appropriated for the Northeastern line; 82,000,000 francs, or 28,000,000 francs (51.8 per cent.) more, was the actual price. The original appropriation for the Swiss Union was 31,700,000 francs; 40,000,000 francs, or 26.2 per cent. more, was the final figure.

An account of the government's underestimate of the cost of the Western line—the so-called “operation blanche” of M. Barthou—has already been described.1 The state had appropriated in all 220,000,000 francs to cover the cost of purchase. It actually paid 321,000,000 francs or more than 101,000,000 francs over the original estimate.

[1]See Book 2, Ch. 8.