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 III

DISORDERS, DELAYS AND ERRORS

• 1. Telephones.—The Report of Marcel Sembat.—The Office in the Rue Gutenberg.—Motives Dictating the Choice of the Site.—Consequences.—The Commission of 1900–1905.—“A Wise Delay.”—M. Steeg.
• 2. The Administration of the Telegraph.—Technical and Operating Services.—Maintenance.—The Underground System of Paris.—The Lost and Found Cable.—The National Printing Office Again.—Lack of Foresight of the Tobacco Monopoly.—Construction of Government Buildings in Paris.—Misinformation.—The French Minister of Agriculture.—The Naval Intelligence Department.—Increase of State Functions Increases Difficulty of Control.

In his character of Socialist Marcel Sembat wishes the state to take over all public utilities. Yet, as reporter of the budget of the postoffice, telegraph and telephone systems, included in the general budget of 1906, he has demonstrated very clearly what becomes of a trading enterprise in the hands of the state.

When the telephone first appeared in France the government, considering that it would be hazardous to attempt its operation, granted to private interests the authority to take upon themselves this experiment at their own risk, reserving, however, the right of buying back the powers thus granted, together with the property accumulated, for a compensation to be agreed upon. In 1880 the Société Générale des Téléphones was incorporated. The franchise granted would have come to an end September 8, 1884, but it was extended for a further period of five years.

On July 12, 1882, the government obtained an appropriation of 250,000 francs to establish lines at Rheims, Roubaix, Pourcing, Troyes, Nancy, etc., where the Société Générale des Téléphones was not operating. After some months of operation the government declared that it was realizing profits at a rate 50 per cent. lower than that of the company. September 8, 1889, that is to say the date of the expiration of the franchise, the government established the telephone monopoly.

The purchase of the company's equipment had been authorized by the law of July 16, 1889. The government offered 5,068,836 francs, but by an order dated May, 1896, the Council of State rendered judgment, ordering the government to pay 9,313,000 francs, which, with interest, ultimately increased to 11,334,338 francs, or 126 per cent. more than the original estimate.

M. Sembat says:

“In replacing private enterprise the state had no intention of borrowing its methods. This was announced in the very beginning. The first act of the government furnished a joyful augury for the future. It lowered the rates on subscribers' contracts. It was impossible to know whether the government was going to sell service at a loss. It fixed its rate at a venture. The desire was to confer a boon rather than to launch a great industry.”

Thus in the very beginning the actual price of the purchase exceeded the estimate by 126 per cent., and rates were “fixed at a venture.”

As a matter of fact, the extension of time granted the Société Générale des Téléphones had been far too short. No industry can establish itself and pay off its capital in five years. Therefore, when the government replaced the company, the latter's equipment was behind the times. In certain cases the intervention of four operators was necessary to bring about one connection. In America and in several Belgian cities multiple switchboards, so named because the terminal point of all subscribers' lines wired to the same exchange is repeated before each operator, were already in use. A single employee sufficed to connect two subscribers on the same switchboard. The French department had experimented with this system at the Wagram exchange.

“But,” says M. Steeg, in his report on the budget of 1907, “despite the promised advantages, for want of money, time and space, the first installations of this new type have been greatly limited. Besides, the work has been done rather under the pressure of immediate needs than in the execution of a comprehensive plan.”

Other difficulties also arose. The operators were unprepared for the new system. The plan of calling subscribers by number, as required by the multiple switchboard, instead of calling them by name, as was the custom under the old system, bothered the operators. It was finally decided to decrease the number of exchanges and to establish three large ones on the right bank of the Seine.

Now a business man under existing conditions would have sought the most commodious site in order to establish his principal exchange. But not so the government. The convenience of the chief telephone exchange was subordinated to the needs of the Postoffice. Although constructed only ten years before, the Post-office building was completely outgrown. The officials did not know where to keep the mail wagons. The opportunity afforded by the establishment of the new exchange was too good to be lost. The Rue de Guten-berg—a short thoroughfare—was condemned and closed, and a telephone building following the line of the curb constructed. The lower floor of the new building, however, was given over as a shelter for the mail wagons.

And here is another curious point! The Telephone department had been anxious to do away with the old widely scattered exchanges. But, after these had been concentrated in the same building, connections were made by the same methods as had prevailed when the offices were situated in different buildings.

As a consequence, and since it was necessary to carry interurban service lines and the lines of three bureaus into the same place, the department was forced to enlarge the conduit which runs from the Rue du Louvre to the Rue Richer through the Rue Mont-martre, at great expense and in unusual proportions. Finally “a special conduit is now required in the Rue Etienne-Marcel, already over encumbered, the present ducts being incapable of containing the too numerous cables that must pass in this direction.”

The defects of such service are easily seen. Concentration in the same building of bureaus to all intents and purposes separate has made necessary the relocation of a vast mass of wires involving in its turn other undertakings on an unnecessarily vast scale. As the whole system, the very foundations of which are false, may have to be renewed many times, it ought surely to be renounced.

In 1900 a commission was appointed to outline a general course of action. It discussed the question until 1905. That year two switchboards, each for 5,000 subscribers, were placed in the Gutenberg exchange. They were not ready to use in 1907. The switchboard for 5,000 subscribers, subsequently ordered for the Passy exchange, has not yet been installed, as is the case also with several other switch boards ordered for a number of other exchanges. Considerable sums have been spent. They have remained unproductive, and the subscribers are still waiting.

In 1906 a contractor made the department a proposition to replace the entire apparatus of the Paris system by the common battery system, adopted by all the great American companies, for 20,000,000 francs ($3,800,000). A committee on telephone equipment was appointed for the purpose of examining into this proposition, “which its contract form,” said M. Steeg, “caused to be instantly rejected.” M. Steeg mentions the rejection as self-explanatory. I confess that I do not understand his point of view. In the interest of the state, whenever it is possible, necessary work should be done by a contractor. Such a proceeding would ensure a triple advantage, viz.: a definite limit to the sums to be appropriated, control on the part of the state, instead of exorbitant expense and abuses of operation and, finally, responsibility of the contractor.

However, the committee, owing chiefly to the persistence of M. Dennery, state engineer, who had seen the common battery system working in the United States, ultimately concluded to adopt it. The necessary expense of equipping the Paris system, general and private exchanges, was estimated at 4,000,000 francs ($760,000).

At last the Telephone department had a definite plan of action. But no proof of any spirit of initiative had been given; for it was only introducing a system already employed for several years by private companies in the United States.

But, at any rate, the new program is at least to be carried out expeditiously? M. Steeg answers skeptically: “We dare not promise it.” After which he proceeds to gild the pill with the following glowing rhetoric: “Like scientific discoveries, industrial improvements may at any moment overturn all estimates. Therefore the department must not anticipate the future too boldly.”

M. Steeg may be reassured! The department need never be afraid of anticipating the future. It is already too far behind the times for that! Meanwhile telephone subscribers are begging the department to conquer their fear of too boldly anticipating future progress at least long enough to give them a reasonably speedy connection when they have summoned the courage to ask for one.

The fire at the Gutenberg exchange gave the department another much-needed excuse for making haste slowly.

To-day we are enjoying in Paris the common battery system. Two subscribers, connected on different exchanges, can be connected in less than thirty seconds. We never complain, however, if we succeed in getting our party within three minutes, a certain proof that the Frenchman is the easiest man in the world to govern.

Speaking of the Telegraph Department, M. Dalimier says:1

“The French government wears itself out in sterile investigations. When one has had some little contact with the many-sided machinery of this complicated system, he is struck by the lack of coöperation among the various departments. For example, a very marked duality is evident between the technical and operating services. Although theoretically united under the same management, each is conducted like an autonomous department.

The technical service appears to have made it a rule, a point of honor, in fact, to ignore the needs of the operating service. Apparatus is furnished which renders effective service very difficult and prevents the carrying out of important changes. With more up-to-date equipment, from a practical point of view, possibly a flat rate system of subscribers' schedules might already have been attempted in certain cities.”

In the eighteenth century Voltaire reproached the French government with not occupying itself sufficiently with the question of the conservation of its resources. If we may judge by the following passage, also from the report of M. Dalimier, this bad habit has not yet been overcome:

“We can bear witness that the underground urban system of Paris is in a deplorable condition. It is given neither supervision nor methodical attention. Repairs are made in haste and without proper oversight. The currents passing through electrical conductors are intercepted in the passage and diverted from their cables without any plan and without technical precautions. Then the cables themselves are punctured, perforated, and crushed in the conduits without any attention being paid to the matter. Entire cables have been abandoned. Certain cables have been dug up or have disappeared under rubbish without any one having any recollection of their being there. In this particular service negligence has reached incredible proportions.”

M. Dalimier then quotes a memorandum of the department, and concludes:

“To sum up, it is acknowledged that the lines are inspected only when they cease to operate, and that, on the other hand, when it is expedient for the force to display exceptional zeal, it is enough for one section of a conductor to be regarded as doubtful in order to replace the whole line with a new one!”

Not only does the department neglect one system but it can completely forget others still more neglected. Following the meeting of the Flood Commission a bill was prepared, including among other very urgent suggestions, the construction of cables with paper insulation and a sufficient number of conductors along the fortifications of Paris. The expense was estimated at 2,000,000 francs. Fortunately, just at this moment, an entire network with rubber insulation and cast-iron conduits was discovered, which had been in place for more than forty years. It was found to be in a state of remarkable preservation, in spite of its complete abandonment. Experts declared that, after slight repairs, and at a cost of scarcely 50,000 francs ($9,500) it could be put in perfect condition. The technical department had utterly forgotten its existence. The inspector of the long-distance underground line connected with the operating service discovered it and put a stop to further discussion of the bill.

The workmen employed in the National Printing Office complain that the shops in the Rue Vieille-du-Temple are in reality so many prisons, and that, deprived of air and light, they are working under the worst possible conditions. A reporter sent out by the Matin1 gives the following description of these shops:

“Under the escort of M. Clavel, head superintendent, I inspected the workshops of the National Printing Office, rummaging into the most obscure corners. I went from the cellars to the roofs. I walked miles through dark passages. I ascended and descended millions of steps. I saw composing-rooms where artists executed typo graphic masterpieces. I saw type foundries where, amid the poisonous vapors of melted lead, without air and without light, half naked men were making use of processes and equipment that private industry abandoned a quarter of a century ago. I saw old and dilapidated printing machines under constant repair, and necessitating more outlay in the way of labor and expense than new and modern machines would require. I inspected stereotyping rooms utterly barren of the improvements introduced of late years. I saw lithographing, photographing and engraving rooms, rooms where they were stitching, binding, folding, fastening. I saw the utter disorder of those cemeteries where they bury the “forms” which are saved either because they can be used again or because there are not enough workmen to arrange them properly in the lettered cases provided for that purpose. I saw the useless and unused reserve supply of new type, a capital of several millions, piled up only to justify the employment of too large a number of foundry workers.”

In 1908 the popular brands of tobacco gave out.1 Why?

When a good business man sees his business increasing he is careful to devote a part of his profits to the improvement of his methods of production. The Tobacco department was able to show, in 1902, 421,000,000 francs in gross receipts; in 1903, 435,000,000; in 1904, 448,000,000 francs. But the general budget was short. It therefore absorbed the whole sum, instead of setting something aside to improve the equipment of this special fiscal monopoly. Just at this time, and when the consumption of tobacco was steadily increasing, the working hours of the laborers in the tobacco factories were reduced from 10 to 9. As a result, there was a 10 per cent. loss of production. The equipment was in no position to offset this labor loss; hence the deficiency.

In 1905 the department obtained some hundreds of thousands of francs from the budgets of 1906 and 1907, to improve its equipment and factory buildings. These appropriations, however, were tardy and insufficient.

I do not mean to imply that the officials of the Tobacco department had not foreseen the necessity for this work, but there was no way of forcing the minister of Finance to grant them the necessary loans in time to be of service. Administrative delays are notorious, and individuals who rebel against them are sternly taught their place.

The reconstruction of the J. B. Say school has lasted (1912) more than twenty years. The construction of the school of industrial physics and chemistry (l'École de Physique et Chimie Industrielles), in the Rue Vauquelin, was decided upon in 1898, but the first order was not signed until 1908.

That misinformation as to actual conditions prevails in government administration is generally acknowledged. On May 17, 1912, the French ministry of Agriculture—in its estimate of the reforms which would be brought about by a lowering of the price of wheat—made a miscalculation of 5,000,000 cwt.

In 1909 the Naval Intelligence department caused a panic in Great Britain by announcing that Germany would have 13 dreadnoughts in 1911 and 20 in 1912. Mr. Balfour aggravated these forecasts by announcing that Germany would have 17 dreadnoughts in 1911 and 20 in 1912. As a matter of fact, they will have only 13 in 1913.

M. Perrissoud, reporter of the state railway budget of France, has declared that “the state ought to be a model employer and give to the taxpayers the largest opportunities of regulation.”

The taxpayers cannot control government undertakings directly; they can only regulate conditions through their representatives.

The report of Emmanuel Brousse, on the regulation of the budget of 1907, and of Louis Marin, on the budget of the ministry of Foreign Affairs for the present fiscal year, are sufficient evidence of the difficulties experienced in attempting parliamentary regulation.

The more functions exercised by the state, the greater the effort required to control its various activities.

[1]Report on the budget of 1912.

[1]Le Matin, January 28, 1912.

[1]See Le Client.