Front Page Titles (by Subject) CHAPTER VII: DISINTEGRATING CHARACTER OF PUBLIC OPERATION - Where and Why Public Ownership has Failed
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CHAPTER VII: DISINTEGRATING CHARACTER OF PUBLIC OPERATION - Yves Guyot, Where and Why Public Ownership has Failed 
Where and Why Public Ownership has Failed, trans. H.F. Baker (London: Macmillan, 1914).
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DISINTEGRATING CHARACTER OF PUBLIC OPERATION
1. Individuals are industrious, productive and economical; administrative and political groups, both national and municipal, are wasteful and run the tax-payers into debt.
The ingenious casuist turns this statement about and says: “In the future, municipalities and states will produce and economize while individuals who have worked will rest. He who has produced shall consume; he who has economized will no longer need to take that trouble.” A truly topsy-turvy world that would be!
However, to the objections to which such a conception gives rise the reply is invariably: “A Socialist society will change human nature.”
If past experiments are mentioned, your Socialist replies: “Those experiments have been tried in a capitalist society and consequently do not count.”
In general those who are advocating most vehemently the nationalization and municipalization of all public utilities treat the officials who direct and govern them, whoever they may be, with the utmost scorn. If the Socialist could only put himself and his fellows in the high places of the government there would be nothing left to wish for.
2. Yet certain difficulties are insurmountable, even to a Socialist. When a political group exploits a utility, if there is any profit arising from the enterprise, it is made at the expense of the consumer; or, if there is any advantage in it for the consumer, the taxpayers pay the piper.
In either case the minority is favored at the expense of the majority. In fact, every government operation ends in contradictions, similar to the one pointed out by M. Favarger 1apropos of the Swiss railways:
“Through its customs duties the Federal Council raises the cost of living; then, in order to make it possible for government officials to support the heavier burden, it raises their salaries.”
I have pointed out the depressing effect produced on industry at large by any threat of government or municipal operation. Private effort finds the struggle difficult, if not impossible, against competitors who may not only bring politics to bear, but who may even make use of the courts upon occasion. For no one is naturally predisposed to invest capital in an undertaking from which he may be driven out at any moment by government or municipal competition.
Consequently every threat of socialization or municipalization is followed by loss of energy in establishing or carrying on business, as well as by tightness in the money market. Then these, in their turn, become important factors in the problem of unemployment.
3. Claude W. Mullins, in his article upon “The Municipal Activity of London,” 2 sheds great light on the disturbing character of municipal trading operations.
“All questions become electoral questions, and this very real danger assumes a more threatening aspect when we consider the large number of employees connected with undertakings like the tramway service or water works. Municipal councillors are employers and candidates in one and the same person, a state of affairs carrying with it a serious menace to the future stability of any state.
“A president or member of a municipal committee is interested in the success of an enterprise both as a simple citizen and as a representative of his constituents.”
Officials are not judged according to services rendered, but according to the effect produced by a “dilettante administration.” The elector of one day may well be the candidate of the next; and, if his election depends upon employees in the government or municipal service, he will be at their beck and call, nor will he hesitate before any sacrifice of principle.
4. The Socialists look upon themselves as republicans in France, as in New Zealand. In reality they are monarchists, who, being at the family stage of civilization, 1 consider themselves as helpless dependents, and therefore long to transform a republican state into a beneficent ruler, whose business it is to make them happy, furnish them with bread, and otherwise provide them with all the things of which they stand in need—their needs being only limited by their desires.
Philip Snowden, M. P., representing the Labor Party in Great Britain, is at any rate logical when he says: 2
“The object of Socialism is not to render the individual capable of living on his personal resources. That is the theory of radical individualism. Its object is to create in him a greater and greater sense of his dependence upon the state, and, at the same time, to inculcate in him the conviction that he is a part of it and that he has a duty and responsibility toward the state; and that only in so far as he fulfills this duty can he benefit by the advantages of a complete personal and social life.”
5. The budget puts a curb on Socialism, at least in so far that it makes taxes necessary; those who would otherwise rush into reckless expenses feel the burden of these same taxes sufficiently themselves to bring home a vague realization of the following truth: Nothing is free; everything must be paid for. If the whole burden could only fall on others they would rejoice in running into debt. Far from preaching economy in the way of expenses, Socialists encourage prodigality, and they consider that fiscal confiscation is an instrument of social revolution.
Sidney Webb says: “The housing of the poor will absorb, through taxation, a continually increasing share of the income of the nation; and this increase of local taxes is an unheeded sign of the gradual nationalization of the soil.” 1
We shall be almost at the “great day” of “the social cataclysm,” when, after refusing to pay the debts due the government and municipal creditors, the Socialists are able to exclaim: “At last we have gone bankrupt.”
6. We hear frequent remarks concerning the crisis of parliamentarianism, of the inefficiency and lack of power of our representatives. As a matter of fact, our representatives are guilty of wishing to do that which they know perfectly well no one of them can do, whatever be his efficiency or his capacity for work.
Now, parliamentary government is possible only on condition that it be divorced from all secondary questions, and all questions which do not concern domestic or foreign security are subsidiary and more or less negligible, in so far, at least, as direct government interest is concerned. Parliamentary government will be strong in proportion as its activities are confined to the fundamental duties of a state.
Statesmen who pursue an opposite policy are paving the way for anarchy. They are surrendering the institutions and the general policy of the country to the will of those who see only their own interest. They become the protegés of the employees whom they ought to control. They defer all questions to the convenience of the ringleaders of associations of their employees.
In the measure that they are willing to burden themselves with functions properly belonging to individuals they are sacrificing the general interest and endangering the security of the state, and chiefly for the sake of employees who consider themselves as the real proprietors of services which they are paid to perform.
The interference of the state in the economic activity of the nation means the ultimate disintegration of the state.
7. The message of the Swiss Federal Council 1 to the Chambers, proposing the creation of an administrative tribunal, contains the following passage:
“In the degree that a modern state extends the circle of its functions and that its component parts penetrate within the domain reserved down to the present to private enterprise, the number of its employees increases to vast proportions and the citizen, threatened in his individual rights by an official autocracy, scents the danger of encroachment on the part of the all-powerful state and feels an instinctive need of efficient protection against this inimical force.”
M. Brouilhet, French socialist reformer and partisan of government intervention, says:
“We can remember when public opinion was most lenient to the government; but since the government, desiring to conciliate the people, has become an active participant in trading enterprises, a reaction has set in, and truly public opinion is now lacking in indulgence.”
As for France, M. Brouilhet concludes:
“Before the government absorbs another tenth of the general activity of the country a long time will certainly elapse.”
In a remarkable article, appearing in the Gazette de Lauzanne, Edouard Secretan, member of the National Council, declares:
“About 30 years ago the Federal power was first and foremost political. Its principal business was the national defense, and the relations between Switzerland and foreign countries.
“In domestic affairs its action in regard to the cantons was advisory and disinterested in character, its intervention as limited as possible. It governed from above and devoted itself mainly to establishing national unity. Under this régime we became a nation under a Federal government chiefly interested in seeing the right prevail.
“But things have changed. The Federal government has chosen to become banker, common carrier, insurance broker, and it is only a question of time before it will become a merchant. It is only half a banker, but it has become a real common carrier and this operation has made it a debtor for 1,500,000 francs, owed almost exclusively to foreign creditors.
“To the enormous enterprise of transportation has now been added insurance. Here, again, we must count by millions.
“To-day our whole political life is dominated by financial preoccupations, and technical experts have taken the place of statesmen.
“They impose themselves on the Federal Council on the basis of responsibilities they have themselves incurred, and the Federal Council transmits to the Chamber the will of this or that general manager of some public undertaking. In fact managerial authority has a tendency to become dictatorial authority.
“The German part of Switzerland, Bern, Zurich, Aaron, etc., is the storm center of all this propaganda. Romance Switzerland still resists. It has twice rejected the state bank, twice the insurance monopoly, and once, at least, the purchase of railroads.”
8. The experiences arising from state and municipal trading operations lead inevitably to the following conclusions:
The propaganda of public ownership has established more firmly than before the truth of the following industrial laws:
First: Neither states nor municipalities should attempt tasks especially adapted to individual effort.
Second: In the case of those utilities in which the public interest is general, as railways, water, gas, electricity, tramways, etc., there must be a physically and morally responsible body, accountable to the public on the one hand and the service on the other, and protected by contracts against vacillations of public opinion and the extortionate demands of interested groups, whether employees, consumers, or politicians.
Third: For individuals the watchword should be action; for local and state governments, control.
ALCOHOLISM IN RUSSIA
The best minds in Russia stand aghast at the ravages wrought in Russian society by the abuse of vodka, the national spirituous drink of the lower orders. The Government at St. Petersburg has maintained a monopoly in the manufacture and sale of this commodity, and has promoted with great energy its production and use. The Army and Navy that fought with Japan were supported by the revenue that came from this monopoly, and Russia, we are told, has replenished the privy purse of its sovereign from the sale of a drink that is actually tending to the demoralization of the common people. As far as we can learn from the opinion of the Russian press, ever since the Russian Government declared vodka a state monopoly, and assumed the rôle of the saloon keeper, the liquor business there has been making rapid progress, and has become one of the main sources of income of that country. Last year the Government of the Czar realized from the sale of liquor $412,000,000, and for the first six months of this year the proceeds exceded those for the corresponding period of last year by nearly $23,500,000, which figures, perhaps, tend to show that the Russian bureaucracy has been successful in one branch of endeavour, at any rate. It may be recalled here that Mr. Maklakov, the Minister of the Interior, said in an interview with a French journalist some time ago that the “severe climate of Russia makes alcohol a vital necessity to the masses.” But some Russians do not agree with that statesman's view, and have very different ideas about the results of the Government's activity in that direction. “Public drunkenness has been growing to extraordinary proportions,” says the Ryetch (St. Petersburg), and the increase in drinking “has assumed a really threatening character.” The radical press, and even some conservative organs, have been conducting a vigorous campaign against the liquor monopoly. Mr. M. Menshikov, of the Novoye Vremya (St. Petersburg), condemns it in the following words:
“A state monopoly of the source of drunkenness exists only here, in Russia, and all the rest of the world —it seems, without exception—does not allow the complicity of the Government in this public vice. In the whole world, even in the barbaric and pagan, the rôle of the Government is presumed to be a struggle against vices, but not participation in the way of their exploitation. . . . Our official publicists (oh, how hard their task is!) maintain that the Government sells alcohol exclusively with a view to limiting the evil: that if it should allow perfect freedom in the manufacture and sale of this poison, drunkenness would reach ‘quite incredible limits.’However, the experience of all nations—both Christian and pagan—which grant freedom in this respect shows different results. Public intemperance in those countries persists, but it is far less and not so appalling as here. Why? For one simple reason. Repudiating the monopoly of liquor, the governments in the West deprive this vice of the most powerful capital in the world, that of the state. They deprive it of the most powerful mechanism of distribution, the governmental system. They take from it the highest authority, that of state approval. That alone constitutes a hard blow to vice. . . . Some may say: Permitting the manufacture, sale, and consumption of alcohol, the governments in the West grant freedom to this evil. Not at all. Only an opportunity for evil is afforded, but simultaneously measures are taken to limit the opportunity. Not getting into an irreconcilable contradiction with itself, like our Government, the western authorities can fight drunkenness like any other vice. But here the temperance movement, as is known, frequently meets with opposition on the part of the Government. The resolutions of numerous village assemblies regarding the closing up of saloons and Government liquor stores have not been affirmed, petitions have not been granted, preachers of temperance have frequently been dealt with as common rioters, and subjected to punishment. . . . Despite the categorical ‘wish’of the Imperial Duma that liquor should not be sold in the colonization lands of Siberia belonging to the Government and the Ministry of Domains, liquor is being freely sold there. . . . For many years the press and society have pointed to the unseemliness of selling liquor on great Christian holidays or in the early hours when the working people go to their factories and mills, or of selling it in such small quantities that the last cent might be taken from the beggar. The indecency and the great harm of it are well understood, but what can you do if the nature of trade in general and that in liquor in particular demands that the trade should adapt itself to the chief consumer—the drinking masses? Having become the owner of and dealer in such a poisonous product, the Government has placed itself in a false position from which there is no way out. To limit the traffic means to limit the income . . . not to limit it means really to make drunkards of the people.”
In conclusion, Mr. Menshikov takes this more hopeful view, however:
“No matter how much bureaucratic eloquence the ‘liquor publicists’should expend, the fate of the liquor monopoly in Russia is already decided. If not the days, the years, of this unhappy child of Count Witte and Kokovtzov are numbered. I say this with absolute certainty, because I cannot conceive that the clouding of the Government's consciousness in this question can last much longer. Seeing the terrible results of public intemperance, it is quite improbable that the Duma and the Imperial Council will not attempt to check the danger, that the church will not take a hand, enlightened society, and lastly the Government itself.”—Translations made for The Literary Digest.
THE FINANCIAL YEAR IN AUSTRALIA
The estimates for 1913-14 are composed of five Budget statements, and, in the case of New South Wales, allow for an increase of £400,000 in taxation, which the Premier foreshadowed, and an average growth in other revenues. Now, it will be noticed that in 1911–12 the combined revenues increased £3,913,000, but in 1912–13 the increase was only £1,778,000, or not one-half that of the previous year. But the expenditures, which increased £3,649,000 in 1911–12, further increased £3,092,000 in 1912–13—hence the combined deficiency.
With regard to the estimates for 1913-14, it will be seen that an increase of close upon £3,000,000 is allowed for, including further taxation in New South Wales and West Australia. Whether it will be realized is the unsolved problem. Revenues have lost much of their elasticity just now.
GROWTH OF LABOUR EXPENDITURE
But these combined results tar all the States with the same brush, and that is altogether unfair. Four of the states are not under labour administration, while two (New South Wales and West Australia) are so. Separating the returns for last year into the two groups, we have the following:
|Two Labour Governments||£20,857,115||£22,275,898||Deficit,||£1,418,783|
|Four other Governments||22,199,283||21,964,907||Surplus,||234,376|
The two labour-governed states secured £1,114,000 of the year's revenue expansion, while the remaining four gained only £664,000; but the latter group all lived within their incomes, while the two labour administrations lived much beyond them. Similar results were shown in the preceding year, only of a less pronounced character, and they are again apparent in the new financial year's estimates, and both these labour administrations have already imposed more taxation, and their programs include yet additional taxation in 1913–14.
Labour has been three years in office in New South Wales, and two years in West Australia. But a three years'comparison of the two groups is altogether remarkable:
|Two Labour Governments.||Four Other Governments.|
|or 33.5 per cent.||or 16.3 per cent.|
The whole reason for the marked retrogression under labour finance has been in the striking growth of their expenditure, which relatively in the past three years has been twice as rapid under labour administration as under what Australians term Liberal administration. It is quite to be understood. Labour came into office on the votes of a class, and that class is master. It cannot be denied what it asks for, and in fact the legislative programs have to be submitted to the caucus at the Trades Halls and approved before they can be put forward.
When these administrations came into office—and the caucus into power—it was boasted that the burden of their schemes should be placed upon the shoulders able to bear it. But their expenditures have run away from their incomes all the same, and the burden has been spread, as the increased cost of living specially affects labour.
What is more, in the efforts to find money for state employees, which have multiplied greatly, loans have been called upon to supplement revenue freely. The railways and other public works are needed, but the effect of the increased loan expenditure on the volume of state employment has been marked all the same. However, the effect upon revenue has been beyond controversy. Happily, all six of the state governments are not under labour rule, and the commonwealth has recently made a change. The state election in New South Wales, just ahead, may do so likewise. But in the foregoing statements facts only have been dealt with, and facts are above the party cries current in Australia.
With respect to the revenue estimates for the current year, over £2,000,000 of the expected increases go to the two labour administrations and £1,000,000 to the remaining four states; but, then, the labor governments are augmenting taxation, and may not realize their estimates. However, that remains to be proved.
THE COMMONWEALTH AND THE STATES
Labour has also been three years in office in the Commonwealth, and the expenditure has been more than doubled—growing from £7,499,517 in 1909–10 to £15,779,483 in 1912–13. Much of the increase is for value received, including the fleet nucleus. But every department has grown enormously, like the post-office, which cost £3,231,198 in 1909–10 and £4,783,744 in 1912–13—an increase of 48 per cent., excluding construction. The expenditure of Australia (common-wealth and states), excluding all duplications, was last year £59,780,088, and the combined revenues £58,492,834, the net deficiency having been £1,287,254. The commonwealth accounts showed a surplus of £391,550, but that was because £494,397 of the expenditure was charged to the accumulations from previous years. That was legitimate, but the actual expenditure of the year is given in the above statement. The common-wealth expenditure in the current financial year is placed at £15,147,000, but that is after deducting £2,653,223 charged against the accumulations of previous years, wiping them out completely.
Australia has tried the effect of labour rule, and has paid the bill, apart from the deficits. This serves to show what the cost has been, and that cost may have some effect on the elections. That it has been a burdensome luxury is clear, while whether class legislation is the best of legislation is a matter which may be left to consideration. Class legislation never gives the results anticipated.—The Times (London), November 29,1913.
THE SHORTCOMINGS OF THE TELEPHONE IN ENGLAND
To anyone who has had practical experience of the United States telephone service, resulting from private enterprise, the inferior condition of the English service excites no wonder. The history of the telephone in the United Kingdom during the past 30 years has been a lamentable tale of bureaucratic blundering, tolerated by a community which has failed to perceive the potential value of this method of communication and to insist upon its effective organization on a business basis. As the result of a short-sighted Government policy, of official mismanagement, and the parochial attitude of local authorities, the number of telephones per hundred of the population in Great Britain to-day is 1.4, as against 8.1 in the United States. London, the greatest city in the world, boasts 2.8 telephones for every hundred of its inhabitants, as against a percentage of 24.0 in Los Angeles.
One of the chief obstacles barring the way to satisfactory development of the telephone as a public utility has been the traditional conservatism of the Post Office and the fixed idea of protecting the Government's telegraph revenues against effective competition by the telephone. In 1889 the Postmaster-General (after declining to purchase the telephone patents) brought a suit to prevent the Edison Company from establishing telephone exchanges in London, as constituting an infringement of his telegraph monopoly. Successful administration of an industrial enterprise like the telephone requires vigilant initiative and elasticity.
PRIVATE ENTERPRISE IN AMERICA
In America the possibilities of the telephone as a time-saving and labor-saving invention were better realized from the outset. Thanks to the intelligence, foresight, and public spirit of Mr. Theodore N. Vail, founder of the telephone enterprise in the United States and still president of the American Telephone and Telegraph Company, the business has been steadily built up with high ideals of organized efficiency and civic duty. Mr. Vail's ambition was, and is, “that every person, firm, or company in the United States that ought to have a telephone shall be provided with one, and that any person so provided, wherever he may be located, can within a reasonable time be connected to the telephone of any other subscriber and talk satisfactorily.” For 30 years work has been steadily carried on with this ideal in view, and with marvellous results. At the International Telephone and Telegraph Conference held in Paris in September, 1910, the chief engineer of the company summarized some of these results as follows:
In the plans which we have made for New York and for the other cities in America it has been found, all things considered, most economical when building new subways to plan for a period somewhere between 15 and 20 years ahead.
Our expenditure for new construction during the first six months of 1910 is more than $21,000,000.
The fundamental plans for New York, not including the vast suburban region outside of the municipal limits of Greater New York, provided in 1900 for a system of 51,398 telephone stations, served from 52 central offices, with an estimated population of 4,800,000. In 1930 the plans provide for 2,142,000 stations, to be served from 109 central offices, with an estimated population of 8,800,000.
At the present time an enormous amount of toll line business takes place between New York City and the territory tributary to it for 30 miles around. In 90 per cent. of this business the connexion is made in an average of 38 seconds. In all of these cases the transmission conditions are so planned that the subscriber may converse with ease. A local call is accomplished in less time, requiring only 22 seconds where but one office is involved, and slightly more between two offices.
Between cities as far distant from each other as New York, Boston, Washington, and Philadelphia, “Good talking with prompt connexions” by underground cables is the regular rule, while communication by phantom loaded overhead circuits has been extended as far west as Denver, distant 2,200 miles from New York.
RESULTS OF EFFICIENT SERVICE
There is no doubt that the superiority of the American system has been attained in a great measure by administrative ability in its organizers and the wide field of opportunity, with few serious obstacles of competition, in which they have worked. Their outlook has been steadily national, not parochial. They have realized that defective telephone communication is, in every sense, bad business, and that the factors constituting good service, in the order of their importance, are (1) speed and accuracy in securing connexions; (2) volume and clearness of sound transmitted, and (3) cost. They have realized that the money value of the time and temper wasted by the public over a bad service is a far more serious consideration than any reasonable charges imposed for a good one, and they have therefore proceeded on the principle that speed and reliability are more important than cheapness. Furthermore, Mr. Vail's civic ideals have been applied, with loyalty and enthusiasm, throughout. Esprit de corps, and a spirit of emulation between exchanges are encouraged to the utmost. One of the best features of the telephone business, as organized in America, is the public appreciation of the staff's keenness, its “team work,” and pride in efficiency.
Under such conditions the public service retains its human interest—no small factor in smooth working—and the “telephone habit” becomes easily explicable. In January, 1911, the number of telephones in New York was equal to the combined totals of London, Paris, and Berlin.
FAILURE OF GOVERNMENT CONTROL
In Great Britain the history of telephone legislation has persistently reflected the vacillations of immature opinion, strengthened by the attitude of permanent officials of the Post Office and the Treasury. The situation to-day is the result of years of laisser-faire, improvidence, and vacillation. Its economic defects and inadequate equipment are the natural consequences resultant from the National Telephone Company's inability, as the expiry of its franchise drew near, to provide for expansion of service and renewal of plant. The economical construction of new underground cables alone involves plans and estimates for a period somewhere between 15 and 20 years ahead. Further causes of disorganization lie in the relaxation of discipline and esprit de corps consequent upon the transfer of the telephone company's personnel to the Post Office; in the jealousies and friction between old employees and new, all tending to impair smooth working; above all, in the technical telephone staff's recognition of the fact that under the cast-iron, water-tight compartment system of Post Office tradition there is little or no scope for intelligent individual initiative and scant prospect of applying business methods to the development of what should be a rapidly expanding commercial undertaking, managed by the best technical and financial talent obtainable.
There are many experts qualified to speak with authority on this question who share the views expressed by Lord Desborough, as president of the London Chamber of Commerce, on May 18, 1911.
Many chambers of commerce besides the London Chamber, he said, had discussed the subject, and they were unanimously of opinion that it would be very much better for the telephone service of this country to be in the hands of a board of experts than to hand it over to a Government Department. . . . Business men would like to see an independent authority formed, somewhat on the lines of the Port of London Authority, or in any case formed of business men and of experts, with sufficient Government representation. Such men would be alive to the needs of the business community and accessible to representations from them, and would bring the telephone service of this country up to the requirements of the nation.—The Times (London), December 1, 1913.
Journal des Économistes, December, 1910.
Revue Économique Internationale, see above.
See Yves Guyot, Les Principes de ’89 et le Socialisme. La Democratie Individualiste.
L'Individu l'Association et L'État, Paris, F. Alcan.
Upon the Insurance Bill, Labour Leader, July 14, 1911.
Socialism in England, page 109.
Gasette de Lausanne, February 1, 1912.