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 XVIII

FICTITIOUS PROFITS

Private enterprises are subject to certain charges from which state undertakings are exempt. These exemptions create an illusion of profit. Local taxes paid by the government railroads in Prussia amount to £750,000 ($3,652,500), while similar taxes, paid by the railways of the United Kingdom, having nearly the same length of line, reach £5,000,000 ($24,350,000). If both were taxed at the same rate the profit on the government railroads in Prussia would be proportionally reduced.1

Further, the profits of one state undertaking are frequently obtained only at the expense of another. For example, the Victorian state coal mine, in Australia, is called a success; but the director of railroads, Mr. Fitzpatrick, complains of losing 45,000,000 francs ($8,550,000) through being forced to use government coal.2

At the end of 1912 it was announced that the New South Wales government was prepared to nationalize the iron industry, but with the proviso that the Federal government must stand ready to order the material for the new railroads from its mills. “Peter is being robbed to pay Paul. But such are the methods of presenting the accounts that the public does not perceive this fact,” says Liberty and Progress, Melbourne, May 25, 1911.

The National Printing Office of France undertakes to do outside work for editors; at the same time it has a monopoly of the government printing. It farms out its work to private printers, and it adds a charge of its own to the original cost when the work is delivered to the departments, which have no choice but to have their printing done by government printers. In this connection the inspector of the finances, M. Bizot, has pointed out the following facts:

“The National Printing Office furnishes the forms for telegrams. It has contracted with a private company to manufacture and deliver these forms to the aforesaid printing office, cut, folded, perforated, gummed, and turned at a cost of 67 centimes per 1,000 forms in pads of 100, and 50 centimes per 1,000 forms when delivered as loose sheets. Up to 1911 the National Printing Office invoiced these supplies to the postoffice at a cost of 2 fr. and 1 fr. 62, respectively, instead of 67 and 50 centimes. In 1910 this addition of more than 200 per cent. represented a profit to the National Printing Office of 82,000 francs.”

And who was paying this profit to the National Printing Office? Why, the Postoffice department, or, in other words, the government, by submitting to an overcharge of 82,000 francs.

The law of April 4, 1912, has ordered that the insurance monopoly in Italy shall be exempt from postal charges, and that its profits shall not be subject to the income tax.

These exemptions will be accounted on the credit side of the insurance monopoly. They ought to be deducted from the government resources.

[1]Edwin A. Pratt, Railways and Nationalization, page 3.

[2]For New Zealand see Book 2, Chapter VII.