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them at least, if not to the shipper, the change will come like a cool and refreshing shower at the close of a hot and sultry day. We recommend to railway owners the careful consideration of this matter. We would even go so far as to suggest that they become active in support of the public-ownership propaganda, and meanwhile that they refrain from further investments in railway development. Even if their advocacy of the strange doctrines of socialism does not succeed, their refusal to invest further in a business which they are not allowed to control may furnish a needed object-lesson to the advocates of railway regulation.

197. The Economies of Government Ownership2

BY FRANK PARSONS

Public ownership aims at service rather than profit. It therefore not only tends to a lower rate level than private ownership, gravitating to the greatest service without deficit, but it tends to lower that level. Thus public ownership favors low rates in a double way, first, by tending to bring rates down to cost, and second, by lowering cost.

Some of the reasons for the superior economy of public ownership are as follows:

1. The public plant has no lobby expenses or corruption funds to raise, as many of the private monopolies have.

2. It has no rebates or commissions or other secret concessions to favored customers to provide for.

3. It has no dividends on watered stock to pay.

4. It has no overgrown salaries or monopolistic profits to provide for. The principal salaries are likely to be smaller under public ownership and the wages of ordinary labor somewhat higher than under private ownership.

5. Litigation expenses and lawyer's fees are likely to be less under public ownership than with private systems.

6. The public plant generally is able to save on interest charges. The public credit is better than even that of very strong private companies, the government being able to borrow often at 3 per cent or less when a private company has to pay from 4 to 6 per cent in the same locality. The government also saves on insurance, insurance simply being intended to diffuse loss, the government acting as its own insurer-diffusing the loss without paying the commission or agents' fees.

27 Adapted from Report of the Industrial Commission on Transportation, IX, 147 (1901).

7. Public ownership gains through superior co-ordination of industry, which is impossible under private ownership except through incurring the dangers of a concentration of wealth and power in the hands of a few, the evils of which would be likely to outweigh the benefits of co-ordination.

8. The public also gains through the civic interests of the people, which increases and facilitates the business. The people patronize their own institutions to a far greater extent than they patronize private institutions. A man does not hesitate to increase the income of a public plant; his civic pride leads him to favor its prosperity; it is his plant; he is a partner in the concern; but the majority of men do not enjoy increasing the profits of a private monopoly.

9. In the next place the public plant escapes the costs and burdens of costly strikes and lockouts.

10. Public ownership saves the cost of numerous regulative commissions and investigations into the secrets of private monopoly. Everything is open and public, and there is no necessity of those tremendous investigations. It also saves in the cost of legislation, since the time and attention of our legislators are very largely given to these great private monopolies, making laws they want and making laws to control them.

II. The superior diffusion of wealth and elevation of labor resulting from a normal public system tend to diminish the extent and the cost of the criminal and defective and unfortunate classes; as in New Zealand, where they have practically wiped out the unemployed agitation through the administration of public utilities.

12. The elimination of the antagonism between the owners of vast industries and the public carries with it all the useless activities and wastes of conflict which result from that antagonism.

198. The Inexpediency of Government Ownership28

BY SAMUEL O. DUNN

Do the railway and the general political conditions existing here, and the experience of other democratic nations, indicate that the adoption of government ownership of railways here would be, on the whole, beneficial to the public? The answer to this question must be set forth here in summary manner. It is in brief as follows:

The railways of the United States are, considering all pertinent conditions, as economically managed as any in the world; and Adapted from Government Ownership of Railways, 376-378. Copyright by D. Appleton & Co. (1913).

it is probable that under government management there would be an increase in the total expense incurred in rendering railway service. Under private management, the development of the railways of the country has gone forward at a rate which, until recent years, has not been equaled in any country. The capacity of the railway trackage and equipment provided in proportion to both area and population is not surpassed in any other country; and while there are some shortages of facilities for handling freight traffic, these are not peculiar to this country. Similar shortages occur on some of the leading private and state railways of the world.

3. The quality of the freight and passenger service rendered. here is in most respects equal or superior to the quality of that rendered by railways in other countries under conditions at all comparable.

4. The service in this country is, however, very deficient as compared with that of most other countries in respect to the extremely important element of safety. But the evidence indicates that this is due rather to local conditions than to private management, and that the situation in this regard probably would not be improved under government management.

5. Passenger rates in this country probably are no higher than in most countries for similar services; but the average rate per passenger per mile is much higher than it is on most state railways; and state railways usually make lower passenger rates than private railways.

6. The freight rates of the railways of this country have been, and are yet, based largely on what the traffic will bear. In other countries under public management, the domestic freight rates are usually based rigidly on distance. The rate-making policy followed in this country is well adapted to promoting the fullest development of industry and commerce, but it has led to many unfair and extremely harmful discriminations. Public regulation has greatly reduced the number of these unfair discriminations, and doubtless can reduce it still further; but, in the nature of things, unfair discrimination seems more likely to occur under private management than under state management.

7. The average freight rate per ton mile of the railways of this country is the lowest in the world, excepting, apparently, that of the state railways of Japan; and relatively to the conditions under which they are charged freight rates here are probably the lowest in the world. Private railways generally tend to make lower freight rates than state railways; and low freight rates are of more benefit to the public than low passenger rates.

8. While in many countries state railways cause financial losses to the public, in the United States the public derives large sums from the railways in the form of taxes. Furthermore, the amount of taxes collected from them is rapidly increasing.

9. The condition of the labor employed on the railways of this country relatively is as good as that of the labor employed on the railways of any other country; and it could not be substantially improved without imposing an additional burden of rates on travelers or shippers, or both, or an additional burden of taxes on the general public. In either case the greater part of the added burden would fall on the middle and working classes.

10. In view of the experience of many other countries with state management of railways, and of the conditions existing in our own country, it would seem that state management here would have a tendency to corrupt rather than to purify politics.

Clearly the preponderance of the evidence does not indicate that, under existing conditions at least, the adoption of government ownership in the United States would be beneficial to the public.

VIII

THE PROBLEM OF CAPITALISTIC MONOPOLY

Corners, rings, patents of monopoly, pools, cartels, trusts, holding companies, "Gary dinners," interlocking directorates, "communities of interest," "gentlemen's agreements," closed shops, codes of "professional ethics"-such terms serve to emphasize the venerable age, the cosmopolitan character, and the motley form of the monopoly problem. It is as old as industrial society and as new as the latest court decision. Other ages have met this "hydraheaded monster"; but they have possessed neither a collection as varied as ours nor such a prize specimen as our "capitalistic monopoly." This for us is the real monopoly. The "corner" is an aspect of speculation. Copyrights and patents exist by grace of the state. The "natural" monopolies of such things as gas, water, and telephone service, and even of forest lands and iron deposits, present much the same aspects and give rise to much the same problems as the railroads. But it is otherwise with "capitalistic monopoly," a phenomenon of Modern Industrialism, an offshoot of the machine system.

To act with wisdom we must first determine whether so "unnatural" and so obvious a thing is "inevitable." To do this we must carefully consider the "conditions of monopolization." But the institution is new; its life history does not as yet stand revealed in its entirety; our experience is limited; and our view is too close for perspective. Our answer is, therefore, hesitating. However, there seem to be three "groups of forces" which have conspired to produce this phenomenon. First, the machine process must be charged with partial responsibility. It has made large-scale production possible; it has caused industries of tremendous size to operate in a "stage of increasing returns"; it has developed in the corporation an impersonal form of business organization; it has concentrated in the hands of the pecuniarily efficient few huge aggregates of wealth; and in many lines it has reduced the number responsible for production to a small handful who can know each other personally and among whom a group spirit can develop. Even if monopoly and large-scale production are distinct economic phenomena, the problem of "capitalistic monopoly" arises only where wealth is concentrated. Second, the high rate of development in the industrial system cannot completely escape responsibility. New technique is often forced into use before old technique has paid for itself. The development of demand in our constantly expanding market has had the most vacillating course. Under competition and independent action of rival producers the market has experienced alternate dearth and glut. These uncertainties, seriously threatening profits, and even solvency, have been greatly increased by violent and unpredictable rhythm of the business cycle. Competing producers have thus been compelled "to get together." Third, "artificial" conditions have contributed their influence to the transformation. The "concentration of cash" and the "restriction of credit," the fickleness and special favors of the tariff, and the clever "manipulation" of railway rates have contributed to the general result. Were we able properly to impute responsibility to these various "forces," we should perhaps know what to do. Were responsibility entirely upon those last mentioned, the monopoly problem would resolve itself into such problems as the money trust, the tariff, and railroad rates. Were sole responsibility upon the second, our question would become a mere aspect of the problem of the economic cycle. Only the first directly promises an independent problem. Yet, were the causes wholly artificial, a removal of them would not solve the problem; their influence has been too organic and too wide-reaching for that.

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