Finance Public and Private
Railways and National Prosperity
Dt'RING the past week there has been just a slight recovery in market quotations of English Railway stocks. For many months—it might be said for many years—the tendency has been in the downward direction, and latterly the depression of the market has been emphasized by anxiety concerning the forthcoming dividend announce- ments, as it is felt that the recent coal stoppage and especially the high prices paid by the companies for foreign fuel must have hit the railways very hard. In this particular respect the utmost sympathy will, of course, be felt for the railroad management, and it is, moreover, to the credit of the administrative departments of the various companies that, in spite of this severe handicap, sufficient foreign coal was purchased to enable the summer service to be run, at all events for two months in the past year. Nevertheless, I find nothing to withdraw from the comments I made in the columns of the Spectator of December 18th, in which I expressed the view that the ultimate salvation of railway shareholders was to be found in a greater study on the part of railroad manage- ment of the requirements of the public, whether as regards passenger facilities or the facilities for the carriage of goods.
CAUSE OF THE RALLY.
I must confess, therefore, that I find little assurance for the future in the cause responsible for the moderate rally in railway stocks during the past week. It has been due to the permission granted to the railways to raise their rates for goods traffic by about 6 per cent. at the end of the present month. I notice also that, with his accustomed lucidity, Sir Josiah Stamp, in an interview with a representative of the Morning Post, has made a defence of the action of the railways by explaining that on the occasion of the last reduction in rates there was no response from trade generally. The reduction was, said Sir Josiah, " a gesture on the part of the railway com- panies, but trade during the past three years has not justified the step taken." At the risk, I know, of dissent from many quarters, I suggest that at least one cause of the trade depression and the consequent lack of the increase in freights desired by Sir Josiah Stamp is to be found in the fact that in two of the key industries of the country, coal-mining and railways, imperfect organization and a failure to recognize the need for an economic wage may have played a most important part. And especially, I think, is this so in the case of the most sheltered industry in the whole country, namely, the railroads, where for years it has been one long series of labour holding the public and the shareholders alike up to ransom by a series of strikes, the result of which has been such a constant yielding to the demands of the Unions as to make efficient, economic control of railroad organization almost an impossibility. And by an economic wage, it must not be supposed that I am necessarily suggesting a lower amount per week than is at present paid ; but so long as the universal limit of working hours per day is fixed, irrespective of the general character and strain of the duties imposed, there must of necessity be a most appalling waste. Moreover, in the railroad as in many other industries in the country, so far from increased output, increased efficiency or increased civility having kept pace with increased pay and increased privileges, the very reverse has often been the case.
STANDPOINT OF SHAREHOLDERS.
Accustomed as I am by the very nature of my duties to look at these matters from the standpoint of the investor, .I can scarcely be accused of failure to realize the need for capital invested obtaining its due reward. I entirely agree with Sir Josiah Stamp when he says, you cannot get permanent improvement if the interests of the shareholders are not at the same time borne in mind, because their capital is essential' to any develop- inent."- r-w-Citila like, however, to ask Sir .Tosiah whether he considers that the interests of the shareholders have .been aided by the general railroad policy since the fusion arrangements of a few years ago which were supposed to open up a new era for railroad shareholders. I think it will be found that until quite recently, at all events, failure to give the travelling public facilities even equal to those of fifteen years ago, and, in many instances, failure to compete in the matter of speed and reliability with motor transit of goods has created an ever-growing dissatis- faction on the part of the general public, upon whose good will the railways must esultimately depend for their revenues and the shareholders for their dividends.
HERALDING A TRADE RECOVERY.
And now, at a moment when after an eight months' stoppage, hopes are entertained of a trade revival based upon the resumption of the coal output, the railroads are obtaining powers to make an increase in their freight charges instead of concentrating, first, upon economies which might, it would be supposed, he obtained through a breaking down of trade union restrictions and, second, upon schemes for stimulating rather than diminishing revenues from goods and passengers.
ECONOMIC LAWS.
There is a similarity between Government and railroad expenditure which cannot be ignored. We know that any criticism of Government expenditure which cuts across " policy " or threatens any diminution in adminis- trative staffs is wellnigh hopeless—and such is the power of trade or railroad unions, supported as it has been by many years of " victories " and with a constant kind of political support from successive Governments, that the consumer and the public arc asked to believe that there are some things, such as Government expenditure and the rights of labour unions which, like the laws of the Medes and Persians, are unalterable. All the time, however, there are other laws operating of an economic character which, although less loudly proclaimed than those of the Medes and Persians, are, perhaps, even more inexorable. Governments may temporarily " wangle " the situation and produce equilibriums in balance sheets by putting on a tax to the consumer, and railways may temporarily meet a situation by passing on the higher costs of labour to the trader, but all the time these measures are working in a vicious circle, and there can be no enduring prosperity for railroads or other industries until camouflage gives place to a facing of real facts, and the requirements of the consumer and the general public obtain first consideration.
ARTHUR W. KIDDY.
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