TRUSTEES FOR THE NATION.
WE do not propose at the moment to go into the details of the Marconi contract, but there is one aspect of the evidence given by Sir Alexander King to which it is important to call attention without delay. In the course of his cross-examination by Mr. Terrell on Monday last, Sir Alexander King was interrogated as follows :—
" Yon were negotiating on behalf of the Government, and I take it it would be your duty to get the best terms you could for the Government ? "Within reason." What do you mean by "within reason " ? "I do not think it is the duty of any Govern- ment Department to get an unfair bargain."
In answer to a further question, intended to bring out the fact that the Government held the Marconi Company entirely at their mercy, Sir Alexander King said: " We do not negotiate on that basis. We do not say to a man, 'Because we have got the pull on you we are going to get the best of von."
Superficially these answers oZ the representative of the Post Office seem extremely plausible. We all want to be fair, and we all in our private life resent the idea of exacting a bard bargain because we have momentarily got the pull on the person with whom we are bargaining. But the practical question is whether this principle of private life can possibly be applied with justice and with safety to the commercial dealings of a Government department. In the first place there is this fundamental distinction, that a private man is dealing with his own money, whereas a Government department is or ought to be a trustee for the nation. It is notorious that an honourable man, when acting as a trustee, must insist on harder terms than he might be willing to accept if he were acting for himself alone. He argues, and rightly argues, that he is not justified in being generous with other people's money. His cestui-que-trusts might conceivably be willing to take a generous view of the point under negotiation, but he has no right without consulting them, or unless be has received general instructions to that effect from them, to conduct their affairs otherwise than on strict business principles. Those principles are fairly well understood by the mass of the community. They do not involve the exaction of the uttermost farthing in each particular case, for the simple reason that every good business man understands that a good bargain must be satisfactory to both sides, other- wise future business becomes impossible. But this clearly means that each side must play its own game and take advantage of all the points that are in its favour. Sir Alexander King's evidence amounts to a frank admission that this was not done by the Post Office in the negotiations with Mr. Godfrey Isaacs. He knew that the Government held the Marconi Company at their mercy, because the patents of the Company were wholly dependent on the license of the Government. He deliber- ately abstained from using this essential fact in the negotiations. In other words he threw away the points in the game which told in the Government's favour on the plea that it was unfair to use them. We venture to say without fear of contradiction that no reasonable, prudent, business-like, or justly-minded trustee acting on behalf of cestui-que-trusts would have so conducted the negotiations. He would have kept always before his eyes the principles involved in the following considerations : "I have no right to act the generous and beneficent millionaire with other men's money. I can only trust myself to do that with my own. Other people's pecuniary interests are a sacred and inviolable trust with which I dare not play the magnificent man."
But the arguments against Sir Alexander King's theory of business are even greater in the case of a Government than in the case of a private trustee. For a private trustee is acting for a limited number of persons, generally in moderately comfortable conditions of life, and with no rival business interest of their own; whereas a Government Department is acting for a whole nation, containing vast numbers of very poor people, and also containing a considerable number of people subjected to business conditions of a totally different character. Sir A. King, in refusing to take advantage of the points of the game, because he thought them unfair to the Marconi Company, was in effect being unfair to all the people in the community whose taxes would be increased by a bad contract, and also to other business firms who have to make a living under the keenest conditions of competition where these theories do not apply.
For these reasons we hold that the plausible theory that a Government ought to aim at some vague ideal of fairness in making contracts cannot possibly be upheld, and we apply this conclusion not only to contracts with business firms, but also to contracts with wage- earners. Our view is strengthened by the fact that even in the interpretation of what is known as the Fair Wage Clause the Government is guided not by vague considerations of what is fair, but by the very definite rule that the wages must be fixed upon the basis of those current in the trade concerned—in other words, the Government must pay the normal competitive wage. To do less than this would be injurious to the community by helping to depress wages : to do more than this would be unjust to other wage-earners. For the wage-earner who bad applied for Government work and been refused would suffer the injustice of being compelled to pay taxes in order that his more successful competitor might receive a higher wage than he was himself earning for identical work. It is indeed a pity that the Fair Wage Clause ever received this somewhat misleading appellation, for it suggests a principle of interpretation which is not even attempted, and which could not be carried out without grave injustice to the community as a whole and risk of widespread political corruption. Of the magnitude of this risk of corruption in the case of commercial contracts it is not necessary to say much. The facts are patent. The Post Office, according to the admission of its representative, refused to negotiate with a big commercial company on ordinary commercial terms. It permitted Mr. Godfrey Isaacs to use all the points in his favour for extracting the best possible terms out of the Government—including, apparently, a threat to sell his patents to the Germans, on the principle of business first, patriotism second. It failed to take advantage of the means by which the Government could have resisted this compulsion. To take one illustration—the con- tract contains a clause giving the Marconi Company
the right to construct all future stations which the Government may require. The Treasury wrote that they regarded it as essential that this clause should be excised. Sir Alexander King knew that he held the Marconi Com- pany at his mercy, but instead of using that power to insist on the excision of a clause thus emphatically condemned by the Treasury, he consented to a compromise which reduced the period for which this part of the contract should be valid from eighteen years to five. This was done on the specious plea of not being unfair to the Company. The inevitable result was the grossest unfair- ness to the nation. The proof of that unfairness is to be found in the enormous boom in Marconi shares which followed upon the acceptance of the Marconi contract. People knew that the Marconi Company, instead of remaining at the mercy of the Government, had now made a contract which placed the Government at its mercy, and as a result the price of the shares rose by leaps and bounds. Other business firms who, in order to get ordinary commercial contracts, are compelled to cut their profits to the uttermost farthing, will have to meet an extra burden of taxation to provide part of the funds out of which the fortunes of the Marconi Company are to be made. We wonder whether Sir Alexander King and his official superiors regard this as fair.
We are very willing to believe that there has been no corruption in the present case—only an extraordinary
lack of ordinary business acumen. But it is quite obvious that directly a Government department abandons business principles in conducting business negotiations the way is opened for corruption. According to the Post Office theory a Government department is not to try to get the best terms it can for the Government and for the nation, but is to take into account what would be fair to the person with whom the negotiations are being conducted. One's estimate of what is fair depends very largely on one's mental attitude at the moment, and that attitude may obviously be influenced by pecuniary considerations. This applies to trustees equally with Government officials. Suppose a trustee is engaged in selling a house for his cestui-que-trusts, and that a particular purchaser has a special reason for buying. It is known that he would give a large price rather than go without the property. But he comes to the trustee and says : "You are taking advantage of my very peculiar posi- tion. Cannot we agree on a fair price, and I will arrange to put something in your pocket ? " The only answer that an honourable man could make would be that it is his business to get the best terms he can for the cestui-que-trusts, and that the offer of a bribe is an insult. But we can never be sure that such offers will not be made in the future, and on an extensive scale, if Government departments are to adopt the principle laid down by Sir Alexander King. In a word. Government generosity must in the long run mean Government corruption. That Sir Alexander King is himself far above the risk of any such temptation we concede, without the slightest reserve. We are not, however, so foolish as to believe that he is certain to be succeeded by men who would never yield to temptation, when the door has been so conveniently left open, as it must be, if Sir Alexander's principle of official bargaining is adopted.
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