TOPICS OF THE DAY.
MISCHIEFS OF OUR RAILWAY LEGISLATION.
THE opprobrium of Parliament is its unintentional legislation— the unforeseen or at least unintended consequences of the laws which it is incessantly passing on partial views. It has been busy for years passing acts "to abolish the slave-trade "; while the most certain consequence has been an immense increase in -the mortality of the slave-ships : to judge of causes by their effects, therefore, Parliament has for so many years been passing acts to increase the mortality in the slave-trade. For a long period it imposed customs-duties ostensibly for the augmentation of revenue and the protection of British industry : in fact, those were acts to limit the revenue and encourage smuggling. In like manner, it has passed acts and resolutions, while seeking cheap- ness in railways, really to prevent a cheap system of railways from resting on the sure basis of commercial profit ; while seek- ing good management, to nullify the strongest motive, the profits accruing from superior management ; while checking specula- tion to force companies into profitless speculation; while seeking safety, to compel things which lead to danger. This inverse legislation probably equals in the amount and importance of its effects the direct legislation. The novel event of a dividend not exceeding 41 per cent, just declared by the North-western • Com- pany, is one to startle the public, and to make us look abroad at the, whole system. It is not surprising that the falling off in the dividend has been discussed with animation, or imputed to causes as various as the winds. The Railway interest impute it to " competition "; the Anti-Railway writers to over-speculation. The causes, indeed, are almost as many as the conjectures of commentators : they concern not merely the North-western Railway, but the whole railway system ; not only railway interests, but the interests of every class in the community ; and they are so momentous in their ultimate tendencies that it is desirable to trace these many proximate causes to the principles which lie at the bottom of the mischief.
The North-western may be considered the typical railway. The earliest of the great trunks, it has also been regarded as the stablest in its prosperity ; and its management on the whole is accounted judicious. We speak of the company collectively ; for it is quite needless to go back to the times when its parts existed separately. The statement, therefore, made by Mr. Glyn at the half-yearly meeting on Friday, may be considered to represent the case of the railway interest generally ; and from his speech we gather the causes of the lower dividend which the directors were obliged to offer.* Competition, in a direct form, has proved to be a thing which cannot be enforced on railway companies. It is an engine which has often been used to an excess far beyond the public interest ; as in the case of stage-coaches, which instead of competing only until fares were reduced to the point of the low- est profit, reduced them to nil, and so destroyed the competition which would have kept up cheap rates. So the traffic of the Bou- logne steamers has exhibited alternations of fares ruinous to the competitors with fares oppressive to the public. But in the case of railway companies, the resources for carrying competition are so -evident, the consequences so manifest and so easily calculated, that the mere appearance of a competitor in the field leads to an anticipative arrangement by which a portion of the mutual loss is saved to all parties. As Mr. Glyn says "where combination is possible, competition is impossible." But Parliament has re- cognized "the principle of competition " : in other words, it has used that influence in terrorem : under that threat, railway companies have been subjected to arrangements almost as disadvantageous as it would have been to negotiate a com- bination with rival companies. Thus, when the North-west- ern Company obtained its Amalgamation Bill, Parliament en- forced a tariff of fares fixed at very low rates. That illegiti- mate interference with trading operations has been followed by a season of unusual commercial depression ; the Irish trade in live stock, especially, has suffered to an immense extent, the trade in pigs being absolutely suspended ; and a consequence is, that in place of the increased traffic which in trade is the legiti- mate offspring of cheapness, and which Parliament must have an- ticipated as a condition of its arbitrary arrangement, there has been decreased traffic. Again, to avoid the competition of rival enterprisers, the Company has been forced into collateral under- takings, branch-lines and so forth, some of which do not "pay," • and some of which are forbidden to exist by the difficulty of ob- taining money. Thus, speculation as yet profitless has been forced on the company by Parliament. The same effect has been produced indirectly by Mr. Gladstone's Act, which most irration- ally restricted the dividends of railway companies to 10 per cent ; virtually forcing any dividend which might accrue beyond that amount back into the coffers of the company, whence it has natu- rally flowed into nominal investments devised for the purpose of releasing it to the shareholders in the shape of nominal divi- dend" on the increased capital. Thus, Parliament has forced upon companies wasteful modes of investment, and has prevented the companies from setting the large dividends legitimately pro- duced by prosperous years against the small dividends of adverse years : it has forbidden dividends in excess of 10 per cent ; it has afforded no security against dividends below a fixed minimum.
• The capital of the company is 20,288,4991.; the revenue for the half-year end. lug on the 30th Juno, 1,080,6911; the expenditure, 515,9931.; balance, 514,6971
The State, which enforces these strange laws upon the particular commercial body in question, exacts from it rates and taxes to the extent of 100,0001. besides the Income-tax.
The proximate causes, then, of the diminished prosperity in this great railway company—causes large in their operation and large in their effects—are, an arbitrary enforcement of low fares concurrently with diminished traffic ; arbitrary limitation of di- visible profits ; direct enforcement of over-speculation under threat of competition; indirect enforcement of the same by the limitation of profits.
Such causes could scarcely have had any good effects ; they must almost of necessity have the very worst—effects diametri- cally opposite to those which were intended. Cheapness is the legitimate result of extensive traffic, to procure which enterprisers are stimulated by the hope of deriving from low individual charges large aggregate profits. The Legislature destroys the stimulus ; and by enforcing low rates without securing the larger traffic, en- dangers the stability of the whole arrangement; for no arbitrary law would oblige a company to go on with rates which yield no profit. On the other hand, diminished prosperity concludes to parsimony—to want of respect and zeal among servants—to the losing of hope and heart even among principals—to all the most fatal sources of bad management, and therefore of instability, ultimate dearness, and lack of safety.
Parliament has been betrayed into this course ef perverieje- gislation by not having settled any principles for Us own guid- ance. It has suffered the railway system to grow tli, haphazard, while it was pondering the question whether. the system should be the care of Government or of, private speculators ; it has throughout refused to take a comprehensive grasp of the whole subject; it has, looking by turns only to spatial objects—such as cheap fares, or accommodotion of poor, or prevention of accidents, or prevention of waste of capital, and many other specialties—re- sorted to partial expedients, based in their turn upon principles the most inconsistent with each other—on state management, private and protected monopoly, or trading competition. Even after the system, a hybrid between private trading and state management, was suffered to grow up, Parliament has ne- glected to define the portions of it which came under one principle or another ; so that state management has been attempted *here private management alone could be effective, monopoly has been protected where it might have been left to shift for itself, and. competition has been used to produce its disasters without its benefits. If the system is a mixed one, between private trading and state control, it would not be impossible to distinguish the portions of it which may be deemed to belong to one or other na- ture, private or public, and to apply enabling or compulsory laws accordingly. Inasmuch, for eiample, as the companies are tra- ding bodies, stimulated most powerfully by. trading; influences, it is desirable to extend the most potent trading influence, the love of profit, with the utmost freedom. There should therefore be no limit on profit. To confound high profits with high rates; indi- vidual cost to the travelleg with aggregate revenue to the coal- pony, is a very gross confusion of ideas, which such notorious ex- periences as those of the modern haberdasherytrade ought to have dissipated in the minds of all intelligent men. On the other hand, as railway companies need extraordinary powers for ac- quiring lands, and as there is some distractiori.of responeibility induced by the contract system between the actual constructor of the works and the traveller who uses them, it is proper for the state penally to enforce sufficiency of construction, and to regulate the extension and direction of lines. Competition might be held in terrorem to coerce companies convicted of overt mismanage- ment; but it is a most mischievous instrument when used to com- pel a premature anticipation of what ought to be the development of time—for tearing open the bud before its full growth. In short, assuming that the hybrid character fortuitously acquired by our railway system is to be retained, it would be easy, by a due dis- crimination in applying enabling or compulsory laws, to avoid. those outrages on common sense and policy which enforce whole- sale railway disasters by act of Parliament. The present adver- sity of the North-western Company is an adversity inflicted by act of Parliament ; it is one which involves perils not only_ to that company, but to the railway system at large; and there can be no security against it, until Parliament shall have comprehended and settled the principles on which it means to base its own conduct towards railway companies.
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