PRIVATE ENTERPRISE.
PROMINENT among the many features of interest which arise out of the opening of the Immingham Docks by the King is the fact that these huge docks have been constructed by a railway company, thus pointing to a further extension of the policy which for many years past has been adopted by most of the principal railway com- panies of the kingdom. There are many people who hold that it is undesirable that railway companies should go beyond the work of building and working railways, and who consequently object to any railway company building or owning docks. With the general feeling underlying this proposition we agree. The advantages of division of labour are not confined to individual workmen. They extend also to great companies and industrial undertakings, and in the main it is undesirable that a company formed for one specific purpose should undertake subsidiary duties. For this reason we feel that a profound mistake was made by the railway companies when they undertook the con- struction of their own rolling stock. In the long run the companies would probably have obtained cheaper and better rolling stock if they had continued to deal with firms who made a speciality of this manufacture. What they have now done is to build up vast organiza- tions for the construction of their own rolling stock, with the result that when any important new invention is made the company has to consider whether it is worth while to scrap a large amount of valuable plant in order to produce engines of a new design. If, on the other hand, the com- panies had continued to deal with engine-building firms, competition would have forced one or other of these firms to make the necessary sacrifice of capital for the sake of improvement of design. When, however, we pass to the question of docks, different considerations arise. One of the main duties of a railway company is to secure easy communication between the sea and the interior, and unless efficient docking accommodation is available this easy communication cannot be secured. A good dock, therefore, may be looked upon as merely a continuation of a railway, strictly analogous in every respect to a shunting yard at an inland station. This, of course, does not touch the further ques- tion whether a railway company should also own a line of steamships for communication with foreign ports ; but that is a point into which we need not for the moment enter. It is more important to lay stress on another aspect of the opening of the great dock at Immingham. This dock, which is one of the largest in the kingdom, has been constructed, like almost every commercial dock in Great Britain, entirely by private enterprise. The superiority of this method of construction over State enterprise is admirably illustrated by comparing the harbour accom- modation of Great Britain with that of France. In the latter country docks are mainly constructed by the Government, with the result, as M. Yves Guyot has frequently pointed out, that they are too small and too numerous. Each seaboard constituency wishes to have public money spent upon the creation of a local dock, and as the Government cannot possibly afford to build a large dock in each little place it builds a number of little docks, many of which have been rendered practically useless by the expansion in the size of steamships. On the other hand, in Great Britain private enterprise comes forward to build docks suitable to the work to be done in the places where they will prove most advantageous. The community thus obtains the advantage of the most efficient instrument of production. It is true that this process, like all com- petitive processes, involves the waste, or partial waste, of the capital privately expended in less efficient docks else- where. But such waste is inevitable if progress is to take place. The public cannot be too often reminded that decay is the counterpart of growth. The waste of old capital is the necessary accompaniment to the fertility of new capital. Nor need the most anxious economist repine ; for the capital which is wasted under the system of private enterprise represents money which would otherwise have been spent on temporary satisfactions. An individual has the alternative of spending his spare cash, let us say, on champagne, or on contributing to the construction. of a dock. If he chooses the former alternative, he has the pleasure of drinking the champagne, and that is the end of the business. If, however, he spends his money in helping to build a dock the world gets the advantage of the use of the instrument of production so long as it is serviceable ; and, even though the dock may only last a few years before it is superseded by a bigger dock, the world remains better off than it would have been if the money had gone on champagne.
This is the final economic argument in favour of raising capital by private subscription. for commercial enterprises rather than raising it, or the interest to pay for it, by taxation. There is a further administrative argument in favour of private enterprise which is only fully realized by comparing results. The system of State railways in India is about as good as any State railway system in the world. The Indian Government is a well-organized bureaucracy unaffected by democratic pressure and bending its energies to the one end of producing successful results. Yet the State railway system of India is admittedly in some important respects a failure. At the present moment all the commercial classes in India are clamouring for additional railway facilities which the Government is unable to give. Not only are additional railways required, but more rolling stock is wanted on the existing lines. The Government cannot satisfy these demands because it cannot raise the necessary capital without embarrassing its general financial position. A few years ago Lord Morley, as the Secretary of State, tried to deal with this problem, and laid down a more or less definite programme for the expansion of Indian rail- ways. But not once since that programme was laid down has the full amount of capital contemplated been spent upon the development of Indian railway lines. In the present year we think we are right in saying that the total new construction of railways provided for under State management in the vast Empire of India is twenty-eight miles. That alone is a sufficient proof of the failure of the State system in a country which is expanding com- mercially and agriculturally almost as rapidly as the New World. As a means of escape from this deadlock we see in the Indian papers that a suggestion has been made by Sir Francis Spring, Chairman of the Madras Port Trust, that the Indian railway system should be converted into a gigantic trust, financially independent of the Government, but subjected to Government control so far as such control is necessary to protect the interests of the public. This is probably the best way of dealing with the problem of railways in such a country as India. It would also, we may add parenthetically, have been the best way of deal- ing with the telegraphs and telephones in the United Kingdom.
The essential vice of State enterprise lies in a confusion of functions. " The business of Government," as Mr.
Gladstone used to be fond of saying, " is to govern, not to trade," and directly a Government confuses these two entirely distinct functions one or the other, and in the majority of cases both, suffer. No Government can trade as well as a company or trust created for purely trading purposes, and directly a Government begins to trade it ceases to use its power of control impartially. A glaring illustration of this is furnished by the history of the London County Council trams. The Progressive Party on the County Council insisted several years ago, in spite of the advice of far-seeing men like Lord Avebury-, in purchasing the tramway system of the metropolis instead of leaving it in the hands of companies working under the control of the Council. As to the financial results up to date there is much difference of opinion, for the accounts are complicated by such questions as the cost of street widening in order to permit the passage of tramways. On the whole, however, it seems to be fairly established that the ratepayers have made a profit on the undertaking. But it is more than doubtful whether this profit is nearly as great as the net revenue which could have been realized -without any risk at all by leaving the tramways in the bands of a commercial company. At the time that the tramways were taken over the North London Company was paying a huge rental to the County Council, and was willing to increase that rental immensely for a continuance of its privileges. Prudent financiers urged in vain that it was better to make sure of a steady and safe income rather than to launch out upon the risky experiment of municipal trams. How risky that experiment was the Progressive Party in the County Council is now appreciating. Even so important a municipal body as the London County Council cannot check the progress of invention, and the appearance of the motor-'bus has entirely altered the financial prospects of the London trams. So serious is the competition of the motor-'buses that the Progressive Party in the Council, composed mainly of people who in national politics call themselves Free Traders, is actually demanding the esta- blishment of a rigid system of protection, so as to preserve the profits of the tramways. The definite proposal made is that the County Council should have power to license or to refuse to license motor-'buses, so as to prevent them running on routes where they might cut into tramway profits. We could hardly find a better illustration of the injury inflicted on the community by municipal or State enterprise.
Previous page
