RAILWAY AMALGAMATION.
A i3 we anticipated a fortnight since, the announcement of the intended amalgamation of the London and North- Western and Lancashire and Yorkshire Railway Companies has somewhat startled the public, The impression was that our great Railways were already most colossal undertakings, and the junction of our very largest company with one of the next in rank could not but form a combination of bewilder- ing magnitude. The simple figures we published were rather under than above the mark. We put the capital of the amalgamated company at £83,000,000, but the authorized capital which will soon be expended is £85,000,000, and the capital of the leased and dependent lines is £15,000,000. The total is £100,000,000, and the new con- cern would thus employ rather more than one-sixth of the capital invested in our Railways. The aggregate mileage, 2,270 miles, is far from being so great in proportion, and is exceeded by the mileage of more than one foreign railway; but per contra, the Companies get more than an average share of the railway business done in the country,—their proportion of the gross traffic, over £10,000,000, being nearly a fourth, instead of the sixth, which would be the amount corresponding to their capital. These are startling enough figures, and the affair looks even more gigantic when we reflect for a moment on the share the concern will have in the industrial coo- nomy of the country, and compare it with other trading corporations which have been famous for their size. The amalgamation simply means that a fourth of the internal land transit, at least of by far the most important description of land transit, of the richest nation in the world will be in the hands of a single corporation. The communication be- tween the capital and several of the most important districts of the United Kingdom will be wholly or almost wholly under their direction. This is an immense work to be entrusted to a single mercantile concern, and lies never been exceeded in magnitude and importance combined. The Bank of England is perhaps an engine of greater economic power, banking being the highest kind of business, but the capital of the Bank of Eng- land is, after all, only about £14,000,000—capital, deposits, and circulation together, rarely exceed sixty or seventy millions— so that even in respect of capital the newly amalgamated company is much the larger undertaking. Even so famous a corporation as the East India Company, when it was at last extinguished, had only a capital of about £12,000,000, and that amount, in American phrase, was strongly "watered." The public may be excused therefore for indulging some curiosity about a concern which will exceed in bigness anything that has been before known in the annals of industrial enterprise, and which will enjoy a practical monopoly of so large a part of the national communications as to influence directly and indirectly the welfare of almost every individual in the community. But a large part of the public, besides being startled, have been seized with a feeling akin to fear. The notion of the benefit of competition in all business has still so firm a hold, that the abolition or diminution of competition over so large a field is anything but a welcome prospect. The public, it is said, will be at the mercy of a huge tyrannical combination in the use of one of the most essential instruments of national wealth. What fares the combination pleases will be charged, and it will also be absolute in the matter of facilities and accommoda- tion, subject only to such antiquated limitations in the public interest as were stipulated for in the original concession. The people of Liverpool in particular have taken alarm at the possibi- lity of their business being " strangled " by an increased mono- poly, the existing state of affairs with only a moderate amount of competition being already considered quite intolerable. We be- lieve, however, that the fear is unfounded ; that the step is only a part of the natural progresci in establishing ourRailway system.; that the end of a series of great amalgamations, finally abolish- ing Railway competition throughout the United Kingdom, could only be the general profit of the whole community, as well as of railway shareholders. The reasons, to our mind, are not far to seek.
Is the process of amalgamation inevitable ? This is, in fact, the key of the whole question, for there will be little use, indeed, in endeavouring to maintain the principle of competi- tion when the " law of things " sets steadily against it. The entire history of English Railways shows, we think, that there is a law in the matter. Started at first on the theory that competition was to be the principle, that independent com- panies were to have the control of rival routes between, the same places, thiat the public were to look to this rivalry for cheap fares and good accommodation,—the mere fact that there has never been competition except of the most limited kind, that competing companies, even where they have not amalgamated, have usually agreed, and that amalgamation has at last placed almost the entire Railway business of the country in the hands of some nine or ten great Companies, goes a long way to prove that the competition principle was unsound. If there had been anything in it, some one or more of the great Companies would have found its interest in working it, and would have shunned amalgamation ; while it might also have been possible so to legislate as to forbid the numerous agree- ments and understandings which have paved the way to formal and complete unions. It has, moreover, been shown very clearly why competition is impracticable. The business of transit is essentially a limited one. The facilities given or refused have something to do with its amount ; but after all, the multiplication of roads and facilities cannot multiply propor- tionally the occasions for people to use them. Beyond a cer- tain point, the additions to the number of roads are superfluous. Hence competition in Railway history has never had any other object but to provide a test for the division of the business common to two or more rival railways. A rule for division arrived at, self-interest has taught the Companies the expedi- ency of agreeing, so that they could reduce the joint expenses to a minimum, charge as much as possible to the public, and divide the net profit. Such proceedings have been so uniform
in Railway history, and are exemplified so well at the present moment on the great competing routes—in the south-east, for instance, between the South-Eastern and Chatham and
Dover Companies, and in the north between the various companies which connect Scotland with London — that
other proof is not required of the impossibility of obtaining competition where the self-interest of the expected competitors so clearly commands the division of a limited profit, which competition could only reduce. And there are other causes which have steadily promoted amalgamation. As " through " business has increased, it has been found that the multiplicity of undertakings is a nuisance. General charges are swollen, there is far too much rolling stock for the actual work done, frequent interchanges of traffic are inconvenient. It is im- possible to arrange through and connecting trains without an amount of friction and negotiation which are not to be ex- pected from ordinary human agency. Amalgamation is thus rendered necessary over very wide districts indeed, if the business is to go on at all, and Railway history has only proved that with the increase of business till) nuisance of divided management became daily more intolerable. So great has been the necessity, both on this account and for the reason of self-interest above stated, that even when Parliament has pre- vented amalgamation, all sorts of irregular arrangements have been devised by which the Companies have been enabled to charge common rates and fares to the public, and divide expenses and profits. Nothing in short could exceed the ingenuity with which competition has been evaded, and arrangements entered into corresponding to the facts of the business.
But while recognizing amalgamation as inevitable, we do not see that the public suffers. The good it does get from the fragments of competition left does not come to much. Occa- sionally there is such a feud as that which broke out a twelve- month since between the Midland and Great Northern com- panies respecting the coal traffic, but the difference made in the charges, though it causes a serious loss to railway shareholders, is not felt by the mass of the public, and though there must be a gain somewhere by the cheapening of the cost of conveyance of an important article of trade, it is too inappreciable a gain and too transient to be made much of when contrasting a competitive with an amalgamated system of Railways. Liverpool, it is alleged, is placed at a disadvan- tage compared with other ports in the kingdom, because it is now served by a company which has an exclusive monopoly, instead of by competing companies ; but one has never heard of any decay in the prosperity of Liverpool, and we should doubt very much, when the complaint is put to the proof, if any serious differences in the rates could be shown, or if Liverpool could be proved to be more in the hands of one monopolist than almost every other port except London. It is very clear, moreover, that amalgamation offers advantages even to the public which are not possible through competition. What we have pointed out as a nuisance to multiplied companies in adjusting through and connected trains, and in interchanging traffic is equally a nuisance to the public, only to be got rid of by amalgamation. And the opposite ideal lately described by Sir Edward Watkin is really very seductive. To have the entire Railway system worked as one, with through booking from any station to every other station in the kingdom, is so obvious a boon, that the amalgamations which give us an approximation to it, and tend to bring it about completely, are desirable as the next best. As to the public being at the mercy of the monopolists, that is an argument very easily dis- missed. Practically, it is nothing, for the public already suffer all the disadvantages of a monopoly, fares being as high and accommodation as limited as if the sham competition did not exist, but the monopoly besides is of a sort which could not inflict permanent injury, because it is peculiarly under legislative control, and is likely to inflict least injury when concentrated and made visible, because it will then attract more attention and be more afraid of giving offence. No one really dreams for a moment that Railways will do as they like, even with the most absolute security against new competition. Their business would become indefinitely more profitable, as it is doing every day, with the natural growth of the country ; but they would fear to show excessive profits, would lower fares and increase public accommodation not to let them rise too fast, would evade in every way the risk of public odium. The directors and officials would equally have an interest in their public repute, would be peculiarly sensitive to public opinion as Government officials now are, and could not, if they would, conduct their
business on the principle of a vigorous and legally-protected monopoly. At the worst, the true remedy for the evils apprehended from exclusive monopoly is not competition, but an improvement in the form of public control. But as we hinted in noticing the subject before, the chief advantage we anticipate from the continuous process of amalgamation is the facility it will afford for the purchase of the Railways by the State. When the entire system of Great Britain is managed as one line, the question will infallibly be put, why a private company should have it, keeping the grow- ing profits for itself, instead of its being retained in the nation's own hands V A large joint-stock company manages no better than a State department, perhaps hardly so well, and in working a monopoly it has the disadvantage of aiming first at profit instead of the public advantage, which is the object of a State Department, profit being only incidental, In short, where there is only one railway, the analogy between the business of railway conveyance and the work performed by the Post Office will be complete, and the abolition of the private company must come. As paving the way for these important results, the proposed amalgamation is a most critical event in Railway history. We trust when the Bill comes before Parliament it will be treated as a public and not a private matter, and that while every kind of advantage is stipulated for on behalf of the public in return for the pri- vileges asked for, there will be no shortsighted opposition to the principle of amalgamation itself.
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