LIBRARY UNIVERSITY OF CALIFORNIA. G I FT OF Class ?*ZyL O P obit a ROBI OTHER PEOPLE'S MONEY BEING A STORY OF MUNICIPAL SPECULATION AND ITS CONSEQUENCES BY ROBERT P. PORTER HE advocates of municipal ownership in the United States are threatened with a movement in England which may knock the underpinning from their structure and bring down the edifice with a crash. The epidemic of municipal trading and interference with private en- terprise may be arrested by a Royal Commission, or Joint Committee of Parliament, which has been appointed to define the extent to which municipal trading shall be sanctioned by the Legislature. The contention of a large and influential body of English- men, who have become thoroughly alarmed at the present situation, is, that individual effort in England is being crushed and enterprise stifled by municipal interference ; that unless a vigorous opposition is organized against these encroachments of the muni- cipality the national consciousness will be choked in the coils of the boa constrictor bureaucracy as effectually as it has been in Germany. The facts in relation to this important movement, which only crystallized six months ago, will come Municipal interference stifles individual enterprise ^Reprinted from the N. Y. Times of October jl, 1899. 164286 Other People's M o n e y Conclusions of half -baked economists Englishmen alarmed at the increase in their local debt as a surprise to those in the United States who have accepted without question the conclusions of enthusi- astic writers or half-baked economists in relation to the achievements of municipal trading in England. If only a part of the acts alleged as a basis for Parlia- mentary action and a halt in this tendency to State omnipotence be true, the disillusioning is likely to be as complete as it will be sudden. The immediate cause for alarm and dissatisfaction on the part of taxpayers is the increase of local indebt- edness and taxation since the inauguration of munici- pal trading. From 1878 to 1897 the local debt of England and Wales has more than doubled, and now represents the enormous sum of $1,260,000,000, over half of which represents various trading plants which may or may not be worth the original capital invested therein. In the past twenty years the local debt of England has increased 120 per cent., and the annual amount of local taxation has increased 77 per cent., against an increase in the population the paymaster who has to meet these increasing burdens of only 23.6 per cent., and in the ratable value of his property of only 26.7 per cent. It is furthermore claimed, in a recent address by Dixon Henry Davies before the London Society of Arts, that while the imperial legis- lators have been devoting themselves to a systematic reduction of the national debt, local legislators, under the pretense of doing all sorts of things for the corn- community Other People" s Money munity which should be left to individual enterprise, have as steadily been augmenting the liabilities of municipal taxpayers. Enormous as is the increase in local debt, there is, as Mr. Davies truly contends, no closing the capital account. He instances the case of electricity. Mu- nicipalities in England have hitherto only dealt with this great subject in a small and timid spirit. The total indebtedness under this head in the last pub- lished figures is only some $15,000,000, due to the fact that about all the English municipalities have thus far done is to tie up this important and universal industry so that private enterprise is afraid to touch it. Experts declare that if the English authorities retain possession of the electrical industry and keep pace with the needs of the future, they will have to spend $500,000,000 where they have at present spent $15,000,000. "Surely," says the writer referred to above, " such a vista of capital commitment should give pause to the counsels of those adventurous spirits who, with vicarious enterprise, are so ready to land the ratepayers in further trading risks." The most discreditable thing to municipal enter- prise in England in this connection is the fact that in no less than 104 cases local authorities have obtained and are holding " provisional orders " granted by Par- liament for electric lighting, etc., without doing any thing to carry the powers into effect. Dog-in-the- manger - The Dog-in- tbe- Manger tactics of English local authorities Other People" s Money manger-like, these powers have been taken to keep private and individual effort out, and the natural result is to retard enterprise and stop the progress of the towns. That these encroachments of municipal governors into the domain of commerce restrict and repress in- dividual enterprise there can be no doubt. Indeed, it is being loudly proclaimed in England that it has had the deplorable effect of enslaving the free energies of the nation, especially in the exploiting of electrical enterprise. The facts presented to sustain the charge, it must be admitted, are of a startling character. Not only have municipalities obtained " provisional orders " in order to prevent individuals from entering the field of competition, but they have organized an opposition to all efforts on the part of private enterprise to extend the service or lower the price. The Electric Lighting act of 1888 provides that "the grant of authority to any undertakers to supply electricity within any area, whether by license or provisional order, shall not in any way hinder or restrict the granting of a license or order to the local authority or to any company or per- son in the same area." We are told that whenever electric stations belonged to private companies the local authorities have promptly taken advantage of this section. But what was sauce for the company goose was by no means sauce to the municipal gander. The act Other P e o p I e 9 s M o n e y act makes no difference, but the municipalities have always granted authority to competing companies in cases where private companies controlled, but have systematically refused where the plants were controlled by municipalities. Nor is this the worst. The most high-handed outrage so far perpetrated ^ in the name of municipal ownership was the defeat in ' ^ J . Parliament of proposals to supply large districts in i i c T- i i -i i i i outrage the north or England with a thoroughly modern sys- tem of electrical transmission. When the means of insulating high-tension currents became improved, and other scientific appliances were devised, it was discov- ered, so says Mr. Davies, that the English parochial limits, fixed in the time of King Alfred, did not form a scientific division for confining a peculiarly elastic and transmissible force. Some parties therefore pro- posed, in full reliance on the section of the act of Par- liament above quoted, to establish electric transmission systems on a much larger and more modern scale than has hitherto been known in England, but which would in no way be unusual either in the United States or Germany. They moreover proposed to subject them- selves to a maximum charge, less than one-half the rate which the municipalities were authorized to charge, and were as a general rule charging for the electrical unit. What did the friends of municipal ownership do ? Welcome Town Cltrks oppose cheap ekctric power Other People" s Money Welcome and assist the company in the effort to establish modern methods in an important industry ? On the contrary, they organized a relentless, bitter, and, from the American point of view, unlawful oppo- sition, and by concentrating the municipal political influence defeated the second reading or the bill in Parliament. Yet no monopoly was sought for the company who, I am told on reliable authority, merely wished to trade in competition with any existing station, just as a new railway seeks power to compete in the carrying trade. The proposal was welcomed by the trading community. The Chambers of Commerce petitioned in its favor, and no one opposed the great enterprise except the municipalities. These organizations, with their autocratic town clerks, did not want the price of electricity reduced. It has been proved by reliable testimony that this proposal would have practically supplied electricity from a central station on the coal fields over an area of nearly 2,124 square miles for lighting, power, and any purpose for which it would be used ; and, having regard to what was being done in Germany, Austria, Italy, and our own country, it was quite certain that it could be supplied at something like one-fourth the rate at which it is sold at present.* At a meeting held to * Since the above was written in November, 1899, the writer has visited this district in Derbyshire, with Chesterfield as a center, and Sheffield, Derby, Nottingham, Doncaster and Barnstey aa principal towns. He has also examined similar proposals in South Lancashire and Other People's Money to protest against the attitude of municipalities in re- lation to this and kindred enterprises, Mr. Graham Harris said : " The total area in that district, at present supplied by municipalities who were op- posing the bill and stirring up opposition all over the kingdom, was under four square miles, and the whole work might be done by one small engine working continuously. They had 730 customers, but the whole population was counted by hundreds of thousands. The suggestion of the municipalities was that the company should be prevented from supplying that area, and that all the millions of people in the area, including their 730 customers, should be prevented having the electricity at the price the com- pany were prepared to supply it at." After reading the above, surely we must accord with another British authority, who declares that here we see the municipal trader in his true colors. He does not wish to trade in the same way that any com- mercial man trades, facing difficulties as they come, contending with his rivals, whoever they may be, adapting himself to new conditions, scrapping his existing plant as soon as it is superseded, and substi- tuting more efficient plant, often at great sacrifice/' " Your municipal trader," says Mr. Davies in his able address Cheshire, in Leicestershire and Warwick, and in Glamorganshire and Monmouth, South Wales, representing districts of 964 square miles, 1,265 square miles, and 1,034 square miles respect- ively. In each c?- the private proposal for supply of light, heat and power is far below the nria*nf rnt present cost. Other People's Money If science prove him wrong, so much the worse for science An organized lobby for the suppression of fair dealing address before the Society of Arts, "won't hear of scrapping superseded plants. He wants protection for the ratepayers' trade. If science has shown that he is on the wrong lines, and has made an improvident in- vestment, so much the worse for science, which must f3 to the wall (as it has in Glasgow and many other ritish cities) before the necessities of municipal trading. Science must wait until his machinery wears out. That will be quite time to introduce anything new." In these efforts to destroy all enterprise and obtain a complete monopoly for the British Town Clerk and his municipal contractors and friends, the Municipal Corporation Association has been formed. This body, I am told, raises its funds for such extraordinary and, happily in the United States, unheard of proceedings by a ratable levy over the whole of the affected towns, so that, although ostensibly preserving its local char- acter, the opposition is centralized. This association, equipped with learned counsel and a well-organized lobby, becomes most powerful at Westminster. In the particular case referred to it called upon munici- palities all over the kingdom to bring pressure upon their respective members of Parliament to defeat the bill. Thus the North of Scotland and South of Ire- land are whipped into line to defeat measures which would be of immense value to Lancaster, York, and some of the Midland counties. As things stand at the Other People's Money the present moment in England this powerful organi- 11 i r j- j i zation is the barrier against the initiation or individual enterprise, and the risk of having to face such an op- position practically debars even the attempt, except on some such scale as above described. It has aptly been described as a power organized especially to stifle new enterprise at its birth, not for the common good, but to protect selfish interests. No wonder the tax- payers and commercial bodies of England are up in arms against a scheme for the suppression of fair deal- ing by the unlimited enlargement of the functions of government. The nearest approach to this organiza- tion which we have in the United States is at the present moment advocating the repeal of the wise constitutional provisions in so many State Constitu- tions which limit the creation of municipal debt beyond a certain percentage of the assessed value of property.* Baffled by these wise provisions in their attempt to bring about the British condition of affairs in the United States, the American advocates of mu- nicipal trading have discovered that this obstacle must be removed before municipalization of profit- making industry is possible. While, therefore, the form the question is taking in the United States is a little different, the object sought to be attained is precisely the same. These are some of the specific charges which will be *See u Vested Wrongs," by Robert P. Porter. Other P e o p I e ' s Money be made during the next session of Parliament against what the English call municipal trading, but which we exploit under the term municipal ownership. The general charges are equally worth considering and should start those advocating these schemes for the United States thinking. These charges completely dispose of the four stock arguments of the municipal ownership advocates in the United States, which are, as is well known, (a) That municipalities can borrow more cheaply than private individuals. (b) That if a profit can be made out of the general supply of some commodity for the community why should not the community realize that profit for itself. (c) That the motives of private adventure are self- seeking and sordid, and contrast unfavorably with the disinterestedness of the city Aldermen (New York, Philadelphia and Chicago, for example). (d) That some of these enterprises are in the nature of monopolies, and that it is better that the Government should be a monopolist than a private person. To this case of the municipal trader which I have put in a nutshell, the English opponent of mu- nicipal Socialism aptly and vigorously replies, sustain- ing his position with an array of data that confounds the college professor and socialistic clergymen who have rushed madly into the municipal ownership arena and Other People' s Money and want our cities to absorb alike all the lighting and street railway enterprises. In the first place these English economists claim ^ that the cost of borrowed money is a small element of indtctment , r . . \ ,. i '/ answered cost in the success of municipal trading when there is a loss of 10 per cent, in cost of management when municipal is compared with personal talent in man- agement. Commenting on the "profit to the community" argument, one of the speakers who took part in the discussion before the London Society of Arts, says : " We seem to have heard of this system before in " a remote island, where we are told the inhabitants " earned a precarious livelihood by taking in each other's "washing. The great danger of a municipality en- " gaging in a trade is to hold the balance evenly be-