UNIVERSITY OF CALIFORNIA 
 AT LOS ANGELES 
 
 THE GIFT OF 
 
 MAY TREAT MORRISON 
 
 IN MEMORY OF 
 
 ALEXANDER F MORRISON
 
 THE FABIAN SOCIALIST SERIES, No. 5 
 
 THE COMMONSENSE OF 
 MUNICIPAL TRADING
 
 THE FABIAN SOCIETY 
 
 FOUNDKD I8S3 
 
 THE FABIAN SOCIETY consists of men and women who 
 are Socialists, that is to say, in the words of its "Basis," of 
 those who aim at the reorganisation of society by the emancipa- 
 tion of Land and Industrial Capital from individual and class 
 ownership, and the vesting of them in the community for the 
 general benefit. . . . For the attainment of these ends the 
 Fabian Society looks to the spread of Socialist opinions, and the 
 social and political changes consequent thereon. It seeks to 
 promote these by the general dissemination of knowledge as to 
 the relation between the individual and society in its economic, 
 ethical, and political aspects. 
 
 The Society welcomes as members any persons, men or 
 women, who desire to promote the growth of Socialist opinion 
 and to hasten the enactment of Socialist measures, and it exacts 
 from its members no pledge except a declaration that they are 
 Socialists. 
 
 The Society is largely occupied in the endeavour to discover 
 in what way the principles of Socialism can be applied both to 
 the political problems which from time to time come up for 
 settlement, and to those problems of the future which are as yet 
 rather political theory than actual politics. It holds fortnightly 
 meetings for the discussion of papers on such subjects by members 
 and others, some of which are published as Fabian Tracts. 
 The Society includes : — 
 I. Members, who must sign the Basis and be elected by the Com- 
 mittee. Their subscription is not fixed ; each is expected to 
 pay according to his means. They control the Society through 
 their Executive Committee and at business meetings. 
 II. Associates, who sign a form expressing general sympathy with 
 the objects of the Society, and pay not less than los. a year. 
 They can attend all except specially private meetings, but have 
 no control over the Society and its policy. 
 III. Subscribers, who must pay at least 5s. a year, and can attend 
 the lectures. 
 
 The monthly paper, Fabian News, and the Fabian Tracts are 
 sent as published to all three classes. 
 
 Lists of Publications, Annual Report, Form of Application 
 as Member or Associate, and any other information can be 
 obtained on application, personally, or by letter, of 
 The Secretary of the Fabian Society, 
 
 3 Clement's Inn, Strand, 
 
 London, W.C.
 
 THE COMMONSENSE OF 
 MUNICIPAL TRADING 
 
 BY 
 
 BERNARD SHAW 
 WITH NEW 8-PAGE PREFACE 
 
 NEW YORK 
 
 JOHN LANE COMPANY 
 
 MCMXI
 
 1. The Commercial Successes of 
 
 Municipal Trading . . i 
 
 2. Municipal Management . . 9 
 
 3. When Municipal Trading does 
 
 not pay . . . .12 
 
 4. The Anti - Social Reactions of 
 
 Commercial Enterprise . . 17 
 
 5. The Beneficial Reactions of Com- 
 
 mercial Enterprise . . 34 
 
 6. Commercial and Municipal Prices 43 
 
 7. Difficulties of Municipal Trad- 
 
 ing — -Electrical Enterprise . ^^ 
 
 8. Difficulties of Municipal Trad- 
 
 ing — Housing ... 66 
 
 9. The Municipal Audit . . 79 
 
 10. The Municipal Revenue . . 89 
 
 11. Our Municipal Councillors . 103 
 
 1 2. Conclusion . . . .115
 
 HB 
 443/ 
 S53<L 
 nil 
 
 PREFACE TO 
 THE FABIAN EDITION 
 
 In handing over this edition to the Fabian Society 
 to be distributed at a price which will make it 
 easy for those most concerned to buy a copy, I 
 do not find it necessary to add any new matter 
 or withdraw any old. The ordinary electioneering 
 opponents of municipal trading have for the 
 most part left my book alone, having neither the 
 economic knowledge, the practical experience of 
 municipal work, nor the literary skill to cope 
 with me. But they still persuade the public that 
 trading municipalities are staggering towards 
 bankruptcy under a burden of ever-increasing 
 debt. The trick is simple : instead of calling the 
 funds of the municipality its capital, you call it 
 " municipal debt," and go on to contend that the 
 success of the municipalities in serving the public 
 at cost price and eliminating idle shareholders, 
 means that they are less capable and businesslike 
 
 V 
 
 431715
 
 vi Municipal Trading 
 
 than the commercial concerns which measure their 
 soundness by the excess of their charges over 
 their expenses, and by the resultant magnitude of 
 their dividends. 
 
 But the opponents of municipal trading could 
 not, when this book was first published, get over 
 the unanswerable fact that in spite of all their 
 denunciations of our municipalities as bankrupt 
 and mismanaged concerns — denunciations which 
 would have ruined even the soundest private 
 businesses, but against which private businesses 
 have a remedy (witness the enormous damages 
 obtained by " the Soap Trust " against a popular 
 newspaper which can slander municipal trading 
 with complete impunity) — municipal credit, as 
 shewn by the prices of its stock, remained 
 unshaken ; and the very people who were declar- 
 ing it to be worthless were glad to invest their 
 own money in municipal stock at gilt-edged 
 prices. They now, however, point out triumph- 
 antly that the price of municipal stock has fallen, 
 and that the London County Council can no 
 longer get as much money as it wants at 3 per 
 cent. In reply, I can only say that a con- 
 troversialist who is desperate enough to claim 
 that this is the result of a loss of confidence in 
 municipal security is desperate enough for any- 
 thing. The credit of our municipalities is as 
 high as ever it was. What has really happened 
 is that the value of money has risen since the
 
 Preface to Fabian Edition vii 
 
 South African War. Consols have flillen from above 
 par to nearly eighty. The bank rate has touched 
 seven. The Anti-Municipalizers forget that if they 
 wish to claim a fall in the price of municipal stock 
 as evidence that their campaign against English 
 civic activity is producing some effect, they must 
 point, not to a general fall in prices which has hit 
 private enterprises much harder than public enter- 
 prises, but to a fall confined to municipal stocks 
 and unaccompanied by a rise in the price of 
 money. It is no use triumphing over the diffi- 
 culties of the Borough Treasurer when the Chan- 
 cellor of the Exchequer and the Rothschilds are 
 in the same straits. The argument would not be 
 worth mentioning but that it illustrates the amaz- 
 ing ineptitude and ignorance with which the 
 question is discussed in the daily press. 
 
 Perhaps the stupidest cry that has been raised 
 in the Anti-Municipal agitation — which is really 
 an agitation to reserve all public services for the 
 profit of private individuals — is the cry for " a 
 commercial audit." I venture to believe that no 
 honorable and sensible man who will take the 
 trouble to read these pages will ever again dis- 
 grace himself by echoing that cry, or by casting a 
 vote for any person capable of such an elementary 
 blunder. Those who did so at the last municipal 
 elections are now sufficiently ashamed of them- 
 selves ; and we hear nothing more of the gentle- 
 men who think a reduction of the death rate a
 
 viii Municipal Trading 
 
 commercial mistake because it does not shew a 
 profit of lo per cent in cash, as it would have 
 to do before a contractor would undertake it. 
 But we must face the fact that honorable, sensible, 
 and ordinarily intelligent people, from thought- 
 lessness, ignorance, and the tyranny of commercial 
 habit, do make these blunders, and, as voters, 
 become the tools of the moneyed interests which 
 see in every extension of municipal activity the 
 closing to them of some field which has been to 
 them a veritable Tom Tiddler's ground on which 
 they have been picking up gold and silver at the 
 expense of the ratepayers for years past. 
 
 It is generally assumed that the result of the 
 municipal elections of 1907 was a severe set-back 
 for municipal trading. The causes of that set- 
 back, in so far as they had produced a genuine 
 revolt of the ratepayer against municipal activity, 
 are explained in this book. Before the revolt 
 occurred I pointed out that our system of rating, 
 and the success with which the cost of our social 
 ameliorations was being evaded by the property 
 owners and by the working classes, and thrown 
 on the struggling mass of middle-class ratepayers, 
 was producing intolerable injustice. The remedy 
 proposed — that of putting back the clock — was 
 impracticable. I knew, and everybody who had 
 ever served on a public body knew, that the first 
 hour spent on a committee would knock out of 
 the new representatives most of the nonsense
 
 Preface to Fabian Edition ix 
 
 they had been talking at their election meetings, 
 and that the most intelligent and disinterested of 
 them would presently become ardent municipal- 
 izers. But it is still true that until municipal 
 finance is radically reformed, and constitutional 
 machinery provided for public enterprises extend- 
 ing over much larger areas than those marked out 
 by our present obsolete and obstructive municipal 
 boundaries, we shall continue to have ratepayers' 
 revolts, and crippled public enterprise. 
 
 In London the issue was so confused with the 
 usual political party considerations that hardly any 
 one noticed that the clean sweep which was sup- 
 posed to have been made of Municipal Socialists 
 was really a clean sweep of those Liberals who had 
 been the most determined opponents of the Muni- 
 cipal Socialists in the previous Council. It was 
 these Anti-Socialists who were swept away, whilst 
 the professed Fabian Socialists held their seats in 
 the midst of the debacle. I mention this for 
 the sake of its lesson, which is, that the 
 ratepayers must not put their trust in election- 
 eering literature which proceeds on the wildly 
 erroneous assumption that every Liberal is a 
 Socialist and every Conservative an opponent of 
 State or Municipal activity. There is no salvation 
 for the voter except in understanding exactly what 
 the municipalities are doing ; and this book is 
 intended to put him in that position as far as a 
 book can supply the need of that actual first-hand
 
 X Municipal Trading 
 
 experience of the working of municipalities which 
 only very few of us can obtain, and without 
 which I certainly should not have been able, 
 merely as a man of letters, to make my book of 
 any value. 
 
 In conclusion, I again warn the ratepayer who 
 is gasping for breath under the pressure of the 
 propertied class squeezing rents from him from 
 above, and the working class squeezing education, 
 housing, medical attendance, poor relief, and 
 old age pensions from him from below, that 
 his condition will become more and more pre- 
 carious, no matter whether he votes Moderate 
 or Progressive, until he takes his public business 
 as seriously and unromantically as his private 
 business, and resorts to the simple and obvious 
 means of relieving and protecting himself that 
 may be gathered from these pages. 
 
 Two new developments of the opposition to 
 civic enterprise have occurred lately. One is the 
 practice of circulating to the ratepayers statements 
 implying that municipal trading and taxation of 
 unearned incomes involve irreligion and licentious- 
 ness. This I need not deal with : it is only too 
 obvious that the irreligion and licentiousness in 
 which we are already steeped are the result of 
 abandoning our people to the unscrupulous rapacity 
 of commercial enterprise, which makes huge profits 
 out of the evils our municipalities strive constantly 
 to suppress. No municipality has yet taken or
 
 Preface to Fabian Edition xi 
 
 proposed to take a single step against religion or 
 morals, whereas private enterprise openly and 
 shamelessly exploits poverty, vice, and irreligion 
 for its own profit to the despair of the ratepayer, 
 who has to pay for dealing with all the disease, 
 the crime, and the depravation of character that 
 enriches the sweater, the distiller, and the brothel- 
 keeper. 
 
 The other development is the offer of Tariff 
 Reform as a means of relieving the ratepayer 
 without recourse to Municipal Socialism. On 
 this I have only to say that if Tariff Reform 
 succeeds in suppressing manufactured imports and 
 substituting home production (its original object), 
 it will not be a source of revenue at all. If, 
 however, importation continues, and a revenue is 
 derived from taxing imports, the ratepayer has no 
 security that this revenue will be applied to his 
 relief by increasing our present Grants in Aid by 
 the central government to the local authority 
 rather than to reducing the income-tax on un- 
 earned incomes, in which case, he would be paying 
 more for imported goods only to see the excess 
 pocketed by the very people who already exact 
 so large a share of his earnings as rent. So, as 
 municipal trading is not an evil to be staved off 
 by any possible means, but a highly desirable and 
 beneficial extension of civilization, equally good 
 for Free Trade and Protectionist countries, there 
 is no reason whatever why the most ardent Tariff
 
 xii Municipal Trading 
 
 Reformer should not also be an ardent Municipal 
 Socialist. 
 
 Perhaps the most impudent of the recent 
 complaints of municipal trading is that it drives 
 capital out of the country. It is almost the 
 only sure means of keeping it at home. The 
 present system, which sends English capital to 
 develop Bahia Blanca whilst leaving Birmingham 
 to wallow in its own death-rate, is driving capital 
 abroad as fast as it will go. Municipal trading, 
 if it had nothing more to recommend it than its 
 effect in making home investment compulsory, 
 would be justified by that alone from the patriotic 
 point of view. 
 
 G. B. S. 
 
 AyoT St. Lawrence, 
 l^th January, 1908.
 
 I 
 
 THE COMMERCIAL SUCCESSES OF 
 MUNICIPAL TRAOING . 
 
 Municipal Trading seems, a very , si in pie anatter- 
 of business. Yet it is conceivable by a sensible man 
 that the political struggle over it may come nearer 
 to a civil war than any issue raised in England 
 since the Reform Bill of 1832. It will certainly 
 not be decided by argument alone. Private pro- 
 perty will not yield its most fertile provinces 
 to the logic of Socialism ; nor will the sweated 
 laborer or the rackrented and rackrated city shop- 
 keeper or professional man refrain, on abstract 
 Individualist grounds, from an obvious way of 
 lightening his burden. The situation is as yet so 
 little developed that until the other day few quarter 
 columns in the newspaper attracted less attention 
 than the occasional one headed Municipal Trading; 
 but the heading has lately changed in the Times to 
 Municipal Socialism ; and this, in fact, is what is 
 
 B
 
 2 Municipal Trading 
 
 really on foot among us under the name of Pro- 
 gressivism. 
 
 At first sight the case in favor of Municipal 
 Trading seems overwhelming. Take the case of a 
 shopkeeper consuming a great deal of gas or elec- 
 tric light for the attractive display of his wares, or 
 a factory owner with hundreds of work benches to 
 illuminate. For all this light he has to pay the cost 
 of production plus interest on capital at the rate 
 necessary to induce private investors to form ordin- 
 ary commercial gas or electric light companies, which 
 are managed-V7:t-h the object of keeping the rate of 
 interest, up instead o^ down : all improvement in 
 the service "and reductions in price (if any) being 
 introduced with the sole aim of making the excess 
 of revenue over cost as large as possible. 
 
 Now the shopkeeper in his corporate capacity 
 as citizen-constituent of the local governing body 
 can raise as much capital as he likes at less than 
 four per cent. It is much easier to stagger consols 
 than to discredit municipal stock. Take the case 
 of the London County Council. For ten years past 
 the whole weight of the Government and the news- 
 papers which support it has been thrown against 
 the credit of the Council. A late prime minister 
 denounced it in such terms that, to save his face, 
 his party was forced to turn all the vestries into 
 rival councils on the " divide and govern " prin- 
 ciple. The name of the London County Council 
 has been made a hissing among all who take their
 
 Commercial Successes 3 
 
 politics from the Court and the Conservative 
 papers. To such a torrent of denunciation a private 
 company would have succumbed helplessly : the 
 results of an attempt to issue fresh stock would 
 not have paid the printer's bill. But the County 
 Council has only to hold up its finger to have 
 millions heaped on it at less than four per cent. It 
 has to make special arrangements to allow small 
 investors a chance. The very people who have 
 been denouncing its capital as "municipal indebted- 
 ness " struggle for the stock without the slightest 
 regard to their paper demonstrations of the ap- 
 proaching collapse of all our municipal corpora- 
 tions under a mountain of debt, and of the 
 inevitable bankruptcy of New Zealand and the 
 Australasian colonies generally through industrial 
 democracy. The investor prefers the corporation 
 with the largest municipal debt exactly as he 
 prefers the insurance company with the largest 
 capital. And he is quite right. Municipal expendi- 
 ture in trading is productive expenditure : its debts 
 are only the capital with which it operates. And 
 that is why it never has any difficulty in raising 
 that capital. Sultans and South American Repub- 
 lics may beg round the world in vain ; chancellors 
 may have to issue national stock at a discount ; 
 but a Borough Treasurer simply names a figure 
 and gets it at par. 
 
 This is the central commercial fact of the whole 
 question. The shopkeeper, by municipal trading, can
 
 4 Municipal Trading 
 
 get his light for the current cost of production plus 
 a rate of interest which includes no insurance against 
 risk of loss, because the security, in spite of all 
 theoretical demonstrations to the contrary, is treated 
 by the investing pubHc and by the law of trustee- 
 ship as practically perfect. Any profit that may arise 
 through accidental overcharge returns to the rate- 
 payer in relief of rates or in public service of some 
 kind. 
 
 The moment this economic situation is grasped, 
 the successes of municipal trading become intellig- 
 ible ; and the entreaties of commercial joint stock 
 organization to be protected against the competition 
 of municipal joint stock organization become as 
 negligible as the plea of the small shopkeeper to be 
 protected against the competition of the Civil Service 
 or Army and Navy Stores. Shew the most bitterly 
 Moderate ratepayer a municipal lighting bill at six- 
 pence a thousand feet or a penny a unit cheaper than 
 the private company charges him, and he is a con- 
 verted man as far as gas or electric light is concerned. 
 And until commercial companies can raise capital at 
 lower rates than the City Accountant or the Borough 
 Treasurer, and can find shareholders either offering 
 their dividends to relieve the rates or jealously de- 
 termining to reduce the price of light to a minimum 
 lest they should be paying a share of their neigh- 
 bors' rates in their lighting bills, it will always be 
 possible for a municipality of average capacity to 
 underbid a commercial company.
 
 Commercial Successes 5 
 
 Here, then, is the explanation of the popularity 
 and antiquity of municipal trading. As far as their 
 legal powers have gone, municipalities have always 
 traded, and will always trade, to the utmost limits 
 of the business capacity and public spirit of their 
 members. 
 
 No doubt a body of timid and incapable coun- 
 cillors will leave as many public services as possible 
 to commercial enterprise, just as, in their private 
 concerns, they keep small shops in a small way in- 
 stead of becoming Whiteleys and Wannamakers, 
 Morgans and Carnegies. And a body of rich and 
 commercially able councillors may pursue exactly 
 the same policy because they hold shares in the 
 commercial enterprises which municipal enterprise 
 would supplant, and have in fact deliberately taken 
 the trouble to get elected for the purpose of pro- 
 tecting their private enterprises against the " unfair " 
 (meaning the irresistible) competition of the muni- 
 cipality. Further, a body of amateur doctrinaires 
 who rush into municipal trading on principle with- 
 out enough business training and experience either 
 to manage the business themselves or allow their 
 staff to do it for them, will make a mess of it at 
 first, precisely as that much commoner object the 
 amateur joint stock company makes a mess of it. 
 There is no magic in the ordeal of popular election 
 to change narrow minds into wide ones, cowards 
 into commanders, private ambition into civic patri- 
 otism, or crankiness into common sense. But still
 
 6 Municipal Trading 
 
 less is there any tendency to reverse the operation ; 
 for the narrowest fool, the vulgarest adventurer, the 
 most impossible fanatic, gets socially educated by 
 public life and committee work to a degree never 
 reached in private life, or even in private commerce. 
 The moment public spirit and business capacity 
 meet on a municipality you get an irresistible de- 
 velopment of municipal activity. Operations in land 
 like those effected by the Corporation of Birming- 
 ham in Mr. Chamberlain's time, and by the London 
 County Council in our own, are taken in hand ; 
 and the town supplies of water, of light, of tram- 
 ways, and even of dwellings, are conquered from 
 competitive commerce by civic co-operation. And 
 there is no arguing with the practical results. You 
 take a man who has just paid a halfpenny for a ride 
 in a municipal tramcar which under commercial 
 management would have cost him a penny or two- 
 pence ; and you undertake to go into the corpora- 
 tion accounts with him and prove that under a 
 "fair" system of book-keeping he should have paid 
 fourpence. You explain to the working man voter 
 how true economy demands that his relative who 
 is employed as a driver and conductor in the muni- 
 cipal service for ten hours a day, and six days a 
 week, with standard wages and a uniform, should 
 go back to competition wages, seventeen hours, 
 seven days, and his own seedy overcoat and muffler. 
 You buttonhole the shopkeeper who has just paid 
 two and threepence per thousand cubic feet for his
 
 Commercial Successes 7 
 
 gas, with the public lighting rate and a bonus thrown 
 in ; and you assure him that unless he votes for a 
 return to the supremacy of the commercial company 
 at three shilhngs per thousand and a reimposition 
 of the Lighting Rate, the city will be bankrupt and 
 the Mayor replaced by a Man in Possession, You 
 unfold a Union Jack in London, and tell the care- 
 worn cockney, who pays for his water to a private 
 company more than double what his neighbor 
 across the border pays to the Croydon Corporation, 
 that the Empire stands or falls with the practice of 
 buying water at a price which varies inversely with 
 the quantity consumed, with the right of a water 
 shareholder to a vote in every constituency through 
 which one of his pipes runs, and with the main- 
 tenance, free of Probate Duty, of a monopoly granted 
 by James I., and by this time appreciated by looo 
 per cent in value. It is all pathetically useless. The 
 municipal trader does not contradict you : he laughs 
 at you. So long as the municipal market is the 
 cheapest market, the public will buy in it ; and the 
 protests of the companies are as futile as the protest 
 of the stationer and the apothecary against the 
 stores. 
 
 It is not necessary to overload these pages by 
 quoting, from the Municipal Year Book, examples 
 of successful municipal trading in verification of the 
 above. Progressive electioneering literature teems 
 with such examples. The tracts of the Fabian 
 Society and of the London Reform Union, the
 
 8 Municipal Trading 
 
 columns of the Progressive papers, the protests 
 against " municipal indebtedness " in the Anti-Pro- 
 gressive papers, the annual reports of the local 
 authorities, the weekly papers devoted to municipal 
 matters with their endless photographs and figures, 
 the handbooks of municipal socialism compiled by 
 such papers as the Clarion from its own columns, 
 and the County Council returns and parliamentary 
 reports on municipal trading, have so surfeited the 
 public with the facts that a recapitulation here would 
 be beyond human endurance. It is waste of time to 
 force an open door ; and in all public services in 
 which the determining commercial factor is practi- 
 cally unlimited command of cheap capital combined 
 with indifference to dividend, the door is more than 
 wide open : it has been carried clean off its hinges 
 by the victorious rush of municipal socialism under 
 the reassuring name of Progressivism.
 
 II 
 
 MUNICIPAL MANAGEMENT 
 
 The importance of management as a factor in 
 industrial success cannot easily be exaggerated ; 
 but management is nowadays as completely dis- 
 sociated from ownership, and as easy to buy in the 
 market, as machinery. Nobody now suggests that 
 a railway company is an impossibility because rail- 
 ways cannot be managed by a mob of shareholders, 
 even when they act through committees of directors 
 who do not know the difference between a piston 
 rod and a sun-and-planets gear. The directors 
 simply prescribe the results they wish to obtain, 
 and engage a staff of skilled administrators and 
 railway engineers to tell them how to obtain it. 
 Thus the London and North -Western Railway 
 Company manufactures everything it wants, from 
 locomotives to wooden legs, without the interven- 
 tion of a contractor. A mob of ratepayers acting 
 through a municipal authority is in precisely the 
 
 ^ B 2
 
 lo Municipal Trading 
 
 same position. The ratepayers are just as stupid 
 and short-sighted as ordinary joint stock, share- 
 holders ; and the worst of their representatives on 
 the municipahties are as incapable as the worst 
 ordinary guinea-pig directors. But the ratepayers 
 and councillors light their towns with electricity ; 
 run tramway services ; build dwellings ; dredge 
 harbors ; erect dust destructors and crematoria ; 
 construct roads and manage cemeteries, as easily as 
 a body of clergymen's widows can lay an Atlantic 
 cable if they have money enough, or an illiterate 
 millionaire start a newspaper. The labor market 
 now includes an ability market in which a manager 
 worth £ 1 0,000 a year can be hired as certainly as 
 a navvy. 
 
 In the ability market, the municipalities have 
 a decisive advantage in the superior attraction 
 of public appointments for prudent and capable 
 organizers and administrators. A municipality can 
 always get an official more cheaply than a company 
 can. A municipality never becomes bankrupt, is 
 never superseded by a n^w discovery, and never 
 dismisses an official without giving his case pro- 
 longed consideration in committee, from which he 
 has practically an appeal to the whole body. A man 
 who behaves himself and does his work has no- 
 thing to fear in public employment : his income 
 and position are permanently assured. Besides, he 
 enjoys his salary to the full : he has no appearances 
 to keep up beyond the ordinary decencies of life :
 
 Municipal Management 1 1 
 
 he need not entertain ; need not keep equipages or 
 servants for purposes of ostentation ; may travel 
 third class if he likes, live in the most unfashionable 
 neighborhood, belong to what sect he pleases or 
 to no sect, and dispose of his time and gratify his 
 tastes out of office hours with a personal independ- 
 ence unknown to commercial employees. It is no 
 exaggeration to say that these considerations make 
 a municipal post of ^350 a year more desirable 
 than some commercial posts and professional prac- 
 tices that bring in ^1000 a year ; and this is why 
 the ratepayers, in spite of their stinginess in the 
 matter of salaries on the professional scale, get so 
 much better served than they deserve. 
 
 All that can be said on the other side is that 
 if the municipal officer has no fears, he has also 
 strictly limited hopes. The Town Clerk and the 
 Borough Engineer, the County Surveyor and the 
 Medical Officer of Health, all know that they will 
 never get ^15,000 a year, nor even ^5000, in the 
 municipal service. The dreams of vulgar ambition, 
 and the excitements of financial speculation, of party 
 politics, and of fashionable life, are not for them. 
 But these very disabilities have their value as selec- 
 tive conditions. The vulgarly ambitious commercial 
 and social adventurer is very far from representing 
 a desirable type of municipal officer ; and ambitions 
 that are not vulgar have full scope in municipal life, 
 where a departmental chief can attain a position of 
 enviable consideration and real public usefulness.
 
 12 Municipal Trading 
 
 Promotion is not only from step to step in the same 
 municipality, but from municipality to municipality ; 
 so that if the clerkship to the London County Council, 
 worth ^2000 a year with the chance of a knight- 
 hood, becomes vacant, every provincial Town Clerk 
 can present himself as a candidate for the post with- 
 out forfeiting or risking his already secured position 
 in any way. He can also, of course, resign his post 
 and engage in commercial enterprise at any moment ; 
 but the fact that he practically never does so shews 
 that there is nothing to be gained by such a step. 
 
 On the whole, then, when the directors of a joint 
 stock company on the one hand, and the represent- 
 atives of the ratepayers on the other, both being alike 
 "amateurs carrying on business with other people's 
 money," come into the market to engage an execu- 
 tive staff, the municipality has the advantage of its 
 competitor. It can get its management cheaper as 
 certainly as it can get its capital cheaper.
 
 Ill 
 
 WHEN MUNICIPAL TRADING DOES 
 NOT PAY 
 
 If the Medical Officer of Health wants a micro- 
 scope or the County Surveyor a theodolite, it will 
 not pay the municipality to set up a scientific instru- 
 ment factory to produce that single article, possibly 
 of a kind which can be produced by half a dozen 
 firms in sufficient quantity to supply the whole of 
 Europe. Even the London County Council, with 
 all its bands, has not yet proposed to manufacture 
 its own trombones. The demand of the authority 
 must be sufficiently extensive and constant to keep 
 the necessary plant fully employed. The moment 
 this limitation is grasped, the current vague terrors 
 of a SociaHsm that will destroy all private enterprise 
 laugh themselves into air. The more work the muni- 
 cipality does, the more custom it will bring to private 
 enterprise ; for every extension of its activity involves 
 the purchase of innumerable articles which can, in 
 
 13
 
 14 Municipal Trading 
 
 the fullest social sense, be produced much more 
 economically by private enterprise, provided it is 
 genuinely self-supporting, and does not spunge on 
 the poor rates or on other private enterprises for 
 part of the subsistence of its employees : in short, 
 provided it works under a " fair wages " clause. 
 
 There is another way in which private enterprise 
 will hold its own even in pieces of work sufficiently 
 vast to use up the necessary plant. Personal talent 
 in all its gradations, from smartness and push up 
 to positive genius, plays as important a part in 
 industry as it does in the fine arts. It is perfectly 
 possible for a born captain of industry to be in a 
 position to say to a municipality : " Here is such 
 and such a big undertaking to be carried through. 
 Although I may have to raise at lo per cent the 
 capital that you can raise at 1,-k '■> although I pay 
 and treat my employees so well that they would 
 not exchange my employment for yours ; although 
 I have to pay my sub-chiefs double the salaries 
 you can get men of the same quality for ; yet I 
 will so organize the work, and so command and 
 inspire my industrial troops that I will do the work 
 for less than it will cost you to do it yourselves, 
 and do it better, and have a satisfactory profit for 
 myself into the bargain. Here is my tender, which 
 is lower than the estimate of your Works Depart- 
 ment ! " Under such circumstances — assuming, of 
 course, that there were sufficient reason to believe 
 that the contractor could make his boast good — the
 
 When it Does Not Pay 15 
 
 tender should and would be accepted. Nobody 
 who has any experience of opening tenders for 
 important and difficult engineering work will con- 
 sider this instance far-fetched. Even when the total 
 figure is under ^20,000, the difference between 
 the lowest and highest tender is often more than 
 100 per cent. Although the specification may be 
 so minutely detailed as to leave very little room 
 for variation in the nature or quality of the pro- 
 duct, one contractor will undertake work for j/^6000 
 which another will ask _^ 14,000 for, without any 
 discoverable ulterior motives. One is driven to 
 conclude that it is the personal factor that makes 
 the difi'erence. Fertility and promptitude in de- 
 vice, boldness and swiftness in execution, power of 
 making other men work enthusiastically : all these 
 may give a contractor as decisive an advantage over a 
 borough engineer as over a rival contractor. Some- 
 times the advantage is on the other side : it is the 
 municipal official or the committee chairman who 
 suggests improvements and economies to the con- 
 tractor, upon whose mechanical routine the fresh 
 . minds even of a committee of amateurs (which 
 practically always includes somebody who is not an 
 amateur) often play very beneficially. In fact there 
 are many matters in which municipal experience is 
 so necessary that even the ablest contractor, when 
 he first touches public work, can learn a good 
 deal from the most ordinary municipality. But as 
 municipal experience is always at the contractor's
 
 1 6 Municipal Trading 
 
 service, there is nothing in municipal trading to 
 deprive an able enterpriser of the legitimate ad- 
 vantage of his talent. On the contrary, it protects 
 him against the sort of competition that he really 
 dreads : the competition of scamping and sweating, 
 of underbidding by the apparent cheapness that is 
 really the worst sort of extravagance. It narrows 
 the competition to competition in ability of manage- 
 ment and excellence of product, which is just the 
 sort of competition in which he can win. 
 
 It follows that a joint stock company, if it is 
 clever or lucky enough to secure a manager of 
 exceptional talent, may compete successfully with a 
 municipality of only ordinary managerial resources. 
 Or, to put the facts in the order in which they 
 usually occur, an industrial genius, by forming a 
 joint stock company to provide him with capital, 
 may do so. 
 
 But the business of the world is mainly ordinary 
 work carried on by ordinary men and women. And 
 all such public business of sufficient magnitude to 
 keep the necessary plant working full time until it 
 has paid for itself, can, when it is purely local, be 
 done more cheaply by municipal than by private 
 enterprise.
 
 IV 
 
 THE ANTI-SOCIAL REACTIONS OF 
 COMMERCIAL ENTERPRISE 
 
 In many public services, labor plays a larger part 
 than machinery. In them, consequently, the cost 
 depends much more on wages and vigor of super- 
 intendence than on the rate of interest. Take for 
 example the collection of dust from house to house, 
 where the plant required consists of horses and 
 carts, shovels and baskets. Not only is the cost of 
 this plant negligible compared to the cost of the 
 labor, but the labor is the motive power : the man 
 drives the horse, not the horse the man : the man 
 plies the shovel, not the shovel the man. It is quite 
 otherwise in, for example, an electric lighting 
 station. There the cost of the plant is higher rela- 
 tively to the cost of labor ; and the plant drives the 
 man instead of the man driving the plant ; for the 
 steam engine and the dynamo do not stop and pull 
 out a pipe when the foreman goes round the corner. 
 There is another difference : the labor in the electric 
 
 17
 
 1 8 Municipal Trading 
 
 lighting station is skilled and organized : its price 
 is standardized by Trade Unionism ; so that munici- 
 palities and commercial companies have to pay the 
 same price for it, and therefore cannot enter into 
 a competition in sweating. The dustman, on the 
 other hand, is an unskilled, unorganized, casual 
 laborer, obtainable by private employers at a wage 
 which no Progressive municipality, committed to a 
 "moral minimum" subsistence wage, can offer. 
 Furthermore, the private contractor, who, in the 
 dust business, is seldom very delicate in handling 
 his employees, can slavedrive his men in a way that 
 may be very necessary to get the greatest result from 
 their labor at a job in which they have no interest, 
 but which in municipal employment is as imprac- 
 ticable as it is undesirable. 
 
 Now it is clear that precisely the same argument 
 that converts even the Moderate ratepayer to muni- 
 cipal electric lighting (its comparative cheapness) 
 converts even the Progressive ratepayer to private 
 enterprise in dust collecting ; for no municipality 
 with the smallest sense of decency or social duty 
 can bring out its bill for dust collecting at so low 
 a figure as the sweating contractor. Consequently, 
 as long as the question is settled, as it too often is 
 at present, by the ratepayer's thoughtless preference 
 for the lowest tender, municipal trading will be 
 stopped just at the points where it is most needed. 
 For a moment's reflection will convince any in- 
 telligent person that whereas the private electric
 
 Anti-Social Industrial Reactions 19 
 
 lighting companies do their work as well, if not so 
 cheaply, as the municipalities, the most disastrous 
 inefficiency and unscrupulous recklessness are pos- 
 sible in dust collecting and such cognate work as 
 the stripping or cleansing of rooms after cases of 
 infectious disease. What is more, this inefficiency 
 and recklessness will not only put the ratepayers to 
 heavy private expense for medical attendance, dis- 
 ablement and so forth, but recoil directly on the 
 rates themselves in sanitary expenditure ; whereas 
 the extinction of the electric light for an hour 
 occasionally, though it provokes loud complaints 
 and is undeniably exasperating, costs nothing but 
 the inconvenience of the moment and a little candle 
 grease and lamp oil. We must therefore conclude, 
 not merely that the commercial test is a misleading 
 one, but that the desirability of municipal trading 
 is actually in inverse ratio to its commercial profit- 
 ableness. A few illustrations will make this clear. 
 
 Take the most popular branch of commercial 
 enterprise : the drink traffic. It yields high profits. 
 Take the most obvious and unchallenged branch 
 of public enterprise : the making of roads. It is 
 not commercially profitable at all. But suppose the 
 drink trade were debited with what it costs in dis- 
 ablement, inefficiency, illness and crime, with all 
 their depressing effects on industrial productivity, 
 and with their direct cost in doctors, policemen, 
 prisons, &c. &c. &c. ! Suppose at the same time 
 the municipal highways and bridges account were
 
 20 Municipal Trading 
 
 credited with the value of the time and wear and 
 tear saved by them ! It would at once appear that 
 the roads and bridges pay for themselves many 
 times over, whilst the pleasures of drunkenness are 
 costly beyond all reason. Consequently a munici- 
 palized drink traffic which should check drinking 
 at the point of excess would be a much better bar- 
 gain for the ratepayers than our present system, 
 even if the profits made at present by brewers and 
 publicans were changed to losses made up by sub- 
 sidies from the rates. 
 
 But the drink traffic is not the best illustration of 
 the fallacy of the commercial test. The main factor 
 to be taken into account in comparing private with 
 public enterprise is neither the Drink Question nor 
 any of the other Questions which occupy so many 
 sectional bodies of reformers, but the Poverty 
 Question, of which all the others are only facets. 
 Give a man a comfortable income and you solve 
 all the Questions for him, except perhaps the Ser- 
 vant Question. Now the all-important difference 
 between the position of the commercial investor 
 and the ratepayer is that whilst the commercial in- 
 vestor has no responsibility for the laborers whom 
 he employs beyond paying them their wages whilst 
 they are working for him, the ratepayer is respon- 
 sible for their subsistence from the cradle to the 
 grave. Consequently private companies can and do 
 make large profits out of sweated and demoralized 
 labor at the expense of the ratepayers ; and these
 
 Anti-Social Industrial Reactions 21 
 
 very profits are often cited as proofs of the superior 
 efficiency of private enterprise, especially when they 
 are set in sensational contrast to the inability of 
 municipalities to make any commercial profits at all 
 in the same business. 
 
 For example, consider the case of a great dock 
 company. Near the docks three institutions are sure 
 to be found : a workhouse, an infirmary, and a police 
 court. The loading and unloading of ships is dan- 
 gerous labor, and to a great extent casual labor, 
 because the ships do not arrive in regular numbers 
 of regular tonnage at regular intervals, nor does the 
 work average itself sufficiently to keep a complete 
 staff regularly employed as porters are at a railway 
 station. Numbers of men are taken on and dis- 
 charged just as they are wanted, at sixpence an hour 
 (in London) or less. This is convenient for the dock 
 company ; but it surrounds the dock with a de- 
 moralized, reckless and desperately poor population. 
 No human being, however solid his character and 
 careful his training, can loaf at the street corner 
 waiting to be picked up for a chance job without 
 becoming more or less a vagabond : one sees this 
 even in the artistic professions, where the same evil 
 exists under politer conditions, as unmistakeably as 
 in the ranks of casual labor. The shareholders and 
 directors do not live near the docks; so this does 
 not affect them personally. But the ratepayers who 
 do live near the dock are affected very seriously 
 both in person and pocket. A visit to the work-
 
 Z2 Municipal Trading 
 
 house and a chat with one of the Poor Law Guar- 
 dians will help to explain matters. 
 
 Into that workhouse every dock laborer can walk 
 at any moment, and, by announcing himself as a 
 destitute person, compel the guardians to house and 
 feed and clothe him at the expense of the rate- 
 payers. When he begins to tire of the monotony of 
 *'the able bodied ward" and its futile labor, he can 
 wait until a ship comes in ; demand his discharge ; 
 do a day's work at the docks; spend the proceeds 
 in a carouse and a debauch ; and return to the work- 
 house next morning, again a destitute person. This 
 is systematically done at present by numbers of men 
 who are by no means the least intelligent or capable 
 of their class. Occasionally the carouse ends in their 
 being taken to the police station instead of return- 
 ing immediately to the workhouse. And if they are 
 unlucky at their work, they may be carried for 
 surgical treatment to the infirmary ; for in large 
 docks accidents that require hospital treatment occur 
 in busy times at intervals of about fifteen minutes. 
 Finally, when they are worn out, they subside into 
 the workhouse permanently as aged paupers until 
 they are buried by the guardians. 
 
 Now workhouses, infirmaries and police courts 
 cannot be maintained for nothing. Of late years 
 workhouses have become much more expensive : in 
 fact the outcry against the increase of the rates, 
 which is being so vigorously used to discredit muni- 
 cipal trading, is due primarily and overwhelmingly
 
 Anti-Social Industrial Reactions 23 
 
 to Poor Law, and only secondarily to educational 
 and police expenditure, and has actually forced for- 
 ward those branches of municipal trading which 
 promise contributions out of their profits in relief of 
 the general rate. This expenditure out of the rates 
 on the workhouse is part of the cost of poverty and 
 demoralization ; and if these are caused in any dis- 
 trict by the employment of casual labor, and its re- 
 muneration at less than subsistence rates, then it is 
 clear that a large part of the cost of the casual labor 
 is borne by the ratepayer and not by the dock 
 company. The dividends, in fact, come straight out 
 of the ratepayers' pockets, and are not in any real 
 sense profits at all. Thus is it one of the many 
 ironies of the situation that the sacrifices the rate- 
 payer makes to relieve the poor really go largely to 
 subsidize the rich. 
 
 A municipality cannot pick the ratepayer's 
 pocket in this fashion. Transfer the docks to the 
 municipality, and it will not be able to justify a loss 
 at the workhouse and police station by a profit at 
 the docks. The ratepayer does not go into the 
 accounts : all he knows is whether the total number 
 of pence in the pound has risen or fallen. Conse- 
 quently the municipality, on taking over the docks, 
 would be forced to aim in the first instance at or- 
 ganizing its work so as to provide steady permanent 
 employment for its laborers at a living wage, even 
 at the cost of being overstaffed on slack days, until 
 the difficulty had been solved by new organization
 
 24 Municipal Trading 
 
 and machinery, as such difficulties always are when 
 they can no longer be shirked. Under these con- 
 ditions it is quite possible that the profits made 
 formerly by the dock company might disappear ; 
 but if a considerable part of the pauperism and crime 
 of the neighborhood disappeared simultaneously, 
 the bargain would be a very profitable one indeed 
 for the ratepayers, though the Times would abound 
 with letters contrasting the former commercial pros- 
 perity of the dock company with the present " in- 
 debtedness " of the municipality. 
 
 If we now turn back from the grand scale of com- 
 mercial enterprise as represented by the dock com- 
 pany to the petty scale represented by the parish 
 dust contractor, we find the same danger of false 
 economy. When a municipality does its own dust 
 collecting for a year, it is usually quite easy for those 
 members whose only conception of economy is to 
 reduce every item of expenditure separately to the 
 lowest possible figure, to obtain estimates from con- 
 tractors offering to do the work for less than it has 
 cost the municipal Works Department. The con- 
 tractor's secret is a simple one : casual labor at very 
 low wages eked out by tips from the householders. 
 And here the consequences reach further than in the 
 case of the docks. The collection of dust, unlike the 
 unloading of ships, has a direct relation to the health, 
 comfort and energy of the inhabitants. The indi- 
 vidual ratepayer who fancies he has saved a few 
 pence by the employment of a contractor may lose
 
 Anti-Social Industrial Reactions 25 
 
 anything from a shilling to several pounds through 
 illness, and suffer a constant depreciation of his own 
 energy and that of his employees, if the dust is not 
 punctually, frequently, and efficiently collected. The 
 annoyance and the increase of domestic labor caused 
 by the visits of a casually employed underpaid dust- 
 man, even when he is conciliated by tips, is known 
 only to the woman at home, whose worries have an 
 important reaction on the national energy, as married 
 men well know. During smallpox epidemics, which 
 are very costly, rates may be heavily increased by 
 the results of cheap contracting. The ratepayer is 
 always paying for the notifiable infectious diseases, 
 especially scarlet fever, diphtheria and measles ; and 
 if the disinfection after these and after smallpox is 
 done by casual labor, so that the man who disinfects 
 a scarlet fever room today may be discharged by the 
 contractor in the evening, and go straight to an 
 ordinary job tomorrow, the disinfector may himself 
 spread more infection than he prevents. In sanitary 
 work, then, the cost of poverty in poor law relief, 
 and the cost of the demoralization of the casual 
 laborer in drunkenness and crime, is increased by 
 the cost of inefficiency and hygienic unscrupulous- 
 ness in disease, with its expensive public routine of 
 inspection, disinfection, cleansing and stripping, in 
 addition to its privately borne cost in medical attend- 
 ance, nursing and disablement. 
 
 But it is not yet clear that the remedy is for the 
 municipality to do the work. It may be argued that
 
 26 Municipal Trading 
 
 under a proper system of inspection and an effective 
 scale of resolutely enforced penalties, a contractor 
 could be induced to do it as thoroughly as the muni- 
 cipality itself, without resorting to casual or under- 
 fed labor. Let us suppose, then, that a contractor 
 offers to do municipal work at a figure which works 
 out lower than the estimate of the Works Depart- 
 ment even when the cost of sufficient inspection and 
 enforcement of penalties to secure efficiency is added 
 to the sum named in the contract ; and that he also 
 undertakes that everyone in his employment shall, 
 judged by the standard of the laboring class, be in 
 comfortable circumstances. Satisfactory as thisseems, 
 there will still be a heavy loss to the ratepayer in 
 accepting the contract unless everyone employed by 
 the contractor actually receives a full living wage, as 
 the following analysis will shew. 
 
 The payment of less than a living wage is pos- 
 sible in two ways. There is the direct form in which 
 the underpaid, underfed, underhoused,underclothed, 
 underrespected, undercomforted employee draws on 
 his or her vital capital for a few years and is then dis- 
 charged and replaced by younger and less exhausted 
 travellers on the same road to ruin. Contractors can 
 make profits on relays of this kind just as publicans 
 in seaports or in the Australian bush can make profits 
 by relays of sailors and shepherds who come to them 
 with the earnings of several months' work, and are 
 thrown out by the potman as soon as all their money 
 is spent in drink. On this form of sweating, common
 
 Anti-Social Industrial Reactions 27 
 
 as it is, nothing need be said. To everyone intelligent 
 enough to read a book on municipal trading it must 
 be clear without argument that the employment of 
 a contractor of this type would be ruinously dear to 
 the ratepayer even if the contractor did the work for 
 nothing and paid a bonus in aid of rates into the 
 bargain. 
 
 But sweating is not in actual practice so obvious 
 and simple a matter. The commonest and most 
 dangerous form is not the direct and sensationally 
 cruel sweating of a scandalously wretched victim by 
 a sordidly brutal employer, but the unsensational 
 and quite popular sweating of one industry by an- 
 other, with the result that the actual starvation of 
 the worker often takes place in neither industry, 
 though it occurs elsewhere in consequence of their 
 relation. This economic phenomenon, which was 
 first analysed by Mr. and Mrs. Sidney Webb,^ and is 
 only beginning to be appreciated even by professional 
 economists, is quite compatible with normal good- 
 nature on the part of the employer and normal cheer- 
 fulness and decency on that of the employee. 
 
 Take a familiar example. A married laborer, or 
 a shop assistant or clerk of the grade that makes no 
 pretension to gentility, earns, say, from eighteen to 
 twentyfour shillings a week. An additional six shil- 
 lings a week will make a difference in the comfort and 
 social standing of the family enormously greater than 
 
 1 Industrial Democracy, By Sidney and Beatrice Webb (London 
 Longmans, 1897).
 
 2 8 Municipal Trading 
 
 could be produced by raising an income of a thousand 
 a year to five thousand. It is difficult for the readersof, 
 say, the Spectator and the Times, to form any concep- 
 tion of the magnitude of a promotion from eighteen 
 shillings a week to twentyfour, or from twentyfour 
 to thirty. Such well-to-do persons are often scan- 
 dalized when their attention is called to the apparent 
 ferocity with which the very poor resist Factory 
 Legislation when it protects their children from being 
 withdrawn from school and sent out to earn a few shil- 
 lings at an early age ; but the truth is that if five shil- 
 lings a week made as much difference to a duke as it 
 does to many laborers, he would send his son out into 
 the streets to earn it at ten years old if the law allowed 
 him. And if he had a couple of sturdy daughters, he 
 would not allow them to eat their heads off at home, 
 so to speak, when they might go into a factory, or 
 dust yard, or shop, and bring home five, ten, twelve 
 or perhaps even fifteen shillings apiece. If he had no 
 children, or not enough to require a woman's whole 
 time for the housekeeping, his duchess would give 
 half her day as a charwoman in a lower middle class 
 house for five shillings a week or as much more as she 
 could get for it. Such family circumstances seldom 
 occur in the peerage except after revolutions ; but 
 millions of English laborers' homes are in that posi- 
 tion. The consequence is that there is a huge mass of 
 the labor of women and minors always in the market 
 at less than subsistence rates ; and whole industries 
 can be carried on by such labor with plenty of profit
 
 Anti-Social Industrial Reactions 29 
 
 to their organizers. But they are carried on at a loss 
 to the ratepayer, who has finally to make up much 
 more than the whole difference between the wage 
 paid and the cost or subsistence, except where the 
 debt is cancelled by premature death. 
 
 Let us follow the process in the instance most 
 favorable to it. Alaborer is working for twentyfour 
 shillings a week (the present London " moral mini- 
 mum " subsistence wage) for the London County 
 Council. If he and his wife can get a boarder at six 
 shillings a week (for which a separate apartment and 
 much more food than would otherwise be wasted can 
 hardly be expected) the twentyfour shillings become 
 thirty: an immense difference. Economically, it does 
 not matter to the laborer whether the boarder is his 
 own son or daughter orsomebody else's. The London 
 factory girl can always find a family to board with if 
 she has none of her own ; but the evil is so far ex- 
 aggerated by family affection that a girl who could 
 bring home only five shillings would probably have 
 to board with an eighteen shilling laborer instead of 
 a twentyfour shilling one unless the latter were her 
 father. 
 
 Now it is clear that though the girl (or lad) takes 
 five shillings home, and thereby eases the family cir- 
 cumstances very appreciably ; so that both the parents 
 and the daughter are benefited and pleased, the 
 father is partly supporting the girl out of the wage 
 paid him by the County Council. That means that 
 her employer is spunging on the ratepayer for part
 
 30 Municipal Trading 
 
 of the cost of the labor he uses. With this advantage 
 he tenders to the Government for a clothing contract, 
 or to one of the Borough Councils for a dusting con- 
 tract. These bodies, being now mostly bound by re- 
 solution to pay full living wages to their own direct 
 employees, find that they cannot do the work them- 
 selves so cheaply. It is therefore given to the con- 
 tractor in the name of economy ; so that though the 
 ratepayers pay full subsistence wages to their own 
 adult male laborers, yet by employing a contractor 
 to sweat the laborer's daughter, who brings her wage 
 up to subsistence point by indirectly sweating him, 
 they get the labor of two persons for less than a sub- 
 sistence wage and a half, even if they pay the con- 
 tractor ten shillings for the labor he pays five for. No 
 doubt many ratepayers will regard this as a clever 
 stroke of business; but it would have been still 
 cleverer for the ratepayer to have paid the laborer 
 twentynine shillings a week for the services of him- 
 self and his daughter in direct employment and so 
 saved the contractor's profit. Yet even from this 
 point of view the system of allowing one industry to 
 flourish as a parasite on another is a penny-wise and 
 pound-foolish one, as we shall see when we pursue 
 the process to its end — for we are by no means done 
 with it yet. Meanwhile it must be remembered that 
 our hypothetic laborer need not be in the employ- 
 ment of the County Council. He may be in the em- 
 ployment of a commercial company or firm at a living 
 wage, in which case both the contractor and the
 
 Anti-Social Industrial Reactions 31 
 
 public body accepting his contract are making the 
 company pay for the difference between what the 
 contractor pays his employees and what it costs them 
 to live. 
 
 Let us now follow the career ot the laborer's 
 daughter. In course of time her parents die, or else 
 get past working and become dependent on their 
 children instead of helping to support them. Five 
 shillings a week will not meet this emergency. If the 
 daughter marries a man earning a subsistence wage, 
 she provides for herself and either puts her parents 
 on her husband's back (he having parents of his own, 
 probably) or else lets them go into the workhouse. 
 But this solution of the difficulty does not always 
 occur. She may not marry ; and if she does her 
 husband may die, or desert her, or be disabled, or be 
 out of employment in times of bad trade. These 
 things occur sufficiently often to produce at all times 
 a considerable number of women struggling to live 
 and to bring up their children by their own unaided 
 exertions. 
 
 Imagine the fate of such a woman. She seeks 
 employment in a factory, and is offered five shillings 
 a week. If she refuses it on the ground that she 
 cannot feed herself and her children on it, plenty of 
 younger, jollier, better looking laborers' daughters, 
 with their fathers' wages to fall back on, will take 
 her place willingly. She tries to earn something as 
 a charwoman, and finds that plenty of laborers' 
 wives are willing to " come in for an hour a day "
 
 32 Municipal Trading 
 
 for the same five shilling wage, though in this case 
 the hour may mean half the day, a midday meal, 
 and certain stray perquisites of washing and the 
 like which may, at best, perhaps double the nominal 
 value of the job. Permanent domestic service is 
 barred by the children ; and so is boarding with a 
 family. Rent may be anything up to six and six- 
 pence a room. At every turn the competition of the 
 subsidized laborer's boarder, whether wife, daughter 
 or stranger, has reduced wages below subsistence 
 point ; and there is seldom any prospect of an im- 
 provement, because most of these sweated industries 
 would, if they were compelled to pay a living wage, 
 either disappear altogether or else save themselves by 
 reorganizing their system, introducing machinery, 
 and employing labor of quite a different class. The 
 situation is a desperate one; and though nearly every 
 middle class family knows (and has perhaps helped 
 to sweat) some respectable widow who has weathered 
 it, no middle class family knows or tolerates the 
 many widows, deserted wives, and single women of 
 the prevalent "middling" character, who give up 
 the struggle, and drudge and drink and pilfer their 
 way along as best they can, qualifying themselves 
 and their children for poor relief, sick relief, and 
 police coercion, and forming a centre of infection 
 for that disease of hopeless inefficiency and uncon- 
 scientiousness in daily work which costs the rate- 
 payers more than the whole budget, imperial and 
 local, civil and military.
 
 Anti-Social Industrial Reactions 33 
 
 Thus we find that even when a contractor can 
 guarantee that the labor he employs is not casual 
 labor; that it is efficient, regular, respectable, cheer- 
 ful, healthy, and untouched directly by pauperism, 
 prostitution or crime; and that he pays the full wage 
 customary in his industry, it will still not pay the 
 ratepayer to accept his tender unless he can shew 
 that every person he proposes to employ on the work 
 will get a self-supporting adult's living wage for it. 
 Not until this fundamental condition is insisted on 
 can a simple comparison of the contractor's tender 
 with the Borough Engineer's estimate be accepted 
 as a test of the relative merits of commercial and 
 municipal enterprise. 
 
 This is the common sense of the modern in- 
 novation of a Fair Wages clause in all industrial 
 contracts made by municipalities, and of the pay- 
 ment of a full living wage to all municipal 
 employees.
 
 THE BENEFICIAL REACTIONS OF 
 COMMERCIAL ENTERPRISE 
 
 In reading the last chapter, the intelligent advocate 
 of commercial enterprise must have been oppressed 
 with a sense of unfairness, because it says nothing 
 of the employers who are not sweaters, nor of the 
 great social benefits which commercial enterprise has 
 conferred on the community. If commerce has its 
 anti-social reactions, represented by the prison, the 
 workhouse, and the poor rate, what about its 
 beneficial social reactions ? It feeds us, clothes us, 
 provides our system of transport. In a word, our 
 subsistence and our civilization are its daily work, 
 done at its own risk. 
 
 Unfortunately, though it does, if not all this, at 
 least enough of it to establish high claims to our 
 consideration, it does so at the commercial dis- 
 advantage of being unable to appropriate the total 
 benefit resulting from its operations. If on the one 
 hand the dock company is able, as we have seen, to 
 
 34
 
 Beneficial Industrial Reactions 35 
 
 spunge on the ratepayer for the maintenance of its 
 labor, and to throw on his shoulders the social 
 wreckage its methods involve, it is, on the other 
 hand, quite unable to reap for itself the whole value 
 of the docks to the seaport. It may be scraping 
 together a very paltry dividend with the utmost 
 anxiety, whilst trade to the value of many millions 
 is coming to the town through its gates. Indeed it 
 may pay no dividend at all, and yet see commercial 
 companies all round it making handsome profits 
 which would instantly disappear if the docks were 
 swallowed up by an earthquake. And the dust 
 contractor, with all his opportunities of sweating, 
 has to quote such low figures lest his competitors 
 should send in the lowest tender, that he sometimes 
 becomes a bankrupt in consequence of operations 
 which have reduced the death-rate of the parish and 
 saved many doctor's bills. 
 
 Now it is the chief and overwhelming advantage 
 of public enterprise that it can and does reap the 
 total benefit of its operations when there is a benefit, 
 just as it suffers and is warned by the total damage 
 of them when there is damage. In the technical 
 language of the political economists, public enter- 
 prise goes into business to gain the value in use or 
 total utility of industrial activity, whilst commercial 
 enterprise can count only on the value in exchange 
 or marginal utility. An illustration or two will 
 make the meaning clear. 
 
 It is commonly enough understood that there
 
 36 Municipal Trading 
 
 are certain highly beneficial industrial operations 
 which cannot be left to commercial enterprise, 
 because their profits are necessarily communized 
 from the beginning ; so that a company under- 
 taking the work could not get paid for it. The 
 provision of thoroughfares in a city is a case in 
 point. It has never been possible to put a toll-bar at 
 the end of every city street and compel each passenger 
 to pay for using it. Commercially, therefore, city 
 street-making " does not pay " ; so it is left to the 
 municipality, with the result that the ratepayers 
 gain enormously by their expenditure. What is not 
 so generally recognized is that this power of the 
 ratepayers to realize profits inaccessible to private 
 speculators, applies to a greater or less extent over 
 the whole field of public industry. Streets and 
 highways are only a part of the industry of loco- 
 motion : commercial enterprise, which cannot touch 
 them, can and does undertake toll bridges, tram- 
 ways, railways, cab services, and, in short, every 
 means of locomotion which can be charged for per 
 passenger. But though commercial companies can 
 make a dividend in this way, they cannot charge 
 for, and consequently cannot reap for themselves, 
 more than a fraction of the value of the service 
 they render, even when they have the closest 
 monopoly of the traffic. The reason is that the 
 actual passengers are not the only people benefited 
 by facility of communication. Take an extreme 
 case : that of a rich invalid in the country whose
 
 Beneficial Industrial Reactions 37 
 
 life depends on the arrival of a London surgeon to 
 operate within, say, two hours. He will pay any- 
 thing, " skin for skin, yea, all that a man hath will 
 he give for his life " — much less the necessary 
 hundred guineas or so — to bring the surgeon to his 
 bedside ; and the railway company will do it for 
 him ; but the railway company will not get the 
 hundred guineas. It will get no more than if the 
 surgeon were starting on a pleasure trip, and were 
 paying for the fun of the journey instead of being 
 heavily paid to endure its fatigues. In the same way 
 everybody who buys a pound of tea or a ton of 
 coal derives from the commercial enterprise which 
 has established communication between China and 
 Newcastle a benefit which is out of all proportion 
 to the charge for freight and for commercial 
 travellers' tickets which is all that the railway and 
 steamship company get. Suppose these charges were 
 abolished ! Suppose, even, that people became so 
 sensitive to the discomforts of railway travelling 
 and of seasickness that they had to be paid so much 
 per mile at the ticket office to induce them to 
 travel. Private enterprise in locomotion, as at 
 present organized, would be ruined at once ; but 
 it would still pay the ratepayer and the taxpayer 
 handsomely to keep the railways and shipping lines 
 — in other words, to maintain civilization — on these 
 terms. 
 
 This difference is fundamental. It quite dis- 
 ables all commercial comparisons between com- 
 
 431715
 
 38 Municipal Trading 
 
 mercial and communal industry. When a joint 
 stock company spends more than it takes, it is carry- 
 ing on business at a loss. When a public authority 
 does so, it may be carrying on business at a huge 
 profit. And there is no question here of the shop- 
 keeper's trick of selling canary seed under cost 
 price in order to induce bird fanciers to buy their 
 flour and fodder from him. A municipality might 
 trade in this manner too, if it saw fit : for instance, 
 it might wire houses for electric light under cost 
 price in order to stimulate a commercially profit- 
 able consumption of current. But it is quite pos- 
 sible that a municipality might engage in a hundred 
 departments of trade ; might shew a commercial 
 loss on every one of them at the end of every half 
 year ; and yet continue in that course with the full 
 approval and congratulation of the very ratepayers 
 who would have to make up the loss. Its total 
 gains are immeasurable ; and its success can only 
 be estimated by constant reference to the statistics 
 of public welfare. For instance, if the statistics of 
 health, and of crime, had been applied a century 
 ago to test the alleged prosperity of Manchester 
 under unrestricted private enterprise, nobody 
 would have boasted of a factory system that " used 
 up nine generations of men in one generation" as 
 profitable because it produced a commercial peerage 
 of cotton lords. If the new education authorities 
 adopt the recommendation of Dr. J. F. J. Sykes, 
 and have the children in the schools periodically
 
 Beneficial Industrial Reactions 39 
 
 weighed and measured, the vital statistics thus 
 obtained will provide an important test of the 
 social value of the industrial order under which the 
 children live. Thus, let us imagine a city in which 
 the poor rates, police rates, and sanitary rates are 
 very low, and the children in the schools flourish- 
 ing and of full weight, whilst all the public services 
 of the city are municipalized and conducted with- 
 out a farthing of profit, or even with occasional de- 
 ficits made up out of the rates. Suppose another city 
 in which all the public services are in the hands of 
 flourishing joint stock companies paying from 7 to 
 21 per cent, and in which the workhouses, the 
 prisons, the hospitals, the sanitary inspectors, the 
 disinfectors and strippers and cleansers, are all as 
 busy as the joint stock companies, whilst the schools 
 are full of rickety children. According to the com- 
 mercial test, the second town would be a triumphant 
 proof of the prosperity brought by private enter- 
 prise, and the first a dreadful example of the bank- 
 ruptcy of municipal trade. But which town would 
 a wise man rather pay rates in .'' The very share- 
 holders of the companies in the second town would 
 take care to live in the first. And what chance 
 would a European State consisting of towns of the 
 second type have in a struggle for survival with a 
 State of the first .? 
 
 This demonstration of the irrelevance of the 
 ordinary comparisons of commercial profits and 
 expenses with municipal profits and expenses leads
 
 40 Municipal Trading 
 
 to a comparison of the very important factor of 
 incentive. The commercial incentive stops where 
 its profit stops. The municipal incentive extends to 
 the total social utility, direct and indirect, of the 
 enterprise. What is more, the incentive of com- 
 mercial profit is often actually stronger on the side 
 of socially harmful enterprises than of beneficial 
 ones. Vicious entertainments and exhibitions, un- 
 scrupulous newpapers and books, liquor licenses in 
 neighborhoods already overstocked with drinkshops, 
 are only the obvious instances, just as our com- 
 mercially unprofitable cathedrals, national galleries, 
 and blue books are conspicuous at the opposite 
 extreme. 
 
 But it may be contended that an efficient censor- 
 ship would bar the downward path to commercial 
 enterprise, very much as the London County Council 
 has forced the London music halls into the com- 
 paratively decent courses which have produced their 
 present enormous prosperity. The fact remains that 
 the music halls did not see their own interest until 
 they were forced to look at it through the public 
 eye ; and this goes to shew that the limitation of 
 the gains of commercial enterprise to its commercial 
 dividend, also limits its mind, and, by making it 
 habitually blind to public considerations, prevents 
 it from grasping even the commercial opportunities 
 which large public needs offer. 
 
 Take a simple instance. London is at present 
 helplessly at the mercy of a cab service which cari-
 
 Beneficial Industrial Reactions 41 
 
 catures all the worst weaknesses of commercial 
 enterprise. It costs a shilling to go ten yards in a 
 cab : consequently the stands are always full of idle 
 cabs, and the most energetic policing cannot clear 
 the streets of crawling ones. Yet if you want to take 
 a cab for an hour, which hardly anybody does, you 
 get it for a halfpenny a minute. What is wanted is 
 the penny-a-minute cab, which would, for hundreds 
 of thousands of Londoners who now never take a 
 cab except when they are travelling with luggage, 
 abolish walking for all purposes except constitu- 
 tional ones. The penny bus, still a comparative 
 novelty, has shewn that even twopence is a prohibi- 
 tive fare in London ; for the increase of passengers 
 produced by the reduction to a penny has been so 
 lucrative that the main thoroughfares will not 
 accommodate all the omnibuses that seek to ply 
 in them. The London cabmen could introduce a 
 penny-a-minute fare if they had sufficient business 
 capacity ; but if they had, they would not be cab- 
 men. It is easy to say that the cab proprietors would 
 do it if it would pay. It is equally easy and equally 
 absurd to say that a tube railway from the Mansion 
 House to Uxbridge Road would have existed ten 
 years ago if it would have paid ten years ago, or 
 that the grime of the underground railway was a wise 
 economy of its directors. The truth about private 
 enterprise is that it is not enterprising enough for 
 modern public needs. It will not start a new system 
 until it is forced to scrap the old one. And the 
 
 c 2
 
 42 Municipal Trading 
 
 reason — one that no profusion of technical educa- 
 tion will wholly remove — is that only a fraction of 
 the public benefit of industrial enterprise is com- 
 mercially appropriable by it. It will not risk colossal 
 capitals with the certainty that it must do enormous 
 service to the public, and create a prodigious un- 
 earned increment for the ground landlords, before 
 it can touch a farthing of dividend ; and therefore, 
 however crying the public need may be, if the 
 municipalities will not move in the matter nothing 
 is done until millionaires begin to loathe their super- 
 fluity and become reckless as to its investment ; 
 until railways are promoted merely to buy tubes 
 from Steel Trusts, and monster hotels floated, after 
 the usual three liquidations, to buy tables and 
 carpets from furniture companies. And even then 
 what is done is only enough to shew that it should 
 have been done fifty years sooner, and might even 
 have been done commercially but for the fatal, 
 though inevitable, commercial habit of mind which 
 must consider only the dividend which it can grasp 
 and not the social benefit that it must share with its 
 neighbors.
 
 VI 
 
 COMMERCIAL AND MUNICIPAL PRICES 
 
 The effect of municipal enterprise on prices is an 
 important factor in the situation. The rough and 
 ready conclusion as to market prices is that sellers 
 will compete for custom by underbidding one another, 
 and that thus free competition will secure the utmost 
 possible cheapness to the consumer. The simple reply 
 to this optimistic receipt for a self-acting millennium 
 is that as soon as sellers find this out they stop com- 
 peting ; and competition is replaced by conspiracy. 
 The far-seeing and capable heads of the trade com- 
 bine, and finally get the whole trade into their own 
 hands, even if they have to sell at less than cost for 
 long enough to ruin all the small manufacturers who 
 are too poor or too stupid to join the combination. 
 A monopoly being thus established, a market price 
 is fixed, and retailers are supplied only on condition 
 of their selling at that price. 
 
 Now it does not follow that this price will be 
 
 43
 
 44 Municipal Trading 
 
 higher than the old competition price it has super- 
 seded. On the contrary, the cost of production is 
 so much reduced by the concentration of the trade 
 in the hands of the most intelHgent masters, manu- 
 facturing on a large scale with the best machinery 
 and the largest capitals, and public consumption is 
 so much increased by every reduction in price, that 
 a frequent result of the substitution of combination 
 for competition, and of relative monopoly for com- 
 plete freedom of trade, is the appearance in the 
 market of a better and cheaper article. 
 
 But there are limits to this beneficial process. 
 The Trust, after all, is not a philanthropic enter- 
 prise, which is exactly what the municipality is. 
 The Trust aims at the maximum of profit ; and its 
 prices will always be fixed so as to carry that profit. 
 The municipality, on the other hand, must aim at 
 the suppression of profit, because municipal profit, 
 as we shall sec presently, has the effect of making 
 the consumer pay more than his fair share of the 
 rates. But no matter what result is aimed at, whether 
 profit or no profit, that result can be produced, not 
 by one price and one price only, but by any one of 
 several different prices. 
 
 To make this clear, take a case : a fantastic one 
 to begin with. Let the problem be to fix the price 
 of a newly invented patent flying machine for a 
 single passenger. As the patent excludes competi- 
 tion, the patentee may fix its price at anything from 
 its bare cost to a completely prohibitive figure. Our
 
 Prices 45 
 
 experience of the automobile shows us what he would 
 do. He would offer the asroplane first at ^500,000. 
 It is quite possible, in view of the insane distribu- 
 tion of riches at the present time, that he would sell 
 half a dozen through Europe and America at that 
 figure ; for ridiculously rich people do spend such 
 sums on much less attractive whims. That is, he 
 would receive three millions. When there were no 
 more buyers at half a million, he would introduce 
 the Popular iEropJane at ^ 1 00,000. Probably there 
 would be no buyers : everybody would wait con- 
 fidently for a further reduction. He would then 
 come down to ^1000, and make a stand at that, 
 probably, for some years, meanwhile paying artisans 
 £22. week to fly about in aeroplanes and familiarize 
 the public with their existence and practicability, 
 just as until quite recently the most expensive auto- 
 cars were seen running on our main roads, crowded, 
 not with dukes and millionaires, but with people 
 whose average family income was clearly not much 
 above thirty shillings. 
 
 If he sold 3000 asroplanes at ;^iooo apiece, the 
 takings would be the same as that from the sale of 
 six at j^500,ooo. A sale of 6000 at ;/^500, of 
 30,000 at ;(^ioo, or of 150,000 at ^^20, would all 
 produce the same sum, and a slight modification of 
 the larger numbers to allow for varying cost of pro- 
 duction would make them all return the same profit ; 
 for the labor of organizing the production and dis- 
 tribution of a million and a half aeroplanes would
 
 46 Municipal Trading 
 
 be enormously greater than of half a dozen, whilst, 
 per contra, the market would be much more stable, 
 and the manufacture of the million and a half would 
 be a matter for machines turning out aeroplanes by 
 the gross like pins, whilst six only would have to 
 be built as primitively as a village carpenter builds 
 a wheelbarrow. All these changes would enter into 
 the calculations of the seller ; but the main factor 
 in his choice would be the sliding scale by which 
 the number of buyers goes up as the price comes 
 down. And it is clear that neither the lowest price, 
 nor any single price whatever, would have a decisive 
 advantage from the purely commercial point of 
 view. There might be hundreds of equally con- 
 venient prices all yielding the same commercial 
 result ; and when, after a long series of trials, 
 something like a stable customary price was reached 
 as the most satisfactory to the seller, all experience 
 is against the hope that it would, in a community 
 stratified as ours is in purchasing power, be the 
 price at which the most socially beneficial use of 
 the invention would be possible. It would either be 
 too cheap, like gin, or too dear, like house room. 
 As in the case of the motor car, the whole industry 
 of the world might be deprived of its benefit for 
 years whilst producers were competing for the custom 
 of plutocratic young sportsmen with racing 
 machines of extravagantly superfluous horse power. 
 Let us take a more prosaic case. Let the problem 
 be to fix the price per word of a cable message, say
 
 Prices 47 
 
 to the United States. Here there Is clearly no single 
 most profitable price. The difference between the 
 cost of sending one message a day and twenty is 
 negligible : consequently the profit on one message 
 a day at a pound and twenty messages at a shilling 
 apiece is the same. Still, it saves trouble to send one 
 message instead of twenty ; so the commercial 
 tendency will be to charge a pound. At present, 
 accordingly, cabling to the United States is an ex- 
 pensive luxury. The charge is a shilling a word ; 
 and a couple of tiny offices in Northumberland 
 Avenue, in which one never finds as many as two 
 customers at the same time, suffice for all the people 
 in that populous centre who wish to avoid the crowd- 
 ing in the postal telegraph offices. It is difficult to 
 believe that a sweeping reduction in this heavy 
 charge would reduce profits, however much it might 
 multiply cables, offices, plant and staff. But it is not 
 certain that it would increase profits ; and if it did 
 not, the company would have reduced their charges 
 and magnified their operations for nothing. The 
 huge benefit to both nations from the development 
 of their intercourse would not go into the com- 
 pany's pocket. 
 
 But it would go into the nation's pocket. It 
 would probably pay the nation to make telegraphic 
 communication with the American continent quite 
 free of direct charges except possibly for the purpose 
 of checking a frivolous use of the cables. At all 
 events the nation's interest in keeping charges down
 
 48 Municipal Trading 
 
 is as clear as the company's interest in keeping them 
 up to the highest point at which the loss by restrict- 
 ing the use of the cable will be less than the gain by 
 high rates. 
 
 A municipality does not meddle with trans- 
 atlantic cables ; but it does with telephones. Its ad- 
 vantage over local commercial enterprise is of the 
 same nature. There is not one price only available, 
 and that the most profitable, but several prices all 
 yielding the same total profit. It is the interest of 
 the private company to select the highest of these, 
 and the interest of the public and of the municipality 
 to select the lowest. There is, however, one very 
 important difference between a telegraph and a tele- 
 phone service. Competition between telegraph com- 
 panies may duplicate cables unnecessarily ; but it may 
 nevertheless keep down charges. But competing 
 telephone exchanges are intolerable : the nature of 
 the service compels monopoly. At Tunbridge Wells, 
 where the municipality established an exchange in 
 competition with a private company, all the argu- 
 ments in favour of municipal enterprise, and all its 
 promises of a cheaper service, broke down before 
 the nuisance of ringing up your butcher or baker, 
 your doctor or solicitor, and finding that he was on 
 the rival exchange. It was perhaps natural for the 
 ratepayers of Tunbridge Wells to sell their own baby 
 exchange rather than buy the grown-up one of the 
 commercial company ; but it was not the final solu- 
 tion of the difiiculty ; and the victory was not really
 
 Prices 49 
 
 one of private enterprise over municipal socialism, 
 but of national over local organization of an essenti- 
 ally national service. The private company was not 
 tied by the municipal boundary of Tunbridge Wells ; 
 and this advantage made it irresistible when the 
 question arose which competitor should swallow the 
 other. 
 
 Take a third case of the simplest oilshop order. 
 Let the problem be to fix the retail price per gallon 
 of the petroleum of, say, the Standard Oil Trust. 
 A practical monopoly of the petroleum supply may 
 be assumed ; but a monopoly of petroleum is not a 
 monopoly of light. Petroleum could be put out of 
 use altogether by too high a price. On the other 
 hand every reduction of price means an increase of 
 consumption. Lamps are lighted earlier and extin- 
 guished later ; duplex lamps are substituted for single 
 wicks ; the poor man puts a light in the passage as 
 well as in the room ; oil stoves come into use ; 
 oil is used lavishly in cleaning bicycles and sewing 
 machines ; and though the difference may not amount 
 to more than a spoonful a day per house, yet a spoon- 
 ful multiplied by millions has to be reckoned with 
 by a Trust. Under these circumstances petroleum 
 is likely to be very cheap. The cost of production 
 and distribution will be economized to the utmost 
 by the monopoly because one monopoly factory will 
 do the work of ten competing ones with much less 
 than ten times the land and plant ; and a Trust can 
 control railways and manipulate freights ; whilst the
 
 50 Municipal Trading 
 
 fact that a low price means an enormous demand, 
 and that every attempt to put on an extra penny a 
 gallon cuts off that demand so seriously as to reduce 
 the gross profit instead of increasing it, acts as a far 
 better guarantee of cheapness than the old-fashioned 
 competitive system. The Trust, in fact, has a larger 
 appetite for customers than the scattered competitors 
 it has extinguished ; and so, from the social point 
 of view, the Trust is a very welcome industrial de- 
 velopment, and the present outcry against it is but 
 a straw fire compared to the blaze of indignation 
 which would break out if the old system were 
 miraculously reimposed on the consumer. 
 
 A municipality could not compete with the Oil 
 Trust because, as we shall see later, it is disabled by 
 its boundaries. It may be argued that a public body 
 could undersell a Trust because it does not aim at 
 profit. But in practice, as there is a good deal of 
 commercial human nature in public bodies, it would 
 be found that without the incentive of a little profit 
 to boast of at elections the public body would aim 
 rather at the minimum of trouble to itself than at 
 the maximum demand for oil. Municipalities as a 
 matter of fact do always make as much profit as 
 they dare ; and though this is beyond all question 
 unfair to the consumer, who is made to contribute 
 more than his share to the rates, yet the incidence 
 of rating is already so unfair — indeed, so absurd — 
 that to object to a small profit on this ground would 
 be to strain a gnat whilst swallowing a camel,
 
 Prices 5 1 
 
 especially as without the incentive of this profit the 
 tendency would be to a high price and a restricted 
 supply rather than to a low price and an extended 
 supply. The real advantage of public enterprise would 
 therefore be, not the complete reduction of price to 
 cost, but the application of the profits to the public 
 good instead of their private appropriation by idle 
 shareholders. The United States, by owning the 
 Standard Oil Trust, could avoid such horrible ab- 
 surdities as the annual export of millions of dollars 
 in dividends to be wasted in parasitic fashionable 
 life in European capitals and Mediterranean pleasure 
 cities, whilst large sections of the American popula- 
 tion are miserably poor. But even on this point the 
 Trust is better than the mob of small competitors ; 
 for if profits are not socialized it is better to con- 
 centrate them on a few millionaires, who are forced 
 by the mere weight of their superfluities to throw 
 whole masses of money back on the public in the 
 manner of Mr. Carnegie, than to scatter them on a 
 crowd of " successful tradesmen " whose children 
 become unprofitable pensioners on the nation, and 
 cannot afix)rd to give anything back except an 
 occasional subscription to maintain the evil of irre- 
 sponsibly managed begging hospitals. 
 
 The tendency of private enterprise, with its pre- 
 ference for " a high class connection," and its natural 
 desire to make the rate of profit as high as possible, 
 is to keep up prices to the point beyond which the 
 contraction of the market would make the trade
 
 52 Municipal Trading 
 
 unstable. The sudden relntroduction of competi- 
 tion by a new departure — for example the tube rail- 
 way suddenly upsetting the monopoly of the old 
 underground in London — always brings down prices, 
 a fact which proves that private enterprise maintains 
 the highest price that will pay instead of the lowest. 
 This tendency is clearly an anti-social one. Through 
 its operation the various inventions which are the 
 sole real assets of modern civilization, instead of 
 raising the standard of life of the whole population, 
 may remain for a long time the toys of the rich, 
 who themselves cannot escape from an overwhelm- 
 ing environment of primitive poverty, to which 
 more civilization means only less air, less house 
 room, less decency, less health, and less freedom. 
 
 The pressure on a municipality is in the opposite 
 direction. Once its inertia is overcome, all its in- 
 ducements and obligations tend to cheapness and 
 the widest possible diffusion of its products. Instead 
 of the large number of prices that are equally re- 
 munerative commercially, it has to consider only 
 one ideal price : that is, cost price on the basis of 
 the greatest attainable number of customers ; and 
 any modification it makes in this price can be dic- 
 tated only by its desire to raise its revenue as 
 conveniently and popularly as possible, or by con- 
 siderations of social welfare, such as those which 
 make Bibles artificially cheap and brandy artificially 
 dear. In short, the radical antagonism between en- 
 terprise that has for its object the making of the
 
 Prices 53 
 
 largest possible profit at the expense of the com- 
 munity, and that which aims simply at supplying 
 public needs as cheaply and effectively as possible, 
 inevitably tells heavily in favor of municipal trading. 
 The incidental public benefit of private enterprise 
 has been very great, faute de mieux^ in the anarchic 
 period of transition from medievalism to modern 
 collectivism, during which we should have had no 
 industry at all without private enterprise. But the 
 benefit has been at best incidental, and has stopped 
 short, by the laws of its own nature, of the attain- 
 able maximum. The benefits of public enterprise 
 are not incidental : they are the sole reason for 
 its existence ; and there is nothing to limit them 
 but remediable defects of political machinery and 
 those human infirmities which are common to pri- 
 vate and public interest alike. 
 
 The one drawback is municipal Inertia. It is as 
 possible for a local authority as for an imperial 
 government to do nothing over and above the work 
 that cannot be left undone without obvious and 
 immediate disaster. Private enterprise, on the other 
 hand, must discover and supply public wants or else 
 starve. Unfortunately, this incentive, instead of 
 being strongest where the public need is most vital, 
 and weakest where it is most frivolous, is gradu- 
 ated in just the opposite way. The public need is 
 greatest where the purchasing power is least : the 
 commercial incentive is strongest where purchasing 
 power is heaped up in ridiculous superfluity. Private
 
 54 Municipal Trading 
 
 enterprise begins with lOO horse power racing auto- 
 mobiles, and reluctantly filters down to cheap and 
 useful locomotion : public enterprise begins at the 
 other end and helps those who cannot individually 
 help themselves. Thus, even if we grant that the 
 desire to make money is a stronger incentive than 
 public spirit and public need, we must admit that 
 it is strongest at the wrong end, and dwindles to 
 nothing at the right end, whereas public spirit and 
 public need are strongest at the right end and are 
 not wanted at the other except for repressive pur- 
 poses. It may be said that the remedy is a redistri- 
 bution of purchasing power and not more municipal 
 trading. This proposition is quite unquestionable 
 from the extreme Socialist point of view ; but as 
 the present opponents of municipal trading would 
 certainly reject this remedy as more fatal to their 
 hopes than the disease, it need not be dealt with 
 here further than by an emphatic reminder that 
 poverty is at the root of most of our social diffi- 
 culties ; that it is incompatible with liberty and 
 variety ; and that it has put the opponents of muni- 
 cipal trading so far in a cleft stick that they cannot 
 abolish poverty except by public enterprise, and can- 
 not escape public enterprise except by the abolition 
 of poverty.
 
 VII 
 
 DIFFICULTIES OF MUNICIPAL 
 TRADING 
 
 Electrical Enterprise 
 
 So far, the case for Municipal Trading seems clear 
 enough. Indeed, on all the issues raised by its 
 opponents, it comes out of the controversy trium- 
 phantly. But if a simple verdict of Go Ahead be 
 delivered, the real difficulties, which are seldom 
 mentioned and never appreciated in popular con- 
 troversy, will soon assert themselves. 
 
 To begin with. Private Enterprise enjoys a de- 
 gree of license which may be described as almost 
 anarchic. It has for its area the heaven above, the 
 earth beneath, and the minerals under the earth. 
 National frontiers and local boundaries do not exist 
 for it. In the matter of advertizing it is exempt 
 from all moral obligations : the most respectable 
 newspapers give up the greater part of their space 
 
 55
 
 56 Municipal Trading 
 
 every day to statements which every well instructed 
 person knows to be false, and dangerously false, since 
 they lead people to trust to imaginary cures in 
 serious illnesses, and to ride bicycles through greasy 
 mud in heavy traffic on tires advertized as " non- 
 slipping " : in short, to purchase all sorts of articles 
 and invest in all sorts of enterprises on the strength 
 of shameless lies, perfectly well known to be lies by 
 the newspaper proprietor, who would at once dis- 
 miss the editor if a falsehood of the same character 
 appeared in a leading article. Its operations are 
 practically untrammelled by restrictive legislation ; 
 the accepted principle of the State towards it is 
 laisser-faire ; it has an overwhelming direct repre- 
 sentation in parliament ; and in private life there 
 are ten thousand people engaged in it for every one 
 who knows anything of the municipality of which 
 he is a constituent except that it periodically extorts 
 money from him by the hands of the detested rate 
 collector. Political ignorance, individual selfishness, 
 the habit of regarding every piece of public work 
 as a job for somebody, the narrowness that makes 
 the Englishman's house a castle to be defended 
 contra mundum^ the poverty and long hours of work 
 that leave the toiler no energy to spare for public 
 work or public interest, the vague association of 
 public aid with pauperism and of private enterprise 
 with independence, the intense sense of caste which 
 resents municipal activity as the meddling of pre- 
 tentious tradesmen and seditious labor agitators :
 
 Electrical Difficulties 57 
 
 all these symptoms of the appalling poverty of 
 public spirit, and the virulence and prevalence of 
 private spirit in our commercial civilization, are on 
 the side of private enterprise, and have hitherto 
 secured for it a monopoly, as far as a monopoly was 
 practicable, of the national industry : a monopoly 
 that is only slowly giving way before the manifest 
 private advantages of municipal employment to the 
 employee class, and of municipal gas and water to 
 the employer class. 
 
 Municipal enterprise, on the other hand, is 
 handicapped from the outset not only by all the 
 influences just cited, but by the national presump- 
 tion against State action of all kinds inherited from 
 the long struggle for individual liberty which fol- 
 lowed the break-up of the medieval system. That 
 struggle led men to assume that corruption is in- 
 herent in public offices ; that a trading municipality 
 is the same thing as a seventeenth century mono- 
 poly ; and that the remedy for all such evils is free 
 competition between private enterprisers rigidly 
 protected from public competition. Nominally this 
 view is obsolete ; but in practice it is still assumed 
 that whereas private men and private companies may 
 do anything they are not expressly forbidden to do, a 
 municipality may do nothing that it is not expressly 
 authorized to do ; and as every authorization has to 
 come from a parliament in which private enterprise 
 is powerfully represented, the municipalities so far 
 can get little more than the refuse of private enter-
 
 58 Municipal Trading 
 
 prise. The municipality, in fact, does not enjoy 
 freedom of trade, and the private capitalist does, 
 the natural result being that whilst municipal enter- 
 prise is struggling to get trading Bills through 
 hostile parliaments, and agitating for larger powers, 
 private enterprise is forming gigantic industrial 
 conspiracies which ruthlessly stamp out the old- 
 fashioned huckstering competition on which the 
 nation foolishly relied for protection against mono- 
 poly, and establishing a predatory capitalistic col- 
 lectivism which has knocked more anti-Socialist 
 nonsense out of the English people in the last five 
 years than the arguments and pamphlets of the 
 Socialists have done in the last fifty. Nevertheless 
 the race between municipal and national Collectiv- 
 ism, and the frankly plutocratic Collectivism of 
 the Trusts, is one in which, under existing circum- 
 stances, the municipalities have no chance except in 
 the industries which the Trusts will not touch 
 because they do not pay in the commercial sense. 
 
 To illustrate this, let us take the leading instance 
 to the contrary : the provision of electric light and 
 locomotion. A moment's consideration will shew 
 that the successes of municipal electricity belong to 
 the early stages of the industry, and can only be 
 maintained if the municipalities deliberately check 
 its inevitable development by suppressing private 
 competitors. So long as private enterprise can range 
 over the whole country, whilst municipal enterprise 
 cannot cross its own little boundary, so long will
 
 Electrical Difficulties 59 
 
 the attainment of the maximum of economy and 
 efficiency by the municipahty be impossible. In 
 London the absurdity of the separate electric light- 
 ing concerns of the Borough Councils can be got 
 over by their consolidation in the hands of the 
 County Council, which would then have an area at 
 its disposal which no single private enterprise seems 
 yet prepared to handle as a whole. But the ad- 
 ministrative county of London is not England ; and 
 even London's boundaries do not form the most 
 economical terminuses for her electric trams. In the 
 country, municipal enterprise is reduced to absurdity 
 by the smallness of the areas and their openly non- 
 sensical boundaries. Mr. H. G. Wells's description 
 of his residence on the boundary between Sandgate 
 and Folkestone^ (two places as continuous as May- 
 fair and St. James's), a boundary which no municipal 
 tramcar or drain-pipe can cross, shews the hope- 
 lessness of substituting public for private Collectiv- 
 ism there. A shipping firm whose vessels were 
 forbidden to cross any degree of latitude or longi- 
 tude might as easily compete with the Peninsular 
 and Oriental as the Folkestone municipality with a 
 Trust which could (and would) operate over a whole 
 province. 
 
 Abroad, this difficulty is emphasized by the use 
 of water power as a source of electricity. If Niagara 
 happened to be one of the falls of the Regent's 
 
 1 Mankind in the Making. By H. G. Wells (London, Chapman 
 and Hall, 1903), Appendix, p. 410.
 
 6o Municipal Trading 
 
 Canal, the fact that St. Pancras and Marylebone may 
 not hght Shoreditch with electricity would be an 
 unbearable folly. In England we look to our coal 
 for power ; and we are coming to the end of our 
 easily accessible coal, whilst other countries are as 
 yet coming only to the beginning of theirs. The loss 
 of our relative advantage in power will sooner or 
 later force us to look to our water power. We have 
 not, like the Swiss and the Italians, an abundance 
 of waterfalls. But we have the tides ; and what 
 hardly any of us yet seem to realize, in spite of the 
 fascinating lectures of Mr. H. J. Mackinder on 
 political geography,^ is that tides such as ours, in- 
 stead of being universal, occur only in a very few 
 places on the globe ; so that if we could harness to 
 our industries the stupendous daily rush of millions 
 of tons of tidal water through the Pentland Firth, 
 not only need no Englishman ever go underground 
 again for fuel, but the advantage would not be 
 shared directly by other nations who have no such 
 tides at their disposal. I mention this grossly in- 
 sular consideration to those whose social sympathies 
 stop at the frontier. 
 
 The alternative to water power is the generation 
 of electric current from coal at the pit's mouth, and 
 its distribution therefrom without regard to admini- 
 strative boundaries over areas which include several 
 municipal districts. 
 
 1 Britain and the British Seas. By H. J. Mackinder (London, 
 Heinemann, 1902), p. 339, etc.
 
 Electrical Difficulties 6i 
 
 In neither case can the electrical industry be 
 handled adequately by local authorities whilst their 
 activity is limited to existing areas. The boundaries 
 of these areas correspond to no contemporary reality 
 in distribution of population or natural configura- 
 tion. Many of them are imaginary lines drawn along 
 the middle of busy streets and closely inhabited 
 roads : others cut across country like the scent of 
 a hunted fox. In London at present, neither the 
 London County Council nor the commercial elec- 
 tric traction companies can run an electric tram 
 through a London borough without the consent of 
 the Borough Council, which, being too small to 
 provide London with tramways itself, can, and often 
 does, prevent other people from doing it, mostly 
 on grounds which are beyond human patience — for 
 instance, that Tottenham Court Road rivals Bond 
 Street as a fashionable shopping centre, and that if 
 tram-lines were laid along it the aristocracy would 
 desert it. Even when the London County Council 
 is given power to over-ride this sort of opposition, 
 it will be unable to touch railways, though it is 
 clear enough that the problems of London housing 
 will never be solved as long as Surrey and Kent 
 remain for the most part less accessible to men who 
 have daily business in London than Yorkshire and 
 Lancashire.^ 
 
 ^ I have myself had to leave a house situated on the main road 
 from London to Portsmouth, with the fortieth milestone at my gate, 
 because I could not keep appointments in London in less than three 
 hours from door to door. The case of the more remote residents 
 may be imagined.
 
 62 Municipal Trading 
 
 Here, then, we find how impossible is the situa- 
 tion set up by the growth, within the last quarter 
 century, of a vast machinery of modern industrial 
 collectivism on the lines of a parochial system of 
 localization which belongs to the time when it was 
 possible for a famine to rage in one English county 
 whilst there was a glut in the adjoining one. The 
 Industrial Freedom League is an inevitable product 
 of that situation. It is true that the Industrial 
 Freedom League does not put the situation frankly 
 before the public, because the moral of such an 
 elucidation would not be the suppression of public 
 enterprise in the interest of private enterprise, but 
 the further reform, co-ordination, and extension of 
 local government with a view to enabling it to deal 
 with large districts. This is the last thing the League 
 desires, because its one valid plea against the muni- 
 cipalities is the inadequacy of their areas. 
 
 Suppose, for instance, Mr. Emil Garcke were to 
 say, " The Industrial Freedom League does not 
 claim Industrial Freedom ; it protests against Indus- 
 trial Bondage. It is practically a committee of the 
 commercial electrical enterprises of the country to 
 protest against an intolerable state of things in which 
 the municipalities, without having the power to 
 develop the electrical industry fully itself, has the 
 power — and uses it — to prevent our doing it. We 
 are ready to effect a revolution in English industry 
 by establishing, throughout whole provinces, a house- 
 to-house distribution of electrical power which will
 
 Electrical Difficulties 63 
 
 enable the intelligent individual craftsman to com- 
 pete once more with the brute force of the factory. 
 We are ready to link up entire manufacturing dis- 
 tricts with networks of electric trams which will 
 enable Englishmen to work in towns whilst their 
 children grow up in the country instead of in slums. 
 But we are stopped by the municipalities. This one 
 has an Electric Lighting Order which gives it a vir- 
 tual monopoly within its own ridiculous limits : that 
 one will not allow a tramway to pass down its main 
 street because the shopkeepers consider tramways 
 vulgar. We represent capital, intelligence, educa- 
 tion, technical knowledge, scope of enterprise and 
 breadth of view ; and we are stopped at every turn 
 by the narrowness, the ignorance, the timidity, the 
 jealousy, the poverty of a series of little gangs of 
 small shopkeepers, led by the local solicitor, the 
 local auctioneer, the local publican and the local 
 builder, who flourish their little monopolies and 
 vetoes in our faces, and are determined that what 
 was good enough for their great-grandfathers shall 
 be good enough for the modern British Empire." 
 
 All this would be quite true enough and fair 
 enough for all purposes of commercial controversy; 
 but the remedy is, not to make our petty local 
 authorities still more petty, but to develop our 
 system of local government so that there shall be 
 machinery for provincial and national collectivism 
 as well as for parochial collectivism. Such a con- 
 clusion would not suit the anti-municipal agitators:
 
 64 Municipal Trading 
 
 consequently they are driven to obscure the issue 
 by attempting to revive the obsolete doctrines of 
 the laisser-faire school, and to disparage municipal 
 enterprise by those comparisons of private v^'ith 
 public balance-sheets which, as we have seen, are 
 worthless as a measure of advantage to the rate- 
 payer. 
 
 None the less, as things now stand, the ratepayer 
 has a real grievance. If he tries to establish electric 
 tramways from county to county, or to reduce the 
 cost of electric power (still ridiculously expensive 
 in its application to domestic heating, for example) 
 by making the generating centre supply a whole 
 province, he can do so only through the local 
 authority or through a commercial joint stock com- 
 pany. If, for the sake of cheap service and public 
 control, he tries the local authority, he finds that its 
 power, like that of the witch who cannot cross running 
 water, stops at a boundary which dates, probably, 
 from the Heptarchy. If he submits to the prices 
 and the power of the joint stock company, he finds 
 that the local authority vetoes the tramway, or has 
 a virtual monopoly of power distribution within its 
 own area. So it ends in his going without. 
 
 The reason why the League, which would be 
 very powerful in parliament but for the tight hand 
 kept by the great provincial municipalities on their 
 borough members, does not get any serious grip of 
 the electorate, is that its case is strong only where 
 the interest of the ordinary private citizen is weak.
 
 Electrical Difficulties 65 
 
 The grievance of being hampered in the exploita- 
 tion of a whole province, is the grievance of a 
 millionaire or of a Trust controlled by a group 
 of millionaires, who are generally assumed to be 
 Americans. The hostility of the average municipal 
 councillor to these combinations, though it is a 
 thoroughly unenlightened one, reflects that of the 
 public at large. The municipal areas are still large 
 enough for ordinary trading capitals of six or seven 
 figures ; and, as we have seen, the case for muni- 
 cipal trading within these limits is overwhelming.
 
 VIII 
 
 DIFFICULTIES OF MUNICIPAL 
 TRADING {continued) 
 
 Housing 
 
 A LEADING case in which commercial enterprise 
 has such decisive artificial, legal and political advan- 
 tages over municipal enterprise that the municipality 
 cannot compete with it, is the great building in- 
 dustry of housing the population. Compare, for 
 example, a municipal housing scheme with a muni- 
 cipal electric lighting scheme. In the latter the 
 municipality has as much scope within its own area 
 as any joint stock company. It can light the palace 
 of an ambassador, the show rooms of a universal 
 provider, the benches of a factory, the dining room 
 of the business or professional man, and the kitchen 
 of a laborer. In short, it can supply everybody in 
 the constituency. But in housing it is restricted by 
 law to insanitary areas and to workmen's dwellings. 
 
 66
 
 Housing Difficulties 67 
 
 The London County Council may accept as a 
 tenant an artisan earning from thirty shilHngs a 
 week to several pounds; but a struggling journal- 
 ist scraping together a precarious pound a week is 
 turned from its doors. A private builder is under 
 no such restriction. He can take an order for a 
 cathedral and for a potting shed, for a millionaire's 
 house in Park Lane and for the cottage of the 
 millionaire's gamekeeper. In the intervals between 
 large contracts he can keep his staff and plant em- 
 ployed on small ones. If he decides to go into the 
 business of the housing of the working classes, he 
 can proceed much more cheaply than the munici- 
 pality. Instead of erecting huge blocks of dwellings 
 with fireproof floors and all the solidities and sani- 
 tary appliances of what may be called parliamentary 
 building, he may " run up " rows of small private 
 houses which will presently become lodging houses ; 
 or he may adapt the family mansions of a neigh- 
 borhood deserted by fashion for occupation by 
 working class families. Under these conditions 
 there can be no question of a commercial or any 
 other test : comparison is impossible. The muni- 
 cipality is compelled to take the refuse of a trade 
 and to carry it on in the most expensive way : the 
 private builder has the pick of the trade, and can 
 adapt his expenditure to the pecuniary resources ot 
 the tenant. The result is that municipal trading 
 cannot justify itself by its results in this direction 
 as it can in others, especially in great cities. The
 
 68 Municipal Trading 
 
 buildings may seem palatial in comparison with the 
 slums they replace ; and they are better appointed 
 and not more barrack-like than many of the piles 
 of flats used by middle class people ; but a visit to 
 even the best of them will reveal the fact that the 
 rents are too high for the wages of the occupiers. 
 A flat let at nine shillings a week to a man earning 
 twenty-four, married and with a family, solves the 
 housing problem for him in a highly questionable 
 manner. It makes parasitic labor practically com- 
 pulsory for his wife and children. In fact it is the 
 value of the County Council flat as a testimonial 
 of respectability to the woman seeking parasitic 
 labor that makes it worth the man's while to pay 
 so high a rent, exactly as an address in Park Lane 
 may be worth a huge rent to a man whose personal 
 requirements would be equally satisfied by a house 
 in Holloway or Peckham. 
 
 In passing, it may be said here that the views of 
 the poor as to how to make the most of the family 
 income vary more strikingly than the views of the 
 rich. The laborer or humble shop assistant who 
 pays nine shillings a week for a flat of two or three 
 rooms out of a wage of twenty-four, contrasts with 
 the skilled workman who earns from thirty to fifty 
 shillings a week, and sometimes more, and who 
 nevertheless lives in one room, never troubles him- 
 self about respectability, and spends his money on 
 "good living," by which he means a gluttonous 
 Falstaffian jollity. He and his family are hearty
 
 Housing Difficulties 69 
 
 eaters, hearty drinkers, loud laughers, indefatigable 
 excursionists, noisy neighbors, and prompt strikers. 
 And it is not easy to declare with any conviction 
 that they have chosen worse than the people who 
 sacrifice everything to a craze for respectability, 
 which is sometimes almost as ruinous as a craze for 
 drink. For the twenty-four shilling votary of re- 
 spectability is a very mild case. Every house-to- 
 house student of poverty tells us of single women 
 or widows with wages that fluctuate from four to 
 ten shillings, or, in momentary crises of prosperity, 
 to twelve or thirteen, who nevertheless keep their 
 rooms spotlessly neat, and shiver through the winter, 
 fireless, without underclothing, in dresses that are 
 superficially decent, while in the same house slatterns 
 live disgracefully on four times their income, or 
 Bardolph and Mrs. Quickly set an example of roar- 
 ing, jovial blackguardism. Then there is the poor 
 person with a " fancy," who cannot live without a 
 horse, or a dog, or a bird, or flowers, or pigeons, or 
 some musical instrument, things apparently as wildly 
 beyond their means as steam yachts and motor cars, 
 which they yet manage to procure by simply sacri- 
 ficing every other consideration to them, as beggar- 
 misers get and keep bags of sovereigns even if they 
 have to eat carrion to do it. We are apt to forget 
 that the fancy for respectability is often as unintel- 
 ligent and thriftless as any of the other fancies. We 
 are revolted at the heartlessness of the man who 
 starves his wife to provide cutlets for his pet dog ;
 
 yo Municipal Trading 
 
 but we applaud the widow who starves her children, 
 physically and morally, in order to bring them up 
 respectably and be respectable herself. In the poor 
 middle class this is a crying evil : boys who have 
 the making of strong artisans in them degenerate 
 into underfed clerks ; numbers of wretched little 
 private-venture schools for young gentlemen and 
 ladies, which ought to be suppressed more ruthlessly 
 than gambling hells, keep children out of the Board 
 schools and Polytechnics ; and girls grow up into 
 shabby-genteel " ladies," whose ignorance, incom- 
 petence, and unsociability defy description. But 
 this mania for respectability does not disappear at 
 the boundary of the middle class. It goes down to 
 the very basement of society ; and this fact has an 
 important bearing on the housing problem, because 
 your respectability is judged by the street, house or 
 room you live in just as much in the slums as in the 
 squares. And the tendency in all classes is to spend 
 too much in keeping up appearances. However 
 honorable any ambition may be when it is taken in 
 the economic order of its real importance, it may 
 become disastrous when it is taken out of that order. 
 If you have to choose between underfeeding your 
 boy and patching his knickers, patch his knickers. 
 If you have to choose between underclothing your 
 daughter comfortably and overclothing her present- 
 ably, underclothe her comfortably. But unfortun- 
 ately underfeeding and underclothing can be con- 
 cealed ; and patching and overclothing cannot.
 
 Housing Difficulties 71 
 
 And so the order in which they are taken is too 
 often the opposite of the economic order. In the 
 same way the obvious respectability and order of 
 the County Council flat at three shillings a room, 
 however great an advance they may be on the 
 poisonous squalor of the sewage saturated cellars at 
 four and sixpence which figure in the report of the 
 Royal Commission as samples of the results of pri- 
 vate enterprise, are nevertheless too dear in a city 
 where twenty-four shillings is the standard municipal 
 wage for laborers, and where the Imperial Treasury, 
 to its disgrace, refuses to pay even that modest 
 figure. 
 
 The special difficulty in housing finance is the 
 extraordinary manner in which the question of cost 
 price is complicated by the phenomenon of economic 
 rent, that rock on which all civilizations ultimately 
 split and founder. In a municipal electric supply 
 there is no difficulty about cost price, because a unit 
 in Piccadilly costs no more than a unit in Putney. 
 But the freehold of an acre of space for dwelling 
 purposes costs from nothing to a million according 
 to its situation. To convert the Mansion House 
 into a block of workmen's dwellings would cost the 
 price of a small frontier war ; but the Richmond 
 Corporation finds it within its resources to devote a 
 whole road to workmen's cottages with gardens ; 
 and the Richmond Corporation itself envies the still 
 greater facility with which municipal cottages are 
 multiplied in Ireland. If a municipality owned all
 
 72 Municipal Trading 
 
 the land within its jurisdiction, it would still have to 
 make the occupiers, including its own departments, 
 pay rent in proportion to the commercial or resi- 
 dential desirability of their holdings ; but it could 
 pool the total rent and establish a " moral minimum" 
 of house accommodation at a " fair rent " on a per- 
 fectly sound economic basis. At present it has to 
 throw economics to the winds by buying land at its 
 real market value, and charging it to its housing 
 schemes at its value for working class dwellings (a 
 pure figment), the ratepayer making up the differ- 
 ence between this and the real marketvalue. Having 
 performed this conjuring trick, the municipality 
 generally proceeds to pass a resolution that the 
 dwellings shall be let at rents sufficient to prevent 
 any loss coming upon the ratepayers, without men- 
 tioning that they have already borne a loss which 
 does not appear in the housing accounts. Even then, 
 the effect of the resolution, when it is strictly carried 
 out, is to put the rents too high for the sake of 
 enabling the Borough Treasurer to make a delusive 
 demonstration that the dwellings are paying their 
 way commercially. 
 
 Socially, of course, they may pay their way with 
 a handsome profit. It is true that they are seldom 
 occupied to any extent worth reckoning by the 
 occupants of the slums which have been demolished 
 to make room for them. They are taken by people 
 who are on the verge of the middle class, and by 
 the respectable-at-any-price poor. But these people
 
 Housing Difficulties 73 
 
 are shifted up from private lodgings of the highest 
 working class grade, which, being left vacant, have 
 to be relet to second grade tenants, who leave their 
 rooms vacant for the third, and so on to the lowest 
 grade, all being shifted a step up. But the trans- 
 action is very slow and very costly. Each scheme 
 is entered upon to meet a particular local emer- 
 gency ; and long before the years of preHminary 
 red tape are worried through, the emergency has 
 been settled by the brute force of necessity ; and 
 though new emergencies have arisen, the old scheme 
 is more or less a misfit for them : indeed it may 
 have become apparent that the right cure is not a 
 local housing scheme but a locomotion and country 
 housing scheme. 
 
 On the whole, though municipal housing is 
 popular because " there is something to shew for 
 the money," and because it deals with a notorious 
 and frightful evil, its opponents can always easily 
 demonstrate that in city centres at least the schemes 
 are commercially hopeless, and that though the rents 
 are too high for the incomes of the tenants they 
 are yet so low relatively to the real site value that 
 the tenants are virtually receiving a grant in aid of 
 their wages at the expense of their fellow citizens, 
 which grant is exploited by the parasitic trades in 
 the manner explained in Chapter IV. 
 
 It should not be forgotten that the housing 
 question is not one of building only : it is also one 
 of demolition. Houses do not last for ever ; and 
 
 D 2
 
 74 Municipal Trading 
 
 we have not yet settled the best Hfetimc for the 
 builder to aim at. Building " great bases for eter- 
 nity " may be the work of a cathedral builder ; but 
 as far as ordinary dwelling houses are concerned, 
 there is a growing opinion that living in the same 
 house all your life and then leaving it to your chil- 
 dren is as unwholesome as wearing the same sheep- 
 skin and handing it also on to posterity. It may be 
 that the municipal by-laws of the future will in- 
 clude a prohibition of the use of a dwelling house 
 for longer than twenty years. In any case it is clear 
 that a good deal of XIX century building will prove 
 very shortlived, and that the rows of cheap houses 
 built for clerks and artisans on the sites of the sub- 
 urban parks and country houses of 50 years ago 
 will presently begin to figure as " condemned 
 areas " on our municipal agenda papers. Besides 
 the decay of the jerry-built brick box, we shall have 
 to face the obsolescence of the solidly built "model" 
 or municipal tenement block. These places seem at 
 first so enormously superior to the filthy rookeries 
 they replace that their revolting ugliness, their 
 asphalted yards with the sunlight shut out by giant 
 cliffs of brick and mortar, their flights upon flights 
 of stony steps between the street and the unfor- 
 tunate women and children on the upper floors, 
 their quaint plan of relieving a crowd on the floor 
 by stacking the people on shelves, are overlooked 
 for the moment ; but long before they become un- 
 inhabitable from decay they will become as repug-
 
 Housing Difficulties 75 
 
 nant as the warrens they have supplanted. In short, 
 the municipalities of the future will be almost as 
 active in knocking our towns down as in building 
 them up. 
 
 At present the demolition problem has been so 
 little thought out that the law gravely enacts that 
 the municipality must rehouse all the people it dis- 
 places by demolishing a rookery. As a rookery is 
 always so outrageously overcrowded that not even 
 by replacing two-storey houses by dwellings built 
 up to the extreme limit allowed by the Building 
 Acts is it possible to rehouse the tenants on the 
 same site, the municipality has either to let the 
 rookery alone or acquire extra land for rehousing. 
 Now this is not always possible without fresh 
 displacements. The whole district may be over- 
 crowded; and in that case the only remedy is for 
 the excessive people to go elsewhere ; and this, of 
 course, raises the insoluble question as to which 
 persons are excessive. In practice what happens is 
 that the letter of the law is admitted to be im- 
 practicable ; and the municipality bargains with the 
 Local Government Board as to how many people 
 it must rehouse. It offers to rehouse a third ; the 
 Board demands two thirds ; and after much chaffer- 
 ing what is possible under all the circumstances is 
 done. 
 
 If the obligation to rehouse were imposed on 
 private and municipal enterprise alike, municipal 
 housing would be at no disadvantage on this point.
 
 76 Municipal Trading 
 
 But commercial enterprise is practically exempt 
 from such social obligations. Within recent years 
 Chelsea has been transfigured by the building opera- 
 tions of Lord Cadogan. Hundreds of acres of poor 
 dwellings have been demolished and replaced by 
 fashionable streets and " gardens." The poHtics of 
 Chelsea, once turbulently Radical, are now effusively 
 Conservative. The sites voluntarily set aside by 
 Lord Cadogan for working class dwellings on un- 
 commercial principles of public spirit and personal 
 honor have not undone the inevitable effects of the 
 transfiguration of the whole neighborhood. The 
 displaced have solved the rehousing problem by 
 crossing the river into Battersea. Thus Lord Cado- 
 gan is more powerful than the Chelsea Borough 
 Council. He can drive the poorer inhabitants out 
 of the borough : the Council cannot. He can re- 
 place them with rich inhabitants : the Council can- 
 not. He can build what kind of house pays him 
 best, mansion, shop, stable or pile of flats : the 
 Council cannot. Under such circumstances com- 
 parison between the results of his enterprise and the 
 Council's is idle. The remedy is either to curtail 
 Lord Cadogan's freedom until it is no greater than 
 the Council's, or else make the Council as free as 
 Lord Cadogan. As the former alternative would 
 end in nothing being done at all, and rendering im- 
 possible such great improvements as have been made 
 both in Chelsea and Battersea by Lord Cadogan's 
 enterprise, the second alternative — that of untying
 
 Housing Difficulties 77 
 
 the hands of the ratepayer — is obviously the sensible 
 one. 
 
 The obligation to rehouse is imposed on rail- 
 way companies and other enterprises which have 
 to obtain parliamentary powers. But they evade 
 the obligation to a great extent by privately acquir- 
 ing the house property they need, and evicting the 
 tenants before they clear the area ; so that when 
 the hour for demolition comes there is nobody to 
 be rehoused. This is the explanation of the furious 
 intensity of local feeling against the railway com- 
 panies. The people driven off the areas cleared by 
 them overcrowd the surrounding neighborhood ; 
 and many small shopkeepers who are not them- 
 selves disturbed are ruined by the removal of their 
 customers. There is no compensation and little 
 rehousing. But this local unpopularity, to which 
 the railway company is indifferent, could not be 
 defied by the local authority. It may acquire land 
 for the future extension of its electric lighting works 
 or the like ; and in gradually clearing this land it 
 no doubt takes care to deal with a few houses at a 
 time in order to avoid the obligation to rehouse 
 which becomes operative when ten houses are dealt 
 with at one stroke ; but even in this it has to pro- 
 ceed with a constant care to avoid "hardshipping" 
 its constituents, whereas a commercial company will 
 spread disaster through a whole ward without the 
 least consciousness of what it is doing. This is only 
 a striking instance of the inconvenience and suffer-
 
 78 Municipal Trading 
 
 ing which the movements of commercial enterprise 
 cause daily in crowded communities because they 
 are wholly unconcerted. Municipal civilization is 
 nothing but a struggle to get the operations of 
 civic life better concerted. Meanwhile, the fact that 
 the commercial speculator can with impunity be 
 inconsiderate to a degree that would cost every 
 municipal councillor his seat at the next election 
 must be constantly borne in mind in any com- 
 parison of private with municipal enterprise. 
 
 Finally it must be admitted that until the muni- 
 cipality owns all the land within its boundaries, and 
 is as free to deal with it and build upon it as our 
 ground landlords are at present, the problem of 
 housing cannot be satisfactorily solved.
 
 IX 
 
 THE MUNICIPAL AUDIT 
 
 There arc certain diiFercnccs between the legal 
 conditions of communal and commercial finance 
 which must be taken into account in comparing 
 them. These differences are mentioned here because, 
 however wholesome they may be in the long run 
 for municipal enterprise, they sometimes handicap 
 it at the start. 
 
 A private company docs not pay interest on its 
 capital until its capital actually earns the interest. 
 Nobody expects this to happen at once ; and some- 
 times it does not happen at all. In any case the 
 company treats its capital as a property to be held 
 for ever. A municipality has to pay interest from 
 the day the capital is borrowed ; and it must not 
 only treat that capital as a debt to be paid off, but 
 the paying off must begin at once, concurrently 
 with the interest. It is thus compelled to bequeath 
 to posterity a freehold property and goodwill for 
 
 79
 
 8o Municipal Trading 
 
 which it has had to pay handsomely ; and the result 
 is that the Irishman's jesting question as to what 
 posterity had done for him that he should do any- 
 thing for posterity, is becoming a serious question 
 in the mouths of English ratepayers. The rough 
 and ready reply that though the individual dies the 
 community is immortal, and its life must be treated 
 as infinitely continuous, is plausible ; but even an 
 immortal individual would starve if he invested all 
 his income and spent none of it; and a community 
 can sacrifice the present to the future in the same 
 way. For instance, the immortality of the nation 
 would not justify a Chancellor of the Exchequer 
 in attempting to pay off the national debt in one 
 year. If commercial traders and joint stock com- 
 panies could set up industrial plant only on condi- 
 tion that they must form a sinking fund to pay off 
 its cost within a period not greater than its lifetime, 
 and often considerably less, the outcry would be 
 heartrending ; and the newspapers would be filled 
 with demonstrations of the impossibility of trading 
 on such terms. 
 
 Something of the kind is actually done at pre- 
 sent when a concession is given to a private tram- 
 way company on condition that at the expiration of 
 a term of years it shall hand over its lines to the 
 municipality for their market value as scrap iron. 
 But the difficulty about such contracts as these is 
 that the courts will not enforce them. To a states- 
 man or a socialist it is just as reasonable to compel
 
 The Municipal Audit 8 1 
 
 a private company to buy itself out within a fixed 
 period — for that is what such a condition comes to 
 — as to place the same obligation on a municipality. 
 Both have to make a present to posterity if any- 
 thing is left at the expiry of the term. But there is 
 nothing unprecedented in this. The inventor has to 
 present his invention to posterity at the end of 
 fourteen years, and the author his book at the end 
 of forty-two years, or seven years after his death ; 
 whilst the London shopkeeper has to present his 
 goodwill to his landlord at the end of his lease. 
 And yet the same judge who will enforce the con- 
 sequences of the expiry of a patent or copyright, 
 and of the falling in of a lease, as if they were the 
 most obviously natural and proper of arrangements, 
 will refuse to enforce the scrap iron clause against 
 a tramway company on the ground that it is incon- 
 ceivable that Parliament could have contemplated 
 anything so monstrous as its Act seems to imply. 
 The result is that whereas a municipality is always 
 held rigidly to its bargain, a commercial company 
 can defy even an Act of Parliament if it is careful 
 to conciliate all private opposition and attack no- 
 thing but the interests of the community. It is 
 true that Acts of this description have sometimes 
 driven too hard a bargain, as the electrical lighting 
 companies succeeded in shewing when the term was 
 lengthened from twenty-one to forty-two years. 
 But municipal trade has suffered in the same way, 
 many municipal projects having been abandoned
 
 82 Municipal Trading 
 
 or postponed because the term of repayment was 
 too short. 
 
 In everyday practice, it is not so much the judge 
 as the official auditor who is to be feared by the 
 municipalities. It is not at present at all difficult 
 to find a barrister who is thoroughly disaffected to 
 municipal trading. If such a one were appointed by 
 the Local Government Board to audit the accounts 
 of a County Council, a London Borough Council, 
 or an Urban District Council,^ he might, on the 
 very plausible ground of keeping it up to the mark 
 commercially, insist on allowances for deprecia- 
 tion which, as the actual wear and tear is in 
 practice made good out of revenue, and a reserve 
 fund is maintained to replace scrapped machinery, 
 might virtually load the enterprise with a second 
 sinking fund, and enable the opponents of muni- 
 cipal trading to point to commercial companies 
 which (having no sinking fund at all) could shew 
 more economical and businesslike figures. On the 
 other hand, if the auditor has not a formidable 
 power of public criticism, the struggle which goes 
 on in a local authority between the electric lighting 
 committee in its efforts to hold over its profits 
 under the head of reserve fund, and the rest of the 
 council in its desire to distribute the profits among 
 the ratepayers in the form of the always popular 
 
 1 Municipal Corporations (except Tunbridge Wells, Bournemouth, 
 and Southend-on-Sea) are not subject to the L.G.B. audit. The rate- 
 payers elect two auditors and the Mayor nominates a third. In other 
 words, the Municipal Corporations are not audited at all.
 
 The Municipal Audit 83 
 
 contribution in aid of the rates, may lead to the 
 pillaging of the reserve fund for electioneering 
 purposes, and even to such depreciation of plant 
 as used to occur in the early days of continental 
 State railways, when impecunious finance ministers 
 swept the railway fares into the treasury and allowed 
 the rolling stock, the permanent way, and the 
 stations to decay. And yet if the auditor be em- 
 powered to dictate the financial management in- 
 stead of simply to criticize it and check the items, 
 he might discredit the most beneficial public enter- 
 prises by " simply looking at them as a man of 
 business." He could not very well insist on street 
 paving being put *' on a sound business footing " 
 by means of turnpikes and tolls which would make 
 municipal paving " pay " ; but he might, without 
 shocking public opinion, insist on commercially 
 profitable charges for water and light in addition 
 to a double sinking fund (a double present to pos- 
 terity) and thus enable the Industrial Freedom 
 League to prove by figures that communal enter- 
 prise is less economical than commercial enterprise. 
 These possibilities are by no means fantastic. 
 The report of the Commission on Municipal 
 Trading (Blue Book No. 270, 23rd July 1903, 
 4s.) contains several sensible suggestions as to the 
 auditing of municipal accounts ; but as the recom- 
 mendation " that the auditor should certify that 
 separate accounts of all trading undertakings have 
 been kept, and that every charge that each ought
 
 84 Municipal Trading 
 
 to bear has been duly debited " is not balanced by 
 any consideration of the invisible credits of munici- 
 pal trade, it may be inferred that parliament is still 
 disposed to apply the commercial test to communal 
 enterprise ; and it is not the business of the Local 
 Government Board to be more enlightened than 
 parliament, though the Board is no doubt more ex- 
 posed to the brute force of fact, which soon brings 
 the most hardened commercial doctrinaires to their 
 senses in the fairly obvious cases. The very munici- 
 palities themselves are dominated by the com- 
 mercial view, and often encourage themselves rather 
 childishly, keeping their accounts in such a way as 
 to produce the utmost possible appearance of com- 
 mercial prosperity by throwing as much as possible 
 of the expenses on the general rate whilst crediting 
 the receipts of each municipal service to its special 
 department. There is, in fact, for the moment a 
 serious menace to municipal enterprise in the cry 
 for commercial auditing. 
 
 Fortunately, the demand is not a permanently 
 practicable one. Experience soon reduces com- 
 mercial auditing to absurdity when it is applied to 
 municipal business, quite as much because it is too 
 tolerant in some directions as because it is too 
 exacting in others. Municipal auditing is techni- 
 cally a distinct branch not only of accountancy but 
 of law ; and it is no more the business of the 
 ordinary accountant or barrister than pleading 
 points of international law before the judicial com-
 
 The Municipal Audit 85 
 
 mittee of the Privy Council is the business of the 
 ordinary Old Bailey practitioner. It will finally 
 develop as a practically separate profession ; and it 
 is only in the meantime that we need be on our 
 guard against the vulgar cry for treating a municipal 
 enterprise like any other business, on sound business 
 lines etc., etc., etc. 
 
 The most commercially obsessed auditor, when 
 he first touches municipal trade, is brought up 
 standing by the novel fact that the duty of the 
 municipality is to make as little profit as possible, 
 whereas the duty of the commercial company is to 
 make as much profit as possible. An electric light- 
 ing company paying a dividend of lo per cent is a 
 triumph of good management : a municipal electric 
 ligl.'.ting committee making profits at the same rate 
 is guilty of social malversation, which the auditor 
 should at once expose and challenge. 
 
 To understand this, the ratepayer must imagine 
 himself in the position (if he does not already 
 actually occupy it) of a consumer of municipal 
 electric light. He pays at the usual commercial 
 rate : say 6d. to 2d. per unit. At the end of the 
 financial year he learns that the profit on municipal 
 lighting has been so great that the electric lighting 
 committee has been able to hand over a sum in 
 aid of the general rate which reduces it by a penny 
 in the pound. Is he gratified by the intelligence : 
 Not at all : he indignantly demands what the 
 municipality means by overcharging him for current
 
 86 Municipal Trading 
 
 in order to relieve the rates of his neighbors who 
 burn gas or oil. And his protest is perfectly 
 justified. The object of municipal trading is not 
 relief of the rates : if it were, it might be manipulated 
 so as to throw the entire burden of local taxation 
 on certain classes of consumers exactly as the entire 
 burden of local taxation in Monaco is thrown on 
 the gamblers of Monte Carlo. Its object is to 
 provide public services at cost price. This cost price, 
 to make the service really economical in the wide 
 sense of good municipal statesmanship, may include 
 higher wages to unskilled labor than a private com- 
 pany would pay, and it of course includes interest 
 on the capital raised by the general body of rate- 
 payers. To this a cunning municipality will perhaps 
 add some little bribe to the general ratepayer lest, 
 when not expecting to be himself a consumer, he 
 should refuse to trouble himself about the service, 
 and vote for an avowed opponent of it. It will even 
 retain a little profit to encourage itself ; for the 
 commercial habit is strong in the average councillor. 
 But more than this the municipality has no right to 
 charge except with the deliberate purpose of re- 
 adjusting the burden of the rates by an obviously 
 abusable method which should be challenged by 
 a good auditor. The reckless way in which 
 municipal trading is often recommended from the 
 platform as a means of relieving the rates shews 
 that some of its popular advocates understand it 
 as little as its popular opponents ; but the question
 
 The Municipal Audit 87 
 
 comes up sharply enough in practice on the 
 municipalities ; and charges are kept as near to 
 cost as is compatible with the excessive caution 
 which characterizes municipal enterprise. This is 
 done, not on principle, but because of the curious 
 jealousies which exist between municipal com- 
 mittees, and between each committee and the whole 
 council. Thus, when the electric lighting com- 
 mittee makes a profit it tries to keep it by credit- 
 ing it to the reserve fund. A proposal to apply it 
 to the reduction of the rates usually comes from 
 the Finance and Rating Committee in the form 
 of an amendment to the Electricity Committee's 
 report. Furious hostility between the committees 
 ensues ; and if the amendment is carried, the 
 Electricity Committee considers that the Finance 
 Committee has plundered it, and takes care, next 
 time, to reduce the price of current to the consumer 
 so that there shall be no profits to be seized 
 upon. 
 
 Thus the theoretically right course is taken 
 even when the councillors do not understand the 
 theory ; and the practice is to avoid profits by 
 keeping prices down to cost. The absence of 
 profits is, in fact, a proof of the proper conduct 
 of the enterprise. Such absence in a commercial 
 company would be a proof of incompetence. An 
 auditor therefore has to apply precisely opposite 
 tests to municipal and commercial undertakings. 
 His view of a commercial company is that the
 
 88 Municipal Trading 
 
 larger the profits, the sounder the undertaking. 
 His view of a municipal supply is that the less the 
 profit, the honester the finance of the borough. 
 Above all, if he is to certify, as the Committee 
 on Municipal Trading recommends, " that in his 
 opinion the accounts present a true and correct [sic] 
 view of the transactions and results of trading for 
 the period under investigation " he must estimate 
 not only the appropriated profits which would go 
 to commercial shareholders as dividend, but the 
 total social utility of the enterprise during the year 
 to the ratepayers. And this is a sort of accounting 
 which neither the Institute of Chartered Account- 
 ants nor the Incorporated Society of Accountants 
 and Auditors yet profess-
 
 X 
 
 THE MUNICIPAL REVENUE 
 
 One of the keenest grievances of the commercial 
 man who sees profitable branches of his own trade 
 undertaken by the municipaHty is that it is com- 
 peting against him " with his own money," meaning 
 that it forces him to pay rates, and then uses the 
 rates to ruin him in his business. The effective 
 platform reply to this is that the profitable muni- 
 cipal trades, far from costing the ratepayers anything, 
 actually lighten their burden. The commercially 
 unprofitable trades are left to the municipality with- 
 out demur. The trades by which private contractors 
 make profit and the municipality none, are, as we 
 have seen, mostly sweated or parasitic trades which 
 in the long run add heavily to the ratepayer's public 
 and private burdens. 
 
 But in any case the alleged grievance is far 
 stronger as against commercial than as against com- 
 munal competition. The private tradesman has to
 
 90 Municipal Trading 
 
 pay rent and interest as well as rates. Rent is the 
 great original fund from which industrial capital is 
 saved ; and interest on that capital eventually forms 
 a second capital fund of equal or greater magnitude ; 
 so that when a shopkeeper finds his business captured 
 by a huge joint stock universal provider, he is being 
 competed against " with his own money," paid by 
 him to his landlord or to the capitalist from whom 
 his capital is borrowed, just as much as when the 
 new competitor is a municipality. 
 
 Nothing shows the economic superficiality and 
 political ignorance of the ordinary citizen more than 
 the fact that he submits without aword to the private 
 appropriation of large portions of the proceeds of 
 his business as rent by private landholders, whilst 
 he protests furiously against every penny in the 
 pound collected from him by the municipality for 
 his own benefit. The explanation probably is that 
 in signing his lease he has explicitly accepted the 
 rent as inevitable, and at least has his house or shop 
 to shew for it ; whereas the rate collector strikes 
 him as a predatory person who makes him pay for 
 streets and lamps, schools and police stations, in 
 which he has no sense of property. 
 
 Still, in dismissing the usual grievances on this 
 subject as unreasonable, it must not be assumed that 
 rating is a satisfactory method of raising revenue. 
 A rate is simply a tax on houses : that is, a tax on 
 an article of prime necessity. If it were shifted to 
 bread there would be an overwhelming outcry about
 
 The Municipal Revenue 91 
 
 taxing the bread of the poor ; and yet the poor 
 suffer more from want of house room than from 
 want of bread. What is more, the poor, under pres- 
 sure, can contract their requirements of house room 
 in the most disastrouslyunhealthy way. Eight people 
 cannot live on a single ration of bread ; but they 
 can sleep in one room, and even take in a lodger. 
 
 We are all in the habit of estimating a man's 
 means by the value of the house he lives in. Shop- 
 keepers give credit to a good address much more 
 readily than to a good man. The Income Tax Sur- 
 veyor, making a guess at the income of an actor or 
 journalist or artist, assesses his address, and can be 
 brought down promptly by the modest admission, 
 *' I have only two rooms on the second floor." 
 But scientific precision cannot be claimed for this 
 method. A man living in a house worth ^150 a 
 year is pretty sure to be a well-to-do man if he uses 
 the whole house as his private residence ; but many 
 people pay that rent in order to carry on the busi- 
 ness of lodging-house keepers, in which case they 
 live in the basement and the attics, and would not 
 dream of taking a house for their own use at so 
 high a rent as a third of that sum. The differences 
 between business premises are as great as the differ- 
 ences between business and private premises. A 
 single small room in Bond Street will accommodate 
 a fashionable palmist who may be making a consider- 
 able income. Next door a manufacturer of motor 
 cars, requiring a hundred times as much space, may
 
 92 Municipal Trading 
 
 be making no profits at all. In cheaper neighbor- 
 hoods, the same contrast may occur between a watch- 
 maker and a jobmaster or furniture remover. On 
 the whole, there is very little to be said for our 
 rating system as an index of what each individual 
 ratepayer can afford to pay. 
 
 The only thing to be said for the system is that 
 it is a rough way of taxing rent, since, theoretic- 
 ally, the rate falls on the landlord. It does so 
 in fact as well as in theory when the tenant is 
 rackrented to the last farthing ; but then very few 
 ratepaying tenants are so rackrented. If the tenant 
 would at a pinch pay another ^2 a year, say, sooner 
 than move (a pretty common case, one guesses), he 
 is from the economists' point of view enjoying £i 
 a year of the rent ; and if his rates go up by ^2 he 
 will not be able to shift the increase on to his land- 
 lord : all that will happen is that his rent will become 
 a rackrent instead of falling _^2 short of it. The rate 
 collector takes what the landlord spared. Thus the 
 increase in local rates which has taken place of late 
 years must to a great extent have fallen on the rate- 
 paying tenants instead of on the landlords ; and this 
 explains why the tenants resist the rates so strenu- 
 ously in spite of all abstract economic demonstrations 
 that it is the landlord who pays in the long run. 
 
 The popular remedy is to rate site values directly, 
 collecting from the tenant as usual, but empowering 
 him to deduct from his rent ad valorem. Thus if 
 the rate be a shilling in the pound on the site value,
 
 The Municipal Revenue 93 
 
 a shilling is deducted by the occupier from every 
 pound he pays the leaseholder, and by the leaseholder 
 from every pound he pays the ground landlord. 
 
 There is nothing impracticable or incomprehen- 
 sible in this. The real objection to it, as Voltaire 
 pointed out 150 years ago in " L'Homme aux 
 Quarante Ecus," is that it throws the whole weight 
 of local taxation on the proprietor of land, the most 
 responsible and active sort of proprietor, and ex- 
 empts the people who do nothing but order their 
 banker to cash their dividend warrants and cut ofF 
 their coupons for them. A landlord has to look 
 after his property : in fact, some of the strongest 
 arguments in favor of municipalization of land are 
 drawn from a comparison of the handsome work 
 done by great landlords in developing towns and 
 districts, with the meaner results of petty proprietor- 
 ship. The landlord, far from^ being the worst sort 
 of proprietor, is the best. The admitted objec- 
 tion to property as an institution is that it in- 
 evitably creates an idle class of rich people. But 
 in England this was faced cheerfully enough as long 
 as property meant property in land, because even 
 the most complete emancipation of the landlord 
 from feudal duties left him still personally re- 
 sponsible for the prosperity of his estate ; and 
 when he neglected or mismanaged it (as no doubt 
 he often did) at least he finally impoverished him- 
 self as well as others. It was not until the industrial 
 revolution of the XVIII and XIX centuries de-
 
 94 Municipal Trading 
 
 veloped the joint stock system, that our manufac- 
 tures began to throw vast quantities of money into 
 the hands of shareholders who were completely cut 
 off from the management of their property, and 
 whose children grew up with the purse of Fortun- 
 atus and without exercising personal supervision or 
 bearing personal responsibility of any kind in return 
 for it. This is the explanation of the apparently 
 anomalous incidence of the Income Tax, which, by 
 sparing the poor and striking at the rich, recognizes 
 the fact that personal industry is often in inverse 
 ratio to income, 
 
 I n the face of this social development the cry for 
 concentration of local taxation on site values will re- 
 commend itself in principle to nobody except those 
 whose income is derived exclusively from industrial 
 dividends. Colossal as the phenomenon of " un- 
 earned increment " is in great cities, it differs in 
 nothing but its obviousness from the incomes which 
 result from it when it is invested in industrial enter- 
 prise. When a ground landlord sells an acre of land 
 in the centre of London for a million, and invests 
 that million in Consols which bring him in ^25,000 
 a year, he does not exchange an unearned income 
 for an earned one : he only exchanges a position of 
 responsibility as a landholder strongly interested in 
 keeping up the character of a London neighbor- 
 hood, for a position of indifference to all public con- 
 siderations whatsoever. To exempt him from rating 
 at the expense of the purchaser of his acre would be
 
 The Municipal Revenue 95 
 
 to make the landlord a Jonah and throw him to 
 the whale of Socialism. If any discrimination is made 
 between classes of proprietors it should operate 
 in the other direction. Lord Cadogan and the 
 Dukes of Westminster, Bedford, Portland, etc., 
 may with some plausibility claim that the difference 
 between their properties and the surrounding ones 
 is worth paying them for. Sir Gorgius Midas and 
 his progeny have nothing to say for themselves at 
 all. It may, of course, be politically convenient to 
 enlist Sir Gorgius for the attack on the landlords, 
 and then, when the battle is won, invite the land- 
 lords to revenge themselves by joining in the cam- 
 paign for a graduated and differentiated Income 
 Tax, exactly as the landlords revenged themselves 
 for Free Trade by carrying the Factory Acts against 
 the manufacturers. But this treatise is concerned 
 not with parliamentary tactics, but with political 
 science. 
 
 Perhaps the most urgently needed discrimina- 
 tion is between people who are able to pay rates 
 on some scale or other and those who cannot afford 
 to pay them at all. It is admitted that persons with 
 incomes of less than ^ 1 60 a year cannot afford to 
 pay income tax; and we allow abatement even to 
 people with as much as ^^699 a year. Now we have 
 multitudes of small tradesmen and shopkeepers who 
 make less than _^ 1 60 a year, and are nevertheless 
 left staggering under the burden of rates of from 
 six to nine shillings in the pound on the valuation
 
 96 Municipal Trading 
 
 of their premises. These men resist the rates with 
 desperation ; and they are quite right. Everything 
 that has been said in the preceding chapters as to 
 the productiveness of municipal enterprise can be 
 reduced to the single formula that municipal trade 
 is a good investment. So is life insurance, for the 
 matter of that ; but suppose a man cannot afford the 
 premium, what then ? 
 
 Let us examine this point a little more closely. 
 The cardinal difference between private and muni- 
 cipal enterprise for the capitalist is that investment 
 in the one is voluntary, whilst investment in the 
 other is compulsory. Let it be granted as a set-off 
 to the compulsion that the municipal investment is 
 unexceptional in point of soundness. What you get 
 then is Compulsory Investment, which many rash 
 people think must be a thrifty thing, because they 
 identify investment with saving, and cannot conceive 
 saving as wrong under any circumstances. As a 
 matter of fact, for the majority of the unfortunate 
 inhabitants of these islands, thrift in this sense is one 
 of the most heartless and ruinous of all the vices. A 
 poor woman who receives five shillings can always 
 take it to the post office savings bank and refrain 
 from spending it on the wants of the moment. Many 
 well intentioned people who have been made hope- 
 lessly silly in money matters by large independent 
 incomes, habitually urge working folk to take this 
 course on all occasions, apparently under the impres- 
 sion that the wants of the moment for the poor refer
 
 The Municipal Revenue 97 
 
 exclusively to gin. But it is clear that if the woman's 
 boots are falling to pieces, the purchase of a new pair 
 will be a far more thrifty proceeding than the bank- 
 ing of the money. The Hves of most poor women is 
 a continual struggle to keep themselves and their 
 children dryshod. I purposely leave the food ques- 
 tion, the starving child, the aged father and so forth 
 out of the question, because purchasers of half crown 
 books on Municipal Trading regard them as melo- 
 dramatic figments, though they are the most constant 
 and pressing realities to millions of poor people. 
 
 In short, saving and investment are quite second- 
 ary duties : the first and the hardest is expenditure 
 on present needs. Saving, investment, life assurance, 
 all of them most prudent and excellent operations 
 for people who have had as much of present nourish- 
 ment as they need, and still have something to spare, 
 are, for heads of families in a state of privation, slow 
 forms of suicide and murder ; and those who preach 
 them indiscriminately should be indicted for incite- 
 ment to crime. When a bishop offends in this way, 
 people who really understand the situation feel their 
 blood rising almost to guillotining point. Yet, after 
 all, the bishop does not force people to take his in- 
 considerate advice. But the municipality does. The 
 London County Council, for instance, goes to many 
 an unfortunate wretch grimly struggling with poverty 
 in a little shop, underfed, underclothed, underhoused, 
 and consequently desperately in want of more money 
 to spend on himself and his family. Taking him by
 
 98 Municipal Trading 
 
 the scrufF of the neck, it says to him, " Come : you 
 must invest in the general prosperity of this magni- 
 ficent metropolis, of which you are — or ought to 
 be — proud to be a citizen. You must no longer cross 
 the Thames in a wretched penny ferry boat : you 
 must build a colossal Tower Bridge, with splendid 
 approaches ; or you must pass underneath in tubu- 
 lar triumphs of modern engineering. You must no 
 longer walk through slums from the Strand to 
 Oxford Street : you must make a new and lordly 
 avenue flanked with imposing buildings. And you 
 must cheer yourself up with parks and bands, and 
 run delightful steamboats on the river for your re- 
 creation on summer evenings." Is it any wonder 
 that the unhappy victim of this comprehensive civic 
 patriotism turns savagely on his Progressive bene- 
 factors and asks them whether they suppose his 
 name is Carnegie or Pierpont Morgan or Roths- 
 child that he should be forced into the schemes of 
 millionaires. And the irony of the proposals is the 
 more biting as he well knows that if the improve- 
 ments happen to eff*ect his own business beneficially, 
 his landlord will take the first opportunity to appro- 
 priate the increment by putting up his rent. 
 
 This grievance is one which cannot be argued 
 away, and cannot without gross callousness be dis- 
 regarded. There should clearly be complete ex- 
 emption from rates for persons whose income is 
 below a certain figure. We have no right to force 
 on people conveniences that they cannot afford. The
 
 The Municipal Revenue 99 
 
 particular device by which this is to be effected need 
 not be gone into here. It is enough to say that 
 though a general reduction of rates would end in 
 an equivalent increase of rents, and although the 
 exemption of a particular class of tenants would 
 enable the landlords to confiscate some of the relief 
 exactly as the employers of pensioners manage to 
 confiscate some of the pension by paying lower 
 wages to the pensioner, yet an exemption applying 
 only to particular and exceptional cases could not 
 produce anything like an equivalent rise of rents. 
 
 The moral is that the relief of the ratepayer, 
 whose burdens are heavy enough to crush all en- 
 thusiasm for municipal schemes that threaten to 
 raise the rates, should be accomplished by taxation 
 of income, heavily graduated and differentiated 
 against unearned income. It could be collected by 
 the Inland Revenue Department and distributed by 
 the method of grants in aid. The grant in aid is an 
 excellent device when it is made conditional on the 
 efficiency of the services for which it is earmarked ; 
 and this, of course, implies control and criticism by 
 a vigorous and capable Local Government Board. 
 
 On the continent, taxation of income for local 
 purposes is freely resorted to ; and each town has 
 a custom house, or octroi, at every gate. There is 
 an octroi at Newcastle-on-Tyne, and perhaps in 
 some other English towns ; and there is no valid 
 theoretic objection to this means of raising local 
 revenue, except the impracticable general objection
 
 loo Municipal Trading 
 
 to all indirect taxation. But as an octroi is an in- 
 tolerable hindrance to people who are unaccustomed 
 to it, and as taxation of income, and even ordinary 
 rating, are far more scientific methods of raising 
 local revenue, it is not likely to be resorted to un- 
 less an absolute refusal of the electorate to sanction 
 sufficient direct taxation to meet the growing neces- 
 sities of the municipal exchequer makes a crude 
 resort to indirect taxation unavoidable. 
 
 There is another difficulty in municipal finance. 
 When there is any work to be done by a munici- 
 pality, the question presents itself, shall it be paid 
 for out of the general rate for the half year, or shall 
 it be paid for by a loan ? 
 
 According to the popular view, the thrifty course 
 is to pay as you go, and not add to " the burden 
 of municipal debt." The correct financial theory 
 is undoubtedly just the reverse : all expenditure on 
 public works should be treated as capital expendi- 
 ture. The capital should be raised in the cheapest 
 market, and the rates used to pay the interest and 
 sinking fund. When a municipahty which can 
 borrow at less than 4% deliberately extorts capital 
 for public works from tradesmen who have to raise 
 it at from 10 to 40% or even more, it is clearly 
 imposing the grossest unthrift on its unfortunate 
 constituents. In practice everything depends on the 
 duration of the work. It would be absurd to pay 
 for an electric lighting plant out of the half year's 
 revenue. It would be silly to raise a loan to clear
 
 The Municipal Revenue. . ;.i;0][ 
 
 away a snowfall. But between' theSe extremes' there' 
 is much debateable ground on which the economic 
 presumption is usually quite erroneously taken to be 
 in favor of present payment. The result may be a 
 rate so high that the struggling ratepayers (a large 
 class in our cities) have to borrow the money to pay 
 it, in which case they are clearly raising capital on 
 their own private credit at comparatively exorbitant 
 interest instead of on their public credit through 
 the municipality. This is due solely to the habit 
 of calling the capital of the municipality its debt. 
 Municipal trading is the best cure for this habit ; 
 and one of its indirect advantages is that it trains 
 councillors and auditors to take a much more in- 
 telligent and considerate view of the ratepayers' 
 interest than they do at present. 
 
 In comparing municipal with commercial enter- 
 prise, the power of the municipality to make appar- 
 ently unlimited calls on the ratepayers' pockets is 
 generally classed with those advantages on the muni- 
 cipal side which are so overwhelming as to be called 
 unfair, meaning only that they are advantages be- 
 yond the reach of commerce. In the same sense the 
 competition of the mammoth universal provider with 
 the petty shopkeeper is unfair; the competition of 
 the electric light with gas, or of the railway with 
 the stage coach was unfair; and the use of rifles by 
 civilized armies against Zulus armed with assegais 
 is unfair. But it is easy to exaggerate the advantage 
 of the municipality in this respect. Every additional
 
 IQ2 , Municipal Trading 
 
 penny in the pound is so fiercely contested by the 
 ratepayer, who is also an elector, that far more mis- 
 chief is done and money wasted by municipal im- 
 pecuniosity than by municipal extravagance. In spite 
 of the fact that our citizens get better value for their 
 rates than for any other portion of their expenditure, 
 they voluntarily give thousands to company pro- 
 moters to make ducks and drakes of with a better 
 grace than they give shillings to the rate collector 
 for the most indispensable requirements of civiliza- 
 tion. When the election comes round, woe to the 
 party that has put up the rate ! If any opponent ot 
 municipal trading really thinks that the ratepayers' 
 pocket is the treasury of Rhampsinitis, let him 
 become a municipal councillor and try.
 
 XI 
 
 OUR MUNICIPAL COUNCILLORS 
 
 Whoever has grasped the full scope of the case 
 for Municipal Freedom of Trade will see that the 
 practicability of public enterprise is limited only 
 by the capacity of its organizers and administrators. 
 And this raises the question, where are we to find 
 our municipal statesmen ? 
 
 Let us first see what attractions the career of 
 a municipal councillor offers, and what its draw- 
 backs are. 
 
 As compared with a member of parliament, a 
 municipal councillor has an almost unbounded 
 liberty of conscience and initiative. The party dis- 
 cipline which is a necessity in Parliament does not 
 exist in municipal government, because the pro- 
 cedure of the councils differs widely from that of 
 the House of Commons. There is no Cabinet, no 
 Government, and no Opposition. There are, of 
 course, Moderates and Progressives, Conservatives 
 
 103
 
 104 Municipal Trading 
 
 and Liberals, Labor members and Independents, 
 Established Churchmen, Free Churchmen, and No 
 Churchmen ; and these form voting combinations, 
 and carry their alliances and their feuds into the 
 council chamber, appointing " whips," holding 
 party meetings, and playing at party government 
 by offering perfectly imaginary services to the real 
 parliamentary parties in order to increase their 
 sense of personal importance, and to establish a 
 claim for their leaders on birthday honors and on 
 adoption as parliamentary candidates, or at least 
 on the fantastic orders of chivalry established by 
 the Primrose League and its imitators. But all this 
 is child's play, because there is no Government in 
 the parliamentary sense, and consequently a vote 
 against one's own party involves no ulterior conse- 
 quences. 
 
 This will be better understood from a descrip- 
 tion of the organization of a municipality. The 
 executive work is, of course, done departmentally 
 by a paid permanent municipal staff. There is a 
 sanitary department with the Medical Officer of 
 Health as technical chief and a Chief Clerk as 
 business chief. There is a Highways, Sewers and 
 Public Works department (or some such title) 
 under the Borough Engineer and a Chief Clerk. 
 There is a Finance and Rating department under 
 the Borough Treasurer or City Accountant and a 
 Chief Clerk. There is perhaps an Electric Light- 
 ing Department, under the Electrical Engineer
 
 Our Municipal Councillors 105 
 
 and a Chief Clerk. And so on, the central de- 
 partment being the General Business department 
 under the Town Clerk, who is the head of the 
 official hierarchy. On the parliamentary system, 
 each of these departments would be presided over 
 by a councillor selected on strict party lines ; and 
 these presiding councillors would be called Ministers 
 and would form a Cabinet, the " first lord " of the 
 General Business department being the Prime 
 Minister and leader of the Council. All regular 
 municipal legislation would be brought for- 
 ward by this Cabinet ; and on the rejection 
 of any of their resolutions, or the carrying 
 of a vote of censure against them, they would 
 resign ; a general election would take place in the 
 borough, and a new Council be elected ; and a 
 new Cabinet would be formed. And the ejffect of 
 this system would be that no member would be 
 free to vote on any measure on its merits, because, 
 as the effect of his defeating it would be to change 
 the whole Government of the district (with the 
 general policy of which he might be in cordial 
 agreement) and transfer it to another party (the 
 general policy of which he might consider ruinous), 
 besides putting himself and the ratepayers to the 
 heavy expense of an election, he would find him- 
 self repeatedly voting simply to keep his party in 
 office without the slightest reference to the par- 
 ticular measure at stake, and would finally give up 
 all pretence of discussion, and insist on being pro- 
 
 E 2
 
 io6 Municipal Trading 
 
 vided with a comfortable smoking room or library 
 in which he could sit at his ease until a bell was 
 rung to call him to the voting lobby. 
 
 There is, providentially, nothing of this sort in 
 the municipal councils. Each department is con- 
 trolled by a committee of councillors ; and each 
 committee elects its own chairman. The business 
 of the department is brought before the committee 
 by the Chief Clerk and the chief of the technical 
 staff. The decisions of the committee are embodied 
 in a series of resolutions. These resolutions form 
 the report of the committee ; and at the next meet- 
 ing of the full council, the chairman rises and 
 " moves his report " : that is, he moves all the 
 resolutions of the committee ; and the Council 
 adopts them or not, as it pleases. It happens quite 
 commonly that an amendment is moved and carried ; 
 or the resolution is referred back for further con- 
 sideration ; or it is flatly rejected. But nothing 
 else happens. The chairman may be disappointed 
 or indignant ; but he does not resign. The com- 
 mittee may sulk for a while ; but it goes on just 
 as before. The chairmen do not form a Cabinet in 
 any sense. They do not all belong necessarily to 
 the same party even when they are elected on party 
 lines ; for the party that is in a majority in one 
 committee may be in a minority on another. In 
 many bodies the custom is to give every party its 
 share of the chairmanships ; and in almost all, old 
 members are allowed sooner or later to have their
 
 Our Municipal Councillors 107 
 
 turn in the chair without regard to their opinions 
 and often without regard to their fitness for the 
 duty, in which case the waste of time in committee is 
 extremely trying to the more businesslike councillors. 
 As to an appeal to the constituency by way of 
 general election, it is out of the question. The 
 councillors are elected for a fixed period ; and no 
 action of the council, short of a resolution accepting 
 the simultaneous resignation of all its members — 
 a plan outside practical politics — can shorten or 
 lengthen its own term of office. 
 
 Under these circumstances independence of 
 thought and character is not strangled in municipal 
 public life as it is in the House of Commons. 
 When a recruit has once mastered the procedure 
 and taken the measure of a municipal council, he 
 can, if he has ability enough, make himself as much 
 of a Prime Minister in ten minutes as the senior 
 alderman. He can indulge in cross voting without 
 stint. He can get a chairmanship quite as soon as 
 he knows enough to be something more than the 
 puppet of the officials. No doubt, if his ambition is 
 fashionable, he will find the House of Commons a 
 better address than the Town Hall. But if he 
 values useful public activity and freedom of 
 conscience, he will find a municipality enormously 
 superior to parliament, unless his political talent 
 or family influence is of a very unusual order. 
 
 It will now be asked why, under these tempting 
 circumstances, it is so difficult to get efficient
 
 io8 Municipal Trading 
 
 candidates for the municipal councils. The root 
 cause is no doubt that insisted on long ago by- 
 Plato : namely, that capable men understand too 
 well how difficult and responsible public work is, to 
 be particularly anxious to undertake it ; so that 
 the first qualification for public life ought to be a 
 strong reluctance to enter it. It is no exaggeration 
 to say that the strongest man can kill himself with 
 overwork even on a town council if he attempts to 
 do everything there is for him to do. A wise 
 insurance company would prefer a cabinet minister's 
 life to a municipal chairman's, if the chairman 
 shewed any disposition to do his work thoroughly 
 and seriously. 
 
 On the other hand, nothing is easier than to sit 
 on a council and do nothing. The claim of the 
 House of Commons to be the best club in London 
 is far more questionable than the claim of the 
 municipal council to be the best club accessible 
 to most of its members. It is possible for a 
 councillor to be stupendously ignorant and shame- 
 lessly lazy, and yet to be not only popular with 
 his fellow councillors, but — provided he is a 
 tolerably entertaining speaker — with the ratepayers 
 also. He passes for a very busy public man when 
 he is really only a sociable one, by attending all 
 his committees and doing nothing on them. 
 
 There is at present no way in which the municipal 
 faineant can be brought to book, even if a com- 
 munity which does not pay for his services had any
 
 Our Municipal Councillors 109 
 
 right to make the attempt. Payment of directors' 
 fees would not improve matters : the guinea-pig 
 has been tried in private enterprise and found 
 wanting. Still, there is a great deal to be said for 
 payment of members of municipal bodies. It would 
 make the voters much more jealous and exacting 
 as to the personal qualifications and public industry 
 of their representatives, besides producing some 
 sort of consciousness that membership of a local 
 authority really means useful work and not mere 
 ceremonial. Far from substituting selfish motives for 
 public ones, it would relieve municipal work from 
 the reproach that men have no reasons but inter- 
 ested — not to say corrupt — reasons for undertaking 
 it. It would give capable Labor leaders that train- 
 ing in public life without which they are apt to be 
 socially dangerous in direct proportion to their 
 ability and earnestness, and with which they stand 
 so usefully for the whole community as well as for 
 their own class against the sordidness and exclusive- 
 ness of the commercial classes and the social ignor- 
 ance and thoughtlessness of the aristocracy. Labor 
 representatives usually make excellent councillors, 
 because they are much more severely criticized 
 than their middle class colleagues. It is possible 
 for a middle class councillor to sit on a munici- 
 pality for twenty years in a condition of half- 
 drunken stupor without exposure and defeat at the 
 poll ; but Labor councillors receive no such in- 
 dulgence. As a rule they take their public business
 
 no Municipal Trading 
 
 very seriously ; are free from the social pressure 
 which leads to so much reciprocal toleration of 
 little jobs and venial irregularities among the 
 middle class men of business ; have the independ- 
 ence of professional men without their class pre- 
 judices ; are exceptionally sensitive to the dignity 
 of sobriety and respectable conduct ; and, as they 
 usually pay inclusive rents, never deliberately shelve 
 necessary public work because it may mean an 
 extra rate of an eighth of a penny in the pound. 
 Thus, oddly enough, the municipal Labor mem- 
 ber generally finds himself in alliance with the 
 councillors who are too rich to be penny-wise and 
 pound-foolish, and with the professional men whose 
 livelihood has always depended on their own per- 
 sonal skill, in opposition to the petty shopkeepers 
 and employers whose cramped horizon and short- 
 sighted anxiety to keep down the rates at all 
 costs are the main stumbling blocks in the way of 
 municipal enterprise. 
 
 The tyranny of the petty tradesman Is a serious 
 evil in municipal life. The municipal constituency 
 is small — only a ward ; and the bigger and more 
 important the city, the fewer votes will secure a 
 seat, because of the difficulty of inducing busy 
 or fashionable people to vote at all : in fact, it 
 is easier to poll a village to the last man than 
 to poll 50% of the electors in a London ward. 
 The squares and the slums have the same reason 
 for not voting, because the city man, the laborer
 
 Our Municipal Councillors 1 1 1 
 
 and the artisan are alike in respect of not working 
 at their homes ; so that when they return home 
 tired in the evening they will not turn out again 
 in the raw November darkness, and trudge through 
 the mud to the polling station at the request of 
 that enthusiastic pest the canvasser. The result is 
 that the smaller shopkeepers elect one another, 
 since they can vote at any moment of the day by 
 leaving their shops for a few minutes. 
 
 To canvass for this shopkeeping vote is an art 
 in itself, and one which men of superior education 
 and liberal ideas cannot be induced to study and 
 practise. The small shopkeeper does not understand 
 finance, nor banking, nor insurance, nor sanitary 
 science. The social distinction between him and the 
 working class is so small that he clings to it with a 
 ferocity inconceivable by a peer, and will concede 
 nothing to a laborer that is not either begged humbly 
 as a favor or extorted by force of Trade Unionism. 
 A proposal to give women living wages instantly 
 brings before him a vision of " the girl at home," 
 encouraged in uppishness, and asking another shil- 
 ling a week. His pocket is so shallow that an extra 
 penny in the pound appals him, not because it 
 means an extra five or ten thousand pounds of 
 revenue, but because it will cost him individually 
 another half crown or five shillings. The fate of 
 an intelligent candidate who does not use his speech 
 to conceal his thoughts may be imagined. Very 
 much more reasonable men than Coriolanus are
 
 112 Municipal Trading 
 
 defeated at every election because they betray large 
 views of municipal business instead of passionately 
 affirming their own merits, vituperating their op- 
 ponents recklessly, and flattering the follies of the 
 most narrow-minded electors. And so, though a 
 doctor may get in by the votes of his patients, and 
 a minister of religion by those of his congregation 
 and of his poor, the small shopkeeper is master of 
 the municipal situation. His ideas rule all the urban 
 local bodies. The 28 London Borough Councils are 
 completely in his hands. Even when he finds in his 
 own ranks men of remarkable shrewdness and some 
 capacity for large ideas, he keeps them rigidly 
 under his thumb; and they, knowing that an appeal 
 to the more liberal classes would not be responded 
 to, accept their servitude and become what the 
 Americans call " ward bosses." We do not conde- 
 scend to name them at all, vestrydom being too 
 little considered to be worth an English terminology. 
 One remedy for this is to make voting as easy 
 for the city man as it is for the local tradesman. 
 Our plan of making an election as great a nuisance 
 as possible to everyone concerned gives an over- 
 whelming advantage to the man who has nothing 
 to do but " slip round the corner and vote " in the 
 slack moments of a business that actually consists 
 of interruptions and intrusions. The barrister, the 
 doctor, the man of science, the author, the financier, 
 the head of a large business, cannot be disturbed in 
 this way. If he cannot vote by post, preserving the
 
 Our Municipal Councillors 113 
 
 secrecy of the ballot by the familiar expedient of an 
 outer and inner envelope, he will not vote at all. 
 Even the laborer is now learning to meet the can- 
 vasser with " I will come if you send a carriage for 
 me," thus creating a grievance for the candidate 
 who has no carriages or carriage-keeping friends, 
 and imposing an intolerable corvee on the people 
 who do keep carriages, and whose friends borrow 
 them for elections. A great deal of the apparent 
 failure of democracy to secure the best available 
 public representatives is really a failure to adapt our 
 method of taking the vote to the convenience and 
 susceptibilities of the more thoughtful and cultivated 
 classes. We ignore the fact that what Plato said of 
 the representative : that the reluctant and not the 
 eager man — the man who feels the weight of a 
 crown and not he who is dazzled by its glitter — 
 should be chosen, has its application to the voter also. 
 The partisan whom no weather and no distance can 
 keep from the polling booth is not necessarily a better 
 judge of a candidate than the man who has to be 
 coaxed to undertake the very grave responsibility of 
 choosing the government of the town for the next 
 three years. Yet, far from coaxing him, we handicap 
 him by arrangements which give a long start to 
 political rancor, personal thickness of skin, and, 
 above all, to the shop round the corner. 
 
 Still, there is something to be said for the petty 
 tradesman. He is shrewd and effective enough when 
 he is in his depth ; and his local knowledge is indis-
 
 114 Municipal Trading 
 
 pensable. The policing and sanitation of a city 
 consist largely of a running fight with petty nuisances 
 and abuses to which the gossip of a street is a better 
 guide than the most comprehensive municipal states- 
 manship. When the absurdity of the present muni- 
 cipal areas forces us to reconstruct our whole scheme 
 of local government, there will still be a place for 
 local committees to deal with the small change of 
 municipal life ; and on these local committees the 
 petty shopkeeper will be as useful as he is noxious 
 on bodies whose scope far transcends his homely 
 little outlook.
 
 XII 
 
 CONCLUSION 
 
 The conclusion of this statement of the case for 
 Municipal Trading leaves the reader still at the 
 beginning of the subject, but, it is hoped, in an in- 
 telligent and unbewildered attitude. It will save 
 him the trouble of a struggle with irrelevant rows 
 of figures paraded to prove that municipal trade 
 does not pay. It will also save him the trouble of 
 reading ingenious attempts to confute these de- 
 monstrations from their own point of view ; for he 
 will understand that though the demonstrations may 
 be erroneous in this or that instance, and though a 
 Borough Treasurer may keep the municipal books in 
 such a way as to give his accounts the utmost com- 
 mercial plausibility, yet in the very cases where 
 municipal trading is most profitable to the rate- 
 payer, its departmental expenses are and ought to 
 be greater, and its surpluses (if any) are and ought 
 to be less than those of a private firm doing the 
 
 "5
 
 1 1 6 Municipal Trading 
 
 same work — nay, that when the municipality under- 
 takes at a heavy departmental loss work that has 
 previously been carried on by commercial con- 
 tractors at a tempting commercial profit, the rate- 
 payers are probably saving more by this apparently 
 bad bargain than by the municipal gas works and 
 tram lines which not only do not cost them a farthing 
 out of pocket, but actually contribute hard cash to 
 the rates as well. 
 
 On the other hand he will see that municipal 
 statesmanship, far from having been simplified by a 
 safe Socialistic formula, now requires from its Coun- 
 cillors much more knowledge, ability, and character, 
 than the old system, which had a really simple for- 
 mula in the rule : Do nothing that can be left to pri- 
 vate enterprise. In our reassurance at the discovery 
 that the bogey of increasing municipal indebtedness 
 is only the comfortable phenomenon of growing 
 municipal capital, we must not forget that over- 
 capitalization is as possible, if not as probable, in 
 public as in private finance, and that a councillor must 
 not only be in favor of, say, a municipal supply of 
 electric light, but must, when that point is carried, 
 have sense enough not to buy more horse power 
 than is necessary, nor lay a cable down a country 
 road for the sole sake of the mayor's brother-in-law 
 who has a villa at the far end, nor appoint a civil 
 but unqualified young man as engineer merely be- 
 cause he is the sole support of his aged mother. 
 On the other hand, he must not clamor for the
 
 Conclusion 117 
 
 municipalization of the section of a great trunk line 
 of railway that happens to cross his borough, nor 
 press the Parks Committee to undertake the muni- 
 cipal breeding of elephants for the sake of having a 
 Jumbo for the children to ride on. Every proposal 
 to municipalize lies somewhere on the scale between 
 these extremes, and must be judged in council, not 
 according to a Socialist or Anti-Socialist canon, but 
 according to its place on the scale, and always in 
 view of the complicated social reactions analyzed in 
 the preceding pages. 
 
 Now this is not work for the political partisans 
 and convivial vestrymen who still look on an alder- 
 man's robe or a mayor's chain as the crowning 
 ornament of a successful commercial career, and 
 on a Council as a Masonic Lodge where members 
 can make useful acquaintances and put valuable 
 pieces of business in one another's way. Complete 
 disinterestedness is neither an attainable quality 
 nor a desirable one ; for it means complete in- 
 difference ; and an attempt to *' purify " politics by 
 getting rid of all personal motives is apt to end 
 like an attempt to purify card playing by abolish- 
 ing the stakes : the keenest lovers of the game for 
 its own sake are the first to insist on stakes in order 
 to make the others play carefully. A very little 
 practical experience will convince the youngest 
 idealist that the way to set a man to work, in 
 public as in private, is to give him an axe to grind, 
 and that nothing gets done until it becomes a job
 
 1 1 8 Municipal Trading 
 
 for somebody. But there are axes and axes. One 
 man, being a shopkeeper, seeks election because he 
 hopes to establish a claim on the custom of the 
 councillors (some of them heads of large establish- 
 ments) with whom he will become intimate at the 
 party meetings. When he is elected he will elect 
 as mayor the man who will give the council two 
 banquets a year, with champagne, rather than the 
 strict teetotaller who will give one, with lemonade, 
 or none. This naive kind of interested motive is 
 by far the commonest in English local public life. 
 It does much more to stultify municipal politics 
 than the rapacity of the slum landlord who seeks 
 election to protect disorderly houses and to thwart 
 the administration of the Housing and Public 
 Health Acts, the chicanery of the country jerry 
 builder who aims at preventing the adoption or 
 hindering the administration of sanitary by-laws, 
 and the intrigues of the publican to get on the 
 rating committee so as to mitigate the tendency to 
 assess public houses on ruthlessly high valuations. 
 As a matter of fact, in large cities, the better sort 
 of builders and landlords of good house property 
 have exceptionally strong personal interests in good 
 municipal government ; and a respectable and suc- 
 cessful publican without either ability or character 
 is almost an impossibility ; for the first man to be 
 demoralized and ruined by a public house is the 
 publican himself if his character is vulnerable. The 
 really dangerous men are those whose motives are
 
 Conclusion 119 
 
 so artless, petty, and familiar, that they are imper- 
 ceptible ; and it is these simple souls, incapable of 
 mental effort or social comprehension, who stand 
 blamelessly in the way of all far reaching municipal 
 action, whilst downright rogues will listen keenly 
 to important proposals, and even support them 
 vigorously if any pickings seem likely to come 
 their way. 
 
 In short, for obstructive purposes, twenty sheep 
 are more effective than fifty wolves. The moral is, 
 not, of course, to elect rascals, but to prefer political 
 motives, even when they are rooted in personal 
 ambition, to commercial motives, convivial motives, 
 snobbish motives, and especially to no motives at 
 all. Purely political successes will serve the turn 
 of a man who has the right temperament for public 
 life quite well enough to make him work for the 
 public good without any abnormal deficiency in 
 selfishness, if the public will only let him. What 
 really witholds capable and highminded men from 
 public life is the ignorance and intense recalcitrance 
 of the people who vote, and the discouraging indif- 
 ference of the people who dont. This will continue 
 to make democracy intolerable until we deliberately 
 and carefully teach citizenship to our children. One 
 intelligent voter is worth a hundred persons who 
 made bad Latin verses in their teens, or enjoyed for 
 one day in their childhood a more or less accurate 
 recollection of a more or less accurate statement in a 
 schoolbook as to the principal products of Sumatra.
 
 I20 Municipal Trading 
 
 Finally, it has, I hope, been made clear that the 
 infancy of modern local government must no longer 
 be hampered by our ancient parochialism. The in- 
 jury done us by foreign frontiers, with all their 
 cannon and all their custom houses, is as nothing 
 compared to the waste and hindrance set up by 
 our absurd municipal frontiers. A relimitation of 
 the areas and reconstitution of the units of local 
 government is the most pressing requirement made 
 by municipal trade upon our constructive states- 
 manship. We will no doubt ignore the existing 
 deadlock as long as we can ; for we are slow to 
 frame ourselves to new occasions : we still nail 
 telephone wires to chimneys and copings exactly 
 as a laborer's wife stretches her clothes line in the 
 back yard ; and the newest buildings so resolutely 
 ignore the existence of the bicycle that it is posi- 
 tively easier to accommodate one in an XVIII 
 century house than in a XX century one. But 
 electricity is a potent force : it will shock British 
 conservatism (a polite name for British laziness) 
 out of its anachronisms if anything can. 
 
 Printed by V^. & R. Clark, Limited, Edinburgh.
 
 UNIVERSITY OF CALIFORNIA LIBRARY 
 
 Los Angeles 
 
 This book is DUE on the last date stamped below. 
 
 MAR a 195r 
 
 Form L9 — 15m-10,'48 (B1039 ) 444 
 
 UMVERSITY Pf CALIFORNIA 
 
 AT 
 LOS ANGELES 
 
 T Tx>r> A "Dxr
 
 KD Shaw - 
 4451 — Coffl mon s o nce 
 S53o of municipal 
 _1511 — ti^ading-. 
 
 i^-' 
 
 ED 
 
 4431 
 S53o 
 1911 
 
 HX 
 
 UC SOUTHERN REGIONAL LIBRARY FACILITY 
 
 AA 000 904 804 2
 
 '.'Mil f^^^^^M 
 
 nil 
 
 k