.. J. 13 ^ STATE PURCHASE OF RAILWAYS. STATE-PURCHASE OF RAILWAYS BY CHARLES WARING OF THE WIVIE5IT7 LONDON CHAPMAN AND HALL, LIMITED 1887 LONDON : PRINTED BY J. S. VIRTUE AND CO., LIMITED, CITY ROAD. CONTENTS. STATE PURCHASE OF RAILWAYS. I. STATE RAILWAYS AND TRADE. PAGE Prospects of railway legislation 1 Popular discontent 2 Probable effect of revival of trade ....... 3 Royal Commission on depression 3 Extension of corporate power 4 Dangers of delay in consideration of State purchase ... 5 The coming industrial struggle ....... 6 A Royal Commission proposed 7 Growth of State railways 7 Tendencies of Government ........ 8 State railways on the Continent 8 The English position 9 Feeling in the United States .'- V 10 Signs of the times . .10 Perfect free trade 11 BELGIAN STATE RAILWAYS. Belgian State railways 13 Value of the Belgian experiment 14 Early history of Belgian railways ....... 14 Effect of reductions in rates 16 Results, direct and indirect 18 Reduction of passenger fares . . . . . . . .19 Further reductions 20 Finances of Belgian State railways . 20 Growth of Antwerp upon removal of tolls . . . . .22 Belgian imports and exports ........ 24 Emigration and immigration 24 THE GERMAN SYSTEM. ( Jerman State railways . . . . . . . . -2~> Prussian law of 1838 25 vi CONTENTS. The German Handelstag 26 The Empire and the railways 27 Experiments and reductions ........ 28 Increase of traffic on reductions ....... 29 Co-operation of traders and managers ...... 29 THE FRENCH SYSTEM. The French Government and the railways . . . 30 State regulation 30 Effect of district monopolies 31 French Commission of 1881 ........ 32 Reforms suggested .......... 34 Mr. Crowe's report 35 HOME AND FOREIGN RATES. Comparison of English and foreign rates . . . . .35 Foreign rates are generally lower ....... 36 Passenger fares at home and abroad . . . . . .37 German and Belgian rates compared to English . . . .38 Terminals 38 Foreign shipping bounties ........ 39 COURSE OF FOREIGN TRADE. Foreign trade 39 European trade, 18801884, Table of 41 II. THE ENGLISH POSITION. The English agitation against rates 45 Character of the evidence upon home rates 46 Grievances the result of the system 48 Evidence before Royal Commission on Depression . . . .49 Mr. Grierson and the Mining Association . . . . .50 Rates on imports .......... 52 Agricultural rates .......... 52 Where are the defenders of agriculture ? 54 Two classes of rates .......... 55 Rates fixed by competition ........ 56 Competition between railways and the sea . . . . .56 Import, export, and transit rates ....... 56 Rates between port and port . . , . . . . .57 Rates fixed by the competition of ports ...... 58 CONTENTS. vii Nature of the grievance ......... 58 Not a sentimental grievance i 59 The State only can remedy it . . - . .. . . .59 Injustice of confiscating railway profits 59 Rates fixed by competition between companies . . . .60 No effective competition between different lines . . . .61 Competitive lines often a disadvantage . . . . . .61 Rates fixed by the companies 62 " What the traffic will bear " 62 Mileage rates and cost of service rates ...... 63 Differential rates 63 Manner of fixing rates 64 Alleged co-operation between traders and companies . . .65 Rates not adapted to circumstances of trade 66 Meaning of " What the traffic will bear " 67 Dangerous power in hands of companies . . . . . .68 Companies dictate their own terms 69 Alleged identity of interest between companies and public . . 70 The companies powerless to find the best rate . . . .70 Mr. Grierson's illustration of their position 71 The kind of reduction which would benefit trade . . . .73 Lessons of the Post Office 73 The case of agriculture ......... 74 Dividends at home and abroad 76 Railway investments compared with others 77 Dividends no ground for an attack on railways . . . .78 A large transport tax economically bad 79 A struggle between two principles 79 State aid to railways ......... 80 Remedies ........... 81 Proposals of the companies 82 The Government Bill 82 The essence of the Bill 84 Poor prospects of adequate reform 84 State purchase the only true remedy 85 Common objections to State railways 85 The people and officialism 87 Policy of Government taxation 88 Objections to social legislation .90 Favourable position of England for administering railways . . 92 The Government policy in fixing rates 92 Advantages of a universal rate 94 Practicability of rates irrespective of distance .94 Justice of a fixed universal rate 96 vm CONTENTS. More information wanted 96 Favourable situation of England for trying experiment . . .98 Volume of traffic 99 Classification 101 Purchasing power 102 National debts 103 Capacity of the country to purchase . . . . . .105 STATE PURCHASE OF RAILWAYS. (Reprinted from the FORTNIGHTLY EEVIEW, June, 1886.) I. THE PKOBLEM. Mundella's Railway Bill (1886) 108 Principle of the Bill 109 Confiscation of dividends ........ 109 Necessities of industry . . . . . . . . 109 State Purchase Act of 1844 110 Urgency of the situation . . . . . . . . .111 Magnitude of railway power . . . . . . . .111 Services to civilisation . . . . . . . . .113 Effect of Mr. Gladstone's Act of 1844 113 Royal Commission of 1865 113 Railway and Canal Traffic Act, 1854 114 Report of Sir Henry Tyler, 1871 114 Joint Select Committee, 1872 115 The Railway Commission 115 Select Committee, 1881, 1882 115 Railway power 116 Effects of monopoly . . . . . . . . .117 The landowners and the railways .117 Growth of railway monopoly 118 Competition replaced by combination 119 Lord Dalhousie's Board . . . . . . . . .119 Progress of amalgamation 119 Establishment of the Clearing House 120 Result of the legislative struggles 120 The only effective competition, that of the sea . . . .121 Canal competition 122 Conclusion of the Select Committee of 1872 122 Basis of rates . . . . . . . . . . .124 Preferential rates . 1 24 CONTENTS. ix PA O CO OOCOOOr-lOOCOO * ^co S^ S " ^w S\ 5 S sfsr*" s 10 " s 111 00 r I 1 O 00 oo 1 1 Hamburg. ill ? II -S II ! II 2 I ! t-T r-TT)T ' CO t>T tC t-^ CO r-l ^ SS S SS ^^ o^ "S" s" l f i" s N TEADE 1 ? || ? | | o || S | ? ^t It srf ~ " s |g | "*;JS o^to ^^ ^ ^ o**> **> t-ToTcxT co'co" o co I-H o 2 ^ C<3 ^ jfl FOKEIG: s ooo-^ooto oocooooo ^J 0000 00 gg'PSgf 000-00^^, 0^ 0^ ^ 0^ 0^ ^ 0^ w 41 1 11 Ills S If t 5 = " s" 8 " S l}^ 3 g German Empire. ggg|S|||l S 4 |t f 1 ll i i * 5 rrC irTocT t^- C^l CO CO ""* t"^ COtCrM COCO OrH ^^ 3S ssis lll> H || s ^ II? 1 ? 8 8 6 ,. CO ^^ r% g, g. CO 2-0 2 2 i is wo s of of ~ 2S g2 1 - - co co o- ** ^ g^P^OrH o : :::j| :::j| :. .|| . . .|||| || "S ^JTs* ^^ .^S ^ ' S ^ 1 illll lllll illll lllll II II NOTE. S everywhere to 54,272, increases in 42 STATE PURCHASE OF RAILWAYS. It will be seen from these figures that while our foreign trade slightly decreased between 1880 and 1884, that of Germany, Belgium, Italy, Denmark, and Norway increased considerably. The returns for Bussia, Austria, Hungary, and Spain, are not complete. Our chief competitors are Germany and Belgium, and the figures for these countries are most significant in relation to our inquiry. In good years their increase of trade is at a greater ratio than ours, and in bad years their decrease is smaller. It is a novel and startling experience for English- men to find their country last but one (and that one heavily weighted France), in a list of eight of the industrial nations of Europe, in the commercial pro- gress of the five years succeeding the advent of 1880. The comparison above instituted will not be pleasant reading either for the patriot or the trader. The page will not be turned without a pang on which is recorded the fact that the United Kingdom and France alone of those eight nations have to deplore a decrease of foreign trade in the period referred to. How are the mighty fallen ! will be on the lips of a good many of the merchant princes of the great emporium of the world, and some of them will begin to feel if their princely crowns are still on their heads. Assuredly they will not remain there unless the plain truth is realised and faced. The period of commercial conquest in which England was so well fitted to distinguish herself is well-nigh over. "Whilst it lasted her com- mercial supremacy was unassailable. Her enterprise, STATE PURCHASE OF RAILWAYS. 43 bolder than that of any other people, enabled her to open new fields of consumption which offered almost any profit she chose to ask ; and she asked enough to cover her grand, lavish, and extravagant methods, her equally grand and extravagant expenditure, anjl a sufficient margin for accumulation besides. Alas ! those days are over, and it is hard no doubt for such magnificent traders to be obliged to turn to the saving of the candle ends of commerce for her gains. But so it is. We shall have to humble ourselves to the small profits and quick returns business if we mean to survive. We have had to struggle against protective tariffs before, and have met and overcome them ; but it is a question how long we can fight them when they are reinforced by low State railway tariffs, and while we have an unsatisfactory tariff ourselves which favours foreign incursions into our home markets. Between 1875 and 1884 our yearly imports from Germany increased by nearly two millions sterling, while our exports diminished by four millions, making a balance of six millions against our trade. Our imports from Belgium also increased in a much greater ratio than our exports. It is satisfactory to be able to buy largely, but in the long run we can only do that by keeping open markets for our own products. That will not be done by wrapping ourselves up in a comfortable optimism. The warning which comes from every Consular district in Europe, and which is corroborated by our manufacturers, cannot safely be 44 STATE PURCHASE OF RAILWAYS. neglected. From Germany we hear constantly of the displacement of articles in which we formerly had a monopoly. In the iron and coal trades the greatest efforts are being made to drive us, not only out of Germany, but out of Europe. The Westphalian coal-fields are becoming more accessible every year to all parts of the Continent, and immense reductions of freight, often amounting to 50 per cent., are being effected in all directions. As an idea of what foreigners think possible in railway transport, one of the Consuls mentions an agitation to reduce rates on ores and raw iron to one tenth of a penny per ton per British mile. In Austria, British goods are giving place to German and Swiss productions, and it is reported that English rails have long been beaten out of the market by Belgian firms. In Hungary there is a similar decrease of British and development of German trade. In Denmark the German iron and metal trades have within a short time increased 110 per cent, as against an English increase of 5 per cent.* In Italy, since 1880, British imports have increased by 16 per cent., those from Germany by 102 per cent., those from Belgium by 150 per cent. Special tariffs are arranged between the Italian and Belgian Governments from which the cost of transport can at once be ascertained from over one hundred and fifty different stations. The special through rates, variously described as * These high percentages are no doubt open to the objection taken by Mr. Giffen, that it is easy to show a high percentage of increase when there is a low figure to begin with. STATE PURCHASE OF RAILWAYS. 45 transit rates, international rates, penetration rates, and conventional rates, are a marked feature of the Continental traffic, and must go a long way to- wards neutralising customs tariffs. In Spain the Belgian and German trade is said to be increasing by leaps and bounds, and in articles which were once obtained exclusively from England. Reports of a like nature come from the Consular offices of Russia, Switzerland, Sweden and Norway, Greece, Portugal, Roumania, Saxony, Holland and the Netherlands, and even our ancient client Turkey is deserting us. This sapping of our position once fairly begun, and under the hostile conditions of our own railway tariffs, how long will English commerce, unrelieved by legislation, be able to boast as in former years, " Come the three corners of the world in arms, And we shall shock them " ? II. THE ENGLISH POSITION. It is idle to deny the gravity of the English posi- The Eng- lish agita- tion. It is useless to cry " Peace! peace', whention there is no peace. The forces opposed to the existing rates. system are increasing in strength, and will become more and more formidable with every fresh abortion of Government attempts at a mere reform of rates. Nothing will be gained by ignoring or disparaging the opposition. Neither will permanent benefit arise from patching up a compromise between the com- panies and the traders, in the manner proposed by the 46 STATE PURCHASE OF RAILWAYS. Bill of the Government. The evil lies too deep to be removed by such superficial remedies. There is an immense national waste caused by inability to get into the market. Fish is used for manure, and fruit and vegetables are left to rot ungathered while thousands of people are starving. Besides, when we are assured that the agitation against railway rates is mainly sec- tional, and is promoted by a few selfish individuals who are seeking preferences for themselves, and are referred to the millions who are satisfied and silent, we ask what proof there is of this alleged general con- tent. It is said that those who object to the present system are not attacking the railway interest so much as the general interests of commerce. How is it that no persons except railway officials come forward to assert this ; that the great representatives of commerce do not testify to the benefits of the system ; that no economist of note is its champion ? In their absence we are bound to assume that the evidence laid before successive Commissions which on the side of com- merce is all in favour of reform is representative; that it is given by men who are entitled to speak for the entire commercial body and for great industrial combinations. No amount of plausible explanation offered by railway ofiicials has sufficed to stem or to divert the agitation. If we examine the long list of wit- cimracter nesses w ^ have appeared before Parliamentary Com- eridence m i^ ees since 1864, we find that they are sharply me divided into two classes, one representing commerce STATE PURCHASE OF RAILWAYS. 47 and the other representing the railway interest. Out of forty-eight witnesses examined by the Select Com- mittee of 1872, twelve were chairmen or managers of railway companies, and they were the only defenders of the railway policy. Seventeen were sent by Cor- porations or Chambers of Commerce to oppose the practice of the companies, and eight were private in- dividuals who had complaints to make on their own behalf. Six represented canals, whose interests had been injured by the proceedings of the railway com- panies, and five were from Government departments who explained the relations of the railway to the State. Out of these five Sir Henry Tyler strongly supported State purchase, and Sir Thomas Farrer gave a qualified approval to the general railway policy. The Select Committee of 1881-82 examined over one hundred witnesses, of whom forty-five were delegates from Chambers of Commerce or industrial associations, and twenty- eight were private traders, all of them making a variety of charges against the management of the railways. There were eleven official witnesses from the Board of Trade and the Eailway Commission. On behalf of the companies fourteen managers were called, and only one independent witness the Mayor of Grimsby came forward to testify to the prosperity conferred by the railways and the general satisfaction with the management. Before the Commission on the Depression of Trade the great burden of complaint was against the railway companies, and no answer whatever was made to the case against them. On no 48 STATE PURCHASE OF RAILWAYS. occasion have any of the great merchants and manu- facturers with whom the companies dealt, and who it is said are consulted as to the scale of charges, ap- peared to defend the practice of the companies. There can be but two explanations of their absence. Either they consider that they are fairly represented by the Chambers of Commerce, or they have preferences over the general body of traders which they are not pre- pared to disclose. Otherwise, is it to be believed that they would not come forward to oppose changes which Mr. Grierson says would injure and even go far to ruin them ? In either case it is clear that the evi- dence which has been given stands for a trade dis- satisfaction which is almost universal, which is be- coming more intense, and which is not met in the smallest degree by convicting its representatives of inconsistency and confusion in the suggestion of remedies. No personal attack is intended to be made upon the piakTedTof managers or directors of the companies. The griev- of e the U ances are the result of a system under which it is wrongly assumed that a monopoly can be regulated by ordinary commercial laws. "While the system lasts it is the plain duty of its administrators to do the best they can for their shareholders. There is very scanty evidence that in doing this they often exceed their legal powers ; one witness before the Depression of Trade Commission speaks of travelling goods man- agers who reduce rates as they are required without reference to published tariffs; but the matter is not clear. ances com- STATE PURCHASE OF RAILWAYS. 49 The charge of general undue preference is not made out. Of corrupt preference there is no evidence what- ever. But it rather adds to the grievance, and cer- tainly adds to the irritation, that there is no one to hang. If commercial and industrial justice could be done by the execution of chairmen, managers, or directors, there is perhaps patriotism enough amongst them to appease opposition by the sacrifice. The apostles of the system are evidently not to blame. It is the system itself which sins. Eedress for wrongs committed by individuals may be had, but redress against a system is much more difficult to obtain. The good-natured attempt of the railway authorities to convince English traders that they have no substantial grievance, and that they are rather benefited than otherwise by the special features of the railway system, altogether breaks down. "When a man has to pay rates relatively or absolutely higher than his competitor in business, no amount of reasoning will convince him that he is not under a disadvantage. It may all be explained away, but he discovers it in his books, his banking account, or his decreased power of produc- tion. The histories told to the recent Commission are not Evidence given fantasies or theories, but the experiences of practical before the men who are keenly alive to all the conditions ofcommis- strenuous competition. The President of the Sheffield depression Chamber of Commerce says that they pay in the Shef- field district f d. per ton-mile for pig and ore compared to ^d. on the Continent, or one-third more. For rails E 50 STATE PURCHASE OF RAILWAYS. they pay 1-g-d., as against ^d. on the Continent, ' or two-thirds more ; the difference making the profit which satisfies the foreign competitor. Sir Lowthian Bell, who is of opinion that as a rule our rates for fuel, ore, and limestone, though not for pig-iron, steel, and malleable iron, are lower than the European rates, also says that on a ton of pig-iron, after paying the royalties, as much as 27 per cent, of the remainder often goes in railway rates. Mr. Hickman says that the charges for freight in South Staffordshire are now one-seventh or one-eighth of the value that is 12 or 13 per cent., while formerly they were one-six- teenth, or between 6 and 7 per cent. T\T f^ ' son' and * The Mining Association of Great Britain allege that Mining the high railway rates are slowly but surely killing tion? lc the trade of the country. It would, perhaps, be un- fair to reproduce this statement without giving Mr. Grierson's answer to it. Mr. Grierson supplies a table showing the gross charges per ton, irrespective of dis- tance, from those iron and coal-fields in Great Britain which are nearest to the sea, in comparison with similar charges from the iron and coal-fields of Belgium, Hol- land and Germany which are nearest to their ports. As our minerals are much nearer to the sea than foreign minerals, he is able to show that the gross charges paid by foreigners from the place of produc- tion to the port are heavier than those paid by us. Now, as I have several times insisted, the contiguity to the sea of our chief seats of industry constitutes a natural advantage which the English manufacturer STATE PURCHASE OF RAILWAYS. 51 enjoys over the industry of every other country, and it is rather adding insult to injury to throw this advantage into the argument to justify high rates, or lessen the evil of the transport tax. These are advan- tages which ought to be held in trust for industry generally, and ought not to be absorbed by the rail- way companies. It exactly illustrates the injustice of charging " what the traffic will bear." But, leaving that point, the weak place in Mr. Grierson's argument is that he assumes that the nearest port is the ultimate destination of the produce. No greater mistake could be made. The market may be in the centre of Eng- land or in the centre of the Continent. Iron from Belgium, Westphalia, Silesia, or Bavaria may be in- tended for the English market, and on such a journey would get the advantage of the low foreign export rate and the low English import rate. Or Germany, Belgium, and England may be competing at hundreds of towns in the interior of Europe. In our case the journey to the sea is the first stage, in the case of Germany or Belgium the produce would often not go to the sea at all. If England gets the benefit of the low foreign rate, she has to pay the high home rate as well as the sea freight and two sets of ter- minals, while Germany and Belgium only pay the low foreign rate and one set of terminals. If Mr. Grierson wishes to compare gross charges he should take the 'hole distance from the place of production to the of consumption. He says that the railways can- >t be killing trade because the districts in which our E 2 52 STATE PURCHASE OF RAILWAYS. collieries and works are situated (these favoured places near the sea) could produce much more than they do if there was only the demand, which unfortunately there is not. True enough, perhaps, but the reason there is not a greater demand is because we are being driven out of our old markets in Europe by lower foreign rates. His tables and figures are quite con- sistent with the allegation of the Mining Association that the railways are killing English trade. Rates on Let us take another illustration. One witness says that the Germans can land their goods (alzarine is the article) and bring it into our own market at a lower rate than we can supply it at home. The charge from Mayence to Glasgow is 50s. per ton, and from London to Glasgow it is also 50s. per ton. The Ger- man goods go from Mayence to Rotterdam by rail, from Rotterdam to Leith by steamer, and from Leith to Glasgow by rail. In this case there is first a rail- way journey of about two hundred and thirty miles, then a sea journey, then a railway journey of 43 miles, and there is a double loading and unloading. The home goods travel by railway 401 miles, and there is one loading and unloading. The charge is the same. Another case is that of Belgian girders, which are sent from Belgium through Grimsby to Sheffield for 15s. per ton. Here there is loading and unloading twice over. The rate from Sheffield to Grimsby, with loading and unloading, is 20s. per ton. Aifrioui- Take the case of the farmers. A tenant farmer s< from Northumberland says : "It will cost me more to STATE PURCHASE OF RAILWAYS. 53 send cattle to Liverpool than it will cost to send them from Chicago or New York." He adds, " The rail ways have it all their own way." Another farmer says that it costs actually more to send cheese from Cheshire to London than it does to take it from New York right past the Cheshire stations to London. It will be observed that in both these instances the foreign goods have to be handled twice as often as the home goods. On home and foreign cattle from the North to London there is a difference of 2 per waggon, which would generally absorb the whole profit on a given transaction. From Newcastle to Leeds, where there is no water competition to account for the differ- ence, the foreign cattle are carried 40 or 50 per cent, lower. Foreign grain is sent from West Hart- lepool to Newark 72 per cent, cheaper than home grain. The witness who makes this statement esti- mates the extra payment of home farmers at an increased rental of 6s. 9d. per acre. That is about equal to the whole rent of land in Austria, and twice or three times the rent of land in Eussia, where a great part of the grain comes from. Applied to the acreage under corn crops in the United Kingdom, the differ- ence in freight would account for some millions of the agricultural deficiency. The facilities for importation increase to the great advantage of the consumer, but to the disadvantage of the producer. The carriage of wheat from Dantzic to London was formerly from 6s. to 7s. per quarter, and from Odessa 8s. or 9s. It is now conveyed from Dantzic for Is. 3d. per 54 STATE PURCHASE OF RAILWAYS. quarter, and from Odessa for 2s., 2s. 6d., or 3s. Even in France, where the rates are above the con- tinental average, there is often a striking difference in favour of the French lines over our own. Loaf sugar sent from Paris to the manufacturing districts of England is charged from Paris to Eouen (83 miles) 5s. 7d. per ton; from Paris to Havre (140 miles) 7s. lid. per ton. From Liverpool to Manchester (32 miles) the rate is 10s. lOd. per ton. One witness says that there are a great many trades in the interior of the country which cannot possibly survive unless some change is made in the rate of carriage. Where are Where are the upholders of the agricultural interests fenders of O f the nation ? Have their energies for almost two agri- f f culture? generations been exhausted in the defence of the untenable and exploded principles of protection? The railway system is robbing them of their rightful heritage, and they do not appear to have vigour enough to cry Stop thief ! and bring the culprit to justice. I claim the owners and cultivators of the soil as allies in my advocacy of an approach to uni- versal rates, and to uniformity in the cost of carriage of home and foreign produce not by levelling up, which would be in violation of free trade and an injury to the consumer, but by levelling down, which would be a benefit at once to the consumer and the home producer. " Sweet are the uses of adversity," and assuredly the adversity of the landlords and farmers is deep enough to need some sweetening. Let them study the Blue Books from which the facts STATE PURCHASE OF RAILWAYS. 55 here presented have been collected and summarised, and they will find comfort in joining the army of attack in the war upon rates. Let them help to abolish an undue transport tax, and to restore a rental value to the soil, not by the artificial crutch and wooden leg of protection, but by the economical application of the resources of science which are the appanage of all. The Eoyal Commission on the Depression of Trade note the disadvantage which the inland producer labours under, but revive the old-world argument that there is no justification for depriving the pro- ducers on the coast of the natural advantages of their position. That is an argument against the construc- tion of railways. It is a remarkable circumstance that at this end of the century a body supposed to be constituted of statesmen, economists, and high com- mercial authorities, should fail to see that the removal of every barrier against the inland producer is an equal advantage to the seaports, and that to maintain restrictions is to inflict a fine on trade generally for the doubtful benefit of a select class of producers. For the purposes of our examination, English rail- TWO way rates may be roughly divided into two classes, rates! 8 C (1.) Eates which are determined by causes over which the railway companies, upon their own showing, have either no control or a very small control. (2.) Eates which it is admitted are determined at the discretion of the companies within their statutory powers. Within the first and larger class are included all rates determined by the competition of the railways- 56 STATE PURCHASE OF RAILWAYS. Eates with the ocean, and by competition of railways cpmpeti- inter se, and between railways and inland waterways. This is necessarily a very large class, comprising the majority of rates, and has given rise to the saying that sea competition rules inland rates. It unquestionably governs or influences so many of them that it would be, comparatively and practically, an easy matter to make the sea charge the universal measure of railway rates. Sir Thomas Farrer says that three-fifths or more of the places to which goods are carried by rail- Competi- way are affected by sea competition. Sir James tion between Allport says that sea competition rules the rates for and the foreign produce. The Chairman of the London and opo North Western Eailway says that "the canals and the sea do more to reduce rates than any competition amongst the railways themselves." Mr. Grierson illustrates the working of sea competition, and argues the matter with much fairness from the railway point of view. He gives particulars of export rates and im- port rates varying from 10 to 100 per cent, above the local rates, and of transit rates 50 per cent, higher than local rates. It would have been useful if he had also given details of the comparative difference between the competitive rates between extreme points and intermediate rates on the same route. import, We need not discuss either the export rates or the export, and transit rates. Everyone admits that low export rates rates. are advantageous, and the only difficulty is that they are not low enough. The transit rates do not appear to affect English trade in any degree. It cannot matter STATE PURCHASE OF RAILWAYS. 57 to any English trader that tea from China intended for New York should make part of the journey by rail between London and Liverpool. The import rates, on the other hand, though standing on precisely the same economical principles as the export rates, give rise to great dissatisfaction. There are other rates, not between always for imports, which are ruled by sea competi- p rt and tion, which are greatly complained of, especially where they are lower from port to port than from in- termediate stations on the same route. Mr. Grierson illustrates the matter in the case of railways running between different seaports. He says, " Steamboats ply between Liverpool and Bristol. Goods carried by railway between those two places by one or other of the three available routes must pass through some one of the following places : Birmingham, Worcester, Hereford, Shrewsbury, Chester, or Warrington. The local rates to all these intermediate towns may appear disproportionate to those charged between the extreme points. But is there any real injustice done? Is it disadvantageous to the public that railway companies should compete with sea carriage between different ports in the kingdom ? Should not railway companies be allowed to accept, in respect of traffic so carried, which would otherwise be totally lost to them, a less percentage of profit without being compelled to reduce all their rates to intermediate inland places to the same or proportionately less amounts ? What injustice is done to those whose goods are carried to and from intermediate inland places by the fact that their rates 5 8 STATE PURCHASE OF RAILWAYS. are higher, or higher in proportion, than the competi- tive rates, provided that the rates to intermediate places are fair and within the companies' local maximum ? " Eates There are other cases, arising from the competition fixed by 7 the com- of ports, which Mr. Grierson describes as follows : petition of ports. " Assume, for instance, port A to be 51 miles, port B 72 miles, and port C a greater distance from D, one of the great seats of manufacture and commerce. The merchants and shipowners at C and B desire to compete with A, and they induce the railway com- panies to carry from all three at the same rates. The result is that the rates are lower for the throughout distance than to and from some intermediate places. " (p. 33.) Nature These two illustrations sufficiently cover the class f the . . . J grievance, of grievances arising out of sea competition, and we may dissect them and see what the nature of the grievance is, and whether it can properly be described as sentimental. It is necessary to look at the interest of all concerned : the companies, the consumer, and the producer. We may assume that the companies know their own business, and that their practice conduces to their interest. In regard to the consumer, it is clear that there is a certain public advantage when- ever and however the companies lower their rates, and that it generally outweighs any disadvantage in- flicted upon individuals or a select class of producers. But that is not an invariable rule. There is an advan- tage in introducing new competition, but not when its STA TE PURCHA SE OF RA IL WA YS. 5 9 effect is to stifle other competition of equal value. Now it is evident that whenever upon the lowering of a rate the gross rate charged to the new freighters is less than that charged to the old freighters, there is a danger of shutting the market against certain pro- ducers, which may be an injury to them, without conferring a corresponding advantage on the public. We do not say that in this matter of sea competition the railway companies do injustice. It is probably true that if they did not carry the traffic it would go by sea, but the disadvantage under which the inland trader is placed is none the less on that account. The injury to him is not sentimental, it is very matter-of- The grievance fact. The contention is that the inland traffic could not senti- mental and should be carried at the same rate as that which but the State is ruled by sea competition. The companies may not only can be able to do this with due regard to dividend. If they are obliged to level they will make a determined effort to level up. From their standpoint, as com- mercial undertakings having certain powers conferred by Parliament, that policy would be perfectly justi- fiable. The true remedy is to level down, but it is a policy which only the State has the means of executing. Asked why the companies should not be compelled injustice to carrv at a lower rate from places which are nearest or eating railway which have not the benefit of competition, Sir Thomas profits. Farrer said, " You cannot compel them to do so with- out injustice to the railway companies." " You can compel them to level, but not to level down, and their interest will generally be to level up rather 60 STATE PURCHASE OF RAILWAYS. than down. They will rather give up the distant and precarious competitive traffic than the certain and remunerative traffic." The French Government took the same view in 1883. In the report of a committee adopted by the Chamber of Deputies it is stated, " It is necessary to examine closely before provoking a reduction, which often after some years increases receipts, but which at first always diminishes them. The figures of the tariff and the prosperity of the companies are closely bound together. If it is wished that the State should be absolute masters the railways must be purchased, or at least the acquired results must be consolidated. To reduce the tariffs largely without compensation, and at the same stroke the dividends of the shareholders, would be a sort of ex- propriation without a prearranged indemnity." My contention is that the State should be absolute master, and ought therefore to purchase. Rates Next there are the rates which are determined by fixed by t t J cpmpeti- competition between the companies, as where a corn- between pany having the longer route is obliged to carry the com- panies, between given points at the same rate as a company having the shorter route. To rates fixed by free and open competition there could be no reasonable objec- tion, though it is again obvious that if the competition is to be most effective, and bring all the resources of the country into activity, the gross rates from all places should be equal. Whenever the rates between the competitive points are lower in the gross than the intermediate rates, a certain amount of productive STATE PURCHASE OF RAILWAYS. 61 power is extinguished or repressed. Still, if railway competition between given points was really effective there would be less objection to them than now exists. The law of supply and demand, which is responsible for so much official eloquence, would come at least into partial operation. As it is. these so-called corn- NO . . effective petitive rates are fixed, not by competition, but by competi- corabination. They may afford to the railway which between carries by the shortest route a larger margin of profit imes. than is received by the railway which carries by the longer route, but the cost of haulage is comparatively so small that there is really very little difference. There is a strong conviction in the public mind that competing railways are often a disadvantage to a district than otherwise. They are so dominated by the idea of a central railway interest, and so much under the control of a general railway policy, that no one company is free to offer the advantages to industry which it might do if it were not bound by undertak- ings to other companies. The object for which com- peting lines were authorised has long since disap- peared from sight, contrary to the intention of the legislature and in evasion of public policy. Staffordshire is served by three railways, and there Competi- ought to be effective competition between them, but often a di. the companies have so combined that neither of them can alter their rates without the consent of the others. So that even if one company is convinced that a reduction is desirable, it is powerless to move without obtaining leave from the others, and that leave cannot 62 STATE PURCHASE OF RAILWAYS. be had if the other companies think there would be the slightest derangement of their traffic. This is more or less the case all over England when railways come into competition. A district is often better served by one railway having power to reduce rates to promote traffic, and able to import independence and enterprise into its management. Mr. Hickman relates that when a deputation waited on Mr. Moon to complain of the rates between Staffordshire and Liverpool he told them it was their own fault. He said, " You have yourselves to blame. When we alone served South Staffordshire, and were the only company carrying to Liverpool, our rates were 25 per cent, less than they are now." In this way trade is taxed to support three railway companies, and traders are mocked with the semblance of competitive rates. Bates are determined by a railway policy settled at the Clearing House. The result is that while competition for traffic has not reduced rates, the com- petition in facilities has increased the terminal charges. Rates The second division of rates comprises those which fixed by companies, are fixed by the companies, within their legal powers, the traffic on principles not forced upon them by extraneous conditions. Mr. Grierson discusses the various bases of rates, and by a process of exhaustion arrives at the conclusion that the determination of rates by what the traffic will bear is the only sound principle, both equitably and economically. In this argument we are able to go a long way with him so long as the railways are conducted as private undertakings. Equal STATE PURCHASE OF RAILWAYS. 63 mileage rates are universally condemned, and where- ever they have been tried they have been discarded. They are one of the worst forms of protection, or rather of obstruction, which is the true meaning of protection. Our rates are already regulated by Mileage mileage or distance to a degree which is indefensible, cost of ser and which acts as a restriction upon trade. The further we get from the principle of mileage-run the more trade develops. That is the experience of every goods manager in the world, and it is astonishing that they have not made a more serious effort to free themselves from it altogether, as they would have done if they had not been obliged to concentrate their attention upon the half-year's dividend and the daily quotation of the shares upon the exchange. Besides, there is nothing so difficult to move as a corporate interest which works in a groove. Particular rates based on cost of service are equally impossible. Their principle is the same as that of the mileage rate, but would be much more difficult to carry out, and would be equally prejudicial to commerce. A universal rate irrespective of distance and based on average cost is the true principle of rating. We go further with Mr. Grierson than in his condemnation of mile- age rates and special service rates, and admit that the differential rates introduced by the companies have Differen- ~ . , tial rates. done an immense service to the country. Special rates for exports, special rates for imports, transit rates, and long distance rates, have all greatly stimu- lated production and consumption. They have caused 64 STA TE PURCHASE OF RAIL WA FS. irritation and have perhaps driven a certain amount of trade to the wall, but the balance of advantage is greatly in their favour. But this may be granted without setting up differential rates as objects of reverence because they are differential. Lower differ- ential rates have been good because low rates are better than high rates. They have removed a portion of the tax on transport. If all rates were reduced to a universal standard the tax would be still further remitted, and this is what the State as owner of the railways could and what the companies cannot do. Manner of The manner in which the rates are fixed is also open to objection. The assumption that there is a certain scale of charges which is best for commerce and is best for the railway companies is purely arbi- trary, and the way in which the scale is ascertained is equally arbitrary. The hypothesis that there is a certain supply and a certain demand which deter- mines the rates, and that the rates do not influence supply and demand, is contrary to common experience. Every reduction of rates quickens consumption and production. A mere registration rate, like the old registration rate on wheat, would be the best for com- merce, short of no rate. Under the system which exists commercial laws do not rule the rates, but the rates govern commercial laws. The rates are masters and not servants. But assuming that there is this natural rate, or real basis, which it is the joint interest of the companies and the traders to maintain, how is it ascertained and who fixes it ? Mr. Grierson says STATE PURCHASE OF RAILWAYS. 65 u that the aim of the railway companies is to make rates conform to the requirements of trade," or in popular language, to charge what the traffic will bear, and that in order to do this they consult merchants, P anies manufacturers, and traders. The information would have been more useful and more complete if it had been explained when, where, and how this consulta- tion takes place. In France the traders are protected to a certain extent by the Government control of tariffs and by the law that intermediate rates shall not be higher than rates between extreme points. The French railway companies also profess themselves as always ready to confer with representatives of commerce upon measures for the development of traffic. In Germany there is a real and effective co- operation between chambers of commerce and the railway authorities, and there are frequent negotia- tions with representative trade associations. There are also local councils for the arrangement of disputed questions. The traders of both France and Germany can make themselves felt through the Government and by means of their chambers of commerce. But how is the consultation between the companies and English traders conducted, and who represents the traders ? What notice of it is given, that all interests may be considered ? With whom does the decision rest in case of difference of opinion ? The railway companies form a powerful combination, acting toge- ther in defence of common interest, and communicat- ing frequently upon their policy. But how are the 66 STATE PURCHASE OF RAILWAYS. traders organised and supported in the conference? It is plain that the companies do not consult the chambers of commerce, because every chamber of importance in the country has protested against their rates. The agitation against rates is instigated and conducted by these chambers and by associations re P r 6senting different industries. Is it not manifest stances" of ^ a ^ ^ there was actual co-operation amongst various trade. interests to adapt rates to the requirements of trade, they would vary as trade was good or bad ? There has now been a depression extending over many years, the longest period of depression known in England, and just at the end of it there were some small reduc- tions of rates. But consider the agitation that was required to obtain them. It was not until the com- panies were threatened by legislation with a confisca- tion of their profits that they began to make their rates conform to the requirements of trade. They know that if rates are lowered when trade is bad it is very difficult to get them up again when trade revives, and they preferred to see their traffic receipts diminished by a million and a half rather than make a reduction which might be more or less permanent, It is impossible for railway companies to adapt them- selves to the circumstances of trade ; they exact their bond whether trade is good or bad. Sir James Allport argues that as railways do not advance their rates in prosperous times, the public has no right to ask for a reduction when trade is bad. One is curious to know also the precise meaning of STATE PURCHASE OF RAILWAYS. 67 " what the traffic will bear," how it is decided what Meaning 7 of "what proportion freight should bear to profit or to value, the traffic^ and what merchandise can afford to pay under different conditions. Does u what the traffic will bear," mean all that can be got short of sending it away ? Presumably that is what is meant, for Mr. Grierson says: " Producers pay what they find it worth while to pay; they pay no more." That simply corners the producer. It places him in the position of having to decide whether he will pay what may be an extortionate rate or close his works and retire from business. It compels him to go on at a loss or to stop. There is plenty of evidence that producers in numbers have to make this election, and that they pay more than they can afford rather than give up the struggle. The railway rates, then, become a tax upon their capital and not upon their profits. The railway companies are the real appraisers of what the traffic will bear, except in the rare instances where private firms are strong enough to dictate their own terms. It then becomes a question of what the railways can bear, as in the famous American case, that of the Standard Oil Company. That is not a frequent occurrence in this country, but it does some- times happen. The Burton Breweries are a case in point. The Manager of the Dowlais Coal and Iron Company, who was examined by the Select Committee of 1882, said : " As far as we are concerned we do not care anything about the railway companies ; we are strong enough to fight the railway companies ourselves ; we 68 STATE PURCHASE OF RAILWAYS. appeal to their selfishness ; but I can quite understand that there are weak people to whom the railway commissioners would be invaluable ; that is to say, strong companies like ourselves get concessions which Danger- W011 ld p u t the small people to a disadvantage." This ous power hands of snows now dangerous is the power vested in the thecom- companies, and to what abuses the principle of charging what the traffic will bear may lend itself. Eailway directors would be more than mortal if they did not wrest such powers to the advantage of their shareholders. In the earlier period of railways there was a way of forcing concessions from the companies which is not as effective as it was before the multipli- cation of lines. An example may be given which proves how elastic rates may become under pressure, and how ignorant the companies sometimes are as to the rates which will best develop traffic. Some years ago the coal owners of West Lancashire, being dissa- tisfied with their rates, determined to promote a new line to Liverpool. The London and North- Western Company did not want another railway so they agreed to give the coal owners a group rate all round of 14d. per ton to Garston. The collieries got what they wanted, and the export of coal from Garston increased from 100,000 tons per annum to 1,100,000 tons. Yet before this enforced concession the companies were presumably charging what they thought the traffic would bear, and also what they thought would conform to the requirements of trade and best develop traffic. STA TE PURCHASE OF RAIL WA YS. 69 When we analyse " what the traffic will bear " and ea the other phrases used to describe differential rates J^ ate *- tneir own imposed at the discretion of the companies, they are terms - found to have a very simple meaning. " Look what very delicate and complicated things these charges are ! " exclaims Sir Thomas Farrer. " How difficult and dangerous it is to interfere by any hard and fast rules with steps which commercial motives dictate." He dwells on the advantage of " natural conditions" and " commercial motives properly understood and thoughtfully and ably administered." As if a railway manager were a philosopher seeking the good of his species, instead of a tradesman looking for what he can get. All these soft descriptions which are used to cover rates "real basis," " natural conditions," u commercial motives," " law of supply and demand," <; natural laws of trade " are disguises for the trade law of grabbing, in which the shrewdest and hardest gets the advantage and the weakest goes to the wall. The railway companies are the strongest, because they are combined and occupy the ground by a legislative right of occupation, while traders are scattered and disorganised, and have to send their goods by railway or not at all. The companies are therefore generally in a position to dictate their own terms. There is no remedy for this state of things so long as railways are worked as a separate industry trading for profit instead of being used as machinery for the promotion of all other industries for the benefit of the entire nation, to which end the nation must own the machine. 70 STATE PURCHASE OF RAILWAYS. Alleged The supposed identity of interest between the identity of . rr f . interest companies and the public imposes upon some able the ran- writers. It assumes that there is a rate, some golden panies and medium, which will develop the largest traffic, and c ' which it is not the interest of the companies to raise and not the interest of the public to lower. The saying contains an insidious half truth. It is not the interest of a company to cripple trade and not the interest of the public to have a poor railway company. It is rather the interest of the public to have a rich proprietary whose object is not dividend. The Belgians maintain that it is best to have a losing proprietary that is, that it is best for the State to borrow money at 4 or 5 per cent., and to work the railways to produce 3 per cent. As the object of the English companies is always dividend, it is against public interest that the railways should be administered by companies. There can be no identity of interest between railways and the public, unless the public own the railways. But as long as the railways are administered under the joint-stock system the public and the companies may have some strictly limited interest in common. Still, assuming that there is a rate, a very low rate, which would develop traffic immensely, and at the same time afford good profits to The com- the companies, they cannot find it. They cannot even powerless 5 search for it efficiently, because an efficient search test rate & involves risk. Eisk involves loss ; loss lowers divi- dends; and sin against dividend no manager will commit. There is also almost always in joint-stock merce. STATE PURCHASE OF RAIL WAFS. 71 companies a fatal tendency to work in grooves. So far from there being this identity of interest between the public and the companies, Mr. Hadley, the American writer, points out that " there is almost always a certain opposition between the present and the future interests of a railroad." It is also true that there is always a temptation for officials and directors, especially in the case of profitable railways, to prefer the present and certain interest to the future and problematical interest. This is not a mere point of theory ; it works out in practice every day. There is Budd's case, on which a legal decision was founded. Sir Thomas Farrer describes it as follows: " There was another case, in which the Queen's Bench decided that when the London and North- Western Eailway Company ran from a seaport (Swansea), where there are copper works, through another place, some miles inland, where there are also copper works, the railway company could not make a lower charge for the longer distance in order to compete with the sea traffic. The result was that the company levelled up, and the Swansea traffic probably went by sea." Here it would have been for the public interest that the companies should have levelled down. It might or might not have been for their own interest, but they were unequal to the effort of testing it. Let us take a supposititious case which Mr. Grierson puts (p. 160). Mr - Grier - J son's illus- "Take, for instance, coal carried at *50d. per ton per trationof the posi- mile, and that the rate is reduced to *45d. ; that is a tion of the compa- reduction of 10 per cent, in the rate. Assume a 7 2 STA TE PURCHA SE OF RAIL WA YS. train of 240 tons, and Is. 6d. per train mile each way, that is, for the loaded and return empty waggons, as the average cost of haulage and maintenance of way, it would require an increase of 16'6 per cent, in the traffic to leave a railway in the same position as it was before." The result would, Mr. Grierson thinks, be problematical. Here, then, it is found to be the interest of the companies to charge the higher rate rather than to make a 10 per cent, reduction in the hope of getting more than a 16*6 per cent, increase of traffic. It would, of course, be to the public interest to have the reduction of 10 per cent. This shows the cramped and cautious business view which managers are compelled to take by their obligations to the shareholders. A reduction of 20 or 50 per cent, on goods, though perhaps not on minerals, would probably pay them better than a reduction of 10 per cent., but an English manager's hair would stand on end if that were proposed to him. Yet it is a common occurrence in Germany, and in the United States they have reduced their rates 50 per cent, all round within a few years. Our managers have not scope for the exercise of their abilities, and no opportunity of test- ing the vitality and elasticity of commerce. Let us endeavour to estimate by a practical illustration what kind of reduction would be for the public advantage. We have it on the authority of Mr. Grierson that English merchandise only averages about 2 J to 3 tons per truck. Mr. Finlay's estimate puts it lower, be- tween one and two tons. Let us take 2^ tons as the STA TE PURCHA SE OF RAIL WA YS. 7 3 average, it being certain that the real figure is much lower. The trucks are constructed to carry 5 tons at least. In 1885, the railways in England and Wales carried 62,527,984 tons of merchandise, for which they charged 17,312,933, or about 5s. 6d. per ton. They The kind . . ofreduc- might have carried twice the quantity in the same tion which would waggons. Allowing 2s. per ton for the expense of benefit trade. handling the extra traffic, they could have carried the double traffic for 3s. 9d. per ton, or a reduction of 32 per cent. This would have been for the public interest, but the railway companies would have got nothing out of it. Even if there was no risk attending such an experiment, the companies would naturally ask them- selves why they should do double the amount of work for the same profit. Yet it would be for the public advantage that an approximation towards it should be aimed at. If the lessons of the Post Office were kept Lessons of the Post in mind, an extraordinary development of traffic would Office. not be regarded as a mere hopeless fantasy. It is probable that in a few years a 3s. 9d. rate would be a paying rate. Notwithstanding the introduction of post-cards, which have checked letters, the number of letters increased from 867 millions in 1871, to 1,403 millions in 1886, or from 27 to 39 per head of the population. The increase of telegrams since the Government bought the telegraphs has been 214 per cent. In 1885 the year's increase of telegrams was 1-32 per cent. In the next year after the reduction in charge the increase was 17*9 per cent. It may be said that it would be absurd for railway 74 STATE PURCHASE OF RAILWAYS. companies to think of making reductions on this scale. That may be granted, though it is not as large as that which the American companies have made within ten years, but it is no less absurd for them to pretend that they represent public interest. They are in the position of being able to do much injury to individuals and to sections of traders, without being able to do the greatest amount of public good. They attempt to comply with local demands, but they cannot satisfy half the demand. They make rates at the request of merchants. They enlarge or narrow the field of competition as they choose. They give benefits to one class and refuse them to others. In our complex society an advantage to one person is often a disadvantage to another. They encourage new competition, which is a good thing, but they kill other competition, which is a bad thing. They are in the pathetic situation of the old man and his ass : they cannot please everybody. " Eeduced rates are com- plained of by one portion of the public, and yet if they were cancelled other sections would consider them- selves aggrieved. Such are the difficulties with which the railways have to contend ; bound to serve and accommodate classes at variance with each other ; subject to criticism and complaint if they do not satisfy contradictory demands " (Grierson, p. 26). And yet they represent that they and the whole public have a common interest. Thecaseof ^he position is well exemplified in the case of agricul- ture, agriculture. It is good for the consumer that there STATE PURCHASE OF RAILWAYS. 75 should be foreign competition, but is it likely to be good that home competition should be destroyed and that we should become wholly dependent on foreign supplies ? I have touched on the case of agriculture before. Eailways should be its salvation. Their differential rates in favour of the foreigner are perdition to its interests. Competition is good, but the unfair competition created by the railways, when they give a bonus to the foreigner by carrying his importations cheaper than home produce, and which will end in destroying the agricultural industry, is not good for the community, which has to make up in other ways for the reduced rates on foreign produce. It is manifestly calculated to cripple and destroy the vitality of English agriculture when foreign produce is carried past our farms to our markets at lower rates than our own produce. No amount of argument will convince the farmer that he is not injured. The utmost measure of competition in rates which he ought to meet is the rate at which the foreign produce can be carried. The difficulty has to be met, not by raising foreign rates but by lowering the home rates, not merely on the produce in which foreign competi- tion has to be met, but on every description of English produce and on every article which goes on or off the land. This would be in the interest of both the producer and the consumer of the fruits of the earth. What, I repeat, has become of the agricul- tural advocates? Have they been struck dumb or incapable that there is no voice raised against the 76 STATE PURCHASE OF RAILWAYS. giant who has spread his network of iron over their land ? The nation could not support them in the maintenance of an unjust tax on bread, but it has every interest in supporting them in an effort to shake off an unjust transport tax which is strangling them. The whole nation suffers when the purchasing power of agriculture is reduced as it is by 43 millions a year, and if any portion can be restored by a more just and economical use of the scientific instrument of transport in the hands of the State, the State should not hesitate to handle it. Dividends The effect of an immense volume of traffic is seen at home and when we compare home and foreign dividends. Not- abroad. withstanding the waste in construction, which has raised the average cost per mile of English railways to double that of foreign railways, yet so much greater is our traffic and movement that our railways pay equally good dividends. Mr. Mulhall gives the following figures for 1882 : United Kingdom, 4*20 per cent. ; France, 4-12 per cent. ; Germany, 4*21 per cent. ; Belgium, 3*66 per cent. ; United States, 4-80 per cent. It is not pretended that these figures represent the exact ratio of traffic to capital. Many other things have to be taken into account, such as the scale of rates, the cost of labour, and the amount of taxes which railways pay in various countries. For example, English railways contribute to local and imperial taxation four times as much as German rail- ways, while the French railways pay nearly three times as much as the English. But taking a broad STATE PURCHASE OF RAILWAYS. 77 view of the subject, it is the greater amount of work which our railways do which keeps the balance of earnings fairly level. When we consider the large proportion of dead weight which attaches to the work, the result is still more extraordinary. The latest returns for the principal English railways (those whose earnings are given at the end of "Bradshaw's Eailway Manual' 7 ), show the earnings to be, on ordinary stocks, 4*867 per cent. ; on preference stocks, 4*344 per cent. ; on guaranteed stocks, 4*495 per cent. ; on debentures, 4*171 per cent.; and on loans, 3*944 per cent., or an average of 4*512 per cent. The traffic receipts for the lines to which these figures refer constitute 92 per cent, of the gross receipts for all English traffic. If we eliminate the stock on which no interest is paid, and on a large part of which, being mere water, no interest was intended to be paid, the average rate of interest amounts to about 5 per cent. That is the dividend, therefore, which about 90 per cent, of the English traffic is expected to make up. Considering the change which has taken place in the value of money within twenty years, and the relative position of various kinds of investment, that is a very good dividend for sleeping capital in first-class securities. Mr. Grierson compares the average divi- Railway dends on railways of the United Kingdom with the mints dividends of banks, insurance companies, gas JBbm-* panies, and water companies. He says (p. 159) : " The average dividends of banks are 11*83 per cent. ; of insurance companies, 12*45 per cent. ; of gas companies, 78 STATE PURCHASE OF RAILWAYS. 10 per cent., and of water companies, 5*73 per cent." We think there must be some mistake about these figures. Mr. Mulhall gives the average rate of interest on investments of British capital as follows : " Bail- ways, 4*3; banks, 6-5; mines and iron, 5*5; canals and docks, 4-0; gas and water, 8-0 ; telegraphs, 5-7; insur- ance, 6*0 ; shipping, 5*0." But if Mr. Grier son's figures were strictly accurate, there is no common standing-place for the comparison of private trading concerns with public or semi-public institutions. He might as well select for comparison all joint-stock undertakings, including breweries, candle, boot, and match manufactories. The prices at which railway stocks stand in the market fix their value above ordinary kinds of investments. They have become favourite forms of trust investment, and have largely taken the place which mortgages used to occupy. A further distinction is to be noticed, that in ordinary commercial concerns the reward of capital and manage- ment is often classed together. In railways the management is included in the working expenditure, and there are no means of ascertaining what propor- tion it bears to that of ordinary trading adventures. Dividends But it would be idle to contend that 4, 5, or 6 per forfnat- cent, is more than railways conducted on commercial railway principles are entitled to earn, or that such reasonable property. ^ v ^ en ^ s a ff orc i an y ground for an attack on railway property. It is much less than the companies ex- pected to make thirty or forty years ago. It was universally assumed in 1844 that 10 per cent, was a STATE PURCHASE OF RAILWAYS. 79 reasonable dividend for railways to earn, and the maximum charges were arranged on a proportionate scale. But public opinion changes as to the nature of such levies. It was then considered necessary and desirable that there should be a tax on wheat. A tax of 10 per cent, on transport and a tax on corn were neither of them regarded as economically bad. The tax on wheat has been removed, and the tax on communication, which stands on precisely the same ground so far as public policy goes, will have to follow it. The interest of 800 millions invested in rail- ways is not to be put against the interest of and allowed to check the increment of ten times that bad - amount invested in other industries. In a very few years, when the public see the advantages of apply- ing free trade doctrines to transport, 4 or 5 per cent. dividend on railway capital will be regarded as just as unreasonable as an average 10 per cent, would be regarded now. There is a struggle going on between two prin- ciples. On the one hand it is held to be proper twoprinci- * pies. that commerce and transport should be taxed for the sake of the community. On the other hand it is held that it is better that the community should be taxed to promote the increase of commerce. The first principle is seen at work in England and France, in both of which countries, besides the high rates exacted by the railways, there is also a large contribution made by the railway companies to the state revenues. In England, the rates, taxes and duties paid to the 8o STATE PURCHASE OF RAILWAYS. Government amounted in 1884 to 2,336,268, and in France they reached the enormous sum of 6,174,352. In Belgium and Germany the other principle is in operation. The Belgian Minister told Mr. Grierson that their object was to develop the resources of the country, and a return on capital was not of primary importance. Mr. Grierson says, " Other countries having in view advantages from railways have paid for them with public money, and are prepared to pay still further for them at the expense of the taxpayer." The taxes on the railways in Belgium amounted to only 1,468 in 1884, and in Germany to only 287,430. There can be no mistake as to the direction which opinion throughout the world is tak- ing. Ten years ago there were only about 17,000 miles of state railway, where there are now 50,000 miles. It is becoming understood that it is against public policy that railways, which are the greatest stimulating or controlling influence of commerce, should be in the hands of those who, from the nature of their obligations, cannot adapt them to the growing necessities of industry. s^te aid The state aid afforded to private railways, both ways. on the Continent and in the United States, also handicaps us in the commercial struggle. The Union Pacific Eailway received a subsidy of 10,970,000, and the Union and Central Pacific received a land grant of 30 million acres in alternate lots, 20 miles deep, on either side of the lines. The Northern Pacific received a land grant of 48 million STATE PURCHASE OF RAILWAYS. 81 acres. Thus these three railways received in land, which steadily improves in value, twice the total area of England and Wales. The Canadian Atlantic and Pacific Eailway received a grant in the form of a guaranteed loan of 2,500,000. It is impossible to estimate the future value of these properties, and the power which it affords the railways which serve them to throw their wares at very low rates into the markets of the world. In the meantime we are wast- ing fibre in discussing what is a proper dividend for a railway to earn. Nothing short of complete State control will give Remedies. English trade a fair chance in the industrial struggle of the future. Not the inefficient control of the French Government, which creates a partnership be- tween the public and the companies in illusory benefits, but the drastic control of Germany and Belgium, by which railways can be adapted to the development of commerce and put to the best use as need arises. It is an abuse and an anachronism that the greatest instrument of national industry should be fettered by obligations to individual proprietors. As matters now stand, the interest of railway shareholders are put above the interests, many times greater, of all who are engaged in agriculture, manufactures, mining, commerce, shipping, and banking. It is fair to ask of those who draw back before national purchase that they should show in what other direction we are to look for a sufficient remedy. It is useless to appeal to the railway companies. They are 82 STATE PURCHASE OF RAILWAYS. not in a position to make the required reductions and concessions. They are bound to see, as far as lies in their power, that nothing is taken away from their shareholders to be handed over to the rest of the com- munity unless full compensation is made. In any revision of rates which is forced upon them they will endeavour to compensate themselves in some way for Proposals an y concessions they make in another. The utmost of the J f Co - that they voluntarily offer is a new classification, which, while it might remove some anomalies, would not afford the relief which is required. Aoy radical change in classification is not to be expected from them. Their alterations would be made from the rail- way point of view and not for the public advantage. According to their view, the existing classification of the Clearing House answers reasonably, if not per- fectly, the requirements of trade. The change in itself would give rise to a new class of complaints, and the battle would begin over again. The Nor are the proposals of the Government more Govern- * ment Bill, hopeful for commercial interests, while they threaten a serious danger to the railway companies, though it may not be so much in the immediate effects which the Bill will produce as in the amplification and extended application of the principles declared. The Conservative Bill follows the main lines of the Liberal Bill of last year, although some important provisions have already been sacrificed. It would naturally have been expected that the Government would have followed the advice of the Eoyal Commission on Depression of STATE PURCHASE OF RAILWAYS. 83 Trade. What is the object of appointing Eoyal Com- missions if a Government intends to act in diametrical opposition to the recommendations of its own Commis- sion ? The members of the Eoyal Commission in ques- tion were not agreed upon all points, but they were unanimous in the opinion that no steps could be taken for the compulsory reduction of rates. They recognised no principle on which the State could rightfully over- haul the expenditure of the companies, interfere with their management, or reduce their rates without compen- sation. Eailways are in possession of a title which is generally supposed to be the most unassailable of all titles a title guaranteed by Parliament; but it is being construed against them, on the popular axiom that what the State confers it can also take away. No doubt the State is omnipotent, and can do whatever it considers for the general advantage, but it is a new doctrine in English legislation that Parliament may legitimately annul a contract made for a considera- tion, without compensation for loss which may arise from its interference. When that doctrine is admitted there will be no guarantee for the security of any kind of property. There are only two ways of dealing honestly with the companies either to allow them to manage their property in their own way, subject to their statutory obligations, or to buy them out. It is true that the State might reasonably ask them to reduce their rates if it guaranteed their dividends, but that course is neither proposed by the Govern- ment nor advocated by anyone. G 2 84 STATE PURCHASE OF RAILWAYS. 1116 The essence of the Bill lies in Clause 24, which essence of the Bill, relates to tariffs. It requires the railway companies to submit a new classification and revised scale of maximum charges to the Board of Trade within a year after the Act comes into 'operation. The Board of Trade will then publish the proposed classification and tariff of charges, and they will be open to objec- tion on the part of the public. An effort will be made by the Board of Trade to reconcile the objectors and the companies, by bringing them together with a view to agreeing upon terms, to be embodied in a Provisional Order and submitted to Parliament. If the Board of Trade fail to bring about an agreement they will themselves prepare a scheme, which is to be published and finally fought out between the com- panies and the traders before a Select Parliamentary Committee. Therefore, supposing the Bill passes this session and everything proceeds without delay, per- haps in the course of three or four years a revised scale of charges and a new classification may come Poor pros- into operation. How it will affect industry depends adequate entirely upon the shape in which it comes out of the reform. ordeal, and it is quite consistent, on the face of the Act, that the average effect might be to raise rates rather than to lower them. But this is the smallest part of the question in difference. It leaves un- touched the whole subject of differential rates and the unequal treatment of traders, districts, and home and foreign goods. Clause 25 deals with this part of the subject, and it makes a radical alteration in the law STATE PURCHASE OF RAILWAYS. 85 by throwing the burden of proving that a difference does not amount to an undue preference upon the railway companies. But what is legally undue pre- ference will have to be settled by the courts, that is, by the Railway Commission as reconstituted, the Court of Appeal, and, with leave obtained, the House of Lords. The struggle between the companies and the traders will go on just as merrily as before, but with more advantage on the side of the traders, and therefore more litigation. The Bill, in short, will promote the interests of the legal community much more than that of the trading community or the com- panies. It is founded on a principle dangerous to the stability of all property, and especially of railway property, while it offers no distinct, certain, and definite remedy for the disadvantage under which British commerce is labouring. There is, in fact, state pur- & ' chase the only one way of removing those disadvantages, which only true consults the legitimate claims and interests of com- panies, producers, and consumers alike, and that lies in a large application of State credit and power by the purchase and management of the railways. State railways are opposed on various grounds, Common political, social, and economical; but in spite of to state theoretical objections they make practical advances. Some of the objections which are taken to them apply with less force to England than to any other country. We are so situated in many respects that we should be able to administer a State system under more favourable conditions than are possible elsewhere. One of the most 86 STATE PURCHASE OF RAILWAYS. pointed appeals to an Englishman is that used by poli- tical economists, that the less Government interferes with commerce the better it is for commerce. But the business of railways is not necessarily a commercial business at all. It is the necessity under which it is placed to earn dividends which has converted it into a commercial speculation. It is not an industry in itself and ought not to be worked as an industry. It is, and ought to be used, as part of the machinery of all industries, and it would be so used if it belonged to the whole community instead of belonging to a class representing less than two per cent, of the community. No manufacturer would thrive if, instead of owning his machinery and using it for the purpose of econo- mical production, it belonged to someone who hired its services to him at the price fixed by the lender. Yet this is the position of the nation in regard to its railway machinery. It hires the use of it for all its industries from the owners at their own price. The prejudice against Government interference rests on lingering traditions of unwise interference, of which the present generation has had no experience, such as the navigation laws, the Orders in Council, the anti-combination laws, and protective laws enacted for the benefit of select classes favoured by Government. State bounties for particular industries, and State pro- tection either for agriculture or manufactures find no favour with the people, and if the purchase of the railways involved the surrender of free trade, the idea would be scouted. But free trade would be extended STATE PURCHASE OF RAILWAYS. 87 by means of State railways. In the two instances in The people which State administration comes into direct contact officialism. with modern industry, the Post Office and the Tele- graphs, no inconvenience is felt and no prejudice exists, and much social advantage has resulted from the enlargement of the State sphere of action. Nothing is rarer than to discover any dissatisfaction with the management of those services. The prejudice against officialism does not exist in the class which now holds the balance of power and will in future make the laws. The facility with which the working classes co-operate with Government in carrying out laws intended for general advantage is seen in the working of the Edu- cation Acts, where their patience has been tried ex- tremely by the exaction of school fees and by domiciliary visits. There is also a very small amount of friction in the exercise of municipal functions, which are con- stantly obtaining a wider scope. There is far less complaint of the management of gas and water under- takings where they belong to municipal bodies than when they are in the hands of joint- stock companies. But the doctrine of political economy which prohibits Government interference with private undertakings does not apply to great joint-stock undertakings, which practically become monopolies. In the management of such concerns, of which railways are the largest and most powerful, there already exist interference and officialism of an extreme type; but the case is aggravated because the interference is that of an irresponsible Government. If what are called the 8 8 STA TE PURCHA SE OF RA 1L WA YS. natural laws of trade operated freely, if there were open competition in transport, there would be some force in the objection. But the railway companies interfere with the natural laws of trade at every turn by the exercise of arbitrary powers, and in a manner from which there is no appeal which individuals can avail themselves of. From such an administra- tion State management on settled principles would afford a welcome relief. Policy of It is also objected that one of two things will ment happen : either the Government will tax the com- munity for the benefit of trade, or trade for the benefit of the community. In Belgium, the Government, while keeping the balance fairly even, have on occa- sions put a small tax on the shoulders of the people in order to promote industry. In Germany, the Govern- ment, while charging very low rates, make a large revenue out of the railway, a policy which their im- mense military establishments enforce upon them. The revenue which is obtained from our own Post Office is, in a certain sense, a tax on industry, but this is because the profit derived from the postal ser- vice is not, as it ought to be, applied to the reduction of the charge for service, and as it undoubtedly would be if it was a tax which the people felt in a sensible degree. The proper principle, no doubt, is that accounts should balance that the railways should be self-supporting, and that profits should go in reduction of rates. That it might be necessary to depart from the rule occasionally, and that it might be advan- STATE PURCHASE OF RAILWAYS. 89 tageous to do so, is obvious. In the introduction of the system it is probable that the community might have to make up a deficit ; but if a tax of one per cent, increased the power of the nation to pay it by two per cent., there could be no objection to it. This it would certainly do, and more also. " Nothing," says Mr. Mill, " gives a greater impulse to improvements in the production of a commodity than by taking off a tax which narrows the market to it." Heavy rail- way charges constitute such a tax both on producers and consumers. It is a question of incidence : which is best for a community, to raise a tax in a manner which limits industrial operations or in one which promotes them? But it is alleged Government is much more likely to tax industry than promote it. That depends upon the character of the Government, and the relative powers of the Government and the governed. There would, no doubt, be a tempta- tion, and in the hands of autocrats it would be a dangerous power. A chancellor of the exchequer who could raise two millions by putting a charge of ^d. on the movement of passengers and goods might desire to exercise the power. That is a matter entirely in the hands of the people, and the people who live by industry, and know where the shoe pinches, would not allow any British Government to tax trade unduly. The political objections which have much force in other countries, such as the abuse of patronage and the centralisation of power, would affect us in an infini- tesimal degree. The arguments on those grounds are 90 STA TE PURCHA SE OF RAIL WA FS. rather in favour of purchase than against it, since the danger from those sources is much greater while the railways are in the hands of the companies than it would be if they were in the hands of the State. to b socfai n8 Jt is som etimes argued that State control of the tion! la " railways would amount to a social revolution, and would dislocate all modern industrial usages. Many people are frightened away from the subject because it is part of the Socialist propaganda; but that is really one more pressing reason why it should be taken in hand by the authorised exponents of national policy. .Because some reckless advocates would seize railway property without compensation, it is assumed that State ownership, however legitimately brought about, must be wrong. On the contrary, it is to forestall the application of extreme doctrines that an early con- sideration of the subject is desirable. In regard to their proprietary rights, the railway shareholders occupy a position not wholly dissimilar to that of the perpetual pensioners a few years back. It is probable that if the commutation of those pensions had been postponed for a generation the terms would have been less advantageous to the owners. They were wise, therefore, not to oppose the settlement offered by Go- vernment. It is equally possible that a generation hence opinion may undergo great changes as to the terms upon which the State would be justified in expropriating the railway companies. The signs of such a change are not wanting. "Who would have foreseen ten years ago that Parliament would enter- STATE PURCHASE OF RAILWAYS. 91 * tain a proposition to compulsorily reduce railway rates, and as a possible consequence to reduce profits, with- out compensation ? If fair terms of purchase could now be agreed upon, it would be for the interest of the shareholders to accept them. It would also be the interest of the public to give more for the railways now than to acquire them at a much lower price some twenty or thirty years hence, because the advantages they would derive in the meantime would more than compensate for the higher price they would now pay. The railways would be cheaper to the State at the market prices to-day than they would at half or less than half the valuation after a twenty or fifty years' controversy. Therefore it is for the common advan- tage that the question should be dealt with quickly. There is no harm in desiring to produce a social or industrial revolution so long as it is not aimed at by violent and revolutionary means. I do not rest my advocacy of State railways on Socialistic or Commun- istic principles, or on any grounds of popular supre- macy or natural right. I regard it as a matter of pure business, because I believe that only by means of State administration can the railways be fully utilised for the development of the national industry, which contributes in the highest degree to the general wel- fare, and which is the real foundation of the greatness of our people. Nor do I advocate State purchase on any precon- ceived theory as to an ideal basis of rates. We do not want national control of the railways in order 92 STATE PURCHASE OF RAILWAYS. to indulge in rash experiments or sudden changes which might involve a great disturbance of finance. I should prefer to follow the Belgian example : to proceed step by step, from one point of advantage to another, assuring ourselves of our security as we go on, and not risking large acquired results by specula- FaVour- tive incursions into the domain of theory. But it is tion of impossible not to believe that England is in a position for^a? to devote her railways to industrial development with bgiaii." an amount of independence and enterprise which no other country possesses. "We are free to deal with rates in a manner which would be difficult in other countries. Continental nations are so situated that the rates of particular States must depend in some measure upon those of neighbouring countries. They must be regulated for international traffic as well as for home traffic. The distances to be traversed are also so great that the cost of locomotive power is a much more important item than it is with us. Great Britain, on the other hand, is so compact and isolated that she is in a situation to try for herself, and for her own advantage, experiments in transport which might not be practicable for the long distances and the inter- changeable traffic of the Continent, or in the United States, Australia, or India. The If it is asked why it is necessary to discuss rates as Sent" 1 a P ar t of State purchase, the answer is that it is often fixhJg m se t U P as an insuperable objection to State railways that a Government could not adapt its rates to the necessities of industry ; that it must lay down hard and STATE PURCHASE OF RAILWAYS. 93 fast rules, such, for instance, as mileage rates, which would injure trade on the one hand and raise prices to the consumer on the other. It is quite clear, from the agitation of the last few years, that a Government could not conduct railways on commercial principles. The railway companies, if they continue in posses- sion, will not be permitted to practise the differential system on the scale they have hitherto done. But the Government has a resource which the companies have not : it may look for a measure of equality in rates without making revenue its first consideration. It may have to level, but it will be in a stronger posi- tion than the companies are to level down. A Go- vernment could not raise import rates without great injury to the general consumer. Every year we are becoming more dependent upon foreign countries for grain and meat. In 1880, 33 per cent, of the meat and 40 per cent, of the grain that we consumed came from abroad, and the proportion has probably increased since then. It is impossible to raise the charges on these imports. It is equally out of the question to raise rates on imported raw materials ; and as manu- factures cannot be protected without protecting agri- culture, it is impossible to give protection in any form by raising rates. But by lowering home rates to import rates, the doctrine of free trade is extended instead of being contracted. The object of free trade is only fully answered when it allows our own people to compete on equal terms with foreigners. It is a legitimate use of the resources of the country to use 94 STA TE PURCHA SE OF RA IL WA YS. them for the development of our own industries both at home and abroad. t^lTot ^ n a f rmer paper, reprinted in this volume, I universal endeavoured to show that the objects of Govern- rate. ment could be obtained by introducing a universal rate irrespective of distance. The advantages of such a plan are not contested. Mr. Grierson writes, " To the consumer the ideally perfect state of things would bft a tariff for the conveyance of merchan- dise based on the same principle as the penny post." But I go farther, and say that that is the ideally perfect state of things for the producer as well. Mr. Grierson also admits its advantage to the producer, for he says, " Commodities would be con- veyed at a low price, and producers over an immense area would be able to send them to market." The interests of producers and consumers are identical, the great mass of the nation being both producers and consumers. The two conditions which are required for the utmost development of trade are low and equal rates and simplicity, simplicity being of equal, even if not of greater value, than small charges. This is what the principle of the Post Office would give us. But this desirable thing Mr. Grierson says is imprac- ticable that distance cannot be ignored, or altogether effaced. Upon the practicability of the scheme it is Practica- impossible to pronounce a positive opinion; it has rates' irre- never been tried on a sufficiently large scale, but all the approaches that have been made towards it are in favour of its complete practicability. The whole STATE PURCHASE OF RAILWAYS. 95 practice of the railway companies for years past has given up distance as the determining element in ,the charge for conveyance, or even as an important factor in the charge. The adoption of almost any kind of classification surrenders the principle of making distance a prime consideration in the charge. The charge is as much for carrying a ton of goods of one class ten miles as it is for carrying a ton of goods of another class fifty miles. That is the first way, and it may be a necessary way, in which the companies put aside distance as the criterion of charge. A second way is the manner in which terminals are fixed. They are determined, not according to cost of service, but absolutely, so that a freighter at a roadside station often pays as much for terminal accommodation as a freighter at a city station. This portion of the charge is altogether the largest part of the whole rate, and it has no relation to distance. A third way is in the practice of grouping, which is common, and under which freighters within the group pay exactly the same freight on a given article, whatever may be the distance. But there is yet a fourth way in which the com- panies violate the principle of distance in an out- rageous manner, by charging the same commodity less for a longer distance than a shorter distance. The case stands then in this way, that as to every article carried, the largest proportion of the charge has no relation to distance. The presumption, therefore, is strongly in favour of the feasibility of making a 96 STATE PURCHASE OF RAILWAYS. fixed charge for locomotion in every case, irrespective of distance. f U fixed f But ii; is not onlv a question of what is practicable, r^ ersal ^ is P ar tly a question of what is just and right. It is the practice of the companies to ignore distance when it suits them, and it suits them so often that it is a mere matter of justice that it should be ignored altogether for the sake of the development of trade and equality of competition. The charge for particular services are allocated capriciously and with an entire absence of principle. In a country of the area of the United Kingdom there ought not to exist such distinc- tions as geographical advantages. It is to the general advantage to abandon the principle of location, and to promote in a larger degree " the inter- dependence of districts and industries and the co-operation of places far apart." Sir Thomas Farrer says that the railway system has tended to equalise the prices of the distant and of the near produce, and has injured the producers near the market as compared with the producers farther from the market. That process is still going on, the railway companies being the arbiters. The process ought to go on and be carried to a logical end, but it is contrary to public policy that it should be left for the companies to decide what natural advantages shall be preserved and what removed. More in- Before we can decide upon the practicability of a formation wanted, rate fixed irrespective of distance we require more information than we have. "We have no record of the ton mileage or the passenger mileage. We have not STA TE PURCHASE- OF RAIL WAYS. 97 even the average distance for which passengers and goods are carried, and we want more than that. We want details of the number of passengers in different classes, and of the quantity of goods of various classes which are carried for various distances, short and long. We require to know also the relative cost and profit upon haulage over relative distances, short and long. Having these particulars, it would be possible to determine whether the long distance charges can be brought gradually down to the short distance charges. If this were impracticable, two rates might have to be charged eventually, a local rate and a through rate. But the difficulty of the larger opera- tion is not so great as it seems when we consider how large a proportion of the present charge is fixed. The cost of locomotive power for the United Kingdom is something under ten millions, out of a total expendi- ture of thirty-five millions. The question is, how much the Government would have to sacrifice in order to bring down the long distance charges, and how far the sacrifice would be compensated by increased traffic and greater economy in working. The practicability, therefore, is a matter of figures, and of the wisdom or unwisdom of incurring some financial risks by succes- sive and judicious experiments, for the sake of the social and commercial advantages that would follow. That the scheme is not practicable in the hands of the railway companies is clear, though if our railway managers had their hands free, and were able to make a temporary sacrifice of dividend, we much over- H 98 STATE PURCHA SE OF RAIL WA YS. estimate their ability if they could not make it re- munerative. The provision in the Government Bill Grouping, legalising grouping is a recognition of its practi- Favour- cability and of its advantages. England has favour- able situa- J tion of able conditions for carrying out such a system England . J J for trying which other countries do not possess. Those con- ment. ditions are : (1) our insular position, which is favourable to independent action. (2) Our compara- tively short mileage and the relative situation of our minerals and our furnaces, which makes the scheme more feasible than if we had to carry immense quan- tities of cheap and heavy material over long distances for the purpose of manufacture. But the American cases show that distance counts for little even over enormous stretches of line. Grain has been carried from Chicago to New York for a smaller gross sum than from Chicago to Pittsburg that is less for 350 miles greater distance. Cotton from Memphis to New Orleans, a distance of 450 miles, is charged less than from Winona to New Orleans, a distance of 275 miles. Such cases as these may prove too much, for they show that the shorter distance is charged at a higher rate of profit in order to make up for the lower profit on the longer distance. But when discriminations are made on this scale they, at any rate, clear away the general objection that distance is an insuperable ob- stacle to equal rates. Mr. Morton Frewin also sup- plies me with an illustration from America of the advantages of making very low rates over long dis- tances. He writes, " During the recent trunk line STATE PURCHASE OF RAILWAYS. 99 Avar, the rates for passengers from San Francisco to Chicago, over all the roads, were cut from about 120 dols. to 15 dols. The result was that the big passenger coaches, fifteen seats on a side, two places to a seat, were travelling filled up the whole time, instead of being four-fifths empty. Thus the railways were getting for the haul (say 2,300 miles) 900 dols. per car, whereas for a car-load of cattle for any such haul the rate would be at the most 220 dols. per car. Humanity, unlike cattle, loads and unloads itself. This low charge was actually, I am told, found profit- able by the roads, and it stimulated enormously the general through business. The Chicago drygoods and other houses trebled their { drummers,' and every intervening point on the road towns like Omaha, Denver, Salt Lake, &c. recognised at once a great de- velopment of business and local enterprise." (3) Our third advantage is the great volume of our traffic, and the probability of its enormous expansion under a simpler and a lighter tariff. The volume of traffic is Volume of traffic. much greater than in any other country. The average number of passengers per inhabitant in the United Kingdom is 22 -8, against 11 in Belgium, 6 in the United States, and 5'3 in Germany and France. Our tonnage per inhabitant is 8*4, against 6 '5 in Belgium, 4'3 in Germany, and 2*5 in France. (4) The room for economical administration by reducing dead weight, utilising all facilities, and harmonising the manage- ment. To give to the public the whole sum which is now assessed against them on account of mileage run, H2 i oo STA TE PURCHASE OF RAIL WA FS. as distinct from other charges, would be equivalent to a reduction of nearly one-third of the rates. As some proportion of the charge for haulage would be retained, it might be possible to equalise the rates for all distances by a reduction of one-fourth. Would such a reduction be self-compensating through in- creased traffic? It is of course impossible to say without trial ; possibly a still larger reduction might be more effective. The Americans have in ten years reduced their rates by one-half, and their working expenses in even a larger proportion, by laying them- selves out to carry larger loads. Whether that can be done in England is a matter which ought to be thoroughly investigated, whether the State acquires the railways or not. Mr. Jeans writes, " Mr. Grierson has admitted that in England the ordinary goods- truck is not filled to the extent of more than one-half its carrying capacity that instead of carrying 6 or 7 tons, it is usual to carry only 2J or 3 ; and hence we find trains carrying no more than 70 to 100 tons, when they might just as well carry 250 or 300. Ob- viously, if the rule were the other way, the train mile receipts, instead of being only 4s. lOd. or 5s., should be double that figure ; and as the cost of working goods-traffic decreases in an almost direct ratio with the weight of the train, or rather of the live or paying load, the adoption of fuller waggon-loads would give a much higher range of receipts in proportion to the ordinary working expenses." Mr. Jeans estimates that the average load carried on English lines is less STATE PURCHASE OF RAILWAYS. 101 than in any country except Luxemburg. He puts the load in the United Kingdom at 70 tons, against 173 tons in the United States, 132 tons in Germany, 121 tons in France, and 96 tons in Belgium. If the dead weight could be removed or largely reduced by increased live load, a tremendous impulse would be given to trade. The opening for improvement in this respect alone is against the assumption of the railway managers that a universal rate is impracticable. If by any means we could reach the standard of the United States, its practicability would be assured beyond question. In settling classification, the railway companies ciassifica- tion. decide upon matters involving greater pecuniary interests than are affected by mileage. The principles upon which classification is now arranged are ex- tremely indefinite, except that the one standing direc- tion of getting from merchandise all it can pay is the guiding rule of the companies. In this way one class of goods pays for another. A classification framed to meet the general advantage would be subject to several conditions. It should be universal ; it should possess the largest possible degree of simplicity ; it should not be arbitrary, but should be based upon principles declared by law. A special qualification should be that it should be adapted to develop industry and to encourage the cheap exchange of necessaries. Under such a classification, where provisions and raw pro- duce were placed in the lowest class, and when, a universal rate being enforced, a simple card would 102 STATE PURCHASE OF RAILWAYS. enable anyone to ascertain the cost of transport on a given article, it would be impossible to forecast the expansion of trade. It might be that, as in the case of the Post Office, the financial results would not be at first satisfactory, but the social benefits could not fail to be extraordinary. Direct communication be- tween producer and consumer would become the rule instead of the exception ; that pariah of trade, the middleman, would disappear ; distribution would be simplified and multiplied in manifold ways, and greater energy would be thrown into all departments of production. The magnitude of the proposal is likely to be the ng 1 power. chief obstacle to its consummation. If the purchase could be made by degrees, as in the case of Germany and Belgium, a beginning might be made. There are, however, very grave difficulties in the way of a piecemeal acquisition of railway property. It would probably either be ruinous to the proprietors or much more costly to the State. The Government, as part owner of the system, would become one of the com- petitors with the companies for the traffic or a partner in their monopolies, and in the one capacity having the public purse at its back would unfairly compete, or in the other would become accessory to the in- justices inflicted on the public. The object of pur- chase is harmonious management and economy of labour and strength by making one train do the work of three. That object could not be accomplished under a dual system, nor could the railways be made sub- STATE PURCHASE OF RAILWAYS. 103 servient to industry by partial ownership by the State. If acquired at all, the whole system must be acquired at one time. Otherwise the great social object of the purchase would remain unachieved. This, it is objected, would be equivalent to doubling the National Debt, the mention of which frightens respon- National sible politicians away from the subject. A highly esteemed representative of the working classes in the House of Commons lately said to the writer, " We shall have to use guarded language in recommending State purchase if we want people to believe that we are in our right minds." He referred to the attitude of the unreflecting multitude, but examination shows that there could not be a falser analogy than to com- pare railway purchase with the National Debt. A purchase of a remunerative property at a fair valua- tion is not to be compared to a debt which has been incurred in the destruction of property. The purchase would equal the National Debt* in amount, and there the similarity ends. A national debt which is no burthen to the taxpayer is no debt at all. A debt involves annual charge, and if no annual charge is involved the debt can be but nominal, and a people can support with courage and equanimity a nominal debt even of gigantic proportions. It is the annual interest which constitutes debt, and the railway pur- chase would create none. Nay more, the purchase would greatly improve the national fortune and national credit the moment it had been effected, since the national exchequer would have at its back io 4 STATE PURCHASE OF RAILWAYS. a material property of constantly increasing value which from the commencement would more than meet the annual payments. The tendency of money is to become cheaper it has cheapened to the extent of one-fourth in our time whilst the value of railway property must increase with the increase of popula- tion and the increased prosperity which its econo- mical use will accelerate. Every future cheapening of money will improve the national railway bargain, and there need never be a shilling deficiency in the national railway budget unless the people choose to run a temporary risk by a wholesale reduction of rates, which risk will be inspired by considerations of profit derived from the development of industry (an inspiration they would do well to obey) apart from the railway balance-sheet altogether. But the policy of reduction will be strictly limited by its fruits and by the assent of the community. The objection to the increase of so-called national debt is often purely sentimental. A debt which represents waste and war does not stand economically on the same footing as one which is covered by a property of which the dis- tinguishing characteristic is its power of reproduction. Mr. Euskin writes in " Unto this Last " : " One mass of money is the outcome of action which has created, another of action which has annihilated, ten times as much in the gathering." A national debt contracted for war purposes is of the latter character. It re- presents a certain kind of property, the credit of a State what lawyers call a chose in action but it STATE PURCHASE OF RAILWAYS. 105 is only "the gilded index of far-reaching ruin." On the other hand, a national debt incurred in the construction of beneficial and permanent public works is indicative " of faithful industries, pro- gressive energies, and productive ingenuities." This would be eminently the character of railway consols. A high authority, Mr. Mulhall says : " Public debt is only to be deplored when wasted by fraudulent or incompetent ministers, or sunk in chimerical undertakings or squandered in gun- powder." And after all, we should only be buying from ourselves, since only a minute proportion of our railway stock is held abroad. It would be a transfer from half a million of the population to seventy times the number. But even if we were buying a foreign property, and the price was not in dispute, the capa- city of the nation to make the investment cannot be questioned. Take almost any known test of that Q f capacity, such as the accumulated wealth of a nation. CO^JT to 7 purchase. the wealth according to population, the average earnings per inhabitant, the measure of taxation com- pared with earnings, or the productive power of the country, and Great Britain stands first amongst European nations, and almost first amongst the nations of the earth. The United Kingdom is absolutely the richest country in the world except the United States, and with reference to population, it is the richest without exception. The wealth of the United King- dom is 8,720 millions sterling ; that of France, 8,060 millions; that of Germany, 6,323 millions; that of io6 STATE PURCHASE OF RAILWAYS. Belgium, 806 millions; and that of the United States, 9,495 millions. The ratio of wealth per inhabitant is in the United Kingdom 249, in France 218, in Germany 140, Belgium 145, in the United States 190. In earnings per inhabitant Australia stands first, the United Kingdom second, United States third, France sixth, Belgium eighth, Germany ninth. The annual earnings of the United Kingdom are 1,247 millions ; of France 965 millions ; of Germany 850 millions. The excess of our earnings over Germany for two years and a half would buy our railways. Notwithstanding our large National Debt, our taxation compared to earnings is not half that of France, and not much more than half that of Germany, the ratio of taxes to earnings being in Great Britain 7'1, in France 14'7, in Germany 12-1. On the Continent military expenditure adds 9 per cent, to the cost of production and in Great Britain only 6 \ per cent. In productive power that is, power available for industries the ratio of countries stands, United Kingdom 7*5, France 6*6. Germany 7*2. This calculation includes river power, which is much greater in France and Germany, but of which Mr. Mulhall estimates that only a tenth is used. If we exclude rivers, the ratio would be, United Kingdom 9*4, France 6*6, Germany 7*8. Add to these advan- tages the fact that Great Britain has command of an unlimited capital at a rate of interest one fourth less than that of the Continent, and our ability as a nation to purchase the railways can hardly be doubted. STATE PURCHASE OF RAILWAYS, 107 However, whatever our wealth or capacity may be, we shall all agree that it is not to be used recklessly or risked unwisely. I have endeavoured to place the problem before the country as a serious one, but not as one incapable of a wise and hopeful solution. It no doubt demands the most careful investigation, and in the hope that others may take that view of it, and especially that it may engage the attention of the statesmen who are responsible, more or less, for the future of the nation, I leave it for the present. STATE PURCHASE OF RAILWAYS.* I. THE PEOBLEM. 's THE Government Eailwav Bill marks a new era in . railway legislation. Whether it passes or not is of (1886). J r little consequence. It cannot fail to have momentous results, not contemplated by its authors, in the near future. It opens the entire question of the relations between the public, the State, and the proprietors, and in such a manner that they cannot be permanently settled within the compass of the Bill. That there must be a large reform of railway rates cannot be doubted. The most conservative of railway officers must admit that to himself. The increasing severity of competition with foreign nations necessitates a reduction of the present charges, and if this Bill does not provide a solution it must be found in some other manner. Most of the trade witnesses examined on the Depression of Trade Commission said the rates were too high. But if the Bill passes it offers no security for a permanent reconciliation of the interests of the nation and the companies. Its principle is that the * Reprinted from the TortmgJithj Renew for June, 1886. STATE PURCHASE OF RAILWAYS. 109 State has the moral right to revise railway rates, Principle . of the bill. which is equivalent to a declaration that Government Confisca- tion of is justified in limiting to a fixed amount the profits dividends. which the railways may earn, and confiscating all profits above that amount. It may be said that the principle is already recognised by the clauses fixing maximum rates, but that is a misapprehension. The maximum charges were in the nature of an agreement between the companies and Parliament. They were accepted by the companies rather than imposed by the State, and the margin they allow for profits is wide enough to enable the companies to earn the highest dividends which the conditions of traffic permit. If the companies by their combined strength succeed in throwing out the Bill it will be the signal for a renewed and more vigorous attack. If on the other hand the measure is carried, the door will be opened to a further and unlimited application of the principle of confiscation to the prejudice of railway property. No moderate reduction of rates will satisfy the neces- Necessities * of in- sities of industry, and unless there is a material reduc- tion an agitation will at once begin for a further re- vision. The hunger of industry in this connection will grow by what it feeds on. In short, the Bill is but the beginning of an attack on railway profits, and it exposes the fallacy of the contention that the public interests and the railway interests coincide. It is the interest of the shareholders to have high dividends ; it is not the interest of the public to accept any scale of rates which will produce high dividends. One is 1 1 o STA TE PURCHA SE OF RA IL WA FS. forced, therefore, to the conclusion that a war of rates has commenced between the State and the companies for which there is no permanent compromise ; and, unless a solution of the controversy be found, con- tinuous blows of a serious character will periodically be struck at the stability of railway property, which ^ will result in grievous loss to the holders. The writer of this article is of opinion that the only equitable solution to be found is in the purchase of the railways by the State. state The idea of a State railway system is not new to Purchase t . . Act of English law. The conditional purchase by Govern - 1844. . m . ment is already provided for by an Act of Parliament which, paradoxical as it may seem, has not only pre- vented completion of the transfer, but has stifled serious consideration of the subject. For practical purposes the Act of 1844 is worse than useless, it is obstructive ; but it may be a comfort to those to whom social reform in any shape is a bugbear, to know that the principle of railway expropriation has been approved by Sir Robert Peel, the Duke of Wellington, Lord Lyndhurst, and Sir James Graham, who were in the Ministry of 1844, and who could hardly have been dominated by the youthful personality of Mr. Glad- stone, who had charge of the Bill. If, however, the knowledge of this authoritative sanction does not appease anxiety, the discussion of the theoretical aspect of the question cannot be profitably entered upon now. The present generation has not leisure lor academical controversy about models of Govern- STA TE PURCHASE OF RAIL WA YS. in ment, under which philanthropic virtues and the hypothetical laws of population, production, and political economy may be expected to evolve the greatest good with the least evil. The facts which confront society are exigent. Labour is unemployed, f r trade is stagnant, enterprise is suspended, and the yituation - people in large numbers are hungry and disaffected. It is not necessary to exaggerate the situation for effect, nor does a full recognition of its gravity involve the conclusion that we have reached the limit of national prosperity ; but it is impossible to deny that if the depression continues the position will become more critical than it has been since the reform of the Poor Laws in 1834, or the repeal of the Corn Duties in 1846. England possesses now, as heretofore, natural resources superior to those of most other countries, and they are practically unexhausted. Her welfare can then be maintained in spite of the increased competition of other countries if her instruments of industry, of which railways are the greatest of all, be made properly available, and placed under the most favourable and economical conditions, and if her labour be as productive as that of other nations. For good or evil the railway organization wields an influence over trade more potent than that of any other railway agency, or almost any combination of agencies. An p( imperfect idea of the magnitude of their power may be derived from a general statement of the interests repre- sented by the companies and the services they perform. The capital value of their magnificent property is about 1 1 2 STA TE PURCHASE OF RAIL WAYS. 800 millions sterling, or more than the national debt. Their lines extend over nearly 20,000 miles of road, now almost the exclusive highways of commerce. In 1884, the united companies carried 694,991,860 passengers, 183,615,556 tons of coal and minerals, 75,712,330 tons of general merchandise, and live stock the carriage of which came to 1,237,780. Their receipts amounted to 70,522,643, their working expenses to 37,217,197, and their net profits, avail- able for dividend, to 33,305,446. In their ceaseless industry, by day and night, they employ nearly 400,000 persons. The number of their shareholders is not known, but an estimate approximating to the truth puts it at upwards of 400,000, and the holders of debentures may number 100,000, making half a million of owners of railway property. Every man, woman, and child of the population contributes to their revenues and shares in the advantages they offer. The income- tax is understood, especially in Ministerial quarters, to be a mighty lever in the regulation of our national affairs. A penny added to or taken from the income- tax is a public transaction of importance to a large number of citizens ; it makes a difference to the revenue of nearly 2,000,000. A penny added to or deducted from the passenger fares and tonnage rates of the railways would represent a difference to the public of 4,000,000. Such figures give a very inadequate impression of the tremendous grasp which the railway system has over the commerce, safety, comfort, and prosperity of the nation. It is the habit of railway STA TE PURCHASE OF RAIL WA YS. 113 officers, who comprise amongst their number the best men of business in the world, to ascribe the aggregate increase in national wealth during the last half- century to railway enterprise. It is not my intention to depreciate the services rendered by the railways to civilisation ; on the other hand, it serves my purpose Services to to concede all that is claimed, for the more clearly it tion. is shown that the giant strides of British commerce are due to the railways, the more obvious it is that the continuance of our prosperity depends upon their further adaptation to the needs of industry. Several causes have combined to postpone the con- Affect of J Mr. Glad- sideration of the State purchase of railways. The Act stone's of 1844 suspended the power of expropriation for 1344. twenty- one years. The natural effect was to prevent ^ inquiry in the meantime ; and it was not until 1865 that opportunity was afforded for examination of the subject. A mass of evidence was then laid before the Eoyal Commission, but it is now out of date, and has Royal no practical bearing on the existing conditions of 8 ion of management, or on present social, commercial, or political circumstances. The Commission felt that the evidence did not warrant them in recommending purchase, especially as the terms prescribed by the Act of 1844 were acknowledged to be prohibitory. During the commercial crisis of 1867 a favourable bargain might have been made with the companies, but the country was in no mood then, or soon after- wards, to sanction large undertakings. When the Commission made their inquiry there was no indica- i ii4 STATE PURCHASE OF RAILWAYS. tion of the collapse which was contemporaneous with their report. In the years immediately preceding the panic, railway speculation was extremely popular. Tlle mana g emen t was also fairly satisfactory. The Ict ffi i C 854 Railwa y and Canal Traffic Act, 1854, had brought the companies under a certain degree of control. The \/ standing conflict between the Government and the railway officials was appeased, and although there were complaints of inequality and high rates, the public discontent was not extreme. It is also to be noticed that while some of the witnesses and commis- sioners favoured State purchase, no one approved of State management. The plan suggested was, that the State should buy the lines and grant leases of them, the idea being that the Exchequer would get a hand- some return out of the rents, and the lessees would make their profits out of the public. The objections to the scheme were fatal. It would be far better to leave the lines in the hands of the companies. The object of State purchase should be the relief of industry, but the object of the advocates of State purchase in 1865 was the creation of two sets of profits, one for the Treasury, and one for the lessees. Such a proposal will not bear discussion. The argu- ments in the report of the Eoyal Commission are arguments against State purchase with a view to leasing, and not against State ownership and manage- ment, which was not considered. Report of The subject was not revived until 1871, when Sir Sir Hemy J Tyler, Henry Tyler, then the Inspecting Officer of the Board STATE PURCHASE OF RAILWAYS. 115 of Trade, made a report to his department, in which he pointed out the growth and probable effects of monopoly, and advocated purchase and regulation by the State. Attention was also called to amalgamation by the large proposals contained in private bills, and this led to the appointment of the Joint Select Com- mittee of 1872. This Committee did not consider Joint that expropriation came within the range of their commit- inquiry, but incidentally some important evidence on tee> 1872> the subject was obtained. The report of this Com- mittee is of marked ability, and although it is not very recent, it is the most authoritative of official documents on the general relations between the public and the railway companies. Between 1867 and 1872 public dissatisfaction rapidly increased, and many sug- gestions were made for regulating the action of the companies and compelling them to give greater facilities and more equal treatment to traders. The Joint Committee were unable to accept most of the recommendations offered to them, and their report makes it clear that it is impossible to have a strong system of State control apart from State guarantees or State ownership. The result of their inquiry was the Act of 1873, establishing the Eailway Commission. This semi-legal tribunal has afforded some protection The Rail to public interests, but its powers for the purpose are ^oon. inadequate, while its constitution and jurisdiction are a constant source of irritation to the companies. The Select Committee of 1881 and 1882 did not commit- inquire into State purchase, and it is manifest that if I 2 1 16 STATE PURCHASE OF RAIL WAYS. the subject is worthy of attention, it is of sufficient magnitude to call for special investigation. Its dimensions have prevented individuals from attacking it, and Governments have been overburdened with other cares. Nor has there hitherto been such a representation of national opinion as would have enabled Parliament to enforce a sale on equitable terms. Although something might have been saved by earlier action it is not an unqualified misfortune that the matter has been deferred until the parties to the sale and purchase are in a position to strike a just bargain. Railway Eailway power in the abstract, as it strikes the public view, is something very large, hazy, and indefinite. The actual extent to which it penetrates the life of the nation is felt rather than understood. In his evidence before the Joint Committee of 1872, Sir Henry Tyler used a remarkable expression. " The question arises," he said, " whether the State shall manage the railways, or whether the railways shall manage the State." As a matter of fact, the question arose many years before, and was decided in favour of the railway companies. They have managed the State almost from the outset, and their authority over the convenience, comfort, and prosperity of the community is now despotic. It may be urged that it is a bene- volent despotism, but its ascendancy will hardly be disputed. The limitations and the exercise of its power are determined by one consideration alone : what will bring most money to the till ? And it is no STATE PURCHASE OF RAILWAYS. 117 exaggeration to say that if the conveyance of a hundred passengers and a hundred tons of merchandise would fill the railway coffers better than the convey- ance of a thousand, only one hundred would be carried. The proposition strikes at the root of the question under discussion, and if it stood alone it is sufficient to show how irreconcilable are the interests of railways and those of industry, and how impossible it is for the railways to contribute fully to the national prosperity if dividend is to be the only consideration in working them. Mr. Mill wrote, " To confer a Effects of monopoly upon a producer or dealer, or upon a set of producers or dealers not too numerous to combine, is to give them the power of levying any amount of taxation on the public for their individual benefit, which will not make the public forego the use of the commodity." That is exactly the position which the railway companies now occupy towards the public, and the traffic returns begin to show that, with all their experience, the managers have not learnt the point up to which they may impose their levies with- out loss to the companies. The Parliamentary influence of railway shareholders The land- has been only less than that of the landowners, and aM the commonly the two interests have been represented in ra the same persons. The landowners have been quick to see that the interests of the companies were their interests also. They have received as a reward for their assistance four times the value of the. land sold, while the general increase in the value of land through 1 1 8 STA TE PURCHASE OF RAIL WAYS. railway development has been great. " Tatham tells me," said Major Pendennis to his nephew, " that the Chatteris branch of the railway may, will almost certainly, pass through Chatteris, and if it can be brought on this side of the Brawl, sir, and through your fields, they'll be worth a devilish deal of money, and your five hundred a year will jump up to eight or nine." Another interest which has played a promi- nent part in railway legislation, and which is always strongly and ably represented in Parliament, is that of the law. The vast accession of private bill legis- lation introduced by railways has replenished legal coffers. The shareholders, the landholders, and the lawyers have formed in the Legislature a harmonious family party, of rather expansive dimensions, the branches of which have co-operated with the subtle affinity which attends a mutual advantage. f ^^ e establishment of a railway monopoly, unquali- fi e d ^y competition, has been effected by gradual steps. The issue of monopoly was not foreseen. There was no conjecture at first that roads and canals would be entirely superseded, and even upon the metals it was supposed that there would be compe- tition between carriers using their own plant. This last idea was wholly impracticable. The necessity of single management, and the difficulty of obtaining access to lines and stations excluded independent carriers. On the failure of these means of competition, the public turned for protection to competition amongst railways, which was encouraged by Parliament. Sir STATE PURCHASE OF RAILWAYS. 119 Robert Peel, in a famous speech, pronounced for " Free Trade " in railways. Great efforts have been C . * tion re- made from time to time to preserve this form of placed by competition, but without success. Wherever combi- tion. nation was possible competition was extinguished. Up to 1845 powers of leasing were inserted in special Acts as a matter of course. An Act was then passed restricting leases without the express sanction of Parliament. The Select Committee presided over by Mr. Gladstone in 1844 reported that monopoly was to be dreaded and guarded against, and a Bail way Board was constituted to examine new schemes, having special regard to amalgamation and competition. This Board, under the direction of Lord Dalhousie, reported onLordiM- the projects of 1845. The Private Bill Committees Board, passed schemes condemned by the Board, and which were opposed as offering no guarantees for the protec- tion of the public interest. Sir Eobert Peel stated that the Government intended to leave the bills to the judgment of the Committees. Lord Dalhousie's Board was placed in a ridiculous position, and was dissolved within the year. There were, however, many public men who viewed Progress with alarm the great and rapid combinations which were being effected. In 1846 two hundred bills were promoted for railway and canal amalgamations, causing the appointment of another Select Committee. It was then discovered that lines originally independent had, by private arrangement, come under the same control, producing amalgamation and monopoly with- 120 STATE PURCHASE OF RAILWAYS. out going to Parliament. The necessity for super- vision and control was again recognised, and a Kailway Commission was established for the purpose. A bill was introduced giving them jurisdiction over new schemes and excessive tariffs. It was, of course, opposed by the combined railway interest, and was abandoned, and its demise was quickly followed by that of the Board, whose functions, such as they were, repassed to the Board of Trade. I n 1847 a further step towards co-operation was e. taken b y the constitution of the Kailway Clearing House, a very useful establishment for facilitating traffic, and a very convenient one for bringing railway managers into a general union of interest and senti- Resuitof ment and for promoting monopoly. The definitive lative result of the legislative struggle was that principles laid down for the public security were unsettled and overridden. Imperial and local policy was insuffi- ciently represented before the bill Committees, and public legislation was emasculated in the interest of private corporations. The railway companies became practically independent of control, alike in the prose- cution of their undertakings, and their abandonment. After the crisis of 1847 projects were given up, without the consent of Parliament, involving 2,000 miles of railway and 40 millions of capital. Upon the revival of speculation, apprehension was again excited by the efforts to obtain territorial monopolies, and the magnitude and number of schemes for amalgamation. The policy of " districting " the country was openly STATE PURCHASE OF RAILWAYS. 121 advocated. Mr. CardwelFs Committee of 1853 tried to devise some check upon the companies, but they were frequently able to obtain their objects without going to Parliament. Between 1846 and 1871 the length of the London and North Western Eailway increased from 379 miles to 1,507 miles ; that of the Great Western, from 118 miles to 1,387 miles; that of the North Eastern from 274 to 1,281 miles, and that of the Great Eastern from 139 to 874 miles. These additions were made contemporaneously with the reports against large amalgamations. The Joint Committee of 1872 state, that " The general recom- mendations and resolutions of Committees, Commis- sioners, or Government Departments, have had little influence upon the action of the private bill Com- mittees." Since that report was made, amalgamation has steadily proceeded. The London and North Western Eailway Company now manages 1,811 miles of railway, the Great Western 2,301 miles, the North Eastern 1,534 miles, and the Great Eastern 1,038 miles. How steadily amalgamation goes on is seen from the fact that while in 1870 twenty-eight com- panies worked 12,414 miles of railway, the same number of companies had obtained possession of 17,000 miles in 1884. The companies have now obtained a position effective superlative strength and advantage, and one which compe- tition that they may well regard as almost impregnable. No of the sea. means have been devised by which competition can be maintained, or combination be prevented. The only 122 STATE PURCHASE OF RAILWAYS. effective competition now left, and it is doubtless a great force in islands such as ours, is that of the sea. " The sea," says Sir Thomas Farrer, " is the great free trader." Wherever railways compete with ships rates and fares are low; and they not only regulate the cost of traffic between seaports, but, to a certain extent, between all markets. This is a form of com- petition, however, which the railways do not hesitate to attack, and one which, if it is to be preserved, Canal must be jealously guarded. Carriage by canal, which tition. is convenient for heavy and slow traffic, has ceased to be an influential agency in determining the cost of conveyance. There are four thousand miles of river and canal in the country, and it is manifest that, with proper connecting links and facilities for through carriage, a large proportion of the rougher goods might travel by them at low rates. In 1871 the com- panies had acquired 1,500 miles of canal. The canal companies gradually surrender to the more virile power and policy of the railway companies. Conciu- The general conclusion arrived at by the Committee joint select of 1872 was, that the action of competition, by which 72 the price to the consumer is reduced to the point " which affords a fair profit to the producer and no more, did not exist in the case of railways. In the last fourteen years the position has not improved. The arrangement of rates and fares between the companies is universal, and is carried into effect without the sanction of Parliament. Mr. Grierson says that there are constant meetings of the managers STA TE PURCHA SE OF RAIL WA YS. 123 for this purpose. Mr. Findlay says, " We agree with every company between competing points." The rates charged upon all the trunk lines which compete for through traffic are settled by agreement. The rates between England and Ireland are fixed by the English and Irish Traffic Conference, representing the various companies. Passenger fares on the London and North Western are 2d. per mile where there is no competition, and l^d. per mile where competition comes in, making a difference of 4s. 2d. in a hundred miles. And yet it is the habit of railway men to speak of traffic as " finding its level," as if it were something impersonal, regulated by a natural law, or as if, in the language of Mr. Forbes, the companies only " formulated the conditions of the market." They formulate the conditions of the market just as a successful general formulates the terms of capitulation. So far where the lines come into competition, but upon the greater part of the system there is no possi- bility of competition. There are about six thousand stations in the United Kingdom, and only at one- fourth of them do competing lines meet. As to four thousand five hundred stations there is complete monopoly, and the companies charge what they please, within their powers. The London and North Western charge a higher rate from the North to Harrow than they do to Willesden. Mr. Findlay says, " I believe that to certain stations north of Sudbury or Harrow we charge a higher rate than we do to London, simply because it is within our power, and we can get the 124 STATE PURCHASE OF RAILWAYS. higher rate for the shorter distance." There is some valuable competition between railways in facilities, in speed, convenience, and comfort, but this also is subject to arrangement. Basis of The report of the Select Committee of 1882 states rates, "What that the managers informed them that the charge for the traffic will ^ conveyance was " such a sum, within the power of the companies, as they thought the traffic would bear, having regard to competition, both of other means of conveyance and other districts or markets ; or in other words, as much as could be got, and without reference to the cost to the company of performing the service." The unalterable rule of the railway directors is to get all they can. They have thus arrived at the position described by Mr. Mill as the inevitable result of monopoly. By having a maximum rate above the usual rate, they are able to give preferences to districts and individuals, so long as they do not amount in law Preferen- to undue preference, which is difficult to prove. Their tial rates. practice has extended commerce, and has satisfied a public want, but it has also given rise to chronic discontent amongst traders, and has encouraged an arbitrary exercise of power which threatens grave social and political dangers. The embarrassments are not entirely the creation of the railway companies, but the gradual outgrowth of a system the tendency of which was not foreseen until the railway power was established. There is no satisfactory mean which can be adopted by the companies, acting on commercial principles, in determining rates. They must either STATE PURCHASE OF RAILWAYS. 125 have fixed distance rates and terminals, or use a discretion. An equal mileage rate would discourage competition, and would be disastrous to commerce. On the other hand, having a discretion, the companies become masters, and are able to give arbitrary verdicts affecting the welfare of individuals and districts. The difficulty is inseparable from their position as mono- polists, ruled by the supreme law of self-interest. Several elements enter into the determination of A* 10 - liesm rates, such as distance, value, quantity, regularity of rates - supply, cost of stations, sea competition, and so forth. The consequence of monopoly is that there are anoma- lies of charge which, though preposterous at first sight, may be capable of explanation without assuming undue preference or extortion. Those which illustrate most forcibly the power of the companies as intermediaries between the producer and the consumer may be arranged under a few heads. The preferences and facilities given to imported goods cause the keenest dissatisfaction. It is the practice of the companies to Home and quote special rates for exports and imports. The export rates do not give much trouble, but those for imports give rise to acute discontent. The companies plead the necessity of meeting sea competition. The traders allege that, being sure of the home traffic, the railways tempt the foreign traffic by low rates, and that home producers have to pay exorbitant charges in order that foreign commodities may be carried for very small profits. There is no dispute about the practice, nor about the disproportionate rates which are charged 126 STATE PURCHASE OF RAILWAYS. for home and foreign produce. The companies not only charge less for foreign than for home produce over equal distances, but they charge less for foreign produce over a long distance than for home produce over a short distance. They also grant facilities for getting early into the market to foreign produce which they refuse to home produce. The difference in charge for English and foreign cattle over a comparatively short distance amounts, on one line, to four shillings per head, which is said to be about a dealer's profit, and the necessary effect of it is to prevent dealing. American meat and corn are carried at lower rates than British meat and corn, and this, it is truly asserted, amounts to a tax on British farming. Effect of Assuming that the railways cannot reduce the rates low import rates. to the home producer, the public get an advantage from the lower foreign rate ; but when we consider that much of this produce is brought to American ports by railways constructed by State assistance, it will be seen how heavily the English farmer is handi- capped. He has to compete against the nominal rents and the unexhausted fertility of the American soil, against the Government aid which brings the produce to the seaboard, and against the preferential rates given by the English railways. A home market is of no use to him under such conditions. His argument is that if the railways can make a profit out of the rates they quote to foreigners, they can afford to give the home grower the same rate, or otherwise that the latter is paying high rates to balance the low rate of STATE PURCHASE OF RAILWAYS. 127 the foreigner ; or, in other words, he is being taxed to contribute to his own loss and his ultimate ruin. One example is sufficient to show how seriously these differences handicap home industry. In 1881 the London and North "Western Kailway carried drawn steel wire from London to Birmingham, a distance of 113 miles, for 28s. 4d. per ton, while from Antwerp to Birmingham, a distance of 313 miles, they charged for the same goods 16s. 8d. per ton, the railway rate being lls. 8d. and the steamer rate 5s. Another class of cases comprises home products only, ^ The same kind of goods, in the same quantities, are onhome * produce. frequently carried on the same line at a smaller gross Examples. charge for a long distance than for a short distance. Amongst the curiosities of the traffic rates, I find an equal charge for 27 miles and for 86 miles, and an equal charge again where the difference of distance is 116 miles. Charges excessively disproportionate in regard to distance are another cause of complaint. As examples, I pick the following rates: for 27 miles, 4s. 9d. per ton ; for 20 miles, Is. 5d. ; for 8 miles, 8s. 4d. ; for 100 miles, 16s. 6d. ; for 112 miles, one third more than for 114 miles ; the same charge for 28 miles as for 2 miles ; double the charge for one mile extra ; and a smaller charge for double the dis- tance. The Great Western Eailway Company charge for milk to London Id. per gallon for 10 miles, and at the same rate for 100 miles. This meets a public want, as is shown by the increased consumption. In 1865 the company imported 520,668 gallons of milk ; 1 28 STA TE PURCHASE OF RAIL WAYS. in 1876, 2,624,373 gallons; in 1880, 5,071,164 gal- Ions, though not all of it from within the 100 miles limit ; but it shows also the arbitrary character of the control of the companies. Different Different scales on different railways are common, scales on m > 7 different except when competition comes in ; between Norfolk and London the charge for cattle is 10s. per head ; between the Midland Counties and London, a longer distance, 5s. per head. For the same distance one railway makes a charge of 10s., another a charge of 4s. 6d. Preferences to large traders are also common, the Burton brewers being the most striking example. Differences are also made in facilities for storage. The London and North Western Company allow free storage at some stations for two months, with a charge of 2d. per ton per week afterwards ; at other stations they only allow fourteen days, with a charge of 6d. per ton per week afterwards, and no reason is given for the preference. Frequently there is a difference on the same line between up and down charges. Through rates are sometimes so arranged that goods can be carried past their destination, and back again on the line, at less cost than if they were sent direct in the first instance. The complaints of excessive charges apply chiefly in the coal trade, the rates having been raised when coal was at an abnormal price, and not afterwards reduced. The extent to which the collieries are in the hands of the railway companies can hardly be exaggerated. Grouping. The custom of grouping collieries, or making the STATE PURCHASE OF RAILWAYS. 129 same gross charge within a certain zone, prevails largely. In South Wales the Great "Western Eailway group a large number of mines together for London, Swansea, and Birkenhead. The practice also extends to other industries. The North British line has groups including 100 stations, at variances of seventy miles distance, under the same charge. Grouping has a wonderful effect in promoting competition, but if enforced partially or capriciously it may inflict extreme individual hardship. Its operation in the case of the Denaby Main Colliery was described by Mr. Buck- ingham Pope to the Select Committee of 1882. The Denaby Colliery was grouped to the east and not to the west. Its own markets were flooded with other people's coals on equal terms, but when it attempted to return, it was charged according to distance. This illustrates forcibly the position of the companies. It is their interest to be free-traders in the main, but they cannot be free-traders all round. Universal grouping is advantageous, and would be the result probably of State management ; but partial grouping at the caprice or in the interest of the companies cannot but be unjust, and is therefore to be con- demned. The railway managers say that the complainants do Arbitrary not want equality or a general reduction, but some compa- 1 nies. A individual preference or advantage. Whether that is question of public true or not it does not affect the public policy of policy. leaving these immense powers in the hands of a giant monopoly, which is bound to play for its own hand. 130 STATE PURCHASE OF RAILWAYS. One other illustration will show the unqualified control possessed by the companies over mineral industry. At Westbury there is a deposit of iron ore, but there is no coal in the district suitable for smelting. In order to create an industry the Great Western Com- pany have given low rates for the import of coal and coke for smelting, and similar rates for the export of pig-iron for the purpose of manufacture. Their powers are exercised wisely for the advantage of the people, but they are absolute masters of the district, and are able to fix the rate of profits and, incidentally, the rate of wages. A resolution of the directors could ruin the industry in a week. The iron industry in South Staffordshire is also at the mercy of the railway com- panies. The importation of ore is the only thing which prevents the total extinction of the iron trade of the district. Mr. Findlay says that no blast furnace could exist on native ore, and that the pig-iron producers are dependent altogether upon the railways for cheap conveyance of raw commodities. This gives the com- panies despotic command over profits and over labour. They may use their power for the general welfare, but it depends on their good will. They might extinguish every blast furnace if they pleased, to the ruin of the trade and the displacement of the population. They can bring enormous influence to bear on trade dis- putes. inquiri- The power of the companies in the regulation of profits and the minuteness of their inquisition is candidly explained by Mr. Grierson. He says, "There STATE PURCHASE OF RAILWAYS. 131 is a staff of officers whose business it is to know the business of every district, and in the same way to know every trader, what competition each man has to meet with men who give their lives to it." This is very thorough business no doubt, but such a censor- ship raises social, commercial, and political questions, which ought not to be dealt with by a railway caucus, but by the State. A pertinent question was put by Mr. Craig to Mr. Grierson during the inquiry of 1881. " Is it not unsafe for railway companies to combine to fix a rate which they keep at a fixed standard for years, irrespective of the state of trade, whilst traders are like so many separate sparks ? " The shrewd answer given was, "The rates are fair. 77 That may be so or not ; it is largely a matter of opinion. But it is no answer to the point raised by Mr. Craig. Competition and exchange depend upon railway charges more than upon any other adjustable factor in commerce. Is it politic that they should be so entirely under the control of the railway companies ? A danger of the future is that the railways may Control of obtain control of the harbours, when they would be in a danger a position to minimise the advantages of sea compe- future. tition. This is not an imaginary peril. Local author- ities, harbour boards, and dock trustees are placed under strong temptations to surrender the control of their ports in return for traffic facilities and improve, ments offering new developments of trade. The Joint Select Committee of 1872 called attention to move- ments for the possession of harbours which, if carried 132 STATE PURCHASE OF RAILWAYS. out, would enable the railways to monopolize traffic by land and sea. Since then the railways have largely extended their command over sea ports. Millions of money have been spent at Plymouth, Bristol, Barrow, Fleetwood, Swansea, Newport, Harwich, Lowestoft, Milford Haven, and other places, and hardly a session passes in which docks are not transferred to the companies. ests *f te h~ ^ would be an exaggeration to say that the railways companies are not answerable to the State, but we have seen how and the 7 comma- they have eluded the general principles laid down for . legislation. The opinion grows that eventually the country will be " districted " between three or four companies, who will combine for mutual advantage, and become practically one vast corporation. It has been already shown that the interests of the railways and those of commerce and industry are irreconcilable. But they cannot even be worked for common profit when their interests are really identical, if time be needed to harmonise them, owing to the half-yearly demand for dividend. It is impossible for the com. panies to make immediate sacrifices of profits by concessions to commerce for any future advantage, because shareholders insist on a full harvest of divi- dend twice a year, and every year. This secured, they trouble themselves neither about the management of their property nor the interest of the public. Nor can any effectual control over the companies adequate ^ exercised by the State without the adoption of state con- ar ^ rar y me thods and the infliction of much injustice. STATE PURCHASE OF RAILWAYS. 133 Owing to the expense and uncertainty of the law affecting this question, which requires the united knowledge of a legal and a railway expert to interpret, and to the multiplicity of railway rates and the complexity of railway management, both traders and Government are almost powerless against the com- panies, and must so remain unless an unjustifiable law of a despotic character be passed. If the Government Bill pass, and the State attempt to fix the actual rates, thus limiting the profits which the railways may earn, a confiscation of dividends will be legalised. But if it is just ? which I hold it is not, to set up a tribunal to decide between the traders and the companies in the fixing of rates, it is impracticable, unless the whole system of charging is altered. No court or govern- ment department can deal with special and differential rates numbered by millions. It is equally imprac- ticable for the State to revise the charges in relation to the cost of the service. It would involve inter- ference with the details of management, the fixing of expenses, and the economies to be made. It would necessitate a dual control, and while the advantage to the nation would be problematical, it would be extremely vexatious to the companies. Experience also proves that facilities for traffic depend upon the willing co-operation of the companies. Through rates and running powers can be enforced when the pro- prietary companies are in accord, but otherwise they are of little value, and no amount of Government supervision will make them really serviceable. It is 134 STATE PURCHASE OF RAILWAYS. impossible, therefore, to avoid the conclusion that effectual Government supervision cannot justly be secured or enforced without purchase. Political The political consequences of the extension of dangers of the corpo- railway power also deserve attention. The Joint Corn- power, mittee of 1872 foresaw that combination might lead to " the creation of corporations, so few, so large, and so powerful, as to render it expedient on political if not on economical grounds, that the State should acquire the railways." An earlier Committee had expressed apprehension as to the results of proposed amalgamations of the London and North Western Company, which would involve the union under one control of companies having 60 millions of capital, with a revenue of 4 millions, and working 1,200 miles of railway. This company now has a capital of 100 millions, a revenue of 10^ millions, and manages 2,000 miles of road. All experience shows how utterly impossible it is to forecast the development of business and traffic, and, as a consequence, the growth of railway property and influence. Within twenty years, between 1865 and 1885, the called up capital of the companies has increased from 445,478,143 to 801,464,367; the mileage from 13,289 to 18,864; the passengers from 251,862,715 to 694,991,860; the receipts from 35,890,113 to 70,522,643, and the working expenses from 17,149,073 to 37,217,197. If we may measure the future by the past, the begin- ning of the next century will see some of these figures doubled. It may reasonably be doubted whether STA TE PURCHA SE OF RAIL WA YS. 135 railway property, conferring the power involved in its possession, backed by a compact phalanx of Peers and members of Parliament, partners in the estate, and influencing legislation in its support, can consistently with the interest of the people be much longer left in the sole control of the companies. The more the question comes to be understood, the more, it may be concluded, will the public incline to assume control by agencies that Parliament may create, and in order to accomplish this equitably, the State must purchase. In addition to the real obstacles to State purchase, Common which, though not insuperable, are formidable enough, to "state* 1 there are some objections lying on the surface, which examined, ought to be examined. One is the inexpediency of interfer- State interference in matters which the public can trade" 1 manage for themselves. In this connection we may consult an eminent master of Political Economy. Mr. Mill writes, " Whatever, if left to spontaneous agency, can only be done by joint stock associations, will often be as well, and sometimes better done, as far as the actual work is concerned, by the State. Government management is, indeed, proverbially careless and in- effective ; but it may be doubted whether joint stock management generally has been less so." The rail- ways supplied a public want, and they have contributed to, and shared in, a period of great prosperity. The success of commerce has been so marked that attention has been diverted from the sacrifices by which it was obtained. There is not the same keenness of super- ijb STATE PURCHASE OF RAILWAYS. vision in joint stock concerns which there is in private business. The railway managers and employes are men of the first business talent in their various depart- ments; but is it not obvious that they would serve the State with the same zeal as they serve the com- panies, stimulated as they would be by honours which the State could give in addition to their present or greater pay, and urged to put forth their best energies by the necessity of ministering to the daily conveni- ence of the community ? It is also suggested that there would not be equal alacrity in the adoption of inventions and improvements under a State depart- ment ; but experience teaches the contrary. The management of the Post Office and telegraphs, under which every kind of business facility is provided, proves that immobility is not a necessary characteristic of a public department. The prejudice too against State management hitherto entertained by the middle class is dying out, and it never existed in the class which now constitute the elective majority. The strain The labour and complexity which would attend the manage- single management of all the railways is another point which fixes attention. It is a great strain to manage one railway, and it is feared that the care of the whole system would be so immense that no Minister could exercise proper supervision over it. The managers of the Great Western, the Great Northern, the London and North Western, and the Midland have between them the care of what were originally over two hundred separate lines. It would be easy to select a STATE PURCHASE OF RAILWAYS. 137 quorum of the present managers, who in a few confer- ences could produce a plan for placing the railways of the United Kingdom under one control, and for bringing the various parts of the great machine into complete harmony. A strong argument for amalga- mation is the advantage of unity of administration. This advantage is greatest under a State system, which moreover would secure the whole time and ability of the managers for the perfection of commu- nications and organization; whilst now during the Session, the managers of the great railways are almost exclusively employed in Parliamentary contests. The constitution of a State department for railway manage- ment presents no difficulties which cannot be over- come by the knowledge and capacity which would be placed at the service of the State. The ease, as well as the power, with which a Government can handle railways was shown during the war between France and Germany. There are some minor points, such as the abuse patronage, undue influence, favouritism and the credit of Government through mismanagement or &c mischance. The objections mostly suggest their own answers. Patronage might be put under the control of a non -political committee, and as a rule it would go by merit. Clerkships would be filled in the same way as in the Post Office. For particular positions officials would require special training and experience, and they would rise according to their capacity. It is possible that subordinates might attempt to use 138 STATE PURCHASE OF RAILWAYS. undue influence with railway servants at election times, but public opinion would remedy this. It is incredible that any Minister responsible to Parliament would thus abuse his power. Such as it is, the evil exists already. There were complaints of pressure in the Crewe establishment at the last election, and charges of undue influence in the Post Office and telegraph departments, but public condemnation promptly restrains this excess of zeal. In regard to extensions, it is questionable whether the Government would be more ready to yield to outside pressure to obtain useless, or backward in supplying necessary lines. The chances are justice would be done far more evenly than it is done by the companies. The reaW It is upon the satisfactory settlement of the principles difficulty of state upon which rates and fares are to be fixed that the i- practicability of State purchase depends. The first which tiling to determine is the object with which the railways to be fixed, shall be worked whether as a source of profit to the Treasury, or in the promotion of industry, commerce, and trade, and for the benefit of the people. Then arises the question, Is it possible or desirable for the State to retain the commercial character of management, with full powers to accommodate rates and fares to circum- stances, making large or small profits according to the nature of the traffic ? We shall assume that the State would have the largest liberty both in object and means. The amount which can be got out of the railways, and the comparative advantage of using them as a revenue-earning machine, or as a means of STA TE PURCHASE OF RAIL WAYS. 1 39 developing the resources of the country, have to be ascertained by experiment. It is probable that, as in the case of the Post Office, the railways would serve both purposes. Eates and fares might be reduced so as to give immense indirect relief to industry, and also return a direct profit to the Exchequer. But this could not be done at once. In the stages of introduc- tion the Chancellor of the Exchequer might have to provide for a deficit on the railway accounts. Mr. Forbes says that even the State cannot carry at a loss; but, with much deference, that is precisely what the State can do, and where it has the advantage over the companies in getting the greatest benefits for industry and commerce out of this mighty instrument of national wealth. Treating it as an open question, whether the com- state mercial system is the most advantageous, the further co point arises whether the State could adopt it. It tem. might not be wholly impossible for a Government to quote dissimilar rates and fares to localities and individuals, but, manifestly, it would be difficult. They could not exercise the large discretion of the railway companies. There would be a real and not an imaginary danger of political partiality. A Con- servative Government might give preferences to Lancashire, or a Liberal Government to Durham. If. in practice there were no unfairness, there would be accusations of favouritism which would be injurious to the public service. But if the virtue of Ministers were unassailable their judgment would not be trusted; HO STATE PURCHASE OF RAILWAYS. they would have to delegate their discretion to officials who, in their turn, would have their motives impugned. The pressure to make differential rates would be un- endurable. Instead of a general election settling an imperial policy, it would be decided in reference to peddling local interests. Members of Parliament would be worried to death to get special rates for their constituents. Without some anchorage of principle the Government would be driven by all the tides and gales of interest and opinion. It would be a hazardous thing for the Legislature to buy the rail- ways with the idea that they can be conducted on the mercantile principle of making variable profits as they are possible. The risk of failure would be so great that the project would not be justifiable. Aitema- It is necessary to find some ground upon which this rates. question of rates can rest. The State must have some uniform system, or a basis of uniformity and equal treatment. The State basis must also be one which will stimulate instead of checking enterprise. Putting aside the mercantile system as inapplicable, two alternatives have been suggested : (1) an equal mile- age charge; (2) a graduated mileage charge, or distance scale. There is another, however, which has not been considered, namely, an equal gross rate, varied by a simple classification, but irrespective of distance. The true II. THE SOLUTION. rate's the I shall now proceed to explain the grounds upon system. ee which I have formed the judgment that the time has STA TE PURCHASE OF RAIL WA FS. 141 come when a new impetus may be given to commerce not far short of that caused by the introduction of railways. This in my opinion can be done by establishing the railways on the basis of the Post Office Service, gradually eliminating distance as an element of charge in the carriage of goods, under the ownership and administration of the State. There are good reasons why the alternative methods j^ 6 which have been suggested are unacceptable. An ilea s e equal mileage rate will not do. Trade has been developed under another plan, and the object of any substituted plan must be a still further development. Industries have been created which cannot be abandoned. Coalfields and ironfields have been opened for distant markets, which would be shut out by a uniform mileage rate. Such a system would stereotype trade, and would create a number of petty monopolies which have easy access to the market. It would raise prices all round to the consumer. It is not advocated in the general interests of commerce, or by any one except producers who want protection. It would confirm the advantage and the disadvantage of location, and would prevent the main object of railways, which is to open markets, not to close them. It would operate upon local commerce, just as high revenue tariffs upon national commerce. It would paralyse a number of private undertakings, and would create a State system of protection for others to the general disadvantage of the community. In Germany it has been tried, but the Government has had to V 14-2 STATE PURCHASE OF RAILWAYS. abandon it or to admit exceptions which destroy the general application of the rule. Graduated A graduated mileage rate or sliding scale, varied by distance . J rates. distance that is, one rate for 50 miles, and others for 100 miles, 200 miles, and so forth would have some advantages over an equal mileage rate, but it rests on the same principle, and would operate, though in a less degree, in the same manner. It would establish the principle of geographical protection, which in a country of short distances is unnecessary and injurious. Still, if arranged liberally, with slight variations of rate over long distances, it offers a possi- ble solution, though not, as I think, the best solution, of the difficulty; though as an introduction to the system of one gross rate it might be found useful. Candis- The question then arises, Is it possible, out of tance be eiimi- Utopia, to eliminate distance as an element of charge in conveyance by railway ? Can a gross charge be made, according to a fixed standard, for separate classes of goods whether they travel 10, 100, or 1,000 miles ? The proposition may seem a startling one, but it is to be remembered that the postage system was derided at first by men of business and by political economists. A single railway rate for all distances is but a larger application of the same principle, and it has some attractions, as well as merits, which will gain it a hearing. That there are obstacles of some magnitude is obvious, but the advantages offered are of a kind which, when they are understood, will stimulate a vigorous attack upon the difficulties. I STA TE PURCHA SE OF RAIL WA YS. 143 do not imagine that a paper plan can be produced which can be applied all round, and at once. It is a matter in which it would be necessary to hasten slowly. It would be advisable to experiment on Gradual goods traffic at first, and to begin with one class of ments" goods, say coal and minerals. The scheme might suggesi afterwards be extended to merchandise, and eventually to passengers, though the reform of passenger fares is not so urgent as that of the goods rates. It would probably be necessary, in the introduction of the system, to have two or three rates, one for short distances and others for long distances : so much for every distance not exceeding 100 miles, so much for every distance between 100 and 300 miles, and so much for all distances exceeding 300 miles, keeping the one rate for all distances in view as the ultimate object, and adapting it to the needs and circumstances of commerce by degrees. It may be asked, why not one rate for all classes of ciassifi- J cation. goods ? That may come eventually, but my present contention is not for the entire abolition of classifi- cation. Even in the Post Office there is classification, as between letters, parcels, and circulars, and special arrangements are made by the Telegraph Department with the Press. But classification ought to be greatly simplified. The Government classification would have regard to the general wants and interests of the com- munity rather than to the facility with which different kinds of goods can be carried. In the lowest class, and at the lowest rate, should be put all coal and 144 STATE PURCHASE OF RAILWAYS. minerals, provisions of all kinds, raw produce, and all articles of export and import. It is clear that the two thousand articles of the Clearing House might be classified in a much simpler form when the object in view was not the accumulation of profits but the development of industry. Advan- The advantages of one gross rate are seen in the universal practice of grouping, which stimulates competition to seen in the utmost within the zone of the group. Its general grouping. adoption would remove all restrictions upon compe- tition, and bring the produce of every district within reach of every market. It would mean Free Trade in the full expression of the term, which is not alone the removal of import duties, but the greatest, freest, and cheapest exchange of commodities, and the removal of every barrier between the producer and the consumer. The defence of differential rates is that they open up new industries and new fields of competition to the incalculable benefit of trade. If there is this rapid extension of trade under a very limited and partial application of the principle, what might be expected of a plan which, while reducing rates generally, would put all freighters on equal terms as to near and distant markets ? Speaking of the coal-fields Mr. Baxter says, " The public policy is to bring the whole or as many as you can of the colliery owners and coal-getters into a competition one with another, so as to get the coal at the lowest earning price." The railway companies carry out this policy to a partial extent, yet upon it rests the STATE PURCHASE OF RAILWAYS. 145 defence of their arbitrary power and their gigantic monopoly. The descending mileage rates induce competition, but not free and full competition. If distance were annihilated (which Sir Thomas Farrer says is one of the purposes of railways) it would stimulate trade up to the outside limit of production and consumption. The certainty and the simplicity of the plan would of have a magical effect upon trade. Traders are now plan - prevented from extending the range of their dealings because they do not know the rates, and cannot estimate the profits they might make. Their profits are really decided by the companies, and this acts in restraint of exchange. It is impossible to forecast the growth of commerce if traders knew generally the cost of carriage on each transaction, but it could not fail to be both rapid and large. Assuming that the rate can be put low enough to stimulus give a new impetus to trade, it would find employ- and relief ment for labour and relieve the depression in impor- si tant industries. It would afford a partial remedy for agricultural distress by throwing open our own markets to farmers and enabling them to meet foreign competition. It is said that the railways in agricul- tural districts are unprofitable, but they would not be so if they were utilised more fully for agricultural purposes. It is surprising how few agricultural sidings there are on our railways, which pass over the land en route like the carrier pigeon, using it as a mere highway without serving it. There should be 146 STATE PURCHASE OF RAILWAYS. sidings in every other three or four farms, nay, on every farm, if agriculture is to have the full benefit of railways. The Board of Trade returns show that we import 20,000,000 in value of miscellaneous agricul- tural produce yearly, not including meat and grain, some of which might be dispensed with if the markets were more accessible to home producers. It would also remove the stagnation in the export trade. The effect of a low and simple rate would be to bring every manufacturing town practically to the seaboard. It would revive the shipping industry by enabling us the better to compete with foreign nations in the neutral markets of the world. To sum up the argument on this part of the question, it may be said that the greatest advantage of the railway system can be best ensured by using it to secure the cheapest exchange for every commodity, both at home and abroad. This can only be effected by the practical annihilation of distances, in the lowest possible single rate for the whole country. There is a class, though probably not a large one, near wn i ca would be opposed to the system. It consists of market, the producers whose position in relation to certain markets gives them a protection of which they would be deprived. They have vested interests which they will not wish to surrender. There may be, for instance, a colliery which has been purchased at a high price, or where operations have been undertaken in anticipa- tion of exceptional profits through advantages of location. In a case of that kind, where there had STATE PURCHASE OF RAILWAYS. 147 been special outlay, it might be just and expedient to refer it to a commission for compensation. But to those who insist on the natural advantages of position, and who wish for a rate which shall operate as a protective duty in their favour, it is necessary to point out that railways are not natural but artificial adjuncts to trade, and may fairly be put under artificial condi- tions for the general advantage. As every one would get the advantage of the system in some way, an average rate, based on cost, would, as a piece of abstract justice, work with perfect equality all round, but as we do not live in a world and con J where abstract justice is possible, or where equality is always fair, the point to consider is, what is practic- able. For this reason it is necessary to examine how a single rate would affect separate classes, such as (a) the general body of consumers, (b) producers at a distance, (c) consumers near a large producing field, and (d) producers near large markets. The interests of the first two classes (a and b) are identical. It is the interest of one body to get into the market, and of the other that they should be there. Anything which widens the field of competition is of advantage to the general consumer. A rate based on an average, not too high to check consumption, would benefit him. The distant producer would be the largest immediate gainer by an average rate, since it would open new markets to him at lower rates than he now pays. The interests of the other two classes (c and d\ who have the benefit of existing short distance rates, also 148 STATE PURCHASE OF RAILWAYS. coincide to a considerable extent. The consumer adjacent to a particular field of production would be disturbed by a rate above that which he now pays, which is below the average rate. For example, where trade has grouped itself around a coal and iron district, a new rate of carriage above the existing short distance rate would throw a loss upon the con- sumer of those particular commodities, and although they would gain in other directions, they would feel the change most in regard to the article which they used most of. The producer having the advantage of the local market, would also suffer from the adoption of an average rate above the rate he now pays. If the general average were brought down to the rate he pays he would suffer from the new competition, but he would gain by being able to enter new markets, both for the commodities which he buys and sells. If his trade was an established one he would estimate his loss above his gain. The objection may also be raised that the man nearer the market, being under heavier expenses in the matter of wages and works, would be swamped by the long distance man who is under more favourable conditions, and we should have the anomaly that the producer nearest the market would be the worse off. The answer to this is that the system being introduced gradually the con- ditions of commerce would gradually be adapted to the change. congestion One of the greatest advantages of the system would t/on pul l " be that the congestion of population in and around STATE PURCHASE OF RAILWAYS. 149 large centres of industry would be relieved, with the consequence of lessening the cost of production. This would cause the establishment of innumerable new centres of industry, to the incalculable benefit of the community, both in profit and in health. In the dissection of interests it is impossible to make a com- plete separation between those which are local and those which are general. That which is for the general good is, in the main, for the good of localities. What is lost in one way is gained in another way. There are few districts which constitute little worlds of their own, independent of the rest of the nation. There are but a small number of producers and manu- facturers who produce and manufacture everything which they require in their business. All industries are mutually dependent. Whatever apparent hostility there may be between classes, the interests of all would be best served by the largest development of trade which is possible. Either this is true, or the doctrine of Free Trade generally is unsound, which even Protectionists do not now maintain. Another advantage of the single rate would be that the services of the middleman would to a great extent be dispensed with, and direct exchange between producer and con- sumer would become general. There are reasons why it is impossible to adopt the ^ present rate as the basis of an average rate. It would versa ! ra * e examined be too high for the short distance traffic, and would be practically prohibitory. But, assuming that a rate could be found which would not have thisjjffect, there 1 50 STA TE PURCHA SE OF RAIL WA YS. are still some objections to be met. We put aside the man who objects to competition on equal terms, who sets up a vested interest in location. He must be dealt with on the broad ground of public policy, though, as we have indicated in the case of excep- tional outlay on the faith of not being disturbed, it might be met with compensation, or by a preferential rate for a limited period. But the man who objects to the law of competition must submit to the code of all civilised societies, that the individual welfare must give place to the general welfare. No improvement was ever effected which did not cause some individual suffering in the process. Take, for instance, coal of an inferior kind, which may bring a good price in consequence of its command of a special market, but which would fall in value if it had to compete with better coal from a distance. It is manifestly against public policy that the inferior article should be pro- tected. It would be impossible to compensate a proprietor because his coal was not of a high quality, and he would suffer in consequence. But this loss and suffering would be more than counterbalanced by the public gain, and for one colliery which was thrown out of work many new fields of labour would be opened. It must be remembered also that the arti- ficial protection which now exists is always liable to be destroyed by the stroke of a goods manager's pen. distil- There are, however, some practical difficulties to be trade! considered. First, it will be said that trade would be STATE PURCHA SE OF RAIL WA FS. 1 5 1 revolutionised ; that settled industries would be dis- turbed ; that circulation would be interrupted, with the inevitable result of producing a panic and perhaps collapse. This is the old argument against the intro- duction of railways, viz., u Who is to compensate the coachman ? " The answer is that the system need not be introduced in a violent manner. There are irritating elements of disturbance already which would once for all be removed by a system established on the principle of equality and free competition. The manner in which railway companies fix and alter their rates is a source of constant perplexity to traders. It is in their power to throw out of gear the industry and trade of large communities. It is a frequent thing to hear of large concerns being moved to the coast in order to escape the exactions and the irritating control of the companies, to the violent disturbance of capital, industry, and labour. Some large reform of railway rates is inevitable, and whatever form it takes it will produce a temporary interference with trade, whether the basis is a mileage rate, a distance scale, or the revision of rates by the Board of Trade as proposed by the Government Bill. Perhaps the last method would be the most objectionable, since when revisions depend on the construction which a court of law places upon the provisions of an Act of Parliament^ it is many years before a settled system is arrived at, and by the time the principles are well established a new agitation has begun for their alteration. What is required in order to give free scope to trade is a 152 STATE PURCHASE OF RAILWAYS. settlement on principles which are certain, simple, intelligible, and likely to be permanent. Effect on ij^g secon d objection which may be taken is, that if freighters, the long distance rate is brought down to the short distance rate, the local freighters will pay too much and the distant freighters too little. Arbitrary in- equalities- of this kind exist now all over the kingdom. The practice of the companies is to charge high profits in one case to make up for low profits in another case. No attempt is made to regulate the charge by the cost of service. The State would distribute the cost evenly over the whole system, as it does in the Post Office department, and this would be perfectly fair to the community. The simple question is whether the rate can be put so low as to encourage new traffic, without prohibiting any portion of the present traffic. I believe that this can be done, but it cannot be done at one bound or one leap. In the first place it may be necessary to have two or three rates not differing largely in amount, one rate for local traffic and others for through traffic. This plan would fall far short of the advantage of a single rate, but it may be used as a step towards the ultimate object. It would also enable trade to conform gradually to the new regulation. Practica- A single gross rate is practicable in this country bility of a rate fixed for the reason to which we mainly owe our original tiveof manufacturing supremacy, namely, that the distances being comparatively short, and the sea-coast every- where easily accessible, the cost of haulage is not consequently a very large proportion of the whole STATE PURCHASE OF RAILWAYS. 153 expense. Taking the parcel traffic, which may be assumed to represent the goods traffic generally, 80 per cent, of the whole does not travel beyond 200 miles, and of that 80 per cent, one half travels under 50 miles. This should settle the practicability of the single tariff and secure its adoption, for if short distances are advantageous, the practical annihilation of distance must be still more advantageous. Haulage is not the only cost of conveyance. There are the lines, the stations, and the terminal services to be paid for. The cost of locomotive power as shown by the Board of Trade Eeturns is not 25 per cent, of the total working expenditure. It is important to inquire upon what principle the The larger public now pays for the other services. It is admitted of the" * that the charge is not determined by the cost to the already railway company of the particular service, which from its nature often cannot be ascertained. The terminals are fixed arbitrarily by the companies, at such an amount as they think reasonable, subject to the general rule of getting what the traffic will bear. The charges are not proportionate to the cost of the stations or of the permanent way. They are averaged all over the route, without reference to the cost of construction or of working. Mr. Grierson, Mr. Findlay, Mr. Tennant, Mr. Scotter, and Mr. Walker, represent- ing five of the great companies, have expressed them- selves in favour of a fixed terminal charge. Some of the companies have adopted a scale of rates by which a single class of goods is charged at the same rate of 1 54 STA TE PURCHASE OF RAIL WA YS. terminals at different stations. The following is an extract from the evidence of Mr. Grierson before the Select Committee in 1881. Mr. Barclay asks: " How would this proposal work in the case of short distances, say ten miles, beginning to charge the goods with 3s. besides loading and unloading ? That is exactly what the companies are doing to-day all over England. 61 How much would this bring out the rate? If the rate were 2d. per ton per mile, that would be 4s. 8d. for the whole distance. u And how much in addition for loading? That depends upon the nature of the goods ; it might be from 3d. to Is. per ton. "That would amount, station to station, including all charges, to at least 5s. a ton ? Yes, with loading and unloading it would. " "Would not that be practically prohibitory of short distance traffic altogether ? I do not suppose it would." Terminal Mr. Grierson in another part of his evidence says that the terminals sometimes amount to 50 per cent, of the whole charge, and that on the average they produce one-fifth or 20 per cent, of the revenues of all the companies, but there is reason for believing that they amount to a larger proportion than that. A compromise has been suggested and accepted on behalf of the chief companies, whereby merchandise should be charged Is. 6d. per ton at each station, in addition to the maximum charge for haulage and expenses STATE PURCHASE OF RAILWAYS. 155 of loading and unloading. Now, when the average charge for haulage, terminals, and all services amounts to only 5s. 6d. per ton, it will be seen that the pro- portion for terminals, 3s. per ton, is a larger propor- tion of the total cost than haulage. However, the point is that railway managers having a large experi- ence agree that the terminal charge can be fixed irrespective of the cost of stations ; and if this is so, the smaller proportionate charge for haulage can also be fixed irrespective of distance. In fact, the dis- proportion between the charge for terminals, in relation to the cost of particular stations, would be greater than the disproportion between the charge for haulage in relation to the cost over varying distances. The one thing strikes the public eye and the other does not. It being quite clear that the present charges for Long and short distances cannot be raised without a dislocation distances. of trade which would be injurious, the practical question is whether the long distance charge can be reduced by degrees to the minimum, not to the lowest existing rate in use, but to the average minimum. In the case of two rates being fixed to begin with a short distance rate and a long distance rate it would be necessary to define what is short distance and what is long distance. It would be very inconvenient to draw an arbitrary line, say at 10, or 20, or 30 miles, as the radius of a short distance rate. That might answer in rural districts, but around large centres of industry it would be better to fix by commission, or by consultation between the central and local authorities 156 STATE PURCHASE OF RAILWAYS. and the traders, a boundary, not necessarily equi- distant from a fixed centre, which should include the bulk of the local trade, and which with the develop- ment of trade might be gradually extended to the ultimate point when the distinction between long and short distance might be altogether abolished. ^^ e nnanc i a l effect of the State assumption of the lem - railways may now be examined, and the fact that it would at the outset involve a deficit in the railway budget must be faced. The amount of it would depend partly upon the bargain which the State was able to make upon purchase, and largely upon the extent of the reduction in the rates. By taking a hypothetical case it is easy to see what the deficit might amount to. Taking the figures for 1884, the railways carried 183,615,556 tons of coal and minerals for 15,528,656, or at the rate of about Is. 8|d. per ton. Of general merchandise, they carried 75,712,330 tons for 20,879,968, or at the rate of about 5s. 6|d. per ton. It is well to note here the low average, which can only be explained by an enormous short distance traffic, and which increases the difficulty of bringing the long distance charge down to the short distance charge. The average of the short distance charge, say for 10, 20, or 30 miles, is not known. It may be assumed, however, that Is. per ton on minerals and 4s. per ton on merchandise, including all expenses of carriage, terminals, loading and unloading, and every service which the railways perform, would be a low short distance average, since it would mean that STATE PURCHASE OF RAILWAYS. 157 the charges for haulage only was about 6d. per ton on minerals and Is. per ton on merchandise. Now suppose the State wished to adopt these rates, Is. for minerals and 4s. for merchandise, would the transaction be impossible or impracticable, or the result ruinous ? So large a reduction could not be made at once, Gradual reductions but, introduced by gradual steps, it would be within of long distance the capacity of the State to effect, and the loss would charges. be compensated in a large measure by increased traffic in the stages of introduction. To reduce minerals by 3d. a ton to begin with would decrease the revenue from this source by only 2,295,194. An average reduction on merchandise of 6d. per ton would involve a decrease of revenue amounting to 1,892,808, or, together, 4,188,002. Thus by easy steps, reducing the long distance charges more and the shorter distances less, the rates might be brought down respectively to Is. and 4s. without hardship to any class, and with immense benefits to the community at large ; and taking the extreme view, the decrease of revenue could only amount to 12,000,000 sterling, even if the rates were reduced at once to the minimum short distance charge, crediting nothing for the increased traffic occasioned by the reduction. But experience shows that a full compensatory credit on this head may be safely assumed. The result of the working of the parcels traffic by the railways since the introduc- tion, only three years ago, of the parcel post-office system, which lowered the rates for parcels, and compelled the railways to follow them in this reduc- 158 STA TE PURCHA SE OF RAIL WA YS. tion, puts this beyond question. The parcel-traffic of the railway companies in 1885 had increased in volume over that of 1881 by from 25 to 30 per cent., whilst, notwithstanding the reductions made, the earnings increased by 8 per cent. -^ ma y seem at ^ rst s i&kt a startling proposal that ra ^ wa 7 budget should be added to the national *ects b ~ Budget, thus doubling its totals, and that the State should undertake to work the railways at a reduction on the present charges of 12,000,000, but no one will question the power of the nation to sustain the burden, even if it were so much dead loss, with no indirect return to the community and no prospect of future profit. Look how our budgets grow, even in reputed times of peace and retrenchment. Since 1874 our expenditure has risen from 70,000,000 to 100,000,000. Can any one show how or where or in what particular the nation has benefited by the increase of 30,000,000, except by the 5,000,000 which is spent for education ? The Queen's Govern- ment has been carried on, and that is all. If there is to be lavish expenditure by the State, which it is possible there may be under a democracy, it should be in reproductive undertakings. Without seeking for new and untried fields of social experiment, the State has in the railways an established means, which, supported by national credit, would yield not only an indirect but a direct return for every penny judiciously of experi- Properly considered, the magnitude of the operation ence. STATE PURCHASE OF RAILWAYS. 159 ought not to operate as an obstruction to State pur- chase, but ought to stimulate action. The true lesson of experience is, that if the State is not to take control of the railway system, one of two alternatives must be faced, viz., either the partial confiscation of railway property by the arbitrary interference of the State, or railway domination. The time, therefore, has come when there should be a serious inquiry. Every year which goes by adds to the proportions of the obstacles. Twenty years ago the undertaking would have seemed just as impracticable and impossible to the timid and tentative mind, but if the State had bought the railways then it would now be saving to the country six or eight millions a year in interest alone, and almost as a matter of certainty it might have been working the railways at the rates here suggested, with a large balance to the credit side of the railway accounts. The practical point is, would low and certain andTheprac- equal rates operate in the increase of trade ? Mr. turn isT* Grierson admits the enormous advantage to the public would be of carrying at low rates for long distances, nor does it of largely indeed require the knowledge of a railway expert to rates C ? d judge on such a subject. It is wholly impossible to estimate the strides which commerce would make under such a system. We have seen what trade has done even under the restrictions and the high rates imposed by the railway companies. In 1858 the gross receipts of the railways were 23,956,749 ; in 1865, 35,890,113 ; in 1870, 43,417,090 ; and in 1884, 1 60 STA TE PURCHASE OF RAIL WA VS. 70,522,643. In a very short time the traffie would be doubled. If the carriage of minerals all round at Is. per ton added 50 per cent, to the traffic, the loss of revenue, amounting to 6,347,879, would be reduced to 1,757,491 ; when the traffic increased by 75 per cent, the loss would be turned into a gain of 537,713. If the carriage of goods at 4s. per ton increased the traffic by 50 per cent., the loss of 5,737,522 would be converted into a gain of 1,833,731. Are these expectations too sanguine ? Compared with the increase in the imports of food, mainly resulting from reduction of import duties, which is perhaps the most instructive comparison which presents itself, they will scarcely be thought extravagant. In 1859 the value of the food imports, not including wine and spirits, was 48,073,185. In 1865 it had risen to 71, 883, 930, and in 1873 to 130,942,183; that is in thirteen years the imports had nearly trebled. This, at any rate, is not a dream and delusion. There would be some increase of expense in carrying a larger traffic, but it does not seriously affect the calculation ; it is a question of labour rather than of accommodation. Railways It will be seen that in this scheme the idea of the should, be the instm- purchase of the railways by the State with the view trade. of earning profit by working them is not contemplated. The contrary idea is proposed, namely, to utilise this national instrument in the way most calculated to benefit trade, and by that means to contribute to and increase national wealth and welfare, regardless of the remuneration of the instrument itself. It is believed STA TE PURCHA SE OF RAIL WA FS. 1 6 1 that by giving the nation the use of the instrument at cost price or something less the State would sow a seed which would produce a national harvest of wealth, compared with which the one or two per cent, extra interest on its capital to be earned by an additional tax on industry for the use of the rail would be a bagatelle. The unearned increment of trade would go into the pockets of the people instead of the pockets of one class of capitalists. The trader has not derived the benefit which he The cost of ought to have done from the railway system. When we consider the immense circulation developed by our fiscal reforms, the cost of carriage has not diminished in an equivalent ratio. The share which the producer contributes to the fall in prices is altogether out of proportion to the share which the carrier contributes. In 1845 the charge for the carriage of tea between Manchester and London, by Messrs. Pickford, was 45s. per ton ; in 1881, by the London and North Western Eailway, it was 40s. per ton. In 1845 the charge for coffee was 37s. 6d. per ton, for sugar 37s. 6d. per ton, for soap 35s. per ton. In 1881 the same articles were charged respectively 27s. 6d., 25s., and 27s. 6d. per ton the average decrease in the four articles being 8s. 9d. per ton in forty-five years, a reduction which bears no proportion to the revolution in the other conditions of commerce in the same period. Trade is too highly taxed in the item of carriage. Had the tax been remitted in a larger proportion, as it might have been had the railways been conducted 1 62 STATE PURCHASE OF RAILWAYS. by the State on the system suggested, it may be assumed that the present depression in trade would have been avoided, and the community would have profited in addition by the fall from 5 per cent, to 3^ per cent, in the value of money during the last thirty years, the benefit of which has gone to the capitalist. ^ ^ e P resen ^ railway capital 250 millions receives capital, between 4 and 5 per cent., 80 millions between 5 and 6 per cent., 60 millions between 6 and 7 per cent., and 7 millions above 7 per cent. When the normal rate of interest has fallen in twenty years from 5 to 3^ per cent, and is still declining, it is a serious matter that trade should be taxed to this extent. The past is irrevocable, and the nation must pay in revenue or in equivalent capital for the engagements it has entered into, but the future, subject to the claims of justice, belongs to the people, and experience teaches that they should no longer delay to enter into its possession. Additions The additions to railway capital continue to be very waycapi- large, amounting for the last ten years to over 200 tal. millions. Only about 37 per cent, of this capital consists of ordinary stocks, the dividends on which are regulated by the earnings of the companies, the remaining 63 per cent, being raised on guaranteed or debenture stock at fixed rates of preferential interest, much above the rate at which the State can borrow money. This is a strong reason why the pur- chase of the railways, if it is ever to be effected, should not be long delayed. STATE PURCHASE OF RAILWAYS. 163 The chief sources of economy in State administra- Economy tion would come under three heads: (1) The saving state ad- in the cost of extensions, through facilities possessed ti by the State ; (2) the complete utilisation for increased traffic of the present means; (3) the saving under unity of administration. 1. As trade expands, under reduced rates and fares, Saving in large extensions of the railway system may have to be si made. They can be effected by the State in a more economical manner than by the railway companies. In the item of parliamentary cost alone the saving would be very large. The expenses incurred in pro- moting and opposing railway Bills between* 1872 and 1882 amounted to the respectable sum of 4,000,000, which in England would make a single line of railway 300 miles long. The State would be in a better position to deal with landowners, and would cease to pay four times the value of land for the privilege of improving private estates. Mr. Forbes says that in Germany they make short work of a contentious landowner in a matter of public necessity, and in this respect we might perhaps learn something from Ger- many. A great part of the future outlay on railways will be in improved methods of construction and working, and better carriage accommodation for the mass of travellers. For all these purposes the nation ought to get, and under the State would get, the benefit of cheap money. An undoubtedly large saving would be effected in finance, not only by means of the lesser rate at which the State could command the M2 1 64 STATE PURCHASE OF RAILWAYS. money needed, but by the avoidance of the expensive expedients of paper railways to which new companies are almost invariably obliged to resort. Profits on 2. It is sometimes said that the expectation of traffic. increased profits from increased traffic is not a prac- tical view to take, but I venture to believe that it is, if the means of communication be harmonised and fully utilised. It is, for example, difficult to believe that increased traffic would not lessen the dead weight of railway trains, which it is admitted is one of the most formidable difficulties in making profits. Mr. Grierson says if you get your trucks loaded with 4 or 6 tons you 1 make a profit, if with 15 cwt. you make less. On* the same authority we have it that in Eng- land the goods average very little indeed, not above 2^ tons or 3 tons per truck. It is a common thing to run goods trains with loads under 100 tons, which might just as well carry 300 tons, and at the same cost. Sir James Allport says that the extent of traffic is only limited by the want of power or the want of proper arrangements, and that the limit of travelling capacity is the power of distribution the locomotive power, and the rolling stock. Mr. Findlay gives some interesting particulars as to the London traffic, from which it appears that the goods sent out on a given night averaged 1 ton 13 cwt., in waggons constructed to hold 5 tons, and that the average load per train was 55 tons. It does not want the experi- ence of a railway manager to know that it is more profitable to carry full train loads than half train STATE PURCHASE OF RAILWAYS. 165 loads, or to find out that the lower the rates the more certain it is that the traffic will be heavier. Mr. Cobden said, " The more trade you have, the more free trade, the more profits will your railways bring." The railways have never been in the position to try what effect a large reduction of rates would have upon traffic, because they could not face the immediate loss required to attract it. They have reaped the benefit of national free trade, but are not able to try the experiment of domestic free trade. Our canal system has become effete and obsolete utiiisa- through the policy pursued by the railway companies, canals. In Belgium and North Germany, where -the canals and navigable rivers belong to the public, they act as an important auxiliary in the carriage of the country. In France the Government spends eight and a half million francs on the canals, while the income derived from them is only three and a half million francs. It is a significant sign of the times that the English public are now turning their attention to enlarged and improved water transit as a means of escape from the control and exactions of the railway companies. In the hands of the State the canals might be utilised to a large extent for the conveyance of minerals and coarse and heavy goods, to the relief of the railways where the lines are crowded. For many kinds of merchan- dise it might not answer, as the competition in speed amongst the railways has encouraged traders to dis- pense with stocks, and they require immediate delivery of goods. Mr. Findlay says that the London and 1 66 STA TE PURCHA SE OF RAIL WA YS. North Western Company tried a differential rate for slower delivery, but they had to give it up. Perhaps the difference was not enough, and it would be worth another experiment. But in the case of coal and minerals, lime, manure, certain classes of timber, and other heavy articles when quick delivery is not material, the canals might be brought into use. There are many corporations on the canals which consume from half a million to 50,000 tons of coal in the year for making gas alone, paying rates to the railway companies from 50,000 down to 500 per annum. It cannot matter to them in the least whether the coal is a week or two or three days on the road. The corporations know exactly what is wanted and when it will be required, and could send their orders accordingly. The same considerations must apply in many large industries. 3. The third source of economy is harmonious management. There would be an immense saving of time, of misapplied labour, of friction and obstruction now wasted or caused by incomplete communications, and the diversities of interest and management amongst the companies. Single management is advocated on the same principles and for the same reasons that rail- way men have for fifty years past been advocating amalgamations. They have never had any difficulty in satisfying private Bill committees that harmonious management and extensions of their own systems would be for the benefit of the public. Even the select committees, which have looked with apprehen- STATE PURCHASE OF RAILWAYS. 167 sion upon the social and political results of great railway combinations, have been obliged to acknow- ledge that amalgamation produces many benefits. In 1872 the joint select committee reported that the Xorth Eastern Railway, which was originally composed rf thirty- seven lines, had the most complete monopoly in the United Kingdom, with the lowest rates and fares and the highest dividends. The profits arising from single management may be estimated by the experience of this company, which for the last sixteen years has paid an average of 7f per cent. Equal bene- fits would follow the adoption by the State, when the chief officials would be free from contests and litiga- tion with traders, and from parliamentary struggles, which now occupy and perhaps absorb their thoughts during the greater part of every session, and would be able to give undivided attention to the perfection of a system of management which would afford the largest facilities for intercourse and commerce. Another improvement which the public would look improved passenger for, and be entitled to. and which would require accommo- dation, outlay, is better third-class accommodation. The London and North Western Company now force ten persons into small compartments, allowing them for sitting room sixteen inches each. Conveniences for comfort and decency on long journeys are altogether wanting. The experiment of comfortable travelling at low rates for long distances has not yet been tried in this country. The people who travel third class are the real travelling public ; they make the profits, 168 STATE PURCHASE OF RAILWAYS. and they are entitled to decent accommodation. A system of traders' tickets universally applicable at very low fares might also be tried. Convenient work- men's trains at exceptional low fares would have to be provided. Incidental advantages would be the exten- sion of the postage parcel system. The possible developments, indeed, of a State railway system for the public convenience are practically unlimited. Obstacles ^g g re at obstacle to the purchase of the railways chase. an ^ canals, with their docks, ferries, steamers, estab- lishments, and engagements, is the magnitude of the financial operation involved, and the absence of settled principles upon which it can be effected. Fifteen or twenty years ago the property might have been acquired for between 500 and 600 millions. The purchase money would now amount to about double that sum. The called-up capital of the railway com- panies of the United Kingdom amounted at the end of 1884 to 801,464,367, the proportions of the different stocks being : Ordinary, 298,983,446 ; Guaranteed and Preferential, 300,412,847 ; Loans and Debentures, 201,068,074, all of which, except 58,600,298, was bearing interest. The canal stock, not owned by the railway companies, is about 10,000,000. The problem is therefore how to purchase an under- taking representing in round figures about a thousand millions sterling. character The idea of adding a thousand millions to the ' National Debt by, as it were, the stroke of the pen is STATE PURCHASE OF RAILWAYS. 169 in itself appalling to some minds, but quite unneces- sarily so. The Bail way Consols would represent a pro- perty, the value of which it is possible to ascertain almost to a sovereign, and the question is whether it would be a good or bad bargain. The risk, such as it is, consists in the danger of the State being outwitted in the transaction, or in its buying a property which it cannot manage properly or turn to good advantage. The object of this article is to show that at a fair price both to buyer and seller it would prove a good bargain, and one pregnant with incalculable advantages to the people. The compulsory expropriation of railway property presents no difficulties in principle. A large portion propria of it consists of land which has been acquired under conpulsory powers. In dealing with railway property itself Parliament has before now compelled preference shareholders to take a lower rate of interest than they had contracted for, and has often allowed fresh prefe- rential capital to be created over existing preference shares, and new debenture stocks over existing debentures, and rent charge stocks over both. The Act of 1844, which is assumed to be a kind of bargain between the Government and the railway companies, gives power to the Treasury to purchase all railways made between 1844 and 1865 at twenty-five years' purchase of the annual profits, calculated on the average of the three years preceding. If, however, the profits do not amount to 10 per cent, on the capital the price is to be referred to arbitration. The 170 STATE PURCHASE OF RAILWAYS. basis of the arbitration would be twenty -five years' purchase of profits, equal to 10 per cent, on the capital. For practical purposes this statute was still- born, and is only worth mention in this connection for the purpose of showing that compulsory State purchase of railways is not only justifiable, but was always contemplated by Parliament. The price The price which the Government should pay for ' the railways and the method of computation are matters on which no one will care to dogmatise. It is a subject for the most deliberate consideration of statesmen and financiers ; but there are two main points on which the public conscience must be satisfied : that the shareholders shall be dealt with honestly, and that the State shall pay the real and not a fictitious value. There is no danger that railway property will be confiscated, or that the property of one man will be taken away and given to any other men or class of men. But, on the other hand, it is equally important that the public convenience and prosperity shall not be sacrificed to a sentiment or in deference to an Act of Parliament passed forty years ago, which was moribund from its birth, and which has never influ- enced the investment of a shilling. The just principle of dealing with the shareholders would be to give them the actual ascertained value of their shares, adding any prospective value which rests on a reason- able foundation and taking also into account the improved security they will have. An allowance for compulsory expropriation or conversion, by way of STA TE PURCHA SE OF RAIL WA YS. 171 penalty inflicted on the State for purchasing, is not likely to be entertained. The railway companies could hardly complain of the conversion here suggested, for they exercise the power of changing the character of their particular stocks without compensation to share- holders, in cases where there is no preference or depreciation. There are several constituents in the appraisement Appraise- of railway property, such as the amount of capital, the railway manner in which it was raised, the revenues and pl dividends, the market price of the stocks over long periods, and the valuation of works and plants and rolling stock. The fair price cannot be determined by taking any one of these things singly. A railway which has allowed its rolling stock, its permanent way, its stations, and its works generally to get out of repair for the sake of keeping up dividends and the market price of stocks is not in as sound a condition as one which has provided against the future by keeping its property in order. A valuation and an audit are indispensable preliminaries of purchase. The rate of interest and the market price may be a fair guide in the case of guaranteed and preferential and loan and debenture stocks, where they would not be applicable to ordinary stocks. The value of the first class of stocks, in railways which are well established, is easily computed, and it is important to notice that they constitute about 60 per cent, of the total railway capital. The ordinary stock is more difficult to appraise ; but given the ascertained value of i7z STATE PURCHASE OF RAILWAYS. the concern, and the basis on which prospective value can be estimated, and the true value can be determined with mathematical precision. It is a matter for investigation by an authorised body on which all interests would be strongly represented rather than for general discussion. The probability is that the State would pay rather more than the true value ; but safeguards would be required that the benefits of State purchase were not largely discounted in the transaction. Conver- It has been assumed sometimes in the discussion sion of railway that the Government would have to go into the market stock into govern- to raise say a thousand millions, and that under such securities, conditions it would not be easy to estimate the effect on the price of consols, or to anticipate the rate at which the money would be borrowed. It is not, however, a question of finding money, but of the conversion of railway stock into Government stock. If a portion of the investors objected to take Govern- ment paper in the place of railway paper they could be paid off in money, but their number would be very small. The North Eastern Company carried out a financial operation much of the same character, to the extent of 33 millions, without State support, and the Government of the country is equal to the larger transaction. That there would be some temporary disturbance of the money market is possible, but it would quickly settle itself. The credit of the nation, unless it made a preposterously bad bargain with the companies, could not be seriously injured, and event- STATE PURCHASE OF RAILWAYS. 173 ually it would be improved. The purchase and the administration of the railways would be an under- taking of great magnitude, responsibility, and labour, but if it can be shown that it offers real and not speculative advantages, we have statesmen who will not be discouraged by the obstacles. STATE PURCHASE OF IEISH RAILWAYS.* - ^ une num ^ er of this Beview I ventured to raUwa8 Discuss the subject of State purchase of the railways of the United Kingdom. I then treated at consider- able length the general arguments affecting the owner- ship and management of railways by Government, most of which are applicable to the Irish railways, and, to avoid repitition, the reader is referred to that article. There are several circumstances which con- tribute to retard the favourable reception by the public of that idea. The magnitude of the financial operation ; the success which has attended railway administration in Great Britian ; the opposition of the railway companies, who are unwilling to surrender their influential position, and the slow growth of education and information on the question, prevent its rapid development. In time, as the people more clearly perceive how mighty an instrument for the creation of national prosperity railways become when used not as a money-making industry in themselves, but as the hand-maiden of all other industries, the progress of opinion will be quickened. * Reprinted from the Fortniqhtly Review for December, 1886. STATE PURCHASE OF RAILWAYS. 175 In the meantime there is one part of our railway Objections i J do not system, the Irish railways, to which the objections a PP ] y to Ireland. advanced against the purchase of English railways do not apply. To begin with, the purchase money would be a comparatively trifling sum, and there would scarcely be any powerful railway opposition ; the condition of the property being such that it may fairly be assumed that the shareholders are not wedded to their interests. The administration of the Irish rail- ways has never been strong, efficient, or popular, and has no hold upon the public confidence ; and lastly, unfortunately in some respects, the Irish people have been so driven by circumstances to look for Govern- ment assistance and periodical relief in some form or other, that there is not the same jealousy of State intervention in social or commercial affairs which exists in other parts of the United Kingdom. Apart from the question of Irish Government, No practi- which I do not intend to discuss, there is no practical cuity in the State difficulty in the way of the State acquisition of the acquiring Irish railways. My object will be to show that Ireland offers a promising field for the trial of an experiment which has achieved much success in other countries and in our own colonies, and that whatever Government is, or may become, responsible for the administration of Irish affairs, they could put their hand, at the outset, to no more hopeful labour than that of placing the Irish railways on the basis of State ownership, to be managed primarily for the advance- ment of national industry. 1 76 STATE PURCHASE OF RAILWAYS. Irish ^ The evidence taken by the Select Committee on dustry. Irish Industries last year shows that the trade of Ireland is in a languishing, almost in a vanishing, condition. As witness after witness is called, it is one continued story of overbearing competition, of manu- factures declining, of agriculture decaying, of commerce departing, of the absence of industrial activity, of restricted facilities, of undeveloped resources, and of unprofitable results. It is the country of all others which requires a powerful stimulus of a nature applic- able to every kind of industry. It is impossible that any Government should take all the interests of Ireland under its protection, yet in effect that is what the various trade witnesses ask for. According to the evidence nearly every branch of production stands in need of Government assistance for its development. State assistance for agriculture, State aid for dairy- farming and butter- making, State aid for drainage, State aid for industrial banks, State borings for coal, State assistance for the fisheries, State instruction in the cultivation of flax, Government contracts for boots, guns, and other articles, technical instruction in pottery-making, protection and bounties for the mill- ing industry and for chemical and manure works, Government intervention for the purpose of afforesta- tion these are some of the objects for which subsidies in some shape are desired. wa/of ne There is but one way in which they can all be Irish m helped, and that is by dealing with the railways. By . this means an incentive may be given to exertion, and STA TE PURCHA SE OF RAIL WA YS. 177 whatever elements of self-help exist in Ireland may be brought into operation and given a fair field. The railways are indissolubly connected with the success or failure of all other industries, from the great and chief interest of agriculture downwards. It is just as important to deal with the railways as with the land, since no land reform will be productive unless there is cheap access to the market. The prosperity of agriculture also depends largely upon that of other industries, so that the benefits which railway reform conferred upon general commerce would react upon the land. It is no doubt very important that some- thing should be done for the Irish fisheries, but no money spent in this direction will yield a proper return unless cheap means of transit are provided. The improvement of Irish harbours may also be a good object in itself, but harbours are useful just in proportion as they are connected with an efficient railway service. It was a misfortune for Ireland that the comprehen- Lord Mei sive plan for the construction of Irish railways, pro- proposal posed by Lord Melbourne's Government about 1837, stmctSig proved abortive. That it should have miscarried ways. *" causes no wonder. It was bold and sagacious, but it was in advance of the times, and was made when railways were yet an unknown quantity in modern commercial and social development. The Eoyal Com- mission appointed in 1836 to consider a general system of railways for Ireland recommended two divisions, one northern and one southern, with cer- N 178 STATE PURCHASE OF RAILWAYS. tain trunk and branch lines. To avoid a partial execution of the plan, it was proposed that the Government should, in certain events, undertake the construction of the railways as public works. The Ministry adopted the views of the Commission and introduced into Parliament measures authorising them to construct certain lines, the management of which was to be vested in a Board of "Works. The House of Commons approved the proposals, but they were subsequently abandoned, with the result that Irish railways were left to private enterprise, which, suc- cessful in England and Scotland, has been in Ireland a conspicuous failure. History of From the outset the efforts of the railway companies ways. had to be bolstered up by State loans, sometimes for the purpose of construction, sometimes to pay off liabilities. Ever since 1842 the Government has, in a kind of grandmotherly way, looked after the Irish railways seeing them through the trials of infancy and coming to their relief in times of emergency. The early loans were very useful, and enabled many undertakings to live through the stages of probation. But on the whole the Irish railways have not been successful themselves, and they have failed to develop, as they ought to have done, the industries of the country. They are characterised by high charges, slow speed, insufficient accommodation, and poor dividends; while if Irish evidence is reliable they are a tax upon, rather than an assistance to, the Irish people. It is pretty clear indeed that Ireland derives STATE PURCHASE OF RAILWAYS. 179 less advantage from railways than any other country where they have been introduced. The Eoyal Commission of which the Duke of Th e Royal Commis- Devonshire was chairman (1865) refused to recom-sionof mend the purchase of the Irish railways. This Commission seems to have thought that a nation might be regenerated by homilies on the virtues of patience and humility. Irishmen were reminded that their railways were not unsatisfactory in proportion to their resources, that their geographical position and special industry were not favourable to a great increase of traffic, that their imports were small, that there was no wealthy resident population disposed to travel, and that there was a marked absence of commercial activity. In other words, they were told that, being a poor country, they ought to be content with a poor system of railways. Finally, the Commissioners were of opinion that it was important not to discourage private enterprise and self-reliance in Ireland. If we are to accept Lord Dufferin's account of the manner in which Irish industry has been strangled in the past, this was like binding a man's arms behind his back, and then tell- ing him to help himself. The Commission also declined to recommend State aid in reduction of rates on the ground that the subsidies would have to be extended to other industries, thus following the traditions of the school of statesmen who refuse reasonable requests for fear they should be asked to do something else, reason- able or unreasonable, afterwards. Notwithstanding the discouraging report of the N2 i8o STATE PURCHASE OF RAILWAYS. The Irish Royal Commission, the Government of which Lord Railway J Commis- Derby was the head determined to make an exhaustive sion of 1867. inquiry into the finances and efficiency of the Irish railways, and by a Treasury Minute, dated October, 1867, a Commission was appointed to obtain informa- tion as to the position, prospects, and value of the railways, and to ascertain the income, expenditure, assets and liabilities of each company. There can be no doubt that the real object of the Commission was to ascertain upon what terms the railways could be acquired. Their inquiry was in the nature of an audit and valuation, which are the indispensable preliminaries of purchase ; their instructions being to ascertain all the facts which a prudent person or company would require to be made acquainted with as a preliminary step towards entertaining the question of purchase as a commercial speculation. It is clear therefore that the Conservative Government had in contemplation the purchase of the railways. In the first report the Commission submitted a statement, now only of historical value, giving particulars of their audit and valuation, and showing the difference between actual condition and a proper state of efficiency. Expecta- The expectation that some decisive step was about tion of *"+* govern- to be taken was increased when the Commission was cha*e. pu " further directed to inquire into the Belgian system, and to supply estimates (1) of the loss which would result from the adoption in Ireland of the Belgian scale of rates, and of the time which would elapse STATE PURCHASE OF RAILWAYS. 181 before the increase of traffic would overtake the loss ; (2) of the saving to be effected by concentration of establishments; and (3) of the diminution of charge which could be made by placing the debenture capital under Government guarantees. The second report of the Commission contains a valuable account of the Belgian State railways up to that time, and of the commercial revolution which was being effected in that country. The Commissioners estimated that the adoption of the Belgian scale on the Irish lines would result at first in a decrease of 645,700 per annum, or 42 per cent, of the gross receipts, on the assumption that no increase of traffic would ensue ; that 32,000 per annum would be saved by concen- tration of managemeut, and 82,000 in interest, showing a net reduction of 525,700 annually upon the receipts. But they also arrived at the conclusion that at the expiration of eleven years the receipts from the increased traffic would pay all charges and leave a balance in favour of the exchequer. The report concludes as follows : " We do not feel it to be within the spirit of the instructions which we have received, to speculate upon the degree of material prosperity which would be given to Ireland by the adoption of a great reduction of rates and charges, and a concentration of management. It is, however, useful to know that if our antici- pations of the increase of traffic resulting from the reductions be realised, the public using the Irish railways would pay for such increased traffic during a period of twelve years, the sum of 12,000.000 less than they would have paid for such traffic at the existing rates ; but instead of this advantage being obtained by means of any permanent sacrifice on the part of the State, a clear profit of 50,000 would be secured in the twelfth year 1 82 STATE PURCHASE OF RAILWAYS. after payment of working charges, cost of increased accommoda- tion, and additional rolling stock, and interest on all capital pre- viously advanced, and a profit of 90,000 in the thirteenth year." To one not familiar. with the usual fate of Eoyal of Com rt Commissions, it must seem surprising that suggestions miSor 1 a so ^ U ^ ^ fitful potentialities should have been left tune for fey Government to be buried in the lumber of neg- Ireland. J lected Blue Books. The Commissioners may have taken too rosy a view of the prospect, but they were on the right path. An explanation of the neglect to give effect to their admirable recommendations may perhaps be found in the displacement of Lord Derby's Government, and the absorbing attention of their suc- cessors in the disestablishment of the Irish Church and in the first Irish Land Bill. Had effect also been given to the railway scheme, which appears to have been the intention of the Conservative Government, it is probable that the material interests of Ireland would have been greatly promoted. Report of The conclusions of subsequent Committees may be quentcom- briefly summarised. The Joint Select Committee of 1872 recommended no special remedy for Ireland, but contented themselves by reporting that it was notorious that the existence of numerous railway companies in the same district, or on the same route, led to very objectionable results. The Select Committee of 1882 were agreed " that the further amalgamation of the Irish railways would tend to economy and efficiency of working, and that such amalgamation should not only be urged upon the companies concerned, and STATE PURCHASE OF RAILWAYS. 183 meet with every facility which Parliament could offer for effecting the requisite arrangements, but also if necessary be made the subject of direct Parliamentary action." The Select Committee on Irish Industries which sat last year separated without completing their evidence. Such is the practical outcome of the various inquiries directed by Government. The Blue Books, however, contain a mass of evidence which presents the remarkable feature that Irish mercantile opinion, excluding the opinions of railway officials, is unanimous as to the desirability of amalgamating the Irish railways under State administration. The charges against the Irish system, which are Character- sustained by proof, are that it is poverty-stricken and Irish raii- n way sys- inefficient ; without spring, vitality, or power of self- tem. recovery and development ; that the decentralisation and multiplication of interests and direction render it wasteful and obstructive ; that the rates and fares are excessive and operate in restraint of industry; that while there is no effectual competition there is much jealousy, and an entire absence of harmonious work- ing ; that the accommodation is insufficient, and there is no prospect that private enterprise will provide the necessary extensions and connections. Mr. Grierson says nothing is worse for a district Poverty of the com- than a poor railway company. Ireland is covered with poor railways. According to the English standard of prosperity there are few successful rail- ways in Ireland. The Board of Trade return for 1885 contains the names of forty-seven companies, 184 STATE PURCHASE OF RAILWAYS. which are worked by twenty-six companies. Of these forty-seven companies thirty pay no dividend on ordinary shares, and five pay less than 3 per cent. Only about two hundred and forty miles of railway in Ireland pay from 5 to 5| per cent., the highest Irish dividend, except that of the six-mile line between Dublin and Kingstown, which reaches 9^ per cent. There are at this time nineteen Irish companies which are paying no dividend on preference shares, and which must be in an almost hopeless state of insol- vency. It is needless to urge that companies labour- ing under such financial embarrassments are not in a position to offer facilities for commerce or to properly develop traffic. Even the fairly prosperous com- panies, which work about half the mileage of the country, and pay dividends ranging from 3 to 5 per cent., cannot afford to reduce their rates with a view to increased traffic. All authorities are agreed that the companies cannot reasonably be expected to under- take the risk of a period of diminished profits. Share- holders are not tolerant of experiments made at their cost. The poverty of the companies necessitates not only the exaction of high charges for little work, but by reason of the deficiency of rolling stock prevents them from bidding for increased traffic, or even handling the ordinary traffic efficiently at times of pressure. Wasteful The administration of the Irish railways is no- admims- tration. toriously wasteful. One witness says that for the mileage there is nothing in the world to equal the STA TE PURCHA SE OF RAIL WA FS. 185 establishment charges of the Irish companies. Accord- ing to Bradshaw's Kail way Manual there are three hundred and three directors, ninety-seven secretaries, engineers, and managers, besides about sixty auditors and solicitors, engaged in the administration of rail- ways, the mileage of which is not largely in excess of that of the English Great Western. Mr. Findlay says that " there could be no difficulty whatever in manag- ing the whole of the railways by one board of directors, one manager, and one locomotive superintendent." The London and North- Western Eailway Company, the capital of which is three times greater and the receipts four times greater than the capital and receipts of all the Irish railways, and which carries three times the number of passengers and nine times the tonnage of minerals and merchandise, is managed by a board of thirty directors, a chairman, two deputy chairmen, and one general manager, the board meeting once a month. The Great Western, whose mileage nearly approaches that of the combined Irish companies, is managed by a board of sixteen directors, a general manager, and a secretary. The working expenditure of the London and North- Western is 51 per cent, of the receipts, that of the Great Western 49 per cent., that of the Irish companies 55 per cent. ; Government duty being reckoned in the charges of the English companies and not of the Irish. The result of amalgamation, as far as it has gone in Resul t of Ireland, has been successful. The amalgamation of Cation. the northern lines in 1876 was attended by increased i86 STATE PURCHASE OF RAILWAYS. facilities and reduced charges. The Great Northern of Ireland was composed of eleven lines, the greater number of which paid no dividend. The amalgamated companies now pay 4| per cent. The waste of money now caused by conflicting interests and management is but a small part of the evil. The delay and obstruction offered to commerce and communication weighs heavily against the success of industrial life. High The worst feature of the Irish system is the high restraint tariff, which all the witnesses describe as restraining P . , / O trade. The excessive charges, coupled with the low dividends, are prima facie proof of defective manage- ment, and make a case for inquiry. When English railway officials are asked for an explanation of the difference between English rates and Continental rates, their invariable answer is that the Continental railways have cost about two-thirds less to construct. Eut so have the Irish railways. In round figures, the English lines cost about 40,000 per mile, the Irish lines about 14,000 per mile. The Irish charges ought therefore to be on an equality with the Continental charges, and Irish commerce should have the benefit of cheap construction. Instead of that the Irish rates are not only higher than the Continental rates, but they are higher than the English rates often 30 per cent., and sometimes 50 per cent, higher. The average English charge for merchandise is, within a fraction, 5s. 6^d. per ton, the Scotch charge is 5s. 2id., the Irish charge is 6s. 8^d. The English charge for minerals is about STATE PURCHASE OF RAILWAYS. 187 Is. 8|d., the Scotch charge is Is. 5|d., while the Irish charge reaches the high average of 2s. 4^d. There can be no mistake about the significance of these figures. The proportional difference is some- times more and sometimes less than that represented by the average, but the mean figure gives a fair idea of the unfavourable manner in which Irish industry is handicapped in the commercial race. This is corro- borated by all other evidence. The witnesses tell the same story from beginning to end that the rates prevent the development of local resources, that existing industries are strangled, and that profits are devoured by transit charges. There is a constant reiteration of the same class of evidence, pointing to works closed, mills stopped, undertakings abandoned, and a decrease of native production, all of which is assigned, sometimes partially and sometimes wholly, to the railway system. It is probable that agriculture, as the chief of Irish industries, suffers most, but all existing industries are crushed, while no attempt can be made to establish any new industry. Enterprise can take no root in the country. The coal and mineral rates prohibit inland manu- factures. Mr. Findlay admits that there is 50 per rates - cent, difference between the coal rates of England and Ireland. One of the witnesses says that it costs more to get coal ten miles inland than to take it from Scot- land to a seaport. The Belgian iron trade which exists largely on imported ores, while its raw materials for that manufacture are rarely, if ever, in juxtaposi- 1 88 STATE PURCHASE OF RAILWAYS. tion, would collapse suddenly if it had to pay for mineral transport on the scale of the Irish railways. ruf rates 11 " Ireland nas been, and should continue to be, a famous stock-raising country, but graziers and dealers do not get adequate facilities from the railway com- panies. The Eoyal Commission of 1865 stated that it was cheaper for Irish farmers and cattle-dealers to drive their lean stock by road than to send it by rail, and the same thing was repeated before the Select Com- mittee of 1885. But not only is stock sent by-road, there is also a heavy and continuous road traffic in mer- chandise between different Irish town which are connec- ted by railways. Another witness says that the rates for the carriage of soap are so high that it is the practice to send the goods to England and have them reshipped to Ireland, in order to get the benefit of the through English rates. It seems almost incredible, but there is evidence to that effect. All efforts to revive the woollen industry have been frustrated by the high rates. The growth of flax is decreasing for the same reason. The railways have killed the milling industry. The witnesses say that you may count silent mills in Ireland by the thousand. The freight turns the scale against the home produce. A parcel which travels five hundred miles in England for sixpence costs one shilling for thirty miles in Ireland. illiberal The classification is less liberal than in England. tion S in C At the same time, it is admitted by railway experts that there is less necessity in Ireland than in England for a complicated classification. There are complaints STATE PURCHASE OF RAILWAYS. 189 in Ireland similar to those with which we are familiar in Great Britain of preferential and differential rates, of diversions of traffic, of inequalities and anomalies. In the instances adduced there are to be found examples of a double rate for corresponding distances, of the same rate for double the distance, of much larger gross rates for shorter than longer distances, of different tariffs on different lines, and of inequalities between districts. The same reluctance is also ob- served on the part of railway companies to furnish information, and on the part of traders to give evidence. It is unnecessary to add that there is no effective Absence of competi- competition in Ireland. Where the companies come tion. into actual competition they arrange the rates, as in England. Mr. Findlay says if you had competing railways in Ireland there would be nothing left of them. The passenger traffic is no better than the goods traffic. A favourite explanation of the low Continental rates and fares is, that the service is slower, and that quick travelling and delivery is not a primary consideration as in England ; the Irish trains are no quicker than the Continental trains, but travellers do not in consequence get the benefit of the Continental scale of charges. Mixed trains are common, in which passengers, minerals, and merchan- dise all travel together. There is no passenger duty in Ireland, yet passengers do not profit by the exemp- tion. The passenger fares are higher than in Great Britain. The average fare for each passenger in 190 STATE PURCHASE OF RAILWAYS. England is S^d., in Scotland lOJd., in Ireland Is. 3|d. The pleasure traffic in Ireland is on an illiberal scale, and it is said that it is cheaper for Irishmen to visit England and Scotland than to go to their own holiday resorts. Locairates In considering the grievance of Irish traders it is through necessary to distinguish carefully between the local or Irish rates and the through rates between England and Ireland. It is the relation which they bear to each other which causes much of the dissatisfaction which exists, and constitutes one of the difficulties of the Irish problem. By the arrangements of the Irish and English Traffic Conference there is through book- ing of passengers and goods between every principal station in Ireland and every principal station upon the London and North- Western, the Great Northern, the Midland, and the Lancashire and Yorkshire rail- ways. These rates, although they may not amount in law to undue preference, are regarded by Irish manufacturers and merchants as preferential, and give rise to much exasperation. The Commission of 1868 expressed the opinion that Ireland required a special stimulus for short traffic, which was mainly local, from town to town. The double action of low through rates and high local rates destroys this inland commerce. There are, however, two sides to the question. Upon the whole it can hardly admit of doubt that the through rates .are for the advantage of the Irish people. They are able to buy in the best market and to sell in the best market. There has been an enormous STA TE PURCHA SE OF RAIL WA FS. 191 development of intercourse between the two countries since the Traffic Conference was established. The passenger traffic has trebled within ten years, and the goods traffic has more than doubled. It is a great advantage to the people to have delivery to or from England within forty-eight hours. On the other hand, to certain classes of producers and traders it consti- tutes just the same kind of grievance as that felt by English producers when foreign produce is carried over English lines at lower rates than English pro- duce. English manufacturers are able to send goods into Ireland from long distances at lower rates than Irish manufacturers can send to the same places from their centres of industry. Eailway officials admit that it is cheaper to send to Limerick, Galway, or Omagh from Manchester, Birmingham, and Bradford, than it is to send from Cork, Dublin, or Belfast. The combined operation of the through rate and Effects on the local rate breaks down the Irish manufacturer, tures. The weight is taken off the through traffic and put on the local traffic. The through rate is advantageous to the Irish consumer; it is also good for the Irish producer in so far as it finds him a ready foreign market. But, on the contrary, it is a misfortune that rates should be so arranged as to close Irish markets to Irish manufacturers, and this must be the case so long as people in remote Irish towns can get goods more cheaply from England than they can from Irish ports. In order to give Irish industries a fair chance and 192 STATE PURCHASE OF RAILWAYS. ^ P reserve the open market to the Irish people, both wanted. f or sa } e an( j p urc hase, it is desirable that the local rates should be reduced to the level of the through rates. This will not happen under the joint stock system. The Irish companies cannot afford to do it, and the English companies, as a matter of self-interest, do all they can to stimulate the through traffic at the expense of the local traffic. As in England so in Ireland, there are some persons who want protective rates in the form of mileage rates, or other arrange- ments which will secure to them the advantages of geographical location. The Belfast and Dublin trader wants a rate which will enable him to import goods from England and resell them in Ireland ; in short, he wants protection as an intermediary between the English manufacturer and the Irish consumer. The through rates are destructive of this position, and so far they are for the benefit of the general consumer ; but they are also preferential in comparison with Irish rates. Probably we should hear less of the desire of the Irish people for the protection of their native industries if the railway rates were arranged less to the positive disadvantage of native industry. At present Irish producers are unfairly weighted by an artificial system. Deficient Ireland also suffers from deficient accommodation dation. and incomplete communication. The plan of the system is piecemeal and haphazard. The inconveni- ence is felt severely in the fishing industry, which is located in just that part of Ireland where there are no STATE PURCHASE OF RAILWAYS. 193 railways or tramways. The west of Ireland is very much isolated as regards the north and east. But all industries, and especially agriculture, suffer from the same cause. No remedy is to be found in connection with the Irish railway system on its present basis. The Tramways and Public Companies Act, 1883, was an admission on the part of the Government that no further private capital, unguaranteed by the State, can be found for the extension of the Irish railway system. The recognised wants of Ireland are 1. A large reduction of rates and fares. wants. 2. Amalgamation and harmonious management. 3. Extension and completion of connections. How are these wants to be supplied ? Let us take Exten sions. the last item first. The concurrent testimony of all the witnesses examined on the subject is to the effect that no future extensions can be looked for, either from the existing companies or from private enter- prise. They must therefore, if made at all, be secured by some form of Government intervention. Even railway officials agree in this proposition. But if branch lines and the necessary connections are made by the State while the existing railways, which they necessarily feed, remain the property of the com- panies, the State would be sacrificed for the benefit of the shareholders, and the State operations would receive the immediate appreciation of the Stock Ex- change in a corresponding rise in the price of Irish railway shares. The extension and completion of the 1 94 STA TE PURCHA SE OF RAIL WA FS. system cannot therefore be profitably undertaken without the acquisition of the railways by the State. Mr ; rind- In connection with this part of the subject it will posais. be useful to consider a scheme which Mr. Findlay, whose experience entitles his opinion to weight, laid before the Select Committee on Irish Industries last year. In outline his proposals are, that Ireland should be divided between four companies, and that these companies should have power to acquire the smaller lines in their districts. That the Government should guarantee to the Irish shareholders a dividend based on the average of preceding years. That in return for such guarantee the Government should have an ex-officio representation on the Irish boards in the person of a chief commissioner. That the chief commissioner should have power to initiate a revision of the tariff, to be settled, in case of dispute, by the Eailway Commissioners. That the profits above the guaranteed dividend should be divided between the companies and the Government. That the Government should find the existing railways capital for extensions to be worked on terms to be agreed upon; Mr. Findlay's idea being that they should be worked at cost price. Defects of These suggestions are subject to the fatal defect proposed scheme, that they are rather for the advantage of the railway companies than for the benefit of Irish industry. The proposed amalgamations in districts would involve the concession of a legal monopoly, which would not be for the public advantage. No Government is likely to guarantee the dividends of lines over which it has STATE PURCHASE OF RAILWAYS. 195 not full power of control, involving interference in the^ internal affairs of the companies and the decision of the economies which could be made. It is con- ceivable that to secure the construction of railways where they do not exist, and with, a view of develop- ing the resources of the country, it may be worth the while of a Government to guarantee an interest on the capital required to construct them. This was the motive for our Government guarantees on Indian rail- ways, and is that on which foreign Government guarantees are made. But what advantage can a Government derive from guaranteeing a dividend on the capital of railways already constructed and at work ? Is it likely either that any sane Government would undertake the burthen of dividend on existing railways and leave them to be worked under the con- trol and management of the companies ? Mr. Findlay himself would hardly seriously contend after due re- flection that a Government director sitting at Irish railway boards, with the functions of Sir Juland Danvers on Indian railways, would be able to exercise any efficient check on the management. The principle of a partnership between the com- Partner- panies and the Government, or the public, was con- tween sidered by the Joint Select Committee of 1872, andmentand was properly condemned as impracticable. If the scheme proposed by Mr. Findlay was successful, the shareholders would derive the greatest benefit. If it was a failure the country would have to bear the loss. Mr. Findlay acknowledges that private enterprise 196 STATE PURCHASE OF RAILWAYS. cannot make a profit out of extensions, and yet he proposes the construction out of Government money of new lines, which would act as feeders to the exist- ing railways, which in their turn would feed the English system. Mr. Findlay approaches the subject with the generosity popularly ascribed to people who are disposing of other people's money. He says, " What would it matter to the Government of a country like this to spend five or ten millions of money in opening up those poor districts of Ireland? It would be a very small thing. If the money were raised at 3 per cent, it would only be a question of three or four hundred thousand a year." The remedy for Ireland must go deeper than Mr. Findlay supposes. If the Government takes the risk it must take the con- trol, and work the railways for the benefit of industry and commerce and in the true interests of the people. The Bel- I n his evidence before the Select Committee Mr. gian plan. Findlay said, " There is no doubt that if Parliament thought it desirable to adopt the plan of managing railways in Ireland upon the principle upon which the State have managed the railways in Belgium, great advantages might be given to some one." Then he adds, " But if large reductions of rates were made it does not at all follow that the consumer would get the advantage of it ; it would be rather the manufac- turer, or the middleman, or some other person in the trade who would get it." The latter part of the answer is the old protectionist argument renewed, that a moderate duty on wheat would not raise the price STATE PURCHASE OF RAILWAYS. 197 of bread. It is, however, too late to endeavour to convince economists that reducing the price of an article does not cheapen its cost to the consumer. Middlemen levy their tax on expensive and inexpen- sive things with equal impartiality. We may rest assured that the consumer and the community in general would wholly benefit by any reduction of rates. Besides, as has been, I think, conclusively shown in the article in this Eeview before referred to, one of the tendencies of the simplification and reduc- tion of rates is to bring the producer and the con- sumer into direct communication, and to enable them to dispense with the services and the charges of the middleman. Is it open to reasonable doubt that the commercial prosperity of Belgium has been owing, amongst other causes, to the low railway rates introduced by the State, and that this is the chief reason that the Belgian maufacturers have been able to compete successfully in markets which were formerly supposed to be ex- clusively English ? Under State administration of the railways, in which the principle is pursued of applying the profits mainly in reduction of rates the most fruitful use to which profits can be turned the commerce of Belgium has undergone an enormous expansion, amounting to a commercial revolution. The reduction in the goods tariff began in 1856. In that year the State railways carried 2,545,000 tons of goods. In 1864 they carried 5,251,000 tons. The increase of tonnage in eight years was 106 per cent., 1 98 STATE PURCHASE OF RAILWAYS. and the increase of receipts 49 per cent. The public saved by the reduction in rates 800,000 in the cost of carriage, and the Treasury realised a profit of 231,240, after paying expenses and interest on out- lay. In the report which Sir B. Samuelson lately made to the President of the Chambers of Commerce, he states that the Belgian Government have made a profit since the commencement of 3,900,000. The effect of the State railways on the development of commerce is shown by a comparison of the gross receipts of the railways for 1870 with those of 1883. In the former year they amounted to 1,815,000, and in the latter they reached 4,880,000, showing an increase of 168 per cent, in thirteen years. A com- parison of the rates charged in Belgium with those of England is very much against our own country, and still more unfavorable to Ireland. Conces- It may be argued that there is no analogy between sions to agricui- Ireland and Belgium, the one being an agricultural ture. country and the other a manufacturing country. Granted that that is so, it surely is an exploded idea that agriculture does not require facilities for transit. It is the enormous extension of those facilities in other countries which makes agricultural competition so hard to meet. Treating Ireland as a purely agricultural country, there is the more need, if agriculture is to be preserved as a profitable industry in these islands, that every obstruction to quick and cheap transport should be removed. But Ireland has other resources besides those of agriculture, which only need develop- STATE PURCHASE OF RAILWAYS. 199 ment. The manufacturing trade of Belgium depends largely on imports, and for the purposes of importation Ireland has natural advantages as great as those of any country of her area in the world. The increase of communication which followed the making of roads in Ireland in 1836 produced some remarkable results, but nothing in comparison with what may be expected from the nationalisation of the railways. In my former article I endeavoured to show that it Usual ob- was practicable to introduce into our railway system state P ur- , . . . . . chase. the post-office principle of a single rate, irrespective of distance. In the criticisms upon that article in the press no attempt was made to show that the basis of the calculations was incorrect or that the proposal was impracticable. But an almost universal objection to State purchase was made on the ground of the magni- tude of the undertaking. An operation involving a sum exceeding the amount of the national debt was pronounced too gigantic to be carried out. It is probable that in England its size may retard the realisation of the idea until the people have learned to look it in the face, to understand its utility, and to recognise that its advantages to the community are on or above the scale of its dimensions. If, however, the English railway estate is thought ^ n ^' ec " too lame to handle, this objection on the score of size I 1 rish P" 3 "" J chase on cannot be urged against the State purchase of Irish account of railways. A system of railways greatly inferior in tude - capital, movement, traffic, and revenue to the London and North- Western Bail way, which is efficiently 200 STATE PURCHASE OF RAILWAYS. administered by one board of directors, will not be considered above the capacity of Government officials even by the upper middle class, which arrogates to itself the special gift of administration. It will hardly be contended that even in Ireland the united wisdom of three hundred directors, aided by a proportionate num- ber of managers, engineers, lawyers, and secretaries, is needed to work 2,500 miles of railway. Nor in a country where to secure national contentment and pros- perity statesmen gravely contemplate the acquisition of its landed property, can the acquisition of the railways be considered either too novel, too expensive, too dangerous, or surrounded with too much risk. The proportions of the financial part of the operation sink into insignificance by the side of the money involved in the various schemes propounded for the pacification and advancement of Ireland. I venture therefore to think that the consideration of the subject is opportune, and that it is, so to say, a Vordre du jour. Practica- Ireland is a country where a single gross rate, single irrespective of distance, would be for some reasons exceptionally feasible. It is a country of short distances, it being nowhere more than fifty miles to the seaboard. It is also a country where the greatest proportion of the traffic travels for a short distance only. In my former paper I made some calculations showing what it would cost to bring down the rate in England and Wales to Is. per ton for minerals, and 4s. for merchandise ; those charges to cover carriage over all distances, terminals, and all expenses of hand- STA TE PURCHA SE OF RAIL WA YS. 201 ling, except haulage outside the station. I am still of opinion that that would be a practicable reform in our own country and would eventually become remunerative. But in Ireland the charges could be brought down The still lower without any large present sacrifice on the fi c d e in- n " part of the State, with great immediate advantages to M the community, with no risk of heavy losses, but, on the contrary, with every prospect that a great and much needed stimulus would be given to every depart- ment of Irish industry and commerce. The Irish railways in 1885 carried 1,022,026 tons of minerals for 120,791, or at the rate of about 2s. 4^d. per ton. Of general merchandise they carried 2 3 704,254 tons for 906,929, or at the rate of about 6s. S^d. per ton. They also carried live stock for which they received 221,069, a very important item in Irish traffic. If the rate for minerals were reduced to Is. per ton, which would be a very large reduction on the present Irish rates, the sacrifice of revenue on the present traffic would amount to 69,690. If the rates for goods were reduced to 3s. 4d., which would be an exceedingly low rate, to include both carriage and terminals, the sacrifice of revenue would amount to 456,204. If the carriage of cattle were reduced by one-half, the sacrifice would be 110,534. Thus, for a total sacrifice of 636,428 per annum the Irish rates might be reduced all round by more than one-half of the present charges. This is just about the same reduction as was proposed in 1868. Taking the very worst view of it, that there was no large increase of p ' 202 STATE PURCHASE OF RAILWAYS. traffic, the money would not be thrown away, it would go into the pockets of the community; but all the teachings of experience show that it would give an immense spur to industry, and that in a short time the traffic would become directly remunerative to the Government, Either that is so, or else it is impossible to take any steps to improve the material condition of the country. Advocacy I should not be in favour of making the large of grad- ual reform reductions suggested all at once, or of introducing a of rated. single rate at the outset. That would be approached gradually, by two rates or three rates, arranged according to a distance scale. Probably in Ireland, where the distances are comparatively so short, it would be found sufficient to begin with two rates, a local rate for short distance to be agreed upon, and a through rate for all other distances. The fewer rates Better f r ^ ne sa ^ e f simplicity, the encourage - m ent thereby offered to exchange, and the certainty that the benefits would go straight down to the community. If the plan were introduced in this gradual way, and account is taken of the saving which would be effected by single management and of the low rate of interest which Government would pay for the money they required, the probability is that the cost of the experiment, including the necessary extensions and connections, and making also a large reduction in passenger fares on the same principle as that applied to rates, would not exceed half a million annually a small sum when we reflect on the vast increase of STATE PURCHASE OF RAILWAYS. 203 happiness and prosperity which it would open up to the Irish people. The success of the Irish and the English Traffic Conference, in developing exchange by means of low through rates, shows that there are resources and materials in Ireland which would be brought into vigorous life by encouragement, and leads to the conviction that the railways in the hands of the State would soon become a highly remunerative property. The financial part of the transaction would be a Amount of comparatively small matter. The stocks to be dealt F with amount to about thirty-five millions, of which the ordinary shares come to 16,578,988, on much of which no dividend is earned, and which consequently is worth little. The guaranteed shares amount to 1,205,076 ; the preferential shares to 8,065,358 ; the loans and debentures to 9,748,167. The total of the financial operation would therefore appear to be between twenty and thirty millions sterling probably nearer the former than the latter sum an amount insignificant by the side of the proposals recently made for the improvement and pacification of Ireland. It is not the business of a private individual to speculate as to the price which should be paid for the railways ; that is a question between the Government and the proprietors. It may be pointed out, however, that there is one element of simplicity in the case of Ireland which does not apply to England. There would be no claim for unearned increment, for it is abundantly clear that the Irish railways under joint-stock manage- 2 o 4. STA TE PURCHA SE OF RAIL WA YS. ment have no prospective value. It would be far otherwise, however, if they were in the hands of the Government ; and if and when the democracy once realise the value of the unearned increment of such a wealth-creating instrument as the railway system, which they may possess themselves of without violating any of the rights of property, they will soon find a statesman of a stature equal to the magnitude of the undertaking. OF THE 7BRSJT7 PBINTED BY J. 8. VIKTUK AND CO., LIMITED, CITY KOAD, LONDON. ii, HENRIETTA STREET, COGENT GARDEN, W.C. MAY, 1887. Catalogue of PUBLISHED BY CHAPMAN & HALL, LIMITED. FOR Drawing Examples, Diagrams, Models, Instruments, etc,, ISSUED UNDER THE AUTHORITY OF THE SCIENCE AND ART DEPARTMENT, SOUTH KENSINGTON, FOR THE USE OF SCHOOLS AND ART AND SCIENCE CLASSES, See separate Illustrated Catalogue. THOMAS CARLYLE'S WORKS. MESSRS. CHAPMAN & HALL are now publishing an entirely New Edition of the Writings of MR. 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WILHELM MEISTER. 3 vols. ON HEROES AND HERO ' TRANSLATIONS FROM MU- WORSHIP. S^EUS, TIECK, AND RICHTER. PAST AND PRESENT. KINQS QF NQR CRITICAL AND MISCELLA- ] WAY ; Essay on the Portraits of Knox NEOUS ESSAYS. 7 vols. and General Index. SARTOR RESARTUS. Cheap Edition, crown 8vo, sewed, is. SIXPENNY EDITION. 4/0, sewed. SARTOR RESARTUS. Eightieth Thousand. HEROES AND HERO WORSHIP. ESSAYS : BURNS, JOHNSON, SCOTT, THE DIAMOND NECKLACE. The above in I vol., cloth, 2s. 6d. CHAPMAN &* HALL, LIMITED. 31 DICKENS'S (CHARLES) WORKS. ORIGINAL EDITIONS. In demy 8vo. THE MYSTERY OF EDWIN DROOD. With Illustrations by S. L. Fildes, and a Portrait engraved by Baker. Cloth, 75. 6d. OUR MUTUAL FRIEND. With Forty Illustrations by Marcus Stone. Cloth, i is. THE PICKWICK PAPERS. With Forty-three Illustrations by Seymour and Phiz. Cloth, .1 is. NICHOLAS NICKLEBY. With Forty Illustrations by Phiz. Cloth, i is. SKETCHES BY BOZ." With Forty Illustrations by George Cruikshank. Cloth, 1 is. MARTIN CHUZZLEWIT. With Forty Illustrations by Phiz. Cloth, ,1 is. DOMBEY AND SON. With Forty Illustrations by Phiz. Cloth, l IS. DAVID COPPERFIELD. With Forty Illustrations by Phiz. Cloth, i is. BLEAK HOUSE. With Forty Illustrations by Phiz. Cloth, i is. LITTLE DORRIT. With Forty Illustrations by Phiz. Cloth, i is. THE OLD CURIOSITY SHOP. With Seventy-five Illus- trations by George Cattermole and H. K. Browne. A New Edition. Uniform with the other volumes, i is. BARNABY RUDGE : a Tale of the Riots of 'Eighty. With Seventy-eight Illustrations by George Cattermole and H. K. Browne. Uniform with the other volumes, i is. CHRISTMAS BOOKS : Containing The Christmas Carol ; The Cricket on the Hearth ; The Chimes ; The Battle of Life ; The Haunted House. With all the original Illustrations. Cloth, 125. OLIVER TWIST and TALE OF TWO CITIES. In one volume. Cloth, i is. OLIVER TWIST. Separately. With Twenty-four Illustrations by George Cruikshank. Cloth, i is. A TALE OF TWO CITIES. Separately. With Sixteen Illus- trations by Phiz. Cloth, 95. * * The remainder of Dickenfs Works were not originally printed in demySvo. BOOKS PUBLISHED BY DICKENS'S (CHARLES) WORKS. Continued. LIBRARY KDITION. In post 8vo. With the Original Illustrations, 30 vols. , cloth, 12. s. d. PICKWICK PAPERS 43 Illustrns. , 2 vols. 16 o NICHOLAS NICKLEBY 39 2 vols. 16 o MARTIN CHUZZLEWIT 40 2 vols. 16 o OLD CURIOSITY SHOP & REPRINTED PIECES 36 2 vols. 16 o BARN ABY RUDGE and HARD TIMES 36 2 vols. 16 o BLEAK HOUSE 40 2 vols. 16 o LITTLE DORRIT 40 2 vols. 16 o DOMBEY AND SON 38 ,, 2 vols. 16 o DAVID COPPERFIELD 38 2 vols. 16 o OUR MUTUAL FRIEND 40 2 vols. 16 o SKETCHES BY "BOZ" 39 ,, I vol. 8 o OLIVER TWIST 24 i vol. 8 o CHRISTMAS BOOKS 17 * vol. 8 o A TALE OF TWO CITIES 16 ,, i vol. 8 o GREAT EXPECTATIONS 8 i vol. 8 o PICTURES FROM ITALY & AMERICAN NOTES 8 i vol. 8 o UNCOMMERCIAL TRAVELLER 8 I vol. 8 o CHILD'S HISTORY OF ENGLAND 8 i vol. 8 o EDWIN DROOD and MISCELLANIES 12 i vol. 8 o CHRISTMAS STORIES from "Household Words," &c. 14 ,, i vol. 8 o THE LIFE OF CHARLES DICKENS. By JOHN FORSTER. With Illustrations. Uniform with this Edition. los. 6d. A NEW EDITION OF ABOVE, WITH THE ORIGINAL ILLUSTRA- TIONS, IN CROWN 8vo, 30 VOLS. IN SETS ONLY. CHAPMAN S- HALL, LIMITED. 33 DICKENS'S (CHARLES) WORKS. Continued. THE "CHARLES DICKENS" EDITION. In Crown Svo. In 21 vols., cloth, with Illustrations, 3 i6s. s. d. PICKWICK PAPERS 8 Illustrations ... 4 o MARTIN CHUZZLEWIT 8 ... 4 o DOMBEY AND SON - 8 ...4 o NICHOLAS NICKLEBY 8 ... 4 o DAVID COPPERFIELD 8 ,, ... 4 o BLEAK HOUSE 8 ... 4 o LITTLE DORRIT , 8 ... 4 o OUR MUTUAL FRIEND 8 ... 4 o BARNABY RUDGE 8 ... 3 6 OLD CURIOSITY SHOP 8 ,, ... 3 6 A CHILD'S HISTORY OF ENGLAND 4 ... 3 6 EDWIN DROOD and OTHER STORIES 8 ... 3 6 CHRISTMAS STORIES, from "Household Words"... 8 ,, ...3 6 SKETCHES BY "BOZ" 8 ... 3 6 AMERICAN NOTES and REPRINTED PIECES ... 8 ...3 6 CHRISTMAS BOOKS 8 ... 3 6 OLIVER TWIST 8 ... 3 6 GREAT EXPECTATIONS 8 ... 3 o TALE OF TWO CITIES 8 ... 3 o HARD TIMES and PICTURES FROM ITALY ... 8 ... 3 o UNCOMMERCIAL TRAVELLER 4 ... 3 o THE LIFE OF CHARLES DICKENS. Numerous Illustrations. 2 vols. 7 o THE LE FTERS OF CHARLES DICKENS... 2 vols. 7 o 34 BOOKS PUBLISHED BY DICKENS'S (CHARLES) WORKS. Continued. THE ILLUSTRATED LIBRARY EDITION. Complete in jo Volumes. Demy 8vo, ros. each ; or set, 15, This Edition is printed on a finer paper and in a larger type than has been employed in any previous edition. The type has been cast especially for it, and the page is of a size to admit of the introduction of all the original illustrations. No such attractive issue has been made of the writings of Mr. Dickens, which, various as have been the forms of publication adapted to the demands of an ever widely-increasing popularity, have never yet been worthily presented in a really handsome library form. The collection comprises all the minor writings it was Mr. Dickens's wish to preserve. SKETCHES BY " BOZ." With 40 Illustrations by George Cruikshank. PICKWICK PAPERS. 2 vols. With 42 Illustrations by Phiz. OLIVER TWIST. With 24 Illustrations by Cruikshank. NICHOLAS NICKLEBY. 2 vols. With 40 Illustrations by Phiz. OLD CURIOSITY SHOP and REPRINTED PIECES. 2 vols. With Illus- trations by Cattermole, &c. BARNABY RUDGE and HARD TIMES. 2 vols. With Illustrations by Cattermole, &c. MARTIN CHUZZLEWIT. 2 vols. With 40 Illustrations by Phiz. AMERICAN NOTES and PICTURES FROM ITALY. i vol. With 8 Illustrations. DOMBEY AND SON. 2 vols. With 40 Illustrations by Phiz. DAVID COPPERFIELD. 2 vols. With 40 Illustrations by Phiz. BLEAK HOUSE. 2 vols. With 40 Illustrations by Phiz. LITTLE DORRIT. 2 vols. With 40 Illustrations by Phiz. A TALE OF TWO CITIES. With 16 Illustrations by Phiz. THE UNCOMMERCIAL TRAVELLER. With 8 Illustrations by Marcus Stone. GREAT EXPECTATIONS. With 8 Illustrations by Marcus Stone. OUR MUTUAL FRIEND. 2 vols. With 40 Illustrations by Marcus Stone. CHRISTMAS BOOKS. With 17 Illustrations by Sir Edwin Landseer, R.A., Maclise, R.A., &c. &c. HISTORY OF ENGLAND. With 8 Illustrations by Marcus Stone. CHRISTMAS STORIES. (From "Household Words" and "All the Year Round.") With 14 Illustrations. EDWIN DROOD AND OTHER STORIES. With 12 Illustrations by S, L. Fildes. CHAPMAN & HALL, LIMITED. 35 DICKENS'S (CHARLES) WORKS. Continued. THE POPULAR LIBRARY EDITION OF THE WORKS OF CHARLES DICKENS, In 30 Vols. , large crown $vo, price 6 ; separate Vols. 4^. each. An Edition printed on good paper, each volume containing 1 6 full-page Illustrations, selected from the Household Edition, on Plate Paper. SKETCHES BY "BOZ." PICKWICK. 2 vols. OLIVER TWIST. NICHOLAS NICKLEBY. 2 vols. MARTIN CHUZZLEWIT. 2 vols. DOMBEY AND SON. 2 vols, DAVID COPPERFIELD. 2 vols. CHRISTMAS BOOKS. OUR MUTUAL FRIEND. 2 vols. CHRISTMAS STORIES. BLEAK HOUSE. 2 vols. LITTLE DORRIT. 2 vols. OLD CURIOSITY SHOP AND REPRINTED PIECES. 2 vols. BARNABY RUDGE. 2 vols. UNCOMMERCIAL TRAVELLER. GREAT EXPECTATIONS. TALE OF TWO CITIES. CHILD'S HISTORY OF ENGLAND. EDWIN DROOD AND MISCELLANIES. PICTURES FROM ITALY AND AMERICAN NOTES 36 BOOKS PUBLISHED BY DICKENS'S (CHARLES) WORKS. Continued. HOUSEHOLD EDITION. /;/ 22 Volumes. Crown 4/0, cloth, <\. Ss. 6d. MARTIN CHUZZLEWIT, with 59 Illustrations, cloth, 55. DAVID COPPERFIELD, with 60 Illustrations and a Portrait, cloth, 55. BLEAK HOUSE, with 61 Illustrations, cloth, 5 s. LITTLE DORRIT, with 58 Illustrations, cloth, 55. PICKWICK PAPERS, with 56 Illustrations, cloth, 53. OUR MUTUAL FRIEND, with 58 Illustrations, cloth, 55. NICHOLAS NICKLEBY, with 59 Illustrations, cloth, 53. DOMBEY AND SON, with 61 Illustrations, cloth, 53. EDWIN DROOD ; REPRINTED PIECES ; and other Stories, with 30 Illustra- tions, cloth, 53. THE LIFE OF DICKENS. BY JOHN FORSTER. With 40 Illustrations. Cloth, 53. BARNABY RUDGE, with 46 Illustrations, cloth, 45. OLD CURIOSITY SHOP, with 32 Illustrations, cloth, 43. CHRISTMAS STORIES, with 23 Illustrations, cloth, 45. OLIVER TWIST, with 28 Illustrations, cloth, 33. GREAT EXPECTATIONS, with 26 Illustrations, cloth, 33. SKETCHES BY "BOZ," with 36 Illustrations, cloth, 33. UNCOMMERCIAL TRAVELLER, with 26 Illustrations, cloth, 33. CHRISTMAS BOOKS, with 28 Illustrations, cloth, 3 s. THE HISTORY OF ENGLAND, with 15 Illustrations, cloth, 33. AMERICAN NOTES and PICTURES FROM ITALY, with 18 Illustrations, cloth, 35. A TALE OF TW T O CITIES, with 25 Illustrations, cloth, 33. HARD TIMES, with 20 Illustrations, cloth, 23. 6d. CHAPMAN & HALL, LIMITED. 37 DICKENS'S (CHARLES) WORKS. Continued. THE CABINET EDITION. Now Publishing. To be completed in 30 vols. small fcap. Svo, Marble Paper Sides, Cloth Backs, with uncut edges, price Eighteenpence each. A Complete Work will be Published every Month, and each Vohtme will contain Eight Illustrations reproduced from the Originals. CHRISTMAS BOOKS, One Vol., MARTIN CHUZZLEWIT, Two Vols. DAVID COPPERFIELD, Two Vols., OLIVER TWIST, One Vol., GREAT EXPECTATIONS, One Vol., NICHOLAS NICKLEBY, Two Vols., SKETCHES BY " BOZ," One Vol., CHRISTMAS STORIES, One Vol., THE PICKWICK PAPERS, Two Vols., BARNABY RUDGE, Two Vols., BLEAK HOUSE, Two Vols., EDWIN DROOD; AND OTHER STORIES. [In the Press MR. DICKENS'S READINGS. Fcap. 8v0, sewed. CHRISTMAS CAROL IN PROSE, is. CRICKET ON THE HEARTH, is. CHIMES: A GOBLIN STORY, is. STORY OF LITTLE DOMBEY. is. POOR TRAVELLER, BOOTS AT THE HOLLY-TREE INN, and MRS. GAMP. is. A CHRISTMAS CAROL, with the Original Coloured Plates, being a reprint of the Original Edition. Small Svo, red cloth, gilt edges, s. 38 BOOKS PUBLISHED BY DICKENS'S (CHARLES) WORKS. Continued. CHARLES DICKENS'S CHRISTMAS BOOKS. REPRINTED FROM THE ORIGINAL PLATES. Fcap. cloth, is. each. Complete in a case, js. Illustrated by JOHN LEECH, D. MACLISE, R.A., R. DOYLE, C. STANFIELD, R.A., &c. A CHRISTMAS CAROL IN PROSE. THE CHIMES : A Goblin Story. THE CRICKET ON THE HEARTH: A Fairy Tale of Home. THE BATTLE OF LIFE. A Love Story. THE HAUNTED MAN AND THE GHOST'S STORY. The Cheapest and Handiest Edition of THE WORKS OF CHARLES DICKENS. The Pocket-Volume Edition of Charles Dickens's Works. In 30 Vols. small f cap. Svo, 2 55. SIXPENNY REPRINTS: (i.) READINGS FROM THE WORKS OF CHARLES DICKENS. As selected and read by himself and now published for the first time. Illustrated. (II.) A CHRISTMAS CAROL, AND THE HAUNTED MAN. By CHARLES DICKENS. Illustrated. (HI. THE CHIMES: A GOBLIN STORY, AND THE CRICKET ON THE HEARTH. Illustrated. (IV.) THE BATTLE OF LIFE: A LOVE STORY, HUNTED DOWN, AND A HOLIDAY ROMANCE. Illustrated. The last Three Volumes as Christmas Works, In One Volume, red cloth, 2s. 6d. CHAPMAN &. HALL, LIMITED. 39 T THE FORTNIGHTLY REVIEW. Edited by FRANK HARRIS. HE FORTNIGHTLY REVIEW is published on the ist of every month, and a Volume is completed every Six Months. The following are among GRANT ALLEN. I SIR RUTHERFORD ALCOCK. MATHEW ARNOLD. PROFESSOR BAIN. SIR SAMUEL BAKER. PROFESSOR BEESLY. PAUL BERT. BARON GEORGETON BUNSEN. DR. BRIDGES. HON. GEORGE C. BRODRICK. JAMES BRYCE, M.P. THOMAS BURT, M.P. SIR GEORGE CAMPBELL, M.P. THE EARL OF CARNARVON. EMILIO CASTELAR. RT. HON. J. CHAMBERLAIN, M.P. PROFESSOR SIDNEY COLVIN. MONTAGUE COOKSON, Q.C. L. H. COURTNEY, M.P. G. H. DARWIN. SIR GEORGE W. DASENT. PROFESSOR A. V. DICEY. M. E. GRANT DUFF, M.P. T. H. S. ESCOTT. RIGHT HON. H. FAWCETT, M.P. EDWARD A. FREEMAN. J. A. FROUDE. MRS. GARRET-ANDERSON. J. W. L. GLAISHER, F.R.S. SIR J. E. GORST, Q.C., M.P. THOMAS HARE. F. HARRISON. LORD HOUGHTON. PROFESSOR HUXLEY. PROFESSOR R. C. JEBB. PROFESSOR JEVONS. ANDREW LANG. EMILE DE LAVELEYE. the Contributors: T. E. CLIFFE LESLIE. MARQUIS OF LORNE. SIR JOHN LUBBOCK, BART., M.P. THE EARL LYTTON. SIR H. S. MAINE. DR. MAUDSLEY. PROFESSOR MAX MULLER. GEORGE MEREDITH. G. OSBORNE MORGAN, Q.C..M.P PROFESSOR HENRY MORLEY. RT. HON. JOHN MORLEY, M.P. WILLIAM MORRIS. PROFESSOR H. N. MOSELEY. F. W. H. MYERS. F. W. NEWMAN. PROFESSOR JOHN NICHOL. W. G. PALGRAVE. WALTER H. PATER. RT. HON. LYON PLAYFAIR, M.P. LORD SHERBROOKE. PROFESSOR SIDGWICK. HERBERT SPENCER. HON. E. L. STANLEY. SIR J. FITZJAMES STEPHEN, Q.C LESLIE STEPHEN. J. HUTCHISON STIRLING. A. C. SWINBURNE. DR. VON SYBEL. J. A. SYMONDS. THE REV. EDWARD F. TALBOT (WARDEN OF KEBLE COLLEGE). SIR RICHARD TEMPLE, BART. W. T. THORNTON HON. LIONEL A. TOLLEMACHE H. D. TRAILL. PROFESSOR TYNDALL. A. J. WILSON. THE EDITOR. &c. &c. &c. THE FORTNIGHTLY REVIEW is published at 2s. 6d. CHAPMAN & HALL, LIMITED, n, HENRIETTA STREET, COVENT GARDEN, W.C. SCIENCE AND ART & JFwtrnal for Sftadjers antf TV /T ESSRS. CHAPMAN & HALL have made arrangements for the issue of a Journal entitled " SCIENCE AND ART," commencing with the month of April. There are thousands of Science and Art Schools and Classes in the United Kingdom ; but the Teachers connected with these Institutions, although engaged in the advancement of identical objects, are at present unknown to each other, except through personal friendships. The new Journal will enable those engaged in this common work to communicate their views upon subjects of importance, with a view to an interchange of ideas, and the establishment of unity of action in the various centres. Each issue of the Journal will contain a contribution by a distinguished member of the Scientific or Artistic world; short papers by prominent teachers ; leading articles ; correspondence upon topics of interest ; test questions for home practice by students, etc., etc. The price of the Journal will be Threepence, including postage. OFFICE: n, HENRIETTA STREET, COVENT GARDEN. CHARLES DICKENS AND EVANS,] [CRYSTAL PALACE PRESS. UNIVERSITY OF CALIFORNIA LIBRARY THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW SEP 20 1915 UCIA INTERLIBRARY LOAN i %^3 lffltt>=i^