-«**-
DEBA TERS' HANDBOOK SERIES
MUNICIPAL OWNERSHIP
DEBATERS^
HANDBOOK SERIES
Enlargement of the United States Navy
(3d ed. rev. and enl.)
Direct Primaries (3d ed. rev. and enl.)
Capital Punishment (2d ed. rev.)
Commission Plan of Municipal Govern-
ment (3d ed. rev. and enl.)
Election of United States Senators (2d ed.
rev.)
Income Tax (2d ed. rev. and enl. )
Initiative and Referendum (2d ed. rev.
and enl.)
Central Bank of the United States
Woman Suffrage (2d ed. rev.)
Municipal Ownership (2d ed. rev. and
enl.)
Child Labor
Open versus Closed Shop (2d ed.)
Employment of Women
Federal Control of Interstate Corporations
Parcels Post (2d ed. rev. and enl.)
Government Ownership of Railroads
Compulsory Arbitration of Industrial Dis-
putes
Compulsory Insurance
Conservation of Natural Resources
Free Trade vs. Protection
Reciprocity
Trade Unions
Recall
Other titles in preparation
Each volume, one dollar net
Debaters^ Handbook Series
SELECTED ARTICLES
ON
MUNICIPAL OWNERSHIP
COMPILED BY
JOY E. MORGAN
AND
EDNA D. BULLOCK
Second and Enlarged Edition
» J 9 t
J » »
9 O J » '
• * . *
THE H. W. WILSON COMPANY
WHITE PLAINS. N. Y. and NEW YORK CITY
1914
%
Published 1911
Second Edition January, 1914
EXPLANATORY NOTE
The vast quantity of literature concerning municipal owner-
ship, much of which has been produced within the last few years,
is in itself complete evidence of the rapidly widening interest in
our public municipal utilities. The material here collected has
been gathered and arranged for (i) debaters, (2) students of
municipal problems, and (3) others desiring compact informa-
tion on municipal ownership.
The arrangement is natural and logical. First occurs the
brief to acquaint the student with the scope and general analysis
of the question and the arguments pro and con in outline form.
The table of contents precedes the brief. The reprints are ar-
ranged in the order of the brief as far as practicable. The
bibliography is sufficiently complete to include all important ma-
terial, yet not so inclusive as to be bewildering to the inexperi-
enced investigator. Annotations have been added where they
would be of real value to the student.
In view of the vast amount of material on this subject,
prejudiced, popular, and scientific, it is believed that this book
will furnish, not only an inexpensive practical method of supply-
ing material on municipal ownership, but will be a guide as well
to the novice and the veteran student.
EXPLANATORY NOTE TO SECOND EDITION
In this revised edition the additional reprints are found
in the concluding pages. They consist chiefly of material on
municipal transportation, a subject upon which there is
little available literature relating to American conditions.
December, 1913.
280186
i
CONTENTS
Brief xi
Bibliography
General References xv
Affirmative References xx
Negative References xxiv
Introduction
General Discussion
United States. Industrial Commission. Report 3
Doherty, Henry L. What the Public Does Not See
Des Moines Register and Leader 9
Public Service Enterprises Springfield Republican 9
National Civic Federation. Report on Municipal and Pri-
vate Operation of Public Utilities 10
Rowe, Leo S. Municipal Ownership and Operation
American Journal of Sociology 11
Burdett, Everett W. Municipal Ownership of Engineering
Utilities Engineering Magazine 13
Municipal Ownership Outlook 18
Municipal Ownership Investigators Nation 22
Johnson, Edmond R. Public Regulation of Street Railway
Transportation Annals of the American Academy 24
Problems of Municipal Ownership Outlook 29
Donald, Robert. Principles of Municipal Ownership
Outlook 30
Affirmative Discussion /
Parsons, Frank. Fifteen Reasons Why the People Should
Own Their Own Public Utilities Arena 39
Selleck, W. A. Municipal Ownership
Nebraska State Journal 40
Vlll
CONTENTS
Municipal Ownership Outlook 43
Dunne, Edward F. Municipal Ownership— What It Means.
Reader 46
Adams, Henry C. Municipal Ownership and Corrupt Poli-
tics Outlook 48
Burns, John. ^Municipal Ownership a Blessing
'. Independent 51
Dunne, Edward F. Our Fight for Municipal Ownership.
Independent 55
Ely, Richard T. Advantages of Public Ownership and Man-
agement of Natural Monopolies CosmopoHtan 61
Brown, George Stewart. Municipal Ownership of Public
Utilities North American Review 67
Rowe, Leo S. Municipal Ownership and Operation of Street
Railways in Germany. .Annals of the American Academy 75
Donald, Robert. Municipal Ownership of Street Railways
in Glasgow Outlook 80
Argument for the Municipal Ownership of a Street Rail-
way Company City Hall 88
Ely, Richard T. Municipal Ownership of Natural Monop-
olies North American Review 94
Negative Discussion
Municipal Socialism Quarterly Review 106
Cravath, James R. Municipal Ownership of Electric Light
Plants World To-Day 114
Darwin, Leonard. Municipal Trade Quarterly Review 123
Hill, John W. Municipal Ownership of Public Utilities.
World To-Day 125
Thurber, F. B. Arguments against Municipal Ownership.
North American Review 133
Hill, John W. Comparison of the Cost of Steam Power in
Municipal and Privately-Operated Plants
Engineering Magazine 141
CONTENTS ix
Jones, Chester Lloyd. American Municipal Services from
the Standpoint of the Entrepreneur
Annals of the American Academy 143
Main Question in Municipal Ownership
Journal of Commerce 158
Brandeis, Louis D. How Boston Solved the Gas Problem.
Review of Reviews 159
Burdett, Everett W. Municipal Ownership in Great Britain.
Journal of Political Economy 164
Brown, William Horace. Public Ownership and Popular
Government American Journal of Sociology 180
Robbins, Hayes. Public Ownership versus Public Control.
American Journal of Sociology 193
Additional Reprints
Calgary, Alberta. City Clerk. Municipally Owned In-
dustrial Sites 221
Municipal Asphalt Paving Plant 223
Calgary Municipal Street Railway 223
Regina, Saskatchewan. City Clerk. Electric Light and
Power Plant 231
Street Railway and Spur Track System 232
Winnipeg, Manitoba. City Clerk. Municipal Ownership . . 234
Sheehan, C. M. and Firmin, Albert. Municipal Lighting.
Twentieth Century Magazine. 236
Lloyd, Henry Demarest. Public Ownership of Urban and
Suburban Street Transportation
' Twentieth Century Magazine. 247
BRIEF
Resolved, That municipalities in the United States should
own and operate plants for supplying light, water, and trans-
portation.
Introduction
I. The question is important.
A. Transportation is inseparably connected with questions
of congestion of population, slums, and tenements,
and water and light concern intimately the health and
comfort of the people and the safety of the commu-
nity. ♦
B. Stupendous financial interests are involved.
C. A vast majority of every community is directly con-
cerned.
II. It is generally granted.
A. That there are three methods by which municipalities
may deal with natural monopolies.
1. They may grant private companies franchises to
build and operate plants.
2. They may build or purchase plants and lease them
to private companies for operation.
3. They may own and operate the plants themselves.
B. In American municipalities the first method is almost
universal in the case of street railways and quite
common in the case of water and lighting plants.
C. The question is whether the last method is preferable
to the others.
III. The solution of the question seems to present four main
issues.
A. Is the ownership and operation of light, water, and
transportation plants a municipal function?
xii BRIEF
B. Is the system of private ownership of natural municip-
al monopolies in the United States objectionable?
C. Would the objectionable features of private owner-
ship, if they exist, be remedied by municipal owner-
ship and operation?
D. Does the experience of this and other countries show
that municipal ownership is more successful in prac-
tice than private ownership?
Affirmative
The affirmative believes that municipalities should own and
operate their light, water, and transportation plants, for,
I. The ownership and operation of these utilities is a proper
function of municipal government.
A. The ends of government embrace all the benefits and
all the immunities from evil which government can
confer.
B. It is not socialism.
II. Private ownership is objectionable because it gives rise
to great evils.
A. There is great waste of forces.
I. Business is not regulated by competition.
B. The public is plundered.
I. Enormous dividends are secured from franchises
which belong to the public.
C. The public is dependent on those who own the mo-
nopolies. .
D. Public moral standards are lowered by bribery and
corruption, "
I. The companies spend large sums controlling boards
of aldermen.
III. Municipal ownership remedies the evils of private owner-
ship and is followed by great advantages.
A. Plants are run for the benefit of the public.
B. Rates of service are lowered.
C. Whatever profits are made lessen taxation.
T). Needless investment and speculation is checked
c^
BRIEF xiii
E. Regularity and economy of administration is insured.
I. Close watch is kept by every taxpayer who is vir-
tually a stockholder.
IV. Municipal ownership and operation is more successful in
practice than private ownership and operation.
A. In operating water plants. .
B. In operating gas plants.
C. In operating plants for transportation.
■" Negative
The negative believes that municipalities should not own and
operate their light, water, and transporation plants, for,
I. Municipal ownership of these utilities is unwise in theory.
A. It is not a proper function of government.
I. It is not necessary for the promotion of intel-
ligence, the care of the unfortunate, or to estab-
lish justice.
B. It increases government interference in the field of
private action.
C. It deprives industry of the moral and economic ad-
vantage of self interest.
II. Municipal ownership is financially disastrous.
A. Waste and extravagance result.
1. Those in charge have little skill or experience.
2. They have little interest in an economic admin-
istration,
B. There is a constant tendency to rely on the city's
ability to tax to make up deficiencies.
C. There is slight chance of extra revenue.
I. The clamor for low rates precludes the possibility
of extra revenue.
III. Municipal ownership is inefficient.
A. It is not awake to new inventions.
B. The service does not secure the best men.
1, The salary is insufficient.
2. Opportunity for advancement is too meager.
XIV
BRIEF
C. The service is subject to the change of political par-
ties.
IV. The present status of American city government precludes
further consideration of the question.
A. Most American cities have failed to do efficiently
what they already have to do.
1. Jobbery and corruption are common.
2. The police service is poor.
3. Laws are not enforced.
B. To add to municipal functions is simply to aggra-
vate existing conditions and to delay reforms in-
definitely.
i
BIBLIOGRAPHY
A star (*) preceding a reference Indicates that the entire
article or a part of it has been reprinted in this volume.
General References
Bibliographies
Brooklyn, New York. Public Library. Books on Municipal
Ownership. 27pp. 1906.
A useful classified and annotated list.
Brooks, Robert C. Bibliography of Municipal Problems and City
Conditions. N. Y. 1901.
Published also in Municipal Affairs. 5: 1-346. Mr. '01.
Kansas City Public Library Quarterly. 8: 21-71. Ap. '08. Bibliog-
raphy of Municipal Betterment.
Municipal Affairs, 1897-1902. Vols. I-VL
Bibliography in every quarterly issue.
Seattle. Public Library. Municipal Government, a List of
Books and References to Periodicals. 1911.
United States. Library of Congress — Division of Bibliography.
Select List of Books on Municipal Affairs with Special Refer-
ence to Municipal Ownership. 34pp. 1906.
For sale by the Superintendent of Public Documents, Wash-
ington, D. C. Five cents. ^
Books, Pamphlets and Documents
Baker, Moses Nelson, ed. Municipal Yearbook. Engineering
News Publishing Co., New York. 1902.
Beard, Charles A. American City Government. Century.
N. Y. 1912. Chapter VIII, Municipal Ownership.
Bliss, William'^D. P., ed. New Encyclopedia of Social Reform.
1908. Municipal Ownership, Gas, Street Railways, Water.
xvi BIBLIOGRAPHY
r England. Home Office. IMunicipal Trading (United King-
dom) ; Return Showing the Nature and Extent and, for
Each of the Last Four Years (1902-3, 1905-6) for Which
Figures are Available, the Financial Results of Reproduc-
tive Municipal Undertakings, v. 1-3 in i. 1909.
' Fairlie, John A. IMunicipal Administration. 1901. Chapter XIL
Municipal Improvements.
Fairlie, John A. Essays in Municipal Administration. Macmil-
lan. New York. 1908.
Foote, Allen Ripley. Municipal Public Service Industries. Other
Side Publishing Company. Chicago. 1899.
Goodnow, Frank Johnson. City Government in the United States.
Century. New York. 1904. •
Goodnow, Frank Johnson. Municipal Government. Chapter XV.
Local Improvements. Century. New York. 1909.
Holcombe, A. N. Public Ownership of Telephones on the
Continent of Europe. Bost. Houghton. 1911.
Howe, Frederick C. European Cities at Work. Scrrbners.
N. Y. 1913.
Illinois. Labor Statistics Bureau. Biennial Report, v. 10.
Private and Municipal Ownership of Public Works.
King, Clyde Lyndon. Regulation of Municipal Utilities. Ap-
pleton. New York. 1912. Chapter II. Municipal Owner-
ship versus Adequate Regulation.
League of American Municipalities. Book of American Munic-
ipalities. Chicago. 1908.
Le Rossignol, James E. Monopolies, Past and Present, pp. 117-
42. Crowell. 1901.
Massachusetts. Board of Gas and Electric Light Commis-
sioners. Annual Reports.
Michigan Political Science Association. Publications. 5 : 349-88.
Mr. '04. Suggestions for and against Municipal Ownership
of Public Utilities. C. A. Kent.
Municipal Program. Macmillan. New York. 1900.
Munro, William Bennett. Government of European Cities. Mac-
millan. New York. 1909.
Bibliography, pp. 380-402. ^ ^ *
*National Civic Federation. Municipal and Private Operation of
Public Utilities. 3 Vols. 1907.
BIBLIOGRAPHY xvii
New International Encyclopedia. Article on Municipal Owner-
ship.
New York (State). Public Service Commission, First District.
Annual Reports, 1907-date.
Pond, Oscar Lewis. Municipal Control of Public Utilities, a
Study of the Attitude of our Courts toward an Increase in
the Sphere of Municipal Activity. (Columbia University.
Studies in History, Economics and Public Law. 15: 1-115. '06.)
Seabury, Samuel. Municipal Ownership and Operation of Public
Utilities in New York City. Municipal Ownership Publishing
Co. 1905.
Shaw, Albert. Municipal Government in Continental Europe.
Century. New York. 1895.
Shaw, Albert. Municipal Government in Great Britain. Century.
New York. 1895.
Tolman, William H. Municipal Reform IMovements in the
United States. Revell. New York. 1895.
Towler, W. G. Socialism in Local Government. Ed. 2. New
York. Macmillan. 1909.
United States. Census Office. Twelfth Census, 1900. Special Re-
ports. Street and Electric Railways. 439pp. 1902.
United- States. Commerce and Labor, Department of. Water, Gas
and Electric Light Plants under Private and Municipal Own-
ership. 983PP- Fourteenth Annual Report of Commissioner
of Labor, 1900.
Also appears as House Document 713, 56th Congress, 1st Ses-
sion.
United States. Commerce and Labor, Department of. Municipal
Ownership. Reports from United States Consular Officers,
1897-1905. 55pp. Monthly Consular Reports, May, 1905. pp.
284-336.
♦United States. Industrial Commission. Report. 1901. Municipal
Public Utilities. Vol. IX.
United States. Labor, Bureau of. Bulletin. 12: 1-123. Ja. '06.
Municipal Ownership in Great Britain. F. C. Howe.
Whinery, S. Municipal Public Works. Municipal Ownership,
pp. 189-218. Macmillan. New York. 1903.
Wilcox. Delos F. American City ; a Problem in Democracy. Chap-
ter III. Control of Public Utilities.
xviii BIBLIOGR.\PHY
Wilcox, Delos F. Municipal Franchises ; a Description of the
Terms and Conditions upon which Private Corporations En-
joy Special Privileges in the Streets of American Cities. 2v.
Gervaise Press. Rochester, New York. 1910-11.
>: Zangerle, John A. Larger View of Municipal Ownership. Pub-
lished by the Author. Cleveland, Ohio. 1906.
Magazine Articles
American City. 6: 709-13. My. '12. Municipal Housekeeping
in Europe and America. Harvey N. Shepard.
American City. 8:. 121-38. F. '13. Public Markets and Market-
ing Methods. J. F. Carter.
American City. 8:215. F. '13. San Francisco's Municipal
Street Railway. W. M. Harrison.
American Journal of Sociology. 11 : 817-29. My. '06. jMunicipal
Activity in Britain. T. D. A. Cockerell.
♦American Journal of Sociology, 12 : 241-53. S. '06. Municipal
Ownership and Operation; the Value of Foreign Experience.
Leo S. Rowe.
Published also in National Municipal League, Proceedings of
the Atlantic City Conference for Good City Government, 1906.
pp. 280-90.
American Political Science Review. 5:374-93. Ag. '11. Cen-
tral Utilities Commissions and Home Rule. E. H. Meyer.
Annals of the American Academy. 2"/: 20-36. Ja. '06. Water, Gas
and Electric Light Supply of London. Percy Ashley. -
Annals of the American Academy. 28 : 359-70. N. '06. Municipal
Ownership as a Form of Governmental Control. F. A. Cleve-
land.
*Annals of the American Academy. 29: 275-91. Mr. '07. Public
Regulation of Street Railway Transportation. Edmond R.
Johnson.
Annals of the American Academy. 30: 557-92. N. '07. Relation
of the Municipality to the Water Supply; Symposium.
Arena. Public Ownership News. See IMonthly Numbers of the
Arena from ]\iay, 1901 to August, 1909.
Arena. 31 : 448, 458-63. My. '04. Municipal Ownership versus
Private Ownership. Frederick F. Ingram.
BIBLIOGRAPHY
XIX
Arena. 2>7 '• 181-90. F. '07. Opposing Views on Municipal Owner-
ship ; a Notable Symposium.
Atlantic Monthly. 107:433-40. Ap. '11. Tendency of Municipal
Government in the United States. G. B. McClellan,
Cassier's Magazine. 32: 3-1 1, 178-85, 237-49. ]\Iy.-Jl. '07. Munic-
ipal Ownership in England. R. S. Hale.
*Des IMoines Register and Leader. Ag. 26, '08. What the Public
Does Not See. Henry L. Doherty.
*Engineering Magazine. 31 : 741-3. Ag. '06. Municipal Owner-
ship of Engineering Utilities. E. W. Burdett.
Condensed from an address delivered before the National Elec-
tric Light Association.
Fortnightly Review. 89: 489-511. Mr. '08. London's Electrical
Future. T. H. Minshall.
Independent. 60: 1153-7. My. 17, '06. First Municipal Street Rail-
way in America. A. M. Parker.
International Quarterly. 12: 1-12. O. '05. Public Ownership in
New York. E. B. Whitney.
Municipal Affairs. 6: 524-38. '03. Recent History of Municipal
Ownership in the United States.
♦Nation. 82: 441-2. My. 31, '06. Municipal Ownership Inves-
tigators.
Nation. 83 : 386-7. N. 8, '06. Case of Municipal Ownership.
National Municipal Review. 2: 11-23. Ja. '13. State vs. Munic-
ipal Regulation of Public Utilities. John Morton Eshel-
man.
National Municipal Review. 2:24-30. Ja. '13. State vs. Mu-
nicipal Regulation of Public Utilities. Lewis R. Works.
'*Outlook. 80: 266-8. Je. 3, '05. Municipal Ownership.
^♦Outlook. 82: 504-11. Mr. 3, '06. Principles of Municipal Own-
ership. Robert Donald.
^ *Outlook. 86: 49-51- My. 11, '07. Problem of ^Municipal Owner-
ship.
' Outlook. 86: 621-3. Jl. 27, '07. Municipal Ownership, Pro and
Con ; the Report of the National Civic Federation's Commis-
sion. 1
Political Science Quarterly. 17: 643-68. Ag. '03. Holyoke Case.
A. D. Adams.
XX BIBLIOGRAPHY
Political Science Quarterly. 24: 23-56. Mr. '09. Municipal So-
cialism and its Economic Limitations, with Special Reference
to the Conditions in New York City. E. J. Levy.
Political Science Quarterly. 26: 122-32. Mr. '11. Electric
Lighting System of Paris. A. N. Holcombe.
Quarterly Journal of Economics. 23: 161-74. N. '08. Civic Fed-
eration Report on Public Ownership. W. B. Munro.
♦Quarterly Review. 205 : 420-38. O. '06. Municipal Socialism.
♦Quarterly Review. 209: 409-31. O. '08. Municipal Trade. Leonard
Darwin.
Review of Reviews. 35 : 32g-^2>- ^Ir. '07. Municipal Ownership
of Street Railways in Germany. E: T. Heyn.
Scientific American. 96: 430. My. 25, '07. How Chicago Is Solving
Municipal Ownership of Transportation Facilities. A. F.
Collins.
Scribner's Magazine. 40: 98-109. Jl. '06. Glasgow. F. C. Howe.
♦Springfield Republican. Ap. 10, '07. Public Service Enterprises.
Survey. 22: 803-4. S. 11, '09. Socialism in Local Government.
W. G. Towler. Review.
World To-Day. 19: 957-64- S. '10. City and the Public Utility
Corporation. Brand Whitlock.
Affirmative References
Books and Pamphlets
American Economic Association. Publications, 1906, 3d Series.
9' 113-33- Case for Municipal Ownership. F. C. Howe.
Baker, Charles Whiting. Monopolies and the People. Macmil-
lan. New York. 1899.
Bemis, Edward Webster, ed. ^Municipal Monopolies. Crowell.
New York. 1899.
Papers by experts on waterworks, lighting, telephone and
street railways.
Bemis, Edward Webster, Municipal Ownership of Gas in the
United States. Macmillan. New York. 1891.
♦Calgary, Alberta, Canada. City Clerk. Municipal Manual,
1913.
BIBLIOGRAPHY xxi -
Commons, John Rogers. Social Reform and the Church. Munic-
ipal ]\Ionopolies. pp. 123-55. Crowell. 1894.
Conference for Good City Government, 1910: 12-21. Con-
servation in Municipalities. W. D. Foulke.
Conference for Good City Government, 1910: 156-69. Kansas
City Franchise Fight. J. W. S. Peters.
Cook, W. W. Corporation Problem. Corporations as Owners of
Natural Monopolies, pp. 208-13. Putnams. New York. 1891.
Dolman, Frederick. Municipalities at Work. Methuen. London.
1895.
Howe. Frederick Clemson. British City. Scribrier's. New York.
IQ07.
Howe, Frederick Clemson. City the Hope of Democracy. Scrib-
ner's. New York. 1905.
National Convention upon Municipal Ownership and Public
Franchises. Proceedings, New York City, 1903 (in Mu-
nicipal Afifairs, v. 6, no. 4).
National Municipal League, Proceedings of the Atlantic City
Conference for Good City Government, 1906. Municipal Op-
eration in Duluth, Minnesota, pp. 244-8.
National Municipal League, Proceedings of the Atlantic City
Conference for Good City Government, 1906. ]Municipal Own-
ership in Jacksonville, Florida. J. M. Barrs. pp. 257-65.
National Municipal League, Proceedings of the Atlantic City
Conference for Good City Government, 1906. One Maj^or's
Experience ; Municipal Ownership in Nashville, Tennessee.
James M. Head. pp. 269-79.
Parsons, Frank. City for the People, C. F. Taylor. Philadelphia.
1901.
*Regina, Saskatchewan, Canada. City Clerk. Municipal Man--
ual, 1913-
Rowe, Leo Stanton. Problems of City Government. Appleton,
New York. 1908.
Shaw, George Bernard. Common Sense of Municipal Trad-
ing. Lane. New York. 191 1.
♦Winnipeg, Manitoba, Canada. City Clerk. Municipal Man-
ual, 1913.
xxii BIBLIOGRAPHY
Zueblin, Charles. American Municipal Progress. Chapter X.
Public Control, Ownership and Operation. Macmillan. New
York. 1902.
Magazine Articles
American City. 6:411-9. Ja. '12. German City Worthy of
Emulation. W. D. Foulke.
American City. 7: 140. Ag. '12. Town Without Municipal
Tax<:s. (Silverton, Colorado).
American City! 7:424-6. N. '12. Twenty Years of Successful
Municipal Ownership in South Norwalk, Connecticut.
American Magazine. 61 : 685-96. Ap. '06. From Yerkes to
Dunne; how Chicago is Trying to Evolve Municipal Owner-
ship out of the Worst Traction Problem in the World. H. K.
Webster.
'^ Annals of the American Academy. 27 : 1-19. Ja. '06. Glasgow's
Experience with Municipal Ownership and Operation. Robert
Crawford.
*Annals of the American Academy. 27 : 37-65. Ja. '06. Munic-
ipal Ownership and Operation of Street Railways in Germany.
Leo S. Rowe.
Annals of the American Academy. 27 : 72-90. Ja. '06. Movement
for ]\Iunicipal Ownership in Chicago. Hugo S. Grosser.
Arena. 32: 461-71. N, '04. Glasgow's Great Record. Frank Par-
sons.
Same article condensed. Review of Reviews. 30: 733-4. D. '04.
*Arena. 34: 645-6. D. '05. Fifteen Reasons why the People Should
Own Their Own Public Utilities. Frank Parsons.
-'-Arena. 35: 526-7. My. '06. Five Reasons why We Favor Municipal
Ownership.
Arena, 38: 401-8. O. '07. National Civic Federation and its New
Report on Public-Ownership. Frank Parsons.
Chautauquan. 62: 19-32. Mr. '11. Municipal Ownership. P.
Alden.
Published also in Alden's Democratic Eng-land.
Chautauquan. 62: 103-10. Mr. '11. Municipal Ownership in
the United States. C: Zueblin.
BIBLIOGRAPHY
XXlll
*City Hall. 2: 225-7. Ja. '10. Argument for the ^Municipal Own-
ership of a Street Railway Company,
Contemporary Review. S3 : 485-500, 623-39. Ap.-^NIy. '03. Case for
Municipal Trading. Robert Donald.
Contemporary Review. 84: 12-32. Je. '03. The Trust or the Town.
Robert Donald.
♦Cosmopolitan. 30: 557-60. ]\Ir. '01. Advantages of Public Own-
ership and Management of Natural Monopolies. Richard T.
Ely.
Independent. 52: 884-5. Ap. 5, '00. Austin, Texas Argument a-
gainst Municipal Ownership.
♦Independent. 60 : 449-52. F 22, '06. Municipal Ownership a Bles-
sing. John Burns.
♦Independent. 61 : 927-30. O, 18, '06. Our Fight for Municipal
Ownership. Edward F. Dunne.
Independent. 71:798-803. Privilege Becomes Property under
the Fourteenth Amendment; the Consolidated Gas Deci-
sion. J. F. Orton.
International Quarterly. 12: 13-22. O. '05. Chicago Traction
Question. Clarence S. Darrow.
♦Lincoln, Nebraska. State Journal. My. 12, '07. Municipal Own-
ership. W. A. .Selleck.
♦North American Review. 172: ^45-55. Mr. '01, Municipal Own-
ership of Natural Monopolies. Richard T. Ely.
♦North American Review. 182: 701-8. jNIy. '06. ]\Iunicipal Own-
ership of Public Utilities. George Stewart Brown.
Same article condensed. Review of Reviews. 33: 724-5. Je. '06.
♦Outlook. 70 : 726-7. Mr. 22, '02. Municipal Ownership and Cor-
rupt Politics. Henry C. Adams.
Outlook. 74: 11-3. ]\Iy. 2, '03. Public Ownership Conflicts.
Outlook. 76: 965-7. Ap. 22, '04. Fear of Municipal Socialism.
Outlook. 79: 931-4. Ap. 15, '05. Shall New York Own its Sub-
ways? R. Fulton Cutting.
Outlook. 79: 934-8. Ap. 15. '05. Shall New York Own its Sub-
ways? Bird S. Coler.
"^♦Outlook. 80: 411-3. Je. 17, '05. Municipal Ownership.
♦Outlook. 80: 431-5. Je. 17, '05. Municipal Ownership of Street
Railways in Glasgow. Robert Donald.
xxiv BIBLIOGRAPHY
Outlook. 82: 818-9. Ap. 14, '06. Chicago's Municipal Ownership
Battle.
Outlook. 82: 835-41. Ap, 14, '06. Boston Franchise Contest.
Robert A. Woods and Joseph B. Eastman.
Outlook. 83 : 618-20. Jl. 14, '06. Why German Cities are Beauti-
ful and Healthful. W. H. Tolman.
♦Outlook. 86: 49-51. My. 11, '07. Problem of Municipal Owner-
ship.
*Reader. 7: 477-84. Ap. '06. Municipal Ownership — What It
Means. Edw'ard F. Dunne.
Twenti th Centur\^ Magazine, i: 3-12. O. '09. What Happened in
Pasadena. F. M. Elliott.
Twentieth Century Magazine, i : 127-31. N. '09. Story of Los
Angeles Waterworks under Private and Public Ownership.
F. M. Elliott.
Twentieth Century Magazine. 3: 173-5. N. '10. Public Ownership
in Seattle. L. B. Youngs.
Twentieth Century ]\Iagazine. 7:3-8. N. '12. Study in Despot-
ism; How a Highly Reputed Street Railway Monopoly
Had to Be Beaten to Its Knees in Order That Its Em-
ployees ]\Iight Enjoy a Right Conferred by Law. Livy S.
Richard.
♦Twentieth Century Magazine. 7: 8-15. N. '12. Municipal
Lighting. C. M. Sheehan and Albert Firmin.
♦Tw'Cntieth Century Magazine. 7:27. N. '12. Public Owner-
ship of Urban and Suburban Street Transportation. H.
D. Lloyd.
Twentieth Century Magazine. See also Public Ownership News
in monthly numbers.
'Negative References
Boohs and Pamphlets
American Economic Association Publications, 1906. 3d Series.
9* 133-43- Municipal Ownership. Winthrop M. Daniels.
Avebury, John Lubbock, ist Baron. On ^Municipal and National
Trading. ]\lacmlllan. New York. 1907,
BIBLIOGRAPHY xxv
Grant, Arthur Hastings. Comp. List of Defunct Municipal
Lighting Plants. Ed. 8. Municipal Ownership Pub. Co.
1913-
Knoop, Douglas. Principles and Methods of Municipal Trad-
ing. New York. Macmillan. 1912.
Meyer, Hugo Richard. ]\Iunicipal Ownership in Great Britain.
Macmillan. New York. 1906.
Reviewed in Political Science Quarterly. 22: 528-32. S. '07.
Porter, Robert Percival. Dangers of ^Municipal Ownership. Cen-
tury. New York. 1907.
Seligman, Edwin Robert Anderson. Principles of Economics.
Development of Public Ownership, pp. 562-75. 1905.
Magazine Articles
American Journal of Sociology. 3 : 837-47. My. '98. New Plan
for the Control of Quasi-public Works. J. D. Forrest.
*American Journal of Sociology. 10 : 787-813. My. '05. Public
Ownership versus Public Control. Hayes Robbins.
Includes a comparison of street railways of Boston and Glas-
gow, and an account of the workings of the Massachusetts Rail-
way Commission.
*American Journal of Sociology. 12: 328-40. N. '06. Public Own-
ership and Popular Government. William H. Brown.
*Annals of the American Academy. 28 : 371-84. N. '06. American
Municipal Services from the Standpoint of the Entrepreneur.
Chester Lloyd Jones.
City Hall. 11 : 366-7. Je. '10. ]\Iunicipal Ownership in Vienna.
Robert Atter.
*Engineering ^Magazine. 34: 509-11. D. '07. Comparison of the
Cost of Steam Power in Municipal and Privately Operated
Plants. John W. Hill.
Condensed from an address given before the Central States
TTaterworks Association.
Harper's Weekly. 51 : 1344, 1357- S. 14, '07. Problem of ^Munic-
ipal Ownership ; the Report of the Public Ownership Com-
mission of the National Civic Federation. Roland Phillips.
♦Journal of Commerce. Jl. 16, '07. Main Question in Municipal
Ownership.
Journal of Political Economy. 13: 481-505. S. '05. Municipal
Ownership in Great Britain. Hugo R. Meyer.
xxvi BIBLIOGRAPHY
*Journal of Political Economy. 14: 257-314. My. '06. Municipal
Ownership in Great Britain, Everett W. Burdett.
Journal of Political Economy. 14: 553-67. N. '06. Municipal Own-
ership in Germany; Street Railways and Electric Lighting.
Hugo R. Meyer,
Municipal Affairs. 6: 539-78. '02. European and American Re-
sults Compared. Robert P, Porter.
Municipal Affairs. 6: 579-613. '02. Recent Attacks on Municipal
Ownership in Great Britain. Robert Donald.
Chautauquan. 40: 548-57, F. '05. German Municipal Social Ser-
vice. Howard Woodhead.
*North American Review. 182 : 853-60. Je. '06. Arguments a-
gainst IMunicipal Ownership. F. B. Thurber.
North. American Review, 183: 729-36. O. '06. How London Loses
by Municipal Ownership. Ernest E. Williams.
North American Review. 184: 590-603. Mr. '07. Municipal Glas-
gow. Benjamin Taylor.
Outlook. 82: 765-6. Mr, 31, -'06. Street Railways; Boston and
Glasgow.
Outlook. 92: 407-13. Je, 19, '09. City gets Fifty-five Per Cent;
the' Fourth Plain Tale from Chicago. C. Norman Fay.
Public Service (monthly). Chicago.
A corporation organ, its object being to prevent municipal own-
ership.
^ *Quarterly Review. 205 : 420-38. O. '06. IMunicipal Socialism.
*Quarterly Review, 209: 409-31, O. '08, Municipal Trade. Leon-
ard Darwin.
*Review of Reviews. 36 : 594-8. N. '07. How Boston Solved the
Gas Problem. Louis D. Brandeis.
World To-Day. 7: 1536-42. D. '04. Philadelphia and its Gas-
w-orks. Hayes Robbins.
*World To-Day. 12: 374-9. Ap. '07. Municipal Ownership of
Electric Light Plants. James R. Cravath.
*World To-Day. 12: 621-5. Je. '07. Municipal Ownership of Pub-
lic Utilities, John W, Hill,
World To-Day, 13: 1037-40, O. '07. Philadelphia Gas Works un-
der Private Operation, T: L. Hicks.
• • • • • • ■
• •• • • •. . *. • : •% • • ••
. . ...... •••.%••,,,•,
SELECTED ARTICLES ON
MUNICIPAL OWNERSHIP
INTRODUCTION
Present Status of Municipal Ownership
The municipality, as we are familiar with it in America
to-day, is, like the great corporation, a product of our wonder-
ful development. Early statesmen did not and could not foresee
the possibilities, problems, and dangers that characterize present
day municipal institutions. The lack of similarity between the
conditions that prevail in our different cities renders municipal
problems more difficult. Each city is organized under a different
charter and is a problem in itself. A plan that would be success-
ful in one might entirely fail in another.
There is a growing tendency, however, to extend municipal
activity to include those enterprises that involve moral, hygienic,
social, and educational questions ; altho there is difference of
opinion as to just how much importance should be given these
various considerations.
Functions of the Municipality
The state and federal governments must solve those political
and economic questions that in their nature are broad in scope
and policy and require extended legislation, administration, and
adjudication. On the other hand, the city works in a limited ter-
ritory and is chiefly concerned with the details of its own needs
and the problems growing out of those needs — problems greatly
2, , SEIxECTED ARTICLES
intensified by the larger number of people crowded into a small
area. For example, the ownership of interstate railroads creates
a problem less pressing than the ownership of city transporta-
tion facilities. It may be necessary for the city to own and oper-
ate the latter in order to relieve congested conditions and to allevi-
ate the slum and tenement evils. No such reasons could be
urged for the ownership of interstate railways.
Authorities and the Issue
The arithmetical facts as to the financial status of municipal
ownership may be gleaned by the student from this book and
from many other sources. Here again, authorities will not agree
as to the figures or their bearing on the issue. Each authority
writes from his own point of view and gathers data and inter-
prets it to favor the conditions that he wishes to prevail. It is
for the student to study each case painstakingly and thoroly be-
fore he makes his conclusion. He must not assume that because
municipal ownership has been a success in one community it will
succeed in another or vice versa until he has shown that the con-
ditions which determine its success or failure are the same in
both cases.
The issue before the student is : Are the utilities in question
of such a nature that their operation is a municipal function and,
all things considered — condition of municipal politics and finance,
the cost of operation, and the probabilities of success, — is it bet-
ter morally, socially, and economically ,for American municipal-
ities to own and administer these utilities?
• •' • • * •
. » » » • «,
GENERAL DISCUSSION
United States Industrial Commission. 1901.
Report. Volume IX. Introduction, pp. 239-41.
Municipal Public Utilities. General Discussion of Regulation
and Public Ownership.
Importance of Problem.
Professor Edward W. Bemis, of the Bureau of Economic Re-
search, says that the problem of municipal public utilities is made
important by the fact that competition has broken down under
them and that they are virtually monopolies. The same problems
are already confronting us in cities as will later become con-
spicuous regarding railroads, and the experience in the manage-
ment of public utilities in cities will be a valuable lesson. The
magnitude of the problem may be judged from the fact that the
capital of the privately owned water, gas, and electric plants in
the country is nearly $1,400,000,000, while the capital of street
railways is $1,800,000,000. The further fact that certain syndi-
cates and individuals are getting controlling interests in the
street railway, gas, and electric-light companies of very many
different cities increases the importance of the problem.
Tendency of Public Utilities toward Monopoly.
Professor Bemis declares that competition in the street rail-
ways, electric light, and water supply business has almost en-
tirely broken down. Efforts have been made in the most im-
portant cities in this country to maintain competing companies,
but in nearly every instance the experiment has ended in con-
solidation. The tendency toward consolidation has been slightly
less marked in the case of electric-light companies, but consolida-
tion has still gone on very rapidly, and in most cities street light-
4 , SELECTED ARTICLES
ing and household lighting are furnished by a single corporation,
altho large establishments are able to supply themselves by
means of private plants.
Consolidation of plants of this sort results in great economies.
There is a saving in office force, in avoiding the duplication of
mains, pipes, and wires, in the collection of bills, and in other
ways.
Consolidation of Plants of Same or Similar Character.
Professor Bemis says that in recent years there has been a
marked tendency toward the concentration of ownership of plants
in different cities and of plants of different character in the same
city. Thus in New York City the Consolidated Gas Company
increased its stock in July, 1900, to $80,000,000, and bought up
the other gas and electric light companies of that city. The same
syndicate has also a controlling interest in the street surface
railways of New York, altho the elevated roads are in the hands
of a different syndicate. The Elkins-Widener-Whitney syndicate
also controls the street railways of Philadelphia, Chicago, and a
rapidly increasing number of other cities. Similarly, the United
Gas Improvement Company of Philadelphia has a controlling
interest in the gas companies of over 40 different cities, among
them Jersey City, Kansas City, and Atlanta. The officers of the
Standard Oil Company have also a very large interest in gas and
street railway enterprises all over the country. In Chicago the
surface railroads and several of the elevated railroads have been
at times in the past, and doubtless will be in the future, owned
by a single syndicate.
Mr. Allen Ripley Foote advocates the consolidation of the
gas and electric-light plants of a municipality, and also the con-
solidation of the electric street railways with the electric-light
plants. It would make a saving in the cost of management and
would cheapen the cost to the consumer.
In dealing with a consolidated syndicate, however, there
should be thoro control of capitalization to prevent stock water-
ing, and thoro publicity of accounts. Without such system of
public accounting consolidation might not be beneficial to any-
body but the syndicates themselves.
MUNICIPAL OWNERSHIP 5
f'
Possible Methods of Managing Public Utilities.
Professor Bemis says that there are three possible methods of
solving the problem of public municipal utilities. One is to regu-
late the private operation of them ; another is direct public owner-
ship and operation, while a third is public ownership with private
operation. Regulation of private ownership has been most ad-
vanced in England and Massachusetts ; public ownership has
gone furthest in England, while the system of public ownership
and private operation scarcely exists in the United States, but
is very common in England.
Comparison of Public and Private Ownership of Municipal
Utilities.
Professor Bemis declares that there are certain evils and
dangers in public management to be carefully guarded against,
but he still believes that progress lies in the direction of public
management of municipal utilities. Private companies in Eng-
land do not oppose the public as they do here. Since the Brook-
lyn Bridge Railway has been taken over by private management
there is a great deal more dissatisfaction than ever before, while
under public management for many years it had given universal
satisfaction.
Professor Bemis holds that the principle of municipal owner-
ship of gas, electric lights, and street railways is the same as that
in respect of water supply, which is generally considered a public
function, but that it is more a question of expediency as to how-
fast we should go in relation to those utilities. He does not be-
lieve all industries should be owned and controlled by the people,
but where competition breaks down of its own weight and
monopoly thus results, then the public must control it in some
way. We should begin by learning thru publicity of accounts
what profits these monopolies are making and by seeing what can
be done thru regulation and taxation ; but experiments in
municipal operation should be at once undertaken and the causes
of success or failure carefully studied.
Mr. Foote thinks that in a sense the socialistic idea is the
basis of the initial point in the advocacy of municipal ownership.
6 SELECTED ARTICLES
The people feel that the public should have the benefits and the
profits, if there are any, in the operation of the quasi-public
plants, and that private corporations have been making excessive
profits and have exercised more or less venality, not only in the
securing of their franchises, but also in the operation of the
plants.
Mr. Foote asserts that it is impossible to compare the results
of a municipal or political monopoly with those of the properly
supervised private industrial monopoly. When the water works
are under private ownership, everything has to be paid for by
private capital in the way of extending lines and making improve-
ments, etc., and the rates have to be sufficient to pay all operating
expenses and whatever profit is made. If the municipalities
should buy these works, they would frequently reduce the price
to the consumer, but would make up the dift'erence by taxation.
They w^ould especially extend the service lines and charge the
cost to special improvement assessments on property rather than
to consumers. The city does not have to earn profits.
As to whether there is any advantage in municipal ownership,,
assuming honesty of operation in both cases and the same ele-
ments of cost, etc., there are not sufficient data at hand to reach
a conclusion, and they cannot be obtained without having the
accounts of the municipalities and quasi-public corporations
public and uniform. The witness, however, does not think the
business of the municipalities of the country is yet sufficiently
developed to permit the satisfactory operation of their public
utilities by the taxpayers. As yet it always costs more to do^
public business than to do private business of the same nature.
Mr. Foote says further that if it were possible to get men
sufficiently patriotic to work for the people as a whole as loyally
as they would in their own business, municipal ownership would
be very desirable ; but such a condition does not exist, and when
the factor of self-interest is eliminated from industrial manage-
ment there is eliminated at the same time the factor of efficiency.
The witness has never yet seen an industry so well managed
by the public but that a set of private men, having the same
opportunities in the details of management, could operate it and
make a profit, and give the price as low, if not lower.
MUNICIPAL OWNERSHIP 7
Mr. Foote believes, however, that there are more reasons
why waterworks should be managed by municipalities than any
other of the public utilities, because there are more regulations
required in the operation of these plants that partake of the
nature of police regulations. He sees no reason, indeed, why a
small municipality might not operate its own waterworks plant
more economically than a private company, because in a small
plant the duties of the officials of the private company would be
so light that to pay any sort of a salary to them the cost of
operation would be high; whereas,- if the plant were operated
by a municipality, the work could be performed by officials of
the municipality who had other municipal duties to do.
Mr. Foote says that if the theory of municipal ownership
should be adopted he would recommend the management by the
municipality of every public utility where an economic gain could
be made to the public ; but he would still insist that the accounts
of the municipalities should be kept in such a way that it could
always be ascertained what the actual cost of construction and
of the management of the plant would be. He instances several
cases of municipalities owning and operating certain utilities in
which the accounts were so kept that while on the face of the
records there seemed to be great economy in such operation,
yet as a matter of fact they had been operating less cheaply
than a private corporation could have done.
Political Effects of Extension of Public Ownership.
Professor Bemis asserts that whenever there has been a
failure of any municipal public-service pFant, such failure can be
traced generally to the spoils system in politics or to a lack of
general business sense in the council, which has led to the selec-
tion of poor managers, or to the plant not being properly
equipped. A proper reform in the civil service would show the
people that they could improve the government, and have it
practically useful in a cooperative way, by cheapening transporta-
tion, fuel, light, telephone, and telegraph service. Moveover, an
increase in public functions increases the popular inter-est in hav-
ing the government better managed.
8 SELECTED ARTICLES
Professor Bemis thinks the efforts of the influential and
wealthy companies to keep their own old franchises, or get better
ones, or to escape their share of taxation, are a potent source of
municipal corruption. A very intelligent employee of a certain
gas company informed him that all the employees in that com-
pany had to be recommended to their places by the political
boss of their precinct, and had to keep up their membership in
the political organization in order to retain their positions.
When the Philadelphia Gas Works were still under public
management, they were buying 40 per cent of their gas from a
private company, and they always took their employees at the
recommendation of the Philadelphia alderman, and did not keep
them longer than they could help. Their motto was : "The more
different people we can hire in a given month the more aldermen
we can please the more times." It would be easier to convince
the people of the need of civil-service reform and business
efficiency than it would to get rid of the demoralization con-
nected with this relation of private companies to legislative and
administrative bodies.
Civil Service in Municipal Affairs.
Mr. Foote advocates a rigid civil-service reform in municipal
affairs in case municipalities should take over to themselves the
operation of their public utilities. He believes that the em-
ployees engaged in the operation of utilities should be retained
for life, during good behavior. The witness declares that he is
somewhat different from the average civil-service reformer in
that he does not believe that it is of any interest to the public
how a man gets his position, but it does interest the public what
he does after he gets it. Therefore primary appointments should
be made in any way that would seem best — not necessarily by ex-
aminations — but there should be a probationary period of six
months before the employee goes upon the regular roll. Pro-
motions should be made from the lower to the higher grades
from those in the service, and not from the outside, thus creating
a stimulus for efficient work.
MUNICIPAL OWNERSHIP 9
The Relation of Municipal Ozi'nership to Labor Conditions.
Professor Bemis says that the tendency of public employ-
ment is to improve labor conditions. The hours of labor are
usually reduced. The municipalities in England attempt to pay
the standard trade-union rate of wages. Tramways when
operated by private companies had refused to recognize unions
and had worked their men very long hours ; but as soon as
the municipalities took hold of the plants, union wages and
hours, etc., were introduced.
% Des Moines Register and Leader. August 26, 1908.
What the Public Does Not See. Henry L. Doherty.
Throughout this state there are a great many small cities ;
the growth of these cities depends primarily on their ability
to have conveniences and comforts that are not enjoyed in
country life. The only reason that a city lot representing one-
seventh of an acre may be worth $50,000, while the same kind
of dirt some place else is worth $100 for a full acre, or $14
for the area of the lot, is the opportunities that it presents
and the opportunities primarily due to the quasi-public and
municipal service of that particular community — sewerage, water,
gas, electric light and matters of that sort. Nothing so con-
tributes to the growth, prosperity and enhancement of wealth
of those cities as the liberal conduct of the quasi-public utilities
or the advantages such as sewerage, furnished by the munici-
palities. Failure to furnish those various advantages means
that the city cannot grow ; and these quasi-public corporations
can be a great factor in the growth and prosperity of these
communities ; they can either retard or accelerate their growth
by anticipating the needs of the communit}' or failing to do so.
Springfield Republican. April 10, 1907.
• Public Service Enterprises.
Ambassador James Bryce spoke before an audience of Chi-
10 SELECTED ARTICLES
cago business men on the policy to be pursued by a city in
relation to public service enterprises as follows : —
"It is a pre-condition to the giving to a municipal authority of
any control over public work and public utilities that are not neces-
sarily involved in the varying existence of that municipal author-
ity, that the authority itself should be honest and capable — that Is
to say that the administrators should be upright and intelligent
men. Whether they are will depend on the conditions of the
particular city. It will depend mainly on the public spirit of the
citizens and the sense of civic duty which animates them. If
there is a lively sense of public duty and of the responsibility of
the individual citizen for the good government of the community,
if he givrs an honest vote based on his judgment of the char-
acter of the candidates; if he watches the conduct of those who
administer on its behalf and calls them to strict account for
any misdoings, it will obviously be safe to intrust to the munic-
ipality functions which otherwise it might be desirable to with-
hold."
That all this is an indispensable condition of success in
municipal enterprises, no one will dispute; and it is equally
to be admitted that few, very few, American cities can meet
this pre-condition of a successful public ownership policy.
But there is one point to be noted in this connection
which Mr. Bryce did not touch upon and which is very important
in any consideration of the subject. It is this — that the existing
close limitations upon the functions of municipal government in
America are well calculated to injure that public spirit of the
citizen and impare his active sense of civic duty which are so
essential to good government in any case ; while it may most
plausibly be asserted that an extension of these functions to
the city ownership and operation of such public services as
have been mentioned would tend to cultivate strongly that
spirit of individual watchfulness over and concern in the con-
duct of the government which are now so lamentably lacking
in American cities.
National Civic Federation. Report on Municipal and Private
Operation of Public Utilities. Vol. I, p. 441.
Messrs. Edgar and Clark in closing their review summarize
their opinions as follows: — "Our investigation has determined
with certainty many heretofore mooted questions. We believe
no intelligent reader of this Commission's work will fail to con-
MUNICIPAL OWNERSHIP ii
elude that it clearly proves municipal ownershp to be productive
of many and serious ills, with little or no compensating good.
The writers of these chapters agreeing, we believe with the
other members of the Committee of Twenty-one, that public
service companies should reasonably be regulated and afforded
the protection that comes with regulation, and appreciating that
the Committee was not appointed or constituted to consider
methods of regulation, nevertheless desire to record their opinion
that some form of regulation of private companies be adopted in
each of the United States. What that form should be this Commis-
sion is not prepared, by any investigation or study it has made, to
suggest. As it has always been the function and duty of govern-
ment to insure that individuals shall deal justly with their fellows,
it is now the function and duty of government to protect the
governed against injustice on the part of these associations of
individuals working under the name of public service corpora-
tions. Any government that is too feeble or corrupt to control
with justice the conduct of a public service corporation has little
prospect of being able to itself supply such public service with
efficiency and justice. Our duty is to elect to office men of in-
telligence and integrity to govern efficiently, honestly and justly:
men who can and will curb the unjust aggressiveness of the
individual, or of the voluntary association of individuals, and
who can and will compel each to bear its share of the burdens
of government, and give in price, service or otherwise a proper
consideration for special privileges enjoyed."
American Journal of Sociology. 12: 241-53. September, 1906.
Municipal Ownership and Operation ; the Value of Foreign
Experience. Leo S. Rovve.
A final financial lesson, of a negative rather than of a positive
character, relates to the policy to be adopted in fixing the cost
of service to the consumer. It has been pointed out time
and again that the industries usually referred to as public-service
industries occupy an exceptional position because of the special
franchises or privileges necessary for their operation. While
12 SELECTED ARTICLES
this is true, a far more important fact is often lost sight
of — namely, that these industries are capable of subserving
certain broad social purposes, and that it is within the power
of the municipality so to adjust the cost of service that these
larger social ends will be attained. It is one of the common-
places of social economy that the transportation service is the best
means of relieving congestion of population, and that the gas sup-
ply can be made one of the most effective means of influencing
the habits and customs of the people. In the transportation
service the plan adopted in most of the large European munici-
palities has been to adjust the fares under a zone tariff, thus
increasing the cost of service with the increase in the length of
ride. Although this has given satisfactory financial results, it
has prevented the municipalities from performing their greatest
service to the social well-being of the community, namely,
to induce the population to move into outlying and less-con-
gested sections of the city. It is true that the uniform fare of
our American cities is unnecessarily high, and is no doubt a
considerable tax on the short-distance passenger, but it is a tax
which ultimately redounds to the social welfare of the community
in contributing to that more equal distribution of population so
necessary to the social advance of the community. In this mat-
ter of the adjustment of transportation rates to the attainment
of social ends, German municipalities are considerably in advance
of the English, but they have all much to learn from the condi-
tions prevailing in our American cities.
As regards the gas supply, it is evident that a reduction in
the price of gas so as to permit the substitution of the gas-stove
for the coal-stove is certain to have a far-reaching influence
on the diet of the poorer classes. In this respect the British
municipalities have done splendid service. The readiness with
which food is heated on the gas-range, as compared with
the effort to start a coal-tire makes it possible to introduce a far
larger proportion of, warm cooked food into the workingman's
diet. The little that has been done in this direction is sufficient
to show the tremendous power of the city in furthering social
w-elfare.
These are but a few of the many instances in which the
^lUXICIPAL OWNERSHIP 13
municipality, in the management of its public-service industries,
is able profoundly to influence the industrial efficiency, the social
welfare, and the general well-being of the community. European
municipalities have all begun to appreciate the power which they
can wield in this way. Although the sum-total of actual achieve-
ment is somewhat meager, the general principle involved is one
of the greatest moment ; the full import of which we have
but begun to appreciate in the United States.
Whatever lessons may be drawn from foreign experience —
and they are numerous and important — no one will contend that
this experience can do more than throw an interesting sidelight
on the problems that confront our American cities. The final
choice between private and public ownership and operation must
be made on the basis of our own peculiar conditions. In this
choice, factors which are entirely absent in European countries
will play an important part. We must recognize, in the first
place, that the attitude of the American people toward the city
is totally different from that which prevails in the countries of
Europe. With us city government is a negative rather than a
positive factor. We look to it for the protection of life and
property, but it is with considerable reluctance that we accept any
extension of function beyond this limited field. In Europe, on
the other hand, the city is a far more positive factor in the life
and thought of the people. As new needs arise, the inhabitant
of the European city looks to the community in its organized
capacity for the performance of each service. With us in the
United States the presumption is against any extension of
municipal functions, and it requires considerable pressure to
induce the population to accept an increase in municipal powers.
Engineering Magazine. 31: 741-3. August, igo6.
^Municipal Ownership of Engineering Utilities.
Everett W. Burdett.
In view of the present spirit of unrest and discontent regard-
ing the operation of public utilities in the United States, leading
to the agitation for municipal ownership of enterprises hitherto
14 SELECTED ARTICLES
mostly conducted by associations of private capital, the thoughtful
address delivered before the National Electric Light Association
by Mr. Everett W. Burdett demands attention.
Mr. Burdett admits that there has been good reason for
adverse criticism, and refers to the manner in which, in certain
instances, there has been just objection to the manner in which
corporate organizations have abused the confidence which has
been placed in them. This, however, is but one side of the
question, and the other side should be given fair consideration,
before the advisability of transferring the control of public
utilities to municipal control should be conceded.
"Forgetting the beneficent results which have been obtained
only through the accumulation of great wealth derived from
corporate organizations, the dissatisfied citizen sees only the
abuses of financial and corporate power of which he has
been, or imagines himself to be, the victim. The very word
'corporation' has come to have an opprobrium of its own.
"And yet, of course, this wholesale distrust and condemna-
tion of wealth and corporate power is unreasonable. It loses
sight of the fact that we are unable to assert from what other
source the people at large would have derived the blessings
which have come from the establishment and maintenance of
the almost countless hospitals, libraries, colleges, parks, museums
and special funds for the encouragement of learning, the pro-
motion of science, the reward of courage and endeavor, and
the various other beneficent uses for which they have been estab-
lished and maintained by private wealth, largely derived from
corporatioins. They forget that it has been only by the uniting
of the funds of the rich and the savings of the poor in corporate
organizations that the country has been developed by the estab-
lishment and exploitation of numberless forms of industrial
enterprises, which have given employment to labor, activity and
volume to trade, and a market for all the products of our soil and
all the talents of our people.
"In electrical enterprises the central station electric lighting
investment in the United States alone already aggregates 700
million dollars, involving an annual operating expense of nearly
MUNICIPAL OWNERSHIP 15
or quite 100 millions, distributed among all classes of workmen
and through every artery of trade. The census reports show
that in the single year 1904 there was an output of new electrical
apparatus of the value of more than 150 millions. There are
nearly 5,000 central electric lighting stations. There are 23,000
miles of electric railway, carrying each year over 5,000 million
passengers. A network of nearly 300,000 miles of steam railroad
gridirons the country, transporting upward of 750 million pas-
sengers annually. Spoken words are transmitted through more
than five million miles of wire, by the use of more than three
million telephones, by which more than 5,000 million messages
are transmitted yearly.
"All these wonders we owe to corporations. They have given
free play to tWe enterprise and individual energy of our people,
and have made that enterprise and energy vastly more powerful
and effective than it otherwise could possibly have been. They
have enabled the man of small means to do a part of the world's
work by joining his savings with the capital of his wealthier
neighbor. They have encouraged thrift and the spirit of invest-
ment. They have advanced civilization and brought to every
man's door the diversified products of our own and other coun-
tries."
Mr. Burdett calls attention to the fact that the principal
beneficiaries of the development of corporate organizations
have been, not the organizers, managers, and stockholders of
these enterprises, but the general public, and that the community
at large has obtained vastly greater benefits from corporate enter-
prise than have those whose money has made them possible. A
comparison of dividends paid with services rendered shows the
truth of this statement, and demonstrates that the tax-gatherer,
the employe, and the general public have each and all reaped
rewards vastly greater than have been realized by the stockholders
in the enterprises. The existing widespread agitation for the
municipal ownership and operation of public utilities may
really be attributed to the influence upon the popular mind of
the widespread dissatisfaction and resentment occasioned by the
abuses of great wealth and corporate facilities. To this must
be added the skilful use of this dissatisfaction by politicians,.
i6 SELECTED ARTICLES
seeking to turn public opinion to the advancement of their own
ends.
'Tn pointing out the fallacy of adopting municipal ownership
in the United States on the strength of its alleged successes
abroad, the first thing which is to be suggested is the danger
which always Hes in the offhand adoption of foreign methods,
laws or practices in another country. It can seldom be done suc-
cessfully. Differences in political, economic or social conditions
almost always exist which render the transplanting of the cus-
toms or methods of one country into another inexpedient.
"As contrasted with American municipal service, that abroad
is less political and more business-like in its character, more
certain in its tenure, more continuous in its service and more
disinterested in its activities. Its desirable features are not only
secured and protected by law, but are demanded by public senti-
ment. While the raw material is perhaps as good or better in
the United States than in the European cities, it is handicapped
in its efficiency by its political character and the uncertainty
of its tenure. The American municipal servant never knows
how long he is to be permitted to hold his place and is subject
to constant changes in policy and supervision. The only thing
he can be reasonably sure of is that his head will ultimately
drop into the basket. This system, for system it has come to be,
may perhaps prevent dry rot and some of the evils of bureau-
cracy, but it is at the expense of efficient public service."
An examination of the operation of municipal ownership
in Great Britain does not give positive assurance as to the suc-
cess or failure of the system in the United Kingdom. In some
instances, in electric lighting, for example, a little more than
one-half of the municipal undertakings have showed a profit,
while a much larger proportion of private enterprises have been
found profitable. It is not by financial returns alone, however,
that a system is to be judged. A well managed system shows
its efficiency by the extent and nature of its development, by the
completeness of the public service rendered, and by the real
additions to the wealth of the community which are effected
by its operation. Judged by this standard the operation of such
utilities as electric lighting, telephone service, electric power
MUNICIPAL OWNERSHIP 17
distribution, and the like, by municipalities, cannot compare in
efficiency with the work of private corporations. In support of
this view Mr. Burdett refers to the action of the Institute of
Electrical Engineers to endeavor to overcome the restrictive
action of local authorities upon the development of the electrical
industries in Great Britain.
"The remedy for existing conditions must come from both
within and w^ithout. The companies interested, the public au-
thorities and the public at large must each contribute to the
solution of the problem. None of them can or will be w'holly
effective without the others. Human nature is such that it can
not be trusted to regenerate itself, public clamor is frequently
ineffective, while enactments of the legislature can not accom-
plish all that is desired.
'Tn the first place, the companies engaged in furnishing
public services must, in their own interests, strive more and
more to give good service at fair rates. While they can not
all avail themselves of the advantages of the legal so-called slid-
ing scales, they can hope for the best results only along the line
of the theory of the sliding scale. In my judgment, the time
has gone by, if it ever was, when extortionate rates and
wretched service will promote the interests of the corpora-
tions. He who serves the public best serves his company
best. Patience and a spirit of conciliation, and a real desire
to increase facilities and reduce charges as rapidly as consist-
ent with such management, will ultimately bring their rewards
in the form of increased earnings and larger dividends. And
when the public, in any given community, comes to see that,
notwithstanding the mouthings of the demagogue and the
agitator, it is being fairly treated by the corporations, its ob-
jections to large and increasing returns upon invested capital
will gradually disappear.
"Next : the abuses of great wealth and corporate privileges
to which I have alluded must cease, or at least be greatly
mitigated. Self-interest must realize the fatality of a con-
tinuance of the abuses involved in gross over-capitalization,
poor service, high-prices, discrimination among consumers and
i8 SELECTED ARTICLES
above all the attempt to control the law-making power for
purely selfish ends.
"Third : Public sentiment must be cultivated. The one great
need in the economic world, is popular education along sound
economic lines. Let us no longer leave the exploitations of
vital economic principles to the visionary or the doctrinaire,
on the one hand, or to the irresponsible politician or sel'fisH
agitator, on the other. A real campaign of education is what
is needed, a broad, comprehensive, intelligent, persistent, ag-
gressive and well-directed campaign, which shall leave nothing
in reason undone to spread sound economic doctrines. So far
as self-interests enter into it, let it be an enlightened self-
interest, having in mind the rights of all; let it be devoted
to the fundamental proposition that all members of the com-
munity are bound together in such intimacy of relation that
no member can ruthlessly injure another without ultimately
feeling the recoil upon himself. 'Live "and let live,' should
be the motto."
Outlook. 80: 266-8. June 3, 1905.
V Municipal Ownership.
The problem on which the American people are thinking
more or less clearly and definitely is this : Where is the
line to be drawn between those industries which the munici-
pality should control and those which should be left to indi-
vidual ownership and administration? Without attempting to
answer that question, we here suggest three principles by
which the thinker may be guided in seeking a sane and rational
conclusion :
L We are not to go back. Industries which are now
controlled with fair measure of success by the municipality
ought not to be abandoned by the municipality and turned over
to public service corporations. The city of New York has
built and owns a water system, and has carried it on for
years with fairly satisfactory results. No consideration should
induce it to consider the proposition to turn over the control
of its water supply to private owners. This proposition, made
MUNICIPAL OWNERSHIP 19
on behalf of thq notorious Ramapo Water Company, was suc-
cessfully resisted, but not without a battle. New York for
years owned and controlled its streets. In order to secure
greater convenience of transportation, a few years ago it allowed
a private corporation to build a second-story street and own
and control it. It allowed another corporation to acquire
a quasi ownership and a practical control of the center of
its great avenues. It never ought to have done this. It has
not allowed a private corporation to own its great subway,
and no impatience for immediate convenience should tempt it
to allow its future subways to become private property. It
should own and control its highways, whether under the ground,
on the ground, or above the ground ; and if it allows the
system of transportation on these streets to be administered
by private corporations, it should keep that administration sub-
ject to governmental supervision and control:
11. There is a very simple and a very clear distinction be-
tween those industries which are carried on by individuals for
individuals, and in which, therefore, competition will probably
be maintained, and those industries which are of necessity
carried on by one great organization for the community as
a whole, and in which, therefore, competition cannot be main-
tained. The bakers and butchers and tailors and shoemakers
belong in the first category; the water supply, lighting, and
transportation belong in the second. If the baker furnishes
me poor bread, I can go to another baker ; but if the gas
company furnishes me poor gas, I cannot go to another gas
company. If my shoes pinch my feet, I can try another shoe-
maker ; but if the trolley line puts on so few cars that I
have to hang on to a strap in my daily trip between my
home and my office, I cannot try another trolley line.
Are there, not, the reader may ask, a beef trust, and a
sugar trust, and something very like a coal trust? Yes. But
municipal ownership furnishes no remedy for these combina-
tions. That must be sought in State or Federal legislation. If
the city were to take over all the butcher shops, it would
still have to buy its meat of the beef trust. Again, the reader
may ask : If the gas company charges too much or furnishes
20 SELECTED ARTICLES
inferior gas, can we not charter a competing company? if
the trolley line gives poor service, can we not give a franchise
to a rival line? The answer is, No! History has demon-
strated the truth of the economic aphorism. Where combina-
tion is possible, competition is impossible. The gas companies
combine under one management, or divide the city into dis-
tricts, and leave the individual no option but to take gas from
his district company. The street has already been given to
one trolley line, and cannot be given to another. And if a
rival line is built to parallel it, the two soon combine, if not
under one management at least in one policy.
Speaking broadly, then, there are in the city certain natural
monopolies. Water, lighting, transportation, are illustrations.
The city is not called upon to undertake all industries, nor all
that are necessary to human well-being. It need not open
city bakeries and groceries. But it may well take over the
natural monopolies. That is, it may well undertake the ex-
periment of doing for itself those things which are necessary
to the welfare of the city as a whole, and in which, therefore,
practically all the citizens have a common interest, and which,
in the nature of the case, must be done by one corporation,
either private or public.
III. There is also a simple and clear line of distinction
between ownership and administration. The city may both own
the plant and administer the industry, or it may own the
plant and allow private enterprise to administer the industry
subject to governmental rules and regulations. If the city ad-
ministers the industry, it must employ a large number of men
and disburse weekly large sums of money; and in the present
state of public morals this involves some public peril. The
apprehension of this peril constitutes the most common argu-
ment against municipal ownership ; but it is really only an
argument against municipal administration. If the city owns
the plant and permits private enterprise to administer the in-
dustry, neither such employment nor such disbursement by the
city is involved. The city of New York owns the subway,
and this ownership enables it to exercise a certain supervision
and control over the administration of the subwav. But this
MUNICIPAL OWNERSHIP 21
ownership involves no considerable addition to its pay-roll and
gives no considerable increased political control to the party
in power. So it may own the gas plant or the telephone plant
and lease the right to operate for a term of years. Does the
reader satirically remark, "Philadelphia !" We have not for-
gotten Philadelphia. But the difficulty in that city is not pri-
marily due to the fact that the city has a gas plant to lease ;
it is primarily due to the fact that Philadelphia has long
suffered from an unscrupulous and corrupt political ring on
the one hand, and a somewhat self-complacent and very apa-
thetic content among the citizens on the other ; until now the
city is so bound hand and foot that it is difficult to untie
the knots with celerity and perilous to cut them by a revolution.
The question of municipal administration of municipal in-
dustries we reserve for future consideration. In our judgment,
the political peril involved in such administration is less than
the political perils in which we are already involved from having
public service corporations which, on the one hand are eager to
get special advantages from the Legislature, and, on the other
hand, are subjected to blackmail by corrupt legislators. Xh^
cor ruption in our publi c, schools and in our Water and Fire
and Street Cleaning Departments does not compare with the
corruption traceable to the connection of public service cor-
porations and municipal governments in our lighting and our
trolley systems. But the two questions of municipal ownership
and municipal administration are distinct in fact, and should
be kept distinct in our thinking.
We submit, then, these three principles to the consideration
of any of our readers who are pondering the problem of mu-
nicipal ownership: i. Do not permit the city to lose a control
which it now possesses. 2. In extending control, extend it
over natural monopolies — that is, over those industries which
serve the city as a whole and which experience proves must
necessarily come under a single control. 3. Keep clearly in
mind the distinction between ownership and administration.
First let each city secure municipal ownership. Even if it is
not ready also to assume municipal administration, it should
not grant any long-time lease ; for it should not estop itself
22 SELECTED ARTICLES
from considering the question of municipal administration when-
ever it finds private administration of a public service, for any
reason, unsatisfactory.
Nation. 82: 441-2. May 3, 1906.
Municipal Ownership Investigators.
There is little doubt that English experience will be made
to support both sides of the argument with equal conclusive-
ness. . . . One investigator will observe the London County
Council's steamboats plying on the Thames, and will say,
"What geese Americans are not to insist that their cities own
every ferryboat !" Another will look into the complaints of
poor service by the same boats, will scan the balance sheet
which shows that they have been run at a great loss, and
will say: "Heaven deliver us from such disastrous experiments."
So of municipal tramways in Manchester, city electric lighting
in Birmingham, Government-controlled telephones, and so on.
Their bad and good points will be vociferously and contra-
dictorily explained to the American people, who will be expected
to be made thereby wise unto their political salvation.
We by no means wish to disparage the investigation. The
investigators at least will learn something. And if they offer
us divided counsels, the inference that the whole matter is com-
plicated with difficulties will not be without its uses. We al-
ready have a sort of advance agent of investigation in the
person of Everett W. Burdett of Boston, whose paper on "Mu-
nicipal Ownership in Great Britain" is published in the Journal
of Political Economy for May.* Preliminary extracts from it
vexed the righteous souls of the municipal-ownership enthusi-
asts in Chicago. But they could not suppress Mr. Burdett's
article, as they did the famous Dalrymple report; here it stands
in its 56 pages of type.
Its most valuable part is the statistical information which
Mr. Burdett has amassed. His arguments may be combated and
his applications parried, but his facts must be at least chewed
*See portions of Mr. Burdett's article given in this handbook.
MUNICIPAL OWNERSHIP 23
and digested. We can all draw inferences — even a horse can,
as the farmer said, if he "gets a good hitch." But the facts
and figures we are to hitch to must first be provided; and
those which Mr. Burdett presents are very much what was
needed. Some things they put beyond reasonable dispute.
Whatever else may be said of the policy of government own-
ership of electric lighting, power, and traction, English and
Continental experience shows that it has a hampering effect
upon the development of the electrical industry, and that the
practical extensions in the way of public service are not
nearly so great as in this country. Mr. Burdett's summary is :
"The United States, with less than double the population of
Great Britain, has six times the amount of apparatus installed
for furnishing electric light and power, sixteen times as much
for electric traction, twenty-three times as many miles of
electric railway, twenty-six times as many motor cars, and five
and one-half times as much money invested in such enterprises."
Such differences are, of course, to be explained in part by
differences in extent of area and in the distribution of popula-
tion and in national customs, but the salient fact remains well
established. Governments, like monopolies, are not enterprising.
They do not encourage invention because they do not offer
the great stimulus of a big money prize to either inventor or
promotor. On the other hand, relieved of the pressure of com-
petition, they are not forever turning, as private investors and
corporations are, to plans for reducing the cost of production
and improving while cheapening the public service. Hence the
result which jMr. Burdett's studies set forth so impressively:
quite aside from the debate about policy and cost, municipal
ownership in Great Britain appears to be demonstrably sluggish
in taking up with new processes and in venturing upon en-
largements of the service looking far into the future. A city-
owned trolley-line, for example, would not push out into the
thinly-peopled suburbs — such an extension would not immedi-
ately pay. But a private corporation could afford to wait
for returns; while its directors, by means of real-estate specu-
lation along the suburban lines, would see their way to making
a great deal of money. Americans may be bled by corporations,
24 SELECTED ARTICLES
but they at least get the service. Englishmen may or may not
have to pay more for their municipally owned utilities — the
actual cost is in dispute — but they confessedly suffer from what
Mr. Burdett calls "the inertia and lack of business enterprise
which are inseparable from municipal ownership."
If the Government is a fool and the corporation a knave,
what woods are we to take to. Reform your governments, say
some, and make them pure enough and capable enough to under-
take municipal operation. Short of that millennium, however,
there are those who would be content if our governments
could be made pure enough and wise enough to regulate public-
utility corporations. That would not at once open heaven to
us, but it would make earth a little more comfortable ; and it
would give the people more for their money, while at the
same time stimulating inventive genius and managing talent
by giving them more for their brains.
Annals of the American Academy. 29: 275-91. March, 1907.
Public Regulation of Street Railway Transportation. Edmond
R. Johnson.
Comparison of Municipal and Private Ownership.
In the United States, street railways, with the exception of
certain subways, are owned by private companies. In Europe,
although the majority of the street railway enterprises are still
owned by corporations, the tendency is towards the purchase
and operation of the tramways by city governments. The suc-
cess that has attended municipal ownership and operation has
been such as to lead some persons to conclude that all cities,
both European and American, might advantageously adopt the
policy of municipalization of the street railway service.
In Great Britain the street railway service during the decade
following 1890 was generally unsatisfactory. This was in part
due to the fact that the Tramways Act of 1870, by which fran-
chises were limited to periods of twenty-one years, foreshadowed
a policy of municipalization of the private lines. When the
time came for changing from horse to electric traction, the
MUNICIPAL OWNERSHIP 25
private companies generally neglected the service, with results
that are well stated in the following quotation taken from the
minutes of the Plymouth, England, Town Council :
The main objects of the corporation in purchasing the tram-
ways were to get rid of the company management, which had
failed to give the public an effective tramway service and which
had exhibited so considerable disregard of public inconvenience
and remonstrance, and in the second place the direction and
control of the policy of the tramway extension in the hands of
the* council as representing the general body of ratepayers, for
the general benefit of the borough, instead of leaving the tram-
way system to be developed and extended for the purpose of
securing profits to shareholders without regard to local necessities.
The main advantages of municipal ownership and operation
are :
(i) The possibility of low fares and of adjusting fares with
reference to the most advantageous distribution of population.
(2) The ability of the city to regulate the wages and hours
of labor of the street railway employees. '
(3) To secure to the city the increasing profits resulting!
from the growth of population and traffic.
Assuming that a municipal government is honest and is
able to manage the street railway service efficiently, the ad-
vantages of municipalization are manifest. There are, however,
certain dangers connected with municipal ownership and opera-
tion even under the favorable conditions prevailing in the cities
of Western Europe :
1. There is the liability that municipal debts may be greatly
increased and that the cities may be so desirous of reducing
street railway fares as to neglect to provide for the payment
of the railway debt within the proper period.
2. Writers opposed to municipalization claim that the city is
more liable than private corporations are to allow the track
and equipment to depreciate, and to neglect the construction of
new tracks extending the lines into unoccupied suburban regions.
3. It is also claimed that the municipalization of street rail-
ways will restrict the construction of interurban electric lines,
for the reason that each city will be disposed to confine its
lines to the region within its own limits, and that, having
done so, private companies will not find it profitable to con-
struct lines connecting the cities.
2(i SELECTED ARTICLES
*
European cities have so recently adopted the policy of munic-
ipahzation of street railways that it is too early to determine
what their policy will be as to the payment of the debts incurred
in buying out the corporations or in constructing new lines, or
what their policy will be regarding the maintenance of their
track and equipment, and whether they will extend their systems
with adequate rapidity. In general, it may be said that ,the
British and Continental cities have thus far dealt satisfactorily
with these questions. Whether municipalization will hinder the
construction of interurban lines remains to be seen, but it seems
pfobable that this may prove to be a somewhat important con-
sequence of municipalization.
The success that is attending the purchase and operation of
street railways by foreign cities argues but little for such a policy
for American cities. The condition of municipal government in
the United States is such as to discourage the ownership and
operation of street railways by public authorities at the present
time. For the United States the policy for some time to come
should be one of public regulation rather than one of public own-
ership and operation.
The Street Railway Problem in the United States.
The adjustment of the relations of the public authority to the
street railway transportation service is a problem comprising the
regulation of the provisions of the charter and franchise granted
to the company, the regulation of the capitalization and financial
methods of the corporation performing the service, the public
supervision of the service, the control of the fares, and the adop-
tion and enforcement of wise methods of taxation. This is in-
deed a complicated problem, the solution of which has been as
yet but partly accomplished. The regulation of the franchises,
services and charges of street railways needs to be more detailed
than is required in the case of steam railroads, because the street
railway service is more completely monopolistic than is the busi-
ness of railroad transportation.
That these facts necessitate a detailed regulation of the street
railway service is being increasingly recognized in the United
MUNICIPAL OWNERSHIP 27
States as shown by the general tendencies discernible in the legis-
lation of the states :
1. There is a tendency to limit the period for which the fran-
chises are granted, and to increase the obligations to be met by
the companies in order for them to maintain the validity of the
franchises they receive from the public. The states are giving
the cities power to exact more than they formerly could of the
street railway companies, and the cities are showing an increasing
disposition to avail themselves of the powers they have received
.from the states.
2. The state and municipal control over fares is being more
frequently exercised. In several states and in numerous cities
efforts are being made to establish an effective public regulation
of street railway charges. These eft'orts indicate more clearly
than any other movement could the tendency towards a greater
exercise of public authority.
3. There is a growing disposition to tax the franchises and
earnings of street railway companies as well as their physical
property. The fact is coming to be recognized that taxation
levied only on the physical property of street railway companies
reaches but a small part of the value possessed by the companies,
and that an adequate system of taxation necessitates the taxa-
tion either of the franchises or of the earnings of the companies.
Moreover, the legal limitations ordinarily placed upon property
taxation — that all kinds of property shall be taxed equally — pre-
sents another reason for adopting some other basis than physical
property for the assessment of street railway companies. In
some states the value of the street railway franchise is reached
for purposes of taxation by treating the franchises as property
and thus avoiding the restrictions of the laws regarding taxation
of all physical property. The most convenient and, on the whole,
the most practicable method of taxing street railway companies
is that of requiring them to turn over to the city annually a liberal
percentage of their gross receipts. While the gross receipts tax
is not theoretically the most ideal one, the objections to it are
not important in the case of the street railway business, and its
advantages outweigh the theoretical objections.
28 SELECTED ARTICLES
The present thought regarding the proper solution of the
street railway problem in the United States may be approxi-
mately summarized as follows:
(i) A five-cent fare, with six tickets for a quarter, and a
general system of transfers; (2) that the service shall be per-
formed by chartered companies, but that each company shall pay
to the city a percentage of its gross receipts and be required to
pave and sprinkle the parts of the streets occupied by its tracks;
(3) that capitalization of the company shall be regulated by pub-
lic authority and over-capitalization prohibited ; (4) that fran-
chises shall be limited to twenty or thirty years, and that the city
should retain the right to purchase at the expiration of this period
the property of the company at a fair valuation; (5) that a com-
mission or some other public authority shall pass upon the public
necessity for a proposed street railway, and regulate the service
in the public interest; (6) that the annual reports made to the
state and city shall give full information regarding both the
service and finances of the company.
The general problem of the public regulation of street rail-
ways has been simplified both by the consolidations that have
brought the street railway system in each of the most of our
large cities under a single control, and by the recognition on the
part of the public of the fact that the street railway service is a
monopoly and must be regulated as such. The fact that the
street railway service is a monopoly not only necessitates public
regulation, but makes possible more efficient public control. The
truth of this is well illustrated in Boston, where all the lines,
elevated, surface and subway, are operated by a single company.
Over-capitalization has been prevented, the fares are being regu-
lated, and different parts of the street railway systems are co-
ordinated so as to secure a good service in a city where the
difficulties of providing street railway transportation were ex-
ceptional. What Massachusetts and Boston have done other
states and cities can, and doubtless will do. Indeed, hopeful
progress is being made in several states, and the successful solu-
tion of the "street railway problem" in the United States by
public regulation rather than by municipalization seems more
than probable.
MUNICIPAL OWNERSHIP 29
Outlook. 86: 49-51. May 11, 1907.
^Problems of Municipal Ownership. ''
We may accompany this with another general principle. The
people, through their government, whether national, State, or
municipal, have a right to embark in any business public in its
nature and on which the common welfare of the community is
depending, provided that they can do it better and cheaper for
themselves than they, can hire a private corporation to do it.
On the other hand, we think it is equally evident from a wide
experience that the water-works of a city should never be left in
private hands even for temporary operation. The sanitary con-
ditions of the city are too dependent upon pure water and the
peril from false economies is too great. In w^ater supply, econ-
omies are dangerous and extravagance is safe. The city, there-
fore, can better afford to pay for a water supply extravagantly
administered by the municipality than for a water supply
economically administered by private enterprise. In fact, ex-
perience shows that whatever economies private enterprise
effects rarely diminish the expenditures of the citizens ; they
swell the profits of the corporation. What is true of the water
supply is true of the school system. No one would propose
that the public school buildings should be owned or the public
schools operated by private enterprise ; no one would propose
to farm the children o ut tq_ tlT e lowp'^t biddpr ; for in public edu-
cation as in public Water supply the perils of extravagance are
immeasurably less than the perils from excessive economy.
The practical question respecting m.unicipal ownership relates
to public utilities which have generally been carried on in the
past by private enterprises and are now being experimentally at-
tempted in municipalities, both at home and abroad, by the gov-
ernment. These are chiefly the utilities of light and transporta-
tion. Should the government own and operate the lighting plants
and the street railways? or should it own them and lease them
to private corporations for operation? or should it own them and
grant a permanent franchise or lease, subject to periodical re-
vision of the rent or franchise tax, and exercise over them gov-
ernment supervision and control? or, finally, should it leave them
30 SELECTED ARTICLES
wholly in private hands and subject to private control, and trust
to competition for securing efficient service and reasonable rates?
In our judgment, no economic thinkers, except a few paid ad-
vocates of private enterprises, any longer hold the last of these
views. The third of these views is held only as a compromise,
because permanent franchises have been granted in the past, and
it is not clear how the city can recover the possession of the
franchises which it has given away. Except for complications
growing out of past legislation, the only practical issue respecting
municipal lighting plants and municipal railways is this : Shall
they be owned and operated by the city, or owned by the city
and leased to private enterprises on measurably short leases for
operation?
We here simply endeavor to state with clearness the issue,
without debating it; but our general judgment, considering the
political and industrial conditions in this country, is in favor of
municipal ownership with private operation on short leases.
Outlook. 82: 504-11. March 3, 1906.
Principles of Municipal Ownership. Robert Donald.
I have now reviewed the attitude which advocates of munic-
ipal ownership assume towards the least industrial and commer-
cial of communal undertakings. I will now deal with the more
industrial, which raise serious contentions.
What are the principles which should guide municipal action
with regard to the larger and more profitable services, including
street railways, electricity and gas supplies, telephones, etc?
The operations of these services cannot, on any intelligent
principle, be left to free trade. xA-lmost every American city has
started by having several street railway corporations, and more
than one electric or gas corporation ; but the irresistible tendency
has been for absorptions and amalgamation to take place until a
monopoly has been established — a clear indication that the serv-
ices come within the domain of natural monopolies. When, how-
ever, monopoly is reached through the stress of competition and
the operations of graft, the undertakings are greatly over-
MUNICIPAL OWNERSHIP 31
weighted with capital and burdened and drained by vested inter-
ests, progress is retarded, and cheap rates made impossible. The
obvious conclusion is that public lighting services which are
monopolistic in character should be kept in control by the
municipality. It should not allow privileges which the commu-
nity creates to pass beyond its power.
There is little difference between the principles involved,
whether the public service franchise is' for gas, electricity, or
street railways. Compensation can be granted to the city for gas
supplies on two systems : a tax per cubic meter of gas sold, as in
Paris and German cities, in which case the money goes to the
municipal exchequer and insures the city getting a share in the
profits ; or the enforcement of a sliding scale, the operation of
which enables the corporation to increase its dividend as it low-
ers its price — a system which enables the consumer to benefit.
The same systems could be applied to electricity supply.
Street railway corporations operating under franchise can be
made to pay fees either through a percentage of gross receipts
or in some other way.
It is quite feasible and practical for a city in various ways to
grant public service franchises, but the system has drawbacks.
Social interests enter very largely into the operation of all city
services. It is in the interest of the community that light should
be as cheap as possible to the poor, and it helps the police to have
the streets well lighted. Efificient and cheap transportation has
an important influence on health, and promotes well-being. Cor-
porations which exist solely for making profits will not, as a rule,
risk a fall in their dividends in order to cheapen a commodity
or popularize a service. The corporations have always an eye on
the end of the franchise period. They regulate their operations
accordingly. They cease to introduce new methods, they neglect
adequate maintenance, they allow their plant to become dilapi-
dated ; and naturally so, as the future is uncertain, and they want
recoupment and profit.
From a theoretical point of view — assuming for the moment
that there are no administrative dif^culties — let us see how com-
plete municipal ownership and operation would work. Take
street railways. The City Council owns the railroad laid down in
32 SELECTED ARTICLES
its own streets. It can regulate the time of construction so as to
be least inconvenient to the people. The routes would be planned
also in conjunction with street improvements, clearing of slums,
and rehousing the poor. A corporation holding a limited fran-
chise has no interest in the permanent development of a suburb.
The City Council would always adopt the best systems of
transportation, as it will live to reap the benefit. It would have
some regard to the appearance of its cars. It would be a model
employer. Fair wages would be given and reasonable hours ob-
served. Its car conductors would be provided with neat uni-
forms. They would be smart and civil. The municipality would
study the needs of special classes. For instance, there would be
cheap cars for workmen, morning and evening. There would be
special services to artisan colonies in the suburbs, to parks and
pleasure grounds. The citizens would be made to feel in every
way that the cars were their cars, and that every cent they paid
would go towards the improvement and development of their
own co-operative property. A municipal car service can be made
an excellent means for stimulating civic patriotism.
Then the municipal car system would dovetail into the work
of other departments. The cars would be run at night to collect
city garbage, market produce, etc., and the day load of electricity
required for street railways would be welcomed by the city
electricity department.
All these features of a municipal street railway system, which
I say are possible, exist in British and Continental cities. But
we can imagine a publicly owned street railway service and sub-
ways going much further. The system of transportation in a
city is an essential element in its life. The better it is, the more
it aids business, the more it adds to social amenities.
In some British cities the average fare is a little over one cent.
It is only a step further to socialize the street railways as we
have socialized the highways, bridges, and ferries (for the use
of which in former years tolls were levied), and introduce free
transportation — that is, free in the sense that the use of the
streets, maintained out of local taxation, is free, and the use of
elevators in high buildings (paid for in the rent of the rooms)
is free. I only refer to the Utopia of free travel to emphasize
MUNICIPAL OWNERSHIP 33
the difference between private and municipal operation of street
railways. While it is the aim of all cities of which I know to
make their municipal railways self-sus-taining and profitable,
there are cases where a city deliberately incurs a money loss for
the sake of a social benefit. Huddersfield, a large manufacturing
city in Yorkshire, established tramways because companies re-
fused to do so, and ran them for years at a loss, for the general
benefit to the community. The steep gradients and hilly streets
which the cars had to climb made horse and steam traction both
unprofitable, but the conformation of the site made transporta-
tion facilities all the more necessary. Electric traction has now
turned the city car system into a profitable undertaking. In
Cologne, Diisseldorf, and other cities, street railways are run
several miles beyond their borders to municipal forests at such
low fares that loss is incurred.
The same principles of social benefit arising from cheapness
of service should operate in the case of electricity and gas sup-
plies. Both services under municipal ownership can be managed
on parallel lines by different committees. Under the Scottish
municipal code, municipalities are precluded from making profit.
The surplus is devoted to reducing charges and improving the
services. This system is not yet general, as municipalities prefer
to manage their undertakings so as to give a commercial instead
of or in addition to a social profit. A commercial profit means
that the surplus left after meeting all payments for maintenance,
depreciation, interest, redemption charges, etc., is handed over
to the relief of local taxation — thus benefiting all taxpayers.
When the other system is adopted, the benefit in the form of a
cheaper service is confined to consumers. The contrast between
the two systems is most striking in the case of street railways in
London. In the wealthy and crowded financial center of London
and in the rich West End districts tramways are not permitted,
yet the rich taxpayers in these areas get a share of relief which
comes from the pennies of the poor who use the tramways in
other quarters of the metropolis.
Hundreds of municipalities in Great Britain and in Conti-
nental Europe own and manage efficiently both gas and electricity
undertakings. One necessary condition for cheapness of produc-
34 SELECTED ARTICLES
tion is for the municipality to supply all the city, and not merely
produce gas or generate electricity for its own requirements. It
is economically wasteful, for instance, for the city of Chicago to
distribute electricity all over the city only to light the street
lamps.
In Continental Europe the franchise system has existed both
as regards gas and electricity, although it is now being discon-
tinued. It did not give low charges and did not make for
efficiency. The sole object of the concessionary corporation is
to reap the richest harvest it can during the period of the fran-
chise, without regard to the future of the undertaking or of the
city's needs. In Great Britain the franchise system was adopted
for electricity supply. All companies were limited by statute to
forty-two years, at the end of which period the municipality takes
possession on payment of "the then value" of the plant, without
compensation for good will or displacement. This system re-
tarded development so that most of the companies have been
bought up long before the franchise expired, receiving some-
times double their capital expenditure. And it has paid the com-
munity to give this compensation in order to develop the business
and lower the charges.
Municipal ownership in Great Britain has been more enter-
prising than corporation rule ; it has always considered the inter-
ests of the whole community, and has invariably meant lower
charges for consumers.
The same principles of public utility which apply to street
railways, gas or electricity supplies are applicable to telephones
and the distribution of hydraulic power, or any other service
which is monopolistic in character. Telephones, while managed
successfully by municipalities in England, Norway, Sweden, and
Holland, present some difficulties. Localization is not desirable
and isolation is impossible. There should be only one telephone
system in order to have the best facilities for intercommunica-
tion. The telephone service works most smoothly and answers
public needs best in European countries where it is a State
monopoly under the post-office. With the telegraph system a
State monopoly, as is the case throughout Europe, it is an
anomaly to have the telephones under separate management.
MUNICIPAL OWNERSHIP 35
The general principles of municipal ownership will probably
find ready acceptance as theories of civic policy, but what about
their practical application? It will be pointed out as an initial
material difficulty that street raihvay systems, gas and electricity
supplies, cannot be limited by city boundaries. They should
serve many areas governed by different authorities. Provided all
these authorities are animated by the same ideas of civic policy,
the difficulties disappear; working arrangements mutually bene-
ficial are entered into, or joint services are established, and
parochialism gives place to a wider civic patriotism, which recog-
nizes larger communal interests. As a matter of fact, the large
cities in England serve their smaller neighbors with water and
gas, and are now beginning to do so more and more with street
railways and electricity.
The most powerful and convincing arguments urged against
municipal ownership are not, however, advanced on practical but
on moral and political grounds. Let the municipality extend its
activities and you enlarge the opportunities for patronage. Add
to the number of public employees and you swell the power of
the party boss. Give the municipality more money to spend in
contracts and supplies and you widen the doors for grafters.
Municipal ownership, in fact, means more politics, more cor-
ruption, more dishonesty in public life, and more power in all
elements which degrade a city and demoralize a people. These
are the last words, the final crushing arguments, of the anti-
municipalists. They apply only if we grant one large assumption
and make a humiliating confession. If we take it for -granted
that the evil elements in a community are permanent, that corrup-
tion will forever triumph, that politicians will more and more
make public plunder their business, that the sense of citizenship
and the moral conscience of the Nation will continue to wither
and fade, then the case against municipal ownership is complete,
just as it is against every form of good government.
If, on the other hand, we have still faith in the moral regen-
eration of the people, still believe that purity in politics and
public life is possible, then municipal ownership is the greatest
and final means of reform. It is radical; it goes to the root of
the matter and gets rid of the mainspring of corruption. Graft-
36 SELECTED ARTICLES
ers, corrupt politicians, and all the other parasites who now live
by plunder could not exist if there were no franchises to sell, no
contracts to give out. Let the cities keep their franchises, oper-
ate municipally their undertakings, and the chief source of cor-
ruption and the means of temptation will disappear. So long as
corporations and contractors are mixed up in city administration
so long will the tempter be there, and grit will interfere with
the smooth working of the municipal machinery.
But, it may be urged, admitting that one evil is eradicated,
others are more strongly intrenched. The patronage which falls
to the City Council is increased and the power of the city em-
ployee is greater — both dangers from which we now suffer.
Having extinguished the tempter, the next step is the moraliza-
tion of the 'city councilor and the purification of the civil service
— neither impossible reforms. The city councilor has long since
been discovered in Germany and Great Britain who is prepared
to serve his city without any ulterior motive — ready to give his
ability and his time freely and honestly to the service of the peo-
ple. He is making his influence felt in the United States ; and
without this public-spirited servant, animated by a sense of
citizenship.' who subordinates all selfish aims, municipal owner-
ship cannot succeed.
Its success also means that a permanent civil service for cities
must be organized above party and solely on merit, which only
involves an extension of the system which has been introduced
successfully in various departments of the United States Govern-
ment. •
While this political danger from the city's employees is always
heard of. nothing is said of the much more serious influence of
the corporation directors, lawyers, and stockholders. The politi-
cal dangers feared from an army of municipal employees have
never yet been apparent in British cities. To begin with, the
workers benefit doubly by municipal ownership — they share in its
general advantages and receive just treatment, for a municipality
must always be a model employer. Then the interests of the
city's employees are divergent. Workers in various departments,
while having the same employer, have not common interests.
Combination among all is not practicable. In the most developed
MUNICIPAL OWNERSHIP z7
of British cities, where every public utility service has been
municipalized, the municipal employees have not proved a serious
factor at election times, partly from the reason that they are too
good citizens to attempt a systematic and combined campaign
which would lead to reaction, and also partly from the fact that
a large proportion of them live outside the borders of the munic-
ipality which they serve. Were combined action ever attempted
against a common municipal employer, such a foolish proceeding
would lead to the drastic remedy of disfranchisement, just as the
civil servants in Washington are deprived of their votes, al-
though not for the same reason. The interests and well-being
of the whole body of citizens would always preponderate over
the action of the city's employees, who must always be a com-
paratively insignificant minority.
There are those who will admit the whole of these premises,
but still only regard the system as an ideal to be reached in the
far future. Such would argue that the time is not now opportune ;
we must go through a transition period ; we could not get honest
officials ; we could not trust the people yet ; they do not know
how to use their votes. The enemies of reform always fly to dis-
trust of the people. The same reasons were advanced for with-
holding votes from agricultural laborers in England. They
would not, it was said, know how to use them. They could not
be trusted. People will never learn how to use political privi-
leges until they get them, and, similarly, people will never know
how to run municipalies under municipal ownership until they get
the opportunity. There will at first be a period of stress, trial,
and turmoil, when loyalty to the people's cause will be strained,
when the old system will strive hard for mastery. This experi-
ence is gbne through before all great reforms are finally estab-
lished, and has been successfully weathered by loyal service and
steadfast courage.
Municipal ownership, it should be borne in mind, withdraws
from public life the influence of the stockholder, who, when he
goes to the poll, has conflicting aims to consider — his position as
a citizen and his interest as a stockholder. When the city keeps
its franchise and operates its undertakings, it becomes an in-
dustrial commonwealth, as far as public works are considered.
38 SELECTED ARTICLES
with all the citizens as its stockholders. Once the barrier is past»
once the new civic regime is inaugurated, the citizens will not
be so short-sighted as to damage their own property. Those of
them who hold city stock, bearing its moderate but certain return,
will not like its value depreciated. They will prefer to see their
city's credit stand well in the market. All other citizens are also
partners in the co-operative undertakings which they use them-
selves or derive benefit from. As good citizens they will do
nothing which is likely to impair the efficiency of their co-
operative enterprises. Rather they will seek to develop them
within their legitimate sphere, and widen the benefits which they
confer on the people.
AFFIRMATIVE DISCUSSION
Arena. 34: 645-6. December, 1905.
Fifteen Reasons Why the People Should Own Their Own Public
Utilities. Frank Parsons.
1. A public plant does not have to pay dividends on watered
stock.
2. It does not have to pay dividends even on the actual in-
vestment.
3. It does not have to retain lobbyists, or provide for the
I entertainment of councilmen or legislators or subscribe to cam-
paign funds, or bear the expenses of pushing the nomination and
election of men to protect its interests or give it new privileges,
or pay blackmail to ward off the raids of cunning legislators and
officials, etc.
y 4. It does not have to advertise or solicit business.
5. It is able to save a great deal by combination with other
departments of public service. Speaking of the low cost of elec-
J trie light in Dunkirk, the mayor of the city says: "Our city owns
its water-plant, and the great saving comes from the city's own-
ing and operating both plants together."
6. Full public-ownership (that is, public-ownership free of
debt) has no interest to pay,
7. Even where public-ownership is incomplete, the people
not owning the plant free of debt, they still have an advantage in
respect to interest, because they can borrow at lower rates than
the private companies have to pay.
8. As cities usually act as their own insurers, public-ownership
is free of tribute to the profits and agency-commissions of private
insurance companies.
9. There is often a large saving in salaries. A public plant
pays its chief well, but does not pay the extravagant salaries
40 .SELECTED ARTICLES
awarded by millionaire, monopolists to themselves or their sub-
stitutes in office.
^ 10. Public plants frequently gain through the higher ef-
ficiency of better treated and more contented labor.
11. The losses occasioned by costly strikes and lockouts do
not burden the ledgers of public works.
12. Damages and costs of litigation are likely to be less with
public than with private works. Accidents are fewer in a system
that aims ;it good service and safety, and treats its employes well.
'- 13. The civic interest of the people leads to other economies
through the increase of patronage and the lessening of waste.
The larger the output, the lower the cost of production per unit
of service, other things equal, and the tendency to waste elec-
tricity, water, etc.. is much less when the people know that the
service is a public one, the profits of which belong to them, than
when they know that the service is rendered by a private cor-
poration charging monopoly rates and making big profits for a
few stockholders. These economies are intensified as education
and experience with public-ownership develop the understanding
and the civic patriotism of the people.
14. The cost of numerous regulative commissions and in-
terminable legislative investigations into the secrets of private
monopolies would be saved by the extension of public-ownership.
15. Legislation would cost us less were it not for the private
monopolies. For a large part of the time and attention of our
legislatures is given to them.
Nebraska State Journal. May 12, 1907.
Municipal Ownership. W. A. Selleck.
There is a natural direction in which municipal functions are
extending. I quote from Sidney Webb : "First, where the con-
sumption of a commodity is compulsory, e. g., water supply,
second, where no pecuniary return is received for the supply of
any commodity or service r e. g., streets, sewers, fire protection ;
third, where the service is furnished irrespective of cost, e. g.,
public schools, libraries and parks ; fourth, where the good of
MUNICIPAL OWNERSHIP 41
the community demands . . . that the service rendered be as
great as possible, e. g., food inspection."
There will be slight, if any, criticism on any of the foregoing
heads, as we have been accustomed to consider them proper fields
for municipal activity. Yet not one of them has been so estab-
lished without having passed over debatable ground. Indeed
the first, waterworks, may be considered by many as still on the
field of, debate. The second, streets, sewers and fire departments
are so regarded only because we have accepted the fact that
these are public uses which should be furnished without charge
and at public expense. This is a matter of growth in knowl-
edge and experience. Who of us cannot remember the toll
road or the toll bridge? It is not two years since we had a
private sewer within the city limits of Lincoln.
At first thought it may seem to some that the schools have no
place in this discussion for surely no one thinks they should be
other than public, controlled and financed by the public. Yet
why do we so confidently assert this except as we firmly believe
it to be for the public good? The owners of private schools,
those who believe in the parochial school might well say that the
public by establishing free public schools is encroaching on their
ground, making their property less valuable, and in many in-
stances could without doubt make plausible claim that they were
doing as good if not better work in training children than the
public school. The fact that the public school is so firmly estab-
lished as to be both a national and a state policy and is no longer
left to the whim of the individual city does not make the argu-
ment essentially dififerent.
In all of the above mentioned lines municipal ownership is
recognized in Lincoln, at least, as beneficial to the public.
I come now to more debatable ground. The last point was
where it was desired that the service rendered, or to put it
differently, the consumption by the public should be as great as
possible. Reversing that statement brings the fifth head, viz:
where it is desirable that the public consumption should be as
small as possible, e. g. the liquor traffic. Sixth, where improved
standards are desirable, regardless of their being financially self
sustaining, e. g., public baths, lodging houses, parks, etc. Seventh
42 SELECTED ARTICLES
and lastly, where a monopoly is desirable, e. g., street railways,
gas and electric light companies, telephone companies, ice plants,
heating plants, garbage crematories.
In this state the public sentiment on the liquor question has
apparently divided rather on the line of control or prohibition
than of public ownership. One state only, so far as I can recall,
having experimented along the line of ownership rather than
control of private ownership.
We als--! recognize parks and libraries as being proper avenues
of public activity. In larger and older cities baths and lodging
houses are so recognized. The need is not pressing here yet and
until the need is felt, public opinion can hardly be said to exist.
The last list of corporations constitute the debatable ground
of the present day. Street railroads, gas and electric light and
telephone companies, ice plants, heating plants and garbage
plants. I have chosen to approach this group by the somewhat
tedious process of this paper for the purpose of showing, if I
could, that there is no essential difference between this group
and the others on which we are all practically agreed.
For a moment, let us compare and contrast them. Take the
street car and the gas and electric light and the telephone as the
types of their class, and the waterworks, public schools and
parks as the types of their class. Waterworks, schools and parks
are public necessities. So are the others.
All the people are benefited alike by the waterworks, schools
and parks, and are not by the cars, the lighting companies and the
telephone, but is that true? On the contrary, is it not more true
that the burden of their support falls on all but the benefits are
enjoyed by those who happen to be prepared to enjoy them?
The taxpayer who has no children gets only an indirect bene-
fit from the public schools. The man living at a distance from
the park does not get the same benefit as the man who happens
to have located near it. The house that is not reached by the
water main must still depend on the cistern or the well for drink-
ing water. Indeed, light, heat and means of communication
either of transporting the body or the voice is fully as much a
necessity of city life as is water or schooling or library books.
Does anyone say a man cannot go 'without water and live?
MUNICIPAL OWNERSHIP 43
I reply I agree, but he is not obliged to have water pumped
through mains as long as the rains descend and the springs
of earth do not dry up.
Compare them as you will ; contrast them in any way possible
and you will find that the reasons which have made desirable
public ownership of schools, libraries, waterworks, streets and
alleys, parks, etc., are all applicable and cogent reasons for the
ownership of any and all public corporations whose business it
is to serve the public at large as a public body, or whose business
is such as requires a continuous and permanent use of the public
streets.
Outlook. 80: 411-3. June 17, 1905.
Municipal Ownership.
A contributor reports on another page the results of municipal
ownership of street railways in Glasgow. We beUeve that his
statement of facts can be absolutely trusted ; and they seem to
demonstrate that, given the right conditions, municipal ownership
and operation of street railways may be made highly advantageous
to the citizens. New York and Chicago are not Glasgow. The
question whether municipal ownership and administration can
be made advantageous to the citizens of an American city is not
conclusively answered by the fact that such ownership and ad-
ministration have been made successful in a Scotch city. It is still
necessary to ask, What conditions in the American city are nec-
essary to make such success probable, and can these conditions
be brought about? In answering these questions we take a con-
crete case, that of New York City, but the general principles will
apply equally, though with modifications, to all American cities of
considerable size.
I. The city must not tie its hands by granting to any corpora-
tion a permanent franchise to conduct any municipal industry. A
franchise to an inter-State railroad to enter the city is not one
to conduct a municipal industry ; but even in such cases the fran-
chise should always be subject to periodical revaluations. No
water, gas, telephone, electric, dock, or transportation franchise
should be granted except for a moderate term of years. Where
44 SELECTED ARTICLES
it is possible, the city should build and own the plant, as it has
built and owns the subways in Boston and New York. If it has
not the money, and if constitutional limitations deny it the right
to use its credit, as is the case in New York, arrangements should
be made in the contract with the operating corporation by which
the property may be purchased at a fair valuation by the city.
II. If the city is to carry on municipal industries — as water,
lighting, dock, telephone, and transportation systems — it is indis-
pensable that the city secure for that purpose honest and capable
officials. In Glasgow only rate and rent payers vote in municipal
elections. "The slums,'' says Mr. Shaw in his volume on "Mu-
nicipal Government in Great Britain," "evade the tax-collector
and sacrifice the franchise." Moreover, "the extraordinarily
severe laws against bribery, direct and indirect, apply to municipal
elections ; and it is next to impossible to get a British voter to the
polls who does not contemplate the contest with some glimmering
of interest and intelligence." Whether it would be advantageous
to attach a property or tax-paying qualification to the suffrage in
American cities it is useless to discuss ; because such limitation
of the suffrage, however desirable, is impracticable. It is easy to
attach qualifications to the suffrage when it is granted, but almost
impossible to do so afterwards.
The result which Glasgow secures by a limited suffrage,
American cities must generally secure by another method. By
the extension and enforcement of the Australian ballot system,
and the abolition of the provision allowing the illiterate voter to
take some one into the polling-booth with him. a quasi educational
qualification can be attached to the ballot. Quite as important
is a political reconstruction of the city to adjust it to modern
needs. The municipal council in most of our cities is patterned
after the State and National legislative bodies. But a municipal
council is not analogous to a State or National legislature. It is
far more analogous to the board of directors of a commercial cor-
poration. The recent act of the New York Legislature in taking
from the New York Board of Aldermen, as its municipal council
is called, the power of granting franchises and conferring it upon
the Board of Estimate and Apportionment is a step in the right
direction. But it is only a step. What is really wanted is the
MUNICIPAL OWNERSHIP 45
abolition of the municipal council which is elected by wards, and
the substitution therefor of a small board of not more than
fifteen nor less than nine, who shall be elected on a general
ticket, or by boroughs, and shall represent the entire city. Ex-
perience has proved that ward representation tends to ward poli-
tics — the bane of our municipal system. It has been proved that
it is almost impossible to get threescore or more of men who are
honest and capable, and who will give their time to the details of
city administration. And it has also been proved, by the value
of the services rendered by the Rapid Transit Commission and by
the Board of Estimate and Apportionment, that it is possible
to get a small board of competent, honest, and public-spirited
men. The work of a city council is administrative, not legisla-
tive ; and for such work a small body, not a large one, is needed.
Finally, the city must not expect to make money out of its
industries ; it must expect only to make them self-supporting. It
may be that private corporations will pay into the city treasury
more money in the form of taxes than the municipally conducted
industry will pay in the form of profits. "The dividends which
the city reaps," says our correspondent, "are in the form of civic
betterment, lower death rate, and improvement in social condi-
tions." The city will pay here, as it has paid abroad, higher
wages ; it will prescribe for its employees here, as it has pre-
scribed for them there, shorter hours. It will give to the travel-
ing public here, as it has given there, lower rates. In other words,
the profits which have gone into the pockets of capitalists as a
payment for their money and their services will be distributed
partly among the employees in better labor conditions and partly
among the traveling public in better accommodations and lowered
prices. No more may be expected to be paid into the city treasury
than is necessary to accumulate a fund for large repairs, for
important extensions, and for unexpected exigencies.
There is no good reason why any American city should
not have an experience parallel to that of Glasgow, provided it
will comply with the necessary conditions : provided it will not
part with the control of its streets by granting indefinite or per-
petual franchises ; will frame its city government for adminis-
trative rather than for legislative purposes ; will develop a civic
46 SELECTED ARTICLES
pride and a public spirit which will inspire men of integrity and
of ability to serve the city ; will exclude all partisan spirit from
the administration of its municipal industries ; and will look for
its profits, not to treasury balances, but to a purer and better
municipal life.
Reader. 7: 477-84. April, 1906.
Municipal Ownership — What It Means. Edward F. Dunne.
Nature of Utilities.
If a person seeks to deal with a grocer, a butcher, a baker,
a doctor, a lawyer or any other similar purveyor of a needed
object, he may transact business with some independence. He
is enabled to stand at arm's length, to make a free and voluntary
contract. If the character of the goods he seeks to purchase is
unsatisfactory, he may go elsewhere. If the price his grocer,
or butcher, or baker asks is unreasonable, he may go to another.
He is not bound by circumstances to deal with any one person or
company in the purchase of such necessities of life.
But if this same person seeks to purchase gas or electric light,
or to utilize the street-cars, the steam cars, the telegraph or the
telephone, he finds himself deprived of the right of free contract.
He must take such service as is offered him and he must pay the
price demanded. There is no alternative. He finds himself face
to face with a monopoly, and he must stand and deliver, or do
without. Individual protest against such a monopoly is abso-
lutely unavailing. He may protest against the character of the
street-car service, or against the rate of fare charged. But, if
he wishes to ride, he must pay the rate fixed and endure the
service given or be thrown off. His gas may be of deficient
qualiffT^orthe price exorbitant, but he must meet the corpora-
tion's demands or his meter is jerked out. His telephone service
may be unsatisfactory, and he may complain against high rates,
but he must pay the price charged or the wires will be cut and
his telephone removed.
MUNICIPAL OWNERSHIP 47
Graft and Ownership.
Private ownership of traction and other utilities has shown
that these corporations have wielded, at times, a dangerous
power in our political life. Yet the cry has been raised by
opponents of municipal ownership that public control of these
conveniences would lead to the establishment of a "political
machine'' which would prove a menace to any municipality in-
volved. This cry is wholly false. Hundreds and hundreds of
municipalities, w^here the people have claimed their own, testify
to-day to the falsity of this outcry.
Municipal ownership will take the traction and similar utilities
out of politics. Private ownership keeps them in politics. Only
a few days ago one member of Chicago's City Council made
the statement that he had one hundred and fourteen of his ward
"constituents" on the pay roll of the Chicago City Railway Com-
pany.
"That's the way I take care of my fellows," he said. "And
I've got a lot more jobs with other corporations."
And this is but one alderman who has secured jobs for his
followers and lieutenants with one traction corporation. This
official, it may be remarked, has voted persistently in the Coun-
cil for the plans of the traction corporations. Does he get the
"jobs" as partial return? I leave the reader to answer. There
are other aldermen who have made boast to friends of the number
of "constits" they have placed with the traction corporations.
Does this look as if private ownership has kept these
utilities out of politics? To this cry of "political machine" it
might be pertinent to return the inquiry as to whether any
"political boss" in any of our cities ever has been found contend-
ing for the principle of public ownership of public utilities. On
the contrary, the "political boss," wherever he flourishes, is
found eager to continue public utilities in private hands. The •
reason is plain : Private ownership continues the opportunities
for graft, for the traffic in votes for special privileges and fran-
chises, for corruption. Municipal ownership, conducted under
rigid civil service, as all its true adherents demand, will remove
the "traction problem" and similar questions from politics and
48 SELECTED ARTICLES
effectively and finally displace private corporate and individual
privilege-seekers from the positions they have held in corrupting
the civic and political body.
Results of Ownership.
The success of municipal ownership in the cities of Great
Britain, of Switzerland, of Italy, of Austria-Hungary and of
Australia has sounded the knell of private ownership of public
utilities in the countries of the eastern hemisphere. It has pro-
duced, in almost every case, these foremost results :
First — Reduced the cost of the utility to the public.
Second — Increased the efficiency of the service ; brought about
the re-equipment of lines and plants in accordance with modern
methods ; secured regular service with more frequent schedules
and less-crowded cars ; reduced accidents.
Third — Increased the wages and bettered conditions of the
workers who operate these utilities.
^r'ourth — Made strikes a thing of the past. ^^'"^
Fifth — Eliminated public "graft" and corruption.
Outlook. 70: 726-7. March 22, 1906. ^^^
Municipal Ownership and Corrupt Politics. Henry C. Adams.
The question of the municipal ownership of street railways
is not an isolated question, but a part of a great system of indus-
trial evolution that is now going on. Whether regarded from the
nature of the service rendered or of the conditions under which
they are operated, street railways must be classed as public in-
dustries ; and, this being the case, the question whether they
should be owned and operated by the municipality, or controlled
through a commission appointed by the municipality, is the
only one to be considered. My own opinion, arrived at with
some reluctance after many years of hesitation, is that the policy
of public ownership and public administration has more to be
said in its favor, all things taken into consideration, than the
programme of public control.
MUNICIPAL OWNERSHIP 49
It is often said that municipal ownership of the street railways
would result in the creation of a political machine and in the
corruption of city politics. This, without doubt, suggests a most
serious criticism upon the plan. At the same time, 1 am inclined
to think there is less likelihood of corruption should the street
railways be owned by the city than under existing conditions.
The franchise of the street railway in a large city is worth an
immense amount of money, and increases in value at a rate more
rapid than the increase in population. This being the case, there
is every motive presented for the purchase of political influence, so
long as the street railway remains in the hands of private
corporations. If, however, the city itself owns the franchise and
operates the railways upon it, the Aldermen have nothing of
value to sell, and the present form of political corruption at least
would be done away with.
There are two thoughts in addition that I would like to sug-
gest. In the first place, are we entirely clear as to what we mean
when we use the term "political corruption"? Many things
which in private industry are regarded as all right are character-
ized as corrupt if done by an official of the State.
The truth is, the ideal of public morality entertained by the
American people is infinitely purer and higher than the ideal of
morality which controls in the business world. We should not
forget that municipal ownership means absolute publicity, an
established system of accounting, and the unquestioned right on
the part of citizens to investigate the manner in which the
municipality performs its public duties — a condition which does
not and cannot exist so long as street railways continue to be
private property.
The second thought which I wish to express relative to this
phase of the question is that public responsibility is always fol-
lowed by a development of the sense of respectability. Men of
influence and brains are no longer in this generation influenced
by the amount of money that can be made out of a situation.
The political economy which assumes that the struggle for money
is an adequate explanation of industrial conduct is sure to err in
its conclusions, because it does not recognize all the motives in-
volved. The sense of power and the ambition for influence are
50 SELECTED ARTICLES
equally strong motives to industrial activity u'ith the desire for
money. This being the case, the talents and brains of the country
will inevitably be drawn into the service of those organizations
which grant the opportunity of an exercise of power and influence*
The conclusion from this premise is direct. If the municipal-
ities wish to secure the services of men of talent and of respect-
ability, they must assume functions that call talent into the field
and also those that gratify the sense of respectability. History de-
clares that the rise of efficient local government follows the as-
sumption by the government of social responsibilities, and, as
exemplified in the United States, that the decay of local govern-
ment follows the restriction of local functions.
The superficial humorist may reply that this argument in-
volves an amendment of the Xew Testament to the effect that he
who is unfaithful in little things will surely be faithful in big
things, which, of course, is not only a misquotation but a misap-
plication of the true quotation. If the city desires the service
of respectability and talent, it must grant to its servants respon-
sibility and influence.
The dangers which attend the experiment in municipal owner-
ship of street railways arise, as it appears to me, from two
sources. In the first place, it is likely that the public will demand
an immediate dividend from the new investment in an abnormal
reduction in fares, and, in the second place, it is not unlikely that
the Common Council of the city, in its desire to justify the
purchase, will sacrifice the interests of the future to the present.
These difficulties, however, may be easily avoided by two simple
devices. In the first place, the municipal railway accounts should
provide for a deterioration account, and charge up to operating
expenses each year an ample sum to cover deterioration. Pro-
vided this is done, fares cannot be reduced too low — assuming,
of course, that the railways are not to be operated for the public
profit. In the second place, the bonds issued for this purpose
should include a sinking-fund provision capable of wiping out
the debt in a reasonable number of years.
It seems to me that the problem of municipal ownership of
street railways and the government ownership of commercial
railways are independent problems. The great difficulty in gov-
MUNICIPAL OWNERSHIP 51
ernment ownership of commercial railways does not lie in the
technical questions of construction and operation, but in the
adjustment of a schedule of rates that shall be fair to all sections
of the country. In the question of municipal railways this ques-
tion does not find a place. There are no terminal facilities, since
the freight carried, being passengers, is self-loading and self-
unloading; there is no need of an extended classification of
freight, since all freight for the most part is of the same sort.
The question of rates is one that may be easily and simply
settled. jMoreover, the interests involved in the case of municipal
railways are restricted to a small locality, and the result of this
is that the policies of administration may be easily adjusted. For
many other reasons also that might be mentioned, the decision in
favor of municipal ownership for street railways does not in-
volve a similar decision for commercial railways.
Independent. 60: 449-52. February 22, 1906.
Municipal Ownership a Blessing. John Burns.
The increase in the "social sense" which the universal de-
mand for municipal ownership symptomizes is one of the most
hopeful signs of the day in America and thruout the world.
Cheap, popular, publicly owned rapid transit is the best way to
disperse the ghettos of poverty, the slums of misery and the
Alsatias of vice. The basis of a happy life is unattainable so
long as railroads, ferries, traction and electric light companies
are used as, under present conditions, they often are, against
social advancement. The home, which is the cradle of character,
can no more be solved by the tenement dwelling than city archi-
tecture can be improved by a duplication of flatiron buildings.
Mount Kisco is a slope, not an elevation, and till municipal own-
ership of street railways, with a deliberate social object in view,
is attained, the workers of the lower East Side, the West Side
and other congested quarters must remain in that circumscribed
pit of Tophet in which limited space, high rents and restricted
company tractions now confine them. Men and money, like
. 52 SELECTED ARTICLES
manure, are no good in heaps. They putrefy. They are only
good when scattered over fresh fields and pastures new.
The greatest agency — indeed, the only agency — is city trac-
tions owned by the city, carrying the citizens, taking the town
to the country in the evening, bringing the country to the town
in the morning.
Municipal ownership as usually tried in Europe, particularly
in Great Britain, has been a counter attraction to drink, a
healthy diversion from vice, and has shown the people a more
excellent way of personal and national life. The bread of
municipal ownership has been cast upon the waters, and has
been returned to us, not after many days, but almost immediately.
In industry it has made against Sam Parks on the one side and
Farley on the other. It has infused the embittered car driver
and conductor with a proportionate dignified and civic sense of
duty to his neighbors who employ him. The municipal car man
has reciprocated his share that municipal ownership has brought
to him by greater efficiency, civility and loyalty to his employers,
the traveling public. The poor and lowly it has helped by re-
ducing distances and saving them from physical fatigue, which,
rather than endure by living in the suburbs, when they had to
walk, they forfeited for the squalid banalities of slumdum. I
know of no section w^hich has lost by municipal ownership in
England. Even the dispossessed and generously compensated
shareholders have profited by the great increment of social happi-
ness that public tractions has brought to all those cities which
had the courage to enter upon it.
The chief contribution that municipal ownership will make
in America to State, Federal and civic development will be the
extent to which it kills boodle, destroys graft and eliminates
from public life and service the petty corruptions that mortify
the flesh in the body politic of America, without the cleanliness
and the purging of municipal life that can only come from the
moral exaltation that communal pride in public property alone
brings. America will be confronted with the greatest problem
that ever lay athwart the upward path of a democratic people.
Under municipal ownership there is no one" to off'er bribes,
because there is nothing to sell. The occupation of the thief is
MUNICIPAL OWNERSHIP 53
gone, because the receiver has disappeared. Any doubts as to
the greater cheapness and efficiency of municipal ownership are
disposed of by the incontestable fact that in Great Britain — un-
der municipal ownership — roads are better, the staff more loyal,
because more contented, and the amazing cheapness of traction
is proved by the fact that the average fare of electric car passen-
gers in London is under two cents, while over fifty millions of
people ride as one cent passengers.
The effect on housing has been the disappearance in ten years
of eighty thousand one room tenements, a corresponding increase
in larger tenements and a diversion to common parks and heaths
of the women and children, who by traction alone, without injury
or loss to any one, now secure, as an everyday right, what, thru
company ownership and dear fares, was an occasional and
fatiguing privilege.
The educational value of municipal ownership on all classes
of a community in Europe is most marked. It is the seminary
to the statesman, it is the school to the political economist, it is
the college to the reformer, it is the polytechnic to the labor
leader. On a smaller, but equally useful, scale the larger duties
and obligations of government are learned, and as America fifty
years hence w^ill possibly have two hundred millions of in-
habitants, it is about time that the assimilation of these millions,
the co-ordination of these masses, the directing leadership of
this host should be provided with civic guides, municipal philoso-
phers and neighborly friends, so that the path of the greatest
community of free men should be not only straight, but clean,
and till some field of apprenticeship for this stewardship for the
leaders of the future is provided, America's future will be not
the conscious ordering, but a sordid welter and an undignified
scramble for mere money, which is the present creed of the cor-
rupting boodler. Municipal ownership destroys this species and
in so doing discourages and renders impossible the sad revela-
tions that your insurance scandals have revealed. Appetite grows
by what it feeds upon. The seed of corruption dropped by the
political agents in elections, in defense of their franchise and to
extend their power, becomes a seed-plot from which is reared
the upas tree of state defilement. President Roosevelt realizes that
54 SELECTED ARTICLES
it may reach, if it has not already done so, Federal political life.
Why be wise after the event? Prevention is better than cure,
and surely American opinion, after having read the "Shame of
the Cities," might save itself another book called "The Crime of
the Republic." Both can be avoided thru the trade union, the
labor leader, social idealists, city merchants, the governing alder-
men, the men and statesmen, all uniting in a movement that ex-
perience unanimously testifies in Great Britain is the greatest
ameliorative agency, as it has been the greatest moral force that
fifty years of brilliant, continuous and glorious success has secured
the Anglo-Saxon people. America is not cursed v^ith that heritage
of snobbery, feudalism and convention that Old World communi-
ties have had to contend against. Its immunity from these dis-
abilities gives it greater power than it ever dreamed of, and yet
public utilities lie across its continent a fallow field trodden only
by privileged monopolies, and denied to the citizen without toll,
exaction and fraud. If democracy is to justify itself, as I hope
and believe it will, it can only do it by the municipal ownership
equipping the American people with the one thing they supremely
lack as compared with Europeans, and that is cleaner, purer civic
life, without which personal wealth is a mockery, national re-
sources a misused gift and their constitution a thing of paper.
It is said that the municipal employee may become a serious
and dangerous influence, when the source of his income is owned
by the community in which he is a voter.
This fear seems to be a stumbling block to a great many well
meaning and sincere people. My answer to it is this : The test
from experience is all the other way. As a rule, municipal em-
ployees have been modest in their claims, reasonable in their
demands, and, as an invariable rule, municipal labor has been
singularly free from strikes and other disturbances. At the
worst, these must always be in a minority. The employees of a
municipality never have any difficulty in getting, without threats,
as a right, what now is occasionally wrested from the private
companies by sacrifice, pain and disturbance for the whole com-
munity. In a word, municipal ownership, apart from being good
for passengers, best for cities, cheapest for the poor, is the line
of least resistance for the solution of industrial problems, is the
MUNICIPAL OWNERSHIP 55
way that wisdom directs and necessity compels. The extent to
which municipal ownership prevails in any country is the stand-
ard of class co-operation by common means for common ends.
The car barn vote introduces into politics the interested "pull**
to an extent that is impossible under municipal ownership, be-
cause the usual political differences operate with men under
municipal ownership, and thus create an electoral equipoise which
is impossible so long as men's employment depends upon votes,
as it too often does, under company rule. The danger of the
municipal employee is a bogie which is always raised in America,
which we have buried for all time in the old country. To their
credit, they rarely, if ever, abuse the position that municipal
ownership gives them, and if they were inclined to do so against
the community, the community in turn has always a better, a
simpler and more peaceful remedy than now prevails.
Independent. 61: 927-30. October 18, 1906.
V Our Fight for Municipal Ownership. Edward F. Dunne.
In recent years perhaps no subject has engrossed so much of
the attention of the public in the great cities of this country, and
in Chicago particularly, as the question of ownership and opera-
tion by the public of public utilities. By these I mean street cars,
gas works, electric light plants, telephones, telegraphs, railroads
and other enterprises, the operation of which requires the pos-
session and use of public property.
No subject is of more vital interest to the inhabitants of cities,
who are compelled, day by day and year by year, to make use of
and pay for these utilities, whether they like them or not.
A resident of a city may dicker, bargain with and change his
butcher, his baker, his haberdasher, his tailor, his lawyer, his
doctor, if he is not satisfied with his services or charges, but
when he comes to pay his street-car fare, his electric light or
telephone bill there is room for neither dicker, trade nor change.
He must stand up and deliver, no matter how unreasonable the
charge or unsatisfactory- the service.
56 SELECTED ARTICLES
If he objects to the street car service or the price, he is thrown
off the car. If he demurs to the service or price of gas or electric
Hght, it is shut off. If he criticises his telephone bill, his 'phone
is pulled out. He has learned by experience that individual pro-
test or objection is unavailing.
The existence of grave and scandalous abuses, both in the
service given and the price charged for such utilities, and the
recognition by thousands of the utter helplessness of citizens, as
individuals, to help themselves or correct these evils, which have
become over-burdensome and intolerable, have brought about in
many of the great cities of the world an unrest and public
agitation for the correction of these evils.
In Chicago a citizen is charged from $40 to $175 for the an-
nual rent of a telephone, and the service is not over-good at that.
The same service is given in Stockholm, Sweden, for $20 a year,
on the average ; in Christiana, Norway, for $22 a year, on the
average; in Trondhjem, Norway, for $13.50 a year, on the aver-
age ; in Berne and Zurich, Switzerland, for $10 and unward ; in
Berlin for $36 per annum ; in Copenhagen from %2'/ to $48, and
in Paris, France, for $78.
The same .disproportion obtains in the cost of the other utili-
ties. In Chicago the shortest ride a man can take on the street
cars costs him five cents, and then he rides a great part of the way
hanging to a strap, jammed, jostled and jolted about in a manner
that is irritating to his fellow passengers and indecent to the
gentler sex. The fare paid in other great cities of the world,
outside the United States, is about one-half that amount.
This state of facts and figures in Chicago and elsewhere is
causing the people to endeavor to find the reason for this condi-
tion of affairs, and to find a remedy.
On the threshold of this inquiry the people of Chicago have
discovered that all these public utilities furnished to the citizens
of the city of Chicago are owned and operated by private corpora-
tions, organized and conducted for private gain. On stepping
over the threshold into the vestibule of the investigation they
have also found that in all the cities where public utilities were
furnished at a cheaper price, these public utilities were generally
MUNICIPAL OWNERSHIP 57
being owned and operated by the public — in other words, by the
municipality itself.
Must or must we not conclude that the difference in owner-
ship and operation is the cause of the wide discrepancy in the
cost of these absolutely essential necessaries of life to the resi-
dents of cities?
These facts and their significance had long engaged my atten-
tion, in common with that of other thoughtful men of Chicago,
when my election as Mayor .in April of last year gave me oppor-
tunity to help in the solution of at least one of these problems.
I refer to the traction problem, which sooner or later must con-
front every growing city in the land. Conditions in Chicago were
especially bad, so much so that my campaign was conducted on a
municipal ownership platform, and the people at the polls de-
clared emphatically in favor of the acquisition and ownership of
the traction systems of the city. How far the present adminis-
tration has been able to carry out the wishes of the people in this
direction doubtless will be of interest everywhere to foes as well
as advocates of the municipal ownership idea.
At the time of my inauguration a great strike of teamsters was
in progress. It lasted one hundred and five days, and presented
sufficient problems of its own to keep the administration en-
grossed until July 5th, 1905, when I took the first step toward
carrj'ing out the wishes of the people as expressed at the polls.
I submitted to the council a message offering two plans by which
the city could acquire possession of the traction systems.
One of the plans provided for an ordinance under which not
to exceed $75,000,000 worth of "Mueller certificates" should be
issued, subject to the approval of the people. These certificates
were to be in the nature of income bonds, payable out of the re-
ceipts of the traction system, and not a general obligation of the
city. The theory was that they could be disposed of readily and
would yield the money necessary for the purchase of the street
railway properties or the building of new roads. This became
known as the "city plan."
The second plan, known as the "contract plan," offered a twen-
ty-year franchise to five or more citizens who would agree to ac-
cept a charter, issue the necessary bonds and construct a modern
58 SELECTED ARTICLES
electric system covering the entire city. These proposed bonds
would bear a 5 per cent, interest and be used solely for the acquisi-
tion of the street railway properties. The net receipts of the
system were to be turned into a sinking fund to the credit of the
City of Chicago, to be used ultimately for the purchase of the
system by the city.
Under this plan the enterprise would be undertaken on a purely
patriotic basis, for the good of the city, the company receiving
no benefit beyond the salaries for the board of directors and the
interest on the bonds.
On the submission of these plans to the council, they were
promptly referred to the committee on local transportation, which
unfortunately was not in sympathy with the municipal owner-
ship idea. This committee held up the plans for several months,
and, notwithstanding my repeated protests, invited the traction
companies to negotiate with the city for an extension of their
franchises. By December 5 these negotiations had so far pro-
ceeded that the committee had agreed upon and recommended
to the city council ordinances which would have extended the
franchises and postponed municipal ownership many years.
During this period litigation was pending in the Circuit Court
of the United States, involving the validity of the companies'
claims that their franchises, under the so-called 99-year act,
would not expire until 1958. This claim was viewed with alarm
by all parties, as giving the traction companies practically in-
definite rights in the streets of Chicago, and formed the basis
of most of the arguments in favor of granting some franchises
by ordinance to the traction companies then and now in posses-
sion of our streets.
It was apparent that nothing could be accomplished by the ad-
ministration until a final decision of the courts in this matter
could "be obtained. Immediately upon entering ofiice I had ap-
pointed Mr. Clarence S. Darrow as special traction counsel and
Glen E. Plumb and Edgar B. Tolman as assistant traction coun-
sel. These gentlemen, together with the corporation counsel,
Hon. James Hamilton Lewis, pushed the pending suit with
great vigor. On March 12, 1906, the highest tribunal in the
land, the Supreme Court of the United States, declared these
MUNICIPAL OWNERSHIP 59
so-called 99-year claims without foundation. The city thoroly
defeated the companies at every point.
In January, 1906, it became evident that the ordinances ex-
tending the franchises would never be ratified by the people
even if passed by the council. Prominent citizens and news-
papers who at first had opposed the mayor's policy now advo-
cated the defeat of the ordinances extending franchises which
had been framed up in committee. The spring election was
approaching. This was the situation when unexpectedly, on
January 19, 1906, on receipt of the report of the transportation
committee, the council passed the ordinance framed by the
mayor, authorizing the submission to the people of the question
as to whether the Mueller certificates proposed should be issued.
The issue for the spring election was thus clearly defined
and was fiercely contested before the people. Two ordinances
were submitted for approval at the polls. One authorized the
Mueller certificates ; the other, the operation of the road when
acquired by the city. Notwithstanding the solid opposition of
the Republican party, the opposition of the press and the
hostility of Democratic leaders, the ordinance authorizing the
certificates carried by about four thousand majority. The ordi-
nance authorizing the operation of the railroad lacked the req-
uisite number of votes, 60 per cent, being needed, altho it
received a majority of about twelve thousand.
Immediately after this election I instructed our traction
counsel, Messrs. Walter L. Fisher and Samuel Adams, to test
in the courts the validity of the Mueller certificates as au-
thorized by the popular vote, and of the statute which author-
ized the city to own and operate street -cars. The Circuit Court
of Cook County upheld the validity of the certificates, the
ordinance and the Mueller law. An appeal has been taken
to the Illinois Supreme Court, which I am confident will up-
hold the decision of the lower court in every particular.
When this is accomplished our long and successful fight
will be over, for I have no doubt that we shall negotiate the
certificates readily and be able to purchase the railway proper-
ties with the proceeds.
At the present time the city is negotiating with the traction
6o SELECTED ARTICLES
companies in accordance with a letter which, as mayor, I
addressed to the chairman of the transportation committee.
In that letter I suggested that, pending the litigation which
would settle the validity of the Mueller law and ordinance,
if the present companies were able and willing to enter into
an agreement to sell to the city all of their tangible property
and unexpired franchises and rights, at a price to be fixed at
once, and to undertake the immediate improvement of their
service, the city would be prepared to enter into negotiations
on the basis of paying the fair cash value of the tangible and
intangible property and actual cost of improvements, together
with reasonable interest thereon. Pending payment, the roads
were to be operated by the companies so as to provide for a
sinking fund out of the proceeds to apply on the purchase price.
The companies, in response to my letter, assented to the car-
rying on of negotiations on these lines, and have placed an
excessive value upon their properties, some $73,000,000. The
city has employed competent engineers to value the plants, the
commission consisting of Professor Cooley, dean of the en-
gineering college of the University of Michigan ; Bion J. Arnold
and A. B. duPont. Failing to reach an agreement with the
companies, we shall offer to arbitrate, in accordance with pro-
visions in the ordinances under which the companies have been
operating. Should an agreement become impossible, we shall
place our certificates on the market for sale and with the pro-
ceeds build new modern lines.
Upon the maturity of these certificates, all of them, in my
judgment, can be paid in full, and the people then owning their
plant, can proceed to reduce fares to the lowest possible cost,
as has been done in all the great cities of England and in
many of the great cities of Germany, Austria-Hungary, Aus-
tralia and Italy.
Corruption of public officials, the stealing of public property,
favoritism in the selection of employees, strikes, inefficient
service, exorbitant charges and insolence toward and defiance
of the public has marked the history of private management
of public utilities in Chicago and elsewhere in America. The
people have called a halt. The demand of the people to place
MUNICIPAL OWNERSHIP 6i
a check upon public corruption by and with the referendum,
at first feeble and unheeded, has swelled into a roar whose
reverberations are heard in the council chambers of the land,
as well as in the temples of finance.
In my judgment the people are in no condition to be longer
trifled with ; no longer will they be despoiled and flouted as
they have been in the past, and the legislator, councilman or
alderman who remains deaf to the cry of the people and heed-
less of the popular demand for municipal ownership under
honest civil service rules and the referendum, may as well
prepare for sepulture under a stone upon which will be written
the epitaph, "He served the corporations — not the people."
\/ Cosmopolitan. 30: 557-60. March, 1901.
Advantages of Public Ownership and Management of Natural
Monopolies. Richard T. Ely.
It may be said in favor of public ownership and public
management, that b}^ this means the regulation required by
the general public arises out of the nature of public property.
When private persons manage private property, the natural
thing for them to do is to manage it in the interests of
private individuals. W^ien public property is managed by public
authorities, the natural thing is to manage it in the interests of
the general public, because the ownership is, by the very hy-
pothesis, vested in the general public. The easy and natural thing
to do is to manage property in the interest of its owner. It
is, as a rule, right and proper to manage private property in
the interest of private persons, and not infrequently it is
gross abuse of a trust to manage it otherwise. It is, on the
other hand, a perversion of public property to manage it in the
interests of private persons. As in the case of private owner-
ship of natural monopolies it requires a pressure diverting prop-
erty from that management springing up out of the nature of
property, to secure the public ends, so it is only through an
open and acknowledged abuse of a public trust that public
62 SELECTED ARTICLES
property can be otherwise managed than to promote the general
welfare.
It is a decided advantage of public ownership coupled with
public management, that it makes clear the issues before us with
respect to natural monopolies. Exactly what the situation is,
may readily be discovered. The source of evils which exist
can be ascertained, and steps taken to introduce appropriate
remedies. Naturally there may be resistance, and frequently
there is resistance, on the part of private interests to a wise
management of public property and public business. This re-
sistance has various sources. Partisan politics will occur to
every one as one source. The low and degraded view of public
office as a reward of party service and not as a public trust,
is one of the great evils against which the American people
have been contending for a generation. On the whole this
contest has been successful, although there still remains much to
be done to bring about popular enlightenment concerning the
true nature of public office and to cultivate a finer sense of
right and wrong with respect to it. A more dangerous, because
frequently a more powerful and always a more insidious,
source of resistance to right management of public undertakings,
is found in the selfish interests of private corporations and
powerful private combinations of one sort and another. It
was the political machine of Philadelphia acting in harmony
with a private corporation, which turned over the public gas-
works to a private corporation. At the time this article is be-
ing written, this same political machine is opposing the im-
provement of the public water-works, and is favoring a plan to
lease them to a private corporation. The people of Philadelphia
have already approved a loan the design of which is to improve
the public water-works, but the political machine, in the service
of private interests, resists needed improvements. There is
strong reason to suspect that private parties in their own private
interests sometimes do what they can to make public enterprises
a failure, and there is also a very wide-spread effort to repre-
sent public activities of every kind as much worse than they
really are, coupled with a reluctance to acknowledge merit on
the part of those engaged in the public service. In consequence
MUNICIPAL OWNERSHIP 63
of this, it becomes necessary to go behind the politician, often
a mere tool, to find the real power behind him, and this real
power may belong to the very respectable elements of the com-
munity.
There must inevitably be a struggle to establish the policy
of public ownership of natural monopolies, but when this policy
is once thoroughly established, when it comes to be so thoroughly
approved and so firmly rooted in our life that an effort to
upset it is manifestly hopeless, it must enlist in the cause of
good government the intelligent and well-to-do element in the
community. There will then be established a harmony of in-
terests which is now so sadly wanting.
It is often said, it is said, every day by press and pulpit, that the
better class of the community is apathetic. But why is this the
case? What is the deeper, underlying cause? When the better class
of the community feels itself and its interests seriously threat-
ened, it is by no means apathetic. Take the better class of
New York and Boston in its attitude upon the question of
silver monometallism. This better class has a very clear idea
concerning its own interests with respect to the free and un-
limited coinage of silver, and will any one claim that with re-
spect to this question it is apathetic? But what is the interest
of this better class with respect to excellence in municipal gov-
ernment? W^ould not their franchises suffer, would not the
terms under which they are able to serve the public with their
property, be changed for the worse for them, by municipal
reform? Probably in every great city in which the policy of
private ownership of municipal monopolies obtains, the number
of persons financially interested in this private ownership ex-
ceeds by far the number of officeholders. Can the apathy and
indifference they show be a source of surprise? Must it not,
on the other hand, be a source of surprise that in many of our
cities there is so much effort as we actually see on the part
of the well-to-do to establish good municipal government, even
when this involves a considerable amount of self-sacrifice?
We indulge in no attacks on individuals or classes. We
are attempting to show what course of action men's interests
lead them to take, and we ask this question : Can we base a pub-
64 SELECTED ARTICLES
lie policy upon the hypothesis that a large and powerful class
in the community will act in a manner contrary to its own
interests?
In all the cities of the world where there is a thoroughly
established policy of public ownership and management, the
well-to-do find that their interests are bound up with those
of good government. It is a great thing so to clarify the
situation that we can find out exactly what are the obstacles
in the way of improvement.
Closely connected with what has gone before, it must be
observed that while malignant forces tending to degradation
will still exist under public ownership, some of the more power-
ful forces of corruption will disappear. The purity of public
life will then simply depend upon the general level of intelli-
gence and morality, and if that is as high in New York as in
Berlin, there is no reason why in the course of time New
York should not, equally with Berlin, secure a model govern-
ment.
Another advantage resulting from public ownership of natural
monopolies, coupled with excellence in their management,
would be the fair and impartial conditions under which private
business would hereafter be conducted. We have now a class
of dependent monopolies, monopolies which are not such in
their own nature but such because they receive favors from
monopolistic enterprises. It is at least questionable whether in
agriculture, manufacture or commerce any monopoly could be
built up without public or private favors. If an agricultural,
manufacturing or commercial business is not aided by positive
legislation, and is not assisted by special railway rates or favors
of any sort coming from any other monopolistic undertaking,
the writer is not prepared to admit that it can become a monopoly.
An exception, of course, is made of those enterprises based upon
very limited supplies of natural treasures, such as anthracite
coal.
Enlarging the field of public industry would give a career
in the service of the public to talent ; it would tend to establish
a balance between the advantages of public and private life,
MUNICIPAL OWNERSHIP 65
and could not fail in an intelligent and, on the whole, upright
community to ennoble public life.
It is gratifying to see that to an ever-increasing extent these
truths, not after all difficult of comprehension when serious at-
tention is given to them, are coming to be accepted. While
this article is being written, a campaign is in progress in one
city in which the candidate of the Republican party has given
as clear expression to these truths as one could desire. As re-
ported by a prominent newspaper, he states his views in part
in these words : "If elected, I expect to continue in my at-
tempts to carry out the principles of my platform of two wears'
ago, reiterated in the platform of this year, for the public
ownership and control of public utilities, such as water,
gas and electric-light plants, street-railways and telephones.
I should like to see a civil service law enacted
to go hand in hand with these reforms, but I do not believe
that we should wait for such a measure. I am firmly
of the opinion that the public ownership of such franchises
will of itself bring about civil service reform. Municipal own-
ership will do more than any other one thing to improve city
government in America. In my opinion much of the poor
and bad government in city affairs is due to the influence of
franchise-holding corporations. It is to their interest to have
poor government, to secure the election and appointment of offi-
cials whom they can control to their selfish ends. We have
seen examples of this in our own city, \vhere local corporations
exerted their influence against salutary measures looking toward
civil service and other similar reforms."
On the other hand, the platform adopted by the Democratic
party in another city in the campaign which is at the same
time in progress, shows that the recognition of these principles
which the writer is endeavoring to establish in this article is
not confined to any one party. The follow^ing is one of the
planks in this platform :
"We believe the prevailing corruption and bribery in all large
cities to be caused by the fact that' public utilities are controlled
l)y private corporations. The dependent relation of corpora-
tions upon the good will of aldermen, coupled with the frailty
66 SELECTED ARTICLES
of human nature, makes it impossible to secure official honesty.
While there are disadvantages attendant upon municipal control
and ownership of public utilities, they are insignificant compared
to the wholesale corruption and bribery incident to control by
private corporations."
The methods to achieve the desired transformation in our
public life are many. Every improvement in the civil service
is helpful. The diffusion of knowledge begetting clear-cut ideas
concerninc^ the nature of public corruption, as well as sound
ideas concerning social progress, is the chief force producing
a movement in the right direction, and the number of educa-
tional agencies at work in the enlightenment of public opinion
is as gratifying as it is surprising to one who has not considered
the subject. The popular educational agencies which have come
into operation in the United States during the present generation,
are something without a parallel in the world's history. We
have our great Chautauqua movement and other similar move-
ments almost innumerable. We have our University Extension
movement, together with the unparalleled activities of our
universities in all branches of learning which pertain to public
life. Our state universities, a part of the governmental ma-
chinery of our states, are undergoing an expansion and an
improvement which would have been deemed incredible even
ten years ago. Once more, we have a serious proposal to
establish a national university at Washington, and if this is
ever established it will no doubt become a civic academy, doing
for the civil service something like the work which West Point
and Annapolis do respectively for the army and the naval service.
While the influence of the press is often devoted to private
interests, it is gratifying to see the stand which not infrequently
influential newspapers take in behalf of the public, even against
powerful private interests. At the same time, the public con-
science is being educated by the pulpit. Most gratifying is the
public spirit of many men of large wealth who are active in
the promotion of good government, while organizations of
business men, for example the merchants of New York, are
frequently taking a noble stand in defense of popular rights.
We may, then, in conclusion say that while the obstacles to
MUNICIPAL OWNERSHIP (^7
reform are many and progress must in the nature of things be
slow, the situation is on the whole a hopeful one. We must not
expect great changes this year or next year, but we may feel
pleased if there is a steady movement in the right direction.
Nor must we be fanatical adherents of any one particular reform.
Social improvements come in many different ways and from
every direction. Each one sees but a fractional part of the
truth, and must be satisfied if he contributes a little part to
the grand work of social amelioration.
■^ North American Review. 182: 701-8. May, 1906.
Municipal Ownership of Public Utilities. George Stewart Brown.
Progressive Democrats are for municipal ownership, pri-
marily, because they believe in democracy. They believe (i) that
competition in the public services is impracticable; (2) that
municipal ownership will pay, either in cash savings to the
taxpayer or in cheaper and better service; (3) that municipal
ownership is a political necessity, and will remove the main
and most threatening source of political corruption.
Competition in Public-Service Industries is Impracticable.
There is a fundamental difference between a corner grocery,
for instance, which can spring up anywhere, and an industry like
a gas company, whose very existence depends on a grant from
government, and whose first nourishment is the right to use the
property of the community, the public streets.
In Baltimore, ^Maryland, the native city of the writer, there
was for a time so-called competition in every public-service
industry; the result was some temporary benefit, perhaps, in re-
duced rates or improved service ; but in the end came con-
solidation, with a capitalization bearing interest on two fran-
chises instead of one, and a not inequitable plea on the part of
the combined company to the effect that "you, the people, have
forced us to this condition of over-capitalization, and must help
us bear the burden."
This has resulted in confusion worse confounded both to the
corporations themselves and to the public mind, which has failed
68 SELECTED ARTICLES
to grasp the real nature of the problem. So-called competition
in public-service industries is not competition at all, — it is war.
The stronger company either buys out the weaker at once without
further parley, or it divides the territory with the weaker, if the
territory is big enough to divide, and agrees on rates ; or it
temporarily lowers the rates below the point of profit until the
weaker succumbs. As a matter of fact, with the exception of the
telephone service, industrial public-service war has had but one
universal result, consolidation. Not a single instance to the con-
trary can be cited. The tendency to consolidation has become
so strong that lighting companies furnishing different kinds of
lights, like gas and electricity, are now combining, although they
largely supply a different field and class of customers. No in-
genuity of the most skilled lawyers can prevent consolidation.
On the other hand, when a few consolidations here and there
have been found illegal, a new method has always been invented
to keep the separate interests together, or to reunite them in fact
if not in name.
Granted that a public service must be a monopoly, the people
will not long tolerate a monopoly in private hands. They will
perhaps try regulation first ; they will sooner or later insist that,
if a monopoly, it must be a government monopoly, operated
solely for the public benefit, instead of a private monopoly, op-
erated primarily for the purpose of private gain, and only in-
cidentally for the service of the people.
Municipal Ownership Will Pay
V^/
One item is almost universally neglected in considering the
financial success or failure of city ownership, and that is the
capitalized value of the right to do the particular service through
the use of the public property in the streets. Let us assume, for
illustration, two companies in cities of the same size with their
two tramway services, or electric-lighting services, costing the
same sum for instalment and with the same rates and an equally
efficient management — two business enterprises, that is to say,
earning exactly the same amount of money, and identical in their
conditions, except that one is public and the other private.
MUNICIPAL OWNERSHIP 69
Let us suppose that the value of the actual material property
of each, bought and constructed, is $50,000,000, and that the
private concern pays interest and dividends on a capitalization of
$100,000,000, the other $50,000,000 being the intangible value
created by the permit held by the private concern from govern-
ment to use its combined material properties in connection with
the public streets for the required public service.
Thus we have the interest on $50,000,000 saved for our equally
efficient city service. That is the saving to the city, or the margin
of efficiency, which our supposed public concern effects as com-
pared with the equally well-managed private company. Now, in
Baltimore, for instance, the attempted easement assessments, un-
der a plan similar to the New York franchise-tax law, amounted
to $23,000,000, and they were moderate, because they did not
attempt to reach all the intangible value, but only so much of it
as came directly from the use of the city streets. Yet this is half
the city debt ; and, if the same ideal condition had existed in
Baltimore as is supposed in our illustration, the effect of public
management would have been like cutting the debt in two.
To return to our illustration. Fifty million dollars is paid by
the first city to the private company for rendering a govern-
mental function, whereas the other city saved that amount by
performing that function itself ; or, to state it in a different way,
the public concern would have to be only half as efficient as the
private company to produce the same result to the city.
It is absurd to attenipt to settle finally the right or wrong of
the policy of municipal ownership by reference to the results of
any specific instance, just as it would be ridiculous to conclude
that individual failures or successes in the banking business
demonstrated the folly or wisdom of following that business as
a calling. Yet Philadelphia, the stock example of the opponents
of municipal ownership, is always so quoted, without regard to
the question what Philadelphia gained in the increment of fran-
chise value while it held on to its public service. Compare the
advantages which Philadelphia gets out of its present lease of the
gas-works with the condition of Baltimore with a company op-
erating under a perpetual franchise. Now, Philadelphia's present
advantage is due to the fact that, at the time of making the lease,
70 SELECTED ARTICLES
it had a large accrued franchise value to dispose of, and who can
say offhand that its long-continued policy of holding on and
operating was worse, on the score of past extravagance and de-
bauchery, or better, on the score of present advantages derived
incidentally from that very policy?
The writer believes it is a recognition of the value of the cap-
italized franchise that makes us hold on to the one public service
that is generalh' municipalized, namely, our water-supplies. Log-
ically, our reactionaries should advocate the turning over of our
water-supplies to private enterprise. Why not, if municipal own-
ership is so bad?
Whatever the reason, we seem to have finally reached the con-
clusion to hold tight to what we have. For, even in the most
reactionary communities, any proposition to give up a municipal
water system to private management would be immediately
laughed out of court. The veriest tryo can see that now he pays
for water the actual cost, namely, the low rates of interest on city
capital expended for plant plus the actual running expenses of
the department, and that any balance goes to a lowering of his.
tax rate, while, were it farmed out, he would at once begin to pay
in addition interest upon the watered flotation of a private com-
pany capitalized on its franchise value. Even if he thinks the
private company could- hire men for lower wages, save money
on its supplies and in many other ways, he knows that the new
item would largely exceed any such savings ; and he also in-
stinctively feels that, as that franchise value grows with increase
of population, the capitalization on which he must give a fair
return will grow with equal pace.
To show still further that we are conscious of this same idea
concerning the franchise value to be given away, it is worthy of
note that, in considering the establishment of some new service,
such as a subway for underground wires, or a sewerage system,
we invariably favor municipal ownership, entirely without respect
to making it pay as a business proposition.
In the fight to put the wires underground in Baltimore, it was
clearly recognized that the way to do so was by a municipal sub-
way. And here the idea of municipal profit on the transaction
was eliminated, the plan being simply to charge enough rental
MUNICIPAL OWNERSHIP 71
to pay interest and sinking-fund, and thus give the use of the
subways to the private companies for cost, simply and solely to
get the streets clear of obstructions.
Not charging for the franchise value would probably be the
result of the plan proposed as an alternative to municipal owner-
ship and operation ; that is, public ownership with private opera-
tion. This method would be much preferable to private owner-
ship, because the franchise itself would be reserved, and some day
might be utilized without extra cost by the city itself.
Again, in the matter of sewerage in Baltimore, only once was
it seriously proposed to farm out the system to a private com-
pany. The proposition to grant a franchise was coupled with fair
promises of the benevolence the company would show to the city
— how it would relieve the city from an enormous municipal debt
and charge fair and reasonable rates ; but immediately, with loud
and universal public condemnation, the proposal was buried out
of sight. Its opponents called it a scheme for "graft," a "gi-
gantic steal," etc. Why graft? Why a steal? What was there
to steal except the franchise value, which, of course, would have
been abundantly capitalized? A distinct popular recognition of
the point I am trying to make.
The margin of efficiency saved by the reservation of the fran-
chise value, coupled with the lower interest rate on municipal,
as compared with private, loans (with the promoters' and bank-
ers' commissions on the latter), must be more than used up by
higher wages, political debauchery and extravagance before pub-
lic operation can become more expensive than private ownership.
Besides, there is no inherent reason why the mob of voters
should not obtain as good and successful management as the mob
of stockholders.
Again, the increment of franchise value to come from future
increase of population is going to be enormous. We all believe
in great increases in population in the future in and about our
great cities. The franchise or right to serve a city of a million
souls will be worth more than twice as much as the franchise to
serve half a million. If we buy now from the private owners,
including present franchise value, we will save all future incre-
ment, with every prospect that the proportionate improvement in
72 SELFXTED ARTICLES
the governmental service will be greater every year in the line
of increased efficiency. The increase, up to the present time, in
the value of public-service capitalizations, has been almost be-
yond the dreams of avarice. From the moment of municipali-
zation, this will become the property of the people, and accrue
to them as reduced rates, better service or lowered tax rates.
Municipal Ownership is a Political Necessity.
Public-utility corporations are the chief bulwark and support
of the machine, and interest in the questions afifecting vested
privilege means for the individual showing such interest that he
puts himself outside the party pale. Give the "boss" his fran-
chises and the vested interests behind them, and you have the im-
mense modern campaign fund which alone makes the machine
possible.
What is the testimony of those who have had practical ex-
perience in this matter? Ask La Follette, ask Mark Fagan, ask
Tom Johnson, ask Folk, ask Weaver, and they will answer, with
one accord, that their breach with their party organizations came
when they attempted to remedy some abuse which the masters
of vested privilege, the franchise-holders, were committing, or to
punish the perpetrators thereof. They will testify that it was not
the free choice of subordinates, or the suppression of petty and
minor graft, that aligned the party "boss" against them. These
were sins, but forgivable sins. The one unpardonable sin was to
touch with a fearless hand the public-service monopoly question,
or to punish those who assist the machine in carrying out its
alliance with business privilege.
No one now, conservative or radical, stands for unregulated
monopoly, while all thinkers and writers on the subject recognize
public services as necessary and natural monopolies ; and it is
generally admitted that existing political evils are primarily
caused by the presence in politics of the public-service corpora-
tions, and this admission involves the recognition of the necessity
for some remedy. Certain opponents of municipal ownership
propose "regulation" and "punishment for the wrong-doer."
Now, in the first place, "regulation" means what looks very like
MUNICIPAL OWNERSHIP yi,
a political impossibility. It means that the servant must regulate
his master ; that the party man, who has been elected as such,
must put himself outside the breastworks of the organization by
regulating the party's best and ever-faithful friend, the cam-
paign contributor. This is not in human nature. This is why
you will so often find the business man in office, honest as the
day is long in his private business, but in office particularly care-
ful to carry out his reforms in places where they do not conflict
with big business privilege.
The advocates of regulation overlook one point, which, in my
opinion, is vital. Regulation of rates or service is always resisted
by the owners ; and the advocate of regulation is compelled to put
himself in constant antagonism with his business associates and
social friends, who happen to be owners or managers of the par-
ticular service involved. To do this, to interfere with the busi-
ness interests of those with whom one enjoys the most pleasant
personal relations in one's daily walk, is a disagreeable and often
dangerous thing for any man to do.
Yet the public official must needs do this, over a long and ag-
gravating period of years, throughout his w^ole political exist-
ence, if he is to carry out a policy of regulation, or even attempt
to compel the public-service corporations to obey their legal obli-
gations. A battle for municipal ownership would be a compara-
tively short conflict, and there would be nothing to disturb per-
sonal relations, as soon as it became an accomplished fact.
This social and business association, combined with the fear
of wrath to come in the shape of a contribution which will set
their party machine against them, explains the failure of execu-
tive officers, otherwise honest and efficient, to take up, on their
own initiative, cases of plain violation of public obligations on the
part of these companies. This is what the organizations and the
companies mean by a "safe" man. Every nomination for import-
ant office is scrutinized from their own point of view by the rep-
resentatives of these vested interests. Fagan, La Follette, and
Johnson are not considered "safe." because they have touched the
vital pocket-nerve. To obtain their renominations, they have each
been compelled to capture their party, over the heads of its old
organization, and practically to construct a new party of their
74 SELECTED ARTICLES
own, and fight the combined power of the public-service corpora-
tions, which immediately rallied around the banner of the oppos-
ing party. The fact that they have succeeded shows that the
people have learned to protect their government, and indicates
strongly that they will be responsive to the necessities which
municipal ownership brings of a more certain tenure of office in
the public service and a greater governmental efficiency.
In every case where "regulation" has seriously been attempted,
long and tedious litigation has been the result. Witness Roose-
velt's Ford Law which, though passed in 1899, has never yet been
enforced. Witness La Follette's rate legislation and Johnson's
efforts for three-cent fares. If the litigation is successful, it in-
volves the election of successive administrations, who are firm
believers in the same policy, to keep the "regulation" going ; and
this, in turn, means a continuous political warfare, fraught with
all these necessary antagonisms and involving a steady incentive
to political corruption, without the definite results municipal
ownership would secure.
Municipal ownership is only beginning to be tried in this coun-
try, although a start is being made in the electric-lighting service,
some 800 plants, large and small, having been established, accord-
ing to Mr. McCarthy, the legislative statistician of Wisconsin.
But time enough has not rolled by to make history and show suc-
cess or failure. Private ownership, on the other hand, has ex-
isted for a long time, and yet no important instance can be cited
of successful "regulation" in any city. In the cities where it
has been attempted, like Chicago, Cleveland, New York and
Detroit, the sentiment for municipal ownership is strongest. It
is not too much to say that, for political reasons, "regulation"
either has not been attempted, or where attempted has failed.
If we are to measure efficiency by something more than dollars
and cents, if elements like comfort and convenience and con-
science and political freedom are to count for anything, we must
by cooperation, through the medium of our city governments,
furnish the people with those necessities which, from the nature
of the situation, ordinary competitive business cannot furnish,
and as to which they must either be protected by government or
taxed to make a watered franchise pay.
MUNICIPAL OWNERSHIP 75
These are real functions of government according to the true
doctrine of "'laissez-faire." The philosophers of that school did
not hesitate to provide a police force to prevent private exploita-
tion, to establish a tax-collecting department instead of farming
out the taxing power. But we have handed over the public prop-
erty in the streets to private corporations, and given them a
power, monopolistic in its nature, to furnish public necessities ;
and within limits the owners have the power to charge or tax the
people for this service.
We who believe in public ownership believe in radical reform
as we believe in democracy. We want to make democracy free
and able to handle the big propositions for popular benefit, as well
as the small ones. We hold that, if we merely get good men in
office who will look after and trample upon the small grafters,
we accomplish something; but to give real justice to the people,
we must stop the big leaks involving millions, as well as the small
leaks involving hundreds and thousands. To fight the "boss"
successfully, you must cut off his supplies, his campaign con-
tributions. You must take away the special privilege of the man
behind the '"boss," the public-utility captain, and turn him from
a natural enemy of government into an ordinary unprivileged
citizen and the friend of progress.
Annals of the American Academy. 27: 37-65. January, 1906.
Municipal Ownership and Operation of Street Railways in Ger-
many. Leo S. Rowe.
Any attempt to determine the success or failure of municipal
management of street railways in Germany must be based upon a
comparison of public with private management. A careful review
of the experience of German cities will show that private control
has been singularly unprogressive. This has been due, in part at
least, to the onerous conditions under which the original franchise
grants were made. The companies did not feel justified in incur-
ring the risks involved in making improvements on a large scale
or in extending the service into the outlying districts of the city.
Impressed with the lessons of this experience we find the more
recent franchise grants specifying minutely the streets over which
the service must be extended.
76
SELECTED ARTICLES
The relation between city and street railway corporations in
Germany seems to be exactly the reverse of that in the United
States. Here the companies are constantly seeking the right to
extend their lines into new districts, whereas in Germany the
municipal authorities are engaged in a constant struggle to secure
from the companies an extension of the service. This difference
in the attitude of the companies toward the extension of the
service is due in part to the broader spirit of enterprise of Ameri-
can corp'irations, but the main reason is to be found in the fact
that the German companies were aware that every new grant
from the city would be accompanied by a demand for such a per-
centage of gross receipts as would considerably diminish their
dividends. It is not surprising, therefore, that the German com-
panies have shown a conservatism which is usually interpreted
as lack of enterprise and inability to discount the future.
We have seen that the movement toward municipalization
was largely determined by the antagonism between the cities and
the street railway companies, growing out of the desire of the
city to secure a more rapid extension of the service. If at the
time they applied for the right to substitute electricity for horse
power, the companies had more fully appreciated the value of
the privilege, it is likely that they would have been more willing
to accede to the wishes of the city authorities.
The process of municipalization was greatly facilitated by the
fact that under the German law the accounts of public service
corporations are subjected to careful public control. The amount
expended by each company for the construction and equipment
of the lines is easily ascertainable. Every dollar of capital repre-
sents actual investment. The total capitalization of the companies,
whose lines have been recently municipalized is as follows :
Total
Length of line,
including dou
capitalization ble track r'l'ys
Cologne Street Railway Co..
Nurnberg Street Railway Co.
Munich
$1,368,625
1.570,000
1.500,000
50.5
29
63
Capitalization
per mile of road
$27,101.48
54.138.28
23,809.52
MUNICIPAL OWNERSHIP -jj
The net capital liabilities per mile of track of the electric sur-
face railways of the United States is $92,114. In the cities with a
population of 500,000 and over, the net capitalization per mile of
track reaches the enormous sum of $182,775. In New York City
the capitalization per mile of track is $259,542; in Chicago,
$109,537; in Philadelphia, $165,085; in St. Louis, $198,647; in
Boston, $97,353; in Washington, $186,416; in Pittsburgh, $185,170,
and in San Francisco, $140,985.
The influence of this wide difference in capitalization on the
expense account of street railway lines under American and
European conditions is readily apparent. The percentage of total
income expended by American companies for interest and liqui-
dation charges and for the payment of guaranteed dividends to
subsidiary companies is considerably larger than those of the
German companies. The following table presents some data re-
lating to Frankfort, Cologne and Munich. Accurate figures for
the larger American companies are not obtainable :
Interest and liqui- Percentage of total
dation charges. expenditure.
Frankfort
Cologne ...
Nurnberg.
$112,065.04
204,000.00
138,063.00
10.6
17.0
28.7
Any attempt to review the results of municipal ownership
would be incomplete without some reference to the effect on the
civic life of the communities under consideration. The introduc-
tion of electricity as a motive power greatly increased the possi-
bilities of profit, and led the companies to exert the strongest
possible pressure to secure a renewal of their franchises combined
with the right to use electrical power. In the struggle to secure
these new rights one can detect the first traces of the insidious
forms of corruption w^hich have done so much to undermine the
civic life of American communities. In a number of instances,
members of the council were retained as attorneys for street rail-
way companies, and in one case an influential member of the
"Magistrat" of one of the larger cities was made a director of a
78 SELECTED ARTICLES
street railway company at a time when the company was seeking
important privileges.
On the other hand, in those cities which have municipalized
their street railway system, there is no indication of corruption
traceable to the large increase in the number of city employees.
The civil service system is so highly organized that the danger of
political influence is reduced to a minimum.
Viewing the situation broadly, it may fairly be said that the
municipalization of the street railways has protected these cities
from the dangers involved in the desire of private corporations to
secure control of local administration for the purpose of securing
special privileges. In 1890 but a few of the companies were de-
claring large dividends. In fact, the large return which they were
compelled to make for the franchises under which they were op-
erating grants made it necessary to exercise the greatest economy
in order to make a fair profit on the capital actually invested.
The new franchises, in offering to the companies far larger pos-
sibilities of profit, correspondingly increased the temptation to
secure control of local policy. It is too early to predict whether
the cities in which the street railways are still in the hands of
private companies will be able to withstand the temptations which
now beset them.
Are these lessons of German experience of any real value to
our American municipalities? The answer to this question is a
matter of far more than theoretical importance. Partly because
of the feeling of irritation aroused by the corrupting influence
of public service corporations on the civic life of American com-
munities, but mainly owing to a general awakening to the possi-
bihties of improved service in urban transportation and in gas
and electric light service, the public mind is anxiously turning
to municipal ownership and operation as a possible solution. In
fact, indications are not lacking that we are drifting toward a
fetichism of municipal operation which is likely to work great
harm. One of the safeguards against this danger will be a proper
estimate of the value of foreign experience.
The success of municipal operation in Germany means that the
people are enjoying better service than under private manage-
ment. The causes of the failure of private operation to meet
MUNICIPAL OWNERSHIP , 79
modern requirements are readily ascertainable, and as we have
seen these causes do not exist in the United States. In other
words, the conditions for successful private management are far
more favorable in the United States than in Germany.
Furthermore, as regards urban transportation, the require-
ments of public opinion as to the standard of service are im-
measurably higher in the United States than in Germany. Not-
withstanding our prodigality of public franchises, the American
public has always set a relatively high standard as regards the
character of the transportation service. We have been willing
to pay a high, at times an exorbitant price, but there has been a
corresponding demand for good service. No American commun-
ity of any size would to-day tolerate the conditions of urban trans-
it that obtain in most German municipalities. The present unrest
of American public opinion is due to the fact that the require-
ments as to the standard of service are being raised with such
rapidity that the over-capitalized corporations are unable to main-
tain the pace to which they have been forced during recent years.
Although the arguments in favor of municipal operation are
being grouped about the possibility of large financial returns to
the city treasury, it is not likely that this argument will stir the
American people to any drastic measures. To secure united ac-
tion, appeal must be made to the desire for improved service.
The fact that municipal operation has given improved service in
Germany does not necessarily mean that it will produce the same
results in the United States. Whatever may be said against
American street railway corporations, no one will deny that they
have given far better service than the German companies. It is
true that they have been given greater freedom in the develop-
ment of the service and that the public demands, especially as
regards rapidity of service, have been considerably higher than
in Germany. Be this as it may, it is important to bear in mind
that municipal operation in the United States would have to bear
comparison with a higher standard of service than in Germany.
Any attempt to apply the lessons of German experience which
does not keep these differences in mind, is certain to be mislead-
ing rather than helpful.
<So SELECTED ARTICLES
Outlook. 80: 431-5. June 17, 1905.
Municipal Ownership of Street Railways in Glasgow.
Robert Donald.
Glasgow, the commercial metropolis of Scotland, was the first
city to adopt municipal ownership of street railways on a large
scale and to carry it to a logical conclusion by operating as well
as owning its roads. The success of this pioneer enterprise has
stimulated progress all over the world. It is not surprising that
Chicago should seek the advice of Mr. Dalrymple, the manager
of the Glasgow Tramways, when about to make the first experi-
ment in the municipal ownership of street railways in America.
The chief officers of the Glasgow Tramways have been fre-
quently called in to advise other municipalities, and have been
tempted away to occupy other positions. When Mr. Yerkes
wanted a man to direct his vast railroad enterprises in London —
electric suburban roads and deep-level subways — to remodel an
old system and inaugurate a new one, he found him in Mr. John
Young, the organizer and first manager of the Glasgow Tram-
ways. No better testimonial to the efficiency of municipal owner-
ship could be found than this appointment. Glasgow has been
a training-ground for street railway administrators, as its former
officers are managing tramway systems in Leeds, Madrid, and
other cities.
The ownership of tramways in Glasgow was the necessary
outcome of the city's municipal policy. The city has always held
a leading position for the extent of its municipal institutions as
well as for efficiency of management. From the romantic Lake
Katrine in the Trossachs, associated with memories of Scott's
masterpieces, the city draws its municipal water supply. Since
1869 it has owned its gas-works, and lowered the price until now
it is fifty-three cents per thousand cubic feet. Its municipal
electricity is also supplied at the extremely low rate of five and
one-half cents per kilowatt hour. Private slaughter-houses were
abolished in the middle of the last century, and three municipal
establishments serve the city. All the markets are municipal pos-
sessions. Forty years ago the center of Glasgow was congested
MUNICIPAL OWNERSHIP 8i
and overcrowded. Dens of rookeries were packed round narrow
courts. They were nurseries of crime breeding-grounds of dis-
ease. A radical remedy was adopted. Nearly a hundred acres
of slumland, with a population of 51,000, were bought by the city,
which carried out a bold reconstruction and rehousing scheme.
Over $12,000,000 has been expended in the improvement scheme.
The municipality has built thirty new streets, widened as many
more, and provided new tenements and lodging-houses for the
displaced population. It burdened itself with a heavy annual
charge to start with in support of the improvement ; but the
scheme, instead of now being a burden, has become a financial as
well as a social benefit to the community. It was the persistency
of Glasgow that broke down the private telephone monopoly in
Great Britain, encouraged other municipalities to establish their
own system, and has now led to the complete nationalization of
the whole service.
Among the other municipal possessions of Glasgow may be
mentioned a series of hospitals, homes for inebriates, art galleries,
museums, numerous parks, libraries, baths, winter gardens,
botanic gardens, public schools, art schools, technical institutes,
free concerts, pleasure grounds, facilities for golf and other
games, gymnasia and playgrounds for children, etc. Its solicitude
for the poor has induced it to establish a family home for chil-
dren of widows and widowers, and depots for the supply of
sterilized milk to poor children. It was due to civic enterprise
that the Clyde was converted into a navigable river and Glasgow
made one of the leading ports in the world.
Connected with Glasgow's greater municipal organizations are
many subsidiary developments of special interest. The Cleansing
Department, for instance, which deals with city refuse, has de-
veloped large estates, maintains farms, and works stone quarries,
from which the municipality obtains part of its supply for street
paving. The Water Department supplies hydraulic power. In
fact, Glasgow municipality looks after the welfare of its citizens
on a most comprehensive scale, by providing them with all com-
mon services of public utility — with one exception. Having done
so much to promote the health and welfare of the community, it
has not considered it necessary to make provision for the disposal
82 SELECTED ARTICLES
of the dead, by municipalizing the cemeteries. All its numerous
services, institutions, works, municipal industries, are carried on,
not for the purpose of accumulating large profits to be trans-
ferred to accounts for the relief of local taxation, but on the
principle of supplying the cheapest and best services, so as to
spread the benefits over the greatest number of the citizens. The
dividends which the city reaps are in the form of civic betterment,
lower death rate, and improvement in social conditions. Its
progress in civic affairs has never been tarnished by the taint of
politics. The ward "boss" is unknown. Citizens' committees
take his place. Civic patriotism runs strong, and the differences
among the members of the City Council are not so much on the
principles of progress as on the pace at which they should go for-
ward.
Bearing in mind the history of Glasgow, its experience in
municipal administration, it was the most natural thing in the
world that, given the opportunity, it should municipalize its tram-
ways ; and it would have been going back on its record if it had
not made the system a success. Like most British cities outside
London, Glasgow had always municipal ownership of its tram-
ways. Several years after tramways were introduced into Ameri-
can cities, experimental lines were tried in England. Parliament
scented the nucleus of a new monopoly. Cities feared that they
would lose control of their streets ; so a law was passed, though
not until 1871, laying down the principles of municipal ownership,
with short franchises — an undesirable condition, as time showed.
The cities could build the roads and grant franchises to com-
panies for twenty-one years, or could leave the companies the
right to build, with or without conditions. In either case, the
tenure of the private corporations expired automatically after the
lapse of twenty-one years from the opening of the track. At that
time the House of Commons foresaw, the possibility of municipal
operation, but was fearful of the result, and passed a Standing
Order, to prevent it. The city which owned the roads was under
no obligation to buy the operating company's rolling stock,
depots, etc., but the city which did not begin with municipal own-
ership was called upon to buy the company's undertaking at its
"then value ;" that is, after twenty-one years' use, making allow-
MUNICIPAL OWNERSHIP 83
ance for depreciation but none for compensation in respect of
good will and future profits. Both methods undoubtedly retarded
progress. When the franchise period was drawing to a close,
there was no desire for improvement, no attempt to introduce
electric traction ; roads were not extended ; rolling stock was
allowed to become dilapidated as well as obsolete.
The legislative barrier to prevent municipal operation was
not disposed of until 1896. Several towns, notably Huddersfield
and Plymouth, had before that date operated lines only on suffer-
ance, because no company had made a reasonable offer. Glasgow
discovered that, in taking over the powers which established the
company, it had also taken the right to work the tramways, so
that it was outside the scope of the Parliamentary prohibition.
It had given a company the franchise for twenty-three years —
two years beyond the minimum period — on the following condi-
tions :
1. The company paid all promoting expenses and interest on
the money which the city borrowed in making the roads.
2. It paid into a redemption fund three per cent, on the
capital expenditure.
3. It paid four per cent, on the cost of construction to form
a fund for renewals carried out by itself under supervision of
the municipality.
4. It paid $750 per mile for the use of the streets.
These were stringent conditions, but they did not preverft the
tramway company from paying fair dividends, and they enabled
the city to pay back the whole of the capital expenditure when
the franchise expired, and to receive in the form of mileage dues
$378,120.
The franchise expired in June, 1894. The situation was sim-
ilar to the position in Chicago. War was declared between the
company interests and the municipality. Municipal elections were
fought on the future of the tramways. A spontaneous outburst
of civic enthusiasm led to a citizens' victory ; municipal ownership
was adopted. Defeated in the election field, the company inter-
ests then declined to sell their worn-out cars, their old horses,
and their depots at a reasonable price. The city's reply was to
build new depots, buy new cars, engage and train a new staff.
84 SELECTED ARTICLES
Without the use of the track it could not adopt electricity, but
had to begin with horse traction. There was a dramatic change.
At midnight the company's cars disappeared from the streets ;
a few hours later the municipal cars were running. The success
was immediate and has been permanent.
It will be interesting to state the effect of municipal owner-
ship, and to explain the policy which guided the City Council.
The company — as all private enterprise must do — kept mainly in
view immediate profits. Like most British companies, it pur-
sued a narrow policy. The keynote of the municipal system was
service, giving the best possible to the citizens. The municipality
operated the roads in the interest of all. It greatly lowered the
fares, banished all advertisements from the cars, made the names
of the routes and destinations conspicious, opened up new routes
and linked up new districts. It also considered its employees.
Without a contented staff there cannot be a perfect service. So
the drivers and conductors were dressed in new uniforms, their
wages were increased, their hours reduced. The citizens had the
feeling of personal possession when they patronized the cars,
which display the city's arms and its motto — "Let Glasgow
Flourish." Civic patriotism asserted itself later on, when the
displaced franchise-holders started a competing service of omni-
buses, which failed to get support and soon disappeared.
The City Corporation had no sooner completed its horse-car
service than it set about investigating electric traction. It sent
deputations to America and to Continental Europe. To the dis-
appointment of many, it adopted the overhead instead of the
underground trolley.
In reconsfriicting its system, the City Corporation adopted the
system carried out in other departments. It dispensed with con-
tractors as much as possible. It built the new depots and the elec-
tricity-generating station, laid down the extensions, and, after
the first set of cars, built all others in the department's work-
shops. The Glasgow tramways extend beyond the city boundaries
by agreement with suburban municipalities, and serve a popula-
tion of a million. Since the tramways were municipalized, the
roads have increased from sixty-four to one hundred and fifty
miles. This extent of road is small in comparison with the Chi-
MUNICIPAL OWNERSHIP 85
cago street railways, or of the systems in less populous American
cities. The area of Glasgow is small — 12,688 acres — for a city
of its population, 790,000. Many streets are too narrow for tram-
ways. Suburban districts still maintain a lingering but dying
prejudice against the democratic street-car. Glasgow is a busy
center for a British city,. but its bustle cannot be compared with
the feverish activity of Chicago. There is far greater mobility
among the people in American than in British cities.
There are interesting differences in the methods of operating
the car service. There are no transfers in Glasgow, as in Ameri-
can and Continental cities. The city is divided into routes, and
fares are regulated according to distance. The policy is to carry
the greatest possible number of people at the lowest possible
rate, and to make every route independent and self-supporting,
except in the case of new roads which are being developed.
British people have not yet acquired the traveling habit to the
same extent as Americans. A larger number of people want to
travel a mile than to go five miles ; but, unless the fares were low
for short distances, British people would not take the cars.
The fares in Glasgow are one cent for a stage of a little over
half a mile, and over 30 per cent, of the passengers travel this
short distance, and bring in nearly 17 per cent, of the receipts.
For an average of two and a third miles the fares are two cents,
and close on 61 per cent, of the passengers travel this distance
and contribute 665<2 per cent, of the receipts, so that 91 per cent,
of the total number carried pay two-cent or one-cent fares. Only
6.31 per cent, travel for three cents, bringing 10.38 per cent, of
the receipts; 1.62 pay four cents, and bring 3.54 per cent, of the
receipts. Less than one per cent, of the 189,000,000 passengers
last year paid five cents or more. It is obvious that the long-dis-
tance passengers contribute an undue share of the profits, while
in American cities the policy is to overcharge the short-distance
traveler,
Glasgow tramways differ in other respects from the American
cars. The conductor, instead of ringing up the fare, gives pas-
sengers tickets which they punch, and the discs punched out of
the tickets are the means of checking the receipts. Then the cars
are double-deckers. Leaving out of account overcrowding, which
86 SELECTED ARTICLES
is not permitted in Glasgow, the double-decker will carry nearly
double the number of passengers of the ordinary American car.
Stoppages are more frequent, however, and fares are more diffi-
cult to collect. There are regular stopping places, about the
width of a block apart, for taking up and setting down passengers.
The Glasgow tramways are managed by a Committee of the
City Corporation, which holds frequent meetings and reports
regularly to the City Council. It consists of twenty-eight mem-
bers, who appoint sub-committees for supervising different de-
partments. It obtains the sanction of the Council for its actions.
The Council might be regarded as the legislative authority, and
the Committee as the executive.
From a financial point of view the Glasgow undertaking has
been remarkably successful. A cautious policy has been adopted.
As I have pointed out, the original capital for constructing the
roads was paid off when the municipality obtained possession.
More capital was borrowed, on the credit of the city, to start the
horse traction system, and the city has been continually borrowing
to meet additional capital expenditure, until the capital now
stands at over $12,000,000. The Council pays a little over three
per cent, interest on the capital, which is borrowed for a period
of thirty years. It has adopted the policy of practically renewing
the permanent way out of revenue, depreciating heavily, and
building up revenues in order to keep down capital expenditure.
Unlike other British cities. Glasgow does not use its surplus
profits for the relief of local taxation. It pays a mileage rate on
the same basis as the old company did into what is known as the
Common Good Fund of the City — a general fund which can be
applied to any purpose for increasing the amenities of the city
and the welfare of the people. This mileage rate amounts to
$125,000 a year. The result of pursuing this cautious policy as to
capital expenditure, and carrying out repairs and renewals from
revenue, was that, by the time the whole system was converted
to electric traction, the whole capital incurred four or five years
previously for equipping the horse system had been entirely ex-
tinguished.
Last year's accounts indicate the healthy financial condition
of the tramways. The total receipts, for instance, amounted to
MUNICIPAL OWNERSHIP 87
£724,857 ($3,624,255), the operating expenses to £356,820
($1,684,100) — 49 per cent, of the revenue. The net receipts
showed a gross return on the capital outlay of 17.46 per cent.
The interest and franchise charges to other municipalities
amounted to £64,376 ($321,880). The payment into a sinking
fund for redemption of capital at the rate of two per cent, was
^45.553 ($227,765). There still remained the huge surplus of
£258,102 ($1,290,510), which was allocated to depreciation and
reserve fund, and the payment of $125,000 in mileage dues to the
Common Good Fund. The ordinary depreciation on equipment,
power stations, cars, etc., amounted to $393,095. There was a
special depreciation for cables, overhead wires, buildings, etc.,
of $310,000. There was carried to a general reserve fund $93,950,
and to a permanent way renewal fund $300,135. This fund now
stands at $965,025. The tramways undertaking makes the same
contribution to local taxation as if it were under private enter-
prise. The amount which it paid in taxes in the last financial
year was $174,580. The accounts of the department are examined
and audited by independent professional accountants. The ac-
counts are published with elaborate detail, showing the smallest
item of expenditure worked out to percentages and comparisons
with previous years.
The Tramway Department, as I have indicated, generates
its own electric power, the total cost of which is less than one
cent per kilowatt hour.
The Tramways Committee delegates considerable power to its
general manager, who is responsible for the staff who form part
of the permanent civil service in the city. Politics does not in-
fluence appointments, and promotion is by merit.
In conclusion, I would like to point out that the Glasgow tram-
ways system has not by any means reached its high-water mark
of efficiency. With its cautious financial policy, the Tramways
Department could in a few years accumulate reserves which
would enable it to introduce the underground trolley without
adding greatly to its capital, and further swell its earning powers.
With liberal depreciation and reserve funds to meet renewals
and obsolescence, with a redemption fund which liquidates the
original capital of the undertaking in thirty years, which is at the
88 SELECTED ARTICLES
same time maintained in an efficient condition out of revenue, the
City Corporation is more than doing its duty to the next genera-
tion. Lower fares for long distances should be easily possible
in the near future, and there is a prospect that the average fare
will come down to one cent. A universal one-cent fare ir-
respective of distance could then be adopted.
City Hall. 2: 225-7. January, 1910.
Argument for the Municipal Ownership of a Street " Railway
Company.
Nearly all the arguments commonly advanced by persons
urging the operation of street railway companies by the municipal
government are contained in the minority report of a sub-com-
mittee of a citizens' committee of Detroit, ]\Iich., filed in De-
cember. Detroit being a typical American city, the application of
the ideas of the municipal ownership enthusiasts in this instance
is of great interest to all those who are impartially studying the
question, and THE CLfY HALL prints the report practically in
full, following the outline chosen by the sub-committee :
1. Is municipal ownership financially practicable?
2. Can it be made economically possible?
3. Is it morally right?
4. Can it free us from political corruption?
Is it the best as well as the only reasonable and feasible
5
plan?
Is it Financially Practicable f
"Our investigation shows that a municipally owned and op-
erated street railway system cannot financially fail in this city
for the reason that it will always be within the power of the city
to make the expenses of transportation cover the cost of opera-
tion, just as we do now with our water works and other munici-
pal institutions. Just what the cost per passenger would actually
be it has not been possible for us to exactly figure out. But this
is plain : with municipally owned lines, based upon the actual cost
of construction and operation, we can greatly reduce the present
MUNICIPAL OWNERSHIP 89
rate of fare. This is self-evident when we consider the condi-
tions of the old company and their expenses. It is burdened
with a debt much greater than the actual valuation of the property.
If we consult the company's own reports, we can see what an
enormous reduction could be made in the way of reduced fares
if the lines were owned and operated by the municipality.
"The Detroit United Railway, in its report to the American
Street Railway Investment for the year ending December 31,
1908, states that it operated in the city of Detroit, during that
year, 23,977,814 car miles, that its earnings per car mile for each
mile operated were 23.05, or a fraction over 23 cents per mile.
It states that its net earnings, after paying taxes and all legiti-
mate operating expenses, were 8.53, or a fraction over Syz cents
on each and every car mile so operated. This, taking its own fig-
ures, left it a net profit, after paying all legitimate operating
expenses and taxes, over the sum of $2,045,000. This gives us
some idea as to what can be done in the way of lowering the
fares if the system is operated by the municipality in the interest
of the people.
"The money to finance such a proposition can easily be raised.
Controller Doremus proved this only a few evenings ago in a
public address. If you were to grant the present company a
franchise for 30 years, based upon 6 or 7 tickets for a quarter,
the directors would go into the money market and borrow millions
with nothing back of it but the franchise. Has not the city this
same opportunity? We not alone have the franchise, but we have
the property on which to issue these bonds. The bonds will al-
ways be secure. Money can be borrowed by the city at a lower
rate than by the D. U. R. There will never be any danger of a
foreclosure, for the city has within itself the power to regulate
the fares to meet the liabilities that may from time to time occur.
Therefore, there can be no more chance of the system failing un-
der municipal ownership and operation than there is for the city
of Detroit to disband its municipal organization.
Can It be Made Economically Possible f
"To say that a municipality cannot operate its street railway as
economically as a private company is to declare the judgment of
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the 400,000 people of Detroit unequal to the wisdom and judgment
of the 6 or 7 foreign directors of a private company. Can not the
city hire men of brains? Can it not hire the same experts and
the same men with equal skill to operate the cars that the present
company employs? Most assuredly it can, and it will. There is
no great mystery or hidden secret about the successful operation
of a street railway. There are not even the complications to
contend with that surround the average business concern. The
street railway does a cash business. It receives its money in ad-
vance. In this way it has the advantage even over our other public
utilities. The expenses per car mile are easily figured, and the
rate or rates of fare to make it successful are also easily estab-
lished.
"Great Britain alone has close to 2,000 municipal undertakings.
The incomes from these enterprises total each year in round
numbers, $150,000,000, and, as stated by Prof. Frederic C. Howe,
who made a critical examination of the conditions of these enter-
prises for the National Bureau of Commerce and Labor at Wash-
ington, it is equivalent to 22% per cent of the total revenues
collected from all sources in England and Wales, and to 39 per
cent of the total revenues of Scotland.
"One hundred and forty-two of these municipal undertakings
are street railway systems, and Mr. Howe adds that the gross
profits to the municipalities from this source is close to $10,000,-
000 a year, besides a generous amount paid in taxes. The capital
used in the street railway enterprises is about $200,000,000, all
raised on the faith of the public in these undertakings, and there
has yet to be an instance in which those loaning money to
municipalities for this purpose have lost a single cent. Many
of these enterprises are not run to make money, however ; they
are run to give the cities service at cost, or as near cost as is safe.
Js It Morally Right?
"There are some who contend that it is not morally right for
the city to enter into a business that can be conducted by private
individuals. It is always morally right to protect our interests,
either individually or collectively. It is not only a moral right to
protect ourselves from monopolies, but it is a legal right, and
MUNICIPAL OWNERSHIP gr
therefore becomes a personal duty. As to the operation of street
railways in a municipality, it is not a competitive industry. The
history of the entire world demonstrates this fact. It is yet
fresh within our memory how ex-Maj'or Pingree encouraged the
Detroit Electric Railway, known as the three-cent line, with the
understanding that it would be a competitor, competing with the
other roads within the city; but how long did that competition
last? A consolidation soon took place, and the roads were owned
and operated by one company and it has held an absolute
monopoly over the city. Thus the question naturally comes as
to whether it is morally right to protect ourselves against this
condition, and the effect of this combination upon our civic life.
The fundamental test of any institution, method or service must
be its effect upon the public good, its relation to morals, manhood,
government, civilization and progress, as w^ell as its financial
side. In applying the vital test, the principal emphasis must not
be placed alone upon the financial results, but the human results
must be considered as well. The character products and the
social products of our institutions are of as great, if not greater,
moment than the money products.
"There is too much interest, too much affecting society and
its future welfare to trust and place these street railroads again
in the hands of private parties, whose only object and aim is to
secure the almighty dollar. In order to establish the proper
standard of morality in civic life it is necessary that the munic-
ipality own and operate its own street railways, give service at
cost, and eliminate the element of allowing a private company
to do the public's business for profit.
Can It be Free From Political Corruption?
"In considering the political question as it affects this problem,
let us be absolutely honest and sincere. Is it not bad politics to
urge us to commit municipal functions to private control? Is
there not ten times more bad politics in private than there is in
municipal control? There is less opportunity for bad politics in
municipal control than there is in private control. There is less
incentive for the city to employ those of bad politics than there is
for a corporation to employ those of bad politics. Where have bad
92 SELECTED ARTICLES
politics been discovered? Who have been responsible for its em-
ployment? Where bribery and treachery in municipal affairs have
come to light, who have been the guilty ones? Were they among
those endeavoring to retain to their municipalities their full func-
tions and rights, or were they those who resisted and sought to de-
feat municipal ownership and the city's rights? An honest answer
to each of these questions is in favor of the municipal ownership
of pubHc utilities. Once these utilities are municipalized and in the
hands of the people, the cause for bribery and political corruption
will disappear. An investigation of the institutions even of our
own city that are now in the hands of the municipality shows that
the political corruption surrounding these institutions has been
lessened — yes, almost destroyed.
Is It the Best as Well as the Only Feasible Way?
"Let the municipality arrange so that the people can elect or
select an honest commission of five members free from any
partisan or political interference. Let the commission be the
choice of the citizens of this city, and place in their hands the
complete management and direction of the street railways. Pay
each member an adequate salary, and let each be subject to recall
by popular election on petition of 25 per cent of the electorates.
There is no question but what you will then see graft absolutely
removed and the city free from much of the corruption that has
come from these sources of corruption and that have menaced our
civic life in the past.
"To establish the conditions for which we were told this com-
mittee was appointed, municipal ownership is the only way in
which it can be done. The history of private corporations the
world over has but one page. They are operated in the financial
interest of the few, with little consideration for the people, either
for those who are patrons or for those who operate the cars and
do the work. Their private interests are paramount and must be
first served. Investigation throughout all the world shows that
the municipalities everywhere are taking over these institutions.
Water works were first taken over because water is closely re-
lated to the health of the comimunity. Then came gas and elec-
tricity. Next comes the operation of street railways, and
MUNICIPAL OWNERSHIP 93
wherever the}- have been taken over, they have been a success,
all things considered. The results have been higher wages and
shorter hours to the employes, and better service and lower rates
of fare to the people. There is no question but what municipal
operation of street cars is the best and most feasible way offering
itself to Detroit at this time.
"Nor is there any menace to the community in increasing the
number of city's servants through the operation of profitable
enterprises. Detroit today has between 3,500 and 5,000 employes,
and the number can easily be increased by 2,500 to 3,000 without
any danger. Glasgow has 15,000 city employes, or 10 per cent of
its voting population. Altogether British cities employ between
150,000 and 200,000 men. Yet in no instance is it claimed that
this political power is manipulated in favor of any political
organization. But when public service corporations are privately
owned, the contrary is the fact. Pressure is always brought to
bear on employes of private corporations doing public business to
vote as their employers desire them to, regardless of their own per-
sonal preferences, or of the effect it may have on public interests.
Recommendations to the Comtnon Council.
"We therefore recommend to the common council :
"First. That they grant no more franchises for the purpose
of operating privately owned street railways to any person,
corporation or company.
"Second. That the council make arrangements to at once
inaugurate and establish a thorough system of municipality owned
street railways covering the entire city.
"In order to establish and properly operate such a system, we
recommend that they first arrange and have elected by a special
election a non-partisan commission who shall have the direction
and control of the inaugurating and the operation of the munici-
pally owned street railways. We advise that in establishing the
roads they first take over such streets and lines on which the
present franchises have expired, and that then the commission
shall make arrangements for the purchase from the old com-
panies, at actual physical value, such lines as these companies
94 SELECTED ARTICLES
still retain the franchises on, providing the company will dispose
of them to the municipality at actual physical value.
"In case of refusal, the commission shall proceed to establish
lines that vi^ill give the people a complete service, and, if neces-
sary, parallel such lines as have franchises, or by placing tempo-
rary tracks in and upon the same streets if necessary-, until the
entire city is completely covered by such municipally owned and
operated street car system.
"To adopt any other method than municipal ownership to
settle for once and all the problem of street car transportation
at cost, is to continue the friction and wrangling between the
city and the corporation during the life of any franchise that may
be given. A municipality of 400,000 people never yet had the
wisdom to legislate most wisely for a municipality which will
soon have a population of a million. Human intelligence is too
finite to know what will be the cost of transportation when a few
more miles of trackage is going to accommodate twice the present
traffic, with only a small percentage increase in the cost of doing
the service.
"To the time-tried axiom of a 'corporation has no soul,' and
particularly a corporation with a franchise from a populous city,
may be added another, 'Privilege knows no honor.' A corpora-
tion with a franchise can invent a hundred ways to squeeze profits
from the public through unsatisfactory and inadequate service,
low wages and long hours for employes and high fares. No great
city will seriously blunder so long as it keeps control of all its
public utilities. And only in this way can cost and service be
harmonized."
North American Review. 172: 445-55. March, 1901.
Municipal Ownership of Natural Monopolies. Richard T. Ely.
The question under discussion relates to the ownership and
management of those local businesses which furnish what are
called public utilities. The principal classes of these public util-
ities are water, light and transportation. They are called monop-
olies because, as we know from experience, we cannot have in
their case effective and permanent competition.
MUNICIPAL OWNERSHIP 95
It is often said that we do not want to decide the question of
municipal ownership in accordance with general principles, but
that each case should be decided as it arises. If New York City
desires public ownership of water-works, it is urged, let New
York City by all means try the experiment. But let New Haven,
if the people of that city so desire, continue private ownership of
water-works. Still others say, let us adhere to private ownership
until we find that we have made a serious mistake in so doing.
Both these attitudes imply the renunciation of science, or a denial
of the possibility of a scientific solution of the problem. Imagine
such an attitude in engineering as applied, let us say, to bridge-
building. The result would surely be disaster. The outcome of
this attitude in what we may call applied economics or social
engineering has likewise been disastrous. ^Mistakes have been
made which it has not been possible to correct, or which have
been corrected with great loss. The private ownership of water-
works in London, which still persists, although recognized to be
an evil many years ago, affords an illustration. If at length this
evil is corrected, it v^rill cost the taxpayers many millions of dol-
lars which might have been saved. Innumerable illustrations
could be afforded, did space permit. What must be desired by
any one who has an appreciation of the nature of modern science,
is the establishment of general principles whereby mistakes may
be avoided and loss prevented. The practical man will naturally
take into account the actual, concrete condition in his application
of general principles. The social engineer must, in this partic-
ular, follow the practice of the mechanical engineer.
When we approach the question of public ownership versus
private ownership of such great industries as those connected
with artificial light and transportation, our attention is attracted
by the municipal corruption which exists, particularly in our own
country. The fact of this municipal corruption, and also the
further fact of the very general incompetency in the management
of municipal affairs, are not called in question, and they are not
under discussion. The corruption and incompetency may not
everywhere be so bad as many pessimists imagine, and it may,
furthermore, be true that, in both respects, we have in many
cities witnessed gratifying improvement. Yet, when we have
96 SELECTED ARTICLES
made these admissions, the true state of the case is bad enough.
The civic conscience with us is slow of development. The satis-
factory performance of public duties implies, in some particulars,
a higher civilization than we have reached. It requires some de-
velopment of the imagination to see the harm and suffering
brought to countless individuals by lapses in civic virtue. Fur-
thermore, it implies a higher development of conscience than that
found in primitive man, to reach that state in which there is a
conscious desire to abstain from all acts which may hurt people
who are not seen. Many a man will give to a poor widow, whom
he sees, money to relieve her distress, but, at the same time, will
not hesitate to increase the burdens of poor widows whom he
does not see, by fraudulent evasion of taxation.
The sort of men now in our municipal councils are not the
kind of men to whom we would gladly turn over vast business in-
terests. The very thought repels us. Whether or not they are
morally better or worse than the men who in many cases are said
to corrupt them, and who now exercise an important influence in
the management of privately owned public utilities, it is freely
conceded that they are less fit for the conduct of important busi-
nesses. We w^ant street railways managed by men who under-
stand the street-railway business, gas-works managed by men who
understand the gas business, and neither class of enterprises man-
aged by men whose gifts are most conspicuous in the partisan
manipulation of ward politics. It is important that it shoulti be
understood that the advocates of municipal ownership do not call
in question the fact of municipal corruption and inefficiency in
the management of public business, and that they have no desire
to turn over the management of public utilities to a class of men
who must still be considered typical in the municipal council of
the great American city.
But when we have admitted freely corruption and inefficiency
in municipal government, it still remains to examine into the
causes of these conditions, for there is a very widespread suspi-
cion that a large share of the responsibility therefor must be laid
at the door of private ownership. A real, vital question is this :
would we have the same class of men in our common councils
which we now find there, should public ownership replace private
MUNICIPAL OWNERSHIP 97
ownership? Is it true that private ownership places in office and
keeps in office some of our worst municipal wrong-doers? It is
important that the reader should understand the real nature of
the problem under discussion, and it is believed that these ques-
tions which have just been asked bring before us a large part of
that problem. This important problem, the solution of which is
■of national significance, should be approached with no partisan
bias, and no angry recriminations or denunciations should be
tolerated. The spirit of the injunction, "Come, let us reason to-
gether," should be the spirit of approach.
We must clearly and sharply fasten in our minds the indis-
putable fact that, with respect to public utilities of the sort under
discussion, we are confined to one of two alternatives. These
alternatives are public control of private corporations, and public
ownership with the public control which naturally springs from
ownership. The experience of the entire civilized world has
established the fact that we are restricted to these alternatives.
We may have private street-railways, private gas-works, private
water-works, etc., but in that case it is invariably and in the
very nature of the case necessary to exercise public control over
their operations. Charges must be regulated, general conditions
of service must be prescribed, and regulation must be found for
a thousand and one cases in which public and private interests
touch each other. This is because, on the one hand, the nature
of the service rendered is in such a peculiar degree a public
service, and also because the effective control of full and free
competition is absent. We may, on the other hand, choose public
ownership and management. We could, of course, separate public
ownership from public management, and consider each one. In
other words, we could have a publicly owned urban transportation
system with private operation. Generally, public ownership and
public management go together, and in the limited space at our
disposal we will not undertake to separate them.
It is freely granted that either one of our two alternatives
presents immense difficulties. This is a further point concerning
which there can be no controversy among those who really under-
stand the nature of the case. The evolution of industrial society
has again brought us problems most difficult of solution. If we
98 ' SELECTED ARTICLES
may use the language of design, history teaches us that Provi-
dence does not intend that men organized in society should have
what we are always looking for in the future, namely, an easy-
going time. Every age has its problems. In one age they may be
brought by the inroads of barbarians, in another age by famine
and pestilence, in another age by international wars. We have
been dreaming of a coming time when ho social problems should
vex society ; but, if history teaches us anything, it shows us that
in such dreaming we are indulging in Utopian aspirations. Every
civilization has been tested heretofore, and every civilization must
have its test in the future, our own included. One of the tests of
our civilization is the ability to solve the problem under discussion.
The question which confronts us is this : Which one of the
two alternatives promises in the long run the best results?
Those who talk glibly about public control of those private
corporations owning and operating public utilities frequently ex-
hibit a sad ignorance of what their proposed remedy for existing
evils means. They think in generalities, and do not reflect upon
what control means in details. We have to. observe, first of all, that
public control of private corporations furnishing public utilities
so-called means a necessary antagonism of interests in the civic
household. Human nature is such that those who are to be con-
trolled cannot be satisfied with the control exercised. However
righteous the control may be, those who are controlled will fre-
quently feel themselves aggrieved and wronged, and will try to
escape the control. It is, furthermore, a necessary outcome of
human nature that those persons who are to be controlled should
enter politics in order that they may either escape the control, or
shape it to their own ends. Again, we must remember what vast
aggregations of men and capital it is proposed to control. The
men owning and operating the corporations which furnish public
utilities are numerous, and they maintain large armies of em-
ployees of all social grades, from the gifted and highly trained
attorney to the unskilled laborer. The amount of capital involved
in a great city is counted by tens of millions. The very nature
of the case brings it about that there should be persistent, never-
ceasing activity on the part of those to be controlled. The effort
to escape from this control, or to shade it, is a part of the efforts
MUNICIPAL OWNERSHIP 99
by which men earn their livelihood, and their activity is as regu-
lar as their hunger. The efforts of patriotic and high-minded citi-
zens, in their self-sacrificing neglect of their private affairs to
« look after public concerns, may grow weary, but not so the activ-
ity of the corporations to be controlled. Can a task of greater
difficulty be well suggested? It is not said that the problem here
presented is one which it is impossible for modern civilization to
solve ; but it is well that the general public should know precisely
what it means. Some of us are to control others of us, and to do
so against their will. But who are those whom we are asked
to control? They are very frequently our friends and neighbors.
I am asked to resist what is esteemed the extortion of a gas
company ; but one of the gas magnates may be my neighbor and
friend, and occupy a pew next to mine in church. Perhaps the
gas magnate is my employer. Perhaps he has just contributed,
and with the best intent in the world, one hundred dollars to an
object which I have greatly at heart. Perhaps I am a college
professor, and the street-car magnate whose rapacity I am called
upon to help hold in check has endowed the chair which I occupy.
Imaginary illustrations can be continued indefinitely, and those
who desire to do so can in any city make them sufficiently con-
crete. Is it strange that many of us who are called upon to con-
trol others of us should simply refuse to do it?
In so brief an article as this must be, it is possible to do little
more than to throw out suggestions. It is noteworthy that in
Massachusetts public control of corporations furnishing public
utilities has been tried more persistently than anywhere else, and
that in that State there is a stronger sentiment than anywhere
else in the Union in favor of public ownership and public man-
agement. Serious charges have been brought against the Board
of Gas and Electric Lighting Commissioners, which has to exer-
cise control over gas and electric-lighting plants. Even a paper
of the standing of the Springfield Republican has felt called upon
to rebuke the board severely for keeping secret information which
it has gathered. The attitude of the board is characterized as
"extraordinary." "If the board," says the Springfield Repub-
lican, "is empowered to keep secret what information it is pleased
to, how are the people to know that they may not become a mere
100 SELECTED ARTICLES
agency of the monopolies to cover up and justify their possible
undue exactions ?" Insinuations of this kind are frequently heard
in Massachusetts. Dismissing all charges of corruption and bad
intention, we have as a net result a strong movement in Massa-
chusetts, away from private ownership of public utilities, to public
ownership.
The writer has followed this subject, and the trend of opinion
with respect to it, for fifteen years with some care. In his own
judgment the trend in favor of public ownership is marked and
surprising. He has seen one investigator after another start with
prepossessions in favor of public control of private corporations,
and turn away from that position as a hopeless one, and take up a
position in favor of public ownership as the only practicable solu-
tion under our American conditions. There lies before the writer
a letter recently received from an attorney, a member of a well-
known firm in one of our great cities. This lawyer has been
forced by experience to abandon the position in favor of private
ownership. He says, as the result of long-continued and self-
sacrificing efforts to improve politics in his own city:
"The alleged benefits of regulation are practically as impossible
as an attempt to regulate the laws of gravitation, for our legis-
lative councils are nominated, elected and controlled by forces too
subtle and insidious to be attacked, and even to be known. * * *
A community cannot regulate against millions of dollars organized
to prevent it. This temptation disappears, however, when the
municipality becomes the owner."
The difficulties of public ownership are not to be denied. They
lie on the surface. The problem in the case of public ownership
is to secure men of talent and experience to conduct these enter-
prises, and keep them in office during good behavior ; to engage
men for all positions on the basis of merit, and, while retaining
vast armies of employees, to enact such legislation and ad-
ministrative reforms as will prevent employees of the city, en-
gaged in furnishing public utilities, from either using their
political power for their own selfish ends, or from being used for
partisan purposes. This implies, on the part of society, an appre-
ciation of excellence of service, and a thorough-going reform of
municipal civil service. Politicians of the baser sort, and all those
who have selfish ends to be gained by political corruption, will
work against such reform. On the other hand, public ownership
» • i •
MUNICIPAL OWNERSHIP loi
with public operation presents the issues in a comparatively
simple form. The clarification of issues is, indeed, one of the
strong arguments in favor of municipal ownership. Who knows
to what extent employees on the street railways of Baltim.ore,
Philadelphia, New York and Chicago are appointed through the
influence of politicians? It is known, however, that many appoint-
ments are made through the influence of politicians of precisely
the worst sort. It is furthermore known that these corporations
are now generally in politics. But because the corporations
furnishing these public utilities are owners of private property,
and because they conduct a business which is only quasi-public,
the political corruption with which they are connected is hidden
and obscure, and voters are confused and perplexed. Public own-
ership carries home to every one the importance of good govern-
ment, and arrays on the side of good government the strong
classes in a community now so often indifferent. Frequently men
who are powerful in a community, in working for good govern-
ment, work against, rather than for, their own private interests.
It is, indeed, gratifying to see men of wealth, as frequently as
they do, turn aside from selfish considerations to promote meas-
ures calculated to advance the general welfare. But can we ex-
pect this kind of conduct persistently from the great majority?
Have we any right to expect it? A personal allusion is sufficiently
instructive to warrant reference to it. When the writer had in-
vested what was for him a considerable sum in gas stock, he tried
to answer for himself this question : As an owner of gas stock,
exactly what kind of a municipal government do I want? The
government of the city in which was located the gas-works in
which the writer was interested was a stench in the nostrils of
reformers throughout the country; but he could not persuade
himself that as an owner of gas stock any very considerable
change was for his interest. The city government, as it then was,
was a "safe" one, and the result of a change could not be foretold.
Is not this, as a matter of fact, the solution of the problem
which owners of stock in street railways, gas-works and similar
enterprises generally reach when they look at municipal reform
solely from the point of view of self-interest? And can we,
then, be surprised at a certain apathy and indifference on the
102 SELECTED ARTICLES
part of what are called the "better classes" in a community?
Men of great wealth have been known to work directly against
their own narrow interests for the public weal, but has an entire
class of men ever been known to do this?
A further result of municipal ownership would be a better
balance between private and public interests, and this better bal-
ance would strengthen the existing order against the attacks of
socialists and anarchists, on the one hand, and unscrupulous
plutocrats, on the other. A balance between private and public
enterprise is what is fundamental in our present social order, and
a disturbance of this balance consequently threatens this order.
This balance is favorable to liberty, which is threatened when it
is disturbed either in the one direction or the other. Any one
who follows passing events with care cannot fail to see that it is
menaced by socialism, on the one hand, and by plutocracy, on the
other. A man of high standing in Philadelphia, himself a man
of large wealth, when presiding at a public meeting recently,
stated, practically in so many words, that a professor in a school
of some note had lost his position on account of a monograph
which he wrote in relation to the street railways of that city.
This monograph was temperate in tone, and its scholarly char-
acter elicited commendation on all sides. We need not go into the
merits of this particular case, but we cannot fail to notice dis-
quieting rumors in regard to the attacks upon freedom of speech,
which are an outcome of private ownership of public utilities.
There is a widespread apprehension that the utterance of opinion
upon one side promotes one's interest, and that the utterance of
opinion upon the other side may prove damaging. Mathematical
proof cannot be well adduced, but readers can, by careful observa-
tion, reach a conclusion as to the question whether or not our in-
dustrial order is menaced by plutocracy, always bearing in mind
that plutocracy does not mean honestly gotten and honestly ad-
ministered wealth. There are good rich men, and bad rich men,
as there are good poor men, and bad poor men. Does private
ownership of public utilities, on the one hand, tempt rich men to
wrong courses of action, and does it, on the other hand, place
great power in the hands of unscrupulous wealth?
In an article restricted as the present is, it is impossible to go
MUNICIPAL OWNERSHIP 103
statistically into experience. The question may be raised, how-
ever, Has any one ever noticed an improvement in municipal
government from a lessening of the functions of municipal gov-
ernment ? Can any one point to a municipal government
which has improved because its duties have been diminished,
and the number of its employees lessened? If we turn away
from local government, do we find that it is through
the lessening of the function of government in general that an
improvement is achieved? At one time, the Italian government
operated the Italian railways. Later, it leased the railways to a
private corporation. Has this retirement of Italy from the opera-
tion of the railways produced a regeneration in public life? As
we travel over this country, and observe the course of local gov-
ernment, do we not, on the contrary, find that, on the whole, it
has improved as its functions have increased, and as it appeals
directly and effectively to larger and larger numbers? The case
of England is a very clear one. If we go back fifty years, we
shall probably find that the government of English cities was quite
as bad as ours is now. During the past fifty years, there has been
a continuous improvement, and this has accompanied continual
expansion of municipal activity, while at the same time, through
an extension of the suffrage, English municipal government has
become increasingly democratic in character. We must hesitate
about establishing a casual connection between these two move-
ments, but is it unnatural to suppose that there may be such a con-
nection? When there is a great deal at stake, when the city has
much to do, good government of the cities appeals to all right-
minded persons ; and if there is no division of interests through
private ownership, we ought, in a civilized community, to expect
to find all honest and intelligent people working together for good
government. A tangible basis is afforded the masses for an ap-
peal for higher interests, and reliance is placed upon municipal
self-help. Instead of asking other people to do things for them —
namely, great private corporations — the people are told to help
themselves.
Mistakes and wrong-doing must be anticipated under either
one of our two possible systems. What about the relative serious-
ness of the mistakes and wrong-doing, however? We have a
104 SELECTED ARTICLES
certain demoralization in each case, and a certain loss. While in
the case of public ownership we have an opportunity to recover
from mistaken action, in the case of private ownership mistaken
and wrong action is often irretrievable on its consequences. Take
the case of New York City as an illustration. Jacob Sharp
secured a franchise for the Broadway surface railway through
wholesale corruption, and was sent to the penitentiary. The fran-
chise, however, was retained by those into whose hands it fell,
and others have entered into the fruits of his theft. Under our
American system of government, in cases of this sort stolen goods
are retained. The franchises are retained, and the forgotten mil-
lions continue to suffer, because their rights have not been ade-
quately safeguarded. With the other policy, namely, that of
public ownership, how different would be the result? If the street
railways were mismanaged, or their earnings stolen, it would be
sufficient to turn out the municipal plunderers. Too many over-
look what is distinctively American in our problem ; namely, our
constitutional system, which protects franchise grants when once
made, and renders so irretrievable a mistaken policy, provided we
have the system of private ownership.
Let it be distinctly understood that the position is not taken
by the present writer in favor of municipal ownership at any and
all times, and everywhere, and under all circumstances. It must
come in the right way, it must come deliberately, and it must
come provided with adequate safeguards. It must come as a part
of other movements, especially of full civic service reform. But
it is calculated in itself to promote these other reforms, and in
some cases municipal ownership will be the first step in the direc-
tion of that full civil service reform which is so sadly needed.
In some cases civilization may be in too low a condition to permit
municipal ownership. The socialization of public sentiment
which must lie back of proper social action may not have gone
far enough. The question is : Have we the social man back of the
social action which we advocate? If we are talking about the
heart of Africa, with its individualistic blacks, unquestionably we
have not the social man which would make possible any consid-
erable amount of social action. Among barbarians and semi-
civilized people the few must do things for the many. Social
MUNICIPAL OWNERSHIP 105
action must not be forced down from above, and it must not come
accidentally, if it is to be successful. It must come as the result
of full and free discussion, and of full and free expression on the
part of the people. It is on this account that the initiative and
referendum, in a country like ours, may properly accompany the
social action. Have we in our own country the social man to back
social action? If he does not everywhere exist, he is coming, and
coming rapidly, and the amount of social action which the social-
ization of sentiment makes possible and desirab4e increases in
proportion as he makes his appearance. The question of munic-
ipal ownership is a question of social psychology. It turns on the
nature of the social mind.
NEGATIVE DISCUSSION
' Quarterly Review. 205: 420-38. October, 1906.
Municipal Socialism.
Municipal Ownership Socialistic.
The British Philistine (B. Shaw) is, we have admitted, a
little bitten with the socia/Iist frenzy ; but this new political
arithmetic will occasionally appear to him somewhat topsy-turvy.
He will ask, still stupidly obsessed, as Mr. Shaw would say, by
irrelevant commercial ideals, what is now to replace the motive
of the private undertaker, and how is the capital for industry to
be provided? To this Mr. Shaw has his airy reply. xA.bility is a
commodity which can be hired in the market ; but, in a system
which contemplates the abolition of the market, surely this is
a hard saying. Economic production at a cost which will be
well covered by the available purchasing power of the community
is no longer an object. We are trading largely for the sake of
invisible profits ; and in matters of invisible profit the mere able
man of industry is as a child. The municipality, for instance,
is owner of gas-works. Its object is not to sell gas to those
who are willing to purchase it at a price which will give a profit
either to shareholders or ratepayers. Its oljject is to give per-
manent employment to a happy and contented staff of gas-
workers, to light the dark places of the town, to see that the
poor man's house is lighted as brilliantly as that of the rich, and
to take care somehow that no one, even remotely connected with,
the gas-works, is either a carouser or a debauchee. This is a
task not for ability but for collectivist faith-healing. Its organ-
iser, we suggest, should rather be the civic enthusiast who has
some skill in the management of public meetings, and who, when
his fellow-citizens want to have electric light, can urge them
with glowing eloquence to rest content with the inferior light for
MUNICIPAL OWNERSHIP 107
the sake of the common property of the town, now sunk in a
gas-plant, and for the sake of the staff, who otherwise would
find their occupation gone if they would not consent to be cruelly
overworked in learning a new trade. This is a task for an
inspired political wire-puller, not for the mere able man of indus-
try.
It is not want of sympathy with socialist ideals, but abso-
lute scepticism as to the practicability of the proposed methods
of achieving them, that deters the liberal economist. He has a
tempered faith in the ameliorative processes of liberty. On the
whole, the free organisation of industry does give advantage to
diligence and trustworthiness, does discourage and ultimately
procure the correction of supersession of inefficient methods and
character, while it allows us to avail ourselves of the improve-
ments which the progress of science puts within our reach. This
A^iew promises no immediate millennium, but it explains our prog-
ress in the past, and seems to guarantee a similar advance in
the future. This very phenomenon of socialism — what is it. he
asks, but a sign of a righteous but over-sensitive social moral-
ity which has grown up under the very system which it seeks to
demolish? With this charter of progress, such as it is, the lib-
eral economist must be content. To him Mr. Shaw's idea that
industry can be carried on without being subjected to the test
of finance, and without the motive power arising frofti the ex-
pectation of profit, seems wildly fantastic, if not altogether un-
imaginable.
*»'
Municipal Ownership Expensive.
To an optimism like Mr. Shaw's, which settles so easily the
•question of management, the matter of capital oft'ers no diffi-
culty. The credit of the municipality is such, he argues, that
it can borrow more cheaply than the private trader. In passing,
we might remark that only the larger municipal bodies can now
borrow af a cheap rate : and some of them would find it difficult
to borrow at all. But. accepting Mr. Shaw's statement, we may
ask why it is that capital can be borrowed cheaply by munici-
palities. The answer, we presume, is. because the security is
good, because society acknowledges its indebtedness for all time,
io8 SELECTED ARTICLES
and guarantees the principal and interest of the debt. The in-
definite extension of this system is an immense boon to the idle
capitalist class, or, at all events, to the richer section of it. But
the question surely remains : Is the system really cheap to the
community? Let us consider a concrete instance.
The estimated capital expenditure for the London County
Council's steamboat service is about 300,000/. Something presum-
ably must be added for working capital, if, as is inevitable, we
still talk in the discredited language of commercial accountancy.
The traffic is carried on at a loss of over 53,000/. per annum. The
53,000/, loss, in Mr. Shaw's audit, is compensated by invisible as-
sets, e.g. the contentment, etc., of 300 polite and skilled officials
who, being in municipal employment, are, we hope, as well satis-
fied with their wages and as free from sickness and the other
inconveniences of life as Mr. Shaw's picture leads us to expect.
The steamers, it is generally admitted, go too slowly and un-
punctually to suit passengers on business bent; but the account
must be credited with pleasant excursions enjoyed by many per-
sons of leisure at a nominal cost. It is difficult to reduce these
advantages to figures ; and, pending the arrival of the new pro-
fession of municipal accountancy, we must be content with the
Council's assurance that they more than balance the loss of
53,000/, per annum.
To continue, however, the question of the capital involved. A
steamboat service on the Thames is a very proper field for enter-
prise. It has been attempted by more than one set of private
capitalists ; for hope springs eternal in the commercial breast.
They ventured at their own risk ; the public had for a while its
service of boats ; but, as the ultimate result, most of the capital
is now resting quietly, a burden to no one, figuratively speaking,,
at the bottom of the Thames ; and no one except the capitalists
concerned is a whit the worse. The capital involved in the Coun-
ty Council experiment, on the other hand, remains a debt owed to-
the well-to-do people who have taken up County Council stock. It
will have to be paid, interest and principal, by the ratepayers and
taxpayers of the county, and so becomes a permanent burden on
the community.
MUNICIPAL OWNERSHIP 109
Municipal Ownership Not Enterprising.
In considering the duration of the life of capital in other
walks of trade, we have first to remember that a very large
amount of capital never makes any return at all to the investor,
and that most of the investment which is productive only remains
so because it is constantly renewed and refreshed by fresh doses
of capital. The disadvantage of this seems to lie entirely with
those who adventure the capital, viz. that class of the public
which presumably is most able to bear the loss. The advantages
belong to the community at large, for whose sake invention is
stimulated and the improvement and supersession of antiquated
services encouraged. It is not to be supposed that the same spirit
of enterprise could or should characterise the work of a munici-
pality which is risking public funds which it cannot write off as
bad debts. The same principle is illustrated by the comparative
impotence, uselessness, and occasionally absolute harmfulness of
endowments. The permanent withdrawal of capital from the
control of the living, and its committal to the sterilising grasp
of the dead hand, are often not far removed from a public mis-
fortune. The same unavoidable danger seems to attend the
proposal to make capitalisation a municipal or national function.
The first step of the municipalising enthusiast, as we under-
stand it, is to warn the private adventurer off those fields of
enterprise which for their inception require legislatively con-
ferred way-leaves and franchises ; and it need hardly be pointed
out that these constitute a very large and increasing proportion
of the great industries of the civilised world. Investors who
otherwise might have ventured their money in such undertakings
are invited instead to take up municipal stock. The whole burden
of preserving intact the evanescent value of such investment
will be thrown on the rates and taxes. The old channel of
relief which lay through the writing-off of the bad debts of in-
dustry will no longer be available ; and public enterprise will
sooner or later have to face the alternative — of seeing progress
brought to a standstill by reason of the burden of indebtedness
in respect of improvements of which the value has expired, and
of having to decline new fields of enterprise in which the yearly
no SELECTED ARTICLES
increment of the population might expect to find its profitable
employment ; or, on the other hand, of repudiating the debt, a
course logically demanded by those who regard with abhorrence
the existing capitalistic order."
Monopolistic Evils Exaggerated.
But the stronghold of the advocate of municipal trading and
the denouncer of profit is the alleged injury to the public when.
3. service is carried on by private enterprise under a complete
or partial monopoly. Monopol}^ of old was a usurpation granted
"by the Crown to an individual or a corporation, or for some
plausible reason assumed by the public authority itself ; and the
profit which is made under such conditions is in reality a tax.
It is only in comparatively modern times that monopoly has been
granted for the protection and advantage of the public. Mon-
opoly is an evil arising out of a natural limitation of supply,
and is only to be mitigated by a choice of evils. To give com-
pulsory powers, under conditions, to railways and telegraph com-
panies seemed preferable either to allowing them to tear up the
streets at their will, or to making the public wait for the advan-
tage of railways and telegraphy till the companies could agree
with private owners. Xo great principle seemed at stake. Gas,
water, and sewage were managed by companies or public author-
ities, as accident decided. Of old time the Government claimed
a monopoly in letter-carrying, and later insisted on adding to
it the telegraph and the telephone, which seemed formidable
competitors. It allows messenger companies, but exacts from
them a heavy royalty ; and as yet it has made no claim to a
monopoly of carrying parcels. The Government makes roads,
but not railroads ; it is partially responsible for harbours, but
not for railway stations. No one invariable principle has been
followed.
The difficulty of protecting the public in monopolised serv-
ices as adequately as it is protected in other services by competi-
tion is probably not wholly superable. If, as with the Post-office,
the Government constitutes itself sole contractor, it is impossible
to say what we may have lost in efficiency. Letters are carried
at a profit, but all other branches of post-office work are con-
MUNICIPAL OWNERSHIP iii
ducted at a loss ; and by common consent we have the worst
telephone service in the civilised world. We have not even the
consolation that the postal staff is made thoroughly happy.
If next we consider the important service of railways, we
shall find that the protection of the public is more effectively
carried out by competition, which was supposed to be excluded,
than by the regulations of the Board of Trade, though these have
been carefully and wisely contrived. To begin with, there has
always been competition between one railway and another ; roads
and canals and sea-carriage are still available; but probably the
greatest incentive to diligence in the public service has been the
recognised disposition on the part of goods and people to stay
where they are unless movements are encouraged by cheap
and attractive conditions of travel. If we consider the fact that
there are, as a rule, alternative ways of doing what we want to
do, and that much that we want to do may very well be left
undone, it will appear that the evil of railway and, indeed, of
all monopoly is much exaggerated. Purveyors of service for our
luxuries, amusements and necessities compete more or less un-
consciously one against another. If fine cognac is dear, we
pretend to prefer Scotch whisky ; if a holiday by railway is un-
comfortable owing to overcrowding and expense, we take a
steamer to Cromer or to Norway. Even if a business journey
to Birmingham might seem desirable, the excessive cost of it
may decide us to make shift to manage by means of letter or
telegram.
Summing up this portion of our argument we may say that
the evil of monopoly is very much exaggerated ; that regulation
for the protection of the consumer is possible ; that a closer con-
sideration of the different methods of introducing regulations
might even warrant us in increasing the sphere of monopolised
industries served by private enterprise ; and lastly, that, even if
regulation is evaded and a considerable profit is made, the earn-
ing of profit is a legitimate incident in industry, and that the
existence of a guaranteed investment has a public and general
convenience. It is frequently argued, and with some plausibility,
that the existence of state and municipal debt has a great ad-
vantage as providing financial convenience to banks, insurance
112 SELECTED ARTICLES
offices, provident societies, trustees, and persons responsible
for the custody of charitable and similar funds. Stocks repre-
senting partially monopolised undertakings offer a field for the
investment of such funds which is not open to the objection
urged against the municipal capitalisation of industry pure and
simple, namely, that municipal debts exist for the advantage
of the rentier class only, and that they withdraw capital from
the risks of competition to which, in the interest of the general
consumer, ordinary investment is properly liable.
Municipal Area Limits Industry.
The economical creation and distribution of electrical power
can only be carried out on a grand scale ; and for the inception
of such enterprise parliamentary powers are needed. The areas
of municipalities are admittedly too small to satisfy this condi-
tion. Local Government divisions generally have arbitrary
boundaries, and do not lend themselves to the advantageous
grouping of power-areas. The supply of electrical energy to the
mechanical industries of this country is an undertaking of un-
precedented magnitude. Not only, it is suggested, can the
present uses of steam and gas be largely superseded by the new
force, but industries and uses altogether new and unimagined
are waiting to be called into existence. Large fortunes will be
made, and large fortunes will be lost, in experiments. If we are
to feed and find employment for the increasing millions of this
country, and to hold our place in the van of nations, we have
need here of a lavish and reckless expenditure of money by the
captains of the industry.
It is painful, therefore, to be forced to the conclusion that
this movement is being strangled in its infancy by the miserable
jealousy and self-sufficiency of the municipal monopolist.
Municipalities, unabashed by the revelations of municipal in-
competence at Poplar and West Ham, are asking that they shall
be made the monopolists of a force on which the whole future
of British industry probably depends. The impotence of the
larger authority, the County Council, for such a task is hardly
less marked. The leading spendthrifts of Poplar are influential
members of the London County Council. They have overborne
MUNICIPAL OWNERSHIP 113
the opinion of competent financiers like Lord Welby, the chair-
man of their own finance committee, and are determined to
obtain a monopoly for the supply of electrical energy. Hitherto
this dire calamity, which would probably condemn London to
gradual but certain industrial decay, has been averted; but,
wuth one or two exceptions, notably at Newcastle, the agitation
has succeeded in its dog-in-the-manger policy of defeating all
applications from private companies for leave to speculate in
this vast field of industry. Meantime we are being overtaken
and relegated to an inferior rank among industrial nations by
countries which have found means to evade the rapacity and
stupidity of these obstructive tactics. It is not now a question
of protecting the helpless consumer ; that disguise will no longer
serve ; the managers of the industrial enterprise of this country
do not ask to be protected from the monopoly of private ad-
venturers, but from the incompetence and inadequacy of munici-
pal management.
We have followed the example of Mr. Shaw and have dis-
cussed the question in its larger aspects. We agree that refer-
ence to figures is probably irrelevant when addressed to those
who are forcing on this movement. The strength of the party
of municipal monopoly is pure fanaticism. Its adherents re-
pudiate accountancy and rely on arguments which hardly seem
to touch the ground of common-sense. In Major Darwin's work
the reader who desires a more detailed consideration will find
a most dispassionate discussion of the merits and demerits of
each argument. Like Mr. Shaw, he recognises that the appeal
to balance-sheets is futile. He suppresses, however, any in-
clination he may feel to decide the question by reference to a
general principle, and considers each allegation on its merits.
This procedure will be found most useful for those who are
disposed to regard the subject as an open question; but, as we
have argued, the whole controversy is overshadowed by the
larger issue of whether we are prepared to make a great ex-
periment in collectivism. If we are not prepared for this,
municipal trading stands condemned; it can only be logically
acceptable to those who regard it as a starting-point for a far-
reaching economic revolution w^hich they earnestly desire.
114 SELECTED ARTICLES
World To-Day. 12: 374-9. April, 1907.
Municipal Ownership of Electric Light Plants. James R.
Cravath.
Does it pay a city to go into the electric light business?'
Should it own its street-lighting plant or should it let the con-
tract to a private compan}^? These are questions which have
perplexed the voters in many towns. The average citizen who
pays the taxes needs only to have the evidence on both sides laid
fully before him to decide and vote in the way most favorable to
his pocketbook. His difficulty usually is to get the evidence.
On the one hand, if the most radical advocates of municipal own-
ership are to be believed, the electric-lighting companies of the
country are earning enormous profits, which under municipal
ownership would stay with the taxpayers and consumers. On
the other hand, according to some of those opposed to munici-
pal ownership, such ownership has a record of dismal failures,,
mismanagement and graft. The majority of thoughtful citizens
who belong to neither of these two radical classes are looking
for the truth, which (as usual in such arguments) lies some-
where between the two extremes. I will aim to present in an
unprejudiced way some of the essential facts on both sides, as
observed during many years' work and familiarity with the
electric light and power industry of the country, both as carried
on by cities and by private corporations.
In the case of a large number of the electric light plants
owned by municipalities in the United States, the question of
city versus private ownership was never an issue, for the reason
that the towns are so small and the profits so uncertain that if
the city did not build the plant no one else would. These we
must evidently leave out of account in our discussion. What,
then, are the objects sought by a city which establishes its own
electric light plant if private capital has embarked, or is willing
to embark in the enterprise? Evidently to save money for the
taxpayers or to get better service.
The Question of Profits.
The common argument, of course, for the establishment of a
municipal plant is that the city will gain the profits which
MUNICIPAL OWNERSHIP 115
ordinarily go to a private company undertaking a street-lighting
contract. But what are the profits actually earned by electric
light and power companies through the country?
Whether an electric light plant is built by the city or by a
company, interest should be paid on the investment. If we as-
sume that a large part of the cost of construction is paid by issu-
ing bonds, it is undoubtedly true as claimed by municipal own-
ership advocates that a city can sell bonds bearing a lower rate
of interest than could a private corporation doing the same
business. It will be evident, however, that a difference of one
or two per cent in bond interest on a plant may easily be counter-
balanced by other factors, such as the rate of wages paid and
the efficiency of the management.
It is of first importance to determine in this connection the
actual profits being made by electric light and power companies
over and above the common rates of interest paid on municipal
bonds. If such profits or dividends are considerably above in-
terest rates on municipal bonds, we have at once a strong in-
centive for municipalities to enter into electric lighting business
themselves. Otherwise one great argument for municipalization
disappears.
Unfortunately there are no figures available on the financial
condition of electric lighting companies the country over, and
we must fall back upon our general knowledge of the business
and the statistics of a few localities. The State of j\Iassa-
chusetts for twenty years past has had an excellent system of
regulating electric light companies and municipal plants and
safeguarding the interests of both stockholders and public.
Yearly reports are made to a board of gas and electric light
commissioners, both by private companies and municipal plants.
We have therefore from Massachusetts more complete infor-
mation as to the state of the industry than from any other state or
locality. We can place more confidence in the reports of this
commission than in most of the other statistics cited in connec-
tion with municipal ownership controversies, for the reason that
the methods of classifying accounts and making reports as well
as the issuance of stock and bonds are controlled by the com-
mission according to certain uniform regulations, and have been
ii6 SELECTED ARTICLES
for many years. Companies and municipalities not required to
report according to such fixed rules, if they issue reports of
their financial conditions at all, issue them in such various
shapes that no one but an expert can analyze them in a way to
afford a true comparison, and frequently even an expert can
not make such comparison without actual further examination
of the books.
In Massachusetts, according to the 1905 report of the com-
missioners, of the fifty-six purely electric light and power com-
panies in the state, twenty-four paid no dividends ; one paid a
dividend of two per cent; one a dividend of four per cent; one
a dividend of 4.5 per cent; four a dividend of five per cent;
eleven a dividend of six per cent; three a dividend of seven per
cent; eight a dividend of eight per cent; one a dividend of nine
per cent, and two paid dividends of ten per cent. In some states
with some kinds of corporations these statistics on dividends
would give little indication of the per cent of earnings on the
actual investment, because of the common practice of issuing
watered stock for which but a small per cent of the face value
has been paid. In Massachusetts, however, where securities for
many years past have been issued only upon approval of the
commission, to pay for actual improvements in a plant, these
figures can safely be accepted as indicating very nearly the true
state of affairs. This statement as to dividends, of course, does
not show what earnings may be put back into the property in
the shape of new construction and extensions. In this latter
connection it is of interest to note that the combined balance
sheets of the Massachusetts companies show a surplus of 10.76
per cent on the entire capital stock, in the 1905 report, but this is
less than the surplus showed the year previous.
These figures simply demonstrate what is known to every
well-posted man in the business : namely, that electric light com-
panies, when well managed and if in sufficiently large towns, can
be reasonable expected to pay the usual prevailing rates of interest
on investment, and in some cases a little more than that, but that
there are plenty of companies which either for the lack of good
management or for some local reason are earning practically noth-
ing. There is certainly nothing in these figures to indicate that enor-
MUNICIPAL OWNERSHIP 117
mous profits are to be pocketed by taxpayers as a result of a
municipal electric light plant.
Rates of Mu7iicipal and Private Companies.
But are the street lighting rates in the Massachusetts cities
served by private companies the same as those where there are
municipally-owned plants? Consulting the Massachusetts report
further to determine this point, we find that the rates per year
for arc lamps commonly rated as 1200 c. p. are from $104, the
highest rate, to $54.69, the lowest. In municipal plants the cost
of such lamps is given as from $133, the highest, to $53.34, the
lowest. In the Massachusetts figures, of course, interest on the
investment is included, as it should be in all such reports. Taken
altogether, the cost of street lighting by municipal plants in
Massachusetts is not strikingly different from that in cities
supplied by private companies, although the highest municipal
figures are considerably above the highest contract figures.
The reason that these Massachusetts figures on costs of
municipal lights do not correspond with some which we see
quoted by radical municipal ownership advocates on plants in
other states is that in Massachusetts the law requires that an
allowance of five per cent of the cost of the plant shall be made
yearly for depreciation. This allowance is certainly none too
much, and in some cases is too little, but it is frequently left out
of account altogether in figuring the cost of municipal lighting
on a plant owned by a city.
Another set of statistics which throw some light on the
amount of profit in electric lighting business in general is ob-
tainable from a report made by the secretary of the Iowa Elec-
trical Association to that body in 1906. The secretary obtained
reports from seventy-seven electric light companies in that state.
The average dividend was 2.95 per cent.
New York state also has had for a short time a gas and
electric light commission under laws similar to those in Massa-
chusetts. The returns made indicate in general a very similar
condition of affairs to that in Massachusetts. On the whole,
from my knowledge of the business the country over, I think
the Massachusetts figures would correspond closely to those in
ii8 * SELECTED ARTICLES
the majority of other states, were the figures known, except
that a very limited number of companies may temporarily earn
a little better than ten per cent.
I have so far considered this question of financial returns
only in a general way, without taking up specific examples. For
those who wish to study such specific examples the published
reports of the Massachusetts and New York commissions are
open. As the former reports are made on uniform systems of
accounting, comparisons can fairly be made between the different
companies and municipalities reporting. Specific examples from
other states have been cited many times in municipal-ownership
controversies, but because of the great differences in methods of
accounting, as before explained, they are likely to be almost
worthless for purposes of comparison unless scrutinized closely
by experts.
Chicago and Muncie.
One of the most prominent examples of a municipally-owned
electric light plant is that of Chicago, about which there has
been considerable controversy. Chicago's municipal electric
light plant, unlike many others, was not built by the sale of
bonds, but has been paid for a little at a time out of the general
tax levy as the plant has been gradually enlarged. According to
the last published report of the city electrician, in which interest
on the money was figured in both cases, there has been a saving
to the city of something like ten per cent in the total cost of
street lighting for the entire period of eighteen years the city
plant has been in operation. This statement, however, assumes
that the cost per lamp under a private contract would have been
the same as the city has been paying a company for a few rented
lamps in widely scattered outlying districts where the city could
not operate as cheaply. As to whether Chicago would have
had to pay for a large number of electric street lamps as much
as it has been paying for a comparatively small n'umber of scat-
tered lamps on short and uncertain contracts; is, of course,
problematical.
According to Haskins & Sells, expert accountants, who went
through the Chicago lighting accounts about six years ago, the
MUNICIPAL OWNERSHIP 119
operating cost of a municipal 450-\vatt arc lamp in the city of
Chicago in the year 1900 was $62.09; and the total cost, including
water, insurance, taxes, depreciation and interest charges was
$99.08. Allowing for certain items, over which there may be
controversy, it is safe to say that the cost per lamp was over $90,
including lixed charges, which is not far from the average paid
in other great cities. The rate paid for similar lamps in New
York city is $100, but coal and distribution investments are
higher in New York.
Chicago has what might be rated as one of the relatively
successful municipal plants. Among the decidedly unsuccessful
ones, a conspicuous example was that at Muncie, Indiana. This
city had a municipal street-lighting plant which cost $36,000.
In eleven years, under council committee management (or lack
of it), the operating cost per lamp nearly doubled. The superin-
tendent, in his annual report made before the final demise of the
enterprise, recommended that if the city could not find the
money with which to improve the plant, it had better sell to
private parties, or buy current from some private company. The
matter was brought to a head by the bursting of a fly-wheel in
the municipal plant and the wrecking of the station. A ten-year
contract was then made with the electric light company to
supply street lamps at a cost far below the operating cost shown
by the yearly reports of the municipal plant. The municipal
plant, upon which $36,000 had been expended in construction,
was valued by a board of appraisers at $15,000, or a depreciation
of $21,000, with no fund to provide for it.
Management the Vital Matter.
I might go on and cite numerous cases of disastrous munici-
pal electric-light plant ventures and I might also cite some
cases of Vv'ell managed and successful municipal plants.
If a proper depreciation account is not kept and a municipal
plant is not insured for its actual value, it is the whole body of
taxpayers who suffer when the plant is destroyed by accident.
When a company gives poor service or charges high rates, the
public at large will be much more benefited by taking measures
to secure adequate control of the offending company than they
120 SELECTED ARTICLES
will by trying to take over the business of the company, the dif-
ficulty of whose operation is not known.
In the case of both private and municipal plants, the margin
of profit is small enough for good or bad management to throw
the balance one way or the other. But with this difference: If
the private plant is mismanaged it is no concern of the taxpayer ;
it concerns only stockholders. Under a contract with a private
company for street lighting at a reasonably low rate, the tax-
payer takec5 no risk save a possibility of paying a small per-
centage more for given services than he would pay if the city ran
the plant. If the city owns the plant, he may get his street
lighting for a little less than he would pay the private company,
but with the tolerable certainty that if there is grafting or in-
competency in the management of the plant, he will pay a
good deal more. In fact, it is a kind of one-sided speculation
except, of course, where reasonable rates can not be obtained
from a private company. The taxpayers of a city usually, there-
fore, should think several times before embarking in such
enterprises.
TJie Energy of Private Management.
As the management of municipal electric light plants is.
such an important factor in determining whether it is a losing
proposition or not, let us inquire into the possibilities for good
or bad management in connection with it. I am not one of
those who believe that municipal management is necessarily
and invariably incompetent. This is disproved by a number
of cases where municipal enterprises were well managed. But
there are certain things in American municipal affairs to
which we can not shut our eyes, however much we may hope
to change them within the next twenty-five years. The war
against graft in municipal politics has been making considerable
headway the past ten years, and we may hope to see it make
even better headway the coming ten years ; nevertheless graft
is a factor to be considered.
The fact is that at the present time it is as a rule difficult
to get the best class of men for the management of municipal
enterprises. Why? In the first place, a man of ability and
MUNICIPAL OWNERSHIP 121
ambition will usually prefer to work for a private corpora-
tion where opportunities for advancement and appreciation
of ability are better than in municipal service, and where he
is more certain of his position. The man working for a mu-
nicipality is altogether uncertain as to his future or as to
the competency or incompetency of the council committees
to which he may be responsible. As he is working for the
public, he is subject to all sorts of criticisms to which an offi-
cer in a private corporation is not subject, and may even be sus-
pected of grafting because he is a city employee and for no
other reason. These things, no doubt, account for the fact
that comparatively few men of promise in the electric lighting
industry of the country are to be found in municipal plants.
In my personal experience on the editorial staff of a paper
devoted to the electric lighting industry and in traveling among
such plants, I almost invariably find that the up-to-date, pro-
gressive and aggressive management which contributes to the
general progress of the art is to be found in private rather than
municipal plants.
Graft and Public Ozunership.
The advocates of municipal ownership have laid considerable
stress on the possibility for corruption of city councils and
other officers in connection with the letting of the street-lighting
contracts or franchises to private companies. That there are
such possibilities, especially in the larger cities, no one will
deny. On the other hand, is it not likely that a city government
composed of rascals would find even more opportunity for rob-
bing the taxpayer under municipal ownership? In the case
of a private contract the amount is definitely known to every
one at the time the contract is made, and if there is anything
very unreasonable about the proposition, public sentiment will
enforce reasonable terms before the contract is signed. When
the public utility is municipally owned, it is a difficult matter
to locate and prevent graft both large and small.
Space is not available here to cite specific examples of suc-
cessful and unsuccessful municipal plants at any length, but I
may mention a few of the extremes. One of the most sue-
122 SELECTED ARTICLES
cessful municipal plants I know of is that at Marquette, IMich-
igan, where the city developed a water-power. The property
is managed much like that of a private company. Considerable
power load is carried. S-o enterprising has been the management
that the gross earnings from operation, according to the annual
reports, are as high as $4.20 per capita of population. Most
private companies are not doing as well as to gross earnings.
The lighting department of the city is kept separate from all
others, jr.st as if it were a company, and it is paid $75 per year
for a 20O0-c.p. arc lamp. For the balance of the revenue the
management of the plant is dependent on its own enterprise.
Chicago's plant is mentioned elsewhere. Detroit's municipal
plant may also be rated among the more successful. While
lamp costs in Chicago and Detroit are nowhere near as low
as advertised by municipal ownership advocates in years past,
they are not far from prevailing contract rates.
Failures of Municipal Plants.
Among recent municipal ownership failures may be enu-
merated Muncie, Indiana, mentioned elsewhere, plant abandoned,
and bonds not paid off ; La Grange, Illinois, plant sold to a com-
pany ; Elgin, Illinois, municipal costs so high that contract was let
to company; Jonesboro, Indiana, plant turned over to bondhold-
ers ; Alexandria, Virginia, plant leased to a company for thirty
years ; Ashtabula, Ohio, $88,000 plant depreciated $50,000 in
fourteen years, advertised for sale ; Brunswick, Missouri, plant
sold for thirty-five cents on the dollar, city taking pay in light and
water; Casselton, North Dakota, plant sold for two-fifths cost;
Siloam Springs, Arkansas, $30,000 plant leased for $600 per
year; Peru, Indiana, council investigating committee found arc
lamps cost $207 per year and advised that the city abandon
the business and sell the plant : Linton. Indiana, plant leased for
five years ; Hamilton, Ohio, gas plant shut down and state exam-
iner reported deplorable financial conditions and abnormal costs
due to faulty construction in electric light plant; Bloomington,
Illinois, increase from $58 to $65 in yearly cos^of arc lamps
in ten years, although cost should have been less; Easton, Penn-
sylvania, mayor favors letting of private contract if city can
MUNICIPAL OWNERSHIP 123
not maintain better service, and business men petition for such
a contract ; Lakewood, Ohio, expert accountant found cost
of arc lamps about double the price offered by a private com-
pany.
Conclusion.
What conditions will be twenty-five years from now, I do
not know, but I hope and believe that they will be more favor-
able for municipal enterprises. In the meantime I am willing
to let the private corporations take the risks and the profits
wherever they can and will give reasonable rates and good serv-
ice.
Quarterly Review. 209: 409-31. October, 1908.
^^lunicipal Trade. Leonard Darwin.
IMr. Bernard Shaw, in his 'Common Sense of jMunicipal
Trading' (p. 3), tells us that 'the central commercial fact of
the whole question" is that cities can raise money at low rates
of interest, and that consequently the citizen, 'by municipal trad-
ing, can get his light for the current cost of production plus a
rate of interest which includes no insurance against the risk
of loss, because the security' is practically perfect. Prices in
municipal trade can therefore, so it is urged, be reduced below
the level of prices in private trade. This is. no doubt, a view
commonly held by sensible persons, and it may on that ground
be described as the common-sense of municipal trading. But
if it is widely accepted, it is so not because it is accurate, but
because the underlying fallacy is not easily exposed. Is it
right, it should in the first place be asked, that a municipality
should make 'no insurance against loss' out of the profits of
any industry it may manage? Every commercial venture is not
a success ; and losses are inevitable if a city enters extensively
into such enterprises. Out of the profits of successful ventures,
such as gas-works, an insurance fund ought therefore to be
created to cover losses in unsuccessful ventures, such as the
London steamboats ; for, if this is not done, these losses may
have to be met by additional taxation. No doubt most munic-
124 SELECTED ARTICLES
ipal trades are monopolies, in which case the city has generally
the option of raising prices as an alternative method of meet-
ing a loss.
Taxes Increased.
It is obvious, therefore, that in order to estimate the imme-
diate increase of taxation likely to fall on the citizens of a city
municipalising any industry, the probable net loss in cash must
first be estimated ; and to this must be added an estimate of
the rent which would be drawn from the private proprietors of
the industry if it were not municipalised. In fact a careful study
of these returns indicates that an increase of taxation is the
probable immediate result of municipal trade, though it is a
result which the citizens concerned may never perceive.
Municipal Employment Costly.
To discuss in detail all the reasons why the direct employ-
ment of labour by municipalities is likely to be costly would
occupy many pages. But an analysis of these reasons indicates
that they are based on a few broad underlying considerations
which may be briefly stated here. In the hrst place, the mu-
nicipal workman often has a vote in the district in which his
work lies, and thus gains a voice in the selection and rejection
of his masters, the members of his town council — a privilege
not enjoyed by any private workman. This is, no doubt, the
basis of the socialistic claim that the civic employe is certain to
be well treated. But it also indicates the probability that work-
men in public employment will be paid wages above the mar-
ket level, that less w^ork will be demanded of them in a given
time, that discipline will be less efifectively maintained, and
that for these reasons the cost of production will be greater
in municipal than in private trade. In the second place, the
stimulus of personal gain is almost inoperative in municipal
trade, whilst that same stimulus animates private trade in ways
too numerous here to be mentioned, thus making private trade
more progressive than municipal trade — more progressive,
that is, in cases where financial success is probable. In a district
where the profitable working of a tramway is improbable, it may
MUNICIPAL OWNERSHIP 125
be that it is more likely to be constructed by town councillors
than by company directors, because the local authorities are un-
restrained by that excellent commercial brake, the fear of person-
al loss.
Corruption.
It is perhaps unfortunate that the question whether munici-
pal trade pays or not necessarily forms such a large part of
this controversy, because no doubt in many matters other con-
siderations are more important than those concerning finance.
Cities may be right to face losses when those losses are in-
curred for the general good ; and the management by local au-
thorities of roads, waterworks, baths, slaughter-houses, ceme-
teries, harbours, etc., when these services are unremunerative,
may in many cases be justified on this plea. But to impose
additional taxation merely for the sake of encouraging the di-
rect employment of labour cannot thus be justified, for the result
would be to benefit a class and not the whole community. In
fact, as regards society generally, direct employment is the re-
verse of a benefit, because the germs of corruption undoubtedly
exist in our cities, and the probability of the disease spreading
is greatly increased if large numbers of employes are brought
under the direct authority of the civic authorities. This is by
far the strongest argument, not necessarily against municipal
ownership, but against the direct employment of labour by civic
authorities. On this subject the United States is often held up as
a warning in indicating the depths of corruption into which Eng-
lish-speaking cities may fall, and of the difficulty of extricating
them.
World To-Day. 1*2: 621-5. June, 1907.
Municipal Ownership of Public Utilities. John W. Hill.
All the arguments that can be made for municipal owner-
ship and operation of public utilities can be made against it,
with the additional argument that the very highest measure of
success in business management has been attained in private or
quasi-public enterprises ; and this will always be so, so long as
we live under a form of government subject to frequent elec-
126 SELECTED ARTICLES
tions, spasmodic reforms and the lifting into office of many-
men, often unfitted to conduct with success the commonest af-
fairs of life. Municipal ownership means the conduct of pub-
lic utilities by men whose chief and sometimes only claim to
consideration is the fact that they received more votes than
their opponents at the last election.
Unless all men are capable of managing public utilities, mu-
nicipal ownership and operation in principle is bound to be a
failure, because any man may by the votes of his friends be sud-
denly thrust into an office which will require him to assume
the management of enterprises calling for technical skill and
experience ; and herein lies the danger to public interests, be-
cause the staff can not be any better "than its head, and under
the withering and degrading influence of partisan politics is often
worse than the head.
Political appointments are to be condemned, because they are
political appointments, and not because of inherent objection
to the man appointed, for no matter how great his talents, or
how evident his fitness for the work assigned, the knowledge
that his appointment is due to political influence rather than
to recognition of merit, will clog his efforts and weaken his am-
bition, and the constant feeling of insecurity connected with
public office will chill his ardor and shorten his reach.
All public utilities begin with plans and construction work.
and here arises the first economy in favor of private owner-
ship. In organizing the staff to design and build, merit and
efficiency alone are considered, political considerations do not
enter, and each man is selected and each move made to secure
the largest, quickest and safest return for the money expended.
In private enterprises promises for efficient service can be made
and the incentive to active and successful effort can be main-
tained. Civil service rules which are often a bar to high achieve-
ment and practical ability in municipal enterprises seldom find
place in private work. A competent official is recognized and
awarded even though his knowledge of Greek and grammar is
not of a high order, and the adjustment of the members of
the working staff to the positions of greatest usefulness is sure
and easy under private management.
MUNICIPAL OWNERSHIP 127
The writer at one time had occasion to seek the services of
a competent transitman in tunnel work; several candidates
were highly recommended for the place by the City Civil Service
Commission, who, when put to work, succeeeded indifferently
well. Finall}^ a man of large practical experience in coal-mine
surveying, but with a poor record from the Civil Service ex-
amination, was employed for the duty, with marvelous results
in the speed and accuracy of his work. This man had grown
up in the coal mines, had learned to handle a transit and level as
a forester learns to handle an ax, with only the rudiments of
trigonometry at command and wholly unable to explain on paper
the usual adjustments of field instruments, but he was as sure
in his work under ground as if it was second nature. He made
good, notwithstanding his failure to show a satisfactory record
on Civil Service examination, but it was only by violating the
Civil Service rules with regard to appointments in the city
service that his talents became available." In a private enter-
prise his record of past experience and recommendations would
have secured a place for him.
Freedom of action in choosing one's assistants seldom pre-
vails in the conduct of municipal bureaus. Eminent talents are
rarely known and seldom sought for among the employees of
municipalities, because the term of office is short or uncertain
and the encouragement to lofty and persistent effort corres-
pondingly lacking.
In organizing a municipal staff, the first consideration is po-
litical service and availability for future political ends. A ward
captain will usually rank higher in the estimation of the appoint-
ing power than an experienced mechanic, engineer, clerk or ac-
countant, and utility and fitness for the task assigned is a sec-
ondary consideration, and too frequently not a consideration at
all. Under such conditions public service is perfunctory, dila-
tory and inefficient, the cost of service is enhanced, and the com-
fort and convenience of the pubHc impaired.
This is not necessarily due to inherent defects or incompe-
tency in the individual appointee, but to a pernicious feature of
American municipal government, which makes merit and fitness
for service take second place to influence and patronage. Under
128 - SELECTED ARTICLES
-such conditions any part of a public service which depends upon
manual labor or human skill must be obtained at an increased
cost over the same service from a system which knows neither
influence nor patronage, and which marshals its employees ac-
cording to merit and fitness for the duty assigned.
In organizing a working staff for a private corporation, the
fewest men consistent with the work to be performed are se-
lected, and effort is always made to bind them by feelings of
self-interest to the enterprise, and retain them indefinitely, be-
cause their experience becomes a valuable working asset of the
corporation, which can not readily be replaced on short notice.
No such conditions can prevail in public affairs because the man
at the top is himself a creature of chance or caprice, and his
tenure is subject to the whims of the people who elevated him
to office. He can not guarantee a term to his subordinates be-
cause of political expediency and his own uncertain base, and
the fidelity of service which comes from respect for vested au-
thority, and the skill and command of his superior, can rarely be
inspired in employees on municipal work.
In the making of contracts and purchase of supplies for
public utilities the private corporations have a decided advantage.
The usual restrictions, hindrances, circumlocution and indirect-
ness of methods forced by law and ordinances in public con-
tracts and purchases of materials are swept aside in private en-
terprises, and the object, whatever it is, is sought by direct
methods guided by intelligence of purpose.
Contracts for public works are so hampered by "safeguards"
and by restrictions, that an experienced and conscientious con-
tractor is bound to protect his interests b}' demanding prices above
those he would ask for the same kind of work from individuals
and private corporations.
The exercise of judgment and sense of fair dealing which
prevails between men of honor and mental ability, can not
prevail with the municipal officers and the contractor. The mu-
nicipal contract is an inflexible instrument, open to only one
construction, and that the construction put upon it by the officer
himself.
Contracts made by private corporations go direct to the
MUNICIPAL OWNERSHIP 129
three material points: i. — Kind and quality of work. 2. — Time
of performance. 3. — Price and terms of payment.
Contracts with private corporations are treated, as they
should be, as commercial transactions subject to their laws and
customs, and free from the taint of political or any sinister in-
fluence. Differences between the buyer and seller on quality
-and price of work are quickly and fairly compromised, and as
a rule work on the private contract is in progress before the
municipal contract has completed its travels around the offices
which by law are required to participate in its execution. The red
tape connected with the letting and award of public contracts in-
volves delay and expense which the bidder is bound to con-
sider in making his prices for the work.
Private inspection and measurement of work is usually exact,
without being captious, and the delay due to the list of officials
who must be seen before difficulties can be met and overcome in
public work are not encountered in private work, because some
one in whom his employers have confidence is vested with au-
thority to act, and his acts are by law the acts of his principals.
In public affairs it is often a matter for the courts to decide as
to who really has the authority to resolve disputed and trouble-
some conditions of municipal contracts.
Political and usually incompetent inspectors and inexperi-
enced managers are the rule on public contracts, while a private
corporation, from the necessity of conserving its capital, must
have competent men to manage its work and avoid losses due
to mistakes of judgment or errors of inexperience. Time and
cost alike are essential elements of private corporations, be-
cause returns are sought for at the earliest convenient date, while
public enterprises are usually conducted with small regard of
time and less regard of cost.
As a personal conviction, I think, the less the larger munic-
ipal corporations engage in lines of business which can be con-
ducted by private corporations, the better it will be for the pub-
lic at large. There is more need of coffee and sugar in a mu-
nicipality than there is of trolley cars and electric lighting. But
no one, not even our most aggressive demagogues, has pro-
posed to establish a municipally owned and operated grocery
130 SELECTED ARTICLES
store, but it may come to this in time, when the men who purvey
our real necessities of life will be political partisans imbued with
the spirit of political success, rather than with the desire to cul-
tivate and secure the good will of their patrons.
It is proper that the bent of an enterprise or monarchy should
be paternal, because, as a sentiment at least, everything and all
avenues of progress start from a common center at the head
of the government. Paternalism, however, is neither desirable
nor possible in a republican form of government where the
officials from the President downward in the scale are chosen for
a brief time as executives of public will, and with an opportunity
too limited to admit of permanently fixing the stamp of indi-
vidual ideas on public affairs.
The best service is rendered when there is hope of reward,
and the best commodity produced where there is hope of profit.
Where reward and profit are lacking, service and commodity
depreciate in value. The rewards of political life are dubious
and ephemeral, and the profits are not forthcoming by honest
ways. All these things go to make municipal ownership of pub-
lic utilities an undesirable end. The losses due to extravagance
and misdirected efforts of municipal bodies will represent enor-
mous dividends on properly applied capital, and when it is con-
sidered that any municipal work can be built and operated at
less cost by private corporations than by public corporations,
it is a marvel how intelligent people can be hoodwinked into
the support of the popular and irresponsible clamor for the
conduct of public utilities by municipal officials.
A case in point on one of the impediments to an award of
municipal contracts is worth consideration. In a city contract
involving nearly eight hundred thousand dollars' worth of work
and materials, the lowest bidder, a thoroughly responsible party,
was somewhat ambiguous in stating his prices on certain items,
and to guard against error, he was asked to explain the intended
scope of the doubtful prices written in his proposal, and upon
reducing his explanation, which was satisfactory, to writing, his
proposal was accepted.
A disappointed competitor prayed for an order of court re-
straining the director of public works from executing the con-
MUNICIPAL OWNERSHIP 131
tract because of irregularity in making the award. The prayer
was granted and the director ordered to reject all bids and re-
advertise the contract, causing several weeks' delay, during
which interval of time prices of materials were advanced and
the cost o[ the work accordingly increased.
The court, in this case, held that the director had no right,
prior to award of contracts, to confer with the lowest and ap-
parently best bidder upon the contents of his proposal, as to the
amount of labor and material embraced in the price of one or
two of the many items ; that it gave the bidder an unfair ad-
vantage over his competitors notwithstanding under the law
and customs of the department he was the lowest and best bidder.
The court held that the award of a public contract was not sub-
ject to the business and common-sense judgment of the director,
but was a simple problem of arithmetic which could be solved
by any clerk in the director's office.
The opinion of the court cost the city many thousands of
dollars and weeks of delay, and was thought by the director and
his advisers to be unsound in law and logic. But it was the
opinion of a court, and as such had to be respected.
No such foolishness could arise in disposing of a list of tend-
ers on a private contract, for only such people would be invited
to bid as could certainly comply with the requirements of the
contract. Personal interests would have no weight in making^
the award. Quality of work, guarantees, and time of perform-
ance and price alone would be considered, and no reasonable
ground would be afforded for complaint on the part of the dis-
appointed bidders. The buyer would seek the best article at the
lowest price, unrestricted by the usual municipal conditions cal-
culated to hamper his decision and thwart his judgment.
The faults of municipal contracts are not due so much to mis-
management as to the multitude of conditions to be met before
a contract can be made, and the troublesome restrictions placed
upon its performance after it is made. It can not be gainsaid
that the private corporation can buy the same thing at a better
price and upon better terms, and can adjust disputed points of
performances more quickly and satisfactorily than can a munici-
pal corporation. The parties can go at once to the gist of the
132 SELECTED ARTICLES
difficulties and adjust them according to the judgment of intelli-
gent and experienced arbitrators.
While private corporations are organized and operated for
profit, and always have profit in view, the service rendered
should be better and rates charged be more reasonable than the
service and rates of a municipal corporation which attempts to
perform the same work or furnish the same commodity.
If faults are found in the service or charges of private corpo-
rations, the cause should be looked for in the ordinances or laws
granting the franchises, rather than in the management or
operation of the private corporation.
The city of Philadelphia for years owned and operated a
municipal gas-works, which eventually became an asylum for
broken-down political heelers, and for some who were not
broken down. The evils of municipal control shown in the poor
quality of gas, indifferent and slovenly service, high prices, and
large annual losses in the operation of the works, became so
great that many of the people of this truly good (?) town,
prayed that some one might be permitted to take the city gas-
works from municipal control, even if they had to steal it, and
thus get rid of an incubus which poHtical inefficiency and greed
had fastened upon them.
In course of time, the gas-works w^ere leased to a great and
powerful company which shortly overcame all the difficulties
formerly surrounding the municipal gas-works, and gave to
the people better service at lower prices, in addition to making
an annual payment to the municipal sinking fund of several
hundred thousand dollars, increasing from year to year, which
was used to extinguish the overwhelming debt created by muni-
cipal control of the institution.
A certain city in the United States was about to construct
large and necessary improvements in its water-works, after plans
and estimates had been prepared by engineers not under munici-
pal control. A syndicate of capitalists agreed to construct the
works within the estimate of cost and time. It was found, how-
ever, that the law would not permit of the construction in this
way, and that the work must be carried out under the manage-
ment of the municipality, with the natural result that the cost
MUNICIPAL OWNERSHIP 133
has been exceeded by nearly seventy per cent and the time ex-
ceeded by one hundred per cent, with the works unfinished to-
day. The parties who proposed to perform the work were men
, who had driven railroads over mountains, across broad rivers,
and through the trackless wilderness, who know the exact value
of materials and labor, and how to obtain the best results at the
lowest prices, and who could not afford to tolerate extravagance
or delay, because their profit depended upon quickness of action
and certainty of results.
Extortion by private corporations should not be tolerated,
and a reasonable appeal to the courts can be relied upon to pre-
vent or remedy this. Public utilities under private control should
be allowed an income which will represent a reasonable profit
on just capitalization and honest and efiicient management, and
more than this can not be obtained, if the people are alive to
their interests. It is always possible to compel satisfactory serv-
ice at reasonable prices from private interests, and no one ap-
preciating the value of his property can afiford to antagonize
the people upon whose good will and patronage his success de-
pends.
North American Review. 182: 853-6a June, 1906.
Arguments against Municipal Ownership. F. B. Thurber.
There are two sides to most questions, and municipal owner-
ship is no exception to this rule. There are situations in coun-
tries having a form of government different from ours, where
graft is not an epidemic disease, and where public ownership
and operation may be successful ; but even there opinions differ.
In Great Britain it has run its course, and there is a reaction in
public opinion against "municipal trading." as it is called there,
just at a time when many well-meaning persons in this country,
as well as professed Socialists and their organs, are advocating
it here.
In a country with universal suffrage, it is desirable to limit
the number of public officials to the smallest possible number,
for political reasons; and there are also economic reasons which
apply especially to lighting, traction and other public-service
u-
134 SELECTED ARTICLES
corporations which are large buyers of materials, employ large
numbers of persons and require a high order of administrative
ability. Indeed, water, a natural product, which runs down-hill
and is distributed with a minimum of labor and expense, is about
the only public necessity justifying public ownership in this
country, and even in this there are exceptions.
Nothing can be truer, as a rule, than that "public-ownership
waste exceeds corporate profit" ; supplement this with the even
more important political considerations, and thoughtful citizens
may well hesitate to favor the present Socialistic fad of municipal
ownership. It advocates play upon public prejudice, and claim
economies for public ownership which do not exist.
Public officials where municipal plants have been established
are naturally interested in making a good showing and holding
their easy jobs ; in many instances, their bookkeeping omits
interest, taxes, depreciation. sinking>fund for renewals or im-
provements, and other item^ which a private corporation must
recognize. The taxpayer is a convenient beast of burden upon
which to unload deficits, and he in turn unloads on rentpayers
where he can. Under public ownership, new inventions, im-
provements and extensions are ignored. Under private owner-
ship, the best professional talent is employed at salaries unheard
of in public employment, and all these improvements are at
once utilized, giving the public an up-to-date service.
Individual initiative and energy, coupled with the cooperation
of many small partners in corporations, has made this country
great ; and I cannot believe that the municipal Socialistic propa-
ganda will largely prevail if the facts are properly presented
to the jury of American public opinion.
As illustrative of the above points, I cite a few opinions of
others, taking up first :
Political Objections.
"The Evening Post" (New York) of March 8th. 1905, in
an editorial on the strike in the Subway and on the Elevated
Railway, entitled "Some Lessons of the Strike," said :
"Nor can we omit to point the warning which the strike
furnishes against municipal ownership of a great transport sys-
tem. One thing which the infatuated strike-leaders have steadily-
counted upon is Mr. Belmont's political involvements. Thev have
MUNICIPAL OWNERSHIP 135
repeatedly raided him in the confidence that he dared not antag-
onize 7,000 voters. Now, imagine the city itself — that is, a Mayor
standing for reelection — running all the transportation lines.
Fancy 12,000 or 20,000 motormen and conductors directly in the
pay of the municipality. What demands should we not see made,
what threats indulged in, what political appeals made and terror-
ism exerted! From what is going on ill the green tree of ownership
by a politician, we may infer what would be done in the dry tree
of ownership by an Administration dependent on universal suf-
frage. W^e had best look twice at that fire before jumping into it
out of our present frying-pan."
The "Chicago Evening Post'' of September 15th, 1905, in an
editorial entitled '"The Bridgetender's Rake-off." shows how
municipal ownership and operation work in Chicago. It said :
"As the taxpayer reads the facts and figures presented by the
'Evening Post' of yesterday regarding the salaries paid to the
city bridgetenders, he will be particularly impressed by the 'rake-
off' that goes to the occupants of these 'soft snaps' — the amount
of money drawn from the city treasury that is not earned.
"The taxpayer who knows little about practical politics will
wonder why a man should be paid $3,400 a year to look after a
bridge, pay out about half of this to have tlie work done, pocket
the other half and devote his time to running a saloon or some
other purely private matter. He will marvel that a bridgetender,
who at most is nothing but a motorman, should draw several
times a motorman's pay, yet do no part of a motorman's work.
"There is not a bridge in Chicago that should not be handled
at an outside cost of $3,000 a year — considering that three or
four months the work of attending to bridges is merely nominal.
It has been shown that one bridgetender is clearing $155 a month
out of his $2,700 salary: another is pocketing $1,840 a year out of
$3,400: still another is netting fully $1,000 annually out of his
$283.33 a month.
"This is a reckless way to play with the people's money.
Even the city authorities who are responsible for the salaries and
the selection of the men to whom they are paid show they are
ashamed of the whole 'grafting' business by their reluctance to let
the people scrutinize the bridgetenders' pay-roll.
"The shameful condition so fully exposed by the 'Evening
Post' should be changed without delay. The Mayor and City Coun-
cil ought to join hands in a bit of reform that would be im-
mediately to the benefit of the public treasury. The Mayor should
limit the number of bridgetenders to actual requirements, and
he should see that every man earns his pay. The Council should
limit the appropriation for this work, so as to leave no opportu-
nity for grafting.
"The bridgetender should be required to attend to bridges,
to look after them thoroughly. He should have no time for prac-
tical politics or for running a saloon. And for this work, faith-
fully done, he should receive a fair salary.
"Stop this bridgetender's graft. Cut out the practical politi-
cian's rake-off. Mayor Dunne, who proposes to bring the street
railroads under the same management as the city bridges, should
be particularly anxious first of all to reform this especially glaring
evidence of loose municipal operation."
As illustrating how persons who know only one side of a
question change their minds after seeing the other side, the
136 SELECTED ARTICLES
following editorial, entitled "The Conversion of the Scot," from-
the "New York Times" of June 15th, 1905, is pertinent:
"Mr. James Dalrymple, Glasgow's managing expert of tram-
ways, hailed and imported by the 'Lord Mayor' of Chicago and the
Municipal Ownership League of New York as the high apostle of
municipal-run street railways, has experienced a conversion and
given his adorers a chill. His change of prospect from the fair
municipal landscape of Glasgow to the political bogs and quagmires
of Chicago is marked by the following two utterances, the first
delivered just after Mr. Dalrymple landed and was hugged by the
Leaguers in this city, the other on his way back on Tuesday via
Philadelphia;
BEFORE.
"I see no reason why Chicago, or any other city in this country,
should not be able to own its street railways, and to run them with
as much success as we have achieved at Glasgow. I admit that
the proposition at Chicago is a much larger one than the one we
had-to tackle, but at the bottom it is the same.
"The people of Glasgow would not go back to the old days of
private ownership for anything in the world. I am not saying that
a company would not do as well by the public. I know, in fact,
that it could, but it would be doing so with a somewhat different
end in view. For a company has always the shareholders to con-
sider. And I have to admit that you will find people in Glasgow
to-day — quite influential people, too — who say that the street-car
service is not profitable."
AFTER.
"To put street railroads, gas-works, telephone companies, etc.,
under municipal ownership would be to create a political machine
in every large city that would be simply impregnable. These po-
litical machines are already strong enough with their control of
policemen, firemen, and other office-holders.
"If, in addition to this, they could control the thousands of men
employed in the great public-utility corporations, the political ma-
chines would have a power that could not be overthrown. I came
to this country a believer in public ownership. "What I have seen
here, and I have studied the situation carefully, makes me realize
that private ownership under proper conditions is far better for
the citizens of American cities."
Economic Considerations.
' The experience of the City of Philadelphia with her gas-
works is interesting, because she has both operated and leased
them ; and the results have a bearing upon both the political and
economic phases of this subject.
For man}- years, the city owned and operated its gas-works,
with the result of high prices, poor service and the gradual de-
velopment of a political ring which robbed the city and prac-
tically -dominated its politics. This grew so intolerable that,
ten years ago, the works were leased to the United Gas Improve-
ment Company. Hays Robbins, in an article in the "World of
To-day," December, 1904, says:
MUNICIPAL OWNERSHIP 137
"During the late seventies and early eighties, the waste and
mismanagement under this [municipal operation] system became
so scandalous that public-spirited citizens, notably the well-re-
membered Committee of One Hundred, dared the power of the gas
ring and fearlessly exposed its shameful record. Professor Bryce
says that this ring controlled no less than 20,000 votes, using them
most effectively to prolong its corrupt rule."
The result of the lease to the United Gas Improvement Com-
pany has been to improve the service, lower the price and give
the city a yearly revenue of $650,000, as against an average
yearly deficit under city management of $239,000.
The candle-power under city management averaged 19.17;
under the Company management it has averaged 22.88. Thou-
sands of service connections which w^ere worn out or inadequate
in size to supply sufficient gas have been renew^ed, convenient
stations for the payment of gas bills furnished, and the plant
brought up to the highest efficiency.
Btit, while accomplishing this great gain by taking the gas-
works out of politics, the city did not entirely escape the evils
of municipal ring rule which developed in other directions, and
has only recently been broken by another uprising of citizens.
Some people have inferred that the recent political revolution
in Philadelphia had something to do with the gas business, but
it was only in the sense that the political ring controlling the
city, needing more revenue to carry on extravagant and fraudu-
lent public improvements which they had inaugurated, approached
the United Gas Improvement Company with an offer to
extend their lease^ provided the Gas Company w-ould raise
$25,000,000 for the ring to carry on the city improvements which
were under way. After a long negotiation, the Gas Company
consented to a contract which good judges believe would (if
the money could have been honestly expended) have been
advantageous to the city as well as to the Gas Compan3^ But
the abuses of the municipal ring had become such a stench in
the nostrils of the community that the public revolted and the
ring was smashed. So far, however, as the relations of the Gas
Company to the city are concerned, they have been entirely satis-
factory, and it will be a sorry day for Philadelphia if the city
should resume municipal operation of its gas-works. Municipal
owmership is one thing, municipal operation another.
'The Times" (London) recently indicated the result of
138 SELECTED ARTICLES
municipal ownership and operation in England, in a series of
articles under the title of "Municipal Socialism.'' from which
the following paragraph is quoted:
"Such was the fashion, however, in which the work was done
that it was aptly described by one alderman as 'the municipaliza-
tion of laziness.' There was little or no control over the men, with
whom it was essentially a case of 'go as you please.' One or two
members of the Council who had been builders went one day to see
how a certain work was progressing, and they found that two men
had been for three weeks on a job which one man ought to have fin-
ished in three days. In such circumstances as these, the cost of work
went u: necessarily. The work's manager estimated, for instance,
that certain renovations to be carried out in the Stratford Town Hall
by his department would cost nine hundred pounds sterling; but,
though nothing more was done than he had allowed for, the bill
came to two thousand pounds sterling."
It is natural for public officials to try to make a good showing
in their accounts in order to justify themselves, and therefore
many items which private corporations have to recognize are
often omitted. How it w^orks in England is shown by Mr. John
Holt Schooling, an eminent authority, in the "Windsor Maga-
zine," for January, 1905. The following is a summary :
Undertaking. No. Capital. Annual Result Claimed. Correct Result.
Gas 97 £24,030,000 Gain, £394,82-5 Loss, £1,647,725
Electricity 102 12,510,000 Gain, 11,707 Loss, 1,075,057
Trams 45 9,750,000 Gain, 99,318 Loss, 729,432
The department of Commerce and La1:)or of the United States
Government has issued an interesting report upon the relative
expenses of private and municipal electric light and power plants.
The year covered is 1902, and the .figures as follow :
Private Stations Municipal Stations
Per cent. Per cent.
Salary and wages 29.9 35.8
Supplies, material and fuel 32.6 46.2
Rent, taxes, insurance and miscellaneous... 18.2 8.4
Interest on bonds 19.3 9.6
Total 100 100
Watered Stock.
A principal grievance of the advocates of municipal owner-
ship is that private corporations water their stock; and that this
entails an additional burden upon the community. While this
may be true in some instances, it is not true as a rule.
The Hon. Chas. G. Dawes, formerly Comptroller of the Cur-'
rency. well summarizes the facts in the following words:
"Stock in the modern corporation represents, not only owner-
ship, but the location of control. The stockholders of a corporation
unanimously desire permanence of control in a certain set of men.
MUNICIPAL OWNERSHIP 139
In which event they might find it impracticable to liave stock is-
sued only in an amount equal to the cash value of its property.
The notion that stock is always- watered to sell or to perpetrate
some fraud is erroneous. The public is not necessarily injured be-
cause stock at par does not always represent an equal amount of
cash or its equivalent.
"Varying values in corporation assets are reflected in the selling
or market value of the stock — not by constant alterations in the
stock issues themselves. Dishonest men may, and do to some ex-
tent, use watered stock to create impressions of value which does
not exist; but the abolishment of watered stock would not ma-
terially hinder them. Wrong impressions and overvaluations of
stock worth par or above par are created as easily as in the case
of watered stock worth less than par, and generally by similar
methods. Stock exchanges, through the improper manipulation of
operators, are frequently used to create wrong impressions of stock
values; but in such cases, and all cases, it is not the water in the
stock that causes the chief trouble among unwary investors. It is
the water in the prices they pay for it. And that kind of water
may be found at times irrigating with remarkable impartiality
purchase of stocks at all prices above and below par."
This is emphasized by the Hon. M. A. Knapp, Chairman of
the Interstate Commerce Commission, who, in a paper before
the American Association for the Advancement of Science, said :
"If common assertion is well founded, the body politic is af-
flicted with a grievous ailment which takes the name of 'trusts.'
Those who diagnose this malady — and nearly every one professes
ability to do so — declare that one of its worst and most aggravated
symptoms is over-capitalization, or 'watered stock.' For this and
other manifestations of the disorder the favorite specific just now
Is publicity.
"With all deference to those who advocate such publicity as a
preventive of stock-watering, I venture to doubt the correctness
of their contention. Indeed, my scepticism goes to the extent of
questioning whether over-capitalization, as such, is a matter of
real gravity, much less a portentous evil which demands an extra-
ordinary remedy. I hold it unproved that the excessive issue of
corporate securities is a source of such danger as to excite alarm,
and I am yet to be convinced that enforced publicity will not be a
harmful exercise of public authority.
"Leaving out the speculator, and taking into account only those
seeking honest investment, ten times more money, to say the least,
has been sunk in farm mortgages, suburban lots, patent rights,
buying and selling grain, cotton and other commodities, where no
corporate shares were dealt in or even existed, than was ever lost
on account of the fictitious or excessive issue of corporate se-
curities. If the State is to assume the function of keeping folly
and cupidity from paying twice or ten times what a thing is worth,
it surely would assume the guardianship of the largest numbers
and the heaviest losers."
The foregoing appHes to the interest of the investor as affected
by watered stock. As regards the interest of the consumer of
pubhc utilities, the watered railroad carries at the same price as
the unwatered, and the watered gas company sells its product
at the same price as the unwatered one. There is a thought in
this connection which may not have occurred to everybody, and
140 SELECTED ARTICLES
that is that, even if watered stock is a medium through which
promoters do sometimes make profit in one way or another, are
they not entitled to a profit? Would our railroads and other
public utilities have been built if there had not been a profit to
promoters beyond six per cent, upon the actual investment?
Some men put their money, labor and time into transportation ;
some into real estate. Transportation made the real estate valu-
able. It saved time for the general public and promoted their
comfort ; yet the men who have grown rich through increased
values of real estate are honored, and those who have grown
rich through transportation are denounced as "franchise grab-
bers" and "public robbers." The same is true of lighting,
telephone and other corporations. It appears that to grow rich
through rendering the public a service is a crime, while to grow
rich without such service is honorable. How many of us ap-
preciate that "corporation" means "cooperation" and that the
captains of industry, backed by many small partners (stock-
holders), are doing a great work?
The advocates of municipal ownership and operation claim,,
first, that it would be a relief from present political corruption ;
second, that profits would be realized for the public which are now
absorbed by corporations. I believe that political corruption un-
der municipal ownership and operation would be infinitely greater
than at present, and the expected profits would turn out losses,
to be borne by taxpayers. I have stated facts and opinions in
support of this belief. I could add many others if space per-
mitted.
There is a large and growing class of citizens who believe in
"a square deal" for everybody ; that government should protect
life, property, health and education, but that in a country with
universal suffrage the number of political employees should not
be unduly increased ; that the line should be drawn between
public ownership and public administration, that' in a manufac-
turing or transportation business public administrativ-e waste ex-
ceeds corporate profit, and political dangers are greatly en-
hanced ; and that Individualism as distinguished from Socialism
should be encouraged.
MUNICIPAL OWNERSHIP 141
Engineering Magazine. 34: 509-11. December, 1907.
Comparison of the Cost of Steam Power in Municipal and
Privately-Operated Plants. John W. Hill.
During the past few months I have had occasion to collect
statistics on the cost of steam power, and in support of the claim
of better management by private corporations, advanced in this
paper, it is found that even in the few cities having the highest
type of triple-expansion pumping engines, and accessories to
match, and in which the contract test and annual duties of the
machinery are the best ever attained, the cost of power per year
is greater than in the large well-managed steam power plants,
owned and operated by the private electric and manufacturing
corporations, and a comparison of statistics divided as to cost
of fuel, labor, repairs and stores, show the excess cost to be prin-
cipally in the item of labor.
In the following table, the figures represent the annual costs
per indicated horse-power of prime movers : Coal figured at
$2.50 per ton. excepting Hamilton, $2.20 per ton. City Water-
Works, and Philadelphia Power, 8,760 hours ; Pittsburg Power,
8,666 hours ; Hamilton, 8,000 hours.
Nature of power. Fuel. Labor. Repairs. Supplies. Total
City pumping works (1) $15.70 $24.62 $5.96 $2.74 $49.02
City pumping works (2) 17.44 25.19 5.25 2.58 51.48
City pumping works (3) 16.70 24.01 1.28 2.05 44.04
City pumping works (4) 16.75 21.90 1.85 1.88 42.38
City pumping works (5) 16.82 26.19 1.17 1.59 45.77
City pumping works (6) 21.39 15.64 9.62 1.24 47.90
City pumping works (7) 18.89 4.14 ... 50.03
City pumping works (8) 27.64 26.44 9.55 5.44 69.08
New York (9) 25.55 13.13 5.90 1.42 46.00
Philadelphia (10) 20.51 6.61 1.52 1.32 29.96
Pittsburg (11) 19.51 4.42 3.55 2.50 29.97
Hamilton (12) 16.90 5.18 0.88 0.64 23.62
It is interesting to note that the total cost of power by a
private corporation. No. 12 on the list, is less than the cost of
labor alone in the city water-works power, Nos. i. 2, 3, 5. and 8.'
The figures are from the last annual reports. The costs of labor,
repairs, and supplies are not known in detail for No. 7, but can
roughly be stated as $25 for labor, $4.14 for repairs and $2 for
supplies.
In each city pumping station, the engines considered are from
the best known and highest class builders, and the water-works
142 SELECTED ARTICLES
profession is accustomed to point to the cities considered as ex-
amples of excellent water-works management.
The average cost of labor in the eight city power stations is
$23.62 per indicated horse-power per year for 8,760 hours, while
the average cost of labor in the private corporation stations is
^7-33, or about one-third the cost in the municipally-owned and
operated stations, or to state the matter in different form, the
city uses three men to do one man's work.
Engineers generally recognize the modern high duty triple-
expansion pumping engine as the highest type of steam power,
and the service of pumping at constant speed, against a steady
head, to reservoirs, the 'optimum' condition for high running
duty. Moreover, the long runs of pumping engines, without in-
terruption for Sundays are calculated to favor the annual econ-
omy, when compared with steam engines working under a con-
stantly varying load, and, in all but traction and electric lighting
stations, stopped altogether for Sundays and holidays.
The duties obtained on the trials of Engines i to 6, inclusive,
are the highest in the history of pumping machinery, a fact
well attested by the annual charge for fuel ; indeed the fuel
costs, on the average, are as good for the city-managed works, as
for the private-managed works. But when ^-ou come to the labor
charge, there is where the politician comes to the front in great
shape. There could be no political advantage in being wasteful
of fuel, but there is a decided advantage in future elections in
being wasteful of labor. Two men can cast two ballots, and
three can do better, while the coal burned in the furnace can-
not vote, and there is therefore no advantage in being prodigal
with it.
After allowing for the favorable conditions of modern water-
works steam pumping service, even then the cost of power in
the best private w^orks is less than in the best water-works under
municipal management.
Instances can be multiplied of povirer costs under municipal
and private control which will verify the low cost for labor for
private control and the high cost for municipal control. And if
compared on the volume of business transacted, it can be demon-
strated in almost anv if not all cities that the cost per unit of
MUNICIPAL OWNERSHIP 143.
work performed or business conducted is much greater for
public than for private business.
The least objectionable of public works which can be con-
ducted by the public are the building and maintenance of sewers
and sewage disposal works, the cleaning of streets and the col-
lection and disposal of garbage, although in some large cities this
work is now the subject of annual contract. Water-works, elec-
tric and gas works, trolley lines, and steam and hot water heat-
ing systems, works employing large numbers of people, and
requiring skilled assistance, should be the subject of private
construction and control under contract or franchise which will
properly safeguard the interests of the public and prevent
extortion or poor service.
Cities have been and can be robbed by public service corpora-
tions, but only with the aid and connivance of public officials.
Standing alone, the public service corporations will be compelled
to meet the obligations imposed on them by their franchises,
and give the public the required service at fair rates. The
legislature can pass laws and the city councils can pass ordi-
nances giving away public rights, and the public service corpora-
tions may be the beneficiaries thereby, but the officials chosen
by the people to represent them are the culpable parties in such
transactions.
Annals of the American Academy. 28: 371-84. N. '06.
American Municipal Services from the Standpoint of the En-
trepreneur. Chester Lloyd Jones.
The people of the L^nited States have been said to possess
great confidence in machinery. This is a characteristic quite as
much of our political as of our industrial life. An example of
the latter fact is the popular attitude toward public service corpo-
rations. The average man reads of monopolized industries, with
their manipulations of prices and arbitrary charges for equal
services, and at once looks to a new set of political machinery
to eliminate the evil. He concludes that public service corpora-
tions are monopolistic in character and that the only way to cure
144 SELECTED ARTICLES
the abuses connected with them is to summarily abolish the order
of things that made the abuses possible. When the local services
are poorly managed he seizes upon accounts of the successful
management of similar enterprises by public officials in distant
countries and decides that the remedy is to adopt the same system
at home. This attitude of mind is brought about by drawing too
uncritical a contrast between what exists under widely different
conditions in a foreign country and the actual management of
the home services. The assumption is made that the same po-
litical machinery will work the same results at all times and in
all places. Instead it should be realized that the time and place
are ordinarily the elements immensely more important, and that
these being in an ideal condition the method of management be-
comes a comparatively unimportant matter. Given perfect con-
ditions, and the discussion of the superiority of public or private
management of the public services becomes purely academic,
but so long as perfect conditions do not exist there is an oppor-
tunity for an honest difference of opinion as to the relative ad-
vantages of the two methods.
In the minds of all the chief question in the management of
the public services is how to secure the greatest efficiency. Put-
ting aside, then, the purely academic question of whether public
or private capital should manage public services, it becomes
simply a problem of solving which of the two methods under the
condition surrounding the particular enterprise gives greater
promise of securing good results. Too much stress cannot be
placed upon the fact that in choosing between any systems of
managing the public services the community in which they are
placed is an inseparable element in the problem.
It is largely from this point of view that the public service
corporations in the United States claims that its administration of
the public services is superior to that by public officers. It is
asserted that under present conditions private management brings
better net results — the claim of greater efficiency. That the
government has a right to regulate the action of public service
corporations is no longer a subject of dispute in the law of the
United States. The right of the state to go even to the length
of appropriating the services to itself in return for just payment
to the owners or lessees is unquestioned, but if such action is
MUNICIPAL OWNERSHIP 145
taken it should be dependent on the advantages to be gained
and not on the basis of sentiment or prejudice.
From the standpoint of the entrepreneur public services may-
be divided into two classes, according to the degree of profes-
sional skill necessary to their management: First, there are those
which, after the original construction is completed, require only-
ordinary manual labor and a fair degree of executive and clerical
ability to keep them in efficient condition. Such until recently
has been the character of the work of street cleaning in even our
large cities. In the management of services of this character but
little difference need exist between public and private operation.
A fairly able manager at the head and a fair devotion to duty
by the staff should produce passable results. At the other ex-
treme stand those branches which demand a high degree of
executive ability, good commerical judgment and a great tech-
nical skill to secure satisfactory results. Such are the gas and
electric lighting plants and the transportation systems w^hich have
come to play so important part in our municipal life. It is very
evident that the majority of our public services approach the
latter class much more than the former, and it is to the considera-
tion of such enterprises that we wall chiefly turn our attention.
The entrepreneur insists that under present conditions a
system of public management varies in success inversely as the
complexity of the organization necessary to render the service.
The chief points of superiority claimed for private management
are as follows :
First, the effect of the desire of gain upon the management.
It is all important to secure some force which will affect the
entire administration with a desire for efficiency. Any element
which fails to contribute to the sum of efficiency of the plant is
a dead weight, a hindrance to the earnings of the company and
lessens the quality of the service performed. The strongest stim-
ulating influence which can be easily brought to bear upon the
average man is the desire for gain. If this force can be enlisted
on the side of efficiency the battle is won. There are many rea-
sons why this is much easier of accomplishment under private
management than under public officials.
The continual shifting of political partie? and of the men in
146 SELECTED ARTICLES
■
influence in the same party has prevented the development in
our cities of a corps of municipal employees who can feel con-
fident that faithful v^ork brings permanence of tenure, and that
greater ability insures more rapid advancement. The disintegrat-
ing effect of short terms and insecure tenure of office is evident
in all ranks of the service, from the heads of departments to
the day laborers. Since the tenure of office is but for a brief
period and political fences are constantly in need of repair,
there is every temptation on the part of the mayor and the heads
of departments under him to use the means in their hands for
their continuance in office. Manipulation of the municipal
patronage can be practiced without causing important protest.
Even if the public services suffer in no other way from this in-
fluence, their management is bound to be in more or less constant
flux from changes of party or changes within a party.
The lower officers and laborers, too, feeling that in any case
their term must be short, cannot but be susceptible to the
thought that while the opportunity lasts the best must be made of
it. A temptation to make the most of an easy job at good pay
is always present, and there is a strong possibility that the money
interests of the municipality will have to suffer as a consequence.
To say the least, the chance of advancement and permanent
tenure being removed the feeling comes to the laborer that the
position will last in any case as long as the term of office. The
next election brings him an even chance of getting his work
hack again, but long and faithful service gives him no claim to
preference. The security of his position depends rather upon
his loyalty and services to the party than to the city's interests.
His political activity becomes more important in his eyes than
his industrial duties, and this attitude inevitably leads to a
disposition to "sit down on his job."
Another disadvantage that the short term of offi.ce brings to
the publicly-elected manager of the city services is that, no matter
how anxious he may be to serve the municipality creditably, he
hardly has time to become familiar with his duites when he is
turned out of office. The branches of a large city service are
so many and intricate that it would take almost a whole term
for the new official to become truly acquainted with the depart-
ment it was his duty to manage.
MUNICIPAL OWNERSHIP 147
As a general rule the man elected has much less experience
in management of work similar to that over which he is to
preside than would a man chosen to manage a private business
of the same size. Take, for example, the management of a big
city gas plant or street car system. What guarantee have we
that the popularly elected chief will have seen the service in the
lower positions in a similar enterprise which would be required
of one put in charge of a like concern privately managed? We
are not here concerned with the question of whether or not the
public can ever be impressed with the necessity of electing ex-
perienced men to manage their public services, but simply with
the fact that the histor}' of American municipal enterprises does
not prove that they regularly do so. while the history of
privately managed services shows the adoption of that practice.
The public officer has generally less technical training than the
one selected under private management. The very circum-
stances of American municipal politics at the present time, where
the salaries of the offices and the patronage connected with them
constitute the chief legitimate reward for political service, make
it highly improbable that the more important offices connected
with the publicly-managed enterprises will be given to men who
have not taken an active part in securing the success of the party in
power. This so narrows the number of men specially fitted by
education who are also apt to be selected for the offices by the
political party as to practically eliminate the class entirely.
Further, the reall}^ first-class man would not only be thus debar-
red, but as a rule would not accept the position if offered because
of the better opportunities obtainable in the field of private
enterprise. Under these conditions the public services must
operate at a disadvantage. It means that as a rule the man
who is at the head of the work is not a master of the technique
of operation in his department. He must rely upon his sub-
ordinates for advice and information which he should himself be
in a position to give. He cannot see so clearly what should be done,
and adopt a firm and consistent policy to carry it out.
These are the disadvantages of public management when the
heads of departments are chosen directly by the people. Ap-
pointment by their political representative, the mayor, or election
by councils or by a combination of these methods, has much
148 SELECTED ARTICLES
the same effect. A greater independence of selection may some-
times be obtained, but the controlHng influence is more apt to
be politics than efficiency. Even if the appointed officer wishes to
maintain an independent attitude, to carry on the operations of
his department on strictly business principles and to keep his
selection of employees free from any but industrial considera-
tions, he can hardly expect to carry out these plans. Council-
men will unfailingly urge upon him the employment of this man
and that, regardless of whether additional help is needed or not.
The temptation to create a position for such an applicant or to dis-
charge some one not possessed of political support is great. The
head of a department knows that his plans for keeping up a
high standard of efficiency are first and last dependent upon
receiving adequate appropriations from councils. To get out of
sympathy with the representatives would be to antagonize the
very body upon whom he must depend for his resources. He is
thus placed between two fires — he must choose between allowing
politics to enter into the management of his labor account or he
must run the risk of creating hostility or at least lack of interest
on the part of councils. As a rule the head of a department
chooses what he considers the lesser of the two evils and' sur-
renders his labor account to exploitation. The door once opened,
it is almost impossible to check the advance of politics, and the
w'ould-be impartial director finds himself forced into the active
campaign. This picture is not an exaggeration, as is proven by the
experience of many cities. In practice we find that the appointive
head, though he may often have the advantage of experience over
the officer directly elected works under no less a disadvantage
than he. The management of the Philadelphia gas works illustrates
the case. Though the chief was appointed and at first made
a show of independence, his forced reliance on councils soon re-
duced the department of gas to a mere wheel in the machine.
Providing that the management of city services is under the
charge of boards elected for so long a term as to constitute
practically permanent bodies a greater independence of action
may reasonably be expected from the members, but the appoint-
ments are still bound to be sought by and as a rule, given to the
men who have rendered yeoman service to the party rather than
to those who have the best experience and technical training.
MUNICIPAL OWNERSHIP 149
The limited possibilites in the way of salary remain the same as
where the officers are elected. Even granting that the officers
are well qualified when elected or appointed to the permanent
board they have not the same incentive as when working for a
personal employer. The loyalty to the municipality is not, with
notable exceptions, as keen as the loyalty to the private employer.
The officer is almost sure to hold his position for the full term
even if no great efforts for improvement are made, and that
fact — all unconsciously, perhaps, but none the less surely — les-
sens his efficiency as corhpared to the man who realizes that
his position and advancement depend upon his best efforts every
day and his being up with the times in his plans for extension
and improvement.
Even when the head offices are filled by the members of a per-
manent board there still may remain the management of the
employment list on the spoils principle. This of course means
that the larger portion of the service is left under the same dis-
advantages as before described. These, in brief, are the condi-
tions which put the personel of a publicly managed city service
under a disadvantage as compared to private enterprise. In order
to bring the two more sharply into contrast, let us review the
similar points as shown in an average private corporation. Here,
again, the comparison is not between what should be and what
is but is based on present conditions in the United States.
Those at the head of the private company are responsible to
the stockholders much more directly in fact, however it may be in
theory, than are our public servants to the people. They have
greater reason to believe that their offices are permanent during
good behavior. Efficiency is the chief claim to permanence of
position and exceptional ability is rewarded by rapid advance-
ment. • No time is wasted in non-industrial pursuits, such as
caring for the party fortune in the employee's own ward.
Secondly. Experience and technical training are at a premium
and are definitely sought after from first to last. The salaries are
higher than in public enterprises where the officer's responsibility
is the same.
Thirdly. There is continuity of policy. The company cannot be
carried along on any but sound business principles. The con-
sciousness of the permanence of the interests involved makes the
150 . SELECTED ARTICLES
directors less prone to adopt a policy which would temporarily
bridge over a difficulty at the cost of increased expenditure later
on. There is no temptation to conceal the state of affairs "until
after election," as must often be the case where party interests
clash with those of the public industries.
Besides the disadvantages connected with the personel of man-
agement and operation there are other limitations of municipal
administration. In the management of the finances of the public
services the city is distinctly handicapped. The administration
of any large corporation is subject to occasional demands for
large amounts of money which cannot always be foreseen. Such
are the unusual expenditures caused by accidents or the necessity
of making an important addition to the plant at once. To meet
such a condition is difficult for most of our cities. An emergency
fund large enough to cover such demands would prove too easy
a source of income to be placed in the hands of the ordinary
authorities. Such a practice would soon lead to appropriations
for "extraordinary" purposes wdiich would come to be counted
upon as a regular source of income for the department.
To make the appropriation rest on special action of councils
also would be a possibility, but would not be entirely satisfactory.
Councils are not always easily convinced of the advisability of an
expenditure even when it would appear an imperative necessity
to even the casual observer. Reluctance to incur the criticism
through running up the tax rate or desire to spend the available
money on some more brilliant but less necessary project has de-
feated many excellent and imperative improvements and exten-
sions in publicly managed city services. Even if councils realize
the advantage or need of certain changes it may be impossible
for them to grant the money, though they wish to do so. Many
of our cities also have already reached the statutory limit of in-
debtedness and it would be impossible for them to raise the money
needed to meet any largely increased demands upon their treasur-
ies. Thus the improvement, though it might be all important to have
it made at once, would have to be postponed until the legislature
could, by special act, allow the city to increase its indebtedness.
Whatever method of solution is adopted it seems clear that the
city is at a distinct disadvantage in meeting unusual demands
MUNICIPAL OWNERSHIP 151
which may be made upon it for maintaining its public services at
their highest efficiency.
A private company in a similar position experiences no
such hindrance. A good financial risk can easily secure im-
mediate command of capital, and does not have to go before a
local or state legislature where conflicting interests may delay if
not defeat the needed appropriation. The financial interests of
those managing the company also prompt them to be on a keener
lookout for any unusual demand which may be made upon them.
They hold a better chance of foreseeing the necessity for exten-
sions, alterations or improvements, and have better facilities for
meeting the situation when it comes.
^luch of the writing denunciatory of private management of
public services is based on the evil effects of the influence of cor-
porations in politics. Many would be willing to concede the
superior efficiency of private management in general, but insist
that all the advantages gained through such administration are
much over-balanced by the corrupt practices due to intrigues in
the local legislative bodies. The evils connected with attemped
franchise grabbing are so great, it is asserted, that the only way to
abolish these influences is to effectively take the services out of
politics by putting them under public management absolutely. Such
arguments are based on the assumption that political influences
are removed by delivering the services into public control. Politics
are to be removed by placing the management in the hands of
politicians. Thus stated, it becomes clear that the adoption of
control by the public does not necessarily mean all it seems to
indicate. As a matter of fact, under present American conditions,
politics are a permanent factor in the management of public serv-
ices whether under private or public operation. The patronage
wielded by public officers is no whit less an important factor in lo-
cal politics than that exerted by the franchise-holding companies.
Beyond a doubt such influence is baneful — and in the one case
quite as much as in the other. Whether we shall be able to
develop laws and a public opinion which will eliminate these
influences is still a question for the future. Our course of action
for, the present must be planned with a frank recognition of the
existence of such influence and the object of reducing it to a
minimum. No one who considers the situation carefully would
152 SELECTED ARTICLES
assert the presence of political influence in the one case and deny
it in the other. The best interests of the community demand
that whatever system of management be chosen that politics be
eliminated. For the good of the corporations also it is beyond
doubt to be desired that they should confine themselves wholly
to industry. Under present conditions the temptation to enter
politics for the defense of their interests is in many cases almost
irresistable. Oftentimes these interests may be legitimate and
need defence only due to the general prejudice against the
management of businesses affected with a public interest by
private individuals.
This state of affairs is most unfortunate both for the public
and for the entrepreneur. On the one side it produces an acute
distrust of all companies making proposals to do public work.
Every proposition is attached as if it were an attempt to legalize
the stealing of public money. The representatives of the people
are often prejudiced and unable to consider the purely industrial
side of the enterprise in question. Listead of attempting to
attract capital while fully protecting municipal interests, they are
apt to approach the granting of a franchise in a hostile attitude.
and often insist on useless stipulations which are an expense to
the company and of no advantage to the community. As an
example of such specifications may be cited the requirement made
by one of our largest cities that service pipes for gas must be
put in every sixteen feet. When it is remembered that such
services often, as in this case, extend for long distances along
parks and undeveloped districts the regulation appears ridicu-
lous as well as useless.
The lack of sympathy between the public and its servants
has an equally bad effect upon the attitude of the latter. Re-
alizing that the spirit of many of those from whom they must
get their rights is one of hostility and unreasoning prejudice^
they assume the stand that unfair measures may be used to over-
come unfair treatment. Once the field has been entered, there is
the temptation to extend the company's activities beyond the de-
fense of their legitimate interests to the securing of special
and questionable privileges. The influence used to prevent prej-
udiced or "hold-up" legislation may easily be continued to deaden
the convictions of would-be honest representatives. Examples;
MUNICIPAL OWNERSHIP 153
of the use of corporate influence in this way fill all too many-
pages of the history of American municipal councils. The
general result of such a state of affairs is mutual distrust and
recrimination.
It must not be supposed, however, that by removing the pub-
lic services from private management all evils connected with
their administration will be at an end. Our American experience
demonstrates quite the contrary. The onl\- definite change which ,
necessarily results is the transfer of the influence exerted by the
private companies into the hands of the local politicians, an
alternative by no means insuring improvement. It is not to be
expected that in a country where the rewards of office are the
most important object of political struggles, rather than any
honor or social position attached thereto, that the large patron-
age offered by the payrolls of the publicly managed municipal
services would not prove a prey to the ward politician. The
chance to secure ''jobs" with liberal pay at public expense for
the political and personal friends of the successful candidates is
too tempting to be resisted. It may, of course, be argued that an
efficient civil service would put all the positions of this character
out of the reach of the politicians. That is doubtless possible,
but the creation of an effective civil service law for the manage-
ment of the present public positions should be a prerequisite be-
fore the city should embark on new and expensive departures in
municipal industries. When the cities show the willingness and
the ability to create a truly efficient civil service the field may not
be so difficult for public administration of the public services,
but until such a move is not only advocated but carried out in
good faith, any increase in the activities of a city only opens
a longer payroll for exploitation by the "boss."
This fact is so patent in the history of American municipal
industries that it is worth while to illustrate it from one of the
most conspicuous examples — the notorious experience of Phil-
adelphia in the management of her own gas works. Hardly a
branch of this now famous experiment failed to show signs of
exploitation for political ends.
The first account to be attacked was, of course, that promis-
ing the greatest number of positions to clamoring political de-
pendents. This was the labor list in the manufacturing and
154 SELECTED ARTICLES
distributing departments. High wages were paid — twenty-five
per cent over the price for labor on the open market. The chief
of the gas bureau was constantly besieged by the friends of
various councilmen in search of easy work at high prices. The
lists were padded with a number of laborers far beyond the actual
needs of the plant. So many were there indeed that it is asserted
that had all the employees been stood shoulder to shoulder,
room could not be found for all of them at one time on the
grounds of the plant. Naturally, under such conditions there
was shirking of work on all sides, and some favored ones
turned up at the works, it was said, only on pay day. The
amount of work each had to do varied in accordance with the
influence of his friends in councils. Receiving these easy jobs
from the political boss, the employees were in turn exploited by
him by means of semi-annual "voluntary contributions" to the
party in power. *
The purchasing and selling accounts were likewise abused.
Coal was bought from favored firms only, the residual tar and
ammonia always went to a single firm, though nominally sold to
the highest bidder. In practice there was but the one bidder.
When another bidder on one occasion put in a bid higher than
that of the regular contractor the award was not given him '"be-
cause he did not have the facilities for handling the product." The
coke was disposed of through a member of select council. The
charges entered under the blanket account of "miscellaneous"
exceeded $100,000 a year, and there were large amounts charged
against such accounts as "ice," "matches" and "drugs and horse
medicine."
The works were exploited indirectly also. Councils were anxious
to cut down all appropriations for improvements and extensions
in order to turn as large an amount as possible into the treasury
as "profits of the works." This would enable them to keep down
the general tax rate and have money for more favored plans, but
it had a disastrous effect upon the general condition of the plant.
Small and rotten mains and service pipes were left unrenewed,
thus causing a leakage in some years of as much as thirty per
cent of the gas manufactured. Antiquated machinery was kept
in use through the refusal of councils to put in modern ap-
pliances — a practice which cost the city in wasteful methods of
MUNICIPAL OWNERSHIP 155
production far more than would have been the cost of new ap-
paratus. Councils even went so far as to cut down very mate-
rially the use of the gas for public lighting'. In the place of the
public gas lamps light was bought at high prices from gasoline
and electric lighting companies. These were private concerns in
which councilmen and others prominent in local politics were
interested.
In a w^ord, the management of almost every branch of the
public gas works was dictated by politics. Not only the heads
of departments, but every employee from the top to the bottom
of the labor account threw his whole intiuence into political af-
fairs. The tenure of the party in power marked the tenure of
office of the employees. Such was the experience of Philadelphia
in the management of a municipal industry.
It is not contended that this is in all respects a typical case
and that the same thing would occur in every detail in all our
American cities did they undertake similar services. That such
is not the case is proven by the experience of some of our cities
in similar enterprises. But the example is given to show what has
actually occurred in one of the most important experiments in
municipal ownership in America. The circumstances of other
American cities are not so different as to overthrow the pre-
sumption that the possibility of similar abuses exists there also,
though not perhaps in the same degree as in the above instance.
The example is given only to drive home the argument that
under present conditions it is entirely possible for politics to
play quite as large a part in the management of public services
when under public as when under private control.
This being the actual state of affairs, the important question to
be answered is : In which way can the connection of the pujjlic
services and politics be more easily minimized. If public owner-
ship is to be chosen radical measures must be adopted to remove
all control of the municipal industries from possibility of political
interference. To widely extend the functions of city government,
thereby increasing the temptation to abuse of patronage, seems in
itself to introduce an element making it increasingly difficult to
keep a civil service system on a strictly non-partisan basis.
The other alternative is to elect representatives of such char-
acter as to command public confidence and who will be able to
156 SELECTED ARTICLES
guard the city's interests in making arrangements with con-
tracting companies. Each of these methods carries with it the-
possibility of honest management. On the point of integrity
there would be little to choose between the two, carried on under
ideal conditions. Improvement over present conditions must
in either case come through raising the character of the repre-
sentatives. A simple change from one set of machinery to the
other will accomplish nothing.
The jioint then is : Is it easier to elect men who will be
judges of a fair contract or men who will be able to run our
municipal industries at a standard of efficiency equal to the
average of private management. The former seems much more
easy of attainment than the latter. The chances of our getting^
by popular vote a man with intelligence to determine the pro-
visions of our contracts seem much greater than our chances of
getting men specially suited by experience and education to carry-
on our municipal industries. The average man can choose work
for the carpenter to do and judge the work when done much
better than he can do the work himself. SimiIarl3^ the average
representative can choose the terms upon which the city will
have its work done and can judge w'hether it has been done ac-
cording to the agreement much easier than he can carry out the
plan himself. If the representatives of the people cannot be trust-
ed to make fair terms with a contracting company how can they
be trusted with the entire management of an industrial enterprise?
There is but one limit to the power of the public to regulate
the conditions upon which they will give the public services into
the hands of private companies — a fair return to capital. What
is a fair return is, again, largely settled by the conditions offered
in the contract. If the agreement is so strict as to make it
impossible to raise the earnings of the company above the average
of industrial undertakings in the community then it is clear that
the city must hold itself ready to guarantee that the earnings
shall reach that standard. Otherwise capital will of course re-
fuse to take up the project. In case the municipality, on the other
hand, does not care to assume the chance of loss by the company
it must be prepared to grant a larger possible rate of return in
exchange for its freedom from liability.
MUNICIPAL OWNERSHIP 157
Within these Hmits the city may take all necessary measures
to protect its interests in its public services. The more clearly the
city evinces its desire to guard its own interests and at the same
time to grant to the private company a reasonable rate of in-
come and to protect it from unreasonable interference with that
income, the less will be the desire and the temptation of the
company to interfere with local political affairs.
Such an agreement would secure to the city all the advantages,
claimed by the advocates of municipal operation without the in-
ceased responsibility of direct management. A municipally-
operated plant would in any case withdraw from other branches
of industry the same amount of capital as would be employed in
the enterprise bj' a private corporation. The interest on that
capital must in the one case just as surely as in the other finally
be paid by the community at large.
The choice between the two methods of operating the munic-
ipal services must depend not on what may be accomplished under
ideal conditions, but upon the likelihood of efficiency under pres-
ent conditions.
Under American conditions to-day, then, the entrepreneur
would maintain that :
1. The direct responsibility present imder private manage-
ment makes it possible for a higher degree of efficienc}^ to be ob-
tained than under public operation.
2. The stimulus of gain can be made a more powerful element
working for efficiency in all branches of operation under private-
than under public control.
3. The influence of politics upon the public services can be
lessened more easily by having the representatives determine the
terms upon which the city services shall be let out under contract
than by turning the entire administration of the services over to
the representatives.
4. By the granting of contracts clearly safeguarding both the
interests of the city and the investor the management of the
public services may be brought to the highest degree of simplicity,,
economy and efficiency.
158 SELECTED ARTICLES
Journal of Commerce. July i6, 1907.
Main Question in Municipal Ownership.
The chief motive of men in this age is that of self-interest
in one form or another. It is not only natural but indispensable
to success and progress and needs only to be guided by sound
principles. In the expenditure of capital and the exertion of
enterprise, skill and economy in any service to the community,
and all industry and business is in some sense a service to the
community, the main incentive is profit or compensation depen-
dent upon the efforts of those concerned. Men do not exert
themselves for nothing, or for their health, but for gain. In pro-
viding a direct service like that of furnishing light, electric power
or transit facilities which is in its nature a commercial business,
the main question is whether men will do it better with their
own capital and under their own management, with the incentive
of gain for themselves, or by the use of capital supplied from
the public treasury, under the direction of public officials with
fixed salaries for themselves. Will the public officials nominated
by political organizations and elected by popular vote be best
qualified to exercise control over the business, and will the men
employed by them and subject to their authority be those most
capable for the work? Under which condition here suggested are
men of special ability, of energy, of experience and mastery in
the business, more likely to be engaged in it? Under which is
there more likely to be alertness in extending the business to
meet every demand, in adopting improved methods, in economiz-
ing cost and increasing results? Reason and experience give the
same answer to these questions.
No doubt private self-interest in this service needs to be
under restraint and regulation and prevented from making illegit-
imate gains or rendering inadequate service, but its motives can-
not be dispensed with without paralyzing the main springs of ac-
tion in a business requiring expert ability, sustained effort and
vigilant direction, such as no political system with which we are
acquainted will afford. If the public is to furnish the capital and the
credit and take the risks of gain or loss, while the men in charge
of the service have no direct stake in it, are not chosen for their
MUNICIPAL OWNERSHIP 159
experience or fitness and are paid without reference to results, it
stands to reason that the practical results will prove costly and
unsatisfactory, and experience has verified the dictates of reason
in this respect. There has been corruption in obtaining franchises
by men seeking the privilege of employing capital and energy in
providing these public utilities, but the opportunities and the
temptations for corruption would be vastly greater if that busi-
ness were made the object of political quest and political control.
The scandals of the franchise abuses would pale into insignificance
in comparison with those of municipal abuses with millions of
money and great forces of workmen at command, and the prac-
tical and financial results would be more deplorable and more
difficult to remedy than those we are already burdened with in
the administration of city affairs. No large city in this country
has yet gone far enough to demonstrate this, but every step has
tended that way. Private enterprise and the motives that give it
force need everywhere to be under the restraint of the law to se-
cure rights and prevent wrongs, but it is the most effective power
we have, and every effort to displace it with oflficialism and
socialism tends to degeneration.
Review of Reviews. 36: 594-8. November, 1907.
How Boston Solved the Gas Problem. Louis D. Brandeis.
While this investigation (National Civic Federation) was
proceeding, Massachusetts entered, in connection with the Boston
gas supply, upon an experiment, new in America, which may lead
to the best practical solution of the public-utilities problem. The
new Boston system creates substantially a partnership between
the public and the stockholders of the gas company, — a partner-
ship in which the public will secure an ever-increasing share of
the profits of the business.
Twenty Per Cent. Reduction in Two Years.
This system has already given to Boston 8o-cent gas, although
Boston is located many hundred miles from the mines which
supply its coal. Eighty cents is a lower price for gas than is
i6o SELECTED ARTICLES
actually enjoyed by any other city in the United States, except
a few within the coal and oil region, like Cleveland or Wheeling,
and Redlands and Santa Ana, Cal. Ev^en in those cities the price
is not lower than 75 cents, — a price which Boston may reasonably
expect to attain soon. For, during the two years ending July i,
1907, four reductions in price each of 5 cents have been made. To
Tiave reduced the price of gas 20 per cent, during that period of
generally rising prices in labor and materials is certainly a notable
achievement. The most recent reductions in price were the
wholly voluntary acts of the company, made under wise laws
framed in the interest both of the public and of the stockholders.
The saving to the gas consumer by these reductions was in the
first year $265,404.55, in the second year $565,725.60, and will be
in the third (the current) year about $800,000.
Earnings Unimpaired ; A Comparison With New York.
That this saving to the consumer was not attained by a sac-
rifice of the interests of the stockholder may be inferred from the
market price of the stock of the association which controls the
gas company. In the two years following the legislation of
1905, a period in which most other stocks depreciated largely, the
common stock of the Massachusetts Gas Companies rose from
44/'2 to 57>2 ; and even in the severe stock depression of late
September. 1907, this stock was firm at 52.
Compare with the results of the Boston experiment the at-
tempt in New York City made at about the same time to reduce
the price of gas from $1 to 80 cents by legislative fiat and the
compulsory orders of the State commission. The Xew York
company contended that the law was unconstitutional ; the fed-
eral court issued an injunction; the consumer still pays out $1
for each 1000 feet of gas ; and the market price of the stock of
the Consolidated Gas Company of New York fell during the
same period of two years from 200 to 118, and in late September,
1907, to 9634.
But Boston has reaped from the sliding scale system as ap-
plied under President Richards' administration of the company
far more than cheaper gas and higher security values. It has
been proved that a public-service corporation may be managed
MUNICIPAL OWNERSHIP i6i
■with political honesty, and yet successfully, and that its head
may become a valuable public servant. The officers and em-
ployees of the gas company now devote themselves strictly to the
business of making and distributing gas, instead of dissipating
their abilities, as heretofore, in lobbying and political intrigue.
As a result, gas properties which throughout the greater part of
twenty years had been the subject of financial and political
scandals, developing ultimately bitter hostility on the part of the
people, are now conducted in a manner so honorable as to de-
serve and to secure the highest public commendation.
Moderate Capitali::ation.
The aggregate outstanding securities of the constituent com-
panies had a par value of only $15,124,121 (of which $9,309,600
was stock and $5,814,521 funded debt). But when, in 1904, ap-
plication was made under the act to fix the capital, the companies
claimed that the properties had recently cost the then owners over
^24,000,000, that their replacement value was about the same
amount, and that the fair value for capitalization should be not
less than $20,609,989.99. The Public-Franchise League, on the
other hand, contended that substantially any excess in value over
the $15,124,121 represented not contributions by stockholders,
but accumulations from excessive payments exacted from gas
consumers ; that in the reorganization of the business such value
should not be capitalized ; and that the Consolidated Company's
capital stock should therefore be limited to the aggregate of the
capital of the constituent companies then outstanding, plus such
additional amount of stock as it might be necessary to issue at
its estimated market value (which was above the par value) to
provide funds for paying off all existing indebtedness. The
League deemed the retention of the original capital so augument-
■ed of fundamental importance, mainly because the payment of a
high rate of dividend on a small capital issue would tend to keep
the public vigilant.
After a long and bitter struggle the gas companies, acting
imder the enlightened and able leadership of jMr. Richards,
agreed, in 1905, with the Public-Franchise League upon legisla-
tion which provided that the capital of the consolidated company
i62 SELECTED ARTICLES
should be limited to the aggregate par value of the outstanding-
stock and funded indebtedness of the constituent companies, ta
wit: $15,124,000; that the maximum price of gas in Boston should
be reduced to 90 cents within twelve months after the consolida-
tion was affected ; and that the Governor should appoint a com-
mission to consider and report to the next Legislature whether
the adoption in Boston of the so-called London sliding-scale sys-
tem for "the automatic and interdependent adjustment of the
price of gas to consumers and the rate of dividends to stock-
holders of gas companies" was expedient. The favorable recom-
mendation of the minority of this commission, Messrs. James
E. Cotter and Charles P. Hall, was supported by the Public-
Franchise League and the gas company, and on Alay 26, 1906,
the Sliding-Scale act received Governor Guild's approval in spite
of the strenuous opposition of both conservatives and radicals.
TJie Principle of the Sliding Scale.
The Boston Sliding-Scale act, which embodies with some
modifications the main provisions of the system widely used in
England, provides as follows :
First: Ninety cents per 1000 feet of gas (that is, the maximum
price then actually charged by the Boston company) is made the
"standard price" of gas.
Second: Seven per cent, (that is, i per cent, less than the
dividend which was then being paid by the Boston company) is.
made the "standard dividend."
Third : The company is prohibited from paying more than 7
per cent, dividend unless and until one year after it shall have
reduced the price of gas below 90 cents, and then may increase
its dividend at the rate of i per cent, for every 5 cents reduction
in price of gas.
Fourth: New stock can be issued only with the consent of the
Gas and Electric Light Commissioners and must be sold at auc-
tion at such minimum price and under such other conditions as
the commissioners prescribe.
Fifth : Provision is made for determining annually, and pub-
lishing in detail in the newspapers, the cost of manufacturing-
and distributing gas.
MUNICIPAL OWNERSHIP 163
Sixth : After the expiration of ten years, the Gas and Electric
Light Commissioners may upon petition ''lower or raise the
standard price per thousand feet to such extent as may justly be
required by reason of greater or less burden which may be im-
posed upon the company by reason of improved methods in the
art of manufacture, b}* reason of changes in prices of materials
and labor, or by reason of changes in other conditions affecting
the general cost of manufacture or distribution of gas."
Efficiency in Management Sought.
The League therefore urged that the possibility of a large re-
turn upon capital offered under the sliding-scale system should be
regarded merely as an -incentive to securing for the gas business
the kind of management most likely to produce and distribute
gas at the lowest possible cost, and thus supply an essential pre-
requisite to cheap gas. Protection against corporate abuses
demands for gas companies strict supervision and publicity.
Eairness demands that proper compensation be made in some
form for the use of our streets. But no self-sustaining system
of supplying gas can give to the people cheap gas unless it rests
upon high efficiency in management.
The gas business has many of the characteristics of both
manufacturing and merchandising. Like other manufacturing
businesses, it produces an article for sale. The cost of its product
is dependent largely upon the character and condition of the
plant; upon the extent to which labor and waste-saving devices
are adopted ; upon the skill with which raw materials and sup-
plies are purchased and waste or residual products are disposed
of ; and whether the plant is operated to its full capacit}-.
To an even greater extent than in most mercantile businesses,
the pro rata cost of distribution of gas is dependent upon large
volume. The distributing plant requires an exceptionally large
investment. But the mains or pipes are rarely used to their full ca-
pacity. The interest, depreciation, and maintenance charges are
the same whatever the volume of sales. The inspection of meter,
and many other charges, increase but slightly with the increase
of sales. The pro rata cost of distributing gas diminishes largely,
therefore, with the increase in the quantity sold. But, as in most
mercantile businesses, the quantity of gas which can be sold in
i6a selected articles
any of our large cities is dependent mainly upon the skill, energy,
initiative, and intelligence with which the business is conducted.
The demand for gas is not a fixed quantity. There is, undoubt-
edly, a minimum quantity which will be used under almost any
conceivable circumstances. But limits can scarcely be set to the
possible increase of its use in our large cities. Xot only is there
an ever-growing demand for intense artificial lighting of public
places, stores, and residences, but there is an almost limitless
field now occupied by electric light, coal, and oil, of which gas is
the natural competitor. The limits of the use of gas in any city,
therefore, will be set mainly by the skill, energy, and initiative of
those who manage the business, and by the extent to which they
appreciate the fact that increased use of gas will result from re-
duction in price, bettering of appliances, and improving facilities.
A management possessing the requisite ability and skill for
such a business and which w^ould exerci-e the requisite vigilance
and energy may be best secured by following those lines upon
which the remarkable industrial advance of America has pro-
ceeded, the lines of intelligent self-interest. Those who manage
our gas companies and other public service corporations should
be permitted, subject to the limitations stated above, to conduct
the enterprise under the conditions which in ordinary business
have proved a sufficient incentive to attract men of large ability,
and to insure from them their utmost efforts for its advancement.
These essential conditions are :
A. The right to enjoy a fair share of the fruits of successful
effort.
B. The opportunity of devoting one's whole efforts to de-
veloping the business.
C. The probability of pursuing for a reasonable time with-
out interruption such business policy a? may be adopted.
Journal of Political Economy. 14: 257-314. May, 1906.
Municipal Ownership in Great Britain. Everett W. Burdett.
/. Is It Successful f
For the purposes of this article I shall assume that, in the
generation and supply of electricity for lighting, the municipalities
MUNICIPAL ..OWNERSHIP 165
of England and Scotland have, upon the whole, been measur-
ably successful in furnishing a fair article at a fair price. Tak-
ing all the figures together, Mr. R. S. Hale, of Boston, a compe-
tent statistician and engineer, after careful consideration, con-
cludes that there has been a difference in favor of the consumer in
the results which have been obtained from the municipal, as con-
trasted with the private, supply of electricity for lighting — a
difference, however, which is not so large as not to be creditable
to the companies, in view of the handicaps under which they
have been obliged to operate, to which I shall presently allude.
Moreover, with the exception of metropolitan London, practically
all of the private plants are in very small cities, while the great
bulk of the municipal plants are in larger cities.
Another fact to be borne in mind in this connection is that,
in some important instances, the showing which municipal plants
have been able to make has been materially assisted by the
circumstance that the going plants and business of private
companies have been taken over by the municipalities, which
have thus reaped the benefits of individual initiative and devel-
opment. This is conspicuously true of Leeds (population 390,000
in 1896) and Liverpool (population 517,951 in 1896).
But the success of municipal undertakings in the supply of
■electricity for light has been confined to the single feature above
named, and has resulted solely to the benefit of comparatively
few consumers, and not to that of the general public. It has
likewise been accompanied by failures in other directions, to be
presently mentioned, which more than counterbalance the single
favorable feature above referred to.
There is nothing to show, and there is no reason to assume,
that the electric supply in Great Britain could not have been
furnished by private companies as satisfactorily and as cheaply
as has been done by municipalities, if they had had the oppor-
tunity. Where (in a very few instances) they have had such
opportunity the results have been about the same or better ; and
if there are any differences against them, they are amply ac-
counted for by the difference? in conditions under which private
and public lighting enterprises are by law conducted in Great
Britain.
i66 SELECTED ARTICLES
//. Detrimental Consequences of Municipal Ownership.
If it be assumed that the public supply of electricity has been
successful in the single particular above referred to, it has been
attended with other consequences of a most detrimental character.
I. HAMPERIXG AND RESTRICTION OF THE INDUSTRY.
The first, and perhaps the most serious, of these consequences
has been the undoubted hampering and restriction of the growth
and development of the electrical industry, as a whole, in Great
Britain — resulting, as I shall presently show, from the peculiar
manner in which the laws applicable to the subject have favored
the municipal and discouraged the private exploitation of the
industry.
The backwardness of the development of the electrical in-
dustry, as a whole, in Great Britain is, I think, practically ad-
mitted on all sides ; if not admitted, it is readily demonstrable.
So serious was this state of things that in 1902 the Council of
the Institution of Electrical Engineers of England appointed a
committee "to determine whether they can recommend the coun-
cil to take any action, and, if so, what action, that would assist
the industry." The inquiry was based upon facts set forth in a
paper written by Mr. W. L. Magden, published in the Journal of
the Institution of Electrical Engineers, 1900. The Institution
of Electrical Engineers was composed of men connected with
both public and private electrical enterprises, seeking only an en-
largement of the field, however that result might best be brought
about, including such eminent men in the profession as Professor
W. E. Ayrton, F. R. S., jMajor P. Cardew, R. E., Lieutenant-
Colonel R. E. Crompton, C. B., Air. S. Z. Eerranti, Professor
J. Perr}', F. R. S., ]\Ir. A. Siemens, Professor Silvanus P.
Thompson, F. R. S., and others. Their qualifications to pass
upon this subject amply appear from the proceedings of the com-
mittee, which were published by the Institution.
After taking the evidence of various people competent to
speak upon the subject, including both those in "favor of as well
as those opposed to the municipal operation of electric-lighting
and tramway plants, the committee reported :
That, while taking divers views of subsidiary questions, the
witnesses were practically unanimous in their conviction that elec-
trical enterprise has not attained the stage of industrial develop-
MUNICIPAL OWNERSHIP
167
ment in this country which might fairly have been expected, hav-
ing regard to the many favorable natural conditions, and having
regard also to the achievements of British capital, labor, and in-
ventive genius in so many other branches of the mechanical arts.
And among the resolutions adopted by the committee (March
25, 1902) was the following:
That, notwithstanding that our countrymen have been among
the first in inventive genius in electrical science, its development in
the United Kingdom is in a backward condition, as compared with
other countries, in respect of practical application to the industrial
and social requirements of the nation.
These conclusions are amply borne out by the facts in evi-
dence, and others which are readily obtainable. The most strik-
ing and convincing figures were submitted by Mr. Philip Dawson,
E. E., found on p. 183 of the report. They included the fol-
lowing :
Comparative Approximate Figures as to Electric Lighting, Power,
AND Traction, 1901
71
en
-♦-»
■^ 1-
a
'u
cal
city
ts
c >>
1
Country
Station Kilow
Available f <
Lighting an
Power
g Station Kilow
Available f
§ Traction
Miles of Sin
Track Electric
Equipped
No. of Elect
Cars
Running
Total Electr
Station Capa
in Kilowat
Total Appro
mate Capit
Invested
Great Britain
200,000
900
2.600
250,000
40,000,000
$35,000,000
Continental Europe
400,000
154,600
5,000
9.800
550,000
350,000,000
85,000,000
U. S. of America.
1,200.000
800,000
21,000
68.000
2,000,000
70,000,000
200,000,000
Thus it is seen that the United States, with less than double
the population of Great Britain, has six times the amount of
apparatus installed for furnishing electric light and power, six-
teen times as much for electric traction, twenty-three times as
many miles of electric railway, twenty-six times as many motor
cars, and five and one-half times as much money invested in
such enterprises.
2. DISCOURAGEMENT OF PRIVATE INVESTMENT.
The limitation of the industry above described has resulted
not only in postponing, and in some instances, in excluding, a
supply of electricity for lighting and for traction in a large num-
ber of cities and towns, but also in the limitation of the investing
classes interested in the development of the industry, and in the
minimizing of the number and importance of the establishments
i68 SELECTED ARTICLES
for the manufacture of the electrical machinery and apparatus
which would have been necessary in case of larger develop-
ment. The latter feature of the situation is strikingly illustrated
by contrasting it with the enormous size and importance of
such manufacturing establishments in the United States and
Germany.
An Englishman has well said :
The idea of thrift should be encouraged as far as possible. It is
of immerse national value. . . . The possibility of small invest-
ment, and thus an important inducement to thrift, is greatly
diminished by the municipality indulging in business which would
be carried on otherwise by associations of individuals who would
raise capital from the community generally by shares.
Without private capital and skill new industrial enterprises
do not receive that impetus and development which they other-
wise would. Public officials do not invent, exploit, or develop
new things, but leave the field of discovery, initiation, and devel-
opment to private persons actuated by the hope of large rewards.
Whatever may be the result of the prosecution by the public
or its representatives of an enterprise which has been founded
and put on its feet by individuals, it is doubtful if any case of
successful municipal initiation of such an enterprise can be cited.
Individual initiative is always necessary. Sir Richard Webster,
then attorney-general of England, called it "the absolute neces-
sity of inventive competition." Water supplies, gas supplies,
transportation, electricity, even in England, all owe their initia-
tive to private enterprise. Only twelve important towns in Eng-
land built their own water-works. Gas supply was in private
hands exclusively at first, and it was nearly or quite fifty years
before it went largely into the hands of municipalities. Most, if
not all, tramway undertakings which are controlled by munici-
palities today were originally established by private enterprise
and subsequently taken over by public authorities.
The same is true of electricity. The towns and cities with
gas plants on their hands were literally forced into the supply of
electricity to head off private enterprise. But, notwithstanding
this, private enterprise started electric companies in London,
Liverpool, Sheffield, Birmingham, Nottingham, Newcastle, and
other principal towns in England.
3. INADEQUATE DISTRIBUTION OF .SUPPLY.
The third particular in which municipal supply has worked
AIUNICIPAL OWNERSHIP
169
badly in Great Britain is the inadequate distribution of the sup-
ply in places where supply has been undertaken. This has re-
sulted in the accommodation of the few at the expense of the
many. The non-consumer (who is legion) gets no benefit; the
consumers (who are comparatively few) get all the benefit. I
take it to be an indisputable economic proposition that the char-
acter of a public service is to be judged of by its extent quite as
much as by its cost. It is better service, for example, to supply
100,000 people wnth dollar gas than to supply 10,000 or 50,000
of the same people with 50 cent gas ; or to furnish railway facili-
ties to the larger number at 5 or 6 cents, than to the smaller num-
ber at 3 cents. Unless public service is available to the greatest
possible number, it fails to just the extent that it is not so avail-
able. This is strikingly show-n, with respect to electric-lighting
service, in the number of lamps installed and the number of cus-
tomers supplied in five characteristic cities in England and Scot-
land, as contrasted with three principal cities in the United
States, by the table on the following page. The figures given
are the nearest approximation possible from the available data.
The total installation in each case is converted into its equivalent
in sixteen-candle power lamps.
It thus appears that the private company in Boston alone has
almost as many lamps installed as the total number in the two
principal cities of Scotland and three of the principal cities of
City
Population
Supplied
No. of Lamps
Installed, 16 C. P.
No. of Customers
Glasgow .
Edinburgh
Manchester
Leeds
Birmingham
760 423
316,479
543,969
428,953
522,182
403,000
336,000
3(iO,000
154.000
113.000
9,324
7,129
5,171
3,988
2.374
Total...
2,572,006
1,306,000
27.986
Boston -.
New York
Chicago
573.574
2,050,600
1,698,575
1,114,000
2,846,700
1,500,000
15,136
50,000 plus
England, outside of London, put together; and is supplying
more than half as many customers as those five cities combined.
Indeed, the number of customers supplied in Boston is almost
170 SELECTED ARTICLES
as large as the total number of customers of the public plants
in Edinburgh and Glasgow combined. With a population sup-
plied one-fourth smaller than that of Glasgow, Boston has
nearly three times as many lamps installed, and over 60 per
cent, more customers. As compared with Manchester, with
slightly more populatiori supplied. Boston has nearly four times
as many lamps installed, and nearly three times as many custom-
ers. Taking Edinburgh and Leeds together, with a combined
population nearly half as large again, Boston has nearly two
and one-half as miany lights and more than one-third more cus-
tomers. If a comparison is made between Boston and the two
cities of Glasgow and Birmingham, which are perhaps the most
conspicuous among the British municipal undertakings, we find
that while the combined population of those two cities is more
than double that of Boston, they have between them considerably
less than one-half the number of lamps installed, and only about
three-fourths as many customers.
If the comparison is made with Birmingham alone, that
birthplace of English municipalism, with a population supplied
nearly as large as that of- Boston, is found to have only the
beggarly number of 2,374 customers, with 113,000 lamps, as
against Boston's 15.136 customers and 1,114.000 lamps. The
ratio of customers is as one to six, and of lamps as one to ten.
Comparing Boston and corresponding English cities, taken
together, it will be found that three times as many people have
an electrical supply in the former as in the latter ; that is to say,
there are thirty takers of electricity in Boston for each i.ooo of
population, as against ten takers for an equal population in the
English cities.
A very striking illustration of the superior distribution of
electrical supply in England obtained by private business man-
agement, operating under reasonably favorable conditions, over
that prevailing in the public service, is furnished by the two
companies in Newcastle. Those companies represent the best
development which has been achieved in the United Kingdom,
either by private or public undertakings. The figures are as
follows :
MUNICIPAL OWNERSHIP
171
Comparative Results of Private Ownership and Operation in Newcastle,
AND Public Ownership and Operation in Eight Other Important Cities
of the Same Class in Great Britain
Population \
(Approxi
mare)
No. of
Private
Lights of
8C. P.
Private ^9- of
Motors,' '-on-
1^ p sumers
Average
Price to
Public,
Excluding
Trams and
Street
Lighting
Thousands
of
K. W. H.
Sold to
Public
Public plants:-
Dublin
West Ham
Dundee
Leicester
Salford
Aberdeen
Cardiff
Nottingham ..
Private plants-
Newcastle
289.000
267,000
163,000
220,000
220,000
165,000
164,000
239,000
217,000
82,000
84.000
72,000
156,000
122,000
107,000
62,000
206,000
288,000
220
850
I 670
1,004
715
1,030
167
2,240
2.865
1,000
1,871
1,321
607
1.079
1.913
2,704
6,650
4.160
3.58
3.13
3.52
3.83
2.62
3.65
3.27
2.08
( 1.66
(2 50
857
1,827
1,073
1.719
2,051
1,581
1,736
7,937
11.684
(The figures in columns 2, 3, 4, and 5 are taken from the Electrician' s sheet
for 1904 — 5. The figures in columns 6 and 7 are taken from Garcke's 'Manual,
Vol. IX (1905). The figures as to Nottingham include sale of current to the city
tramways.
From the foregoing the following comparisons appear:
Average population served by public plants 215,875
Population served, by the private plants 217,000
Average number of customers of public plants 1,403
Number of customers of the private plants 4,160
Average number of lights supplied by public plants 111,375
JSTumber of lights supplied by the private plants 288,000
Average capacity in h.p. of motors supplied by public
plants 1.106
Capacity in h.p. of motors supplied by the private
plants 6,650
Average number of k.w.h. sold by public plants 2,347,625
Number of k.w.h. sold by private plants 11,684,000
Average price per k.w.h. paid by customers of public
plants 3.21 cents
Average price per k.w.h. paid by customers of private
plants 2.08 cents
Thus it appears that in Newcastle, with a population almost
exactly the same as the average population of the other eight
cities, the two private companies have nearly three times as
many customers as the average number of customers of the
public plants ; more than two and one-half times as many lights ;
generate more than six times as much power ; and sell nearly
172
SELECTED ARTICLES
five times as much current for all uses : while their prices aver-
age more than 2314 per cent, lower.
These results have been accomplished in about four years by"
companies, one at least of which has operated under legal con-
ditions more nearly like those governing municipal undertakings,
than any others in England, while the municipalities with which
the comparisons are made have had a free hand ever since 1882
to accomplish the inferior results shown by their operation.
4. FINANCIAL RESULTS UNSATISFACTORY.
British municipal plants of the kind under discussion, as a.
whole, show an average loss. Lord Avebury, formerly Sir John
Lubbock, the second chairman of the London County Council,
in a recent communication to the London Standard has stated
that for the year ending March 31, 1903, sixty towns and cities,
in Great Britain showed a loss in operating their electrical under-
takings equivalent to nearly half a million dollars, notwithstand-
ing the fact that "the accounts do not show the full loss."
Official returns for the electric-lighting undertakings of the
kingdom to December 31, 1904, show the following results of
operation :
Municipal
Private
Number of returns
Undertakings showing profits
Undertakings showing losses
Total amount of profits
Total amount of losses
182
105
77
£217,000
83.000
66
61
5
£596,667
5,000
Balance of profits
£134,000
$770,000
£591,667
$2,958,335
Percentage of plants showing profit
Percentage of plants showing losses
Average profit per plant
58 .
42
$4,230
92
8
S45.126
And the showings made by municipal plants, as poor as they
are, have been made possible only by neglect of the items of
depreciation and reserve. Says Lord Avebur\^ :
In comparatively few places does any sufficient sum appear to
have been placed to depreciation or reserve during the year under
review. At Glasgow the loss was transferred to a suspense ac-
count, and in several other cases the loss was either charged to-
the general district or borough fund, or in part paid by this means
and the balance carried forward to next year's account.
MUNICIPAL OWNERSHIP 173
Based upon Sir Henry Fowler's "Returns"' to the House of
Commons, it appears that, in recent years, the annual allow-
ances for depreciation, in the cases of 193 water-works, 97 gas-
works, 102 electric plants, and 29 tramways owned and operated
by municipalities in England and Wales, have averaged less
than two-tenths of i per cent, on the amount of capital origin-
ally invested, and barely over two-tenths of i per cent, on
the balance of capital indebtedness remaining after repayments
of capital out of earnings.
5. MONOPOLY OF MUNICIPAL CORPORATIONS.
It may be as well in this connection as in any other to say
something about the Association of Municipal Corporations and
its influence, particularly upon legislation.
According to a recent statement by its president, it embraces
in its membership no less than 294 of the municipal corporations
of the country, w'hich is w'ithin about thirty of the whole num-
ber. Only one municipality of more than 30,000 is outside its
membership, the others all being under 16,000. Its meetings
are largely attended by the mayors, town clerks, and other prin-
cipal officials, as well as by the members of the town and borough
councils. Matters of common interest are discussed, and the
association is committed for or against the various matters
touching municipal interests proposed or pending in Parliament.
It employs counsel, and otherwise takes an active part in shap-
ing or opposing legislation. As practically all matters of im-
portance, including all applications for rights to perform quasi-
public services, must come before Parliament, the importance of
the intervention of this association can in some degree be appre-
ciated. Its power is tremendous — some say practically invin-
cible.
6. OFFICE-HOLDING VOTERS.
The creation of a large and ever-increasing class of office-
holding voters is another very serious result of municipal owner-
ship in Great Britain. The objections to it are obvious to
Americans and are well recognized in England.
It was one of the principal features of the meeting of the
20th of July, 1905, already referred to, and the London Times,
in its editorial upon that meeting, not only emphasized this
174 SELECTED ARTICLES
danger, but pointed out the fact that there is a yearly increase
in the number of non-office-holding persons who may be de-
pended upon to vote soHdly for municipal extravagance in ex-
penditure, being what the Times calls "expectant beneficiaries
of such extravagance."
Fully to realize the importance of this consideration, one has
but to reflect upon what the conditions would be in Boston, New
York, Philadelphia, or any other large American city, if all the
street-car operatives and electric, gas-lighting, and telephone
employees were added to the already sufficiently large municipal
pay-rolls. In the city of New York, for example, there are
about 50,000 such employees, exclusive of those in the telephone
service. There are already on the city pay-rolls fully 50,000
municipal employees. If the former should be added to the
latter, the combined force would constitute an army of fully
100,000 people, or one-sixth of the total voting population. If
united and aided by their friends and relatives, such a combina-
tion would be invincible.
Under such conditions, the existing local political "machines"
would become so strong as to be impregnable, and the private
citizen would finally realize all the burdens and inconveniences
which his practical disfranchisement would involve. He is now
urged to take some part in local politics ; it would then be of no
use to do so. The cohesive power of such a combination of
office-holding voters would control every local matter, particu-
larly those involving expenditures of money in which they might
have a personal interest, although they m.ight not be, and in a
majority of instances would not be, taxpayers themselves.
7. INCREASE IN MUNICIPAL DEBTS AND TAXES.
The last, although by no means the least important, circum-
stance which has attended, if not resulted from, the enlargement
of municipal functions in Great Britain, is a tremendous increase
in municipal indebtedness and taxes.
Take, for example, the recent statement of Lord Stalbridge,
chairman of the London & Northwestern Railway, that in the
twelve years between 1891 and 1003 the local rates and taxes,
exclusive of income tax or government duties, paid by British
railways increased from the equivalent of about eleven and a
MUNICIPAL OWNERSHIP 175
quarter million dollars to nearly twenty-two and a half million
dollars, or 100 per cent, and continues to increase at the rate of
a million and a quarter yearly.
One of the leading citizens and most extensive manufacturers
of Glasgow, and at the same time one of the fairest men ii: his
attitude toward municipal ownership, ]\Ir. Arthur Kay, in a
paper read before the Glasgow Royal Philosophical Society,
March 25, 1903, reviewing the local statistics for the preceding
eleven years said :
The figures given show that the population of Glasgow has in
the past eleven years increased 16 per cent., the valuation 45 per
cent., the rates [i. e., local taxes] 112 per cent., and the debt 119
per cent. The ratio of assets to liabilities has gone up from 119. 0&
to 128.89.
That is to say : the valuations of property for taxation had
increased nearly three times as much as the population ; which,
of course, involves the possibility that the increase in the actual
wealth of the community had enormously outstripped the in-
crease of the population in eleven years, but more probably leads
to the conclusion that, in order to meet the demands of a rapidly
increasing municipal expenditure, the valuations of property for
purposes of taxation had been abnormally advanced ; also that
the individual ratepayer had seen his annual taxes more than
doubled in the period, and the municipal indebtedness for which,
as a citizen, he is in part responsible, increased in a still larger
ratio, while the excess of the municipal assets over liabilities
had increased only by a paltry 10 per cent.
///. Causes of Unfavorable Results.
Assuming the foregoing to be a fair statement, in outline, of
the present condition of municipal electric lighting, railroading,
and telephoning in Great Britain, and that, upon the whole, it
would not be desirable, if practicable, to reproduce them in the
United States, and that it is wise, if possible, to avoid the causes
by which they have been produced, it is necessary to determine
those causes with as much accuracy as may be.
The principal and controlling cause of the results which have
been obtained in Great Britain is found in English legislation
and official regulation respecting the electric industry.
176 SELECTED ARTICLES
Municipal ozvnership of gas-works. — xA-nother cause of the
unsatisfactory results above indicated is the municipal owner-
ship of existing gas-works. This fact has led the municipalities
owning them, with practical uniformity, to object to the ex-
ploitation of a new illuminant by private capital, and to pro-
cure rights for themselves, which have been in fact, if not in
law, exclusive. Under these rights they have either not estab-
lished electric-lighting plants at all, or have established them
after Img periods of delay, thus depriving the communities
which they have represented of the new and improved illuminant,
either permanently or for long periods of time after the progres-
sive communities of the United States had been supplied by
private companies.
Municipal inertia. — Another cause is lack of that individual
initiative and business energy and push, without which no indus-
try will develop.
In municipal management it often happens that the right
thing at the right moment cannot be done for lack of power.
Consent must be gotten from the local authorities ; and before
it comes, the opportunity is gone. At one time a popular revul-
sion against extravagance results in failure to make proper
necessary expenditures, and at another a determination to have
good service leads to waste or recklessness. Public business is
everybody's business. Everybody's business is nobody's business,
and things a little out of the routine, the little unexpected all-
important things which constantly appear, are found undone
under municipal management when it is too late to do them.
Private business has the enterprise and energy which municipal
business lacks.
Xone of these causes have been operative in the United
States, and, because of their absence, the industry has been vastly
better developed, and the extent of territory and the number
of persons served have been much larger.
/F. Duplication of British Results, so Far as Favorable, Im-
possible in America.
But if it should be assumed that the results of municipal
undertakings in Great Britain are, upon the whole, favorable to
MUNICIPAL OWNERSHIP 177
the consumer and the public at large, and that it would be desira-
ble, if practicable, to duplicate them in the United States, this
could not be done, owing to the existence of radically different
conditions in the two countries.
Differences in political conditions. — If, and so far as, the
municipal ownership and operation of public-service utilities
in Great Britain have been successful, it has been because of the
character of the local civil service of that country. Politics, in
the American sense, is unknown in the administration of local
enterprises. Business principles are applied to the administra-
tion of public as well as private works. The rigid limitation of
the voting franchise, with other causes, has operated to put into
city and town councils and other local legislative bodies men
of a superior type, who regard public service as an honor, and
whose services are retained by the public practically as long as
they are willing to serve. In the choice of administrative
officials they exercise the same care as the directors of private
corporations do, and the tenure of such officials is as long and
as certain as that of those in similar capacities in private em-
ployment.
Laivs governing the voting franchise. — The qualified voters
for municipal officials are called '"burgesses." They are persons
of full age, w^ho. for at least one year, have occupied alone, or
with others, a house, shop, or other building in the borough,
and have resided in the borough or within seven miles thereof
for a full twelve months.
The most important limitation of this general qualification
of the burgess is that he must have paid, on or before July 20,
all rates, (i. e.. local taxes) which were payable by him up to
the preceding January 5. In Scotland this provision operates
very much to reduce the actual voting lists below the number
who are theoretically entitled to enrollment. It practically ex-
cludes from the franchise the entire body of irresponsible and
vicious electors. Albert Shaw, in his Municipal Government in
England, 1895. estimates that these provisions exclude at least
one-third of the theoretical voters at all parliamentary and mu-
nicipal elections in Scotland.
The "lodger," so called — that is, an unmarried man. paying
178 SELECTED ARTICLES
at least $50 a year for lodgings — is theoretically entitled to
the franchise ; but inasmuch as he must procure his own enroll-
ment from year to year (whereas the ordinary ratepayer is
enrolled without any action on his part, because he is a rate-
payer), he practically loses his right to vote. Thus it is appar-
ent that all "floaters"' and other irresponsible unattached single
men are excluded from the franchise. Out of 20,000 Jews hud-
dled together in the tenements of the Cheetham districts of Man-
chester only 900 are on the municipal voting registers — undoubt-
edly chiefly because they do not meet the requirement as to
the rentable value cf the tenements occupied by them. But
this law sometimes excludes intelHgent citizens from the fran-
chise, simply because they are "lodgers," as, for example, in
the case of the ten reporters on the Manchester Evening Chron-
icle, not one of whom was a voter at local elections. In England
the lodger is excluded by law from the municipal franchise,.
although he may vote for members of Parliament, — except in
London, where a lodger in occupation and residence in one defi-
nite house within the borough for the preceding twelve months
is allowed to vote.
The exploitation of the slums and of the non-rent-paying
population for municipal political purposes is therefore practi-
cally impossible in Great Britain.
In addition to the provisions for the practical limitation of
the electoral franchise to the responsible and desirable rate-
payers, the purity and efficiency of municipal government in
Great Britain has also been protected and promoted by the great
stringency of the so-called Corrupt Practices Acts, applicable
throughout the kingdom.
Evidences of deterioration in local governments. — But, ex-
cellent as is their general character, I think it is beginning to
be understood and generally admitted that the local governing
boards of the larger British towns and cities are becoming less,
rather than more, efficient. This result naturally accompanies
the multiplication of the duties imposed upon those bodies. They
are becoming overburdened, and in some cases fairl}'^ swamped,
with the extent and variety of the public concerns which engage
their attention. In Glasgow, for example, it is said that a con-
scientious member of the council must devote about two days a
week to the discharge of his public duties. In Manchester the
MUNICIPAL OWNERSHIP 179
chairman of the gas committee for ten years has spent at least
six hours a day in the discharge of the duties of that position.
While willing to give much of their time gratis to the public
service, business men are beginning to find that the draft upon
it is more than they can meet without absolute disregard of their
private affairs. ' The wonder is, that, notwithstanding this fact,
these bodies have thus far adhered as closely as they have to the
high standards of the past.
V. Summary.
First. The operation by British municipalities of public
utilities of the kind under consideration has been successful,
if at all, in the single particular of furnishing the service or
supply at a fair price to a comparatively few persons. Aside
from gas supply, it has not resulted in any considerable profit
to the municipalities, the losses in electric lighting, traction, and
telephone enterprises being frequent, while the profits when
realized are generally not more than 2 or 3 per cent, on the
investment — the net result to date being an average loss.
Second. It is by no means conceded, but, on the other hand,
is strenuously denied, even in England, that municipal trading
has, upon the whole, been successful, and British public senti-
ment is by no means settled upon that subject.
Third. The municipal supply of electricity for light, trac-
tion, and telephone service has been attended by certain serious
results, which more than offset the success, if any, which has
been obtained in the single resppect above referred to, viz :
(i) A most serious check upon the general development
of the electrical industry in Great Britain, and, in consequence,
upon the establishment of the manufacturing plants and facili-
ties which would otherwise have grown up.
(2) An extremely restricted supply in the cases where the
supply has been undertaken, resulting in the accommodation of
the few, to- wit, consumers, at the expense of the many, to wit,
rate-paying non-consumers.
(3) The abnormal enlargement of the functions of local
government, resulting in the discouragement of private enter-
prise, and the creation of a large and increasing body of office-
holding voters.
i8o SELECTED ARTICLES
(4) A most serious enlargement of municipal indebtedness,
and the creation of a class of voters who can be relied upon to
support extravagant expenditures.
Fourth. The unfavorable results realized in the development
of the electric industry are primarily traceable to the character
of the legislation and official regulations governing the matter,
all of which, professedly and in reality, are framed for the en-
couragement of municipal, and the discouragement of private,
enterprise; and also to the inertia and lack of business enterprise
which are inseparable from municipal operation.
These laws and regulations, not having worked well in
Great Britain, should not be imitated or approximated in America.
Fifth. If a different view from that above expressed is taken
of the character of the results achieved, and it is deemed advisa-
ble, if practicable, to duplicate the financial and technical results
of British municipal undertakings in America, it will be im-
possible to do so, owing to the totally different political condi-
tions obtaining in the municipalities of the two countries, re-
spectively. Not only is the municipal civil service in Great Brit-
ain totally different from that in America, and dependent for its
character and tenure upon a wholly different system of laws
and administration, but the public sentiment and education of
the people of the two countries upon the subject is so opposed
that the conditions in either country could not be reproduced,
by legislation, or otherwise, in the other.
Sixth. In view of all the foregoing considerations, it is mani-
fest that the continued encouragement of the exploitation of
private business by private capital, rather than the entrusting
of business or quasi-business enterprises to municipal officials,
is the only sound course to be pursued in the United States.
American Journal of Sociology. 12: 328-40. November, 1906.
Public Ownership and Popular Government.
William Horace Brown.
The growing sentiment in favor of public ownership and op-
eration of industrial enterprises appears to be due mainly to two
MUNICIPAL OWNERSHIP i8i
causes : first, dissatisfaction with the manner in which such
enterprises, or those of them conducted under pubHc franchises
or privileges, are operated under private ownership ; second, re-
sentiment against large aggregations of private capital, whether
its employment in such enterprises is advantageous to the public
or not.
The first cause appears to predominate in American munici-
palities. The second is no doubt the moving sentiment of the
majority of those in the United States who would have the fed-
eral government own and operate the railways and telegraphs,
although other reasons are commonly assigned.
The term "industrial enterprises" is used in the broadest
sense, with a knowledge of the distinction observed in the secur-
ities market between manufacturing and mercantile business
commonly termed industrial, and the transportation, lighting,
and other business usually carried on under public franchises.
Yet as a fact all are industries — departments of business employ-
ing capital and labor. The separation of those departments of
enterprise, or business, which are commonly conducted under
public franchises or subject to public regulation in certain re-
spects, from other departments as properly and naturally those
which should be owned and operated by government, either mu-
nicipal or federal, is purely arbitrary. When it is asserted by
advocates of public ownership and operation that there is such
a distinction which they desire government to observe, they at
once admit the doubtfulness of their proposition, and the neces-
sity of placing close bounds upon their innovation. In European
countries no such distinction is insisted on. Municipalities there
own abattoirs and distilleries, and engage in many other enter-
prises. Therefore, if it is a proper function of government, mu-
nicipal, state, or federal, to engage in the railroad or gas-mak-
ing business, it is likewise proper for it to go into many other
kinds of business.
The municipality exercises control over and grants special
privileges in greater or less degree to the omnibus carrying busi-
ness, house-wrecking, the building business, the advertising-sign
business, not to quote too long a list. It does not seem to be any
stretch of logic to analogize that, if a municipality may proper-
l82
SELECTED ARTICLES
ly engage in the telephone business, because it permits the string-
ing of wires in alleys and under the streets, it may as properly
engage in the construction business, on the ground that in the
erecting of buildings contractors are specially permitted to mo-
nopolize half the street about the premises during such opera-
tions. Besides, building is under strict municipal regulation as
to materials used, sanitary appliances, etc., and is controlled by
the city inspectors.
If we are to admit it to be the logical function of government
to turn merchant, manufacturer, and speculator, with the money
of the taxpayers, it is of first importance to find out whether
we are to place any limitations upon it, and, if we are, for what
reason. If we are going to fix an arbitrary rule of limitation,
without sound reasons therefor, we may as well expect those who
follow after us to throw it over, So it would seem to be of first
importance to ascertain and bear in mind what the province of
the government under free institutions really is. Under an ab-
solutism the problem is exceedingly simple. The nearer we ar-
rive at popular freedom, the more disputed it becomes.
It is undeniable that in the United States from the earliest
times the people have been firm in the faith that government
was for the purpose of conducting purely public business, and
should interfere as little as possible with the occupations of the
citizens. In early years this feeling was so strong that it threat-
ened disruption of the government as organized under the fed-
eral constitution. People denied its authority to declare embar-
goes or to impose internal revenue taxes. The whole body of
the people wanted the least government necessary to preserve
order locally and to conduct interstate and foreign affairs, and
they wanted that at the least possible cost. This was the senti-
ment which Mr. Jefferson coined into his epigram: "That gov-
ernment is best which governs least."
The theory was, of course, that the people should be permit-
ted the widest latitude in conducting their commerce and in
regulating their private actions not inconsisent with the gen-
eral welfare. There should be no sumptuary laws ; no state inter-
ference with religion: no laws permitting monopolies; no fa-
voritism ; no recognition of class distinctions ; nothing, in fact.
MUNICIPAL OWNERSHIP 183
that would in any way deny perfect equality or interfere with
the exercise of commercial and individual liberty; always, of
course, recognizing the universal code of morality. In general,
this has been admitted by every writer of recognized authority
on governmental science as the true basis of popular representa-
tive government, both in England and in America. From
Franklin and Jefferson and ^Madison, to Bryce and Lecky, it
will be found as a recognized principle, even among those writ-
ers who hold less faith in democracy than others. It is simply
a recognition that the day for anything like a paternal govern-
ment for an intelligent people is past.
A real democracy is adapted only to simple forms of gov-
ernment; for government, being an institution of business, can-
not be successfully conducted through many ramifications by
the popular will. The popular understanding is not equal to
coping with intricate business propositions. The more compli-
cated the government of a municipality becomes, the greater
the number of departments; and the more responsibilities in-
volved, the less is success likely to attend management by
boards of unskilled minds subject to popular influence or guided
by partisan interests. The more and weightier the business under-
taken, the greater the requirement for centralized authority and
specialized skill; and consequently the less can be permitted of
popular dictation. This is merely the principle that applies to
business consolidation, where the most intricate problems are
concentrated in a few executive heads.
How can we square this sentiment, this fundamental principle
of a minimum of governmental interference, with the theory
that the people, either individually or organized together in
companies, are not to be intrusted with the conduct of commer-
cial enterprises, and that government shall deprive the people of
their business opportunities, and monopolize such enterprises
under its arbitary power? The question cannot be answered by
any shifting rules of limitation — that has already been shown.
Under the assumption that all commerce or enterprise carried
on under a public franchise or privilege is proper business for
government to engage in, the principal departments of com-
mercial enterprise would be included. It is merely a question of
i84 SELECTED ARTICLES
degree, at the most; and it matters little as to the difference
between packing-houses operating under municipal license, and
under guard of municipal and government inspectors, and an
electric company with a franchise. It resolves itself at once into
a question of whether, if government is more competent and
better entitled to conduct one-fourth of the business of the
country — that is, to deprive the people of one-fourth of their
worldly opportunities — it should not take over and conduct one-
half, or three-fourths, or all, and leave the people with no
opportunities whatever. Otherwise stated, if it is the proper
function of government to take from the people and operate a
part of the business enterprises within its jurisdiction, it is not
the proper function of the people to say it may not also assume
and monopolize other enterprises.
To be sure, municipal-ownership advocates will declare that
it is not proposed to deprive the people of anything; that, on
the contrary, it is proposed to take from the corporations that
have robbed the public and give to the people that which right-
fully belongs to them. This has a very seductive sound, but it is.
sophistry. The people own the businesses which it is proposed
government shall take over and conduct. There are perhaps
several millions of shareholders in the various corporations of
the United States. In addition, the saving banks hold over three
billion dollars of deposits, the life-insurance companies have
nearly as much, a very large percentage of all being invested in
corporate securities, really held with the people's money. It
is intended to pay them for their properties, of course. But has
government the money to do this? No, it intends either to bor-
row the money on the properties or to go in debt to the owners,
for them. Now we have arrived at this situation: The people
who are actually in the business which the government, local or
federal, will take over, must retire from such business. They
must enter other business, become idle capitalists living on their
incomes, or seek salaried positions. They cannot enter other
lines of trade without displacing some who are already in them,
for practically all avenues of trade are as full as reasonable
profits will permit ; otherwise there would be an increase of
competition as things now are. The municipalization or govern-
MUNICIPAL OWNERSHIP 185
ment ownership of industries will not create new business. It will,
in fact, tend to narrow the volume of exchanges, for the reason
that, on the average, public operation will not be as en-
terprising or as ably conducted as private operation. This will
be disputed, but it appeals to reason that the citizens who have
created the country's industries, who are conversant throughout
with their technicalities, and who now successfully manage them,
are more competent to do so than any others are. The people
who have shown the greatest ability in building up businesses
are surely the ablest in managing them.
The government, after thus having displaced the most com-
petent business skill of the land, greatly disturbing the equilib-
rium of trade in so doing, and destroying the choicest avenues of
money-making investments, holds out to the people thus dis-
possessed the alternative of accepting its low-rate bonds for the
amoimt of their holdings — for we are not considering now the
radical scheme of confiscation. Thus all, so far, except wage-
earners, have had their incomes reduced, their possibilities for
advancement curtailed, with large numbers forced into idleness ;
while the overcrowding of other business channels and lines of
endeavor have reduced profits and caused business demoraliza-
tion. Government, meanwhile, has become shopkeeper, trader^
speculator, carrier, exclusively with hired help, much of which is
engaged because of political influence or partisan activity. It has
promised higher wages, and is attempting to pay them with
impaired efficiency in operation and against a condition of indus-
trial disturbance. At the same time, its income from taxes has
fallen greatly, not because the rate of taxes is less — it is. in fact,
higher — but because all the property which it has taken over now
pays no taxes, and the bonds with which it paid for them are, as a
rule, not productive of taxes.
Something must be done to forefend disaster. An attempt
is made to reduce wages, which have been in many instances
raised through influences other than consideration for the best
interests of the enterprises ; and strikes and tumults follow.
Whatever deficiencies occur in returns must be made up from
the general fund. New taxes are imposed — stamp taxes, increases
in the excise, a modification of the tariff — which of course al-
i86 SELECTED ARTICLES
ways means a raise. And then a revulsion of feeling in regard to
government trading.
Now, it is just as easy to deny that these results would occur
under an extensive experiment in public ownership and operation
as it is to outline them as probable. No government has entered
upon the scheme far enough, and tried it long enough, to
establish a criterion which may be used as indisputable evidence.
Lacking sufficient statistics of actual results necessarily leaves
the subiect in a degree open to conjecture; but only as any
proposition in conflict with logic and the known results of
human actions are conjectural. And we have incomplete data
which show the trend of municipalization experiments in the
direction indicated.
It is more than inconsistent, it is paradoxical, for a people
who have for generations maintained the doctrine of the widest
possible freedom in all departments of human endeavor, and
particularly for that portion of the people which has supported
that doctrine to extremes, now to appear as the sponsor for a
system of governmental interference with such freedom so
radical that it is nothing short of paternalism. This strange
paradox is not relieved by the excuse that the common people
are being despoiled by defiant corporations which enjoy and
abuse special public privileges. The corporations are a part of
the people. They are creatures of the same governmental power
which it is proposed shall supersede them in proprietorship,
and are supposed to be subject to the control of that power.
If government has created institutions that are harmful to
the country and the people, it is a governmental fault. The
people created the government and maintain it. They elect, by
universal suffrage, the officials who administer the afifairs of the
government. If these affairs are inefficiently or dishonestly ad-
ministered, it reflects directly upon the intelligence and the
watchfulness of the electors. Administrators as well as legislators
hold their offices by short tenures. It is the business of the
people — not their privilege, but their business — to keep their
government in clean and able hands. Just so far as they do this
do they demonstrate their fitness for self-government. Just so
far as they fail or neglect to do this do they show their unfit-
MUNICIPAL OWNERSHIP 187
ness. Under our system bad government must be the result of
the incapacity or indifiference — which is the most hopeless kind
of incapacity — of the citizens.
This is so manifest as to be not debatable; yet we know
government has created corporations that have imposed on the
public, and that it has failed to exercise adequate control over
them. States have shown unwise liberality in granting charter
powers without adequate safeguards, and American municipali-
ties are notorious, n(5t only for their prodigality in granting
franchises, but in the worse than incompetent manner in which
they manage their business affairs generally. It is a frequent
comment that our governmental system has shown its weakness
more in the government of large cities than in any other respect.
Demagoguism, graft, and political trickery find in them their
most profitable fields, and it is in them that reform works the
slowest.
Even where rank dishonesty does not appear in the conduct
of municipal business, there has been much to condemn. We can
see on every hand in practically all of our cities things that
have been done wrong or entirely neglected. Cities have grown
with great strides, problems have developed rapidly, and our
system of rotation in office, to forestall building up an office-
holding class, has had the effect of keeping, too much of the
time, inexperienced men in the management of them. In some
instances, also, there have been inadequate systems imposed by
state constitutions or legislatures. But in all cases the shortcom-
ings are primarily those of the people. Franchises have been
corruptly bartered by councils and boards; yet we know that
members who have been notorious in such treachery to the pub-
lic's interests have been returned again and again to their ofiices
by the votes of the people. It is hardly an exaggeration to say
that the officials who have been most recreant to their trust have,
as a rule, been able, through their machinations, to hold their
places for the longest periods. Whenever municipal ownership
abroad is cited, it should be remembered that in European cities,
as a rule, the executive officers are not elected by the people, and
are free from political press^e. This is true even of the chief
cities of England and France.
i88 SELECTED ARTICLES
Many other facts of common knowledge might be quoted to
expose the errors of government and its defects in business
management. The real difficulties have been great. Legislative
bodies and executives have lacked foresight in providing for
adequate control over public corporations. Entanglements and
litigation have resulted in many instances ; and if we freely allow
that corporate greed has overstepped itself and brought on a
storm of popular resentment, it must be remembered that in few
instance-^ has public management — that is, the officials of all
classes — been competent successfully to cope with it. And, in
the final summing-up, it will be found that two causes are at the
bottom of the whole trouble : our political system, which insists
on short tenures of office and selects public servants for other
reasons than their superior ability; and the carelessness or lack
of judgment of the people themselves.
There is to be taken account of the arguments that the task
of government in properly controlling public utility, or other
commercial enterprises operating under public privileges, is
greater than it would be in conducting those enterprises itself;
and that the removal of such businesses from private hands tO'
government proprietorship would at the same time remove the
principal source of political corruption.
The former contention is a necessary one for the advocates
of government trading, for at the outset they are met with the
indisputable facts given above concerning the weakness, even tO'
failure, in the conduct of purely official business. The very first
step in the logic of the case is that, if our officials, as they aver-
age, have failed in the conduct of afYairs purely public in their
nature, they would fail yet worse in conducting the largest busi-
ness enterprises of the country added thereto in one vast compli-
cation. If they have been found wanting in some things, there
is not the slightest warrant founded on human experience for
the belief that they would prove more efficient in many and
weightier things. Such an assumption is not only contrary to
experience, but is repugnant to common-sense. It does not
matter that municipalities are operating some public-service
plants with a degree of success. They might conduct them with
a still greater degree of success without afTecting the argument..
MUNICIPAL OWNERSHIP 185^
As to the second claim, while it might prove true in some
instances, there are records that show it cannot be depended on.
Human nature is not changed by merely shifting the temptation.
Years ago Philadelphia owned and operated her gas-works. On
the theory of municipalization advocates, that should have pre-
vented tampering with the officials, so far as the gas business was
concerned, and the business should have been a blessing to the
people. But the results were contrary. The works were allowed
to run down, the quality of the product was low, the price for it
high. All this was laid to the machinations of capitalists who
were alleged to have bribed and conspired with the officials,
where the capitalists themselves were not the officials. Finally
a change was made. The works and business were turned over
to a private corporation by lease on terms alleged by the corpora-
tion baiters to be rank robbery of the people. For years the
transaction was pointed to as a horrible example of corporation
outrage and spoliation of the people — not, of course, through the
fault of the people, but because of corporate greed.
Finally it was discovered that the bargain had proved an
excellent one ; that the quality of gas had been improved, the
price cheapened, the works rebuilt and extended, while the city
received nearly half a million a year in cash payments. What is
the moral? Why, the municipality, not having managed its own
affairs as ably and honestly as the much-maligned gas company
had conducted the gas business, sought to raise a vast sum of
needed cash in lump payment for a further extension of its val-
uable privileges, thus discounting its rentals for many years ; and
that is how one government demonstrated its fitness for higher
things.' The country is studded with towns that have had unsat-
isfactory experience with ownership and operation of water and
electric-light plants, and have turned them over, or are seeking
to turn them over, to private companies ; and in almost every
instance there has been a faction that complained of the alleged
conspiracy of certain of their officials with capitalists.
While reliable statistics are yet lacking to demonstrate the
results of extensive government ownership and operation which
I have predicted, there are enough, not only to destroy faith in^
the roseate claims of the public-ownership apostles, but to point
a distinct warning of the danger. The statistics are in too many
190 SELECTED ARTICLES
instances discovered to be deceptive in the favorable results they
show. In several particulars is this true. They are given to
omitting proper charges for depreciation. This especially in
respect to electric-lighting plants, where depreciation and obso-
lescence have been very costly. They frequently fail to show the
true cost of operation by neglecting to state the services given
the works by other departments of the city government, and the
sums that are lost in taxes that would be paid under private
ownership ; also the quality of service rendered. And, besides,
the scheme has been tested on too limited a scale to permit of
jumping at enthusiastic conclusions. There have been, if nothing
else, too large a percentage of known failures, so far as the test
has gone.
But against this warning we are handed a flowery statement
of results in Europe, and especially in England and Scotland.
This is carrying the argument away from our conditions, and
even if the known facts over there were more favorable than they
are, it would not warrant our attempting to follow their example.
As to results in Great Britain, however, the game has not been
played through, and the final score will not be shown for years
to come. It may be conceded that, if an\' country possesses a
system and character of government capable of engaging suc-
cessfully in government trading, Britain is that country. Yet we
have reports of antiquated instruments in municipal telephone
systems, of lack of enterprise in perfecting and extending the
service which would be borne with sour grace in American cities.
.Not only has the service been poor, but in some instances the
operation has been at a loss. The same may be said of municipal
electric lighting in Great Britain. The service is complained of,
and in a number of cities, including Glasgow, Edinburgh, Bath,
and Bristol, has been operated at a loss. As for the municipal
tramways in England and Scotland, American travelers are prac-
tically a unit in declaring that most of the systems, and the
methods of operating them, would not be tolerated in America,
even those often quoted as examples of municipalization success,
such as Glasgow and Edinburgh.
Of most vital importance is the problem of municipal indebt-
edness which the experiment has created. More than two thou-
sand million of bonds have been issued in England to extend
MUNICIPAL OWNERSHIP 191
municipal trading, and the investments have in some instances
already affected municipal credit. Some lines about London are
already a charge to taxpayers, and the leading newspapers are
sounding the alarm as to what may be the ultimate result. There
has also been observed an effect on the industrial system of the
country, and the subject of the displacement of private enterprise
and responsibility by government is awakening much serious,
thought.
The day has not arrived when we may point to England's
example as one which America may safely follow.
Patient, disinterested examination of the subject in its various
phases does not discover any warrant in experience, political
conditions, or the purpose of government, as viewed by the clear-
est intelligence of recent times, for the assumption that public
trading would prove the public blessing so confidently claimed
for it by its advocates. This will apply either in the case of
municipal or federal government engaging extensively in busi-
ness. It is characteristic of propagandists to indulge in positive
assertions — not merely to believe and prophesy, but to declare
future results. That it is the true purpose of government to
conduct the chief commercial enterprises of this country, or any
considerable portion of them, no man — no American, at least — has
any right to declare. That the results of municipal trading in
America, so far as it has been tried, have been entirely success-
ful, as has been frequently asserted, statistics so far obtainable
do not prove. It cannot truthfully be stated, without qualifica-
tion, that experience so far in municipal ownership and operation
has, as a whole, been of greater benefit to the people than pri-
vate ownership and operation in the same instances would have
been.
A hopeful theory is that by imposing ownership and opera-
tion of industrial enterprises on city governments the quality
of citizenship will be raised, because citizens will then take
greater interest in city affairs. It would not be difficult to
prove by history that, the more paternalistic governments have
become, the less responsibility has been shown by their citizens
or subjects. But it is not necessary to enter such an argument.
For the accepted doctrine of free government is, that it
192 SELECTED ARTICLES
should protect the people and guard their interests by reason-
able regulation and control, and not that it should conduct the
business of the people.
The plea that government cannot properly control corporate
operations, or that it will not do so, is a pitiful one. It must
be conceded that in many things government has not done
so. But that being the natural function of government, there
can be no question that it should first demonstrate its efficiency
in that duty before engaging in commercial experiments, even
if the latter should be admitted a proper course for it to take
in any event. Let the protests of the people against corporate
derelictions be directed to enforcing adequate control. Let
the errors that have been made in the past through wasted fran-
chises, excessive privileges, inadequate laws and charters, be
remedied as fast the nature of the various cases will permit.
Clean the administration offices. Keep able men in office longer,
the delinquents not so long. Perfect the merit system, not in
a way that it will help shirking inefficients to retain their
places, but so that it will more surely encourage merit. Deal
with corporate interests with a view to the greatest public ^
advantage, not merely with the view of carrying out arbitrary
ideas of short-term franchises or municipal purchase.
Government control and regulation are natural functions.
If they be properly exercised, they must prove more beneficial
to the people than government trading. They will insure im-
proved service of public utilities, which municipalization does
not. They will increase the public revenues by compensation,
without the danger of increased public burdens. Strict govern-
ment control is more likely to decrease political corruption than is
government trading, as the management would not be swayed
by political considerations; this with special reference to traction
properties employing large numbers of men.
What may be effected through wise control and regulation is
exemplified in the street and elevated railway service at Boston,
concise explanation of which has recently been given to the read-
ing public by Mr. Hayes Robbins. It is not too much to say that
Massachusetts and Boston have, in fact, fairly solved the problem
of public control and regulation. In quality of service; in mile-
MUNICIPAL OWNERSHIP 193
age of track in proportion to population; in benefits to the
public treasury, and in all things that constitute satisfactory-
urban transportation, we have the highest testimony that this
system is superior to any in Europe; while the uniform five-cent
rate of fare, compared with the zone rates there, is no higher,
and wages of employees average twice as high.
Now, what has been done in Massachusetts may be re-
peated in every state in the Union, not only with respect to
tramways, but also as to lighting, telephone service, and water
supply. It was observed as far back as Aristotle that com-
munity of property was not a practicable scheme for populous
communities. How true that observation was is attested by the
fact that, while it has frequently been attempted, by almost
every character of people and under almost every social con-
dition, it has failed in every instance. The more extensive the
municipilization ideas are put into experiment, the nearer we
approach the community of property system, and, according to
all human experience, the nearer to governmental and indus-
trial chaos.
American Journal of Sociology. 10: 787-813. May, 1905.
Public Ownership Versus Public Control. Hayes Robbins.
When it was first announced that the Citizens' Union of
New York was entering upon a campaign to increase the range
of municipal powers so as to include ownership and operation,
among other things, of street railways, gas and electric-light
service, it was regarded as something of a politico-economic
sensation. The extraordinary feature was not the character
of the proposition itself. Municipal ownership is no novelty,
either as a theory in this country or as a practical accomplish-
ment in Europe, especially in Great Britain. But that an organi-
zation of the civic prominence and influence of the Citizens'
Union should select the opening months of a new Tammany
administration to start the machinery at the state capitol for a
■constitutional amendment permitting these new city functions,
was unique in American political history, to say the least.
194 SELECTED ARTICLES
Had the last municipal election in New York continued the
reform administration in office, a suggestion for adding an im-
mense new set of complex responsibilities and powers to the
city government's activities certainly would have seemed less
eccentric than coming, as it did, close upon the heels of the most
striking demonstration ever afforded of the insecurity of clean,
able, and nonpartisan government in the great "social experi-
ment" city of the New World.
But these are points of political expediency rather than of
principles at stake. The larger importance of any such move-
ment does not lie in the sensational interest of an unpropitious
launching, but in the fact that it raises again (and each time
more seriously, whatever the outcome of the particular agitation)
the issue of the wisdom and practical feasibility of taking the
government into these exacting and complicated fields of indus-
trial responsibility and management. This is, indeed, a large
issue; and if a fresh discussion of it leads to nothing more con-
crete than the remedying of certain abuses in existing systems,
and establishing more equitable and satisfactory relations be-
tween the community and public-service corporations, it will
have been well worth while.
The demand for public ownership and operation of street
railways, lighting facilities, etc., is often based upon the broad
contention that the furnishing of "common necessities" ought
logically to be in the hands of all the people. The argument is
obviously careless, in that it would equally justify state produc-
tion of wheat, sugar, coal, oil, meats, cotton, and wool — what-
ever, in fact, has come to be regarded as a "necessity" of life.
The real distinction comes in when the article in question is
not only a public necessity, but is supplied under practically
monopolistic conditions. There is a separate grouping of indus-
tries of this class, which is recognized in the practical policies
of virtually all civilized countries. From time immemorial gov-
ernments have elected to take over the control and operation of
so-called '"natural monopolies;" whether it was the development
of valuable natural products, especially rare mineral deposits, or,
in more recent times, the furnishing of water supply, drainage
systems, street-lighting, and even in some cases of public
MUNICIPAL OWNERSHIP 195
transportation and communication facilities. The instinctive
appreciation that the peculiar character of such industries calls
for and justifies something more than a laissez-faire policy is
what underlay the very general support of the President's inter-
vention in the coal strike. The act was unofificial, to be sure, but
morally it had the effect of an assertion of the sovereign popu-
lar right to take a hand in the conduct of a virtually monopolis-
tic industry supplying a necessity of life.
The principle has steadily become clearer that, where com-
petition is impossible or ineffective, some outside agency is not
only admissible, but necessary, to supply or compel the progres-
sive improvement and the checks against extortion which natur-
al conditions do not in such case afford ; and since this interfer-
ence is required in the public interest, what more natural than
that the government, as the organized expression of the people's
will, should be the intervening agent?
Much elaborate argument has been wasted in the vain effort
to show that competition is really feasible under all conditions.
But public sentiment has become impatient of all such obviously
specious reasoning in defiance of known facts. Competition
between transportation lines, or gas -and electric-light companies,
or telephone systems, usually ends either in a price agreement,
or a division of territory, or an outright consolidation of the
rival corporations. ^Massachusetts has frankly recognized the
humbug of competition in certain of these fields, and has even
gone to the extent, as a recent decision of its Board of Railroad
Commissioners, in a case at Springfield, witnesses, of declaring
virtually that the monopoly is advantageous and should be pro-
tected ; but such an expression from the source quoted must
always be taken in connection with the all-important proviso
that the monopoly operates under a very strict and comprehen-
sive system of public control, and this is precisely what Mas-
sachusetts law provide.
Here is where the real issue lies today. There is less and less
effort to galvanize the corpse of competition in the public-service
facilities of our cities, either in practice or in theory. Equally,
there is less and less disposition to deny the public right to supply
in some way the safeguards which competition would naturally
196 SELECTED ARTICLES
afford if it were actually there. The vital question is on the
how. And here begins the cleavage between the public-ownership
proposition and public control.
It will be of interest to inquire into some of the experience of
recent years, under both systems, in this country and abroad.
So far as strictly municipal undertakings are concerned, Great
Britain furnishes pratically all the advanced experiments of large
importance, and unfortunately the differences of opinion as to
practical results are so pronounced, and the testimony so con-
flicting, that positive conclusions are in many cases difificult. Not
only this, but in forming judgments very much depends upon
whether the results under municipal operation at a given time are
compared with previous private-management experience in the
same community, or with present American experience under
private management.
Take, for example, the famous case of Glasgow. The tracks
of the street-railway system were the property of the city from
the beginning, but were leased in 1871 to the Glasgow Tramway
& Omnibus Co., for twenty-three years. On November 12, 1891,
the Town Council voted not to renew the lease, and entered into
negotiations with the company for the purchase of its equipment.
These negotiations fell through, and the municipality thereupon
purchased an entire new outfit for a horse-car line — cars and
horses, barns, ground, buildings, and machinery. Why was not
an electric system installed, as it certainly would have been by
any American private corporation taking possession of an urban
transportation system so recently as 1894?
Mr. J. Shaw Maxwell, in a review of municipal-ownership
experiments, in the Co-operative Wholesale Societies' Annual for
1902, says it was because there was not time enough in the two
years after the negotiations with the private company collapsed
to the date when the city had to begin operations, to purchase and
install an electric plant. A different explanation is indicated in
the very exhaustive and favorable account of the Glasgow tram-
ways, to which the Light Railzcay and Tramivay Journal (Lon-
don) devoted almost its entire space in the issue of July 3. 1903.
It appears that a special committee was appointed as early as
July, 1891, to investigate methods of operation for the tramways
MUNICIPAL OWNERSHIP 197
and a month later reported in favor of "mechanical traction :" but
they could not agree on whether it should be electric, cable,
compressed-air, or gas-motor.
The subcommittee were busy considering the question until
after the following May, when they decided that it would be im-
practicable to start the service with mechanical traction, and that
the safest course would be to start with horses and wait further
developments in regard to the various forms of traction.
In October, 1902,
offers were received for erecting and completing an electric instal-
lation, with all plants, appliances, rolling-stock, etc., necessary for
working about eight miles of the tramways in the northern part of
the city, including the Springburn route, on the overhead system,
but the committee did not then see their way to recommend the
acceptance of any of the offers.
Not until five years later was even a short experimental line
authorized, and the principal reason seems to have been that
"there was as yet no general concensus of opinion as to which
was the best system of mechanical traction." The first test-line
was opened in 1898, and in the following year a complete change
to the electric system was voted. The last horse-car was with-
drawn from service in 1901.
There is a conflict of testimony also with regard to the finan-
cial results of the Glasgow undertaking. It appears that in the
twenty-three years of the lease to the private company nearly
$1,700,000 had been expended on capital construction account, of
which upward of $980,000 had been paid off by the tramway
company, which also had expended some $617,000 on the re-
newal of permanent way, and contributed some $309,000 in
clear cash profit to the city. Statements of percentages of profit
made by the municipality since 1894 make a considerably better
showing when the capital basis upon which they are computed
includes (in addition, of course, to later expenditures) only the
net debt upon the system at the time of the transfer, than when
it includes, as it should, the total investment up to that time, of
which almost two-thirds had been contributed free and clear by
the operating company.
Another easy way of getting an erroneous impression of finan-
cial results is to compare the average annual payments to the
"Common Good," or net profit fund, during the whole twenty-
three years of the lease with the annual payments into that fund
since 1894. By this method it appears that only about $13,500
198 SELECTED ARTICLES
per year went to the city's profit account prior to municipal man-
agement, while in the first year after the change, 1894-95, the
amount so paid was $40,193; in the four succeeding years,
$43,794 each; in the next three, $60,825; in 1902-3, $121,650;
and Mr. John Young, the general manager of the system, informs
the writer that "it has been decided that this sum shall be paid
over to the Common Good annually in the future."
But the $13,500 average for the twenty-three years before
1894 of course includes all the meager early years, from the time
when the total capital investment of the system was less than
$17,000. If, instead of stating the payments to the "Common
Good" as an average for the whole period, the figures are given
year by year, as is done for the period since the lease, it appears
that the amounts increased steadily prior to 1894 ^s well as since,
and in the last year under the old system amounted to over $27,-
000 ; in the last thirteen months, over $32,000. Further, it should
not be overlooked that if Glasgow had been obliged, as any
private corporation purchasing the plant would have been, to pay
annual interest, say at 2^/2 per cent., on the $980,000 of capital
investment which had been paid up by the private company, the
amount available for Common Good would have been less by
about $24,500 each year than it actually has been since the city
began operations. In other words, instead of $43,794 from
1895 to 1899, it would have been about $19,300 in each of those
years; instead of $121,650 today, it would be just over $97,000.
On the other hand, on the basis of what the old company
actually was accomplishing just prior to 1894, with the same
unpaid capital debt to carry as that taken over by the city, the
municipal management has steadily increased the net return to
the "Common Good," and that with some reduction of fares,
installation of a modern system, and altogether improved service.
And it is further to be noted that the movement toward
municipalization of British tramways is steadily forging ahead.
Huddersfield has been operating its own system since 1882;
Plymouth and Blackpool, since 1893; Leeds, since 1894;
Sheflf^eld, since 1896; Liverpool, since 1897; while Manchester
has only recently undertaken the same experiment, the largest
of the kind in England, covering nearly 150 miles of trackage.
MUNICIPAL OWNERSHIP 199
In 1901, 56 propositions for municipalizing tramways were
authorized, the estimated cost ranging from about $23,000 to
$14,600,000. According to the Board of Trade Returns spe-
cially obtained on this subject in 1900, 70 out of a total of 177
tramway systems were then under public ownership and manage-
ment, and these 70 represented a total expenditure on capital
account of $49,650,737, as against $56,116,580 for the 107 private
corporations.
The circumstance above all others which has made fairly
satisfactory results possible, as compared with the previous sys-
tems, is the relatively high character of British municipal admin-
istration. Through long traditions of decency and much clarifying
experience, these cities have developed the habit of picking men
of honorable repute, business experience, and capacity for public
service ; and but for this fact it is altogether probable that the
experiments would have proved disastrous failures. To cite a
few cases by way of illustrating the average composition of the
governing bodies of English municipalities : in 1901 the City
Council of Birmingham contained forty manufacturers and
tradesmen associated with the metal and cutlery trades ; in Brom-
ley nearly half the members were manufacturers and tradesmen,
connected chiefly with the cotton industry; in Hull the shipping
interests were strongly represented ; in Huddersfield woolen
manufacturers were prominent ; in Sheffield the staple industry
was represented in all its phases, from corporation directors to
steel-workers and molders ; in Glasgow the municipal corporation
consisted of twenty-one merchants and shopkeepers, twenty-six
manufacturers and tradesmen, sixteen professional men, four
following no calling, while the great trading interests of the city
were well represented.
In spite of all the favorable features, public opinion in Great
Britain, while strongly tending toward municipal ownership in
many quarters, is by no means a unit on the practical results
achieved down to date. Mr. Maxwell himself, although a believer
in municipalization, quotes a number of critical judgments; for
example, that of Mr. Benjamin Taylor, in the electric railway
number of Cassier's Magazine, that "generally speaking, the most
perfect tramway system is procurable when the municipality owns
200 SELECTED ARTICLES
the track and leases the lines to a company under municipal
regulations." Mr. Taylor reviewed the experience of Glasgow,
Huddersfield, Blackpool, Leeds, Sheffield, and Plymouth, and
expressed the conviction that
In no single instance has it [municipal operation] been perfectly
successful. Glasgow furnishes the nearest approach to success,
but in Glasgow, with a small track for an enormous dependent
population, it would take very bad management indeed to produce
financial failure. . . . Any well-managed company, in posses-
sion of the advantages which any of these corporations [municipali-
ties] whose work has been reviewed, possesses, would have, long
ere this, produced inuch better results both for itself and for the
public.
Whatever may be the conclusion, however, as to public versus
private tramways in Great Britain, when we compare the results
under the very best of the municipalized systems with those
realized in many of the larger American cities, the differences are
pronounced. Dr. Albert Shaw% author of Municipal Governuient
in Great Britain, who has sometimes been quoted as an advocate
of municipal ownership, declared before a committee of the New
York legislature : "1 have never dreamed of advocating municipal
ownership in the city of New York. I have never thought of it
as a remedy." And, as to foreign cities : "I never believed any
experience derived from them of any applicability to our cities. "~
Mr. Charles Francis Adams, who was a member of the special
Massachusetts investigating committee appointed in 1897, and
whose right to speak with considerable authority on these matters
is unquestionable, declares that he has "never yet found in
Europe anywhere a case of municipal or public transportation
worthy an instant's consideration as compared with our own,"
This has the appearance of an extreme view, to be sure; but con-
crete facts go a long way in support of it.
Suppose, for example, the comparison is made between the
Glasgow experiment, w^hich is decidedly the most favorable for
municipal ownership that could be taken, and the Boston system,
which, if it is indeed the best in the United States, has many a
close second so far as practical operation is concerned, whatever
may be said of the general fiscal relations with the community.
Of that, more later.
Glasgow today has 139 miles of tramway, measured as single
track. The population of the city is about 800,000; and in the
MUNICIPAL OWNERSHIP 201
financial statement and general account issued by the Tramways
Committee the total population served, including the suburbs, is
given as one million. The Boston Elevated Railway Co. operates,
as a unit, some 440 miles of elevated, subway, and surface lines,
and serves approximately the same aggregate population, includ-
ing the suburbs. In other words, Glasgow has one mile of track
for every 7,200 of population, in round numbers ; Boston, one
mile for every 2,270. The Glasgow system in 1902-3 carried
177,179,594 passengers; the Boston company carries about
236,000,000 paying passengers, of whom 130,000,000 use free
transfers, making 366,000,000 separate trips furnished. The
average daily traffic is : Glasgow, 485,000 ; Boston, 1,000,000.
The Glasgow rolling-stock consists of about 680 cars of all kinds ;
the Boston company owns over 3,300. The average number of
cars operated in one day in Glasgow is now about 450; in Bos-
ton. 1,300. Thus Boston operates one car for every 770 passeng-
ers carried each day; Glasgow, one car for every 1,077.
This difference is reduced, however, by the fact that prac-
tically all the Glasgow cars are "double-deckers," seating from
50 to 55 passengers. A car seating 55 provides for 25 inside and
30 on the roof. The equipment of the Boston system is varied,
including 174 elevated-railway cars seating 48 passengers, with
comfortable standing-room for 50 more; nearly 1,600 surface-
railway box-cars of different sizes, the great majority seating 34
passengers each; and more than 1.500 open cars for summer use,
seating from 40 to 60 according to the number of benches. In
winter, therefore, although Boston operates about 40 per cent.
more cars in proportion to traffic than Glasgow, the average
seating capacity of a car on the Glasgow system is greater than
that of Boston surface cars by an even larger percentage ; but
this does not apply to carrying capacity. The standard surface
car on the Boston system is 25 feet long, exclusive of platforms;
in Glasgow, only 17 feet; which means, of course, less standing-
room inside. And there can be little doubt as to which of the two
evils is to be preferred, for winter travel — standing-room inside
a warm car, or a seat on the roof, exposed the cold and fre-
quently to storms. This exposure to weather, by the way, is a
permanent feature of "upper-deck" travel on the Glasgow cars.
202 SELECTED ARTICLES
summer or winter ; a second roof, or cover of any sort, has been
found impracticable on account of the many bridges under which
the cars must pass.
A new type of box-cars, the largest size that can be used on
many of the crooked streets, and seating 36 passengers, is being
installed on the Boston lines. And it is somewhat unjust to the
Boston system, moreover, to estimate the average seating ca-
pacity solely on the basis of standard surface cars, even though
there are 1,600 of these and only 174 of the elevated cars, which
seat 48 each. An elevated car runs many more miles in a day
than a surface car, and hence handles a much larger relative pro-
portion of the traffic. While there are less than one-ninth as
many elevated as either type of surface cars, the mileage made by
the elevated cars is more than one sixth of the total made by the
surface. This, of course, increases the average seating capacity of
the rolling-stock as a whole.
In summer the average seating capacity of the elevated and
open surface cars on the Boston system is nearly, if not fully,
equal to that of the Glasgow cars, and this with protection from
the w'eather, .and without the delays and inconvenience in requir-
ing passengers to climb to the roof. Double-deck cars were tried
in Boston at one time, but abandoned because it was found im-
possible to handle heavy traffic with sufficient expedition ; and it
is chiefly on this account, in fact, that the street-railway judg-
ment of this country has been, on the whole, against the use of
this type of rolling-stock.
The Glasgow system, June i, 1903, wath 130 miles (measured
as single track), represented a total capital investment of
$13,405,024, or $103,115 per mile. The Boston system, including
stock^and bonds of leased lines, is capitalized at a little less than
$/| 4,500,000 ; and if to this be added the cost of the city-owned
subway, on which cost the company pays the interest and a
liberal sinking-fund contribution, the total capital investment
becomes approximately $48,500,000, or $110,227 per mile. There
is no presumption of overcapitalization here, as compared with
Glasgow, in view of the costly elevated and subway sections
which form a part of the Boston service, and of the further
fact that labor cost of construction in this country includes a
MUNICIPAL OWNERSHIP 203
wage-rate practically double that of Scotland, and which is only
partially offset by the superior skill and energy of our workmen.
The Boston system, with earnings of about $12,000,000 an-
nually, pays a direct tax of seven-eighths of one per cent, on
gross earnings, a state corporation tax of about $16 per $1,000 of
market value of the stock, and local taxes on its real property, in
the various municipalities through which its lines pass, ranging
from $15 to $20 per $1,000 of assessed valuation; and, in addi-
tion, is required to remove snow and ice from, and maintain the
paving on, the street surface occupied by its tracks. The interest
which it pays on the cost of the subway is sufficiently in excess of
the interest the city has to pay on the bonds issued for its con-
struction, to retire the bonds and make the subway the city's
property free and clear in less than forty years.
The total of these taxes and service obligations, and excess
interest payment, now amounts to upward of $1,550,000 a year,
or nearly 13 per cent, of the gross earnings. Glasgow, with a
street-railway revenue of $3,178,471, in 1902-3, paid into the
"Common Good" $121,650; to which should be added the taxes
which the municipality as a whole assesses upon the tramway
property, amounting in 1902-3 to $88,488. A further addition
•should be made of $83,982, being the average annual payment by
the Tramway Committee since 1894 into the sinking-fund for
reduction of the capital debt; these payments, of course, are
profit to the municipality, in that they give it that much clear in-
terest in the property as an asset. The total of these payments
which go to the public good is $294,120, or slightly over 9 per cent.
of the gross revenue. The Boston corporation, serving the same
population as the Glasgow lines touch, pays to public-benefit ac-
count more than five times the gross amount so paid by the
Glasgow system, and 39 per cent, more in proportion to earnings.
The question of fares cannot be considered apart from that of
the amount of service furnished. What are the facts, then, as
between Glasgow and Boston? Glasgow has a graduated scale of
fares, ranging from i cent for a little over half a mile to 8 cents
for nine miles. The standard 5-cent fare in this country takes a
passenger 5.8 miles in Glasgow. Needless to say, the confusion
and complications of such a system, for the varying distances
204 SELECTED ARTICLES
traveled, would prohibit it from meeting the demand for the
utmost possible expedition on our large American city transit
systems. Even more serious is the increasing rate of penalty it
imposes upon the wide distribution of traffic, and hence upon the
building up of workingmen's homes in the suburbs.
In Boston the uniform fare is 5 cents, and by means of the
• free-transfer privilege it is possible for this sum to ride from one
end of the system to the other, fully 20 miles. Wage-earners and
clerks employed in the business districts can live 8 to 9 miles out
and ride to and from their homes for 5 cents, while the Glasgow
"suburbanite," to travel equal distances, if the lines extended that
far, would have to pay 7 and 8 cents, respectively. A journey of
15 or 16 miles out from central points in Boston, by connection
with outlying suburban lines, may be taken for 10 cents, and 20
to 25 miles for 15 cents. The same distances under the Glasgow
rates would cost 13, 14, 18, and 22 cents, respectively.
The short ride and congested-district character of the Glas-
gow service must be borne in mind in connection with the fact
that the average amount received per passenger, based on the re-
turns of annual earnings, is a little less than 2 cents. In Boston,
counting the free transfer passengers, it is about 3% cents. But
what is the effect of the sliding scale on Glasgow traflfic? Simply;
that the great bulk of the travel consists of short rides within
the city limits. Thirty-six per cent, of the passengers pay i-cent
fares — that is, ride only half a mile; 56 per cent, pay the 2-cent
fare, covering 2.33 miles ; only 8 per cent, pay fares of 3 cents
and upward; in other words, only 8 per cent, make journeys of
more than 3.5 miles.
To be even more explicit : The most distant suburban point
to which the Glasgow tramways extend is Paisley, 6.95 miles.
To get there costs 6 cents, or 7 from the center of the city. The
next farthest point is Clydebank, 6.39 miles; fare, 6 cents. Three
other suburbs are between 4 and 5 miles, and one about 3^.
From Park Street station, Boston, a passenger may ride 9.53
miles to Arlington Heights for 5 cents; 9.83 miles to Charles
River Bridge; 8.23 miles to Arlington Center; 8 miles to
Waverley; 7.9 miles to the Melrose line; 7.36 miles to Milton;
J.2, miles to Neponset ; 6.32 miles to Woodlawn ; and 6.04 miles
MUNICIPAL OWNERSHIP 20s
to Lake Street; and the uniform fare for any one of these jour-
neys, or for any two of them in combination, through free trans-
fer, is 5 cents.
The Glasgow system is not doing what it might and ought
toward reHeving the terrible congestion of workingmen's families
huddled within the cramped distance limits. That the need of
such distribution is great appears from the fact that more than
30 per cent, of the families in Glasgow, according to an invest-
igation made a few years ago, were living in single rooms, as
compared with about V/z per cent, in Boston.
But there is yet another most important consideration entering
into this matter of fares — the question of wages. The relation
of wage-rates paid, to the average fare charged, is twofold.
First : Wages are by far the largest item of operating
expenses, and, as between two systems using substantially the
same traction methods and carrying approximately the same
number of passengers per car, the one paying the higher wages
must necessarily charge a higher rate of fare. If the system
paying the higher wages also operates more lines and furnishes
a larger number of cars for the amount of traffic handled, all
the more reason why the rates of fare must be higher.
Both Glasgow and Boston use the system of electric traction.
Boston operates more than three times more track, and runs 4a
per cent, more cars in proportion to traffic. How about the
wages. The pay of motormen and conductors in Glasgow ranges
from 97 cents per day during the first six months to $1.22 after
three years of service. In Boston surface-car conductors and
motormen receive $2.25; elevated motormen, $2.30 the first year^
$2.40 the second, and ^2.50 the third; brakemen, $1.85; guards,
$2.10; while all these employees receive 5 cents per day addition-
al after five years of service, 10 cents after ten years and 15 cents
after fifteen years. These rates are about double those paid in
Glasgow.
From the operating standpoint, therefore, whether it be in
respect to wage expense, trackage operated, or amount of car
movement, or all three, as is actually the case, there is abundant
reason for higher average fares per passenger carried on the
Boston system.
206
SELECTED ARTICLES
The second respect in which the wage matter relates to fares
charged brings in the question of purchasing power. The differ-
ences between Boston and Glasgow street-railway wages reflect
similarly wide dift'erences between the general "run" of Ameri-
can and Scotch wages all along the line — not so great in some
cases, of course; in others greater. It is one of the truisms of
economics that prices are to be considered high or low, not abso-
lutely, but solely with reference to the purchasing power of the
community, and in a community where wages are practically
double the rates prevailing in another, an average fare of 3^
cents would be, if anything, somewhat cheaper than one slightly
under 2 cents in the other; at least, so far as concerns the army
of wage-earners and clerks, and their families, who constitute
the great majority of the patrons of any urban transportation
system, and are the people to whom the matter of rates and
service is of chief importance.
It may be urged, as accounting for some of the relative ad-
vantages of the Boston system, that it is surrounded on all
sides by "feeder" electric roads which deliver passengers from
an area including a considerably larger population than is
brought into touch with the Glasgow lines. The fact is, how-
ever, that the bulk of the business from this wider area is
handled by the suburban service of the steam railroads. Hun-
dreds of trains each day, in and out of the two great terminals
in Boston, accommodate an immense traffic, and not only from
outlying points, but from stations directly within the territory
of the Boston elevated, and in constant competition with it ; so
that the accounts are probably square in this respect. As a matter
of fact, the proportion of traffic on the Boston Elevated Co.'s
lines which does not originate within its own territory, compared
with the total business, is small.
The reasonable deduction from these somewhat extensive
comparisons seems to be that, while public ownership and opera-
tion of street railways, under the favorable civic conditions of
British municipalities, in most cases give a better and cheaper
service than was afforded by the various private corporations it
supplanted, even this improved service is relatively meager in
extent, and usually of mediocre quality, compared with Ameri-
MUNICIPAL OWNERSHIP 207
can experience ; and that the municipalized enterprises would
break down entirely if subjected to any such tests as are com-
monly required under American conditions.
Glasgow was selected for comparison, as already observed,
because it makes the best showing for municipalization, probably,
to be found anywhere. In other British experiments results are
less favorable, some of them markedly so; but in few of them
have the facts ever been presented with sufficient clearness and
fairness to warrant any very precise comparisons. The experi-
ment of the London County Council in constructing electric lines
in the south of London is a case in point. It appears that in
1899 the council's experts estimated the expense of this undertak-
ing at about $1,242,000. It has only recently been completed, and
proves to have cost some $4,800,000. In consequence of this
excessive expenditure, there seems to be a fair prospect, accord-
ing to the chairman of the Finance Committee of the County
Council, that the expenses, and charges against these lines, will
exceed the income, and the deficit will have to be added to the
tax budget. Thus far, the net returns to the council from the
south London system have not been anywhere near so great
as those from the leased lines on the north side ; but, on the
other hand, the fares are somewhat higher on the private lines,
and the service in some respects not so good.
The same uncertainty exists in regard to municipalization of
electric lights. The London Times presents statistics showing
that during 1901 the city of Salford lost $36,441 on the operating
account alone of its electric-light plant, to say nothing of the
charges on the $908,803 invested. Bath lost $6,024 in the same
year, on a plant which was purchased for $119,217, and upon
which $379,548 had been spent. Even after this expenditure, the
works broke down, and the city tried in vain to sell the outfit to
a private corporation. Bedford lost $14,598 on operating ac-
count; Bristol, $12,165; Morley, $9,732 ; Glasgow, $21,980; Edin-
burgh, $13,089. These facts certainly are striking. Granting
that the Times was conducting a campaign against municipal
ownership, and hence did not give the statistics for cities which
may have had more favorable experience, the specific cases here
cited are of such importance as to destroy any warrant for as-
2o8 SELECTED ARTICLES
serting in general terms that "municipal electric lighting is a
success in Great Britain." It would be impossible to make such
a claim, evep if all the other experiments were financially satis-
factory.
Coming to the United States, the briefest statement of the
situation shows how slight a hold the public-ownership idea has
obtained thus far. Chicago, it is true, has voted in favor
•of municipal ownership of the street railway, gas and electric-
light plants ; but in the present financial condition of that city
there is little prospect of the proposal getting any farther. Thus
far, only one community in the land owns and operates its own
street railways, namely, Grand Junction, Colo., a town of less
than 5,000 population. Of places of 3,000 population and
upward, 193 are supplied with electric light by public enterprise,
1,190 by private; 20 operate municipal gas-works, 956 rely upon
private companies; 1,465 have private telephone exchanges,
while not one has embarked in this branch of municipal enter-
prise. Water-works and sewers, the two forms of municipal serv-
ice requiring relatively the least of expert management and
trained business judgment, are much more largely under direct
municipal control; there being only 42 private sewerage systems
against 1,045 public, and 661 private water companies against
766 public.
It is interesting to note that by far the larger number of
municipally owned electric-light plants and gas-works are
found in small places, where the conditions are relatively sim-
ple; very few of the large cities, where the demands of the sit-
uation are complex, extensive, and exacting have tried the ex-
periment. Of cities of 30,000 inhabitants and upward, only four
conduct municipal electric-light w^orks, and three municipal gas-
works ; while in places of 3,000 to 5.000 inhabitants, iii electric-
light plants are under public management, and seven gas-works.
In the six largest cities — New York, Chicago, Philadelphia, St.
Louis, Boston, and Baltimore — both electric light and gas are
supplied by private companies, with the partial exceptions that
Chicago furnishes her own electric-street lighting, and the Phila-
delphia gas-plant, although leased to a private corporation, is
owned by the city.
MUNICIPAL OWNERSHIP 209
The Philadelphia experiment in gas-making is one of the
interesting cases of municipal mismanagement on a large scale.
After many years of operation by the city, the plant had so
deteriorated and the financial losses to the city had so accumu-
lated, the gas supplied was so poor in quality and high in price,
and the political manipulations of the "gas ring" (which Pro-
fessor Bryce says controlled 20,000 votes) became so notorious,
that after a thorough legislative investigation the whole outfit
was leased to a private corporation for a term of practically
thirty years, or from December i, 1897, to December 31, 1927.
The conditions of the lease provided for a complete rehabilita-
tion of the plant, declining price and improved quality of gas,
and liberal annual cash payments into the city treasury.
In the four years previous to the making of this lease the
expenditures incurred by the city in connection with operating
the gas plant, including salaries of office employees, furnishing
of street lamps, rentals, betterments, etc., exceeded the income
by $958,615.64, an average deficit of $239,653.91 per year.
The item of betterments during this period averaged $365,-
498.02 per year. In view of the condition the plant was in when
taken over by the private company, it is a fair inference that
the bulk of these so-called "betterments" were virtually waste,
yielding very little actual improvement in the efficiency of the
works. But if we waive that point, and credit the full amount
of the betterments to the city as permanent improvement of the
plant, the current operating account, disregarding the betterments
outgo, showed an average annual surplus of $125,844.11. In the
six years after the lease the cash payments to the city by the
private company, in consideration of the privileges granted it,
amounted to $2,600,523.12, or an average of $433,420.52 per
year. Thus the gain to the city on current operating account
alone, under the lease, has amounted to an average of $307,576.-
41 annually, as compared with the four previous years. The
private company now makes all the betterments (which go to the
city free and clear at the end of the lease), and these must a-
mount to $15,000,000 during the term of the lease, or an average
of $500,000 per year. Adding to these guaranteed betterments
the net gain on current operating account, it would appear that
210 SELECTED ARTICLES
the average annual gain to the city since the lease went into ef-
fect has amounted to $807,576.41.
As a matter of fact, the company is making the bulk of the
betterments in the first years of the lease. By the first of Jan-
uary, 1904, it had expended on this account a total of $9,608,199.-
50.
And this does not tell the entire story. The company fur-
nishes the city with gas for street-lamps and public buildings,
free 01 expense, and is required to increase the number of street-
lamps to the extent of 300 per year, as ordered by the City
Council. At the same time, the average candle-power of the
light supplied has increased from a range of from 19.04 toi9.47
in the four years preceding the lease, to a range of from 22.72 to^
23 in the six years after the lease. The price per 1,000 feet is
$1, of which 10 cents goes to the city treasury. The city has the
power to reduce the price to 90 cents, if it chooses to forego
its own revenue of 10 cents ; after 1907 it may reduce the rate to
85 cents; after 1912, to 80 cents; and after 1917, until the end
of the lease, to 75 cents.
In addition, the item of making service connection and
installing meters, part of which was formerly charged to the con-
sumers, is now borne entirely by the private company. The city
has the option of resuming possession of the plant January i,
1908, but only upon condition of reimbursing the private com-
pany for all betterments made in the meantime. At the expiration
of the lease the entire plant is to be turned over to the city, with
all the betterments, free and clear. The issue of returning to
city management or executing a new lease will then come before
the city of Philadelphia, and if those who endured the service as
it was before 1898 were to be the ones to do the deciding in
1927, there is little doubt what the verdict would be.
The experience of Boston a few years ago throws additional
light on the difficulties of municipal ownership in this country.
Under Mayor Quincy, a number of new municipal bureaus or
departments were created, through which the city undertook to
do its own printing, electrical construction, carpentering, and
repairing, furnish its own ice, and so on. Under the succeeding
administration of Mayor Hart, an experienced business man, it
MUNICIPAL OWNERSHIP 211
was found that, instead of proving sources of economy, these
bureaus were veritable waste-pipes leading from the city treas-
ury, and they were closed up as fast as possible, with the excep-
tion of the printing-plant, for which a satisfactory offer could
not be obtained. Among other things, it was found, for example,
that the electrical equipment of a ferry-boat, which under private
contract would have cost only $6,800, cost $10,200. Electrical
work in the city building for hospital nurses cost $4,754 ; by
private contract it would have been $1,528. Work on a city
armory, which normally would have cost $2,600, absorbed $6,700
of the city's funds. Ice for public drinking-fountains, which
private companies were furnishing at $2 to $3 per ton, was
costing the city $6.
Political appointees, numerically far in excess of the require-
ments of the service, and individually incompetent as a rule, had
brought the bureaus to this extravagant pass ; and it was vir-
tually impossible to resist the drift in this direction, because the
Common Council would not vote money enough to carry on the
work of the departments, unless "places" were made for the
favorites of the aldermen, as demanded. Chief Electrician Wil-
liam Brophy, of the Boston Wire Department, reported to IMayor
Hart:
A glance at the pay-rolls shows that nearly 60 per cent, of the
men whose nam'es they contain were appointed at the request of
certain prominent gentlemen, who, to say the least, are not the
best judges of the necessary qualifications of the employees of this
department.
And among these employees, it is hardly necessary to add, there
was a more or less general adoption of that leisurely gait
which already has come to be known on the state-managed in-
dustries in New Zealand as the "government stroke."
Civil-service regulations proved no safeguard against these
aldermanic raids, and the efforts to get around the rules were
even carried to the extent of supplying a variety of ordinary em-
ployments with new and singular names for which no civil-serv-
ice examinations existed !
On the general question of whether such abuses could be
overcome, and a civil-service system devised which would pro-
vide a really satisfactory selection of employees for socialistic
municipal enterprises, it seems high time to remark that the
212
SELECTED ARTICLES
extent of effectiveness of any civil-service test, v^^here more than
somewhat perfunctory service is required, is very easily over-
estimated. It has become a sort of fetich in the popular mind,
to such an extent that very many participants in this line of
discussion have made the tacit admission that if a rigid civil-serv-
ice system could be established, it might then be a feasible to
place industrial enterprises under the management of govern-
ment bureaus. But the truth is that no civil-service examination
ever devised is adequate to select out industrial capacity, or catch
in its meshes that indefinable, unclassified, evasive quality of
practical genius which enables one man to take charge of a
business undertaking and bring it through to success, while an-
other, of equal or even superior technical knowledge, makes a
total failure of the attempt.
Natural selection is the only method that has ever been
found to develop the highest type of managing ability in the in-
dustrial field, and no feasible substitute for it has ever been
proposed. How would it be possible, for example, to establish
tests of business policy and management which should be re-
garded as the accepted "standards"? There are, in fact, no ac-
cepted "standards" of policy for the successful conduct of busi-
ness enterprises. The conditions of success are not only con-
stantly changing, but they are widely different at one and the
same time, in different plants, according to the situation, charac-
ter of the market, previous traditions of the business, and a hun-
dred and one features irreducible to concreteness. What might
be regarded as essential business principles in one situation, and
made the basis of a general competitive examination, might
yield a group of successful candidates notably unfit to conduct
enterprises under the varied and changing conditions of other
situations not covered by these established tests. On the other
hand, it is doubtful if some of the most successful managers
of modern industries could themselves pass an examination of
the sort which would probably be regarded as necessary to select
the best managing talent.
To bring all these considerations to bear against the municipal
operation of complex industrial enterprises is not, however, to
concede the entire case to the opposite contention of unlimited
MUNICIPAL OWNERSHIP 213
private control. There are grave abuses and inadequacies in
private management, here and there, as well as under public
enterprise, although usually of a different character, and capable
of being remedied by other means than sacrificing the positive
advantages and permanent incentives to efficiency and improve-
ment, furnished by the element of individual rewards and penal-
ties. In other words, there is a middle ground of public control,
to which attention may well be drawn, since here, indeed, is a
really fruitful field.
The transportation system of Boston was selected for com-
parison with Glasgow intentionally, because it affords the best
illustration in evidence anywhere of this attempt to solve the
municipal-service problem along the lines of public control. The
public control here exercised is both specific and general : that
is, the Boston Elevated Co. operates under certain restraints and
requirements imposed equally upon all street-railway corpora-
tions in the commonwealth, and in addition is subject to an com-
prehensive set of special regulations framed in recognition of
the peculiar conditions of metropolitan transportation.
In addition to the various taxes already specified, whereby
the public receives its contribution to the "Common Good," it is
provided that, if any dividends are declared in excess of 6 per
cent., an amount equal to the excess shall be divided among the
cities and towns in which the company operates. In point of
fact, whatever has been earned in excess of 6 per cent, thus far
has been turned back into improvement and extension of the
system, and this may be expected to continue for a number of
years ; the plans for development of the Boston transportation
facilities are of a most comprehensive character, and the work
is steadily in progress. The division of profits above 6 per cent.
(8 per cent, in the case of all other street-railway companies)
is probably the least important of the Massachusetts public-
control features ; it may possibly, however, act as some measure
of protection of the Boston system and its present exceptionally
public-spirited management, against becoming the prey of specu-
lative interests ambitious to exploit the property solely for the
quick profits to be got out of.it.
The general body of Massachusetts street-railway legislation
214 SELECTED ARTICLES
is very largely the outgrowth of an official investigation in 1897,
by a special committee, whose report is perhaps the most valua-
ble and suggestive that has appeared on the subject. This legis-
lation is of an advanced character, providing very careful pro-
tection of public interests and close supervision of quasi-public
enterprises. As a matter of fact, for more than half a century
Massachusetts communities have held the power of life and
death over street railway corporations, at short notice. The
franchibcs of any such company are nominally perpetual, but
they are subject to revocation at will in and by the communities
through which its lines pass, the only appeal being to the State
Railroad Commission. The commission may nullify the revoca-
tion, or sustain it if in its judgment the public interests so re-
quire, what ever the cause of complaint against the offending
corporation.
In other words, a street-railway franchise in Massachusetts
is what the investigating committee of 1897 termed a "tenure
during good behavior;" the sole exception to this indefinite-
term principle being in the case of the Boston Elevated Railway.
In view of the extraordinary investment required for per-
manent plant, the Boston corporation holds perpetual franchises
for the right of way of its elevated structures, subject only to
revocation of its charter; and, by virtue of taking over the
West End Street Railway, the Elveated Co. operates under a
twenty-year lease of the subway, originally granted to the for-
mer corporation. The surface-line franchises, however, are re-
vocable by the municipal authorities.
The State Railroad Commission is not only the final arbiter
of life and death for street-railway companies, but it determines
in the first instance, by careful inspection of the proposed routes,
plans, etc., whether the capital stock to be issued corresponds
with a fair estimate of the actual expense of construction to be
incurred; and no corporation may issue stock in excess of that
decision. All increases of stock must be authorized, and the
price per share at which it may be sold to those already owning
stock must be fixed, by the commission. The price so fixed must
represent as nearly as possible the market value of the stock at
the time. No certificate of original stock may be issued until the
MUNICIPAL OWNERSHIP 215
par value thereof has been paid in, in cash : and no stock or scrip
dividends may be declared, or proceeds from the sale of stock
divided among the stockholders ; these restrictions apply to all
public-service corporations. Bonds may not be issued by street-
railway companies until the Railroad Commission is satis-
fied that the value of the real and personal property of the
company for railroad purposes exclusive of the value of the
franchises, equals or exceeds the amount of capital stock and
debt. These provisions render stock-watering virtually impos-
sible.
The railroad commissioners, also, may nullify at their dis-
cretion any location granted through a street for a new street
railway or extension of an old one. in case a majority in value
of the owners of real estate on that street, or ten such owners,
appeal to the commission within thirty days after the location
is granted. Even after the work of construction is completed,
operation may not begin until the commissioners have certified
that the laws relative to its construction have been complied with,
and the board's engineer has inspected the line in detail and
found everything safe and adequate. Thereafter the commission
may revise or alter any regulations of a street-railway company
for the use of its road or cars ; may determine how and to what
extent cars shall be heated : and the companies forfeit $25 for
each trip upon which the cars are not so heated, unless the
failure is due to an accident to the heating apparatus. The
district police are required to enforce this provision. If the
commission considers that additional accommodations are re-
quired, after due notice to the company it may order such ad-
ditional accommodations, and after one week from the service
of such notice, if the company neglects to provide them, it for-
feits $100 for each day of such neglect.
Transfer privileges may not be withdrawn except upon
approval of the Board of Railroad Commissioners. The books
of every railroad corporation must be kept in a uniform mamner,
upon a system prescribed by the commission, the accounts exam-
ined from time to time, and the results made public as the com-
mission may consider expedient. Such examination and publica-
tion of results may be compelled at any time by application of
2i6 SELECTED ARTICLES
any persons owning one-fiftieth of the paid-in stock of the cor-
poration, or bonds or other evidences of indebtedness equal in
amount to one-fiftieth or such stock — an important provision in
protection of the minority stockholder, creditor, or bond-holder.
A five-thousand-dollar fine is the penalty for refusal or neglect
of any such corporation to exhibit its books and accounts when-
ever the commission requires.
These are only illustrations of the far-reaching supervision
exercised by the Massachusetts Railroad Commission. No other
in the country is endowed with powers so sweeping; no other
stands so high in reputation for ability, fairness, and unimpeach-
able honesty. Only because its extraordinary authority is never
abused is it possible to continue that authority in active exercise.
The commission is securely intrenched in the respect and con-
fidence of all elements in the community; so much so that it has
become in many cases a custom of opposing interests, corporate
and otherwise, to refer controversies to it for decision ; and,
although the decision is often adverse to the corporation inter-
ests, sometimes to the extent of important and expensive changes
in plant or equipment or method of operation, the commisssion
still remains the preferred tribunal.
The general attitude of the present commission toward the
street-railway problem is admirably summed up in a paragraph
of its recent decision in the Springfield case, referred to. The
commissioners say:
The operation of street railways in the larger municipalities has
shown that the traffic within city limits can be handled with great-
er success and greater safety by one than by several com-
panies. It will not do, however, for a company which receives the
privileges of monopoly to forget the obligations which go with
them. The public in such case can look to the one company only
for needful extensions and additional accommodations. In response
such company should be quick to meet all reasonable demands.
When it undertakes to perform the entire public service, it must
carry out the task.
The Massachusetts Commission consists of three men,
appointed by the governor with the consent of the special ad-
visory body known as the "Council," and each holds ofifice for
three years. Its integrity is preserved through two consider-
ations : the virtual absence of attempts on the part of Mas-
sachusetts corporations to control it by influencing the election
of a "friendly" governor, and the positive demand of public senti-
MUNICIPAL OWNERSHIP 217
ment for a commission that shall be above criticism. To appoint
to this commission a man open to suspicion of representing
special interests would be hardly less disastrous to the future
political prospects of a public official than an attempt to "pack"
the Supreme Court with political or corporate favorites.
It might be expected from all too familiar experience else-
where that the power of revoking franchises would be in constant
use as a club for blackmail extortion ; and with a less active
public conscience than still prevails, for the most part, in Massa-
chusetts, it probably would be. But in the Bay State a liberally
managed, law-abiding corporation is practically as sure of fair
treatment and a long lease of life as if its franchises were ab-
solute for twehty, thirty, or fifty years. In fact, the half -century
of experience with revocable franchises was so satisfactory to all
concerned that in all the hearings before the investigating com-
mittee of 1897 no request to change this feature was made by any
municipality or corporation in the state.
Other public-service corporations are likewise under strict
provisions of public control. Gas and electric-light companies
are under the supervision of the State Board of Gas and Electric
Light Commissioners, who have the power of examining accounts,
etc. Telephone and telegraph corporations, and water companies,
are under the state commissioner of corporations, who is also the
commissioner of taxes. All issues of stock or bonds of any
such corporations must be approved by these commissioners re-
spectively, as the case may be, and must be on the basis that the
amount is "reasonably necessary for the purpose for which such
issue of stock or bonds has been authorized." Whenever the
mayor of a city or selectmen of a town, or twenty customers,
complain as to the price or quality of gas or electric light fur-
nished, the Board of Gas and Electric Light Commissioners must
notify the corporation and order a public hearing, and after the
hearing may order such reduction of price or improvement in
quality as the facts brought out may warrant. The price so
fixed may not be increased, except that any corporation may
apply for a new hearing, if it considers itself aggrieved.
The annual expenses of the Board of Railroad Commissioners
and the Board of Gas and Electric Light Commissioners are
2i8 SELECTED ARTICLES
charged upon the various railroad and gas and electric-light cor-
porations, respectively, in proportion to their gross earnings.
All corporations in Massachusetts, of whatever kind, are
subject to state taxation upon the value of their "franchises,"
representing the right to do business — an express assertion of
the principle that the carrying on of an industrial enterprise is a
social privilege rather than a fundamental or natural individual
right. The value of the franchise is determined by the state tax
commissioner, and is arrived at by taking the total market value
of the stock of the corporation at the time of the assessment,
and making certain deductions therefrom, as follows : In the case
of a telegraph or railroad or street-railway company, the value
of its real estate and machinery subject to local taxation within
the commonwealth is deducted; also so much of the value of
its stock as is proportional to the length of its lines lying out-
side the state. In the case of telephone companies, the value
of the real estate and plant subject to local taxation within the
state is deducted ; also the value of all stock of other corpor-
ations held by a "domestic"^ telephone company, and upon which
a tax has been paid in Massachusetts or any other state for the
preceding year ; and so much of the value of the stock of a
"foreign"! telephone company as is proportional to the number
of telephones it owns or controls outside the state. In the case
of all other corporations, manufacturing, etc., the value of real
estate and machinery subject to local taxation is deducted. And
it should be noted that the assessments for local taxation of
corporations are subject to equalization or alteration upon pro-
ceedings which the state tax commissioner has power to compel.
The differences between the total market value of the stock
and the various deductions specified is considered to represent
the value of the franchise, and this is taxed at the same rate as
that ascertained for the general state property tax in any given
year.
That a system of public espionage and control so thorough-
going and rigid as this should have given satisfactory results,
on the whole, and without serious abuses, is a tribute to the
, 1 "Domestic" corporation organized under Massachusets laws;
foreign" under laws of some other state.
MUNICIPAL OWNERSHIP 219
relatively high standards of civic life and general political con-
ditions maintained — not without exceptions, to be sure — in the
commonv^-ealth, and it would take considerable optimism to as-
sume that similar regulations would work equally well every-
where — or even anywhere — else in the Union. The city of Bos-
ton is the danger spot, and source of constant menace to the just
exercise of these extraordinary powers over corporate property;
and many times there has been occasion to realize how narrow is
the margin of safe control in the hands of decent elements,
which prevents the legislative system from being converted into
a weapon of plunder in the hands of professional blackmailers
and "grafters."
However, if Massachusetts has to fight at every step for the
integrity of her public-control policies, where shall be found the
justification for other and less favored communities rushing
away beyond these limits to the extreme experiment of public
ownership and operation? If an effective system of regulation
cannot be maintained in our large cities, because of political cor-
ruption, what hope is there for the success of absorption out-
right, placing public-service facilities wholly in the hands of the
selfsame political influences?
Public control retains the vital spark of individual enterprise
and the incentive of private reward, which have kept alive the
spirit of industrial progress and brought nearly all the material
gains of civilization into being; and at the same time asserts in
practical form the right of the whole community to hold self-
interests within just bounds and guarantee to itself such benefits
as its own contribution to the success of the enterprises entitles
it to demand. There is "hard Yankee sense" in such a program.
It does not violate the American idea of individual achievement.
It has shown itself practicable under at least some American
conditions. But the first task of the municipal reformer is to
bring the general civic conditions themselves to some permanent
and dependable plane of honesty, public spirit, and cleanness.
If public control cannot succeed on any lower level than this, what
would happen to public ownership?
ADDITIONAL REPRINTS
Calgary, Alberta, Canada. City Clerk. Municipal Manual,
1913- pp. 46-9.
Municipally-Owned Industrial Sites.
Chief among the inducements Calgary offers to manu-
facturers are the industrial sites owned by the city. These
are located in various parts of the city and were purchased
some two years back, to provide for the rapid industrial de-
velopment, which was then and is still taking place in the
City o: Calgary.
"Manchester,"' immediately within the southern limits ot
the city and situated on the Calgary-Lethbridge branch of
the C. P. R.. is offered manufacturers desirous of locating
in Calgary, on the following terms: —
1. Cost price $1,200 per acre; one-third cash, the balance
in equal instalments divided over a term agreeable to the
purchaser, up to six years, with interest at 6 per cent., pay-
able annually.
2. (a) The purchaser or purchasers must agree that all
buildings erected on land bought by them shall conform to
the requirements of the second-class fire limits of the city.
2. (b) To use the land for 10 years from the date of
purchase for manufacturing purposes only, and after 10 years
for the same purpose until otherwise allowed by by-law of
the City of Calgary.
2. (c) To begin building operations on the land purchased
within six months from the date of purchase and to complete
the buildings within a reasonable time, and if the purchaser
or purchasers fail to carry out this provision the agreement
shall be void and the land revert to the city.
2. (d) That he or they shall not assign or sublet without
the consent of the Council of the City of Calgary.
222 SELECTED ARTICLES
2. (e) To pay the City of Calgary its proportionate share
of the rental of the main spur or spurs constructed to serve
the subdivision.
Street cars, sewer, water and electric light are extended
to and in use in "Alanchester." This property is approxi-
mately two and one-half miles from the postoffice. Appli-
cations for sites in this property should be made to the Rail-
ways and New Industries Committee of the City Council,
and addressed in care of the QA\.y Clerk.
Two miles east of the city limits and about five miles
from the postoffice, lies another tract of land owned by the
city, for use as industrial sites. This property is served by
the C. N. R. and the G. T. P. railroads. The Alberta Interur-
ban Railway proposes to erect their shops on this property.
The city holds an agreement with the vendors from whom
this site was purchased, whereby the vendors agree to hold
the east half of those blocks lying east of the city property,
up to November, 1914, for working men's home sites, to be
sold to industrial or manufacturing concerns locating on this
property at not more than $100.00 per 25 foot lot and to be
used for the purpose above mentioned.
The city also owns several blocks of land in the subdi-
vision known as Calgary Junction.
Another site owned b}'- the city within easy reach of the
business districts of Calgary, lies about two miles northeast
of the postoffice. The Calgar3'--Edmonton branch of the
C. P. R. runs through this property.
The three sites last mentioned have not yet been placed
on the market, but when there is a demand for them they
will most probably be offered at the same advantageous
terms as are in force in "Manchester."
Industrial sites will be sold only to bona fide manufactur-
ers fulfilling the above-mentioned terms.
The city has power to limit the assessment on land used
for manufacturing purposes to $3,000.00 per acre up to date
of January i, 1918, and to $5,000.00 per acre until January i,
1923, and to exempt from taxation buildings, improvements,
machinery and stock being used on said land, subject to a
MUNICIPAL OWNERSHIP 223
by-law providing for such exemption being ratified by the
people as in the case of a money by-law.
The above clause does not mean that the industrial con-
cerns are exempt from local improvement taxation.
If the aforesaid land, buildings, stock or improvements
cease to be used or occupied for the purposes aforemen-
tioned, such land, etc., so ceasing to be used or occupied
shall be liable to taxation in the usual manner.
Calgary, Alberta, Canada. City Clerk. Municipal Manual,
. 1913. pp. 83-4.
i\Iunicipal Asphalt Paving Plant.
The asphalt paving plant which is owned and operated by
the Cit}^ of Calgary, is situated on the banks of the Bow
River, just west of jMewata Park.
The plant, when in operation, is capable of constructing
1500 sq. yards per da}^, but this capacity will be largely in-
creased when the addition, which is being made to the pres-
ent plant, is completed.
The cost of the paving plant up to date of January i,
1913, was $49,000.00 but a large sum is being expended in
making an addition.
Pavement is laid by this plant at an average cost of $2.10
per sq. j^ard. This price includes an allowance for debenture
interest, sinking fund, and depreciation of the plant. Pav-
ing laid for this sum shows a great saving when compared
with the price paid to paving companies under contract with
the City.
The above-mentioned plant has been in operation since
July of the year 1912 and has proved an unqualified success.
Calgary, Alberta, Canada. City Clerk. Municipal Manual,
1913. pp. 84-97.
Calgary Municipal Street Railway.
The City of Calgary, having a population of 35,000 suc-
cessfully launched an up-to-date street railway service on
July 5, 1909.
224 SELECTED ARTICLES
For several years capitalists endeavored to get the
franchise, claiming that it could not be operated at a profit.
The city, however, did not give this away, but voted
$476,000.00 to build and operate it as a public utility, and al-
though it was not anticipated that more than operating ex-
penses would be received for a few years, it has been a suc-
cess from the start. Beginning with twelve cars of the most
modern type — pay-as-you-enter — it returned the city interest
charges and a surplus of $10,000.60 for contingent account,
during its first six months' operation.
Cojistruction was commenced September, 1908, and one-
half mile of track was laid that Fall. During the paving of
the main street, on May t, 1909, work was again proceeded
with, on the arrival of rails and material. Twelve "pay-as-
3'ou-enter" cars, 41 ft. 6 in. long, were ordered, and the work
of construction was pushed da}^ and night, with a view of
having a portion of the system in operation for the Alberta
Fair, July 5, which was accomplished by a close margin.
The power generator arrived July t, and two cars on July 2.
The railway ofiicialh^ opened at 8 a. m. on Juh^ 5, with two
cars, operating from the centre of the cit}' to the fair
grounds, a distance of about one-half mile, to the great sur-
prise of the citizens and the visitors generally, as it was not
expected possible to carry out the work in such time.
During fair week 35.460 passengers were carried without
an accident or interruption of any kind, and as this work
thereafter proceeded and additional cars arrived, they were
added so that by September 15 twelve cars were in opera-
tion, on sixteen and one-half miles of track, four miles of
which were paA'ed.
This work was carried on by five paving contractors and
one track construction company, who had the contract for
the unpaved section, the city doing all special work, inter-
sections and overhead, under the supervision of City Engi-
neer Childs and Superintendent McCauley.
All materials and construction is of the best; tubular steel
poles being used on the paved sections; the pavement, which
is composed of granitoid, wood block, bitulithic and asphalt;
MUNICIPAL OWNERSHIP 225
the track on such sections being laid on a sub-base of four
inches of cement, with six-inch ties being spaced four feet
apart, grouted in with cement, representing on the granitoid
pavement sections seventeen inches of bed.
The rails are 60 and 80 lb., Lorain 6-inch and 7-inch sec-
tion, 60 feet long, high ''T" bonded with double compressed
bonds; all intersections are manganese steel, supplied by the
U. S. Steel Company and Hadfields, of ]\Ianchester.
Overhead feeder wires are of aluminum, and all material
is of the best quality, nothing being spared to make the sys-
tem permanent in every particular.
After a completion of the work, as first estimated, a sur-
plus was saved sufticient to purchase six additional cars 46
feet 6 inches long, which were received July i, 1910, giving
an equipment of 18 cars. In September, 1910, a further by-
law was voted to extend the line 24 miles, and purchase 12
additional cars and equipment, at a cost of $484,000.00. These
cars were received and 24 miles of additional extensions con-
structed in 191 1, giving a total mileage of forty and one-
half miles and thirty cars.
A further by-law was passed by the Council, to a vote of
the ratepayers, October 3, 191 1, for $375,000.00, to construct
twelve additional miles of track, purchase 18 cars (passen-
ger), one scenic car and one sprinkler car; add to the car
barn and equip the system with all modern appliances, which
has been carried out.
With the decision of the C. P. Ry. to erect their Western
shops in Calgary, a further by-law was passed to construct
three miles of line to these shops, and to purchase complete
six 46 feet 6 inch cars, at a cost of $82,000.00, making the
equipment 54 passenger, i observation and 2 sprinkler cars;
55^ miles of track, with 3^ miles donated to the city — a
total of 59 miles.
With this gift 86 acres of a park were also given, on the
Bow River, beautifully situated, wooded, and also water suit-
able for boating.
During the year all the line feeders within three-quarters
of a mile of the power house plant have been placed under-
226 SELECTED ARTICLES
ground. Two additional sub-stations for light and power
for the railway, are under construction, which will increase
the railwa}^ power 1,200 k. w. hours.
At present power is supplied by two 500-k. w. direct
driven steam units as an auxiliary, and one 300-k. w. and one
1 500-k. w. motor generator, for which power is purchased
from the Calgary Power and Transmission Company at
$30.00 per horsepower.
The power department is separately operated, supplying
the city with light and power, and charges the railway for
such power as it uses, at 2 cents per k. w. hour.
Five classes of tickets are used: "School," good to and
from school for adults and any time for children, 10 for 25
cents; "Work," good morning and evening, 8 for 25 cents;
"Ordinary," good any time, 6 for 25 cents. "Ordinary,"' 25
■in book form, $1.00; and pads of civic employees' tickets, 30
for $1.00, the latter charged to the departments in which
they are used.
No passes are issued to anyone, but transfers are made
from the different routes at ten different points in the city,
and a labour fare between 12 and 2 p. m. is being considered.
Employees are paid a sliding scale, representing after
three months' service, 28 cents; second six months, 30 cents
per hour; for the second year, 32 cents per hour; for the
third year, 34 cents, and after thre^ years, 35 cents per hour.
Free winter coats, and half cost of uniforms are granted,
with free uniforms after one year.
Politics are not permitted to enter into the operation of
the system, the Superintendent being the sole judge of quali-
fication necessary, and dismissals are made subject to em-
ployees having the right to appeal to a committee, composed
of the officers of the Street Railway Sick Benefit Associa-
tion, to arbitrate with the Superintendent should any dispute
arise.
The above association was organized May i, 1912, and
is composed of all the operating staff with proper officers
and constitution.
The fees are: $2.00 entrance fee and $1.00 per month there-
after, one-half of which is paid to the association's treasurer
MUNICIPAL OWNERSHIP 227
by the street railway department, leaving the members' fees
$1.00 entrance and 50 cents per month.
For this, on a duly signed certificate from the doctor,
members receive $1.50 per day during sickness after four
days, and free private ward in hospital in case of injuries
received in the service.
The railway department also furnishes free club rooms,
piano, pool, shooting galleries, etc., where concerts, dancing
and competitions are regularly held.
Under agreement with the railway, all employees agree
to become members, and also if required, become district
constables, so that they may maintain order on the system If
necessary.
Operated by the City Commissioners: Maj-or J. W.
Mitchell, as chairman; A. G. Graves and S. J. Clarke as
Commissioners, with Superintendent McCauley in charge,
the following results have been showm up to June 30, 1912,
as reported to the Minister of Railwa^'-s. in annual report:
BEGAN OPERATIONS JULY 5, 1909— TWO CARS.
Fi'oui July 5, 1909, to June 30, 1910.
Revenue $144,244.18
Operating expenses 87,263.36
Surplus from operation $56,980.82
Less —
Interest on debentures $ 22,860.00
Sinking fund 4,685.29 27,545.29
Nett profit $29,435-53
Passengers carried 3*649,697
Miles operated 500,622
Salaries paid $46,513.42
From July i, 1910, to June 30, 1911.
Revenue $275,434.51
Operating exoenses 139,601.98
Surplus from operation $I35>832-S3
228 SELECTED ARTICLES
Less —
Interest on debentures $ 23,220.00
Sinking fund 9,370.00
Contingent account 5 per cent.
gross revenue 13,771.72
Taxes 2,264.17 $ 48,625.89
Nett profit $ 87,206.64
Passengers carried .' 7,176,086
Miles operated 801,086
Salaries paid $76,686.85
From July j, 191 1, to June 30, 19 12.
Revenue $479,240.24
Operating expenses 282,600.56
Surplus from operation $196,639.68
Less —
Taxes $ 2,264.18
Interest on debentures 45,000.00
Sinking fund 18,160.00
Contingent account 5 per cent.
gross revenue 23,962.01 $ 89,386.19
Nett profit $107,253.49
Passengers carried 12,941,530
Miles operated 1,643,328
Salaries paid $172,521.75
For Four Months, ending October 31, 1912.
Revenue $230,984.25
Operating expenses i39,i59-83
Surplus from operation $ 91,824.42
Less —
Interest on debentures and sinking
fund $ 25,953.62
Contingent account 5 per cent.
revenue 1 1,549.19 $ 37.502.81
Nett profit $54,321.61
MUNICIPAL OWNERSHIP 229
Passengers carried 5.547,809
Miles operated 810,826
Salaries paid $89,160.15
Calgary has grown during the past three years from
35,000 to a population of 75,000.
The above nett profits are clear of all charges, coverina'
operating expenses, interest, sinking fund, and 5 per cent, of
the gross revenue, as a contingent fund provided to cover
accidents to the public and the employees, and provide for
renewals and contingents of all kinds, not otherwise pro-
vided for.
The surplus in this account for the year ending June 30,
191 1, was $13,771.72, which, added to the sinking fund (pro-
vided for the same period) of $9,370.00, amounts to $23,141.72;
and from June 30, 1911, to June 30, 1912, $42,122.01, or more
than twice the amount set aside by private corporations as
a renewal or contingent fund.
The following statistics show the growth of the system:
Cars operated July 5, 1909 2
Cars operated July i, 1910 15
Cars operated July i, 191 1 22
Cars operated July i, 1912 48
Cars operated Dec. 31, 1912 54
Miles of Track.
July 5, 1909 3 Miles
July I, 1910 i6y2 "
July I, 1911 265^ "
July I, 1912 54
Dec. 31, 1912 59 "
Employees.
July 5,1909 16
July I, 1910 62
July I, 1911 102
July I, 1912 246
Dec. 31, 1912 266
230 SELECTED ARTICLES
Aside from the regular service, an observation or "Seeing-
Calgary" car is operated over the different routes, on hourly-
trips, at a cost of 25 cents, from which all the principal parts
of the city may be seen, and are announced. This car cost,
complete, $7,500.00.
This car is the original and only one of its kind; 46 feet
long with elevated seats; bronze fittings, bevelled plate glass
mirror sides, etc.
It has been found a good investment, earning as high as
$124.00 per day of nine hours operation. Six additional 46
feet 6 inch cars were received from Preston, Ontario, on Nov.
25, making 54 cars, and during 1913 large extensions are pro-
vided for, including 24 additional motor cars, 41 feet and
46 feet long, and 6 trail cars, 44 feet long, the latter of which
will be operated to the C. P. R. shops as train cars.
Also 4 work cars, i sprinkler and i large power construc-
tion car, which will give the system 78 motor passenger, 6
trail, I observation, 9 work or freight cars, 3 sprinklers and
I sweeper — or a total of 98 cars of all classes.
Aside from the above 17 miles of additional track will be
constructed, and an additional car barn and its equipment
added, all at a cost of $500,000.00, which will place the capital
expenditure, including paving costs, at $2,300,000.00
As the railway purchases power froth the City Power De-
partment, that department furnishes the necessary plant,
which is being increased by three sub-stations, and the ad-
dition of 2,100 horsepower.
Of the 59 miles of track now constructed, 26 miles is
permanent work on paved streets, and it is expected in 1913
to pave an additional 9 miles; therefore it is clearly shown
that Calgary in operating its municipal railways is doing so
on a sound and business basis, and controls its own streets
without dictation by any monopoly, and conserving the
profits, which for the year 1912 will amount to over
$100,000.00, for the reduction of taxes and local improvement,
besides operating two 5,000-gallon electric car sprinklers
over the streets covered by the railway, without charge.
MUNICIPAL OWNERSHIP 231
Regina, Saskatchewan, Canada. City Clerk. Municipal
Manual, 1913. pp. 40-3.
Electric Light and Power Plant.
The Electric Light and Power System is owned and
operated by the City. This utility is not only self-sustaining,
but revenue producing, showing a surplus of revenue over
expenditure of $102,000 in 1912. The generating plant con-
sists of:
6 boilers, aggregating 2,000 h. p.
I 100 kw. Ideal Engine type generating unit.
I 450 kw. low pressure Turbine generating unit.
1 1,500 kw. high pressure type generating unit.
2 400 kw. direct current railway units, vertical engine
type.
Some 300 arc and 50 incandescent street lights are in use,
and provision has been made for the installation of 300 ad-
ditional arc lights during the year 1913. Provision is made
in the capital estimates for 1913 for the sum of $425,000 for
the construction of a new Power House complete with the
most modern machinery and equipment, it being the inten-
tion, on completion of this building, to convert the present
Power House into a pumping station.
Provision is also made in the 1913 Capital Estimates for
the sum of $25,000 for investigating and reporting upon the
construction and operation of Gas Works, and the prepara-
tion of plans and specifications, it being the intention to
commence the construction of a Gas Plant early in 1914-
Rates.
For energy used in one installation and registered on one
meter in one month.
Light.
First 300 kw. hours at /c; all used in excess of 300 kw. at
6c per kw. hour.
Light used in day time on two rate meter in installation
of over 5 kw. of maximum demand, 5c per kw. hour.
232 SELECTED ARTICLES
Power.
First 300 kw. hours at 5c per kw. hour; 300 to 600 kw.
at 4c per kw. hour. All in excess of 600 at 3>:^c per kw.
hour.
For power used i" day time on two rate meters in instal-
lation over 5 kw. of maximum demand, 3c per kw. hour.
Heating and Cooking.
Energy for heating and cooking apparatus supplied at
power rates.
A minimum rate of $1.00 per month to be charged on all
light services and $1.00 per month per connection h. p. in
motors or kw. of maximum demand for heating services.
Special rates arranged on large power services according
to condition of service.
Meter rental for light, 25 cents per month.
Meter rental for power, 50 cents per month.
Meter rental for two rate meter, 50 cents per month.
Meters are furnished for all installations. Burned out
lamps are renewed by the City, and lamps sold at the Elec-
trical Department Office at corner of Dewdney and Broad
Streets.
Accounts are rendered monthly by the City Treasurer
and are payable monthly. Ten per cent, discount is allowed
on current light and power only if paid within ten days of
account leaving treasurer's office.
In the event of nonpayment of account, connections are
cut off within twenty days after date of mailing and a fee
of $1.00 charged for each reconnection.
Regina, Saskatchewan, Canada. City Clerk. Municipal
Manual, 1913. pp. 59-61.
Street Railway.
In 1910 it was decided to undertake the installation of a
Street Railway System as a municipal enterprise. The Coun-
cil submitted to the ratepayers the question of granting a
f-o„^hise to one of a number of companies, who applied for
MUNICIPAL OWNERSHIP 233
it; but, notwithstanding that unusual difficulties would have
to be overcome, they decided that it would be undesirable
to grant a franchise.
The work of construction was commenced in the spring
of 191 1, and on July 29th the first service was instituted, and
a constant service has been maintained since that date.
The following are details of the system up to December
31, 1912.
Capital Expenditure $922,000.00
Mileage of Track 16
Rolling Stock 20 cars, i snow sweeper
Gross Earnings for 1912 $100,842.00
Operating Expenses, 1912 $ 85,900.00
Total Number of Passengers Carried to Dec. 31st.,
1912 2,195.726
The system has proved to be a much appreciated utility;
and a comprehensive scheme of extensions is outlined for
1913, covering practically the whole area within the city
limits, and providing for some fifteen (15) additional miles of
track; fourteen (14) additional street cars, several freight
cars and other freight equipment, and additional plant for
power.
Spur Track System.
The city is fortunate in possessing considerable property,
which was transferred to it from various sources in the past
and which at the present time, forms an exceedingly valu-
able asset. Parts of this property have been sold from time
to time and built upon, and it is being handled in such a way
as seems best to enhance the development of the city. A
section of city property covering about 320 acres has been
set aside as an Industrial District, and is being served by
spur tracks laid out in a suitable way to serve all the district
from the Canadian Northern, Grand Trunk Pacific and Ca-
nadian Pacific Railways. A large Industrial District contain-
ing many warehouses doing an extensive business has grown
up in this area, the wholesale distribution business amount-
ing in 1912 to over $40,000,000. The City holds warel^^"-''-
sites throughout this district, which are c— -ca by spur
234 SELECTED ARTICLES
tracks, at a value of from $i,ooo to $2,000 for lots 25x125 in
size, except corner lots which are sold at a slight additional
advance on this price. This is less than the actual value
of the property, and in order to ensure that the property
will be developed when sold, restrictions consistent with the
conditions set out in the application are made whereby the
purchasers are required to develop the property within one
year from the date of purchase. The property throughout
this district is .being sold very fast, with corresponding
rapid development, thus showing that business men looking
for sites for their various businesses appreciate the advan-
tages offered to them by the city in this regard.
Winnipeg, Manitoba, Canada. City Clerk. Municipal
Manual, 1913. pp. 92-5.
Municipal Ownership.
The City of Winnipeg is a firm believer in Municipal
Ownership of all public utilities. The City owns and oper-
ates its Hydro-Electric Power Works, Water Works Plant.
Street Lighting System, Stone Quarry, Fire Alarm System,
Police Signal System, Fire Service Water Works, Asphalt
Plant and Gravel Pit. Winnipeg enjoj^s the distinction of
being the first city in America to acquire a Municipal Asphalt
Plant.
City Quarries:
The first quarry was opened in 1897, and made a separate
department in 1901. New quarry opened at Stony Mountain
in 1906 comprises 80 acres.
Output :
1901 — 21852 yds. at $1.30 $ 28,407.60
191 1 — 891 19 yds. at $1.20 106,942.80
1912 — 84221 yds. at $1.10 92,643.10
Paid in Freight — Wages
1901 — $16,984.00 $26,219.00
^^'T $26,998.99 41.824.68
I912— $23,OoQ^,^,_^^ 47,173.56
MUNICIPAL OWNERSHIP
235
City Gravel Pit—
This plant was started in 1882 and was placed in the
Quarries Department in 1912. Lot contains 40 acres.
Output:
191 1 — 51090 yds. at 65c $33,208.50
1912 — 65136 yds. at 60c 39,081.60
Day Labor:
The Pavements, Sewers and general improvements con-
structed in the Citj'-, including Water Works extensions, are
done very largely by day labor at a considerable reduction
in cost to what it was under the contract system.
Fire Service Water Works:
The City has installed a High Pressure Water System
for additional fire protection in the central business parts
of the Cit3^ The plant consists of four large and two small
Glenfield-Kennedy pumps driven by Crossley gas engines
and has a capacity of 9,000 gallons per minute at 300 lbs.
pressure. The cost of the system is assessed upon the prop-
erties within the benefited area, but the City at large pays
the cost of maintenance and operation.
No. of miles of mains 9
No. of hydrants 95
Gas Works:
The City has the authority to issue debentures to the
amount of $600,000 for the purpose of constructing gas
works.
Municipal Power:
Realizing the grea! advantages afforded to manufacturers,
power users and the householders generally by having avail-
able an abundant supply of electric energy for power and
lighting purposes, the City of Winnipeg in 1905 reached a
decision to undertake an hydro-electric development as a
municipal enterprise. After a careful examination of the
hydraulic resources of the Winnipeg River, the engineers of
the City reported in favor of the site at Point du Bois. the
estimated cost of the developm^^^^ t^xMg^ ^1)3,250,000, and in
June, 1906, the ratepp-- ^ expressed themselves in favor of
236 SELECTED ARTICLES
the City expending this amount of money on municipal hy-
dro-electric works. The designs for the works were com-
menced in the fall of 1906 and tenders received and contracts
let for the general works in January, 1909, and for machinery
for equipment of the Generating Station in September, 1909.
The construction and equipment of the system, including
the Transmission Line, Terminal Station and a portion of
the distribution lines in the City, was completed on October
16, 191 1. LTpon completion of a thirty days test the plant
was turned over to the City for operation, and it speaks vol-
ume^ for the excellence of design, construction arnd equip-
ment of the works when the fact is known that from the
time the electric power was first turned on the plant has
given service without interruption of any kind.
»
Twentieth Century Magazine. 7:8-15. November, 1912.
^Municipal Lighting. C. M. Sheehan and Albert Firmin.
The United States today is knit together by a labyrinth
of roads, avenues, streets, and alleys upon which the rich
and the humble, the just and the unjust, are free to traverse
on a common basis, without let or hindrance, so long as a
decent regard for the rights of other wayfarers is observed.
These thoroughfares, with practically no exceptions, were
cut and constructed and are now being maintained by the
people, through diverse political units or governments rang-
ing in form all the way from simple village boards of super-
visors to great municipalities like New York City. We have
become so accustomed to this state of affairs, and the results
have been so eminently satisfactory, that we never question
the wisdom which prompted or the force of public opinion
which has continued it. Though we may be desirous at
times of changing the particular government officials who
are empowered to exercise supervision over our thorough-
farp<;, and occasioually find it imperative to do so, we never
entertain any thougnt v.? -^rljcally changing the system or
substituting private for public cu^u. 1,,
► ! I I
MUNICIPAL OWNERSHIP
^Z7
The care and maintenance of our streets and avenues is
a very large and very complex problem, but as we are ac-
customed to it, we are not awed; yet, strangely enough,
when the question arises as to whether or not governments
should themselves light public streets, or engage corpora-
tions to do so, there is, on the part of many, a timorous un-
certainty as to the wisdom of public ownership, and in some
cases a vigorous denunciation of the plan. This denuncia-
tion is based on the assumption that the government can-
not perform such work as satisfactorily as the corporations.
That is to say, we accept the greater problem and shy at the
lesser. In some cases, while this extreme view is not enter-
tained, the almost equally absurd view is advanced that,
though the government should be permitted to illuminate
the thoroughfares, it should be strictly confined to that
work alone, and restrained from connecting the wires or
pipes of such street system with the residences, stores, and
factories of its citizens which line them. Yet in many cases
those who fear such an extension of government ownership
are the users of water delivered by municipal agencies, or
the recipients of some other form of government activity
of a parallel character. It is to show that there is nothing
startling in the proposition of municipal ownership of light-
ing plants, and that such municipal plants are making head-
way even against tremendous and unfair antagonism, that
this article is written. At this time, municipal electric light-
ing plants only will be considered.
The commercial conditions of the past fifty years have
brought about a situation where men engaged in business
are impelled to win trade, not b}- the superiority of the
wares they offer or the modesty of their prices, but by pre-
venting would-be rivals from engaging in competition against
them. The effort is so to bring matters about that the
market, whatever it be, shall be monopolized and fenced in
for personal exploitation. The electric lighting of municipal-
ities and villages is no exception. Those who at the outset
of the development of electric lighting feared competition
from municipal ownership or entertained designs of exploita-
238 SELECTED ARTICLES
tijn, quickly secured legislation to prevent cities and towns
from constructing, purchasing, or taking over plants for pub-
lic operation, except upon conditions which are intentionally
designed to be difficult to fulfil. Ordinarily, the village,
town, or city which desires to establish an electric-light
plant must first obtain the consent of the legislature. The
influence in our several legislatures of the interests that are
antagonistic to the extension of public ownership is a mat-
ter of such common knowledge that it is not necessary to
more than call it to mind here, when it will be seen what
difficulties are likely to be encountered in the effort of cit-
izens of a town or city to secure from the legislature enabling
acts. Then when the consent of the legislature is finally
obtained, the consent of the local authorities must be pro-
cured. After all of which it not infrequently happens that
the question must be submitted to popular vote, and ordi-
narily finally to win out it must secure at least three-fifths of
all votes cast on the proposition — in many cases, indeed, the
afiirmative vote must be equal to three-fifths of the vote cast
for the highest officer voted for at the same election, so
that every person who fails to vote on the proposition has
his vote counted against public ownership. And, after all
these difficulties have been overcome, the contract for con-
struction or the details of purchase must be approved by
certain of the local authorities. While all these obstacles
have to be overcome before a municipal plant can be in-
stalled, a private corporation can usually procure a franchise
to supply current by a mere majority vote of a quorum of
a legislature. Thus while a municipality is encountering
difficulties which seem created to embarass and harass it,
the corporation can secure from the legislature the franchise
it desires, and finds its path both straight and smooth. Yet
with all these obstacles in the way, municipal ownership of
electric-light plants has grown from one, in 1881, to I377) J"
1911.
It will be observed that the people are awakening to the
necessity of municipal operation, for while in 1882 the ratio
of public to private plants was but i to 8^^, in 1892 it was
MUNICIPAL OWNERSHIP 239
I to 5. in 1902, I to sVo, and in 191 1 it reached i to 3^. If
a municipal plant is abandoned, however, or substituted by
a private plant, the press agents of the electric interests
throughout the country advertise the fact far and wide and
it goes forth that municipal ownership is a failure; and this
notwithstanding that on the whole it is gaining ground.
The Federal Census of 1907 shows that during the preceding
five years though only ^3 municipal plants changed to pri-
vate operations, 113 private plants changed to municipal
operation.
There is a feature of municipal ownership of lighting
plants in the United States to which attention has never
been adequately called, and which is of striking force as
indicative of the struggle that is going on, and of how the
movement towards municipalization is compelled to make
headway very largely under the most disadvantageous con-
ditions. In explanation of what this feature is, it should be
said that electricity, like most commodities, can be manu-
factured in large quantities relatively cheaper than in small,
and ordinarily the greatest profits can be realized in serv-
ing the largest communities. Small communities ofifer fewer
inducements than large for capital, considered dollar for
dollar; and hence, while the struggle of the interests has been
to prevent the introduction of municipal plants anywhere,
the opposition has been strongest in locations where profits
have seemed greatest. The burden of supplying the least
desirable locations has fallen on the municipalities, 3^et an
analysis of results shows they have been mainly successful.
This feature of confining municipal undertakings to the
risks which look unprofitable, and leaving the good things
in the commercial world to private concerns is not only true
of lighting plants but is exhibited in the case of certain
New York City ferries. These are pointed out as municipal
failures, whereas the ferries were actually private failures
before they were turned over to the city. The companies
which operated them could not do so profitably. Matters
went from bad to worse, and the communities which were
dependent upon them, and particularly Staten Island, saw
240 SELECTED ARTICLES
ahead great land value and property depreciation, if not
absolute ruin, in the event of suspension of traffic, so that
the municipality in self-protection was obliged to take that
which no corporation or individual would continue. That
municipal ownership of ferries would prove a failure from
the standpoint of financial returns was a foregone conclu-
sion, but the conditions were and continue such that no form
of ownership can be anything but a failure on the same basis.
As long as there was a prospect of profit either from opera-
tion or stock juggling, the corporation held on; when this
ceased, it let go.
It is not to be understood from what has been said, how-
ever, that municipal ownership is absolutely confined to
small towns, for there are numerous exceptions, and some
of the greatest successes have been in large places; but a
study of the history of their creation shows that the struggle
has been the keenest and the greatest opposition has been
encountered where the prospects have indicated that the
trial would be most worth while.
In the case of private ownership in large towns and cities,
it is very common for the extension of wires to be confined
to the principal streets, as is the case in Brooklyn, N. Y.
Here a private company has been operating since 1884, yet
the streets upon which current can be obtained, even in the
thickly settled districts, are comparatively few, and the
company gives as an excuse that the cost of extension of its
wires is prohibitive; yet in scores of villages throughout the
country isolated plants are successfully operated under
municipal ownership though the population thereof is no
greater than that of a single square block in Brooklyn.
Investigation shows that in 173 places where municipal
ownership prevails, with a total population of 1,158,143, the
ratio of consumers to population is about one to eleven per-
sons, whereas in Brooklyn, under private ownership, and
with all the advantages of a compact population of about
1,700,000 in which to develop business, the ratio is only one
to every no persons. In 173 places enjoying municipal own-
ership, it has been found that the ratio of consumers to pop-
MUNICIPAL OWNERSHIP 241
ulation is the equivalent of every second family. This is
important, for it shows, from the standpoint of service, that
people must be getting what they want or they would not be
seeking it so largely.
Naturally the question as to whether or not municipal
plants are furnishing current as cheaply as private plants is
very common. Let us again take the Brooklyn company as
a standard of privately owned plants, a high exemplar of
which it professes to be. Until recently its ordinary rate was
12 cents per kilowatt, but following a campaign by a lead-
ing civic association, in July, 1912, it reduced it to 11 cents,
with much advertising of its concession; yet out of 251
plants recently investigated, all operated municipally, it was
found that 201 charged less than 11 cents.
An analysis has been made of eighteen municipal plants
whose method of bookkeeping conforms in details of cost to
that of the Brooklyn company, the object being to compare
the cost of the various units which enter into the cost of
current. The results are shown in the accompanying table.
It is noticeable that the actual cost of generation and
distribution combined is practically the same in the munici-
pal and the private concerns. There is a wide difference,
though, between the "general expenses" and "fixed charges"
of the public and of the private company. It will be ob-
served that the Brooklyn Edison Co., the private company,
charges up under these headings two and a quarter cents
out of a total cost of four and seventy-three one hundreths
cents, whereas only one of the public plants equals this fig-
ure, and most of them are even below one cent. Further
inquiry shows that, under the head of fixed charges, the
inunicipalities in several instances are including sinking
funds. The reason this item is so heavy in the case of
private companies is that interest upon bonded indebtedness
must be met from this fund, and the swollen bonded in-
debtedness is the burden that tells.
The corporations are forever complaining that they are
oppressed by taxation and that it is unfair to compare them
with municipal plants for the reason that such are untaxed,
yet with our specimen private company we see that taxa-
242
SELECTED ARTICLES
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MUNICIPAL OWNERSHIP 243
tion is but three-tenths of a cent per kilowatt, out of a
total cost of four and seventy-three one hundreths cents,
and this includes the special franchise tax. Investigation
brought out an interesting fact in respect to this company
in this particular. In the report of the Public Service for
1908, it was set forth that the tangible property on which the
"Kings County system" (Brooklyn system) is assessed for
taxes was but $1,581,240. to wdiich was added franchise value
of $10,550,000, or a total of $12,131,240 on which tax was
assessed, yet the reported capitalization was $20,805,993.92.
It is conceded that the value placed on the property for the
purpose of taxation was too low, and, it is fair to infer, was
adopted to escape taxation. But even allowing for this, it
is plainly apparent that the capitalization was out of all pro-
portion to the actual value of the plant and equipment. The
franchise value represents mainly capitalization of excess
profits. How much better it is for the communities to con-
struct their own plants and confine capitalization to the
actual cost than to permit private parties to pyramid capi-
talization in this way and then burden the consumers with
a weight of interest even to eternity.
In the case of private plants, whether business grows or
not, there is practically never an effort to diminish indebted-
ness. The men who dominate the affairs of corporations
are largeh^ those who derive their incomes from the interest
on the bonded indebtedness of their undertakings, and nat-
urally the effort is to perpetuate and not to terminate their
bonds. In the case of municipally owned plants there is
contrary effort. It is found, for instance, that the municipal
plants mentioned in the following table, forty-two in all. are
free of debt:
City Value
of Plant
Sanitary District of Chicago, 111 $4,036,599
Chicago, 111 2,788,909
Logansport. Ind 750.000
Jacksonville, Fla 515,703
Fort Wayne, Ind 300,000
Owensboro, Ky 211,000
244 SELECTED ARTICLES
Coldwater, ]\Iich 170,000
Henderson, Ky 161,000
Austin, Minn 85,000
Bangor, Me 85,000
Auburne, Ind 75, 000
Peru, Ind 65,000
Galveston, Texas 65,000
Bay City, Mich 57,974
Whitehall, Mich 50,000
Aurora, 111 46,469
Clarkson, Neb 40,000
So. Brooklyn, Cleveland, Ohio 40,000
Paducah, Ky 36,000
Ada, Minn 30,000
St. Peter, Minn 30,000
Carmi, 111 ' 30,000
Appleton, Minn 25,000
Bayfield, Wis 20,346
Elkhorne, Wis 29,866
St. Joseph, Minn 20,000
Shelbina, Mo 20,000
Wolfboro, N. H 20,000
Solvay, N. Y 20,000
Arcadia, Wis 20,000
Columbus, Wis 20,000
Thornton, Ind 19,000
Little Rock, Ark 15,000
Son way, Ark 15,000
Fairfield, Iowa 15,000
Blair, Wis 15,000
Westfield, N. Y 12,000
St. Clairsville, Ohio 10,000
La Grange, Mo 7,5oo
Erie, Colo 4,000
Bath, 111 3,200
Benedict, Neb 3,ooo
$9,982,546
MUNICIPAL OWNERSHIP 245
Of the 259 municipal plants with a total valuation of
$25,402,106, the bonded indebtedness amounted to but
$8,961,579. The municipalities ordinarily undertake to cre-
ate a sinking fund for liquidating the bonds as they fall due,
but how seldom it is that corporations do so. The sugges-
tion that the public service corporations should be com-
pelled to create a sinking fund for the liquidation of suc-
ceeding bond issues is of but recent origin, and as yet has
secured no considerable indorsement, though it is a matter
of exceeding great importance to the public. Yet so long
as our lax laws permit the continuation of the system now
prevailing, bonded debts will mount not only up to the full
value of the plants but to a point where it will exceed this
value and will discount future earnings.
It is true that the cost of all the various municipal plants
mentioned as free from debt has not Deen paid exclusively
from earnings, but in some cases from taxation, but the time
is coming when the public will recognize that it is better
to pay for whatever is required outright by taxation and
thereafter freely to enjoy it even unto eternity than to
acquire it by means of indebtedness and pay the bill at the
expiration of a long period of drain from interest charges,
which are more than likely to exceed in the aggregate the
original debt. In the case of municipal lighting plants, and
other undertakings of a kindred character, when there are
reasonable prospects of amortizing the initial cost by earn-
ings, there is justification for incurring indebtedness, but
sound finance dictates that municipalities should incur other
debts only in extreme and very exceptional cases. The evil
that ensues from a departure from this rule is shown in the
case of New York City, where last year the interest charges
on the outstanding debt were 27 per cent of the taxes raised.
To engage private corporations to do the work of public
agencies offers no escape from the evils of bonded indebted-
ness, as may be seen by reverting to what has already been
said in respect to such corporations being enamored of their
debts and ever reluctant to diminish them. The substitution
of the name "corporation" for the name "government" does
246 SELECTED ARTICLES
not alleviate, for in the end the public must bear the burden.
Then also municipalities are able to borrow at less interest
than corporations, so that when bonded debt is incurred by
them the burden is not as great as when incurred by corpora-
tions.
The greatest deterrent to municipal ownership is the fear
of graft, yet the insidious pyramiding of bonded indebtedness
and the watering of stock by private corporations is greater
in magnitude than graft ever was. Mr. Roger W. Babson
has estimated that there is $30,000,000,000 of water in the
capitalization of the corporations of the United States. This
means that we are now paying interest on excess capitaliza-
tion to the amount of $160 per family, or one-half as much
as taxes to the national, state, county, and municipal gov-
ernment paid on a per capita basis by the citizens of New
York City, the highest taxed people in the world. The cor-
poration is conducted for the advantage of those controlling
it at any particular time, and it seldom happens that the
interests of those in control and the general public are re-
garded as identical, so that it is not surprising the municipal
plants, which are directly contrary in purpose, being con-
structed and operated for the public and not for private gain,
should compare therewith much more than favorably.
There can be no longer any doubt that municipal owner-
ship is here to stay. Everything points to the absorption
by the government of those undertakings which are essen-
tially monopolies. There will doubtless be scattered cases
where success will not be achieved, where the municipal
plants will lapse back into private hands, but with advancing
civilization and the rapid growth of our cities, electric light-
ing will become increasingly essential for our well-being,
and it will be brought more forcibly home to us than ever
that we cannot, without great jeopardy, permit interests with
ends inimical to the great welfare to control it. One-half
of our lives we are subjected by nature to darkness, which
can be relieved only by artificial means. There is but one
safe repository for a means so vital to our well-being, and
that is in the hands of the people themselves.
MUNICIPAL OWNERSHIP 247
Twentieth Century Magazine. 7:27. November, 1912.
Public Ownership of Urban and Suburban Street Transpor-
tation. Henry Demarest Llo^'d.
Municipal ownership w^ould mean:
For the street car emplo^'^ees:
Better wages.
Shorter hours,
Othe" gains, and in so far as they are citizens.
Self-employment. They would continue wage-workers,
but wage-workers of the public of which they are a sovereign
part.
For other employees a daily exhibit of this difference be-
tween public and private employment.
For the public:
1. Lower fares.
2. Better service.
3. The latest improvements.
4. Inclusion of public health, decency, distribution of pop-
ulation as elements to be considered in the development of
the street-car lines.
5. Removal of the corrupting influence of the street car
millionaires in press, politics, pulpit, society, the clubs, the
Council, etc.
6. Cutting out a link, and a most important one, in the
chain of the private, profit-seeking monopolies of public utili-
ties, making the next step that much easier.
7. Educating the public in the public ownership and opera-
tion of the "means of production, distribution, and exchange,"
and giving them confidence to proceed to other socializations
as light, land, houses, docks, manufacture of articles used by
the city, and from that to manufacture of articles used by
the citizens.
8. Enabling land values to be (i) modified as by exten-
sions into the country, by "one city, one fare'' rates: (2) so-
cialized as by municipal experiments, like those in London
and elsewhere in buying land, building houses — another form
248 SELECTED ARTICLES
of the "ownership and operation of the means of production,
distribution, and exchange."
9. Bringing electric lighting and heating within practical
reach, since the power plants could also furnish light and
heat.
Here is a movement in which every step towards social-
ization is made easy for us. The industry presents in an ag-
gravated form every evil of which the socialists complain in
the moiern situation, exploitation, corruption, monopoly.
Every citizen is in touch with the evil, and by tens of thou-
sands they can be taught socialist doctrine and let to co-
operate in socialist work. The saving of fares would be the
smallest item in the lists of human benefits, but still a sav-
ing of $12 to $24 a year by every man, woman, and working
child who uses the cars regularly is something, is it not?
Our total federal tax is only $75 per capita.
THIS BOOK IS DUE ON THE LAST DATE
STAMPED BELOW
AN INITIAL FINE OF 25 CENTS
WILL BE ASSESSED FOR FAILURE TO RETURN
THIS BOOK ON THE DATE DUE. THE PENALTY
WILL INCREASE TO 50 CENTS ON THE FOURTH
DAY AND TO $1.00 ON THE SEVENTH DAY
OVERDUE. t.
MAR 10 1934
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UNIVERSITY OF CAUFORNIA IvIBRARY
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