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it kept the freight and passenger rates low; the result was a deficit
amounting to about a billion dollars, which had to be made good out
of the public treasury. The taxpayers carried a burden which should
have been borne by the shippers and passengers. Second, public
ownership would mean poor service; the utilities 2. Means retention
would not keep up with modern methods; the of obsolete
public would be put to great inconvenience by methods.
reason of incompetent management. Private companies are alert, on
the look-out for new economies, and always ready to adopt improved
methods. The incentive to all this is their desire to make greater
profits. They do not hesitate to spend money upon improvements if
by so doing they can obtain more business and increase their
earnings.[241] Remove this incentive, as is done when the
government operates a public utility, and everybody takes his job
easily. Third, municipal ownership would merely 3. Would not
substitute the influence of organized labor for improve political
that of organized capital in politics. The nation, conditions.
states, and cities would have an enormous number of officials and
employees on their respective pay rolls. The employees would also
be voters. They would stand solidly for whichever political party
offered them better wages, fewer hours of labor, and other
advantages. The interests of the public would have scant
consideration in the face of organized political pressure from this
huge array of government workers. Even today the city employees
are an important factor in municipal politics. What would they be if
their numbers were doubled or trebled? The railroad employees of
the country number many hundred thousand. Count in their wives
(who are also voters), their relatives and friends, the voters whom
they can personally influence, and you will see that they would form
no negligible factor in national politics. Fourth, 4. European
although public ownership has been moderately experience not
successful in European countries where the applicable.
governments are highly centralized it does not follow that it would
have the same success in this country. In the United States, where
government is conducted on a democratic basis, with short terms of
office and strong partisan forces at work, with the spoils system still
flourishing in many states and cities, public ownership would result in
gross mismanagement and extravagance. If the government is to
engage in business it should first put itself on a business basis.
Before it undertakes to operate the railroads or the telephone service
it should introduce efficiency into its own governmental functions.
Summary.—In balancing these various Weight of the
arguments, one against the other, and in foregoing
comparing the relative merits of public regulation arguments.
with those of public ownership, much depends upon local conditions.
It cannot be said that either policy is the better one at all times, in all
communities, for all utilities, and under all circumstances. Where
public regulation has been satisfactory there is a good deal to be
said for the policy of letting well enough alone. Where the policy of
regulation has not been successful the arguments for trying the
experiment of public ownership become stronger. It ought to be
remarked, however, that if local conditions are such as to make
regulation a failure they are not likely to make public ownership a
success. A state or community which cannot hold capital under
effective control is not likely to be much more successful in its
dealings with a large body of public employees. No great weight
should be attached to the fact that public ownership has succeeded
in one city or failed in another. The success or failure of public
ownership, as a policy, cannot be fairly judged from this or that
adventure in it, any more than we can judge the outcome of a
campaign from the winning or losing of a single skirmish. Banks
sometimes fail, yet our banking system is sound. Speculators
occasionally succeed, and make fortunes, but that does not prove
speculation to be a profitable form of business.
So far as can be judged from the figures of profit and loss, public
ownership is less economical than private management. The
community which owns and operates a street railway or a lighting
plant or any other public utility will not make a profit, in most cases,
unless it charges higher rates than would be charged by a private
company. The books may show a profit, but this is because not all
expenses which ought to be charged to the plant are put down; they
are saddled upon the taxpayer in some roundabout way. Public
ownership cannot be justified as a matter of pennies and dimes. But
profit and loss are not the only things to be considered. The question
as to which plan is better for the public is much The question is not
more than a question of surplus or deficit. The one of profit and
fair treatment of labor, the reliability of the loss alone.
service, the removal of sinister political influences—these should be
reckoned with as well. And that is where people with different points
of view fail to agree. The advisability of public ownership is an
intensely practical issue which cannot be solved by appealing to any
set rules or principles. It is entirely logical for one to favor public
ownership of the water supply while opposing its extension to the
street railway. One is closely related to the public health; the other is
not. In a well-governed community, where the service rendered by a
private company has proved to be unsatisfactory, the policy of public
ownership may be entirely justified. This does not mean, however,
that the people of boss-ridden cities, with the spoils system in full
operation, should take over public services which are doing well
enough under private management. Conditions, not theories, should
determine which is the wise policy.
Guild Operation.—In recent years another alternative to private
ownership has been put forth. It is known as guild ownership.
Knowing that many people are disinclined toward public ownership
because they fear that it would merely mean the mismanagement of
the public services by politicians, some labor leaders have proposed
that the utilities should be owned and operated by the organized
employees. In brief they suggest that the government should supply
the capital (receiving interest on it, of course,) and that the
employees should operate the utilities through officials chosen by
them, or chosen by themselves and the government jointly. The
Plumb plan, put forward in 1919 as a solution of the railroad
problem, was a proposal of this nature. Some advocates of guild
operation believe in applying this policy not only to public utilities but
to all industries.
General References
F. W. Taussig, Principles of Economics, Vol. II, pp. 397-418;
Clyde L. King, The Regulation of Municipal Utilities, pp. 3-55;
H. G. James, Municipal Functions, pp. 246-281 (Public Utilities); pp. 282-295
(Municipal Ownership);
Massachusetts Constitutional Convention, 1917-1918, Bulletins, No. 22
(Municipal Ownership in the United States);
E. M. Phelps (editor), Government Ownership of Railroads (Debaters’
Handbook Series). Contains material on both sides of the question. See also K. B.
Judson (editor), Government Ownership of Telegraphs and Telephones, and J. E.
Johnson, Municipal Ownership, in the same series;
F. C. Howe, The Modern City and its Problems, pp. 149-164.
Group Problems
1. Government ownership of telegraphs and telephones. History of the wire
services. How the telegraph and telephone companies are organized. Present
methods of regulation by the national, state, and local authorities. Public
ownership of telegraphs and telephones in Europe. The results of European
experience. American experience during the war. Summary and conclusions.
References: K. B. Judson (editor), Government Ownership of Telegraphs and
Telephones (Debaters’ Handbook Series); A. N. Holcombe, Government
Ownership of Telephones in Europe, pp. 441-463; H. R. Meyer, Public Ownership
and the Telephone of Great Britain, pp. 239-268; W. W. Willoughby, Government
Organization in War Time, pp. 191-198.
2. State regulation of public utilities. References: H. G. James, Municipal
Functions, pp. 246-281; C. L. King, Regulation of Municipal Utilities, pp. 253-263;
G. P. Jones, State Versus Local Regulation, in Annals of the American Academy
of Political and Social Science, LIII (May, 1914), pp. 94-107; Proceedings of the
Conference of American Mayors, 1915, pp. 123-162; H. M. Pollock and H. S.
Morgan, Modern Cities, pp. 225-249.
3. Municipal ownership in Europe. References: G. B. Shaw, The Common
Sense of Municipal Trading, pp. 17-42; Leonard Darwin, Municipal Ownership,
pp. 33-66; Douglas Knoop, Principles and Methods of Municipal Trading, pp. 95-
106; F. C. Howe, European Cities at Work, pp. 37-67; Yves Guyot, Where and
Why Public Ownership Has Failed, pp. 55-71; W. H. Dawson, Municipal Life and
Government in Germany, pp. 208-259; C. D. Thompson, Municipal Ownership,
pp. 15-25; National Civic Federation Report (1907), Part I, Vol. I, pp. 261-302.
Short Studies
1. Franchises. Cyclopedia of American Government, Vol. II, pp. 44-48.
2. A model street railway franchise. C. L. King, Regulation of Municipal
Utilities, pp. 165-181.
3. Gas and electric lighting franchises. W. B. Munro, Principles and Methods
of Municipal Administration, pp. 247-257.
4. Germany’s experience in public ownership. W. H. Dawson, Municipal Life
and Government in Germany, pp. 208-259.
5. Great Britain’s experience in public ownership. Douglas Knoop,
Principles and Methods of Municipal Trading, pp. 306-365.
6. Municipal ownership in the United States. Massachusetts Constitutional
Convention, 1917-1918, Bulletin, No. 22; National Civic Federation, Shall the
Government Own and Operate the Railroads, the Telegraph and Telephone
Systems? The Affirmative Side; Ibid., The Negative Side.
7. Guild ownership. G. D. H. Cole, Guild Socialism, pp. 42-77.
8. Public service commissions. S. P. Orth, Readings on the Relation of
Government to Industry, pp. 308-343.
9. The danger of giving government too much to do. Otto H. Kahn,
American Economic Problems, pp. 235-275.
10. The Plumb plan. Public Ownership League, Bulletin, No. 12, pp. 86-100;
Ibid., Bulletin, No. 14, pp. 59-74; 127-130.
Questions
1. Name all the principal public service industries of the present day. Would you
say that the following are public utilities: abattoirs; grain elevators; coal mines; pipe
lines for conveying oil from city to city; wireless telegraph establishments; airships
carrying passengers; automobiles; taxicabs; jitney busses; hotels; steamships;
docks; banks; hospitals? Why or why not in each case?
2. Make a definition of public utilities which will square with your answer to the
previous question.
3. If a merchant should install an electric generator to provide light for his own
store, would he be then engaged in a public service and would he require a
franchise? If he desired to sell current to his neighbors (without crossing a street)
would he then require a franchise? Give your reasons.
4. Certain industries are particularly suited to public management (for example,
the postal service and water supply). Name some others. Why are they suited?
5. What provisions should be made in a street railway franchise as regards term,
fares, service, contributions by the company to the public treasury, disposal of the
plant when the franchise expires, and regulation during the franchise term?
6. Can you give any reasons why the government should carry mail but not
telegrams? Parcels by post but not by express?
7. Name some reasons why the effective regulation of public utilities is difficult.
8. What public utilities are operated in your city? By what companies? When do
their franchises expire? Who regulates them? Would any of them be better
managed under public ownership?
9. Which of the arguments for municipal ownership seem to you to be the
strongest, and why? Which of the arguments against?
10. Would it be consistent for an Englishman to favor municipal ownership of
street railways in London but to oppose it in New York after becoming a resident
there?
Topics for Debate
1. Street railways should be (a) owned and operated by private companies, or
(b) owned by private companies and operated by the government, or (c) owned
and operated by the government.
2. Guild operation should be applied to all public utilities.
CHAPTER XXV
EDUCATION
THE PUBLIC
BOARD OF EDUCATION
SECRETARY
PRINCIPALS
ENGINEERS
SUPERVISORS
JANITORS
TEACHERS
PUPILS