CONFIDENTIAL TILL SEPTEMBER 12, 1902.

ADDRESS
DELIVERED BY

HON. R O B E R T P. P O R T E R ,
BEFORE THE

BRITISH ASSOCIATION,
BELFAST,

SEPTEMBER

12th, 1902.

~^*~~~

LONDON:
PRINTED AT THE BEDFORD PRESS, 20 & 21, BEDFORDBURY, W.C.
1902.

MUNICIPAL TRADING.

I

H A V E been requested by the President of the
Economic Section of the British Association
to submit a paper on " Municipal Trading/' a subject
which of late years has entered widely into economic
discussion, both in Great Britain and in the United
States. While this title conveys a precise meaning
and clear limitation of the question intended to be
discussed to the British economist and statistician,
we should express what is here intended a little
differently in America, namely.—"Municipal Ownership of Public Utilities" or, to be still more brief,
" Municipal Ownership." The cities and towns of
the United Kingdom have exhibited much greater
activity in what may be called business ventures than
our cities in America, therefore, so far as actual
experience is concerned, I am afraid my observations will be extremely disappointing. The fundamental idea of the founders of the Republic was a
form of Government that would interfere as little
as possible with individual effort and enterprise; and
as a result, our railway systems and large city
undertakings of all kinds were left—so far as the
Federal Government was concerned—to make their
advent with as few restrictions and obstacles as

4

possible. I n the early part of the last century the
various State Governments entered into financial
partnership with the promoters of canals; and later,
when steam railways were introduced, states and
cities, and towns and counties, were alike appealed
to for assistance in building railways. Nor was
the appeal unheeded, for in the 'forties and 'fifties
an epidemic, very similar to the present fever for
municipal trading in England, literally swept over
the country, and ended in bankruptcy and ruin, not
only of cities and towns, but of important States.
Bonds issued by State and local authorities for
the promotion of railways went in default; while
the unhappy taxpayers, deluded by the belief that
these were " productive," not " unproductive," undertakings, were simply unable to stand up under the
burdens imposed upon them.
These and kindred experiences taught us the
useful lesson that there was a limit to State and
municipal credit; and though, as I have said, it
occurred before municipal trading was a known art,
it has had much to do with the hesitancy on the
part of the United States to plunge into experimental municipal industries. The taxpayers of those
times, who saw their property practically confiscated
to pay for enterprises which* should have been left
entirely to individual endeavour or private speculators, invented a device known to us as " the debt
limit clause;" and this clause, in some form or other,
has been inserted in nearly every State constitution
drawn and adopted since those days of financial

5
disaster and destruction of State and local credit.
I n some States, so deep were the scars t h a t additional clauses were inserted, prohibiting the use of
public funds in any industrial enterprise whatever.
The Supreme Court of the State of Michigan
recently, in construing this clause in the constitution of that State, compelled the city of Detroit
to return to a company a street railway which
that municipality had purchased, and was about
to operate.
The debt limitation ranges from
10 per cent, of the assessed value of property
returned for taxation in New York to 5 per
cent, in many of the Western States, and in one
State to as low as two per cent.
The method
of assessing property for taxation in America is
based on the capitalized value, and not on the
rental value, as in England. Thus, assuming the
assessed value of taxable property in New York
City is £600,000,000, the limit of its indebtedness
would be £60,000,000. I n returning property for
taxation, some States assess the value much higher
than others, so a five per cent, debt limit in a
State where the assessment is very low, may work
out about the same as a ten per cent, debt limit
in a State where the assessed value of property more
nearly approaches its real value. The period for
repayment of local loans in America is much shorter
than in England, extending generally about twentyfive years. This seems to give our cities sufficient
borrowing powers for their legitimate needs, but
not latitude enough for a full swing in the fasci-

6
nating arena of municipal trading.
Partially
because of the debt limitation, and partially
because private enterprise has been allowed a freer
headway in such undertakings as the supply of gas,
electric lighting, tramways, and telephones, we find
in the United States no city owning and operating
its own tramways and street railways, probably less
than half-a-dozen manufacturing gas, a very few
engaged in supplying electric light, and, I think,
not one engaged in the telephone business. American cities, however, are wTell supplied with all such
utilities. W e have at least 20,000 miles of very
good street railways, nearly all propelled by electric
traction, and, as a rule, planned to take the population from the congested districts quickly into the
suburbs at a moderate uniform fare. The distance
one can travel on these electric tramways for 2^-d.
ranges from 5 miles to 15 miles. The companies
pay annually large sums, aside from the regular
taxes on capital, for the use of the streets; and so far
as these amounts are comparable, I find they bring
as much net revenue to the municipal treasury as
the profits of your best-managed municipal enterprises. The public on both sides of the Atlantic
seem to be equally well served, according to their
respective requirements. I n America we believe in
the cheap, quick, long-distance haul, enabling the
wage-earner to have a small home beyond the
bricks and mortar and smoke of our modern centres
of industrial energy. I n England I find those who
favour municipal trading put especial emphasis on

7
the short penny, and even halfpenny, fares. The
quick short distance and lower-priced haul is undoubtedly growing in favour in the United Kingdom.
T^he workman, I am told, does not like to be too
far away, as living near enables his family—boys
and girls—often to earn a living. This may be better
for England, but whichever policy be pursued,
private companies would be as likely to find out
and adopt the most expedient and profitable
method as municipal authorities.
Our cities are well supplied with good quality
of gas, at prices generally regulated by the State
legislatures.
I n many cities, competition has
brought down the price below legal rate, and it has
been found difficult, if not impossible, to put it up
again. The few experiences we can point to in which
cities have undertaken to supply their own gas
have been melancholy failures. Some few of the
smaller towns have undertaken municipal electric
lighting; but where comparisons are possible, the cost
is found to be relatively higher. W e have had no
experience in municipal telephoning.
Since the
expiration of the original patents, competition has
not only greatly increased the efficiency and reduced
the cost, but in some States where the laws have
effectually regulated these monopolies, established a
service that would be difficult to excel. I need only
mention the State of Indiana: population, two-and-a
half millions, with fifty-five thousand exchanges
belonging to one company and twenty-two thousand
to another—in all, for the State, seventy-seven

8
thousand exchanges. The cost for unlimited use in
business in Indianapolis is £8 per year; for residence,
less than £5. I n the smaller exchanges, the prices
range from 4s. to 8s. per month. One-fifth of the
whole number of exchanges are in farmhouses.
Without for a moment assuming t h a t we
have solved, the difficult problem of the management and restriction of public utilities, a study
of the history of the several industries above
mentioned, in the United States, will, I think,
show that our progress has been on the whole
satisfactory, and that public requirements have been
fairly looked after. W e have about £400,000,000
invested in street railways, and as much more
in gas, electric lighting and telephoning : an estimated, total of, say, £800,000,000. W e may be
thankful that this huge sum has not been added
to our municipal debts, even if it may properly be
placed in t h a t seductive column the municipal
trader has christened "productive debt." Productive or non-productive, we have an inherent
antipathy to debt, National, State, or local, in
America, and hesitate to shunt it off upon posterity.
Immediately after the Civil War, we vigorously
attacked our immense National Debt, and would
have wiped it out in one generation, had it not
been for the Spanish war.
State debts which
were once burdensome have been similarly reduced;
our municipal indebtedness shows a great proportionate decrease between 1880 and 1890, when
compared with the increase of taxable values; and,

9
I think, an actual diminution will be shown during
the decade ended 1900.
Municipal trading is rapidly increasing municipal debt in England, and serious complaints may be
heard on all sides in consequence of the increase of
local taxation.
The answer is that the debt is
" productive," and that the profits of these industrial undertakings will be used to reduce the
taxes. If the object of all this municipal trading
was profit, it would be simpler to exact adequate
compensation from private companies for the occupation or use of the streets. Or, in the case of
tramways, build the tracks ; or, as in the case of
the cities of New York and Boston, construct the
subways and lease them to private companies;
thus avoiding the responsibility of operation, and
practically remove the transaction from the domain
of speculative industry. B u t the object is not profit,
we are told by those who rank high in the counsels
of English municipalists, and many go so far as to
advocate no profits for municipal undertakings.
While theoretically occupying the high ground of
" no profits," I have yet to examine the budget of
a city or town engaged in profit-making industries
where a distinction is not made between the productive and unproductive undertakings, and in
which the authorities do not congratulate the ratepayers on the surplus (when there is any) from the
tramway, gas, or electric-lighting accounts. Indeed,
it is a regrettable fact t h a t municipal book-keeping
not infrequently shows profits which vanish when
B

10
the stern test of a shareholder's dividend warrant is
applied to them.
The municipalists, who have
acquired the tramways on the ground that the poor
man is entitled to a halfpenny fare, and that the
wage-earner's pennies support these industries, are
apt, later on, to point with conscious pride to the
large profits from this undertaking which has gone
to reduce rates—thus the well-to-do and even rich
landowner is benefited by the profits obtained from
those who patronise the tramways. The other day,
I noticed t h a t a large Yorkshire textile town increased its city tax rate 6d. in the pound, 3|KL
of which, it is naively announced, " is given back to
the ratepayers in the shape of a reduction in the
price of gas."
N o t a gift to the ratepayers, but
to the consumers of gas. There is not the semblance of equality of taxation in such financing.
The entire community in the case quoted is
apparently taxed 6d. in the pound that a portion
of the community, including the large manufacturers who use prodigious quantities of gas, may be
rewarded by a reduction in the price of that commodity. I t is possible the reduction of price was
on gas supplied to street lighting and for city purposes alone. If so, the action is not quite so indefensible.
A n interesting point has been introduced into
this discussion by Mr. Emile Garcke, based, I believe on the practice in Scotland, where the burghs
are not allowed to make profits out of such enterprises in aid of taxes ; and this restriction has lately

11
been imposed by Parliament in dealing with
Scottish towns. The charges, Mr. Garcke contends,
should comprise the following items of cost :—
(1). " T h e cost of all direct and indirect salaries
and wages paid for or made chargeable to the
operation and administration of the undertaking ;
(2) the full and fair cost of all materials consumed ; (3) the cost of insurance against loss by
accidents of all kinds; (4) the cost of adequate
maintenance and upkeep, and provision for wear
and tear ; (5) the value of municipal taxes relinquished by reason of municipal ownership, and
the amount of State taxes paid or chargeable in
respect of the undertaking; (6) interest on the
entire investment; (7) a sinking fund for reduction
of capital within period approved by ratepayers and
Local Government Board. Should there, however,
be a surplus, notwithstanding the enforcement of
this principle, such surplus should be applied either
(1) to reduction of the charge for such services,
or (2) to an increase of sinking fund for reduction of
the capital account of the undertaking ; but in no
case should such surplus be applied to a reduction
of rates."
I t is not difficult to see that the end of this
plan is State socialising or absolutely free service.
* I n a pamphlet entitled "The Independent Labour Party :
What it is and Where it Stands/' one may read :—" The practicability of Socialism is shown in no better way than by recent
advances in municipalisation. The great point which experiments in municipalisation have proved beyond dispute is that

12
I n fact, " Municipal trading/' defined in one word,
is " Socialism," and on this point all consistent,
and really earnest Municipalists, seem to agree.
I remember reading, some years ago, an interesting
pamphlet written by Mr. Cooper, an erratic
Norwich man, who spent much of his life and
energy in advocating free State railways.
He
proposed to abolish six out of the seven lines
between Manchester and Liverpool and London,
and open the seventh free to all. A t least Cooper
was logical. On this point—and it is well worth
consideration—Mr. Garcke says :—
" If the ratepayers are frankly told t h a t the
enterprises they are to sanction are not for the
primary purpose of reducing the rates, it will
be found t h a t the really dangerous aspects of
municipalisation will disappear ; while such undertakings as are allowed by the ratepayers to be
municipalised, will be carried on at the risk of the
community for the benefit of the community : not in
the narrow sense of producing commercial results,
but in order to render public services, which are of
such general importance to the community, that
public authorities can organise labour and provide for the needs
of the people, not worse, as was held until recently, but very
much better than private capitalists. Every town council in the
country is contemplating some greater or less application of the
Socialist idea to its own special circumstances. So, with the
ideas which underlie all working political action, Socialism is
effecting a revolutionary change. The old notions of individual
enterprise are going."

13
their excellence and efficiency are paramount
considerations."
I n referring to profits I touch upon a controversial point, and one t h a t has been much discussed.
Personally, I do not think it wise for a municipality
to take a penny profit from such undertakings.
Cheapness and efficiency of service should come
first, and hence, in making bargains with companies
for supplying public utilities, it concerns the community much more t h a t the company—in case of a
tramway, for example — should be compelled to
extend its lines into districts favourable for workrnens' homes and unprovided with transportation,
or t h a t the promoters should give additional trains
and cheaper fares, than the mere payment of a sum
into the city treasury. If this course is faithfully
pursued, those who use the utility, by reason of the
authorities, will get as much as they may reasonably
expect for their money ; but the community will
neither be taxed to make up for a too low rate nor
be responsible for a larger capital commitment.
I venture to suggest that there is a danger when
municipalities take up industrial enterprise that
they do not always consider simply what is best for
the public, but what will make a good showing in
the annual budget. They are apt to be bitten by
the desire to deal in larger matters, whereas, if they
looked at the matter fairly and squarely, they would
see t h a t their only hope of safety lay in keeping
out of business with trust moneys, [and looking
sharply after those undertaking to manage semic

14
public businesses in their midst. This seems to nie
the real function of municipal administrators.
This is not the occasion for a comparison of
corporation and company operations, either as to
services rendered, cost to those using the particular
utility, or profits secured.
That phase of the
problem has been pretty well thrashed out by the
Select Parliamentary Committee, and by daily and
special trade newspapers. Nor will the reference
I have made to the hesitancy on the part of
America in municipalising its public utilities, warrant the rejoinder that our municipal governments
are untrustworthy and corrupt. That is another
theme, and one t h a t has been worn threadbare
by discussion. Those who fail to see clearly where
the English municipalist is coming out will not be
satisfied with the rose-tinted exploits of a few wellmanaged undertakings, taken over as "going
concerns," modernised and built up without fear of
competition or governmental interference.
I t is
childish to compare these enterprises, as is frequently
done, with the last days of company operation, when
private endeavour had been given its passports and
notice to quit. The questions which, it seems to
me, must be answered, are more far-reaching than
these, and the principles involved much broader
than the profit-and-loss account of a municipal
ledger.
First of all—and I put it before all fiscal considerations—what will be the effect of municipal
trading on the excellent work which your English

15
municipalities have taken up and conducted with
such a large measure of success during the last
twenty-five years ? More than twenty years ago, I
was commissioned by one of our Government Departments to visit England, and study your methods
of administrating municipal affairs.
The budgets
of many of your cities were at that time carefully
gone over, and I had no words except of praise for
the conduct of affairs. Everything was being done
to brighten and improve the life of the people :
better sanitary arrangements, more parks and open
spaces, additional supply of pure water, increased
school accommodation, establishment of free libraries,
encouragement of music in the parks, and other
movements for the uplifting of the people and the
maintenance of a high degree of municipal spirit.
I t was a programme t h a t everyone could heartily
endorse, so long as it was continued upon lines of
equality, and all were fairly taxed for the benefit of
the entire community. No one thought of making
money out of these enterprises ; no communities
had then built around the sacred person of a Town
Clerk a competitive force which was soon not only
to antagonise existing railway companies—oftentimes
the largest ratepayers of a district—but was to
compel its own citizens to assume responsibility for
loans to promote industrial undertakings which
would compete with, and perhaps ultimately destroy,
their own business. I n short, the ennobling civic
work in which all could join has, since the period
I am speaking of, been changed, and municipalities

16
have in many instances descended to a form of
competition which is not only unjust to the ratepayer, but which, when it assumes the shape of
organised Town Clerks attempting to influence
Parliamentary legislation, would be considered an
illegal proceeding in the United States.
The bitterness expended by these Parliamentary
contests to prevent individual enterprise, and continue municipal monopolies in tramways, in gasworks and electric lighting, and the disposition on
the part of municipalities to secure these rights and
hold them, dog-in-the-manger-like, against private
companies anxious to invest and serve the public,
have, in my opinion, done much to side-track publicspirited municipal work in England. I t may lower
the tone of your administration of local affairs
from the high standard it should occupy by introducing too much of the commercial spirit.
The
government of cities and towns, to be completely
successful, must be in the hands of its most publicspirited and successful men of affairs. Of late years
many of this class are losing confidence, and some
may be found actively engaged promoting public
sentiment, in opposition to what they have a right
to regard as the dangerous tendencies of municipalities, in promoting complicated business ventures
with the public funds. I s it possible, I ask in all
sincerity, that with the murmurings and mutterings
of this sort of opposition audible in so many quarters,
the good work for which you have been so justly
famous can be held up to the standard ? Your local

17
politicians are becoming large employers of labour—
at minimum hours and maximum wages—to popularise themselves with the non-taxpaying voter.
They openly boast in their reports of the increase
they have ordered in wages, the reduction of hours
of labour, and the decrease in fares and in the price
of commodities. This reckless scattering of public
funds is in strange contrast with the experience and
economies deemed necessary for the successful promotion and development of private enterprise.
When called to account, they seek to soothe the
troubled ratepayer by dividing the rapidly-increasing
municipal debt into "productive" and "unproductive."
The increased tax rate, they promise, is soon to be
reduced by the " profits of the new enterprises." I t
is a game that cannot be played to the end to the
satisfaction of both sides.
The profits too often
are chimerical, and disappear in higher cost of
installation and of operation, which more than
offsets the somewhat cheaper cost of capital when
the public credit is pledged for its repayment.
Then there are the heavy expenses resulting from
changes in methods, involving the sacrifice of entire
plants, that modern industry must continually face,
and which sometimes results in heavy sacrifice of
capital. There remains but one place for the
losses — and all business ventures are liable to
losses—namely, the rates.
A s to how much local debt and taxation you
can stand up under here in England, I am not prepared to determine. You are better qualified to

18
gauge your capacity in this direction, than one
whose experiences have been drawn from a country
where municipal debt must be distinctly limited as
to amounts, and the time of repayment is well within
the generation contracting the obligations.
The
present local indebtedness of the United Kingdom
is well over £300,000,000 ,: an amount equivalent to
double the same class of indebtedness in the United
States.
Between 1879 and 1898 this indebtedness
has grown £150,000,000. The piling up of local
indebtedness, w^e should remember, tends to escape
the purview and control of Parliament, in a way
in which the National Debt does not, and the
danger is thereby increased. This may not cause any
alarm; and I even notice an endeavour on the part
of representatives of some municipalities to induce
Parliament to extend the period of repayment of
certain classes of loans to one hundred years. H e r e
is unloading obligations on posterity with a
vengeance ! There is another aspect of municipal
trading which is more than suspected, and which
likewise involves the piling up of obligations for
future generations.
Gradually, but certainly,
additional classes of work-people and their superintendents are coming in for pensions or superannuation—such as school teachers, policemen, poorlaw officers, gas workers, tramway men, and
so forth. I am assured t h a t no sufficient provision
is being made to provide the capitalised value of
these accruing pensions, and that some day your
ratepayers will wake up and find obligations

19
representing twenty-five, perhaps fifty, millions
sterling, the services for which were given to a
previous generation.
Obviously, the continued
growth of municipal employees increases this
danger.
Actually, there was a small increase in
local indebtedness in the United States between
1880 and 1890, relatively to ability to pay, we might
say there was no increase, because in the same
period the value of taxable property doubled. I n
the United Kingdom, the total increase in the
rateable value of the country in twenty-five years
has been less than 30 per cent., while its local
indebtedness has trebled. The American returns for
the last ten years have not yet been published; but
I think it may safely be assumed t h a t the reverse
of this proposition is true, namely, that our local
indebtedness has increased in thirty years 30 per
cent., and the value of taxable property has
trebled.
These figures are not introduced for the
purpose of indicating that we are wise and you are
unwise, but for the purpose of showing the effect of
placing a limitation on this class of debt. Nor is
it unlikely that the municipalist may be able to
prove, to the satisfaction of some, that, always
keeping separate the "productive" and " u n p r o ductive," a steady increase of local debt has been
upon the whole a good thing. Sir H e n r y Hartley
Fowler's admirable statistical classification of indebtedness shows that the so-called " productive"

20

debt is only about half of one per cent, beyond
the danger line. If, in consequence of the anxiety
in financial circles at the steady increase of
local debt, the rate of interest should rise half
per cent, on all local securities, what would
become of the "productive" debt? Assuming t h a t
the trading debt represents one-third of the
total local debt, a rise of a quarter per cent, would
extinguish the " productive" properties of these
loans, and, in a sense, throw them on the rates.
Those who have wTatched railway dividends in
England and America for a series of years will
realise the uncertainty of such investments, and
with such a narrow margin the uncertainty would
seem to be accentuated. For example, are these
heavily indebted municipalities prepared to face the
steady increase in the working expenses, which, in
the case of railways in England, in thirty years has
mounted from 48 to 63 per cent, of the gross
receipts; an increase largely due to additional
demands on the part of labour—which can practically dictate to politically-elected boards — the
greater requirements of the public for less money,
and to the increase of taxation, especially local
taxation ? I believe the facts here warrant a
dispassionate examination on the part of the
public.
The safer method for the ratepayers is, undoubtedly, that adopted recently by both Boston
and New York, and, to some extent in London,
in the leasing of the North London tramways—

21
in which cases the municipalities insure themselves
a nett revenue for certain undertakings, by leasing
to responsible private companies the subways for a
series of years at a rate of interest from 1 to 1 |
per cent, higher than the city pays for the actual
money expended on the undertaking; reserving as
additional security a bond, and the entire equipment,
to insure the public treasury against possible losses.
Such arrangements do not prevent adequate safeguards as to fares, speed, frequency of train service,
provision for safety and comfort of travel, and I
recommend them to the consideration of English
municipalities. The form of agreement is simple,
and merely involves a contract in writing, to the
effect t h a t the Company agrees to pay for the
exclusive use of the tunnel and subway, for the
period of twenty-five years, an annual rental equal
to 4|- per cent, of the nett cost of the tunnel or
subway. Then follows a definition of the " nett
cost," which is deemed to include all expenditure
incurred in acquisition and construction, including
damages, expenses, and salaries of the commissioners, and interest at 3^ per cent, per annum
on the debt incurred in construction, prior to
the beginning of the use. A s Boston can borrow
money at from 3^ to 3^ per cent., one may cypher
out to a certainty the revenue, and the risks
are nil.
I t would be presumptuous for me to suggest
any remedy for municipal trading, but as an alternative plan, the leasing system, when the contracts

22

are wisely drawn, secures the revenue for the city
treasury, and good, cheap service for the public.
On the other hand, it shifts the financial risk
from the ratepayers' shoulders. This, with some
form of debt limitation, will gradually modify
existing conditions, especially if backed by a strong
public opinion in opposition to further use of
the public funds in this manner. The " no profit "
idea would take municipal trading out of the arena
of debatable questions in the United States, because
desire for the enormous profits we have been
told, British municipalities are reaping out of
business enterprises, is the only argument in favour
of municipal trading that arrests attention with us.
I t might have the same effect in England, but
as your cities have actually embarked in business,
it would require some time to change the system and
achieve results. I n spite of the activity of municipalities in England, private enterprise has not
been entirely beaten in the race; while I observe
in certain quarters it holds its own admirably in
competition with tax-exploited industry.
Even
the capital invested in private company electrical
undertakings is increasing, and this in spite of
almost insurmountable obstacles. I t is a case for
gradual readjustment, not violent change. With the
facts fully understood, the people will by degrees
curtail these unwise and dangerous economic
experiments, and bring your * cities back to the
sphere of work which is strictly their own.
The broadest objections to municipal trading,

23
as carried on in England, would seem to be six in
number. The injurious effect upon the work which
is strictly within the municipal sphere of operation.
The fact t h a t in giving the required attention to
trading operations, the " unproductive" work is
almost certain to be neglected. The tendency to
discourage improvement or development. The engendering of ill-feeling, which is sure to arise when
the taxpayer finds himself obliged to help defray
the cost of competing with himself, and which ends
in quenching civic pride. The difficulty in adjusting
the burden of a trading undertaking on the right
shoulders, and such an equitable regulation of the
charge as will not put a burden oil those who
derive no benefit. The impossibility of drawing a
line as to which industries shall be taken up by
municipalities, and which shall be left to individual
enterprise.
Whom among us is prepared *to formulate hardand-fast rules as to the limits of municipal action ?
The question was once asked, I think by Lord
Avebury, whether it is intended to buy up every
business which pays 3 per cent., and if not, why
not ? Bread is more of a necessity, and more universally used, than either gas or tramways, and
bakers make more than 3 per cent. The real municipalists will answer this question logically, and say,
by all means municipalise the bakeries. The Town
Clerk municipalist will hesitate, and go off on a
long discussion of what he calls " natural monopolies," and will probably contend t h a t bread does

24
not come under this category. If the cities took up
its manufacture, all competition, however, would
soon be abolished in the interests of monopolistic
municipal bakeries.
Thus the conditions would
remain identical, whether naturally or artificially
sustained.
These gentlemen would probably
contend that telephoning is a natural monopoly, yet
I have seen remarkable results of free competition
in parts of the United States : results quite equal to
the municipal and governmental achievements of
European countries.
I n summing up some of the objections to
Municipal Trading, the London Times says :—
" The time has come for the mass of the people
to make up their minds about a movement which
must have consequences reaching far beyond the
expectations of those who now encourage or acquiesce in it. Nor is it an answer to say, * W e will
stop when mischief is being done.' Once create
large municipal staffs ; once bring together large
bodies of men accustomed to light work, regular
employment, and good wages; put down plant,
erect buildings, and purchase land; create vested
interests with subtle ramifications; and it will not
be possible without using heroic means to rectify a
series of mistakes. Then, too, there is the question
of the capacity of our public bodies to deal effectively
and wisely with all the functions thrust upon
them.
And, gravest uncertainty of all, there is
the question whether the purity, such as it is, of
municipal government will be maintained if it

25
exercises a multitude of duties, touches finance at
many points, and makes politics and business almost
synonymous."
The relations of municipalists to labour must
always be a source of concern, because, especially in
the case of the Metropolis, it is undesirable on several
grounds that the governing body of larger cities
should be a gigantic employer of labour. I t might
in such event become a grave question whether the
council would control the staff, or the staff would
control the council; whether, in fact, the dog would
wag the tail or the tail wag the dog. The concessions
of to-day may become the basis for still greater and
more exorbitant demands on the part of labour tomorrow ; and between the increased cost due to
these and similar causes, and the lessened receipts
resulting from the demands for lower fares and
reduced price of commodities, there will always be a
tendency to place the municipalities at a disadvantage. There are, of course, many other obstacles,
such as the conflict arising through different areas
in distribution of light, power, and heat, as well as
locomotion. I n some cases, notably Glasgow and
Manchester, these difficulties have been partially
overcome, but in London I find this conflict of area
and of jurisdiction in relation to streets and highways has been a serious obstacle in building up a
harmonious system of locomotion. Private companies in the United States find no difficulty in
linking up towns, villages, and townships, and all
other minor civil divisions, into one system, over

26

which through booking and a uniform fare usually
extends.
I have purposely avoided any allusion to the
numerous state failures in conducting such enterprises as railways, telegraphs, and other industries,
t h a t as a rule flourish better under the skilful
guidance of men reared to the business, and whose
expert knowledge is often taxed to the utmost to
meet the growing and changing public demands.
France, Italy, and nearly all European countries,
except possibly Germany, have failed to make the
most of their railway systems. In Germany the
work is well done, but railways are not the potent
force they are in Great Britain or the United States.
Those favouring State ownership find no encouragement in Australia or New Zealand ; while the losses
on your telegraph system, since it has been managed
by the British Government, does not encourage us
to go and do likewise. These matters are, strictly
speaking, outside the subject allotted me, but they
have a bearing on the general question of how
far it is wise for States to depart from the safe
theory that " the State is governed best that is
governed least," and undertake enterprises which
have usually been left to individual endeavour. To
dampen individual effort may prove a dangerous
experiment, and its effects may be more far-reaching
than it seems at present. I n conclusion, permit me
to say that I am a firm believer in the municipal
spirit of the age, and an ardent supporter of all
its higher aims. These few words of warning are

27
therefore offered, because I believe municipal trading
propensities, if not limited, will neutralise and
destroy much of the good already accomplished
by conscientious municipal workers, in their proper
sphere, both in England and in the United States.