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points of resemblance and difference between a municipality or other local government, and a public joint-stock company.
Probably the first thing to strike the casual observer will be the similarity of the government of the two institutions. Just as the government of the joint-stock company is entrusted to certain elected representatives called the directors, so the government of the locality is entrusted to certain elected representatives called the town or district council. Neither the electors of the directors nor the electors of the council often interfere directly in the management, and both in the company and the locality their powers of direct interference are almost entirely limited to placing a veto on the raising of new capital. There is, of course, nothing surprising in the similarity, for the municipal corporation and the jointstock company are only two kinds of corporation, and in America, indeed, every company is called a “corporation” at this very moment. So far as their government is concerned, the chief difference between the municipal corporation and the business corporation lies in the fact that in the municipal corporation the electors exercise their right of nla
y rate to the extent of taking s of two political caucuses, electors seldom do more than
nominated by the directors
ordinary public company are -wy, knowing nothing at first hand either about vuuer or about the business of the company; whereas the electors in a locality are each other's neighbours and have the results of the working of the municipality immediately before their eyes every day of their lives. Consequently the electors in a locality are able and willing to exercise far more influence than the shareholders in a company.
Secondly, it will be observed that the municipal corporation and the business corporation resemble each other in the fact that the bond of union between the members of the corporation is not a directly personal one, but one founded on the connection between persons and certain property. Just as you become a proprietor or shareholder in a public company by purchasing certain stock or shares, so you become a citizen, burgess, or parochial elector in a place by owning or occupying in a certain way for a certain period a particular kind of fixed property within the area of the city, borough or district. In neither case is there any power to reject a new member or expel an old one. Neither the proprietors of the G. W. R. nor the citizens of Bristol can refuse you admittance to their register because you have cheated at cards or married your deceased wife's sister, or even because you are bald and have
a glass eye.
But there is an important difference in the nature of the property which confers membership of the two different kinds of corporations. In the company each share or each £1 of stock is like every other, and merely represents a certain fraction of the whole property of the company : in the city or district each share consists of certain definite things, and these things are not in the actual possession of the local organisation. They are in the possession of the citizens or electors individually, and the organisation has merely certain claims in respect of them. To make the G. W. R. something like the City of Bristol, you would have to divide up the stations and rolling stock into 40,000 or 50,000 portions of different value, and give each shareholder his own particular bit to make as much out of as he could, subject to payments to the company for maintaining the line. These payments would be levied from the various shareholders in proportion to the value of their particular bits, which would be revalued from time to time.
Thirdly, we notice a great similarity in the work of the two * kinds of corporations. The municipal corporation resembles the company in being a business organisation created and carried on for the benefit of its members. It is true that here and there in the multifarious duties imposed on local authorities you may find that they are compelled to do some things which, however desirable from an altruistic or even from a national point of view, cannot be said to be for the immediate material advantage of the particular local organisation performing them. But, after all, similar obligations have been imposed on many public companies, private firms, and individuals carrying on different kinds of businesses. Are local authorities required to do so very much more in this direction than the owners of railways and factories ? Whatever answer be given to this question, no one not blinded by enthusiasm can have any doubt that in the main the local government organisation is one for business purposes. In its sober moments every town council recognises the fact. In these days of easy communication and locomotion from place to place effective philanthropy requires to be at least national in its scope, and so, as time goes on, local authorities are gradually abandoning to the State duties like that of seeing that the poor do not suffer more from their poverty than is necessary to maintain the stimulus to industry and good conduct, and that of seeing that every child shall
have the small modicum of literary education which satisfies the public conscience.
But though the work done in both cases is business done for the benefit of the members, there is a vast difference in its character and the way in which the benefit accrues to the members. The company performs services in which the shareholders have no direct interest, and about which they frequently know nothing for other persons, receives money payment for them, and distributes the net profit among the shareholders in money dividends. The local organisation or municipality, on the other hand, does not in its ordinary and principal work perform services for outsiders. It performs services which are directly for the more or less common benefit of its members. It does not attempt to charge each member exactly for what he receives, but assumes that the common and general benefits conferred will be, taken altogether, approximately in proportion to the value of fixed property occupied in the locality, so that the cost of them may be fairly and economically raised by rates in the pound on the annual value of the property. In regard to the ordinary and principal work of the municipal
ether a profit should be made is what is called a “mutual” pembers than the cost of the 1, as the extra amount would
bers in exactly the same pro--www 111 which it was collected from them, and would have to be returned to them by deduction from the next rate levied. But with regard to the special department of local government work known as municipal enterprise, the case is altogether different. What is a municipal enterprise ? only consider the derivation of the words, it would appear that every undertaking of a municipality should be a municipal enterprise; but the term has acquired a technical meaning. The distinction between municipal enterprises and municipal undertakings which are not enterprises corresponds with the Local Government Board's division of municipal work into "reproductive” or “self-supporting,” and “non-reproductive”; but this division involves a very unsatisfactory use of the words reproductive and self-supporting. It is obviously confusing to call the expenditure on a road reproductive as long as there is a toll, and non-reproductive when the toll is abolished. It would be better to say that a municipal undertaking is a municipal
enterprise when it is expected and intended that its cost should be defrayed by free sales of the commodity produced or service rendered, and not by taxes which must be paid whether much, little, or none of the commodity or service is taken.
The removal of dirty water from houses within the local authority's area is not a municipal enterprise, because every one has to pay in the general rate for the service whether he requires dirty water removed or not. The provision of clean water to the houses, on the other hand, is usually a municipal enterprise, because a person's payments are calculated on the basis of some rough estimate of the amount he is likely to use, and if he does not have the water at all he does not pay at all. The difference between providing a particular service as part of the ordinary work of the municipality and providing it by means of municipal enterprise is thus one of principle, but in practice its importance is a question of degree, inasmuch as it becomes greater and greater the more widely the payments exacted differ from the ordinary rates. Compare, for example, two things which are often coupled together-water and gas. There are several substitutes for gas, but none for water, so that whether any one will have gas or not is a matter of choice, but whether he will have public water or not is a matter as to which he can exercise no free-will when he has no good-will. Moreover, when people have got a supply of gas and water, their consumption of water will come out much more nearly in proportion to the rateable value of their houses than their consumption of gas. A recognition of this fact may be discerned in the usual practice of basing water payments to a large extent on rateable value while gas is invariably supplied by meter. The conclusion obviously is that the fact of domestic water supply being a municipal enterprise and not ordinary work of the municipality is of comparatively little importance. It could be undertaken as part of the ordinary work of the municipality with advantage, and in some places it actually is so.
The distinction between municipal enterprise and ordinary municipal work being thus founded on the fact that payments for the services rendered by municipal enterprise differ from those made for other municipal services and are not in proportion to the shares of the members of the local organisation as indicated by rateable value, nor even made by all ratepayers, it is clear that in municipal enterprise the municipality's business is no longer a merely mutual one. It is no longer absurd to charge more for the services than what would precisely defray their cost, since the extra amount will not be redistributed exactly as it was collected. The municipality is now really in the position of the joint-stock company: it is true that so long as its operations are confined to its own district it will do business only with its own members, but this does not seem to be of much importance : the ordinary jointstock company frequently deals with its own shareholders, and seldom finds it convenient or desirable to give them any preference as customers.
The company analogy is entirely in favour of allowing the municipality to make a profit in aid of rates out of the enterprise. If companies in similar enterprises were not allowed to inake anything beyond 2 per cent., or whatever other rate of interest can be got without any risk of loss, it is tolerably clear that no companies would be formed to undertake such enterprises. Similarly, if municipalities are precluded from making any gain for the general body of ratepayers by municipal enterprise, while they are not precluded or protected from making a loss which that general body will have to make up, it is tolerably clear that the ratepayer quâ ratepayer will always (as he very often is at present) be opposed to the undertaking of any municipal enterprise. He cannot a no
ayer gain by it, and he may indeed es are formed to make good years w municipal enterprises may still be re it will always be by the triumph of
he gas consumers or the electric light puupiu
who happen to ride in tramcars, or to have their property increased in value by cheap locomotion. How such a state of things can be considered desirable by any friends of municipal enterprise passes my comprehension. That the principle of no-profit should have been laid down by its enemies is not surprising.
Next, supposing the interest of the consumer to be powerful enough to start and extend the enterprise, and supposing the prices fixed at first bring in a profit, it is easy to see that the rule that the profit must be promptly got rid of is likely to lead to extravagant mismanagement. According to the principle, it ought to be given away in reduction of the prices charged. But will it? Some of it, perhaps ; but a considerable share is likely to go to unnecessarily and unfairly increased working expenses. The besetting sin of town councils and similar bodies is to make too easy bargains, and the temptation to do so is much greater where it does not affect the rates before the next election.
Lastly, it is undesirable for the community to use its credit to