PROFESSOR COHN AND STATE RAILWAY OWNERSHIP IN ENGLAND

To the issue of the Archiv für Eisenbahnwesen for November— December, 1898, Professor Gustav Cohn of Göttingen contributes a long and interesting article on "The Prospects of State Railway Ownership in England." He takes as his text, or more accurately as a straw showing the direction of the wind—for Professor Cohn knows too much about railways in general and the history of English railways in particular to regard the arguments therein put forward as either important or novel-Mr. Clement Edwards' recent book on "Railway Nationalisation;" and frankly confesses that Mr. Edwards' description of his own work as an attempt to find a plank for a new party platform is not calculated to inspire any great confidence in the strength of an agitation so launched.

Professor Cohn starts by summarising the history of railway nationalisation in Switzerland. He points out that the democratic bent towards extension of the functions of the community was for many years held in check in that country by the even stronger bias in favour of the traditional cantonal independence, which was bound to be impaired by the added weight that the control of the entire railway system would give to the central government. In the end "demagogy triumphed, and nationalisation was carried through by the force "of enmity first against great accumulations of capital, and, secondly, against the foreigners who possessed that capital."

Professor Cohn then turns to look what analogous new force is likely to be brought into play in England, and declares that he cannot find it. "Things change slowly in England. . . The democracy itself in England is conservative because it is English." He thinks, however, that, if England, which has already once or twice coquetted with Protection, were definitely to abandon Free Trade-a course which, however, he regards as "beyond the bounds of calculation, perhaps even of probability "--the knell of private ownership of railways might also sound, as only by actual ownership could the State obtain such a control of railway rates as would then be necessary. Apart from the "strong prejudice "a mere prejudice, and one which will some day be overcome, the Professor thinks-of the nation against a system of State working with many hundred thousands of servants in State uniform," Professor Cohn apparently finds the main obstacle to nationalisation in the "phalanx of railway directors 2" which " now, as

1 In the September number of the Journal, the writer of this note ventured to suggest that the force which Professor Cohn looks for might, ere long, be found in the belief of the half-million railway employées (almost all voters) that they would obtain better conditions of service and higher wages from the State than from their present employers.

2 In the interest of accuracy it is perhaps worth while investigating the numbers of the railway phalanx in the House of Commons. The Railway Year Book for 1898 gives the names of sixty-s -seven M.P.'s who are directors of railways in the

always, sits in the House of Commons and also in the House of Lords; as only one, though an important part, of those traditional social forces. which are only very gradually being deprived by the new democracy of their influence on public affairs." He concludes his study of the question in the following words: "The democratic tendency in English national life will doubtless constrain the companies to do much more in the direction of cheapening third-class fares, workmen's trains and so forth. But it will only win the final victory when it has succeeded in reducing the large number of railway directors in the House of Commons and replacing them with men of anti-capitalist sympathies." W. M. ACWORTH

STATE RAILWAYS AND STATE REVENUE IN PRUSSIA

IN a speech delivered before the Imperial Parliament on the 1st of March, 1898, one of the leaders of the National Liberal party uttered the following opinion:-"I believe I shall not be wrong in affirming that, if a private railway company were to find itself in the present financial position of the Prussian State railways, that is to say, drawing 3 per cent. over and above the interest on its existing capital, the Prussian Government would have no hesitation in demanding of that company that it should yield unconditional priority in its deliberations to the common weal and to the facilities of public communication." The speaker was here giving utterance to a view that has widely prevailed for some years amongst interested parties and which, from their United Kingdom. But this list is, as usual, swollen by a large number of names which in no sense represent the " railway interest." Sir Michael Hicks Beach appears in the list, because he is a director of a company which ten years ago promoted a line, that has never been made, through his Wiltshire estate, now sold to the War Office. Mr. Albert Brassey's name appears because his family inherited, as a damnosa hereditas from their father who made it, a petty line in the North of Ireland, the Enniskillen, Bundoran and Sligo, which the Great Northern of Ireland bought nearly five years ago. Sir John Kennaway's directorate is of a tiny local branch, the Sidmouth Railway, which is leased in perpetuity, at a fixed rate, to the London and South Western. Sir Wilfrid Lawson, by right of his chairmanship of the Maryport and Carlisle, is counted as representing the capitalistic and anti-democratic railway interest. In fact one-third of men whose names are given are not railway directors in any natural sense of the word at all. Of the remaining forty-six there are a large number, Sir Matthew White Ridley and Mr. Walter Long for instance, who, assuming them to be actuated merely by personal motives, certainly are not likely to postpone the wishes of the constituencies to the interest of the shareholders. There are a number of others, Sir James Joicey, Sir James Kitson, Sir Joseph Pease, for instance, whose personal interest as traders must vastly outweigh their interest as railway shareholders. It may, perhaps, be added, that a closer personal familiarity with our English railways would probably enable Professor Cohn to appre ciate that an M.P. director is quite as likely to bring democratic influences from the House of Commons into the board room as to carry capitalistic interests into the House.

standpoint, is not without relative justification. To carry out, however, the demands that are deduced from it is beset with many and great difficulties. These we will proceed to consider.

I.

To ask what the Prussian Government would have done in the event of private railway companies realising a net profit equal to that actually realised by the system of State railways is a somewhat unpractical question. Neither can a direct answer be made to it, and that for very plain reasons. In the first place no one credits the Prussian Government with any intention of denationalising its railways. Hence the assumption put forward above must remain without verification by appeal to experience.

Let us however admit, in view of the persistence of the existing State management of railways, that it may prove suggestive and full of promise to set the hypothetical alternatives in a clearer light, so as to show how much better the interests of railway communication might be served if the Prussian railways were to-day carried on by private enterprise. But we would deprecate on behalf of our comparison that irrational procedure which seizes on any haphazard possibilities and seals them as things deserving of all confidence, in the fantastic spirit that is for ever proving

Dort wo du nicht bist,

Dort ist das Glück!

(Where thou art not, there is happiness.)

And we would recommend that which has actually been shown to be the policy of Prussian railway administration hitherto as the experiential basis for any inferences as to that which at the present may be looked upon as likely to happen.

Now with regard to the case of a private railway company, when netting a clear profit of 6—7 per cent., having been compelled by State legislation or State administration to "yield unconditional priority in its deliberations to the common weal and to the facilities of public communication," in other words, to surrender a considerable portion of its net profit, experience has nothing whatever to tell us about any country, least of all about Prussia.

On the other hand it has much to report to the contrary effect.

It is quite true that cases have occurred of a limit set to the rate of net profit as prescribed by the statutes of private railway enterprises, or by legislation concerning them. Nor is this true of railways only, a precedent being at hand in earlier concessions. Thus when the Liverpool and Manchester railway obtained its parliamentary powers in 1826, the dividend was limited to 10 per cent. after the model of the

powers that had about the same period been granted to the gas-lighting companies. It is true, again, that (presumably in imitation of English legislation) ch. 33 of the Prussian Railway Act of November 3rd, 1838, contains the following ::- In so far as, after deduction of the expenses of transport, and of the fixed annual contribution towards the reserve fund, according to the statutes approved by ministers, the interest on the capital invested in the undertaking shall amount, during the most recent interval of time, to a net profit of more than 10 per cent., the rates of transport must be reduced to such a degree as shall prevent the net profit exceeding 10 per cent.”

Now in England the regulation regarding the rate of profit which was imposed not by a general Railway Act, but by particular concessions, was taken seriously, the dividends however of the railway companies, taken in the mass, never, except in the most prosperous, exceeded about 7 per cent. In Prussia on the other hand, under the nose of its Railway Act, quite a number of railway companies effected over many years a profit far exceeding 10 per cent. In the case of the Berlin and Anhalt Railway Company, at the time when their shares were fetching a dividend of 18 per cent., several agricultural associations in the districts adjacent to the line presented a petition, October 20th, 1872, to the Minister of Commerce drawing attention to this infringement of the clause quoted above. The minister's reply, issued on February 4th, 1873-the very day on which the Prussian private railway system collapsed in such a remarkable manner— declared that "The Act sanctions the undertakers of the railways appropriating a net profit of 10 per cent. on the capital invested in their undertaking. This decision should in my judgment be interpreted, and has hitherto been interpreted, by the Government to mean that to the capital in question must be added not only the sums represented by the original shares, but also those raised by the issue of preference bonds and applied to the undertaking." 1

In England, the classical land of the private railway company system, whence the model for this legal decision was borrowed, such an interpretation has never been made, and would be self-contradictory. In Prussia it has been maintained and serves as a conspicuous memorial of the attitude of the State administration toward joint stock lines at the time when the railways were in the hands of private companies. And what was the practical effect? Not only was there no reduction by State intervention of a dividend of 6-7 per cent. to 3-4 per cent., there was not even any carrying out of the legal prescription to the extent of reducing a dividend of 18 per cent. to 10 per cent.

All laudatory comments on the private railway system should be tempered in the stream of actual experiences such as these.

1 V. the pamphlet Die Anklagen gegen die Berlin-Anhaltsche Bahn nebst einer . . . Petition an den Herrn Handelsminister und dessen Rückaüsserung, herausgegeben vom landwirthschaftlichen Vereine der Kreise Delitzsch und Bitterfeld, 1873.

II.

Finding the position we have dealt with untenable, the opponents of railway surplus profits will betake them to other points of attack. They will not fail to adduce the much more effective argument that it was the Prussian Government itself which, when it took over the railways, was careful not to admit any such financial aim, but rather assumed, when occasion served, the opposite rôle of indifference respecting financial losses here and there.

This is correct no doubt, but it has been reiterated often enough. It is a task, interesting in itself and never inapposite, to analyse the causes that have led to these surplus revenues accruing to the credit of the Prussian State railways. Nevertheless, not much will be gained by the tolerably unanimous conclusion that the surplusage is rather the spontaneous outcome of lucky developments than a carefully devised supplement to the original anti-fiscal intentions. The main problem is not to be found in that direction; it is a question of finance.

For what has the State done with the railway surplus revenues? Have they been spent on superfluities, or not? And if not, if that surplus is substantially indispensable to it, how can it replace them by other forms of revenue?

That is, in the end, the real question.

If they do not settle that, all the complaints poured forth against the surplus revenues of the Prussian State railway administration, and against its supporters, in an ever increasing torrent of newspaper articles, pamphlets, books, speeches, &c., by the advocates of interested parties, are futile and at random.

What has the State done with that surplus?

It is instructive, in framing the answer, to note that the critics of the railway surplusage never bring the reproach against the State administration of extravagant dissipation of revenue, or the consequent advice to reduce its expenditure, but that they are anxious, on the contrary, to incite the Government to make fresh outlay on a large scale. It is practically the same set that both blames the financial policy of the railway administration and urges on the Exchequer to high-flown schemes for inland waterways.

Not that we would make the latter procedure a ground of blame to them. They have well-known reasons for justifying those financial sacrifices which they demand of the State. But the Prussian Government has reasons fully as good, aye, and far better to justify those financial sacrifices which it has thought fit to make in disposing of the surplus railway profits. In fact part of them has been devoted to the identical object on behalf of which those who are interested in the traffic question demand a yet larger outlay.

This never resting pressure of progressive needs in the Imperial