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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, locať 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 corporation then, no question whether a profit should be made can possibly arise. The business is what is called a “mutual” one, and to charge more to the members than the cost of the services rendered would be absurd, as the extra amount would only be held in trust for the members in exactly the same proportions as those in 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 ? If we 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 quâ ratepayer gain by it, and he may (indeed must, unless great reserves are formed to make good years balance bad) lose by it. New municipal enterprises may still be undertaken, but when they are it will always be by the triumph of an interest—the interest of the gas consumers or the electric light consumers, or of the people 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 cheapen just the particular things which happen to come conveniently within the domain of municipal enterprise. These things—with the exception of water, which is likely to leave the domain of municipal enterprise and enter that of the ordinary work of the municipality—these things are neither things of first necessity, nor things consumed only by virtuous persons. What particular claim have the consumers of gas or electric light, or, it may be, the users of telephones, to have their pockets relieved at the risk always, and every now and then at the actual cost, of the whole body of ratepayers? The consumers of oil may be both a more necessitous and a more deserving body of persons. The demand that the risk of loss should be taken in the production of certain commodities, while all gain should be foregone, obviously amounts to a bounty on the production of those particular commodities, and bounties, we have very properly been taught to believe, are uneconomic in their operation.
To overthrow these arguments in favour of profit-making, strong reasons ought to be brought forward. But where are they? The opponents of profit-making are usually content to be dogmatic : they say that profit should not be made, but give no reasons. Some of them are antiquated socialists, who hold that all profit is wicked and that the local authority ought not to touch the unclean thing. They forget that the kind of profit they ought to object to is the interest paid to the public creditor who supplies the capital, and not any profit beyond this acquired by the local authority; and they do not know that it is now very well understood that even interest on capital would have to appear in the book-keeping of a purely communistic state. Others may have regarded municipal enterprise as akin to distributive co-operation, where the profits are divided among the consumers. But this, too, is a false analogy, for it is the ratepayers in general, and not the consumers of the commodity or service provided by the municipal enterprise, who are banding themselves together to work the enterprise. In more than one case (that of Liverpool docks, of course, being by far the most important) harbours or docks which were once municipal enterprises have been turned into that kind of co-operative institution which is called a harbour or dock trust. But here the municipality is relieved of all liability to loss, as well as all prospect of gain. It is one thing to ask the municipality to give up an enterprise altogether, and another to ask it to take all the risk of loss and none of the chance of gain. Finally, a considerable number of the opponents of profit-making have assumed that municipal