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to the previous ist of January and was paid that very day. The following day the elections took place. The result, which had been regarded as doubtful, was that the ministerial majority was re-elected.

A matter which is if possible even more important is the business of fixing the railway charges. A large number of people argue that, because the State runs the Post Office, the telegraphs, and the telephones—though with very qualified success—it can therefore run the railways. This is a fundamental error. In the Post Office business there is no question of varying charges. The charge for a letter is one penny from Lombard Street to Charing Cross, and one penny from Land's End to John o' Groat's. Nor has anyone ever claimed that a universal provider sending out 100,000 circulars should have a reduction in the postage charged because of his wholesale quantity. But if the cost of a postage stamp were a serious amount, we may be very sure that long ago there would have been an irresistible demand for a tariff, varying according to distance, and differentiating between wholesale and retail consignments. And this is essential to railway working. The famous Prussian Finance Minister, von Miquel, did indeed declare that differential tariffs were inadmissible on a State railway system, and the Prussian rates are in a large measure based on this idea. But a sheer mileage tariff, charging forty times as much for 400 miles as for 10, is an impossibility in this country. It would divert the whole of the long-distance traffic to the coasting vessels, and bankrupt the railways. The whole trade of the country has grown up round a system of differential tariffs, taking account of quantity, trade conditions, competition between various points of origin and destination, and so forth. And not all the power of the Government would suffice to fit English trade into the Procrustean system under which the very modern commerce and industry of Prussia have grown up.

In fixing and adjusting differential tariffs a political minister would, by the law of his being, be inexorably bound to regard political considerations. In the words of an official memorandum presented to the Cape Government in 1907 : ' influential persons ... make representations to the ministerial head of the Government, supplemented by such pressure, political influence, or other means, as are considered perfectly legitimate in their way, and which are best qualified to attain the end the

applicants have in view. . . . It is by no means unknown for the requests to coincide somewhat with a critical division in Parliajaent, present or in prospect; or otherwise something has occurred which is regarded as irritating to the public or embarrassing to the Government; and the desire to minimise the effect by some conciliatory act is not unnatural. . . . The fictitious and often transitory importance which a community or district manages to acquire obscures the consideration of the railway and general interest of the whole.'

It is frequently said by advocates of State ownership that interference on political grounds can be got rid of by placing the actual management of the railways under the control of an independent or semi-independent Board of Commissioners to whom the power of fixing and altering rates would be entrusted. How impossible this is will be appreciated by anyone who reflects on the tendencies in our own parliamentary history. Even a humble body like the Road Board, entrusted with the prosaic task of subsidising road improvements of local authorities, which fixes no rates, and treads on no trader's personal toes, is attacked in the House of Commons year by year because it is not directly responsible to Parliament. Australasia has been dealing with this very question for the last thirty years. State after State has found that the politicians were running its railways upon the rocks ; has set up a Commission as a shock-absorber between Parliament and the railways; and then pulled down the Commission again, or emasculated its powers, precisely because it displayed the independence which was the object of its creation. And indeed, in the nature of things, it cannot be otherwise. If the State owns the railways, the State must manage them in accordance with the public opinion of its citizens. And the constitutional organs for expressing that opinion are the Parliament which the people elect and the Minister who has the confidence of the Parliamentary majority. A rate-fixing despot, appointed for a fixed period to act in the light of his own expert knowledge, honesty, and intelligence, regardless of the wishes of the electors and their representatives, may be an ideal to dream of, but there is no place for him in a democratic Parliamentary system.

Such is, in the baldest outline, the case against State ownership. Of course the case has not here been proved. Within the limits of space available, it is only possible to make assertions, and to indicate the grounds on which these

assertioits are based. After studying the available evidence with such impartiality as we are able to bring to bear upon it, it is our firm conviction that, while State ownership in some *countries may answer, and in some may even be desirable, •such a policy would be disastrous for this country. The railways would certainly corrupt politics, and politics would with equal certainty render impossible the efficient and economical management of the railways.

Nevertheless, it cannot for one moment be supposed that the State will make considerable financial sacrifices, and incur even larger financial liabilities in connexion with the railways, and then hand them back to the companies to manage, with the same large measure of irresponsibility which they enjoy at present. If the State is to nurse the companies back to financial prosperity, it must claim in return the right to obtain and retain the ultimate control over their broad policy. Railway history shows only one method in which the idea of giving the State responsibility for a general policy, while leaving to the companies full control of the normal conduct of the business, has been successfully worked out. The field of operation was, curiously enough, Mexico, a country not, perhaps, to be regarded as a pattern of organisation at the present moment. Before the Diaz régime collapsed, the Mexican railways had for a good many years been successfully managed under a system initiated by Mr. Limantour, the brilliantly able Finance Minister of the Republic. The Government was the majority stockholder in all the companies of any importance, with the single exception of the old original Mexican railway from Vera Cruz to the capital. The Government had obtained this position through the acquisition at a nominal figure of a sufficient amount of deferred ordinary stock to control the general meetings of the shareholders. This stock was issued to the Government in return for its guarantee of prior securities and for other substantial concessions. The directors were responsible for the management of the company, and were free to deal as they thought best in the interest of the shareholders with their staff and their customers, but subject always to this consideration that, unless their policy ran broadly on lines of which the Government approved, the Government proxy would be used to turn them out of office at the next general meeting. In practice the Government never appeared openly upon the scene at all. The directors were re-elected year after year very much as in any ordinary company. But we may assume that behind the scenes the representations of so important a shareholder received considerable attention.*

It is a far cry from Mexico to England; but it would not be the part of wisdom to say that, because a scheme has worked in Mexico, therefore it cannot work in England. Indeed there seems every reason to think that some such scheme might be profitably adopted here. That the railways must be partly controlled by the State we are all agreed. That State control from outside, through Parliament, the Board of Trade, and the Railway Commission, has not been very successful in the past is commonly admitted. In any case, it is inadequate under the new conditions that have now arisen. On the other hand, the objections to direct State operation under a Minister responsible to Parliament are most serious ; and most devices for the interposition of a non-political buffer between Parliament and the railways have broken down under political pressure. The system of indirect control by the State acting as shareholder has not hitherto been tried in a democratic State. If the State, as in the Mexican example, owned more than half the shares, the directors would be in effect the nominees of the Government, and thus the evils of complete State control would arise afresh under another form. But it is open to question whether a plan could not be devised for giving the State some representation on the board of directors and some corresponding share in the profits of the concern without putting the Government in a position to enforce political methods of management.

This at least is certain. The railway problem is not the least important of the reconstruction problems that will have to be faced after the war, and it is high time that public attention should be directed to its solution.

X.

* This system is successfully applied in Germany to the management of the public utilities,' gas, electricity, tramways, and other similar public undertakings, in many of the great cities. The management is in the hands of a company in which the city is a large shareholder, and on whose Board the Corporation is represented by one or more directors.

ENGLISH BANKING

OF

F one effect of the war upon many of us there can be

no doubt. Upon a somewhat uncritical community the critical spirit has descended. So far as this phase of mental activity has been well informed and judiciously employed it may be welcomed, but it is to be feared that the greater part of contemporary criticism is very badly informed and very injudiciously introduced. The amateur strategist in things naval and military, the amateur diplomatist, and the amateur financier are all very much in evidence, and were it not that they cancelled out one another's opinions they might be dangerous. Quiet folk go unconsidered in such times as these, but it is they rather than the critics who make the strength of a nation in time of war. It is a nice point how far a government is the better for a vigilant and outspoken criticism, but a daily dose of nagging, parliamentary and press, is an unmitigated evil. It is too often informed by ignorance and inspired by vanity.

It is not, however, governments only that suffer. We are all ' very conscious of one another's infirmities. It is the fashion to find fault. In our present mood every interest, however legitimate, and every business, however well conducted, has its critics. The shipowner, the coal-owner, the wheat importer, the flour miller, and even the unfortunate butcher and baker are under the harrow. But the particular criticism with which the present article is concerned is the attack made upon English bankers on account of their alleged failure to assist traders, manufacturers, and farmers on the lines adopted by German bankers. To a small extent this criticism may be presumed also to apply to Scottish and Irish banks, but the main attack is directed against English and especially against London bankers.

Criticism, so far as it is just and discriminating, ought never to be resented, but much of the current criticism overlooks the most elementary considerations. It is therefore necessary to give some account of what English banking really is, and upon

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