GOVERNMENT MANAGEMENT OF RAILWAYS. [Abridged from the Journal des Economistes, August, 1877.] THE attentive observer of politics and of the railway system of the different countries of Europe has remarked of late years a strong tendency to the absorption by the State of lines so long worked by charter companies. Bavaria, near the close of 1875, purchased the railways of the Eastern Bavarian Company; Saxony has assumed the lines of the railway company from Leipzig to Dresden. The Italian Legislative chambers have recently voted the purchase by the State of a portion of the roads belonging to the railway system of the peninsula. Does this absorption, this purchase of railways by the State, answer to an economical want? Do the results of working by the State, hitherto obtained, justify us in predicting a better management of the lines heretofore worked by the companies, when they shall be worked by the Government? What is the solution to be arrived at from the point of view of the general interest, in different countries? Is it that the working of railways by the State is to be preferred to that by private companics, or will the contrary solution rather have to be admitted? When two railways situated in the same country, the one belonging to the Government, the other to a private company, are in almost identical conditions as to working-that is to say, if the receipts per mile of each road, and the variations of the longitudinal sections, are approximately the same-we arrive at the following economical deductions: 1. The working coefficient, or the ratio of expenses to receipts in running the roads, is greater on the government railway than on the private onc. 2. In order to obtain the same receipts, the Government is subjected to a greater expense than the private company. 3. The rate of interest paid on account of construction capital exceeds on the private railway that realized by the Government railway. 4. The expenses of working per passenger and per ton of freight under the system of the State are greater than those of the private railway. These results, founded upon the figures of the working of many years given us by statistics, are a characteristic mark of the inferiority of the working of railways by the State, compared to the working by private companies. The economic inferiority of railway management by the State when compared with that by private companies results from several causes. The working of a railroad is above all things an industry-the industry of transportation, and as such it ought to be managed commercially. A private company should manage, and it does generally manage its railway, in the same manner as the manufacturer or merchant manages his factory or his trade. In the hands of the State, on the contrary, the railway falls into the jurisdiction of one of the ministers, and it is managed administratively. The State has to do with administration, and not with commerce. In England and in Austria, where the railways are managed on the most commercial plan by the companies which own them, or which have obtained the charters, the commercial agents of these companies traverse the country to secure freights, just as the clerks of any merchant would travel to open up markets for the goods of their patron. Private companies interest themselves in finding out means of producing new sources of traffic, of attracting new freights to their lines. If all the railways belonged to the Government, and were worked by it, these methods, employed by the railway companies to make the most out of the lines which they have in their hands, would soon fall into disuse, for they are conformed neither to the habits nor to the character of the State and of its functionaries. This is a first cause of the economic inferiority of State railways in comparison with private ones -a cause which is exhibited in a diminution of the receipts. The expenses of working a railway are no less important than the receipts. A rational and economical management requires that the expenses should constantly follow the same variations, the same law as the traffic. For the merchant and manufacturer this rule is elementary, and railways ought equally to observe it. If the traffic falls off, the expenses should fall off likewise, otherwise the working coefficient will be increased. The expense of the working force represents a very important figure in the management of a railway. If the traffic falls off, the railway companies reduce a part of their personnel. In railway management the smallest economy must not be neglected, for the amount of that saving multiplied by the number of miles of trains or of way, or by that of tons of freight, yields at the end of the year important sums, and establishes the fact that in railways there is nothing so little, no economy so trifling, as not to merit the attention of those responsible for the direction. In this respect the economic inferiority of working railways by the State compared to that of private companies is well established. Governments in general are not accustomed to dismiss a part of the official staff of a railway which it works when the traffic upon these railways diminishes. This personnel is composed in effect almost entirely of old soldiers, towards whom the State has, so to speak, contracted a moral obligation of keeping them till their age renders them unfit for working service, when it gives them a retiring pension. One point of economy in which the superiority of privately managed railroads over those of the State is incontestable, and in which the economic results obtained by private industry greatly outrun those reached by the State, consists in the utilization of the working force. Let us cite an example in the railway running from Vienna to Berlin. On the Austrian portion of this railway, the personnel of the train is composed, besides the engineer and the fireman, of one conductor in charge of the train, and two conductors charged with the care of the tickets. Now, on the same line of railway when it enters Saxony, where it is managed by the Government, the same train comprehends, besides the engineer and fireman, four conductors and three brakemen. The Saxon train has always three officers more than the Austrian train. In the latter the brakes are cared for by the three conductors of the train, who, during the trip, are seated upon the platforms, and during the stops superintend the handling of baggage, etc. The Saxon train has all these extra brakemen, and while the train is en route the conductors are seated in a reserved compartment of a car, and chatting among themselves like ordinary travellers. Estimating the expense of one brakeman at only 1500 francs per year, each regular train of travellers on the Government railway of Saxony will cost at least 4500 francs per year more than on the system of the Austrian company. One sees at once the importance reached by the figures of these additional expenses of running when the number of regular passenger trains per day is so considerable. Thus the railway companies make much better and more economic use of the officers on their trains than the railways of the State, and that, too, without any prejudice to the security of the train, and the good execution of the service. With rare exceptions it may be asserted, that the personnel employed by the Government for any given work is more numerous than that occupied upon a similar labor with a private company. The comparison of the methods pursued by State railways and by private ones to accomplish the best use of the material consumed in running trains leads to conclusions of the same character as the preceding. Railway companies are in the habit of giving to their employés, who by their attention or zeal succeed in ac complishing economies in consumption, a premium representing a part of the saving. They by whose care the rails, the locomotive, or the cars are saved for running use, or the expenses in any direction are reduced, are suitably rewarded. The employés thus encouraged are induced to study economy in the interest of the company, and this stimulus operates to induce each person employed to study how to augment the receipts or diminish the expenses. This is an idea which has not hitherto penetrated into the administrative spheres of the government of railways, and yet there is none more important commercially than this. It has been introduced into every department of business. One of the principles taught by political economy is that in the domain of labor, in that of industry and of commerce, the sphere of activity of the State begins nearly where the rôle of the individual ends, or where the activity of private industry ceases. Wherever, in the vast field of industrial action, individual efforts can be successfully applied, the Government should leave free room to that agency, and not enter into competition with it. If the State, in almost all countries, has constructed highways, canals, etc., it is because that at the time when these public works were executed, it alone was capable of undertaking them, and of managing them after their construction was finished. The association of capital, which, in more recent times, has created companies of great powers and credit, superior to that of many governments, was then almost unknown. The intervention of the State is unnecessary in the construction or management of railways, except in case of lines recognized to be of general utility, but with a small traffic, and consequently where the expenses of construction are such that private industry would not find from the profits of working them a sufficient reward for its labor and its capital. The rôle of the Government should be limited to exercise a control over its railways. From the point of view of political economy, the construction, the purchase, and the working of railways by the State was an economic blunder; it was, moreover, a hindrance to the freedom of industry. The Government administers, instead of operating in the interest of commerce and of industry; the agents of the State have not, in the conduct of affairs purely industrial and commercial, those qualities which private industry and individual interest alone can confer. It is claimed, however, that the management of railways by the Government would lead to a simplification of the rates, a reform of regulations, and a reduction of freights and fares. Now this simplification and reform of regulations may be obtained without recourse to the radical solution of the purchase and working of railways by the State. A reform of this kind was brought about long ago in Austria by an agreement between the numerous railways of that country, whom their own interests led to this progressive measure. As to a lower tariff, if we look at practical examples, the rates charged by the two Bavarian roads are no lower since the Government management took effect than under the former tariff. Moreover, even were the rates charged by the Government railways lowered, it would by no means constitute an economic superiority in their favor. The Government, in order to construct or to purchase railways, is obliged to appeal to the private treasury of the citizens; it contracts a loan, the interest of which can only be discharged by the levying of a tax. If, then, the State derives no net profit from the working of its railways, if it transports at the price it receives, the tax to be paid by the citizens will be augmented, in this case, by the entire sum necessary to discharge that interest. No such solution as that is admissible. Let it not be said that if the State effects, on the one hand, a lower price for transportation by railway, it may well, on the other hand, increase the tax upon the people, and that a compensation will be arrived at in that manner. This might be true if the increase of tax sustained by each citizen were proportionate to the use he made of the railway. Such a distribution of the taxes is impossible in practice, and it would happen that he who could make little or no use of the railway would pay the tax for him who constantly uses it, which would be a gross injustice. The State is obliged, in fairness, to impose such a tariff upon railway traffic as will enable it, by the aid of the profits real ized, to pay for the capital invested in the railways which it works. What, then, becomes of the theory of those who hoped that the Government, if it were to buy up all the railways, would carry for the public at the mere cost of working the road? From the moment that the railways should become the property of the Government and be managed it, they would become subject to political influence. The minister of the railways would find himself absolute master in questions which touch industry and commerce most intimately; he would dispose of one of the most considerable elements of national wealth-transportation; he would be chief of an army of functionaries scattered over the whole country, and in continual contact with the whole nation; the railways would pass very probably into the rôle of propaganda, or the means of yielding a pressure of political influence in the hands of the minister or of a majority of the legislative body. Who would occupy him self with the development of traffic, with the increase of receipts, with the curtailment of expenses, with the proper and economic use of the railway personnel? From that day, the railways would have lost their essential character, they would have ceased to be an industry, they would become only a bureau, and would constitute only one section of the more or less complicated machinery of the Government. AMERICAN TRADE WITH CHINA. [From the Bankers' Magazine, N. Y.] "THE Commerce of our Pacific steamers is made up of a larger variety of commodities than is by many persons supposed. From January to July the steamers bring principally teas and silks, and great expedition is used in the transport of these goods. Tea deteriorates with age, and the sooner a new crop can be put on the market, the better will be the tea, and the greater will be the proportionate profits of the shipper and consignee. When the steamer arrives at San Francisco, the railroad cars are drawn up at her side and the chests of tea or bales of silk are transported at once without the necessity of a second handling. The work goes on with great rapidity; in a few hours the transfer is complete, and the train is on its way to the eastward. It has the right of way over every thing but a passengertrain; nothing is allowed to stop or delay it. It contains from twenty-five to thirty cars; it climbs the Sierras, and winds through the snow-sheds; crosses the alkali plains of Nevada and Utah, and steadily ascends the long slope of the Rocky Mountains, till it halts at the water-shed between the Atlantic and the Pacific, more than 8000 feet above the level of the sea. Then down the mountains and through the broad valley of the Missouri, across the fertile prairies of the Mississippi, striking the lakes, and crossing the Alleghanies, the train comes at length to the seaboard. Twelve days suffice for the journey, and in one instance, a tea-train carried its cargo in nine days and a few hours from San Francisco to New York. "With the present system of commerce, a man may do four times as much business as formerly. A decade or two ago, it took the best part of a year to send a cargo of tea or silk from China or Japan and get the returns therefor; from six to twelve months' capital was locked up, and there was no way of releasing it. Now the steamers and the railway are able to deliver cargo in New York in twenty-eight days from Yokohama, and in thirty-three days from Hong Kong. If we multiply those figures by four for Hong Kong, and by five or six for Yokohama, we shall not be far from the best time of the old sailing-ships. "Nearly every steamer takes $1,000,000 or so in silver coin, chiefly in trade dol. lars. Mexican dollars have long been a well-known commodity, and are in constant demand; the trade dollar was created to supply this want, and is rapidly doing so." |