Government in Business

I

THERE are three positions which can be taken with respect to the public ownership or operation of public utilities. One position assumes that government is essentially corrupt or incompetent, or both, and that business is properly the affair of private initiative, which government has no right to usurp. Those who take this position hold that government should keep its hands off the ownership and operation of public utilities and other business, except to supply private initiative with necessary or desirable powers, such as the power to condemn land for right of way, or in some cases to regulate prices and service. Many men who take this position hold that if any government activity competes with private business done for profit, then that fact alone should lead the government to withdraw from that activity. As an example, the printing of return addresses on government stamped envelopes can be done more cheaply and more conveniently when the stamped envelopes are being manufactured than it can be later by private industry. Yet there is a constant drive, widely supported, to stop the government from printing return addresses on stamped envelopes, on the ground that it competes with private industry.

Another position is that of the socialists and communists. They hold that the one and only right purpose of public utilities and other public services is to meet the needs of the whole people, and that for public service properties to be owned, operated, manipulated, and speculated in for private profit is wrong in principle. They hold that it leads to exploitation of the public, to economic despotism, and to political corruption through the improper influencing of public officials when an increase of privilege and power is wanted. They believe also that it leads to the development of false social and economic ideals, so that the attention of people, rich and poor, is diverted from productive work to social and economic competition, speculation, and stock gambling. They hold that so long as highly honored men who control industry, and who present themselves as leaders to be respected and trusted, are actively engaged in the manipulation of securities for the sake of profits, the average man will imitate those whom he trusts and admires, and speculation will continue to be a national disease, undermining morale and destroying interest in productive work.

When it is pointed out that, in spite of fine theory, government ownership or operation often is corrupt or incompetent, and that the resulting waste may be a greater tax on the public than the profits taken by private industry; and when attention is drawn to the fact that the privately owned telephone system and the railways of America often give better service at lower rates than some of the publicly owned systems of Europe, the replies we get are not always clear or convincing.

Proponents of public ownership and operation hold that we need a new set of industrial standards and methods, and that the business men of the country should be working primarily for public service, and not for private gain. They hold that it is debasing to national character for a fragment of the surplus wealth to be handed out as charity and philanthropy, rather than for the whole to be distributed as lessened cost and enlarged service. They hold that the constant teaching by industrial leaders that government is essentially inefficient and corrupt, and therefore unfit to handle business affairs, and the habit of some utilities of endeavoring to promote their interests by controlling public officials, are in themselves debasing and corrupting influences, and that they destroy pride and faith and hope in government, leading to the attitude, ‘If everyone else is crooked in government, then I will try to get mine.’

While these people have their attention centred on our faulty methods for distributing the products of industry, they often overlook the marvelous accomplishments of private industry in the production of goods. The average man who drives an automobile has little comprehension of the miracle of industrial refinement and coördination which it represents. He reads his morning paper quite unaware of the vast industrial coöperation which produced it — of mine and forest; of metal, pulp, clay, and chemicals; of factory, railway, bank, and office. The efficient and economical production of goods by modern private industry is one of the greatest marvels of human history. It represents intelligent, faithful, courageous, and persistent effort of which the public is generally unaware. To discredit that accomplishment by wholesale cheap condemnation is tragically unfair. It is scarcely conceivable that modern industry could have resulted from a rigid communistic or socialist régime.

II

There is a third attitude toward public utilities and public service in general, which differs strikingly from both of those I have described. It is the historic American position which has always characterized our policies where they were not interfered with by the propaganda of political theorists or by interests that have tried to manipulate public policy for private profit.

This typically American attitude is very distrustful of abstract political theory. It aims to take the course that works best in active practice. Communism, socialism, capitalism, autocracy, dictatorship — all these have been cordially approved by the American people, provided they are controlled by good motives, and provided they work well in actual practice. Let me give some examples.

Henry Ford has been an economic dictator. The economic policies of his company, so long as they keep within the law and do not greatly violate commercial usage, have been largely determined by himself. More than once he has cleaned house and dismissed his key men. Yet the public has believed that he tried to give good value and to pay good wages, and he has been a popular hero. Should the public as a whole be convinced that he is no longer working in the public interest, but is building entrenched privilege for himself, popular approval of him would quickly vanish. He has been esteemed because a large part of the public has believed that he has held his power as a public trust.

The governing boards of some of our largest and best universities are selfperpetuating oligarchies. In many cases the boards of trustees appoint their successors as they see fit, though there has been a tendency of late to give limited representation to alumni. As I have compared the work of these private oligarchies with our democratically controlled state universities I have concluded that both types have public service to render. The state universities have given much broader service to the people and in some cases have achieved high standards of scholarship and research in their graduate schools, but our educational oligarchies also have done good work and have sometimes maintained a higher standard of academic freedom. Where is the state university that has a finer record for freedom of speech and opinion than has Harvard University? The American people has sized up this situation and is not worried about political theories. It tends to give its loyalty to the institution which best serves the public good, whether it be controlled by a democracy or by an oligarchy.

Going to the other extreme, Americans, except as they have been frightened or prejudiced by propaganda, have not been afraid of communistic arrangements. In fact, some of the customs and institutions most highly prized and most deeply entrenched in our national life are purely communistic.

Our public schools are communistic. That is, their services are supplied to the whole people according to existing needs, and not according to the individual’s ability to pay. Not only that, but under our compulsory education laws, unless other educational arrangements are made, our children are compelled to accept the services of the public schools. In the early days, education was largely a private industry, conducted for private profit. When the public school system began to develop, it was bitterly opposed by those who held it to be communistic (‘agrarian’ was a word in common use then). The opponents also held that public schools interfered, at government expense, with the livelihood of private schoolmasters, and that free education would pauperize both children and parents. Also, there was already great overproduction of teachers. When the private schools could not get as many pupils as they could care for, why accentuate the competition with public schools?

This fight, as to whether elementary education should be a public or a private industry, was very bitter. Americans at large turned from private to public schools, not because they believed in communism or disbelieved in capitalism in theory, but because they believed they could be better served by public schools.

At present there is a powerful drive among men in high places to change this policy, especially with reference to secondary education. A typical statement is that of the president of one of our large corporations: —

Originally, of course, the thought was only for the elementary schools, but since then progress has been made in our school systems to such an extent that the highschool education of the present day is almost as good as the college education of forty or fifty years ago, all at the expense of society, and incidentally to the taxpayer. With that thought in mind, I wonder what is to be the progression in our studies at the expense of the state, and where will it stop.

If the American people is to keep its public school system it will have to fight for it again.

III

Another communistic type of service is our fire department system. Fire service is furnished without charge. This has not always been true in human affairs. As a boy attending the Chicago World’s Fair, I read an interesting newspaper item. It seems that the Turkish Government had erected a building in which Turkish culture was represented, including a fire department on the Turkish model. When an adjoining building caught fire, the Turkish outfit rushed to the scene and the man in charge began to bargain with the owner of the burning building as to how much it was worth to put out the fire. He explained the status of a private industry by shouting, ‘No money, no squirt!’ Unfortunately the negotiations were only started when Chief Sweeny’s men appeared with the regulation city equipment and spoiled the Turk’s opportunity to reap the rewards of private initiative. Americans did not develop a communistic fire-control system because they were enamored of a theory, but because it worked best.

In the early days many of our highways were private enterprises. They were built by private companies at private expense, and produced an income through charging tolls. Later these private highways proved inadequate, were taken over by the public, and were operated as communistic public utilities, furnishing service to all the public alike without direct charge. The ferries across the rivers on these roads also were started as private capitalistic industries. When the highways were turned to communistic ownership and control, the ferries were left in private hands. This is evidence in support of the statement that the common-sense sanity of Americans was not concerned with abstract theory or with political slogans, but with the best practical solution of the problem at hand.

In early America the country roads were maintained in a communistic manner. Each voter was supposed to give three days’ work a year for road repairs. This communistic practice was so abused that it became a national joke. Sam Walter Foss reflected the general opinion in a rhyme beginning:

About fifty years ago rural America abandoned this expression of communism, and reverted to the capitalistic method of letting private contracts for road maintenance. In recent years there has been a return to the habit of using public employees on road maintenance, but now it is with modern equipment and trained supervision.

In recent years, too, highway administration has taken another turn. It has been found that by a tax on gasoline the users of the highways can be made to pay for them in proportion to use. The government still builds and administers the highways, but, to employ terms in their ordinary meanings, pays for them as a socialist government would, rather than as a communist régime would do.

The post office is another example of pure socialism in government. In the long-drawn-out fight to establish the parcels post, the private express companies made the most vigorous charges that a national parcels-post system would be an extension of socialistic methods, which was true. To-day private capitalism in the Railway Express Company, and socialism in the parcelspost system, operate side by side.

After any method of doing business is firmly established, it comes to seem perfectly natural, and we do not think of our pet prejudices as applying to it. It does not seem monstrous that the city government should put out our fires. Were we used to seeing burials at public expense, without the stigma of pauperism, any other arrangement probably would seem inhuman and barbarous.

IV

I hope that by now I have made my point. Human affairs in a great country like America are so varied and so complicated that they cannot all with wisdom be forced into the strait-jacket of any single political theory. It makes no difference whether that theory is communism or socialism or capitalism. Good government will use many methods, though we may have thought of some of them as antagonistic to each other. There can be no sounder political philosophy than that represented by the historic practice of America, of using whatever method will best fit the case, and of changing methods when the changes will promote the public welfare.

When the socialist rants against the evils of capitalism, the common-sense American tells him not to talk so loud until we have learned how to free ourselves from governmental corruption and stupidity. The city government of Chicago and the régime of Tammany are not good arguments for public ownership, except when we find their corruption bolstered up by private industries. The close connection of the Insull régime with the corrupt government of Chicago is significant. When the capitalist raves at the inefficiency and corruption of government ownership, the common-sense American tells him to go slow until he can clean his own house. So long as the private utility man overcapitalizes his industry, robs his stockholders, overcharges the public, and bribes government officials, he had better not complain too much about government inefficiency.

Are not our publicly owned highways entirely paying their way — through gasoline taxes and automobile taxes — and helping to support industry and the government, as well as the privately owned railroads are? And are they not doing this without the stock manipulation, the vast burden of indebtedness, the legislative lobbying, and the political wirepulling that at one time characterized the American railroad industry? Talk privately to a wide-awake railroad president and he will tell you a story of a moss-grown industry, overburdened with excess capitalization, with obsolete and crudely developed equipment and bureaucratic methods. One of the most respected of our railroad presidents told me recently he believed that a billion dollars a year could be saved by eliminating obsolescence in American railroads.

The fact is, we have not handled either our public business or our private business any too well. The common-sense American is from Missouri; he wants to be shown. He thinks the world is not yet finished. He wants to keep on trying both public ownership and private ownership in the hope that better methods may develop. He wishes that both publicownership men and private-ownership men would stop their dishonorable misrepresentation and their biased propaganda. It is time for both the managers of private utilities and the proponents of public ownership and operation to play the game openly and fairly, like mature, self-respecting, and dignified men and women. Such a change would add to the self-respect and decency of American life, and would greatly help to relieve us of prejudice and confusion.