The questions of which Mr. Austen Chamberlain spoke, at one end of the scale are put on behalf of a man discharged for theft, at the other end of the scale on behalf of the man who fears he will not be promoted. The practice of putting such questions not only leads to deplorable waste of executive ability, it also modifies profoundly the entire administration of the public service. Lord Welby, the highest authority in Great Britain, in 1902 testified that it was the function of the Treasury to hold the various Departments up to efficient and economical administration. But that the debates in the Commons not only weakened the Treasury’s control over the several Departments, but also made the Treasury lower its standards of efficiency and economy. He added that in the last twenty or twenty-five years both Parties had lost a great deal of “the old spirit of economy,” and that at the same time “the effective power of control in the Chancellor of the Exchequer had been proportionately diminished.” In former times the Chancellor of the Exchequer had been “paramount, or very powerful in the Cabinet.” Upon the same occasion, Sir George H. Murray was called to testify, because “in the official posts he had held, particularly as Private Secretary to the late Prime Minister, Mr. Gladstone, he had had frequent opportunities for observation not only of the reasons for expenditure, but of the control exercised over it in Parliament.” Sir George H. Murray said: “But I think the whole attitude of the House itself toward the public service and toward expenditure generally, has undergone a very material change in the present generation…. Of course, the House to this day, in the abstract and in theory, is very strongly in favor of economy, but I am bound to say that in practice Members, both in their corporate capacity and, still more, in their individual capacity, are more disposed to use their influence with the Executive Government in order to increase expenditure than to reduce it.” Sir John Eldon Gorst testified in 1902: “But although the Civil Service head of the office has a very great motive to make his office efficient, because his own credit and his future depend on the efficiency of his office, he has comparatively little motive for economy. Parliament certainly does not thank him; and I do not know whether the Treasury thanks him very much; certainly his colleagues do not thank him…. I think anybody who has any experience of mercantile offices, such as a great insurance office, or anything of that kind, would be struck directly with the different atmosphere which prevails in a mercantile office and a Government office…. I have no hesitation in saying that any large insurance company, or any large commercial office of any kind is worked far more efficiently and far more economically than the best of the Departments of His Majesty’s Government.”
Sir John Eldon Gorst might have added that the Civil Service head of a Department really had only rather moderate power to enforce economy. Before the Royal Commission of 1888, Lord Welby [then Sir Welby], Permanent Secretary to the Treasury, was asked: “But you would hardly plead the interference of Members of Parliament as a justification for not getting rid of an unworthy servant, would you?” Lord Welby, who had been in the Treasury since 1856, replied: “It is not a good reason, but as a matter of fact it is powerful. The House of Commons are our masters.”
In the hands of a commercial company, the telegraphs in the United Kingdom would yield a handsome return even upon their present cost to the Government. That is proven beyond the possibility of controversy by the figures presented in the preceding chapters. In the hands of the State, in the period from 1892-93 to 1905-06, the operating expenses alone have exceeded the gross receipts by $1,435,000. If one excludes, as not earned by the telegraphs, the $8,552,000 paid the Government by the National Telephone Company in the form of royalties for the privilege of conducting the telephone business in competition with the State’s telegraphs, the excess of operating expenses over gross receipts will become $9,987,000. That sum, of course, takes no account of the large sums required annually to pay the interest and depreciation charges upon the capital invested in the telegraph plant.
On March 31, 1906, the capital invested in the telegraphs was $84,812,000. To raise that capital, the Government had sold $54,300,000 of 3 per cent. securities, at an average price of about 92.3; and for the rest the Government had drawn upon the current revenue raised by taxation. On March 31, 1906, the unearned interest which the Government had paid upon the aforesaid $54,300,000 of securities had aggregated $22,530,000, the equivalent of 26.5 per cent. of the capital invested in the telegraphs. Upon the $30,500,000 taken from the current revenue, the Government never has had any return whatever.
The nationalization of the telegraphs has corrupted British politics by giving a great impetus to the insidious practice of class bribery. It also has placed heavy burdens upon the taxpayers. But that is not all. The public ownership of the telegraphs has resulted in the State deliberately hampering the development of the telephone industry. That industry, had the Government let it alone, would have grown to enormous proportions, promoting the convenience and the prosperity of the business community, as well as giving employment to tens of thousands of people. In the year 1906, only one person in each 105 persons in the United Kingdom was a subscriber to the telephone; and the total of persons employed in the telephone industry was only some 20,000. On January 1, 1907, one person in each 20 persons in the United States was a subscriber to the telephone.
Under the telephone policy pursued by the Government, the National Telephone Company down to the close of the year 1896 for all practical purposes had no right to erect a pole in a street or lay a wire under a street. As late as 1898, not less than 120,000 miles of the company’s total of 140,000 miles of wire were strung from house-top to house-top, under private way-leaves which the owners of the houses had the right to terminate on six months’ notice. Inadequate as it was, the progress made by the National Telephone Company down to 1898 was a splendid tribute to British enterprise.
The necessarily unsatisfactory service given by the National Telephone Company, down to the close of 1898, created a prejudice against the use of the telephone which to this day has not been completely overcome. Again, the Government to this day has left the National Telephone Company in such a position of weakness, that the Company has been unable to brave public opinion to the extent of abolishing the unlimited user tariff and establishing the measured service tariff exclusively. On the other hand, it is an admitted fact that the telephone cannot be brought into very extensive use except on the basis of the measured service exclusively.
The British Government embarked in the telegraph business, thus putting itself in the position of a trader. But it refused subsequently to assume one of the commonest risks to which every trader is exposed, the liability to have his property impaired in value, if not destroyed, by inventions and new ways of doing things. In that respect the British Government has pursued the same policy that the British Municipalities have pursued. The latter bodies first hampered the spread of the electric light, in large part for the purpose of protecting the municipal gas plants; and subsequently they hampered the spread of the so-called electricity-in-bulk generating companies, which threatened to drive out of the field the local municipal electric light plants.