By Sir George S. Gibb.
A paper read at a meeting of the Royal Economic Society, on 10th November, 1908.
Railway nationalization has for many years occupied the minds of economic and political students and the practical activities of statesmen in many countries and in English colonies. It has been regarded here as a remote possibility which might some day or other come to the front for practical discussion. But quite recently it would have been thought to be as incredible that any responsible politicians should be considering proposals for purchasing our railways for the State as that any substantial number of persons could be found who would advocate an abandonment of the fundamental principle that there should be no taxation of imports into England except for revenue purposes. In these days, however, public opinion moves suddenly and rapidly. The despised fallacy of yesterday rises as the creed of to-day. There are already many indications that, before long, there will be a numerous and influential, though perhaps a somewhat heterogeneous party, who will urge that immediate steps should be taken to nationalize our railways.
The test, and the only test, to be applied to proposals for railway nationalization is whether railways owned by the State and worked directly by Government officials would be better and more efficient than railways owned and worked by private corporations, and whether, after taking account of all the effects of the change, upon each class, each district, each interest, the net result would increase the wealth and well-being of the community, and be a permanent benefit to the public.
We may, I think, start from the assumption that railway proprietors as such have no interest in opposing nationalization. The value of their property, whether measured in terms of capital value or in terms of future income, estimated on a fair basis, would, it is assumed, be fully provided for in the gigantic financial operation which railway purchase would involve. There is no legal flaw in the title of railway proprietors. They enjoy the fundamental rights attached by our law to absolute property, subject only to the performance of obligations definitely prescribed by Acts of Parliament. I think, therefore, that we may discuss this subject of railway nationalization without apprehension that the change, if it were adopted by the deliberate judgment of the community, would be accompanied by anything in the nature of confiscation of existing rights.
This might not be the intention or the wish of all who think that our railways should be nationalized. Probably some extreme Socialists would like to transfer railways to the State without giving what, in our judgment, would be adequate compensation to existing owners. Their aim is the substitution of a new social polity for that which exists, in which antiquated ideas of private property would have no place. But that is only a phase of their creed which condemns it to sterility. It is not the small band of Socialist zealots, but the majority of the nation that we have to consider in estimating the risk of anything being done in the nature of confiscation.
Those who join the party for nationalizing will, no doubt, find themselves in strange company. There can be little doubt that the movement up to the present has been mainly Socialistic. A trader, who advocates nationalization because he hopes that he might be able to transfer to somebody else, perhaps he does not very much care whom, some part of the burden of the charges which he has to pay for railway carriage, will find that his next neighbor at a meeting of the party is a man who has joined for quite other reasons, with the object, indeed, of ultimately seizing for the State some part of his neighbor, the trader's, property, which the latter was reckoning to increase at the expense of, amongst others, his neighbor the Socialist, through the plan of railway nationalization. But the homogeneity of the party need not concern us, nor the question whether each and every member of it would be actuated by a single-minded desire for the public good. The forces making for honesty and equity in the treatment of existing interests would, I think, so overwhelmingly outweigh the influences tending in a contrary direction that we need not complicate the question by importing into it a discussion as to whether adequate compensation should or would be paid to existing owners in the event of the State deciding to acquire their property. Fair and adequate compensation for existing interests may be taken for granted.
But although compensation can be paid for property, it cannot be paid to the general community who would suffer in the event of the administration and operation of railways under State management being less efficient than under private management. If a mistake be made, all would suffer, and their sufferings would not, and could not, be mitigated by compensation in any form.
It may be useful at the outset to consider what has led to the question of railway nationalization in this country being discussed.