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826 of the public treasury, to arrange its rates to pay interest on its securities; a private company will generally be prevented, by the indirect competition of railways in other parts of the country which it serves, from doing very much more than this. The relative merit of the two systems depends upon the question how we can secure the best efficiency and equity in the application of the principles thus far laid down. There are three different systems of control:—

1. Private operation, subject only to judicial regulation, was exemplified most fully in the early railway history of the United States. Until 1870 railway companies were almost free from special acts of control; and, in general, any company that could raise or borrow the capital was allowed to build a railway wherever it saw fit. In the United Kingdom there was almost as much immunity from legislative interference with charges, but the companies were compelled to secure special charters, and to conform to regulations made by the Board of Trade in the interests of public safety. The advantage of this relatively free system of railway building and management is that it secures efficient and progressive methods. Most of the improvements in operation and in traffic management have had their origin in one of these two countries. The disadvantage attendant upon this system is that the courts are reluctant to exercise the right of regulation, except on old and traditional lines, and that in the face of new business methods the public may be inadequately protected. There is also this further disadvantage, that in the gradual progress of consolidation railway companies take upon themselves the aspect of large monopolies, of whose apparently unrestricted power the public is jealous. As a result of these difficulties there has been, both in the United Kingdom and in the United States, a progressive increase of legislative interference with railways. In the former the Railway and Canal Traffic Act of 1854 specially prohibited preferences, either in facilities or in rates. The Regulation of Railways Act of 1873 provided for a Railway Commission, which should be so constituted as to take cognizance of cases on the investigation of which the courts were reluctant to enter. Finally, the legislation of 1888 put into the hands of a reorganized Railway Commission and of the Board of Trade powers none the less important in principle because their action has been less in its practical effect than the advocates of active control demanded. In the United States the years from 1870 to 1875 witnessed sweeping and generally ill-considered legislation (“Granger” Acts) concerning railway charges throughout the Mississippi valley; while the years from 1884 to 1887 were marked by more conservative, and for that reason more enforceable, acts, which culminated in the Interstate Commerce Act, prohibiting personal discrimination and gradually restricting discrimination between places, and providing for a National Commission of very considerable power—not to speak of the pooling clause, which was extraneous to the general purpose of the act, and has tended to defeat rather than strengthen its operation.

2. Operation by private companies, under specific provisions of the government authorities with regard to the method of its exercise, has been the policy consistently carried out in France, and less systematically and consistently in other countries under the domination of the Latin race. It was believed by its advocates that this system of prescribing the conditions of construction and operation of lines could promote public safety, prevent waste of capital and secure passengers and shippers against extortionate rates. These expectations have been only partially fulfilled. Well trained as was the civil service of France, the effect of this supervision in deadening activity was sometimes more marked than in its effect in preventing abuse. Moreover, such a system of regulation almost necessarily carries with it a guarantee of monopoly to the various companies concerned, and not infrequently large gifts in the form of subsidies, for without such aid private capital will not submit to the special burdens involved. These rights, whether of monopoly or of subsidy, form a means of abuse in many directions. Where the government is bad, they are a fruitful source of corruption; even where it is good, they enable the companies to drive hard bargains with the public, and prevent the expected benefits of official control from being realized.

3. State operation and ownership is a system which originated in Belgium at the beginning of railway enterprise, and has been consistently carried out by the Scandinavian countries and by Hungary. Since 186O it has been the policy of Australia. It has generally come to be that of Germany and, so far as the finances of the countries allow, of Austria and Russia; British India also affords not a few examples of the same method. The theory of state ownership is excellent. So large a part of the railway charge is of the nature of a tax, that there seem to be a priori reasons for leaving the taxing powers in the hands of the agents of the government. In practice its operation is far more uncertain. Whether the intelligence and efficiency of the officials charged by the state with the handling of its railway system will be sufficient to make them act in the interest of the public as fully as do the managers of private corporations, is a question whose answer can only be determined by actual experience in each case. If they fail to have these qualities, the complete monopoly which a government enjoys, and the powers of borrowing which are furnished by the use of the public credit, increase instead of diminishing the danger of arbitrary action, progressiveness and waste of capital. Even in matters like public safety it is by no means certain that government authorities will do so well as private ones. The question is one which practical railway men have long since ceased to argue on general principles; they recognize that the answer depends upon the respective degree of talent and integrity which characterize the business community on the one hand and the government officials on the other.

.—On economics of construction and of operation, see Wellington, The Economic Theory of Railway Location (5th ed., New York, 1896). On principles governing railway rates in general, and specifically in England, see Acworth, The Railways and the Traders (London, 1891). On comparative railway legislation and the principles governing it, see Hadley, Railroad Transportation; its History and its Laws (New York, 1885). On the history of railway legislation in England, see Cohn, Untersuchungen über die Englische Eisenbahnpolitik (Leipzig, 1874–83). On practice concerning rates in continental Europe, see Ulrich, Das Eisenbahntarifwesen (Berlin, 1886). (Since this was published, continental passenger rates have fallen. The French translation—Paris, 1898—gives Russian tariffs.) On the question of “nationalization” (i.e. state ownership and operation), see an article by Edgar Crammond in the Quarterly Review (London) for October 1909, which cites, among other works on the subject, Clement Edwards’s Railway Nationalization (1898); Edwin A. Pratt’s Railway Nationalization (1908), and E. A. Davis’s Nationalization of Railways (1908).



The first thing a railway company in Great Britain has to do is to obtain a special or private act of parliament authorizing the construction of the line. Not that the mere laying or working of a railway requires parliamentary sanction, so long as the work does not interfere with other people’s rights and interests. An example of a railway built without any legislative authority is the little mountain railway from Llanberis to the summit of Snowdon, which was made by the owner of the land through which it passes. Such a railway has no statutory rights and no special obligations, and the owner of it is liable to be sued for creating a nuisance if the working of the line interferes with the comfort of those residing in the neighbourhood. When, however, a company desires to construct a line on a commercial scale, to acquire land compulsorily, to divert rivers and streams, to cross roads either on the level or by means of bridges, to pass near houses, to build tunnels or viaducts, and to execute all the other works incidental to a railway, and to work the line when completed without interference, it is essential that the authority of parliament should be obtained. The company therefore promotes a bill, which is considered first by select committees of the two houses of parliament, and afterwards by the two houses themselves, during which period it faces the opposition, if any, of rival concerns, of local authorities and of hostile landowners. If this is successfully overcome, and the proposals meet with the