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TORONTO UNIVERSITY STUDIES



I^OT_, TTIC^^L SCIEHSrCE



W. J. ASHLEY, Editor.



FIRST SERIES.



MUNICIPAL MONOPOLIES



Ai\M) THEIR MAXAGHMHNT



-A., k:. si 3sr oXj i^iii, b. .a..

University College, Toronto.




PRESENTED


THE Il.IBI?,.A.E,-3r


OF


4E University of Toronto

!



X s'D 70 FRONT STREET WEST.



TORONTO UNIVERSITY STUDIES

IN



W. J. ASHLEY, Editor.



^y FIRST SERIES. No. II.



MUNICIPAL MONOPOLIES



AND THEIR MANAGEMElNT

/ BY

-A._ n. sinsrcL^iK, B. ^.,

University College, Toronto.




TORONTO :
PRINTED BY WARWICK & SONS, 68 & 70 FRONT STREET WEST.

1891.



^3/



Copies of this E.-:s iji ma\i be ohfai7ie / on application to the EducMtion Dep (rimeiit for (hdario,

Toronto.



TABLE OF CONTENTS.



Page.

Preface 5

Mlnicipal Monopolies and their Management —

Chapter I. — Municipal Monopolies 7

Section I. — On Certain Requisites of Modern City L^fe 7

1. Waterworks 7

2. Street-cars 8

3. Lighting 10

II. — Their Relation to Government 11

III. — The Monopolistic Character of the Several Industries 15

1. Street Railways 15

2. Waterworks 16

3. Gas Supply 17

4. Electric Lighting 18

Chapter II. — Comparison of Public and Private Management of Municipal Monopolies. 20

Section I. — Some Abstract Financial and Economic Considerations 21

II — Relative Efficiency of Public and Private Servants 24

III. — Some Comparative Statistics % 27

1 . Waterworks 27

2. Gas Supply , 29

3. Electric Lighting 34

4. Street-cars 35

IV. — Some Conclusions 36



Bibliography 3'



M130258



preface:.



The due relation between civic Government and certain industries, which,,
while of first consequence to the inhabitants of cities, are yet necessarily monop-
olistic in their character, is a question of urgent importance. The present position
of affairs in the chief city of Ontario has suggested to the Editor the desirability
of devoting to the consideration of this topic the second of the Toronto University
Studies in Political Science.

The earlier portion of Mr. Sinclair's Essay is occupied with a statement of
the conditions affecting the industries in question, and a discussion of the various
considerations which have to be taken into account in the determination of muni-
cipal policy. Herein he is, to a large extent, traversing ground already examined
by ethers ; and such usefulness as the Essay will possess will be derived from its
comparative completeness and its systematic arrangement. The later part of the
Essay, however, is, in my opinion, of higher value; for it is, as far as I know,
the first impartial attempt that has yet been made to compare the financial
position of public with that of private undertakings. This comparison ought to
do somewhat to moderate the ardour of extremists on either side.

Into the detail of Mr. Sinclair's argument it is not desirable to enter in this
note. But there are two aspects of the subject! which he has not touched, and
upon which some observations may not be out of place.

An enlargement of municipal action in relation to monopolistic industries
has been very widely supported, especially in the United States, in the belief,
which has been freely expressed, that it would be a step in the direction
of Socialism, or " Nationalism." Such advocacy can scarcely be regarded as
altogether wise. In the first place, it implies that we can formulate a much more
definite conception of the future organization of society than is permitted by an
intelligent belief in social evolution. In the second place, it arouses the opposi-
tion of men who would otherwise be ready to assist in a practical reform ; and
allows those who are struggling to retain in their own hands the advantages of
monopoly to shelter themselves behind the principle of industrial freedom-
It would be at once more scientific and more expedient, if the advocates of muni-
cipal action would allow that, as the world is now constituted, individual enter-
prise has obvious advantages, and then go on to point out that in the
case of certain city industries these advantages cannot be obtained, since, from
the nature of the case, competition is there impossible. What the common sense
citizen has to understand is this, that to try to maintain individual enter-
prise in a field where it cannot be allowed with advantage, is to discredit
individual enterprise even in fields where it is desirable.



[50



The other aspect of the subject to which Mr. Sinclair has not adverted, is its
relation to the labour employed. The desire to secure improved conditions for
labour is the chief motive for the English agitation for municipalization, for
instance in the case of the London docks and tramways. In America this con-
sideration is seldom heard of ; and it is the financial advantage to the city that
is put in the foreground. But it is evident that this is a question which will
force itself upon public attention, even if it is not raised by philanthropy. Where
large bodies of comparatively unskilled labourers are employed, there is always
especial danger of labour disputes ; as is sufficiently evidenced by the street car
strikes in New York, Vienna, Toronto, and indeed in most great cities. But labour
disputes involving a cessation in the supply of water or gas or street car service
more immediately affect public safety and convenience than any other similar
difficulties, and call more loudly for a remedy. It is difficult to believe that the
present anarchy can long continue. In the interest of the users of the service,
if not in that of the labourers, some method of public regulation must, sooner or
later, be arrived at. But whether direct municipal management would be an
immediate and satisfactory way out of the difficulty may well be doubted. The
solution of the problem must depend on the circumstances of each place. In the
present condition of municipal politics in most American cities, to add greatly to
the number of voters in the pay of the corporation would certainly be dangerous.

W. J. A.



»




MUNICIPAL MONOPOLIES AND THEIR MANAGEMENT



CHAPTER I.— MUNICIPAL MONOPOLIES.

Section 1. — On Certain Requisites of Modern City Life.

This is an age of great cities. Thpy have swept over their old boundaries ; and
adjacent towns and even counties have been absorbed. In the United States a hundred
years ago, there were only 1 3 cities numbering more than 5,000 inhabitants ; not one
had more than 40,000 ; and of the total population of the country only ^\ per cent,
lived in cities of more than 8,000. In 1880 there were 494 cities of more than 5,000,
In 1890 there are 74 of more than 40,000; 28 of more than 100,000 ; and nine times
as large a percentage (29.11) of the total population live in cities of more than 8,000 in-
habitants.

This tendency to aggregation has not been confined to new countries.* The
capitals of Great Britain, France, Germany and Austria have each increased in population
■fivefold since 1800, and their example has been followed by the provincial cities. In
England and Wales, during the ten years 1871-81, the population of city districts
increased 19.63 per cent., while that of country districts increased only 7.36 per cent.

With this rapid growth of cities, which forms so striking a characteristic of the
present century, new and unforeseen difficulties have sprung into existence. Old forms
of civic government, on being subjected to the severer strain, have not stood it well.
They seem to have been out-grown, as the circle of their influence widened ; and, in the
face of new conditions, all the great municipalities of the world are striving to solve the
tremendous problems they find confronting them.

What are some of the necessities of modern city life, that give rise to these
problems ?

Accompanying the increasing importance of cities, partially the cause, but much
more largely the result of that development, is the attempt to protect their inhabitants
from the manifest evils shewn in some of the existing cities of the Old World to be the
result of crowding a large population into a small area. The latest discoveries of physical
science have been called into service ; and it has been found that cleanliness is a necessary
precaution against the epidemics that attend the filth and squalor of Eastern plague-
swept cities. Of the good that can be accomplished in this direction an excellent ex-
ample is presented in the case of Liverpool, which "comprises an area of 5,210 acres,
with an estimated population of 599,738, or 115 people per acre, being the most densely
populated city in Great Britain. The total number of deaths during the year 1889
was 12,159, equal to 20.3 per 1,000— a reduction of 6.9 per 1,000 since 1880. The
total number is 1,847 less than in 1887, and 2,000 below the average of the last ten years
— notwithstanding the increase in population — which is attributed to the good sanitary
work of the health committee."f

Waterworks. — For cleanliness an abundant supply of water is absolutely necessary.

It would, no doubt, be possible in most cities to obtain sufficient water for this pur-
pose from wells ; but health demands that the water used should be of a purer quality

* A comparison between an old and a new country in this respect is interesting—

In Germany - 28 per cent, of the people live in cities of more than 5,000 inhabitants.

IntheUnitsd States 26 " ''• " " 4,000

But in " " 18 " *' 100 cities of more than 20,000

While in Germany - 16 " " 116 " 20,000 *'

So that in the United States (as compared with Germany), the large cities have grown at the expease
of the small. — Mayo Smith, Statistics and Economics, p. 31. [Pub. Amer. Econ. Assoc, Vol. III.)

t Mr. Sherman in United States Consular Reports, June, 1890.



[52:



than can be obtained from the soil of cities, impregnated as it must be with the
germs of disease. In order to be pure, the water supply must therefore be brought
from beyond the reach of this contaminating influence. It must be brought from
its source either in mains or by aqueduct, and distributed throughout the city by a
system of pipes. Whatever method be adopted, it is evidently a matter involving a very
great outlay of capital. This cost is greatly enhanced by the fact that in order to
supply high buildings, and to give *' a head " of water in case of fire, it is desirable to
keep a much greater pressure of water in the mains than would otherwise be necessary.
A far better and more costly piping is essential in order to stand the strain of this pressure ;
and the loss of water by leakages becomes important, since the amount of a fluid passing
through an orifice in a given time varies directly with the force behind it. A system of
water-works is thus a ^necessity for a city.

The growth in the number of water- works in the United States and in Canada is
illustrated by the following table * shewing the number of works operating in the years
mentioned : —

1800. 1850. 1875. 1885. 1889.

United States 5 69 535 1,037 1,960

Canada 6 20 46 87

In Great Britain and Ireland in 1880, there were 120 companies operating with a
capital of £7,000,000, (exclusive of 8 in London with a capital of £12,000,000), and a
number of municipal plants in Glasgow, Birmingham, Manchester, etc.f

Street Cars. — Another necessity arising from modern conditions of city life is some
mode of cheap and speedy transportation from place to place within the city limits.
Not only is this essential as a mode of communication between the business sections
of a city, but, by enabling artizans to live farther from their work, it also acts as a safety
valve to relieve the congested districts of population from the strain that would other-
wise come upon them.

This strain is far too great already, but under existing conditions it must grow
greater. In the new County of London there are 118 square miles, which have
an avero.ge of 32,500 inhabitants to the square mile ! In the more densely populated
central sections, e.g., Whitechapel, the number will of course be vastly greater. Apart
from the duty of the community to relieve the misery and prevent the evils resulting
from such segregation, its mere presence is a very real menace to the safety of the city.
All great cities have somewhat similar districts : Paris, Berlin, Glasgow, Birmingham,
New York, Chicago, have them ; and it they are not quite as wretched or nearly so large
as those of London, it is only because these cities have not reached in point of numbers^
the " bad eminence " she has attained. If the density of such sections could be reduced
to one-half by doubling the area of a city, the greatest difficulty would be overcome ;
light and fresh air for children, and a certain degree of seclusion would then be pos-
sible. But this increased area involves living at a greater distance from the scene of
one's daily employment. So that some mode of transportation is essential ; and if it
were only cheap enough, and speedy enough, it would meet the requirements of the case.

This need, so far as it has been met at all, is met in all European towns, by elabor-
ate systems of omnibuses, which ply on the principal streets at regular intervals. A
moderate rate is charged, usually varying according to the distance travelled. These
omnibuses are the direct descendants of the old stage coach, and are better adapted to
traffic on narrow and crowded streets, than the street railway systems which take their
place in American cities. These last are a very modern institution indeed, the first
street railway having been built about 1855. Their development seems, however, to have
kept pace with that of municipalities ; and there are now, as nearly as may be, 957 street
railways on this continent, having 8,818 miles of track, and worth in the neighborhood
of $150,000,000. +

* Compiled from tables in Mr. M. N. Baker's Avierican Waterworks Manual for 1889-90. {Engineering
News Office, New York. ) f Sir T. H. Farrer, State in Relation to Trade. {Eng. Citizen Series), p. 93.

X Electrical World, Nov. 22ad, 1890. The writer has reduced the values given by the various com-
panies about one-tenth.



53]



These are divided as follows : —

589 roads, 5,718 miles of track, run by horses,

valued at $54,000,000; cost of running 5.7c. per mile, for each car/'"

49 roads, 527 miles of track, run by cable,

valued at |44,000,000 ; cost of running 2.5c. per mile " "

246 roads. 2,024 miles of track, run by electricity,

valued at $44,000,000 ; cost of running 2' 2c. per mile " "

43 roads, 554 miles of track, run by steam,

valued at $7,000,000 ; cost of running 5.0c. per mile " "

So that " horse " roads do more than half the traffic. This is to be expected from the
circumstance under which street railways have developed. A " horse " road is the easiest
and cheapest to build ; although it is said to cost more to "run" than the others. The
objections to it are : 1st, Its slowness especially for suburban traffic, where all the others
are greatly its superior in this respect. 2nd, It requires a large staff of unskilled
employees. 3rd, Its stables must be in a central part, and usually constitute a nuisance ;
while the excreta of so many additional animals contributes largely to the ulicleaiiliness
of the streets.

Electricity stands second, although it is so new an element in motive powers,+ and
has won its way to popularity in medium-sized towns. It is in a transitional state, im-
provements being continually made in it ; so that a plant that may be very good to-day
may be quite ancient in a year. The larger cities recognise this, and have been cautious
in investing large sums in the enterprise. It is however becoming more stable every
year, and more, important roads are adopting it. The largest electric railway is in
Boston, where the " West End System," with 284 miles of track, has 60 miles of it elec-
trically equipped.

There are two kinds} of electric street car : one in which the power is carried in the
car, which is called the " storage battery " system ; and another which obtains its powf-r
from a wire overhead, connected with the car by a trolley or arm fastened to the cai-,
and having on its upper end a pulley which runs on the wire, thus completing the circuit.
The advocates of the two systems wage enthusiastic war upon each other. The latter
seems so far to be rather the more successful ; notwithstanding the disadvantage it labors
under, of being obliged to string its wires upon poles which makes it necessary that the
track should be by the side of the road, and in case of double tracks, one on each side of
the road ; or else that the poles should be placed in the roadway in the space between the
tracks. In either case the obstruction to traffic is considerable.

Both systems have the following disadvantages : 1st, They are affected by electrical
changes in the atmosphere. 2nd, They are often damaged by lightning. 3rd, The track
must be kept perfectly clear of snow in winter. 4th, The cogs are often stripped from
the gearing in connection with the dynamo, leaving the car helpless on the street § 5th,
They are unable to ascend very heavy grades. Their limit in this last direction would seem
to be ascertained by the following examples : — Milwaukee has an electric railway working
successfully over a 10 per cent, grade. Lynn (Mass.) has a system whose cars succeed in
climbing a grade of 13.2 per cent. In Tacoma an electric railway was started ; but it was
found unable to master a rise of 1 in 7, and it has been replaced by a cable line.

* For comparison with this may be noticed the following: estimate of cost of construction of a ten mile
road with fifteen cars, as given by a committee of the Am. Street Railway Ass( ciation in Sept., 1890: —
Cable system— Cost of cable construction, $700,000; cars, $15,000; power plant, $120,000 ; total, $840,000.
Electric overhead wire system— Cost of roadbed, $70,000; wiring, $30,000; cars, $60,000; power plant,
$80,000; total, $190,000. Storage battery system— Cost of roadbed, $70,000; cars, $75,000; power plant,
$30,000 ; total, $175,000. * *

t The first electrical street railway began running in Cleveland, O., in 1884.

+ A third variety, where the wire is in a conduit beneath the track, has been tried in Boston and in
Denver, but at such cost as to be out of the count.

§ " From five minutes to three years," was the reply of an electrical expert to a question as to the life
I of these gearings.



10 [54



Electric systems have great advantages however : —

1st. They secure speed (from 3 to 20 miles per hour being obtainable at the will of
the eonductor) — a great consideration, especially in suburban districts.

5nd. In case of danger, electric cars can stop more quickly (owing to the dynamo
being reversible) than either horse or cable cars.

"3rd. They are cheap,* and,, with the rapid improvements made in electrical science
will probably soon become cheaper still.

The cable system, though cheap to operate, is very costly to establish; and is adopted i
only where there is great traffic in large cities, or where there are steep inclines to sur-
mount. The cars are propelled by an endless chain, running in a tunnel beneath the track,
-and connected with the car by a clutch which passes from the latter through a. groove
into the tunnel. The chain is kept in motion by a central engine. Should the clutch i
catch on an inequality of the chain, it sometimes becomes impossible for the conductor to '
release it. The car then runs amuck, till it smashes against some obstruction, or till the
-central station can bo communicated with, and the chain stopped. This of course stops
•all the other cars on that line.

Steam as a motive power for street cars, is not popular for obvious reasons. It is
^sed on the elevated railway of New York, and the underground railway of London.
In the former case its noise and filth constitute a nuisHnce to the inhabitants of the
<iistricts traversed, and in the latter to the travellers themselves.

Lighting. — The lighting of public thoroughfares early recommended itself not
merely as a convenience but also as a necessary precaution for the safety of the inhabitants
and their property. " A gas light is as good as a policeman," is a 'common saying,
and the state of affairs so graphically portrayed by Macaulay,f as existing in English
cities of the 17th century would no longer be endurable. '' When the evening closed in,
the difficulty and danger of walking about London became serious indeed. Falls, bruises
and broken bones were of constant occurrence. For, till the last year of the reign of
Charles the Second, most of the streets were left in profound darkness. Thieves and
robbers plied their trade with impunity ; yet they were hardly so terrible to peaceable
citizens as another class of ruffians. It was a favorite amusement of dissolute young
gentlemen to swagger by night about the town, breaking windows, upsetting sedans,
beating quiet men and off^^ring rude caresses to pretty women. . . . The machinery
for keeping the peace was utterly contemptible. ... It ought to be noticed that
in the last year of the reign of Charles the Second began a great change in the palice
of London, a change which has perhaps added as much to the happiness of the great
body of the people as revolutions of much greater fame. An ingenious projector named
Edward Heming obtained letters patent, conveying to him, for a term of years, the
exclusive right of lighting up London. He undertook for a moderate consideration to
_ place a light before every tenth door on moonless nights, from Michaelmas to Lady Day
and from six to twelve of the clock. Those w^ho now see the capital all the year, from
dusk to dawn, blazing with a splendor compared with which the illuminations for
La Hogue and Blenheim would have looked pale, may perhaps smile to think of
Heming's lanterns which glimmered feebly before one house in ten during a small part
of one night in three. But such was not the feeling of his contemporaries. His scheme
was enthusiastically applauded and furiously attacked. . . . Many years after the
date of Heming's patent there were extensive districts in which no lamp was seen."

Progress in lighting has kept pace with other improvements ; | and even Macaulay's
London of fifty years ago " blazing with splendor" would probably appear but poorly

*Tnis cheapness is largely the result of their speed. If a road can run its cars half as fast again as
rthose of another, two-thirds the number of cars will suffice.

t History of England ^ vol. I., eh. 3.

Jin 1882, in Great Britain and Ireland there were £50.000,000 eng.aged in the business ; in 1889 the
-capital had increased to £60,000,000.



551 11



lit as compared with the average city of to-day. The importance of thorough lighting is
being more and more recognized. In Glasgow the municipal authorities compel the
lighting of stairways in tene nent houses, and pay part of the cost. They can afiord to
do so out of what is saved in the cost of preserving order. Oil is of course no longer used for
street lighting. From the advantages gas offers in the way of convenience and safety
over oil lamps, they are being rapidly displaced by it as an illuminant for private use as
well, especially in manufactories or where large quantities may be used.

Apart from its lighting properties its applications are manifold. It has been found
useful as a heating agent on either a large or a small scale ; in the former to drive steam
engin^^s, in the latter for domestic purposes. It is obvious that coal can be more
cheaply handled in large quantities at gas-works than when distributed in small
quantities throughout a city. Moreover in gas-works the by-products of the coal are
almost all utilized, scarcely any waste occurring in the production of gas. In the
burning of gas it is estimated that 80 per cent, of the heat-producing power may be
utilized, while in (?Dal stoves 10 to 20 per cent, is obtained and in a grate fire only
3 per cfnt.*

As a motive power gas would do away with that bane of great cities, the smoke
nuisance, whose far-reaching results for evil upon the physical and moral constitution of
citizens are being more fully appreciated.! If the price of gas could be reduced it would
help in all the above-mentioned reforms. It would be much more largely used, and in
consequence could be produced still more cheaply. It is also held by some that, if it could
be obtained at a sufficiently low price, its utilization as a motive power to drive small gas


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