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Municipal ownership; four lectures delivered at Harvard university 1907 online

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in their private affairs. The man from whom
business has retired may, it is true, be pleased at
the thought of managing a municipal industry
where his commercial incapacity will cause him
little personal inconvenience. But men of the
type most needed will frequently be not attracted
to, but rather repelled from civic life by any
increase in the amount of time and energy
demanded from the members of local elected
bodies. Moreover, the establishment of many
municipal industries in any city will render it
less likely that conscientious councillors will be
able to retain their seats should they seek
re-election. Workmen cannot be blamed for
frequently striving for an increase of wages ; for
apathy on that subject would soon result in their
being inadequately rewarded. The inevitable
result of such action on their part is, however,
that employers constantly have thrust on them
the disagreeable task of refusing such demands.
But when these demands for extra wages or
shorter hours are made by the employees in

K



74 MUNICIPAL CORRUPTION

municipal industries, many of whom have votes
in the locality in which the works are situated,
who is it who will be foremost in resisting un-
reasonable appeals the conscientious councillor,
who merely considers his duty, or the uncon-
scientious councillor who looks mainly to vote-
catching? Any opposition to an increase in
the wages of municipal employees on the part
of a high - minded administrator will not be
forgotten at the next election, and he will receive
no reward for his virtue, unless, indeed, it be held
to be a reward to be relieved from all further
necessity of attending to onerous civic duties.

The voting power of municipal employees
will, moreover, tend to demoralise the electors
as well as the elected. To believe one's self
to be underpaid is a common human weakness,
and demands for an increase of remuneration
are apt to appear merely like demands for
justice. But, in making demands for such
"just" treatment, the municipal workman
must soon discover that his vote is a material
assistance, and he is likely, therefore, to come
to regard the giving of it more and more as
a private privilege and less and less as a
public duty to be exercised in the interests of
the community at large. This is certainly a
downward step in the path leading to corrup-



ELECTORS DEMORALISED 75

don. For instance, is not the municipal V
councillor who uses his vote on the council
for purposes of " graft" likely to be less
severely condemned by the municipal work-
man who looks mainly to his pay when giving
his own vote than by the workman in private
employment who cannot thus attempt to grind
his own axe? When a man on a downward
path ceases to condemn others, he generally
falls more rapidly himself. Thus the municipal
employee is tempted to regard his vote mainly
as an engine to be used in bettering his own
position, though thus to regard it would have
a demoralising effect on himself.

Thus there are opposing advantages and dis-
advantages of municipal ownership as regards
the moral tone of civic life. The municipal-
isation of industries may act as a stimulus ;
but, like other stimulants, it is likely to be
accompanied by harmful after-effects, lowering
the general tone of the body politic. BotrlN
electors and elected will be adversely affected
by the direct employment of municipal labour
that is, by the payment of voters by the city
authorities ; and these harmful influences would,
in all probability, quite outweigh the beneficial'
results arising from the increased responsibility//
thrown on the civic authorities.



76 MUNICIPAL CORRUPTION

In reply to the foregoing contentions, which
' indicate that municipal ownership is almost
\certain to increase municipal corruption, it has,
no doubt, frequently been urged that civil
service reform must be adopted in the United
States simultaneously with any great increase
v in municipal ownership. But it is difficult to
grasp the views of those who take up this
position. If they do admit that, without some
reform in the methods of local administration
in the United States, municipal ownership
would increase the dangerous tendencies now
under discussion, surely they ought to hold
that civil service reform should be an accom-
plished fact before municipal ownership is
advocated. But, as a fact, they show no
desire thus to postpone the advent of municipal
ownership ; and it appears, therefore, as if
they would deny its corrupting influence. But
if they do deny this, why should they in any
way link civil service reform and municipal
ownership together as component parts of one
general scheme? Their attitude appears, in
fact, to be illogical. But it may, perhaps, be
assumed that the advocates of municipal owner-
ship combined with civil service reform regard
the main advantage of municipal ownership
to be the consequent removal of temptations



FRANCHISES AND FRAUD 77

from the path of the civic authorities, rather
than its directly purifying influence.

Passing on, therefore, to consider the
temptations which may be escaped by cities
initiating municipal industries, it should be
observed that in England we are quite un-
familiar with the line of reasoning frequently
followed in the United States on this subject.
The argument as here used may, it is believed,
thus be stated. The worst frauds attributed to\
civic administrators have been committed in
connection with the franchises granted to
private corporations ; abolish these franchises
by means of the introduction of direct municipal
labour, and this type of fraud must disappear/
entirely. Certainly this contention is worthy
of most careful consideration.

In England hardly any, if any, frauds have
arisen in connection with private franchises,
and this argument, in this form at all events,
falls to the ground as regards my country.
But, assuming such troubles to have arisen
elsewhere, it is necessary to enquire to what
extent the temptation leading to corrupt
practices would be diminished by the muni-
cipalisation of an industry, a point which has
not been probed sufficiently deeply in this
controversy. Taking the case of municipal



78 MUNICIPAL CORRUPTION

gas-works, as an example, a very large pro-
portion of the works in England have been
either purchased from private proprietors or
built by contract ; and, where municipal owner-
ship is initiated by either of these methods,
ample opportunity for fraud is thus given ;
forms of corruption which would eventually
result in excessive municipal loans and cor-
respondingly swollen payments for interest
and sinking funds. After the purchase of the
gas-works, the whole of the expenditure on
the production of gas, other than the above-
mentioned payments on account of loans,
would be either on account of the purchase
of materials or for the salaries and wages of

-^the municipal employees. When works are
both constructed and operated by the direct
employment of labour by municipalities, abso-
lutely the whole of the expenditure may be
divided under these headings of materials and

, wages ; for in that case, even as to municipal
loans, they would have been raised solely to
cover these items of expenditure in the original
construction of the works. But as regards the
purchase of materials, fraudulent contracts and
secret commissions would always remain as
dangers to be guarded against. And as regards
wages, here also it must be remembered that



TEMPTATIONS WITH OWNERSHIP 79

the civic authorities would always remain under\
the temptation of buying the votes of the
municipal workmen by raising their wages ,,
or shortening their hours of work. Thus in
absolutely no part of the expenditure in
municipal industry, whether it be on loans,
materials or wages, does municipal ownership
afford a method of escape from the dangers of
corruption ; and, as regards the facilities for^)
bribery, they would be increased. All that
can be said is that the amount of the plunder
obtainable by corrupt civic authorities may
thus, perhaps, be reduced. In other respects
as regards corruption, the municipalisation of
an industry will be but stepping out of the
frying-pan into the fire.

The exact relative amount of possible fraud
under different systems should, no doubt, be
held in view ; but it is even more important
to consider the conditions which are least
likely to tend to make corruption either spread
or obtain a firmer grip on a city. Whether"
we look to the conditions affecting the electors
or the elected, the foregoing arguments point
to the conclusion that corruption is more likely
to arise under municipal ownership than witlj^
private industry ; and the following considera-
tions make it seem probable that, where the



8o MUNICIPAL CORRUPTION

disease does exist, direct employment would
increase the difficulty of finding a cure. In
all civilised countries there now exist a large
number of advanced socialists who believe
that under a socialistic system the condition
of all workmen could, in fact, be improved.
They are, moreover, likely to regard municipal
ownership as a stepping-stone by which to
gain their ends, and to believe that to pay
municipal workmen higher than the market
rate of wages would not only not injure other
private workmen, but that it would indeed be
a benefit to them by serving as a sign-post
pointing to the true path of political progress.
Socialistic enthusiasts holding these views
can hardly be blamed for telling municipal
employees that their votes should only be
given at city elections to those candidates who
promise them better terms of employment than
can be obtained in private industry. But
would not such agitators as these afford to
the corrupt politician precisely the opening
he would wish for? If the city authorities
are corrupt ; if they have in their employment
thousands of workmen who, if dismissed from
the service of the city, would sink to a lower
rate of wages ; if there are a number of honest
enthusiasts advocating this superior treatment



DISFRANCHISEMENT 81

of municipal employees ; if, in fact, all these
conditions exist simultaneously, what would
be the chances of a party of purity succeeding
in throwing off the cursed yoke of corruption /
These high-class city thieves might sometimes
get less plunder than they would get if they
had valuable franchises to dispose of; but
they would get that plunder, such as it was,
with more ease and certainty. It is the fear
of what the future may bring in the way of
corruption in England which has led me to
urge my countrymen to pause before plunging
further into this municipal policy. It is for
Americans to consider how far these argu-
ments are applicable to the United States.

It may, however, be urged that where a
disease is feared, we should search for an
antidote before deciding to swerve from our
path for fear of meeting harmful microbes.
Political safeguards against corruption might,
no doubt, be adopted ; and it has, indeed,
frequently been suggested in England by
persons of liberal views that widespread muni^
cipal ownership should be accompanied by the
disfranchisement of all municipal employees
regards local elections. A better plan, in



opinion, would be to incorporate them, as it,
were, in separate constituencies ; or, in other

L



82 MUNICIPAL CORRUPTION

words, to allow municipal workmen to elect
to all local governing bodies their own repre-

v sentatives in proportion to their numbers.
This proposal would, no doubt, present
greater difficulties in the United States than
in England. But if such representatives were
elected, they would come forward as the
avowed advocates of the claims of the muni-
cipal workmen, and their position would be
both honourable and comfortable ; a statement
which can hardly be made with regard to the
position of certain members of the English
House of Commons whose constituencies con-
tain large numbers of voters in the pay of the
Government. If this safeguard were adopted,
and if it were made illegal for municipal
employees to canvas voters not in municipal

v employment, then municipal ownership might
be regarded with much less apprehension.
In England it appears, however, as if there
were not the slightest chance of any such
reform being adopted. If this be equally true
here, it must be admitted that the abstract
merits of this proposed safeguard afford, in
fact, no reply whatever to those who urge
that the direct employment of labour by
municipalities would both increase the chances
of corruption arising in the United States, and



MUNICIPAL WAGES 83

make this pestilence cling more firmly than
ever to the diseased city where it now exists.



WAGES IN MUNICIPAL INDUSTRIES

In the foregoing discussion on corruption
it was asserted that not only do municipal
workmen receive better pay than private work-
men, but that many socialists hold that it is
right that they should thus be treated. If any
plea could be sustained for the payment to
the directly-employed municipal workman of a
wage above the market rate of wages, then
the fact that they are thus paid could no doubt
be counted as a weight in the scales telling in
favour of municipal ownership. It will, how-
ever, be seen that these socialistic arguments
crumble to pieces on close examination.

That municipal employees are better off than
workmen similarly employed in private industry
is, I believe, an indisputable fact, which would
not be denied by the advocates of municipal
industry in England. When a street railway,
for example, has been recently municipalised,
the town councillors concerned frequently
boast that they have altered the terms of
employment in favour of their newly-acquired



84 MUNICIPAL WAGES

employees, either by increasing their pay, or by
x shortening their hours of labour. A diminu-
tion in the length of the day's work must
normally be accompanied by an increase in the
, number of hands employed, unless, indeed, the
hours were uneconomically long before the
reduction. Although evidence on this point
is not altogether wanting, it is impossible to
give reliable statistics as to the relative number
of hands employed in municipal and private
industry, because municipal industry in England
has never been subject to the searching enquiry
demanded by its opponents. As a solitary
example, it may perhaps be noted that in an
interesting account of the municipalisation of
bakeries in Sicily, Professor Tenerelli states
that the number of hands employed rose from
404 to 557 in the first fifteen months of public
management. But, whether more hands are
employed or not, a great deal of evidence is
forthcoming to show that the rate of daily
wages is higher in municipal than in private
\ industry.

In passing on to consider whether this is as
it should be or not, the analogy of a landlord
and tenant may serve us once again. If an
eccentric landlord, when he received the rent
from the farmer farming his land, were to hand



EXCEPTIONAL TREATMENT 85

it over to the civic authorities as a gift to be
used so as to reduce taxation, no one could
possibly urge that the workmen employed on
his land would thus be aggrieved ; for they
would be thought to be utterly unreasonable
if they complained that the money was used
for the benefit of the public generally, instead
of being handed over to them for their sole use.
But if the landlord were to farm his land him-
self, and were in like manner to devote the
profits to the benefit of the public, could this
change in his methods affect the rights of his
employees? Obviously not. But a landlord
farming his own land instead of leasing it to a
farmer is closely analogous to a city operating
its own street railways, for example, instead
of leasing them out for operation to a private
corporation. When Birmingham thus leased v *
out its street railways, no one ever suggested
that the rent thus obtained by its citizens should
be reduced in order to raise the pay of the
private employees above the market level./
And a rational plea for exceptional treatment
can no more be established on the ground that
a municipality, instead of leasing out its street
railways, operates them itself, than on the
ground that a landlord farms his own land
instead of letting it to a farmer. A municipality



86 MUNICIPAL WAGES

is a landlord, and its industries are like its
farms which it can farm itself or not as it thinks
fit, without reference to its employees.

It may, perhaps, be urged that, for a given
output and as compared with private industry,
municipal industry is less costly in all items
except labour, and therefore that the employees
may be paid more highly without injuring any
one. It has, however, already been indicated
in the foregoing financial discussion that this
contention cannot be sustained by fact or
argument. It may, perhaps, also be urged that
although it is true that additional funds must
be obtained, yet the necessary taxation would
fall more heavily on the rich than the poor,
and, consequently, that the municipal employees
would on the whole be benefited. The true
incidence of the burden of taxation will be
discussed in the last lecture ; and here it is
sufficient to remark that it is not denied that
municipal employees are benefited by their
exceptional treatment. All that is asserted is

' that additional taxation must be imposed where
municipal industry exists, and that it does
injure the private workman somewhat : the
greater the amount of municipal ownership,

Hhe heavier being the burden thrown upon him.
The additional sum required may no doubt be



INCREASED TAXATION 87

raised in various ways. To obtain it, it may
be that the price of gas, if that be the muni-
cipal product in question, would be raised on
municipalisation ; and in that case it would
be on the consumer of gas that the additional
burden would fall, and the impost would be
like a tax on gas. But if gas is to be taxed,
why should not the proceeds of the tax go to
benefit the whole community? Surely it must\
be wrong to levy any sum solely for the
advantage of one class, a class which is
selected at the best arbitrarily, and at the worst
on political grounds. Again, it may be thatX
the impost due to the increase of the labour^
bill on municipalisation falls on the tax-payer,
who either has to make up for any deficit on
the gas-works, or who does not receive in
relief of taxation the profits he might fairly
expect to get from his municipal investment^ ^
The impost due to an increase in the municipal
wages bill must, in fact, fall on either consumers
or tax-payers, and in neither case is it justifiable
to make them suffer for the sake of placing a
fraction of the community in an exceptionally
favourable position.

As another justification of the exceptional treat-
ment of municipal workmen, it has been said
that we should not look at questions connected




88 MUNICIPAL WAGES

with wages solely from the narrowest economic
standpoint. In all matters with regard to which
workmen are careless as to their own true
interest, for example as to their health and safety,
merely to strive at producing goods as cheaply
as possible no doubt does not necessarily point
to the right course of action. Although this is
true enough, no great weight can be attached to
the arguments founded on such statements. It
is, indeed, possible that the cost of production in
municipal industry ought to be higher than the

^cost in ill-regulated private industry ; for this is
not necessarily inconsistent with the true cost to
the nation being less, more possibly being saved
indirectly to the community in matters of health,
etc., than is lost by the extra cost of production.

/But where private industry is well regulated, all
the precautions with regard to health and safety,
which municipalities might reasonably undertake
voluntarily, should as far as possible be enforced

^on all private proprietors ; and if that were done,
municipal industry would present hardly any

^ advantages in this respect over private industry.

/v The true path of reform thus indicated is there-
fore the enforcement of proper regulations in all
industries, and not the promotion of voluntary

\ efforts on the part of civic authorities.

Again, it is often urged that an endeavour



AS AN EXAMPLE 89

should be made by municipalities to set a good
example to other employers of labour, and that
exceptional advantages may be granted to muni-
cipal workmen not for their own sakes, but for
the sake of workmen in private employment.
The validity of this argument obviously depends
on whether private workmen are in truth bene-
fited by the advantages showered on municipal
workmen. Those in doubt on this point should
enquire of any keen manufacturer, in the first
place, whether he knows the rate of wages paid
by city authorities in his neighbourhood, and in
the second place, if he is informed on this point,
whether these civic rates of wages in any way
affect the terms he offers his own employees. A
smile will probably be the answer. It is only^
because municipal ownership is now almost
entirely confined to industries tending to become
monopolies that civic authorities can escape from
the control of the economic forces dominant in
competitive industries, and can both make a
profit and give their employees remunera- /
tion above the market rate. Where wages are
materially influenced by the philanthropic views
of an employer in ordinary industry, ruin is
likely to be the result ; and examples set by^-
the municipal owners of monopolies appear to
have no influence on the wages in competitive

M



90 MUNICIPAL WAGES

^industries. The so-called good example as
set by municipalities is therefore only possible
because of the municipalisation of monopolies ; it
is almost without any external influence ; and it
affords a very feeble justification for the creation
of a specially privileged class of workmen.

Thus, on the one hand, little can be brought
forward to justify municipal employees being
placed in a more favourable position than their
fellows in private industry ; whilst, on the other
hand, there appears to be no excuse for imposing
an unnecessary burden on the private workman.
Moreover, this practice of favouring the muni-
cipal employee is atlso positively harmful for
reasons which may already have been suggested
by this discussion on\corruption. To dismiss
workmen from municipal employment not only
throws them temporarily out of work, but also
generally permanently reduces their wages or
increases their hours of labour ; and the more
power a city has over its employees, the easier
is it for corrupt authorities to influence their
votes. That municipal workmen do receive
more favourable treatment than private work-
men is an indisputable fact : a fact which,
therefore, on the whole, tells against, and not
in favour of the direct employment of labour
by municipalities.



DIRECT EMPLOYMENT 91



THE CASE FOR DIRECT EMPLOY- N y
MENT

All the arguments thus far considered have
resulted in strengthening the case against the
direct employment of labour by municipalities ;
and the legitimate arguments in its favour
must now be discussed. The two main argu-
ments are, in the first place, that municipalities, /
by actually managing industries themselves,
can regulate the prices of the goods sold to
the public more efficiently than under any
method of industry in which private proprietors
participate ; and, in the second place, that
civic authorities, being less influenced by the
desire to make profits than private proprietors,
will, as the representatives of the people, pay
more attention to all questions connected with
morals, health or comfort.

With regard to both these pleas, it is to be
noted that industry may, broadly speaking, be v '
divided into two stages, namely, the work of
initiation and construction, and the work of^,
management and production. It will be seen
that the arguments in favour of direct employ-V
ment of labour by municipalities apply with



92 DIRECT EMPLOYMENT

much greater force in the productive than in
\the constructive stage of industry.

As to the first of the above-mentioned argu-
ments in favour of direct employment, namely,
the facility which municipalities undoubtedly
possess when they manage an industry directly
of regulating the prices of goods, the other
aspect of this question has already been dis-
cussed in my first lecture, where the best method
of controlling prices in private industry was


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Online LibraryLeonard DarwinMunicipal ownership; four lectures delivered at Harvard university 1907 → online text (page 5 of 8)