A large and ever increasing number of us are adherents of the political theory that the extension of the functions of the State to the inclusion of the conduct of business ventures will purify politics and make the citizen take a more intelligent as well as a more active part in public affairs. The verdict of the experience of Great Britain under the public ownership and operation of the telegraphs is that that doctrine is untenable. Instead of purifying politics, public ownership has corrupted them. It has given a great impetus to class bribery, a form of corruption far more insidious than individual bribery. With one exception, wherever the public ownership of the telegraphs has affected the pocket-book interests of any considerable body of voters, the good-will of those voters has been gained at the expense of the public purse. The only exception has been the policy pursued toward the owners of the telephone patents; and even in that case the policy adopted was not dictated by legitimate motives.

The nationalization of the telegraphs was initiated with class bribery. The telegraph companies had been poor politicians, and had failed to conciliate the newspaper press by allowing the newspapers to organize their own news bureaux. The Government played the game of politics much better; it gave the newspapers a tariff which its own advisor, Mr. Scudamore, said would prove unprofitable. No subsequent Government has attempted to abrogate the bargain, though the annual loss to the State now is upward of $1,500,000.

The promise to extend the telegraphs to every place with a money order issuing Post Office was given in ignorance of what it would cost to carry out that promise. But the adherence to the policy until an anticipated expenditure of $1,500,000 had risen to $8,500,000 was nothing more nor less than the purchase of votes out of the public purse. Not until 1873 did the Government abandon the policy that every place with a money order issuing Post Office was entitled to telegraphic service.

When the House of Commons, in March, 1883, against the protests of the Government passed the resolution which demanded that the tariff on telegrams be cut almost in two, the Government should have resigned rather than carry out the order. The Government’s obedience to an order which the Government itself contended would put a heavy burden on the taxpayer for four years, was nothing more nor less than the purchase of Parliamentary support out of the public purse. No serious argument had been advanced that the charge of 24 cents for 20 words was excessive. The argument of the leader of the movement for reduction, Dr. Cameron, of Glasgow, was a worthy complement to the argument made in 1868 by Mr. Hunt, Chancellor of the Exchequer, to wit, that telegraphing ought to be made so cheap that the illiterate man who could not write a letter would send a telegram. Dr. Cameron argued that “instead of maintaining a price which was prohibitory not only to the working classes but also to the middle classes, they ought to take every means to encourage telegraphy. They ought to educate the rising generation to it; and he would suggest to the Government that the composing of telegrams would form a useful part of the education in our board schools.”

Parliament after Parliament, and Government after Government has purchased out of the public purse the good-will of the telegraph employees. Organized in huge civil servants’ unions, the telegraph employees have been permitted to establish the policy that wages and salaries shall be fixed in no small degree by the amount of political pressure that the telegraph employees can bring to bear on Members of the House of Commons. With the rest of the Government employees they have been permitted to establish the doctrine that once a man has landed himself on the State’s pay-roll, he has “something very nearly approaching to a freehold of provision for life,” irrespective of his fitness and his amenableness to discipline, and no matter what labor-saving machines may be invented, or how much business may fall off. To a considerable degree the State employees have established their demand that promotion be made according to seniority rather than merit. In more than one Postmaster General have they instilled “a perfect horror of passing anyone over.” Turning to one part of the service, one finds the civil service unions achieving the revocation of the promotion of the man denominated “probably the ablest man in the Sheffield Post Office.” Turning to another part of the service, one finds the Postmaster General, Mr. Raikes, “for the good of the service” telling an exceptionally able man that “he can well afford to wait his turn.” The civil servants, in the telegraph service and elsewhere, to a considerable degree have secured to themselves exemption from the rigorous discipline to which must submit the people who are in the service of private individuals and of companies. Finally, the civil servants have been permitted to establish to a greater or a lesser degree a whole host of demands that are inconsistent with the economical conduct of business. Among them may be mentioned the demand that the standard of efficiency may not be raised without reimbursement to those who take the trouble to come up to the new standard; that if a man enters the service when the proportion of higher officers to the rank and file is 1 to 10, he has “an implied contract” with the Government that that proportion shall not be altered to his disadvantage though it may be altered to his advantage.

Public opinion has compelled the great Political Parties to drop Party politics with regard to the State employees, and to give them security of tenure of office. But it permits the State employees to engage in Party politics towards Members of Parliament. The civil service unions watch the speeches and votes of Members of the House of Commons, and send speakers and campaign workers into the districts of offending Members. In the election campaigns they ask candidates to pledge themselves to support in Parliament civil servants’ demands. Their political activities have led Mr. Hanbury, Financial Secretary to the Treasury in 1895 to 1900, to say: “We must recognize the fact that in this House of Commons, public servants have a Court of Appeal such as exists with regard to no private employee whatever. It is a Court of Appeal which exists not only with regard to the grievances of classes, and even of individuals, but it is a Court of Appeal which applies even to the wages and duties of classes and individuals, and its functions in that respect are only limited by the common sense of Members, who should exercise caution in bringing forward cases of individuals, because, if political influence is brought to bear in favor of one individual, the chances are that injury is done to some other individual…. We have done away with personal and individual bribery, but there is still a worse form of bribery, and that is when a man asks a candidate [for Parliament] to buy his vote out of the public purse.” The tactics employed by civil servants have led the late Postmaster General, Lord Stanley, to apply the terms “blackmail” and “blood-sucking.” The conduct of the House of Commons under civil service pressure has led Mr. A. J. Balfour, the late Premier, to express grave anxiety concerning the future of Great Britain’s civil service. It has led Mr. Austen Chamberlain, Representative of the Postmaster General, to say that Members of both Parties had come to him seeking protection from the demands made upon them by the civil servants. On another occasion it has led Mr. Chamberlain to say: “In a great administration like this there must be decentralization, and how difficult it is to decentralize, either in the Post Office or in the Army, when working under constant examination by question and answer in this House, no Honorable Member who has not had experience of official life can easily realize. But there must be decentralization, because every little petty matter cannot be dealt with by the Postmaster General or the Permanent Secretary to the Post Office. Their attention should be reserved in the main for large questions, and I think it is deplorable, absolutely deplorable, that so much of their time should be occupied, as under the present circumstances it necessarily is occupied, with matters of very small detail because these matters of detail are asked by Honorable Members and because we do not feel an Honorable Member will accept an answer from anyone but the highest authority. I think a third of the time—I am putting it at a low estimate—of the highest officials in the Post Office is occupied in answering questions raised by Members of this House, and in providing me with information in order that I may be in a position to answer the inquiries addressed to me” about matters which “in any private business would be dealt with by the officer on the spot, without appeal or consideration unless grievous cause were shown.”

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.

Very recently the British Government has taken measures to protect its telegraphs and its long distance telephone service from competition from wireless telegraphy. It has refused an application for a license made by a company that proposed to establish a wireless telegraphy service between certain English cities. The refusal was made “on the ground that the installations are designed for the purpose of establishing exchanges which would be in contravention of the Postmaster General’s ordinary telegraphic monopoly.” In order to protect its property in the submarine cables to France, Belgium, Holland and Germany, the Government has inserted in the “model wireless telegraphy license” a prohibition of the sending or receiving of international telegrams, “either directly or by means of any intermediate station or stations, whether on shore or on a ship at sea.” In short, the commercial use of wireless telegraphy apparatus the Government has limited to communication with vessels.

In one respect the nationalization of the telegraphs has fulfilled the promises made by the advocates of nationalization. It has increased enormously the use of the telegraphs. But when the eminent economist, Mr. W. S. Jevons, came to consider what the popularization of the telegraphs had cost the taxpayers, he could not refrain from adding that a large part of the increased use made of the telegraphs was of such a nature that the State could have no motive for encouraging it. “Men have been known to telegraph for a pocket handkerchief,” was his closing comment. Mr. Jevons had been an ardent advocate of nationalization. Had he lived to witness the corruption of politics produced by the public ownership of the telegraphs, his disillusionment would have been even more complete.

From whatever viewpoint one examines the outcome of the nationalization of the telegraphs, one finds invariably that experience proves the unsoundness of the doctrine that the extension of the functions of the State to the inclusion of the conduct of business ventures will purify politics and make the citizen take a more intelligent as well as a more active part in public affairs. Class bribery has been the outcome, wherever the State as the owner of the telegraphs has come in conflict with the pocket-book interest of the citizen. One reason has been that the citizen has not learned to act on the principle of subordinating his personal interest to the interest of the community as a whole. Another reason has been that the community as a whole has not learned to take the pains to ascertain its interests, and to protect them against the illegitimate demands made by classes or sections of the community. There is no body of intelligent and disinterested public opinion to which can appeal for support the Member of Parliament who is pressed to violate the public interest, but wishes to resist the pressure. The policy of State intervention and State ownership does not create automatically that eternal vigilance which is the price not only of liberty but also of good government. One may go further, and say that the verdict of British experience is that it is more difficult to safeguard and promote the public interest under the policy of State intervention than under the policy of laissez-faire. Under the degree of political intelligence and public and private virtue that have existed in Great Britain since 1868, no public service company could have violated the permanent interests of the people in the way in which the National Government and the Municipalities have violated them since they have become the respective owners of the telegraphs and the municipal public service industries. No public service company could have blocked the progress of a rival in the way in which the Government has blocked the progress of the telephone. No combination of capital could have exercised such control over Parliament and Government as the Association of Municipal Corporations has exercised. Finally, no combination of capital could have violated the public interest in such manner as the civil service unions have done.