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 ~ NEWCOMB - Municl pal Socall sine 
 
A STUDY IN MUNICIPAL 
 SOCIALISM 
 
 WITH SPECIAL REFERENCE TO A PENDING 
 PROPOSAL ADVOCATED BY THE 
 MAYOR AND CITY ADMINISTRA- 
 
 TION OF CLEVELAND, 
 
 OHIO 
 
 BY 
 
 H..T.NEWCOMB 
 
 OF THE WASHINGTON (D. C.) BAR 
 
 From Public Policy. August 29, 1903 
 
 CITIZENS’ ASSOCIATION 
 SOCIETY FOR SAVINGS BUILDING 
 CLEVBLAND 
 
peeeews . 
 . 
 
 tw 
 yrs 
 
CONTENTS. 
 
 Pe Study ir Municipal Socialism eo sor. Pe ee a I 
 A New Experiment in Municipal Socialism............ 2 
 No Public Demand for a Municipal Plant............... 4 
 Prices and Service Under Contract........ gah aia terol 5 
 The Company's Coimmercial Business...-....2. 2.0.05. 508 7 
 
 Present Municipal Functions Should Have Precedence... 8 
 
 Cleveland’s Water Service Bad.... 00.0.0... ccc ce eee eens 9 
 Water Supply and Electrical Supply Not Comparable... 10 
 pire: Competition of Small. Plants... 02036. cies aeeeims 12 
 Municipal Management of Waterworks................. 14 
 Impure Water and Typhoid Fever in Cleveland......:... 15 
 Other Unsatisfied Municipal Needs...................55 18 
 aie. Patronage System an, Objection.’....0:. 07. 6....60. es 19 
 Pouca fower of. City Employes. isco... oo cod sete ees ens 20 
 Political and Economic Direction of Industry............ 21 
 me aneral, Service: aswan Example. «06.5. .000<ecanness ves 23 
 Why Public Management of Industry Is Inefficient....... 24 
 Experience of the Navy Department........... Bake thos 25 
 Table of Comparative Costs of Constructing Ships for the 
 é te Navy i Pubic and Private: Yards 25 cc 26 
 MITMCI ale SOCIAISIN eEISEWHELEG. ss cle aye silanes ossicsigiers eo, sn 28 
 NBII TOA MIST EPONT oop yy os can ek wo vs vr ve fe een 28 
 Sere RRCINT A oir, SET Rog cath ec capa s wack epee 29 
 Pi MICAEO. 200 VCITON | cores o's Oe See pss Sade oe Peaks 31 
 
 104353 
 
CONTENTS— (Continued). 
 
 Inconsistency of Municipal Socialists.................... 33 
 Dr. Victor Rosewater Condemns Gompetition, ....20i2% 34 
 Prof. Edward W. Bemis Denounces Competition ......... 35 
 President Edmund J. James’ “Views... 0.0: ....s4.ceee.0 65 36 
 Judge Thomas M. Cooley’s Opinion..................... 37 
 These Principles Applicable in Cleveland................ 38 
 WER CSc Leh: 1s) og Crk ee era eae eee a TS 40 
 waxeved": Competition ii)... bo, geno alee ee 43 
 avhere. Would It Lead.) occ. 0 on 44 
 tis Ts “Socialism: (045 scec ote santo one ae 46 
 Value of Opportunities for Investment.................. 47 
 
A STUDY IN MUNICIPAL SOCIALISM. 
 
 WITH ESPECIAL REFERENCE TO A PENDING PROPOSAL 
 ADVOCATED BY THE MAYOR AND CITY ADMIN- 
 ISTRATION OF CLEVELAND, OHIO.* 
 
 EY H. T. NEWCOMB, OF THE WASHINGTON, D. C., BAR. 
 
 The purposes of the administration, should it secure 
 the authority to issue bonds for an electric lighting 
 plant, which it has: asked for, have been explained by 
 
 *At the instance of Mayor Tom Johnson a special election has 
 been called in the city of Cleveland and will be held on September 
 8, 1903, to decide questions of issuing municipal bonds in an aggre- 
 gate amount in excess of one per cent of the total value of all 
 the property in the city as listed and assessed for taxation, that is, 
 in the sum of $1,900,000, for the following purposes: 
 
 1. To issué bonds in the sum of $400,000 for the purpose of 
 erecting electric light works for supplying light to the corporation 
 and the inhabitants thereof. 
 
 2.. To issue bonds in the sum of $100,000 for the purpose of 
 completing the improvement of existing boulevards and parks. 
 
 3. To issue bonds in the sum of $100,000 for the purpose of 
 opening, widening and extending streets and public highways in 
 the city of Cleveland, O. 
 
 4. To issue bonds in the sum of $200,000 for the purpose of 
 constructing a bridge over the Cuyahoga River and Cuyahoga Val- 
 ley, connecting Hast Clark Avenue and Clark Avenue in the city 
 of Cleveland, O., and for purchasing or condemning the necessary 
 land therefor. 
 
 5. To issue bonds in the sum of $600,000 for the purpose of 
 purchasing or condemning the necessary land for park and boule- 
 vard purposes and for improving the same. 
 
 To issue bonds in the sum of $500,000 for the purpose of 
 constructing a high-ievel bridge connecting the East and West Sides 
 of the city of Cleveland, O., and for purchasing or condemning tue 
 necessary land therefor. : 
 
 I 
 
& 
 
 the mayor and by Prof. E. W. Bemis, superintendent 
 of the city waterworks. It is intended to build a small 
 plant on the west side of the Cuyahoga river, and 
 within the limits of its capacity to supply electricity 
 for street lighting, and also to commercial users. The 
 small beginning was decided upon in view of the 
 limits of the authority of the administration and coun- 
 cil to issue bonds, and the mayor has explicitly de- 
 clared his intention to extend the system “over the 
 entire city.” 
 
 A NEW EXPERIMENT IN MUNICIPAL SOCIALISM. 
 
 In its length and breadth this is a proposition which 
 has never been decided in the affirmative by any 
 American municipality of as much as third-rate im- 
 portance. While a few cities which in commercial 
 rank and population are comparable with Cleveland, 
 notably Chicago and Detroit, have undertaken di- 
 rectly to supply themselves with electricity for street 
 lighting and other strictly public purposes, no city 
 in this country, having so many as 40,000 inhabitants, 
 has ever attempted to manufacture electricity for com- 
 mercial purposes. Nor is this all. The proposition is 
 revolutionary. It demands a radical* departure from 
 the sound municipal methods which have the sanction 
 of all American experience. It would do this by mak- 
 ing the city of Cleveland a manufacturer of electricity 
 for commercial use and sale, and stili more because, in 
 doing so, the city would enter a field already com- 
 pletely occupied by a plant established by private capi- 
 tal, and thus supplied without any charge upon the 
 
 a 
 
credit of the municipality or any addition (but, on 
 the contrary, contributing its full share of taxes) to 
 the burden of local taxation. 
 
 It would be folly to treat the present proposal as 
 one involving an expenditure of but $400,000. That 
 is the amount now asked, but the experiment, even if 
 confined to the West Side, cannot be conducted with- 
 out a much larger initial capital cost. Beyond this, 
 however, is the certainty that once begun its advocates 
 will not remain satisfied until they have covered the 
 entire local field of electrical supply. This means an 
 investment, provided for by city bonds, the interest on 
 which must be drawn from taxation, of many millions 
 of dollars. 
 
 Surely such a departure from precedent, local and 
 otherwise, ought not to be made unless fully justified 
 by the most valid reasons and until sanctioned by the 
 most deliberate judgment of the people... Yet it is 
 proposed to commit the credit of the city to this vast 
 and far-reaching enterprise after only the most cur- 
 sory and perfunctory investigation by one or two of 
 the officers of the municipal administration, who have 
 long been publiely recognized as extreme partisans of 
 the doctrines of municipal socialism, and with but the 
 briefest opportunity for public consideration and sub- 
 stantially none for the crystallization of local sentiment 
 either for or against the project. The special election 
 is to be held under conditions which render it all but 
 impossible that more than a small fraction of the total 
 vote of the city should be cast, and under other cir- 
 
 3 
 
cumstances which are absolutely unfair to the con- 
 servative element. 
 
 NO PUBLIC DEMAND FOR A MUNICIPAL PLANT. 
 
 A municipal electric lighting plant will not satisfy 
 any public necessity or meet any requirements of the 
 residents of Cleveland, either social or industrial, 
 which are not amply provided for at the present time. 
 The street lighting service rendered by the company 
 now in the field is of the best, and the price has been 
 lowered as rapidly as possible. Electricity for light- 
 ing shops, stores and residences is distributed 
 wherever economically justifiable, and at reasonable 
 cost to’consumers. If the present company had failed 
 in any of these directions; if it had been slow to adopt 
 improved machinery or methods; if it had hesitated to 
 extend its lines to meet or even to precede the city’s 
 development, or if its charges had been exorbitant, 
 these derelictions might properly have been cited as 
 reasons for plupging the city into a dangerous social- 
 istic experiment. Even under such conditions those 
 who have confidence in the principles under which 
 American industrial success has been attained would 
 have sought earnestly for a solution through the power 
 of regulating private capital rather than in the drastic 
 alternative of public ownership. , But even this partial 
 justification for the Adnitateerationts proposal does 
 not exist. In fact, a survey of the situation compels 
 the belief that the sole basis of the project is found in 
 the determination to commit Ohio’s metropolis to the 
 methods advocated by municipal socialists. Under the 
 
 4 
 
sway of this determination the field of local industry 
 was apparently surveyed to discover the point at which 
 the wedge of socialism could most readily gain en- 
 trance. Had the power to involve the city’s credit 
 been unlimited there can be little doubt that the gen- 
 eral satisfaction with the methods and practices of 
 the corporation now supplying electricity would have 
 protected the field which it occupies from experimental 
 invasion. But it was in this field alone, among those 
 in which the superficial plausibility of the arguments 
 for public ownership was regarded as sufficient to gain 
 the essential measure of public support, that the initial 
 expenditure could be brought within the supposed bor- 
 rowing power of the administration. 
 
 These are the facts which must have given direc- 
 tion to the plan finally formulated. They explain why 
 it is now proposed to enter but a portion of the local 
 field of electrical supply, and there to wage what those 
 who seek to inaugurate it clearly wish to make a 
 destructive competitive war against the private capital 
 which has so far served the city and its people with 
 fidelity. 
 
 PRICES AND SERVICE UNDER CONTRACT. 
 
 The city of Cleveland is now paying a private com- 
 pany $75 per arc light per annum for erecting and 
 maintaining 1,099 street lamps and poles, with the 
 necessary overhead and underground construction. 
 
 In 1893 there were 251 city arc lamps in service. 
 
 In 1894 there were 253 city arc lamps in service. 
 
 In 1895 there were 335 city arc lamps in service. 
 
 5 
 
In 1896 there were 484 city arc lamps in service. 
 In 1897 there were 854 city arc lamps in service. 
 In 1898 there were 879 city arc lamps in service. 
 In 1899 there were 890 city arc lamps in service. 
 In 1900 there were 8g2 city arc lamps in service. 
 In 1901 there were 977 city arc lamps in service. 
 In 1902 there were 1,096 city arc lamps in service. 
 In 1903 there were 1,099 city arc lamps in service. 
 
 It will be noted that the greater number of these 
 lights have been erected during the last six years, and 
 not an inconsiderable proportion of them within three 
 years. Among the entire equipment for public light- 
 ing purposes there is no material which has been in 
 use as long as ten years, and most of it has been in 
 use but from three to five years. 
 
 To get one of these lights erected the city of Cleve- 
 land had only to send an order to the company. The 
 latter never refuses to install a lamp when requested . 
 to do so, although in many instances the points at 
 which the lamps are to be placed are at such a dis- 
 tance from existing lines of distribution that the cost 
 of the necessary extensions is altogether disproper- 
 tionate to the amount of additional revenue to be re- 
 ceived from the city for the lamps. 
 
 The company has only had a yearly contract with 
 the city. Nevertheless, it has had to assume that re- 
 newals of its city contract would be made each year 
 on a reasonable basis, otherwise it could not have made 
 the low prices for which its services have been ren- 
 dered. The manner in which the yearly price per 
 
 6 
 
lamp to the city has decreased in the last ten years, as 
 improved apparatus and other causes have made it 
 possible for the company to increase the efficiency of 
 the labor and capital which it employs, is shown below: 
 
 Yearly Price. 
 
 In 1893, moonlight schedule................. $88.66 
 In 1894, moonlight schedule.................. 88.66 
 In 1895, moonlight schedule................. 88.66 
 In 1896, all night, every night service........ 94.80 
 In 1897, all night, every night service........ 93.24 
 In 1898, all night, every night service........ 93.24 
 In 1899, all night, every night service........ 89.88 
 In 1900, all night, every night service........ 87.60 
 In 1901, all night, every night service........ 82.92 
 In 1902, all night, every night service........ 82.92 
 In 1903, all night, every night service........ 75.00 
 
 THE COMPANY'S -COMMERCIAL BUSINESS. 
 
 In regard to the commercial side of the business 
 something should be said indicative of the policy pur- 
 sued by the company. In 1893 its rate by meter was 
 16 cents per unit or kilowatt hour. In 1894 the rate 
 was fixed at 1234 cents. In 1898 the company adopted 
 a two-rate system, under which the actual rate paid by 
 consumers decreases with the number of units used. 
 Under this system all current beyond a certain mini- 
 mum, which is dependent upon the number of lights, 
 billed at 1234 cents per unit, is charged for at 5 cents 
 per unit. The average price thus received last year 
 by the company for current supplied by it was 8.05 
 cents. It will thus be noticed that the policy pursued 
 
 Z 
 
ly the company as to the price of city lamps has been 
 followed also as to the price charged private users, 
 the rates being voluntarily reduced from time to time. 
 This has been true also in regard to power, the price 
 for power, originally ten cents, being now from 6% 
 cents to 4 cents. The company expects to continue this 
 policy of decreasing rates as fast as improvements, 
 which are constantly being made in the electrical field, 
 facilitating the manufacture and distribution of elec- 
 tricity from central stations, will permit. 
 
 PRESENT MUNICIPAL FUNCTIONS SHOULD HAVE 
 PRECEDENCE. 
 
 The proposed departure from approved American 
 municipal practice does not have the support which it 
 might. derive from the complete and satisfactory per- 
 formance of the functions now recognized as pertain- 
 ing to Cleveland’s city government. If every duty 
 which the public of that city has delegated to its mu- 
 nicipal government were adequately performed and if 
 every one of its administrative departments were. so 
 perfectly organized that it might reasonably ‘be ex- 
 pected to continue such excellent service there would 
 be more justification for a desire to assume additional 
 functions. If it is possible for anyone to imagine a 
 condition so contrary to all experience and to the facts 
 of the present hour, he will be readily able to suppose 
 that the public officers to whose efficiency it was at- 
 tributable might look restlessly for further fields in 
 which to expend the energy and talent which such a 
 condition would prove that they possess. It is charac- 
 
 8 
 
teristic, however, of a certain class of those who seek 
 and sometimes attain political authority, as well as of 
 a few doctrinaires who write upon public questions, 
 that the unfilled demand for the proper performance 
 of the duties now appertaining to the various govern- 
 ments—a demand in satisfying which the entire ener- 
 gies of all administrative officers might easily be ex- 
 hausted—does not deter them from advocating addi- 
 tions to those duties which would plunge these gov- 
 ernments into fields hitherto untried and remote from 
 those now occupied. 
 
 CLEVELAND'S WATER SERVICE BAD. 
 
 Thus while the water facilities of Cleveland have 
 often proved inadequate and the supply impure, and 
 before plans for their augmentation and improvement, 
 so as to meet the requirements of the situation, have 
 even been formulated, it is proposed to add to the 
 duties of the city superintendent of waterworks the 
 burden of directing the construction, equipment and 
 operation of a municipal lighting plant, which would 
 enter the field, wholly foreign to his official or private 
 experience, of ‘commercial competition. The present 
 condition of the water supply and the nature of the 
 business of the water department becomes especially 
 pertinent to this discussion not only on accotint of the 
 illustration which it furnishes of the unsatisfactory 
 manner in which some of the present functions of the 
 municipality are performed, but also because it is fre- 
 quently urged that it is so similar to the business of 
 supplying electricity that its successful administration 
 
 9 
 
by the city is almost conclusive as an argument in 
 favor of entering the electrical field. 
 
 It will presently be shown that municipal adminis- 
 tration of the water department is not, and has not 
 been, a success, measured either by the needs of the 
 community or by the standards of ordinary business, 
 in Cleveland and elsewhere, but before doing so it is 
 desirable to point out some of the conditions which 
 make the business of supplying water incomparably 
 simpler than that of supplying electricity. 
 
 WATER SUPPLY AND ELECTRICAL SUPPLY NOT COM- 
 PARABLE, 
 
 Among the conditions which radically differ per- 
 haps the most obvious is the relative development of 
 the machinery and methods in the two industries. The 
 machinery used in pumping and distributing water is 
 exceedingly simple, and the industry has been so long 
 established that for many decades its improvement has 
 progressed but slowly, and along lines clearly indi- 
 cated by experience. In fact, radical changes have 
 long been utterly out of the question and for many 
 years the only development of real significance has 
 been in the capacity of the pumping apparatus. The 
 electrical industry, on the other hand, is of the newest 
 and it is still in a state of preliminary and even experi- 
 mental development. Machinery and methods are still 
 subject to sudden and most radical changes, and there 
 is no guarantee that the most costly, latest and most 
 efficient machinery of to-day will not at any time be 
 rendered obsolete by new inventions and discoveries. 
 
 Io 
 
The operating officers are kept constantly on the alert 
 in order to keep pace with the complex and rapid de- | 
 velopment of the art of manufacturing and distribut- 
 ing electric light and power. Clearly the industry is 
 
 not adapted to the changeful policies of temporary in- 
 ~ cumbents, however faithful and well-meaning, of po- 
 litical offices. Thus, ‘on the side of production, the 
 waterworks involves machinery and methods of the 
 simplest character, which long ago reached a substan- 
 tially stationary stage of development. An electric 
 plant, on the other hand, must have most elaborate and 
 complicated apparatus, no single element of which 
 may not require radical alteration at any time in order 
 to bring it abreast of the progress of the art. 
 
 On the side of consumption the differences are no ° 
 less marked. The natural monopoly of the water sup- 
 ply is legally sanctioned and made absolute whenever 
 it is in the hands of a city by denying the privilege of 
 obtaining water from any possibly competing source. 
 This fact is not controverted by the other fact, which 
 might at first seem to have that effect, that in many 
 " cities the evil results of the municipal operation of the 
 waterworks have so threatened life and health that 
 those able to do so have been impelled to purchase 
 spring water brought from great distances, and at” 
 heavy cost. This alternative is not open to the great 
 majority of the consumers whose lives are daily threat- 
 ened by the impure water which is the terrible conse- 
 quence of municipal incompetence, and the difference 
 between the tainted product of which the poor are 
 
 II 
 
forced to partake and the pure water commercially 
 supplied is so great that they can scarcely be consid- 
 ered as similar or competing commodities. The only 
 source of supply which could be regarded as compet- 
 ing with a municipal waterworks is that of private 
 wells, and they are almost invariably closed by law 
 when the water mains are extended into their terri- 
 tory. Thus no effort is required to obtain customers 
 for a water system. Every building erected for com- 
 mercial or residence purposes, within the fields occu- 
 pied by such a system, becomes immediately a patron 
 and remains such until it is destroyed. 
 
 Electricity enjoys no such monopoly. For lighting 
 purposes it competes sharply with gas, both natural 
 and artificial, with coal oil and with the various~de- 
 vices by which naphtha and other petroleum products 
 are vaporized for lighting purposes, if not also with 
 candles and acetylene. For power it competes with 
 the smallest sizes of anthracite and with bituminous 
 coal, with both kinds of gas, and with various petro- 
 leum products. For heating and cooking purposes it 
 as yet but knocks at the gate of competition with coal, 
 gas, petroleum and wood. 
 
 THE COMPETITION OF SMALL PLANTS. 
 
 This, however, does not tell more than half of the 
 story of the competition, active and potential, which a 
 central station for the distribution of electricity has 
 to meet. The business of supplying electricity from 
 a central station is almost obviously one in which gen- 
 eral competition is wasteful and undesirable. The 
 
 12 
 
duplication of stations and distributing apparatus adds 
 to the investment of-capital without producing a com- 
 mensurate return, and the additional expense must 
 eventually fall upon the public, i. e., usually the con- 
 sumers, although under certain conditions it falls upon 
 those whose capital is unwisely invested in the un- 
 necessary facilities. Thus the business falls within 
 the class of industries which some economists have 
 chosen to designate as “natural monopolies.” The 
 monopoly, however, is much more apparent than real. 
 Except as it is modified by the power of substituting 
 other sources of light, heat or power, already ex- 
 ‘plained, it does exist with regard to most of the 
 smaller consumers, but there is powerful competition 
 with regard to all large users of electricity. Plants 
 capable of supplying single buildings or blocks with 
 electric light and power are capable of excellent effi- 
 ciency, and the relatively low cost of coal in Cleveland 
 renders them especially so in that city. There are 
 conditions, in regard to attendance, hours of utiliza- 
 tion, etc., which occasionally make it quite imprac- 
 ticable for a central station plant to meet the competi- 
 tion, within the closely limited fields respectively be- 
 longing to them, of these small private plants, and in 
 many other cases the margin is so small that the com- 
 petitive advantage passes frequently from one side to 
 the other. Under such conditions it is manifest that 
 the price to be obtained by the central station com- 
 pany is strictly controlled by competition. Thus, on 
 the side of consumption, as on that of production, the 
 
 13 
 
advantages of simplicity are all on the-~side of the 
 waterworks—the latter need never strive for custom- 
 ers—the electric plant must continuously study their 
 needs and cultivate its field by the diligent use of all 
 means in its power. 
 
 MUNICIPAL MANAGEMENT OF WATERWORKS. 
 
 Quite obviously then there are but three things asked 
 of the water department of any municipality. It 
 ought 
 
 (1) To supply pure water; 
 
 (2) To supply plenty of water, and 
 
 (3) To extend its distributing system as rapidly as 
 demanded by local municipal growth. 
 
 Of these three requirements, all of which appear 
 so simple, the third is the only one that has not been 
 notoriously violated by nearly every great American 
 city within the last decade. Within that period the 
 conditions governing the water supply of New York, 
 Chicago, Philadelphia, Pittsburg, St. Louis, Washing- 
 ton and many other cities, in addition to Cleveland, 
 have been such as to cause an unmeasured loss of life, 
 and had they existed through the dereliction of a pri- 
 vate corporation, would have been characterized on 
 every side as intolerable. In some of these cities these 
 deplorable conditions have long been recognized, but 
 lethargic city officers and supine municipal legislators 
 have so continued to neglect the simple measures 
 necessary to correct them that there is as yet little 
 improvement and scarcely more hope for improve- 
 ment. 
 
 14 
 
IMPURE WATER AND TYPHOID FEVER IN’ CLEVELAND. 
 
 What is the situation in Cleveland? The supply 
 has frequently proved inadequate and the quality is 
 notoriously such as to constitute a constant menace to 
 health and life. Certain important extensions begun 
 under a previous administration are being carried for- 
 ward toward completion under that now in power, and 
 the present administration, without improving upon 
 the work done under its predecessor, has instituted 
 methods which, whatever may be ultimately disclosed 
 in regard to their efficiency in securing good mechan- 
 ical construction, are entailing upon the city an ex- 
 penditure per foot that has been reported as three 
 times as great as under those formerly in vogue. There 
 is some prospect that the extensions that have been 
 prosecuted under three administrations will soon be 
 opened for use and that this will relieve a part of the 
 city from the present scarcity of supply as well as 
 somewhat improve its character. But when all the 
 plans that are now in process of execution, or even 
 formulated, have become facts accomplished, no part 
 of the city will be guaranteed against a tainted water 
 supply, and nothing will have been done for the im- 
 provement conditions upon the West Side. It is not 
 strange that the citizens of the city will patiently 
 listen to proposals for the expenditure of its capital to 
 
 provide a plant which at best can only do at public 
 ~ cost what is now done at private expense for the West 
 Side, while leaving the residents of that important 
 part of the city still subject to the dangers that are 
 
 1s 
 
the inevitable accompaniment of either an insufficient 
 or an impure supply of water? 
 
 The extreme urgency of the water situation in 
 Cleveland has been officially proclaimed by the state 
 board of health in terms that by necessary implication 
 convey some idea of the degree in which the city has 
 fallen short of the full performance of this portion 
 of its duty toward its citizens. Dr. W. C. Chapman, 
 president of the board, was quoted as follows in the 
 Cleveland Plain Dealer of June 18 last; 
 
 “Positively the only way that typhoid fever can be 
 stopped in Cleveland is by the installing of a filtration 
 plant. As long as the water is secured from the pres- 
 ent intake typhoid fever will continue to be a scourge 
 in this city, and within a comparatively short time the 
 same condition will be true with reference to the new 
 intake. I have carefully studied into the Cleveland 
 situation, and there can be but one conclusion. That 
 conclusion is that the cause of the great amount of 
 fever is due entirely to the fact that the citizens are 
 forced to drink water befouled and contaminated with 
 the sewage from the city.” 
 
 The foregoing has been confirmed by a formal re- 
 port filed by the state board of health with the corre- 
 sponding municipal board of the city. From this 
 report the following have been extracted: 
 
 “It is more than probable that intelligent investiga- 
 tion would place the culpability for prevalent disease 
 upon a polluted water supply. . . . Day after day the 
 use of the lake water and the gradually increasing 
 
 | 16 
 
pollution of it have gone hand in hand. . . . Efficient 
 filtration, which eliminates from 96 to 99 per cent of 
 the bacteria, is known to be a safe protection. The 
 “measure of protection afforded by the more distant in- 
 take is not known. It is grewsome to go on experi- 
 menting in matters that concern health and life... . 
 Every experiment has been tried and found wanting. 
 Go no further in that direction. Be deaf to current 
 sensations about inventions that claim to immunize or 
 sterilize water. No intake within your reach can be 
 permanently sheltered. Allow no polluted water in 
 your city conduits or in the stomachs of the people. 
 Be clean. Filter the public water supply.” 
 
 Should any private corporation fail in an equal de- 
 gree in the performance of a service of even less im- 
 portance to the public it could not survive the swift, 
 sure and merited condemnation that would follow. Its 
 derelictions would be described under lurid headlines 
 in the sensational press, and solemnly anathematized in. 
 the columns of the more dignified papers; its officers 
 would be caricatured as ruthless wielders of the sickle 
 of death and as coining the blood of their victims into 
 dollars; it would be scourged with bitter invective 
 from every stump and unsparingly denounced in every 
 party platform. The punishment of its officers, di- 
 rectors and shareholders, and its corporate extinction 
 would be, until accomplished, the principal purpose of 
 every participant in the public life of the locality af- 
 fected. But the municipal government and its offi- 
 cers, who administer the “public utility” that has thus 
 
 17 
 
endangered the health and life of every citizen, neglect 
 the duty of formulating plans to correct the gross evils 
 of the situation and smilingly ask for new responsibili- 
 ties, and for the assignment of new duties which will 
 leave them less time and less energy for the perform- 
 ance of those now pertaining to their positions. 
 
 Especial emphasis has been given to the water situa- 
 tion because of the direct connection which the advo- 
 cates of municipal socialism claim to exist between 
 that service and that of supplying electric light and 
 power. That no such connection actually exists has 
 already been shown, but even if there were the results 
 of municipal administration of the waterworks would 
 cause considerable hesitation in the minds of the 
 thoughtful concerning the wisdom of adding in any 
 way to the administrative burdens of the Cleveland 
 water department. This department, however, by no 
 means supplies the sole example of functions com- 
 monly recognized as pertaining to the city government, 
 which are now either wholly neglected or inadequately 
 performed in that city. 
 
 OTHER UNSATISFIED MUNICIPAL NEEDS. 
 
 The abolition of the many highly dangerous grade 
 crossings within its limits, the construction of addi- 
 tional sewers, the development of the park system, and 
 the extension of the boulevards offer opportunities for 
 the exercise of high ability and unlimited energy. The 
 commerce of the city demands a considerable increase 
 in docking facilities, and for the protection of property 
 against fire there should be an immediate extension of 
 
 18 
 
the fire boat pipe service. Additional viaducts are 
 also greatly needed, and are especially vital to the west 
 side. Indeed, the list is a long one, and every citizen 
 of Cleveland is cognizant of some, at least, of the 
 items of unperformed duty which ought to receive ad- 
 ministrative attention before new duties are sought or 
 new powers granted. 
 THE PATRONAGE SYSTEM AN OBJECTION. 
 
 The Superintendent of the Cleveland waterworks 
 claims to have established the merit system in that 
 ‘department, and to disregard political considerations 
 in determining upon the appointment, advancement, 
 retention or dismissal of its employes. It is not quite 
 clear that information of the complete elimination of 
 partisanship from this bureau has reached the higher 
 officers of the administration, or the local partisans, 
 who, in accordance with precedent and the practices of 
 the other departments, expect to have their wishes and 
 interests taken into account in these matters. If, how- 
 ever, the gentleman now at the head of that office has 
 accomplished all in this particular that he claims, or 
 has attempted, it is to be borne in mind that the result 
 is by no means secure. If the merit system has been 
 established in the water department that bureau offers 
 a radical contrast to every other in the local system 
 of government, and.its reconquest will undoubtedly be 
 one of the ever-present aims of every local spoilsman. 
 The- merit system, said to have been established, is 
 sanctioned by no higher authority than the will of the 
 Superintendent, whose own tenure of office is fixed by 
 
 19 
 
the pleasure of the Board of Public Service. It is sup- 
 ported by no statute, and should its insecure founda- 
 tion at any moment be removed the entire edifice 
 would crumble and disappear. Certainly there is here 
 no guarantee of even the best results that are possible 
 under the undoubted and inevitable restrictions of 
 municipal administration. Sooner or later, unless the 
 Legislature shall intervene, the municipal water de- 
 partment is certain again to become subject to the in- 
 iquities of the spoils or patronage system, and if in 
 the meantime the business of supplying electricity 
 should be added to its functions, the public would cee 
 that also pass under a regime of office-grabbing. 
 
 POLITICAL POWER OF CITY EMPLOYES. 
 
 Closely related to this objection to needless exten- 
 sions of municipal functions is that growing out of 
 the political power of a great body of city employes. 
 Such a body is substantially certain to take united ac- 
 tion in support of its selfish interests, and thus to im- 
 peril the general interest. It is dangerous to augment 
 its voting strength, and the process cannot be carried 
 very far without preventing that calm, deliberate and 
 disinterested judgment by the electorate which is es- 
 sential under our form of government. That this is 
 not a fanciful objection is showr by the following 
 statement of conditions in Glasgow, made by Mr. John 
 Paul, a prominent single-taxer, and the editor of 
 Land Values of that city. In an article published in 
 The Public, in which he criticized the advocacy of 
 
 20 
 
municipal ownership by some American single-taxers, 
 Mr. Paul said: 
 
 “But look at the situation from our point of view. 
 We have some 15,000 workers in the employment of 
 the Glasgow council, and every further piece of mu- 
 nicipal expansion adds to the number. Many of these 
 workers are organized and are exercising more and 
 more political influence in the return of their own 
 creatures to the council. The candidate for their 
 ‘support is not the man who will look after the inter- 
 ests of the city, but he who will promise most to the 
 employees of the council. The best interests of the 
 city are'a secondary consideration. In fact, these work- 
 ers cannot see the citv’s interest except through their 
 own, while the more vigilant of them work for the re- 
 turn of candidates who will assist them or their friends 
 into corporation jobs. A labor candidate publicly 
 boasted on the hustings that he had got so many men 
 municipal employment during his term of office, 
 which means that we have Tammany here. And we 
 are likely to have more of it in the future.” 
 POLITICAL AND ECONOMIC DIRECTION OF INDUSTRY. 
 
 The controversy between those who would devolve 
 the management of industry upon the officers of 
 federal, state or municipal governments and_ those 
 who would maintain the system that has prevailed 
 among all free peoples during all historical times, un- 
 der which the owners of property are, subject to direct 
 legal responsibility and to public law, charged with 
 the direction of its industrial utilization, is that be- 
 
 aA 
 
tween socialism and individualism. There is no mid- 
 dle ground in principle, whatever may be temporarily 
 possible in practice. Political direction of industry 
 has always failed and must always fail, for it com- 
 plicates industrial problems by introducing considera- 
 tions that are foreign and antagonistic. 
 
 Economic direction, i. e., that by property owners 
 charged with full legal responsibility and governed by 
 public law, has, in the broad sense, been always suc- 
 cessful. Such direction has well-nigh won tor America 
 the industrial supremacy of the world. It has sent 
 American manufactures into the most remote regions 
 and gained for them the dominion of markets in the 
 countries of oldest and most complete industrial de- 
 velopment; it has spread a busy and satisfied popula- 
 tion over the vast area of the United States; has led 
 their people to the attainment of the highest general 
 standard of living of any people on the earth and has 
 enabled their citizens to subscribe to loans desired by 
 nations whose people were far advanced in trade and 
 commerce while the greater portion of America was 
 a complete wilderness. It has made Cleveland the 
 metropolis of Ohio and the chief city between the At- 
 lantic seaboard and Lake Michigan. Nor have the 
 people of the United States failed to experiment with 
 socialistic undertakings. ‘Their state governments 
 went heavily into the business of railway and canal 
 construction at an early date and thus paved the way 
 for a series of financial disasters which overtook 
 many, disgraced some and seriously impaired Ameri- 
 
 22 
 
can credit at home and abroad. From 1830 to 1840 
 the public debt of the United States increased from 
 about $13,000,000 to $178,409,084, mostly incurred 
 to provide for such experiments, and in 1841, as a 
 direct consequence, Governor McNut of Mississippi 
 added to the vocabulary of American finance the por- 
 tentous word “repudiation.” Every experiment in 
 public railway ownership attempted during this or any 
 other period by the people of this country has proved 
 unsuccessful, if not disastrous, and most of the lines 
 constructed by our governments have been sold to 
 private corporations for much less than their original 
 cost. 
 THE POSTAL SERVICE AS AN EXAMPLE. 
 
 The postal service is so firmly established as a part 
 of the governmental system that most persons forget 
 that it is a great business enterprise and assume that 
 its social and political features outweigh those which 
 are purely economic. If they do, and could not other- 
 wise be served, there can be no doubt of the wisdom of 
 those who made this a department of the federal gov- 
 ernment, but those who look at the strictly industrial 
 aspects of the service are apt to be convinced that a 
 private corporation would give much better and more 
 economical service. Yet socialists have long pointed 
 to this department as an example of the success with 
 which the government can manage a great business. 
 They used this argument until six months ago, prob- 
 ably in the belief that the people had forgotten the 
 Star Route frauds that, before being brought to light 
 
 23 
 
in 1881, had persisted for decades. Perhaps it will. 
 be resorted to again when those cognizant of the 
 revelations of the investigations now in progress may 
 be assumed also to have forgotten, but for the present 
 it is likely to be permitted to remain in abeyance. 
 
 WHY PUBLIC MANAGEMENT OF INDUSTRY IS IN- 
 EFFICIENT. 
 
 In fact, the efficiency of the public service and of 
 public employees always suffers by comparison with 
 that of private service and private employees. One 
 reason for this has been stated with splendid force by 
 Mr. Allen Ripley Foote, a profound student of 
 economic problems, in the following brilliant para- 
 graph: ~ 
 
 “There is an economic advantage inherent in pri- 
 vate ownership that cannot be acquired by a munici- 
 pality. The operation of this advantage creates the 
 profit for which the company works, and which, when 
 created, belongs to those creating it, as justly as the 
 pay for a day’s work belongs to the honest workman. 
 This economic advantage ceases to exist when an in- 
 dustry passes from private to municipal- ownership. 
 It eludes municipal ownership as surely as the secret 
 of life evades the surgeon’s knife. It cannot exist in 
 slavery; it is the offspring of freedom. It is the ad- 
 vantage of personal responsibility, of guaranteeing 
 the saving to the one who saves, the economic advan- 
 tage of a hope. This advantage stimulates enterprise, 
 induces thoughtful care and inspires energy.” 
 
 Employment in the public service carries a lower de- 
 
 24 
 
gree of responsibility and offers relatively insignificant 
 rewards for fidelity, integrity and capability. Thus 
 under its deadening influences, and in greater or less 
 degree, the most conscientious become complacent, the 
 most energetic become slothful, the most faithful be- 
 come careless, and the most ambitious cease to press 
 forward when they perceive the barrenness of suc- 
 cess. It is occasionally practicable to reduce these 
 differences to figures. 
 EXPERIENCE OF THE NAVY DEPARTMENT. 
 
 An excellent test is furnished by the experience of 
 the federal government in building ships of war at its 
 navy yards as compared with the results obtained un- 
 der contracts let to private shipbuilders. The follow- 
 . Ing table was compiled for the United States Indus- 
 trial Commission by Chief Naval Constructor F. T. 
 Bowles. The first three ships included were built at 
 the navy yards, and the others under contract: 
 
 25 
 
‘SBXO,, 94} JO 1U90 Aad ET 10 ‘FELg 07 SOD 
 3UlIq p[NOM YoIGM ‘sasvurep 0O0‘ESFR IOJ pans BAB S10J0BIJUOD)(¢) 
 ‘gold 4oe1]U0N (+) 
 
 IL OFL 
 
 (s) $0°699 
 18° F69 
 SF L18 
 8S 988 
 16618 
 9F 0988 
 
 “S[TOSSOA 
 peqgstuy jo 
 uo} ied sop 
 
 1 
 
 *S19T1Oq, 
 UL 10jBM IO 
 ‘MONUNUMB 
 ‘sar0js no 
 “UM 7OSTOM 
 
 ‘spas’ AABU UL popusdxe JunOwWY (-.) 
 ‘paved 978ATId Ul I[INGs 
 ‘pred AABU UL TING: 
 
 “""S68r 0 ATnL 
 "*CB8I ‘06 “AON 
 “ESL ‘SI ‘00d 
 “POST ‘LT adv 
 "£681 “QT ouns’ 
 "'G68I ‘GT ‘Sny 
 "'"G68I ‘LT 4dag 
 
 eee 0681 “qoul 
 "1681 ‘2 SBA 
 "** 1681 ‘9T “08d 
 nee GERI ‘DCI 
 
 ev eene Wace “mer : 
 “** "6681 ‘Teun: 
 
 "888 “LT “300 
 
 06680 SET 6S GIF 0S9'6PP'T 00°00¢9°@19 
 86 TLE ‘86'S 06° 88S OOL*169°¢ 00°000‘890'¢  ¢ 
 FF'966 6F8'S Ch COP 092'918°S 00°000'069°%  ¢ 
 08 6ZL°661'S Fe O82 S81'8Gs's €6°S96'6E8'I  ( 
 GG'F06' 1 LES 1S 9F8 E81 '8gs‘e O8"SL2°S66'T  ( 
 GF IGL‘C0GF 0€ 0@8 069°S6¢'E ZL6FS'66'S 
 SL'882'L19' FR Le 1988 066°9€8'E 18°60F'C0g'ek ¢ 
 ‘SUO7L, 
 
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 pegstuy jo pue [ing jo pae [nq pue [ng 
 ysoo [BUI | UOJ Jad 4sop JO 1OSIOM Jo 4sop 
 
 “TOISST ULULOD 
 4SiIf Jo 31eq 
 
 ‘SIOTIOG Ul IdIBAA IO 
 UONIUNMMY ‘selojg Noy sdrqg 
 
 ‘AIOUIQOBIN pues [TNH 
 
 ‘[evy JO SUl 
 -ABI JO 01eq 
 
 “SCUVA ALVAIYd AGNV OIITEGNd 
 NI XAVN ‘8S “0 HHL YOA SdIHS OYNILONALSNOO JO SLSOOD 
 
 010d 
 Joes ,eueIpUT 
 “*,Sljodveuulyy 
 teeee ee (US1loTey 
 * ;MBUULOUID 
 sone + SUX9 1, 
 tae laurel 
 
 ‘OmMBN 
 
 HALLVYVdWOOD AO AIAVL 
 
 26 
 
It should be understood that in estimating costs of 
 ships constructed at the navy yards there was no al- 
 lowance for interest on the value of the plant already 
 in existence. The battleships ‘Maine’ and “Texas,” 
 built at the navy yards, are fairly comparable with the 
 “Indiana,” built at about the same time in a private 
 yard. The cost of the “Maine” considerably exceeded 
 that of the “Texas,” and the final cost of the latter per 
 ton was 22.4 per cent more than that of the ship built 
 under contract. The “Raleigh” and “Minneapolis” are 
 of comparable type, and were built, respectively, at a 
 navy yard and under contract. The cost of the former 
 was $817 per ton and of the latter $624, showing a 
 difference of 23.6 per cent in favor of the ship built 
 under contract. 
 
 Considerations, which are of general applica- 
 tion, conclusively establish the folly of adding un- 
 necessarily to the functions of any government. The 
 many sins of commission or of omission which illus- 
 trate them have on most frequent occasions been 
 chargeable against American local governments. 
 They are of a character seemingly inseparable from 
 municipal administration among the people of this 
 country, and their origin lies deep in the political meth- 
 ods and functions of all English-speaking peoples. All 
 good men hope for their gradual and ultimately com- 
 plete eradication, but few will seriously expect im- 
 provement to follow a voluntary expansion of the 
 tainted area. As has been said by a prominent writer, 
 
 27 
 
“Individuals do not become virtuous by adding to 
 their opportunities for evil.” 
 MUNICIPAL SOCIALISM ELSEWHERE. 
 
 If the city of Cleveland is beguiled into experiment- 
 ing with socialism its citizens will not be able to plead 
 that it had not sufficient warning from the recorded 
 experience of others. The persistent propaganda of 
 socialism has succeeded in committing many English 
 and not a few American cities to experiments with the 
 municipal ownership and direction of industry, and in 
 every instance, in which a sufficient time has elapsed 
 since the experiment was begun, the results show the 
 relative weakness of political direction. 
 
 IN GREAT BRITAIN. 
 
 British experience in municipal ownership has been 
 much more extended than that of America, and the 
 results there ought to save the people of this country 
 from the folly of demanding experience of its own. 
 For a time the municipal socialists of England and 
 Scotland appeared to have everything their own way, 
 but the appalling increase of local indebtedness on ac- 
 count of so-called “productive undertakings,’ many 
 of which have actually been a burden upon taxpayers, 
 and the general increase in tax rates and assessments 
 have now awakened public sentiment and a healthy re- 
 action appears to have begun. The annual reports of 
 the local government board show that municipal loans 
 increased during the fiscal year 1901-2 by no less than 
 $144,677,465, and that the average of the last three 
 years was barely less than $125,000,000. This was an 
 
 28 
 
advance of 291 per cent over 1891, when the loans ag- 
 gregated $37,021,495. From 1874-5 to 1899-1900 the 
 loans of the various local governments increased from 
 about $465,000,000 to $1,470,000,000, and the average 
 per capita from about $20 to more than $50. The 
 large increases in tax rates and_assessments during 
 the same time indicate that these undertakings have 
 not been sufficiently profitable to provide for their own 
 interest. While there are many conflicting statements 
 concerning the quality of the services rendered by 
 these municipally conducted undertakings, it is no- 
 where contended that in any important instance it is 
 above that of similar privately conducted enterprises 
 in the United States, and there are numerous illus- 
 trations of extreme incapacity, backwardness and re- 
 actionary methods. The president of the Statistical 
 and Social Inquiry Society of Ireland, Judge Shaw, 
 unhesitatingly declares that in municipal ownership 
 is to be found the true explanation of the notorious 
 British inferiority in electrical matters. A report by 
 a committee of the Chamber of Commerce of Lon- 
 don, especially appointed to investigate the subject, 
 shows that sixty-one municipalities, including Glas- 
 gow, Bradford, Lincoln, Bath, Edinburgh, Leigh, 
 Portsmouth and Carlisle, were conducting electric 
 plants at a loss. 
 IN PHILADELPHIA. 
 
 The most complete experiment in municipal owner- 
 ship ever made in this country was that with the gas- 
 works of Philadelphia. That city leased its gasworks 
 
 29 
 
to a private corporation in 1897, after sixty-two years. 
 of public ownership and fifty-six years of political ad- 
 ministration. Prof. Bemis is quoted, in the report con- 
 demning the project now under discussion, which was 
 adopted by the Cleveland Chamber of Commerce, as 
 having declared that “The works under public opera- 
 tion would have shown better results than were ob- 
 tained had it not been for the spoils system, general in- 
 - efficiency and unprogressiveness,” and no one will deny 
 that it would. 
 
 Unfortunately for Prof. Bemis’ theories, however, 
 “general inefficiency and unprogressiveness,” as well 
 as more or less taint of the spoils system, always co- 
 exist with municipal undertakings of this character. 
 Prof. Bemis himself is on record with the statement 
 that the municipal gas trust “mismanaged the works 
 and used the offices under it as rewards for party serv- 
 ices.” He has declared that “no defense can be made 
 of their conduct,” “that public gas manufacture in 
 Philadelphia, and possibly elsewhere, seems to lead 
 to wasteful use of gas in public buildings and on the 
 streets,” and that it cost the city 84 cents per thousand 
 feet to make gas, while it bought 40 per cent of what 
 it sold to consumers from a private company for 37 
 cents per thousand, and that it sold both for $1.50 per 
 thousand. He asserted that the distributing mains 
 were insufficient, that there was an excessive leakage, 
 and he characterized the works generally as being in 
 a “sad condition.” At one time a committee of one 
 hundred was appointed by Philadelphia citizens to in- 
 
 30 
 
vestigate the situation and reported, in part, as fol- 
 lows: 
 
 “At the outset difficulties were encountered which 
 only yielded to the persistent efforts of counsel.  Lit- 
 tle was known of this trust. Its meetings had for 
 years been held in secret, while its published annual 
 report to the councils was confused and unintelligible, 
 and, as now appears by the evidence, actually falsified. 
 The visible results of the management of the trustees 
 had been the sale of gas at a high price to Philadelphia 
 consumers without realizing an adequate profit to the 
 city. The vast purchases of supplies, made at exces- 
 sive prices from favored parties, without competition 
 or advertisement (in some instances from the trustees 
 themselves, in violation of the ordinance), the dis- 
 bursement of enormous sums annually for these pur- 
 chases in checks drawn to bearer, the frequent failure 
 to produce any record of the supplies.having been re- 
 ceived or the work performed, the admission that, not 
 content with paying bills rendered, the employes in 
 some cases habitually made out the bills themselves, 
 make some of the general features of the management 
 of this municipal trust, as appearing in the very 
 voluminous testimony.” 
 
 IN CHICAGO AND DETROIT. 
 
 The only two large cities in this country operating 
 municipal lighting plants are Chicago and Detroit. 
 Neither of these cities does any commercial business. 
 The Chicago plant is now operating some 4,305 city 
 lamps. It has been in operation since 1888. Messrs. 
 
 31 
 
Haskins & Sells, professional accountants, engaged by . 
 the city to revise its accounting system, for which 
 service it was agreed beforehand that they should re- 
 ceive at least $75,000, made a report to the city cover- 
 ing the operation of its lighting plant. The average 
 cost per arc lamp yearly, as they reported it, from 
 1888 to 1900, was $142.18. The Chicago plant is now 
 making a much better showing under its present super- 
 intendent, but, including fixed charges, the cost per 
 lamp is still considerably above that paid by the city 
 of Cleveland, being $95.27 against $75. 
 
 It is unnecessary to burden this discussion with the 
 detailed criticisms which could be made concerning the 
 official figures published for the Detroit lighting plant. 
 That plant has not been furnishing a full are light 
 service, the practice being to reduce the energy fur- 
 nished to the lamps at midnight, and the total hours 
 operated per annum being only 3,744, so that the cur- 
 rent supplied from the switchboard in 1901 and 1902 
 for each arc lamp was equal to 1,715 units per lamp per 
 annum, whereas the Cleveland company operated the 
 lamps it furnished to the city of Cleveland 3,850 hours 
 in 1902, and furnished 1,950 units for each lamp. 
 Anyone familiar with the service furnished in the two 
 cities knows that that of Cleveland has been better, 
 both as to the character of the lights and the number 
 and duration outages. 
 
 An analysis of the reports of the Detroit lighting 
 commission shows that during every year since the 
 operation of its plant began the actual cost per arc 
 
 / 32 
 
lamp borne by taxpayers has been hiéher than in 
 Cleveland. : 
 
 Apparently the raising of money by direct levy for 
 the rehabilitation of the plant is likely to be trouble- 
 some, and, accordingly, a further bond issue of $150,- 
 000 for that purpose is now under discussion. 
 
 INCONSISTENCY OF MUNICIPAL SOCIALISTS. 
 
 The advocates of municipal ownership, who array 
 themselves in support of the proposed Cleveland pub- 
 lic lighting plant, do so in defiance of the principle 
 which they have always heretofore urged as the very 
 foundation of their system. They have claimed, in 
 season and out of season, that because the businesses. 
 of supplying water, gas, electricity, street railway 
 transportation and so on are “natural monopolies” the 
 public must choose between public or private monopo- 
 lies in those fields. They have explained that perma- 
 nent competition in supplying these services is im- 
 practicable, that whenever it occurs it involves exces- 
 sive costs for both the capital and operating accounts, 
 and that these wastes ultimately fall upon the general 
 public. In this basic contention, so far as the businesa 
 of supplying electric light and power from a central 
 station is concerned, these doctrinaires are correct. 
 Those who perceive the real spirit of Democracy as it 
 is known to English-speaking peoples are, however, un- 
 able to accept the conclusion that this fact requires or 
 justifies the reconstruction of their governmental sys- 
 tems by merging politics and industry. They believe 
 that the proper balance between public and private 
 
 53 
 
undertakings will be preserved and the much higher 
 efficiency of privately managed industry retained by 
 depending, in these fields, upon the principle of state 
 regulation. Private monopolies under public super- 
 vision will give to users the most efficient service at 
 the lowest cost consistent with the general welfare. 
 
 But at the present moment the municipal socialists 
 of Cleveland are pressing their erroneous conclusion 
 with such frenzied enthusiasm that they have lost sight 
 of their correct premise. They have decided to force 
 the municipality into public ownership and in order 
 to gain that end are willing to create costly and waste- 
 ful competition in a business which they have always 
 ‘asserted ought to be protected against competition. 
 
 DR. VICTOR ROSEWATER CONDEMNS COMPETITION. 
 
 _At the convention upon municipal ownership and 
 public franchises, which was held in New York on 
 February 25-27, 1903, Dr. Victor Rosewater, a firm 
 believer in municipal ownership of electric lighting 
 systems, and speaking in advocacy of that idea, used 
 the following language: 
 
 “Electric lighting is a monopolistic industry. No- 
 where has competition been effective. Everywhere 
 has combination been manifested. Even where com- 
 peting companies were originally chartered and en- 
 franchised they have all been merged into one organi- 
 zation or have divided territory, completely excluding 
 competition. . . . Both sides will agree that competi- 
 tion in electric lighting service is unnecessary and un- 
 desirable, that-a duplicate electric lighting service for 
 
 34 
 
the same territory constitutes an economic waste, mak- 
 ing necessary higher charges than would be required 
 for a single unified plant. A potential competition ex- 
 ists between electricity, gas, gasoline and other light- 
 ing agencies, but competition as a regulative force be- 
 tween rival electric lighting concerns is out of the 
 question.”’* 
 
 PROF. EDWARD W. BEMIS DENOUNCES COMPETITION. 
 
 Prof. Edward W. Bemis, superintendent of the 
 Cleveland waterworks, is thoroughly committed to the 
 doctrine asserted in the foregoing extract. In the 
 work on “Municipal Monopolies,” which he edited, ap- 
 pear several articles of his own, and these include the 
 following : 
 
 “... To every one of these cities the supply of 
 water, street railways, electric light, gas for fuel and 
 lighting’ purposes, and the telephone, at the command 
 of everyone, if not in every home, will have become 
 vital necessities. Nearly everyone is also ready to 
 concede that each of these industries partakes of the 
 character of a monopoly... . Although competition 
 has been tried in hundreds of places, combination, 
 either avowed or tacit, has always been the result. . . . 
 A company should be guaranteed a monopoly of its 
 section or grand division of the city. . . . Two com- 
 panies in the same district mean duplication of power 
 houses or manufacturing plants, etc.’ 
 
 Again, in testifying before the United States In- 
 
 : *Municipal Monopolies. Edited by Edward WwW. Bemis, Ph. Lo ey 
 Chapter V, pp. 634 and 635, 
 *Municipal Affairs, Vol. VI, No. 4, pp. 623-624. 
 
 35 
 
dustrial Commission, Prof. Bemis was even more ex- 
 plicit. He said in part: 
 
 “T take it for granted that the Commission recog- 
 nize that competition has broken down as a method of 
 solving the street railway question, or the gas ques- 
 tion, or the electric light question, or the water prob- 
 lem, and probably will break down shortly, if it has 
 not already, in the solution of the telephone question. 
 Efforts have been made in almost every important city 
 in the country to have competing companies and in 
 every instance the experiment has ended, if it began 
 some time ago, in consolidation. So that there is no 
 city that has had for any long time competition in the 
 supply of these services. . . . When it comes to com- 
 petition for the general supply of electric light for a 
 city street lighting or general household light, this is 
 true... . There are good reasons why this should be | 
 true. The economies are very great in consolidation— 
 - the saving of office force, the saving of duplication of 
 mains, service in the street, and service pipes to the 
 houses, economies in the collection of bills.” 
 
 PRESIDENT EDMUND J. JAMES’ VIEWS. 
 
 Dr. Edmund J. James, now president of Northwest- 
 ern University, wrote, in 1886, a monograph on the 
 gas industry, in which he described the consequences 
 of attempts to enforce competition in terms that are 
 equally applicable to the business of distributing elec- 
 tricity from a central station. The following is an 
 extract : 
 
 “When we look at the question from a wide view, as 
 
 36 
 
to the effect of competition among such companies, 
 upon the economy of the supply of capital in the coun- 
 try, one wonders how anyone could ever have thought 
 that it would be a good thing to allow competition 
 among them. Think for a moment what it implies. It 
 involves at least two or three and even more works 
 where one would be sufficient. It means two or three 
 and even more mains where one would be ample. It 
 necessitates a corresponding number of different sery- 
 ices in each house, and an enormously large number 
 of inspectors and collectors—and all for what? 
 Cheaper gas? By no means! The enormous sums of 
 capital which such a system wastes will certainly try 
 to earn dividends in some way or other and the only 
 means is in high prices of gas, or what amounts to 
 much the same thing, in poor quality.”* 
 
 JUDGE THOMAS M. COOLEY’S OPINION. 
 
 “Hon. Thomas M. Cooley, the author of “Constitu- 
 tional Limitations,” and one of the foremost among 
 American jurists and social students, wrote as fol- 
 lows: 
 
 “The supply of public conveniences is usually a 
 monopoly and the protection of the public against ex- 
 cessive charges is to be found first in the municipal 
 power of control. Except: in the very large cities, 
 public policy requires that for supplying light and 
 water there should be but one corporation, because one 
 can perform the service at lower rates than two or 
 
 *The Relation of the Modern Municipality to the Gas Supply. 
 Publications of the American EHeonomic Association, Vol. I. 
 
 37 
 
more, and in the long run will be sure to do so. But 
 scheming men make periodical attacks upon corpora- 
 tions existing for those and similar purposes, and 
 with a popular cry for their watchword they can al- 
 ways enlist local interest in their favor. If they suc- 
 ceed in obtaining a rival franchise, the subsequent his- 
 tory is commonly this: A war of rates for a season 
 and then either a sale of one franchise to the owners 
 of the other or a division of territory or an agreement 
 on charges. The final result is this; that the two sup- 
 ply the market at a greater cost than the one, and the 
 additional cost is paid by the public. . . . The true 
 policy of the state is to give due and full protection to 
 corporate property and at the same time to insist upon 
 the faithful performance of corporate duties. ... ” 
 
 THESE PRINCIPLES APPLICABLE IN CLEVELAND. 
 
 It will scarcely be contended that the Cleveland 
 group of municipal socialists is justified in abandon- 
 ing these fundamental principles and proposing com- 
 petition in the business of supplying electricity merely 
 because the municipality itself is to be one of the com- 
 petitors. Surely the fact that one of the participants 
 is subject to the drawbacks always attaching to a po- 
 litical body when it attempts to take charge of an in- 
 dustry cannot protect the public from the conse- 
 quences of wasting an important part of “the supply 
 of capital in the country” in the needless duplication 
 of existing facilities. All the losses incident to such 
 duplication must fall somewhere, and they would ob- 
 viously have to be laid at the door of those who have 
 
 38 
 
so frequently shown that they are aware that the 
 coursé they are advocating must lead to such losses. 
 Possibly they will urge that as the municipality is to 
 be one of the competitors the ultimate combination, so 
 sure to result were both plants in the hands of private 
 corporations, is less likely to be effected. It is true 
 that this situation seems to present greater obstacles to 
 consolidation than usually exist, but those conversant 
 with the history of previous competitive experiments 
 in similar fields know that the tendency toward com- 
 bination has proved itself equal to surmounting the 
 greatest obstacles hitherto erected and will hesitate to 
 predict that any artificial condition can permanently 
 interrupt its natural course. But if it were possible 
 that the obstacles to consolidation should prove in- 
 surmountable it is clear that the waste of capital 
 would be no less real and that it must fall somewhére. 
 Do the advocates of municipal socialism care to take 
 the position that this loss would fall upon the owners 
 of the private plant and that their loss is of no conse- 
 quence to the community? Such a “plea in confession 
 and avoidance” would be untenable, because it is much 
 more likely that the loss would fall upon the: tax- 
 payers through the excessive cost and wastes that 
 commonly accompany politically conducted industry, 
 but if it were justifiable as a prophecy it would not 
 be in economics or morals or before the people. If the 
 effect of the tax-subsidized competition of the munici- 
 pal plant should be, as its advocates must intend that 
 it shall, the absolute destruction of the value of the 
 
 39 
 
plant now in operation, the loss would primarily fall, 
 of course, upon those who own its shares and its bonds. 
 But while particular capitalists may thus be compelled 
 to assume such a loss and are really defenseless against 
 some forms of attack, the owners of capital in general 
 never permanently bear a loss of this character, and 
 where one is temporarily inflicted there are automatic 
 readjustments of interest and discount rates which 
 speedily effect its compensation. If the people of 
 Cleveland notify those to whom they must address 
 their numerous calls for the capital which constitutes 
 one of the bases of that city’s great industrial pros- 
 perity, that investments there are no longer secure be- 
 cause. destructive tax-supported competition may at 
 any time drive private capital from any particular field 
 to which the whims of ambitious local politicians point, 
 the owners of capital will restrict their offerings in that 
 market until the additional interest promised is suff- 
 cient to offset the new risk which they are asked to 
 assume. 
 IS IT HONEST? 
 
 So far attention has been directed mainly toward 
 the industrial aspects of the proposed change in the 
 city’s methods. There is, however, a moral issue in- 
 volved in the suggested attack upon the value of the 
 electric lighting company’s property which must not 
 be permitted to escape notice. The citizens and tax- 
 payers of Cleveland would undoubtedly prefer pecuni- 
 ary losses to being convicted before the country of 
 failure completely to satisfy their moral obligations. 
 
 40 
 
They are asked by the present administration to enter 
 upon a course which must bring them both the financial 
 loss and the consciousness of municipal immorality. 
 Let it be admitted, for the purposes of this argument, 
 and after all it is no more than a matter of definitions, 
 that, to use the terms commonly adopted by municipal 
 socialists, electricity has become a “public utility” and 
 that its distribution throughout the community is a 
 “public function,” which the people of the municipality 
 have preferred “‘to delegate to a private corporation.” 
 This is in substance the way in which this class of self- 
 styled reformers commonly explain the present situa- 
 tion, and to it no exception need now be taken. No 
 one accepts the delegation of a duty to perform a serv- 
 ice except in consideration of an express or implied 
 agreement, under which such acceptance will carry 
 with it a reasonable expectation of a satisfactory re- 
 turn in money or some other form. In the case of 
 such services aS those performed by quasi-public cor- 
 porations, the return expected is always financial, and 
 the covenant required is that the right to provide the 
 special service in question shall be so enjoyed as fully 
 to protect the investment and to promise satisfactory 
 interest thereon. In many cases it is necessary, in or- 
 _der to get capital to accept the delegation of these 
 services, to guarantee exclusive possession of the field, 
 as against other private corporations or investors, and 
 such guarantees are usually profitable to the commiu- 
 nities which are enlightened enough to be willing to 
 make them, for they result in securing capital at lower 
 
 4I 
 
rates. In any case, however, there must be at least 
 an implied understanding that the decision to delegate 
 the function to be performed by the private corpora- 
 tion is not to be arbitrarily reconsidered. In other 
 words, in order to get private capital to enter one of 
 these quasi-public fields, the municipality which wishes 
 to secure it must afford some evidence that its inten- 
 tions in that respect are not fickle. Had the people of 
 Cleveland, in their collective capacity and through 
 their municipal officers, announced to those whom they 
 asked to build their gasworks, to construct and equip 
 their street railways and to erect and operate an elec- 
 tric lighting and power plant. “We offer you these 
 charters, but we are not sure that we ought not to 
 own and operate our own gasworks, street railways 
 and electric plant. You may take them, but whenever 
 we feel ready we shall commence competing under- 
 takings and support them by taxes, if necessary,” not 
 a dollar would have been subscribed’on such terms. 
 What they did was to say, in effect: “We do not be- 
 lieve in the policy of municipal Ownership. This is. 
 not a community of socialists. We want the advan- 
 tages and economies of private management, and so 
 prefer to delegate these functions. Take them and 
 exercise them subject to suitable public regulation.” 
 
 There was such an implied covenant when the plant 
 now in existence was erected, and it has been tacitly 
 renewed with every expenditure for the improve- 
 ment of the service. The corporation undertook the 
 task of supplying electricity to the community on the 
 
 42 
 
understanding that the field had been left to private 
 enterprise, and that the city did not wish to occupy 
 any part of it. On any other terms the course pur- 
 sued by its officers would have been unjustifiable, and 
 most of its expenditures in improvements absolutely 
 wasteful of the interests of which they are. the trus- 
 tees. The investors in its securities do not ‘seek or 
 need contractual protection against the competition 
 of private capital. If the municipal government should 
 be so far misled as to wish to retry the vicious ex- 
 periment of private competition, the company could 
 appeal to no tacit understanding, and to: no moral 
 obligation to guarantee freedom from such invasion 
 of the field it occupies. Against the danger of such 
 an experiment, it has first the protection afforded by 
 the wisdom of the citizens of the city; second, that of 
 the conservatism of capitalists, and, finally, the ex- 
 perience, fidelity and skill of its employees and officers. 
 There are definite limits to private competition, even 
 when attempted among the so-called natural monopo- 
 lies. It cannot be forever conducted at a loss. Once 
 thoroughly beaten, private capital will recognize de- 
 feat and abandon the field. Hence, against such com- 
 petition, business ability, technical knowledge, intelli- 
 gent devotion to the details of operation, and fair and 
 liberal methods in dealing with consumers afford a 
 certainty of ultimate “peace with honor.” 
 
 TAX-FED COMPETITION. 
 
 But no private business corporation can compete 
 on even terms with a municipally owned and con- 
 
 43 
 
ducted enterprise. Such an undertaking can be oper- 
 ated without regard to the financial results attained, 
 and so long as taxpayers remain complacent, or voters 
 can be kept in ignorance of the true situation, the 
 losses can be added to the regular tax levies. Such 
 competition is tax-fed, and against it honesty, ability, 
 industry, all the business virtues which deserve and 
 usually attain success, are of no avail. Therefore, no 
 group of capitalists would undertake to perform such 
 a service as that “delegated” to the Cleveland lighting 
 company, except upon an implied guarantee of free- 
 dom from this irresponsible. form of competition. 
 Even the municipal socialists cannot advocate a mu- 
 nicipal lighting plant to do commercial business in the 
 field now occupied by this private corporation without 
 a denial of the principles which they have persistently 
 urged as the basis of their doctrines, and no citizen 
 of Cleveland can support it without favoring the 
 repudiation, by the great and honored city in which he 
 lives, of one of its plainest obligations. 
 
 WHERE WOULD IT LEAD? 
 
 Even on purely selfish grounds this proposal should 
 arouse the opposition of every business man, for who 
 knows where, if it is accepted, the threat of tax-fed 
 competition will next descend. Shall the municipality 
 supply electricity and not bread? Is the distribution 
 by cable, wire, and conduit wasteful, when service is 
 duplicated, in any different way than that by wagon? 
 Do more persons use electricity than bread, or is the 
 former more essential to life? Is it more necessary 
 
 44 
 
that stores and houses shall be lighted by night than 
 that men and women shall be clothed by day? Why 
 should the private owners of capital obtain profits on 
 bread and clothing when the city could manufacture 
 both, at greater cost perhaps, and sell them at a loss, 
 making up the deficit by additional taxes? By all 
 means let there be erected by the side of Cleveland's 
 municipal electric lighting plant a municipal flouring 
 mill and bakery, and in the immediate vicinity various 
 city-owned and operated textile mills and clothing 
 manufactories. Let the city establish street car lines 
 and build the cars, let it have milk depots, and wagons, 
 and cows, and farms on which to feed the latter, let 
 it build a gas plant and lay new mains alongside of 
 those now is existence, let it establish a third tele- 
 phone service, and then when the present street cars, 
 gas and electric plants, and telephone systems have 
 fallen into disuse and decay, let the few citizens who 
 are not officeholders respectfully petition the mayor 
 and the superintendent of the water works to give 
 them better service than they now receive from their 
 water department. 
 
 In all seriousness the city of Cleveland must ulti- 
 mately be prepared to assume a tremendous portion of 
 the field of local industry, or it must forego such ex- 
 periments as that suggested. There is no half-way 
 station between socialism and individualism. ‘The mo- 
 ment the war against private capital in the electrical 
 industry is inaugurated, those engaged in the lines of 
 business most likely to be next attacked must begin 
 
 45 
 
to protect themselves by withdrawing their capital. 
 They will do this by letting the services which they 
 render deteriorate, by neglecting repairs and renewals, 
 by putting a stop to any normal tendency toward lower 
 rates that may exist, and possibly by raising them. 
 No owner of invested capital will feel secure, and no 
 owner of free capital will invest it except upon the 
 most exacting terms. 
 
 THIS IS SOCIALISM, 
 
 The term “socialism” is not a popular one among 
 the liberty-loving people of America, and perhaps some 
 exception may be taken to its free use in this paper. 
 To deny its applicability is, however, to deny 
 the principal exponents of the system the right to 
 say what it is. The one fundamental principle to 
 which all socialists in common adhere is that through 
 the socialistic government the whole people shall own 
 and control the capital used. The Fabian Society, the 
 leading socialist organization of England, and having 
 an American branch, expressly stipulates that this own- 
 ership shall not be always that of the national govern- 
 ment, but that the various municipal governments shall 
 own and operate the industries whose operations are 
 wholly within their respective borders. Now, unless 
 it is contended, which would be absurd, that there can 
 be no socialism until the entire program of socialism 
 has been put into force, it is clear that the project un- 
 der discusison is precisely such ag is contemplated by 
 that term. Only willful blindness can fail to see in it 
 
 46 
 
a distinct step toward the general municipalization 
 and nationalization of all industry. 
 VALUE OF OPPORTUNITIES FOR INVESTMENT. 
 
 It is not necessary to discuss the relative strength 
 of the incentives to effort under socialism and individ- 
 ualism, or to cite any of the numerous and painful in- 
 stances of the failure of collectivistic enterprises of a 
 business or even semi-business character. Except for 
 a few instances in which religious zeal has supplied the 
 necessary motive for industry, the record of failure is 
 unbroken. It may not be out of place, however, to 
 direct attention to some of the services performed by 
 private corporations that are too commonly overlooked. 
 It is a very common error to assume that there is a 
 necessary connection between great individual wealth 
 and the development of the corporation as a commer- 
 cial institution. Quite the contrary is the fact. The 
 business corporation is a device by which men of less 
 means than that which must be employed in a particu- 
 lar industry are enabled to enter its ranks as capital- 
 ists. If private wealth had been unlimited or adequate 
 _for these undertakings, no corporations would have 
 ever been formed. Through the purchase of corporate 
 securities men whose savings are the smallest may par- 
 ticipate in the greatest business undertakings. Even 
 their most modest deposits in savings banks and their 
 purchases of insurance are often really indirect invest- 
 ments in industry through other great corporations. 
 If some such means as that provided by corporations 
 had not been devised no person not possessing vast 
 
 47 
 
wealth could have any part in most of the departments 
 of modern business. The existence of these oppor- 
 tunities for investment is thus a great incentive to in- 
 dividual saving and the investment in productive en- 
 terprises of accumulations. which would otherwise be 
 hoarded and kept out of use. By affording opportunity 
 to obtain interest and even to compound it, they aid in 
 the distribution and diffusion of wealth and insure the 
 continuance among the people of sturdy American in- 
 dependence and self-reliance. For this system the 
 municipal socialists would substitute one in which the 
 citizen could have no share in any industry except 
 that of casting one vote for the political officers in 
 whom its direction would be vested. They would 
 take from him in additional taxes what he might other- 
 wise save, and on his enforced investments in indus- 
 tries in which he felt no personal interest they would 
 pay him no dividends. He would be in a fair way to- 
 ward becoming in a degree equal to that of the citizens 
 of some of the overgoverned bureaucracies of Europe, 
 but a creature and plaything of officialdom. 
 COERCED VERSUS VOLUNTARY INVESTMENTS. 
 
 It is essential to the existence of any government 
 that it should have power to take from the governed 
 the funds required for its maintenance. Whatever any 
 government may undertake in furnishing protection to 
 its citizens in the lawful enjoyment of liberty and of 
 property, or in supplying their special needs, must be 
 dependent upon this power to exact revenue by taxa- 
 tion. Thus municipal taxation supplies the salaries of 
 
 48 
 
city police, and is the basis of the credit used to erect 
 public buildings and grade and pave city streets. These 
 and similar necessities constitute at once the basis and 
 the justification of the right of taxation. When it is 
 proposed to add to the objects in behalf of which this 
 right is to be exercised, as in the suggested erection 
 of a municipal lighting plant, it is proper to inquire 
 whether the new demand upon taxpayers inevitably 
 involved is a legitimate one. Certainly it is not con- 
 tended that a capital expenditure of $400,000, the 
 preposterously low estimate made for a Cleveland mu- 
 nicipal electric lighting plant, can be provided for by 
 an addition to the city’s bonded indebtedness, without 
 augmenting the demand upon the taxpaying portion 
 of the public. The question, in this aspect, is, there- 
 fore, whether every taxpayer shall be forced to share 
 in underwriting a commercial enterprise which is to 
 be politically administered. Ordinarily each citizen is 
 permitted to choose whether he will expend his sur- 
 plus accumulations or income in the purchase of addi- 
 tional comfort, will allow it to remain idle, or invest it 
 in business, and, if he decides to take the latter course, 
 to invest in whatever direction is to him most attrac- 
 tive. But when a government makes additional de- 
 mands upon taxpayers for the purpose of going into 
 business, it deprives them, so far as the sums required 
 are concerned, of this liberty of action. Each taxpaver 
 must contribute regardless of his individual wishes. 
 The investment is a coerced and not a voluntary one. 
 One of the incidents of this difference is that it carries 
 
 49 
 
no prospect of return. Not a dollar of the money 
 taken in taxes ever returns to the pocket from which 
 it was taken. Again, in the coerced investment there 
 is but a small fraction of the power of control over the 
 business which would be exercised were the enter- 
 prise voluntarily undertaken. The great discrepancy 
 between the numbers of those contributing capital as 
 taxpayers and those exercising control as voters con- 
 stitutes a serious element of weakness in any business 
 operation undertaken by the government. Those who 
 will lose pecuniarily by failure are always far less 
 numerous than those who have made no direct con- 
 tribution. American industrial prosperity has been 
 built upon the firm foundation of voluntary invest- 
 ments in all commercial undertakings. The entire 
 economic history of the country, both in its successes 
 and in its failures, testifies to the wisdom of leaving to 
 investors complete power to choose the productive pur- 
 poses for which they will use their means. All has 
 been accomplished by voluntary investments. Our 
 governments have not coerced their citizens into in- 
 voluntary investments on.many occasions, but the num- 
 ber is sufficient to afford the necessary comparison. 
 Whether attention be directed toward the early efforts 
 of the states to construct canals and to build railways, 
 or toward the management of the federal postal 
 monopoly from the time of the Star Route scandals of 
 the early 80’s to the latest indictment for malfeasance 
 in office rendered by the grand jury now in session at 
 Washington, the uniform result is most unmistakable 
 
 50 
 
proof of the hopelessness of obtaining efficient ad- 
 ministration of business enterprises at the hands of 
 political government. The city of Cleveland ought not 
 to need a new lesson from its own experience. 
 
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