PUBLIC OWNERSHIP VS. SUBSIDIES
Public Ownership vs. Subsidies Prof. John R. Commons of University of Wisconsin Discusses Question in Address Before American Economic Association at Philadelphia THE railways will require,...
...On the other, the doctrine of Power that strengthens the State through scientific and economical management of individuals...
...One or another of these methods we must look to as inevitable...
...John R. Commons of University of Wisconsin Discusses Question in Address Before American Economic Association at Philadelphia THE railways will require, within the next ten years, over a .billion dollars a year of new capital...
...Our inefficiency is a etate of mind, a pork-barrel theory, a laiasea-faire philosophy...
...Frontier Moves Out Within the past decade or two, it is towards Mexico, China, Central and South America, Africa or Russia, where the speculative investment is low, that American capital has begun to look for high profits and future increases in the value of property...
...It will then merely seek the cover of that .flag, or that alliance of flags, which comes out victorious in the present war...
...From the speculative standpoint it will riot stay at home...
...Europe is both over-populated and over-invested, compared with ourselves...
...Wars in the past have been fought over exports of products and annexations of territory...
...The frontier has movfed out of Our own country and the speculative values of the future are in the backward countries of the earth...
...they can out of government without giving much in return, it follows that they wish to see an inefficient government that cannot protect itself against them...
...By a different state of mind we are already buildifcg up great public interests that require and are beginning to got the co-operation of private interests...
...Government con-•i)l and ownership directs this new apital to the places where the nation need it rather than where speculation would place it...
...From the national standpoint \ve need to keep American capital at home...
...Capital is raised for public improvements, not by burdening industry but by taking an unearned increment...
...but that will not...
...and government officials are learning that they cannot administer public business without the assistance of these same representative private citizens...
...Today we see the clash for control of the world between two great experiments and their two appropriate theories...
...Thousands of our successful business men, professional men and labor leaders, through their service on Councils of Defense arid other public bodies, are now learning both the vital importance of public business and the reasons for its incompetency...
...The latter is true also if the railroads are subsidized or if interest on the new capital is guaranteed...
...New capital obtained by government from special assessments and unearned increments accomplishes the double purpose of getting the capital from those who specially benefit through government, and, at the same time, atting off their inducement to feed t the pork-barrel...
...These issues are, of course, present in this war, but more important for the future is the issue of investment.in backward countries, of lending our savings to foreigners—the export of capital as well as the export of products...
...It is this issue that is forced upon us by the world war...
...The main object is to take out of the hands of the speculative financier the power to decide where the new extensions shall be built, the new terminals be provided, the new rolling stock be furnished...
...It lias been mainly the fact that private financiering could not get the capital needed for the national necessities, whether military or industrial, that has forced other Countries either to subsidize railways, or to guarantee their stocks and bonds, or to purchase them Outright...
...On the one side is laissez-faire, keep hands off, the doctrine that weakens the power of the State to enhance the liberty of the individual...
...The political and judicial contests of the future turn on the power of the state and the power of private property, and their issue is the kind and extent of;, state control over private property...
...suffice...
...The problem of getting new capital for economic reconstruction after the war is the serious problem -thrown upon us by the war...
...The Unearned Increments The state should employ its borrowing power, backed by its taxing power, to buy and operate those essential and basic industries,, whether highways, railways, mines, forests or water-powers, upon which all industries depend for materials, for mechanical power and for markets...
...Already the federal government has begun to compete with the international speculative financier who invites capital to go abroad...
...The irrigation and reclamation projects, the subsidies to rural credit and to state highways, the subsidies to industrial education—in these cases the state is using its taxing power to divert the possible savings of the people away from the international financier arid into the develonment of our own resources...
...With the high values and consequently-high initial investments now required it is only this power to get capital by taxation or at low rates of interest that can make possible, on a sufficiently large scale, these internal improvements...
...Doctrine of Benefits Hut with the doctrine of special benefits, namely, that the benefitted property of every locality and not the taxes of the nation, should be required to pay the1 expenses of permanent improvements, the government might advance on a policy of public ownership without fear that local private interests would log-roll the general public interest...
...By means of it we have built up great private interests whose speculative profits render them hostile to a strong and efficient government, except where it helps them...
...We may refuse' to protect it abroad, with the idea of forcing it to stay at home...
...The latter tends to reduce the taxes on new capital, going as far in some cases as to exempt it altogether from taxation, and so unburden industry and invigorate private enterprise...
...New sdurces of revenue must be found...
...Surely, our government rightly hesitates before it ventures out on this new frontier...
...A Pork Barrel Theory' Just because our pork-barrel theory encourages individuals and classes to log-roll and'get all...
...A general increase in freight rates oilers no assurance either that the new capital will be obtained, or if obtained, that it will be used where it is needed for the development of the country...
...But when we realize that our liberty and property: depend upon a competent civil .service and an expert administration of government' then we make sacrifices and pay attention in order to strengthen that administration...
...These taxes may be* levied in such a way as to burden industry and handicap private enterprise, or in such it way as to place the burden on various kinds of excess profits, unearned increments and special benefits...
...This is the lesson taught by the American system of special assessments'on account of special benefits...
...The weightiest objection to government ownership of railways is the scramble in Congress to get extensions, terminals, and new lines, whether needed or not by the nation as a whole...
Vol. 9 • December 1917 • No. 12
