city spent $2,500,000 on harbor works, and is now engaged in the construction of a great commercial and industrial harbor and terminal that will cost, when completed, $18,000,000.

The development of water terminals being as essential to the creation of inland water transportation facilities as are the provision and extension of navigable channels, the success of a program of waterway improvement depends almost as much upon what the cities may do as upon the course followed by the national government in coöperation with the states. Each municipality located upon an inland waterway must either own and develop its water terminal facilities or must so regulate them as to prevent private monopoly from throttling competition. In any case, there must be such public wharves, transfer, and storage facilities as the traffic of the waterway may require; close coördination of rail and water lines must be insisted upon; and provision must be made for the systematic expansion of port facilities in accordance with the growth of traffic.

Ordinarily the city can best accomplish this by owning all the water front, by leasing a part of the front to corporations for the establishment of terminals, and by constructing and operating such public port facilities as are needed to serve adequately the industries within the city and the traffic upon the waterway. Furthermore, the city, with such assistance of the state authority as may be necessary, must link up and keep in active coördination the railroads and the waterway. This will prove no easy task for the average American city.

This brief consideration of the requisites of success in carrying out a program of waterway development has emphasized the obstacles to be overcome. These are numerous and serious, but they can be surmounted. The present need is that the public shall definitely understand the difficulties to be overcome, and shall realize that the task to be performed requires the coöperation of the national, state, and local governments and, in some instances, of private beneficiary interests.

The development and conservation of the rich water resources of the United States is a duty to be met with zeal and intelligence by the present generation and by those that are to follow. It is highly important that the policy adopted should be as broad as the work to be accomplished, and that the methods followed in carrying out the program should be as sound and conservative as the task is large and difficult.

A Discussion of the Question of Nationalization

ERNEST R. DEWSNUP

As a matter of practical politics, the problem of the desirable relationship of the state toward the railway has been settled in most countries of the world by the adoption of a policy of nationalization. In but three or four of the more prominent countries does the state take no part in railway management, and, in the case of England, one of the two great strongholds of independent railway enterprise, it is interesting to note that, in nearly all of her colonies, possessions, and protectorates, the imperial or colonial governments have freely undertaken the responsibility of railway management. The record of the last few years shows very clearly that the tide of railway nationalization is strong and steady. The acquisition, by the state, of the Western Railway of France, of the West of Flanders Railway of Belgium, of the railways of Japan and Switzerland, the extensive purchases of private lines by Austria, and the resumption of state operation by Italy, are examples in very recent years of the vigor and vitality of the movement. The forces underlying this development have been very complex. Political unity, social amelioration, industrial progress, and financial gain have all been influential motives, varying in relative intensity, of course, in different countries. If, however, one examines the history of that period from which the substantial growth of nationalization really dates, namely, the third quarter of the nineteenth century, the importance of political motives in promoting this movement is very conspicuous. Thus, in Belgium, as in Switzerland a quarter of a century later, the fear of foreign financial control of the railway system was a powerful factor in inducing the resumption of state activity in the railway industry. In Austria and Italy the relation of the state railway system to political harmony and to military strength was regarded as a very important one. Because of this fact, the rehabilitation of state railway systems inaugurated in the decade 1868 to 1878 must not be viewed as a vindication, justified by the history of the previous generation, of the economic benefits of state as against private management of railways. The record of state railway management up to that time had been a very discouraging one. In Belgium, for instance, for five years after

the opening of her first mileage, the state constructed and operated all railways, but the financial results were so unsatisfactory that the extension of the system was entrusted to private enterprise. In Austria and Prussia the inability of the state to secure adequate financial returns from its railways led to the temporary abandonment of the policy of state expansion. Similar experiences, it will be remembered, were the lot of certain states of this Union. There were no facts in 1870 which could be adduced to establish the economic advantage of state railway systems. On the other hand, there were conspicuous examples of the successful working of private roads in America, in England, and even in Continental Europe. At the very time when the Prussian Diet expressed itself in favor of continuing further with the project of a national system, private enterprise was clamoring for railway concessions, in spite of all restrictions that the government had imposed upon construction and working. One of the considerations that induced the Belgian government, in 1871, to resume its railway activities was the too successful competition of the private companies with the state lines. Some companies, it is true, had not met with success, but the financial failures of such roads seem to have been mainly due either to the excessive restriction of governments constitutionally inclined to paternalism or to the fact that they had been located, under the influence of the state, in regions of scanty population and poor economic possibilities.

Apart from ideas of the promotion of political unity or political aggrandizement, some fear was entertained that this new industrial power, promising to become of huge magnitude, might become a political danger, if left in private hands. The unconciliatory and undiplomatic spirit, manifested, at times, by some of the railway managers, served but to foment such a feeling. A more general influence in favor of the movement towards nationalization was the reaction against the laissez-faire teachings of the Smith school, which, by this time, had gained considerable strength, as is concretely evidenced by the economic congresses of Eisenach and Milan in the early and middle seventies. There was thereby induced a more favorable attitude towards the intervention of the state in the field of economic production than at any previous period of the century. Since that time the affection of the peoples of Continental Europe for government paternalism has, if anything, grown greater, and, as a whole, they are inclined to accept, without argument, the theory of the beneficence of state railways.

Nor is this feeling limited to these countries. Twenty-five years ago, Professor Hadley, in concluding his book on railway transportation, said, "There is a strong popular feeling, to a large extent unsuspected by those in authority, in favor of government ownership of railways as a system." Undoubtedly, in England and America, there are today, among the working classes particularly, strong leanings in this direction-the doctrinaire product of social idealism but nevertheless to be reckoned with in the near future. A similar, though less extensive, impression has apparently been made on other classes of society. I have sometimes wondered whether the large increase in the number of state employees, which has naturally accompanied the growth of entrepreneurial and regulative functions on the part of the state, has not had an appreciable influence upon public sentiment. The ideas of the majority of such employees as to the functions and capacity of the state are apt to be affected by their very relationship to it, and these would easily be disseminated, by their medium, amongst a considerable section of the public. This concept of the general beneficence of state policy has fostered the belief that, under the ultimate influence of state management, the railway system may be so organized as to promote the social amelioration and industrial progress of the community in a manner impossible under conditions of private operation. During the last generation, governments undertaking railway nationalization, and other advocates, have laid increasing emphasis upon this assumption. They have unrolled before their audience, the people, an attractive picture of railway systems without capital charges, levying minimum rates and fares, with innumerable resulting advantages for every one. To what extent this picture has found realization in actual conditions we shall shortly see. But however that may be, its influence on the progress of nationalization is unquestionable.

Interwoven with the strands of this medley of politics and social idealism, here and there appears the motive of artificial stimulation of economic development. The desire of relatively undeveloped communities to hasten the natural growth of their estates is not a surprising one, nor is it strange that they should select the state management of railways as their means to that end. Whether their object is best attained in this way is another matter. The construction of a larger amount of railway mileage may be thus secured, with attaching increments of traffic, but this does not in itself justify the policy. The direct financial losses usually

involved, the indirect losses arising from an arbitrary diversion of national resources of labor and capital from other interests, the effect of the distraction of the attention of the government from those very important elements of national welfare which are not economic, the possibility of the stimulation of private enterprise, under judicious supervision and with suitable aid, into the accomplishment of its aims, all need to be taken into full account: but, unfortunately, such communities rarely stop to cast a trial balance of gains and losses.

Such are some of the leading influences that have led toward nationalization, each one of which would form a most interesting study. Obviously, only the bare outlines of the general movement could be sketched in this paper, sufficiently distinctly, may the wish be expressed, to indicate that, from the point of view of permanent public welfare, there is still justification for further discussion of a problem which practical politics has declared settled.

The leading aspects of such a discussion are twofold, (1) the effect of the state upon the railway, (2) the effect of the railway upon the state. Under the former head falls the question of the financial remunerativeness of state railways, an important, though not conclusive, test of efficiency. Varying conditions of construction and operation render the correct application of this test a very difficult one. For instance, to attribute greater efficiency to Australian railways as against British railways, because of a 4 to 412 per cent dividend as against a 312 per cent would be ridiculous. Owing to the value of land, state regulations, and standards of construction, the capital per mile of railway in Great Britain is five times that of Australian railways, some of the recent extensions of which, by the way, have been made at the low figure of $5000 per mile, sufficient to lay down but the flimsiest of tracks with the absolute minimum of facilities. Differences of capitalization and of rate levels may make interest rates incomparable things. A still further difficulty appears in the frequent unreliability of the financial statements of state undertakings of large capital and revenue accounts. The utilization of other state funds for the reduction of railway debt is an attractive financial manipulation which has notably vitiated the significance of quite a few capital accounts. Discussing the industrial domain, with particular reference to factories for the provision of army and navy supplies, Bastable says, "On purely financial grounds, state in