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need for timber for ex-soldiers' homes drove the Federal Government in 1920 to acquire large forest areas in Queensland.
In the realm of finance, state savings banks have long existed, and the Commonwealth Bank appeared in 1912. New Zealand established fire and life insurance departments early in the present century, while Queensland in 1916 acquired a monopoly over insurance for workmen's compensation. The same state took over the monopoly of note issue in 1893, and in 1910 the Federal Government began its issue of Commonwealth notes, and drove private bank notes out of existence. Every government has regarded it as a duty to act as money-lender to new settlers and rural producers generally, offering loans and giving relief in years of drought at lower rates than would be demanded by private financiers. In some states this assistance to the small man has been extended by establishing butter factories, grading, packing, and exporting departments, and the exigencies of war brought the whole export of meat, wheat, and wool into the hands of official bodies.
Finally, some states, when under Labour governments, have attempted to combat trusts and price-agreements by entering into competition in the production or sale of some necessaries of life which seemed to be under anti-competitive control. New South Wales acquired some trawlers and established state fish shops; Western Australia had state butchers? shops for a time, while the Queensland Labour Government of 1915 embarked on the sale of both meat and fish, with state stations and possibly trawlers to supply the shops.
Summary. Thus, even before the war compelled belligerent governments to embark upon production, the scope of public enterprise had already become very wide. Some branches of activity were especially adapted for municipal effort, and on these lines many cities, but especially those of Germany, had gone far. Others could only be handled by the state, though in Australia the capital cities bulk so large that much which elsewhere would be done by the city authority is left to the larger body. The capital outlay is enormous. In 1911 the civic enterprises of the United Kingdom had a value of £536,000,000, and it was estimated in 1914 that the value of public industries in the British Empire, Europe, South America, the United States, and Japan was not less than £10,000,000,000. If we turn from capital value to number of employees, we encounter big figures. The state railways of Australia employ over 90,000 men; the Federal Public Service pays wages or salaries to 50,000, while the German railways in 1911 employecī nearly 700,000 workers of all grades. An estimate in 1914 fixeri the number of state and municipal employees (excluding the army, navy, police, and similar classes) of the world at 12,000,000.
From the above catalogue of activities it is evident that the collectivist state exists already, not indeed in any one place, but scattered piecemeal amongst the states and municipalities of the world. A child can be brought into the world by a state doctor, educated in a state school, and fed by the state during his school days. Then, if he possessed a pair of seven-league boots, he could flit about the world, living in a municipally-owned house, built on communal land by a municipal building department. He could drink communal drink and eat communal food in communal restaurants. He could enjoy himself at state theatres, travel on national railways or state steamers. He could endeavour to smoke state-made cigars, provided he succeeded in lighting them with state-made matches. He could burn coal from national mines, deposit his money in a state bank, insure his life, house, and furniture in a state insurance office. Finally, if he died in Switzerland, the state would give him free burial, including a coffin, undertakers' services, a simple hearse, and one carriage for the family.
The quantity of public enterprise is enormous. But what of its quality How does it work? Does it discharge its duties to producer and consumer any better than private enterprise would? If its efforts result in frequent failure, and cause the consumer to grumble and the state employee to strike, what is wrong? In short, does collectivism offer anything better than capitalism can, or it is just state capitalism, with all the vices of private enterprise and none of its virtues? Or is there a limited field, in which it commands success, but beyond which its efforts are puny and futile ?
To these questions widely different answers are given. The rampant individualist points to some enterprises which had been undoubted catastrophes and argues that because they have failed state effort cannot succeed. On the other hand, socialists, especially of the moderate reformist section, argue from carefully-chosen instances that collectivism is a success, and the Australian Labour Party, without stopping to estimate the success or otherwise of existing or defunct ventures, is ever ready to add new nationalization planks to its platform.
Between these two opposing partisan views the critic has to walk warily. Generalizations are really very difficult to make, for each case has to be carefully examined on its own merits. Figures indicating profit or loss need to be dissected with great care. For instance, while a certain railway line may show a loss it may have brought new land into cultivation, opened the way for new settlements, and so increased the national wealth and yield of taxation. Further, in big state enterprises, which are in the nature of monopolies, it is almost impossible to make a fair comparison between public and private effort. If one wishes to decide whether state railways are more successfully managed than private railways, it is not fair to contrast the state lines of Australia, or even of Germany, with the private lines of England or America. Conditions vary so widely in different countries that a proper comparison is very difficult. Contrasts may be possible where a service, such as light or trams, once privately owned, becomes public property; or where state production or sale exists alongside private effort, as in the case of shipping, public works, clothing and other factories, and in retail distribution. When we institute such comparisons we find that there is in state or municipal enterprise no magic property bringing inevitably efficiency and satisfaction to all concerned. Public industries may deal better with the producer and consumer, or they may not; they may give the labourer good treatment and the consumer a good article at a low price, or they may not. They may make ends meet, and produce a surplus, or they may squander and mismanage, meeting perennial deficits by drawing on the supposedly bottomless pocket of the taxpayer and money-lender. They may regard themselves as existing for the benefit of the community, or regard the community as existing for their benefit. They may be public services; or they may be public nuisances. Success depends upon so many things; on the erection of a suitable organization especially adapted to economic, as distinct from political, work; on the securing of capable heads, workers rather than talkers, able to organize and manage large operations and imbued with a sense of public duty; on up-to-date equipment and methods; on the employment of skilled, well-treated, and conscientious workmen; on freedom from party political and sectional influences on the one side, and from the domination of any numerically strong body of workmen on the other; on the weight of the burden of interest which has to be borne when an industry has been acquired from private owners; on the aim of the enterprise, whether developmental, revenue-producing, monopoly. breaking, or simply service-rendering;, finally, in some degree, on the character of the industry itself. Let us examine these considerations.
Problems of Control. Public economic activity was undertaken by bodies organized primarily for political work. The units were the municipal or shire council and the state, and these may not be the best for the purpose. True, the nation might be a good unit for postal and railway control, though where several states occupy one big piece of territory, as in Europe and Australia, the system should be interstate or international as far as possible. For other work the nation might be too big as a unit, and the single municipality too small, especially as political boundaries are usually drawn without any reference to economic needs or advantages. For instance, many towns may stand adjacent to each other; if they grouped together they would form an excellent unit for a big water or electric supply scheme. And yet one often finds that each place has its own plant, its own experts, inspectors, etc., and thus misses many of the advantages which would be gained by working on a large scale. Further, a political boundary round a city generally shuts out a large population which lives on the fringe outside the boundary post. This population economically is part of the city, and should be served by the city's public services; but frequently it is shut off from such services because it is on the wrong side of a line drawn on a map. Hence there is need for the formation of bigger units to handle some public enterprises. This has been realized by those who seek to bring suburbali municipalities into the fold of the central city-e.g., Greater Birmingham, Greater Hobart, and similar schemes. It has driven other places to put such things as trams under the control of trusts containing representatives of all the districts served by one system. It has caused a British Select Committee to recommend that the electrical supply of the country should be generated in big power stations, each of which serves a. large province. It found some degree of recognition in a wider sphere in the International Postal Union, which, while leaving postal administration in the hands of each state, established co-ordination and system in the passage of mails from country to country. But much still remains to be done. Each Australian railway department still thinks in terms of its own state, rather than of the service of Australia as a whole. Each is shy of linking up its lines with those of adjacent states, leșt goods should seek their route to the sea along the lines of another state, and so deprive it of revenue.
Having found the best economic unit, there remains the finding of the best form of organization and control. Bodies whose aim is solely economic, such as trade unions, co-operative societies, and joint stock companies, have evolved constitutions and methods expressly suited to their specific needs. But public bodies have tried to run business concerns by political machinery. The kind of organization, the form of procedure, the type of men necessary for a foreign office, a naval, military, legal, or education department are probably not at all fitted for managing railways, post offices, mines, or shipping. Excessive centralization, routine methods, red tape, circumlocution, protracted discussion, leisurely decision, and political control-features which distinguish the operations of most public departments—are out of place in a business enterprise, and may spell failure. For a new kind of
work the state requires a new kind of organ and a new type of man; ii will be found that success has come only where a public authority has realized this fact.
One of the chief faults of public enterprise has been the excessive centralization of control and approval. This centralization brings all deci. sions, large and small alike, through many channels before one or two men at headquarters. These men may, in autocratic countries, be experts, but in democratic states the last word lies with the political head, who often knows nothing of the technical matters on which he has to decide. la Australia centralization has been carried to absurd lengths. The smallest matters pass from local to district office, district to state, state to federal office, gathering foolscap sheets as they travel. Such small matters as the site for a country post office, and the appointment of rural post office holders, have to be dealt with by the Minister. It was pointed out in 1915 that an assistant engineer in the post office, earning £450 a year, controlling hundreds of men, and in charge of a big job, had authority to spend only up to £2 without permission from a higher officer. His superior, earning £600 a year, could assist him up to £10, and the engineer in charge of the state, receiving £800 a year, could only spend up to £25; (which is absurd.” Subordinates are given responsibility and yet not trusted; prompt decision is impossible; all threads must pass into the hands of headquarters; time, paper, and labour are wasted, and the big men so occupied with trivialities that they have no time to give to broad problems. The following verdict was passed by a royal commission on the Australian post office in 1915:-"All that seems wrong is want of what is known as business management, which is difficult to describe beyond saying that in well-managed concerns unnecessary work, especially correspondence, is .avoided, simple methods are sought, and brains are kept cool and clear for important matters.
The training (of the staff) has been secretarial rather than managerial-vastly different things.
The need for .decentralization is imperative.
Above all things, your men must be encouraged to think for themselves, even when they make mistakes." The verdict fits equally well scores of other enterprises.
Political Influence. The next cause of failure in public enterprises is the influence of political considerations on economic policy. This influence is especially powerful where democratic forms of government prevail. In such communities the general lines of economic action are laid down by elected bodies, which may be composed of men who know little or nothing of the matters on which they have to decide. If they are capable of taking broad, long views, all may be well. “But often the elected persons act as representatives of some vested interest-capital or labour-or seek only the welfare of the special locality from which they and their party draw their supporters. Some are the spokesmen of private enterprise. Others worry little about the progress of the country as a whole so long as their constituency gets a few more roads and bridges, and possibly a railway. In countries where the capital and adjacent cities dominate the legislature, or where the industrial and commercial population is in the majority, city interests may be fostered at the expense of the country, and railway policy gives undue attention to the capital. The Australian railways have not been planned to give the rural districts their shortest.route to the sea, but have dragged land products up to the metropolis, preventing the growth of new ports and causing the cost of transport from distant districts to be unnecessarily high. Nor is this all. State enterprises may be ruined not merely by placing incapable ministers in charge, but also by appointing parliamentarians or rejected candidates to positions of control and responsibility for which they have no training or experience. Such appointments, whether given to remove a dangerous person from the political arena, as sops to "rejects,” as help to a friend, or as spoils to the victors, lower the whole level of political life and jeopardize the success of state enterprise.
These dangers of the rule of the amateur and the influence of personal and political factors have caused attempts to be made in some places to devise a better system of control. The alternative to old methods seemed to be the appointment of a non-political expert head, into whose hand should be given almost autocratic power. This was first done in Australia in the eighties. New South Wales in 1888 placed its railways in the hands of three commissioners. They were appointed for seven years, during which period they could only be removed for misbehaviour or incompetence. They were given power to decide the position of stations, wharves, and sidings, arrange the train service, fix the rate of pay, working conditions, freights and fares, subject in some matters only to the formal approval of parliament. They were, in short, to remove the control of the railways from the realm of politics. This policy has been copied by the other Australian states, and has been found useful in other countries, whether for making the Panama Canal or administering the British insurance scheme. It has also been adapted to the control of municipal enterprise in many American cities. Here the old method, with permanent officials working under the control of elected councils, seemed to produce little but corruption and inefficiency. After 1900, therefore, some of the newer towns of the middle-west decided to put such things as public health, finance, street transit, lighting, etc., entirely into the hands of expert commissioners, who were chosen by the mayor, the state government or parliament, or elected by the people. These men were protected from any political interference, and given a free hand to do what they thought best. Popular control was limited to the right of initiative and recall. This system, which, incidentally, was adopted for a time in Sydney in the fifties of last century, seems to have worked much more successfully than its predecessor, and has been instrumental in freeing municipal affairs to some extent from the influence of party politics and private interests. But it has by no means solved all the problems. The commissioners, if appointed by parliament or the ministry, may still be chosen for political reasons. The salaries offered are seldom such as would induce really good men to leave private positions for state ones. When appointed, the commissioner is still powerless to control plans for extension; parliament still retains the power to decide what new lines shall be constructed and what routes shall be taken. The commissioner then has to take on his shoulders the task of working these lines; his demands for more capital outlay in rolling-stock, etc., have to take their chance against the claims of other departments, and he is generally starved in consequence. He is not allowed to close down any unprofitable lines, for fear that the ministry might lose its supporters in the district affected. Thus he is only free in matters of detail. General policy is still in the hands of parliament, and a commissioner who persistently sought his own way in defiance of his political chief would have little hope of getting his appointment renewed.
Two other efforts have been made to remedy the evils of political control. In 1888 New South Wales provided for the establishment of a