by the companies in exacting increased work from their men. The question as to how far it is expedient to permit railway companies to expend large capital sums in making unnecessary lines, and a large part of their revenue in unnecessary expenditure, while they adopt questionable means to recoup themselves, out of the pockets of the public or out of the labour of their men, must necessarily engage the attention of statesmen.

The argument for the State ownership of railways, against which of course many objections may be urged, might become irresistible, should the evils associated with railway rates and with railway labour continue to thrust themselves into the eyes of the public. It must be noted that the strike, so far as it was due to administrative causes, might have occurred on a Stateowned as well as on a joint-stock railway. So far, however, as it was due to excessive competition, the strike was the outcome of conditions from which State ownership offers one means of escape.

What was the result of the strike? is a plain question to which no plain answer can be given. It is too soon to say. If the hours of labour are immediately, or ere long, reduced, the strike has been successful; if the same dismal round of work without leisure goes on as before, it has been a failure. It is perfectly clear that, no matter what the terms may be upon which the men have capitulated, the central issue of the strike -the reduction of hours-must be faced. It must be faced, if need be, by the raising of additional capital. The development of the line, and the carriage of increasing traffic, cannot permanently be carried on at the expense of the men. If any attempt is made to smoothe over the difficulties without dealing with them, retribution in shape of another and perhaps more serious strike must inevitably follow.

A practical suggestion may, perhaps, be made in connection with the administration of railways. The interests of men working the railways are, or ought to be, as genuinely identified with the successful development of the companies as are those of shareholders. The men are not destitute of funds. The English Railway Servants' Society owns over £70,000, of which the sum

of £24,000 is invested in four per cent. Debenture stock of seven of the English lines. The sum is not a large one in proportion to the capitals of the companies; but if one considers the capital value of the men themselves, as one may fairly do, since they invest their lives in the companies as the shareholders invest their money, it becomes evident that they, as well as the shareholders, should be represented upon the Board of Directors. There seems no serious reason why the servants should not have a representative on the Board, who would be fully in touch with the men, and able to inform the Board of substantial yet unremedied grievances which he may find to exist. If this representative cannot technically take his seat at the Board as the representative of the men, he may be sent there as representing the men in their capacity of shareholders. With this object the Scottish Railway Servants' Society might consider the advisability of investing a few thousand pounds in the ordinary stock of the companies, sending their representatives to the shareholders' meetings, and endeavouring to place them upon the respective Boards. It is not improbable that the presence there of a practical railway man might be a great benefit all round.

NOTE TO CHAPTER VI.

Even should reduction of the hours of labour result in increased working expenditure, it does not follow that it would result in decrease of net earnings. If, however, such decrease did take place, it would affect: (1) expenditure on other items; or (2) dividends; or (3) rates. That is, that: (1) a che,k would be placed upon unproductive expenditure, e.g., useless trains would be withdrawn and much greater attention than is now the case devoted to judicious economies; or (2) the dividends of the shareholders would be lowered, either by direct deduction or by the payment of interest upon capital raised for the development of unproductive branches; or (3) rates and fares would be raised. The last mentioned would be the final resort, for in the present position of railway competition in Scotland any general or considerable advance is unlikely to take place. There are certain variations both in the conditions of labour on the different railways, and in the incidence of their fixed charges, and the increase in rates which would follow reduction in the hours of labour would by a well-known principle be measured at most by the net cost of the changes to the railway requiring least of these. The possibility of the companies effecting a general arbitrary advance in rates, even by conspiracy to do so, is remote. Should a pooling arrangement be adopted under the sanction of Parliament, the subsequent advantage in reduced legal and working expenses would probably avoid the necessity and prevent the desire for increased rates. Railway monopoly is bringing up in this country difficulties that have reached an aoute stage in the United States. The chief difficulty lies in the fact that the railroad is a natural monopoly, and that the business of a carrier may be, and on the highway is, open to competition.

CHAPTER VII.

THE RELATIONS OF CAPITAL AND LABOUR AS ILLUSTRATED BY THE STRUGGLE.

The deliberate1 corporate action of the manual labour class is as potent a factor in these closing years of the century as the development of the machine industry was at the beginning of it. The surprise and dismay of the workers under the pressure of the advancing power of the middle class, due to its energetic adoption of the factory system, have their natural counterparts in the surprise and dismay of the commercial class under the pressure of the advancing power of labour combined in great masses threatening to dictate terms to the rest of society. The incidents of the earlier phases in the development of the machine industry produced acute industrial disturbance, as do all invasions of established custom. The same effect is now being produced, the world over, in this "période chaotique" through which we are passing to some new o: der. It is quite possible that the advantage, or some of the advantage, gained by capitalists during the earlier years of the development of modern industry, an advantage which has been to a large extent maintained by them, is about to pass over to the other side. Largely founded as this advantage was upon the customary and legal isolation of the labourer, the development of a tendency towards corporate action on the part of labourers was bound to invade it by progressive steps. This development of corporate action on the part of labour has been really coincident with a similar development on the part of capital. The modern joint-stock company and the modern trade-union were born together, and have grown together.

The combination of a great many small capitals, formerly

(1) "It is true that there is less deliberate selfishness in early than in modern forms of industry; but there is also less deliberate unselfishness. It is the deliberateness and not the selfishness that is the characteristic of the modern age."-Marshall: "Principles of Economics," I. 6.

competing against each other, but now in one mass prepared to compete against other similarly large masses, has been developed under the same set of conditions as have led to the development of labour combinations. Individual capitalists club their capitals in order to protect their individual interests by collective action; individual labourers act in the same way with the same aim. There can be no doubt that the dominant motive in both cases is self-interest. The danger which may arise to society lies in the circumstance, that one or other of these masses of combined labour or combined capital which may happen to exercise some socially necessary function may fold its hands and say, 66 we do no work until such and such terms be granted." There is a further danger in the possibility of the growth of gigantic combinations of capital and labour, by means of which the interest of one group may for a time act to the disadvantage of society in general-" a danger so great that if these compacts cannot be bent by public opinion they may have to be broken up by public force."1

The extent to which the public is entitled to interfere in industrial disputes is not capable of precise limitation.2 Fussy interference is, of course, to be discouraged; but the feeling of responsibility is rudimentary, owing, perhaps, to its diffusion, even in the best-regulated corporate bodies, and the dread of public reprobation, or even something more, acts as a wholesome check against arbitrary or capricious action.* This applies with special force to the "indivisible" industries, and among them especially to those engaged in the exercise of

(1) Presidential address by Professor Marshall (p. 16), Section F., British Association, 1890. As, perhaps, for example, by partial re-enanctment of the old laws against engrossing."

(2) "Though there are some little differences of opinion among us as to the scale on which the owners of such undertakings (gas, water, railway, tramway, electric supply companies, e.g.) when in private hands should be compensated for interference with what they had thought their vested rights, we are all agreed that such right of interference must be absolute, and the economists of to-day are eagerly inquiring what form it is most expedient for this interference to take."-Prof. Marshall, Address B. A., op. cit.

(3) "If regulation by public opinion and carefully enforced responsibility is resisted, there is danger of something far more stringent and sweeping. A monopoly, whatever its legal or industrial position, is in danger from sudden movements of public feeling If it is afraid of enlightening public opinion on what it does it may well be much more afraid of the risk of facing an outbreak of unenlightened public sentiment."-A. T. Hadley in Quarterly Journal of Economics, I.

socially necessary functions. A railway company cannot be at once "a great public department" and a private business claiming immunity from criticism, or even from regulation. In all considerable industrial struggles, the great, patient, almost silent, "credulous, and ignorant public" is the real sufferer. It is truer than ever it was, not alone in a merely metaphorical, but strictly in an organic sense, that we "are members one of another." "I conceive it to be demonstrable that the higher and the more complex the organisation of the social body, the more closely is the life of each member bound up with that of the whole; and the larger becomes the category of acts which cease to be merely self-regarding, and which interfere with the freedom of others more or less seriously."

The close interdependence of the parts of our highly organised society, and the dependence of the groups which constitute the commercial world upon each other and upon the public, were conspicuously manifested in the recent financial crisis in London. And in the railway crisis which is just over it became clear that an error in judgment on the part of the directors of a public company, or on the part of their employees, or of both, or a breach of contract by one or the other, might plunge the whole community in trouble and a large part of it in absolute misery. The interest of the public as the holder of the great insurance fund from which all the losses due to all such catastrophes must be paid, is really paramount. The objection that it has no business with industrial conflicts, and that these are best left to be settled by the brute forces of the combatants, will not hold water for a moment.

In dispassionately examining the subject of labour combinations, we must regard them not as the outcome of an isolated movement, but as having been brought into existence by a set of conditions which could hardly have failed to produce them.

(1) Lord Tweeddale, chairman North British Railway, to deputation, January, 1891. (2) The Struggle for Existence," by Professor Huxley, Nineteenth Century, February, 1888.

(3) See for suggestive remarks on this point, speech by Mr. Goschen at Leeds, 28th January, 1891.