Chapter I: Two Precepts, Chapter II: The Three Mainsprings of Human Action

The translation has been read and revised by the Author. Otherwise my hearty thanks for most valuable assistance given in translation are due to Miss Elise Warren and Mr. William D. Kerr.

Neither national nor local governments should attempt that which can be done by individuals: says the economist.

Labor for personal profit must be replaced by labor for the sake of service: answers the Socialist.

Experiments in the way of nationalization and municipalization of public utilities, with the Socialist ideal in view, have been sufficiently numerous. Do they warrant the decision that nations and municipalities have reaped the advantages promised by their advocates? This question—primarily a psychological one—we are going to try and answer in the following pages.

1. Down to the present time there have been only three mainsprings of human action—compulsion, bribery and instinct for personal gain.

Compulsion is the true basis of confiscation and slave labor. Give or I take. Work or I strike.

Bribery, in the way of high office, rewards, decorations, rank and homage, helps to blind us to the presence of compulsion. The church, the schools, and the army furnish the best and most familiar examples of the effect of these two forces, which government and municipal ownership would substitute for the incentive of personal gain.

Neither compulsion nor bribery, however, has proved quite sufficient to induce continuous action on the part of employees and officials entrusted with the operation of national and municipal services, for they are utterly incompatible with any form of contract. The very nature of a contract requires free assent to its terms on both sides. Therefore, the third force, the instinct for personal gain, is invoked.

Personal gain does imply a preliminary agreement—assent on the part of him who offers his services as well as of him who is to pay for them. Every group of employees at the present day is working, not for the sake of service, but for gain.

2. Is the management of a national or municipal undertaking more economical than the management of a private enterprise? “Yes,” answers the Socialist, “because no dividend need be paid on capital.”

But there are interest and amortization to provide for on capital. Consequently the margin of economy is only the difference between interest and amortization, which public undertakings must provide, and dividends which the capital of private enterprises must have.

“The high-salaried employees are paid less by public than by private enterprises: and there are no boards of financially interested directors,” continues the Socialist.

This is possible, but the salaries of ministers, burgomasters and mayors are high; though these high salaries come from the exercise of several different functions. It is probable that high-salaried government employees are paid less than their colleagues of the same relative rank in the employ of private industry; but, in general, the personnel of public undertakings is more numerous and the expenses, therefore, amount to more in the long run. The management of the Western (government) railway, of France, for example, has established sixteen directorships in place of the three departmental divisions customary in the case of private railways. There are no financially interested boards of directors, but it is a question whether the altruism of the councils which direct and control national or municipal undertakings is of greater advantage to these enterprises than personal interest would be.

In effect the partisans of public operation find economy in the non-remuneration of capital, outside of interest and amortization, and in the meager remuneration of promoters, directors, councillors, and the chief managers of the enterprise.