generally conceded by those who have the interests of the public uppermost. That the best results have been obtained is denied especially by those who claim that public ownership is the final solution. Those who favor the commission plan claim that it is only through such an agency that public utilities may be regulated. It is through commissions alone that the necessary information for intelligent and adequate regulation can be secured; that definite inspection and supervision of franchise provisions can be assured; that informal and inexpensive redress for individual grievances can be furnished; and that adequate protection to the investor and to the utility owner can be guaranteed. Those who are dissatisfied with results claim that utility commissions have not given relief to the public in the way of lower rates and better service. They have shown, it is charged, a strong leaning toward the interests of the utilities as against those of the public, and have placed obstacles in the way of public ownership. Despite these and other criticisms, public regulation has grown steadily, and a close examination of regulative laws shows that they are designed to protect the public and preserve the business welfare of the community. They are aimed to safeguard the interests of: (a) The consumer: Formerly thought to be protected by the ordinary operation of the laws of supply and demand. (b) The investor: By demanding that there be a minimum standard of safety and honesty in the issues of securities, and that this standard be determined by the government. (c) The small producer: Where there was no regulation the large utilities, by discrimination, rebates, bribery, and other fraudulent methods, forced the small concerns to close. The chief difficulty in the regulation of utilities is the advantage which big corporations have in dealing with the commissions. While the advantages are not so great as under the former method of regulation by lawsuit, the favorable position of the utilities in dealing with the commissions has made the friends of the public interests almost despair of the success of this method of control. This difficulty has been well expressed in the language of D. F. Wilcox: The principle of state regulation by permanent commissions was put forward in this country a few years ago as a statesmanlike method of protecting the people from the exactions of the public service corporations, while at the same time giving the corporations a fair deal. We now find that all the corporations have been converted to the idea of regulation. They not only welcome it, but insist upon having it. They are so enthusiastic over it that they help write the laws and appoint commissioners.1 Regulating commissions have, as in New York, become the tool of partisan machines and of designing politicians. They have at times failed to give the expected relief in the way of lower rates and better service; they have in some instances placed obstacles in the way of public ownership; and, they have occasionally allowed exorbitant rates of interest and profit. But, despite all of these discouraging failures of commission regulation, the utility commissions have brought about a general improvement of conditions in both rates and service. Then, too, an injured user of a utility now has a recourse in obtaining justice that formerly was denied him. By means of various investigations and the testimony secured, utility commissions have brought to light evils of private ownership that call for stringent control of private ownership or for the more radical step of public ownership and control. Among these evils the most frequent are "excessive charges, enormous profits, watered stock, false accounting, poor service, disregard of safety, 1 Annals of the American Academy of Political and Social Science (January, 1915), p. 8. discrimination, fraud, and corruption, defiance of law, treatment of employees, tendency to corrupt politics."1 Although public utilities as now regulated by commissions are much more disposed to favor the public than was previously the case, yet in the conflict which is going on between the public on the one side and the private owners of utilities on the other, the odds are most likely to be turned in favor of the corporations. Regulation may safeguard the interests of the public to a certain extent by preventing the extremes in profit making and indifference to the demands for better service and greater comfort. But, holding as they do the upper hand, the corporations are difficult to control, and even the commissions appointed as governmental officials are more or less powerless to give the general public a square deal. Hence experience with utility commissions is leading many to feel that nothing short of public ownership will prove satisfactory. But notwithstanding that to many persons public ownership may be the ultimate goal, complete ownership and control of all utilities is a long way off. Moreover, public ownership may not prove desirable for certain utilities; hence, in the meantime reliable and adequate protection of the public can be secured, if at all, only by some form of utility regulation. PUBLIC OWNERSHIP Advantages of Public Ownership.-There are certain advantages in public ownership which render its general adoption in the management of certain utilities probable in all countries. First, the state or city can secure money at lower rates of interest. Second, there is no incentive to overcapitalization and there is no need of paying high dividends. The service may be rendered at cost or at slightly more than cost in order to bring in a small return in profits 1 For specific instances, see Stiles P. Jones, "State versus Local Regulation of Utilities," Annals of the American Academy of Political and Social Science (May, 1914), p. 94, and Carl D. Thompson, Municipal Ownership (B. W. Huebsch, 1917). to the government. There is not the incentive for corruption which exists under private monopoly of public utilities. Every advantage is to be gained by giving good service at low rates. It is thought by some that public ownership is inevitable, for it is claimed that “private ownership of a public utility is fundamentally hostile to and inconsistent with the public welfare." The reason for this appears to be that under private ownership of public utilities the owners are interested primarily in the making of money and only secondarily in the serving of the public. They bend their efforts as far as possible toward the achieving of the former object and vouchsafe to the latter only the necessary minimum of consideration. A conflict naturally arises between the demands of the public and the financial ambitions of the owners of the utility. The conflict has been outlined as follows:1 The public wants and must have: Low rates; Good labor conditions; Low capitalization so as to jus- Franchises and ordinances that Public officials who serve the people. The corporation wants and must have: High capitalization so as to justify Profits go to stockholders; Franchises and ordinances that Public officials who serve the corporations. Public ownership, it is maintained, removes the conflict between the owners and the public because the latter becomes the owner. Under such a policy, the members of a city are working on a co-operative basis for the same endnamely, the best service for the least expenditure of money.2 There is, of course, the danger that the public-owned 1 Carl D. Thompson, Municipal Ownership (B. W. Huebsch, 1917), p. 28. For literature favorable to public ownership, write to the Public Ownership League of America, Chicago, Illinois. utilities may be mismanaged through the influence of spoils politics. And there are some very discouraging failures on this account. But as the number of utilities in charge of the public increases and the interests involved grow, the necessity of a merit system with appointments and promotions on the basis of efficient service will, it is contended, become the rule in the management of public service companies. Is there any fundamental reason why the public cannot secure the same kind of efficiency in the management of its affairs as the private interests secure? This is a problem which deserves much more thought than it has received thus far. Public Ownership in European Cities.-The extent to which municipalities may engage with profit in the ownership and regulation of public utilities is best illustrated by some of the leading cities in Europe, where such ownership and regulation have progressed much further than they have in the United States. European cities frequently operate at a small profit water works, electrical and gas plants, and street railways. The water fronts of rivers, canals, lakes, and inland waterways are almost invariably owned by the cities. The profits of these utilities are used toward defraying the expenses of the municipalities and toward lowering the tax rates. It is interesting to compare the lax methods of franchise granting and utility regulation which formerly prevailed in American cities with the method of dealing with utilities in Glasgow, Scotland, where it was decided from 1869 to 1872 that the city would undertake to construct and own its tramway lines. The first lines built by the city were put in operation in 1872. After the lines were completed, the company arranged for a lease of the management of the car service under the following conditions: (1) The leasing corporation was to pay an annual interest charge on the full amount of the city's investment; (2) it was to set aside annually a sinking fund large enough to clear the entire cost of the lines at the expiration of the lease; (3) it was to provide a replacement |