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CASE FOR FREE ENTERPRISE
By Ralph Cropper, M.Sc. (Econ.), B.A., M.Inst.T.
Mr. A. B. B. Valentine Admits that B.T.C. Provides a "Generalized Service" whereas Users Demand Special Attention, whichonly Private Operators can Afford 0 NE would not expect a senior officer of the State transport undertaking to make out a case for private enterprise in road transport, yet Mr. A. B. B. Valentine, who is a member of the London Transport Executive, did so Most effectively in his presidential address to the Institute of Transport. The arguments that he used, when logically developed, bring out one of the fundamental reasons why a system of independent operators is the most suitable far road goods transport. That reason is that private hauliers can prOvide different qualities of service according to the varying wishes of their customers.
Mr. Valentine adopted as his text the words in the Transport Act which enjoin the British Transport Commission to provide "an efficient, adequate, economical and properly integrated" system of public transport, and he examined the meaning of the word "adequate." This word, which does not appear in other nationalizing Acts, he took to .cover "not only the quantity, but also the quality and timing, of any service provided, including the question whether it should be provided at all."
Quality and Price He then brought out a fundamental point that is so often overlooked. The problem of determining the appropriate standard_ of service, whether in quantity or quality, can seldom be dissociated from its price.
This reflection by Mr. Valentine completely undermines one of the favourite apologetics frequently advanced by hauliers in the past. They have argued that haulage rates could all be standardized and fixed, and yet there would be no danger of monopoly arising; they have contended that the .fixing of rates would not undermine free enterprise, nor diminish the salutary effects of competition, because there would still remain competition in service.
Without denying that, if all rates were fixed, there would still remain some measure of competition in service, the substance of Mr. Valentine's argument is that differences in service are reflected in price; hence, if prices be fixed, standards of service must become nearly identical.
The argument about retaining competition in service is not heard so much to-day, but if free enterprise be extended in scope, and particularly if it be linked with some form of planning in transport, the value of the argument needs to be reconsidered in the light of the principle enunciated by the president of the Institute.
No Heed of Cost Mr. Valentine expanded his point in this way: "When charges are under public consideration, the tendency is to demand that they ought to be lower, without envisaging any sacrifice in quantity or quality of service.... When services are under consideration, the tendency is to ask for more or better facilities of one kind or another, without facing the question whether this. will increase the price. . . . In respect of an overwhelming percentage of the industry's operations, a materially better standard of service can be provided only if the public will pay more for it, and a materially cheaper service can be provided only if the public will accept a Plower standard."
The president had primarily passenger transport in mind, but the argument is equally applicable, to goods haulage. It throws a most interesting light on the differing rates which hauliers frequently charge for what at first sight might appear to be an identical transport movement.
The next paragraph of Mr. Valentine's address must be quoted in full, because its analysis will show how the services offered by independent operators can be A36 much more satisfactory than.. those of a large nationalized corporation. He said: "Nor is it any Use supposing that the public either will, or can, decide (except within very wide limits indeed) where the balance ought to be struck between standard of service and price, even if they could be persuaded to look at both problems at once. We are not generally selling individual articles separately to individual persons. We cannot cater with detailed refinement for each income group. Although this is more true for passengers than freight, we are in the main providing a generalized Service which has to he used in common by a large number of travellers or consignors of goods, some of whom—if they could be given the option—would prefer a lower price even if they knew it meant a poorer service, others of whom would prefer a better service even if they knew it meant a higher price."
Mr. Valentine recognizes that his remarks are more true for passengers than for freight. In passenger transport it is sometimes possible to provide more than one degree of service, as when there is both an express service at a higher fare and stow bus service along the same route. The better service, is provided at a higher charge. Even so, some would-be patrons require an even higher degree of service, and they accordingly summon a taxi or hire car.
Variety Demanded Transport, perhaps more than any other industry, is characterized by the highly varying degrees of service which are demanded of it. This is true of both passenger and freight transport. But on the freight side there are many more complications, arising from the many different kinds of commodity to be conveyed, from the much wider choice of equipment for each transport movement, from the varying degrees of loading and unloading service required, and from the need to collect the goods from the consignor's premises, instead of having them delivered to a convenient picking-up point, such as a bus stop.. These are the basic characteristics of the goods transport industry.
Mr. Valentine stated that " we [the B.T.C.] are in the main providing a generalized service which has to be used in common." This' necessity of providing a, generalized service is the logical outcome of a largescale organization, particularly one which is a public corporation, for such corporations always assume that their duty is to provide a service quite impartial as between different customers. Lest they should please one customer more than another: public undertakings usually make their service" so impartial that little attempt is made to try to attract the customer. Impartiality of service leads to indifference as to whether the service offered meets with customers' wishes or not In passenger transport there may be sound arguments to support the idea of -generalized • services, but for
• freight transport such uniformity is the greatest disadvantage which can be imposed on the industry. Unfortunately, it follows almost inevitably from setting up British Road' Services.
As a member of an Executive, Mr. Valentine spoke from a position where he must be familiar with the
broad policy of the RT.C.'s organization. It will be remembered that he declared that, in the main, the B.T.C. was providing a generalized service which had to be used in corn non by a large number of consignors of goods. Indeed, users of road transport are being supplied with exactly the kind of service provided by the railways.
The railways offer two generalized services, one by goods train and the other by passenger train, and the trader has no further choice. The compulsion on the railways to provide generalized services stems naturally from the inherent characteristics of railway organization. The great difficulties of a railway in singling out any particular consignment for some special priority of service are .obvious, even though the railway might be legally perrnitted to make some additional charge.
The greatest benefit resulting from the expansion of mechanical road transport in the 1920s was to free traders and industrialists from these generalized services. Road transport does not need to be handicapped by these disadvantages. It does not have to be organized on a large scale. It can function equally well (many would say far better) in small-scale units. The pity is that the process of nationalization is compelling road transport to pro-vide no more than a generalized service of much the same kind as trade and industry were glad to escape from in the 1920s.
The new freedom created in transport by motor vehicles roving singly over the highways was from the start seized upon by traders, who began operating their own private transport under what subsequently became the C licence. The fundamental reason was that the trader could thus escape from the generalized service offered by the railways. Now that Mr. Valentine admits that the policy of the B.T.C. for freight transport is the provision of a generalized service, traders must turn increasingly to the operation of their own vehicles.
Independent hauliers can provide widely varying services, which are in marked contrast to the generalized service about which Mr. Valentine spoke. Some traders
wish to be able to hire a vehicle on the spot. others desire that the vehicle should report without fail at a certain time. Some want more than usual care taken of their goods, others wish to have a vehicle that looks spick and span. Some require a driver who knows their work, others want a driver who knows how to handle their customers. All these matters are questions of degree.
A generalized service can offer all these facilities up to a certain degree. Some traders, however, want just a little higher quality of service and they are willing to pay a Ettle extra. Why should, they not be able to select the standard of service that they desire?
The only satisfactory answer to that question is to provide the Ma with a reasonable number of operators from which to choose. He can then measure the differ
ing degrees of service which he reeeiVes from different operators against the varying prices that he has to pay.
Operators say too often that transport provides a service, without realizing what that phrase means. It should mean that transport is prepared to look to the whims and fancies of its customers. Transport should always be aiming to supply services which exactly conform to the varying requirements of its customers. This variety of service flows naturally from a system of independent operators in competition with each other.. This is the strongest argument for extending free enterprise in road transport.