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A New Belief in Free Enterprise
By Ralph Cropper, M.Sc.(Econ.), B.A., A.M.Inst.T. "To Undermine the Appeal of the Theory of Integration, One Must Develop an Equally Attrac tive Substitute . . If Competition be Stressed as a Theory, Every Effort Must be Male to Apply it " This article was written before the Government published its policy on transport, but it loses nothing on that account. Indeed the hope of freedom which has been held out to the road haulage industry lends point to Mr. Cropper's arguments.
REE enterprise" is a grand slogan, but sortie thing more is required if the principle is to win: through. The exponents of free enterprise must develop a logical policy with a popular appeal, based'Oti a philosophy which provides a coherent explanation of the factors governing the road transport business. This is essential in order to combat the philosophyof. integration.
The reason why the Socialists were able to carry the day and secure the cataclysmic changes they desired in road transport was Primarily because they had a policy, based on a philosophy that evoked a wide appeal. They. were able to adopt the philosophy of integration: Actually, it suited the Socialists well, because it fitted in with Fabian ideas of the planned society.
Legacy from the Railways Integration of transport was not a new theme when the Socialists came to power in 1945, it was extremely old, stemming from the railway approach. For years it had been taken for granted as the only rightful course by which transport could make progress. Almost all the leading thinkers on transport in the country assumed, without stopping to give it a second thought, that the solution to the problems of 'inland transport lay in more and more co-ordination and planning.
Sir Cyril Hurcomb, as he was in his capacity as Secretary of the Ministry of Transport, dreamed great dreams of ever larger empires of control over the country's transport operations; this would provide au organization to meet the community's requirements in the best-possible way. He spoke on these lines as long ago as 1935 when giving his presidential address to the Institute of Transport..
Integration has a fascinating appeal. That is why it has been so successful. The philosophy which supports it contains many arguments which all have the appearance of being sound. It declares that the community should plan the transport it needs, should control that transport so as to produce the greatest efficiency, and should thereby secure the utmost economy by the elimirnation of all waste and poor usage of the services provided. In one sense, it plays to man's conceit of his own powers as a challenge to produce something better than when transport is left to develop in its own way. These are compelling arguments. If integration does these things, there is much to be said for it.
For these reasons, this philosophy exercised a great sway over many minds, both inside and outside the transport industry. it persuaded many people in the period immediately after the war that steps towards
integration in transport were desirable. Many voters fell it was worth a trial to see whether integration did provide the much-sought solution to the problem of inland transport.
Integration has much greater relevanceto passenger transport. Services for passengers are built up on the assumption that customers will come along, and the known availability of the service is a most important factor in attracting passengers. Moreover, co-ordination of passenger services so that travellers suffer the minimum of inconvenience between one service and the next-iS' a goal that we would all like to see achieved.
Co-ordination is often difficult to distinguish from integration and, in theory at least, should be assisted by . the development of integration. Even so, the widespread opposition to the area schemes of the past few years 'seems to disclose some underlying feelings among Many people that a measure of " disintegration " of passenger services may have value. However, the Circumstances of passenger transport are 'different from goods transport, where there is much less need for co-ordinated services operating on the basis of a known availability as in passenger transport.
Traditional ways of thinking die hard. The railways dominated the inland transport scene for many years. Their operating methods inevitably entailed organiza: tion and planning. They were such large' monsters that public opinion demanded that they should be controlled by such publicly appointed bodies as the Railway Rates Tribunal and the Railway and Canal Corrimissian.
These ideas were the embryos of integration. It was natural to assume that these principles were right for the newer transport developments of the 20th century. The atmosphere was so clouded over with a thick fog of control, planning and integration, that the leaders of road transport, notwithstanding that they were handling new methods which had no need of the disadvantages of integration, soon became seeped in integrating doctrines; they accepted that the ultimate solution lay in aping the railways.
A Change of View Thus the Labour Government of 1945 could combine its own political doctrines of planning with the-theories of integration which pervaded the minds Of most of the leaders of the transport industry. The Transport Act gave integration a trial. Already there has been disillusionment. The rosy prospects of integration are not being fulfilled. The change of view was brought out clearly in a talk given by Mr. Geoffrey Crowther, editor of the "Economist," to a meeting of the institute of Transport recently.
He had seen, in the 1946 period, the virtue of integration which would deal with the apparent excess of transport facilities then available' in the country and B1 s would reduce that excess to the point where there was just the volume of capital and labour employed in transport to meet the demand. Instead, he said, the . result of attempting integration had been to set up a huge bureaucracy with all the disadvantages entailed in such a large organization and yet without securing any of the expected benefits.
It seemed most unlikely, he declared, that the British Transport Commission would be able to secure. those widespread reductions in costs that had been promised as the fruits of integration. He was wondering, therefore, whether we could put the clock back in transport. At /east there was need for more competition being brought into the transport industry.
Competition One Alternative Those wishing to see a reversal of integration must try to find a philosophy that will have an equally popular appeal to the general public. Such a philosophy lies to hand in "competition." The theory infers that the suppliers of transport are always competing with each other. The competition ensures efficiency because the inefficient stand to fall by the wayside; this ensures a constant search to render satisfaction to customers because customers have a choice among different carriers, or, indeed, could decide not to use the carriers at all. Competition provides automatic safeguards. It is a kind of self-operating mechanism, but in reality operated by the free choice of the customers. Where there is real competition, there is no need for any other controls.
The application of complete competition in transport would no doubt be as disastrous as the application of integration, but the first thing to stress is that if one hopes to undermine the appeal of the theory of integration, one must develop an equally attractive substitute. The second thing is that actions speak louder than words, and that, if competition be stressed as a theory, every effort must be made to apply it as far as possible in practice.
In the United States, the theory of competition is more to the forefront than in this country. It finds exponents who can put forward the applications of the theory with great clarity. A recent example is found in an address by the president of the Inland Steel Corporation of Chicago, Mr. Clarence B. Randall, and the following extracts from his remarks are well worth reflecting upon.
Obligations of Businessmen Mr. Randall had been speaking about business leadership. Apart from the need for businessmen to be "tops of their jobs," they should take an active part in the
political and social life of the nation. "Only by re-establishing ourselves," he declared, "in leadership in the things that mean something to the people and not merely in production will they turn to us for guidance on those social .and economic questions with which we think the country is threatened."
That was his first point: that businessmen had to become active leaders in the community generally. Secondly, businessmen must watch their own characters and reputation. "No man," he went on, "can have an important part in forming public opinion if there is the slightest question about his integrity." He was not so particularly referring to what he called "vulgar things, like stealing money or juggling accounts," but there was a need for "some heart-searching on various aspects of our. business creeds on the subject of intellectual honesty. We dislike people in government who talk out of both sides of their mouths. We must, however, be careful that we are not doing this same thing."
He then reached the core of his argument: "The first and obvious question is whether we have genuine, vital and honest competition one with the other. The freeenterprise System Is not just a -hunting licence to you to get all that yoti can without restraint. The freeenterprise; system is a way of life which brings the greatest good to the .greatest number, but it must be *iced by the free-market." . Mr: Randall argued that the safeguards. (or restraints) upon free enterprise against excessive. exploitation of the public were to be fOund in the free market of genuine competition between the "free enterprisers" themselves.
"We resent price controls," he continued, speaking of American conditions. We say that price controls are not required because that means that the operation of natural laws is suspended by the Government. Now, if that be true, and if those natural laws are what guarantee to the public the integrity of the freeenterprise system, we have no right to suspend them as private individuals. We have no right as honest men to tamper with that automatic control mechanism."
A Ready-made Tool Mr. Randall mentioned that the British steel industry tried interfering with the natural laws governing price and they got nationalization. "They wanted pricerigging; they would rather have the guaranteed price than freedom. They took price-fixing under Government control and thereby created the handy tool which the Government needed."
If road transport in this country wants to be freed from nationalization and if, furthermore, it, wants to remain free so that no Government dare interfere with it again, it should reflect upon the implication of these remarks. There is still much talk in the industry of the value of fixing rates and of condemnation of rate cutting. To what extent is this intellectually honest with the slogan of free enterprise? To what extent does it interfere with the natural price mechanism which is the safeguard of the public? To what extent, therefore, does it hamper the reduction of the present Government controls over road transport, or, in the future, possibly invite a reintroduction of further controls?