"they

just now receiving much attention in Great Britain. The Government over there had to take over the railways during the war, and now that the war is over Mr. Churchill has told the people at the recent election that the Government had decided to nationalize them. The consequence of the Government running the railways for war-purposes has made nationalizers of railway shareholders by the thousand. A A leading British weekly says, (shareholders) look to the public exchequer and the taxpayer to secure their property against the inroads made by labour with the consent and assistance of the Government, and have made up their minds that a handsome Government security will be better for them than the precarious ownership of railway shares." Now this is just what has happened in the United States. But in Britain there is a great public opinion which realizes that State control of the railways is only the beginning of a general scheme of nationalizing primary industries. It is said other schemes of nationalization are inevitable in the early future. Then a note of warning is flung out, a note which may come too late to warn Americans before they take the final step:

"Now, long convinced of the desirability of this large step in State Socialism, we have always urged the necessity of a close public scrutiny into the conditions under which the national acquisition of the railways should take place. The Government ought not to decide to buy the railways before Parliament has had ample opportunity to consider the terms of purchase. Not merely the question of the railways is involved. Other schemes of nationalization are inevitable in the early future. Under them large amounts of public money must be paid for the purchase of private properties and interests in land, mines, public-houses, and other valuable assets. Unless we embark upon this business

with strong safeguards against a policy of plunder, we are lost. The strongly-organized private interests, commanding, as the railways do, powerful advocacy in both Houses of Parliament, will do their utmost to fasten upon the public ruinously high terms of purchase and of compensation. The first safeguard of the people is to insist that before any decision to purchase is announced, the various bases of valuation shall be examined, and the results placed before Parliament in such a form as to enable it to strike a fair bargain. When some years ago, Switzerland decided to consider nationalizing its railways, it first passed a Valuation Act, and then proceeded to an Act empowering the Federal Government to acquire the properties."

It is this essential Valuation Act that is required. In that way we shall be able to separate land and capital, and therefore estimate what the capital is worth to the people. The value of the land can be taken in taxation, and should be taken in taxation. Only in that way can labour, capital, and the public be treated fairly. No one has pointed out this difference in land value and capital of railways so clearly as Hirsch. He says:

"The capital of the undertaking consists of the present value of the road-improvements, plant, buildings, material, etc., less such wear and tear as they have undergone. Suppose any one were to offer to buy any English railroad on such a valuation, or even on the value for which all its capital might be replaced now, without deducting anything for wear and tear. The directors would certainly regard him as a lunatic. Yet if any one offered to buy an ordinary factory of similar age on such terms he would be received with open arms. Whence then the difference? It arises from the fact that the Legislature has given to the railway company a special privilege, i. e., the exclusive use of a narrow strip of land hundreds of miles long, unbroken by any roads or other rights of use. Having the exclusive right of use to this land, the railway company can charge more for carrying goods and passengers over it than if competing carriers were allowed to run trains over it. The difference

between competitive rates and the monopoly rates which the company now charges is a toll on industry as much as the toll levied at the gates in the preceding illustration. Capitalized, this toll forms part of the value of every railway stock. The value of railway shares is thus composed, partly of the values of the capital employed in the undertaking, and partly of the capitalized value of the legal power to levy tribute."

Here the principle is stated, and the principle is the same everywhere where railways are operated by private enterprise, though there may be many important differences in the detail of running a railway here and in Great Britain. Let us, however, bear in mind the necessity of an act of valuation as the first step, whether the railways are nationalized or returned to the owners. There is a limit to the old method of raising wage and increasing rates. That is nothing more or less than the old scheme of robbing Peter to pay Paul. At the time of the railway strike in Britain, 1911, Government intervention took place, and wages were raised with Government consent. What was the effect? The companies immediately raised passenger and freight rates. Mr. Lloyd George then described the situation in this way:

"We (the Government) are simply giving the railway companies a right which is now extended to every business man in the country. . . . If there is a great settlement between colliery owners and their employees, or great cotton spinners, or in any other industry which involves a heavy increase in the labour bill, they pass it on, and they are entitled to pass it on."

There must be a limit to the policy of passing it on, and it seems to me that if we have not yet reached the limit, we are so near it that it makes not much matter.

CHAPTER XII

DEFINITIONS

"We are in a temper to reconstruct economic society, as we were once in a temper to reconstruct political society, and political society may itself undergo a radical modification in the process. I doubt if any age was ever more conscious of its task or more unanimously desirous of radical and extended changes in its economic and political practice.”—WOODROW WILSON, The New Freedom. Chap. I, p. 30.

SOME one has said that all education should begin with the teaching of political economy: the science of wealth. Usually this branch of knowledge is left until the scholar has entered the high school or the university. Why this should be is not easily explained, for the elements of political economy are so simple, the child in the kindergarten stage could learn them. It is, however, a rare thing to find a business man who can name the factors in production; it is rarer still to find one who can define the factors in production. Not that there is any mystery about it, not at all. The literature on the question is voluminous and many great minds have been at work during the past fifty years writing handy volumes dealing with the A B C of the subject. Now if we are to have a clear understanding of the misconceptions of Socialism, Syndicalism, and Toryism, we must get hold of the factors in produc

tion and have no doubt as to their precise definition. Creighton, in Introductory Logic, says:

"The remedy for the obscurities and confusions of words is to be found in clear and distinct ideas. We must endeavour to go behind words and realize clearly and distinctly in consciousness the ideas for which they stand. Now, the means which logic recommends for the attainment of this end is definition."

The professional economists have been slow enough in clearing away obscurities and finding precise definitions. Socialist writers have not been alone in their troubles of separating land and capital and in making up their minds as to what is really wealth. The heroic service rendered by one of America's deepest thinkers, Henry George, is, however, now bringing forth fruit. Though business men in many parts of the world are putting his theory into practice, he has received scant recognition from those economists who teach the science of wealth in our great centres of learning. There should be no difficulty now in differentiating land and capital. It is a process in practice, performed regularly, by people occupying at least one half of the surface of the earth. Yet the socialist makes scarcely any progress, and still speaks of privately owned "capital as an iniquitous thing. We still hear tirades against what they call the "capitalistic" system. In this respect they have scarcely travelled forward a yard beyond the time of Karl Marx. Let us therefore look at the terms for the factors in production and see if we cannot arrive at definitions that will stand the test of thorough analysis.

Political economy has to deal with three objects: matter, producer, and product. The first has been