SO much for the salient features of the so-called system of economic freedom conceived as a method of promoting orderly production and development. Thus presented, however, the system was not without limitations even in the minds of its exponents. I have emphasised already the indispensable background of a framework of law and order authoritatively imposed. But beyond this, there were functions intimately associated with development, where it came to be recognised that unregulated private initiative, either individual or corporative, was not appropriate, for one reason or another. Such for instance was the provision of roads, bridges, harbours, etc.
The characteristic of such undertakings as laid down by Adam Smith was that ‘the profit could never repay the expense to any individual or small number of individuals’ although ‘they might be in the highest degree advantageous to a great society’. This, of course, did not imply that they were beyond the capacity of joint stock enterprise: and in spite of his suspicion of the zeal of such enterprise, Smith was indeed prepared to entrust some such enterprises to this form of organisation; canals, for instance. But, beyond this, there was fear ofinappropriate chargeswhich appeared to be especially acute where the roads were concerned: and here, although he deprecated central control, Smith recommended public commissioners.
Such an attitude, which is limited and embryonic in The Wealth of Nations, was bound to develop and become more explicit as techniques involving the use of connected stretches of the earth’s surface and hence special rights of acquisi.tion thereof, became a more prominent part of the apparatus of society. It cannot be said, however, to have developed as early as might have been expected, at any rate where the works of the nineteenth-century classical writers were concerned. Bentham in the Constitutional Code provides for an ‘Interior Communication Minister’ with inter alia ‘Aqua-procurative or water supply-securing’ and ‘Malaria-obviating’ functions; and it was under Benthamite influence that the vast developments of governmental activity in this latter respect took place. .But on the majority of the members of the London Political Economy Club, absorbed in discussion of free trade, the currency and the measure of value, etc., the great development of public utility functions and the’railways made comparatively little impact.
The systematic discussion of the economic problems of railways in Lardner’s splendid Railway Economy came from one who stood right outside the tradition. His conclusion ‘that bodies which possess the almost exclusive control of the intercourse of the country . . . have none of the qualities and ought to have none of the privileges attaching to private commercial establishment – that they have not been created .. ,; by the unaided efforts of individuals … that they owe their origin and existence to the will of the legislature expressed 1 In the records of the Club, matters of this sort were only discussed on nine occasions in the first fifty years of its existence.
Nevertheless, the attitude and the spirit of Adam Smith’s recommendation regarding turnpikes emerges and becomes explicit with John Stuart Mill, who, despite the ambiguity of his hopes regarding small co-operative societies, must still be regarded as an exponent of the main position of the system of economic freedom. Both in his discussion of production on a large scale in the PrinciplesI and in his little-known letter on the water supply of London, 2 Mill argues for the recognition of the direct public interest in such enterprises. So far as railways were concerned he declared himself against the alleged waste of capital and land involved in duplication and argued that only one such line should be permitted: ‘but the control over that line ought not to be parted with by the state except on a temporary concession as in France’.
As regards water supply, he declared that were there in being a municipal government for the whole of London, he would be in favour of making over to it a function so important as that of water supply. In each of these cases Mill’s reasoning is clear. The case of leaving supply to private agency rests on the possibility of competition. By this it is clear that neither he nor any other classical economist meant mathematically pure competition only; he would have been satisfied with something much more rough and ready than that; he would have been slightly impatient at some of the quite unrealistic refinements which have emerged in this connection. But both with railways and water supply there was no possibility of competition without, as he thought, the likelihood of a substantial waste of resources.
