The Risk Of Local Politics

But in the present state of the world there are other risks of a more serious and insidious kind, which, although at present neither imminent nor pressing, are not at all unlikely to become increasingly so in the near or more distant future. For in these Corporation Loans we touch on the first intrusion of Local Politics into industrial and business concerns. They lie on those outlying points on the circumference where the worlds of politics and business intersect; and where the virus or virtues of the one can readily interpenetrate the other; at those points, namely, where the Local self-government of cities and municipalities is the most remote and free from control by the Central Power. It may well be worth our while, therefore, to glance at them for a moment in this connection, with a view of defining more carefully the class of Governments that are the most liable to, or most exempt from, this intrusion.

Oriental Businesses And Local Powers

In most of the old Oriental countries, private businesses have little or no immunity from the incursions either of the Central or the Local Powers; as we have seen in countries like Turkey, Egypt, Persia, and India (before the British occupation), where these incursions were the standing curse for ages and worked to the ruin of wealth, credit, and industry alike. Nor. again, in young countries, where neither the security of person nor property has had time to become inviolate through the hardening and consolidating forces of custom and tradition, is there as yet a full immunity from the incursions either of the Central or the Local Powers. It is different in all the old European countries, where law and order, and especially the sacred-ness of private property, are most jealously safeguarded; for there the security of individual businesses from the intrusions of politicians into their management has up to the present been the last sacred ark to be touched either by the political commotions of the country, by international complications, or by war itself. But it is not in old centralised Administrations like that of France, for example, that danger lies. The dangers to Corporation Loans from the political side are, curiously enough, to be apprehended in old democratic Governments like those of America and England, where local self-government and laissez-faire have been carried to their most extreme points. For in these countries it is possible - by reason of this very sacredness of local self-government - for Borough Councils or Boards of Guardians to make a raid on the rates through the back door as it were, and to "sweat' them for unproductive purposes, even when they are safeguarded at the front door, as we have seen, by the Central Government whose permission is necessary before most of these Corporation Loans can be issued.

Political Danger To Corporation Loans. America And Local Self-Government. Corporation Loans In America

Take America, for example, where local self-government is so rigorously safeguarded by the Constitution, and what do we see? Local political " Bosses" exploiting the rates for the benefit of themselves or their political and business friends to a degree almost unexampled in any other civilised country. Now, these Bosses and Magnates are intense individualists, and so are the American people themselves as yet; but how would it fare with the rates, and with the Corporation Loans secured on them, if, instead of Bosses and their henchmen, their Municipal Councils were packed with Socialists who, on their own avowed principles, are determined by inroads into Capital to support great masses of the population out of the rates? The process has already begun in England, where, as we have seen in the case of West Ham, whole sections of the population have been maintained through this back-door sweating of individual businesses through the rates, with but little power of direct interference by the Central Government after once a loan is floated; and with the result that old-established businesses employing many workmen are obliged to leave these localities and to carry their establishments elsewhere, to the greater or less detriment of the rates on which the Corporation Loans are secured.

The Future Security Of Corporation Loans In Danger

Now, if these things are getting a foothold here, what security can there be for the future of Corporation Loans anywhere? And especially in the younger democracies where the security of private property as such has not yet become a sacred tradition. It is true that the leakage of the rates from the intrusion of Socialists into Borough Councils and Boards of Guardians is at present a negligible quantity; but West Ham is a warning that under local Socialist Administration neither the growth of population nor the rateable value of property would be sufficient to secure adequately against depreciation the existing Corporation Loans, even when the Central Government itself was altogether free from any Socialistic taint. To sum up, then, I take it that in spite of the careful inspection and supervision of these loans by the existing Government before they are issued, in spite of the elasticity of the rates which secure them under legal compulsion, as well as of the remoteness of the chance of Central Governments themselves becoming purely Socialistic in character; in spite of all this, these Corporation Loans are not as safe, so far as their future outlook is concerned, as the majority of investors in them imagine them to be. Aggressive Socialism, however much it may profess to attain its end by striking directly at the Central Government, can have no chance of success until it has previously secured majorities in its favour in the local Borough Councils, Boards of Guardians, and Parliamentary Selection Committees - as, indeed, Mr. Sidney Webb and Mr. Bernard Shaw have, by the propaganda which they carried on for years by way of these back doors, clearly shown. But as Socialism is a growing force in all civilised countries at the present time, and therefore must permeate more and more the composition of these local Councils of all kinds as time goes on, it may be safely predicted that unless Local Government officials, in democratic States at least, are more directly controlled by the Central Power than they are to-day, never again will Corporation Loans possess that high rank for stability and security which they enjoyed in the past, unless, indeed, by direct Government or National guarantee.