9.1.3The State as‘One Big Company’
The outcome was that, for many decades, the rail systems were planned,
constructed, and operated with reasonable degrees of technical efficiency,
but fell well short of the economic ideal. In time, as we will recount, the
system ran into large secular deficits under the influence of democratic politics
and of industrial relations. Subsequently, in the twentieth century, the under-
lying railwayfinances deteriorated further, when motorized road (and, later,
air) transport and travel became preferred alternatives for many users.
In Germany, after the nationalizations of the 1870s, the state treated its rail
monopoly as a ‘milch cow’, rather in the way of a private monopolist
(Acworth 1920). In Australia, in contrast, only for a relatively short period
did their public owners aim at a‘commercial’rate of return after interest
payments. Subsequently, thefinancial test was weakened,first through cred-
iting to rail the enhancement they caused to land values (albeit in very
imprecise ways, using traffic forecasts), and later by acceptance of the idea of
the state as‘one big company’that should‘be able to balance its accounts’
overall (NSW valuer-general in 1924, cited in Butlin, Barnard, and Pincus
1982, p. 264); or, as W. K. Hancock (1930) had it, as one great public utility.
However, such a holistic approach proved unsustainable, once the railways
placed intolerable burdens on the public purse during the 1930s Depression.
9.2 Reaping
9.2.1Railway Finances
An outstanding characteristic of Australian railways was their sheer size. They
absorbed the largest shares of public investment and borrowing: even in
the 1920s, when there were other insistent claimants for funds, railways
accounted for almost 30 per cent of public investment (down from 40 per
cent in the previous decade: Butlin, Barnard, and Pincus 1982: 268); their
annual income and expenditureflows dominated public budgets into the
1930s; and they became the largest single employer in the colonies and, for
some decades, in the states.^9 Moreover, they posed the most pressing and
persistent puzzle of reconciling democratic political control with the impera-
tives of their efficient and effective operation as enterprises. In all of these
(^9) By the end of the 1890s there were over 10,000 railway employees in Victoria (Serle 1971,
p. 26). In the 1920s employment in railway services (excluding employment in railway workshops
and construction) averaged 63,000; or over 4 per cent of the Australian workforce (Keating 1973,
p. 236). The annual reports of the states railway departments record 110,673 employees in the year
1928/29 (New South Wales 1929, p. 36; Victoria 1929, p. 58; Queensland 1929, p. 33; South
Australia 1929, p. 8; Western Australia 1929, p. 77; Tasmania 1929, p. 19).
Jonathan Pincus