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The following table of the means and relative cost of transporting British mails shows that in the last ten years the percentage paid to steamships has been reduced from 39 per cent in 1883 to 34 per cent in 1893, and the percentage of compensation to railroads has correspondingly increased:
The notion that government mail contracts are always sources of large profit to the British steamship companies operating under them is not borne out by facts. To maintain the government requirements as to speed and regularity a consumption of coal is involved beyond that required on ordinary freight and passenger steamships, and in all steamship corporations the cost of coal is a larger factor than wages in operating expenses. Other minor factors increase expenses of mail steamers compared with freight and passenger steamers.
Illustrating this point is a statement of the annual dividends for the last four years of representative corporations taken from the stock quotations of the London Investors' Monthly Manual, which publishes regularly quotations of navigation shares:
Further illustrating the same point are the par value in pounds sterling and the opening and closing market quotations for the year 1893 of representative corporations receiving mail compensation and of others which do not, taken from the London Economist, June, 1894, which publishes regularly quotations of navigation shares:
The British ocean mail contracts with the Cunard and "White Star" lines to New York require semiweekly sailings or 104 trips per annum, for which last year the payment was £105,500 plus £22,659 admiralty subventions, or $6,000 a trip, no compensation being made for the return trip. For like service the postal subsidy law of 1891 provides that American steamships shall receive $4 a mile, or for the voyage of 3,000 miles, $12,000.
In addition to the compensation for carrying British mails, covered by the transcript above from the report of the British postmaster-general, some of the lines of steamships included also carry mails for foreign governments, especially those of Central and South America, for which they receive compensation, as for carrying passengers or freight.
The British Government furnishes mail connections, usualy daily, with Irish ports and the numerous small islands near by, but these have not been included in the figures given above, having no bearing on questions of the merchant marine.
Roughly speaking, the British foreign mail service last year cost $3,500,000, toward which the colonies contributed $500,000, and receipts from sea postage $500,000, leaving the exchequer to bear a loss of $2,100,000. It must, however, be borne in mind that in all postal contracts, in the United States as well as abroad, the postal service is made self-sustaining only by the large profits in certain branches of the service, compensating for the losses in other branches of the service. The remote points in her colonial system to which Great Britain has to carry the mails by expensive ocean service bear an analogy to remote points within the United States reached by the mails through expensive stage or messenger service, and the reasoning which regards contracts for the former as subvention to shipping might, with equal propriety, regard star-route postal contracts in the United States as bounties to stages, stage drivers, and horses.
Through its royal naval reserve Great Britain gives an average addition of from $1.25 to $2.50 per month as a retainer to 24,000 men employed in the merchant service. While the naval reserve is maintained at an annual expense of nearly a million of dollars, for purely political and naval purposes, this large expenditure is not without indirect effect upon the personnel of the British merchant marine. The following from the British naval estimates for the current year shows both the expenditures for last year and appropriations for this year, and on general lines indicates the duties required of merchant seamen in the royal naval reserve:
ROYAL NAVAL RESERVE.
[Officers, seamen, etc., serving in merchant and fishing vessels.]
Expense of the royal naval reserve.
Pay, allowances, and contingent expenses of royal naval
For the year:
Lieutenants or acting lieutenants, pay, at 10s. per diem
Sublieutenants, pay, at 58. per diem each; messing, at 18.
Lieutenants, pay, at 10s. per diem each; messing, at 28. per
Sublieutenants, pay, at 58. per diem each; messing, at 18. per
For maneuvers (estimated at 30 days):
Lieutenants, pay, at 108. per diem each; messing, at 2s. per
Pay for men embarked for a period of six months' training on board Her Majesty's ships.....
Embarkation of second-class men on board district ships (19 days) in lieu of undergoing drill ashore:
Subsidies to mercantile marine training ships:
Fees and traveling expenses to deputy registrars for enrolling men, etc., and for clerka, messengers, etc..
Pay of pensioner gunnery instructors, at 38. a day
Capitation grant, £1 10s., or £3 for each boy entered into the royal naval
Replacement of gunnery stores
Remuneration to chief officers of coast guard in charge of batteries for drilling
Rents of batteries, stationery, allowance, and miscellaneous expenses
*Not required to drill.
The foregoing facts are believed to be as full a statement of the fiscal relations of the British Government to its merchant marine as the limits of this report suggest Consular Report No. 112, January, 1890, as stated, shows with great particularity the details of mail contracts at that time, The historical genesis of the relationship
of the British treasury to the British merchant marine is explained concisely in the following excerpt from an article by the Hon. Arthur T. Hadley, on "Subsidies" in the Cyclopædia of Political Science (1884):
"England's foreign and colonial relations were such as to force her Government to take the lead in the matter of steamship subsidies; and it did so with great promptness. It was not until 1838 that the practical importance of ocean steam navigation was made to appear. Proposals for a line of Atlantic mail steamers were at once invited, and in 1839 the contract was awarded to Samuel Cunard, whose bid was the most favorable. The original contract was for 3 ships, at an annual compensation of £55,000; it was soon modified to 4 ships, at £81,000. This contract was extended and modified to the advantage of the company in 1846, 1854, and 1858; it is only within the last fifteen years that it has been greatly reduced. In 1840 a contract for 14 ships, at £240,000, was made with the Royal Mail Steam Packet Company, for the carriage of the mails to the West Indies and Southern United States.
This company afterwards extended its field of operations to South America. In 1845 the Peninsular and Oriental Company, which had had for some years a small mail contract, engaged to run 7 mail steamers to India for £160,000; and this company gradually extended its engagements with the Government, so that for a series of years it has received more than £400,000, and often £500,000 annually. The contracts with these 3 companies have been by far the most important; of the rest, only those with the Pacific Steam Navigation Company and with the Union Steamship Company to Africa need be mentioned. Under contracts like these, England expended in forty years nearly £45,000,000 sterling. The expense is now gradually decreasing, but still amounts annually to some £700,000 sterling. These payments are so often cited as an example for America to follow, that we must consider carefully how far they were actually of the nature of bounties for the encouragement of the shipping interest. The early contracts with Mr. Cunard were unquestionably of this nature. Ocean steam navigation was then an experiment; and Great Britain's colonial relations made it a political necessity for her to try the experiment first. Her statesmen were forced to take the burden of risks which no private individual could prudently bear; hence, the apparent disproportion of the payments to the cost of the steamships. Nor is there good reason to doubt the candor of the Commons committee, who, in 1846, reported, in answer to some complaints on this head, that the service was better performed by that company for the price than it would be by any other. But twelve years later, when the business was thoroughly established, the conservatism of the Admirality allowed the Cunard contract to be renewed at a figure which was then quite in the nature of a bounty and was felt by the Post-Office to be burdensome and unfair. There was somewhat the same spirit shown in dealing with the Royal Mail Company, especially in renewing their contract in 1868, when, for certain reasons, the business was not thrown open to public competition as had been the case in all other instances since 1860. The question is a complicated one, but it is impossible to read the correspondence of the authorities with a rival line, and particularly a report for the Government by Mr. Scudamore (Parl. papers, 1867-'68, XII), without feeling that there was an anxiety not merely to have the service well done, but to keep in good condition the line which had done it in the past. The company whose case is oftenest cited as an example of what is done by Government subsidy is the Peninsular and Oriental, but here there is much less ground for so doing than in the two former cases. The company owed its origin and early development to private enterprise; so far from being favored by Government contract it often seemed as if partiality was shown against it; and when it was finally recognized as the only agency competent to perform certain necessary parts of the mail service, the contracts were awarded grudgingly at a sum which was. considered scarcely an equivalent for the extra liabilities and expense incurred. The facts which have given rise to the public impression are the enormous aggregate sum paid to the company, the renewal of one of its contracts some years before its expiration, on terms which seemed especially advantageous, and, above all, the guarantee, for some years in force, of a 6 per cent dividend on the capital stock of the company. The enormous aggregate pay is explained by the enormous aggregate service. The contract renewal in 1870 was really sought by the authorities to obviate some difficulties under the old contract, which gave them far more trouble than they did the company. The guaranteed dividend requires a word of explanation. In 1867 the company was disinclined to take the Government contract, believing that the pay offered would not compensate the service required. The authorities were equally persuaded that it would. As no other company would undertake the work, the matter was compromised; the company taking the contract with the proviso that if they should, under its terms, be unable to pay a 6 per cent dividend (not 8 per cent, as has been frequently stated), the Government should make good the deficiency. Experience proved the company's original estimate a correct one. How the matter was regarded by the Government is illustrated by the following extract from Mr. Scudamore's report (Parl. papers, 1867–’68, XLI, 131, incl. 3): 'It would seem that in deal
ing with ocean services the post-office has only two questions to consider: First, what is the nature of the service required; and, second, what is the proper price to pay for it. In the case of communication with the east, Parliament has openly declared in favor of a more frequent and equally regular and rapid communication; the post-office has ascertained that only one company will undertake the maintenance of that communication, and I think I may also claim to say that it has ascertained, with a reasonably close approximation to accuracy, the proper price to pay for it, for the proper price must in every such case be that which, taken together with the revenue from traffic, will cover the working expenses and give a moderate dividend on capital. It is impossible to obtain good service on other terms. The question can not be dealt with on commercial principles, because the conditions of the postal service compel the contractors to disregard commercial principles. *** For the sake of keeping up such communication with the east as the nation requires, they must set commercial principles at defiance; and, cost what it may, the nation must either pay them what they lose thereby or forego the communication.' (See also Rep. of Com. on Affairs of Oriental Steamship Company, 1867, IX.) Of England's mail contract system it may be fairly said: (1) That its aims are political and not commercial. It is a necessity for England to have constant communication with her colonies, and she has spent large sums for this object. It is almost equally important for her to have an efficient naval reserve and transport service, and she has made her mail contracts one among several means toward this end. (2) That the incidental commercial advantage to the subsidized companies has not been generally great, except at a very early period of the system. This is evinced by the fact that rival unsubsidized lines have been equally successful, and that the largest contracts have been on terms which made them a matter of indifference to the party receiving them." Following is a statement of the net tonnage of the merchant marine of Great Britain and Ireland:
Less than 4 per cent of the net tonnage of Germany's merchant marine receives direct subsidies from the imperial treasury for carrying the mails. The German merchant marine for 1893 comprised 3,728 vessels of 1,511,579 register (net) tons. Nineteen steamships of 51,800 register tons received direct postal subsidies to the amount of 4,990,000 marks (mark 23.8 cents) in round numbers $1,240,000. The distance traversed was 999,622 miles, making the average payment per mile $1.25. In response to the inquiry of this Bureau, through the proper official channels, the German imperial foreign office has furnished the following statement of details of the operations of the German postal subsidy law in force April, 1894: