PRESIDENTIAL ADDRESS. 777 



despotism, more or less benevolent, is definitely at an end ; the reign of law has 

 begun. It is only to be regretted that the quantity of the law errs as much on 

 the side of excess as its quality on the side of deficiency. 



Apart from its interest as a quite startling example of how not to do it, the 

 recent railway legislation of the United States is only -valuable as an indication of 

 the tendency, universal in all countries, however governed, for the State to take a 

 closer control over its railways. Much more interesting as containing a definite 

 political ideal, worked out in detail in a statesmanlike manner, is the recent 

 railway legislation of Mexico. One may be thought to be verging on paradox in 

 suggesting that England, with seven centuries of parliamentary history, can learn 

 something from the Republic of Mexico. But for all that I would say, with 

 all seriousness, that I believe the relation between the State and the national 

 railways is one of the most difficult and important questions of modern politics, 

 and that the one valuable and original contribution to the solution of that question 

 which has been made in the present generation is due to the President of the 

 Mexican Republic and his Finance Minister, Seiior Limantour. 



Broadly, the Mexican situation is this : The Mexican railways were in the 

 hands of foreign capitalists, English mainly .so far as the older ImcB were con- 

 cerned, American in respect of the newer railways, more especially those which 

 constituted continuations southwards of the great American railway systems. 

 The foreign companies, whether English or American, naturally regarded Mexico 

 as a field for earning dividends for their shareholders. The American companies 

 further, equally naturally, tended to regard Mexico as an annexe and dependance 

 of the United States. If they thought at all of the interest of Mexico in developing 

 as an independent self-contained State, they were bound to regard it with hostility 

 rather than with favour, and such a point of view could hardly commend itself to 

 the statesmen at the head of the Mexican Government. Yet Mexico is a poor 

 and undeveloped country, quite unable to dispense with foreign capital; and, 

 further, it was at least questionable whether Mexican political virtue was 

 sufficiently firm-rooted to withstand the manifold temptations inherent in the 

 direct management of railways under a parliamentary regime. Under these cir- 

 cumstances the Mexicans have adopted the following scheme : For a comparatively 

 small expenditure in actual cash, coupled with a not very serious obligation to 

 guarantee the interest on necessary bond issues, the Mexican Government have 

 acquired such a holding of deferred ordinary stock in the National Railroad 

 Companj' of Mexico as gives them, not, indeed, any immediate dividend on their 

 investment, but a present control in all essentials of the policy of the company, 

 and also prospects of considerable profit when the country shall have further 

 developed. The organisation of the company as a private commercial undertaking 

 subsists as before. A board of directors, elected in the ordinary manner by the 

 votes of shareholders, remains as a barrier against political or local pressure in the 

 direction of uncommercial concessions, whether of new lines or of extended 

 facilities or reduced rates on the old lines ; but — and here is the fundamental 

 difference between the new system and the old — whereas under the old system 

 the final appeal was to a body of shareholders with no interest beyond their own 

 dividend, the majority shareholder is now the Government of Mexico, with every 

 inducement to regard the interests, both present and prospective, of the country 

 as a whole. 



Public ownership of railways is in theory irrefragable. Railways are a public 

 service ; it is right that they should be operated by public servants in the public 

 interest. Unfortunately, especially in democratically organised communities, the 

 facts have not infrequently refused to fit the theories, and the public servants have 

 allowed, or been constrained to allow, the railways to be run, not in the permanent 

 interest of the community as a whole, but in the temporary interest of that portion 

 of the community which at the moment could exert the most strenuous pressure. 

 The Mexican system, if it succeeds in establishing itself permanently — for as yet 

 it is only on its trial — may perhaps have avoided both Scylla and Charybdis. 

 Faced with a powerful but local and temporary demand, the Government may be 

 able to reply that this is a matter to be dealt with on commercial lines by the 



