A Memorandum just issued by that active body, the Sanitary
Association, contains the following amusing and instructive account of
the memorable competition between the great London water-companies
forty years ago, and of the close monopoly in which that reckless and
ruinous struggle ended:--
'In 1810, a water mania, like our recent railway mania, suddenly broke
out; and the principle of competition, to which the legislature had
all along looked for the protection of the public, was put upon its
trial. Two powerful companies, which had been several years occupied
in obtaining their acts and setting up their machinery, now took the
field--one, the West Middlesex, attacking the old monopolists on their
western flank; the other, the East London, invading their territory
from the opposite quarter. At the same time, a band of dashing
Manchester speculators started the Grand Junction Company with a
flaming prospectus, and boldly flung their pipes into the very thick
of the tangled net-work which now spread in every direction beneath
the pavement of the hotly-contested streets.
'These Grand-Junction men quite astonished the town by the
magnificence of their promises. "Copious streams" of water, derived,
by the medium of the Grand Junction Canal, from the rivers Colne and
Brent: "always pure and fresh, because always coming in"--"high
service, free of extra charge;" above all, "_unintermittent supply, so
that customers may do without cisterns_;" such were a few of the
seductive allurements held out by these interlopers to tempt deserters
from the enemy's camp.
'The West Middlesex Company, in its opening circulars, also promised
"unlimited supplies" to the very "housetops," of water "clear and
bright from the gravelly bottom of the Thames, thirteen miles above
London Bridge." The East London was not behindhand with the trumpet;
and its "skilful" directors, by paying dividends in rapid succession
out of capital, raised their L.100 shares to the enormous premium of
L.130 before they had well got their machinery into play. Meanwhile
the South London (or Vauxhall) Company was started--in 1805--on the
other side of the river, with a view to wrest from its old rulers the
watery dominion of the south. The war was not, however, carried on in
a very royal sort; for, as the travelling mountebank drives
six-in-hand through a country town to entice the gaping provincials to
his booth, so these water-jugglers went round the streets of London,
throwing up rival _jets-d'eau_ from their mains, to prove the alleged
superiority of their engines, and to captivate the fancy of hesitating
customers.
'The New River Company, thus put upon its mettle, boldly took up the
gauntlet. It erected new forcing-engines, changed its remaining wooden
pipes for iron, more than doubled its consumption of coal, reduced its
charges, augmented its supplies, issued a contemptuous rejoinder to
its adversaries, and, appealing as an "old servant" to the public for
support, engaged in a war of extermination.
'For seven years, the battle raged incessantly. The combatants
sought--and openly avowed it--not their own profit, but their rivals'
ruin. Tenants were taken on almost any terms. Plumbers were bribed to
_tout_, like omnibus cads, for custom. Such was the rage for mere
numerical conquest, that a line of pipes would be often driven down a
long street, to serve one new customer at the end. Arrears remained
uncollected, lest offence should be given and influence impaired.
Capricious tenants amused themselves by changing from one main to
another, as they might taste this or that tap of beer. The more
credulous citizens, relying on the good faith of the "public
servants"--as these once powerful water-lords now humbly called
themselves--were simpletons enough, on the strength of their promises,
to abandon their wells, to sell off their force-pumps, and to erect
water-closets or baths in the upper storeys of their houses. In many
streets, there were three lines of pipes laid down, involving triple
leakage, triple interest on capital, triple administrative charges,
triple pumping and storage costs, and a triple army of turncocks--the
whole affording a less effective supply than would have resulted from
a single well-ordered service. In this desperate struggle vast sums of
money were sunk. The recently-established companies worked at a
ruinous loss; and such as kept up a show of prosperity were, in fact,
like the East London Company, paying dividends out of capital. The New
River Company's dividends went down from L.500 to L.23 per share per
annum. In the border-line districts, where the fiercest conflicts took
place, the inhabitants sided with one or other of the contending
parties. Some noted with delight the humbled tone of the old arbitrary
monopolists, and heartily backed the invaders. Some old-stagers stuck
to the ancient companies, and to the faces of familiar turncocks.
These paid; but many shrewd fellows put off the obsequious collectors,
and contrived to live water-rate free. Thus the honest, as usual, paid
for the knaves; and the ultimate burden of all these squandered
resources fell--also as usual--on society at large.
'Such a state of things could not last; and it came to a conclusion
which experience, had it been invoked, might have led parliament to
anticipate. For, scarcely a century before, the two chartered East
India Companies, after five years' internecine war, had coalesced to
form that gigantic confederacy which for years monopolised the Indian
trade, and rose to an unexampled pitch of corporate power and
aggrandisement, at the cost of the mercantile community.
'Just so, in 1817, the great water-companies coalesced against the
public, and coolly portioned out London between them. Their treatment,
on this occasion, of the tenants so lately flattered and cajoled, will
never be effaced from the public memory. Batches of customers were
handed over by one water-company to another, not merely without their
consent, but without even the civility of a notice. Old tenants of the
New River Company, who had taken their water for years, and had been
their thick-and-thin supporters through the battle, found themselves
ungratefully turned over, without previous explanation, to drink the
"puddle" supplied by the Grand Junction Company. The abated rates were
immediately raised, not merely to the former amount, but to charges
from 25 to 400 per cent. more than they had been before the
competition. The solemnly-promised high service was suppressed, or
made the pretext for a heavy extra charge. Many people had to regret
"selling their force-pumps as old lead," or fixing water-closets on
their upper floors, on the faith of these treacherous contractors.
Those who had fitted up their houses with pipes, in reliance on the
guarantee of _unintermitting pressure_, found themselves obliged
either to sacrifice the first outlay, or to expend on cisterns and
their appendages further sums, varying from L.10 or L.20 up to
L.50--and even, in many cases, L.100. When tenants thus unhandsomely
dealt by expressed their indignation, and demanded redress, they were
"jocosely" reminded by smiling secretaries that the competition was
over, and that those who were dissatisfied with the companies'
supplies were quite at liberty to set up pumps of their own.
'Thus as, in political affairs, anarchy invariably leads to despotism,
so, in commerce, subversive competition always ends its disorderly and
ruinous course in monopoly, which, whether avowed or tacit, individual
or collective, is but despotism in a lower sphere.
'The cure for these evils lies in the competitive contract-system,
which brings competition to bear _for_, instead of _in_, the field of
supply, so as to obviate the reckless multiplication of
establishments, and capitals, and staffs, for the performance of a
service for which one would suffice. Evidence shews that the
water-companies might be bought out, so as to clear the way for the
consolidation of the water-supply with the drainage and other
connected sanitary services, under a public authority, responsible to
the rate-payers through parliament, and charged to supervise the due
execution of the works by contractors competing freely, on open
tender, in the public market--a system obviously calculated to secure
for the public the best possible service at the lowest possible rates.
By empowering such an authority to buy the companies out in full, with
money borrowed at 3 or 3-1/2 per cent., we should come into possession
of their works at an annual charge for interest, less, by nearly
two-fifths, than our present annual payment to the companies; by
consolidating the nine establishments thus acquired, we should save
more than half the present working costs; and by the further
consolidations referred to above, for which this first one would
prepare the ground, we should still more reduce our annual charges,
and still more improve our sanitary condition.'