be right, but I am waiving that question aside entirely, as you will see from my brief. I will discuss the economical benefit only. I come here to you principally on the part of the consumers of the United States, and in discussing this question I wish to lay down two general propositions, which I wish that we should always keep in mind in discussing it, because I think they are sound, fundamental propositions. The first one you will find stated in the first part of the pamphlet.

Mr. James Bryce once in a famous tribute to Mr. Gladstone spoke these sentiments, that in dealing with public funds he was infinitely more careful than he was with his own private funds; that he was exceedingly careful in cabinet meetings. I tried to find that reference the last time I saw Mr. Bryce, which was in Whitehall two years ago, in the local Government office, where I went to see my friend, John Burns. It is perfectly true I can not give you the reference, but the reference is perfectly true. That is the general principle in all these questions. This, in the ultimate analysis, is a fight, the fight between private interests and the general good of the greatest number, and you have that here.

I have always been a low-tariff man from Garfield's time down, and I therefore rejoice very much in the tariff that was passed this last year as promoting the general greatest good of the greatest number in the greatest way, and I am therefore advocating the repeal of this exemption tolls act on the same basis, and I make the argument upon the economic basis for that reason.

Now, you will notice in the opening of my brief, and I think I had better read the first or rather the second paragraph, which is as follows:

The treaty and moral argument has been so much discussed that this argument will be made wholly on an economic basis. The exemption on American vessels should be strongly opposed irrespective of all treaty obligations. It is Dead Beat Socialism v. Dutch Treat Socialism, and every honest citizen should support Dutch treat socialism as meaning the greatest good to the greatest number. It is robbing Peter to pay Paul. Peter represents all citizens of the United States. Paul represents a portion of the inhabitants of the Pacific States and a portion of the inhabitants of the Atlantic States.

I would not say anything about that matter excepting one thing, which I think is a contribution. I know that nobody has studied the Panama question as earnestly as I have for the past 10 years on both sides. I never have seen any adequate defense to the action in seizing Panama, therefore I rejoice very much in this prospective treaty. When you discuss it may I have the privilege of speaking before you on that question?

But there is this point which I want to speak about in regard to treaty obligations. So far as I know, and I give you my honest word, and I have read a great many discussions, but I never saw the proposition to exempt American vessels until three years ago. In that book you will find reference to all the discussions of the probable commercial value of the treaty.

Senator BORAH. You say you never saw any reference?

Mr. Fox. So far as I can remember, in all the discussions about the canal it was presumed that American vessels would pay as well as all other vessels.

Senator BORAH. Did you ever see, almost three years ago, any reference to the fact that we could not exempt American vessels?

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Mr. Fox. It was taken as the regular thing, it seemed to me. Senator BORAH. But did you ever see any reference to it in any of the correspondence or any of the negotiations?

Mr. Fox. I could not say that I have. In all the discussions of what revenue was coming from it there never was the mention that we were going to be deprived of revenue from American vessels; there never was mention of it so far as I could find, therefore it seems to me that the proposition

Senator WALSH. Can you refer us to some economist who calculated upon the income of the canal?

Mr. Fox. Yes, sir.

Senator WALSH. Giving the results of his investigations prior to three years ago, in which the calculation was based upon an income from

Mr. Fox. From all vessels. Ch, yes; it was mentioned in that. I will come to that point now. You will find it all mentioned in that pamphlet. I left those pamphlets with the senior Senator from Connecticut last week, hoping that they would be distributed among you that you might read them and question me on them. You will find a discussion in there as to the probable value of the canal from a commercial point of view.

Unfortunately, the most far-reaching and the best of them is not at all generally known, although it is an official publication of the United States. That was a great surprise to me. When I first began to investigate the subject of the probable value of the Panama Canal, I thought, like most people, it was to pay expenses and a probable profit. I believed what Mr. Johnson quoted there. Mr. Johnson, in his official report, apparently did not know that 20 years before there was a most elaborate report, a very pessimistic report, about the commercial value of the Panama Canal, because he does not mention it in the slightest, and if you will allow me to suggest it, I hope you will take it out of the official reports and put it in the record. The report was prepared and published by the Chief of the Bureau of Statistics in 1880, just about the time when the French canal was about to be started. That report was made out by Mr. Nemo and by Col. George E. Church. Col. George E. Church was a man from Rhode Island, a great civil engineer, who fought in the war. I met him in his last years in England, and I remember his speaking about the Battle of Fredericksburg and his belonging to the Loyal Legion. He traveled all over South America. He was an authority on South America. I saw in his London house the finest library on South America now in existence.

Senator THOMAS. We are wasting a good deal of time on immaterial matter. Suppose we get right down to the subject.

Mr. Fox. You will find in there, then, the statement of his pessimistic view of the Panama Canal in the official report. It is most pessimistic in every way. There is no mention in that report, in Mr. Johnson's report

The CHAIRMAN. Allow me one suggestion, if you will. There are only two questions, I think, with which the committee is at present concerned.

Mr. Fox. Very well.

The CHAIRMAN. One is the economic phases of the proposed legislation

Mr. Fox. Yes

The CHAIRMAN. And the other is

Mr. Fox. I was making answer to you, sir, to that.

reports

There are two

Senator WALSH. It was quite sufficient to say that Mr. Church and Mr. Nemo had made a report in 1880.

Senator THORNTON. I request that you be allowed to finish, Mr. Chairman. You only made one point when you were interrupted. The CHAIRMAN. I made the two points in one sentence.

Mr. Fox. It is Dead Beat Socialism v. Dutch Treat Socialism in every honest citizen to support Dutch-treat socialism as meaning the greatest good to the greatest number. It is robbing Peter to pay Paul. Peter represents all citizens of the United States. Paul represents a portion of the inhabitants of the Pacific States and a portion of the inhabitants of the Atlantic States.

I should like to explain what I mean, briefly, by Dead Beat Socialism v. Dutch Treat Socialism. Dutch-treat socialism is where, when the State performs a benefit for a certain party, the cost of that-the measurable benefit--is either paid in whole or in part by the party, by the Government, by the individual benefited. You have that constantly in the post office, or where you have municipal railroads, or anything else of the sort. The other is where it is paid for entirely out of the State treasury; and you have that prevailing much more in this country than you have in Europe.

In England, for instance, you have a large number of instances where the Government gocs outside of what we think is its proper municipal function, but every individual benefited that way is paid. For instance, all public baths in England and in Vienna, all over Switzerland, are the same way. The railroads in Germany make a very large profit to the Government in that way.

Now, the question with regard to the Panama Canal tolls is whether this great enterprise, which has cost so much money, is going to be treated on the basis of dead-beat socialism or dutch-treat socialism, so far as the citizens of the United States are concerned. What is the situation before us? We have before us the fact that we have a tremendous white elephant on our hands in the way of an economic enterprise. We have an investemnt of something like $400,000,000 or more, upon which we learn now from Mr. Johnson that we must earn something like $10,000,000 to $20,000,000 before we can begin to pay interest on that investment. That I think is the situation. It looks to me as much of a white elephant as was the cost of the Boer War to England, and I am going to consider whether we can lessen the burden on the taxpayers of the United States or not. And this question between exemption of tolls or not is a question of whether we are going to ask the specially benefited by the use of the Panama Canal to pay a small portion of the annual income or whether we are going to pay it all out of the Public Treasury.

I should say it was a question as to whether 95 per cent of the inhabitants of the United States are going to be required to pay the cost of a benefit which inures to 5 or 10 per cent of the people, and it is in that view of the question that I wish to discuss it, whether this question shall be settled on the principle of deadbeat socialism or whether it shall be settled on the basis of Dutch-treat socialism. That idea I first learned from the Hon. John Burns 20 years ago in London.

The name I have given myself, but it is very sound and proper. It is the principle which we apply everywhere in the case of the municipal supply of water, and I see no reason why we should not adopt it. Therefore, I have said that the principle of Dutch-treat socialism should be applied to as many governmental functions as possible, while deadbeat socialism should be applied to as few as possible.

The principle made clear—what I mean by those two terms-I will go on, and I hope you will ask me at any time any questions you desire on this matter, if you think I am in any way trying to evade the point.

The CHAIRMAN. I think the committee is following you.

Senator BORAH. Did I understand you to say it must be either operated upon the principle of Dutch-treat socialism or deadbeat socialism-one or the other?

Mr. Fox. So far as the United States is concerned. But this, here, Senator, is discussing it upon what I call dead-beat socialism for the whole world, which to me is something monstrous. That is, you are going to make the tolls free. That is, you are going to tax all the taxpayers of the United States for the benefit of the shipping interests in England and Germany. Those are the great shipping nations. To me that is something monstrous.

Senator THOMAS. That settles it, of course, if you are opposed to it. [Laughter.]

Mr. Fox. The two great questions at this moment to consider are these: Who has paid for and will pay for the canal, and who will get the small pecuniary benefit that the building of the canal may possibly bring? I suppose there is no doubt as to who will pay for the canal, and who will pay for it in the next 30 or 40 years. It is the taxpayers of the United States. And the reason why there is so much misunderstanding upon this question is because we are dealing with at once one of the most fascinating and interesting questions of political economy, that is, the incidents of taxation. Therefore, we have got to consider this with very great care. Who will get the small pecuniary benefit that the building of the canal may possibly bring? You see, my feeling with regard to that I have carefully stated here. Who is going to get the commercial benefit of this Panama Canal among the citizens of the United States? It will be those who are in the shipping trade, or those who are merchants, who will be able to sell somewhat cheaper, or who as consumers will buy a little cheaper things that they could not otherwise get from the Pacific slope at so low a price.

Senator BORAH. Mr. Fox, do you consider that it will be a benefit to the Pacific coast?

Mr. Fox. To parts of the Pacific coast it may be a net benefit, but to a large number it will not be. But for those who are going to send their wheat cheaper to Great Britain, and not pay any rates to the Pacific railways, for those who are going to send their dried fruit to Great Britain it will be a rebate paid out of the United States; that is, they will get lower rates through English vessels.

Senator BORAH. Do you think the western farmer will be benefited, and the western wheat raiser?

Mr. Fox. I do not see how anybody of the Central region-the region above 36° 30′, above the lower southern boundary of Mis

souri-could possibly be benefited by the Panama Canal. I said that 10 years ago and I say it now.

Senator WALSH. Your argument, as I understand it, is that the canal itself is a mistake?

Mr. Fox. Oh, I think it was a tremendous mistake.

Senator WALSH. That is the way I understand you, from your memorandum here, that it is a benefit only to the people on the Atlantic coast?

Mr. Fox. The Pacific coast.

Senator WALSH. The Pacific coast, while the people of the whole country pay for it?

Mr. Fox. Yes. The city of Chicago is a large metropolis, and I do not see how anybody can say that the city of Chicago is going to get any benefit from the Panama Canal.

Senator BORAH. The city of Chicago, though, is getting a vast benefit from the Pacific coast, is it not?

Mr. Fox. From the railroads - not from the Panama Canal.
Senator BORAH. That is what we are getting tired of.

Mr. Fox. I am coming to that question. I will have to differ with you there, but I must.

Senator BRANDEGEE. The other day Prof. Huebner testified here that it might make some difference to the people who shipped in cargo lots.

Mr. Fox. From where?

Senator BRANDEGEE. People who chartered a whole vessel to carry wheat, for instance, from the Pacific coast through the canal to New York, that they will get the benefit of the remission of tolls, if we have authority to give it.

Mr. Fox. They will get a slight reduction in the cost, but there are a large number of people on the Pacific slope that I do not see how they can get any benefit from it.

Senator BRANDEGEE. On package freight Prof. Huebner thought the ultimate consumer would not get any benefit.

Mr. Fox. The average man will not. It will be absorbed by the companies, in my opinion. I will give you a single instance of that. You have been talking here about Lord Cowdray's railroad, the Tehuantepec Railroad. That is an example of what can be done by private enterprise, and I know of a large manufacturing firm in New England which has very large profits. They manufacture an article which is much in demand. They had before sent their freight over the Pacific Railroad. Now they divide it between the Tehuantepec Canal to San Francisco, and the Pacific railroads. I have never asked them, but I know very well they do not give the consumer the benefit of the gain in freight that they have.

The CHAIRMAN. You are sure of that?

Mr. Fox. I am not certain of that, but I know what their profits are, and I know what their business habits are.

The CHAIRMAN. Why do you suspect that?

Mr. Fox. Because of their habits as business men. All business men are not like Mr. Ford; not at all. They have got lower rates for their freight, but they sell at the same price, I have no doubt. They would tell me if I asked, but I have not asked them. It is not the custom for men to share their lower freight rates with their consumers unless they have to.