Nation Making, a story of New Zealand
Chapter XXXVI. — Indebtedness
Cost of Maori Wars.—Public Debt.—Private Indebtedness.—Interest paid by Excess of Exports over Imports.—England the Carrier and Money-lender of the World.—Decrease of Banking advances.—Excessive Imports evidence of Extravagance.—Private Indebtedness the real Difficulty.—A Fatal error.—Capital invested on English Account and Risk.—Borrowing Must Cease.—Emigration.
In 1870 the Public debt of New Zealand incurred for Native wars, and for public works, mainly of a reproductive character, may be taken at the sum of seven millions sterling. Then, the population was about 250,000, liable for a debt of 28l. per head. To-day, the Public debt of the Colony may be taken at thirty-six millions sterling, and the population at 600,000, or a debt of 60l. per head.
In order to pay the an nual interest of nearly two millions sterling, and a larger annual sum for interest on a Private indebtedness of, say forty millions sterling, we have reduced our public and private expenditure, so that our Imports have materially decreased, and by unflagging industry, have so developed the resources of these rich and fertile Islands, as to have greatly increased our Exports, and so created a sur-page 325plusin one year—1888–9—by savings and gains of 2,301,319l., as will be seen from
According to some political economists, the balance ought to be the other way—if the Colony is healthy—to the extent of our Imports balancing our Exports.
In proof of this position the instance furnished by the Imports (362 millions) and Exports (221 millions) of the United Kingdom, say in 1887, will be cited, showing a balance of Imports over Exports of 141 millions sterling.
This difference is mainly caused by the fact that Great Britain is largely the carrier and money-lender of the world, and like Tyre of old, lays many nations under tribute.
In New Zealand we are borrowers (or rather have been), and not lenders. We are not carriers. We are producers. We have no sources of wealth, or any earning power outside the Colony. Our products of wool, mutton, beef, cheese, butter, timber, gum, coal and gold, &c., furnish the only means we have of paying for what we buy, and of paying interest on what we owe.page 326
Therefore, it is evident that our Exports ought of necessity to exceed our Imports—political economists notwithstanding—in our present circumstances.
That this excess of New Zealand Exports is a position of soundness and strength, will be evident from a comparison between New Zealand and Victoria as to Imports, Exports and Banking advances for the year 1888-9.
|1888–9||Imports||Exports||Credit balance||Debit balance|
This difference in favour of New Zealand being caused by a less expenditure and a greater productiveness in New Zealand than in Victoria.
Now, if we compare the reduction and increase of Banking Advances in the respective Colonies, we shall see how the balance is squared.
In passing, I may be permitted to express the opinion that the enormous Imports per head in the Australasian Colonies, so often quoted as an evidence of wealth, may be taken, rather as an evidence of extravagance and luxury.page 327
Apart from the Public debt of New Zealand—which can only be safely borne by a large increase of population through immigration—there is the Private indebtedness which is straining the resources of the Colony, if it is not impoverishing it, at a rate which, one of these days, will enforce attention.
The wonderful productiveness of New Zealand (as exhibited by Tables I., II. and III. in Chapter XXXVII.), its surpassing healthfulness and vitality, its unequalled climate, and its remarkable variety of products, have inspired its inhabitants with a belief in its almost boundless capacity and wealth-producing power, and have developed an amount of enterprise, at a ratio probably unequalled, except by the United States.
Stimulated by these influences, the Colonists of New Zealand have incurred a Private indebtedness probably approaching forty millions sterling. Before the borrowing mania set in, prices of land were moderate, and large areas were leased from Government at practically nominal annual rentals. Then, any temporary depression was quickly removed by an advance in the price of wool and other products. But when leaseholds were turned into freeholds, by means of borrowed money, the interest upon which, is a far heavier annual charge upon the land, than the leasehold rentals were, an advance in wool and other products does not so readily afford relief as before.
That a young Colony of 600,000 inhabitants, with an indebtedness—Public and Private—approaching page 32880 millions sterling, will find no little difficulty in bearing its burdens, is self-evident. That the full weight of such a burden is not yet fully realized, is also self-evident. New Zealand Colonists, and those who pretend to govern them, are straining the resources of the Colony to pay the annual interest. The unbounded fertility and resources of this young country may be equal to the strain of an annual export of 4,000,000l. sterling unrepresented by any Import, but it is an enormous burden for so small a Colony to bear. Amid the cries of 'Borrow, Borrow,' the question of 'Repayment' has had no consideration. It is remitted for discussion to various periods in the twentieth century, so far as relates to the Public Debt. The philosophy of the hour has got no further than, that 'Sufficient for the day is the evil thereof.' Nevertheless the day of reckoning will surely come in the distant future for Public indebtedness. For Private indebtedness the reckoning day will come in the not distant future.
In the meantime, as a first step to safety, in New Zealand at least, the people have resolved to Borrow no more, not merely for three years, but for many years.
We are learning the first lessons of wisdom, in that we are becoming aware of our folly. Like youth everywhere, we have displayed more enterprise than experience, more energy than wisdom. If we are not suffering from the follies and cowardice which are degrading to age, we are being punished for the mistimed energy and the misplaced audacity which are page 329not unfrequently found amongst the indiscretions of youth.
Regarding the Private indebtedness, the fatal error has been made of borrowing English money on Colonists' account, thus casting the loss on land occupation, arising from a fall in prices of land products, entirely on the borrower's shoulders, though the money-lender was practically the owner of the encumbered lands, a mortgagor having only the right of re-purchase.
A safer and fairer course would have been for Colonial borrowers to have said to English capitalists:—
'This is a case for partnership; we have the land with Colonial skill and experience to work it, but we have not sufficient capital. You have the capital and desire to employ it profitably. We have hitherto borrowed on our own account, and when prices of products fall, we find a difficulty in making both ends meet. The burden is ours, the risk largely yours. In future we don't intend to borrow on our own account.
'English capital is invested on English account in mines in every foreign mining country, and in all the metal-producing Colonies. In the United States, English capitalists hold on their own account, enormous areas of land, as well as railroads and a great variety of other enterprises on partnership account with American citizens.
'English investors are aliens in the United States, and are treated as such, often with scant courtesy.page 330
'In New Zealand, they are not aliens. They belong to us, or rather, looking at our indebtedness, we belong to them.
'Why then should not English capital be much more largely invested in land and other enterprises on English account in New Zealand, an English Colony—instead of in a foreign country—a Colony with resources in proportion to its area far superior to any foreign country, and a climate, which for geniality and healthiness, has not an equal in the world?'
In any case, Borrowing must cease for a generation. If New Zealand is to progress on safe lines, English capital for the future, must be largely invested on English account. The enthusiasm and ambition of the Colonists have led them to take burdens upon themselves, under which they are now staggering. If they are wise, they will resolutely refuse to increase these burdens by borrowing either on public or private account.
Emigration is a growing necessity, which England is at last beginning to realize. Why should not English capitalists send out thousands of English farmers, and tens of thousands of farm labourers to New Zealand, and place them on freehold lands which, as mortgagees, they either practically already own, or can obtain on favourable terms?