ADVANCES TO SETTLERS.

Evening Star, Issue 20255, 16 August 1929, Page 8

ADVANCES TO SETTLERS.

Mb' James Bego’s address to the Otago Fanners’ Union Executive yesterday will have served a useful purpose if it reminds ns that in measuring the effects of economic or political innovation it is never sufficient to observe the immediate consequences in isolation by themselves. Wo must also study the indirect effects, including some perhaps which are likely to be detrimental even to those who at first sight seem to benefit from the change. Mr Begg’s case in brief is that the activities of the Advances to Settlers Department have not been beneficial to the fanning industry as a whole, the advantages of cheap money having been capitalised in higher land-values, the whole benefit passing to the original borrower, and not being passed on to- later holders of tho land. Freight concessions on the railways are capitalised in a similar way, and benefit only those who happen to be on the land at the time when the concession is first granted. The Government is like a good-natured motorist who offers a foot traveller a lift, but the good-natured motorist “does not, as a rule, also give him the privilege of selling his seat to a third party when he vacates it. If he did he would probably find a different passenger beside him at the end of tho journey. The motorist would still be giving a free ride, but the passenger would not be receiving it, having paid full fare to tho first occupant. The Government still presents tho gifts, but the present recipients are under no obligation. Ail Government concessions, if transferable, will be sold, and the value of the concession will enrich the recipient and be lost to tho industry.”

Mr Begg has' here drawn attention to an important aspect of land values which is frequently overlooked. The same principle might be carried further, and applied to the taxation of land. Land taxes tend to be a burden only on the owner of the land at the time the tax is first imposed. People will be unwilling to pay as much for land wdioso ownership involves the liability to pay tax as for land which is not-taxed at all. In the same ivay the remission of land tax is in effect a free gift to the present landowner,! which he is able to capitalise when the land is sold. The position in practice is, of course, much more complicated than this, for all sorts of other influences are constantly at work, and industries cannot properly be regarded as independent units. The tendency is, however, a powerful one.

Nevertheless, Mr Begg’s gloomy conclusion that “ little if any benefit from the introduction of the Advances to Settlers Act remains to-day ” must be rejected. In the first*place, while there may be no case for providing capital to farmers at lower rates than prevail elsewhere, there is a strong case for taking such steps as are necessary to prevent farming from being handicapped in getting an adequate share of the world’s savings. To. ensure supplies of capital other industries have machinery, more or less efficient, which is impossible for farming on account of the nature of its work and organisation. The British Ministry of Agriculture in 1926 quoted with approval the opinion that the success of agriculture “depends on there being an adequate agricultural substitute for the industrial joint stock method of obtaining working as well as initial capital.” To a large extent the Advances to Settlers Department has been effective in providing a substitute. And, further, even if the operations of the department have been equivalent to the granting of a subsidy to the farmer who first borrowed money on favourable terms, that has been a good

thing for the country as a whole. Experience of railway policy doubtless suggests the dangers of vague talk about opening up the country. In many instances no doubt the country would eventually have been opened up in any case. But there are many changes in economic development which are inevitable, but which nevertheless it is advantageous to. speed up, and the agricultural development of Now Zealand would seem to have been an example of this in the past. It is certain that in the absence of the Advances to Settlers Department the agricultural advancement of New Zealand would not have been as rapid as it has been. To suppose the contrary involves a simpler trust in the principles of laissez faire than most people are able to-day to command. Certain individual farmers have no doubt profited tin a large scale, but the rest of us have Ijad advantages/too. i;