“CHEAP MONEY.”

Lyttelton Times, Volume C, Issue 11760, 12 December 1898, Page 2

“CHEAP MONEY.”

MY CONNECTION WITH THE MOVEMENT. (By J. H. NEWLYN.) Although I cannot promise, like . a certain new J.P., to be “neither partial nor impartial,” I' -will try to sketch the early history of the cheap money question without partisan bias. According to John Locke, “ when a nation is running to decay and ruin, the merchant and the moneyed man, do what you can, will be sure to starve last. Observe it where you will the decays that Come upon and bring to ruin any country do constantly first fall upon the land.” This truth seems to have dawned upon the (Oucolic mind when, in the beginning of 1884, the Atkinson Government met a hostile Parliament, and the murmur of “ separation ” promised to become an election cattle cry. It had been stated that the depreciation in the value of property had been caused by the Government’s land proposals, and that there was a degree of uncertainty, as farmers did not know’ what was coming. I had perceived tlm feeling |n conversing with many fanners, who, however, seemed to have no defined views as to the remedy to be adopted. Candidates had begun to prepare for the dissolution of Parliament, and Mr J. C. Wason Cad announced that he would speak at Dhertsey on May 16. Like other people who had “taken in” a newspaper, I had jertain hazy ideas that the British Government had in some way assisted distressed farmers in Scotland and Ireland, and the thought occurred that the New Zealand Government might profitably step in to the Aid of our farmers, who had for years been paying from 7 to 10 pci- cml> for ■roomy on first mortgage. At Mr. VVason’s meeting, allusion was made to the amount o! inoiwy umually remitted to England to pay interSst on our public debt, and, in reply to my juery as to whether the depression could lot be partly attributed to heavy interest -•barged on mortgage, Mr Wason said that Wmers were possibly heavily handicapped, md asked if I could suggest any improvement. With his permission, I then read >he following proposal: “ That in the opinion of this meeting the government should take the earliest possible opportunity of reducing the annual interest on mortgaged property by carrying a Bill to enable them to raise loans at suitable jeriods for the purpose of advancing the Money so raised in England to persons holding land upon which a mortgage exists. All Mortgaged property should be liable, under renditions similar to those now prevailing, Cut any gain made by the Government through having to pay less interest, than the land-owners now pay, should be shared with the farmers, i.e., supposing the Government to gradually succeed in raising coney to lift the mortgages at per cent, * farmer who now pays 7 per cent would .lay the Government half the difference between 7 and 4£ per cent over the cost to >he Government, that is to say, 5-| per cent, ihe remaining per cent going to the •ountry, in an actual saving on the amount -low annually paid as interest on mortgage. That the, above resolution requires to be tven effect to before any steps can be taken j. the direction of obtaining the ‘ unearned scremenb,’ or of nationalising the land of ie colony.” ‘

Mr Wason said that I had raised a l ar 8 a question,” and Mr Lambie, a member of the Ashburton County Council, seemed to conrider the proposal a very sarcastic one, and a severe Mt at those statesmen who were leading ithe people away from the 'serious subject of (taxation by such “ fads as the “unearned increment” and the nationalisation of the land. But as the subject raised was one well worth serious thought, he hoped to see the suggestion made public. Having no desire to further intrude on the indulgence of Mr Wason, I was cbntent with having read the outline of the scheme. All the reporters present, however, obtained copies for their papers, which contained the plan in their next issue. Of course the figures given above were simply given to add point to the idea that the State could benefit the farming community without national loss. ~ A letter in the “ Lyttelton Times on Mav 29, and another m the Telegraph on dune 12, in further explanation of what was termed “a new policy,” were the only additions to the literature of the subject until Sir' Julius spoke at Ashburton on June 13 The almost dramatic re-appearance of the author of our public works’ pokey, on the eve of a long hoped for election, had caused the political thermometer to rapidly shoot upwards to far beyond temperate, and it was deemed an appropriate occasion for launching the scheme into colonial, ih place of local waters. That Sir Julius inteht have time to consider the .cheap money scheme in its bearings upon existing politics, four written questions were forwarded to him at his hotelbeforehismccfcina: began, and, after he had delivered his one of the first questrons dealt with was: “Do you think that the Government should borrow money in tne Home market and let it out on low mortgages to freeholders in this colony, at, say, from 4 to 5 per cent ? ” ~ . , ~ Sir Julius replied “I do not think the Government could do that. It would impair their own credit if they went into the market to borrow on the security of the land; neither do I think it would be a prudent tliiug to do. I am one of those who think that the Government shomd undertake certain great things, such as railways. But do not let the government compete too much, nor interfere too much with private enterprise. This question of the amount of money to be borrowed on the land, and the cost at which it shall be borrowed, has to be reckoned by the rate of supply and demand. If the Government do this work they will hold supreme political power in the country, and impair tneir credit in the Homo Country. However, I doubt the practicability of the proposal. I speak now in a tentative manner, but I believe that in Austria and Germany there are banks of agriculture, in which transactions amounting to millions, are effected. These banks answer very well, hut I 'do not know,the principle on which they are worked. I think 1 his is a subject wmch is well worth inquiring into; they are the means of keeping up the prosperity of the vast numbers of small fanners who would not be able to command the advantages of a huge monetary institution. _ When the above query was asked, I promptly arrived at the conclusion, also come to by a friend by my side, that Sir Julius was avoiding a part of the series of questions I bad submitted to liim, and Ifcid caused a substitute to be sent up. T therefore “put up” a copy of what I had desired to ask :

“ (1) Dees Sir Julius Vogel not think that the high rate of interest which farmers have to pay is one reason why serious depression exists ? “(2) Does Sir Julius-Vogel think that if the Government were to .guarantee the regular payment of interest on mortgages the principal could be x - aised, as needed, in England on easier terns than those prevailing ? “ (3) If money could be borrowed on mortgage at 5 per cent would not the annual payment of £7 Is lid for twenty-live years enable the farmer to quite free his farm in that time ?

“ (4) Will Sir Julius Vogel favour any scheme that enables land-owners to borrow money at a lower rate of interest than they usually pay in New Zealand ? ” It was apparent from the lengthened perusal of the questions, before Sir Julius read them out, that he was surprised to meet them again, and almost expected to detect some catchy alteration. In reply, Sir Julius sold: —“I have already answered the greater part of this question. All I can -ay is that, while f'du nol know any scheme .whirl,. j« praciicvihlc, I am not so \ cun a.-J ( supf««c, tha.!- th tv may not be a. scheme by winch effect may be given to the questioner’s views. I should, however, say, do not let such a scheme be carried out by the Government, You should avoid bringing the Government into too intimate communication with the members of the community over their private affairs. Unless that is

avoided you cannot help having. political corruption.” (Applause.) The above answer is copied from one of the admirable reports that were telegraphd, verbatim, to the Christchurch papers, which owing to a general relieving of reporters at the moment, did not publish the reply of Sir Julius to the third question. Sir Julius considered that the subject of terminal annuities (as implied by the third question) should engage the attention of farmers, more especially if the interest they were at present paying-could be used to discharge the debt incurred while performing its present office. (Applause.) Shortly after the above meeting a large innholder, and a prominent member of Sir J. Vogel’s committee, mentioned in conversation that bo had “ put up ” the question which had, seemingly, been intended as a substitute for the four which had. been sent to the candidate.

The prominence given to tine subject of cheap money by means of the Ashburton address had a niacked effect upon politicians and newspaper correspondents. On both sides some ably written letters added interest to the discussion ; while in the House of Representatives one member stated that the Government should have {insisted farmers. When the elections were in fall swing a large number—possibly a third—of the candidates spoke in favour of the proposal that the State should lend money to farmers at a moderate increase upon the rate at which it could bo borrowed by the Government'in England. At the invitation of a body of Ashburton fanners an address whs prepared and delivered at Pendarves on July 17, 1884. Two facts of interest that stood out prominently in this connection were : First, that Sir Julius Vogel was bound to be a momentous political factor in the immediate future, and, second, that he was unfavourable to direct State aid to farmers. It was, therefore, necessary to frame suggestions for a less pronounced manner of obtaining cheap money with the co-operation of the Government. The first address had incorporated with it about forty-five sections, showing how Associations of farmers could lessen the annual rates of interest and legal charges, provided the State would raise the loons to replace outstanding mortgages. In the discussion which followed it wag the seeming desire of those present that the address should be printed and “placed in the hands of every fanner and every member of Parliament within the colony.” Among the resolutions carried Was the following; “That a committee composed of Messrs Bruce, Parsons, Vucetich, Lambie, Rule, Strachan and the mover, with power to add to their number, be appointed to examine into the merits of the scheme made public by Mr Newlyn, for the reduction of the rates of mortgage interest.” Two editions of the address were published by the committee of the Colonial Land Association, and, by special request, meetings were held at Amberley, Sefton, Seafieid, Methven, Chertsey and Ashburton, at all of which places resolutions of a favourable character were carried without dissent. Pull and fair summaries of these addresses were contained in the “ Lyttelton Times ” of Sept. 28, 1884, and in the “Press,” “Ashburton Mail ” and “ Guardian ” of August 26, and it will suffice now to quote the resolutions carried with a few remarks of some of the speakers. On August 23. 1884, a meeting took place in the Ashburton Town Hall, and there was a very good attendance, especially for a Saturday afternoon. His Worship the Mayor (Mr D. Williamson), in introducing me to the audience, “ unhesitatingly affirmed that the high price of money, and the exorbitant charges and incidental fees incurred by mortgagors, brought about much of the disaster to farmers and fanning interests within the colony, and whatever might be the merits of Mr Newlyn’s scheme, lie thought it highly probable tliat a material reduction in the rates of interest might be effected by some such united action as was suggested by the promoter of the present agitation . . . It was claimed for Mr Newlyn’s proposals that they would bring about a saving of half a million. A scheme which had been carefully elaborated, and which claimed to effect so much,, was certainly entitled to serious consideration, and he hoped it would have a fair trial.”

Mr 11. Parsons said that “ as Chairman of the Pendarves Committee, which had taken up Mr Newlyn’s scheme, he had been asked to support the author by appealing upon the platform. He was sure the opinion of the country was with them, and that as soon as the project was fairly swimming, the doubters would give in their adhesion. He hoped that farmers, one and all, would

join the proposed Association . .■ . The ball was at their feet, and it only remained for them to kick it.”

At the conclusion of my address, among other resolutions, the following was earned, on the motion of Mr Sawle, seconded by Mi' J. Lambic ;—“ That the present committee he requested to prepare a petition to Pariiamen in favour of the scheme before the meeting, and that landowners throughout New Zealand he invited to sign it, and to join in forming a strong Colonial Laud Association.”

Most enthusiastic support was received from a northern farmer, Mr A. St John White, who induced the Kowai Road Board to invite me to Arubcrley and Sefton to explain my views, and at both places favourable resolutions were carried without dissent, and a committee was, at the instigation of Mr White, formed to co-operate with me. In July, when the elections of 1884 were approaching, the late Mr James Macandvew, at Port Chalmers, had spoken in favour of a laud hank as a means of promoting the “cheap money scheme,” and in the beginning of September the Hon J. Bathgate delivered an address before a Dunedin Association advocating a State Bank as a means of bringing about cheap money. As Chairman of the northern branch of the Colonial Land Association, Mr White quickly cooperated with the two. Otavan politicians, and became Chairman of the New Zealand State Bank League, while my committee was invited to become absorbed in the League. This suggestion did not find favour, and nothing was afterwards heard of the League, although the gentleman who so kindly entertained me in North Canterbury wrote several letters to the newspapers as the League’s leader. I have not had the pleasure of meeting any of the members, neither have,l been able to peruse any accounts of the deliberations of the New Zealand State Bank League. So much lias been written about a State Bank as a vehicle for living us “ cheap money,” that an account of that branch of-the question must be for the present deferred. It may, however, be remarked that the first newspaper to allude to a laud bank was the “ Temufca Leader, ’ in an issue dated June 14 .1884, the morning after Sir Julius Vogel's Ashburton meeting when mv question-!' wen- t« >i; ” h>. imbli'le-r of mv pamphlet ten!* t'! •I ” L'".!ia. Ho, i >’! Morten,g!.-iolercst ibn.-s ") had '.va.rdcd a -.opy to t h,- t.dil.ir A Ihe ! e!nm,,i Leader,” and, in a leading article of Sept. 9, 1884, dealing with the scheme, that paper blamed me for not. having mentioned “ the two most active advocates of the cause, the Rev Mr Smythe and Air Twomey.” From the article it appeared that the reverend gentleman had communicated with Sir Julius Vogel, ami been noticed by outside papers. Although space is so valuable. I cannot refrain from quoting at some length from a writer who claims, somewhat hazily, it is true, that both himself and the reverend gentleman named originated the scheme. After twitting me with jealousy, the article continues :

“ Mr Newlyn’s original scheme was that enunciated by the Rev Mr Smythe, in the ‘ Timaru Herald.’ The reverend gentleman claims to have originated the scheme in Ireland, where it has Ivren working for three or four years. When Sir Julius Vogel came to Ashburton, in reply to questions lie said something which amounted to a disapproval of the scheme (whose?), but be also said something about a.n intermediate body having the administration of it, and-about terminal annuities- We have not the paper containing Sir Julius Vogel’s speech now, but wo remember that he said something to this effect. Air Newlyn.at once tacked on the great man’s ideas to tho Rev Air Smythe’s scheme, and strutted it before the farmers of Pendarves as a brand new creation of his inventive intellect.

And still they gazoo, ancl still the -wonder grew, That ono small head could carry all he knew. As regards the terminal annuities part of it,

tho present generation would hardly receive any benefit, because the extra amount to wipe out the debt, together with the minimum interest, would equal the present rate.” The writer was evidently not aware that the questions had been drafted by me. A gentleman who had been present at Mr Wason’s meeting, and who bad joined my committee, then wrote, asking the editor for “ the actual date of any New Zealand newspaper in which the idea originated in its application to this colony.” In reply, it was stated that the Rev T. Jasper Smyth© asked Mr Sutter, at Pleasant Point, on July 7, 1884, if he would be in favour of the Government borrowing money in England at 4 per cent, and lending it to fanners at 5per cent, and on July 10, the same gentleman published a letter - in the “Timam Herald ” on the same subject. “On July 14, in a report of Mr Twomey’s speech in the, ‘ Timaru Herald,’ the matter was again referred to, and pointed out to be impracticable.” It is to be hoped that the success of the Seddon Government in carrying out the first suggestion has materially changed the views of the writer. Certain dates of country papers -were quoted in connection with Mi - Twomey’s proposals, but an editor and newspaper proprietor informed me that, out of a laudable curiosity, h© bad employed alad for some‘hours in a quite unsatisfactory effort to pick out the articles from the files of newspapers said to contain them. When the Stout-Vogel Government became settled, the Colonial Treasurer was asked to assist in carrying out the schemes for lowering the rates of interest. Sir Julius stated that lie would put my proposals before the Cabinet, and on Nov. 20, 1884, the Secretary to the Cabinet regretted that the Government did not “ see their way to specially render add respecting any of the proposals ” I had brought before them. Before the close of the session Mr Macandrew carried a resolution requesting the Government to prepare a measure to enable loans to be made to “ cultivator’s of the soil.’’ To the pleased surprise of all cheap money advocates, Sir Julius Vogel occupied a large portion of his time both at Christchurch and Dunedin, when addressing electors, in sounding the merits of cheap money, and he followed up his remarks by publishing the heads of a scheme which did not in any essential particular differ from mine, save in the fact that his aid was mainly to be given to Crown tenants. At an interview afterwards ha showed and explained certain portions of his proposed Mortgage Debentures Bill. It will be remembered that this Bill met with a rather mild opposition during the session of 1885, and is now on the Statute Book. On the last occasion when the late Hon John Ballanoe met a Christchurch audience, he owned that the Act had been of little aid to embarrassed farmers, and I understood him to say—his voice was unfortunately weak —that he would be glad to see me in connection with my proposals. I had to leave town that evening, and, therefore, never had an opportunity of meeting the late Premier, who, however, in writing, stated that any proposals I might lay before him would have his attentive consideration. When the Mortgage Debentures Bill was in committee, certain clauses drafted by me were taken charge of by Mr (now the Hon) W. 0. Walker, in the unavoidable absence of Mr J. Ivess. How they were disposed of I do not know, but they could not have done the Bill any harm. If further proof be needed of the inadequacy of the Mortgage Debentures Act as a cheap money medium, one has only to turn to the newspapers of August 27, 1887, to find that, when addressing the Ashburton electors, on the eve of the contest which unseated the Premier, and caused the resignation of the Stout-Vogel Government, the author of the Act indirectly owned that the farmers had not been benefited by bis measure, and that he had been “ converted ” soon after the great Ashburton address which heralded his political re-appearance. In concluding his lengthy remarks on v “ the mortgage system,” Sir Julius Vogel said that “before he left the subject of the farmers, he desired to point out to them that he had always had the subject of the State making loans to farmers before him. In 1884, realising the great difficulty under which the farmers laboured, owing to the high rates of interest on advances for land, ho had sketched the outlines of a measure which the Governmentmight bo able to introduce. Bat this proposal evoked such an -amount or oppo.M-.0-n and a.u outcry from-vim*?* nh>> thought their vesod. intco - . 5 w■* the Government d "tfto xurtnv. . ■

he had to announce' Vo + r7--m that, t-hc Government last senior* had m''’Tided te »nng down a measure which would, as it were, lay the train to enable farmers to obtain money at a lower rate of interest than now. If they were able to pass it next session, he felt that it would result in great good to the farming industry.” (Applause-) “ Next session ” found Sir Julius in opposition, and therefore unable to make a third effort to bring to fruition the scheme, or suggestion, the practicability of which he no longer doubted. When it was found that the Mortgage Debentures Bill had passed through the House of Representatives without any heed having been paid to tho clauses which had been drafted with the approval of my committee, the late Hon John Bathgate was asked to see what could be done in the Upper Chamber. In reply, Mr Bathgate wrote:—“The Bill, having passed through committee, it would have imperilled the passing of the Bill to have attempted the recommittment for tho passing of the clauses mentioned at so late a stage of the session I did not think it advisable to do anything. If expedient, an amending Bill would have a better chance next year. But as both committees on the matter of Advances on Freehold Lands have reported, recommending it for special legislation next session, I think it probable the Government will take it up. ... I know that the Premier individually is favourable, and has studied the subject.” But, however favourable the individual members of the Government might have been to cheap money in tho abstract, the Colonial Treasurer, when delivering the Financial Statement in 1886, had to own to the Cabinet's disinclination to satisfactorily deal noth the cheap money agitation. Sir Julius said:—“l regret to say that I am not able to make proposals on the subject. If the Government were to enter tho field as a lender of money, it must obtain the money somewhere. In European countries . there is a market for the

securities that provide the money, but in

the colony thero is not, at present, although Ido not think that it will be long so. . . . The stand thte Government now take is that at present the colony’s credit would suffer by their entering into the business. . ._ • i They recognise, however, that the subject should be watched 1 , and further consideration.given to it.” The Pendarves Committee had not shared Mr Bathgate’s sanguine anticipations, and the. remarks of the Treasurer had been read by them with more disappointment than surprise. The Colonial Land Bill had been drafted and placed in charge-of Mr J. Ivess, M.H.R., that the House might by its criticisms show us the weak places in our proposed remedy for farmers whose finances were in an unsound state, owing to heavy mortgage interest. The measure came in for adverse remarks from some newspapers, but the Association felt that those who were sincere in their effort.'* to get the rates of interest reduced, would be able to propose remedial amendments; in fact, the chief aim was to obtain an open and full discussion of the cheap money scheme. From the “ Ashburton Mail ” of May 27, 1886, the following report is taken: —“ A meeting of membci> favourable to cheap advances on land was held this morning (May 25) ; present—Mr Ivess (chairman), Messrs Macandrew, Turnbull, Bathgate, Sutter, Hatch, Holmes O’Callaghan and Steward. Apologies were received from Messrs Walker and J. M’Kenzie. The draft Bill, under the auspices of the Colonial Land Association, on the line of Mr Newlyn’s scheme, was read, as also a much shorter Bill prepared by Mr Macandrew. The meeting was unanimous in considering the first-named Bill too complicated, and that the Bill prepared by Mr Macandrew would better serve the object in view.”

A resolution to the above effect was carried, and I was requested to withdraw the Bill, which had been placed in Mr Ivesss hands. The committee of the Association were invited to weigh the proposal, and, without any interference or suggestion from me, they decided to ask Mr Ivess to at least press the Bill on to its second reading. The member for Wakanui certainly did his best to explain a Bill which, according to one not unkindly critic, “ was destroyed by its own ponderosity,” an objection, by the way,which had, a vear before been urged by Mr Macandrew against the Mortgage Debentures Bill, the bulk of which was greater than that of the Colonial Land Association’s Bill, but not bulky enough to prove successful. In the debate which fallowed the remarks of Mr Ivess, Sir Julius Vogel thought it necessary to speak at some length, and although he was prepared to sanction tho carrying of the second reading of the Colonial Land Association’s Bill, his objections were aimed more at the Bill fathered by Mr Macandrew. Mr Ivess consented to the postponement of the debate that the Advances to Settlers Bill might, in the meanwhile, be discussed. Naturally, Mr Macandrew was more fortu-' nate than myself, as he got his Bill read a second time. By it, fanners who held their deeds could obtain debentures up to a nominal £2OOO at 4-Jr per cent interest, but an advance could not exceed half tlie assessed valu.- of the land. The debenture..-. could lu< exchanged for Te a-;nt-r-v-c. bearing note.-, which could again be exchanged for debentures. it I mistake not, Sir lloheri Stout, ntm I'reader), * .raymved the mea.-.uo •« 'A;-leton which' "*lO Govcmincsd. wv’e i,. put flesh upmL. A voieran phhrw wl'-oso absence from Pavhameur. lor some u> , was said to he due to hi a rawtado concerning the cheap money question and railway freights, spoke very severely upon the course adopted by the Government and the House in relation to Mr Macandrew s Bill. He said ; -“Never since I have been in Parliament have I seen anything that reflected so much discredit on our institutions. * Members all round the House stated they simplv voted out of compliment an respect to him. Is this the position of the Legislature of'New Zealand—that its members are on such grounds as these to lend their names to a principle of that kind, raising hopes in the minds of the fanners of the country, leading them to the belief that they are to be given relief, which every one in this House knows will not be afforded. I enjoyed the privilege of corresponding with the late Mr Macandrew, whose sincerity cannot he doubted but I am strengthened in opinion that the above description of the minds of members is accurate, by the confession of one o the number that the Advances to Ldl was earned to its second reading to kill the cheap money measure. ( It lias already been shown that the Government bad arranged to alter its mind on the eve of the elections of 1887. The return to power of the late Sir Harry Atkinson o-ave the Parliament a, three years’ rest upon this question, which did not again agitate M H.R.’s until the publication of a memorandum written by the present AuditorGeneral, whose official document bore enough resemblance to the original schemes to warrant the belief that my early proposals had not been quite forgotten. In his Financial Statement of June 24, 1894, the Hon J. G. Ward, in' preparing the way for the Advances to Settlers Bill, said “There has been no little controversy upon the question of providing cheap money. * * * Many schemes have been propounded. * * * Mie Credit Fonder system has been advocated, the establishment of a State bank has been urged, (he issue of paper money has been suggestd, and many other proposals have been made. * * » ' None of these methods would immediately enable the colony to obtain * » money to be utilised by settlers at a low rate of interest.”

Like Sir Julius Vogel on a similar occasion, Mr Ward omitted mention of the original suggestions, which were, however, the ones ultimately adopted in the Advances to Settlers Art of 18'JL and as Parliament h,;s dcllboraMy ssmai'imd Ihe oxiendniv (if the Art hv givnu: ;:,u finally t" borrow ;i, (’nit.her sum <>l :8! .hDLnUOO. 11n' 1 above sunn Mtarv of I.lm- Jiv-t*h-\ of !he agitation .limy iiileivst the readers of a iiew>spa,(«;r whirl, has all along' devoted considerable space to the question. I should like here to thank many reporters throughout the colony for publicity given to tint movement by sldlfnl condensations of candidates remarks on '‘cheap money’’ at election times. Since 1886 I have received no outside financial aid, but at the beginnin" of the agitation the money received from members of the Canterbury Liberal Association was.expended in the publication of two editions of a pamphlet, in postage stamps, in newspapers and stationery, and in travelling expenses. About thirtyfive farmers paid JSI each, and I hope that they, and some of the renders of this paper, will agree with one of their number, who remarked that

“ It was the best pound lie ever spent.”