AGRICULTURAL VALUES

Manawatu Times, Volume LIV, Issue 7084, 5 December 1929, Page 9

AGRICULTURAL VALUES

Problem of Credit

RIGHT AND WRONG USES

AN EXPERT’S OPINIONS.

An article on “Agricultural Credit and the Control of Land Values” contributed by Professor H. Belshaw, to the New Zealand Journal of Science and Technology contains many striking arguments, and although some of the statements made by the Writer may not be acceptable to the average' landowner thgre is no doubt whatever that they fire well worth the serious consideration of all those who work the land, or who depend upon the returns from farming for their subsistence. Mr. Belshaw says:—“lt has long been, the opinion of the present writer that the problem of credit to agriculture cannot be dissociated from the problem of land values, and that in a country such as New Zealand the effective control of land values is essential to the establishment of a safe system of agricultural banking. On mote than one occasion the present writer has endeavoured, through the Press and in lectures to farmers, to warn the advocates of an agricultural bank that this problem must be faced; but unless opinion has changed, considerably during the past year the essential relationship between a wise credit system and adequate security, in land is still not recognised as .fully as it should be. - An. intensive study during the pa3t year of conditions involved in the proper provision of credit 'to farmers has more than ever convinced the writer that the solution of the credit difficulty in New Zoaland consists first in devising machinery for the proper control of lard values.. This article is written, therefore, with, the object of examiping the factors.on which land values depend, and suggesting a course of action which should accompany any scheme of agricultural credit. Proper Use of Credit.

The following truths are taken as axiomatic: — ■ . 1. Credit is a device for directing the productive, resources of the community in such a way that those who own the resources hand'them over in return for a reward in the shape of interest to those who . use and control thorn in production. It is not, therefore, a wonderful life-giving stream which can be charmed from nowhere by the magician’s wand, but represents savings (or capital) already, accumulated. 2. The use of credit in wrong ways means, • therefore, a waste of the capital of the community. If production ife to bo the most economic, credit must :be advanced where it is required most. ~ 3. In practice, the proper use of credit demands' that the security against which it is advanced should be real and adequate. ,ii 4. In agriculture, the credit most urgently required is long-term credit, against which the best security is in land. , . . 5. The proper and safe use of longterm credit' in agriculture demands that land values, as the basis of security, should be real and not fictitious, otherwise the productive resources of the community are wastefully directed, {jjild producers as well as creditors ipffer loss. - '6. The ppst-war situation in New Zealand showed that, in fact, the basis of security in land was fictitious, and that capital was therefore wasted. In short, the difficulties arose not from too little credit, but from too much, advanced in wrong ways and on inadequate security. The danger of a repetition of such an occurrence must be guarded against.” Question of Production.

The truths mentioned by Mr. Bel* shaw can be accepted, but the author xaisses' one important phase of land credit and land values which is of serious consequence, and that is the fact that, in nearly all countries and particularly in New Zealand until quite recently, credit to the farmers lias been based . almost entirely on broad acres.

It is probable that in some cases fully improved and highly productive farms in. New Zealand may have been sold during the period quoted by Mr. Belshaw at values higher than their real worth, but this was by no means frequent because the prospective buyer had every opportunity of knowing the true price of such land because it could be estimated upon actual returns, and the owners of fully improved and highly productive farms were those who had the least inducement and the least inclination to sell.

The trouble -. with land values and land' credit during what is known as the “boom,” probably before the boom and certainly during the recent years following the boom, was not so much due to fictitious land values as to the fact that capital was only available for the purchase of land while practically none was available for the improvement of land. The consequence was, that individuals were encouraged as a rule to buy more land than they could work, 'and 3inco in most cases much of the land whs unimproved they had no means of making their holding productive. Need for Capital and Credit.

If an examination was made into the land transactions of the Dominion since the fall in prices after the war, it would be found that singularly little real loss has been made on fully improved well-worked farms, and that nearly all the financial suffering has been caused because the owners of land had not sufficient capital or sufficient credit to make their land productive.

In the main every legitimate farmer will agree, with Mr. Belshaw that un-

improved or even partly improved land in New Zealand has been, and still is far too high in value, but the State is as much to blame for this fact as the farmer, and, in fact, more so, because the'State all through the period ot boom and slump has demanded the highest price possible for State lands, and, moreover, through its valuation department has persistently encouraged and, in fact, demanded great increases in land prices for rating and taxation purposes. • Whatever bo the cause of land rising or falling in price, every true fanner must agree with Mr. Belshaw that those who work the soil and depend upon it for their living are deeply interested in keeping land values on a par with the price of land products or consistently lower than has ruled for many years. But how is this change to be brought about is the question to be answered.