THE NEXT STEP IN THE ADVANCE OF THE SOCIAL STATE.

New Zealand Mail, Issue 1424, 15 June 1899, Page 41

THE NEXT STEP IN THE ADVANCE OF THE SOCIAL STATE.

(By Oswald Gardner.)

No. 11. That the present system of security is unjust to the borrower and the workers depending upon him, and also f o future generations. As Australasians, we are justly proud of the wonderful development of the country, which no doubt would not have been accomplished so quickly without the use of borrowed money; and capital should, no doubt, also receive its reward for assistance rendered. But it is possible to pay too much for one’s whistle, which many find out when too late to cancel the bargain. We are in debt, both publicly and privately, and a time wdll come, if it has not already done so, when we must pay the penalty, although that penalty may be out of all proportion to the benefit received. Under the genial warmth of an artificial sun, the plant of prosperity puts forth its tender leaves, but with that warmth withdrawn, there comes a frost, a killing frost, and nips his root. So labour finds i-self, under this burden of debt (very often bequeathed to it), left, weary and old with service, to the mercy of a rude stream.

That interest should be paid on borrowed money is just and right; but because rent, interest and security are regulated altogether by the price of money, we have the producers toiling and sweating, and yet getting deeper into debt, while producing wealth that must be exchanged for certain pieces of metal, whifih in themselves are of little or no value,- under the penalty of losing the whole of the wealth they have produced, and their means of support. Let us take an example of the injustice of this system. Suppose a farmer borrows £IOO on the security of 100 acres of land, worth at the time Oi borrowing, £200; it is evident that 1 he mortgagee lends to the value of fifty acres. The farmer invests the £IOO in twenty cows, and pays £lO per annum interest, which is the value of 2001 b of butter at a shilling. If the price of butter fall to sixpence, the farmer must pay 4001 b of butter as interest, although the cows are worth no more butter than at the time of borrowing, and although 4001 b of butter will support twice as many people as 2001 b, or will support the mortgagee for twice as many days, and although tb9 mortgagee did not expect the farmer to produce sovereigns, but butter; so that the interest is really doubled, through no fault on the part of the farmer, or exertion on the part of the mortgagee. But that is not all; for the money value .of the land decreases with the money value of its produce, so that the 100 acres of land have become worth only £.IOO, and the mortgagee steps in and takes the whole area. Or if the farmer be unable to double his output of_ butter, the difference in money value is profit to the mortgagee, who adds the amount to the principal, and claims to have lent the farmer £lO5, on which he demands interest. In this way the farmer in a few years may become penniless, although he started with a property of 100 acres, and has produced a greater quantity of butter every year with the hard work of himself and family; while the mortgagee started with'the value of fifty acres, and has become the owner of 100, without worry or labour, and with an ncreasing income of butter. . Nor oes the fall in prices affect the borrower alone, for to reduce expenses he is forced to discharge labourers, and-to cease from spending money on permanent improvements; so that his property often deteriorates, while he lives in the hope of prices recovering shortly, when he trusts he will be able to re-improve. Also, the discharged labourers were consumers of produce, which they are unable to obtain without employment, so that their dismissal still further tends to lower prices. In this way also the introduction of machinery into one trade lowers the value, not only of its own product, but also of all others. For example, a new machine introduced into the boot trade throws 500 men out of employment, v, ho were wearers of shirts; hut through loss of employment they become unable to buy shirts, so that the production of shirts must] be reduced by the number which those 500 men were accustomed to purchase, and a number of shirt producers, say fifty, necessary to ttcn out those shirts, must also he thrown cut of employment; and so with tailors, the numbers producing trousers for 500 bootmakers and fifty shirt-makers must be reduced; and so on with bakers, butchers, hatters, and in every trade .depending on those bootmakers, directly or indirectly; even the boot trade itself will be affected through a number of wearers of boots being thrown out of employment. The result is that all those products are reduced in money value, while rent and interest remain nominally the same. So that borrowers of money, m endeavouring to pay. their debts, produce an abunance, which lowers prices, and the more they produce, the lower goes the value of their produce, for they have to exchange that produce for money, which is ever tending to get into the hands of the few capitalists; for, as those capitalists simply require a certain

amount of bread, meat, etc., a reduction in prices enables them to pay a smaller amount from their interests received, and yet to demand the same amount of money from those who must first sell that produce, to produce that money. Further, our system of security locks up a very large portion of the lands of the country, forcing the mortgagor to act the part of the dog in the manger, unable to make use of portions of his estate, or to allow others to do so ; for he often finds himself with a property only half of which is productive, and without capital to develop the other half. Nor can he sell, or oven give away, that unproductive part, for the w'hole property is the security of the mortgagee, and the cutting up of the property might weaken that security; so that the mortgagor cannot get rid of a part, without selling the whole, which would often mean ru>n to himself and family. And futme generations are brought in the world, to find that instead of a start in life being provided for them by their fathers’ toil, their property has been worked into the hands of a non-producing class, and they must sell themselves to that class, or be cast adrift with their brothers and sisters on the worid. But, it is said, the fault is with the borrowers of money. No one is bound to go into debt, and if without capital should seek employment from those who have. This is to a certain extent true, but the question is not what should have been, but what is, or is to be; for we have this mortgage system at its height, founded by east generations. And if the population who are without capital are unable to get employment as direct producers, and are unwilling to take up mortgages, they must join the ranks of the distributers, with the result which we already see in the cutthroat competition of commerce, and in the excessive number already employed in this branch, all of whom have to be supported out- of the produce of the producer. For example:—One distributer and his staff could distribute 100 sacks of potatoes produced by ten farmers, taking as commission two of the sacks. If nine others compete with him, the commission of each would possibly be reduced to one sack, but the ten farmers would have to pay ten sacks instead of two; whereas, if those nine others were employed in producing, a very slight addition to the staff of the distributer would be sufficient, and the true wealth of the country would be nearly doubled. But as an increase in the production of potatoes would lower their money value, it pays those farmers better to maintain this extravagant system. So that the present mortgage system is unjust to the borrower and the -workers generally, for the harder they work the cheaper becomes the fruit of their toil; or, in other words, the dearer money becomes, and therefore interest.

But, given a country with the wealth monopolised by a few individuals or companies, what is to be done P The single-taxer says:—‘‘Tax the monopolists who hold our land so that those whom they debar from supporting themselves will be supported by them; for if you admit that the land belongs to the people, surely those people have a right to their rents.” But we would point out that, although the principle is sound, the great bar to its practice is the mortgage system; for to tax the mortgagee as true landowner would iiv many cases force him to foreclose on the struggling mortgagor, who would be deprived of his original capital. To impose a land tax heavy enough to have the desired effect would lower the value of land generally, so that one of the most deserving classes would be cast adrift, and widespread misery would be the immediate effect. That the question of debt has exercised the minds of statesmen for ages.

The unequal and unjust distribution of wealth is not confined to modem times, but is to be found at least as early as the time of Solon. • Aristotle in his treatise, “On the Athenian Constitution,” chapter 2, says : —“The whole country was in the hands of a few persons, and if the tenants failed to pay their rent they were liable to be haled into slavery, and their children with them. Their persons were mortgaged to their creditors, a custom which prevailed until the time of Solon, who was the first to appear as a leader of the people.” And chapter 6:—“As soon as he was head of affairs, Solon liberated the people once and for all, by prohibiting all loans on the security of the person of the debtor, and at the same time he made laws by which ho cancelled all debts, public and private. This measure is commonly called th 9 Seisachtheia (removal of burdens), since thereby the people had their loads removed from them.” (Translation by F. G. Kenyon.) Again, we find in the Jewish law a jubilee year established, in which property, held in security for debt, is returned to the debtor ; so that a man may not mortgage his property for ever, but can only lose the use of it for a period of fifty years, at the most. We find also that the plebeians of Rome, as early as the year 376 8.C., brought forward three laws called the “Liciniaux Rogations,” one of which was: “That the interest already paid for borrowed money should be deducted from the principal, and that the remainder should be repaid in three yearly instalments.” Later, we find Julius Caesar

proposing a law to relieve the debtors of their burdens. We also find in English history several Acts passed with the object of regulating interest, especially in the Tudor and Stuart periods, and in 1869 imprisonment for debt was abolished. These instances show that it has been deemed necessary, in both ancient and modem times, to interfere by law between borrower and lender. And why ham the Jews been persecuted by so many nations? Is it because they are a quiet, sober and law-abiding people? Or because their religion is the on 9 from which Christianity sprang? Or is it because they are a nation of usurers, with whom debt has no jubilee year, but if possible goes on accumulating, until honest men must sell themselves and their descendants into slavery for ever, to pay interest, or until the people awake to the fact that they have been supporting an idle class, that has actually grown richer while doing nothing, yet claiming to have supported labour. (To be continued.)