THE NEXT STEP IN THE ADVANCE OF THE SOCIAL STATE.

New Zealand Mail, Issue 1425, 22 June 1899, Page 49

THE NEXT STEP IN THE ADVANCE OF THE SOCIAL STATE.

(By Oswald Gardner.)

No. 111. That the mortgagee has spent his money when he has invesed it. If a friend lends you a coat to protect you on a journey, it is just and right that he should have that coat returned to him in as good order and condition as when he lent it, or one equally good; also that he should receive some consideration for the loan is reasonable. The capitalist argues that if he lends a hundred pounds and it is just and right that he should be paid back what he lends, therefore he is entitled to one hundred pounds. The logic of his reasoning cannot be disputed ; but the question is What has he lent ? Money, unlike a coat, is of no value in itself; a sovereign would be no protection against a tropical sun, or the cold of the Arctic regions, while a coat would protect against either. Money is simply an order on labour for a certain amount of its produce, and if you apply it in this way to the above argument, you will have the syllogism : The capitalist lends an order for certain produce ; and it is just and right that he should be paid back that which he lends; therefore he is entitled to an order for that amount of produce. In the second case, the capitalist is not satisfied with the order until he finds it is accepted by the possessor of these goods, while in the first case, lie is satisfied with one hundred pounds, although it is merely an order, often varying in true value . Suppose that two men, A and B, are starting across a desert, and that A borrows an ounce of gold from B to buy a ton of rice for the journey, and at their journey’s end they find King Solomon’s mines, -when A, possessing all the rice, pays back an ounce of gold to B from the abundance of the mines, ivhere gold is of no value, would B be justly repaid ? Or, on the other hand, suppose that B lent a sixpence to buy a piece of string with which to tie up the mouth of his rice sack and that A was unable to return the amount at the end of the journey, would B be justified in seizing all the rice, sack string, and in fact all the possessions of A becaaise sixpence had gone up in value ? Yet these are the extremes of our present system of security. It is therefore clear that it is unjust to pay In the exact amount of money lent when it is evident that money has changed in value. Under our commercial system money is invested in a mortgage with the ooject of gain to the lender, as well as the borrower, and the mortgagee should take the risks of a rise or fall of the investment, as it is clear that when the money is lent, it is spent in buying an interest in the business. Yet we find that a mortgagee claims the nominal sum lent, instead of the value of the sum lent. For example, a founder borrows £-300 on the security of his foundry, with the object of buying an engine to drive his machinery ; it is surely clear that the mortgagee has lent the value of that engine only, and has spent liis money when he lent it, having exchanged it for an interest :n the foundry, from which he expects to get an income. Yet if that engine and plant decrease in money value, which they may do, the day after the loan, owing to some new invention, the mortgagee may claim the engine actually lent, and the rest of the plant also. This is clearly unjust, for all produce tends to fall in money value in the long run. Adam Smith says:—“The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the long run. It encourages production, and thereby increases the competition of the producers who, in order to undersell one another, have recourse to new divisions of labour, and new improvements of art, which might never otherwise have been thought of.” [Wealth of Nations, book V., article 1., p. 592]. Again: “We cannot estimate, it is allowed, the real value of different commodities from century to century by the quantities of silver which were gn en for them. ... At the same time and place, therefore, money is the exact measure of the real exchangeable value of all commodities. It is so. however at the same time and place only.” [Wealth of Nations, book 1., chapter V., p. 43]. Therefore a money lender wlr has lent money of a certain value, is fully repairs if he receives mgney of a siml.ir i alue in return, and his just profit is :, i the interest he receives, 1 and not in the increased value of the money lent. At present the mortgagee has the least risk, least worry, least labour, but best security, as the borrower must be ruined before he loses, and if his security is in land, or productive machinery he always has his true value. For if a farmer borrows £IOO on a property, worth at the time of borrowing £2OO, the mortgagee does not lose if the property falls in money value one half; and he has not had the labour and worry of attending to the property ; while the farmer is ruined, although he has invested as much capital as the other, and has had all the work and trouble of management. * So that we see that although the mortgagee has clearly spent his money when he has invested it, he may have his true wealth doubled, as well as having received a regular interest from it, under our present system; while the mortgagor, who is the direct employer of labour, and who may have added considerably to the true wealth of the country, and who takes all the anxiety of directing production, and although he

may have invested as large a capital as the mortgagee in the same business, is ruined before the latter loses any thing. This is clearly unjust to the individual, and injurious to the country. That Bimetallism is not a remedy. That money has risen in value in proportion to produce generally is recognised by bimetallists, who see that a great injustice is done to the workers and borrowers by its rise. But the remedy proposed by them is clearly insufficient. They propose to lower the value of gold, by doubling the gold value of silver; and they state that produce will rise in gold value with silver; so that where we at present pay, say 20ibs of wool at one shilling to get one pound sterling, by doubling the gold value of the shilling, we would only need to pay lOlbs of wool at one shilling to obtain one pound sterling. But this argument rests on the assumption that produce will maintain its present relation to silver, if the latter be doubled in gold value, which we have no reason whatever for assuming, for the same laws that regulate the relation to gold would .regulate the relation of produce to silver, or to silver and gold together. For depression is not caused by the scarcity of money, but by its accumulation in the hands of the land-owner and ! inoiiey-iendcv. Tluarcxuie <.o benefit the producers by increasing the value of silver you must first place that silver in their hands. For example: A has half a sovereign and ten shillings which he is willing to exchange with B for a pair of boots. If the value of those ten shillings alone be doubled, B will receive only ten shillings for his boots, which he will call one pound, and he will be no better off. If on the other hand, the boots rise in value with silver, B will receive ten shillings, which he will call one pound, and half a sovereign, or one and a half pounds in nominal value. But whereas his expenses of production, without rent or interest, are at present ten shillings, and his profit, from which he pays his rent and interest, ten shillings, under the new arrangement his expenses would be one pound and his profit still ten shillings, so that he would again be no better off; for it must be remembered that if boots rose in value with silver, so would wages and all other produce. But it is argued in the first case that A would be able to obtain a pair of boots for ten shillings and therefore would have half a sovereign left to invest in something else. But he would have no reason to give it to B, and therefore if used at all must compete with him in producing boots, or compete with some other producer. It is not scarcity of money that the world is suffering from, but from its accumulation in the hands of the non-pro-ductive class. It must also be remembered that the wealth of the capitalists does not nearly exist in actual coin, but is chiefly in the form of debts owing to them. In fact, the whole scheme of the nimetallists is a proposal to create an artificial prosperity to enable the present debtors to pay off {heir debts (and tin's it cannot do); but does not attempt to guard against the same evil in future. If those debts be unjust, it is surely far more honourable to pass a law authorising part payment directly, than indirectly. Yet such a course is to be refrained from. THE REMEDY. To summarise our position. We have an industrious and clever people, in a naturally rich and fertile country, suffering from depression and poverty, although the country is able to produce sufficient true wealth to support ten times the present population. But we find those people oppressed by the weight of their debts, because money has risen in value, not as a medium of exchange, in ordinary commercial exchanges, but as a measure of the value of debts. In all other measures we have a fixed standard, for a yard of cloth is the measure of a piece of material that will make a certain sized pair of trousers, and ten years hence a yard of the same material will make a similar garment; also, a pound of flour will make the same quantity of bread to-day as ten or twenty years hence. But it is not so with money, for a. pound sterling in ten years may represent twice or half as much true wealth as it does at present, so that our standard of value is not a fixed one, which we have shown does not affect ordinary exchanges, but affects most injuriously the value of debts. We therefore require a system that will regulate debts in a more just manner than at present. And this can only be done we maintain by fixing security in proportion as the money lent is to the property at the time of lending. For example, a farmer borrows £IOO on a property valued at £2OO ; it is evident mat the mortgagee has lent to half the value of the property, and has spent his money when be lias invested it. If the property fall in value to £IOO, the mortgagee shall only receive £SO, or half the full value. To anyone who has followed the preceding statements this will appear just, for it is evident that the mortgagee lent an order of a certain value, nominally £IOO, but that an order nominally the same has become in reality double in value, and it would be unjust to demand from the farmer the value of the whole debt. We are convinced that the chief cause of depression is the mortgage system, which relieves an idle class of its due share of care and worry, and heaps care and trouble upon the industrious, and poverty on the masses. Unless this system be regulated, the principles of the single taxer cannot be applied, without first causing widespread misery to the most deserving classes in the social state. And were the above principles applied, tnere would be no necessity for the bimetallist to endeavour to regulate interest by a

trick ; for by regulating security, interest would be regulated also, as a borrower of money would be in a position to demand a reduction of interest upon a fall in the money value of his produce, or to surrender the mortgagee’s share of the property to him, instead of, as at present, being forced to watch his debt growing until the mortgagee finds that no can affor to lower his interest as his principal has grown. It. would also r>T>pr>lr •> n;v n n + ' exto.V rash borrowing, by making the lender enquire into the nature of the business foi which he is lending his capital, and in many c.i-ses would cause the capitalist to embark in productive industries, instead of lending his money to others to take all the risks of producing. It would also give an immense impetus to production, for low prices would not mean ruin to the borrower of money, and all those dependent upon them; but would mean abundance and prosperity. It would also tend to cut up badly managed or unproductive estates, by handing over to the mortgagee a share of the property, wnich, with a substantial land tax, would not pay if allowed to remain idle. Employment would become much more plentiful, for the producers would not be -afraid of a so-called over-production, and therefore there

TYOUiU iiOu uc oO # «i» viOjiiia’jUU. iOf LliO land tax to support the unemployed. Wealth in its truest sense would accumulate, instead of as at present falsely, or, paper only. This we are convinced is the next step in the direction of progress and wealth for the people.