The Dominion. THURSDAY, FEBRUARY 9, 1911. COLONIAL BORROWINGS.

Dominion, Volume 4, Issue 1047, 9 February 1911, Page 4

The Dominion. THURSDAY, FEBRUARY 9, 1911. COLONIAL BORROWINGS.

A cable messago in this issue reports tho substance of some advice wnich tho Financial Xcws has been offering, to tho Australian States apropos of the fact that tho total ot tho impending Stato loans is about £27,000,000. No sensiblo person pays very much attention to the opinions or tho advice of the News on theso matters since the encouragement of colonial boomstors is one of its special functions; but it is worth while to give a little attention to what is portended by this tremendous borrowing fever from which Australasia is suffering. During last year—within a period of eight nionths, as a matter of fact—our borrowings amounted to £0,850,000, wlulo oven the Government of Canada,, beside which this country is a pigmy in population and trade, and slow in tho matter of development, raised only about £9,000,000. The defence-of -all the furious Australasian borrowers is the same: that they are'borrowing for reproductive works, and that without Borrowing tncro cannot bo, that development ■which thoy declare is necessary. It is only Sir Joseph Ward, however —so far, at least, as we know—who has gone tho;length of saying that if- no did not maintain his present startling policy the bottom would fall out of the country. The public will probably have' observed, by the way, that Sir Joseph Ward has ceased to use-this argument since wc quoted Ballance's denunciation of it as a confession of vicious government. ...

Tho situation has rcallv become' a very, serious one. Only a portion of -trrc money borrowed by the Australasian '. States is reproductive and fruitful in the- true ■ sense. The money advanced to settlers in New Zealand—to genuine settlers who are using it woII, to be-more exact—is certainly reproductive; not in the sonso that tin settlers pay tho interest, which is an important, 53? not *ho main point, but "in the sense that that'money is fruitfullv invested in enlarging the productivity of the country in increasing the wealth it produces. A large .part. of the money, however, 13 uiiroproductive ;n that it is wasted or imprudently invested. Many millions of the money borrowed by Now Zealand, which in this respect is liko tho Australian Starts, is simply wasted. It docs not encourage industry or promote primary development: 'it is merely so muoh goods borrowed to feed and support persons who ought to be feeding and .supporting themselves and hclping.at the samo limo|in the general process of wealth produqtion. _ Such is tho money snent in linndccSfrfjrorhamcnts and "luxuries in the way of such widely different thiugs as unnecessary:,salaries and unnecessary public works. Then, again, there.is,another portion of the borrowed money which is worse than wasted. Not only docs it, as it were, go up in smoke; it actually operates against tho introduction, and tho.good and wholcsomo nsoof voluntary private capital. Such is the money borrowed lor the various trading'enterprises of'tho State, of which'tho latest is the hydro-electric power ; scheme'.' In the rncaritimo, .of course, 'tho public is 'flourishing—as why should it not flourish when a great proportion of its daily needs is borrowed?' In Now.Zealand, for example, tho gross public debt in 1891 was £38,830,350." On March 31 next it will be about £81,000,000 or £82,000,000! Within 20 years, that is to say, tho public has nad nearly £45,000,000 worth of its needs supplied on credit. Of this appalling sum, Siir Joseph-Waiid has accounted for about £20,000,000 in the five years of,his rule.

Borrowing can go on, of. course, and, equally of course, at .a higher rate as time goes, on, since tho. dema ncl goes every year nearer to outrunning tho supply of genuine credit. But the ■ colonial boomstcrs give no heed to tho chances of great international disasters and crises. During its first four years the Liberal Administration increased our gross debt by_only about lA millions sterling; during the last-four years tho increaso has been 16 millions sterling, 'or. ten times as much, although the population has not nearly doubled. \ All this borrowing—and wo speak of Australia as well a« of New. Zealand—has almost destroyed the natural elasticity of tho country. By diverting tho public energies into unnatural channels, by founding establishments that cannot be kept.up oiit of normal means—by, in a. word,, altering tho policy of the country to tho policy of acting as if loans must go on for ever without being repaid, ovcry pinch, every pressure, every new or unexpected demand being met by now loans—the boomstcrs have led the colonics into such, a position that the public almost think their existence depends upon their Government's borrowings. In the caso of nearly overly ono of the colonics reasonable economy would provide tho greater part of their real needs. Taxation increases, tho • revenue, swells ever higher, ■ and still tho money for development must bo borrowed in increasingly greater sums. Moderate borrowing is not only wise, but can also be good business, but there' is a great legacy of trouble being prepared by the wild borrowing mania - of extravagant colonial Governments in recent years. '