The Manawatu Times. SATURDAY, JANUARY 6, 1877.

Manawatu Times, Volume II, Issue 23, 6 January 1877, Page 2

The Manawatu Times. SATURDAY, JANUARY 6, 1877.

An article on New Zealand finance, which appeared some time ago m a London paper —the " Economist" — has, as was natural, attracted a great deal of attention m this colony. Our space does not permit of our reprinting the article m question, but the following extract contains its whole argument m a nutshell: — " New Zealand should profit by the example of England. The enormous expenditure on railways between 1840 and 1847 bore its worst fruits\after the railways were completed, and not while they were m course' of construction. More, m fact, was suddenly sunk m fixed capital, than there was the floating capital to turn to account, and the result was that when the railways were constructed and the wages of the laborers who had constructed them suddenly ceased, the country, instead of reaping the full advantage at once, had to pass through some years of extreme depression, during which there was not nearly enough wealth to make adequate use of the pve&b machines for saving labour, and assisting labour, and encouraging labour, which had been so precipitately brought into being. No doubt there is this to be said, that m New Zealand it has not been the floating capital of the colony which has been suddenly sunk m these great machines, but only the capital of distant countries. And to that extent, no doubt, the effect may be less disastrous. Still, on the other hand, the returns, when at last they came m England, did go to Englishmen, and enabled Englishmen to save more. But the interest m New Zealand will be paid to the foreign j bondholders, and will not help the New Zealanders to save more. . . . Sooner or later the borrowing must come to an end, and when it comes to an end, we shall see such a pressure on the resorces of the colony, as, we fear, it will bo very difficult for it to bear." Here we have both the premisses and the conclusion of the writer m the " Economist." His whole argument is based on the supposed anal- [ ogy between England and New Zea- | land m the matter of railway construction, and he infers that, as there was commercial depression m England when the outlay on railway construction ceased, the same thing must happen m New Zealand. Now, this reasoning is irresistible if the analogy hold good to the extent assumedby the "Economist" writer; but does it ? He himself admits one difference between the two cases, which is that, -while England sunk

Zealand has only sunk foreign and borrowed capital ; so that, while the former country had locked up a portion of the capital that was required to turn the railways to account, the latter will have as much floating capital after the railways are finished as she had before they were begun. Even to this admission, however, there is a set-off in the shape of a reminder that the profits of the English railways, when they did come, remained in. the country, whereas " the interest in New Zea-

land will be paid to foreign bondholders." Tacitly it is assumed that this is the only difference between the two eases, but we take leave to say that such is not the case. In the first place, labour is better paid m New Zealand than it was m England m 1840-47 ; and therefore the New Zealand navvy has more chance of saving money than the English navvy had. And, what is oE still greater importance, the New Zealand labourer has means of investing his savings which the Englishman had not. The New Zealand navvy can become a landed proprietor, and has done so m many instances. In Canterbury, for example, while the Provincial expenditure on railways was going on, we once heard it remarked of certain new pieces of line that a crop of cockatoo farmers had sprung up along them, having made the money which purchased their holdings by taking small contracts on the railway. Besides, new townships are constantly springing up m New Zealand, and this is another opportunity of investment for the labourer's savings which is unknown m England. Town sections which may be had for an old song now, will have increased a hundred-fold m value m the course of two or thi*ee years, so that a frugal and intelligent labourer, who invests m this kind of property, may soon 1 find himself a small capitalist. Now, we do not say that the New Zealand navvies ana workmen generally are more remarkable for intelligence and frugality than their brethren m England, but we do say that the former have more money to save, and incomparably more opportunity of investing their savings, than the English workmen. In short, there is this important difference between the capital invested on the English, and that expended*- pn. the New Zealand, railways — that the latter has a very much greater tendency to reproduce itself than the former ; m other words, if we leave out of the account the actual profits of the railways, the money expended on them m New Zealand is far more likely to be reproductive m other collateral ways than the capital which was sunk m the English lines. This is one great difference which has escaped the notice of the writer m the " Economist," and another equally important is that the railt way expenditure m this colony is likely to attract foreign capital into it, whereas there was no such, object likely to be realized — at least not nearly to the same extent — m the case of the English railway investments. "We hear of capital tending our way, not only from the United Kingdom, but from the neighbouring colonies. We hear of the Irish farmers having £20,000,000 m the savings banks, and we feel tolerably well assured that a good deal of it will find its way to New Zealand, for investment. We have had one party of Irish small capitalists settled among us, and as they do not seem dissatisfied with, the result, we hope I they are but the precursors of many more of the same class from the United Kingdom and elsewhere. But this was not looked forward to and could not have happened m England, when the railway expenditure began there. Here then is the real question at issue — when the loan-expenditure ceases, will that portion of it which shall have reproduced itself m the colony, together with the capital attracted from abroad, be sufficient to prevent the depression which otherwise must ensue ? or, m the language of the " Economist," "to turn to account the great machines for saving labor, and assisting labor, and encouraging labor," which shall have been brought into being ? This is the true issue, for which the "Economist " writer has, like many others, substituted a false one ; for, if we rightly understand him, he assumes that we New Zealanders look forward to the profits of the railways as the only resource which is to save us from financial disaster and commercial depression, when the loan-ex-penditure ceases. If we were so shallow we should deserve the somewhat contemptuously patronising/, language addressed to us by the^ " Economist." But the problem .o^f; which we are endeavouring to find &' practical solution is a very much wider one than he perceives it to he. Whether the railways, when finished, will pay interest on the debt, is not the question, but, will the colony then be able to bear the burden of the debt without any of that galling "pressure on its resources " which the " Economist " anticipates ? In spite of his wisdom, we shall continue to hope that it may be able to do more than this.