THE POLITICAL ECONOMY OF R A I L W A Y S.

Nelson Evening Mail, Volume VI, Issue 226, 23 September 1871, Page 4

THE POLITICAL ECONOMY OF RAILW A Y S.

— — — o— . """■ Coiicludeiftom our IdstA There is another economical result which has disclosed itself very conspicuously to [those who tiave carefiilly marked the effects of the railway system in other countries. It is comprised in the phrase, *' equalisation of prices." It is not in itself an independent gain. It is simply the mode in which the sum-total of gains from cheap transport distributes itself between producers and consumers. Now if this equalisation of prices has made itself manifest in. countries (England for instance) where the transition has been only from excellent common roads to railways,' bow much more conspicuous will it not be where the transition is from bad roads, or bo roads, to railways ? Let me explain this phrase, " eiqualisation of prices." It is not so much in the larger productions of agriculture, such as wheat, oats, potatoes, and so forth, that the equalisation will appear. These •wherever practicable, are conveyed by water, by the coasting steamers; but to some extent it will operate upon such productions. It will, however, be most conspicuous in the productions of the small farmers and dairymen, who raise poultry, butter, bacon, &c, for the town markets. We, will take a single article as an illustration, "and it is of not much importance whether we state the prices accurately. We are quite at liberty to assume an arbitrary price as an illustration of the principle. Powls are now in Dunedin 6s per couple. We will suppose that fowls are produced in some parts of the country not very accessible to the town, or so situated as to make the town inaccessible to the producers. In such a case the remote country price would be, let us suppose, 2s per couple. Though these assumed prices are not of much importance, they are such as I have known to coincide. Now, what I have described as taking place in the case of a railway loan, may be anticipated as certain to take place in the case of the productions of the small farmer. The cost of transhipping poultry by railway is very small. Deducting that, the producer and consumer will share the advantage between them in proportions to be determined by a double competition, that is, the competition of producer against producer tending to lower the price, — the competition of consumer against consumer tending to raise_ the price. If these two competitions be of precisely equal force, then (leaving out the trifling cost of conveyance as being infinitesimal in this case) the consumer who has hitherto paid 6s. will get his fowlsfor 45., and the producer who could only get 25., if indeed he could sell at all, would now get 4s.* It is unnecessary to dwell on other articles. The town consumer will get his bacon, hams, butter, eggs, and cheese at perhaps onethird less, while that same reduced price will yield to the small farmer perhaps one-third or half as much moire than he can now obtain. Let it not be supposed that this is speculative or chirrierical: Remember that I could purchase in the Eastern market Of Melbourne as good a turkey for 7s. 6d. in 1862 as cost about seven times as much in 1 854. Let me once more remind you that I do not state this as an additional gain, but only as explanatory of the mode in which the whole gain arising from cheap transport distributes itself. I cannot resist the temptation of illustrating this part of the subject by another case In the Wairarapa Valley, forty miles from Wellington, are some magnificent totara forests. There are also saw mills which cut the totara logs into boards. But the difficulty is in conveying the bulky boards from the place of production to the place of consumption, the road being a mountain road over the Remutaka ranges, 2500 feet high. The cost of conveyance is consequently heavy, and while the price at the mill is under 10s. per 100 feet, the price at Wellington is something like 1 8s. "per 100 feet. Now, surveyors well acquainted with the country affirm that there is a practical, and by no means difficult, line for a railway ; and should .one be constructed, the boards could be conveyed to town for (let us. suppose) 2s. per 100 feet. Here then would be a saving in tbe cost of delivering the boards in Wellington of 6s. per 100 feet, or about 33 per cent. The difference between 18s. and 12s. (the real gain) would be shared between the producers and' consumer on the principle which I have already explained. • In time the consumers in the town would probably secure the greater part of the saving, but the producer would reap his advantage from the greatly increased demand. Let me now mention a case not of simple interchange (though it partly bears that character) but of substantial saving, in addition to the mere saving in the cost of transport. Very soon after the opening of the line from Melbourne to Sandhurst, slaughter yards were opened at the latter place for the supply of Melbourne with meat. It is well-known that oxen and sheep, when driven to a distant market, fall off in weight and condition, They lose fat, and every one knows that the loss of fat involves the loss of flavor and of nutritious qualities. These disadvantages were obviated by slaughtering the animals at Sandhurst and sending the carcases to Melbourne. There was gain in many ways. Weight and quality preserved, expense of drovers got rid of, carcases capable of being •As an illustration of this double competition, and of the manner iri which the relative forces ot the two may be disturbed, I may here refer to the mode in which. -the Victorian debentures were placed' upon the London money market. The loan was negotiated through the six principal I banks of Melbourne. They agreed to supply j the Government with money, in" sums required from time to time,, and to hold; the: debentures as security at a iimitr-commumcated at first under sealed cover.. Tinder that limit they were not to* sell r for a certain stipulated time ; but when their advance- reached a certain amount, •and after the; expiration otthe time agreed upon, ihey had power to; sell in order to replace their ' advances, and to enable them to supply the renewed wants of the Government. To prevent .the six hanks from competing with each other, it -was however 1 stipulated' that the sales were to be effected through one bank only 5 in other words, •that the' market should be fed through one con-•diii-only. The- effect of this was to reduce the force of. the cdmpetibn of sellers against .sellers' tending to lower the price, wbile'it left unaffected the competition of the buyers, the ; result was the profit of --6885,006 which I have mentioned. If the< dix Tranks had been left free to compete with each other, and had 'not: substituted for the condition in. the.con.pact .which J have mentioned some equivalent arrangement among thepaselves, that competitipn^ould ,have' •act&d lii-wme.aegrW.a^ihst the. force, of jthe competition, ai-po-ng the -buyers, and the Result would;pr6*abjy Bave been a lower premium and a smaller aggregate profit,

packed in a smaller space than live stock — though live stock, also was trankmitted to a considerable extent. . Here, as elsewhere, .we .are inevitably approaching the boiling down, phase of pastoral enterprise.-. Along .the lines of railway, the legs- of. the- sheep, which. yield but little tallow, but which. 1 afford the best food, will be sent to the town consumer, while the tallowyielding parts of the animal will be boiled down as near to the station as possible. By the process of equalisation, the result of competition, the consumer will get cheaper legs of mutton, while the boiler-down will get a sale for what to him is the useless, or, at all events, tie least, useful part of the animal. With the cheaper carriage for the latter, the boiler-down -will be able to offer to the squatter better prices, and even the distant consumer of tallow wilL " share the gains." Cheap carriage may not always show itself in better prices, but rather in arrested decline. Though no one can possibly analyse the distribution in figures, which in the case of a single transaction -may • be infinitesimal, that distribution does most certainly adjust itself by natural laws—as certainly indeed as the laws which regulate rain and sunshine, although we cannot trace the distribution to its ultimate resting place* I now come to the effect of railways upon the town and country populations respectively, and I may add reciprocally. Within my lifetime, which in spite of my grey hairs is a very short time in relation to the progress of a nation like England, London has increased- from under one million to something over three millions of people. A very large part of this increase has taken place since the institution of railways, and it is usually, and I believe justly, attributed to the stimulus, given to production and trade by the rapid development of the railway system. But it is also in part attributable to the effect upon production and trade of the gold discoveries in California and Australia. In America and: on the Continent of Europe similar development from similar causes is observable. But not to travel so far from home, let me call your attention to what has taken place in Melbourne, because I shall apply that case to New Zealand, with, however, a difference to be presently pointed out. The Northern Railway of Victoria reaches the Murray River at a place called Echuca. The Murray River is. navigable for steamers except during a few months in summer for a distance of 1 754 miles. Its tributaries the Edward, the Wakoul, and the Billobong,, are navigable during a part of the year for about 300 miles. The Murrumbidgee, with its several expansions or lakes, has been navigated to Gundagai, about 900 miles. The Darling has navigated for some 800 miles, and the Lachlan has been ascended, but I am not 1 aware how far. All these streams fall into the Murray, and they are all shallow in the dry season, but at other seasons we have here specified an inland navigation of some 4000 or 4500 miles. TheMurray might be made navigable during the whole year, but at present, in the dry season, when the water is low, the channel'is choked by snags. In 1862 there were 12 or .13 steamers .on the Murray, measuring about 2500 tons, and moved by about 450 horse-power, arid these had an attendant flotilla of barges. As the line from Sandhurst to Echuca has been opened since 1862, 1 have no doubt that the tonnaee has increased, but of this I have no account. The Murray is the boundary between New South Wales and Victoria, and the coutry north of the Murray, which is watered by the rivers already' named, is usually called Riverina, and is within the colony of New South Wales. Now, the Northern Railway, at its Echuca terminus, taps, as it were, the whole of this inland navigation, . and brings the. whole Riveroina trade to Melbourne. New South Wales governs Riverina, but Sydney. is not its commercial metropolis. Most of the Riverina squatters and traders transact their business at Melbourne, and when the Judges of the Supreme Court •at New South Wales go circuit to Deniliquin, they find it convenient to go by sea to Melbourne, and thence by railway to' Echuca— a coach conveying them thence to the circuit town. Melbourne is thus not only the capital of Victoria, but is tbe metropolis of a vast interior, into which settlement is rapdily extending. At Cooper's Creek, the starting place of Burke and Wills, and not far from which they died exhausted, there is now an accommodation house for travellers. One striking piece of- evidence of the metropolitan City, of Melbourne is furnished by the press. What ; the Timer is to Great Britain, the Argus is to. Australia. It-is not merely the Melbourne paper j it is the Australian paper. Primarily it represents the opinion of its Victorian subscribers ; secondarily, it is the embodiment of public opinion in Australia. ... Prom the geographical features of New Zealand, and the manner in which settlement has been made, we cannot have a great metropolis. There are many disadvantages in this — economical, social, political; but it is quite inevitable; our town populations cannot be so concentrated, but must ever be distributed , between Dunedin, Lyttelton (with Christchurch), 'Wellington, Auckland, and the smaller coast towns... Notwithstanding this, there are good , grounds for anticipating that what has taken place in Vic- . toria upon a scale exceptionally grand will take place in New Zealand in a minor degree, ahd so to speak, distributively. -Who can doubt that if the Hutt river, whieh falls into Port Nicholson, bad been navigable for only 100 miles into the interior, 1 Wellington would now -have been a considerable city. Who can doubt that if the harbor of Dunedin had. enjoyed the advantage of a navigable river, the growth of : thisf city would have been much more^ rapid -than it has been ? The same may be said of Auckland, with Hs fine harbor. That which navigable streams would lave done here had they existed, will be effected by railways — though, of course, in a minor degree; and less rapidly and effectually. The growth of towns depends upon the prosperity of the country. The country population

*I may here mention, very briefly, that under the railway system proposed- to -be established in New Zealand, the advantages of both saving and equalisation bf prices are likely to be greater in proportion to the capital employed, and the proportion of population directly reached, *than in Victoria. When Victoria opened her 250 miles of railway, .he-population was but little over half a million. By the system of; inexpensive lines, we should have at least four and perhfps five times the extent Tof , railway for the same money, with about half the ' population at firsthand perhaps aboutr the 'same, number when the lines are completed. ., < Thus our railways will penetrate to a greater distance, and . embrace and influence a much larger extent of country; in other words, the advantage will he brought within the reach/of- a larger proportion of the Seople. •- It is quite impossible to calculate this; ,at it must be very obvious. *l* - ■'■•:■:■'■• ■

mainly consists of producers, that of the towns of distributors and exchangers.- This division, though .convenient, and intelligible, neither perfectly accurate nor perfectly " exhaustive. > It is . _iot quite" accurate, because distributors* and exchangers (that is, merchants, agents, brokers, and carriers) are. really producers. They perform a service and add a value to the produce and goo is which pass through their handa. The division is not exhaustive, because, there a e direct producers in all towns, : and there are distributors—that is. traders— in all parts of. the countrv. Still it is convenient to distinguish the town from the country populations by the salient feature which each exhibits. Now it is almost a self-evi 'ent truism to say that, in proportion as settlement spreads throughout the country, and the land becomes occupied by direct producers, there will be a continually increasing demand for more traders of various classes by whom the increased exchanging and distribution must be carried on. If facilities of intercommunication, which is only another expression for cheapness of transport, have the effect (of which T, for one, have no doubt^ of promoting tbe settlement of the country districts, and stimulating production, the town populations must increase in a corresponding ra'io. ' More producers will require more exchangers. Between the producer and the consumer there is almost always orie •middle man, and generally more than one. The wholesale dealer and the retail dealer, the sea carrier and the land carrier, often even an agent or. broker between these, are all set in motion by increased production ; ' arid they are all, or nearly all, dwellers in towns. - I now approach the last branch of my subject, and it is one which. presents some complication, and therf fore -somewhat greater difficulty. The gains which I have enumerated will not, and cannot, be shared equally by all classes of the community, whilst the prices which we must pay in order to secure those gains will, (until railways pay a profit equal. to the interest on the capital expended upon thein) be borne by the whole population. No taxpayer can escape his contribution to the charge, howsoever small his share may be,. while his remoteness from the lines of railway may deprive him of direct benefit. This is undoubtedly inseperable from all internal improvements, but if the people of every district could successfully oppose improvements in every other district, improvement could never begin. In the case of railways, however, the advantages are more generally diffused than those arising from ordinary local improvements. In the first place, a. trunk railway is partially available to persons living at considerable distances from its line of progress. They will generally be able to send their" produce' to the nearest station, which will secure to them the benefit of a portion of the line Thus the wave of cheap transport as well as the wave of equalised prices, though continually diminishing in its advance, does in practice reach -to considerable distances. Still, it must be obvious that there will always be remote localities, which "the -beneficial influence cannot. directly reach.. But there is an indirect consequence which is felt universally, and that alone X think is worth the smallshareof taxation which, as I have said, those who reside in locali- - ties remote from the railway lines cannot escape from. This benefit, arising out of ; cheapness, which indirectly reaches all and invigorates all, I will now endeavor to explain. If, as I trust I have proved, there is a saving from cheap trans- -. port -spread over the whole community, what is done with that saving ? A portion, no doubt, will not ultimately be saved at all. Those who find it hard to support their families will increase their comforts. If they save in one thing, they will expend more on other things. Confined to the bare necessaries of life before, they will very properly indulge in a few comforts. But there can be no doubt that, when once saving becomes practicable; accumulation is the result. This accumulation it is which adds annually to the -wealth of all countries which are still progressive. "But even this accumulated wealth requires further analysis, because it is not all accumulated wealth, theibenefit of which spreads throughout the country. Mere accumulated wealth is not capital. If the man who saves upon his general expenditure during the year expends the whole or a portion of his savings in purchasing books, pictures, plate, and jewellery, the .portion- so- expended remains still in the condition, of wealth. They are " material productions of capital andlabor possessing exchangeable value." ..By: the purchase of such (things, the purchaser..has given employment to the producers of the articles once only: They then remain in his possession in a dormant state. But if, instead of purchasing such articles of -wealth as are destined thus to lie dormant in his hands he devotes a part, or the whole, of his savings to the extension of his business; or if he hand it to others to, be productively employed, such portion is continually reproduced, and it continues to set labor .in motion so long as it is so employed. The portion of wealth so employed is called capital, or, in other words, the term capital is confined -to -that- portion of wealth which is employed directly, or indirectly in productive industry! There is no doubt that spendthrifts are not -so unpopular as they ought to be. " They do |good to trade," it is said; but, in truth, they do good to trade only once, while the morevprudent, who, save and invest, do good to ' trade 1 ; many times; . as often, indeed, as their capital is reproduced with the ordinary profits. Of course the wretched miser who saves only to hoard does no good to trade, or to anybody or anything else.. But such .hoarding is rare in imodern. times, and .the most miserly nowadays ..employ orlihrest thein savings in some way, so as to reap a profit, and this,as I have shown, is to apply their wealth as capital. I have said that capital may be employed in stimulating production, and giving employment to labor indirectly as well as directly. If the person who saves be not himself engaged in any reproductive pursuit he probably invests his savings in a bank, or in some- other dividendpaying institution. His money, so. invested, finds its way- into the hands of the active producer ; thus he stimulates production indirectly. It is by no means difficult to understand in what manner money nominally lying-in banks always operates beneficiklly. in stimulating productive enterprise, and in giving employment to labor. A man who has a good balance at his banker's, for which he cannot, find direct employment, is apt to say, "I have so much money lying idle ob my .{bankers ; 'V but in truth itßoes not lie idle. If the banker keptjthe wholesale —if he did not' lend it to those who can profitably employ it, .dividend would be. a ,word unknown- to-the-English -language.' 'The sum total of the balances -in the banks, although legally demand able at once, can as safely be relied on by the banker, as - r .a- constant- -average^capable? of being safely einployed "in their " bujujiesa. ( r? Of j course, a prudent and well managed^bank must I

keep a considerable amount of specie to meet all demands; but there is a net balance of deposits which it can use to accommodate its customers. - I am not aware what the deposits in the banks in New Zealand amount to, but they count by millions* In Victoria, in 1862, the depot-its exceeded .£8,000,000, whilst the reserve of specie was under £2,500,000, so that they must have felt themselves 6afe to lend 5 J millions out of the deposits to their customers, though the whole of those deposits were legally demandable at once, and without notice, or "at call," as it is technically expressed. It may therefore be no small comfort to any gentleman patriotically disposed, who for his own convenience, keeps an average balance of £100 at his bankers, to know thathe really is an indirect promoter of productive industry to something like two-thirds of that balance ; and although he does not deposit his money with any such benevolent intention, he may really be indirectly helping some farmer at Lake Wakatipu, or some miner at Naseby. It is in truth, in the order of providence, or, to change the expression, it is a natural law, that we are made doers of good without intending and without knowing it. But how, it may be asked, do our annual savings, whether from cheap transport or any other cause, reach the farmer of Wakatipu ? I will answer this question by another : Can anyone tell me of that remote, region which is outside and beyond the direct or indirect beneficial influence of banks? The banks lend the money of their shareholders and their depositors to their own town customers, chiefly the merchants and wholesale trader?. These are thereby enabled to give increased accomodation and credit to their customers — the country storekeepers. The storekeepers, in their turn, are better enabled to give credit and other accommodation to the farmer; and he, in his turn gives employment to the laborer. The banks, moreover, by means of their country branches, bring .'themselves into more immediate contact with the country demand for assistance. Thus, it is that every shilling saved and invested goes to swell the aggregate of 'f that "portion of the wealth of the country annually set apart for production." Thus it is that I believe myself justified in saying that the remotest parts of the country cannot fail to participate in the advantages which spring from, railway enterprise. This is really the compensating element of the whole scheme. The direct benefit of railways cannot be equally shared. Those who use them most, whether for travelling or for transport, get the most-benefit. * Is not that the case with every improvement ? But it is the result of a natural law, that there are other advantages which every man shares in without any effort of his own. So long as a deficiency remains; no, man can escape from contribution to it ; but then there are some advantages of which no man can be deprived, and if no great improvement is to be undertaken until the benefits can be as evenly and universally spread as the cost necessarily must be, then perish all efforts to imprpve : for improvement, upon such conditions, becomes' impossible.

* I have since met with the Bank statements in the Gazette of the Ist' of September. . The deposits amount to £3, 177.05,6 ; .the .specie reserve is _£967;201 ; the balance available roraccommodation, .£2,209,855.