SETTLERS' INDEBTEDNESS.

Otago Witness, Issue 2817, 11 March 1908, Page 6

SETTLERS' INDEBTEDNESS.

One of the most difficult questions in connection with the establishment of a system of small freehold farms is that of the indebtedness which it appears to be inevitable for the owners to incur, and from which they* seem unable to release themselves. This condition is not peculiar to any country. The bondage of the Irish peasants to the "gombeen man" (village usurer) has been but little relaxed since the passing of Gladstone's Irish Land Act, which, while it wiped off the arrears of rent due to the landlord, allowed the accumulated interest and fines due to the usurer to remain a millstone round the neck of the peasant, depi'iving him of much of the benefit of his improved conditions of tenure, and being so great an evil that legislative intervention is now regarded as within the ©phere of practical politics. Then take Denmark, the country nh'ch is held up above all others as an example of the success of small-farm proprietorship : it is stated by E. A. Pratt, in his recent work " The Transition. in Agriculture," that the Danish peasant proprietors are dragging along a most miserable existence, not in paying the purchase money for their farms, but in fruitlessly attempting to pay the exactions of their creditors, foremost of whom stand the mortgagees of everything they possess. Similar conditions prevail in Eussia, Germany, Austria, and other countries, and the position and the best means of relieving from it the peasant class of the continent of Europe formed a prominent subject of discussion at the Agricultural Congress held at Vienna last year. Fortunately the deplorable conditions disclosed do not obtain in New Zealand, though we have seen the effects of the kindred evil of incurring liabilities in respect of land and stock in excess of the financial ability of the settler. During the last 15 years New Zealand settlers have had most things in their favour, and have prospered accordingly, but many of them are inclined' to discount the future, and may be in difficulty when a reverse comes. It is therefore interesting to observe the measures which the leading authorities at the Vienna Congress regarded as most necessary for the relief of the peasant class from the crushing burden of indebtedness under which it labours, and which, it was agreed by all, is the greatest menace to the future of the class. A delegate from the Tyrol declared that all other measures would be fruitless unless tho not yields of the peasants' holdings were first increased, and for this purpose he recommended (1) the extension and improvement of agricultural education ; (2) old age pensions, and further facilities for agricultural labourers to acquire their own homes; (3) the improvement of roads and other means of communication, which were declared to be so bad tbat the carriage to and from the nearest railway station is twice to three times as costly as the freight from America to Europe"; (4) the preservation of home agriculture against ruinous competition by .a countervailing -tariff, and the protection of live stock against the introduction of disease. Another Austrian economist defined over-indebtedness as being a case in which the produce of the holding is not sufficient to maintain the peasant and his family and to pay, in addition, the interest and yearly redemption of the debt; or in which the debt exceeds two-thirds of the value of the estate. The danger was pointed out of the Custom of paying a deposit on pur^i chase and raising the rest of the price by mortgage, the purchase price in such cases oiteiT exceeding the "true" value of the property measured by the net returns ; | and also of mortgaging an inherited pro- I perty in order to buy out co-heirs, when a I similar exce&sire value if often placed on the holding. Other causes of over-in- ' debtedness are borrowing money for im- ' provements to the property, or to meet losses arising from bad management or misfortunes. It was recognised that the debt, .however incurred, must be paid off . by the owner himself, and from the proceeds of his farm; and in order to further this it appears to be agreed that a system of redemption by instalments must be substituted for mortgages where the capital must be repaid in a lump The difficulty , is how to carry this out. For the future, j it was th© unanimous opinion that overindfbtedness can only be avoided by re- i stricting the freedom "to get into debt, but j this proposal has been rejected in both Germany and Austria, thoug.h a law was ' passsd in Prussia in 1906 whereby the ! owner could, on application, have his I power of incurring liabilities defined. This j law, being optional, is naturally ineffec- ' tive. In Austria it has been proposed that every new agricultural mortgage should . only take the. form of a consolidated annuity for th© redemption of .both in- , terest and loan. It is recognised that the i peasant needs cheap, easily accessible < credit, but the radical reforms which have j been suggested make that difficult rather i than easy — they would tend to drive away i the good and industrious settlers, and to favour the idle and useless : the abolition of distraint, for instance, would merely

penalise the peasant who has no othef security than his holding and his stock. Instruction and education were advocated by many, but matter-of-fact men pointed out that no education would cure landhunger, or induce the peasant to pay a debt by instalments, when he need only pay the interest. One of the authorities quoted placed great faith in a system of credit banks on t.he Raiffeisen method, and the adoption in legislation of the resolution that " the only basis of loans on. real property is to be found in redeemable mortgages which cannot be foreclosed." Further loans could only be raised' by personal credit, and it was considered that these would be less likely to be entered into, as there would be a greater urgency to pay them off. It was not supposed suoh a law would abolish over-indebtedness, but it was claimed that it would improve the peasant's credit. It was also thought it would reduce the selling price of land, which the present system has a tendency to inflate beyond its true value. Credit institutions would not be harmed, but some private lenders (who have been indicated) might be seriously affected. The subdivision of inheritances of land -would also be stopped* The congress adopted a resolution embodying expressions of approval of the suggested legislation, but said nothing regarding the- accumulated arrears with which til© peasants are hopelessly encumbered. The discussion, of which necessarily only the main points can be given, was highly instructive, and it will be seen that the various conditions and circumstances are such as many easily arise ia New Zealand.