Chapter XIX
Vogel and the Public Works Policy

Sir George Grey had been dropped by Downing Street in the early part of 1868. His friends may fairly claim that at the time of his departure the Dominion was at peace, and that he left it bearing with him the general esteem of the colonists. True, his second term of office had been in some ways the antithesis of his first. He had failed to prevent war, and had made mistakes. But from amid a chaos of confusion and recrimination four things stand out clearly: (1) he came upon the scene too late; (2) he worked earnestly for peace for two years; (3) the part that he personally took in the war was strikingly successful; (4) he was not well supported by the Colonial Office.

He was the last Viceroy who took an active and distinct share in the government of the country. Since 1868 the Governors have been strictly constitutional representatives of a constitutional Sovereign. They have been without exception honourable and courteous noblemen or gentlemen. They have almost always left the Dominion with the good wishes of all with whom they have come into contact. They have occasionally by tact exercised a good deal of indirect influence over some of their Ministers. They have sometimes differed with these about such points as nominations to the Upper House, or have now and then reserved Bills for the consideration of the Home Government. But they have not governed the country, which, since 1868, has enjoyed as complete self-government as the constitution broadly interpreted can permit.

When peace at last gave the colonists time to look round, the constitution which Grey and Wakefield had helped to draw up was still working. Not without friction, however. Under the provincial system New Zealand was rather a federation page 237 of small settlements than a unified Colony. This was in accord with natural conditions, and with certain amendments the system might have worked exceedingly well. But no real attempt was ever made to amend it. Its vices were chiefly financial. The inequalities and jealousies caused by the rich landed estate of the southern provinces bred ill-feeling all round. The irregular grants doled out by the Treasurer to the needier localities embarrassed the giver without satisfying the recipients. The provinces without land revenue looked with hungry eyes at those which had it. There was quarrelling, too, within each little provincial circle. The elective superintendents were wont to make large promises and shadow forth policies at the hustings. Then when elected they often found these views by no means in accord with those of their council and their executive. Yet, but for one great blunder, the provinces should and probably would have existed now.

1870 is usually named as the birth-year of the colonial policy of borrowing and public works. This is not strictly true. In that year the central and provincial exchequers already owed about seven millions and a quarter between them. The provincial debts, at any rate, had been largely contracted in carrying out colonizing work, and some of that work had been exceedingly well done, especially in Canterbury and Otago. What the Central Government did do in 1870 was to come forward boldly with a large and continuous policy of public works and immigration based on borrowed money.

The scheme was Sir Julius Vogel's. As a politician this new figure may not unfairly be defined as an imaginative materialist who was a Conservative Protectionist with a belief in State enterprise, a constructive financial administrator and an Imperialist somewhat ahead of his time. The first of his race to come to the front in New Zealand public life, he had to fight against a certain prejudice. Talked of behind his back as an adventurer, he rose by sheer ability, chiefly quick synthetic power, helped by a persuasive manner and by genuine good nature. His policy of carrying out Public Works, Immigration, and Land Purchase by large loans raised in London, was virtually the beginning of State Socialism in New Zealand. McLean, who made peace with page 238 the Maori, was his colleague and attended to the land purchases. Other lieutenants managed the railway construction and minor works carefully and well. Vogel's opponents spoke of his finance as an orgy of gambling and extravagance. Nothing could be more unjust. He raised his loans on fair terms and showed skill in such matters as the inscription and conversion of stocks. The amount he borrowed was not at all excessive, though it seemed large to the older settlers of the small, scattered communities then beginning to spread through the Islands. Sound judgment was shown in the choice of the railways and other works pushed on. His finance was a fair compromise between the “Roots and Water policy” of the Skinflints, to be mentioned later on, and the “Butter and Borrowing” specific of more recent days.

If the Dominion had always got as good value for its expenditure as for that part of it for which Vogel was responsible, it would have had very little to grumble at. Of the land speculation to which the Public Works policy undoubtedly led, something is said farther on. The worst that can be said of Vogel under that head is that he did not save from themselves people who were determined not to be saved. And that would have been a hard task. Have we not seen in this centurv land speculators clamour for the fullest right to traffic in land; kick aside all restrictions; ruin or burden themselves; and then blame everyone else from commission-agents and bankers to politicians and Providence? In any case the harm done by the speculation in the seventies passed away, albeit slowly; the good results of the Public Works policy were permanent.

Imaginative and not afraid of a new thing that seemed likely to be useful in a practical way, Sir Julius Vogel had a hand in establishing State Life Insurance, the Public Trust Office, and the State Transfer of Land. He abolished the provincial councils and centralized the Government. He did his best to establish steam communication with the United States and a mail service with England by that route. As early as 1874 he tried to anticipate the Germans by pushing and controlling commerce in the South Seas under the British flag. In 1885 he, with Sir Robert Stout, tried to annex Samoa. A little later he moved the first Government Bill for the granting of female suffrage. His last proposal was of page 239 a Protectionist tariff. He lived to see Protection carried by his opponents and women's franchise by his old friends, but had been long in his grave before Samoa was seized by New Zealand troops and placed under New Zealand tutelage. Far ahead of his time, he tried to establish a Forestry Department. All through his public life he had to struggle against deafness and increasing infirmity, and towards the end to be wheeled to Parliament House in a bath-chair. When he spoke, deafness made his delivery monotonous, but his tones were naturally pleasant, his words well chosen, and his best speeches so full of matter that when the history of the Dominion comes to be written in detail they will be well worth study.

Such was Vogel, one of the short list of statesmen whose work has left a permanent mark on the Dominion, and one of whom it may be said that almost all that he did or tried to do was wise.

As Treasurer in 1870 he proposed to borrow ten millions to be expended on railways, roads, land purchase, immigration, and land settlement. With great wisdom he suggested that the cost of the railways should be recouped from a public estate created out of the Crown lands through which they might pass. With striking unwisdom the Provincialists defeated the proposal. This selfish mistake enabled them to keep their land for five years longer, but it spoilt the Public Works policy and converted Vogel from the friend into the enemy of the Provinces.

His policy, minus the essential part relating to land settlement, was accepted and actively carried out. Millions were borrowed, hundreds of miles of railways and roads were made, immigrants were imported by the State or poured in of their own accord. Moreover, the price of wool had risen, and wheat, too, sometimes yielded enormous profits. Farmers were known who bought open land on the downs or plains of the South Island at £2 an acre, and within twelve months thereafter made a net profit of £5 an acre from their first wheat crop. Labour-saving machinery from the United States came in to embolden the growers of cereals. The export of wheat rose to millions of bushels; and the droning hum of the steam threshing-machine and the whir page 240 of the reaper-and-binder began to be heard in a thousand fields from northern Canterbury to Southland. In the north McLean steadfastly kept the peace, and the Dominion bade fair to become rich by leaps and bounds. The modern community has perhaps yet to be found which can bear sudden prosperity coolly. New Zealand in the seventies certainly did not. Good prices and the rapid opening up of the country raised the value of land. Acute men quickly bought fertile or well-situated blocks and sold them at an attractive profit. So men less acute began to buy pieces less fertile and not so well situated. Pastoral tenants pushed on the process of turning their leaseholds into freeholds. So rapid did the buying become that it grew to be a feverish rush of men all anxious to secure some land before it had all gone. Of course, much of this buying was legitimate and not in any invidious sense speculative. Companies and individuals bought Crown land cheaply and set to honestly work to “break it in.” If they embarrassed themselves it was by sinking money in draining swamps, clearing forest or fern, and otherwise improving their estate. Then when embarrassed they were caught by low prices. Still, other buying was really speculative, and much was done with borrowed money. The fever was hottest in Canterbury, where the Wakefield system of free selection without limit as to area or condition as to occupation, and with the fixed price of £2 an acre, interposed less than no check at all to the speculators. Hundreds of thousands of acres were bought each year. The revenue of the Provincial Council rose to half a million; the country road-boards hardly knew how to spend their money. Speculation, extravagance, reaction—such were the fruits the last years of Wakefield's system bore there. Not that the fault was Gibbon Wakefield's. It rests with the men who could not see that his system, like every other devised for a special purpose, wanted to be gradually changed along with the gradual change of surrounding circumstances.

The southern land revenue, thus swollen, was a glittering temptation to politicians at Wellington. As early as 1874 it was clear that more colonial revenue would be wanted to pay the interest on the growing public debt. Vogel decided to appeal to the old Centralist party and overthrow the Pro-

SIR JULIUS VOGEL

SIR ROBERT STOUT

SIR HARRY ATKINSON

SIR JOHN MCKENZIE

JOHN BALLANCE

page 241 vinces. Their hour was come. The pastoral tenants nearly everywhere disliked the democratic note growing louder in some of them. New settlers were overspreading the country, and to the new settlers the Provincial Councils seemed cumbrous and needless. Fresh from Great Britain, and with the ordinary British contempt for the institutions of a small community, they thought it ridiculous that a Colony with less than half a million of people should want nine Governments in addition to its central authority. The procedure of the Provincial Councils, where Mr. Speaker took the chair daily and a mace was gravely laid on the table by the clerk, seemed a Lilliputian burlesque of the great Mother of Parliaments at Westminster.

Nevertheless, the Provinces did not fall without a struggle. In both Otago and Auckland the older colonists mostly clung to their local autonomy. Moreover, Sir George Grey had taken up his abode in the Dominion, and was living quietly in an islet which he owned near Auckland. Coming out of his retirement he threw himself into the fight, and on the platform spoke with an eloquence that took his audiences by storm all the more because few had suspected him of possessing it. Keen was the fight; Major Atkinson, quondam militia officer of Taranaki, made his mark therein and rose at a bound to take command of the Centralists; the Provincialists were fairly beaten; the land passed to the Central Government. The management of local affairs was minutely subdivided and handed over to some hundreds of boards and councils which varied a good deal in efficiency, though most of them did their special work fairly enough on conventional lines.

Though colonists join in complaining of the number of these, no serious attempt has, however, been yet made to amalgamate them, much less to revive any form of Provincialism. Municipal enterprise has made gradually some attempts to follow in the wake of the great urban councils of England and Scotland. Water companies indeed are unknown, but many of the towns depend upon contractors for their supplies of light; recreation grounds are fairly plentiful, but are not by any means always managed by the municipality of the place. Dunedin has an electric power system, and made £50,000 profit last year out of what might be styled trading enterprise, Wellington has organized a page 242 milk supply. Town councils have nothing to do with education, though some think of entertainment. The rural county councils and road boards concern themselves almost solely with road-making and bridge-building. The control of hospitals and charitable aid, though entirely a public function not left in any way to private bounty, is entrusted to distinct boards. Indeed, the minute subdivision of local administration has been carried to extreme lengths in New Zealand, where the hundreds of petty local bodies, each with its functions, officers, and circle of friends and enemies, are so many stumbling-blocks to thorough-going amalgamation and rearrangement. In New Zealand the English conditions are reversed; the municipal lags still behind the central authority on the path of experiment. This is no doubt due, at least in part, to the tendency in New Zealand to bring such matters as Education, Public Health, Hospitals, Charitable Aid, etc., more directly under the control of State departments than is the case in England.

A few words will be in place here about the continuance and outcome of the Public Works policy. Sir Julius Vogel quitted the Dominion in 1876, but borrowing for public works did not cease. It goes on apace, though it has slackened at times. In 1879 a commercial depression overtook the Dominion. The good prices of wool and wheat sank lower and lower; the output of gold, too, had greatly gone down. There had been far too much private borrowing to buy land or to set up or extend commercial enterprises. The rates of interest had often been exorbitant. Then there happened on a small scale what happened in Victoria on a larger scale twelve years later. The boom burst amid much suffering and repentance. In some districts three-fourths of the prominent colonists were ruined, for the price of rural produce continued on the whole to fall relentlessly year after year until 1894. The men who had burdened themselves with land, bought wholly or largely with borrowed money, nearly all went down. Some were ruined quickly, others struggled on in financial agony for a decade or more. Then when the individual debtors had been squeezed dry the turn of their mortgagees came. Some of these were left with masses of unsaleable property on their hands. At last, in 1894, the directors of the bank which page 243 was the greatest of the lenders—the Bank of New Zealand—had to come to the Government of the day to be saved from instant bankruptcy. In 1895 an Act was passed which, while guaranteeing the bank, virtually placed it beneath State control. This, to be mentioned in its place later on, was the last episode in the long drama of inflation and depression which was played out in New Zealand between 1870 and 1895. No story of the Dominion, however brief, can pretend to be complete which does not refer to this. The blame of it is usually laid upon the Public Works policy. The money borrowed and spent by the Treasury is often spoken of as having been wasted in political jobs, and as having led to nothing except parliamentary corruption and an eternal burden of indebtedness and taxation. This is not true. It was not the public borrowing of the Dominion, but the private debts of the colonists, which, following the extraordinary fall in the prices of their raw products between 1873 and 1895, plunged so many thousands into disaster. Nine-tenths of the money publicly borrowed during these years was very well spent. No doubt the annual distribution of large sums through the Lands and Public Works departments year after year had disagreeable effects on public life. In every Parliament certain members are to be pointed out—usually from half-settled districts—who hang on to the Ministry's skirts for what they can get for their electorates. It would be better if the purposes for which votes of borrowed money are designed were scrutinized by a board of experts, or at least a strong committee of members. It would be better still if loans had to be specially authorized by the taxpayers. But when the worst is said that can be said of the Public Works policy, its good deeds still outweigh its evil. Take it as it worked in the last century. It is true that between 1870 and 1900 the public debt had been multiplied more than six times; but the White population had nearly tripled, the exports had more than doubled, and the imports increased by 75 per cent. Moreover, of the exports at the time when the Public Works policy was initiated, about half were represented by gold, which in 1898 represented but a tenth of the Dominion's exports. In 1870 the colonists were without the conveniences and in many cases comforts of modern civilization. They had scarcely page 244 any railways, few telegraphs, insufficient roads, bridges, and harbours. Education was not universal, and the want of recreation and human society was so great as to lead notoriously to drunkenness and coarse debauchery. New Zealand by the end of the century was a pleasant and highly civilized country. That she became so in the course of thirty years was due chiefly to the much-criticized Public Works policy.

New Zealand has travelled a long way in her borrowing policy since the days of Sir Julius Vogel, but the growth of the public debt has by no means been entirely due to the carrying out of public works. The year 1891 marks the inception of a new stage in the financial history of the Dominion, for then began a period of State activity in new directions, and the Government became authorized to render direct financial assistance to individuals and to provide other services for the benefit of the community at large. Acts were passed empowering the Government to grant loans to settlers on the security of their farms, to workers to enable them to purchase their own homes, and to local bodies for the furtherance of municipal enterprises; the compulsory re-purchase of lands by the State for closer settlement was also authorized, and State coal-mines, State fire and accident insurance offices were established.

Under these circumstances a large increase in the public debt became inevitable, but so far as the expenditure has been upon State undertakings that are either directly reproductive or are entitled to be considered as in the nature of investments, the growth of the Dominion's debt is not a matter which need give its creditors the slightest uneasiness, though it is something which the New Zealand taxpayers themselves should watch with the greatest care. It may be pointed out that a scheme was adopted in 1910 whereby in the case of every new loan raised after that date a sinking fund must be established whereby such loan will be automatically extinguished in seventy-five years. The Public Debt at the end of this year, 1924, may be set down as round about £215,000,000. For more than half this the Dominion receives excellent value, directly or indirectly. The smaller moiety, mainly War Debt, is dead weight and a heavy burden.