The Online Library of Liberty

A project of Liberty Fund, Inc.

• United States Prefatory Note
• Chapter XXXVIII: The Beginnings of Democracy In North America
• Chapter XXXIX: The Frame of Government : State, Local, and Federal Constitutions
• Chapter Xl: the Party System
• Chapter Xli: the Actual Working of the National and State Governments
• Chapter Xlii: the State Governments In Their Working
• Chapter Xliii: the Judiciary and Civil Order
• Chapter Xliv: Public Opinion
• Chapter Xlv: Recent Reforming Movements
• Australia
• Chapter Xlvi: Australian History and Frame of Government
• Chapter Xlvii: Australian Legislatures and Executives
• Chapter Xlviii: the Executive and the Civil Service
• Chapter Xlix: Australian Parties and Policies
• Chapter L: Questions Now Before the Australian People
• Chapter Li: Labour Policies and Proposals
• Chapter Lii: Characteristics of Australian Democracy
• New Zealand
• Chaptee Liii: the Country and Its First Half Century of History
• Chapter Liv: Richard Seddon and His Policies
• Chapter Lv: Compuisoby Aebiteation In Tbade Disputes
• Chapter Lvi: the Working of the Government
• Chapter Lvii: Results of Democratic Government
• Part Iii
• Chapter Lviii: the Decline of Legislatures
• Chapter Lix: the Pathology of Legislatures
• Chapter Lx: the Executive In a Democracy
• Chapter Lxi: Democracy and Foreign Policy 1
• Chapter Lxii: the Judiciary
• Chapter Lxiii: Checks and Balances
• Chapter Lxiv: Second Chambers
• Chapter Lxv: Direct Legislation By the People
• Chapter Lxvi: the Relation of Central to Local Government
• Chapter Lxvii: Comparison of the Six Democratic Governments Examined
• Chapter Lxviii: Types of Democratic Government
• Chapter Lxix: the Money Power In Politics
• Chapter Lxx: Responsibility
• Chapter Lxxi: Democracy and the Backward Races
• Chapter Lxxii: the Relation of Democracy to Letters and Arts
• Chapter Lxxiii: the Results Democratic Government Has Given
• Chapter Lxxiv: Democracy Compared With Other Forms of Government
• Chapter Lxxv: Oligarchies Within Democracies
• Chapter Lxxvi: Leadership In a Democracy
• Chapter Lxxvii: the Later Phases of Democracy
• Chapter Lxxviii: Present Tendencies In Democracies
• Chapter Lxxix: Democracy and the Communist State
• Chapter Lxxx: the Future of Democracy

CHAPTER LIV

richard seddon and his policies

RichardSeddon, or King Dick as he was commonly and affectionately called, was born at St. Helens in Lancashire in 1845. Both of his parents were teachers in elementary schools, then on a far lower level than now. Despite these facilities, he carried away from school little education, being of a restlessly active temper which had no liking for books. After an apprenticeship of five years to an engineering firm, he went at nineteen to seek his fortune in the gold-diggings of Australia. Not finding it there, he crossed the sea from Melbourne to New Zealand, where, after some further experiences in gold-mining, he set up an inn and shop, which his friends called a store and his detractors a public-house, at Kumara, on the west coast of the South Island.1 Here his hustling energy and “hail-fellow-well-met” spirit soon made him successful as a miner's advocate in the Warden's Mining Court, and also a leading figure in local politics. In 1879 he was returned to Parliament as a supporter of Sir George Grey, then Prime Minister, and sat thenceforth in the House of Representatives till he died in 1906, still in middle life, but broken down by a tireless activity which would allow itself no respite from work.

His character and career deserve more than a passing mention. He had little book-learning, no love of knowledge for its own sake, and in particular no acquaintance with even the rudiments of economics and legislation. In eloquence he was equally wanting. There was neither art nor grace in his speeches, which rambled on through a string of details tedious to the listener, with nothing even of that idealistic strain by which men of ardent soul but halting utterance sometimes rouse an audience. But he had Force and Drive. He could say what he meant when he wanted to say it, and said it in a way to command attention. “I believe"— so he once remarked to an interviewer —"in giving it to the great many-headed hot and hot, lots of pepper and seasoning, none of your milk-and water pap, no namby-pamby solemn beating about the bush, but straight-from-the-shoulder talk.” It was well observed of him that he “never could estimate the precise value of comparatives and superlatives, and seemed to the last to imagine that strong language was the only language befitting a strong man.” When he had to deal with a subject, he spared no pains to get up all the facts and to keep them accurately in mind. In Parliament his indomitable persistence and strenuous will bore down all opposition, and the air of determined resolution that sat well on his strong features was all the more impressive from his burly frame and a chest like Vulcan's.

But with this force there were coupled other qualities quite as serviceable. He had a genial manner, a cheery laugh, a crushing hand-grip. Though jealous, he was neither malicious nor vindictive. He was at home with the people. From them he had sprung, and they were proud of him. He got acquainted with everybody, remembered everybody's face, knew how to handle everybody, and thus did more to strengthen his power outside than inside Parliament. Even his opponents found it hard to hate him. With these gifts and a convenient absence of scruples, he was an adroit parliamentary leader, quick in apprehension, shrewd in his judgments, knowing even when to yield and how to yield without the appearance of weakness.1

He was accused of playing down to the crowd, and certainly did much to vulgarize New Zealand politics. Power was his passion, and, though his head was not turned by popularity, he had his full share of vanity. Yet he was something more than a mere self-seeker or vote-catcher. His heart was kindly, and he honestly wished to better the condition and brighten the lives of the class whence he came. He deserves to be remembered as one of the few leaders of the masses who began and remained throughout on the level of the masses. Seldom has any one Of an origin so humble risen to the top, not even in France, in the midst of a revolution, nor in the United States, nor in Switzerland. But the New Zealander, had he lived in the days of the first French Revolution, would have played a notable part there, as he would have done also in those cities of ancient Greece that were often torn by seditions. Revolutions give chances to everybody, but Seddon did not need troublous times to rise. There have been few more remarkable figures in our time than this popular dictator, who gained and kept power without education and without eloquence.1

The election of 1893 gave Mr. Seddon, who had become Prime Minister after the death of Mr. Ballance, a majority of 22, and three subsequent elections in succession confirmed his power. Though during the first few years the resistance of the Legislative Council occasionally delayed his measures, he carried through, during his thirteen years of office, a series of Acts, to which, having regard both to their number or their significance, few parallels can be found in recent history. Most of them were passed in the interests of the working class, and many of them extended the scope and power of State action. Seddon was not himself a Socialist, indeed he was not an -ist of any kind, being free from all theories, and looking solely to the needs of the moment and the exigencies of the political situation. Nor was his Ministry, as a whole, Socialist in the European sense of the term. Resting on the support of the Liberals and of the working-class vote, the latter already strong, though not yet organized, it met the more urgent desires of the latter without offending the former, and carried with it the poorer part of the agricultural class, and indeed the bulk of public opinion in the colony. But it was not by this support only nor by his personal ascendancy that his Ministry kept its grip on members and constituencies. Mr. Seddon was the most astute of party managers, and never hesitated to use Government patronage to win support or buy off opposition. He saw nothing wrong in this, and almost disarmed criticism by the frankness of his avowals. Appropriations for roads, bridges, railways, harbour improvements, every kind of work which could benefit a district or bring money into it, were freely granted. No one charged him or his Ministers with enriching themselves. New Zealand is one of the purest of colonial communities, and, indeed, of democratic communities anywhere, comparable in this respect with Switzerland. But though the grants were occasionally made to districts that were not supporting his government, his abuse of public funds for party purposes did much to lower the tone of politics.

These methods and acts passed, with the support of the Liquor interest, helped to secure his continuance in power, though some thought that his prestige was beginning to wane before he passed away. The pace of legislation slackened during his later years, when two or three of his ablest colleagues were no longer with him, and the trade union leaders, always expecting some fresh concession, grew restive, and were stimulated by the example of the rapid advance made by the Labour party in Australia to think of detaching themselves from the Liberals. After Seddon's death his two successors kept the Liberal majority together on the lines he had followed, while slowing down the pace still further. They were beginning to be weakened by an increase in the class of small farmers, which grew more conservative as it acquired property; and when the wage-earners found that there were limits to the raising of wages, the two sections began to draw apart. Moreover, the Ministry suffered, like every Ministry long in office, by the sort of staleness it acquired in the view of the voters. “In the end the possession of great administrative power brings about destruction. Security breeds carelessness, perhaps corruption; length of office inspires mistrust, discontent, and envy.”1 However, it held on, not without the use of what are euphemistically called “administrative methods,” though at the election of 1908 many of the Labour men drew off, running candidates of their own. Finally, at the election of 1911, the Opposition obtained a small majority, and formed, under the name of the Reform party, a Government, which devoted itself chiefly to financial and land questions, and created a Civil Service Commission, but did not attempt to repeal the measures of its predecessors.

In the election of 1915 the Labour party gained seats in seven constituencies, and elsewhere gave its support to the Liberals, but the Reformers obtained a small majority over both these parties. Shortly afterwards (August 4, 1915) the European War brought about the coalition of Reformers and Liberals in what was called a “National Government,” and it lasted till 1919, when the “Liberal” members withdrew.1

As it is the legislation passed by the Seddon Government that has chiefly fixed upon New Zealand the attention of economists and statesmen in other countries, their measures, and especially those which have a flavour of State Socialism, deserve to be examined in detail. Before, however, I proceed to such an examination, and thereafter to a description of the present political conditions and of the public opinion of the country, a few words must be said upon Local Government, Education, and the Civil Service, in order to complete the account of the machinery of government.

No British colony has developed a more complete system of local institutions. There are, in rural areas, County Councils, and under them Road Boards, both elected biennially on a system which allots one, two, or three votes to the citizen, according to his valuation.2 Their functions cover every kind of rural work except Education, Poor Relief, and Police. The Borough Councils are chosen biennially, the Mayor being elected, not by the Councils, as in England, but directly by the voters, as in the United States. The qualifications are freehold or rating or residential, but the latter does not entitle its holder to vote on any proposal submitted to the electors regarding loans or rates. The functions of these Councils include the care of “streets, drainage, lighting, tramways, bridges, ferries, water-works and water-power, sanitation, fire prevention, workers' dwellings, markets, public libraries, museums, public gardens, and they may contribute funds for recreation, instruction, etc. More than one borough has a theatre.”3

The total indebtedness of the various local authorities in New Zealand (excluding debts to the Government amounting to £3,851,000) was in 1918 £22,260,000. Considerable subsidies are paid annually by the Dominion to Borough Councils, and on a still higher scale to County Councils. No salaries are paid to the members of any of these local bodies. “When the large number of local bodies is considered, it will be seen,” says Chief Justice Sir Robert Stout, “that some thousands of our people are concerned, without fee or reward, in managing our local concerns.” And he adds, “Mistakes may have been innocently made, but up to the present time (1911) not a single charge of corruption or fraud has ever been made against any of our municipal bodies or any of their members.”1 Every one whom I questioned in New Zealand agreed in bearing like witness to the honesty with which local government is conducted.

In rural areas, party politics do not enter into elections, but in the cities it is otherwise. The Labour party ran candidates in the four chief cities in 1913. Municipalities are empowered to adopt in their elections proportional representation, but this right has been so far sparingly used.2

Police belongs entirely to the government of the Dominion, which has entrusted it to a Commissioner. In 1919 a police force of only 878 was deemed quite sufficient for a population of 1,160,000, being one policeman to every 1319 persons. Another cheering fact is that whereas persons born in New Zealand and over fifteen years of age constitute 60 per cent of the whole population, the percentage of New Zealand-born to the total number of prisoners in gaol was only 43.3

Education also is entirely supported by the Dominion Government, the administration being entrusted to thirteen district boards and to school committees elected locally. The question of religious teaching in schools has been much contested. In 1914 a Bill was introduced providing for the reading of the Bible and permitting ministers of religion to enter the schools at suitable times to instruct scholars belonging to their respective denominations, but it was warmly opposed and ultimately dropped, owing to the outbreak of war in Europe. Apart from this question, the schools did not “come into politics.” In the elementary schools instruction is compulsory and gratuitous, while in secondary schools free places are provided for all children who reach a certain standard by a certain age. There is practically no illiteracy among native-born New Zealanders. But one part of the fabric remains unfinished. It is the top story. The University is merely an examining body, and no one of the four colleges affiliated to it, situated in each of the four chief cities, useful as they are and all of them well deserving to be maintained, possesses the equipment which a University needs.1 No city will yield to any other, not even to Wellington, the capital, the honour of being selected as the seat of a true university of the European or American type, concentrating in itself the highest teaching power and the most varied learning of the country. The provision for engineering and other technical instruction is of good quality and sufficient for the population, but institutions created to give instruction in applied science, however valuable for practical purposes, do not fill the void. A first-class university staff is all the more necessary, because New Zealand lies far away from the intellectual influences of Europe. They do, indeed, reach her through books, but with the thin voice of a telephone.

The Public Service

In few countries, if in any, is the proportion of members of the public service to the whole nation so large as in New Zealand, and this because in few does the Government undertake so many tasks on behalf of the people. In 1909 a Minister stated that 130,000 persons out of a population then of 1,000,000 were directly dependent on the State, and this number is said to have now risen to 150,000. This estimate would, however, seem to have been reached by adding to the number of State employees, then 40,000, the old-age pensioners, then 14,000 (now over 19,000), and estimating the dependent families at two and a half persons to each of the above. The condition of the Civil Service is therefore a matter of special interest, for it affects the welfare of a large part of the people, as well as the efficiency of the many and diverse kinds of public work which they perform.

Four questions in particular need to be noticed here, the methods of admission into the Civil Service, the tenure of its members, the system of promotion, and the relation of the Service to party politics.

Admission to the public service is by a competitive examination, held at the age of fourteen, in elementary subjects and therefore affording no satisfactory evidence of the intellectual gifts of the candidates, though some evidence of their diligence. This arrangement does not apply to posts in the railway service, which are filled by the appointment of the Ministers for that department, while in the postal and telegraph services, appointments are entrusted to a non-political Commission. Members of the Legislature used to put political pressure on the Ministers to give places to their friends, and found this one of the least agreeable of the functions which their constituents expected from them. One member is reported to have said: “The applications I receive from candidates for the public service are the worry of my life; men, women, and children all seem to want to get Government billets.” And another observed: “Members of Parliament are to a large extent Labour agents; there is none of us who is not supposed to possess some influence with the Government, and who is not expected to use that influence on behalf of persons seeking Government billets.”1

Tenure.— The existing evils due to political patronage would be much graver had not New Zealand fortunately adopted the British principle of regarding the tenure of posts as practically permanent, i.e. making no dismissals except for serious faults or evident inefficiency. There is no “Spoils System,” no wholesale turning out of officials on a change of Government, such as was once general, and still exists, to some extent, in the United States.

Promotion.— The efficiency of any service depends on the methods used for bringing superior ability to the top, but this implies the entrusting of a wide discretion to the head of the department, who cannot always be trusted to resist political pressure exerted by members of parliament in the way already referred to. The alternative is promotion by seniority, which, even if coupled with examinations at different stages (an experiment tried in New Zealand), gives little security, beyond what mere experience furnishes, for administrative capacity. Thus New Zealand has suffered both from ministerial discretion and from the rule of seniority. As a new country, she had not the advantage of that long tradition and settled custom which in Great Britain has on the whole, if not invariably, controlled Ministers in the disposal of patronage, impressing on them the duty of selecting the best men for the higher posts. An effort to mend things was made in 1912 by an act creating a non-political Public Service Commissioner, with two Assistant Commissioners to exercise a general control over the public service, except the Railway, Defence, and Police departments. Appeals from a decision of the Commissioner may be brought to a Board of three members, one of them appointed from the ranks of, and another elected by the Civil Service itself. This Commission is independent of the Ministry, and its members are removable only by Parliament. An effort to bring its powers under direct parliamentary control has, however, been threatened.

The Participation of Public Servants m Politics.— Though it was long ago laid down that members of the Civil Service are forbidden to take an active part in political controversies otherwise than by recording their votes, this rule was not strictly observed. Members have been known to complain that in the days of the Seddon Government they found an array of public servants working against them at elections, and that it was felt in some places that a man could not get work under the Government unless he supported it by his vote,1 but others have told me of many who, though they might not work against the Ministry, voted against them. In 1907, when a workman had been dismissed because he had moved a resolution hostile to the Government at a meeting of a Labour League, the matter was raised in Parliament and the action of the Government supported. It was generally felt, as some one said, that if the Government did not rule the Civil Service, the Civil Service would rule the Government. The public action, and even the votes, of a body so numerous and so constantly growing would, if steadily thrown for the party which promised them higher remuneration and more favourable conditions, be a dangerous factor in politics, as has happened before now, to some extent in Britain and to a larger extent in Australia, and would also be unfair to those workers who might, as taxpayers, be thus forced to pay more to others than they were themselves receiving for like work. I did not, however, hear that even the railwaymen, the largest single body of employees, have as yet gone far in this direction. Railway workers, though not long ago there was a strike among them, are to some extent kept quiet by the fear of forfeiting their pensions for long service.

The opinions expressed to me in New Zealand all went to show that the upper ranks of the Civil Service were reasonably. efficient and entirely pure. One could not expect to find among them more than a few persons of the calibre of the permanent chiefs of the departments in the countries of Western Europe.

We may now turn to the experimental legislation which has won for New Zealand the reputation of a semi-socialistic State.

The boundless energy of Mr. Seddon, the enormous majority that supported him in the legislature, and the command he soon acquired over the minds of the people, made it possible for his Ministry to carry through in the years following 1893 a series of laws, conceived in the interests of the working class, to which few parallels can be found in any other modern country. Many of these require no special notice, because similar to measures enacted in European countries or in several States of the American Union, so I will advert only to those few which either throw strong light on the tendencies of democratic government or go farthest in enlarging the functions of the democratic State. Most of them did not spring from Mr. Seddon's brain, which was by no means creative, yet without his force and his ascendancy both in and out of Parliament they could not have been pressed through against the resistance of the richer section of the community. I begin with the land policy, in which it was not he, but his colleague John M'Kenzie, Minister of Lands, a masterful shepherd from the Scottish Highlands, who originated, carried, and set a-going the administration of the governmental measures.1

Land Legislation

When the Liberal-Labour Government of 1891 proceeded to tackle the Land question the problem was not new, but had already a history, long, changeful, and complicated. In the earlier years of the Colony, when all the land of the islands, except the parts reserved for the Maoris, lay at the disposal of the Government, sad mistakes were committed. There was abundance of good intentions, but very little foresight. Vast blocks were permitted to pass into the hands of speculators, so that in the early 'seventies, when immigrants desired to take up farms, much of the richest and best-situated arable soil was already gone, while the boom (consequent on Vogel's borrowings) which began in 1870 had run up the price against small buyers. Thenceforward many attempts were made by legislation to repair these original errors. Some experiments failed and were abandoned; none had in 1891 done much to meet the reasonable demands of the people. In that year 584 persons owned 7,000,000 acres out of rather less than 44,000,000 fit for agriculture or pasture, and in 1894, 470 persons held land of the unimproved value of £15,000,000, while 38,465 persons held land of unimproved value to the amount of £23,000,000, i.e. one-eightieth of the total number of holders owned two-fifths of the total value of the land. To make farms easily procurable, and to improve social and political conditions by reducing the number of large and increasing that of small landholders, was an object which all recognized as desirable, but about the means there were great differences of opinion.

In 1892 the Liberal-Labour Government abolished the then existing system of a perpetual lease of Crown lands at 5 per cent, with right to purchase, and substituted what was called a “lease in perpetuity,” at a rent of 4 per cent, without the right of purchase, limiting, moreover, the area which any one tenant could hold to 640 acres of first-class or 2000 acres of second-class land. Presently the tenants under the tenure created by this law began to ask for permission to purchase the freehold. This right they at last obtained in 1907, but with a provision that the price should be the capital value which the land had, not at the time when the lease was granted, but at the time of purchase. At the same time the lease in perpetuity was abolished, and a lease for sixty-six years substituted, with a provision for valuation and renewal at the end of the term at a re-fixed rent. But many tenants remain who hold under the older tenures, some under perpetual lease and some under the lease in perpetuity, and their numbers make them a powerful body. A recent authority remarks: 1

The chief danger of a large State tenantry is the immense political pressure they can exercise. There were, in 1909, 25,204 State tenants, holding 18,264,083 acres, and they will agitate for the freehold so long as there is the slightest chance of getting it, and will be supported in their demands by about 45,000 freeholders of country lands, most of whom are strong upholders of the tenure which they enjoy. Even if they do not succeed in obtaining the freehold, they are quite likely to clamour for reduction in rents in time of depression, as indeed they have already done. One witness before the Land Commission of 1905, on being pressed to give reasons for his belief in the freehold, said, “I believe in the freeholder because the freeholder is the man to whom, in times of trouble, the State will look, and the leaseholder the man who in times of trouble will look to the State.”

The questions connected with State ownership cannot be yet deemed to have been settled, and the authority just quoted expresses the opinion that

the advantages of State ownership have been much exaggerated, and it is not easy to show that New Zealand has derived any benefit that could not have been obtained from freehold tenure combined with taxation of land values. Had the efforts of the legislature in the past been concentrated upon the prevention of land monopoly and closer settlement on freehold farms, more progress would probably have been made than has been possible on the lines attempted in the past.1

While these different forms of State leasing were being tried, the sale of Crown lands in freehold also went steadily on, but with two important provisos, “that the purchaser must reside and execute improvements, and that no one can purchase who already owns a certain prescribed quantity of land.” The “Reform” Government, which took office in 1912, has allotted the proceeds of land sales to the support of a fund, to be now referred to, for the purchase of land.

Besides the measures dealing with the lands that had belonged to the State from the first settlement of the Colony, a further effort was made to meet the desire for small properties. In 1894 the Seddon Ministry passed an Act empowering the Government to acquire privately-owned land by compulsory purchase for the purpose of furthering closer settlement “The land so acquired is disposed of on perpetual renewable leases of thirty-three years, at a rental of £4: 10s. per cent on the amount paid for the land. At the end of such lease the renewal rental is £4: 10s. per cent on the value of the land.”1 The sum of £750,000 per annum may be expended in this way, and in fact sums very large in the aggregate have been so expended. Most sales have been effected by agreement, without compulsion. But the money the State pays is obtained by borrowing in England, and the rents which the State has been receiving have not quite covered the interest upon the loans and the expenses incident to the process of purchasing. Moreover, the recent prosperity of the country sent up the price of land, so that it had become before 1914 more difficult to purchase at a price permitting subdivision and letting at rentals which tenants can afford to pay. Thus, undeniable as is the benefit to the tenants of obtaining farms, that benefit was being secured at a loss to the community as a whole. This was not sound finance. Now that the rates at which loans can be raised in England have so greatly risen, can the process continue? So many countries have, since the days of the Roman Republic in the fourth century B.C, failed in their efforts to deal wisely with the problem of the management and disposal of the public land that it need cause no surprise that, even with the experience of the past to instruct them, successive Governments in the Australasian colonies have done little better. New Zealand, specially favoured in one respect, because she started with no landed aristocracy already entrenched in their vested interests, has paid dearly for the errors of the first twenty years. The Seddon Government, however, deserves the credit of having grappled boldly, if not always wisely, with the evils it found. Without confiscation, though at a heavy cost in money, it improved the situation. Under its successors, who are more definitely committed to the plan of freehold ownership, small properties have been increasing, and the large estates are being slowly reduced as the agricultural population grows.

It is only fair to add that the Governments of recent years have been embarrassed and distracted by the existence of three divergent currents of opinion. One school desires to make the State the universal landowner, and to support its expenses by land revenues. Others desire to extinguish private property in land as in all other means of production, in order to establish a Collectivist regime. Opposed to these sections are those who, both on political grounds and for the sake of satisfying a popular demand, seek to create the largest possible number of small landowning cultivators, just such a class, in fact, as exists in North America and (with smaller properties) in many parts of France. Sometimes trying to satisfy both these schools of opinion, sometimes yielding to one or other, New Zealand land policy has been wavering and changeful.2

Financial Administration

Revenue.— In New Zealand, as in all young countries where population is sparse and the rich are few, duties on imported goods constitute the most convenient form of taxation, so they continue to supply the chief source of revenue. They were at first imposed for revenue purposes only. Presently, however, when there seemed to he a lack of employment for the town workers, and when this was attributed to the competition to which home-made articles had to submit from the competition of British-made articles, the tariff began to be regarded as a means of raising prices for the home-producer, and thereby assumed a Protectionist character. This character it has since retained and developed. Import duties were further raised under Seddon, whose faith in Protection was so ardent that he insisted on preaching the doctrine in England, regarding it as of universal application, whatever might be the economic conditions of a country. The manufacturing employers, who had found their position strengthened against imports by a raising of duties originally adopted in order to add to the revenue in a time of depression, thenceforward pressed for a higher and higher tariff; while the workmen, thinking that this meant more employment for themselves, seconded that pressure, so that with the support of both classes Protection has become the established creed of the country. It gives revenue; it is popular with the townsfolk; and the agriculturists either have not perceived the burden it lays upon them or are willing to bear that burden in what they suppose to be the general interest. The fear of the competition of Australian-made goods was one of the grounds which deterred New Zealand from entering into Federal relations with Australia. Little objection was made when Seddon, who was a strenuous Imperialist, introduced a preferential scale favouring British imports, because the preference was given, not by reducing the tariff on goods brought from England, but by increasing it upon goods coming from foreign countries. Protection has doubtless helped to maintain in New Zealand some industries that might otherwise have languished. But whether this has proved, or will in the long run prove, a benefit to the country is another question.1

Two other features of the financial policy instituted by Ballance in 1891 and continued by the Seddon Ministry, were both a Land-Tax and an Income-Tax graduated on all profits except those from land. The former was designed not only to raise money, but to break up the large estates, an object already sought by the other means above referred to. To make it effective for this purpose it was laid to fall more heavily upon estates in proportion to their value. The ordinary land-tax, which dated from 1891, applied to all properties exceeding £500 (unimproved value), estates below that sum being exempt. A graduated land-tax (first proposed in 1887 by the Stout-Vogel Ministry), applicable to all properties which exceeded £5000 (unimproved value), was added later, and in 1917 the distinction between the two was abolished, so there is now one graduated tax which, imposing one penny in the £ on land the unimproved value whereof does not exceed £1000, rises till it reaches a maximum of seven-pence in the £ at £193,000. The amount was increased for 1917–19 by a supertax of 50 per cent of the primary tax, making the maximum rate 10£d. in the £. For absentee owners there is a further increase of 50 per cent on the graduated tax. The object of reducing the size of estates has been only to some slight extent secured. The more it is secured the less, of course, is the return from the graduated tax. The graduated income-tax, not charged on the incomes of resident individuals below £300, rises by successive steps to a maximum rate of 7s. 6d. in the £, which rate is attained at an income of £6400. Both these taxes were of course resisted by the large landowners and by the rich generally, but were so welcome to the small farmers, as well as to the labouring class, that they were easily carried and have been maintained. Continued prosperity, with high prices for wool, mutton, cheese, and butter in British markets, has enabled them to be borne. There are also progressive duties on property passing at death, a class of imposts now familiar. Great Britain imposed graduated succession duties in 1894, and a graduated income-tax in 1911. Congress imposed a graduated surtax for the United States in 1916. New Zealand, however, led the way so far as English-speaking communities are concerned.

How is this taxation, large in proportion to the wealth of New Zealand, expended? The net public debt amounted in 1914 to a sum of £91,689,000, in 1919 of £170,000,125, with an annual charge of £8,000,000 for interest and sinking fund, about £70,000,000 having been added to it during the War of 1914–18. In 1891, when the Liberal-Labour Ministry came in, it was £39,000,000, in 1909 £70,000,000, in 1914 £91,000,000, while in 1919 War Loans had raised it to £171,000,000, representing £151 per head of European population. Why so rapid an increase up to 1914 in a country which had, theretofore, no naval and only a very small military expenditure? Most of the money had gone into reproductive public works, such as railways and roads, and much in loans to local bodies, on which they pay interest. Other parts had been expended in the purchase of lands for closer settlement, the rents paid for which nearly equal the interest on the sums so applied, and in advances to settlers for farms and to working men to enable them to obtain dwellings of their own; and it would appear that on these various items the State has lost little or nothing, while many a farmer owes his success to this initial aid. Upon the agrarian policy, taken as a whole, there has, however, been a certain loss, for it has involved many incidental expenses, which have had to be charged on general revenue. From such authorities as are available in Europe I do not gather that the Seddon Administration and its continuation down to 1912 can be charged with recklessness — Seddon was personally averse to waste — or with financial incompetence.1 It showed business capacity on more than one occasion. But it was certainly lax in its methods of expenditure, and lax with comparative impunity, because the direct taxes, which in practice are the only taxes the citizen feels, are paid by a comparatively small part of the community, and it was not this particular part that kept the Ministry in power. The tendency of most branches of administration in New Zealand, as in most democratic countries, has been to a steadily increasing expenditure. Old-age pensions, for instance, when introduced in 1898, ten years before they were granted in Britain, were surrounded by a number of restrictions and qualifying conditions which were in subsequent years struck off, one after another, so that the number of recipients has increased much faster than it ought to have done in proportion to the increase in population. In 1919 it was 19,872. The original amount of each pension was £18 a year. The average was in 1919 a little over £37. The total amount expended per annum, which in 1900 was £157,000, had risen in 1917 to £480,000, and in 1919 it was £743,000.1 The large expenditure had not in 1910 reduced the amount spent by the State on charitable aid to the poor, but it had diminished private contributions to charitable purposes.2 The Poor Law arrangements of New Zealand are alleged to encourage extravagance by allowing local authorities to spend sums received from the central revenue; and the growth of pauperism in a community so new and so prosperous has been frequently commented on and was deplored even by the optimistic Seddon.3

The tendency to laxity, not to say extravagance, in expenditure was increased by that habit of constructing public works with a view to the winning of political support which has been already referred to; and it came all the more easily because the Dominion was able to go on borrowing in England at a rate of from 3 to 3£ per cent. Those were happy days, not likely to return in our time. Though there has been for many years past a Sinking Fund, it was a thing more for ornament than use, and valuable, as a leading statesman once observed, chiefly as indicating an intention some day or other to pay off the debt.4 The elasticity the revenue has shown makes parsimony seem unnecessary, and every one knows that the temptation to please the present generation at the expense of posterity is particularly strong in popular governments.

Undertakings Conducted by The State

Among the enterprises and industries which Government has undertaken in New Zealand, the railroads are by far the most important. In a young colony, where there was hardly any private capital available for construction of costly works, and no chance of obtaining it from Europe save through State action, undertakings so essential for the development of the country inevitably fall to the Government. Some few small lines were built by the Provincial Councils, while they existed, but a far greater number by the Central Government, especially after the hold borrowings started by Vogel. At present, two lines which were privately owned having been bought up, practically all the railways are owned and worked by the State. Its action may be examined first as regards the constructing and then as regards the management of the railways.

Construction.— When the business of providing a country with proper facilities for railway communication is determined by economic considerations only, the problems of military or naval defence not needing to be considered, two principles ought to be observed. One is to lay out and construct the railroads on a systematic plan, both the trunk lines and the branch lines being in proper relation to one another. The other is to build lines where the commercial need for them is greatest, and prospects exist of a remunerative traffic, which will enable them to be worked at a profit, as well as maintained in perfect working order. Neither of these principles was followed by the New Zealand Government. Exposed to a strong and unceasing political pressure by those who wished to have the value of their properties improved by transportation facilities, it usually yielded. Trunk lines might be neglected, while some lines were built where they were little needed, and where, consequently, the receipts were, and have continued to be, small. The whole thing was done piecemeal, and consequently at a needless cost, though it ought in fairness to be said that the absence of any economic centre whence railroads might radiate increased the difficulty of planning a system. A Minister might try to resist, but when votes were to be gained or lost, he was apt to comply or be overruled by his colleagues. This went on from the first, and has been no worse under universal suffrage than it was when landowners ruled the country under a limited franchise, for the latter were just as insistent in desiring to improve their properties as a working-class constituency is in desiring to have employment provided at its doors. Less reprehensible, but almost equally unfortunate, was the clamour which arose from every part of the colony for “a fair share” in the distribution of the loans procured for railway construction. With his usual grasp of realities, Seddon said in the Assembly: “Until we have had a fair expenditure of public money out of loans upon each part of the colony, it is wrong of those parts that have had a fair share to say suddenly that there is to be no more borrowing.”1 Districts where the need was small and the physical difficulties of construction great insisted that as much be spent within their limits as in places where the prospects of traffic were brighter. Much of the waste which from early days loaded the country with a heavy debt is due to this intrusion of political influences.

Management.— In early days the railways were both built and managed by the Minister of Public Works. The loss incurred in running them caused so much dissatisfaction, that in 1887 a permanent non-political Commission of three persons was established, who were thenceforth to control and manage the railways. This Board effected some improvements and many economies. But, as usually happens, the economies were unpopular, because the individuals whom they inconvenienced were more vocal than the general body of taxpayers whom they benefited. When the Commissioners tried to increase traffic by anything in the nature of a differential rate, they were charged with unfairness. Members of the Legislature could no longer obtain the favours for their constituents that had been squeezed out of a political Minister. Many New Zealanders declare that the merits of the Board — its independence, and its stiffness in recognizing nothing but its duty to the community as a whole— proved its undoing. The matter is one still in controversy, but be that as it may, Seddon's Ministry abolished the Board, creating a Minister for railways under whom the politicians regained their influence while economy declined. Ministerial patronage, used, of course, for political purposes, flourished once more, and was said to be flourishing when I visited New Zealand in 1912. Patronage includes not only the bestowal of posts in the railway service and the giving of employment to day-labourers, but also the execution of improvements, such as a new station, in places where a constituency can be gratified, and the creating of work for the unemployed in a particular area. It is said that political aims were at one time pursued in another ingenious way by bringing into an electoral district, where the parties may happen to be equally divided, a body of railway workers whose votes could be counted on for the Ministry employing them.

Two questions remain to be considered: the financial position of the Government railways and the service they render. The former is not easy to ascertain because the form in which accounts are presented, with the habit of sometimes charging to capital what ought to come out of revenue, does not tell the whole story. It seems clear, however, that the lines have been, and are being, worked at a loss, i.e. the receipts do not cover interest on the cost of construction as well as all working expenses, so there is a loss to the general taxpayer. The explanation usually given, besides, of course, an admission of the errors which made the original cost greater than it ought to have been, and which also saddled the Department with unremunerative lines, is that the rates are kept low with a view to the development of the country and the benefit of the travelling public. As regards “development,” this is a term wide enough to cover expenditure on unprofitable lines, and one of the results of “political” and otherwise extravagant railway construction and management has been to reduce those very railway receipts which might have been used for the building of new lines where they were really wanted. It is alleged that the higher branches of the railway service suffer because it is hard to promote the most capable men without incurring the reproach of favouritism, and it is further asserted that in the lower departments less work is got out of railway employees of all kinds than private employers obtain.1 The rates for passengers and even for freight traffic, admittedly low, considering the wages of labour, are justified on the ground that this policy helps the people to move about freely, and that producers would complain if rates were raised on the transport of agricultural products.

Station accommodation is poor, but the transportation service is fairly efficient, having regard to the physical conditions of the country, and the permanent way is kept in good order. Trains are few, for the rural population is sparse and the four great cities lie far apart. The total mileage was, in 1919, 3012 miles, of which 2983 belonged to the State. All lines have a gauge of 3 feet 6 inches, a fact which makes the heavy cost of construction all the more remarkable.

Nobody in New Zealand proposes to change the present system of administration. To sell the lines to private companies might, it is thought, lead to the creation of a formidable monopoly. To lease them to private companies would take them, more or less according to the method of leasing adopted, out of Government control. A more obvious remedy for the present defects would be to re-establish an independent non-political Commission, such as existed from 1887 till 1894, and such as exists in some Australian States. This course also would, however, be unwelcome to members of the legislature, whose political interference offends only a small number of thoughtful men. New Zealanders who admit the defects of their system remark that after all it is better than the control which great railway companies have sometimes in other countries exerted over Governments to the prejudice of public interests, as notably in the United States, and also in France.

Besides building railways, the Public Works Department constructs, or aids by money grants, the local authorities to construct, roads and bridges, forms of expenditure in which ample use is made of all opportunities for showing favour to localities. “I am not one of those (observed Seddon) who say that, other things being equal, I should not favour the district that was represented by one who helped to maintain the Government in power.” “It is unreasonable and unnatural to expect the Government to look with the same kindly eye on districts returning members opposed to the Government as on those which returned Government supporters.”1

Minor Governmental Undertakings.— Some of these need only a passing mention. The State has taken over the oyster-beds at Auckland because they were suffering from reckless private treatment. It has established trout and salmon hatcheries to stock the rivers with fish, and thus created some of the best trout-fishing areas to be found anywhere in the world. It wisely took charge of the famous region of mineral springs and geysers at Rotorua, and has provided hotels for tourists there. It set up sawmills to get timber for its public works more cheaply. A more important enterprise was its undertaking to work coal-mines on the public lands. In 1901 coal had become scarce and dear, owing to a diminished importation from Australia, and it was alleged that a coal Ring was keeping up prices. An Act was therefore passed by the Seddon Ministry empowering the Government to work the coal-beds it possessed on the west coast.2 This it has continued to do, supplying its own railways and also competing in open market with private mine-owners. The latter do not seem to have materially suffered, and the prices, though probably steadied down by the State mines, are still high. It is, however, possible that the entrance of Government into the business may have discouraged the opening of new pits. Mine-owners say that they can stand the competition, because the Government mines are worked at a higher cost, not from a difference in wages, because wages are regulated by law, but because the State workers take things easier and do less work for the same wages than private employers obtain. It may be added these miners have been found troublesome to deal with, for they are exacting in their demands, and their Unions much disposed to strike.1

Life and Fire Insurance.—The business of Life Assurance was undertaken by the State as far back as 1869, when no local New Zealand companies were engaged in it. It has been carried on with reasonable success, though in recent years private companies have distanced the State office and obtained most of the new business. These companies are said to put more energy into canvassing, and communication with the outer world is so much more frequent that State intervention may be less needed than in earlier days. State Fire Insurance was taken up by the Seddon Government in 1903, against strong opposition on the part of the private companies then already established, and which had become unpopular because supposed to have formed a combination which was charging exorbitant premiums. When the State office started with a system of lower premiums, they fought hard against it; and experience showed that the reduction it had made was too great for safe business, the percentage of fires being high in New Zealand, where houses are largely of wood, and earthquakes not unknown. The State office, which found itself obliged to raise its premiums, is maintained as offering a security against the formation of a monopolistic Ring, but should it be found to be continuing to do business at a loss, it will be accused of benefiting the insurers at the expense of the taxpayers.

This is the place to mention another enterprise which won much favour. In 1894, when prices had been falling, and there was a good deal of pressure from the farming class, Seddon carried legislation authorizing loans to be made to agriculturists by way of mortgage at 5 per cent, the interest usually charged on farm mortgages being then from 6 to 8 per cent, or even more. The Government could do this, because it could borrow in England at 3 to 4 per cent, and make a profit on lending at 5. Under the powers of this Advances to Settlers Act, it went into business as a moneylender, with the result of relieving the farmers and bringing down the rate of interest in the open market. Repayment by small instalments was required, and the State has, in fact, profited by this enterprise.1 The experiment was followed up in 1906 by another Act, authorizing advances to workers on first mortgage at 4 1/2 to 5 per cent to enable them to acquire homes. The borrower's income must be under £200 a year, and the loan is not to exceed £350. This experiment also seems to have worked well financially, though critics observe that both schemes encourage the belief that whenever any class is suffering from economic causes, it may expect the Government to step in to relieve it. The same remark would apply to the practice of providing State work at times of unemployment.2

All the water-power of large streams has been taken over by the Government. It is still the owner of considerable natural forests, forests of great beauty which ought to be carefully preserved, and as these are disappearing, it has entered on a policy of afforestation with foreign trees, for the native trees, though many of them valuable, are of slow growth.3

Note on Protection

[1]The house had a license, but taken out in the name of his uncle.

[1]A penetrating observer who had every opportunity of studying Seddon told me that he got on much better with the average elector than with men of intellect or education, their mental processes being unfamiliar to him.

[1]M. Siegfried observes that the Frenchman from the country, who is said to have gone round Paris trying to find the being called L'État, and was at last shown a very large building full of public offices, might in New Zealand have simply been led to Mr. Seddon's room.

[1]Hight and Bamford, Constitutional History and Law of New Zealand, p. 303.

[1]The general election of Dec. 1919 gave to the Reform party 48 seats, to the Liberals 18, to the Labour party 10, and 4 others were described as Independents.

[2]A peculiar provision is that where a qualification, freehold, rating, or residential, is possessed by either husband or wife, it is deemed to be possessed by each.

[3]Sir R. Stout, New Zealand, p. 102.

[1]Sir R. Stout, ut supra, p. 108.

[2]Visitors from Europe have remarked on the neglect of civic amenities shown by some municipalities. Auckland, for instance — with an admirable situation and environs of great interest, possessing what is a sort of natural museum of geology and archaeology, for it is, I believe, the only city in the world with a number of small extinct craters in its suburbs, some of which the Maoris turned to account as forts, placing stockades around them — has not made proper use of these natural advantages any more than San Francisco has of hers.

[3]New Zealand Year-Book for 1919.

[1]In 1919 these four colleges had in all about 113 professors and lecturers.

[1]Quoted by Rossignol and Stewart (referred to later), p. 202.

[1]Quoted by Rossignol and Stewart, p. 212. It would appear that there is to-day little, if any, of such action by civil servants.

[1]New Zealand has been fortunate in the authors who have devoted themselves to a description and criticism of her politics, and in particular to accounts of her recent experiments in the field of legislation. The first of these, and one of the fullest and best written, is State Experiments in Australia and New Zealand (published in 1902) by Mr. Pember Reeves, who was Minister of Labour in the administrations of Mr. Ballance and Mr. Seddon. It, however, brings the story down only to 1902. More recent are three works by French observers, the Aurore Australe of M. Biard d'Aunet, the L'Australie Nouvelle of M. Voisson, and the Democratie en Nouvelle Zelande of M. André Siegfried (published in 1904), one of the best studies in contemporary politics our time has produced. (An English translation was recently published.) Still more recent are Sir R. Stout's New Zealand, already referred to, the New Zealand in Evolution (published in 1909) of Mr. Guy Scholefield, very fair and sensible, the Life of R. J. Seddon (published in 1907) of Mr. Drummond, eulogistic but not partisan, and the State Socialism in New Zealand of Messrs. Le Rossignol and Downie Stewart (1910), very careful and impartial. Interesting, but perhaps unduly optimistic, is the still more recent book of Major Lusk, Social Welfare in New Zealand. From all these, and from the very well arranged and executed New Zealand Official Year-Books (published annually), I have derived much assistance. There is now room for another book, which shall bring the story down from 1890 to 1920, dealing fully with strikes and arbitration.

[1]Rossignol and Stewart, p. 33.

[1]Stout, p. 174.

[1]Rossignol and Stewart, pp. 43–45.

[2]The advocates of the leasing system say that the freehold system gave opportunities for trickery and for wild speculation; but it is hard for a visitor to sift and decide between conflicting views in such matters.

[1]See note appended to this chapter. It need hardly be said that New Zealand manufacturers already enjoyed a “natural Protection” in the high cost of importing goods from Britain thousands of miles away, and that they would have gained more by the increase in their home market which larger immigration would have caused than they were gaining by duties which raised the cost of living to the whole community, including their own workmen.

[1]The expenditure in railway construction will be referred to later.

[1]In 1917 an increase of £13 a year was granted to continue till twelve months after the end of the War with Germany.

[2]See as to this Rossignol and Stewart, pp. 183–94, where many interesting details are given.

[3]Rossignol and Stewart, p. 182.

[4]In 1919, however, the Sinking Fund was stated to amount to about £5,951,000.

[1]Quoted by Messrs. Rossignol and Stewart from the New Zealand Hansard, vol. xcix, p. 291.

[1]Some interesting remarks on the costliness of the working of American railways by the State during the War may (with figures) be found in Mr. Moorfield Storey's Problems of To-day (Boston, 1920).

[1]Quoted by Rossignol and Stewart, p. 109. Cf. as to the U.S.A. Pork Barrel, p. 68 ante, and as to Canada, Vol. I., p. 535, where a similar condition of things is described.

[2]The results of the working of coal-mines by the Government is discussed in Round Table Studies, pp. 332–337, and the conclusion from the facts there given seems to be that the mines are operated at a loss, owing to the higher working expenses. Strikes have occurred on these mines.

[1]I am informed that in the summer of 1919 the “go slow” policy-adopted on these Government mines reduced the supply of coal by 30,000 tons per month, with the result of seriously disorganizing the railway service.

[1]See as to this Siegfried, chap, xv; Eossignol and Stewart, p. 285; Scholefield, p. 253.

[2]The Factory Acts, and other laws for the protection of workers and limitation of working hours, are a subject too full of minutiae to be entered on here. Full information regarding them will be found in the works above referred to, and in the successive New Zealand Year Books.

The Social Democratic Party in its platform demands a recognition of the right to have work provided.

[3]In New Zealand, as was long the case in the United States, the people have not taken sufficient thought for the future of their charming woodland scenery. If protective measures are not soon taken, much will be irreparably lost.