The Nonpartisan Leader Newspaper, January 13, 1919, Page 5

!’I' . S b » 4 ol & v @ AR A [ » vl 4 e 20N L s U -~ q - ¥ rd y - 9, «d ¥ e B <R 4 -l ¥ L P How State Succeeds as Credit Agent Government in Australia and New Zealand Regulates Banking by Supplymg ; Public Sources for Short and Long-Tlme Loans _ The fifth of .a series of 10 articles by Mr. Mills, well-known writer and lecturer, on “New Zealand Before the War.” BY WALTER THOMAS MILLS N THE division of labor which now prevails in. the- modern world, there is primary produc- tion which includes the occupa- tions involved in producing raw * materials, such as farming, productlon Followmg this primary production is transpor- tatlon, then manufacture, then storage, and fmally exchange. To carry on this process each worker in any of these lines of service must exchange his own serv- ices ot his own products for the services or:prod- , ucts of others. Some scheme must be devised by which something shall stand for the ownership of these commodities and services while in process of being exchanged for each other. The commodities go by frelght the ownership of thém is sent by mail. To represent the ownership in exchange is the function of money, but the volume of business is so vast and the volume of money comparatxvely so small that cash transactions have become impossi- ble. Besides the general use of money would be too cumbersome in practice even if it were possible. ‘Bank credits have taken the placé of money almost entirely in all processes of exchange except in the - final retail market, and even there the bank check on monthly settlements is largely in use. Bank checks are based upon deposits and the thing deposited may be cash or the check of another bank or it may be a promissory note. LONG AND SHORT- TIME LOANS Credits are of two general kinds, short and long- time credits. Short-time credits are required to carry on account during the time that a shipper must wait for final returns on his own shipment or until regular sales may be carfied to completion. These are usually 30-day transactions and practical- - ly all banking arrangements are made on this basis of 80-day credits. Long-time credits are based upon transactions which can not be completed and re- turns realized within many months or many years. A man wishes credit, for instance, to the purchase of a farm. He will repay the loan out of products, but he can apply for this purpose only a share of each harvest for a series of years. Another needs a credit for the building of a home. His payments may be made by appropriating for that purpose money which would- otherwise go for rents, but again in order .to do this a series of years will be required to complete the transaction. The farmers’ Federal Land bank in this country with -its rural credits, and village settlements in other countries, have been pro- -vided: for the purpose of ex- tending banking services to these long-time credits. In ali of the Australasian states these long-time credits have been undertaken by the .government through farmers’ banks, and in both New Zea- land and in Australia national banks have been established for handling the ordinary commer- cial credits under the usual 30- day transactions. In Australia the nation owns all of the stock-in its com- monwealth bank. In New Zea- land the state owns the ma- jority of the stock and in both countries the final authority in the control of these banks is in the government itself. Loans to enable work- . ingmen to become the own- . ers of. their own homes, to enable farm tenants, young men just beginning in life, and mnew settlers - from other countries, to settleon = - ranching, mining and timber - Many of our reform leaders made the mistake of confining themselves too much to pointing out the evils of many of- the methods of our large private capitalism. It is a mistake because the common ppeople are already very much aware of these evils. There are few farmers or working people who do not realize that the cream has been skimmed off their milk. What they . want are safe, reliable methods. of es- caping the cream skimmers. One of the best proofs we can find for the safety ‘and reliability of proposed methods is their success in other parts of the world. That is why the big press keeps the news of what other countries are doing along new lines hidden. It does not want the people to know of the success in abolishing special privilege in other countries. The Nonpartisan league program, for instance, does not contain a measure not in successful operation either in our own country or in one or more countries outside. The story by Mr: Mills on this page shows how the pro- ducers of Australia and New Zea- land escape the tolls we pay to our banking monopoly. new lands, are provided on such easy terms that it is cheaper in every instance to become an owner than to remain a tenant. In all these countries mortgage foreclosures and evictions are practically unknown. In West Australia, and practically the same is true everywhere, for a period of 21 years in the operation of the farmers’ bank, there was not a single foreclosure or eviction, not a single borrower lost his investment or his improve- ments and the state never lost a penny through bad loans nor expended a penny derived from other sources of income in the financing and managing of the bank. ‘When -in 1893 'the whole world went into bank- ruptey and banks were closing their doors every- _where, it was learned late in an afternoon that the Bank of New Zealand, then a private corporation, could not meet the claims against it. Richard Seddon hurrigdly called the New Zealand parliament to- State-owned enterprises—ships, traveling crane, wharfs and sforage plants owned and oper- st ated by the state for the people. The wheat shown here is being handled in bags instead of elevators, but government ownership is just as applicable to the elevator method as it is {o the Australian method. Not a smgle profiteer gets his hand on this Australian. wheat from the tlme the famer raises it until it reaches the Enropean buyer. PAGE FIVB gether and between the sunset of that day and the sunrise of the next, the government had taken over the bank, assumed all its liabilities, taken posses- sion of all its assets and there wasn’t a bank failure nor a single industrial or commercial failure be- cause money was scarce in all New Zealand durmg all this period of distress, Not only have these arrangements had the ef- fect of promoting land settlement, of making possi- ble a real back-to-the-land movement, but they are all the more remarkable for the reason that they were immediately preceded by what was probably the worst and most arrogant of all the land monop- olies that ever existed anywhere., The British provinces, every one of which had refused to sell lands to companies of orgamzed trade unionists. on any terms, have themselves in turn not only sold the lands, but have furnished the credit at about 3% per cent on long-time payments for estabhshmg farms in the country and for building homes in the towns. STATE CREDITS ON SOLID SECURITY They have directly taken over the storage and transportation of all primary products and finally they manufacture these products in state-owned slaughter houses, flour mills and packing plants. Through their own banks they have furnished the credit which has enabled the producers to realize at once on the value of their harvests and other products without , waiting for returns from the markets to which " the government itself has sent the products. It will be seen in all this that bank credits have been based upon wealth already created and in storage or in transit or upon improvements, stock, tools or houses already in existence. THe basis for such credits has been sound, the risk has been low, the returns have been certain, and the interest rate about one-half what has.prevailed elsewhere. Commercial short-time credits, it has been seen, are based on goods in transit or on sales regularly being made with an average of returns well estab- lished or on contracts made by responsible people and with those who are also responsible for pay- ments promised. Long-time credits havé even a more certain and substantial basis than any of these. There can be no better basis for credit than new wealth produced in a definite way, at a definite place, under skilled direction, by persons of proven capacity and the products always staples in the market. If besides, these products can‘reach the market only through elevators or packing plants controlled by the same government which grants the credit, then there can be no skipping of accounts and no better basis for a credit could possibly be found. more safe and stable than a state bank operated in connec- tion with the storage, trans- portation, manufacture and sale of the staple products of its own custofners. When the modern states everywhere finally make this discovery, as has already been done in New Zealand and Australia, then credit will be provided at cost and the cost will be the actual expenditure necessary to make the loans, keep the accounts and cover the losses incurred in bad bills. The nation, as a banker has entered the field and will not withdraw. As in other lines the nation will protect -the victims of wrongdoing in banking, not by punishing the wrongdoer while the wrong goes on, but by do- ing itself properly and at cost what the usurer has - done most_wrongfully and to the ruin of*his custom- \ (The subject of the next ar- ‘ticle in this series will be “The .~ Nation as a Mer u}t.”) e e e e e A R e Y P, L SV L There can be no institution ~