has no ideals with which to supplement the dissatisfaction with reality which it encourages in its 'nest of singing birds.' The Commonwealth wants a new centre for her literary activities; a new and healthier atmosphere for her imaginative work. She requires some new literary force, such as that found by the Republic in J. R. Lowell -some writer of distinction who, while possessed of original views of life and literature, yet will not hold that 'phthisis is a phase of genius' or that 'good writing is really a disease of the nervous system,' who will not be antagonistic to religion, to culture, or to loyalty, who will not look upon Australian universities as mere 'declension-shops,' but will prove the long-looked-for means of bringing them into touch with the life of the community.

6

Under such a man-whether editor of an Australian Magazine (for repeated failures in the separate colonies need not argue failure in a united Australia) or university professor-the literature of the Commonwealth will receive a new impetus, and will become at once sane and original; original not in the obsolete sense of the word in which the old Greek democracies and aristocracies attained their miraculous fruitions of original genius-one cannot step twice into the same river,' and the day of mountain-cloistered originality is past-but original in the sense of being literature which, though informed and coloured with the imaginative thought of the world, yet faithfully reflects the distinctive conditions of the life of Australia.

!

PERCY F. ROWLAND.

39 Upper William Street, Sydney, N.S.W.

THE NEEDS OF SOUTH AFRICA

I

CAPITAL AND POPULATION

Ar a moment when we are supposed to be entering on a great South African boom, which is not to be confined merely to raising the prices of gold-mining shares already in existence, but is to extend to the exploitation of a vast continent, it may not be amiss to take some stock of our resources, for we shall immediately be called upon for capital and population on a very large scale.

As regards the export of capital to a raw country, we had an experience not long ago, on a comparatively small scale, in the Argentine previous to 1890, and we remember the immediate consequences. The Bank of England, at any rate, is never likely to forget them; and in 1890 we had no war expenditure and a comparatively small amount of Continental money at call in the London market.

Also, since 1890 our whole scale of living has grown prodigiously— eating, drinking, dress and amusement. We have always been an extravagant people, but in the last ten years we have become profusely extravagant, and, what with our Government's growing ordinary expenditure (exclusive of the special South African war expenditure), our municipal expenditure, our constant necessary loans to India and our various colonies, and the development of our home industries— railways, shipbuilding, house-building, electrical appliances and the like our annual savings must already be pretty well used up.

The trade figures for the last four years certainly show that we have no 6 excess of exports'; and therefore, as we have not a superabundance of our own capital nowadays seeking investment abroad, we may either go on borrowing from the Continent' on call,' or we may go on selling our American securities. These latter are a very liquid asset now, compared with 1893-96, but they are always likely to be largely held in this country, even at high prices, because they provide a war-chest better than any other securities. If, for instance, we can imagine England engaged in war with any European Power, or

combination of Powers, the only tolerably free market would be in 'Americans,' for we could export them in order to pay for our food and our cotton.

If France were engaged in such a war combination, there would be large withdrawals of Continental money from London, and no free market outside of England for South African and other colonial securities-in fact they would be absolutely unsaleable, for there would be many sellers and no buyers.

Therefore, although our sales of Americans' may continue to some extent, in order to provide capital for South Africa, there must be a limit to the contributions from that quarter, conditioned by this desire of Englishmen to hold part of their means in the United States, as being outside the area of European complications.

But it may be said that although we have sold these securities so largely in the past few years, we still hold in England enough of them to fulfil the conditions of a war-chest, and, at the same time, have a large balance over, that may be realised at the existing temptingly high prices. It may be so, but then we shall be brought face to face with another difficulty in this displacement of capital.

Supposing that English sales of American securities are greater than the excess of exports of merchandise from the United States, then the proceeds of the sales must come back in gold. Now, it is quite true that the stock of gold in the United States has increased very greatly in the last six years-from some 600,000,000 dollars in 1896 to some 1,000,000,000 dollars to-day; and in this respect their position is now very strong. But if the level of all prices, and particularly the prices of securities, remains higher on the other side of the Atlantic than on this side, we may see a formidable drain of gold, and this gold would find its way, through Paris, to Russia, Spain, Austria, and the other countries of the world that want it for currency purposes. London is deeply in debt to Paris, and would liquidate that debt by these remittances from America on account of securities returned.

We must remember, however, that the stock of gold in any country at a given moment must bear some relation not only to the claims on that country from abroad, but also to the mass of credit superimposed on the gold basis at home. The United States now produce some 16,000,000l. of gold per annum, and therefore they may ship that amount to Europe, and may still hold as much gold at the end of the year as they held at the beginning of the year. But if the stream of their returned securities continues, and if they are going to import iron on a considerable scale from England, and steel from Germany, instead of exporting these articles to Europe, it may require a good deal more than 16,000,000l. per annum of gold to pay for these imports. The real fact is that, if we take into account securities as well as commodities, the United States are now exhibiting an excess of imports, as is evidenced by their rates of exchange on

Europe, which have been hovering around the gold-shipping point right through the height of the present cotton and grain shipping season. This unusual financial phenomenon ought to be considered in connection with the excessive increase in the creation of industrial companies in the United States, which has been carried on for the last four years on a scale of capitalisation unparalleled in the history of the world.

Then, if we look at their railroad securities, we shall find that the average quotation of a total of stocks amounting to something like 1,000,000,000l. is now in the neighbourhood of par, as compared with an average quotation of about 40 during the lowest period in 1896 and about 65 in 1898; and these differences in values mount up to very big figures indeed-400,000,000l. or 500,000,0001.

It may be doubted whether we in England have ever quite appreciated the breadth of the American boom since 1898; and to sustain that boom at home, and at the same time to buy back large masses of securities from abroad, may impose a very great strain on the delicate machinery of the internal circulation. There is, perhaps, no better way of conceiving what that strain may be than to look at the comparative bank clearings in New York. They amounted for the year 1901 to 16,000,000,000l., against 6,000,000,000l. for the year 1896. No such sudden and violent change has ever before occurred anywhere in the records of finance, and a question may arise whether it is all quite sound. As a standard of comparison, we may call to mind that it has taken us a quarter of a century merely to double our bankers' clearings in London. They were 4,960,000,000l. in 1876, and 9,600,000,000l. in 1901. And we have an idea that the British Empire has been going ahead pretty fast in these last five-and-twenty years, and that London is the financial centre and clearing-house of the world.

Of course, the New York increase can be accounted for easily enough, considering that the whole mass of railroad stocks is worth nearly two and a half times more than in 1896, together with the immensely greater activity in dealing in them; and considering, too, the rapid development of industrial companies dealt in on the New York Stock Exchange, and the astounding activity of general trade. The difficult factor to determine is, To what extent these increases in values and in quantities may be attributable to inflation of the currency. Anyhow, it is an expansion which must be borne in mind if we look forward to a considerable drain of gold, because the only process whereby a country that is over-importing can check its imports, whether of securities or commodities, is by lowering prices; and, with the great mass of undigested securities now being carried by finance houses and trust companies in Wall Street, any sudden and violent reduction of values might have extremely unpleasant consequences; but it would be the only method of counteracting a

threatening drain of gold. And unpleasant consequences in Wall Street would certainly react on Lombard Street.

Therefore, when we talk of getting all the capital we shall want for the exploitation of South Africa from sales of our American securities, a good many things may have to be considered before the promise is translated into performance. It is a question really of prices. For instance, it may be a good thing to sell New York Central Railroad stock at 170 and a bad thing to sell it at 150; all will depend on the attractions of alternative investments in South Africa or elsewhere. For, whatever may be the defects in the American currency and banking systems (and they are many), portending, perhaps, imminent trouble, the great fact remains that 80,000,000 enthusiastically industrious people in an extraordinarily rich country are bound to become solidly richer as the years pass on, notwithstanding the nasty jars they may receive from time to time by pressing the pace and doing in five years' time what had better be done in ten years' time, and notwithstanding the pranks they play with their currency. Everything is bound to come right there in the end, because the real wealth is always growing at a pace that has never been approached elsewhere, owing to the increased production of corn, cotton, oil, coal, iron, copper, lead, silver, gold, &c. ; whilst the Americans, by their methods and mechanical appliances, can compete on favourable terms with any other country in almost every line of manufacture, so that the best of their securities are always likely to be the best in the world, and it will require a very strong inducement indeed to make us part with them permanently. Any sensible reduction in their prices will immediately check English sales, and in that case we shall have to turn our attention to some other quarter for fresh capital.

Practically, there are no other securities that we can sell on a large scale. It would be interesting to see the faces of our 'great sister nations' if we attempted to send back Australian bonds to Australia, or Canadian bonds to Canada for sale. The very suggestion brings up a consideration which is sure to arise sooner or later, and for which we must be prepared-namely, a profound and natural jealousy on the part of these two great sister nations if the third great sister nation is to take all the benefit in future of England's resources in capital and population. Why should South Africa be the spoilt child of the Empire, whilst Australia and Canada are both wanting the right sort of Englishmen—as well as English moneyfor their own development? And these two sister nations want the men and the money on a large scale. They both talk of having room for future populations of 100,000,000 apiece, and they are always wanting to place fresh loans on the London market. The truth is that our English capital is already very much locked up in these securities, in the sense that there is no market for them except