LETTER M.—INDUSTRIAL INVESTMENT AND COOPERATIVE COLONIZATION.
Tall Mall, 18th August 18.51. SIR—I proceed now, in conclusion, to exhibit the organization by means of which the funds are to be raised for the purposes I have indicated ; the system upon which societies in respect of each settlement are to be baled ; the superassociation according to which the operations of those separate societies are to be combined and centralized ; and the terms upon which in- vesting and colonizing members are to be received. The principle of investment according to which alone any national scheme of colonization can now be applied to Ireland or the Colonies, is that of the Benefit Building Societies ; the permanent constitution of which was devised by Arthur Scratchley, M.A., the actuary, whose work upon the subject* has been well characterized by the Messrs. Chambers in their Journal as "the grammar of the system." It will be interesting, therefore, and indeed ne- cessary, to premise here an explanation of this system, before pointing out its extension to industrial investment in land as well as houses.
"A Benefit Building Society, when properly constituted, is a species of joint stock association, the members of which subscribe periodically, and in proportion to the number of shares they hold, different sums into one common fund, which thus becomes large enough to be advantageously employed by being lent out at interest to such of the members as desire advances; and the interest, as soon as it is received, making fresh capital, is lent out again and again, so as to be continually reproductive. Large sums may be raised in this manner : for, to take an example, if 1000 shares were subscribed for at ten shillings per month per share, the amount in one year would be 6000/.; which, month by month as received, might be advanced to any members who should wish to become borrowers. The pay- ments of borrowers are so calculated as to enable them to repay, by equal monthly or less frequent instalments, within a specified period, the principal of the sum borrowed and whatever interest may be due upon it throughout the duration of the loan. The other members who have not borrowed, and who are generally called in- vestors, receive, at the end of a given number of years, a large sum, which is equivalent to the amount of their subscriptions with compound interest accu- mulated upon them."—Scratchley ; Introduction, pp. 2-3.
The money is accordingly advanced to such of the members as wish to pass from the condition of investors to that of borrowers, to enable them to purchase houses or landed property in England, the mortgage of which forms the security to the association. The sum advanced by the society to the member being in general not more than two-thirds of the market value of the property, and vet sufficient, with what he has already paid in as an in- vestor, to enable him to complete the purchase, it will be observed that by this principle the society secures a salvage on the money advanced, inas- much as, if the borrower should at any time neglect his repayments, the margin of the value of the property secures the society from loss : and al- though large sums may be required to suit the wishes of borrowers, yet the periodic subscriptions of investors, and the borrowers' repayments, come in so rapidly as to regenerate the lending-fund.
Now apply this to Colonization. Intending settlers join a benefit society as investors, and perform the conditions attached to that position : after they have acquired sufficient standing, they become, by rotation or ballot, eligible to be sent forth as colonists; that is to say, land and other requisites are supplied to them on selected spots, of a value exceeding the money they have paid, credit being given for a term of years, or for life, as may be agreed on, for payment of the excess ; a legal mortgage being of course exe- cuted to the society. Thus, not only the bare land might be given to the settler, but material improvements in its condition can be effected by the society in wholesale quantities, at a moderate cost. As regards the investors, or those who remain at home, no better security can be desired, for it would consist of land daily improving in value once the colonist has taken posses- . sign; and, being a subscription society, its managers can at any time ex- tend, curtail, or put an and to its operations. On these principles, it is apparent that a succession of benefit land so- cieties might be established for carrying out a system of Freehold Assurance Colonization, on successive sites. The difficulty hitherto experienced in ap- plying the latter principle has indeed been that of creating the large capital requisite ; and it is obvious, for many reasons, that the ordinary joint stock mode of operations is absolutely inapplicable to colonization. It is there- fore proposed that in coOperation with a central company, possessing (inten- tionally) only a small capital itself, there should be adopted, for the 'ways and means, the system of the investing members of a benefit building so- ciety; in other words, that the requisite funds should be created by small instalments, payable by way of periodic subscriptions to branch benefit colo- nization societies, to be established in all parts of the kingdom.} The money subscribed by the investing shareholders would be applied, through the agency of the central company, to the wholesale purchase of land in selected localities, to be mortgaged in allotments to such of the brunch members as desired to become settlers. The central company would thus act as the agent of numerous benefit societies ; and " would, in fact," to quote Mr. Scratchley's expression, " be the Soperassociation of separate groups of associating individuals, and would be able to perform, or cause to be effected, all that would be out of the reaoh of one branch society. The company would be essential to them and they would give vitality to it." By the aid of such branch societies, the main difficulty would thuste obviated, of obtain- lag the necessary capital; in all such enterprises has been found to' consist in the natural unwillingness on the part of the public to sink large sums at once for an indefinite number of years. Many persons, on the other hand, would readily join a society for a limited period, as ten or twelve years, ^ C.-Industrial Investment and Emigration: being a Treatise on Benefit Build- ing Societies, and on the General Principles of Associations for Land Investment and Colonization; with an Appendix on Oompound interest Tontines and Life As- surance. By Arthur.Scratchley, M.A., Actuary to the Western Life Assurance So- ciety." Second edition. Published by John W. Parker.] -* I alluded in nrylast letter to the proposal for a Small -Proprietors' Society in Ire- land. I understand that a similar association has been since projected for settling a district of land, now in the market, about half-way between Quebec and Mon- treal, opposite the Three RI. ers Settlement on the St. Lawrence, and in a nosttion to avail itself of the various lines of railway sow-about to be constructed in British North America, either to obtain possession-of allotments of Irish or Colonial land, adapted to cultivation, or to receive at the end of that time, counted from the period of entry, the amount of their subscribed shares in full, equivalent to the accu- mulation of their subscriptions at a reasonable rate of compound interest, not lower than that of the Funds, together with a share ofprofits arising from the increased value of the lands consequent upon -the progress Of associative plantation. Assuming only six per cent as the clear rate nt which the funds of each society could be unproved from the gradual disposal of lends at their enhan- ced value and from the interest on advances to colonist members, the follow- ing would be the probable accumulation of each subscription of 81. per an- num, the sum generally assumed by the building societies ; being the peri- odical payment which, with interest, will amount to about 1001. in ten years— After three years B25 9 6
„ four years 35 0 0 2 6 „ five years 4.5 „ six years 56 0 0 „ seven years 67 4 0 „ eight years 79 4 0 „ nine years 92 0 0
„ ten years 105 0 0 Again, as regards the practical operation of the system in the case of the borrowing or colonizing member, whenever Be desired to enter upon the work of a settler, his account as an investor would be closed : he would be debited with the value of the• estate er allotment assigned to him, (which would bear a proportion to the number of shares he had held as an investor) ; with the amount of passage-money allowed him ; and, as the case might be, with that of a farm-house, or of other improvements made or to be made on his property out of the investing-fund. Upon this advance he would (if without a life- assurance to secure the patrimony to his children in the event of his decease) be called upon to pay a specific number of annual instalments ; e.g.
For each 100/. in value,
five annual instalments of £25 0 0
Or ten 15 0 0 Or fifteen 12 0 0 Or twenty , • 10 4 0 and so on.
If the agreement should be on the basis of the principle of freehold life assurance, as already explained, he would, if, for example, of the age of thirty. on becoming a borrower, be required to pay an annual premium, com- mencing at the end of two years, namely at the age of thirty-two, of 21. 3s. Id.per cent in addition to interest :1 If aged thirty-five when borrowing, he would in like manner begin to pay at the age of thirty-seven, in addition to such annual interest, say six per cent, as may be deemed equitable, . 2/. 108. &I. per cent on the sum borrowed, or on the value of the land, &e. assigned to him ; if forty, then, at forty-two, 2/. 19s. 9d. : if forty-five, then, at forty-seven, 3/. 12s. 6d. : this premium and interest securing the unburdened possession to his heirs whenever he shall die. By a moderate additional premium, the property might be made to vest absolutely in him- self on attaining a certain age, or in his heirs if he shall die previously.
It is hardly necessary to observe, that this system, while affording as secure a provision for a family as an ordinary life assurance policy, has moreover the additional virtue of presenting an immediate benefit to the assured him- self. It especially recommends itself to younger members of the community, inasmuch as in their case the rate of reproductive payments is so small m consideration of their large expectation of life, as to be very slightly if at all in excess of bare rent-tender any circumstances. So rapid, too, is the increase in value of land under a proper system of concentration, that in a very few years the industrious settler might pay off his debt to the society by the sale of a small portion of his improved land. It is also to be noted, that the operation of this plan involves a mutuality of interest on the part of the investor and the borrower; not as in a joint stock association, where the capitalist invests on the one hand, and sends emigrants out of the country on the other. On the plan proposed, every member on entering has before him the alternative of becoming an accumu- lator or a borrower, and for a certain time at least the capitalist and the in- tending colonist are one. To place colonists thus possessed of land in the most advantageous cir- cumstances for the improvement and cultivation of it, it would be very easy to engraft upon the system the plan. so admirably and successfully carried out by Mrs. Chisholm" for encouraging the emigration of select bodies of la- bourers : viz. by receiving subscriptions at the rate of one shilling a week from intending emigrants of approved character, until such contributions shall have amounted to half the necessary passage-money and outfit; the re- maining moiety to be then advanced by the society, and repaid by the emi- grants, after their settlement, 'on easy and liberal terms. And just as one engine is often beneficially employed to drive two sets of machinery, it is plain that this system of weekly contributions might be made use of at the same time to secure to the same class, either in addition or as an alternative, facilities for other prudential purposes ; more especially, to provide a sum of money. payable at the iieeth of the subscriber to his family,—each weekly subscription, for the sake of simplicity of accountantship, being always one sJsiningper week, -but securing an amount varying according to.the age of the subscriber on entry ; as for example- . Age, twenty years £130 „ twenty-five years 100
„ thirty years 95 „ thirty-five years 80 „ forty years 0 „ forty-five years ............ 40
.„ -fifty years
In this calculation, as well as in that of the premium rents to be charged for advances to settlers, it is of course assumed that the climate of the settle- ment is adapted to the constitution of Europeans.
I have in these three letters strictly confined myself to the special treat- • ment of the question of land development in its relation to industrial invest- ment and cooperation. The moral, social, political, economical, and religious aspects of the subject of colonization, have again and again been amply and' ably discussed by your own 4‘ Roman hand."
I am, Sir, your very faithful servant, Wrtatets Ilnumes. i
P.S.—It is most important to observethat no indefinite liability attaches to the Benefit Society system of investment. A subscriber is only retrospec- tively liable • that is to say, in respect only of the payments he has actually agreed to mile until withdrawal.
I quote, for this illustration, the ordinary rates of the Mitre; but the rates to be assumed will of course depend on the climate of the settlement and other circum- stances and conditions.