In a community in which every class is largely dependent upon his goodwill, the banker occupies the highest social position, almost irrespective of his merits. It is this excessive dependence upon the banks which largely accounts for the excessive ups and downs of colonial life. In times when money is easy the banks almost force it upon their customers. When it is tight, many people who are really solvent are forced into the Gazette, and a panic ensues, from which it takes the country some time to recover.
The tendency to merge large firms into limited liability companies, which has extended lately from America to England, has also been felt in Australia, though not to the same extent as in New Zealand. In certain classes of business these come into competition with the smaller banks, but each, as a rule, runs hand in glove with a large bank, undertaking certain classes of loans and supplementing the bank's business. They buy wool and wheat freely in Melbourne, hold auction sales there, sell on commission in England, advance upon wool on the sheep's back and standing crops onwards; in short, merit their usual description of loan, mercantile, and agency houses. Mortgage and land investment companies are another class which has been springing up of late. One company has been started professedly to deal solely with wheat: several already exist which make wool their only concern. Besides these, there are the usual run of mining companies, which spring up epidemically and mostly have their headquarters in Victoria. It is needless to say, that in these companies it is a case of neck or nothing.
Land is naturally the safest investment of any that offer themselves in the colonies. Although every ten years or so there comes to each colony a period of intense speculation in land, with a consequent reaction, it is a generally accepted maxim, that 'you cannot go far wrong in buying land.' There is always the chance of making 50 to 100 per cent. in the year by a land purchase, and at the worst you will get 10 to 20 per cent. per annum, if you can only afford to tide over one, or at most two bad years.
On first-class mortgages the rate of interest varies from 6 1/2 to 8 per cent. for large amounts. For small amounts 8 per cent. is always obtainable by a man who keeps his eyes open. But, beyond this absolutely secure class of investments, one thousand-and-one small chances of making large profits with little risk occur to every man who has got a few hundreds; and if he fails to turn them to account he will have nothing but himself to blame.
In the early days there was of course no distinction between wholesale and retail business, and in country towns the largest firms still keep stores where you can buy sixpennyworth of anything you want. Even in the towns the distinction is not firmly established, and many of the wealthiest importers still keep shops. Nor are the trades specialized to anything like the same extent as at home; though, in wholesale trade, they are becoming more so every day. Nearly the whole of the extra-Australian trade is still with England--chiefly London--though there is a small import trade with America and China, and export to India and the Cape. The French and Germans are both making strenuous efforts to establish a market here, and the Germans especially are succeeding. A great deal of business has been done of late by agents working on commission for English manufacturers; but most of the larger importers have their buyers in England. The tendency, however, is towards buying in Australia, although it is opposed by the large wholesale importers who are injured by closer connection between manufacturers and small buyers.
If, on the one hand, there are fewer of those old-established firms in which strict traditions of honour descend from generation to generation, so, on the other hand, the smaller size of the towns gives less scope for barefaced swindlers. And thus, if the standard of commercial morality is lower here than at home, people are not taken in so easily, or to so great an extent. Everyone is expected to be more or less of a business man, and is looked upon as a blockhead and deserving to be cheated, if he does not understand and allow for the tricks of the trade. In Melbourne the heavy protectionist tariff has brought about an almost universal practice of presenting the customs with false invoices so skilfully concocted as to make detection impossible. Within my knowledge this practice has been resorted to by firms of the highest standing. Sharp practice amongst respectable firms is also very common, and verbal agreements are less trustworthy than in England. You are expected to be on your guard against being 'taken in;' and if you are taken in, no one has any compassion for you, the general opinion being that a man who trusts to anything less than the plainest black-and-white is a fool.
Liberality to employés and in the details of business is little known or appreciated. Exactly contrary to the prevalent idea in America, the Australian merchant is most averse to casting bread on the waters with a view to its return after many days. He distrusts courtesy and liberality as cloaks for the knave, or as the appurtenances of the fool. Loyalty is a phrase little understood, and the merchant leaves as little to his clerks' honesty or honour as he can possibly help. In business he holds that 'Every man's hand is against his neighbour, and his neighbour's against him;' and he pushes the aphorism to its fullest logical conclusion, i.e., not merely to 'Believe every man to be a knave until you find he is honest,' but 'Believe that when a man is honest it is merely the more successfully to carry out some rascality.'
The old-fashioned English prejudice against bankruptcy has been improved out of existence by the speculative nature of all business, and the consequent frequency of insolvencies. Some of the largest merchants have 'been through the Court,' as it is termed, more than once; and provided there has been no open swindle in the case, no opprobium attaches. Even when there has been swindling, it is soon forgiven and forgotten. A man who has been caught swindling is denounced at the time with an exaggerated ardour which would make a stranger think that swindles were almost as rare as the cases in which they are discovered; but it is only just to recognise that the exposed swindler has a fair chance given him of retrieving his reputation, and perhaps of setting himself up again. The fact is, that so much sharp practice goes on, that the discovered swindler is rarely a sinner above his neighbours: he has simply had the bad luck to be found out. If half the stories one hears are true, half the business people in the colonies must be more or less swindlers in small matters. I don't mean that they commit legal swindles, but merely what may be called dirty tricks. On the other hand, I know many business men in whose probity I could put full confidence. But you require to live in a place some time, and must probably buy your experience pretty dearly, before you find these out. And even they in many trades cannot help contamination. It is very difficult to mix thoroughly in business without dirtying your hands; it requires no ordinary moral courage to keep them clean when there is so much filthy lucre about. A man who is determined never to diverge from the strict path of honour finds himself of necessity at a disadvantage in the commercial maze, and the best thing he can do is never to go into it. His sense of what is right cannot but be dulled by the continual grating of petty trickery. He is led almost before he knows it into things from which he recoils with disgust, perhaps too late to prevent them, and he has continually to be on the watch for and to combat the trickery of others. I cannot say that, generally speaking, I have much sympathy with the somewhat smug self-righteousness of Young Men's Christian Associations, but I must say that they have done a great deal of good in putting a leaven of honesty into the commercial lump.
The way in which a man changes his trade and occupation is remarkable. One year he is a wine-merchant; the next he deals in soft goods; and the year after he becomes an auctioneer. The consequence of this is, that, although colonists acquire a peculiar aptitude for turning their hand to anything, and a great deal of general commercial knowledge, that knowledge is for the most part very superficial. This accounts for the phenomenal success which a newcomer who is a specialist occasionally meets with in a line of business in which he is an expert, and also for the failure which often attends the efforts of competent specialists, who become discredited because they are not able to do something properly, which in England would not be considered to come within their province. To a man coming here to establish himself in any business I would always give the advice to take a subordinate position for a year in a similar business already established. This will give him what is called 'colonial experience,' for want of which many an able man fails at the threshold.
Amongst the peculiarities of colonial trade is a strong preference for local manufactures, with the exception of wine. A large manufacturer of agricultural machinery, who has just been making a tour of the colonies, tells me that he finds merchants actually prefer an inferior and dearer article locally made, if it appears at all equal to the English one in appearance. In a certain measure I believe this to be true. It is not merely a patriotic or protective feeling of sentiment, but is to a great extent due to the untrustworthiness of European manufacturers, who constantly send out articles inferior to those ordered. The French in particular sin in this respect. The Americans seem to be most to be relied upon. Owing partly to the duty on wool, and to the small number of articles which can be exported to America, there is not nearly so much trade with the United States as might be expected. If freights were lower, or our social relations with America closer, there would certainly be many more American manufactures in use than there are now.