The value in Vogel

Dr Matthew Birchall
Insights Newsletter
23 September, 2022

Political theatre is not usually associated with Julius Vogel (1835-99), the chief architect of the radical expansion of New Zealand’s rail network in the 1870s. A poor speaker, Vogel was also partially deaf in one ear – no small handicap in the heyday of parliamentary debate.

And yet Vogel’s financial statement of 1870 ranks as one of the most important speeches in New Zealand’s political history. Over the course of more than 3 hours on the evening of 28 June, the ambitious young Colonial Treasurer laid out an economic plan that would transform the country beyond recognition.

Vogel’s vision for New Zealand had two key components. The first was the construction of vital infrastructure, such as roads and railways. And the second was a massive boost to immigration.

He succeeded on both counts.

When Vogel announced his plans, New Zealand had only 74km of rail. By the end of the decade this had increased to more than 2,000km. New tracks were built in every province, and the country was gripped by a collective mania for the distance­-annihilating potential of steam and steel.

No less successful was Vogel’s immigration push. Just under 300,000 Europeans arrived in New Zealand between 1871 and 1886, nearly half of whom were assisted by government.

Commentators on Vogel’s Public Works Policy have tended to focus on the borrowing that underpinned it. This is appropriate. After all, Vogel proposed to finance his scheme by tapping the London market for four million pounds over ten years (roughly $7,000,000 in today’s money).

However, it is important to place Vogel and his railways in context.

Unlike Britain and the United States, New Zealand’s private capital markets did not have the capacity to fund large-scale projects like a national rail network. What is more, the provinces had proven themselves unable to build, well, much of anything.

Vogel’s trains proved essential to economic growth from the 1890s onwards. Refrigeration enabled the country to send frozen meat to the Northern Hemisphere, where it earned handsome returns for rural New Zealand. And all of this depended on adequate transport links between coast and hinterland, especially in North Island bush country.

The result? A 40% increase in per capita incomes between 1896 and 1907.

Today’s policymakers would be well-advised to take heed of Vogel’s story. Value for money matters.

 

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