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Simon Ville, The rural entrepreneurs : a history of the stock and station agent industry in Australia and New Zealand. Cambridge: Cambridge University Press, 2000. xiii, 259 pp, illustrations, maps. ISBN 0521642655 (hardcover). RRP $59.95 in New Zealand.
Reviewed by Jim McAloon, Senior Lecturer in History, Lincoln University, Canterbury, New Zealand.
The stock and station agency, which has provided finance, information, technical advice, networks, marketing, and retail services to farmers, is a uniquely Australasian enterprise, of critical importance in the rural and export economy. Stock and station agencies developed out of general mercantile houses, with greater specialisation noticeable from the 1850s or 60s in Australia and correspondingly later in New Zealand. From the 1880s joint-stock companies replaced partnerships, in order to get access to share and debenture capital. These companies were often floated in London, using prominent returned colonials as well as British directors. Inevitably, there was a trend to merger and takeover after 1914, and particularly so in the second half of the twentieth century.
Ville’s introductory chapter is a useful summary of the economic history of the two nations; thought-provoking in itself, especially noting that while there was a high concentration of investment in the primary sector and related industries in the colonial economies, ‘this did not come at a high opportunity cost since there were few credible alternative paths of development’ (p 7). There is a similarly perceptive short account of the difficulties of early farming, which shows that by the mid 19th century the resolution of these difficulties called for extensive capital investment and much greater expertise than had hitherto been displayed: if the stock and station agencies hadn’t appeared they would have had to have been invented.
Most of the discussion proceeds thematically rather than chronologically, and this emphasises the distinguishing characteristics of the agency as well as tracing the evolution over a century and a half from simple partnerships to integrated conglomerates.
Ville’s discussion of networks is illuminating. Networks depend on trust, reputation and tradition or codes of understood behaviour (p 57); they provide better information than markets and are freer than hierarchical organisations. Information was critical to the success of isolated Australasian farming, and the agents were the vital link. The position of agents in this regard was reinforced by their ‘embedment’ in the local community. Indeed many agents were themselves farmers or invested in farming, and of course kept notes on individual farmers. Local managers had therefore to be the social equals of farmers, and the standing of the manager in the rural community was high.
Characteristic of networks, much business was conducted informally and was difficult to quantify. Ville’s example of a network, the National Mortgage and Agency Company of New Zealand, is excellent but the discussion is a little static, space not permitting him to trace the development of these connections over some decades. Ville also makes a minor but important error in identifying G R Ritchie as General Manager at the turn of the century: the position was held by his father J M Ritchie (and thereafter by a grandson of J M Ritchie: the dynastic structure of NMA and perhaps of some other agencies would be worth exploring).
Information and advisory services are discussed in chapter seven. The lack of information and advice available in the nineteenth century bedevilled farmers. Although information and advisory services cost the agencies money and time, they were important in attracting and holding clients (a theme of course still evident in rural banking advertising today). Ville concentrates on the information provided by agencies to farmer clients – the information provided by Australasian managers to London directors and principals must also have been influential and valuable. A particular example is the way in which John Macfarlane Ritchie, the General Manager of National Mortgage in the 1890s, reassured his London and Edinburgh principals as to the New Zealand Liberal government, in the teeth of some quite hysterical anti-Liberal rhetoric.
Ville’s discussion of financial services is excellent. Private firms relied at first on partner equity, bank support, and individual creditors lending on deposit; in time this shifted to increased share for farmer clients deposits or credit balances. The information available to agencies was one reason why banks preferred to interpose a merchant, as well as spreading risk. Incorporated agencies began with high debt to equity relationship (i.e. raising funds by debenture) which from from the 1890s emphasised paid up share capital instead. Loan business was not in itself profitable, because agents could not go as much over bank rates as they needed to to make a profit, but it brought the other business with it. Information services lost money too, or didn’t make it - where the agency did make money was in marketing livestock, land, and produce. The emphasis on marketing had consequences for rural townships – the saleyards and the saleday, always by auction – these too reinforced information and networks. Networks and information were vital in financial services as in much else. The pressure which could be applied to a recalcitrant client, in a competitive market, had to be finely judged: foreclosure was very much a last resort in a downturn at least.
The study of the wool market from early disorganisation to later growth is illuminating, especially in the relationship of agencies to shipping companies. By the later nineteenth century the option was slow cheap sail or quicker dearer steam; judging which to use required ‘careful assessment of short-term trends in the market’ (p 121). The agencies exercised considerable power in directing the development of shipping services, which made them key mediators of imperial/colonial relationships.
Relocating the wool market to Australasia was more convenient and saved on costs; it also gave quicker realisation, a point of considerable importance to the rising class of small farmers from the 1890s. It also gave farmers the information basis on which to improve quality. Relocation of the market also had consequences in terms of new woolstores and auction rooms on expensive sites bordering wharves or railway lines. This meant an increased cost in fixed capital, exacerbated by the desire of farmers to have a larger number of sale locations than the agencies wanted.
Chapter eight, on organisation and administration, traces development from simple personalised firms of the colonial era, contrasting this with the more complex structure of a company owned and allegedly managed from London. It must be noted, however, that a chart is one thing and reality may be another. Although Ville notes that London boards came in many cases only slowly to allow the local General Manager and head office to actually run the show, John Macfarlane Ritchie always ran NMA as if it was his private firm. Other developments discussed in this chapter are the incorporation of partnerships under limited liability, and the expansion of rural branches with the consequent necessity of finding reliable and competent branch managers.
One virtue of this book is that it deals with history in an Australasian context, rather than an Australia plus New Zealand or even a comparative context. An extremely wide range of material is covered in a very concise fashion. Any reader with an in-depth knowledge of one firm will find the book extremely valuable in enabling a case study to be placed in larger context. It is a moot point whether it is fair to criticise Ville for largely confining his analysis to the level of the firm. For instance, his discussion of wool marketing and shipping really shows that stock and station agents were key mediators of imperial/colonial economic relationships; if the implications of this were explored they would have some bearing on the debates around the Cain/Hopkins thesis on British Imperialism. Certainly Ville provides much valuable material for those who do wish to engage with such larger themes, and a book is perhaps better which provokes further questions than one which does not. This book is a most important contribution to business and economic history in Australasia.