men who had previously plunged into goldfields speculations: J.M. Clark, J.T. Mackelvie, Logan Campbell, C.J. Stone, W.C. Wilson (of the Herald), A.K. Taylor and others. In the timber companies which boomed in the 1870s these same men were also prominent, as were other big wheels in the banking and insurance world taking shape in Auckland in that decade: Joseph Howard, P. Comiskey, Thomas Russell, J.C. Firth, T. Morrin, the Taylor family and David Nathan, to give no more than a representative cross-section. It was not surprising therefore that Auckland entrepreneurs should have turned to the Cape Colville and peninsular area, a brief sea-journey away, whose 'heavy forest' was reported in 1877 as being 'unsurpassed in any part of the colony'.71 The bush was milled by a number of companies, but in the expansionist economic environment of the Vogel period, the little concerns made no great headway. This was the heyday of the large timber companies, three of which—the Auckland Timber Company, New Zealand Timber Company and the Mercury Bay Timber Company—dominated the kauri timber industry in Hauraki.72

Brittle Business Structure of Timber Industry and Consequences Therefrom

Here we come to a paradox: why was it that these large timber companies, so highly mechanized and productive that they were regarded (mistakenly) before the slump as blue chip investments, so niggardly in their payment to Maori owners and so destructive in their milling practices? The short answer is that like many economic activities in colonial New Zealand their continued growth had become excessively dependent on borrowing. In order to finance the installation of the most up-to-date milling machinery and the purchase of accessible bush, the company directors were obliged to borrow heavily from banks who used the mills and timber lands as collateral. As a result the companies became heavily capitalised concerns whose high gearing was sustainable only in expansionist times.73

The Decline of Kauri

A reckoning came when the domestic demand fell away with the slump of the 1880s. But the timber companies, though faced by a shrinking local market, did not shut up shop. On the contrary they expanded. The industry had acquired a dynamism of its own. The companies competed fiercely with one another though profit margins were slender and shrinking. In an environment of low prices, over-capitalization and over-competition they sought to survive by

•     borrowing more heavily from the banks;

•     buying up timber rights and timber lands from Maori as cheaply as they could;

71 AJHR, 1877, C-3, p. 12.

72 See Co-A 204, 52, 242 (NARC).

73 A 'gearing' or 'leverage' ratio is sustainable when the profit level enables the firm both to service its borrowing and to have funds left over for appropriation to provide dividends as a return on the shareholders' investment.

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