Before entering on the occurrences during the Government of Captain Grey, in justice to him, but especially to his predecessor Colonel Gawler, I think it is right, to give quotations from one of the earliest despatches of the latter to Lord Glenelg dated January 23rd, 1839, to show that both Governors had financial difficulties to face at starting. Colonel Gawler says—

" On arriving here about three months ago I found the public offices with little pretension to system. There were scarcely any records of past proceedings, or of public accounts, or issue of stores. The non-fulfilment of one of the leading principles of the regulations made for the disposal of land, that the surveys should be in advance of the demand, had produced a number of complicated questions which the letter of the law as it stood could not rectify. Sections were only laid out in the plain about Adelaide. Seven other districts remained to be marked out for the choice of preliminary purchasers, who will occupy the greater part of the good land in them."

[Such purchasers being principally absentees, or persons who were not about to engage in agriculture.]

" The survey department reduced to the Deputy Surveyor, Mr. G. S. Kingston, with one draftsman and one assistant surveyor ."

What a staff for the acting head of the department to depend on to push forward the surveys! The population shut up in Adelaide, capital flowing out for the necessaries of life almost as fast as it was brought in from England. The colonial finances in a state of thorough confusion and defalcation. Almost all I have been able to discover definitely of the finances of this period is that the whole of the regulated expenditure for the year was drawn and expended in the first quarter (of the year 1838).

It is natural to suppose that a copy of this despatch would be supplied to the Board of Commissioners, who were then responsible for the management of the finances of the colony; but it is scarcely probable that Lord Glenelg ever read this despatch. Colonel Gawler held his appointment as Governor from the Crown, but his office of Commissioner from the Board of Commissioners sitting in London.

The despatch I quote from proves that the home authorities were at once made aware of the embarrassed position of their representative on his arrival in the colony, viz., that three quarters of arrears of liabilities were incurred prior to his assumption of his double office. Then, notwithstanding the information so promptly sent, shiploads of passengers and immigrants continued to arrive, to complicate and add to the Governor's embarrassments.

Thus it is evident that the Governor was compelled to stretch his powers to draw on home authorities, who must have been kept posted up from time to time of such drafts. We know that the influx of population was not arrested ; and we are not informed that Col. Gawler received any special instructions in answer to the information he sent as to how he was to meet the emergency of arrears which could not be laid to his door. It appears clear enough to the writer that the Commissioners at home were bound either to have met the difficulties which had occurred through the mistaken opening arrangements, and by their accepting a trust, tied down by conditions, which could not be carried out, or at once, if unable to do so, to have thrown up the work they had undertaken into the hands of the Imperial Government, as they had ultimately to do, when Captain Grey was dispatched with his stringent instructions, unworkable as he found them to be, to rectify matters.

The real requirement was a loan of, say, half a million, guaranteed by the Government, to meet arrears and to provide for necessary opening works. It is, indeed, a wonder to me how the Board of Commissioners, good and substantial men of business as they were, could have expected successfully to launch and build up a large colony, at such a distance from the mother country, without a sufficient capital within reach of their working representative.

The fact of the appointments of officers, with the exception of Governor, resting with them, left them solely responsible for the first errors. In reviewing the material losses, as well as the loss of time, in respect to public interests, subsequent prosperity has recovered such wastes; but the sacrifice of the small capitals of the pioneer settlers they have had themselves to bear without compensation.

The first divided authority was a mistake. By the Act of 10th August, 1834, the Home Government appointed a Governor, and the Board of Commissioners in London had the appointment of a Resident Commissioner in the colony, under whose control the Land Fund was placed. By a clause in the Act a most unfortunate blunder was made, which provided that the whole of the proceeds of the land sales were to be devoted to immigration, without power to apply any portion to defray the expenses of surveys, or for the erection of indispensable public buildings and other works, to meet which imperative demands a debt had to be incurred, at a ruinous rate of interest, at the same time that the forced capital which had been raised at a great sacrifice was lodged, at a low rate of interest, in the British funds, as has been previously explained.

The first mistake was a divided Government in the colony ; the second, the Governor having to serve two masters, viz., the Home Ministry with the Imperial Parliament and the Board of Commissioners, no sympathy being felt between the two Powers, but, on the contrary, the Commissioners were held in no respect by the Government as to the principles on which the colony under their management was to be carried out. In this unfavorable state of the affairs of the colony it is quite clear that Colonel Gawler was compelled in accepting the position to take upon himself responsibility, the absolute necessity of which I consider is amply proved by his despatch to Lord Glenelg, from which I have quoted.

To make matters worse Captain Grey was hastily sent out with inadequate means and unworkable instructions. Forster, in his History of South Australia, says : — "Captain Grey's duty was not an agreeable one. He had to commence immediately to bring the expenditure of the Government into something like agreement with its income ; on this subject his instructions were specific and stringent." This was something like the order to the Israelites to make bricks without straw. "He had also to stave off as well as he could the creditors of the Government, who held many thousand pounds of dishonored Government bills, besides a considerable amount of unsettled claims, until arrangements could be made with the home authorities for satisfying them."

Answers from home could not be expected to reach the colony under 12 months, if immediately attended to, the only means of communication being then by sailing ships of the old stamp. In this state of things Captain Grey arrived to displace Colonel Gawler, on the 10th of May, 1841. Not many months before he had been hospitably received and entertained by Colonel Gawler when he visited the colony after he had accomplished his difficult but successful exploring trip in Western Australia, and spent sufficient time here to become acquainted with the value of the country and its requirements.

Of him it might reasonably have been expected, from his experience of the causes which had kept back the elder colony of Swan River, and from his subsequent visit to our younger one, he would have been looked up to by the authorities at home as a traveller of experience, competent to advise the Ministry of Her Majesty as to the capacity and requirements of South Australia ; and in either case, if he came out to accept the government without first giving his opinion, founded on his experience as to the truth of Colonel Gawler's reports of the intrinsic value of the undeveloped country of South Australia, or had thrown discredit upon those reports, he is much to blame for the crowning ruin he assisted to bring on the first inhabitants of the infant colony.

Then he was forced by his instructions to stop public works, except so far as was necessary to complete them to prevent early dilapidation, for which purpose he obtained a temporary loan from the Government of New South Wales of £3,000.

The next downward movement was the stoppage of works of a private nature ; the colonists holding large amounts of dishonored Government bills as well as unsettled Government accounts, as I have stated, for works done and goods supplied, were made bankrupts ; thus a large number of laborers fell upon the Governor for work or food. Necessities more compulsory than his stringent instructions, which he had arrived to carry out, were thus created. A number of over 700 immigrants, most of them good working men, were, under compulsion at first, furnished with work at wages reduced to the lowest point at which they were able to subsist, and were marched out daily under inspectors, the majority employed on roadmaking at a Government stroke.

In this crisis Captain Grey applied for power and instructions to sell such of the Government properties as might conveniently be disposed of, but he found such a step impossible, as not a fourth part of the value could be obtained for anything offered for sale.

He applied to the Bank of South Australia, and, was offered £10,000 at 12 per cent, on his personal security ! But as such a sum would have been immediately absorbed by liabilities already incurred, and would leave nothing for the legitimate expenses of his own administration, he had ultimately to adopt the same course which had led to Colonel Gawler's recall. He drew bills on the Lords of the Treasury, which were also returned dishonored.

After many months of severe suffering for the colonists, and trials and responsibilities for the Governor, of no ordinary character, the necessary advances were made by the Imperial Government, and from the time of that assistance, too long delayed, the colony has continued to rise in importance and wealth, all such advances having been long since refunded.

With the appointment of Captain Grey as Governor the management of the colony was taken out of the hands of the Commissioners in London, and we were passed over to the tender mercies of Lord Stanley. The change in Her Majesty's Ministers at the time of the colonial crisis was no doubt an additional agent in prolonging our difficulties. I think it will be fair in this place to quote from Governor Grey's despatch, of the 31st December, 1842, to Lord Stanley, as being a most unfair comment on the action of his pre-decessor, and an unjust charge against the then small number of colonists, as follows: —

" The great majority of the community were interested in the maintenance of the lavish Government expenditure. During the twelve months preceding my arrival about £150,000 had been procured by drawing bills, which were ultimately paid by the British Treasury, and had been distributed in the form of salaries, allowances, and lucrative contracts amongst a population of 14,061 people, who only contributed £30,000 towards their own support; that is, the British Treasury paid annually to every man, woman, and child in South Australia upwards of £10 a head per annum, which was paid to them by Great Britain for the support of them and their families."

Could anything be more monstrous or unjust than to charge the then small population of the young colony with the whole amount of the sum named, which had been principally expended on the substantial public buildings erected, or in course of erection, and which so soon proved to be insufficient in size to afford accommodation in which to carry on the Government business of the rising colony.

Such statements in a despatch to one of the Secretaries of State may cause surprise, but are quite consistent with the remark Captain Grey was at the time of his arrival charged with making, that he was prepared to let Government House as a store, i.e., the portion then built. The large reductions which the Governor immediately made in establishments and works, by cutting off two-thirds of Government expenditure, naturally caused an enormous depreciation in every description of property, by which many people were ruined, and the laboring classes found it more and more difficult to obtain employment from impoverished settlers.

At the latter part of 1841 the Governor had the enormous number of nearly two thousand men, women, and children, thrown upon his hands for support as absolute paupers. This state of things was taken advantage of by some few who made much gain, not always to their credit. The lawyers, of course, reaped a rich harvest.

" The grave question," says Forster, " was forced upon the Governor from whence to obtain the means to support two thousand British subjects, who must either starve or support themselves by rapine and pillage, which they threatened to do in very intelligible language."

Captain Grey reduced the wages of the unemployed emigrants to one shilling and two pence a day, without rations. Great discontent was, as a matter of course, created, and a popular outbreak was more than once anticipated, which the absence of a military made serious. The Governor's income was then £1,000 per annum, and to his credit it is recorded that in this crisis he contributed over £400 towards charitable purposes. Mr. Dutton, in a note in his "History of South Australia" states that "in the year 1840 the immense sum of £277,000 sterling was sent out of the colony for the purchase of the necessaries of life."

The only way open to the Governor to lower the cost of the police department was to reduce the number as well as pay of the officers and men in the force, and this was done although their work was greatly increased by the outbreak of the natives on the Murray, and through the destitution of the working classes.

In reviving the occurrences of this period in our history which were such bitter experiences to the writer and to some others still alive of the early colonists, and after the flight of 37 years, and comparing the then state of the colony with our present position and prospects, and in recalling the proposal which Captain Grey made in one of his gloomy despatches to Lord Stanley, to dispose of Government House as well as other Government properties to raise funds, in contrast with the favorable opinions so early expressed by His Excellency Governor Jervois on his first glance at the country, I can boldly say that history furnishes no parallel to our progress as an infant settlement.

At this time our coastline is the same in extent, and affords only a greater accommodation in harbors as improved since 1841. Our River Murray, also a grand natural canal, is of the same expansive character without change, except as to the removal of snags. Our surface land is now, as it was then, unexceptionally the greatest in extent, and of superior quality to that possessed by any other Australian community ; and to crown all, in spite of much selfish and short sighted policy and actions on the part of most of our previous leading legislators, we have arrived at our present position from which to start onwards to attain a state of wealth and influence equal, if not superior, to any other Australian or British colony.

I continue to finish the first chapter under the administration of Captain Grey by an extract from Dutton's history: —

" In November, 1841, Captain Grey heard from England that Colonel Gawler's bills were is the course of payment by means of the Parliamentary grant voted as a temporary assistance to the colony. On ascertaining this fact, looking to the justice of the still unsatisfied claims for which Colonel Gawler had not drawn bills, and determined to relieve the distress consequent on the non-payment of these claims, he drew upon the Lords of the Treasury for the amounts which were properly substantiated as due. Governor Grey's despatch announcing his having done so gave in full his motives for incurring responsibility which he was aware at the time had been the cause of his predecessors recall."

These bills of Captain Grey were also returned protested. The disastrous news did not reach the colony before the arrival of the Taglione, in October, 1842, but there was not a single despatch for the Governor on board announcing this fact distinctly. It was on the 24th December following that Governor Grey at length received Lord Stanley's despatch announcing the dishonor of his drafts in the preceding May.

"You have," said Lord Stanley, " now drawn bills on the Treasury in discharge of these (outstanding) claims, and the bills have been dishonored and will be returned to you chargeable with interest." Mr. Dutton continues : —

"Lord Stanley gave no good reason for refusing to pay those bills, beyond that they were drawn without special authority, but the reasons given in Lord Stanley's despatch do not justify the course he pursued in refusing to place those few additional thousands of pounds on the same footing as Colonel Gawler's bills, as an attentive perusal of Governor Grey's despatch clearly shows that these claims were composed of precisely similar ones which the British Government had thought it incumbent on themselves to pay to support the credit of the Government."

Mr. Dutton in a note comments on the remark made by Lord Stanley, " that the outstanding debts of Colonel Gawler were created under the full knowledge of the peremptory orders which Colonel Gawler had received not to draw any further," the fact being " a considerable portion of these claims were for contracts entered upon before the prohibition to draw had arrived, but were not due till after that period : and a large sum was due on account of public buildings in the course of erection, the remainder being for absolute necessaries."

Lord Stanley, to meet these dishonored bills, ordered colonial debentures to be issued, to bear interest at 5 per cent. To parties in England this may at first sight appear to have been a very satisfactory arrangement, but fresh light will appear on acquaintance with the working of the matter.

" In the first place the colonists were kept waiting 18 months before they got any settlement at all, then they got the Governor's bills on the Lords of the Treasury, to get which cashed they had to pay the Banks 5 per cent discount. The bills were sent to England and refused acceptance ; then the lawyers got hold of them. In addition to noting protest there was a charge of 20 per cent., also charge for re-exchange. Lawyers in the colony were then ordered to call for an early reimbursement from the unfortunate endorsers, which they could not make except by handing over the debentures bearing 5 per cent interest, whilst the Bank interest was from 10 to 12. A child might guess the consequences to nine out of ten of the holders of these bills. Half the amount of the bills gone in expenses, and a final settlement gained after an advertisement of the properties of A. B. or C. for peremptory sale. Then properties mopped up by Bank manager or some of his friends and partners."

In this number I have considered it necessary to record at some length the difficult position in which Captain Grey with his eyes open allowed himself to be placed as to means at his disposal to carry on the Government of this province. I have also thought myself justified in placing before readers at the same time such particulars as exhibit a justification to a great extent of the actions of his predecessor, Colonel Gawler, of whom it must be said that all his predictions as to the future of this colony have been already more than realised.

In subsequent numbers I shall have to produce the continuation of the fatal affrays with the blacks on the River Rufus junction with the Murray — sad, sad records. In addition to the valuable aid I have met with from gentlemen whose names I lave previously given, and to whom I have expressed my thanks, I have now to add the name of T. J. S. O'Halloran, Esq., S.M., who has kindly allowed me the use of his late respected father's diary, &c., made on his various expeditions as Commissioner of Police, which contain much interesting matter, and for which favor I return sincere thanks. (To be continued.)