§ 12. Some economic features of fanners' selling cooperation. This type of producers' selling cooperation is proving in America to be far more successful than producers' cooperation among workingmen;4 and certain important economic features in it should be noted. The local producers' selling cooperative society is composed of farmers who as enterprisers own and carry on their own separate businesses; they are not, as in the other case, wage-workers. Any productive processes undertaken by this kind of society are subordinate to the main business, being such as picking, packing, drying, preserving, and making boxes for packing. This form of cooperation, with the related form of consumers' cooperation that is fostered by it, promises to have a wide extension.

Some of these societies, as those dealing in citrus fruits, regulate with some success the picking and the marketing so as to distribute them more evenly throughout the year. They watch the markets and direct their agents by telegraph to divert cars en route away from markets that are glutted with products and into markets where prices are higher. They take some of the products, as eggs in the spring at the period of low prices, and pack or refrigerate them, to be sold when prices are higher. For thus withholding the supply they are said by some to exercise a monopolistic power. But this is a more than doubtful view. As long as only the seasonal variations are equalized and the total supply of the year is not reduced, it is, on the marginal principle, an economic service to the consumers, comparable to insurance in its utility. Reducing the area planted or preventing the entrance of others into the industry would be monopolistic acts, but these as yet have not occurred.

4 See ch. 20, §§ 13, 14, 15.

§ 13. Cooperation in buying. Cooperative buying (called also consumers' cooperation or distributive cooperation) has had a large growth in the British Isles since 1844, when the society called the Rochdale Pioneers was founded by a group of factory workingmen. The cooperative stores, both in Great Britain and on the Continent, have flourished mainly among the industrial workers in urban centers. However, this has not been exclusively the case, and, particularly in Denmark and Ireland, cooperative buying has increased in agriculture in connection with selling associations. Between 1890 and 1914 the growth of consumers' cooperation among European industrial wage-earners was phenomenal, especially in Belgium, Germany, and Switzerland. American wage-workers however, have made few and feeble efforts in this direction.

In the period beginning 1867 many cooperative stores were founded in America by farmers in the Grange movement, who operated also grain-elevators, warehouses, and steamboat lines. But the movement failed, about 1877. This result is easily explained by lack of commercial knowledge and lack of harmony among the members, selling on credit, and inefficient management. A new era in consumers' cooperation for farmers began about 1900, and in several widely separated parts of the country - Minnesota, Kansas, California, Washington and elsewhere - the movement has spread rapidly, supported in large part by the same persons who are members of the selling associations.

§ 14. Need of agricultural credit. Banking originated in cities and for the use of the merchant class. It still retains pretty faithfully its commercial character. The change of farming toward a more commercial form 5 has been little aided by banking credit. National banks and many others were forbidden in their charters to lend on the security of real estate, the farmer's one business asset.6 A great number of farms are always in course of being purchased, the balance of purchase money being borrowed by the purchaser. A group of private agencies, such as life insurance and mortgage loan companies and local money-lenders, has supplied long-term farm credits at rates of interest considerably higher than were paid for loans on urban real estate. The total of agricultural loans was estimated in 1916 to be $3,500,000,000. Though rates of interest had become more equalized throughout the whole country, they still ranged between 7 and 10 per cent in the southern and western states, averaging 7 per cent in the whole country for interest and commission. The need of better opportunties for credit in the agricultural districts was long recognized. The high rate of interest for borrowed money necessarily placed a limit on improvements in equipment and methods of farming.7

5 See above, 3.

Note: The years 1917 to 1919 were years of exceptional prosperity for farmers, because the price of their products rose faster and higher than either farm wages or the prices of the things that farmers buy. The years 1920 and 1921 were disastrous. Farm products began to fall while nearly everything that the farmer had to buy kept on rising in 1920, and then fell in 1921, but less than did farm products.

6 See ch. 8, f 8.

Fig. 5, Farm prices, 1909-1921.

§ 15. Provisions for farm loans. The Federal Reserve Act made two important changes to improve agricultural credit.8 Long and vigorous discussion of the subject led at length to the enactment of the Federal Farm Loan Act, July 17, 1916. It authorized the establishment of twelve Federal Land Banks, each with a capital of not less than $750,000, to make loans through national farm associations organized somewhat after the model of the building and loan associations. The bonds issued by these banks may bear not to exceed 5 per cent interest and are tax exempt. The loan is repaid by the farmers under a regular plan of amortization.

This plan went into effect opportunely, when the withdrawal of loans from America by European investors and the financing of the war was already causing rising interest rates. But for this act, the financial difficulties to agriculture would have been serious just as the patriotic slogan declared, "Food will win the war." As private investors were not ready to subscribe for stock in the banks, the Treasury of the United States did so. In the first year of its operation the Federal Farm Loan Banks issued nearly $100,000,000 of bonds; and at the end of about three years (by October, 1920) more than $350,000,000; at which time farm loan associations to the number of four thousand were operating. Besides, there were operating under the act twenty-five Joint Stock Land Banks with mortgage loans of nearly $80,000,000 outstanding.

All of the effects of this legislation are not yet fully apparent; but it is clear that it has brought down the rate of interest on long-time loans of farmers to nearly 5 per cent in the remotest parts of the country. This must stimulate agricultural improvement and make it possible for thrifty tenants to purchase land on long time. But, inasmuch as farmlands are brought within the circle of lower interest rates, their capitalization will be higher, based on the net annual rental. But ultimately the law should, with wise administration and careful changes made in the light of experience, broaden and strengthen the independent farm ownership of the nation, as well as increase agricultural production.

7 See Vol. I, pp. 495-497, on the relation between lower interest rates and productive processes.

8 See ch. 9, § 7 on time deposits, and § 9 on farm loans.

§ 16. Need of an agricultural policy. Men of the farthest vision in the field of agricultural and land economics - men such as Liberty Hyde Bailey, chairman of the Roosevelt Country Life Commission, Eugene Davenport, director of the Illinois College of Agriculture, Kenyon L. Butterfield, president of the Massachusetts College of Agriculture, and Richard T. Ely, founder of the Institute for Research in Land Economics - have since the beginning of this century been striving to gain for this great problem some due share of the national thought and effort. The events of the Great War gave force to their appeal for a national policy of agriculture. It is not too optimistic to believe that in some respects substantial progress toward this end has been made in the development of experiment stations and state colleges of agriculture, farmers' institutes, and "farmers' week" gatherings, that bring together the progressive farmers by thousands, not only to get some technical and practical hints on raising crops, but to gain a broader view of their economic task and of their civic responsibilities. These schools and meetings are helping, as are automobiles, good roads, telephones, rural free delivery, better schools, and an active rural press, to destroy the isolation of country life and to make farmers as a class more broadly educated, more cooperative and more public-spirited than the average urbanite. More insistently the call is heard for a national policy in agriculture, with the belief that, more than any other occupation, agriculture is bound up with the very existence and survival of the nation. This belief rests not merely on the crude physical fact that men must have food to live, but also, and even more, on the eugenic fact that whatever be the country population will ultimately be the nation, and on the historical fact that democracy, stable government, and liberty must have their roots in the soil and in the ownership of homes. This and the foregoing chapter have but sketchily suggested some of the topics that make up the agricultural problems. It is even more important to appreciate that the agricultural problem is connected with all the other industrial problems, and is but a part of the one greatest problem, transcending individual, class, and sectional interests, the problem of national welfare.

References

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Bruce, A. A., The Non-Partisan League Citizens Library Series. New York. Macmillan. 1920. (By a former Supreme Court Justice of N. D. Picture of the economic conditions leading to the formation of the League.)

Carver, T. N., Selected readings in rural economics. N. Y. Ginn. 1916.

Cumberland, W. W., Cooperative marketing; the advantages as exemplified in the California Fruit Growers Exchange. Princeton. University Press. 1917.

Kemmerer, E. W., Agricultural credit in the United States. A. E. Rev., 2: 852-872.

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